Case T-210/01

General Electric Company

v

Commission of the European Communities

(Action for annulment – Competition – Commission decision declaring a concentration incompatible with the common market – Regulation (EEC) No 4064/89 – Aeronautical markets – Acquisition of Honeywell by General Electric – Vertical integration – Bundling – Foreclosure – Horizontal overlaps – Rights of the defence)

Judgment of the Court of First Instance (Second Chamber, Extended Composition), 14 December 2005

Summary of the Judgment

1. Actions for annulment – Subject-matter – Merger control decision – Decision based on several pillars of reasoning, each sufficient to justify the operative part – Criteria of incompatibility with the common market fulfilled in relation to at least one of the markets in question – Action unfounded

(Art. 230 EC; Council Regulation No 4064/89, Arts 2(1)(a) and (3))

2. Competition – Concentrations – Examination by the Commission – Economic assessments – Discretion – Judicial review – Scope – Limits

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

3. Competition – Concentrations – Assessment of compatibility with the common market – No presumption

(Council Regulation No 4064/89)

4. Competition – Concentrations – Assessment of compatibility with the common market – Prospective analysis of potential developments on the market concerned – Need for a rigorous analysis – Judicial review – Scope

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

5. Competition – Concentrations – Assessment of compatibility with the common market – Conglomerate-type concentrations – Concept – Account taken of the likelihood of a dominant position being created or strengthened on the reference market of one of the undertakings party to the operation – Lawfulness – Whether the Commission may rely on the foreseeable conduct of the entity arising from the concentration – Conditions – Production of a rigorous analysis based on solid evidence

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

6. Competition – Concentrations – Assessment of compatibility with the common market – Conglomerate-type concentrations – Account taken of foreseeable anti-competitive conduct – Lawfulness – No obligation on the Commission to assess its likelihood in the light of the risks inherent in its adoption by an undertaking

(Art. 82 EC; Council Regulation No 4064/89, Art. 2(2) and (3))

7. Competition – Concentrations – Assessment of compatibility with the common market – Criteria – Creation or strengthening of a dominant position significantly impeding effective competition in the common market – Cumulative nature – Interaction – Obligation expressly to link findings made in relation to the first criterion, but equally relevant to the second, to the latter – None

(Arts 82 EC and 253 EC; Council Regulation No 4064/89, Art. 2(2) and (3))

8. Competition – Dominant position – Concept

(Art. 82 CE)

9. Competition – Dominant position – Holding of a very large market share an indicator – Assessment of the strengthening of market shares in a bidding market characterised by the award of a limited number of high-value contracts

(Art. 82 EC)

10. Competition – Dominant position – Existence – Relevance of lively competition on the market concerned – Not relevant where there is an undertaking able to act without having to take it into account – Financial concessions granted in order to win certain bids concerning high-value products – Not relevant

(Art. 82 EC)

11. Competition – Community rules – Application by the Commission – Independent of assessments by the authorities of non-member States

12. Competition – Concentrations – Assessment of compatibility with the common market – Anti-competitive effects arising from a direct vertical relationship – Effects depending on the future behaviour of the merged entity – Onus on the Commission to produce convincing evidence as to the likelihood of the alleged anti-competitive behaviour – Unfettered evaluation of evidence

(Council Regulation No 4064/89)

13. Competition – Dominant position in the sale of essential components – Refusal to sell – Abuse

(Art. 82 CE)

14. Competition – Concentrations – Examination by the Commission – Demonstration that conduct will take place in the near future, creating or strengthening a dominant position – Duty to produce convincing evidence

(Council Regulation No 4064/89)

15. Procedure – Introduction of new pleas during the proceedings – New plea – Definition – Reply to a question put by the Court of First Instance as a measure of organisation of procedure – Not included

(Rules of Procedure of the Court of First Instance, Arts 48 and 64(3))

16. Acts of the Community institutions – Statement of reasons – Obligation – Decision different from that previously taken in a case concerning similar or identical situations or the same market participants – Scope

(Art. 253 EC)

17. Competition – Community rules – Implementation – Rules for that purpose drawn up by the Commission – Duty of the Commission to comply with them – Notice on market definition – Scope

(Art. 82 EC; Commission Communication 97/C 372/03)

18. Competition – Concentrations – Examination by the Commission – Definition of the market in question – Criteria – Substitution of products – Concept

(Council Regulation No 4064/89; Commission Communication 97/C 372/03, point 36)

19. Competition – Concentrations – Assessment of compatibility with the common market – Market characterised by indirect and relatively weak competition – Acquisition by an undertaking in a dominant position of its sole competitor – Lawfulness – Conditions – Demonstration that there was no effective competition on the market before the operation

(Art. 82 EC; Council Regulation No 4064/89)

20. Competition – Concentrations – Examination by the Commission – Commitments by the undertakings concerned to render the notified transaction compatible with the common market

(Council Regulation No 4064/89)

21. Procedure – Application initiating proceedings – Formal requirements – Identification of the subject-matter of the dispute – Brief summary of the pleas in law on which the application is based

(Rules of Procedure of the Court of First Instance, Art. 44(1))

22. Competition – Concentrations – Administrative procedure – Access to the file – Observance of the rights of the defence – Limits

(Council Regulation No 4064/89)

23. Competition – Administrative procedure – Access to the file – Distinction between adverse and favourable factors

24. Competition – Administrative procedure – Access to the file – Observance of the rights of the defence – Limits

25. Competition – Concentrations – Administrative procedure – Access to the file – Refusal of access between the decision to bring proceedings and the statement of objections – Infringement of the right to a fair hearing – None

(Council Regulation No 4064/89, Art. 6(1)(c))

26. Competition – Concentrations – Administrative procedure – Access to the file – No right for the parties to the concentration to have access, in portions, throughout the proceedings

(Council Regulation No 4064/89, Art. 18(1))

27. Competition – Concentrations – Administrative procedure – Brevity of intermediate periods laid down at each stage of the procedure – Account to be taken, when assessing alleged infringement of defence rights, of the requirement for speed

(Council Regulation No 4064/89; Commission Regulation No 447/98, Arts 13 and 21)

28. Competition – Administrative procedure – Intervention of the hearing officer – Decision altering his status during the proceedings – Direct substitution of the new function for the old

(Commission Decision 2001/462, Art. 2(1) and (2))

29. Community law – Principles – Fundamental rights – Observance ensured by the Community judicature – Account to be taken of the European Convention on Human Rights

(Art. 6(2) EU)

1. Where some of the grounds in a decision on their own provide a sufficient legal basis for the decision, any errors in the other grounds of the decision have no effect on its operative part.

Moreover, where the operative part of a Commission decision is based on several pillars of reasoning, each of which would in itself be sufficient to justify that operative part, that decision should, in principle, be annulled only if each of those pillars is vitiated by an illegality. In such a case, an error or other illegality which affects only one of the pillars of reasoning cannot be sufficient to justify annulment of the decision at issue because that error could not have had a decisive effect on the operative part adopted by the Commission.

