Judgment of the Court of First Instance (First Chamber) of 25 October 2002. - Tetra Laval BV v Commission of the European Communities. - Competition - Regulation (EEC) No 4064/89 - Decision declaring a concentration incompatible with the common market - Rights of the defence - Horizontal and vertical effects - Foreseeable conglomerate effects - Leveraging - Potential competition - General effect of reinforcement. - Case T-5/02.



European Court reports 2002 Page II-04381



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

1. Competition - Concentrations - Administrative procedure - Access to the file - Observance of the rights of the defence - Infringement - Condition

(Council Regulation No 4064/89)

2. Competition - Concentrations - Administrative procedure - Access to the file - Detailed rules governing access - Commission's power to assess of its own volition the risk of disclosure of confidential information - Obligation to justify any restrictions on the right of access to the file - Scope

(Art. 287 EC; Council Regulation No 4064/89; Commission Regulation No 447/98, Art. 17(1) and (2))

3. Competition - Concentrations - Examination by the Commission - Assessments of an economic nature - Discretion as regards assessment - Review by the Court - Limits

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

4. Competition - Concentrations - Assessment of compatibility with the common market - Concentrations which neither create nor reinforce a dominant position

(Council Regulation No 4064/89, Art. 2(2) and (3))

5. Competition - Concentrations - Assessment of compatibility with the common market - Conglomerate-type concentration - Definition - Assessment according to criteria applicable to other types of concentration - Taking into account of the likelihood that a dominant position will be created or reinforced through leveraging on the reference market for one of the undertakings party to the concentration - Whether permissible - Whether the Commission may rely on foreseeable conduct of the entity resulting from the concentration - Conditions - Presentation of a close examination supported by convincing evidence

(Council Regulation No 4064/89, Art. 2(2) and (3))

6. Competition - Concentrations - Assessment of compatibility with the common market - Conglomerate-type concentration - Taking into account of foreseeable conduct of the entity resulting from the concentration likely to constitute in itself abuse of an existing dominant position - Whether permissible - Obligation of the Commission to assess the likelihood of such conduct having regard to the risks inherent in the adoption of that conduct and the commitments offered by the notifying parties in relation thereto

(Council Regulation No 4064/89, Art. 2(2) and (3))

7. Competition - Concentrations - Assessment of compatibility with the common market - Taking into account of the likelihood that a dominant position will be created or reinforced through leveraging on the reference market for one of the undertakings party to the concentration - Taking into account of leveraging between the markets for two products which are technical substitutes - Whether permissible - Condition

(Council Regulation No 4064/89, Art. 2(2) and (3))

8. Competition - Concentrations - Assessment of compatibility with the common market - Taking into account of the elimination or significant reduction of potential but growing competition tending to reinforce a dominant position - Whether permissible - Obligation of the Commission to rely on convincing evidence of the alleged reinforcement

(Council Regulation No 4064/89, Art. 2(2) and (3))

9. Competition - Concentrations - Assessment of compatibility with the common market - Taking into account of the likelihood that a dominant position will be created or reinforced on the reference market for one of the undertakings party to the concentration - Taking into account of the impact of a reduction of potential competition from neighbouring markets on the reference markets - Whether permissible

(Council Regulation No 4064/89, Art. 2(1), (2) and (3))

Summary

$$1. The general principles of Community law governing the right of access to the Commission's file are applicable to the procedures provided for by Regulation No 4064/89 on the control of concentrations between undertakings, even though their application may reasonably be adapted to the need for speed, which characterises the general scheme of that regulation. Those principles are designed to ensure effective exercise of the rights of the defence and breach thereof in the procedure prior to the adoption of the decision can, in principle, cause the decision to be annulled if the rights of defence of the undertaking concerned have been infringed.

The rights of the defence have been infringed if the non-disclosure of the documents in the Commission's file might have influenced the course of the procedure and the content of the decision to the applicant's detriment.

( see paras 89-91 )

2. As regards the responses given by third parties to the Commission's requests for information, the mere fact that Article 17(2) of Regulation No 447/98 on the notifications, time limits and hearings provided for in Regulation No 4064/89 on the control of concentrations between undertakings imposes an obligation on each third party requesting confidentiality to indicate clearly which parts of its response are to be considered confidential does not prevent the Commission, in the light of Article 17(1) and the objective of Article 287 EC, from examining of its own volition whether there is a risk that business secrets of some of the third parties involved in the procedure, or even other confidential information, may be divulged if unlimited access is allowed to the responses of other third parties who have not themselves requested confidentiality.

However, when faced with a request for access to the file from a notifying party, it is for the Commission, at least until the Advisory Committee has been consulted pursuant to Article 18(1) of Regulation No 4064/89, to justify any restrictions on that right of access, since any exception to that right must be interpreted narrowly, particularly when the Commission intends to prohibit the notified merger in question.

The need for speed, which characterises the general scheme of Regulation No 4064/89, cannot by itself justify a refusal to allow access to the responses gathered as part of a market investigation carried out on the commitments offered by a notifying party. If the Commission does not have the time needed to ask the respondents to the market investigation for a non-confidential version of their responses, pursuant to Article 17(2) of Regulation No 447/98, it has at least to explain to the notifying party how the nature and scope of the fear of reprisals or other negative or undesired consequences expressed by those respondents who simply requested confidentiality without providing a non-confidential version of their responses justifies a refusal to allow access to those responses or to a non-confidential version thereof. Although the short deadlines in the second phase of a merger procedure may, for practical reasons and especially when many requests for confidentiality have been received, give grounds for drawing up non-confidential summaries, the Commission is still obliged to give valid reasons for a blanket refusal to allow access to those responses. That obligation applies even more strongly to the responses submitted to it without any - at least any formal - request for confidentiality.

( see paras 101-102, 105 )

3. The substantive rules of Regulation No 4064/89 on the control of concentrations between undertakings, in particular Article 2, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review by the Community judicature of the exercise of that discretion, which is essential for defining the rules on concentrations, must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations.

( see para. 119 )

4. Under Article 2(3) of the Regulation No 4064/89 on the control of concentrations between undertakings, a concentration which creates or strengthens 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 must be declared incompatible with the common market. Conversely, the Commission is bound declare a concentration falling within the scope of application of that regulation compatible with the common market where the two conditions laid down in that provision are not fulfilled. If, therefore, a dominant position is not created or strengthened, the transaction must be authorised and there is no need to examine the effects of the transaction on effective competition.

( see para. 120 )

5. A merger which is conglomerate in type, that is, a merger of undertakings which, essentially, do not have a pre-existing competitive relationship, either as direct competitors or as suppliers and customers, do not give rise to true horizontal overlaps between the activities of the parties to the merger or to a vertical relationship between the parties in the strict sense of the term. Thus it cannot be presumed that such mergers produce anti-competitive effects and must therefore be prohibited. For them to be prohibited, it is necessary, as with any other concentration, that the two conditions laid down in Article 2(3) of Regulation No 4064/89 on the control of concentrations between undertakings are met.

Although it is true that, in principle, a merger between undertakings which are active on distinct markets is not usually of such a nature as immediately to create or strengthen a dominant position due to the combination of the market shares held by the parties to the merger, since the factors which are of significance for the relative positions of competitors within a given market are generally to be found within the market itself, it is possible for the conditions of competition on a market to be affected by factors external to that market. This is the case where the markets in question are neighbouring markets and one of the parties to a merger transaction already holds a dominant position on one of them if the means and capacities brought together by the transaction may immediately create conditions allowing the merged entity to leverage its way so as to acquire, in the relatively near future, a dominant position on the other market.

If, in a prospective analysis of the effects of a conglomerate-type merger transaction, the Commission is able to conclude that a dominant position would, in all likelihood, be created or strengthened in the relatively near future and would lead to effective competition on the common market being significantly impeded, it must prohibit it.

Where, however, the creation or strengthening of a dominant position on the second market does not immediately result from the merger, but will occur only after a certain time and will result from conduct engaged in by the merged entity on the first market where it already holds a dominant position, that is, where it is not the structure resulting from the merger transaction itself but rather the future conduct in question which will create or strengthen a dominant position, it is for the Commission, if it intends to prohibit the concentration, to conduct a particularly close examination of the circumstances which are relevant for an assessment of the anti-competitive effect of the planned conglomerate in the reference market and to produce convincing evidence in support of its analysis.

( see paras 142-155 )

6. Although Regulation No 4064/89 on the control of concentrations between undertakings provides for the prohibition of a merger creating or strengthening a dominant position which has significant anti-competitive effects, these conditions do not require it to be demonstrated that the merged entity will, as a result of the merger, engage in abusive, and consequently unlawful, conduct. Although it cannot therefore be presumed that Community law will not be complied with by the parties to a conglomerate-type merger transaction, such a possibility cannot be excluded by the Commission when it carries out its control of mergers. Accordingly, when the Commission, in assessing the effects of such a merger, relies on foreseeable conduct which in itself is likely to constitute abuse of an existing dominant position, it is required to assess whether, despite the prohibition of such conduct, it is none the less likely that the entity resulting from the merger will act in such a manner or whether, on the contrary, the illegal nature of the conduct and/or the risk of detection will make such a strategy unlikely. While it is appropriate to take account, in its assessment, of incentives to engage in anti-competitive practices which might result from the situation created by the merger, the Commission must also consider the extent to which those incentives would be reduced, or even eliminated, owing to the illegality of the conduct in question, the likelihood of its detection, action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue. The fact that a notifying party offers commitments regarding its future conduct is also a factor which the Commission must take into account in assessing whether it is likely that the merged entity will act in a manner which might result in the creation of a dominant position on one or more of the relevant markets.

