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Failure to duly notify of intent to take over the company

Decision of the European Commission in the case of Electrabel (COMP/M.4994)

On 10 June 2009 the European Commission imposed a fine of 20 million EUR on the company Electrabel since it did not notify the Commission during its acquisition of Compagnie Nationale du Rhône (hereinafter "CNR") of this intention and thus failed to fulfil its obligations under Council Regulation No 139/2004 on the control of concentrations between undertakings. This rule requires that the Commission be informed of the merger in advance in case those companies fall within the scope of the Regulation. The Commission may investigate whether a significant infringement of free competition within the European Union occurred by this merger.

The Commissioner for Competition Neelie Kroes said in this connection that the breach of the obligations arising from the above Regulation should be regarded as a very serious breach of competition rules.

This case is particularly worrying because, in the view of the Commission, the merger did not even cause infringement of free competition, and the company was fined for failure to notify its intention the Commission in time. In fact, Electrabel informed the Commission of its intention to take over the company CNR on 26 March 2008. On 29 April 2008, Commission gave its consent, together with the finding that a significant infringement of free competition in the market would not occur by this merger.

However the Commission left the question open on when the takeover of CNR had in fact occurred. An investigation later found that the takeover had taken place in December 2003 and that it had been more than 4 years before the Commission was informed of the intention to take over. At the end of 2003, the company Electrabel bought nearly 50% of the shares and thus became the largest shareholder of the company; in the view of the Commission, Electrabel took effective control of CNR because the remaining shares were widely dispersed and the participation of their owners at general meetings - and thus their percentage of participation in decision-making in CNR – were low.

The Commission stated in respect of the large amount of the fine that the company Electrabel is a major multinational corporation that has a lot of experiences with the mergers and therefore should have been aware that the merger, which occurred in 2003, would result in the assumption of control over CNR, which required prior notification in accordance with the Regulation on the control of concentrations between undertakings.

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