Opinion of the Advocate-General



Opinion of the Advocate-General

Table of contents

I – Introduction

II – Legal framework

III – Background to the dispute and the course of the procedure

A – The concentration

B – The problem of collective market dominance

C – Administrative procedure and the Commission’s first clearance decision

D – The proceedings at first instance

E – Appeal proceedings

F – New administrative proceedings and the Commission’s second clearance decision

IV – Preliminary questions to analysis of the appeal

A – Admissibility of the individual grounds of appeal

1. Admissibility of the fifth ground of appeal

2. Admissibility of the remaining grounds of appeal

3. Interim conclusion

B – Whether the appeal is capable of achieving the result sought

1. The alleged failure of the appellants to challenge a decisive passage of the judgment under appeal

2. The grounds of the judgment under appeal which do not support its operative part

3. Interim conclusion

C – Continuing existence of interest in pursuing the appeal

V – Whether the appeal is well founded

A – Extent of investigation and justification required of the Commission in relation to clearance decisions (first, second, third and sixth grounds of appeal)

1. Standard of reasoning for merger clearance decisions (first and third part of the sixth ground of appeal)

a) Whether clearance decisions may be challenged on the ground of failure to state reasons

b) Extent of the duty to state reasons

– The judgment under appeal

– Analysis

c) Miscellaneous matters

d) Interim conclusion

2. The Court of First Instance’s references to the statement of objections (first ground of appeal and second part of the sixth ground of appeal)

a) The Court of First Instance’s approach in general to the relationship between the clearance decision and the statement of objections

– The judgment under appeal

– Analysis

b) The specific references by the Court of First Instance to the statement of objections

c) Interim conclusion

3. The evidential value of factual assertions in the response to the objections (second ground of appeal; first part of the third ground of appeal)

a) The judgment under appeal

b) Analysis

4. Standard of proof for clearance of concentrations (second part of the third ground of appeal)

a) The alleged asymmetry between the requirements for clearance decisions and prohibition decisions in the Merger Regulation

– Merger control decisions are based on prognoses

– Symmetry of the requirements for clearances and prohibitions

– No general presumption of compatibility with the common market

– Interim conclusion

b) The standard of proof applied by the Court of First Instance in the present case

c) Interim conclusion

B – Limitations on the Court of First Instance’s power to analyse the facts and the evidence (fourth ground of appeal)

1. The Commission’s discretion and judicial review thereof

a) The judgment under appeal

b) Analysis

2. The alleged distortion of evidence

a) Paragraph 425 of the judgment under appeal

b) Paragraph 427 of the judgment under appeal

c) Paragraph 434 of the judgment under appeal

3. Interim conclusion

C – The use of undisclosed evidence in the judgment under appeal (seventh ground of appeal)

D – Interim conclusion

VI – The supposed cross appeal

VII – Costs

VIII – Conclusion

I – Introduction

1. The present case presents an opportunity to develop the Court’s case-law in the area of EC merger control. In essence it concerns the question – a most important one in practice – of the extent of the investigation and reasoning which may be required of the Commission where it authorises a concentration between undertakings.

2. The background to this case is a merger control procedure concerning the markets for recorded music, on-line music and music publishing. At the end of 2003, Bertelsmann and Sony agreed that they would integrate their global recorded music businesses. Following initial doubts, by Decision dated 19 July 2004 (2) (‘the first clearance decision’) the Commission approved this proposed concentration.

3. The Independent Music Publishers and Labels Association (‘Impala’), an international association governed by Belgian law to which 2 500 independent music production undertakings belong, complained about the concentration. On its application, by judgment dated 13 July 2006 (3) (‘the judgment under appeal’) the Court of First Instance annulled the first clearance decision.

4. An appeal by Bertelsmann and Sony against the judgment under appeal has been brought before the Court of Justice. In essence, the appellants argue that the Court of First Instance applied excessive legal requirements for a Commission clearance decision and for the judicial review of that decision.

5. However, there is a preliminary question as to whether the appellants still have any legal interest in pursuing their appeal given that in the meantime, on 3 October 2007, their concentration was cleared once more by the Commission.

II – Legal framework

6. The legal framework in the present case consists of Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (‘the Merger Regulation’) (4) as amended by Council Regulation (EC) No 1310/97. (5)

7. Concentrations with a Community dimension within the meaning of the Merger Regulation are subject to a prohibition on implementation and must be notified to the Commission (Articles 4 and 7 of the Merger Regulation). The Commission appraises them as to their compatibility with the common market (Article 2(1) of the Merger Regulation).

8. Whether a concentration is cleared or prohibited depends on whether it 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. On that point Article 2(2) and (3) of the Merger Regulation provide as follows:

‘(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.’

9. The merger control procedure consists of two phases. The first phase is simply a preliminary examination of the proposed concentration. If this raises serious doubts as to the concentration’s compatibility with the common market, there follows in a second phase a formal procedure which the Commission is required to initiate in terms of Article 6(1)(c) of the Merger Regulation. (6)

10. The Commission’s powers of decision in the formal procedure are laid down in Article 8 of the Merger Regulation as follows:

‘(1) … all proceedings initiated pursuant to Article 6(1)(c) shall be closed by means of a decision as provided for in paragraphs 2 to 5.

(2) Where the Commission finds that, following modification by the undertakings concerned if necessary, a notified concentration fulfils the criterion laid down in Article 2(2) …, it shall issue a decision declaring the concentration compatible with the common market. …

(3) Where 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.

…’

11. Before a prohibition decision may be taken under Article 8(3) of the Merger Regulation, the parties to the concentration are given a hearing. For this purpose the Commission sends them a written statement of objections , to which they may respond in writing and, as the case may be, orally. On this matter Article 18 of the Merger Regulation provides as follows: (7)

‘(1) Before taking any decision provided for in Article … 8 … (3) to (5) …, 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. …’

12. The whole merger control procedure is characterised by a requirement for speed , which is realised by a finely balanced, comparatively strict system of time-limits and which seeks to limit the length of merger control proceedings. (8) If the Commission does not make a decision as to compatibility with the common market within the specified time-limit, there is a deemed clearance in respect of which Article 10(6) of the Merger Regulation provides as follows:

‘Where the Commission has not taken a decision in accordance with Article 6 (1) (b) or (c) or Article 8 (2) or (3) within the deadlines set …, the concentration shall be deemed to have been declared compatible with the common market …’

13. As regards the consequences where a Decision by the Commission is annulled by a Community Court, Article 10(5) of the Merger Regulation provides as follows:

‘Where the Court of Justice gives a judgment which annuls the whole or part of a Commission decision taken under this Regulation, the periods laid down in this Regulation shall start again from the date of the judgment.’

14. In most merger control proceedings the Commission acts also as merger control authority for the European Economic Area (9) and decides also as to whether concentrations are compatible with the EEA Agreement.

15. In 2004 the Merger Regulation was substantially amended. However, under the new Article 26(1), the recast EC Merger Regulation (10) applies only from 1 May 2004 and is therefore not relevant to the present case; Article 26(2) provides that the previous law remains applicable to cases such as the present.

III – Background to the dispute and the course of the procedure

A – The concentration

16. Bertelsmann AG (11) is an international media company, having worldwide activities in music recording and publishing, television, radio, book and magazine publishing, printing and media services, and book and music clubs. In the area of music recording Bertelsmann operates through its wholly-owned subsidiary Bertelsmann Music Group (‘BMG’). (12)

17. Sony Corporation of America (13) is part of the Sony Group and operates worldwide in the areas of music recording, music publishing, industrial and consumer electronics and entertainment. In the recorded music sector Sony acts through Sony Music Entertainment.

18. Under a Business Contribution Agreement dated 11 December 2003 Bertelsmann and Sony agreed to combine their global recorded music businesses (with the sole exception of Sony’s business in Japan) and to transfer it into at least three new undertakings. It was intended that these joint venture undertakings should operate under the name ‘Sony BMG’.

19. Under the agreement, Sony BMG was to discover and develop artists, (14) and deal with the marketing and selling of recorded music. On the other hand, its business activities were not to include related activities such as publishing, manufacturing and distribution of recorded music.

20. As Bertelsmann and Sony confirmed in the proceedings before the Court, the concentration was brought fully into effect in 2004.

B – The problem of collective market dominance

21. As with all concentrations having a Community dimension, under Article 2 of the Merger Regulation the proposed concentration of Bertelsmann and Sony required to be appraised as to whether it was likely to 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.

22. In particular, the issue was not whether Sony BMG would achieve an individual dominant position in a given market, but the risk of the creation or strengthening of a collective dominant position between five global recorded music publishers, (15) the so-called ‘majors’ of the worldwide music industry, the number of which would, by virtue of the concentration, be reduced from five to four.