( see paras 159, 161 )

7. The possibility cannot be excluded that leveraging from one market into another may take place when a product in one market and a product in another market are merely technical substitutes. Leveraging may be carried out when the products in question are ones which the customer finds suitable for the same end use.

( see para. 196 )

8. When the Commission relies on the elimination or significant reduction of potential competition, even of competition which will tend to grow, in order to justify the prohibition of a notified merger, the factors which it identifies to show the strengthening of a dominant position must be based on convincing evidence. The mere fact that the acquiring undertaking already holds a clear dominant position on the relevant market may constitute an important factor but does not in itself suffice to justify a finding that a reduction in the potential competition which that undertaking must face constitutes a strengthening of its position.

( see para. 312 )

9. Given the criteria laid down in Article 2(1) of Regulation No 4064/89 on the control of concentrations between undertakings, which the Commission is bound to apply in assessing notified merger transactions, it does not commit any error in examining the impact of a reduction of potential competition from neighbouring markets on the reference markets.

( see para. 323 )

Parties

In Case T-5/02,

Tetra Laval BV, established in Amsterdam (Netherlands), represented by A. Vandencasteele, D. Waelbroeck, A. Weitbrecht and S. Völcker, lawyers,

applicant,

v

Commission of the European Communities, represented by A. Whelan and P. Hellström, acting as Agents, with an address for service in Luxembourg,

defendant,

APPLICATION for annulment of Commission Decision C (2001) 3345 final of 30 October 2001 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case No COMP/M.2416 - Tetra Laval/Sidel),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (First Chamber),

composed of: B. Vesterdorf, President, J. Pirrung and N.J. Forwood, Judges,

Registrar: D. Christensen, Administrator,

having regard to the written procedure and further to the hearing on 3 and 4 July 2002,

hereby gives the following

Judgment

Grounds

Legal background

1 Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1, corrected version in OJ 1990 L 257, p. 13, as amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1), hereinafter the Regulation) provides for a system of control by the Commission of concentrations having a Community dimension as defined by Article 1(2) of the Regulation.

2 Article 2 of the Regulation states:

1. Concentrations within the scope of this Regulation shall be appraised in accordance with the following provisions with a view to establishing whether or not they are compatible with the common market.

In making this appraisal, the Commission shall take into account:

(a) the need to maintain and develop effective competition within the common market in view of, among other things, the structure of all the markets concerned and the actual or potential competition from undertakings located either within or outwith the Community;

(b) the market position of the undertakings concerned and their economic and financial power, the alternatives available to suppliers and users, their access to supplies or markets, any legal or other barriers to entry, supply and demand trends for the relevant goods and services, the interests of the intermediate and ultimate consumers, and the development of technical and economic progress provided that it is to consumers' advantage and does not form an obstacle to competition.

2. A concentration which 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 shall be declared compatible with the common market.

3. A concentration which creates or strengthens 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 shall be declared incompatible with the common market.

...

3 Article 4 of the Regulation requires the party acquiring control, or the parties acquiring joint control, of another undertaking to notify the concentration within a week to the Commission, which is required by Article 6(1) to examine that notification as soon as it is received. Article 6(1)(c), read in conjunction with Article 10(1), provides that the Commission is to initiate proceedings in respect of a notified concentration within one month, and at most six weeks, where it finds that the concentration falls within the scope of the Regulation and raises serious doubts as to its compatibility with the common market.

4 Once proceedings have been initiated in respect of a notification, the decision-making powers of the Commission are fixed by Article 8 of the Regulation. Under Article 8(3), [w]here the Commission finds that a concentration fulfils the criterion laid down in Article 2(3) ..., it shall issue a decision declaring that the concentration is incompatible with the common market. Under Article 10(3), such decisions must be taken within not more than four months of the date on which the proceedings are initiated.

5 Although Article 7(1) of the Regulation provides that a concentration is not to be put into effect either before its notification or until it has been declared compatible with the common market, the implementation of a public bid that has been notified to the Commission may, in accordance with Article 7(3), proceed provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the Commission under paragraph 4.

6 Article 18 of the Regulation, which concerns the hearing of the parties and of third parties, provides:

1. Before taking any decision provided for in Article 7(4), Article 8(2), second subparagraph, and (3) to (5), and Articles 14 and 15, the Commission shall give the persons, undertakings and associations of undertakings concerned the opportunity, at every stage of the procedure up to the consultation of the Advisory Committee, of making known their views on the objections against them.

...

3. The Commission shall base its decision only on objections on which the parties have been able to submit their observations. The rights of the defence shall be fully respected in the proceedings. Access to the file shall be open at least to the parties directly involved, subject to the legitimate interest of undertakings in the protection of their business secrets.

...

7 Article 13(3) of Commission Regulation (EC) No 447/98 of 1 March 1988 on the notifications, time-limits and hearings provided for in Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings (OJ 1998 L 61, p. 1) provides:

After having addressed its objections to the notifying parties, the Commission shall, upon request, give them access to the file for the purpose of enabling them to exercise their rights of defence.

The Commission shall, upon request, also give the other involved parties who have been informed of the objections access to the file in so far as this is necessary for the purposes of preparing their observations.

8 Article 17 of Regulation 447/98, entitled Confidential information, provides:

1. Information, including documents, shall not be communicated or made accessible in so far as it contains business secrets of any person or undertaking, including the notifying parties, other involved parties or of third parties, or other confidential information the disclosure of which is not considered necessary by the Commission for the purpose of the procedure, or where internal documents of the authorities are concerned.

2. Any party which makes known its views under the provisions of this Chapter shall clearly identify any material which it considers to be confidential, giving reasons, and provide a separate non-confidential version within the time limit fixed by the Commission.

Factual background

9 On 27 March 2001, Tetra Laval SA, a privately held company incorporated under French law and a wholly owned subsidiary of Tetra Laval BV (hereinafter Tetra or the applicant), a holding company belonging to the Tetra Laval group, announced a public bid for all outstanding shares in Sidel SA (hereinafter Sidel), a French publicly quoted company. On the same day, Tetra Laval SA acquired roughly 9.75% of the shares in Sidel from Azeo (5.56%) and Sidel's directors (4.19%).

10 The bid was in cash at EUR 50 per share and, in accordance with French law, was unconditional. Acceptance of the bid was unanimously recommended by the Board of Directors of Sidel and was also approved by Sidel's major shareholders. The joint offer document from Tetra Laval SA and Sidel was approved on 11 April 2001 by the stock exchange committee. Following publication on 14 April 2001, the bid was officially opened for the period 17 April to 22 May 2001. It provided that, in the event of the bid being successful, the shares of Tetra SA would be quoted again in the week beginning 11 June 2001, subject to the restrictions in Article 7(3) of the Regulation.

11 Pursuant to the bid, Tetra acquired approximately 81.3%, of the outstanding shares in Sidel. After the closing of the bid, the applicant acquired certain additional shares, making its current holdings roughly 95.20% of the shares and 95.93% of the voting rights in Sidel.

12 Tetra comprises, inter alia, the Tetra Pak company, which is mainly active in the area of liquid food carton packaging, where Tetra Pak is the world-wide market leader. Tetra also has more limited activities in the plastic packaging sector, mainly as a converter (which consists of manufacturing and supplying empty packaging to producers who then fill the packaging themselves), particularly of high density polyethylene (hereinafter HDPE) bottles.

13 Sidel is involved in the design and production of packaging equipment and systems, particularly stretch blow moulding machines (hereinafter SBM machines), which are used in the production of polyethylene terephthalate (hereinafter PET) plastic bottles. It is the world-wide leader for the production and supply of SBM machines. It is also active in barrier technology, used to make PET compatible with products which are sensitive to gas and light, as well as in the manufacture of filling machines for PET and, to a lesser extent, HDPE bottles.

14 On 18 May 2001, the operations by which Tetra acquired its shareholding in Sidel were notified to the Commission.

15 It is agreed by the parties that those operations (hereinafter the merger or the notified transaction) constitute an acquisition within the meaning of Article 3(1)(b) of the Regulation and that the merger has a Community dimension within the meaning of Article 1(2) thereof.

16 By decision of 5 July 2001, the Commission, having concluded that the merger raised serious doubts as to its compatibility with the common market and the Agreement on the European Economic Area (the EEA Agreement), initiated proceedings in accordance with Article 6(1)(c) of the Regulation.

17 On 7 September 2001, the Commission sent to Tetra and Sidel a statement of objections, in accordance with Article 18 of the Regulation, explaining why its initial conclusion was that the transaction should be prohibited. The applicant replied to the statement on 21 September 2001.

18 On 24 September 2001, an additional statement of objections, which focused in particular on the activities of Tetra in the HDPE sector, was sent to Tetra and Sidel, and was replied to by the applicant on 1 October 2001.

19 On 25 September 2001, the applicant proposed a number of commitments, in accordance with Article 8(2) of the Regulation, with a view to remedying the competition concerns expressed in the first statement of objections.

