New ECJ decision - standstill obligation in merger cases must be respected

3.24.2020

In a new decision, the European Court of Justice has established that enterprises which fail to notify a merger and proceed to implement it before it has been approved may be subject to “double” punishment for having failed to comply with the notification requirement as well as the standstill obligation, without this being in conflict with the prohibition on double penalties (the "ne bis in idem" principle).
ECJ judgment of 4 March 2020 in C-10/18 P: Mowi ASA (formerly Marine Harvest) vs the European Commission 

Under Danish and EU competition law alike, a notifiable merger is subject to a standstill obligation, preventing it from being implemented, neither in whole nor in part, until approved by the competition authorities. 

Background

In 2012, Marine Harvest (now Mowi) contracted to acquire 48.5 per cent of the shares of Norwegian listed company Morpol ASA. The acquisition was implemented in December 2012. Under Norwegian law, the acquirer of one third (or more) of the shares in a listed company must offer to acquire the shares of the other shareholders. Marine Harvest therefore offered to acquire, and did acquire over the course of the next months, the rest of the shares in Morpol, after which Marine Harvest took Morpol off the market.

In November 2012, in connection with the initial acquisition of 48.5 per cent of the shares, Marine Harvest requested of the European Commission that a case team be set up to be responsible for the case. Marine Harvest announced at the same time that it would not exercise the voting rights until the merger had been cleared by the Commission. A first draft of the merger notification was then submitted in March 2013, and final notification was filed to the Commission in August 2013, and then the Commission, in September 2013, cleared the merger, subject to remedies. 

In July 2014 the Commission issued a decision imposing on Marine Harvest a fine of EUR 20 million. In the Commission’s view, Marine Harvest had infringed both the notification requirement and the standstill obligation. The Commission held that Marine Harvest’s acquisition, in December 2012, of a 48.5 per cent stake in Morpol had already conferred upon Marine Harvest de facto sole control over Morpol, and that Marine Harvest had thus implemented the merger before it had been notified to and cleared by the Commission.

In determining the size of the fine, the Commission attached particular importance to the fact that Marine Harvest had previously infringed national procedural rules on merger control in France; that there were serious doubts as to whether the merger would be approved; and that the infringement had persisted in no less than nine months and twelve days. At the same time, though, the Commission acknowledged as mitigating circumstances the fact that the infringement was one of negligence; that Marine Harvest had abstained from using the voting rights in Morpol; and that Morpol was preserved as a separate entity pending the Commission’s examination of the merger case.

The Court’s decision

Marine Harvest had argued before the European Court of Justice that the fine should be annulled or reduced, citing the following two submissions. 

In the first submission Marine Harvest argued that an exemption from the standstill
obligation, allowing the implementation of public bids before merger clearance has been obtained, applied. The ECJ rejected this, however, holding that control had already been obtained and the merger thereby implemented on acquisition of the 48.5 per cent stake from a single seller in December 2012. It was not, therefore, a merger effected by public bid for a listed company, and therefore the exemption did not apply.

In the second submission Marine Harvest argued that the fining for infringement of both the notification requirement and the standstill obligation amounted to a "double punishment" inconsistent with the "ne bis in idem" principle of Article 50 of the Charter of Fundamental Rights of the European Union and with Article 4 of Additional Protocol no. 7 to the European Convention on Human Rights. The "ne bis in idem" principle holds that a person cannot be prosecuted or punished for the same infringement twice. The ECJ confirmed that the principle does apply to the imposing of fines for infringement of competition law, but then proceeded to establish that while this is so, it does not apply in the case at hand since the two fines were imposed by the same authority in a single decision. It was, therefore, one decision and thus could not qualify as "double punishment". Also, the ECJ held that it is possible for an enterprise to breach the standstill obligation without at the same time breaching the notification requirement. When an enterprise implements the merger and fails to notify it, as did Marine Harvest, the enterprise breaches both a positive obligation (the notification requirement) and a negative one (standstill). In other words, any failure to meet the notification requirement will inevitably amount to breach of the standstill obligation as well, whereas a breach of the standstill obligation will not necessarily imply a breach of the notification requirement. Marine Harvest therefore could be fined two separate fines, for infringement of both the standstill obligation and the notification requirement. 

Other relevant case law

The ECJ has previously, in another case (PZU Życie), established that the prohibition of double punishment does not prevent one enterprise from being fined, one fine for breach of national competition law and one fine for breach of European competition law. For more on this case, see our previous news article.

Read the judgment of the European Court of Justice.