Keywords

Summary



Keywords

1. Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them

(Art. 230, fourth para., EC)

2. Actions for annulment – Interest in bringing proceedings

3. Competition – Concentrations – Examination by the Commission

(Council Regulation No 4064/89)

4. Competition – Concentrations – Assessment of compatibility with the common market – Commission’s obligation to assess the competition problems created by a merger on all the markets which may be affected

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

5. Competition – Concentrations – Assessment of compatibility with the common market – Concentration capable of creating competitive advantages that may ultimately benefit consumers

(Council Regulation No 4064/89)

6. Competition – Concentrations – Examination by the Commission – Definition of the relevant market – Criteria

(Commission Notice 97/C 372/03, point 13)

7. Competition – Concentrations – Assessment of compatibility with the common market – Taking into account of existing and potential competition

8. Competition – Concentrations – Examination by the Commission – Adoption of a decision finding a concentration to be compatible with the common market without initiation of the phase II procedure

9. Competition – Concentrations – Examination by the Commission – Commitments given by the undertakings concerned of such a kind as to render the notified transaction compatible with the common market

(Commission Notice 2001/C 68/03, point 17)

10. Competition – Concentrations – Assessment of compatibility with the common market – Retention by the parties to a merger of a sizeable share of the markets affected

11. Competition – Concentrations – Examination by the Commission – Commitments given by the undertakings concerned of such a kind as to render the notified transaction compatible with the common market – Acceptability of commitments that are both behavioural and structural

12. Competition – Concentrations – Examination by the Commission – Commitments given by the undertakings concerned of such a kind as to render the notified transaction compatible with the common market – Form

(Council Regulation No 4064/89, Art. 6(2))

Summary

1. Under the fourth paragraph of Article 230 EC, any natural or legal person may institute proceedings against a decision addressed to it or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to it.

A Commission decision declaring a concentration compatible with the common market, in permitting it to be put into effect immediately, is capable of bringing about an immediate change in the state of the relevant markets. As the intention of the parties to the merger in question to bring about such a change is not in doubt, the undertakings engaged in the relevant market or markets can, on the date of that decision, be certain of an immediate or imminent change in the state of the market and, therefore, are directly concerned by that decision within the meaning of the provision referred to above.

As to whether such a third party is also individually concerned by such a decision depends, on the one hand, on that third party’s participation in the administrative procedure and, on the other, on the effect on its market position. Whilst, taking into account the regular contact with numerous undertakings which the examination of a merger requires, mere participation in the procedure is not sufficient to establish that a third party is individually concerned, active participation in the administrative procedure must be taken into account to establish, in conjunction with other specific circumstances, the admissibility of the action.

Therefore, a third party which not only took an active part in the administrative procedure but is also one of the main competitors of one of the parties to the merger and competes on one of the markets on which those parties operate is individually concerned by a decision declaring a concentration compatible with the common market.

(see paras 30-32, 35-38)

2. An action for annulment brought by a natural or legal person is admissible only if the applicant has an interest in having the contested measure annulled. That interest, which must be vested and present and is evaluated as at the date on which the action is brought, exists only if the action, if successful, is likely to procure an advantage for the party who has brought it. It exists with respect to an undertaking which contests a Commission decision authorising a concentration between two of its competitors which may affect its commercial situation.

(see paras 40-41)

3. Review by the Community judicature of complex economic assessments made by the Commission in the exercise of the power of assessment conferred on it by Regulation No 4064/89 on the control of concentrations between undertakings is limited to ensuring compliance with the rules governing procedure and the statement of reasons, as well as the substantive accuracy of the facts and the absence of manifest errors of assessment or misuse of powers.

(see para. 44)

4. When assessing the compatibility of a concentration with the common market, the Commission is required, pursuant to Article 2 of Regulation No 4064/89, on the control of concentrations between undertakings to examine the effects on competition of such a concentration in the markets in which there is a risk of the creation or strengthening of a dominant position as a result of which competition would be significantly impeded. It is possible that a concentration may have such an effect in markets in which there is no overlap between the activities of the parties to such a merger. Although its analysis of the effect on competition may be oriented, in part, towards the concerns raised by the third parties consulted during the administrative procedure, the Commission is bound, even in the absence of any express request by such third parties, but where there are serious indications to that effect, to assess the competition problems created by the merger on all the markets which may be affected by it.

Nevertheless, where it is alleged that the Commission failed to have regard to a possible competition problem on the markets on which the activities of the parties to a merger do not overlap, it is for the applicant to adduce serious evidence of the genuine existence of a competition problem which, by reason of that effect, should have been examined by the Commission. In order to discharge that burden, the applicant should identify the relevant markets, describe the state of competition in the absence of the merger and indicate what would be the likely effects of a merger given the state of competition on those markets.

In that regard, an applicant’s allegations are not sufficient if it is merely asserted that the Commission wrongly confined its analysis to the effects on competition in markets on which the activities of the parties to a merger overlapped either directly or indirectly, without evidence being adduced in support of the applicant’s argument and especially without the non-overlapping markets – which should therefore have been examined – being clearly identified.

(see paras 63-68)

5. Merger control is not premised on the prohibition – through such a concentration – of consequent competitive advantages that may benefit consumers, but on the aim of avoiding the creation or strengthening of a dominant position as a result of which effective competition could be significantly impeded in the common market. The ability as a result of the merger to offer consumers services at a better price could constitute evidence of the creation or strengthening of a dominant position only in limited cases, for example where the merged entity intends or has the capacity to operate a predatory pricing policy.

