EU Blasts Companies Over Merger Shenanigans

In this June 12, 2017, file photograph, the General Electric logo appears above a trading post on the floor of the New York Stock Exchange. EU authorities are accusing General Electric, drugmaker Merck and electronics manufacturer Canon of violating European rules to push through mergers or acquisitions. The Commission is not seeking to annul the mergers, but threatening hefty fines if further investigation confirms wrongdoing. (AP Photo/Richard Drew, File)

(CN) – The European Commission on Thursday deepened its probe into three separate mergers involving Merck, General Electric and Canon, claiming the companies violated EU merger protocol during their acquisitions of other companies.

According to the commission, the investigations will have no impact on its approval of Merck’s takeover of Sigma-Aldrich, General Electric’s acquisition of LM Wind or Canon’s purchase of Toshiba Medical Systems.

The commission says Germany-based Merck and Sigma-Aldrich provided “incorrect or misleading information” to regulators during the notification process. While the commission cleared Merck’s acquisition of Sigma-Aldrich on the condition that the companies divest some of the latter’s assets to satisfy competition concerns, the regulator says the companies withheld information about an “innovation project” that was closely related to what they were required to divest – and something that would have been included in the conditions of the takeover.

Merck has since agreed to license the technology to Honeywell, which bought the divested business, the commission said. However, the commission noted that happened nearly a year after the acquisition and only because a third party told regulators about the innovation project.

Meanwhile, the commission says U.S.-based General Electric initially withheld vital information about its research and development of a product on the wind-turbine market when the company notified regulators of its plan to buy LM Wind. Although GE pulled its original notification and resubmitted 11 days later with information about the planned product, the commission said the missing information made its assessment of the GE merger and a separate transaction involving Siemens’ takeover of Gamesa more difficult.

Finally, the commission says Canon began its acquisition of Toshiba Medical Systems before notifying regulators of its plan or getting approval for it. The commission says Canon got an interim buyer to buy 95 percent in the share capital of Toshiba Medical for the bargain price of $913, then paid $6 billion for the remaining 5 percent and share options over the interim buyer’s stake.

After notifying the commission of the takeover and obtaining approval, Canon exercised its share options and gained 100 percent control of Toshiba Medical, the commission says.

If the commission finds what it believes happened in each case did in fact happen, Merck and GE face fines of up to 1 percent of their annual worldwide revenue. Canon faces a steeper penalty – 10 percent of its annual worldwide turnover – if the commission’s suspicions are true.

“We need companies to work with us to ensure fast and predictable merger control, to the benefit of both companies and consumers. But we can only do our job well if we can rely on cooperation from the companies concerned – they must obtain our approval before they implement their transactions and the information they supply us must be correct and complete,” competition commission Margrethe Vestager said in a statement.

Thursday’s action by the commission, called a statement of objections, allows the companies at issue to examine the commission’s investigation file, reply to the accusations and request an oral hearing on the matter.

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