In merger procedures, it is a fundamental requirement for parties to provide accurate and complete information to the European Commission as it forms the basis of the Commission's assessment of mergers. Under the EU Merger Regulation (EUMR), the European Commission can impose fines where parties intentionally or negligently provide misleading or incorrect information during the merger review process and in response to requests for information. In March this year, the European Commission issued a Statement of Objections to Kingspan, alleging it provided misleading or incorrect information during the Commission's EUMR investigation of Kingspan's planned acquisition of Trimo, despite the transaction being abended earlier in the process. The case highlights that the companies should be careful not only to avoid gun jumping during their acquisition processes (see Here and Here) but also ensure the quality and truthfulness of the information submit to the European Commission.
As a background, Kingspan had notified the Commission of its intentions to acquire Trimo in March 2021. However, by April 2022, the companies abandoned the proposed transaction following concerns raised by the European Commission. Notably, in November 2022, after the transaction was abandoned, the European Commission launched an investigation to determine whether Kingspan had intentionally or negligently supplied false information during the merger investigation.
The Commission's preliminary view is that Kingspan had either negligently or intentionally provided misleading or incorrect information regarding basic facts about Kingspan's internal organization. In addition, it is alleged that basic facts aimed at assessing the following have been misleading or incorrect:
- The scope of the relevant product and geographic market.
- The existence of barriers to entry and expansion.
- The importance of innovation.
- The competitiveness between Kingspan and Trimo and their competitors.
As a reminder, the issuance of a Statement of Objections does not pre-determine the final outcome of the investigation. It is merely a formal step in the investigation process, informing the companies concerned of the objections raised against them. The companies then have the opportunity to respond to the Commission's objections.
Should the European Commission conclude that Kingspan had intentionally or negligently provided misleading or incorrect information, it could impose a fine of up to 1% of the company's annual worldwide turnover for each breach. In 2021, the European Commission imposed a fine of 7.5 million euro on Sigma-Aldrich for providing misleading information on a remedy package during the Commission's investigation of Merck's acquisition of Sigma-Aldrich (despite the acquisition being approved beforehand). In 2019, the Commission decided to impose fines totaling €52m on General Electric for providing incorrect information to the Commission during its 2017 merger investigation into General Electric's acquisition of LM Wind. In 2017, the European Commission fined Facebook 110 million euro for providing incorrect or misleading information during the Commission's 2014 investigation of Facebook's acquisition of WhatsApp (despite the fact that the breach had no impact on the outcome of its investigation).
In addition to fines, the European Commission may also ultimately revoke one of its decisions where "the decision is based on incorrect information for which one of the undertakings is responsible".
The Kingspan case highlights that even the withdrawal of a merger notification does not halt an investigation where the European Commission suspects that misleading or incorrect information has been submitted. While the potential maximum fine is lower than one for gun jumping (1% vs 10% of global turnover) and in practice the fines are well below the statutory maximum, it is an important requirement to comply with during the merger review process.
The European Commission can issue requests for information (RFI) not only to the parties of the case but also third parties, including competitors, suppliers and customers. The Commission has discretion to issue either a simple RFI or RFI by decision. When it comes to simple RFIs, these are not mandatory and recipients are under no obligation to provide the requested information. However, if recipients choose to respond, they cannot provide incorrect or misleading information. The same is true in respect of RFIs by decision. These are mandatory and recipients are under the obligation to provide all the requested information accurately and truthfully. The failure to reply to a formal decision within the specified time limit could also result in a fine.
The ongoing case serves as yet another example of the European Commission's strict stance on procedural violations in the area of merger control, whether it involves providing misleading or inaccurate information, or prematurely implementing transactions. To date, the European Commission has not revoked a merger decision due to procedural infringements, but the risk persists if decisions are based on false information. Both parties involved in the transaction, as well as third parties responding to RFI, must ensure the accuracy of their responses and ensure that no information is deliberately withheld.
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