Keywords

Summary



Keywords

1. Competition – Concentrations – Assessment of compatibility with the common market – Standard of proof – Identical in cases where a concentration is approved and where it is prohibited

(Council Regulation No 4064/89, Arts 2(2) and (3), 6(1), 8(1) and 10(6))

2. Competition – Concentrations – Administrative procedure – Statement of objections – Provisional nature

(Arts 81 EC and 82 EC; Council Regulation No 4064/89, Art. 18(3); Commission Regulation No 447/98, Art. 13(2))

3. Competition – Concentrations – Examination by the Commission – Adoption of a decision holding a concentration to be compatible with the common market – Judicial review

(Council Regulation No 4064/89, Art. 18(3))

4. Competition – Concentrations – Administrative procedure – Observance of the rights of the defence – Submission of arguments in reply to the statement of objections – Right of the notifying parties

(Council Regulation No 4064/89, Arts 11, 14, 15, 18(3) and 19; Commission Regulation No 447/98, Arts 3(1) and 13(2))

5. Competition – Concentrations – Assessment of compatibility with the common market – Creation or strengthening of a collective dominant position significantly impeding effective competition in the common market – Criteria

(Art. 81 EC; Council Regulation No 4064/89, Art. 2(3))

6. Competition – Concentrations – Examination by the Commission – Economic assessments – Judicial review – Limits

(Council Regulation No 4064/89, Art. 2)

7. Acts of the institutions – Statement of reasons – Obligation – Scope – Decision applying the rules relating to concentrations between undertakings

(Art. 253 EC; Council Regulation No 4064/89, Art. 8(2))

8. Actions for annulment – Grounds – Infringement of essential procedural requirements – Infringement of the duty to state reasons in relation to a decision authorising a concentration – To be considered of the Court’s own motion

(Arts 230 EC and 253 EC; Council Regulation No 4064/89, Arts 2, 6(1), 8(1) and 10(6))

Summary

1. There is nothing in Article 2(2) or (3) of Regulation No 4064/89 on the control of concentrations between undertakings which states that it imposes different standards of proof in relation to decisions approving a concentration, on the one hand, and decisions prohibiting a concentration, on the other. The prospective analysis called for in relation to the control of concentrations, which consists of an examination of how a concentration might alter the factors determining the state of competition on a given market in order to establish whether it would give rise to a significant impediment to effective competition, makes it necessary to envisage various chains of cause and effect with a view to ascertaining which of them is the most likely. It cannot therefore be inferred from the regulation that there is a general presumption that a notified concentration is compatible with, or incompatible with, the common market.

That interpretation of Regulation No 4064/89 is not invalidated by Article 10(6), which provides that a notified concentration is to be deemed compatible with the common market where the Commission has not taken a decision on the compatibility of that concentration within the prescribed period. That provision is a specific expression of the need for speed, which characterises the general scheme of the regulation and which requires the Commission to comply with strict time-limits for the adoption of the final decision. It is, however, an exception to the general scheme of the regulation, which is laid down in particular in Articles 6(1) and 8(1), according to which the Commission is to rule expressly on the concentrations which are notified to it.

Furthermore, it is true that the decisions of the Commission as to the compatibility of concentrations with the common market must be supported by a sufficiently cogent and consistent body of evidence and that in the context of the analysis of a ‘conglomerate-type’ concentration the quality of the evidence produced by the Commission in order to establish that it is necessary to adopt a decision declaring the concentration incompatible with the common market is particularly important. However, it cannot be deduced from that that the Commission must, particularly where it pursues a theory of collective dominance, comply with a higher standard of proof in relation to decisions prohibiting concentrations than in relation to decisions approving them. The essential function of evidence is to establish convincingly the merits of an argument or, as in the case of the control of concentrations, to support the conclusions underpinning the Commission’s decisions. Furthermore, the fact that an issue of collective dominance does, or does not, arise, cannot of itself have an impact on the standard of proof which applies. The inherent complexity of a theory of competitive harm put forward in relation to a notified concentration is a factor which must be taken into account when assessing the plausibility of the various consequences such a concentration may have, in order to identify those which are most likely to arise, but such complexity does not, of itself, have an impact on the standard of proof which is required.