23. In the case of Kali & Salz , (16) the Court has already made it clear that the concept of a dominant position for the purposes of the Merger Regulation refers not only to individual but also to collective market dominance. A collective dominant position may be constituted by two undertakings (duopoly) or several undertakings (oligopoly). (17)

24. Collective market dominance does not necessarily require that the members of an oligopoly cooperate collusively , for example by entering into anti-competitive agreements within the meaning of Article 81 EC. (18) Instead, collective market dominance may arise from the tacit coordination of market behaviour (19) of all members of the oligopoly. The members of the oligopoly are then contented with the market shares they have achieved, and there is no longer any effective competition between them. (20)

25. However, a necessary condition for a finding of collective market dominance in those circumstances is that the market in question actually admits in the long term of tacit coordination of market behaviour by the members of an oligopoly. The three criteria developed by the Court of First Instance in Airtours (21) for the purpose of determining whether collective market dominance exists, and summarised in the judgment under appeal as follows, are to be seen against this background:

‘First, the market must be sufficiently transparent for the undertakings which coordinate their conduct to be able to monitor sufficiently whether the rules of coordination are being observed. Second, the discipline requires that there be a form of deterrent mechanism in the event of deviant conduct. Third, the reactions of undertakings which do not participate in the coordination, such as current or future competitors, and also the reactions of customers, should not be able to jeopardise the results expected from the coordination.’ (22)

26. It is the first of the so-called ‘ Airtours criteria’ which is at the heart of the present case, and thus the question as to whether the markets for recorded music are sufficiently transparent for the majors to be able to coordinate their conduct tacitly. In essence the parties to the proceedings are in dispute as to the efforts the Court of First Instance may require from the Commission in terms of investigation and justification in that respect.

C – Administrative procedure and the Commission’s first clearance decision

27. On 9 January 2004 the notification of the concentration required by Article 4 of the Merger Regulation was lodged with the Commission. (23)

28. In the preliminary phase (‘Phase I’ of the merger control procedure) the Commission issued a questionnaire to a number of market participants on 20 January 2004.

29. Impala answered the questionnaire, and on 28 January 2004 it also lodged a separate submission in which it set out the reasons why, in its view, the Commission should declare the operation incompatible with the common market. In this submission Impala set out its concerns about further concentration in the market and the impact that this would have on market access, including in the retail sector, the media, the internet and consumer choice.

30. Thereafter, on 12 February 2004 the Commission initiated formal proceedings pursuant to Article 6(1)(c) of the Merger Regulation (‘Phase II’ of the merger control procedure), because the project notified raised serious doubts as to its compatibility with the common market and the EEA Agreement.

31. Under Article 11(5) of the Merger Regulation the proceedings were stayed from 7 April to 5 May 2004, because the parties to the concentration provided incomplete information to the Commission’s request for information. (24)

32. On 24 May 2004 the Commission sent a statement of objections to the parties to the concentration, in which it provisionally concluded that the notified operation was incompatible with the common market and the functioning of the EEA Agreement, since it would strengthen a collective dominant position in the recorded music market and in the wholesale market for licences for online music and would coordinate the parent companies’ behaviour in a way incompatible with Article 81 EC.

33. The parties to the concentration replied to the statement of objections and a hearing took place before the Commission’s Hearing Officer on 14 and 15 June 2004 in the presence of, among others, Impala.

34. By its first clearance decision of 19 July 2004, the Commission finally declared the concentration compatible with the common market and the EEA Agreement pursuant to Article 8(2) of the Merger Regulation. This clearance was not subject to any conditions or obligations.

D – The proceedings at first instance

35. On 3 December 2004 Impala brought an action against the first clearance decision before the Court of First Instance and applied for the Decision to be annulled (25) and for the Commission to be ordered to bear the costs of the proceedings. The Commission applied for the action to be dismissed and for Impala to be ordered to bear the costs. It was supported in that regard by Bertelsmann and Sony, as well as by Sony BMG Music Entertainment, to whom the Court had given leave to intervene by Order of the President of the Third Chamber of 4 February 2005.

36. By the judgment under appeal the Court of First Instance annulled the first clearance decision and ordered the Commission to bear its own costs and three quarters of Impala’s costs. Impala itself was ordered to bear one quarter of its own costs. The interveners were ordered to bear their own costs.

E – Appeal proceedings

37. By their joint appeal, which was lodged at the Registry of the Court on 13 July 2006, Bertelsmann and Sony (‘the appellants’) claim that the Court should:

– set aside the judgment under appeal;

– dismiss Impala’s application for annulment of the Commission’s Decision, or, alternatively, refer the case back to the Court of First Instance for reconsideration; and

– order Impala to pay the costs of the present proceedings.

38. Sony BMG Music Entertainment adopts in full both the appeal and the form of order sought by Bertelsmann and Sony.

39. The Commission contends that the Court should:

– set aside the judgment under appeal;

– dismiss the application for annulment of the first clearance decision or, in the alternative, refer the case back to the Court of First Instance for reconsideration; and

– order Impala to pay the costs incurred by the Commission in the present proceedings.

40. Impala contends that the Court should:

– dismiss the appeal as unfounded and/or inadmissible in part or inadmissible in its entirety;

– uphold the judgment under appeal; and

– order the appellants to pay the costs of the present proceedings.

41. Before the Court the appeal procedure was first written and then, on 6 November 2007, oral.

F – New administrative proceedings and the Commission’s second clearance decision

42. In consequence of the annulment of the first clearance decision by the judgment under appeal, the Commission carried out a new merger control procedure in this case (26) (in this regard see Article 10(5) of the Merger Regulation), which necessarily ran in parallel to the present appeal proceedings , because the appeal did not have any suspensory effect (Article 60(1) of the Statute of the Court).

43. Thus, for the purpose of its new competitive assessment the concentration was notified again to the Commission on 31 January 2007, and on 1 March 2007 the Commission initiated the formal procedure under Article 6(1)(c) of the Merger Regulation (‘Phase II’).

44. The merger control procedure was concluded by decision dated 3 October 2007, in which the Commission again declared the concentration to be compatible with the common market and the EEA Agreement under Article 8(2) of the Merger Regulation (‘the second clearance decision’). The clearance was not subject to any conditions or obligations.

IV – Preliminary questions to analysis of the appeal

45. Before considering the appeal as to substance, it is necessary to consider whether the individual grounds of appeal it raises are admissible (see below, section A), whether they can at all achieve the result sought by the appellants (see below, section B), and whether the appellants’ interest in continuing to pursue the appeal has not been superseded by the second clearance decision which has since been issued (see below, section C).

A – Admissibility of the individual grounds of appeal

46. Impala resists the appeal on the ground that it is inadmissible in its entirety, because it merely seeks reconsideration of the Court of First Instance’s appraisal of the facts.

47. Given this objection, it is appropriate to recall the standard of reference laid down by Article 225(1) EC and Article 58(1) of the Statute of the Court of Justice, and which the Court has confirmed in its consistent case-law in appeal proceedings: (27) appeals are limited to points of law. The Court of First Instance thus has exclusive jurisdiction to find and appraise the relevant facts and to assess the evidence, and the appraisal of those facts and the assessment of that evidence thus do not, save where the facts or evidence are distorted, constitute points of law subject, as such, to review by the Court on appeal.

48. By contrast, whether the Court of First Instance has imposed too high a standard as regards the reasons given for a Commission decision, whether it has applied the correct criteria in its appraisal of the facts and of the evidence, and whether it has generally applied the law correctly in its judgment, are all questions of law which may be the subject of an appeal. (28) Likewise, the Court has jurisdiction to review the legal characterisation of the facts and the evidence by the Court of First Instance and to review the legal conclusions it has drawn from them, (29) as well as whether it has properly applied the provisions relating to the burden of proof and the taking of evidence. (30)

49. Applying these criteria, contrary to Impala’s submissions the present appeal cannot be regarded as wholly inadmissible. Instead, in this connection a distinction must be drawn between the fifth ground of appeal and the other grounds of appeal.

1. Admissibility of the fifth ground of appeal

50. The fifth ground of appeal, which concerns the requirements for a finding of a collective dominant position, consists in an introductory part (31) and a number of detailed points of criticism. (32)

51. The introductory part raises essentially the question whether the criteria the Court of First Instance itself developed in Airtours (33) for a finding of collective market dominance are to be applied with different degrees of strictness depending on whether what must be proved is a collective dominant position which already exists or a prognosis for the future as regards the risk that a collective dominant position will arise in consequence of a concentration. Thus, the introductory part of the fifth ground of appeal concerns the interpretation of the criteria in Airtours . This is a question of law which may indeed be the subject of an appeal.

52. The position is different as regards the remaining detailed points of criticism which are made in the context of the fifth ground of appeal and which may be summarised as follows. The Court of First Instance failed to take into account net wholesale prices and the importance of price discounts, which are decisive on the issue of market transparency, and instead satisfied itself with considering only list prices and retail prices. Moreover, the Court of First Instance erroneously inferred transparency of discounts from the impact of such discounts on average net prices. In addition, in assessing transparency the Court of First Instance wrongly dismissed the relevance of complex pricing structures. Finally, the Court of First Instance erroneously dismissed price variance and volatility of prices as irrelevant to the question of transparency.