That rule applies in particular in the context of merger control decisions. In that regard, the Commission must prohibit a concentration where the latter satisfies the criteria in Article 2(3) of Regulation No 4064/89. It follows from Article 2(1)(a) of that regulation that the Commission must take account, in the course of its appraisal of a concentration, of, inter alia, the need to maintain and develop effective competition within the common market in view of, among other things, the structure of all the markets concerned. Thus, the Commission’s appraisal of whether a transaction creates or strengthens one or more dominant positions as a result of which effective competition would be significantly impeded must be carried out by reference to the conditions on each of the markets liable to be affected by the merger notified. Therefore, if it finds that the criteria are satisfied with regard to just one of the markets concerned, the concentration must be declared incompatible with the common market.

It follows that such a decision can be annulled only if it is found not only that certain of its grounds are vitiated by illegality, but also that those grounds which are not so vitiated do not provide a sufficient legal basis for the merger to be declared incompatible with the common market. This finding does not, however, remove the need to consider whether certain factors pertaining to competition, identified by the contested decision, reinforce each other, and that it would therefore be artificial to analyse each of them in isolation.

(see paras 42-45, 48, 734)

2. The Commission has a margin of assessment with regard to economic matters for the purpose of applying the basic provisions of Regulation No 4064/89 on the control of concentrations between undertakings, in particular Article 2 thereof. It follows that the Community judicature’s power of review is restricted to verifying that the facts relied on are accurate and that there has been no manifest error of assessment.

As to the nature of that review, there is an essential difference between factual matters and findings, on the one hand, which may be found to be inaccurate by the Court in the light of the arguments and evidence before it, and, on the other hand, appraisals of an economic nature.

Although it must be recognised that the Commission has a margin of assessment when applying the substantive provisions of Regulation No 4064/89, that does not mean that the Community judicature must refrain from reviewing the Commission’s legal classification of economic data. The Community judicature not only must establish, inter alia, whether the evidence relied on is factually accurate, reliable and consistent, but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it.

(see paras 60, 62-63, 253)

3. Regulation No 4064/89 on the control of concentrations between undertakings does not establish a presumption as to the compatibility or incompatibility with the common market of a transaction which has been notified. It is not therefore the case that, where it has doubts, the Commission must find in favour of a concentration falling within its jurisdiction. In each case, it is for the Commission to form a clear opinion as to that compatibility and rule accordingly.

(see para. 61)

4. Having regard to the margin of assessment which the Commission has in economic matters for the purpose of applying the basic provisions of Regulation No 4064/89, effective judicial review is all the more necessary when the Commission carries out a prospective analysis of developments which might occur on a market as a result of a proposed concentration.

A prospective analysis of that kind must be carried out with great care since it does not entail the examination of past events – for which many items of evidence are often available to enable their causes to be understood – or even of current events, but rather a prediction of events which are more or less likely to occur in future if a decision prohibiting the planned concentration or laying down the conditions for it is not adopted. A prospective analysis consisting in an examination of how a concentration might alter the factors determining the state of competition on a given market, in order to establish whether it would give rise to a serious impediment to effective competition, makes it necessary to envisage various chains of cause and effect with a view to ascertaining which of them are the most likely.

(see para. 64)

5. Conglomerate-type concentrations do not give rise to horizontal overlaps between the activities of the parties to the merger or to a vertical relationship between the parties in the strict sense of the term. Even though, as a general rule, such concentrations do not produce anti-competitive effects, they may none the less have such effects in some cases. In a prospective analysis of the effects of a conglomerate-type concentration, if the Commission is able to conclude that by reason of the conglomerate effects a dominant position would, in all likelihood, be created or strengthened in the relatively near future and would lead to effective competition on the market being significantly impeded as a result of the concentration, it must prohibit the concentration.

In that regard, conglomerate-type concentrations give rise to certain specific problems, in particular inasmuch as, first, the assessment of such a transaction may involve a prospective analysis covering a period of time stretching well into the future and, second, the specific conduct of the merged entity may determine to a great extent what effects the concentration has. Thus, the chains of cause and effect following a merger may be dimly discernible, uncertain and difficult to establish. That being so, the quality of the evidence produced by the Commission in order to form a sound basis for a decision declaring a concentration incompatible with the common market is particularly important, since that evidence must support the Commission’s conclusion that, if such a decision were not adopted, the economic changes envisaged by it would be plausible.

(see paras 65-66)

6. Where the Commission analyses the effects of a conglomerate-type concentration, the likelihood of the adoption of certain future conduct must be examined comprehensively, that is to say taking into account both the incentives to adopt such conduct and the factors liable to reduce, or even eliminate, those incentives, including the possibility that the conduct is unlawful.

However, it would run counter to the preventive purpose of Regulation No 4064/89 to require the Commission to examine, for each proposed merger, the extent to which the incentives to adopt anti-competitive conduct would be reduced, or even eliminated, as a result of the unlawfulness of the conduct in question, the likelihood of its detection, the action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue. It follows that the Commission must, in principle, take into account the potentially unlawful, and thus sanctionable, nature of certain conduct as a factor which might diminish, or even eliminate, incentives for an undertaking to engage in particular conduct. That appraisal does not, however, require an exhaustive and detailed examination of the rules of the various legal orders which might be applicable and of the enforcement policy practised within them, given that an assessment intended to establish whether an infringement is likely and to ascertain that it will be penalised in several legal orders would be too speculative.

Thus, where the Commission, without undertaking a specific and detailed investigation into the matter, can identify the unlawful nature of the conduct in question, in the light of Article 82 EC or of other provisions of Community law which it is competent to enforce, it is its responsibility to make a finding to that effect and take account of it in its assessment of the likelihood that the merged entity will engage in such conduct.

In that regard, whilst the Commission is entitled to take as its basis a summary analysis, based on the evidence available to it at the time when it adopts its merger-control decision, of the lawfulness of the conduct in question and of the likelihood that it will be punished, it must none the less, in the course of its appraisal, identify the conduct foreseen and, where appropriate, evaluate and take into account the possible deterrent effect represented by the fact that the conduct would be clearly, or highly probably, unlawful under Community law.

(see paras 70-75, 303-304, 424-425, 468)

7. Article 2(2) and (3) of Regulation No 4064/89 on the control of concentrations between undertakings lays down two cumulative conditions, relating, first, to the creation or strengthening of a dominant position and, second, to the fact that competition will be significantly impeded in the common market as a result. Accordingly, a concentration can be prohibited only if the two conditions laid down by Article 2(3) of the regulation are both met.

Abuse of a dominant position may occur, however, if an undertaking in a dominant position strengthens such a position in such a way that the degree of dominance reached substantially impedes competition, that is to say that only undertakings remain in the market whose behaviour depends on the dominant one. It follows that the strengthening of a dominant position may in itself significantly impede competition and do so to such an extent that it amounts, on its own, to an abuse of that position.