20 On 26 September 2001, a hearing took place before the hearing officer, in accordance with Articles 14, 15 and 16 of Regulation No 447/98.

21 On 9 October 2001, the applicant offered the Commission a new set of firm commitments (hereinafter the commitments), replacing those dated 25 September 2001.

22 The Commission carried out a specific market investigation regarding the commitments by sending 51 questionnaires to different operators in the economic sector in question (customers, converters and competitors); the questionnaires were sent out on 11 October 2001, with the deadline for reply set at 17 October. It received 34 responses (hereinafter the responses to the market investigation) and, judging them to be entirely confidential, drew up two non-confidential summaries concerning, first, customers and converters and, second, competitors. It sent those summaries to the applicant.

23 The draft of the Commission's final decision, which also dealt with the commitments, was discussed and approved by the Advisory Committee on concentrations at its meeting on 19 October 2001.

24 By decision of 30 October 2001 (Case No COMP/M.2416 - Tetra Laval/Sidel C (2001) 3345 final) (hereinafter the contested decision), the Commission declared the notified transaction incompatible with the common market and the functioning of the EEA Agreement, pursuant to Article 8(3) of the Regulation.

25 The contested decision was notified to Tetra on 6 November 2001.

26 In the light of the findings in the contested decision and following a separate administrative procedure initiated by the sending of a statement of objections to Tetra on 19 November 2001, the Commission adopted, on 30 January 2002, a decision setting out measures in order to restore conditions of effective competition pursuant to Article 8(4) of the Regulation (Case No COMP/M.2416 - Tetra Laval/Sidel).

The contested decision

27 In the contested decision, the Commission, in analysing the compatibility of the transaction with the common market, first describes the liquid food packaging industry and examines the relevant product and geographic markets, and then assesses the notified transaction from a competition standpoint. After that analysis, the Commission assesses the scope of the commitments in the light of that prior assessment of competition.

The liquid food packaging sector

28 The Commission considers that the competitive impact of [the notified transaction] will be primarily in the liquid food packaging industry, (liquid food meaning essentially liquid dairy products (LDPs)), fruit juices and nectars (juices), fruit flavoured still drinks (FFDs) and tea/coffee drinks, these four products together being referred to hereinafter as the sensitive products) and, in particular an impact on the sectoral segments in which the parties are primarily active, namely plastic, in particular PET packaging, and carton packaging (recital 12). The Commission states that PET enables the manufacture of transparent bottles. For products which are sensitive to oxygen and light, PET must be enhanced using a barrier technology. There are three stages in the PET packaging process: (i) production of plastic preforms, which are the pre-production tubes used to make the bottles; (ii) production of the empty bottles themselves using SBM machines (see paragraph 13 above); and (iii) filling of the bottles (recital 20). It describes HDPE packaging as having a rather cloudy appearance. HDPE is produced in a similar way to PET but using extrusion blow moulding machines (hereinafter EBM machines) (recital 26). Unlike plastic packaging, pack construction, filling and sealing are integrated operations in the carton packaging process (recital 28).

29 The Commission draws several distinctions, in particular between aseptic and non-aseptic packaging, in line with its earlier decisions in this area, between the packaging itself and the packaging machines, and between packaging performed in-house by the producers of liquid foods and packaging by converters (see paragraph 12 above). However, according to the Commission, that distinction is lessened by the existence of hole-through-the-wall arrangements (hereinafter HTW arrangements) whereby a converter produces the bottles at a site next to the premises of the beverage producer and conveys them directly to the producer for filling.

The relevant product markets

30 Since the competitive impact of [the notified transaction] will be primarily in the liquid food packaging industry, the Commission concentrated its analysis on the segments of that industry in which Tetra and Sidel are primarily active: plastic, in particular PET packaging, and carton packaging (recital 12). The Commission considers that end-use segmentation constitutes a meaningful analytical tool for assessing the liquid food packaging equipment market (recital 44). It acknowledges that packaging systems using different materials, for example glass and cans, form distinct relevant product markets for competition law analysis and that, therefore, PET packaging systems belong to a distinct product market. The Commission categorically rejects the idea that carton and PET do not share common product segments and that there can be no interaction between the two and, accordingly, decides to look at the interplay between carton and PET and the future growth of PET in the traditional carton end-use segments (recital 53).

31 Turning to carton packaging, which is non-transparent, the Commission considers that it is suitable for oxygen and light-sensitive products but cannot withstand carbonation. PET packaging, on the other hand, is transparent and can withstand carbonation but has been traditionally less suitable for oxygen- and light-sensitive products (recital 55). The Commission emphasises that PET is a suitable material for the packaging of all the products that have been traditionally packaged in carton, that is, sensitive products, and concludes that PET may potentially provide an alternative competing material for the entire spectrum of carton-packaged products (recital 57, emphasis in the original). These products can none the less be distinguished from one another, because the specific characteristics of the product dictate slightly different packaging solutions (juices are high acid whereas LDPs are low acid, FFDs and ice tea do not require the same extent of oxygen barrier as juices) (recital 58).

32 Regarding the expected growth of PET use for sensitive products, the Commission dismisses the assertion of Tetra that PET's use is very limited and will not grow significantly in the future (recitals 59 to 148). It states in that regard that [t]he fastest growing PET segment has been water and [carbonated soft drinks] mainly due to a switch from glass packaging and that PET is popular with consumers and producers (recital 55, footnote 22). The Commission finds that already today it is possible to package and sell commercially fresh milk, flavoured milk, ice tea, fresh juice, long-life (hot-fill) juices, fruit flavoured drinks and sports drinks in PET and that there are only two segments for which PET use presents technical problems: aseptic juices and aseptic white (UHT) milk (recital 61). Referring to the figures provided on behalf of Tetra by the consulting company Canadean, it observes that, even though PET use is not currently very significant for LDPs and juices (0.5% in both segments in 2000), the picture [...] is already today very different for the segments of FFDs and tea/coffee drinks which do not require the same barrier properties as LDPs and juices, segments where PET has already made more significant inroads (recital 69) (reaching 20% for FFDs and 25% for tea/coffee drinks in 2000).

33 For the years 2000 to 2005, the Commission, in the light of its own market investigation, that of Canadean and independent studies by PCI, Warrick and Pictet (recital 104), concludes that there is already significant overlap between PET and carton in the FFDs and tea/coffee drinks segments and that PET will continue to make inroads into these segments at the expense of carton, so much so that [u]nder a conservative estimate, with PET reaching 30% in each of these segments by 2005, PET would pack 800 million litres of tea/coffee drinks (including sports drinks) and 1 billion litres of FFDs (recital 144). It adds that improvements in barrier technology and aseptic PET filling are expected to enhance PET's position in all four [sensitive] product segments and that in the LDP and juice segment, PET will grow significantly in the next five years (recital 146). According to the Commission, it is realistic to expect that PET will reach at least 10-15% in fresh milk and 25% in flavoured and other dairy beverages by 2005, but that PET's use for UHT milk (which represents approximately 50% of the total milk market in the EEA) is uncertain (recital 147). Emphasising the significant potential of PET, at least in smaller, premium segments of aseptic milk such as single serve packages, the Commission considers that [w]ith PET reaching at least 15% of fresh milk, 25% other dairy beverages and only 1% UHT milk by 2005, PET will package approximately 3 billion litres per annum (this represents approximately 9% of the total European market for [LDPs] (recital 147). Regarding juices, the Commission believes that it is realistic to expect PET to reach at least 20% of the overall juice market in the EEA by 2005, even if this growth will mainly result from substantial switching from glass to PET (recital 148).

34 Turning to the competition between PET and carton in overlap products, the Commission concludes that carton packaging systems and PET packaging systems (and hence carton packaging equipment and PET packaging equipment) form distinct relevant product markets. It finds that although substitution between the two systems does not currently have the necessary effectiveness and immediacy required for the purposes of market definition (i.e. they are weak substitutes), this may change in the future as PET's barrier technology improves and PET/carton costs converge. The convergence could even be such that the two systems might in future, belong to the same relevant product market for competition law purposes (recital 163).

35 The Commission then examines the segments of specific equipment within each packaging system in order to determine whether there are distinct relevant product markets for each of them (recital 164).

36 Regarding the PET packaging systems, the Commission considers that, for SBM machines, in the light of the specific characteristics of the sensitive products and the ability for price discrimination, separate relevant markets exist for each distinct group of customers on the basis of end-use in particular in the four "sensitive" beverage segments, LDPs, juice, FFDs and tea/coffee drinks (recital 188). The Commission considers that the different barrier technologies form part of the same product market, although some of them might, in future, be placed in a distinct product market (recitals 198 et 199). There are also two distinct markets for aseptic and non-aseptic PET filling machines (recital 204), whilst PET preforms constitute yet another distinct market (recital 206).

37 With respect to carton packaging systems, the Commission notes that there is consensus that there are four distinct product markets: aseptic carton packaging machines, aseptic cartons, non-aseptic carton packaging machines and non-aseptic cartons (recital 209).