53. In reality, these detailed points of criticism do not seek a review of questions of law but instead call in question the actual appraisal of the facts and the evidence by the Court of First Instance in the present case. This is because the relevance of list prices, retail prices, net wholesale prices, average net prices, price discounts, the complexity of price structures, as well as price variance and volatility of prices to the assessment of transparency of a particular market cannot be authoritatively determined in general terms, but depends on the actual analysis of the circumstances of the individual case, and specifically on the particular circumstances of the market concerned.

54. In other words, the Court is being asked to substitute its own appraisal of the facts and of the evidence in this particular case for that of the Court of First Instance. However, this is not permissible in an appeal. At most, the plea that may be raised before the Court is that the Court of First Instance has distorted facts or evidence, or has offended against rules of logic in its assessment of the facts or the evidence. Here, however, neither of those is alleged, and apart from these exceptions it is not the Court’s task, when sitting as an appellate court, to decide for itself what relevance factors such as list prices, retail prices, net wholesale prices, average net prices, price discounts, the complexity of price structures, as well as price variance and volatility of prices have to the assessment of market transparency in a case such as the present.

55. On that basis, it is only the introductory part of the fifth ground of appeal which is admissible, and not the detailed points of criticism in it.

2. Admissibility of the remaining grounds of appeal

56. By contrast, I regard the remaining grounds of appeal as admissible in their entirety, because their subject-matter is not the appraisal of facts and evidence as such by the Court of First Instance. Instead, these grounds of appeal relate to the criteria which the Court of First Instance has applied in assessing the legality of the first clearance decision. Moreover, they concern the evidential requirements to which the Commission is subject in clearing concentrations. All of these are questions of law which are capable of being the subject-matter of an appeal.

3. Interim conclusion

57. Whereas only the introductory part of the fifth ground of appeal is admissible, the remaining grounds of appeal are admissible in their entirety.

B – Whether the appeal is capable of achieving the result sought

58. Apart from the question discussed above as to the admissibility of the individual grounds of appeal, the present case raises the additional question of whether the appeal is in any event capable of achieving the result the appellants seek, namely that the judgment under appeal is set aside. First, the appellants may have failed to challenge a decisive passage in the judgment under appeal (see below, section 1) and, second, it may be that their appeal is directed against parts of the reasons for the judgment which are not the grounds on which the operative part of the judgment under appeal is founded (see below, section 2).

1. The alleged failure of the appellants to challenge a decisive passage of the judgment under appeal

59. First, Impala submits that the appeal as a whole cannot result in the judgment under appeal being set aside, because in their appeal the appellants have failed to challenge a decisive passage in the judgment.

60. Specifically, Impala is of the view that the appeal is restricted to challenges to the reasoning of the Court of First Instance as regards the question of strengthening an existing collective dominant position, and by contrast is not directed against the reasoning of the Court of First Instance in paragraph 528 of the judgment under appeal as regards the possible creation of a collective dominant position. Thus, even if the appeal were wholly successful, according to Impala it could not result in the judgment under appeal being set aside, because the findings of the Court of First Instance contained in paragraph 528 of the judgment as regards further errors of law in the first clearance decision would still stand.

61. I do not find this submission convincing.

62. Admittedly, the appellants must indicate precisely the contested elements of the judgment which they seek to have set aside and also the legal arguments specifically advanced in support of the appeal. (34) However, this does not mean that the drafting of their appeal must correspond in every detail to the structure of the judgment under appeal, and must challenge each section of this judgment by a specific ground of appeal.

63. In the present case, the appellants have by no means restricted their appeal to only the first of the sections in the judgment called into question, that is to the reasoning of the Court of First Instance as regards the strengthening of an existing collective dominant position on the recorded music market. (35) Moreover, such a restriction would not correspond to the result they have stated they wish to achieve by the appeal, namely to have the judgment under appeal set aside in whole. This is because this result can be achieved only if the appeal is to be understood as challenging both sections of the judgment in question, (36) that is both the section concerning the strengthening of an existing collective dominant position and the section concerning the creation of such a dominant position.

64. The appellants’ introductory remarks at the start of their appeal also suggest that the appeal is not restricted to only one section of the judgment. A list of passages in the judgment under appeal which are specifically criticised expressly refers to paragraph 528, which is the one in dispute at this point, and also to paragraphs 533, 539 and 541, which likewise concern the question of the creation of a collective dominant position. (37) In addition, at a number of points in their appeal the appellants expressly incorporate into their reasoning the overall conclusion of the judgment under appeal as formulated by the Court o f First Instance in paragraphs 542 and 543. (38)

65. In these circumstances it cannot be asserted that the appeal is restricted only to the reasoning of the Court of First Instance as regards the strengthening of an existing collective dominant position and must therefore be dismissed in whole as ineffective (in French, ‘inopérant’).

2. The grounds of the judgment under appeal which do not support its operative part

66. The position is different as regards the introductory part of the fifth ground of appeal which, as already mentioned, (39) is the only admissible part of that ground of appeal.

67. In essence it raises the question whether the criteria developed by the Court of First Instance itself in Airtours (40) for establishing the existence of a collective dominant position are to be applied with different degrees of strictness depending on whether what must be established is a collective dominant position which already exists or a prognosis for the future as to the risk that such a collective dominant position might arise in consequence of the concentration. In the former case the Court of First Instance favours a less strict application of the Airtours criteria than in the latter. (41)

68. In this regard the appellants’ main point of challenge is paragraph 251 of the judgment under appeal. There the Court of First Instance states that an (already existing) collective dominant position ‘may, however, in the appropriate circumstances, be established indirectly on the basis of what may be a very mixed series of indicia and items of evidence relating to the signs, manifestations and phenomena inherent in the presence of a collective dominant position’.

69. However, as the appellants themselves correctly pointed out, (42) the disputed passage, and also the legal reasoning of the Court of First Instance connected to it, are obiter dicta . In the whole of the section of the judgment under appeal, from paragraph 245 to 253, the Court of First Instance is not considering one of the grounds of invalidity raised by Impala at first instance, but is merely stating obiter dicta on the application of the criteria for establishing whether a collective dominant position exists.

70. This becomes particularly clear if one reads the disputed passage of the judgment with paragraph 254 of the judgment under appeal, in which the Court of First Instance expressly restricts its consideration of the first clearance decision to the question whether the Airtours criteria are fulfilled: ‘[T]he Court will confine itself, in its examination of the pleas in law put forward, to ascertaining that the Decision properly applied the conditions defined in Airtours v Commission . …’. By contrast, in its judgment the Court of First Instance expressly rules out considering the question whether the existence of a dominant position can be found to be established, ‘without its being necessary positively to establish market transparency’. In the proceedings at first instance this question had, ‘not been discussed’.

71. Thus, because the introductory part of the fifth ground of appeal does not refer to the ratio decidendi of the judgment but merely to additional considerations mentioned by the Court of First Instance, it cannot result in the judgment under appeal being set aside. In accordance with the consistent case-law of the Court this part of the appeal is to be dismissed as ineffective (inopérant). (43)

3. Interim conclusion

72. Thus, only the fifth ground of appeal, so far as it is at all admissible, is to be dismissed as ineffective. By contrast, all the other grounds of appeal are capable of achieving the result sought by the appellants.

C – Continuing existence of interest in pursuing the appeal

73. As regards the grounds of appeal which are admissible and not ineffective it remains to be considered whether the appellants have in the meantime ceased to have an interest in pursuing the appeal.

74. The requirement for such an interest ensures at a procedural level that the courts are not asked to give expert opinions on purely hypothetical questions of law. Accordingly, the existence of an interest is a mandatory requirement of admissibility, which must be considered ex proprio motu and which can be relevant at various stages of the proceedings. Thus, there is no doubt that an interest must exist at the time an action is brought or an appeal lodged; however, it must also continue to exist beyond that time and up to the Court’s decision in the case. (44)

75. An interest exists so long as the appeal is likely, if successful, to procure an advantage to the party bringing it. (45)

76. It is not disputed that at the time they lodged their appeal the appellants had an interest in it. This is because, from the time the first clearance decision was annulled by the Court of First Instance, Bertelsmann and Sony did not have the necessary approval retrospectively for their concentration under the Merger Regulation. If the judgment under appeal were set aside, as the appeal seeks, this approval could have been revived. The appeal could thus have procured them this advantage.

77. However, since the second clearance decision was issued, the participating undertakings once more have clearance for their concentration under the Merger Regulation. The operative part of this second clearance does not fall short of the first in any way, both having declared the concentration to be compatible with the common market and the EEA Agreement, and neither being subject to any conditions or obligations. In addition, the state of uncertainty which has existed since the first clearance decision was annulled, and in which the participating undertakings and the markets could not be certain whether the concentration had been lawfully carried out, was removed by the renewed clearance of the concentration. Specifically, the legal approach taken in Article 7(5) of the Merger Regulation (46) has the effect that the second clearance decision has retrospective effect to the time at which the transactions by which the concentration was brought about were carried out (‘ ex tunc effect’).