It follows, a fortiori, that the strengthening or creation of a dominant position, within the meaning of Article 2(3) of Regulation No 4064/89, may amount, in particular cases, to proof of a significant impediment to effective competition. That finding does not mean that the second condition laid down in Article 2 of Regulation No 4064/89 is, from a legal perspective, subsumed within the first, but merely that it may be apparent from a single factual analysis of a given market that the two conditions are met.

The factors which may be invoked by the Commission in order to establish that an undertaking’s competitors lack freedom of action to the degree necessary for a finding that a dominant position has been created or strengthened with regard to that undertaking are often the same as those which are relevant in an appraisal of whether, as a result of such creation or strengthening, competition will be significantly impeded in the common market. Indeed, a factor which significantly affects the freedom of competitors to determine their commercial policy independently is also liable to result in effective competition being impeded.

It follows that, where it is apparent from the recitals to a decision finding a notified concentration to be incompatible with the common market – including those recitals dedicated to analysing whether a dominant position has been created or strengthened – that the transaction will produce significant anti-competitive effects, the decision should not be regarded as unlawful merely because the Commission has not expressly, and specifically, linked its description of those matters to the second condition in Article 2 of Regulation No 4064/89; and this is so irrespective of whether the lawfulness of the decision is being considered from the point of view of the requirement to state reasons laid down in Article 253 EC, or of the substance of the case. Indeed, any other approach would impose a purely formal obligation on the Commission, requiring it to repeat some of the same recitals, firstly in its analysis of whether a dominant position is created or strengthened in a given market and, a second time, in relation to the analysis of significant impairment of competition in the common market.

(see paras 84, 86-89)

8. A dominant position exists where the undertaking concerned is in a position of economic strength which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, its customers and, ultimately, consumers. In order to establish that a dominant position exists, the Commission does not need to demonstrate that an undertaking’s competitors will be foreclosed from the market, even in the longer term.

(see paras 85, 114, 243)

9. Although the importance of market shares may vary from one market to another, very large shares are in themselves, and save in exceptional circumstances, evidence of the existence of a dominant position. Such may be the case with a 50% market share.

However, in a market characterised by the award of a limited number of high-value contracts, the fact that a particular undertaking has had a number of recent ‘wins’ does not necessarily mean that one of its competitors will not be successful in the next competition. Provided that it has a competitive product and that other factors are not heavily weighted in the first company’s favour, a competitor can always win a valuable contract and increase its market share considerably at one go.

However, such a finding does not mean that market shares are of virtually no value in assessing the strength of the various manufacturers on a market of that kind, especially where those shares remain relatively stable or reveal that one undertaking is tending to strengthen its position. Even on a bidding market, the fact of a manufacturer maintaining, or even increasing, its market share over a number of years in succession is an indication of market strength. A time must come when the difference between one manufacturer’s market share and that of its competitors can no longer be dismissed as a function of the limited number of competitions that constitute demand on the market.

(see paras 115, 149-151, 540, 571)

10. The fact that an undertaking is compelled by the pressure of its competitors’ price reductions to lower its own prices is in general incompatible with that independent conduct which is the hallmark of a dominant position.

However, even the existence of lively competition on a particular market does not rule out the possibility that there is a dominant position on that market, since the predominant feature of such a position is the ability of the undertaking concerned to act without having to take account of this competition in its market strategy and without for that reason suffering detrimental effects from such behaviour. Thus, the fact that there may be competition on the market is indeed among the relevant factors for the purposes of ascertaining whether a dominant position exists, but it is not in itself a decisive factor in that regard.

In a market for products which are sold through bidding processes which take place periodically, each of which concerns high-value sales and which are characterised by protracted negotiations, the bidders will necessarily make financial concessions in one form or another, since such concessions are an integral part of such a negotiating process. In such a context, the mere fact that an undertaking offered discounts in order to win certain bids does not in itself, in this context, preclude it having a dominant position.

(see paras 116-117, 184, 215, 249)

11. The fact that the competent authorities of one or more non-member States determine an issue in a particular way for the purposes of their own proceedings does not suffice per se to undermine a different determination by the competent Community authorities. The matters and arguments advanced in the administrative procedure at Community level – and the applicable legal rules – are not necessarily the same as those taken into account by the authorities of the non-member States in question and the determinations made on either side may be different as a result. If one party considers the reasoning underpinning the conclusion of the authorities of a non-member State to be particularly relevant and equally applicable to a Community procedure, it can always raise it as a substantive argument, but such reasoning cannot be conclusive.

(see para. 179)

12. The anti-competitive effects of a concentration, resulting from a direct vertical relationship of supplier and customer, depend on the future behaviour of the merged entity, without which that aspect of the merger would not have any harmful effect. The onus is thus on the Commission to produce convincing evidence as to the likelihood of such behaviour.

In some cases, such evidence may consist of economic studies establishing the likely development of the market situation and demonstrating that there is an incentive for the merged entity to behave in a particular way.

Since, however, it is an overriding principle in Community law that the evaluation of evidence should be unfettered, the absence of evidence of that type is not in itself decisive. In particular, in a situation in which it is obvious that the commercial interests of an undertaking militate predominantly in favour of a given course of conduct, such as making use of an opportunity to disrupt a competitor’s business, the Commission does not commit a manifest error of assessment in holding that it is likely that the merged entity will actually engage in the conduct foreseen. In such a case, the simple economic and commercial realities of the particular case may constitute the convincing evidence required by the case-law.

(see paras 295-297, 433)

13. If the fact that an undertaking is in a dominant position cannot deprive it of its right to protect its own commercial interests, certain conduct is unlawful if its object is specifically to strengthen this dominant position and abuse it. Thus, for example, a refusal by an undertaking in a dominant position to sell an essential component to its competitors in itself constitutes an abuse of that position.

(see para. 306)

14. Where the Commission analyses the effects of a concentration, it is for it to show in relation to the future development of the market, on the basis of convincing evidence and with a sufficient degree of probability, not only that any conduct foreseen by it will take place in the relatively near future but also that the conduct will result in the creation or strengthening of a dominant position in the relatively near future. It is not enough for the Commission to put forward a series of logical but hypothetical developments which, were they to materialise, it fears would have harmful effects for competition on a number of different markets. Rather, the onus is on it to carry out a specific analysis of the likely evolution of each market on which it seeks to show that a dominant position would be created or strengthened as a result of the merger and to produce convincing evidence to bear out that conclusion.

(see paras 327, 429, 433, 464)

15. Where the Court of First Instance takes into account answers given by a party to questions put by way of measures of organisation of procedure on the basis of Article 64(3) of the Rules of Procedure of the Court of First Instance, and where the other party has had, where appropriate, the opportunity of stating its views on those matters at the hearing, there is no infringement of Article 48 of the Rules of Procedure.

(see para. 505)

16. It does not follow from the fact that, contrary to what applies where a decision follows a well-established line of decisions, the Commission cannot content itself with summary reasoning but must provide explicit reasons where it extends the ambit of a practice, that the Commission must, in addition to stating the reasons for its decision by reference to the case-file to which the decision relates, specifically set out its reasons for reaching a different conclusion than in a previous case concerning similar or identical situations or the same market participants.