The relevant geographic market

38 The relevant geographic market is defined as the EEA because all suppliers [of PET packaging equipment] are active throughout the EEA, [and] are capable of providing and provide their equipment on a cross-border basis (recitals 210 and 211)

Competition law analysis of the notified transaction

39 The assessment of the merger under competition law is contained in a detailed analysis (recitals 213 to 408) and is essentially as follows:

213 The Commission's market investigation and analysis has shown that the operation could strengthen Tetra's dominant position in the market for aseptic carton packaging machines and aseptic cartons and create a dominant position in the market for PET packaging equipment and, in particular SBM machines (low and high capacity) in the "sensitive" product and end-use segments, LDPs, juices, FFDs and tea/coffee drinks.

214 The merged entity's future dominant position in two closely neighbouring markets as well as a notable position in a third market (EBM machines and HDPE filling machines) are likely to reinforce its position in both markets, raise barriers to entry, minimise the importance of existing competitors and lead to a monopolistic structure of the whole market for aseptic and non-aseptic packaging of "sensitive" products in the EEA.

40 In support of its findings, the Commission notes, first, that, as regards the carton packaging market, very little has changed since the Tetra Pak II judgments (Case T-83/91 Tetra Pak v Commission [1994] ECR II-755, confirmed on appeal in Case C-333/94 P Tetra Pak v Commission [1996] ECR I-5951). Thus it finds that, in the year 2000 in the EEA, Tetra had a dominant position on the market for aseptic packaging machines and cartons, with a market share of 80% (recitals 219 and 223) and a leading position in the market for non-aseptic packaging machines and cartons, with a market share of [50-60%] (recitals 229 and 231). Second, whilst acknowledging that Sidel does not have a dominant position on the market for SBM machines, the Commission concludes that it has a leading position, since it is the only company capable of providing the full range of SBM machines from very low capacity to the highest capacity always using leading rotary technology (recital 248). Noting that [t]he importance of effectively managing filling operations in combination with blow moulding is particularly apparent with regard to "sensitive" products such as milk and fruit juice to ensure clean or ultra-clean packaging processes (recital 249), the Commission observes that Sidel manufactures aseptic and non-aseptic filling machines (recital 250) and that it has an innovative Combi technology which allows it to integrate blowing, filling and capping in a single machine (recital 254). The Commission concludes that Sidel has a leading position in the [...] SBM market and a strong position in other PET packaging equipment, in particular aseptic filling machines, secondary equipment and associated services (recital 259).

41 With respect to the creation of a dominant position on the market for PET and the reinforcement of Tetra's position on the carton markets, the contested decision deals, firstly, with the horizontal and vertical effects of the merger; secondly, the leveraging effect from the carton markets into the PET market; thirdly, the effects on the carton markets following from the elimination of competitive pressure from the PET market; and, lastly, the overall effects on the carton and PET markets.

42 First of all, as regards horizontal effects, the Commission considers that, since both Tetra and Sidel are active on three distinct product markets: SBM machines (low capacity); barrier technology and aseptic PET filling machines (recital 263), the transaction would strengthen the position of the merged entity on those three markets. Whilst acknowledging that that position does not constitute a dominant position, the Commission finds that it would reach the level of dominance through the leveraging of the merged entity's dominant position in aseptic carton packaging equipment and aseptic cartons (recital 263).

43 Secondly, the Commission states that the significant vertical effects which would result from the vertical integration of the merged entity in the three packaging systems (carton, PET and HDPE) could lead to vertical foreclosure of independent converters (recital 291). The market structure created by the merger would foreclose independent converters in the following way (recital 292):

(i) the merged entity would be the only vertically integrated liquid food packaging company in carton (carton packaging machines and carton reels), HDPE (EBM machines and HDPE bottles) and PET packaging (SBM machines, barrier technology, aseptic fillers, preforms and bottles); (ii) the merged entity's dual position as supplier and competitor of converters would be likely to create a channel conflict in the market. Using its strong market position as supplier of SBM machines to converters which are to a certain extent dependent on Sidel, the merged entity may be able to raise converters' costs and marginalise their market position as suppliers of preforms and turnkey installations. Tetra/Sidel may be able to offer combined packages of SBM machines and preforms for instance by using Tetra's successful business strategy in carton, offering the SBM machines at a low price and recouping the cost by tying the customer with a long-term contract for the supply of standard and barrier enhanced preforms. The merged entity may also have the ability to offer turnkey installations to its customers without the use of converters.

44 Next, the extent of Tetra's vertical integration on the markets for carton is highlighted, markets in which it has a business model of offering integrated solutions of machines and cartons (reels or blanks) to its customers (recital 296) on the market for HDPE, where it produces HDPE bottles on EBM machines through an alliance with Graham Engineering Corporation and supplies them to customers as a converter through HTW agreements, and also on the PET market. Regarding the PET market, the Commission observes that Tetra is the third largest independent preform supplier in the world with a market share of 10%, that it has plans to produce a limited number of finished PET bottles enhanced with its proprietary barrier technology Glaskin and that, since 1999, it is active in plastic beverage bottle closures through its subsidiary Novembal with a [10-20%] market share in 2000 in the EEA (recital 298). This integration distinguishes it from Sidel, which is not a vertically integrated company (recital 293). None the less, the entity resulting from the merger is likely to create a channel conflict in the market as the merged entity would be a supplier and competitor of converters (recital 301) and may have the ability to marginalise converters by offering customers combined packages of SBM machines and preforms as well as turnkey installations (recital 312). It is also possible that it might be able to marginalise converters from these activities by refusing the supply of SBM machines or raising their costs and favouring its own integrated business (recital 318). As for Tetra's decision to leave the preforms market, the Commission states that it does not conclude that these vertical concerns would, by themselves, result in the creation of a dominant position for PET or preforms (recital 324).

45 The Commission then sets out in detail (recitals 325 to 389) the reasons for its concern that the merged entity would exploit its dominant position on the carton markets by leveraging into the market for PET packaging equipment in order to dominate the PET market for "sensitive" end-products (recital 328). It takes the view that it is sufficient that Tetra/Sidel have that possibility for the transaction to be incompatible with the common market. Thus the concerns of the Commission arise not from the position currently held by Sidel on the SBM machine market, but rather from Tetra's dominance in the carton market (recital 328, emphasis in the original). Referring inter alia to the close links between the two markets for carton packaging and PET packaging equipment, the Commission finds that the merger would create a market structure providing considerable scope for anti-competitive effects arising from the merged entity's simultaneous dominant and leading position in carton and PET equipment respectively (recital 330).

46 Its analysis [is] explained in four stages (recital 331). First, the markets for carton and PET packaging systems belong to closely neighbouring product markets with a common pool of customers. Second, given the future growth of PET in the new sensitive product segments, the merger would enable the merged entity to acquire a dominant position on the PET market by leveraging Tetra's current dominant position on the carton markets. Third, the merger would strengthen Tetra's dominant position in the carton markets. Fourth, the combination of the two dominant positions would consolidate the merged entity's position in the sector for packaging for sensitive products, especially aseptic packaging, thus reinforcing the two dominant positions.

47 In support of its analysis, the Commission cites the fact that the notified transaction is of strategic importance to Tetra, that Tetra has the ability and would have an incentive to engage in leveraging, that the competitors of the merged entity would not be able to rival it at various levels, and, lastly, that Tetra could practise price discrimination.

48 With respect to the ability and the incentive to engage in leveraging, the Commission concludes that the market structure resulting from the merger would be particularly conducive to leveraging effects (recital 359):

(a) There would be a common pool of customers requiring both carton and PET packaging systems to package "sensitive" liquids.

(b) Tetra has a particularly strong dominant position in aseptic carton packaging with more than [80-90%] of the market and a dependent customer base.

(c) Tetra/Sidel would start from a strong, leading, position in PET packaging systems and in particular SBM machines with a market share in the region of [60-70%].

(d) Tetra/Sidel would have the ability to target selectively specific customers or specific customer groups as the structure of the market enables price discrimination.

(e) Tetra/Sidel would have a strong economic incentive to engage in leveraging practices. As carton and PET are technical substitutes, when a customer switches to PET he/she is a lost customer on the carton side of the business either because he/she partially switched from carton or because he/she did not switch some of the production to carton from other packaging materials. This creates an added incentive to capture the customer on the PET side of the business to recover the loss. Therefore, by leveraging its current market position in carton, Tetra/Sidel would not only enhance its market share on the PET side but defend or compensate its possible loss on the carton side.

(f) Competitors of Tetra/Sidel in both the carton and the PET equipment markets would be much smaller, with the largest competitor having no more than [10-20%] share in the market for carton packaging machines or SBM machines.

49 The leveraging practices would be based on Tetra's current dominant position on the aseptic carton markets (recital 364):

Leveraging [this position] [...] in a number of ways [...] Tetra/Sidel would have the ability to tie carton packaging equipment and consumables with PET packaging equipment and, possibly, preforms (in particular barrier-enhanced preforms). Tetra/Sidel would also have the ability to use pressure or incentives (such as predatory pricing or price wars and loyalty rebates) so that its carton customers buy PET equipment and, possibly, preforms from ... Tetra/Sidel and not from its competitors or converters.

50 The Commission also states that [m]any customers who will continue to need carton packaging for part of their production needs could be forced or provided with incentives to source both their carton and PET equipment from a single supplier of carton and PET packaging equipment and that [c]ustomers having long-term agreements with Tetra for their carton packaging needs will be particularly vulnerable to such pressures (recital 365).

