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Patryk Wcislo advises clients in antitrust and competition law, including litigation. Through his work at various prominent international law firms in Germany and the US, Patryk has gained experience in litigation and arbitration, antitrust and merger control. Read Patryk Wcislo's full bio.

Between 2012 and 2013, Marine Harvest ASA (“Marine Harvest”), a Norwegian seafood company, acquired Morpol ASA (“Morpol”), a Norwegian producer and processor of salmon. Marine Harvest notified the transaction to the European Commission under the European Union’s Merger Regulation (“EUMR”), but implemented it prior to the European Commission having granted clearance. In 2014, the European Commission imposed a EUR 20 million fine on Marine Harvest for “jumping the gun”. On 26 October 2017, the General Court of the European Union (“General Court”) confirmed the European Commission’s decision (“Decision”).

WHAT HAPPENED:

On 14 December 2012, Marine Harvest entered into a share and purchase agreement (“SPA”) with companies owned by Jerzy Malek, the founder and former CEO of Morpol. Under the SPA, Marine Harvest acquired 48.5% of the shares in Morpol (“Initial Transaction”). The Initial Transaction was closed on 18 December 2012. On 15 January 2013, Marine Harvest submitted a mandatory public offer for the remaining 51.5% of the shares in Morpol (“Public Offer”). Following settlement and completion of the Public Offer in March 2013, Marine Harvest owned a total of 87.1% of the shares in Morpol (together, the “Transaction”).

Marine Harvest established first contact with the European Commission on 21 December 2012 by submitting a “Case Team Allocation Request”, which initiates the pre-notification process under the EUMR. After submitting various drafts and answers to requests for information, Marine Harvest formally notified the Transaction on 9 August 2013. On 30 September 2013, the European Commission cleared the Transaction subject to some conditions.

On 31 March 2014, the European Commission formally launched a separate investigation into alleged “gun jumping” by Marine Harvest, and in the decision of 23 July 2014, the European Commission imposed a fine of EUR 20 million on Marine Harvest (“Fining Decision”). The European Commission held that Marine Harvest, by implementing the Initial Transaction, had acquired de facto control over Morpol. By acquiring de facto control, Marine Harvest had infringed Art. 7(1) EUMR (“Standstill Obligation”). Under the Standstill Obligation, transactions requiring notification to, and clearance by, the European Commission may not be implemented prior to clearance.

The European Commission rejected Marine Harvest’s argument that the implementation of the Initial Transaction was covered by an exemption provided for in Art. 7(2) EUMR (“Public Bid Exemption”). Under the Public Bid Exemption, the acquisition of control from various sellers through a public bid, or a series of transactions in securities, can be implemented prior to clearance. However, this applies only if the transaction is notified without delay to the European Commission, and if the acquirer does not exercise the respective voting rights. According to the European Commission, the Public Bid Exemption is not intended to cover situations involving the acquisition, from a single seller, of a “significant block of shares” which in itself confers de facto control.

Marine Harvest appealed against the Fining Decision to the General Court. However, with the Decision, the General Court confirmed the European Commission findings, both on substance on with respect to the level of the fine.

WHAT THIS MEANS:

The Decision is an impressive reminder that gun jumping, i.e. the implementation of transactions prior to clearance by the relevant antitrust authorities, can entail severe consequences. Under European merger control law, the European Commission can impose fines of up to 10% of the group’s total turnover on companies infringing the Standstill Obligation. Antitrust authorities in most other major antitrust jurisdictions have comparable sanctioning tools.

The Decision also confirms that the acquisition of a minority stake may well be considered as conferring de facto control. This applies in particular to situations where the minority shareholder is highly likely to achieve a majority at the shareholders’ meetings, taking account of the size of its shareholding and the level of attendance of other shareholders at shareholders’ meetings in preceding years. The General Court furthermore emphasises that the mere possibility to exercise control is sufficient for a breach of the Standstill Obligation. Whether the acquirer actually makes use of that possibility (Marine Harvest argued it did not) is of no relevance.

Finally, the Decision clarifies that the European Commission is entitled to apply a narrow interpretation of the Public Bid Exemption. Parties who intend to rely on the Public Bid Exemption for (partly) implementing transactions prior to clearance should do so, if possible, only after consulting with the European Commission. Indeed, the European Commission, confirmed by the General Court, held that Marine Harvest acted negligently in not having consulted with the European Commission. Marine Harvest’s negligence was a main factor for the European Commission to conclude that a significant fine should be imposed – even though, as Marine Harvest argued throughout the proceedings, the European Commission did not impose a fine in a very similar, previous merger case.

On 12 July 2017, the German Federal Cartel Office (FCO) published a guidance paper (Guidance Paper) on the prohibition of resale price maintenance (RPM). The Guidance Paper has a particular focus on the food retail sector. At the same time, it offers good insights into the FCO’s current overall thinking on RPM. The FCO reiterates that companies engaging in RPM may be subject to severe fines. In addition, it is evident from the Guidance Paper that the FCO has a very broad understanding as to what may be considered as RPM.

