On 8th April 2019 the European Commission(“the Commission”) fined General Electric (“GE”) €52 million for providing incorrect information during the Commission’s investigation of GE’s planned acquisition of LM Wind which was investigated under the EU Merger Regulation . The merger itself was ultimately cleared unconditionally in Phase I on the basis that it raised no competition concerns.
This latest decision seems to be yet another example of the Commission ramping up penalties on companies for procedural irregularities in the merger control process. Earlier cases have seen the likes Facebook fined €110 million in 2017 for providing misleading information in relation to its acquisition of WhatsApp. Last year Altice, the Dutch cable and telecommunications company, received a record fine of €125 million for gun jumping. At the time the Commission made it clear more cases were in the pipeline. The trend of increased penalties for procedural irregularities in the merger control process is also reflected in the decisions of national competition regulators .
Increased Penalties meted out by competition regulators provide a salutary reminder that companies need to answer competition regulators questions fully and truthfully . The cases are also an indication that the need to strictly observe the procedural rules under the merger control process including a prohibition on gun jumping..
In January 2017, GE notified its proposed acquisition of LM Wind to the Commission. The merger created a vertical link between GE’s wind turbine operations and LM Wind’s turbine blade production activities. In this notification, GE stated that it did not have any higher power output wind turbine for offshore applications in development, beyond its existing 6 megawatt turbine. However, through information collected from a third party, the Commission found that GE was simultaneously offering a 12 megawatt offshore wind turbine to potential customers. As a result on 2 February 2017, GE withdrew its original notification and subsequently re-notified the same transaction. This time it ensured that complete information on its future projects was provided to the Commission. On 20 March 2017, the Commission approved the proposed acquisition unconditionally.
As a result of the inaccurate information provided, the Commission sought on 6 July 2019 to make an example out of GE by issuing a Statement of Objections alleging that it had breached its procedural obligations under the Merger Regulation. The Commission’s investigation confirmed that GE had indeed offered a higher power output offshore wind turbine to potential customers. This was in contradiction to its previous representations to the Commission. As a result, GE’s statement in the notification form was incorrect.
Competition Commissioner Margrethe Vestager on announcing the imposition of the fine commented:
“Our merger assessment and decision-making can only be as good as the information that we obtain to support it. Accurate information is essential for the Commission to take competition decisions in full knowledge of the facts. The fine imposed today on General Electric is proof that the Commission takes breaches of the obligation for companies to provide us with correct information very seriously.”
Under the Merger Regulation the Commission has the power to impose fines of up to 1% of the aggregated turnover of companies, which intentionally or negligently provide incorrect or misleading information to the Commission. So in setting the right quantum of the fine ,the Commission takes into account the nature, the gravity and duration of the infringement, as well as any mitigating and aggravating circumstances.
The Commission concluded that GE committed an infringement by negligently providing incorrect information in the merger notification form. Moreover, the Commission considered that given the many contacts GE had with the Commission during the merger review process, particularly when discussing GE’s pipeline products in this market it should have been obvious to GE that the information requested by the Commission on this topic was important for the Commission’s assessment for the Commission’s assessment
This was therefore a serious infringement which prevented the Commission from having all relevant information for an accurate assessment of the transaction. On that basis the Commission concluded that an overall fine of €52 million is both deterrent and proportionate.