51 The leveraging could cause competitors of Tetra/Sidel to be foreclosed from the SBM machine market for sensitive products for the following reasons (recital 369):

(a) whether competitors can continue to sell in the untied product segments (e.g. water or CSDs) is not relevant. This is due to the ability to price discriminate and target specific customer groups which results in a segmentation of the relevant markets by end-use; b) the "sensitive" product segments consist of very complex liquids which require very specific PET lines including barrier technologies and aseptic filling machines or aseptic Combi SBM machines [which combine blowing, filling and capping]. Competitors would not have sufficient incentive to invest and compete in these high technology areas of PET equipment [...] [and] would thus be foreclosed from the so-called "second era" markets of PET.

52 They could also be foreclosed from the rest of the SBM machine market (recital 370).

53 According to the Commission, this outcome is all the more likely given the weak position of the merged entity's competitors and its customers' lack of purchasing power. The Commission notes, in relation to the competitors' position, that a crucial point for it is that, even if Sidel's three competitors in the market for high capacity SBM machines can match Sidel's offerings, the fact remains that they will lack the merged entity's dominant position in carton packaging (recital 372). It states that:

The SIG group, the only one of the three competitors which will have both carton and PET activities, will have market shares of no more than [10-20%] in carton packaging machines and SBM machines. SIG lacks the full range of the merged entity in PET equipment as it currently lacks an essential element, barrier technology, for any future penetration in PET's new product segments. No other supplier of packaging equipment will be able to offer both carton and PET packaging equipment.

54 It concludes that by combining the dominant company in carton packaging, Tetra, and the leading company in PET packaging equipment, Sidel, the proposed transaction would create a market structure which would provide the merged entity with the incentives and tools to turn its leading position in PET packaging equipment, in particular SBM machines (low and high capacity) used for the "sensitive" product segments, into a dominant position. This is also likely to enhance the merged entity's position and have anti-competitive effects on the overall SBM machine market (recital 389).

55 Regarding the alleged effects on the carton markets, the Commission takes the view that the merger would create a market structure which would enable Tetra to strengthen its current dominant position in carton packaging by eliminating a source of significant competitive constraint, which could have serious negative consequences in the carton packaging sector (recitals 390 and 391). The Commission refers to the need to be particularly vigilant when faced with the strengthening of such a high degree of dominance, as in the present case.

56 According to the Commission, without the merger, companies active in PET packaging, especially Sidel and converters, would engage in business strategies aimed at increasing the use of PET in order to take market share from carton. It dismisses the relevance of Tetra's argument that Sidel is able to influence only the price of SBM machines, which forms a very small proportion of the total packaging cost, on the ground that it is the ability of Tetra to influence the price of both carton machines and cartons which is important.

57 Without the merger, PET companies would be expected to compete vigorously to gain market share from carton (recital 398), and Tetra would also be expected to defend its position fiercely by seeking to improve its carton packaging solutions by innovating, bringing better carton technology, new carton shapes and closures and, in some cases, lowering carton prices to defend its position. Indeed, Tetra has been active in this field and has produced new carton packages with more user-friendly features such as the carton gable top package with screw top closure (recital 398). The merger would not only eliminate the need for Tetra to compete as vigorously, but would also enable it to control significantly the shift from carton to PET (recital 399). Thus, it could keep its carton package prices at the current high levels for those customers or that part of customers' production unable or unlikely to switch totally or partially to PET due to consumer preferences, switching costs and long-term contracts, whilst continuing, for customers wishing to switch to PET, to be in a position to influence its customers' choice of packaging machines, for example, through the timing of the shift, and to offer its timely and tailor-made solutions, thus increasing its PET equipment market share (recital 399). Thus, Tetra could pre-empt the major advantage of its main competitor, the SIG group which is the only other company in the world that manufactures and sells both carton and PET packaging equipment (recital 400).

58 The Commission also finds that [t]he fact that the merged entity [holds] dominant positions in two closely related neighbouring markets (carton and PET packaging equipment) and a notable presence in a third market (HDPE) would enable the merged entity to have a particularly strong presence in the sectors for the packaging of the relevant end-use products (LDPs, juice, FFDs, tea/coffee drinks) (recital 404). This would also strengthen the already strong position (recital 407) of Tetra in the sector of packaging of the sensitive products and would increase the barriers to entry for the competitors of Tetra/Sidel, which would allow the merged entity to marginalise competitors and [...] reinforc[e] dominance in the relevant markets for carton packaging equipment and PET packaging equipment, in particular SBM machines used for "sensitive" products (recital 408).

The commitments

59 The commitments, set out in the Annex to the contested decision, are summarised by the Commission as consisting of: (i) divestiture of Tetra's SBM business; (ii) divestiture of Tetra's PET preform business; (iii) holding Sidel separate from Tetra Pak companies and pre-existing behavioural remedies under Article 82 of the Treaty; and (iv) granting a licence for Sidel's SBM machines for sale to customers filling "sensitive" products and for sales to converters (recital 410). The Commission finds them to be insufficient to eliminate the major competition concerns identified on the PET packaging equipment and carton packaging markets (recital 424). The proposed divestiture of Tetra's SBM business and PET preform business would only have a minimal impact on the position of the merged entity, whilst the licence, in particular for Sidel's SBM machine business for sensitive products, would not only be insufficient to eliminate the problems but would not appear to be a viable option (recital 424). The licence may actually introduce complex mechanisms in the market resulting in artificial regulation (recital 424). Lastly, the two behavioural commitments concerning the separation of Sidel's and Tetra's business and compliance with Article 82 EC are considered insufficient as such to resolve the concerns arising from the structure of the market following the merger (recital 424).

60 Given their overall insufficiency to address the competition concerns raised by the transaction, the Commission finds that the commitments thus cannot form the basis for an authorisation decision (recital 451).

61 Accordingly, Article 1 of the contested decision states:

The concentration, notified to the Commission by Tetra Laval BV [...], whereby Tetra would acquire sole control of the undertaking Sidel SA is declared incompatible with the common market and the functioning of the EEA Agreement.

Procedure

62 By application lodged with the Registry of the Court of First Instance on 15 January 2002, the applicant brought the present action against the contested decision.

63 By a separate document lodged the same day, the applicant also applied for an expedited procedure, pursuant to Article 76a of the Rules of Procedure. The Commission, in its observations on that application, lodged on 5 February 2002, agreed that the procedure was justified.

64 On 6 February 2002, the First Chamber of the Court of First Instance, to which the case has been assigned, decided to grant the application for an expedited procedure.

65 The Commission lodged its defence on 12 March 2002.

66 By application lodged at the Registry of the Court of First Instance on 19 March 2002, the applicant brought an action, registered under Case T-80/02, seeking the annulment of the decision of 30 January 2002 (see paragraph 26 above) and the joinder of the present case with Case T-80/02. By a separate document lodged on the same day, Tetra also requested an expedited procedure in Case T-80/02, which was supported by the Commission in its observations in respect of that application, lodged on 3 April 2002. That case was also assigned to the First Chamber of the Court of First Instance.

67 By way of measures of organisation of procedure, on 19 March 2002 the parties were requested, pursuant to Article 64(3)(e) of the Rules of Procedure, to attend an informal meeting on 4 April 2002 with the Judge-Rapporteur.

68 The applicant accepted at the informal meeting that its application for joinder of the present case and Case T-80/02 could be regarded as withdrawn if the oral hearings in both cases could be held consecutively and if the judgments were to be delivered, pursuant to the expedited procedure, on the same date. At the meeting the parties were given leave to lodge speaking notes no later than one week prior to the oral hearings for the two cases.

69 On 18 April 2002, the First Chamber of the Court of First Instance granted the application for the procedure to be expedited in Case T-80/02 and set 26 and 27 June 2002 as the dates for the hearings in the two cases.

70 Upon hearing the report of the Judge-Rapporteur, the First Chamber of the Court of First Instance decided, at its meeting on 10 June 2002, to open the oral procedure and, by way of measures of organisation of the procedure, invited the parties to answer, preferably before the hearing by the deadline set for the filing of speaking notes or, if not, at the hearing, a number of written questions notified by letter of 11 June 2002 (hereinafter the written questions). The Commission was also requested to produce one document.

71 On 19 June 2002, the parties lodged their speaking notes with the Registry of the Court of First Instance. The applicant's notes contained a request that some of the information contained in some of the documents in the case-file be treated as confidential. In its notes the Commission does not dispute the confidentiality of those documents. On the same day, the parties also replied to the written questions and the Commission lodged the document requested.

72 As one of the judges of the First Chamber of the Court of First Instance was prevented from attending, the President of the Court designated Judge Pirrung on 24 June 2002, pursuant to Article 32(3) of the Rules of Procedure, in order to attain the quorum necessary to give judgment and re-scheduled the two hearings for 3 and 4 July 2002.

73 By letter of 24 June 2002, the applicant supplemented its request for confidential treatment of some of the information contained in the case-file.

74 By separate letter on the same day, it asked that a document, a copy of which was already held by the Commission, be included in the case-file. The document in question is the rapport de gestion du Conseil d'administration of Sidel for the 2001 fiscal year (hereinafter the Sidel annual report). The request was granted by the First Chamber of the Court of First Instance by decision of 26 June 2002.

