On 3 May 2021, the European Commission (Commission) fined Sigma-Aldrich €7.5 million for the provision of incorrect or misleading information to the Commission in relation to its review of Merck’s acquisition of Sigma-Aldrich.
This is the third time since the entry into force of the 2004 EU Merger Regulation (EUMR) that the Commission has imposed fines against an undertaking for such conduct in the context of a merger control investigation. Under the EUMR, the Commission can impose fines of up to 1 per cent of the aggregated turnover of companies that intentionally or at least negligently provide incorrect or misleading information.
This latest case dates back to 2015 when Merck sought clearance for its proposed acquisition of Sigma-Aldrich. The Commission granted conditional approval subject to Sigma-Aldrich divesting certain assets to remedy the Commission’s competition concerns – this structural remedy was needed to maintain effective competition in the relevant market for specific laboratory chemicals, and the Commission subsequently approved a suitable purchaser.
At the relevant time, Sigma-Aldrich was engaged in an innovation project (iCap), which was closely associated with the business to be divested. However, no information concerning iCap was provided to the Commission – neither during the remedy submissions nor in replies to two specific requests for information from the Commission. For this reason, the Commission has now concluded that Sigma-Aldrich committed three distinct infringements by providing incorrect or misleading information with respect to the iCap project. Although initially the Commission began proceedings against both parties, only Sigma-Aldrich has ultimately been fined. Following hearings in 2020, the allegations against Merck were dropped.
Previous Commission decisions since 2004 imposing fines on undertakings for providing incorrect or misleading information were against General Electric (fined €52 million in April 2019) regarding its acquisition of LM Wind, and Facebook (fined €110 million in May 2017) regarding its acquisition of WhatsApp. While the fine imposed on Sigma-Aldrich is significantly lower than in those previous cases, this reflects that Sigma-Aldrich is a smaller company with lower turnover for the calculation of the fine. In fact, Sigma-Aldrich’s infringement appears to be the most serious out of the three cases given the missing information directly related to the business that required to be divested, whereas in the two earlier cases, the relevant information had no impact on the outcome of the Commission’s decision. The latest fine is also notable as it has been imposed on the acquired business, as opposed to its buyer (although Merck, as the buyer, suffers the pain of the fine indirectly given it now owns Sigma-Aldrich).
The Commission, like other competition authorities, relies heavily on the information submitted by merging parties to come to an informed decision when reviewing mergers, and the effectiveness of merger control can be significantly impacted if relevant information is not provided.
By adopting this decision and consistent with its approach in its previous decisions, the Commission is sending a strong message: Undertakings that fail to disclose all relevant information during merger control investigations face severe sanctions. Companies therefore must proceed with care in terms of the accuracy and completeness of the information they provide to the Commission. Otherwise, despite filing their transaction (and receiving approval) in accordance with the EUMR, they run the risk of being fined if information is subsequently found to be inaccurate or misleading.
Moreover, in the worst case, the undertakings concerned might even need to unwind their transaction given the Commission has the power to revoke a clearance decision if it “is based on incorrect information for which one of the undertakings is responsible or where it has been obtained by deceit”. While the Commission has not sought to do this in the cases mentioned above, it is worth recalling that Germany’s Federal Cartel Office, the Bundeskartellamt, considered this option a couple of years ago, in the Savencia (formerly Bongrain) / Söbbeke merger case. In that case, the Bundeskartellamt investigated, among other things, whether incorrect sales data had been reported for the relevant products in the course of its merger control proceedings. However, in order to avoid the transaction being unwound, Savencia sold its shares in Söbbeke’s competitor Andechser in 2015.
This Bundeskartellamt case – just like the Commission’s recent decision against Sigma-Aldrich – shows how important it is to (double) check the information presented to competition authorities for completeness and accuracy. These cases also reflect a broader global trend where competition authorities generally are increasingly sanctioning parties for procedural infringements of their merger rules – not only regarding incomplete or inaccurate submissions but also so-called “gun-jumping” (i.e. implementing a deal before required clearances).