Clifford Chance

In a decision 22-D-10 from 12 April 2022, the French Competition Authority ("FCA") fined Cofepp €7 million (approx. 1% of its turnover generated in France in 2020), for both failing to notify its acquisition of Marie Bizard Wine & Spirits ("MBWS") and completing the merger ahead of clearance.

The distinction between the notification requirement and the standstill obligation 

When a merger is notifiable, the companies are under two obligations:

• a positive obligation: the notification to the competent merger control authority (either the FCA or the Commission depending on the turnover thresholds); and 
• a negative obligation: not to implement the merger before clearance (the standstill obligation).

Infringements of each of these requirements are sanctioned by a fine of up to 5% of the turnover generated in France under the French regime and up to 10% of the combined worldwide turnover under the EU regime.

Cofepp acquired control of MBWS before notification and implemented the merger ahead of clearance

On 3 January 2019, Cofepp notified the FCA of its proposed acquisition of exclusive control of MBWS. Both companies are active in the production and distribution of spirits. The deal was cleared on 28 February 2019, subject to divestment commitments in the port and tequila markets. 

The FCA however determined that the effective takeover of the target actually occurred as of 13 April 2018, by way of Cofepp exercising decisive influence on MBWS management, i.e. prior to the notification and prior to clearance. 

Indeed, Cofepp became the largest shareholder of MBWS in 2017 with 29,47% of the shares. Parties had shared commercially sensitive information (e.g., budget plans, business and marketing perspectives, sales volumes), outside dedicated "clean teams". Prior to the notification, they had also established close financial and commercial relations (e.g. Coffep became one of MBWS' main suppliers and provided financial support) and Cofepp was directly involved in MBWS' strategic and operational decisions including its commercial and budgetary policy (e.g., appointment of the CEO, negotiation with MBWS' suppliers on behalf of its management).

The FCA considered the infringements to be particularly serious because of "an accumulation of behaviours reflecting a deliberate intention to carry out the merger in defiance of competition rules". Cofepp did not contest the facts and entered into a settlement procedure with the FCA. 

Key takeways

• Illustration of de facto control

The notion of control, for the purposes of merger control, is defined by the ability to exercise decisive influence over a company. This is a de facto analysis, irrespective of the level of shareholding. As in the present case, decisive influence is inferred from the ability to determine strategic decisions on the management of the company, such as approval of business plan or budget and, more generally, influence on the ordinary course of business.

• Lessons from the EU's decisional practice

In Marine Harvest v. EC (2020) and Altice Europe NV v. EC (2021), the Court of Justice of the European Union ("CJEU") confirmed respective fines of €20 million and €125 million and, most importantly, established that the ne bis in idem principle does not apply in the context of the cumulation of fines for failure to notify (Article 4(1) EUMR) and for implementation ahead of clearance (Article 7(1)EUMR). The CJEU noted that both infringements pursue autonomous objectives and that while an infringement of Article 4(1) is an instantaneous infringement, an infringement of Article 7(1) is continuous. The FCA has incorporated these findings in the commented decision.

In France, fines for failure to notify and gun jumping were infrequent in recent years. The last imposed were respectively in 2013 and 2016. With this decision, the FCA sanctions for the first time both infringements in one decision, and shows once again its particular vigilance and ability to detect breaches and impose fines.