[co-author: Jen Qosja]
Norwegian salmon farmer Marine Harvest has been unsuccessful in its appeal to the Court of Justice of the European Union (CJEU) regarding substantial and separate fines imposed on it by the European Commission for both failing to notify a merger and for 'jumping the gun' in implementing the transaction prior to competition clearance.
The judgment contains noteworthy rulings on the application of the ne bis in idem principle (no double jeopardy) when considering fines under EU competition law, in addition to clarifying the application of the notification and standstill obligations under Article 4(1) and Article 7(1) of the EU Merger Regulation (EUMR).
The ruling is particularly important for companies engaging in merger activity as it demonstrates that the Commission can, in effect, impose a 'double' fine for essentially the same conduct. Companies should therefore exercise even greater caution in future when assessing their merger control notification obligations, in order to avoid being penalised for the unauthorised implementation of a transaction.
Background
The case concerned the acquisition by Marine Harvest, a fish farmer and processor, of Morpol, a producer and processor of salmon.
Marine Harvest had acquired a 48.5% stake in Morpol in December 2012 by way of a private transaction, a further 38.6% in March 2013 following the completion of a public offer, and the final 12.9% in November 2013. Marine Harvest had requested a case team allocation from the European Commission in December 2012 regarding the acquisition of sole control of Morpol but only formally notified the Commission in August 2013, following the public bid.
Although the Commission cleared the deal in September 2013, it found that Marine Harvest had already acquired de facto control of the target with the first acquisition in December 2012 and it should therefore have made the notification at that time. As a result, the company was found to be in breach of both Article 4(1), which requires companies to notify the Commission prior to the implementation of a concentration with an EU dimension, and Article 7(1) which imposes a standstill obligation on companies requiring them not to implement a concentration prior to notification and clearance (a standstill obligation). The Commission accordingly imposed two sets of fines of €10 million each.
Marine Harvest appealed the Commission's decision to the EU's General Court in October 2014 but was unsuccessful. It then appealed this judgment to the CJEU in January 2018.
Grounds of appeal
Marine Harvest raised two main grounds of appeal against the General Court's judgment, each of which was rejected by the CJEU.
1. Interpretation of the Article 7(2) carve-out
Article 7(2) sets out a carve-out from the standstill obligation, which allows companies to implement a public bid for "a series of transactions in securities". Marine Harvest argued that the exemption available in Article 7(2) was incorrectly found not to apply by the General Court as it did not assess the provision in light of recital 20, which states that "transactions that are closely connected in that they are linked by condition" should be treated as a "single concentration". Marine Harvest's argument was that, as the acquisition in December 2012 and the subsequent public bid acquisition were linked de jure by mutual conditionality, they were therefore steps in a "single concentration". As such, the Article 7(1) obligation was only triggered after the public bid acquisition.
The CJEU rejected this argument and endorsed previous rulings that a concentration arises as soon as the merging parties implement operations which create a lasting change in control of the target. It found the exemption in Article 7(2) and recital 20 to apply only to a series of transactions where all of them are necessary before a change of control occurs. Article 7(2) is irrelevant in a situation in which control is conferred in the context of the initial transaction; in that situation a concentration arises immediately and the subsequent transactions do not affect that analysis.
In this case, evidence of de facto control arising from the first transaction included the fact that the Marine Harvest was highly likely to achieve a majority at the shareholders' meeting, given the size of its shareholding in December 2012 relative to the level of attendance of other shareholders at shareholders' meeting in previous years.
2. Fines: Ne bis in idem and the principles governing concurrent offences
Marine Harvest also argued that the General Court had erred in determining that the principle ne bis in idem – i.e. the prevention of double jeopardy – does not apply to a situation in which several penalties are imposed in a single decision, even if they are imposed for the same action. It argued that the principle covers any double punishment, irrespective of whether it is imposed in the same or separate proceedings.
However, the CJEU rejected this argument on the basis that the ne bis in idem principle only precludes an undertaking being found liable, or proceedings being brought against it afresh, on the grounds of anti-competitive conduct for which it has been penalised or declared not liable by an earlier decision that can no longer be challenged. The CJEU concluded that, as the two penalties were imposed by the same authority in a single decision (rather than one being imposed in a separate, earlier decision), the ne bis in idem was not applicable.
Marine Harvest also appealed on the basis of principles governing concurrent offences. It argued that failure to notify under Article 4(1) is a more specific offence and therefore subsumes the more general gun jumping offence under Article 7(1). Companies may have gained comfort from Advocate General Tanchev's opinion, issued in September 2019, which supported this position. The Advocate General argued that the conduct that breaches the notification obligation and the standstill obligation is the same and the standstill obligation should therefore subsume the notification obligation in accordance with concurrent offences principles.
Again, however, the CJEU rejected this argument. It echoed the General Court's statement that the EU legislature had not created a hierarchy as between these two provisions, and that the EUMR provides for the possibility of imposing separate fines in a situation where those infringements are committed concomitantly. The CJEU also observed that Article 4(1) and Article 7(1) pursue autonomous objectives, with one laying down an obligation to act and the other laying down an obligation not to act.
Case comment
This judgment may be considered surprising given that it is one of the rare cases where the CJEU has not followed the Advocate General's opinion. Nevertheless, it is in line with the enforcement trend against gun jumping over the last decade, and in that context it is simply the latest ruling to underscore the EU authorities' dedication to ex ante merger control (as well re-affirming recently established principles relating to the acquisition of control based on the de facto ability to command a majority of votes at shareholders' meetings).
The Commission had acknowledged in its infringement decision that Marine Harvest had not exercised its voting rights in Morpol after acquiring de facto control over it upon the initial transaction, and considered it important that Marine Harvest had kept the Commission informed through pre-notification contacts starting shortly afterwards. But while these may have been mitigating factors in determining the appropriate level of the fine, they were not sufficient to deter the Commission from its finding of a gun jumping infringement.
This robust approach to enforcement is also highlighted by the chronology of the European Commission's investigations: it pursued the procedural breaches through to its decision imposing the fines on Marine Harvest in July 2014, even though it had been prepared to give clearance to the transaction itself in September 2013.
The judgment is also instructive in showing the EU courts' somewhat formalistic interpretation of EU competition law provisions, including a willingness to uphold fines for breaches of separate EU provisions, regardless of the closely connected nature of the conduct.
*Trainee solicitor
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