This case shows how important it is that information disclosed to the competition authorities in connection with a merger is correct and fully answers the authorities’ questions.
MERGER ENDED IN POLICE REPORT
The case started in October 2014 when Metro Cash & Carry Danmark ApS and Euro Cater A/S addressed the Competition and Consumer Authority to have Euro Cater’s take-over of two Metro stores approved. The parties requested a speedy procedure as Metro would have to close its stores in Denmark if the merger was not approved. On this basis, the Competition and Consumer Authority started its procedure even though the merger had not been finally notified.
On 17 October 2014, the Competition and Consumer Authority asked a number of questions, including a question to Metro as to whether other purchasers had been interested in taking over all or parts of the company. This kind of information is requested in order to assess whether the merger will affect competition. The question was central as Metro had acknowledged that the company was to leave the market, and the Competition and Consumer Authority therefore wished to investigate the consequences.
In this connection, Metro stated that it was negotiating with two other potential purchasers. However, based on a newspaper article, the Competition and Consumer Authority became aware that Metro had failed to inform about another potential purchaser which had also shown interest in the company.
In November 2014, the Competition and Consumer Authority stated that the merger could not be approved quickly as the merger could impede effective competition significantly. The parties therefore gave up the merger.
In January 2015, the Competition and Consumer Authority filed a police report with the Public Prosecutor for Serious Economic Crime ("SØK") claiming that Metro had withheld important information on the merger.
CONVICTED OF WRONGFUL WITHHOLDING OF INFORMATION
Before the Court of Glostrup, SØK submitted that Metro had violated section 23 (1), paragraph 12 of the Competition Act concerning disclosure of incorrect or misleading information of importance to the matter. Metro had not informed about a specific expression of interest when answering the two questions on the interest in taking over all or parts of the company.
Representatives from the Competition and Consumer Authority gave statements during the proceedings disclosing that “expressions of interest” cover all kinds of contact, including contact prior to the actual negotiations and the signing of an agreement. Consequently, telephone calls or meetings which do not result in anything further are also covered by the concept.
The expression of interest which Metro did not inform about consisted of a number of initial discussions with a potential purchaser which Metro had addressed. These discussions ended with a brief email from the potential purchaser with a non-binding offer. It appears from the statements that Metro in Denmark did not consider this to be a realistic or serious offer relevant to mention. In addition, there seemed to have been some miscommunication between Metro in Denmark, which had conducted the discussions that ended in the non-binding offer, and Metro in Germany, which handled the merger procedure.
The Court of Glostrup found that Metro was guilty in accordance with the indictment and had acted contrary to the Competition Act by withholding information on the potential purchaser. The Eastern High Court upheld the district court's ruling on 17 November 2017.
Metro appealed against the judgment to the High Court claiming that Metro has answered the questions from the Competition and Consumer Authority correctly irrespective of the fact that Metro had failed to inform about the request from the other purchaser. Because this request was irrelevant and not serious.
Compared to the objective of the merger control, the High Court found that the request was of such scope and nature that information thereon ought to have been provided. The High Court further found that the duty of disclosure under the Competition Act in relation to registration of merger implies that the answering party must provide complete and exhaustive answers to the Competition and Consumer Authority’s questions. It is therefore not up to this party, but to the Competition and Consumer Authority, to assess the importance of the information. On this basis, the Eastern High Court upheld the district court’s judgment.
THE IMPORTANCE OF THIS CASE TO OTHER COMPANIES
This case shows that companies must be thorough and careful when answering questions from competition authorities. This applies especially in connection with a merger control where the procedure may subject to some time pressure. A merger procedure therefore requires that the company has internal procedures that ensure that all information which may be relevant to the answers is communicated correct and quickly to the team handling the merger. Together with the advisor in charge of the dialogue with the authorities, this team can then assess whether the information should be included in the answers.
The prohibition against incorrect and misleading information to the competition authorities does not only apply in connection with mergers. The duty of disclosure is therefore relevant in connection with any dialogue with the competition authorities.