(see para. 72)

6. It follows from point 13 of the notice on the definition of the relevant market for the purposes of Community competition law that companies are subject to three main sources of competitive constraints: demand substitutability, supply substitutability and potential competition. From an economic point of view and for the definition of the relevant market, demand substitution constitutes the most immediate and effective disciplinary force on the suppliers of a given product, in particular in relation to their pricing decisions. Substitutability must therefore be looked at not only from the supply side but also from the demand side, which remains, in principle, the most effective assessment criterion.

As regards demand substitutability, the decisive factor in assessing the geographic substitutability of two airports is not the distance between a main starting point and each of them, but the time required to travel to them from that point. Consequently, where the travelling time to those two airports is the same, the Commission can, without committing a manifest error of assessment, find that the two airports are substitutable, given the lack of consumer preference for flights as between one or the other airport as regards travel to and from the city centre.

Furthermore, for the purposes of examining the substitutability of two airports, the Commission must take account of all demand, that is to say, both time-sensitive and non-time-sensitive passengers, since customers for whom time is not a priority have different requirements because they are more flexible. However, while the Commission was entitled to find that for numerous business customers, two airports could be not substitutable, since one of them offers fewer connections, those particular expectations of business customers having therefore led the Commission to find that there were ‘sub-markets’, depending on whether or not customers were time sensitive, those considerations, peculiar to certain business customers, which are only one part of the demand, do not undermine the finding on substitutability.

As regards the supply substitutability of the two airports, in particular of the services offered to consumers by the airlines from one or other of them, considerations concerning, first, the types of flights which the airports offer on the basis of their specific infrastructures and, second, the particular characteristics of the two airports, have a more limited impact. That is why, although substitutability may be assessed differently, in particular for low-cost airlines for whom it is important to be able to choose between airports in order to minimise their costs, since airport taxes may differ from one airport to another, the Commission is entitled, without committing a manifest error of assessment, to carry out a comprehensive analysis on the basis of which it finds that two airports are substitutable, while taking account of criteria including the commercial factors peculiar to low-cost carriers.

(see paras 99-104, 107-109)

7. When assessing the compatibility of a concentration with the common market, the examination of conditions of competition must be based not only on existing competition between undertakings already present on the relevant market but also on potential competition, in order to ascertain whether, in the light of the structure of the market and the economic and legal context within which it functions, there are real concrete possibilities for the undertakings concerned by the merger to compete among themselves or for a new competitor to enter the relevant market and compete with established undertakings.

(see para. 116)

8. The Commission enjoys a broad discretion in assessing the need for commitments to be given in order to dispel the serious doubts raised by a concentration. It follows that it is not for the Court of First Instance to substitute its own assessment for that of the Commission: the Court’s review must be limited to ascertaining that the Commission has not committed a manifest error of assessment. In particular, the alleged failure to take into consideration the commitments suggested by a competing undertaking which has participated in the examination procedure does not by itself prove that the contested decision is vitiated by a manifest error of assessment, and the fact that other commitments might also have been accepted, or might even have been more favourable to competition, cannot justify annulment of that decision in so far as the Commission was reasonably entitled to conclude that the commitments set out in the decision served to dispel the serious doubts.

In exercising its power of review, the Court of First Instance must take into account the specific purpose of the commitments entered into during the phase I procedure, which, contrary to those entered into during the phase II procedure, are intended not to prevent the creation or strengthening of a dominant position but rather to dispel any serious doubts in that regard. Consequently, where the Court of First Instance is called on to consider whether, having regard to their scope and content, the commitments entered into during the phase I procedure are such as to permit the Commission to adopt a decision of approval without initiating the phase II procedure, it must examine whether the Commission was entitled, without committing a manifest error of assessment, to take the view that those commitments constituted a direct and sufficient response capable of clearly dispelling all serious doubts.

(see paras 128-129)

9. While, according to point 17 of the notice on remedies acceptable under Regulations Nos 4064/89 and 447/98, ‘in order to assure a viable business, it might be necessary to include in a divestiture those activities which are related to markets where the Commission did not raise competition concerns because it would be the only possible way to create an effective competitor in the affected markets’, those activities must be decided in the light of the principle of proportionality.

It follows that, on the one hand, commitments must be decided on in the light of the competition problems raised on the affected markets, because if competition can be maintained on those markets it is not necessary for the Commission to extend the scope of the commitments to markets not affected, in accordance with the principle of proportionality. On the other hand, commitments cannot be regarded as a means of favouring, without justification on competition grounds, a potential competitor which wishes to enter a particular market.

(see paras 132, 134, 137)

10. The fact that the parties to a merger declared to be compatible with the common market may retain a sizeable share of the markets affected does not prove a manifest error of assessment on the part of the Commission, since it accepted significant commitments on those markets in the knowledge, in particular, that the entry of new competitors would be encouraged by the remedial measures and that other factors would reduce the competitive strength of the merged entity.

(see para. 175)

11. Behavioural commitments are not by their nature insufficient to prevent the creation or strengthening of a dominant position, and must be assessed on a case-by-case basis in the same way as structural commitments.

(see para. 182)

12. Article 6(2) of Regulation No 4064/89 on the control of concentrations between undertakings provides that the Commission may authorise a merger if the commitments proposed by the parties dispel the serious doubts as to the compatibility of the merger with the common market. Regulation No 4064/89 thus lays down the objective to be achieved by the Commission, but leaves it a wide discretion as to the form which the commitments in question may take. It does not require the notifying parties to identify a new entrant, even though it may be necessary in certain cases to do so, in particular where no competitor shows any interest in entering an affected market. The identification by name of a new entrant is not, however, required where various competitors have expressed an interest during the administrative procedure in entering the affected markets following the commitments made by the parties to the merger concerned.

In that respect, the fact that no new entrant had penetrated the affected markets at the date of the hearing before the Court of First Instance of the action against the Commission’s decision authorising that concentration is irrelevant. The legality of a contested measure must be assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted.

(see paras 197-198, 203, 206)