On October 22, 2019, the Commission published its decision to fine Canon a total of €28 million for failure to file its acquisition of Toshiba Medical Systems Corporation (“TMSC”). Canon acquired TMSC via a warehousing arrangement, which involved a special purpose vehicle (“SPV”) that held most of TMSC’s shares pending merger control approval.
Canon’s acquisition of TMSC
In early 2016, Toshiba decided to sell its wholly owned medical business, TMSC, in an attempt to overcome serious financial difficulties. Toshiba organized an accelerated bidding process in which Canon acquired TMSC through a two-step warehousing transaction:
- Step 1: On March 17, 2016, Canon acquired one non-voting Class-B share (corresponding to 5% of the share capital) and a call option to acquire all of TMSC’s shares after obtaining relevant antitrust approvals. Upon agreeing on the call option, Canon paid Toshiba the full purchase price for On the same day, an interim buyer, which was created in the form of an SPV specifically for the transaction, acquired 20 Class-A voting shares from Toshiba, representing the remaining 95% of TMSC’s share capital.
- Step 2: On December 19, 2016, after having obtained all merger control clearances, Canon exercised its call option and completed the transaction by acquiring the remaining 95% of TMSC’s shares from the
The Commission’s assessment
On August 12, 2016, almost five months after completion of Step 1, Canon notified to the Commission its acquisition of control over TMSC. In its Form CO, Canon explained that its notification should be understood as covering both steps. The decision also reports that immediately after Step 1 and before submitting the Form CO, the Commission had already received an anonymous complaint suggesting that Canon had breached EU merger control rules.
The Commission found that Step 1 already constituted a partial implementation of the concentration by which Canon acquired lasting control over TMSC. Relying on the Court of Justice’s recent judgment in Ernst & Young, the Commission recalled that a concentration is implemented “by a transaction, which in whole or in part, in fact or in law, contributes to the change in control of the target undertaking.” The Commission relied in particular on the following factors:
- Transaction agreements and internal documents, which showed that the sole purpose of the SPV was to expedite the closing of the acquisition due to Toshiba’s financial
- After the implementation of Step 1, Canon could singlehandedly determine the identity of TMSC’s acquirer, because Canon could either exercise its call option after receiving the necessary antitrust approvals, or in the absence of antitrust approvals, sell the call option to an acquirer of its
- Canon irreversibly paid the full purchase price for the acquisition of TMSC to Toshiba at Step As such, Canon bore the economic risk of the overall transaction upon closing Step 1.
- Canon was closely involved in selling TMSC’s voting shares to the SPV by proposing and commenting on the agreement between Toshiba and the
Double jeopardy concerns
The Commission imposed two separate fines on Canon: (i) €14 million for implementing a concentration before notifying to the Commission; and (ii) €14 million for implementing a concentration before the Commission’s clearance (in violation of the “standstill obligation”). In the recent non-binding opinion in the Marine Harvest case, which was issued only three months after the Commission’s decision in Canon, the European Court of Justice’s Advocate General Tanchev proposed that only a single fine may be imposed on companies that close a transaction before notifying it to the Commission.
According to AG Tanchev, imposing two fines for “one and the same” conduct violates the principle of concurrent offences as enshrined by international law and as codified by Member States’ domestic laws. Should the European Court of Justice follow AG Tanchev’s opinion, it would put in question the legality of double fines imposed in Canon/Toshiba.
Lastly, the Commission emphasized that Canon could have asked for a derogation from the standstill obligation under Article 7(3) of the Merger Regulation. The Commission has previously granted derogations for similar reasons in cases such as Ryanair/Lauda Motion and Orkla/Elkem.
 Canon/Toshiba Medical Systems Corporation (Case COMP/M.8179), Commission decision of June 17, 2019 (“Decision”). The issuance of this decision was previously reported in our June 2019 edition of the EU Competition Law Newsletter.
 Ernst & Young P/S v. Konkurrencerådet (Case C-633/16) EU:C:2018:371, para. 59.
 Marine Harvest v. European Commission (Case C-10/18 P), Opinion of Advocate General Tanchev, EU:C:2019:795.
 Decision, para. 177.
 Ryanair/LaudaMotion (Case COMP/M.8869), Commission decision of July 12, 2018.
 Orkla/Elkem (Case COMP/M.3709), Commission decision of March 4, 2005.