France: Cofepp has been fined 7 million euros for acquiring control of Marie Bizard Wine & Spirits without previously notifying the transaction or awaiting the decision

Cofepp was fined (i) for having acquired control of MBWS without notifying the operation to the Authority and (ii) for having continued and strengthen its decisive influence between the notification (finally made later) and the decision of the Authority. This is the first time the French Competition Authority has sanctioned these two infringements in the same decision.

This decision usefully clarifies the tipping point between absence of control and control; and therefore, on the risk of a sanction for failure to notify and early completion of the operation.

• Failure to notify: companies should pay particular attention when gradually acquiring influence on the management of a company

An operation leading to a change of control must be notified when the turnover thresholds mentioned in article L.430-2 of the French Commercial Code are met. According to article L.430-8 of the same code, any breach of this obligation is sanctioned by a fine of up to 5% of the turnover (excluding tax) achieved in France during the last fiscal year plus, if applicable, the turnover achieved in France during the same period by the acquired target company.

In June 2015, Cofepp undertook a gradual merger with MBWS by gradually increasing its shareholding and becoming its main shareholder. In concrete terms, Cofepp had access to sensitive information about the company’s commercial and budgetary policies, interfered in the company's strategic and operational decisions, and even played a determining role in the choice of its general manager.

The Authority used a series of indicators to assess whether Cofepp had a decisive influence and exercised a de facto control:

• Significative position in the share capital
• Exchange of sensitive information
• Strengthening of commercial and financial relations
• Appointment of the new managing director
• Control of the commercial and budget policy: negotiation with suppliers in place of MBWS managers
• Participation to operational management’s decisions.

• Early realization: violation of the standstill obligation

According to article L. 430-4 of the French Commercial Code, companies are subject to an obligation not to implement the merger until the Authority has cleared the transaction. Article L. 430-8, II of the same code sanctions any breach of this obligation which ensures that a merger does not begin to produce its effects on the market concerned before the Authority has been able to assess them.

In January 2019, Cofepp finally notified the operation but continued to exercise and strengthen its decisive influence before the Authority’s decision (the undertakings have exchanged sensitive information and Cofepp also gave instructions to the CEO and the Chairman of the Supervisory Board of MBWS on various projects).

• Criteria of the amount of the fine

The Decision underlines that the obligation to notify and the standstill obligation “are two distinct obligations, pursuing autonomous objectives” sanctioned by two different fines. In addition, to determine the fines amount the FCA points out an aggravating circumstance resulting of an “accumulation of behaviors reflecting a deliberate will”.

Cofepp, which did not contest the practices, benefited from the settlement procedure, and was fined 7 million euros which represents almost 1% of its turnover.

The full decision of the French Competition Authority is available here (in French)

For more information contact Thomas Oster and Claire Burlin.