Electrabel, a Belgian electricity company, has been fined EUR 20 million by the European Commission for implementing a merger without the Commission’s prior approval, in breach of the EC merger control rules.
The case concerns the acquisition by Electrabel, part of the GDF Suez group, of control of Compagnie Nationale du Rhône (CNR), a French electricity producer. In December 2003, Electrabel acquired the shares in CNR which had been held by EDF, the French electricity producer. This resulted in Electrabel holding almost half of CNR’s shares.
In August 2007, Electrabel began discussions with the Commission as to whether it had acquired control over CNR, which would have constituted a notifiable concentration under the EC Merger Regulation (ECMR). The acquisition was subsequently notified to the Commission in March 2008 and cleared in April 2008.
The Commission carried out a separate investigation into the date on which Electrabel acquired CNR. It came to the conclusion that Electrabel had acquired de facto sole control over CNR in December 2003, a substantial time before the transaction was notified to and approved by the Commission. The Commission’s conclusion that Electrabel had acquired control over CNR at that stage was based on several factors, including: (i) the shareholding of almost 50% made Electrabel the largest shareholder in CNR by far; (ii) Electrabel had a stable majority at CNR’s shareholders’ meetings, on the basis of past attendance rates and wide dispersion of the other shares; and (iii) Electrabel was CNR’s only industrial shareholder.
The acquisition of de facto control should have been notified to and approved by the Commission under the ECMR, before being implemented. The ECMR provides that the Commission may impose a fine of up to 10% of turnover where a company fails to notify a merger or implements it before approval has been obtained.
On 10 June 2009, the Commission announced that it had imposed a fine on Electrabel of EUR 20 million. In setting the level of the fine, the Commission took into consideration the serious nature of the infringement and its long duration, as well as the importance of the “standstill” obligation under the ECMR. It also noted that Electrabel (and its parent company) should have known that the 2003 acquisition constituted an acquisition of control which needed to be notified to and approved by the Commission before implementation. In mitigation, the Commission took into account the fact that Electrabel had subsequently notified the acquisition voluntarily and that it did not raise any competition issues.
The case sends a clear signal to businesses that the Commission will in the future use its powers under the ECMR to punish companies that do not adhere to the notification and standstill obligations. Moreover, the Commission’s decision indicates that, if such a breach were to happen in a case with substantive competition issues, the penalties would be much more severe. In the meantime, Electrabel has appealed the decision to the Court of First Instance. It therefore remains to be seen whether the Commission’s decision, and in particular the level of the fine, will be upheld.
Commission press release and frequently asked questions, 10 June 2009