75 Upon hearing a supplementary report of the Judge-Rapporteur, the First Chamber of the Court of First Instance decided, at its meeting on 27 June 2002, to ask the Commission to produce a number of documents, in particular the Canadean, PCI, Warrick and Pictet studies, and to answer two additional written questions (hereinafter the additional written questions).

76 On 1 July 2002, the Commission lodged its answers to the additional written questions and produced the documents requested. Those documents, with the exception of the responses to the market investigation, which the Commission considered to be confidential, were put into the case-file.

77 The parties presented oral argument and answered questions put to them by the Court of First Instance at the hearing on 3 and 4 July 2002.

78 At the hearing, the Court of First Instance decided to grant the applicant access to a non-confidential version of some of the responses to the market investigation. Five of the responses were found, following verification by the Court, either not to contain answers to the questions asked (four documents) or clearly to be of an entirely confidential nature (one document) and were not given to the applicant. The non-confidential version of the responses, as drawn up by the Court pursuant to Article 67(3) of the Rules of Procedure, was put into the case-file and a copy was supplied to the applicant. The applicant requested, and was granted by the Court, a week to lodge any written observations it might have on that version of the responses to the market investigation. By letter of 8 July 2002, the applicant waived that right, whilst maintaining its substantive plea concerning those documents.

Forms of order sought

79 Since the conditions stated during the informal meeting for the amendment of the form of order sought have been met, the applicant claims that the Court should:

- annul the contested decision;

- order the Commission to pay the costs.

80 The Commission contends that the Court should:

- dismiss the action as unfounded;

- order the applicant to pay the costs.

Law

81 The applicant puts forward essentially five pleas in support of its action. At the informal meeting on 4 April 2002, the applicant stressed that, as stated in its written pleadings, it was contesting the contested decision in so far as it prohibited the merger as modified by the commitments (hereinafter the modified merger). It has asked the Court to focus its examination on the situation which would result following the commitments it has offered.

82 By its first plea, of a procedural nature, the applicant argues that the Commission did not respect the applicant's right of access to the case-file prior to the adoption of the contested decision. On the merits, it maintains that, by refusing to allow the modified merger, the Commission incorrectly applied Article 2(3) of the Regulation. In support of this claim, the applicant asserts that the modified merger has (i) no appreciable anti-competitive horizontal or vertical effects and (ii) no appreciable anti-competitive conglomerate effect. Furthermore, it claims (iii) that the assessment by the Commission of the applicant's commitments is inadequate and (iv) that the Commission has failed to give sufficient reasons for the contested decision.

I - The plea alleging infringement of the right of access to the file

A - Arguments of the parties

83 The applicant states that the Commission failed to give it access to the file, as several documents on which the Commission relies extensively for the purpose of making findings adverse to Tetra in the contested decision were never communicated to it. They are, first, the report of 10 September 2001 by an external economic expert, Professor Ivaldi (hereinafter the Ivaldi report), containing an econometric analysis of Sidel's previous sales margins (hereinafter the econometric analysis) of which the applicant received only a one-page summary, and, second, the responses to the market investigation, of which it received two summaries. Despite a request by Tetra on 19 October 2001 to obtain complete access to those responses, as opposed to inadequate summaries, on 25 October 2001 the hearing officer confirmed the Commission's refusal to allow access to those documents. The applicant maintains that the refusal is contrary to both the Commission Notice on the internal rules for processing requests for access to the file in cases pursuant to Articles [81] and [82] of the EC Treaty, Articles 65 and 66 of the ECSC Treaty and Council Regulation (EEC) No 4064/89 (OJ 1997 C 23, p. 3, hereinafter the access to the file notice) and the case-law (Case 107/82 AEG v Commission [1983] ECR 3151, paragraph 23 et seq.; and Case T-30/91 Solvay v Commission [1995] ECR II-1775, paragraph 58 et seq.).

84 The applicant also stresses that the Commission, because of the importance it gave to the econometric analysis in the contested decision (particularly in recital 346 et seq.), must have relied on documents other than merely the Ivaldi report in the form of the summary disclosed to the applicant.

85 The Commission states that the applicant had access to matters in the file to which the Commission refers and on which it relies in the contested decision. Referring to Article 13(3) of Regulation No 447/98 and to Case T-221/95 Endemol v Commission [1999] ECR II-1299, paragraph 65, the Commission states that access to the file is justified only in so far as it enables the undertaking in question, faced with the Commission's objections and with the documents on which the Commission relies, to present observations on the foundation of those objections. In the present case, Tetra was given the opportunity to present such observations.

86 Firstly, as regards the Ivaldi report, the Commission states that, during the administrative procedure, the applicant did not complain about lack of access to the file so far as concerns the econometric analysis and, accordingly, cannot now argue that its rights of defence have been infringed. The brevity of the summary of that analysis in the report can be explained by the fact that it was a response and correction to the analysis previously submitted by Tetra. Tetra could have presented its observations on that report (and its experts did so during the oral hearing before the Commission on 26 September 2001). Moreover, the report constituted merely a supplementary part of the market investigation carried out by the Commission. Thus, even if there were some substance to the applicant's allegations, which there is not, this should not lead to annulment of the contested decision because the report did not affect its content.

87 Secondly, as regards the responses to the market investigation, the Commission states that they also were of secondary importance, since it relied on its own analysis of the inadequacy of the commitments. The Commission is required to refuse access to those responses on grounds of confidentiality (Case C-310/93 P BPB Industries and British Gypsum v Commission [1995] ECR I-865, paragraph 26), and, although Article 17(2) of Regulation No 447/98 allows a party which submits observations to supply a non-confidential version of its response, the Commission had the right, as confirmed by Endemol v Commission, to prepare objective, non-confidential summaries and to limit access by the applicant to those summaries.

88 The Commission did, moreover, discuss the responses with the applicant at a meeting on 18 October 2001, during which the summaries were made available to it. That access, along with the examination and confirmation by the hearing officer of the objectivity of the summaries, ensured that the applicant's rights of defence were fully respected. In any event, as the results of the investigation merely confirmed the Commission's initial analysis, there is no reason to conclude that the contested decision would have been different even if the requested access had been granted. The alleged infringement of rights of the defence cannot, therefore, justify the annulment of the contested decision.

B - Findings of the Court

1. Preliminary observations

89 First of all, it must be observed that access to the file in competition cases is intended in particular to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission's file, so that on the basis of that evidence they can express their views effectively on the conclusions reached by the Commission in its statement of objections (Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraphs 9 and 11; BPB Industries and British Gypsum v Commission, paragraph 21; Case C-51/92 P Hercules Chemicals v Commission [1999] ECR I-4235, paragraph 75). The general principles of Community law governing the right of access to the Commission's file are designed to ensure effective exercise of the rights of the defence and, in the case of a decision concerning infringement of the competition rules applicable to undertakings and imposing fines or penalty payments, breach of those general principles of Community law in the procedure prior to the adoption of the decision can, in principle, cause the decision to be annulled if the rights of defence of the undertaking concerned have been infringed (Hercules Chemicals v Commission, paragraphs 76 and 77).

90 It must also be recalled that, in order to hold that the rights of the defence have been infringed, it is sufficient for it to be established that the non-disclosure of the documents in question might have influenced the course of the procedure and the content of the decision to the applicant's detriment (Case T-36/91 ICI v Commission [1995] ECR II-1847, paragraph 78; Joined Cases T-305/94, T-306/94, T-307/94, T-313/94, T-314/94, T-315/94, T-316/94, T-318/94, T-325/94, T-328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappij and Others v Commission [1999] ECR II-931, paragraph 1021; and Endemol v Commission, paragraph 87).

91 The Court of First Instance has already confirmed that these principles are applicable to the procedures provided for by the Regulation, even though their application may reasonably be adapted to the need for speed, which characterises the general scheme of the Regulation (Endemol v Commission, paragraph 68).

92 Accordingly, in the present case it is necessary to examine whether the applicant's rights of defence were affected by the conditions under which it had access to some of the documents in the Commission's administrative file.

2. The first part of the plea: the Ivaldi report

93 First of all, even if the Commission's argument regarding the lateness of the complaint of infringement of the rights of the defence were valid, it cannot, in the particular circumstances of the present case, be upheld. The applicant's assertion that Professor Ivaldi apparently had a very limited role at the hearing before the hearing officer has not been denied by the Commission; nor did the Commission respond to the economists' report produced by Tetra at that hearing. In those circumstances, it is reasonable to conclude that the applicant did not, prior to the adoption of the contested decision, appreciate the importance which the Commission would attach to the econometric analysis in the Ivaldi report.

94 Secondly, it must, however, be observed that the applicant had sufficient access to the Ivaldi report, a fact which it has not seriously disputed. The Court accepts the Commission's explanation that the report is brief because it was a response to an analysis submitted by the applicant itself. It follows that only the existence of other documents relating to the econometric analysis in the contested decision and to which Tetra did not have access could establish a failure by the Commission to allow access to the file.