(see para. 513)

17. The Commission may not depart from rules which it has imposed on itself. Thus, to the extent that the notice on the definition of the market in question for the purposes of Community competition law lays down in mandatory terms the method by which the Commission intends to define markets in the future and does not retain any margin of assessment, the Commission must indeed take account of the provisions of the notice.

In that respect, the Commission did not undertake, in the notice on market definition, to use one particular specific method in the assessment of demand-side substitutability. Instead, it stated that the approach which it will take has to vary depending on the circumstances of each individual case and it retained a large part of its margin of assessment in order to be able to deal with each individual case in an appropriate way.

(see paras 516, 519)

18. Concerning the Commission’s examination of the compatibility with the common market of a concentration, inasmuch as point 36 of the notice on the definition of the market in question for the purposes of Community competition law states that ‘[f]unctional interchangeability or similarity in characteristics may not, in themselves, provide sufficient criteria, because the responsiveness of customers to relative price changes may be determined by other considerations as well …’, it follows from that citation, a contrario, that in certain cases, indeed as a general rule. save where particular circumstances indicate otherwise, products which are functionally interchangeable and which have similar characteristics are substitutes.

(see para. 524)

19. Concerning the application of Article 82 EC, a finding that an undertaking is in a dominant position is not in itself a finding of fault but simply means that, irrespective of the reasons for which it holds such a dominant position, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition in the common market. In addition, the concept of an abuse, within the meaning of Article 82 EC, is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is already weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.

In a situation in which the only immediate competition on a given market is indirect and already relatively weak, the acquisition by an undertaking of the only competitor which is still making sales on that market is particularly harmful. The abovementioned principles developed in the context of the prohibition on abuses of a dominant position are applicable, by analogy, to the related legal field of merger control, by holding that the greater the dominance of an undertaking, the greater is its special responsibility to refrain from any conduct liable to weaken further, a fortiori to eliminate, competition which still exists on the market.

Therefore, in such circumstances, it is for the parties to the merger to produce evidence demonstrating that no effective competition existed on the market prior to the merger.

(see paras 549-551)

20. Under Regulation No 4064/89 on the control of concentrations between undertakings the Commission has power to accept only such commitments as are capable of rendering the notified transaction compatible with the common market. It must be held in that regard that structural commitments proposed by the parties will meet that condition only in so far as the Commission is able to conclude, with certainty, that it will be possible to implement them and that the new commercial structures resulting from them will be sufficiently workable and lasting to ensure that the creation or strengthening of a dominant position, or the impairment of effective competition, which the commitments are intended to prevent, will not be likely to materialise in the relatively near future.

(see paras 555, 612)

21. In order to ensure legal certainty and the sound administration of justice, if an action is to be admissible, the essential matters of fact and law on which it is based must be stated, at least in summary form, coherently and intelligibly in the application itself. In that regard, whilst the body of the application may be supported and supplemented on specific points by references to extracts from documents annexed thereto, a general reference to other documents, even those annexed to the application, cannot make up for the absence of the essential arguments in law which must appear in the application.

(see para. 592)

22. The procedure for access to the file in competition cases is intended to allow the addressees of a statement of objections to examine evidence in the Commission’s files so that they are in a position effectively to express their views on the conclusions reached by it in its statement of objections on the basis of that evidence. The right of access to the file is justified by the need to ensure that the undertakings in question are able properly to defend themselves against the objections raised in that statement.

However, access to certain documents can be denied, in particular to documents or parts thereof containing other undertakings’ business secrets, internal Commission documents, any information enabling complainants to be identified where they wish to remain anonymous, and information disclosed to the Commission subject to an obligation of confidentiality.

Although undertakings have a right to protection of their business secrets, that right must be balanced against safeguarding the rights of the defence. Thus, the Commission may be required to reconcile the opposing interests by preparing non-confidential versions of documents containing business secrets or other sensitive information. Those same principles are applicable to access to the files in merger cases examined under Regulation No 4064/89 on the control of concentrations between undertakings, even though their application may reasonably be adapted to the necessity for speed, which characterises the general scheme of that regulation. The rights of the defence are not to be applied with a standard of protection which is different or more extensive in merger control cases than in proceedings involving infringements of Community competition law.

(see paras 629-631)

23. In an administrative proceeding on competition matters, a distinction must be drawn between adverse evidence and documents which are favourable or contain favourable evidence. Adverse evidence is relevant only in so far as the Commission itself relies on it, in which case it must be made available, but if the evidence is not so relied on, the fact that it is not made available has no effect on the lawfulness of the procedure. Conversely, if it is shown that an undertaking was not granted access, during the administrative procedure, to a document favourable to its case, i.e. a document which could have been useful to its defence and which could therefore have changed the outcome of the administrative procedure if that undertaking had been able to make use of it, the reasoning in the decision affected by that document must, in principle be regarded as vitiated by error.

(see para. 649)

24. An application for confidential treatment may justify a refusal to grant access to documents emanating from third parties, such as complaints, in competition proceedings. An undertaking holding a dominant position on the market might adopt retaliatory measures against competitors, suppliers or customers who have collaborated in the investigation carried out by the Commission, and, in such circumstances, third-party undertakings which submit documents to the Commission in the course of its investigations and consider that reprisals might be taken against them as a result can do so only if they know that account will be taken of their request for confidentiality.

(see para. 650)

25. The right to be heard in competition proceedings relates only to the objections which the Commission intends to sustain.

Thus, since the aim of a decision to initiate proceedings under Article 6(1)(c) of Regulation No 4064/89 on the control of concentrations between undertakings is not to address objections to the parties but merely to set out, provisionally, the Commission’s serious doubts leading it to initiate the second phase of the investigation, an undertaking cannot claim that lack of access to the file, before service of the statement of objections, undermines its ability to defend itself. The fact that the undertaking actually had an opportunity to submit written and oral observations on the statement of objections after it had had access to the Commission’s case-file means that it was able to express its point of view in good time on the objections adopted.

(see paras 692-693)

26. Although the terms in which Article 18(1) of Regulation No 4064/89 on the control of concentrations between undertakings is couched do mean that the parties must be able to submit observations with effect from the initiation of the proceedings, they do not imply that the Commission must give access to its case-file at this earlier stage. The need for the parties to have access to the Commission’s case-file in order to be able to defend themselves, ultimately, against the objections raised by the Commission in the statement of objections should not be interpreted as requiring the Commission to grant them access to its file in portions throughout the proceedings, a requirement which would represent a disproportionate burden on it.

(see para. 694)

27. If the Commission is to comply with the timetable thus laid down by Regulation No 4064/89 on the control of concentrations between undertakings, the intermediate periods laid down at each stage of the procedure must also be brief. Inevitably, this has an adverse effect on the conditions under which all the parties to the proceedings must work, but the gain in terms of the speed of the proceedings as a whole was regarded by the legislature as justifying those sacrifices, particularly in order to take account of the commercial interest of the parties to a merger in completing their proposed merger as quickly as possible. In that respect, when assessing alleged infringements of the rights of the defence in the context of proceedings under Regulation No 4064/89, it is necessary to take account of the need for speed, which characterises the general scheme of that regulation.

