EU Flags Missteps By GE and Others In Filing for Deals -- WSJ

By Natalia Drozdiak Features Dow Jones Newswires

GE and Canon among companies being probed for violating merger strictures

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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 7, 2017).

BRUSSELS -- The European Union's antitrust watchdog accused General Electric Co., Japan's Canon Inc. as well as German pharmaceuticals group Merck KGaA and Sigma-Aldrich Corp. of breaching the bloc's merger rules.

The moves come as the EU is trying to drive home to companies the urgent need to submit accurate and truthful information when registering a deal for antitrust review with Brussels. The EU's competition chief told The Wall Street Journal in March that her department is reviewing a handful of recent merger clearances on suspicions companies misled investigators in securing approval.

The EU said General Electric may have misled regulators when the EU was reviewing its $1.65 billion deal with LM Wind Power, while Merck may have done so with its $17 billion acquisition of Sigma-Aldrich, a U.S. supplier of laboratory testing materials.

Japan's Canon Co. may have violated rules by implementing its deal with Toshiba Corp.'s medical-systems unit valued at Yen665.5 billion ($5.9 billion) before registering the acquisition with the EU, the regulator said.

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The EU's clearances for all three deals remain valid, the EU said. But if in its formal investigations the regulator finds the companies did in fact provide incorrect or misleading information, the companies can be fined up to 1% of global revenue. In Canon's case, if the EU finds the company jumped the gun with implementing the merger, it could be fined as high as 10% of global revenue.

"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," said EU antitrust chief Margrethe Vestager.

The EU said GE initially failed to provide information regarding research and development activities and that information was necessary to properly assess the future position of GE and the competitive landscape on the wind-turbine market, the watchdog said. GE re-registered its deal in February to reflect the future project, which had not been notified in the initial registration two weeks earlier, the EU said.

GE said it believed the company acted in good faith and that there was no intent to mislead. "When informed of the EC's concerns, we acted quickly and openly to resolve the issue," said GE spokesman James Healy.

In the deal between Merck and Sigma-Aldrich, the companies failed to provide important information about an innovation project relevant to laboratory chemicals at the heart of the EU's analysis of the deal.

"Had this project been correctly disclosed to the commission, it would have had to be included in the remedy package," the EU said, referring to a business the companies had to divest to win approval for a deal. The viability of the divested business was impaired as a result, the EU said.

The buyer of the divested business, Honeywell International Inc., received the relevant technology only a year later after Merck agreed to license it to them, the EU said.

In its investigation into Canon's deal, the EU said it was concerned the company used a two-step transaction structure involving an interim buyer, which essentially allowed it to acquire Toshiba's unit before obtaining the relevant merger approvals.

Japanese regulators last year warned Canon that the way it structured the deal potentially violated the law, but also said the deal could go ahead.

Canon said it had received the EU's so-called statement of objections announcing the formal investigation, adding it would respond to the EU in due course.

Thursday's announcement follows the EU's decision in May to fine Facebook Inc. EUR110 million ($124 million) for providing incorrect information or misleading authorities over the acquisition of its messaging unit WhatsApp. The EU said Facebook inaccurately claimed during the merger review in 2014 that it couldn't routinely match Facebook and WhatsApp user accounts -- something the company started doing two years later when it began combining user data across the services. Facebook said the errors in the filings weren't intentional.

At the time, the EU also opened an investigation into a previously cleared merger between Dutch telecommunications company Altice NV and PT Portugal SGPS SA. The EU accused Altice of implementing its merger announced in 2014 before formally logging the deal for review with EU authorities. Altice said it disagreed with the commission's preliminary findings.

Under the EU's merger rules, companies have to abide by strict and tight deadlines to submit information requested by the regulator, something lawyers say can be a challenge if companies have to dig up documents or internally cross-check information with different departments.

The EU says all the deals currently under renewed scrutiny will keep their clearance. However, in more severe cases, the EU could revoke a merger clearance if more accurate information would have led to a different decision.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

July 07, 2017 02:47 ET (06:47 GMT)