It follows that, where it has been notified of a proposed concentration pursuant to Regulation No 4064/89, the Commission is, in principle, required to adopt a position, either in the sense of approving or of prohibiting the concentration, in accordance with its assessment of the economic outcome attributable to the concentration which is most likely to ensue.

(see paras 46-52)

2. In proceedings for the control of concentrations, the statement of objections is a procedural and preparatory document which, in order to ensure that the rights of the defence may be exercised effectively, delimits the scope of the administrative procedure initiated by the Commission, thereby preventing the latter from relying on other objections in its decision terminating the procedure in question. It is therefore inherent in the nature of the statement of objections that it is provisional and subject to amendments to be made by the Commission in its further assessment on the basis of the observations submitted to it by the parties and subsequent findings of fact. The Commission must take into account the factors emerging from the whole of the administrative procedure, in order either to abandon such objections as have been shown to be unfounded or to amend and supplement its arguments, both in fact and in law, in support of the objections which it maintains. Thus, the statement of objections does not prevent the Commission from altering its standpoint in favour of the undertakings concerned

It follows that the Commission is not obliged to maintain the factual or legal assessments set forth in the statement of objections. On the contrary, it must give as reasons for its ultimate decision its final assessments based on the situation existing at the time the formal proceedings are closed. Furthermore, the Commission is not obliged to explain any differences with respect to its provisional assessments set out in the statement of objections.

The fact that the Commission is, by contrast to the position under Articles 81 EC and 82 EC, subject to strict time-limits in the control of concentrations, has no effect on the provisional nature of the statement of objections. The effective exercise of the rights of the defence requires that the arguments of the parties to a proposed concentration be taken into account in proceedings for the control of concentrations in the same way as the arguments of the parties affected by proceedings initiated under Articles 81 EC or 82 EC.

(see paras 63-66)

3. The Court of First Instance is not necessarily precluded from using the statement of objections in order to interpret a decision of the Commission relating to the control of concentrations, particularly as regards the examination of its factual basis. That is the case notwithstanding the preparatory and provisional nature of the document and despite the fact that the Commission is not obliged to explain any differences in the final decision by comparison with the statement of objections.

However, the Court of First Instance commits an error of law where, in its examination of the line of argument alleging the existence of manifest errors of assessment, it does not merely use the statement of objections as a basis for verifying the correctness, completeness and reliability of the factual material which underpinned the contested decision, but treats a particular category of conclusions set out in that statement as established, without demonstrating the reasons for which, notwithstanding the final position adopted by the Commission in the contested decision, those elements should be considered as being established beyond dispute. Apart, possibly, from non-controversial elements which, for example, by reason of their empirical and verifiable nature are obvious to such a degree that they cannot be contested, it should not be assumed that assessments made in a statement of objections cannot be modified in the light of the replies to such a statement. It can happen that, in their reply to the statement of objections, the notifying parties will supplement or clarify their ‘case’ regarding the functioning of the market or markets in question in the light of that statement, so that new elements may be added or facts previously examined by the Commission may be put in an entirely different light.

(see paras 69, 73, 75-76)

4. It flows from the rights of defence of the undertakings notifying a concentration that those undertakings have the right to submit in their written and oral hearing following receipt of the statement of objections all material which they consider capable of refuting the Commission’s objections and of leading it to approve their proposed concentration. Accordingly, those parties cannot, as a rule, be criticised for putting forward certain – potentially decisive – arguments, facts or evidence only in their arguments in reply to the statement of objections. It is only with that statement that the parties to the concentration can obtain detailed indications as to the reservations of the Commission in relation to their proposed concentration and as to the arguments and evidence on which it relies in that regard. A line of argument put forward in reply to the statement of objections forms part of the investigation to be undertaken in the formal proceedings and is not submitted out of time, but at the time laid down for that purpose in the procedure for the control of concentrations. Having regard to the requirements of the rights of the defence, such a line of argument cannot be subject to more demanding standards as to their probative value and their cogency than those imposed in relation to the arguments of competitors, customers and other third parties questioned by the Commission in the course of the administrative procedure or in the light of information provided by the notifying undertakings at a previous stage of the Commission’s investigation.

Furthermore, when the Commission examines in its decision the arguments submitted by the notifying undertakings in reply to the statement of objections and takes the opportunity to reconsider its provisional findings in that statement, with a view to possibly departing from them, without making a request for information or undertaking any new market investigations, it does not ‘delegate’ the investigation to the notifying undertakings.