Moreover, under Article 21 of Regulation No 447/98 on the notifications, time limits and hearings provided for in Regulation No 4064/89, which applies, inter alia, to the time-limit set under Article 13 of that regulation for replying to the statement of objections, the Commission is to have regard to the time required for preparation of statements and to the urgency of the case. Thus, it is incumbent on the Commission to reconcile, as far as possible, the notified parties’ rights of defence and the need for the rapid adoption of a final decision.

In those circumstances, the parties to a notified transaction may invoke the shortness of the periods allowed to them in the context of those proceedings only inasmuch as those periods are disproportionate to the duration of the proceedings as a whole.

(see paras 701-703)

28. Although the position of the hearing officer changed upon the entry into force of Decision 2001/462 on the terms of reference of hearing officers in certain competition proceedings, inter alia in that, in accordance with Article 2(2) thereof, he was thereafter attached, for administrative purposes, to the member of the Commission with special responsibility for competition, instead of being attached to the Directorate-General for Competition, it is clear from that decision that the new function of hearing officer is a direct replacement for the function of the person previously operating under that name under Decision 94/810. In those circumstances, in the absence of a decision terminating his mandate in accordance with Article 2(1) of Decision 2001/462, the former hearing officer remained in post after the entry into force of that decision.

That interpretation of the abovementioned provisions is supported by the objective need, with regard to the post of hearing officer, to ensure the continuity of his function in accordance with the principle of good administration. Decision 2001/462 necessarily entered into force at a time when the proceedings in certain cases were already under way. If the effect of the entry into force of Decision 2001/462 and of a failure to appoint a new hearing officer were that no one was authorised to perform that function, it would have been impossible to continue those proceedings, and that would have rendered both the provisions of Regulation No 4064/89 and those of Decision 2001/462 ineffective in respect of those proceedings. Therefore, the hearing officer in post when Decision 2001/462 entered into force was empowered to carry out that function until further notice, at least for the purposes of concluding proceedings already before him.

(see paras 719-720)

29. Fundamental rights form an integral part of the general principles of Community law whose observance the Community judicature ensures. For that purpose, the Court of Justice and the Court of First Instance draw inspiration from the constitutional traditions common to the Member States and from the guidelines supplied by international treaties for the protection of human rights on which the Member States have collaborated or of which they are signatories. The European Convention on Human Rights has special significance in that respect. Moreover, according to Article 6(2) EU, ‘the Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights ... and as they result from the constitutional traditions common to the Member States, as general principles of Community law’.

(see para. 725)





JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber, Extended Composition)

14 December 2005 ( )

(Action for annulment – Competition – Commission decision declaring a concentration to be incompatible with the common market – Regulation (EEC) No 4064/89 – Aeronautical markets – Acquisition of Honeywell by General Electric – Vertical integration – Bundling – Foreclosure – Horizontal overlaps – Rights of the defence)

In Case T-210/01,

General Electric Company, established in Fairfield, Connecticut (United States), represented by N. Green QC, C. Booth QC, J. Simor, K. Bacon, Barristers, S. Baxter, Solicitor, L. Vogel and J. Vogel, lawyers, and, initially, by M. Van Kerckhove, lawyer, and subsequently by J. O’Leary, Solicitor, with an address for service in Luxembourg,

applicant,

v

Commission of the European Communities, represented by R. Lyal, P. Hellström and F. Siredey-Garnier, acting as Agents, with an address for service in Luxembourg,

defendant,

supported by

Rolls-Royce plc, established in London (United Kingdom), represented by A. Renshaw, Solicitor,

and by

Rockwell Collins, Inc., established in Cedar Rapids, Iowa (United States), represented by T. Soames, J. Davies and A. Ryan, Solicitors, and P.D. Camesasca, lawyer,

interveners,

APPLICATION for the annulment of Commission Decision 2004/134/EC of 3 July 2001 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case No COMP/M.2220 – General Electric/Honeywell) (OJ 2004 L 48, p. 1),





THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber, Extended Composition),

composed of J. Pirrung, President, V. Tiili, A.W.H. Meij, M. Vilaras and N.J. Forwood, Judges,

Registrar: J. Plingers, Administrator,

having regard to the written procedure and further to the hearing on 27 May 2004,

gives the following

Judgment

Legal context

1 Article 2(2) and (3) of Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (OJ 1990 L 395, p. 1, corrected version in OJ 1990 L 257, p. 13), as last amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1) (hereinafter, as corrected and amended, ‘Regulation No 4064/89’), provides 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.’

Facts

2 General Electric Company (‘GE’ or ‘the applicant’) is a diversified industrial undertaking active in the following fields: aircraft engines, domestic appliances, information services, power systems, lighting, industrial systems, medical systems, plastics, broadcasting, financial services and transportation systems.

3 Honeywell International Inc. is an undertaking active in, inter alia, the following markets: aeronautical products and services, automotive products, electronic materials, speciality chemicals, performance polymers, transportation and power systems as well as home and building controls and industrial controls.

4 On 22 October 2000, GE and Honeywell entered into an agreement under which GE would acquire Honeywell’s entire share capital (‘the merger’), Honeywell becoming a wholly-owned subsidiary of GE.

5 On 5 February 2001, the Commission formally received notification of the merger pursuant to Article 4 of Regulation No 4064/89.

6 On 1 March 2001, taking the view that the merger fell within the scope of Regulation No 4064/89, the Commission decided to initiate proceedings under Article 6(1)(c) of that regulation and under Article 57 of the Agreement on the European Economic Area (EEA) (‘the decision to initiate proceedings’).

7 On 15 March 2001, GE and Honeywell jointly submitted to the Commission their observations on the decision to initiate proceedings.

8 On 8 May 2001, the Commission sent a statement of objections (‘SO’) to GE, to which it replied on 24 May 2001.

9 On 29 and 30 May 2001, GE and Honeywell took part in an oral hearing before the Commission.

10 On 14 and 28 June 2001, GE and Honeywell jointly proposed two sets of commitments designed to render the merger acceptable to the Commission.

11 On 3 July 2001, the Commission adopted Decision 2004/134/EC (Case No COMP/M.2220 – General Electric/Honeywell) (OJ 2004 L 48, p. 1) declaring the merger incompatible with the common market and the EEA Agreement (‘the contested decision’).

The contested decision

12 The operative part of the contested decision states as follows:

‘Article 1

The concentration by which General Electric Company acquires control of the undertaking Honeywell International Inc. is declared incompatible with the common market and with the EEA Agreement.

Article 2

This Decision is addressed to:

[GE].

...’

