Commission, July 23, 2014, No M.7184

I. INTRODUCTION

(1) Marine Harvest ASA ('Marine Harvest') is a Norwegian seafood company listed on the Oslo and the New York Stock Exchanges which produces farmed salmon and white halibut and offers a wide range of value added products of various seafood species.

(2) Morpol ASA ('Morpol') is a Norwegian producer and processor of salmon. It produces farmed salmon and offers a broad range of value added salmon products, such as smoked, marinated, fresh and frozen salmon products.

(3) On 14 December 2012, Marine Harvest entered into a Share Purchase Agreement with Friendmall and Bazmonta for the sale of the 48,5 % shareholding these companies owned in Morpol. Both companies were previously controlled by one individual, Mr Jerzy Malek, the founder and former CEO of Morpol.

(4) The closing of this transaction took place on 18 December 2012. This acquisition is referred to as the 'December 2012 Acquisition'.

(5) On 15 January 2013 Marine Harvest submitted a mandatory public offer for the remaining shares in Morpol pursuant to Norwegian law. This public offer was successful.

(6) On 21 December 2012, three days after closing of the December 2012 Acquisition, Marine Harvest contacted the Commission for the first time about the transaction by means of a Case Team Allocation Request.

(7) On 5 March 2013, Marine Harvest submitted a first draft Form CO which focused on an overall market encompassing farming, primary processing and secondary processing of salmon of all origins.

(8) Between March and June 2013 the Commission sent Marine Harvest several requests for information in order to gather specific market information on potential separate markets including the market for the farming and primary processing of Scottish salmon as well as the internal documents that Marine Harvest and Morpol prepared in connection with the transaction. It was only in late July 2013 that the Form CO could be considered complete.

(9) On 9 August 2013, the transaction was formally notified to the Commission.

(10) On 30 September 2013, the Commission adopted a conditional clearance decision which approved the concentration subject to compliance with their commitments.

(11) In its decision, the Commission concluded that the December 2012 Acquisition had already conferred upon Marine Harvest de facto sole control over Morpol, and anticipated that an infringement of the stand-still obligation and the notification requirement could not be excluded.

(12) The Commission also anticipated that it might examine in a separate procedure whether a sanction under Article 14(2) of the Merger Regulation would be appropriate.

II. THE INFRINGEMENT

(13) Pursuant to Article 14(2)(a) and (b) of the Merger Regulation, '(t)he Commission may by decision impose fines not exceeding 10 % of the aggregate turnover of the undertaking concerned within the meaning of Article 5 on the persons referred to in Article 3(1)(b) or the undertakings concerned where, either intentionally or negligently, they:

(a) fail to notify a concentration in accordance with Articles 4 or 22(3) prior to its implementation, unless they are expressly authorised to do so by Article 7(2) or by a decision taken pursuant to Article 7(3).

(b) implement a concentration in breach of Article 7'.

(14) The implementation of the present concentration prior to the notification and clearance therefore constitutes an infringement of the notification requirement in Article 4(1) and the standstill obligation in Article 7(1) of the Merger Regulation.

Acquisition of control

(15) The Commission considers that the acquisition of a 48,5 % stake in Morpol in December 2012 conferred to Marine Harvest sole control over Morpol.

(16) On the basis of the attendance rate of the ordinary and extraordinary general meetings of Morpol in the last three years prior to the acquisition by Marine Harvest and the wide dispersion of the remaining shares, the Commission considers that Mr Malek exercised sole de facto control over Morpol at the time of the sale of his stake in Morpol to Marine Harvest.

(17) Through the acquisition of the 48,5 % shareholding in Morpol, Marine Harvest acquired the same rights and possibilities to exercise decisive influence on Morpol which were previously enjoyed by Mr Malek.

Early implementation

(18) The Commission considers that the concentration was implemented at the time of the closing of Share Purchase Agreement with Friendmall and Bazmonta on 18 December 2012.

Non-applicability of Article 7(2) of the Merger Regulation

(19) The Commission considers that the transaction does not benefit from the exemption under Article 7(2) of the Merger Regulation. This provision relates only to the acquisition of control by public offer or successive purchases of securities from various sellers whereas in the present case control was acquired in one step from just one seller.