It is true that the Commission is required to examine carefully the arguments of the parties to the concentration as regards their exactitude, completeness and cogency and to disregard them where justified doubts arise. It is also true that, under Article 3(1) of Regulation No 447/98, the notification of the proposed concentration must contain information that is correct and complete and that, in accordance with Article 11 of Regulation No 4064/89, the notifying parties are bound to provide a response to any requests for information by the Commission which is complete, correct and submitted within the periods laid down, failing which, where the information in question was requested by decision, the Commission may, by virtue of Articles 14 and 15 of Regulation No 4064/89, impose fines and periodic penalty payments. None the less, it remains the case that the Commission must, at the stage of the reply to the statement of objections, if it is not to undermine the rights of defence of the notifying parties, apply the same criteria as those applied for the purposes of the examination of the arguments of third parties or those adopted at an earlier stage of its investigation, while being entitled to draw the appropriate consequences in the event that it should transpire at a very advanced stage of the procedure that the notification concerned does not comply with the requirements of Article 3(1) of Regulation No 447/98.

In those circumstances, having regard in particular to the time constraints which arise by virtue of the procedural time-limits laid down by Regulation No 4064/89, the Commission cannot, in principle, be required, in every individual case, to send, following communication of the objections and after hearing the undertakings concerned, requests for extensive information to numerous economic operators shortly before transmitting its draft decision to the Advisory Committee on concentrations, pursuant to Article 19 of Regulation No 4064/89.

(see paras 89, 91-95)

5. In assessing the compatibility of a concentration with the common market, where the creation or strengthening of a collective dominant position is alleged, the Commission is obliged to assess, using a prospective analysis of the reference market, whether the concentration which has been referred to it will lead to a situation in which effective competition in the relevant market is significantly impeded by the undertakings which are parties to the concentration and one or more other undertakings which together, in particular because of correlative factors which exist between them, are able to adopt a common policy on the market in order to profit from a situation of collective economic strength, without actual or potential competitors, let alone customers or consumers, being able to react effectively. Such correlative factors include, in particular, the relationship of interdependence existing between the parties to a tight oligopoly within which, on a market with the appropriate characteristics, in particular in terms of market concentration, transparency and product homogeneity, those parties are in a position to anticipate one another’s behaviour and are therefore strongly encouraged to align their conduct on the market in such a way as to maximise their joint profits by increasing prices, reducing output, the choice or quality of goods and services, diminishing innovation or otherwise influencing parameters of competition. In such a context, each operator is aware that highly competitive action on its part would provoke a reaction on the part of the others, so that it would derive no benefit from its initiative.

A collective dominant position significantly impeding effective competition in the common market or a substantial part of it may thus arise as the result of a concentration where, in view of the actual characteristics of the relevant market and of the alteration to those characteristics that the concentration would entail, the latter would make each member of the oligopoly in question, as it becomes aware of common interests, consider it possible, economically rational, and hence preferable, to adopt on a lasting basis a common policy on the market with the aim of selling at above competitive prices, without having to enter into an agreement or resort to a concerted practice within the meaning of Article 81 EC and without any actual or potential competitors, let alone customers or consumers, being able to react effectively. Such tacit coordination is more likely to emerge if competitors can easily arrive at a common perception as to how the coordination should work, and, in particular, of the parameters that lend themselves to being a focal point of the proposed coordination. Unless they can form a shared tacit understanding of the terms of the coordination, competitors might resort to practices that are prohibited by Article 81 EC in order to be able to adopt a common policy on the market. Moreover, having regard to the temptation which may exist for each participant in a tacit coordination to depart from it in order to increase its short-term profit, it is necessary to determine whether such coordination is sustainable. In that regard, the coordinating undertakings must be able to monitor to a sufficient degree whether the terms of the coordination are being adhered to. There must therefore be sufficient market transparency for each undertaking concerned to be aware, sufficiently precisely and quickly, of the way in which the market conduct of each of the other participants in the coordination is evolving. Furthermore, discipline requires that there be some form of credible deterrent mechanism that can come into play if deviation is detected. In addition, the reactions of outsiders, such as current or future competitors, and also the reactions of customers, should not be such as to jeopardise the results expected from the coordination.

