The European Commission has fined Canon €28 million for implementing its acquisition of Toshiba Medical Systems Corporation (TMSC) before notification to and approval by the Commission, in breach of EU Merger control rules.

Commissioner Margrethe Vestager, in charge of competition policy, said: "Companies have to respect our competition rules and procedures. They are obliged to notify and wait for our approval before a merger can go ahead. Canon structured a transaction to circumvent these obligations when they acquired TMSC. This is a procedural breach of our merger review so we are fining Canon €28 million. Our merger assessment and decision-making depends on the Commission being sure that companies are not jumping the gun and implementing mergers without our approval.”

EU merger rules require that merging companies notify planned mergers of Union dimension for review by the Commission prior to their implementation and do not implement them until notified to and cleared by the Commission. The notification requirement safeguards the Commission's ability to detect and investigate mergers.

On 12 August 2016, Canon notified the European Commission of its plan to acquire Toshiba Medical Systems Corporation (“TMSC”) from Toshiba. The transaction was unconditionally cleared by the Commission on 19 September 2016.

For the acquisition, Canon used a so-called “warehousing” two-step transaction structure involving an interim buyer.

As a first step, the interim buyer acquired 95% in the share capital of TMSC for €800, whereas Canon paid €5.28 billion for the remaining 5% of the shares and share options over the interim buyer's stake. This first step was carried out prior to notification to or approval by the Commission.

As a second step, following approval of the merger by the Commission, Canon exercised its share options, acquiring 100% of the shares of TMSC.

In July 2017, the Commission addressed a Statement of Objections to Canon detailing its concerns that, through the transaction structure put in place for its acquisition of TMSC, Canon had implemented the acquisition before notifying it to the Commission and obtaining approval under EU merger control rules.

In November 2018, the Commission addressed a Supplementary Statement of Objections to Canon, complementing the preliminary view taken in the Statement of Objections and reflecting developments in the case law.

In today's decision, the Commission confirms its preliminary view that Canon breached the EU Merger Regulation and fines the company €28 million.

According to the EU Merger Regulation, the Commission can impose fines of up to 10% of the aggregated turnover of companies that intentionally or negligently, breach the notification and/or the standstill obligations.

"The Commission's decision marks the end of an investigation lasting more than three years during which the Commission assessed whether Canon had acquired any influence or control over TMSC prior to obtaining merger clearance. Canon sincerely and fully cooperated with the European Commission at all times during the proceedings, and the Commission acknowledges that Canon did not acquire control over TMSC before the Commission had cleared the transaction for lack of any competition concerns. Nevertheless, relying on a novel concept of "preparatory acts" or "partial implementation," the Commission alleges that Canon violated the EU Merger Control Regulation, although the transaction structure was in line with existing and recently reconfirmed jurisprudence of the European courts," Canon said.

Canon disagrees with the European Commission's legal assessment and will appeal the decision in the General Court of the European Union in Luxembourg.