(20) The Commission considers therefore, in line with its precedents, that Article 7(2) of the Merger Regulation is not intended to apply to this type of situation, where the procurement of a significant block of shares is carried out from just one seller and where it is straightforward to establish, on the basis of votes cast at previous ordinary and extraordinary general meetings, that this block of shares will confer de facto sole control over the target company.

III. THE DECISION TO IMPOSE FINES

(21) The Commission considers that the procedural infringements warrant a significant fine on the basis of the following facts and elements.

Nature of the infringement

(22) The Commission considers that any infringement of Articles 4(1) and 7(1) of the Merger Regulation is, by nature, a serious infringement, because such behaviour undermines the effectiveness of the Merger Regulation.

Gravity of the infringement

(23) Marine Harvest's conduct was at least partially based on defective legal advice. The company had received advice according to which Marine Harvest may take over the shares in Morpol, but cannot vote for the share until the transaction is cleared by the Commission. The Commission takes the view that the existence of mistaken legal advice indicates that Marine Harvest's infringement has not been intentional but rather negligent.

(24) In any event, Marine Harvest's conduct was negligent, because (i) Marine Harvest is a large European company with significant previous experiences in merger proceedings, (ii) Marine Harvest obtained legal advice at a very late stage, i.e. on the day of the closing of the deal, (iii) the existence of a precedent on the interpretation of Article 7(2) Merger Regulation (Yara/Kemira Growhow) should have led Marine Harvest to the conclusion that its conduct was most likely not covered by the exception of Article 7(2) of the Merger Regulation and (iv) Marine Harvest had already been fined for early implementation at national level in the context of its acquisition of Fjord Seafood.

(25) Moreover, the Commission notes that - on substance - Marine Harvest's acquisition of Morpol raised serious doubts as to its compatibility with the internal market. In this context, the Commission considers that the implemented merger could have led to a negative impact on competition in the possible market for Scottish salmon for the whole duration of the infringement. As it is particularly important to ensure that a transaction which is potentially problematic is not implemented before scrutiny, the presence of a potential damage caused by the merger is likely to render the infringement even more serious.

The duration of the infringement

(26) The infringement to Article 4(1) is an instantaneous infringement, which has no specific duration.

(27)

As regards the duration of the infringement to Article 7(1), the Commission considers the pre-notification period should be included in the period of the infringement of Article 7(1) of the Merger Regulation, in the light of the potential competitive harm caused by the implementation of the transaction before clearance and the fact that Marine Harvest's behaviour has not been sufficiently forthcoming in the course of the pre-notification phase to justify the exclusion of the pre-notification period from the overall duration of the infringement. As such, Marine Harvest's infringement to Article 7(1) covered a period of nine months and 12 days.

Mitigating and aggravating circumstances

(28) The Commission considers that certain mitigating circumstances should be taken into account when setting the fine. Firstly, Marine Harvest has not exercised its voting rights in Morpol after having acquired control over it. Secondly, Marine Harvest informed the Commission by way of the Case Team Allocation Request shortly after the closing of the December 2012 Acquisition.

(29) There are no aggravating circumstances in this case.

IV. ASSESSMENT

(30) It is concluded that Marine Harvest has negligently infringed Articles 4(1) and 7(1) of the Merger Regulation. Marine Harvest's abstention from the exercise of voting rights at Morpol's general shareholders' meetings and the ring-fence of Morpol's activities are mitigating circumstances, as well as Marine Harvest's willingness to promptly inform the Commission of its acquisition of Morpol. Finally, it can be noted that there are no aggravating circumstances in this case.

(31) When imposing penalties, the Commission takes into account the need to ensure that fines have a sufficiently deterrent effect. In the case of an undertaking of the size of Marine Harvest, the amount of the penalty must be significant in order to have a deterrent effect. This is even more the case when the transaction which has been implemented before clearance raised serious doubts as to its compatibility with the internal market.

(32) It is concluded to impose fines under Article 14(2) of the Merger Regulation of EUR 10 000 000 for the infringement of Article 4(1) of the Merger Regulation, and of EUR 10 000 000 for the infringement of Article 7(1) of the Merger Regulation.

FOOTNOTES:

(1) OJ L 24, 29.1.2004, p. 1.