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

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

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.

Source: https://ec.europa.eu/commission/presscorner/detail/en/ip_21_2181

Photo Credit : https://pixabay.com/photos/hammer-money-euro-currency-611582/

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