Technical Infringements Receive Stiff Fines from the European Commission | White & Case LLP International Law Firm, Global Law Practice
Technical Infringements Receive Stiff Fines from the European Commission

Technical Infringements Receive Stiff Fines from the European Commission

Both the Electrabel case and the Marine Harvest case serve as harsh wake-up calls that companies and their antitrust advisers must adopt a high level of caution when analysing whether a transaction must be notified under the EU Merger Regulation ("EUMR") and approach the European Commission ("Commission"), if in doubt.

In both cases, the Commission imposed stiff fines on companies for breaching the "standstill" obligation contained in Article 7(1) EUMR and, in both cases, the companies were reproached for failing to notify acquisitions of de facto sole control, upon which it can be notoriously difficult to make a call in certain cases.

The "standstill" obligation states that a transaction which is notifiable under the EUMR "shall not be implemented either before its notification or until it has been declared compatible with the common market" by the Commission. The rationale behind this rule – which is arguably less evident in cases which obviously do not raise competition concerns – is that the Commission aims to avoid any permanent and irreparable damage to effective competition in the internal market and the early implementation of a notifiable transaction may make it more difficult for the Commission to restore effective competition, where necessary.

Where this obligation is breached either intentionally or negligently (in antitrust parlance, known as "gun jumping"), the Commission may, under Article 14(2) EUMR, impose a fine "not exceeding 10% of the aggregate turnover" on the company in breach. According to Article 14(3) EUMR, "in fixing the amount of the fine, regard shall be had to be nature, gravity and duration of the infringement."

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