CN06 - First French Competition Authority fine covering a failure to notify

On 12 April 2022, the French Competition Authority ("FCA") issued a 7 million euro fine to Cofepp for the acquisition of control over Marie Brizard Wine & Spirits ("MBWS") before notifying the concentration to the FCA (failure to notify) and a fortiori without waiting for the FCA's clearance decision (breach of the standstill obligation or "gun jumping").

Key takeaways

• This case is a stark reminder that parties to a concentration which meets the French notification thresholds must comply with both the obligation to notify the proposed transaction to the FCA and wait for the FCA's clearance before implementing the transaction.
• Failure to notify and subsequent implementation of a transaction before the FCA's clearance decision may each lead to a fine of up to 5% of the notifying undertaking's French turnover. The fine can be increased by taking the target's revenues into account where appropriate.
• The decision issued by the FCA on 12 April 2022 is the first application of the Marine Harvest caselaw (see our March/April 2020 newsletter) in France.

On 28 February 2019, the FCA issued a conditional clearance decision regarding the proposed acquisition by Cofepp, a company producing and distributing spirits (in particular Poliakov, Label 5, Cruz, Saint James, Old Nick) of sole control of MBWS, one of its competitors which also owns several brands of spirits such as Marie Brizard, San José and William Peel. The contemplated transaction was notified on 3 January 2019 following the execution of a memorandum of understanding under which Cofepp undertook to subscribe to a capital increase as a result of which it would hold 47.08% of the capital and 47.51% of the voting rights of MBWS.

Shortly after clearing the concentration, in April 2019, the FCA's investigations team raided several companies active in the French spirits sector, including Cofepp and MBWS. The FCA then opened an ex-officio investigation for suspected non-compliance with merger control rules in connection with Cofepp's acquisition of sole control of MBWS.

Following its investigation, the FCA found that Cofepp was already exercising decisive influence and thus de facto control over MBWS several months before the related notification. As a consequence, the FCA fined Cofepp EUR 7 million on 12 April 2022.

In its decision, the FCA observed that Cofepp had undertaken a gradual takeover of MBWS starting in June 2015. Cofepp's position in MBWS' general meeting and on its board of directors therefore progressively increased until Cofepp became the main shareholder of MBWS in 2017. Cofepp's position on MBWS' board of directors gave it access to sensitive information on the commercial and budgetary policy of its competitor, allowing it to "closely monitor MBWS' activities and to interfere in certain decision-making".

Among the evidence demonstrating the existence of decisive influence over MBWS prior to the notification, the FCA also considered the intensification of their commercial and financial relationship from 2016, the direct intervention by Cofepp in MBWS' strategic and operational decisions, including in particular the key role it played in the nomination of MBWS' new CEO appointed from 13 April 2018.

Further, the FCA found that beyond a failure to notify the acquisition of de facto sole control over MBWS, Cofepp completed the merger before having obtained authorisation.

On the basis of two distinct provisions of the French commercial code, and in line with the European Commission's decision-making practice, the FCA sanctioned Cofepp for both a failure to notify and a breach of the standstill obligation. Although it imposed a single fine for both infringements in the present case, the FCA pointed out that the obligation to notify a transaction and the standstill obligation constitute two distinct obligations, which pursue separate objectives, and which can each lead to a fine of up to 5% of the notifying party's turnover in France, which can potentially be increased to take the target's revenue into account.

When determining the quantum of the fine imposed on Cofepp, the FCA took into consideration elements demonstrating the gravity of the infringements committed by the latter. This included the fact that the transaction could only be cleared subject to structural remedies as well as evidence showing Cofepp's awareness of merger control rules and obligations. The FCA also took into account the fact that Cofepp had requested and obtained a settlement procedure, and had thereby accepted not to challenge the FCA's findings.

This decision is a further illustration of the great vigilance exercised for several years by the FCA services regarding breaches of merger control rules. Companies are advised to be particularly attentive in this area, particularly in case of progressive takeovers.