78. All this does not necessarily mean that the present appeal is devoid of purpose . This is because the appeal is not aimed directly at the Commission’s first clearance decision, but against the judgment of the Court of First Instance under appeal, which continues to have effect. Accordingly, the possibility of declaring that there is no need to adjudicate on the action (Article 92(2) of the Rules of Procedure) is not applicable in appeal proceedings (see Article 118 of the Rules of Procedure). (47)

79. Nevertheless, the existence of the second clearance decision raises the question as to whether the appeal can procure any advantage for the appellants, that is whether they continue to have an interest in maintaining the appeal.

80. The sole fact that in the judgment under appeal the appellants were ordered to bear their own costs from the proceedings at first instance does not in any event establish that they have an interest. This is because Article 58(2) of the Statute of the Court provides that an appeal directed solely against a decision on costs is inadmissible. For the same reason, the Court dismisses an appeal against a decision at first instance on costs if this is the only one remaining of a number of grounds of appeal and it has already been established that none of the other grounds succeeds. (48) Having regard to the wording and purpose of Article 58(2) of the Statute, nor can an interest in setting aside the decision at first instance on costs justify continuing an appeal. Accordingly, in order to pursue appeal proceedings, it is necessary for the appellant to have an interest beyond that relating to the costs at first instance.

81. In the present case, however, the appellants have an obvious interest in obtaining as quickly as possible not only clearance but also a definitive clearance of their concentration. Only then will the participating undertakings, and indeed the market generally, have legal certainty as to whether the concentration was lawfully effected.

82. The second clearance decision cannot provide this certainty at this time, because it may not become definitive for the foreseeable future. This is because it must, in addition to being notified to its addressees (Article 254(3) EC), be published in the Official Journal of the European Union (Article 20(1) of the Merger Regulation). It is only after such publication, (49) which has so far not occurred, that the period for third parties to challenge it begins to run. (50) The beginning of the period for third parties to bring a challenge could be brought forward generally only if the complete second clearance decision had otherwise become known to the public at an earlier time, for example via the internet, and an appropriate reference had been made in the Official Journal of the European Union . (51) By contrast, the mere fact that the wording of the decision may have been brought to the knowledge of individual third parties, specifically Impala, in advance in the form of a non-confidential version, does not affect the beginning of the period for bringing a challenge (52) and thus the time at which the decision can become final. (53)

83. Should the Court of First Instance annul the second clearance decision too, following the application of a third party, a state of uncertainty would again arise, in which the participating undertakings would not have any clearance for their concentration under the Merger Regulation. Such a situation of uncertainty lasting a number of months or even years could have negative effects on the participating undertakings and on the markets generally.

84. In order, so far as possible, to avoid another such state of uncertainty and its negative effects, it is of particular importance to the appellants to continue with the present appeal and to obtain a final decision from the Community Courts on the legality of the first clearance decision as quickly as possible. Even if, should the Court allow the appeal, the state of the proceedings does not permit it to give a final decision itself on the present dispute, and it must instead refer the case back to the Court of First Instance (Article 61(1) of the Statute of the Court), it would be highly probable that the final judicial decision on the lawfulness of the first clearance decision would be given before that on the lawfulness of the second .

85. In these circumstances the requirement for speed which characterises merger control at the Community level (54) equally favours continuing the present appeal. By this means it is also possible to prevent annulment actions raised by third parties from delaying certainty for the undertakings participating in the concentration for any longer than is necessary.

86. In all, I am therefore of the opinion that at the moment the decision of the Court can certainly procure the appellants an advantage and it follows that they have a sufficient interest in maintaining the present appeal.

87. By contrast, if the second clearance decision becomes final after the close of the oral proceedings but before the decision of the Court of Justice in the present case, on the information available to me at the moment this would result in the appellants ceasing to have an interest. However, I would then consider it necessary to hear the parties again on the question of interest.

88. I n any event, I do not find convincing the idea cursorily mentioned at the oral hearing that the present proceedings could be pursued solely on the ground that the Commission supports some of the individual grounds of appeal relied upon by Bertelsmann and Sony. Community organs have a privileged status as regards appeals they have raised themselves (Article 56(2) and (3) of the Statute of the Court), and in particular need not prove an interest in such appeals. (55) However, where such an organ is not itself the appellant but only one of the other parties to the proceedings, its mere interest in the outcome of the appeal and in the clarification of certain questions of law by the Court cannot compensate for the appellants’ lack of interest.

V – Whether the appeal is well founded

89. The appellants challenge the judgment under appeal with a total of seven grounds of appeal. They raise legal questions of fundamental importance for the system of merger control at Community level. Admittedly, these questions of law arise in relation to the ‘old’ Merger Regulation, but the answers to them are still decisive for the recast EC Merger Regulation (Regulation No 139/2004), because there is no significant difference between the two regulations as regards the points in dispute in the present case.

90. Given that the individual grounds of appeal overlap in part, it is appropriate to group them according to the substantive points to which they relate, and accordingly to consider them in a different order. Only the fifth ground of appeal needs no further consideration, because, as already mentioned, it is in part inadmissible and in part ineffective (‘inopérant’). (56)

A – Extent of investigation and justification required of the Commission in relation to clearance decisions (first, second, third and sixth grounds of appeal)

91. The first, second, third and sixth grounds of appeal concern in particular the pains the Commission must take by way of investigation and giving reasons where it grants clearance for a concentration of undertakings.

92. In essence, the appellants are of the view that the Court of First Instance applied excessive legal requirements relating to a clearance decision by the Commission and to judicial review thereof. In that regard they are supported in part by the Commission. (57) Impala, on the other hand, defends the judgment under appeal in its entirety.

1. Standard of reasoning for merger clearance decisions (first and third part of the sixth ground of appeal)

93. I start my consideration with the first and third parts of the sixth ground of appeal. (58) There the appellants claim that the Court of First Instance applied erroneous and excessive standards of reasoning for Commission merger clearance decisions.

94. It must first be clarified whether Commission clearance decisions can at all be annulled on account of insufficiency of reasons. If so, we must consider the extent of the duty to state reasons and whether the Court of First Instance made any errors of law in this regard in the present case.

a) Whether clearance decisions may be challenged on the ground of failure to state reasons

95. The appellants are of the view that a merger clearance decision by the Commission cannot in any event be annulled for insufficient reasoning.

96. I am not convinced by this view.

97. Article 253 EC provides that decisions by the Commission shall state the reasons on which they are based. This duty to state reasons is a consequence of the rule of law and, in conjunction with the right to proper administration, finds expression also in Article 41(2) of the Charter of fundamental rights of the European Union. (59) It is intended not only to enable acts of the institutions to be subject to independent review by the Community Courts, but also to encourage the institutions to exercise self-control and to guard against ill-considered or ill-thought through measures. The statement of reasons for decisions also contributes to ensuring transparency of administrative action. (60)

98. The obligation to state reasons is by no means restricted to decisions which negatively affect their addressees. The principles of the rule of law and of proper administration instead require reasons to be given also for decisions which benefit their addressees. This applies a fortiori where such decisions may negatively affect the rights and interests of third parties, not least in the field of competition law. Accordingly, neither Article 253 EC nor the third indent of Article 41(2) of the Charter of fundamental rights distinguishes between decisions which benefit their respective addressees and those which are disadvantageous for them. In relation to merger control in particular, this means that reasons must be given for Commission clearance decisions just as much as for prohibition decisions.

99. As it infringes an essential procedural requirement, a breach of the duty to state reasons may be complained of inter alia by means of an annulment action before the Community Courts subject to the conditions in Article 230 EC.

100. Article 10(6) of the Merger Regulation, on which the appellants rely in the present case, does not provide for any exception to the liability of decisions to challenge on the ground of breach of the duty to state reasons. It follows simply from the hierarchy of norms that provisions of secondary law cannot restrict the scope of primary law, including Article 230 EC and Article 253 EC. Instead, Article 10(6) of the Merger Regulation is to be interpreted and applied in light of higher-ranking provisions, in particular Article 230 EC and Article 253 EC. (61)

101. In any event, to introduce an exception to the duty to state reasons, or even to confer on Commission clearance decisions an ‘immunity’ from challenge on the ground of failure to state reasons, would not correspond to the wording or to the purpose and legislative context of Article 10(6) of the Merger Regulation.

102. Article 10(6) of the Merger Regulation provides for deemed clearance only where the Commission does not give a decision in good time as to the compatibility with the common market of a concentration which has been notified to it. (62) By contrast, the provision does not relieve the Commission of its statutory duty (63) to make an express finding by way of a reasoned decision in relation to every concentration notified to it. (64) On the contrary, the provision contains a remedy should the Commission in a given case not comply with this obligation within the applicable time-limit.