95 In that connection, it is clear from case-law that, where the institution concerned asserts that a particular document to which access has been sought does not exist, there is a presumption that it does not exist. That, none the less, is a simple presumption, which the applicant may rebut in any way by relevant and consistent evidence (see, to this effect, Case T-123/99 JT's Corporation v Commission [2000] ECR II-3269, paragraph 58; Case T-311/00 British American Tobacco (Investments) v Commission [2002] ECR II-2781, paragraph 35). It must be found in the present case, however, that the applicant has not rebutted that presumption.

96 In support of its allegation, the applicant essentially refers to the details of the econometric analysis carried out in the contested decision. However, it is apparent from the file, in particular the annexes to the parties' written observations concerning the accuracy of the opposing econometric analyses, that the Commission's analysis is based largely on the information supplied to it by the applicant. The only other factors which the Commission took into account in the formulation of the variables used in its analysis are based on some of the criticisms of the variables used in the Tetra analysis which Professor Ivaldi made in his report. This is corroborated by the very title of the Ivaldi report in that it is referred to, in the singular, as a Note to the File/Internal.

97 That conclusion is not affected by the applicant's argument based on the access to the file notice. In fact, it is clear that the assistance, in the form of advice provided by Professor Ivaldi, is not a study which must be made accessible pursuant to the fourth subparagraph of point I B of the access to file notice. Nor can the adequacy of the analysis in the report be contested by alleging an infringement of the right of access to the file. It follows that the Commission, in having Professor Ivaldi assist it in the study of the econometric analyses submitted by the applicant, did not fail to meet the obligations which it imposed on itself in the access to the file notice.

3. The second part of the plea: the responses to the market investigation

98 As for the second part of the plea, concerning the responses to the market investigation, the case-law also makes it clear that, with regard to answers by third parties to requests by the Commission for information, the Commission must take into account the risk that an undertaking holding a dominant position might adopt retaliatory measures against competitors, suppliers or customers who have collaborated in the investigation carried out by the Commission (BPB Industries and British Gypsum v Commission, paragraph 26; and Endemol v Commission, paragraph 66). Faced with such a risk, third parties who submit documents to the Commission in the course of its investigations, and who consider that reprisals might be taken against them as a result, are entitled to expect that their request for confidentiality will be complied with.

99 It is possible, where certain third parties have asked that their identity not be divulged, that it will be necessary for the Commission not to reveal the identity of other third parties who are involved in the procedure but who did not request confidentiality before replying to the Commission's questionnaires (Endemol v Commission, paragraph 70).

100 Thus it cannot be excluded that this requirement of confidentiality also justifies the drawing up of non-confidential summaries of all of the responses in question (see, to this effect, Endemol v Commission, paragraphs 71 and 72).

101 In other words, the mere fact that Article 17(2) of Regulation No 447/98 imposes an obligation on each third party requesting confidentiality to indicate clearly which parts of its response are to be considered confidential does not prevent the Commission, in the light of Article 17(1) of Regulation No 447/98 and the objective of Article 287 EC, from examining of its own volition whether there is a risk that business secrets of some of the third parties involved in the procedure, or even other confidential information, may be divulged if unlimited access is allowed to the responses of other third parties who have not themselves requested confidentiality.

102 However, when faced with a request for access to the file from a notifying party (namely a person concerned within the meaning of Article 18(1) of the Regulation), it is for the Commission, at least until the Advisory Committee has been consulted pursuant to that article, to justify any restrictions on that right of access, since any exception to the right of access to the file must be interpreted narrowly, particularly when the Commission intends to prohibit the notified merger in question.

103 Tetra was allowed access to only two non-confidential summaries by the Commission of all the responses to the market investigation and not to the responses themselves or to a non-confidential version of them (see paragraph 22 above). The Commission observes that it received requests for confidential treatment from many of those responding to the market investigation, in some cases because they stated that they feared reprisals. However, following verification by the Court of First Instance pursuant to Article 67(3) of the Rules of Procedure, it became clear that the Commission had not informed the 51 recipients of the questionnaires, at least in the faxed cover sheets of the questionnaires, of their obligation under Article 17(2) of Regulation No 447/98 to indicate clearly all those parts of their responses which they deemed to be confidential. Despite that omission, six of the 30 usable responses, out of the 34 responses received, expressly requested confidentiality. One of the respondents provided a non-confidential version of its response to the Commission, pursuant to Article 17(2) of Regulation No 447/98.

104 Accordingly, it is necessary to examine whether the Commission was justified in refusing the applicant access to the responses to the market investigation and to one non-confidential version of those responses, and in limiting access to two non-confidential summaries of all of the responses.

105 The need for speed, which characterises the general scheme of the Regulation, cannot by itself justify a refusal of the kind at issue here. If the Commission did not have the time needed to ask the respondents to the market investigation for a non-confidential version of their responses, pursuant to Article 17(2) of Regulation No 447/98, it had at least to explain to the applicant how the nature and scope of the fear of reprisals or other negative or undesired consequences expressed by respondents who simply requested confidentiality without providing a non-confidential version of their responses justified a refusal to allow access to those responses or to a non-confidential version thereof. Although the short deadlines in the second phase of a merger procedure may, for practical reasons and especially when many requests for confidentiality have been received, give grounds for drawing up non-confidential summaries, the Commission is still obliged to give valid reasons for a blanket refusal to allow access to the responses to a market investigation concerning the commitments offered by a person concerned. That obligation applies even more strongly to the responses submitted to it without any - at least any formal - request for confidentiality.

106 It is apparent from the hearing officer's reply of 25 October 2001 to the applicant's request for access of 19 October 2001 that the Commission's position on access to the file in the present case reflects its general position. The Commission believed that the provision of summaries of the responses to the market investigation, the accuracy and detail of which was confirmed by the hearing officer, constituted adequate access to the file and thus respected Tetra's rights of defence.

107 It must be held, first, in particular in the light of the fact that some of the respondents to the market investigation expressed their fears of possible retaliation by the applicant if their responses were not treated confidentially, that confidential treatment had to be given to all of the responses.

108 Since the Court of First Instance has itself been able to establish that access could have been given to a non-confidential version of at least 30 of the responses to the market investigation, prepared by blanking out confidential information, it is necessary to examine whether access solely to the summaries did actually infringe the applicant's rights of defence in the present case.

109 The Commission's assertion that it referred to the responses to the market investigation in the contested decision only to support a conclusion it had already reached concerning the commitments for other unrelated reasons is supported to a certain extent by the wording of the contested decision (see recitals 424 and 425). It is nevertheless true that at least one adverse finding for the applicant regarding the commitments is presented as being confirmed by the market test (recital 428).

110 It should be noted that, in a memorandum of 18 October 2001 and a formal complaint filed by Tetra on 19 October 2001 with the hearing officer, Tetra complained of a number of deficiencies and inaccuracies in the market investigation questionnaires to which it had access, particularly as concerns the discussion of the commitment offered by Tetra concerning the licence for Sidel's SBM machines. In his reply of 25 October 2001, the hearing officer stated that the Commission's market investigation was conducted in an objective manner and that the questionnaires were not misleading. He also stated that, since the non-confidential version of the commitments had been attached to the questionnaires, the Commission was entitled to assume that the recipients of the questionnaires had read that document.

111 It must be pointed out, firstly, that the complaint and the memorandum are both annexed to, and cited in a footnote of, the application. It follows that the Court cannot uphold the objection raised by the Commission at the hearing, namely that the arguments in the applicant's oral submissions regarding the alleged inaccuracy of the fifth question in the questionnaire sent to customers were new and, therefore, inadmissible.

112 The Court cannot, however, accept the applicant's argument that the questionnaires, by asking the recipients to express a view on whether the commitments [would] reduce significantly the applicant's position in carton packaging and [would] effectively eliminate the strong position of the merged entity on the market for sensitive liquid food packaging, may have misled the recipients as to the test under Article 2(3) of the Regulation. Suffice it to note in that respect that, even if some of the recipients may have formulated their answers by reference to a test other than that prescribed by Article 2(3) of the Regulation, the applicant did not need to have access to the answers to those questions in order to be able to remind the Commission of the significance of that test during the administrative procedure.

113 This is confirmed by the fact that Tetra did actually have access from the beginning to the questionnaires sent to customers and converters, as it acknowledged in its memorandum of 18 October 2001. Although the Commission was required to give it access also to the questionnaire sent to its competitors, the applicant nevertheless acknowledged at the hearing that it had subsequently gained access to it by other means. In any event, as Tetra also acknowledged at the hearing, its arguments do not really relate to the latter questionnaire. It is thus clear that, through its access to the questionnaires and using the summaries of the responses supplied by the Commission, the applicant was able to point out, in its complaint to the hearing officer, that the Commission should apply only the test laid down in Article 2(3) of the Regulation.

114 As regards the allegedly misleading nature of the depiction, in the questionnaires sent to customers and converters, of Tetra's commitment regarding the licence, it can be seen, merely by reading them, that a normally attentive recipient could not have been misled. Whilst the questions asked did contain certain details about the licence which, at most, might have the potential to mislead a recipient who did not take care to examine them in the light of the non-confidential version of the commitments attached as an annex, the Commission was entitled to assume that such an examination was in fact undertaken. The applicant has not shown that, in so far as a recipient might have found the details to be ambiguous, a simple check against the commitment concerning the licence would not have clarified the precise scope of that commitment.

