Mergers: Commission fines Sigma-Aldrich €7.5 million for providing misleading information during Merck takeover investigation

(Credit: Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has fined Sigma-Aldrich €7.5 million for providing incorrect or misleading information during the Commission’s investigation under the EU Merger Regulation of Merck’s acquisition of Sigma-Aldrich.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “The effectiveness of our merger control system relies on the accuracy of the information provided by the companies involved. Accurate information is essential for the Commission to take competition decisions in full knowledge of the facts. Today’s decision to fine Sigma-Aldrich shows that companies should not withhold or provide misleading information. This is vital for the assessment of a deal, especially for research and development projects, which are by nature secret and for which only the parties have access to relevant information.”

The EU Merger Regulation obliges companies in a merger investigation to provide correct and non-misleading information. This is crucial for the Commission to review mergers and takeovers in a timely and effective manner. This obligation applies, regardless of whether the information has an impact on the ultimate outcome of the merger assessment.

On 21 April 2015, Merck notified the Commission of its plan to acquire Sigma-Aldrich. On 15 June 2015, the Commission approved the proposed acquisition subject to the divestiture of certain Sigma-Aldrich assets, which would address the competition concerns identified in markets for specific laboratory chemicals.

In the context of the divestment process, the Commission was made aware that an innovation project, called iCap was closely linked to the divested business and specifically developed for products included in the divestment business. However, the project had not been disclosed to the Commission.

Not only was the project not disclosed and discussed in remedy submissions, but information about it was also withheld in replies to specific requests for information. Moreover, the Commission found indications that Sigma-Adrich’s supply of incorrect or misleading information was intended to avoid the transfer of the relevant project to the purchaser of the divestment business.

Hence, statements provided to the Commission were incorrect or misleading and prevented the Commission from undertaking an informed assessment of the intended scope of the commitments. The Commission can make such an assessment only if it has received from the parties all the information required, particularly when it relates to research and development (R&D) projects. These are typically confidential and the Commission can only learn about their existence through truthful and correct submissions made by the companies involved in merger procedures.

In July 2017, the Commission addressed a Statement of Objections to Merck and Sigma-Aldrich, detailing its preliminary view that both Merck and Sigma-Aldrich had breached their procedural obligations under the Merger Regulation.

In June 2020, after having heard the companies, the Commission decided to drop the objections against Merck and addressed a Supplementary Statement of Objections to Sigma-Aldrich only. It replaced the Statement of Objections and preliminary concluded that Sigma-Aldrich had breached the EU Merger Regulation by intentionally or at least negligently providing incorrect or misleading information to the Commission about iCap.

In today’s decision, the Commission concludes that Sigma-Aldrich committed three distinct infringements by providing, deliberately or at least negligently, incorrect or misleading information in the explanatory submission describing the remedy package and in the replies to two requests for information made pursuant to Article 11(2) of the EU Merger Regulation.

Today’s decision has no impact on the Commission’s decision to authorise the transaction under the EU Merger Regulation.

The fine

According to the EU Merger Regulation, the Commission can impose fines of up to 1% of the aggregated turnover of companies, which intentionally or negligently provide incorrect or misleading information to the Commission.

In setting the amount of a fine, the Commission takes into account the nature, gravity and duration of the infringement, as well as any mitigating and aggravating circumstances.

The Commission considers that the three infringements committed by Sigma-Aldrich are of serious nature and particularly grave notably because (i) the obligation to provide correct and non-misleading information in merger investigations is crucial to ensure the effective functioning of the EU merger control system; (ii) the incorrect or misleading information related to an innovation project that was clearly related to and important for the divestment business; and (iii) the Commission’s only way to obtain the relevant information on this innovation project was from Sigma-Aldrich, such a project being by nature secret and sensitive.

On this basis, the Commission has concluded that an overall fine of €7.5 million is both proportionate and deterrent.

Background

Today’s case is the third time that the Commission has adopted a decision imposing fines on a company for provision of incorrect or misleading information since the entry into force of the 2004 Merger Regulation.

In April 2019, the Commission imposed a €52 million fine on General Electric for initially providing incorrect information during the investigation of its planned acquisition of LM Wind.

In May 2017, the Commission fined Facebook €110 million for providing incorrect or misleading information during the Commission’s 2014 investigation of its acquisition of WhatsApp.

Earlier Commission decisions in this regard were adopted under the 1989 Merger Regulation in accordance with different fine-setting rules.

The Merck/Sigma-Aldrich merger case

On 21 April 2015, Merck notified the Commission of its plan to acquire Sigma-Aldrich. The Commission’s investigation revealed competition concerns in relation to some laboratory chemicals, namely solvents and inorganics used in laboratories by companies and research centres. For these products, Merck and Sigma-Aldrich (i) were the two leading suppliers in Europe; (ii) had two of the broadest product portfolios, with high-quality products and well-recognised brands; and (iii) had efficient sales channels to reach customers in markets characterised by a fragmented customer base. The combination of all these elements would have led to the loss of an important competitive force in the supply of solvents and inorganics following the merger.