103. In addition, Article 10(6) of the Merger Regulation is certainly an expression of the requirement for speed which characterises the whole of the merger control procedure. Together with the strict procedural time-limits laid down by that same article, this provision contributes to creating legal certainty as quickly as possible, and this is to the benefit not only of the undertakings participating in the concentration but also of the markets in general.

104. Nevertheless, the legitimate need for legal certainty cannot go so far as to exclude the decision on a concentration in whole or in part from review by the courts. It is only once the time-limit under Article 230(5) EC for bringing a challenge has expired, or for example an annulment action which has been raised is dismissed, that the clearance of the concentration becomes final and creates definitive legal certainty for all the participants.

105. Contrary to the submission of the appellants, Article 10(6) of the Merger Regulation is by no means deprived of its practical effectiveness (‘ effet utile ’) solely by the fact that the – explicit or deemed – clearance remains subject to review by the courts. Instead, the impending grant of a deemed clearance in case of the expiry of the time-limit (the ‘guillotine effect’) promotes self-discipline in every merger control procedure dealt with by the Commission as the merger control authority, and this to an extent which is not to be underestimated. (65) In addition, the participating undertakings are free to implement their concentration as soon as it is cleared by the Commission or deemed to have been cleared; (66) according to the information they themselves provided, the appellants indeed made use of this possibility in the present case.

106. In all, I conclude that clearance of a concentration – whether explicit or deemed – can be annulled on the ground of breach of the duty to state reasons.

b) Extent of the duty to state reasons

107. The appellants are in addition of the view that in the present case the Court of First Instance erred in finding that insufficient reasons were given for the first clearance decision. In their opinion, the Court of First Instance thereby set itself against the established case-law of the Community Courts.

108. In essence the dispute revolves around the question of the level of detail in which the Commission was required to justify its finding in the first clearance decision that the market was not so transparent as to enable prices to be co-ordinated.(67)

109. This finding was of relevance to the Commission’s assessment that there was no sufficient basis for finding a collective dominant position of the five majors on various national markets for recorded music and that the concentration was not likely to create such a collective dominant position. (68) The clearance of the concentration was based not least on this assessment.

– The judgment under appeal

110. In the judgment under appeal the Court of First Instance reviewed various sections of the first clearance decision as to whether they provided sufficient justification for the finding that the market was not transparent, and in each case decided the issue in the negative.

111. The Court of First Instance considered, first, the section of the first clearance decision which concerned the issue of market transparency, (69) and found that the Commission ‘did not conclude that the market was opaque or not sufficiently transparent to allow a collective dominant position’. In addition, in that section the Commission mentioned ‘only factors capable of giving rise to great transparency in the market and of facilitating the monitoring of compliance with collusion, with the sole exception of the rather limited and unsubstantiated assertion that campaign discounts could reduce transparency and make tacit collusion more difficult’. Thus, this specific section of the first clearance decision could ‘clearly not, in itself, be considered to support to the requisite legal standard the assertion that the market was not sufficiently transparent’. (70)

112. The Court of First Instance then directed its attention to the Commission’s consideration of a potential ‘common price policy’ (71) between the five majors, (72) and likewise reviewed whether there were sufficient factors to prove the alleged lack of market transparency. (73) In this connection it considered both the information provided by the Commission as regards list prices and that as regards price discounts (file discounts and campaign discounts). In this regard the Court of First Instance held first, that ‘according to the very terms of the Decision, list prices … constitute a factor of market transparency’. (74) Second, ‘the few assertions relating to campaign discounts … in so far as they are imprecise, unsupported, and indeed contradicted by other observations in the Decision, cannot demonstrate the opacity of the market or even of campaign discounts …’. (75) Finally, ‘the section dealing with the smaller countries, too, contains no reasoning for the finding that the market is not transparent on account of the campaign discounts’.(76)

113. Specifically in regard to the campaign discounts relied upon by the Commission, the Court of First Instance felt that there was a lack of more specific findings in the first clearance decision as regards ‘the nature of campaign discounts, the circumstances in which such discounts might be applied, their degree of opacity, their size or their impact on price transparency’. (77) The Court of First Instance also bemoaned that ‘[t]hose assertions [by the Commission as regards campaign discounts in larger countries] are confined, moreover, to indicating that campaign discounts are less transparent than file discounts, but do not explain how they would be relevant for the transparency of the market and do not make it possible to understand how they in themselves might compensate for all the other factors of transparency of the market identified in the Decision and thus eliminate the transparency necessary for the existence of a collective dominant position’. (78)

– Analysis

114. In the appeal it is not the task of the Court to substitute its own assessment of the first clearance decision for that of the Court of First Instance. Accordingly, the Court need not itself review and assess the clearance decision as to whether its reasoning was inadequate or sufficient. Instead, the Court has to decide whether the Court of First Instance for its part made any errors of law in the judgment under appeal when it reviewed the reasons given for the clearance decision, and in particular whether the Court of First Instance based its review on correct or on excessively strict criteria.

115. The Court has consistently held that the statement of reasons required by Article 253 EC must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure in such a way as to enable the persons concerned to ascertain the reasons for it and to enable the competent Community Court to exercise its power of review. (79)

116. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. (80)

117. The particular features of a merger control procedure include the time pressure to which the Commission is subject on account of the requirement for speed which applies in that context and the strict procedural time-limits. (81) In addition, in giving reasons for its decisions in the field of competition law the Commission can orientate itself by reference to the degree of difficulty of the individual case, and in doing so assume the knowledge of informed market participants who are familiar with market circumstances; (82) this applies a fortiori to cases involving rights and interests of market participants who, like Impala in the present case, themselves participated in the proceedings. (83) The appellants correctly referred to both of these points.

118. Accordingly, it clearly cannot be required that, in a decision on a concentration notified to it, the Commission defines its position on matters which are manifestly irrelevant or insignificant or plainly of secondary importance. (84) The obvious need not be expressly mentioned in the decision. Moreover, the Commission need not provide more detailed reasons for its decision than is appropriate having regard to the degree of difficulty of the particular case, or than appears to be absolutely necessary from the point of view of an informed market participant familiar with the market circumstances.

119. At least the factual and legal considerations which are of decisive importance in the context of the decision must always be capable of being understood from the reasons given. (85) Accordingly, the reasons given must not be so laconic as to endanger their clarity and persuasiveness. (86) They must in addition be logical (87) and must not disclose any internal inconsistencies. (88)

120. In the present case the Court of First Instance considered that the reasons given were not persuasive, comprehensible and free of inconsistency.

121. In essence, what the Court of First Instance found to be inadequate was an imbalance in the reasons given for the first clearance decision: it contained a list of factors pointing to the existence of market transparency and explained these in detail, (89) but by contrast, as regards the factor of campaign discounts, which allegedly militate against the existence of sufficient market transparency, it made only vague assertions. (90) There was no explanation as to why the campaign discounts were relevant to market transparency, and it was not apparent how campaign discounts taken by themselves outweighed all the other factors relating to market transparency listed in the decision and thus could exclude the transparency necessary for there to be a collective dominant position. (91) Apart from that, the Court of First Instance referred to internal inconsistencies in the reasons given for the decision. (92)

122. I agree with the Court of First Instance that, in a decision in which the Commission has initially described in detail a list of factors which point to the existence of market transparency, the Commission cannot proceed on the footing that there is a lack of market transparency without giving more detailed reasons. If there is only a single factor worthy of mention – in the present case, campaign discounts – which militates against the existence of sufficient market transparency and thus a finding of a collective dominant position, it is necessary to explain in all the more detail how this factor affects the market and the extent to which precisely this factor can outweigh all the other factors pointing to the existence of market transparency.

123. In particular, it is not enough to explain that a particular factor leads or may lead to less market transparency; instead, it is necessary at least to explain why exactly this factor makes the market so opaque that it is not possible to make a finding of a collective dominant position. Otherwise, the reasons for the decision lack persuasiveness and are not comprehensible. The Court of First Instance correctly referred to exactly this in the judgment under appeal. (93)

124. Simply put, in a merger control decision which to a large extent reads as if it were a prohibition decision, it is essential that a sufficiently precise explanation is given of the considerations on the basis of which the matter ultimately turns, even for informed readers who are familiar with the market.

125. The deficiencies the Court of First Instance found to exist in the reasons given are all the more serious given that the question of market transparency, which was disputed by the parties, was not merely a subsidiary matter but was of major importance for the result of the merger control procedure. (94) This is because the Commission’s finding that the market was not sufficiently transparent as to allow prices to be coordinated was a major reason it relied upon for the first clearance decision. (95) In this regard the Court of First Instance rightly imposed high standards on the reasons given for the first clearance decision and subjected those reasons to an intense review.