13 The grounds of the contested decision may be summarised as follows.

14 According to the Commission, GE was itself already in a dominant position on the world market for jet engines for large commercial aircraft (hereinafter also referred to as ‘large commercial jet aircraft engines’) and on the world market for jet engines for large regional aircraft (hereinafter also referred to as ‘large regional jet aircraft engines’) (recitals 45 to 83 and 84 to 87 of the contested decision, and recitals 107 to 229). Its strong market position, combined with the commercial leverage represented by its financial strength and vertical integration into aircraft leasing were among the factors that led to the finding of GE’s dominance in these markets. The investigation also showed that Honeywell was already the leading supplier of avionics and non-avionics products (recitals 241 to 275), as well as of engines for corporate jets (recitals 88 and 89) and of engine starters, in particular for large commercial jet aircraft engines (a key component in the manufacturing of jet engines) (recitals 331 to 340).

15 The combination of the two companies’ activities would have resulted in the creation or strengthening of dominant positions on a number of markets. The Commission found in particular that GE’s existing dominant position on the worldwide market for large commercial jet aircraft engines would be strengthened on account of the ‘vertical’ effects of the merger resulting from the integration of GE’s activity as a manufacturer of those engines with Honeywell’s activity as a manufacturer of starters for those engines (recitals 419 to 427 of the contested decision). It also concluded that dominant positions would be created on the various world markets for avionics products and non-avionics products, on which Honeywell already enjoyed strong positions prior to the merger, as a result of two types of conglomerate effects. In the Commission’s view, those effects were, first, those resulting from a process known as ‘share shifting’, consisting in the extension to those markets of the financial power of GE Capital, a company belonging to the applicant’s group, and the commercial advantages deriving from the business of aircraft purchase and leasing, in the main by GE Capital Aviation Services (GECAS) (another company in the applicant’s group) (recitals 342 to 348 and 405 to 411). Second, the Commission foresaw effects arising in future from the merged entity’s use of bundling practices – pure, technical and mixed – through offers incorporating both aircraft engines from the former GE, on the one hand, and avionics products and non-avionics products from the former Honeywell, on the other (recitals 349 to 404). The Commission held that in the future the practice of bundling would also strengthen GE’s pre-existing dominant position on the market for large commercial jet aircraft engines.

16 In addition, the Commission concluded that GE’s pre-merger dominance on the world market for large regional jet aircraft engines would be strengthened and that a dominant position would be created for the merged entity on the world market for corporate jet aircraft engines, in particular because of ‘horizontal overlaps’, given the presence on those markets of both GE and Honeywell prior to the merger (recitals 428 to 431 and 435 to 437 of the contested decision). It also took the view that a dominant position would be created, in particular on account of a horizontal overlap between the two parties to the merger on the world market for small marine gas turbines (recitals 468 to 477).

17 Thus, having deemed the commitments proposed by the parties to the merger to be insufficient to resolve the competition problems arising as a result of the transaction (recitals 500 to 533 and 546 to 563 of the contested decision), the Commission concluded, at recital 567 of the decision, that the merger would lead to the creation or strengthening of a number of dominant positions, as a result of which effective competition in the common market would be significantly impeded, and that the merger should therefore be declared incompatible with the common market pursuant to Article 8(3) of Regulation No 4064/89.

Procedure

18 By application lodged at the Registry of the Court of First Instance on 12 September 2001, the applicant brought the present action. On the same day, Honeywell also brought an action against the contested decision (Case T‑209/01).

19 By documents lodged at the Registry of the Court on 11, 15 and 16 January 2002 respectively, Rolls-Royce Plc, Rockwell Collins Inc. (‘Rockwell’) and Thales SA sought leave to intervene in the present case in support of the Commission.

20 The applicant requested that certain information contained in its written submissions and in the Commission’s submissions be kept confidential from the interveners.

21 By order of 26 June 2002, the President of the First Chamber of the Court of First Instance granted Rolls-Royce and Rockwell leave to intervene. By the same order he granted the confidential treatment requested by the applicant, subject to observations by the interveners. In accordance with Article 116(6) of the Rules of Procedure of the Court of First Instance, Thales was granted leave to intervene during the oral procedure on the basis of the report for the hearing.

22 Upon a change in composition of the Chambers of the Court pursuant to the Court’s decision of 13 September 2004 (OJ 2004 C 251, p. 12), the Judge-Rapporteur was transferred to the Second Chamber, to which the present case was then allocated.

23 Pursuant to Article 14 of the Rules of Procedure and on the proposal of the Second Chamber, the Court of First Instance, having heard the parties in accordance with Article 51 of those rules, assigned the case to a chamber sitting in extended composition.

24 By letter lodged at the Registry of the Court on 2 February 2004, Thales stated that it wished to withdraw its intervention. By order of 23 March 2004, after hearing the other parties, the President of the Second Chamber (Extended Composition) of the Court took formal note of that withdrawal.

25 By letter of 17 March 2004, the applicant requested that the present case be joined with Case T-209/01. The President of the Second Chamber (Extended Composition) referred that decision to that chamber in accordance with Article 50 of the Rules of Procedure.

26 Upon hearing the Report of the Judge-Rapporteur, the Court decided to open the oral procedure and put questions to the parties by way of measures of organisation of the procedure under Article 64 of the Rules of Procedure. It also asked the Commission to produce certain documents before the hearing. The parties complied with those requests.

27 The parties presented oral argument and their answers to the questions of the Court at the hearing on 27 May 2004. At the end of the hearing, the oral procedure was closed.

28 By letter of 8 June 2004, the applicant lodged at the Court Registry an application for the reopening of the oral procedure, together with supplementary observations on certain aspects of the case, to which a number of further documents were annexed. By order of 8 July 2004, the Court decided to reopen the oral procedure in accordance with Article 62 of the Rules of Procedure.

29 After hearing the parties, the Court adopted a measure of organisation of the procedure under Article 64 of the Rules of Procedure by which it placed on the file the documents and observations lodged by the applicant on 8 June 2004. The observations of the Commission and of the interveners regarding the relevance of those items were also placed on the file.

30 At the Court’s request, the parties lodged observations and supplementary documents relating to the questions raised by the applicant in its initial observations. Those items were also placed on the file.

31 The oral procedure was then closed once more on 23 November 2004.

Forms of order sought

32 The applicant claims that the Court should:

– annul the contested decision;

– order the Commission to pay the costs.

33 The Commission, supported by Rolls-Royce and Rockwell, contends that the Court should:

– dismiss the application;

– order the applicant to pay the costs.

Law

34 In its pleadings, the applicant raises a series of questions concerning the scope of its action, the scope of the Court’s power of review and the overall criteria applied by the Commission in the contested decision. The questions will be addressed as a preliminary issue.

35 The applicant challenges the finding made by the Commission in the contested decision, which serves as a cornerstone for other aspects of its analysis of competition, that prior to the merger the applicant had a dominant position on the market for large commercial jet aircraft engines. That issue will be examined first.

36 The applicant also disputes the Commission’s conclusions on the vertical overlap, conglomerate effects and horizontal overlaps to which the merger would give rise. Those questions will be examined in turn, in second, third and fourth place.