In order to address the Commission’s competition concerns, the two companies offered to divest certain assets in relation to the above specific laboratory chemicals. On 15 June 2015, the Commission approved the proposed acquisition subject to the divestment of most of Sigma-Aldrich’s solvents and inorganics business in Europe.

On 10 November 2015, the Commission approved Honeywell as a suitable purchaser of the divestment business.

In 2016, a third party made the Commission aware of the exclusion of Sigma-Aldrich’s above-mentioned innovation project from the scope of the remedy.

Other merger procedural cases

In April 2018, the Commission imposed a €124.5 million fine on Altice, the multinational cable and telecommunication company based in the Netherlands, for implementing its acquisition of the Portuguese telecommunications operator PT Portugal before notification or approval by the Commission.

In June 2019, the Commission imposed €28 million fine on Canon for partially implementing its acquisition of Toshiba Medical System Corporation before notification and approval by the Commission.

More information will be available on the competition website, in the Commission’s public case register under the case number M.8181.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

UN chief welcomes resolution to 27-year-old disagreement over renaming the former Yugoslav Republic of Macedonia

The US pipeline attack shows the energy sector must act now on cybersecurity. Here are 6 ways how

How trade-based money laundering works and its impact on world finances

Why is the World Health Organisation so much needed?

Remarks by Commissioner Lenarčič on the deployment of EU Medical Teams to Italy

The link between migration and technology is not what you think

UN space-based tool opens new horizons to track land-use on Earth’s surface

‘The clock is ticking’ on meeting the Sustainable Development Goals, says UN deputy chief

UN agencies call for more resettlement and end to detention of asylum seekers in Libya

NextGenerationEU: Commission gets ready to raise up to €800 billion to fund the recovery

Here are six bold ideas to accelerate sustainable energy innovation

Logo Mania: A call to action to our crisis of connection

Judges urge Security Council to serve interests of all UN Member States

Why financial services can kickstart Africa’s digital economy

Parliament approves seven-year EU budget 2021-2027

IMF: World cup and productivity

Connected Claims Europe on 18-19 September 2019, in association with The European Sting

A shocking new report reveals what we’ve done to the natural world

Bosnia and Herzegovina: EU allocates additional €3.5 million to support vulnerable refugees and migrants

Eurozone bank rescues ‘a la carte’ until 2015 then only bail-ins

EU’s tougher privacy rules: WhatsApp and Facebook set to be soon aligned with telcos

Nothing about us without us: how youth empowerment creates lasting change in the climate meltdown

It’s time for the circular economy to go global – and you can help

Dark spots on EU humanitarian aid spending

A reflection of health inequity in recent epidemics

Fuel crisis rapidly draining last ‘coping capacities’ of Palestinians in Gaza

MEPs hail minimum global corporate tax rate deal as historic

Closing VAT loopholes for sales through online platforms

COVID-19 Myths and Facts

A Sting Exclusive: EU Commission’s Vice President Šefčovič accentuates the importance of innovation to EU’s Energy Union

Brexit: €5 billion to help EU countries mitigate social and economic impact

Improvements to pension systems have made them better placed to deliver pensions

Easing ‘classroom crisis’ in Côte d’Ivoire, brick by (plastic) brick

State aid: Commission approves €1.1 billion Polish scheme to further support companies affected by coronavirus outbreak

ECB: The bastion of effective and equitable Europeanism keeps up quantitative easing

State aid: Commission approves German aid scheme to support airports affected by the coronavirus outbreak

Bertelsmann Stiftung @ European Business Summit 2014: Transatlantic Free Trade Agreement (TTIP) needs balanced approach

Green light for VAT overhaul to simplify system and cut fraud

What does strategy have to do with a platform approach?

This is the IMF’s latest take on the economy in 2020

EuroLat plenary in Panama: control of trade talks and fight against crime

Commission paralysed before the banking leviathan

Coronavirus: EU channels further support to Nepal and repatriates EU citizens

Vaccine hesitancy: a pregnancy related issue?

Impressions of China

Challenges in accessing Palliative Care from the perspective of Universal Health Coverage

4 innovative renewable energy projects powering Europe’s green future

South Korea once recycled 2% of its food waste. Now it recycles 95%

Is a deal over EU budget possible today?

EU agricultural production no more a self-sufficiency anchor

Partner countries get €3bn in loans to prop up economies affected by pandemic

Our food system is no longer fit for the 21st century. Here are three ways to fix it

IMF: The global economy keeps growing except Eurozone

The US banks drive the developing world to a catastrophe

Team Europe: Digital4Development Hub launched to help shape a fair digital future across the globe

UN chief pays tribute to Egypt’s role in avoiding ‘dramatic’ escalation in conflict across the Gaza-Israel border

3 ways to fight short-termism and relaunch Europe

More than speed: 5G could become the next big economic driver

Smart cities must pay more attention to the people who live in them

COVID-19 poses a dramatic threat to life in conflict zones

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s