115 In any event, it is not apparent from the non-confidential version of the responses by the customers and converters to the market investigation that they were misled or confused when formulating their responses. Nor do the summaries of the responses provided to Tetra by the Commission, when examined in the light of the non-confidential version of the responses, indicate that information or details were omitted which might have been useful to the applicant to show that recipients of the questionnaires had been misled or confused in that way. This conclusion is supported by Tetra's decision not to submit additional written comments on that version of the responses during the present proceedings (see, to this effect, Hercules Chemicals v Commission, paragraph 80).

116 Lastly, there is nothing in the summaries of the responses to the market investigation to indicate that they do not faithfully reflect the one response whose entirely confidential nature has been recognised by the Court, following its verification of that question (see paragraph 78 above).

117 It follows that the Commission's decision to allow Tetra access only to the non-confidential summaries of the responses to the market investigation did not infringe Tetra's rights of defence.

4. Conclusion

118 It follows from the foregoing that the plea alleging infringement of the right of access to the file must be dismissed.

II - The pleas alleging infringement of Article 2 of the Regulation

A - Preliminary observations

119 As a preliminary point, it must be recalled that the substantive rules of the Regulation, in particular Article 2, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review by the Community judicature of the exercise of that discretion, which is essential for defining the rules on concentrations, must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations (Joined Cases C-68/94 and C-30/95 France and Others v Commission (Kali & Salz) [1998] ECR I-1375, paragraphs 223 and 224; Case T-102/96 Gencor v Commission [1999] ECR II-753, paragraphs 164 and 165; and Case T-342/99 Airtours v Commission [2002] ECR II-2585, paragraph 64).

120 It must also be recalled that under Article 2(3) of the Regulation a concentration which creates or strengthens 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 must be declared incompatible with the common market. Conversely, the Commission is bound declare a concentration falling within the scope of application of the Regulation compatible with the common market where the two conditions laid down in that provision are not fulfilled (Case T-2/93 Air France v Commission [1994] ECR II-323, paragraph 79; see also, to this effect, Gencor v Commission, paragraph 170; and Airtours v Commission, paragraphs 58 and 82). If, therefore, a dominant position is not created or strengthened, the transaction must be authorised and there is no need to examine the effects of the transaction on effective competition (Air France v Commission, paragraph 79).

121 The issue of whether the applicant's second, third and fourth pleas are well founded must be examined in the light of these considerations.

B - The plea based on the absence of horizontal and vertical anti-competitive effects of the modified merger

1. Preliminary observations

122 The applicant argues that the commitments eliminated all the potential negative horizontal and vertical effects arising from the notified transaction which are identified in the contested decision. However, inasmuch as the Commission raises some objections to the merger which are based on such effects (recitals 263 to 324), Tetra maintains that the objections have become unfounded in the light of those commitments.

123 The Commission contends that the applicant is wrong to state that the contested decision contains objections relating to horizontal or vertical effects. The decision does not refer to the creation or strengthening of a dominant position as a result of the horizontal or vertical effects of the merger taken in isolation. The Commission maintains, however, that the modified merger would have significant continuing horizontal and vertical effects which it cannot ignore. It states that the contested decision correctly took into account the remaining (post-commitment) horizontal and vertical effects of the modified merger in the assessment of the conglomerate effects.

124 The Court finds that, even though the Commission did not base the contested decision on those horizontal and vertical effects, it did take them into account in support of its finding that the modified merger must be prohibited. Thus, the Commission states in the contested decision that the strengthening and creation of dominance on the market for PET packaging equipment, in particular the market for high- and low-capacity SBM machines, and the market for carton packaging systems would take place through a number of factors, including horizontal and vertical effects (recital 262). Moreover, the observations of the Commission, especially the explanations given by its Agent at the hearing, indicate that it is its concerns about the PET equipment markets in particular which are based on such effects. Accordingly, it is necessary to examine the applicant's separate plea relating to the creation of a dominant position on those markets due to those effects.

2. Horizontal effects

(a) Arguments of the parties

125 The applicant begins by stating that, although the contested decision finds that there is an overlap between three markets, each one of which is considered to be a distinct market, namely low-capacity SBM machines, aseptic PET filling machines, and barrier technologies, the Commission does not foresee either the creation or the strengthening of a dominant position in any of those markets. The main problem identified by the Commission as regards horizontal effects concerns the market for low-capacity SBM machines, but Tetra's decision to divest itself of Dynaplast, that is to say, its own SBM machines business, would eliminate this problem. The applicant also emphasises that its commitment to grant a licence for Sidel SBM machines would reduce even further Sidel's pre-existing position on the market for low-capacity SBM machines.

126 The Commission acknowledges that the horizontal effects of the modified merger would not by themselves, that is, independently of the other effects of the transaction, lead to the creation or strengthening of a dominant position, but maintains that they would significantly strengthen the position of the merged entity on the PET market and would not be eliminated by the commitments. Moreover, the commitments would not resolve the problem of the strengthening of Tetra's dominant position on the carton markets which, according to the Commission, would result from the elimination of Sidel as a potential competitor on the global market for packaging systems for sensitive products. The Commission stresses that the divestiture of Dynaplast would eliminate only the horizontal overlap between the activities of Tetra and Sidel in low-capacity SBM machines, whilst the commitments would have no effect on Sidel's leading position in high-capacity SBM machines. The Commission also stresses, both in its defence and its answers to the written questions, that the merger would strengthen the global position of the merged entity for PET equipment, including aseptic PET filling machines, barrier technology and PET bottle capping systems.

(b) Findings of the Court

127 The contested decision identifies three horizontal effects which are problematic from a competition law standpoint and which, as acknowledged by the Commission at the hearing, concern only the PET market. They are the alleged negative effects of the transaction on the markets for low-capacity SBM machines, aseptic PET filling machines, and barrier technology. It is therefore necessary to examine whether, despite the commitments, negative horizontal effects remain which could support the Commission's argument that the merged entity might use its current dominant position on the carton markets to leverage its way into a dominant position on the PET market.

128 As regards low-capacity SBM machines, the commitment by the applicant to divest itself of Dynaplast means that the merger would not strengthen in any way the share of that market currently held by Sidel. This precludes Sidel's position from being strengthened on that market and, a fortiori, the transaction from significantly impeding competition in that part of the SBM machine market. The contested decision (recital 427) even recognises that the commitments will eliminate the horizontal overlap of the parties to the transaction in the market for these machines. Although the information obtained from the responses to the market investigation, to which the Commission refers in its defence on this point, have some probative value, the Commission cannot, on the one hand, rely on Dynaplast's contribution to Sidel's position in the market for low-capacity SBM machines, namely an almost [20-30%] market share (recital 266), and, on the other hand, plead before the Court that some of the responses refer to the unimportance or unprofitability of that range of machines. Nor can the mere fact that Tetra was subsequently unable to find a purchaser for Dynaplast, as it confirmed in its answers to the written questions and at the hearing, support the conclusion reached by the Commission, since it merely confirms Tetra's unprofitable and, notwithstanding a large market share, relatively weak position in the market for low-capacity SBM machines prior to the merger.

129 It must therefore be held that the modified merger would not create any horizontal overlap between the activities of the parties thereto in the market for low-capacity SBM machines. The correctness of this conclusion cannot be called into question, at least not in support of the validity of the contested decision, by the Commission's reference to an alleged new technology, TetraFast, developed by Tetra for low-capacity SBM machines, which the Commission mentioned for the first time in its answers to the written questions.

130 As regards the market for aseptic PET filling machines, the Commission should have ruled out the existence of significant, negative horizontal effects on competition. First of all, the modified merger would have only relatively modestly strengthened the merged entity's market share ([0-10%] of the installed base of this type of machine in 2000 in the EEA), if that share is calculated in relation to Sidel's current position, which is [10-20%] on that market (recital 288). Second, there are already sizeable competitors on this market, including new arrivals who have already captured a significant share of the sales on this market (namely [40-50%]), as acknowledged in the contested decision (recital 251). Lastly, the emphasis placed by the Commission, in its written answers and at the hearing, on the commercial potential of LFA-20 machines, referred to in the contested decision (recital 82, footnote 32, and recital 202), which will be capable of filling aseptically both HDPE and PET bottles, cannot support its argument. Those machines, at least according to Tetra, which the Commission did not contradict on this point at the hearing, are still being tested by it and by three competitors which are also developing them.

131 As regards the market for barrier technologies, the Commission acknowledges that the effects of the notified transaction would significantly enhance the merged entity's position in that market, but not to the extent that a dominant position [...] would be created (recital 282). The Commission could have hardly found otherwise, since the combination of Tetra's and Sidel's activities in this area would only provide the merged entity with a market share in the order of [10-20%], and that is without taking into account the, at least potential, effects of Tetra's renunciation of its licence to the Sealica technology, a point confirmed by the Commission in its answers to the written questions. This estimate of the market share is, moreover, strongly disputed by the applicant in its answers to the written questions. It has argued convincingly that, given that these are emerging technologies, the market shares calculated by reference to existing products are not very reliable. At the hearing, moreover, Tetra referred to the problems currently posed by the development of plasma barriers, such as Sidel's Actis technology for beer, a point confirmed by Sidel's annual report. It also stressed that new barrier technologies, especially for some sensitive products like LDPs, do not use PET but require the development of a new plastic resin. In the light of the foregoing, it must be found that th