On 12 April 2022, the French Competition Authority (the “FCA”) imposed a fine of EUR 7 million on Compagnie Financière Européenne de Prises de Participation (“Cofepp”) for an acquisition of de facto control over Marie Brizard Wine & Spirits (“MBWS”), without having notified the transaction or waiting for clearance.
On 3 January 2019, Cofepp notified its intention to acquire sole control of MBWS to the FCA. The transaction was cleared on 28 February 2019, subject to remedies requiring the assignment of trademarks.
In April 2019, considering that it held sufficient evidence suggesting the existence of a control situation before the notification of the transaction, the FCA carried out inspections at Cofepp’s premises.
In its 12 April 2022 decision, the FCA concluded that not only had Cofepp breached its obligation to notify a reportable transaction prior to its completion, but also that Cofepp had breached its obligation to suspend completion pending clearance. This is the first time that the FCA fined a company for both of these two separate infringements in a single decision.
This decision is also noteworthy in that it is a rare case of application of these provisions to an acquisition of de facto control.
At the time of the notification and as of September 2017, Cofepp already held 29% of the capital and voting rights of MBWS, a stake it had progressively acquired over the preceding years. The FCA found that, given the dilution of the other shareholders, this circumstance was likely to offer Cofepp near certainty that the strategic decisions it supported would be approved.
Most importantly, the FCA considered that several practices showed that Cofepp had effectively exercised decisive influence, and hence control, over MBWS prior to the notification, and a fortiori the clearance, of the transaction:
- The FCA first noted that Cofepp had the ability to designate several members of the Board (3 out of 11 between 2017 and 2019) and that it could, accordingly, access commercially sensitive information (in particular quite detailed forecast budgets, sales volumes and business prospects), despite the different mechanisms intended to prevent such exchanges (in particular an obligation to quit the meetings when sensitive information is discussed, as well as provisions of a “clean team” agreement).
- The FCA also noted that Cofepp and MBWS had tight commercial and financial relationships, since Cofepp had become one of the main suppliers of MWBS and had also provided it with significant financial support.
- Finally, the FCA considered that Cofepp had intervened on several occasions in MBWS’s strategic and operational decisions (in particular in the designation of the new CEO, in negotiations with MBWS’s suppliers, in the determination of the budget and commercial policy, etc.).
Cofepp agreed not to contest the charges and settled with the FCA, which imposed a fine of EUR 7 million.
The amount of the fine reflects the fact that the FCA considers such breaches to be “by nature, a serious infringement of economic public order (…), irrespective of the possible effects of the contemplated transaction on competition”. However, the FCA also took into account the knowledge that Cofepp had according to the FCA, that the transaction entailed a risk of harming competition. It also identified an aggravating circumstance in the fact that the “completion of the transaction without notification and authorisation [resulted in] an accumulation of behaviors reflecting a deliberate intent to complete the transaction and a disdain for competition rules”.
The acquisition of (non-controlling) minority shareholdings are not reportable under most merger control regimes, but significant shareholdings between players active in the same industry may create a risk of a progressive acquisition of de facto control. Beyond the specificities of this case, this decision is a useful reminder that it is crucial to closely monitor the evolution of the relationship between a minority shareholder and the company concerned over time, in order to be in a position to file a prior notification as soon as there is a risk that the development of this relationship may qualify as an acquisition of de facto control.