The EU’s second-highest court ruled that Canon’s challenge of its fine was not valid. Photo: Patricia Pitsch/Maison Modern

The EU’s second-highest court ruled that Canon’s challenge of its fine was not valid. Photo: Patricia Pitsch/Maison Modern

The European Union’s general court, based in Luxembourg, on 18 May said it would uphold a €28m fine issued against Japanese multinational Canon in 2019 for breaching EU merger regulation.

Canon had challenged the penalty the EU general court on Wednesday said that it rejects “the applicant’s argument that the interim transaction did not result in the acquisition of control of TMSC and therefore did not constitute an infringement of the standstill obligation and obligation to notify under the merger regulation.”

In 2016, Canon took over Toshiba’s subsidiary Toshiba Medical Systems Corporation (TMSC), using a so-called “warehousing” two-step transaction plan which involved an interim buyer. The latter first bought 95% of TMSC’s share capital for €800, after which Canon bought the remaining 5% for €5.28bn.

This was done before notifying the European Commission. The commission--to ensure the stability of the EU market--has to review all company mergers within the EU and clear them before companies may proceed.

During the second part of the strategy--when the merger had been cleared by the commission--Canon acquired 100% of TMSC by exercising its share options.  The two-step strategy allowed Toshiba to book proceeds ahead of the end of the financial year, in a time where it was struggling, which the court also underlined.

The EU’s second-highest court argues that actions to gain control of TMSC were undertaken prior to the clearance by the commission, and that partial control--as Canon had argued in its challenge--did not exist in this case. It states in its press release: “the commission did not err in classifying the interim transaction as a partial implementation of the concentration.”

Canon had only been cleared in September of 2016, which caused the EU commission to open an investigation against the tech giant and ultimately resulted in the €28m fine.

The commission’s fine--which can go up to 10% of a company’s turnover--will thus remain for Canon to pay, as it has breached EU merger rules. An appeal would take the matter to the European Court of Justice, the EU’s top court. 

It isn’t the first time the Luxembourg-based EU General Court has upheld fines. Only in the institution confirmed that Google would still have to pay the €2.4bn fine it had received for violating competition rules. The court has also overturned other cases in the past, such as in May 2021, when it sided with Amazon in another tax case, saying the company did not have to pay €250m in taxes to Luxembourg.