WHAT HAPPENED:

  • RPM describes a situation where a supplier and a retailer agree that the retailer will not resell the supplier’s products below a certain (minimum) price.
  • While RPM falls under the rule of reason under US Federal antitrust law, it is considered as a hardcore antitrust restriction in most European jurisdictions, as well as under some US State antitrust laws (cf. Maryland’s Attorney General’ recent challenge of RPM).
  • The FCO is arguably the most active antitrust authority in terms of RPM. In recent years, it imposed fines for alleged RPM in a number of proceedings across various industries, including cosmetics, furniture, mattresses, tools and toys. In December 2016, the FCO imposed fines totaling € 260.5 million on 27 food retailers and food manufacturers.
  • A number of authorities provided in the past guidance on RPM. For example, the European Commission addresses RPM in its Guidelines on Vertical Restraints, and in the United Kingdom, the CMA published in June 2017 a one-pager on RPM. The FCO’s Guidance Paper now offers very comprehensive and specific guidance on RPM, in particular, but not exclusively, with respect to the retail sector.

Continue Reading THE LATEST: German Antitrust Authority Issues Guidelines on Resale Price Maintenance

The Polish Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów, “UOKiK”) has recently published its 2015 annual report presenting its first experiences with the recent amendments to Polish merger control regulations. However, only future developments will show the effects of the new much more severe rules on cartel infringement proceedings and sanctions for cartel behaviour.

On 18 January 2015 far-reaching changes to the Polish Act on Competition and Consumer Protection (Ustawa o ochronie konkurencji i konsumentów), alternatively named “Antimonopoly Law” (prawo antymonopolowe), came into effect. These have been made to close previously identified gaps and strengthen competition and consumer protection. In addition to important changes with respect to merger control and anticompetitive practices, the Antimonopoly Law as amended has introduced changes that allow for more open dialogue between undertakings and the UOKiK.

Faster and more flexible merger control proceedings

According to UOKiK’s 2015 annual report the average duration of merger control proceedings could be reduced by half despite the fact that the overall number of merger control proceedings increased. The average duration dropped from 57 days in 2014 to 34 days in 2015. Of all merger control proceedings that UOKiK completed in 2015 only three (of 235) were Phase 2 proceedings. This can be explained by the following amendments introduced in early 2015:

  • A new two-stage merger control process: Phase 1 (1 month) and Phase 2 (4 months). The waiting period may be extended by UOKiK in the event that UOKiK requires additional information and documents from the parties;
  • New approach in case of competition concerns: UOKiK informs undertakings about its competition concerns so that they may alter the proposed concentration to alleviate UOKiK’s concerns, e.g. through adequate remedies;
  • Approach towards remedies: Undertakings may request UOKiK that it refrains from publishing in its decisions the deadline by which divestments must be made;
  • De minimis clause extended: mergers and the creation of joint ventures explicitly (just like acquisitions of control already under the old law) do not need to be notified to the UOKiK if the turnover in Poland of each of the parties to the transaction does not exceed the equivalent of EUR 10 million in each of the two financial years preceding the transaction. The de minimis clause also applies to concentrations whereby control and assets are being acquired simultaneously.

Effective fight against cartels

New rules for more effective fights against cartels have been introduced but could not yet show any significant effect in 2015. The number of started proceedings (from 87 in 2013 down to 34 in 2015) and of leniency applications (from 10 in 2014 down to 2 in 2015) has dropped. UOKIK explains the reduction in numbers with the application of its new “soft approach” that contains inter alia best practices and the authority’s possibility to request undertakings to voluntarily terminate an infringement and to apply its best practices.

Nonetheless, one should keep in mind the following amendments to the law:

  • New provisions concerning fines on individuals: individuals can now be fined up to PLN 2 million (approx. EUR 460,000);
  • Limitation period: the limitation period has been extended from one to five years following the cessation of the anticompetitive practice. Through this extension of the limitation period, there is now a higher probability that UOKiK will be in a position to unearth, prevent and punish cartel activity;
  • New provisions concerning leniency: (i) the introduction of leniency plus means that an undertaking may receive a reduction in fines of up to 30 percent for revealing another cartel, (ii) the obligation to end the anticompetitive practice starts with the leniency application (prior to the amendment it could have been continued until the actual presentation of evidence), (iii) even the ringleader of a cartel may apply for a full reduction of the fine that would otherwise have been imposed, and (iv) leniency applicants can benefit from fine reductions according to percentage bands (beforehand, leniency only led to a reduction of the fine’s ceiling);
  • New provisions concerning settlements: these provisions have been introduced in order to simplify and accelerate proceedings. Specifically, settlements may lead to reductions in the fine of up to 10 percent;
  • New provisions concerning behavioural and structural remedies: these new provisions are intended to more effectively eliminate the effects of anticompetitive practices;
  • New provisions pertaining to dawn raids: appeals can now be brought in the event that the rights of the dawn raid’s addressee or a third person are violated during a dawn raid; the appeal has to be filed within seven days after the unlawful action occurred; as a result of a successful appeal the relevant evidence cannot be used in the proceeding concerned or in any other proceeding.

Authority’s open and soft approach

The UOKiK has adopted a more open approach permitting undertakings to contact the authority directly. New clarifying notices have been drawn up with the purpose of facilitating dialogue between undertakings and the authority. Moreover, UOKiK has updated its guidance (i) on how fines are to be calculated, (ii) on leniency application procedures, (iii) on issuing the commitment decision, (iv) on UOKiK’s detailed statement of objections, (v) on publications concerning sector enquiries, (vi) on merger control notifications and (vii) on UOKiK’s rules for contact with enterprises (see most recent documents and older ones available in English). In 2017, UOKiK will again review the new rules in consultation with undertakings and if necessary amend the provisions accordingly.