37 Finally, the applicant relies on procedural irregularities vitiating the contested decision. Those matters will be examined last.

A – Preliminary issues

1. The application for joinder

38 It is appropriate to note that the fact of joining two cases brought by different applicants cannot alter the scope of the application lodged separately by each of them; otherwise there would be a risk of impairing the independence and autonomy of their separate actions (Joined Cases C‑280/99 P to C‑282/99 P Moccia Irme and Others v Commission [2001] ECR I‑4717, paragraphs 61 to 68, in particular paragraph 66).

39 In the Court’s view there is no reason to join the present case with Case T‑209/01, given, in particular, the difference in scope of the two actions. The application for joinder made by the applicant in its letter of 17 March 2004 is therefore rejected.

2. The relationship between the various pillars on which the Commission’s finding as to the incompatibility of the merger with the common market is based

a) Arguments of the parties

40 The applicant points out that, in its defence, the Commission stated that the elements of reasoning in the contested decision reinforce one another and that it would therefore be artificial to analyse each of them in isolation. Hence, it is not possible in this instance to apply by analogy the approach adopted in Case T‑310/01 Schneider Electric v Commission [2002] ECR II‑4071, namely that errors vitiating the Commission’s analysis of certain markets investigated do not provide sufficient grounds for annulment of a decision where the decision is also based on an analysis of other markets which proves to be well founded. At the hearing the applicant submitted in that connection that the Court cannot substitute its own appraisal of the merger for that of the Commission. Thus, if it were held that some of the grounds relied on in the contested decision were unfounded whilst others were not, it would not be for the Community judicature to assess whether the well-founded elements of reasoning are a sufficient basis for the Commission’s conclusion that the notified transaction was incompatible with the common market.

41 The Commission observes that the contested decision is based on a combination of elements of fact and law which are complementary, encompassing horizontal effects, vertical effects and conglomerate effects. However, the Commission emphasises that each of those elements on its own justifies the prohibition of the concentration.

b) Findings of the Court

42 The Court observes, first of all, that where some of the grounds in a decision on their own provide a sufficient legal basis for the decision, any errors in the other grounds of the decision have no effect on its operative part (see, by analogy, Joined Cases C‑302/99 P and C-308/99 P Commission and France v TF1 [2001] ECR I‑5603, paragraphs 26 to 29).

43 Moreover, where the operative part of a Commission decision is based on several pillars of reasoning, each of which would in itself be sufficient to justify that operative part, that decision should, in principle, be annulled only if each of those pillars is vitiated by an illegality. In such a case, an error or other illegality which affects only one of the pillars of reasoning cannot be sufficient to justify annulment of the decision at issue because that error could not have had a decisive effect on the operative part adopted by the Commission (see, by analogy, Case T‑126/99 Graphischer Maschinenbau v Commission [2002] ECR II‑2427, paragraphs 49 to 51, and the case-law cited).

44 That rule applies in particular in the context of merger control decisions (see, to that effect, Schneider Electric v Commission, paragraph 40 above, paragraphs 404 to 420).

45 It must be recalled in that regard that the Commission must prohibit a concentration where the latter satisfies the criteria in Article 2(3) of Regulation No 4064/89. It follows from Article 2(1)(a) of that regulation that the Commission must take account, in the course of its appraisal of a concentration, of, inter alia, the need to maintain and develop effective competition within the common market in view of, among other things, the structure of all the markets concerned. Thus, the Commission’s appraisal of whether a transaction creates or strengthens one or more dominant positions as a result of which effective competition would be significantly impeded must be carried out by reference to the conditions on each of the markets liable to be affected by the merger notified. Therefore, if it finds that the criteria are satisfied with regard to just one of the markets concerned, the concentration must be declared incompatible with the common market.

46 In the present case, the Commission stated at recital 567 of the contested decision that ‘[f]or all those reasons, it should be concluded that the proposed merger would lead to the creation or strengthening of a dominant position on the markets for large commercial jet aircraft engines, large regional jet aircraft engines, corporate jet aircraft engines, avionics and non-avionics products, as well as small marine gas turbine[s], as a result of which effective competition in the common market would be significantly impeded’.

47 The contested decision does not create a hierarchy between the competition problems found on each of the markets which the Commission examined and then listed in its conclusion as set out in the previous paragraph. On the contrary, in the light, inter alia, of the wording of Article 2 of Regulation No 4064/89, that conclusion can only be understood as meaning that, on each of the markets listed, the merger would have led to the creation or, as the case may be, the strengthening of a dominant position on that market as a result of which effective competition would be significantly impeded in the common market.

48 In the light of the foregoing, it must be held that the contested decision can be annulled only if it is found not only that certain of its grounds are vitiated by illegality, but also that those grounds which are not so vitiated do not provide a sufficient legal basis for the merger to be declared incompatible with the common market. This finding does not, however, remove the need to consider whether certain factors pertaining to competition, identified by the contested decision, reinforce each other, as the Commission contends in its defence, and that it would therefore be artificial to analyse each of them in isolation.

3. The commitments proposed

49 First of all, as regards the validity of the second set of commitments dated 28 June 2001, it is common ground that the parties to the merger submitted, on 14 June 2001, a first set of commitments (see recitals 485 to 533 of the contested decision). The applicant does not dispute the Commission’s contention that 14 June 2001 was the last possible day on which commitments could be proposed, in accordance with Article 18(2) of Commission Regulation (EC) No 447/98 of 1 March 1998 on the notifications, time limits and hearings provided for in Council Regulation (EEC) No 4064/89 (OJ 1998 L 61, p. 1). The parties to the merger nevertheless proposed the second set of commitments on 28 June 2001 (see recitals 534 to 566 of the contested decision), indicating that those commitments replaced those proposed on 14 June 2001.

50 The only differences between the two sets of commitments concern the behavioural commitments relating to GECAS and the structural commitments relating to the proposed divestment of certain of Honeywell’s activities on the various markets for avionics and non-avionics products. The potential effect of those differences will be considered below in the examination of the merits of the case on conglomerate effects.

51 Having challenged in its application the Commission’s refusal to take into account the behavioural commitments, the applicant also contended at the hearing that, by that refusal, the Commission had tainted the entire administrative procedure and deprived the parties to the merger of the opportunity to propose commitments capable of resolving the other competition problems resulting from the horizontal overlaps identified by the Commission. Given its overarching scope, it is necessary to consider that contention in this preliminary section.