In applying those criteria, it is necessary to avoid a mechanical approach involving the separate verification of each of those criteria taken in isolation, while taking no account of the overall economic mechanism of a hypothetical tacit coordination. In that regard, the assessment of, for example, the transparency of a particular market should not be undertaken in an isolated and abstract manner, but should be carried out using the mechanism of a hypothetical tacit coordination as a basis. It is only if such a hypothesis is taken into account that it is possible to ascertain whether any elements of transparency that may exist on a market are, in fact, capable of facilitating the reaching of a common understanding on the terms of coordination and/or of allowing the competitors concerned to monitor sufficiently whether the terms of such a common policy are being adhered to. In that respect, it is necessary, in order to analyse the sustainability of a purported tacit coordination, to take into account the monitoring mechanisms that may be available to the participants in the alleged tacit coordination in order to ascertain whether, as a result of those mechanisms, they are in a position to be aware, sufficiently precisely and quickly, of the way in which the market conduct of each of the other participants in that coordination is evolving.

Lastly, the investigation of a pre-existing collective dominant position based on a series of elements normally considered to be indicative of the presence or the likelihood of tacit coordination between competitors cannot be considered to be objectionable of itself. However, it is essential that such an investigation be carried out with care and, above all, that it should adopt an approach based on the analysis of such plausible coordination strategies as may exist in the circumstances.

(see paras 120-123, 125-126, 129)

6. The Commission has a margin of assessment with regard to economic matters for the purposes of the application of the substantive rules of Regulation No 4064/89 on the control of concentrations between undertakings, in particular Article 2. It follows that the review by the Community ju dicature of a Commission decision relating to concentrations is confined to ascertaining that the facts have been accurately stated and that there has been no manifest error of assessment. That being so, while the Community judicature must not substitute its own economic assessment for that of the Commission for the purposes of applying the substantive rules of the regulation, that does not mean that it must refrain from reviewing the Commission’s interpretation of information of an economic nature. Not only must the Community judicature establish, among other things, whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it.

(see paras 144-145)

7. The Commission does not infringe its duty to state reasons if, when exercising its power to examine concentrations, it does not include precise reasoning in its decision as to the appraisal of a number of aspects of the concentration which appear to it to be manifestly irrelevant or insignificant or plainly of secondary importance to the appraisal of the concentration. Such a requirement would be difficult to reconcile with the need for speed and the short timescales which the Commission is bound to observe when exercising its power to examine concentrations and which form part of the particular circumstances of proceedings for control of those concentrations. It follows that where the Commission declares a concentration to be compatible with the common market on the basis of Article 8(2) of Regulation No 4064/89 the requirement to state reasons is satisfied when that decision clearly sets out the reasons for which the Commission considers that the concentration in question, where appropriate following modification by the undertakings concerned, does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it. In that regard, while it is true that the Commission is not obliged, in the statement of reasons for decisions adopted under the regulation, to take a position on all the information and arguments relied on before it, including those which are plainly of secondary importance to the appraisal it is required to undertake, it none the less remains the case that it is required to set out the facts and the legal considerations having decisive importance in the context of the decision. The reasoning must in addition be logical and must not disclose any internal contradictions.

(see paras 167-169)

8. Article 10(6) of Regulation No 4064/89 on the control of concentrations between undertakings, the purpose of which is to ensure legal certainty where, exceptionally, the Commission has not adopted a decision within the prescribed period, with the result that the undertakings concerned are free to implement their concentration as soon as approval is deemed to have been given, cannot serve as a basis for an exception to the rule that a decision approving such a concentration may be challenged on the ground of infringement of the duty to state reasons any more than it can form the basis of a general presumption that concentrations are compatible with the common market. That provision, which constitutes an exception to the general scheme of the regulation, which is laid down in particular in Articles 6(1) and 8(1) thereof, according to which the Commission is to rule expressly on the concentrations which are notified to it, whether its decision be a negative or a positive one, must be interpreted and applied in the light of Articles 230 EC and 253 EC. An inadequate statement of reasons in breach of Article 253 EC constitutes an infringement of essential procedural requirements for the purposes of Article 230 EC and is, moreover, a plea which may, and even must, be raised by the Community judicature of its own motion.

(see paras 172, 174-175)