In 2019, the European Commission imposed a € 28 million fine on Canon for closing its 2016 acquisition of Toshiba Medical Systems without complying with the EC’s prior notice requirements. The parties attempted to structure their deal to avoid pre-merger notice filings in the EU and in the US, and that got them into hot water with US and EU authorities. This Wilson Sonsini memo says that the EU General Court upheld the EC’s decision and its hardline approach to gun jumping, but this excerpt says that there remain some important unanswered questions:
– First, the judges’ interpretation de facto expands the filing obligation beyond the (easily measurable) transfer of control. It already requires the filing of preliminary transactions with a mere “direct functional link” to the implementation of a final transaction. At the same time, however, the judgment does not provide bright-line guidance on when two transactions share a “direct functional link” or what it regards as a “transaction” in this context.
– Second, the decision begs the question of whether there is any solution for firms that find themselves in Toshiba’s predicament. In theory, merging parties can obtain an exemption from the EC from the merger notification regime in exceptional circumstances. In practice, however, this route has been of little value given that the information requested often comes close to what is required for a full merger notification. In light of the GC’s ruling in Canon/TMSC, perhaps the EC will become more flexible in exceptional cases.
The memo says that the Court’s decision is consistent with other recent decisions that demonstrate the EC’s tough stance on gun-jumping, including its September 2021 decision to affirm the €124.5 million fine imposed on Altice for prematurely exercising control of PT Portugal.
– John Jenkins