126. High standards were also justified here because, as regards market transparency, the Commission was required to assess complex economic situations, in relation to which it enjoyed a not insignificant margin of discretion, as is usual in the field of merger control. (96) However, where the Commission has such a margin of discretion, observance of the guarantees conferred by the Community legal order in administrative proceedings acquires more importance. These guarantees include not least the obligation to give sufficient reasons for a decision. (97)

127. If, in the exercise of its discretion, the Commission takes into account factors which influence the functioning of the market, it must not only identify these factors in its decision but also state their effects. (98)

128. This consideration may be transposed to the field of competition law and merger control. If, in its assessment of the effect on competition of a concentration, the Commission attaches particular importance to certain factors which are relevant to the market, it must not only identify these factors in its decision but must also describe, sufficiently precisely, their effects on the functioning of the markets in question.

129. In a case in which all other factors point to the transparency of the market, the factor which, in the Commission’s view, points decisively against the market’s being sufficiently transparent cannot be simply mentioned without further explanation. As the Court of First Instance correctly emphasises, what is instead necessary is for the Commission to substantiate the effects of this factor in its decision with specific details; (99) it cannot simply rely on the surmise, hesitantly expressed, that ‘this factor could reduce transparency in the market and may make tacit collusion more difficult’, (100) and just as little on the mere conjecture that ‘it appears that campaign discounts are less transparent than file discounts’. (101)

130. In all, the Court of First Instance therefore rightly held that the Commission ought not to have restricted itself to ‘vague assertions’ (102) as regards the factors which were decisive for its decision, which were ‘unsubstantiated’, ‘rather limited’ (103) and in addition internally contradictory. (104)

131. Against this background I am of the view that the Court of First Instance did not make any error of law in finding that the first clearance decision gave insufficient reasons as regards the Commission’s finding in relation to (insufficient) market transparency. (105)

c) Miscellaneous matters

132. For the sake of completeness, in what follows I consider some further arguments which the appellants put forward in their sixth ground of appeal.

133. First, the appellants claim that less stringent requirements are to be imposed in relation to the reasoning of a clearance decision than in relation to a prohibition decision, because the weaker position of third parties in the procedure means that they cannot expect the same degree of precision in the reasoning as the parties to the concentration can in case of a refusal.

134. This argument is not convincing. Neither Article 253 EC nor the third indent of Article 41(2) of the Charter of fundamental rights distinguishes between decisions which benefit their respective addressees and those which are disadvantageous for them as regards the requirement to state reasons.

135. In any event, where a third party has been included in a merger control procedure and has been formally heard by the Commission – as was the case with Impala here – the duty to state reasons is intended also to protect its rights and interests. The third party may expect at least persuasive, comprehensible and internally consistent reasons as regards the essential factual and legal considerations on which the Commission bases its clearance decision. It is precisely these minimum requirements which are the subject of the present case. (106)

136. Admittedly, it is correct that the procedural position of third parties in merger control as regards their right to a hearing is weaker than that of parties to the concentration. (107) However, it cannot be concluded from this that a third party is likewise subject to restrictions when challenging a decision for insufficient reasoning . This is because a person who, because directly and individually affected, is able to clear the hurdle of an interest in bringing proceedings as a third party must be able to bring proceedings on the same conditions as all other applicants (Article 230(4) EC); he must be able to rely on the same grounds of invalidity as they can, including that of insufficient reasoning.

137. Second, the appellants claim that in the present case both Impala and the Court of First Instance had easily understood the reasons for the first clearance decision. From this they conclude that the decision included sufficient reasons.

138. This argument is likewise not to the point. The fact that the applicant has been able to make his other pleas sufficiently clear before the Court of First Instance may constitute an initial factor pointing to the conclusion that adequate reasons were given. (108) However, this cannot be regarded as more than a rebuttable presumption.

139. Specifically, whether a statement of reasons satisfies the legal requirements of Article 253 EC depends ultimately on objective criteria, including in particular whether the essential factual and legal considerations are logical, comprehensible and free from contradiction. (109) If, as in the present case, a statement of reasons is not logical, comprehensible and free from contradiction on an essential matter, the decision in question is to be annulled even if the applicant’s rights of defence have not suffered any damage as regards his other pleas. Otherwise, it would be in practice impossible for an applicant in an annulment action to succeed on the ground that the reasoning was insufficient while also raising other grounds of invalidity.

140. Contrary to the appellants’ view, it is incidentally by no means contradictory for the Court of First Instance in the present case to have found at one and the same time that the reasons given were insufficient and that the Commission made a manifest error of assessment. A decision by the Commission may be vitiated by both procedural and substantive flaws. The fact that the reasons given for a decision – for example on account of not being logical – are deficient does not preclude the possibility that the same decision is also substantively flawed.

141. Third, the appellants claim that, in laying down requirements as to the reasons to be given in a merger control decision, account must be taken of the confidentiality of sensitive commercial information. Thus, in their view, the Court of First Instance made an error in law in that in paragraph 411 of the judgment under appeal it required the Commission to publish details of the pricing and discounting policies of the other majors.

142. This submission too is not convincing. It is clearly based on a misunderstanding of paragraph 411 of the judgment under appeal. In that paragraph the Court of First Instance by no means required the Commission to disclose business secrets of individual market participants. It merely – and correctly – rejected the Commission’s argument that because of their confidential character certain figures could not have been included at all in the first clearance decision. This is because the obligation of professional secrecy (Article 287 EC) cannot be interpreted so broadly as to undermine the requirement to state reasons for a decision. (110)

143. So far as figures include business secrets, the Commission’s present practice in competition law is to replace such figures in its decision with ranges of figures, or otherwise to summarise them or describe them. The Court of First Instance rightly points out (111) that at other places in its first clearance decision the Commission indeed provided information, including figures, on the pricing policy of individual market participants. (112)

d) Interim conclusion

144. In all, it follows that the Court of First Instance did not make any errors in law in reaching the conclusion in paragraphs 325 and 542 of the judgment under appeal that insufficient reasons were given for the first clearance decision, which had, for that reason, to be set aside. Accordingly, the first and third parts of the sixth ground of appeal are unfounded.

2. The Court of First Instance’s references to the statement of objections (first ground of appeal and second part of the sixth ground of appeal)

145. In their first ground of appeal and in the second part of their sixth ground of appeal the appellants claim that the Court of First Instance wrongly used the statement of objections as a benchmark for its substantive assessment of the first clearance decision and wrongly required of the Commission that it justify any deviations from the objections in its decision.

146. It is not disputed that the judgment under appeal contains numerous references to the statement of objections. In the following I shall consider, as a first step, the Court of First Instance’s approach in general to the relationship between the clearance decision and the statement of objections, and then, as a second step, I shall consider in more detail the specific references the Court of First Instance made to individual passages in the statement of objections.

a) The Court of First Instance’s approach in general to the relationship between the clearance decision and the statement of objections

147. The appellants, supported by the Commission, object generally to the Court of First Instance’s discussion of the relationship between the clearance decision and the statement of objections. In their opinion the Court of First Instance misunderstood the nature and function of a statement of objections, and this ‘coloured’ the rest of the judgment.

– The judgment under appeal

148. In considering the complaint of a failure to state reasons, the Court of First Instance, by way of preliminary observation, recalled ‘that the Commission had concluded emphatically in the statement of objections that the concentration was incompatible with the common market on the ground, in particular, that a collective dominant position existed before the proposed concentration and that the market for recorded music was transparent and particularly conducive to coordination’. (113)

149. The ultimate clearance of the concentration was described by the Court of First Instance as a ‘fundamental U-turn in the Commission’s position’ which was ‘surprising, particularly in view of the late stage at which it was made’; (114) in addition, reference was made to the requirement to comply with mandatory time-limits in merger control procedures, which, according to the Court of First Instance, ‘does not allow [the Commission] to extend its investigation, thus reducing the likelihood that the Commission will fundamentally alter its position as the administrative procedure advances’. (115)

– Analysis

150. As in antitrust proceedings, in merger control proceedings it is essential to observe the rights of the defence before making a decision which may adversely affect the undertakings concerned. (116)

151. The rights of the defence include in particular the principle of the right to a hearing, which is a fundamental principle of Community law (117) and which is now also recognised in Article 41(2) of the Charter of fundamental rights. In addition, in relation to merger control proceedings this principle is laid down by statute in the second sentence of Article 18(3) of the Merger Regulation.

152. The fact that in antitrust proceedings and in merger control proceedings the undertakings concerned are issued with a written statement of objections (118) is the result of their right to a hearing. The statement of objections allows them to acquaint themselves with the evidence which the Commission has at its disposal and to render the rights of the defence fully effective. (119) They are given the opportunity to make submissions on the objections in writing and, on justified application, orally. (120) In addition, the first sentence of Article 18(3) of the Merger Regulation makes it clear that the Commission may base its decisions only on objections on which those concerned have had the opportunity of making known their views.

153. It follows from its function in administrative proceedings that a statement of objections is a preparatory document containing assessments of fact and of law which are purely provisional in nature. For that reason, the Commission may, and even must, take into account the factors emerging from the administrative procedure in order, inter alia , to abandon such objections as have been shown to be unfounded. (121)

154. The fact that, in contrast to where Articles 81 EC and 82 EC apply, in merger control proceedings the Commission is subject to strict procedural time-limits does not change this provisional nature of the statement of objections in any way. The requirement for speed in merger control proceedings naturally means that the affected undertakings too are subject to particularly short time-limits within which they can exercise their rights in defence. However, the comprehensive safeguarding of the rights of defence requires that submissions in defence by the persons affected in merger control proceedings may not be taken any the less into account than in antitrust proceedings. Accordingly, such a submission in the context of merger control can lead to a change in the Commission’s view just as much as it can in antitrust proceedings, even shortly before the expiry of the time-limit allowed for a clearance or a prohibition decision.

155. Against this background it was certainly unfortunate that in the judgment under appeal the Court of First Instance regarded the ‘fundamental U-turn in the Commission’s position’ which occurred just prior to the first clearance decision as ‘surprising’ in view of ‘the late stage at which it was made’, (122) and generally described the likelihood that the Commission would fundamentally alter its position as ‘reducing … as the administrative procedure advances’. (123)

156. If the Commission alters its assessment of a concentration which has been notified to it in consequence of submissions in defence made by one of the participants in response to the objections, this new analysis of the case is by no means ‘late’, but is made instead at the usual time in the context of merger control proceedings. Nor is such an occurrence ‘surprising’ or ‘unlikely’, (124) but an expression of observance of the rights of the defence and proves that the hearing given to the undertakings concerned is not a farce.

157. However, contrary to the appellants and the Commission, I am not of the view that the judgment under appeal was vitiated by an error of law on the basis that these rather unfortunate choices of expression by the Court of First Instance expressed a legally inaccurate basic understanding of the nature and function of a statement of objections.

158. Indeed, in the same breath as its statements as to the ‘surprising’ and ‘late’ character of the ‘U-turn in the Commission’s position’, the Court of First Instance expressly emphasised that preparatory character of the statement of objections in the context of merger control too; in addition it recognised that according to the case-law on Articles 81 and 82 EC the Commission was not obliged to explain any deviations from the statement of objections. (125)

159. Accordingly, I am of the opinion that in its general remarks on the relationship between the first clearance decision and the statement of objections the Court of First Instance ultimately did not misunderstand the nature and function of the statement.

160. Even if one were of the view that such an error of law existed, this would not justify setting aside the judgment under appeal, because, as I will show, (126) it did not result in an assessment of the first clearance decision which was erroneous in law, and thus could not in any event have had any effect on the operative part of the judgment under appeal. (127)

b) The specific references by the Court of First Instance to the statement of objections

161. There remains to be considered the criticism by the appellants and the Commission of a series of specific references by the Court of First Instance to the statement of objections in the context of its examination of the lawfulness of the first clearance decision. It is alleged that the Court of First Instance wrongly supported its finding that the first clearance decision was unlawful on a comparison of the decision and the statement of objections, instead of deciding solely by reference to the decision.

162. This submission too is not convincing.

163. Admittedly, the judgment under appeal refers a number of times to the statement of objections. In particular, the Court of First Instance repeatedly emphasises that in the first clearance decision the Commission subdued (128) or changed (129) its description and assessment of certain facts by comparison with the statement of objections.

164. However, it is only on a superficial reading that the Court of First Instance appears to have based its findings of errors in law in the first clearance decision on such mere divergences from the statement of objections. On closer reading it becomes clear that the Court of First Instance derived its findings both of a lack of reasoning and of manifest errors of assessment from the first clearance decision itself.

165. As regards the failure to state reasons , the Court of First Instance’s discussion of the separate section in the first clearance decision, which concerns market transparency, (130) does not refer at all to the statement of objections. (131) In the rest of the Court of First Instance’s discussion on failure to state reasons, (132) references to the statement of objections are infrequent; they occur only in paragraphs 300, 302 and 308 of the judgment under appeal, and none of them is decisive for the Court of First Instance’s finding that the first clearance decision did not contain sufficient reasons as regards the lack of market transparency it claimed to exist:

– in paragraph 308 of the judgment under appeal, which concerned movements in gross and net list prices, the Court of First Instance relies upon the content of the first clearance decision. It does not make any comparison between this decision and the statement of objections, and thus does not find there to have been any divergence between them. Instead, the Court of First Instance appears to seek to draw the same conclusion from both documents; in that way the statement of objections is used by the Court of First Instance merely as an additional illustration of the information it derives from the decision itself.

– In paragraph 302 of the judgment under appeal too, the reference to the statement of objections is purely by way of illustration, the Court of First Instance being of the view that even the subdued assessment of list prices in the first clearance decision is ‘a further element that favours the transparency of the market’.

– Finally, the fact that the reference to the statement of objections in paragraph 300 of the judgment under appeal was not decisive for the line of argument taken by the Court of First Instance is expressly made clear by the Court of First Instance itself in the immediately following paragraph: ‘In any event, even considering only the observations set out in the Decision , the Commission concluded that list prices were rather aligned.’ (133)

166. It follows that any divergences between the first clearance decision and the statement of objections did not play any part in the finding by the Court of First Instance that insufficient reasons had been given for the decision, this being in itself enough to result in the decision’s being annulled. (134) Contrary to the submissions of the appellants and the Commission, the statement of objections was not used by the Court of First Instance as a benchmark for its assessment of the first clearance decision.

167. As regards the Court of First Instance’s findings of manifest errors of assessment , the references in the judgment under appeal to the statement of objections are admittedly more numerous: they are to be found in paragraphs 335, 338, 339, 341, 362, 378, 379, 398, 402, 409, 419, 424, 446, 447, 451, 456, 467, 528, 532 and 538 of the judgment under appeal. (135)

168. The references in paragraphs 338, 339, 341, 362, 402, 456, 467, 532 and 538 of the judgment under appeal to the statement of objections serve without doubt as illustrations of, and supplements to, what the Court of First Instance has already taken directly from the first clearance decision. The purely supplementary character of these references to the statement of objections is also made clear in the paragraphs of the judgment listed by additional words such as ‘moreover’ and ‘furthermore’. At no time is any kind of contradiction between the first clearance decision and the statement of objections criticised. The statement of objections was not used as a benchmark for the judicial examination of the first clearance decision.

169. The same applies for paragraphs 378 and 379 of the judgment under appeal. If one reads them in conjunction with the immediately preceding paragraph 377 of the judgment under appeal, it is clear that they too serve merely to illustrate and supplement what the Court of First Instance has already taken solely from the first clearance decision concerning the transparency of price discounts and has summarised as follows: ‘Accordingly, it must be held that the evidence, as mentioned in the Decision, does not support the conclusions drawn from it.’ (136)

170. By contrast, the references to the statement of objections in paragraphs 335, 398, 408 to 410, 419, 424, 446, 447, 451 and 528 of the judgment under appeal seem to be more problematic. At first glance it appears that the Court of First Instance in fact intended to allege that the Commission had departed from the statement of objections in the first clearance decision without sufficient explanation. (137)

171. According to case-law to which the appellants and the Commission referred in the present proceedings, the Commission is not obliged to explain in its decision potential divergences from its statement of objections, because the statement is a preparatory document the analysis in which is merely provisional in nature. (138) It follows that a decision by the Commission in either antitrust proceedings or merger control proceedings cannot be regarded as vitiated by an error of law and annulled solely on the ground that without further explanation it departs in substance from the statement of objections.

172. However, this does not preclude the possibility that a decision which diverges from the statement of objections can, for other reasons relating to the decision itself, be erroneous in law and accordingly be annulled if challenged.

173. In this connection it is to be recalled that in the context of merger control the Commission is required to analyse complex economic situations. As already mentioned, in doing so it has a not insignificant discretion, (139) but it is none the less always subject to review by the Community Courts. The latter have the task not only of establishing whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it. (140)

174. Thus, even if, in its decision as to the compatibility of a concentration with the common market, the Commission need not explain why it has departed in substance from its statement of objections, three things must be capable of being understood from its decision:

– first, that the facts on which the decision is based were accurate, and in particular that they are based on reliable and consistent evidence ( accuracy of the factual basis );

– second, that the decision does not fail to take into account any relevant information which ought to have been taken into account in assessing the concentration ( completeness of the factual basis ); and

– third, that the facts on which the decision is based are capable of substantiating the conclusions drawn from them ( strength of the factual basis ). (141)

175. Reference points for whether the Commission has, in an individual case, fully taken into account all the relevant information may appear from all the circumstances of the individual case, and in particular from all the documents which were part of the administrative file in the administrative proceedings. Those documents include not least the statement of objections. This is because this statement provides a summary of all the facts and evidence which the Commission considers at that stage in the proceedings to be relevant to its decision.

176. On this basis, in the judgment under appeal it was possible for the Court of First Instance to find that despite its provisional nature the statement of objections was not ‘wholly without merit or wholly irrelevant’. (142)

177. There is no doubt that as the procedure runs its course it may appear – in particular because of the submissions made by the participating undertakings in their defence – that the facts and evidence on which the statement of objections was based were incomplete or inaccurate, or that they were not capable of substantiating the conclusions drawn from them. The Court of First Instance correctly recognises this too, where it says in the judgment under appeal that the Commission ‘is obliged to take account of the evidence obtained during the administrative procedure and also of the arguments put forward by the undertakings concerned, and must drop any objections which might ultimately prove to be unfounded’. (143)

178. However, the Community Courts can and must ascertain whether certain facts which the Commission had established and still relied upon in its statement of objections were, in the further course of the procedure, correctly categorised as inaccurate or unreliable by the Commission and dropped. Equally, the Community Courts can and must consider whether any new facts on which the Commission now relies are in fact accurate, whether the facts thus established are complete, and whether they are capable of substantiating the conclusions the Commission has drawn from them.

179. The correctness, completeness and strength of the factual material which underpins a decision must be liable to judicial review. (144) Without such a review of the factual basis for a decision it would not be possible to assess, in a meaningful way, whether the Commission had stayed within the limits of the discretion allowed to it or had committed manifest errors of assessment.

180. Accordingly, in the judgment under appeal the Court of First Instance correctly undertook this review and in doing so explained that the Commission ‘must be in a position to explain … at least in the context of the proceedings before the Court, its reasons for considering that its provisional findings were incorrect; but above all, the findings set out in the decision must be compatible with the findings of fact made in the statement of objections, in so far as it is not established that the latter findings were incorrect’. (145)

181. Contrary to what the appellants and the Commission submit, this does not mean that the merger control authority is subject to a double burden before the courts. It is not required to defend its decision and in addition refute the statement of objections in so far as it diverges from it. It must simply – and in response to a substantiated submission by the applicant – be able to explain that the factual basis of its decision was correct and complete and that it was capable of substantiating the conclusions drawn in its decision. Any explanations as to why certain factual elements have been supplemented or abandoned or reassessed in the course of the administrative procedure are inevitably bound up with the question of the correctness, completeness and strength o f the factual basis of the decision.

182. Thus, all in all, the Court of First Instance relied on the statement of objections in an acceptable manner as a basis for its review of whether the first clearance decision was adopted on a correct and complete factual basis that was capable of substantiating the conclusions drawn by the Commission. However, the Court of First Instance did not annul the first clearance decision on account of apparent divergences from the statement of objections, but on account of its insufficient reasoning and on account of manifest errors of assessment. The Court of First Instance found there to be such errors of assessment because the factual basis for the decision had been incomplete and incapable of substantiating the conclusions drawn by the Commission from it as regards the absence of market transparency. (146)

c) Interim conclusion

183. Thus, to summarise, the first ground of appeal and the second part of the sixth ground of appeal are unfounded.

3. The evidential value of factual assertions in the response to the objections (second ground of appeal; first part of the third ground of appeal)

184. The second ground of appeal is closely connected to the first part of the third ground of appeal; for that reason I propose to consider both together. In essence, the appellants submit that the Court of First Instance set too high a standard of proof as regards their assertions in the response to the statement of objections. In addition, they submit that the Court of First Instance wrongly held that the Commission was under a duty to conduct a new market investigation following the statement of objections.

a) The judgment under appeal

185. In the course of reviewing the first clearance decision for the existence of manifest errors of assessment in relation to market transparency, the Court of First Instance stated inter alia that ‘the parties to the concentration cannot wait until the last minute before submitting evidence to the Commission with a view to refuting objections raised at the proper time by the Commission, since the Commission would then no longer be in a position to carry out the necessary investigations. In such a hypothetical situation, that evidence must at the very least be particularly reliable, objective, relevant and cogent if it is to be capable of validly refuting the objections raised by the Commission’. (147)

186. The Court of First Instance was further of the view that the Commission could not ‘go so far as to delegate, without supervision, responsibility for conducting certain parts of the investigation to the parties to the concentration, in particular where, as in the present case, those aspects constitute the crucial element on which the decision is based and where the data and assessments submitted by the parties to the concentration are diametrically opposite to the information gathered by the Commission during its investigation and also to the conclusions which it drew from that information’. (148)

187. Moreover, in various places in the judgment under appeal the Court of First Instance criticises the Commission for failing, following the response by the parties to the concentration to the statement of objections, to carry out any new market investigations in order to test the validity of the new direction of its assessment of the intended concentration. (149)

b) Analysis

188. As has already been mentioned in connection with the first ground of appeal, in merger control proceedings it is essential to observe the rights of defence before making a decision which may adversely affect the undertakings concerned (150) (see also the second sentence of Article 18(3) of the Merger Regulation).

189. For that reason, the undertakings concerned cannot be faulted for not having put forward certain – possibly decisive – arguments, facts or evidence when notifying the concentration or during the Commission’s market investigation, and instead doing so only in their submissions in defence when responding to the statement of objections. (151) The statement of objections is the first document which tells the parties to the concentration in detail what the Commission’s objections are to their intended concentration and the individual arguments and evidence on which it bases those objections. (152)

190. Thus, the sole fact that the parties to the concentration put forward certain arguments, facts or evidence for the first time in their response to the statement of objections does not by any means justify a finding that they withheld this information ‘until the last minute’. (153) Instead, the rights of defence conferred upon the undertakings concerned give them the right to put forward in the course of their written and oral hearing, that is after receipt of the statement of objections, everything which they consider appropriate to refute the objections and to persuade the Commission to clear their concentration. Such a submission is not too late, but is made at the point in time specifically envisaged for it in the merger control procedure.

191. Nor can a higher standard of proof or of cogency be imposed on the submissions put forward by the undertakings concerned in reply to the statement of objections than is imposed on the submissions by competitors, customers, and other third parties questioned by the Commission in the course of the merger control procedure. Admittedly, the Commission is obliged to review the submissions of the parties to the concentration carefully as to their accuracy, completeness and cogency, and in case of reasonable doubt to leave them out of account, but in doing so it must apply the same standards as it does in considering third parties’ submissions.

192. The rights of defence of the undertakings concerned would be devalued if they were not applied in relation to their defence submissions on individual objections raised by the Commission, or if their defence submissions were from the outset viewed as less credible and less cogent than, for example, information provided by third parties in the course of the market investigation.

193. Moreover, if in its decision the Commission considers the defence submissions made by the undertakings concerned and is persuaded by them to reconsider and even depart from the provisional conclusions in its statement of objections, this does not in any way mean that the investigation has been ‘delegated’ to them.

194. Finally, the Commission cannot be obliged in every individual case to undertake further market investigations following the statement of objections and after hearing the undertakings concerned. The time pressures arising from the comparatively strict procedural time-limits are already enough to make it impossible for the Commission to send further comprehensive requests for information about complex economic questions to numerous market participants shortly before issuing its draft decision to the Advisory Committee on concentrations. (154) Realistically, in the short time remaining it is only seldom that such an investigation could be expected to give useful results. Moreover, the undertakings concerned would have to be given a new hearing on the results of the investigation, if, for example, it was intended to rely on them for making a prohibition decision. For that reason, the appellants correctly observed that the consequence of an unclear factual situation after hearing the undertakings concerned cannot be the initiation of new market investigations. Instead, the decision must be made on the basis of the existing information. This approach is supported by Article 10(6) of the Merger Regulation, which provides for a deemed clearance if the Commission does not make a decision within the time-limits allowed to it.

195. Against this background I am of the view that the Court of First Instance misunderstood the legal position in stating that the parties to the concentration could not ‘wait until the last minute before submitting evidence to the Commission with a view to refuting objections raised at the proper time by the Commission’ and that such evidence had to be ‘ particularly reliable, objective, relevant and cogent’ if it were to be capable of validly refuting the objections raised by the Commission; in addition, the Court of First Instance was wrong to complain about the absence of further market investigations following the statement of objections, and to equate the acceptance by the Commission of the appellants’ defence submissions with an unlawful delegation of the investigation to the parties to the concentration. (155)

196. Thus, the second ground of appeal and the first part of the third ground of appeal are in substance well founded.

197. However, it does not follow that the judgment under appeal is to be set aside. (156) Specifically, the Court of First Instance did not just object that in assessing market transparency the Commission relied on the defence submissions by Bertelsmann and Sony and failed to carry out new market investigations. Instead, it also reviewed the substance of the Commission’s analysis of market transparency for manifest errors of assessment.

198. In this connection it is to be emphasised that the passages in the Court of First Instance’s judgment which are disputed here were not the first place where the Court of First Instance found there to have been manifest errors of assessment, it having already found one much earlier, at paragraph 377 of the judgment under appeal: ‘Accordingly, it must be held that the evidence, as mentioned in the Decision, does not support the conclusions drawn from it.’ That finding is by no means related to the defence submissions by the parties to the concen