52 The Commission clearly set out, in its SO of 8 May 2001 in the present case, the objections pertaining to all the anti-competitive consequences of the merger, particularly those concerning horizontal and vertical effects deriving from the merger which were subsequently included in the contested decision (see, in particular, points 118 to 122, 124 to 126, 459 to 468, 469 to 471, 473, 474, 578 to 586 and 612 to 633 of the SO). In order to address the objections raised by the Commission in the SO, the applicant proposed on 14 June 2001, among others, structural commitments which the Commission examined but rejected on the ground that practical considerations would have prevented their being put into effect. The applicant has put no evidence or arguments before the Court to explain in what specific regard the rejection of those commitments was illegal or unjustified (see, in particular, paragraphs 487, 555 et seq., 564 in fine and 610 below). The Commission is not responsible for technical or commercial gaps in the commitments in question (which led it to conclude that they were insufficient to permit it to approve the merger at issue); nor, more specifically, can those gaps be attributed to any unwillingness on its part to accept that other commitments, of a behavioural nature, might be effective. It was for the parties to the merger to put forward commitments which were comprehensive and effective from all points of view and to do so in principle before 14 June 2001.

53 In the observations which it submitted following the reopening of the oral procedure, the applicant corrected its answer to a question put at the hearing and acknowledged that the Commission had in fact informed it, on 22 June 2001, of the reasons why its commitments, submitted on 14 June 2001, had to be rejected. However, it went on to claim that the Commission had given it the impression that if it enhanced its commitment concerning GECAS’s future conduct, the transaction would be declared compatible with the common market. In support of its argument, the applicant produced, at this late stage in the proceedings, two press releases of 14 and 18 June 2001 and an article of 11 February 2002 reporting an interview with the Member of the Commission responsible for competition at that time. In substance, the applicant claims that the Commission gave it assurances which gave rise to a legitimate expectation on its part.

54 It should first be noted that the applicant requested the reopening of the oral procedure in relation to the commitments, solely in order to allow it to correct the factual error mentioned in the previous paragraph. Thus, to the extent that it now seeks to rely on its contacts with the Commission, those observations are out of time and therefore inadmissible. Furthermore, the line of argument relating to legitimate expectations, advanced for the first time at the hearing, constitutes a new plea in law and must be rejected pursuant to Article 48(2) of the Rules of Procedure.

55 In any event, the right to rely on the principle of the protection of legitimate expectations extends to any person in a situation in which it is apparent that the Community authorities have caused that person to entertain justified hopes (Case 265/85 Van den Bergh en Jurgens v Commission [1987] ECR 1155, paragraph 44, and Case C‑152/88 Sofrimport v Commission [1990] ECR I‑2477, paragraph 26). In this instance, the contacts on which the applicant relies, which took place between itself and the Commission following the submission of its first set of commitments on 14 June 2001 and which concerned the possibility that a further set of commitments differing in some respects from the first set might be submitted, could not give rise to such hopes nor, therefore, to a legitimate expectation.

56 It follows from the foregoing that the Court must reject the arguments, relating to the commitments, that were advanced by the applicant at the hearing and in the context of the reopening of the oral procedure.

4. The standard of proof and the scope of the Community judicature’s power of review

a) Arguments of the parties

57 The applicant maintains that conglomerate mergers, such as the merger notified in this case, only rarely result in the creation or strengthening of a dominant position, unlike horizontal or vertical mergers. Therefore, any assertion to the contrary requires a particularly convincing demonstration of a specific mechanism by which competition is harmed.

58 In its observations on the statements in intervention and at the hearing, the applicant relies on the judgment in Case T‑5/02 Tetra Laval v Commission [2002] ECR II‑4381 as authority that proof of conglomerate effects calls for a precise examination, supported by convincing evidence, that particular care must be taken when taking future conduct into account and that the Commission’s analysis must be particularly plausible with regard to effects that will emerge after a certain lapse of time. It also stated that, according to that judgment, the Commission must take into account the deterrent effect for an undertaking of the prohibition on abuse of a dominant position set out in Article 82 EC.

59 According to the Commission and the interveners, neither Regulation No 4064/89 nor the case-law requires a higher standard of proof in the case of a conglomerate merger.

b) Findings of the Court

General considerations

60 It must be observed first that the Commission has a margin of assessment with regard to economic matters for the purpose of applying the basic provisions of Regulation No 4064/89, in particular Article 2 thereof. It follows that the Community judicature’s power of review is restricted to verifying that the facts relied on are accurate and that there has been no manifest error of assessment (Joined Cases C‑68/94 and C‑30/95 France and Others v Commission (Kali & Salz) [1998] ECR I‑1375, paragraphs 223 and 224, and Case C‑12/03 P Commission v TetraLaval [2005] ECR I‑987, paragraph 38).

61 Moreover, Regulation No 4064/89 does not establish a presumption as to the compatibility or incompatibility with the common market of a transaction which has been notified. It is not the case that the Commission must find in favour of a concentration falling within its jurisdiction in a case in which it might entertain doubts but rather that it must always make an actual decision one way or the other (see, to that effect, Tetra Laval v Commission, paragraph 58 above, paragraph 120).

62 As to the nature of the Community judicature’s power of review, it is necessary to draw attention to the essential difference between factual matters and findings, on the one hand, which may be found to be inaccurate by the Court in the light of the arguments and evidence before it, and, on the other hand, appraisals of an economic nature.

63 Although it must be recognised that the Commission has a margin of assessment when applying the substantive provisions of Regulation No 4064/89, that does not mean that the Community judicature must refrain from reviewing the Commission’s legal classification of economic data. The Community judicature not only must establish, inter alia, 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 (Commission v Tetra Laval, paragraph 60 above, paragraph 39).

64 Although those principles apply to all appraisals of an economic nature, effective judicial review is all the more necessary when the Commission carries out a prospective analysis of developments which might occur on a market as a result of a proposed concentration. As the Court stated in its judgment in Commission v Tetra Laval, paragraph 60 above, paragraphs 42 and 43, a prospective analysis of the kind necessary in merger control must be carried out with great care since it does not entail the examination of past events – for which many items of evidence are often available to enable their causes to be understood – or even of current events, but rather a prediction of events which are more or less likely to occur in future if a decision prohibiting the planned concentration or laying down the conditions for it is not adopted (see, to that effect, Tetra Laval v Commission, paragraph 58 above, paragraph 155). A prospective analysis consisting in an examination of how a concentration might alter the factors determining the state of competition on a given market, in order to establish whether it would give rise to a serious impediment to effective competition, makes it necessary to envisage various chains of cause and effect with a view to ascertaining which of them are the most likely.

Treatment of conglomerate effects

65 Conglomerate-type concentrations do not give rise to horizontal overlaps between the activities of the parties to the merger or to a vertical relationship between the parties in the strict sense of the term. Even though, as a general rule, such concentrations do not produce anti-competitive effects, they may none the less have such effects in some cases (Tetra Laval v Commission, paragraph 58 above, paragraph 142). In a prospective analysis of the effects of a conglomerate-type concentration, if the Commission is able to conclude that by reason of the conglomerate effects a dominant position would, in all likelihood, be created or strengthened in the relatively near future and would lead to effective competition on the market being significantly impeded as a result of the concentration, it must prohibit the concentration (Tetra Laval v Commission, paragraph 58 above, paragraph 153, and the case-law cited).

66 In that regard, as the Court of Justice also pointed out in its judgment in Commission v Tetra Laval, cited at paragraph 60 above, conglomerate-type concentrations give rise to certain specific problems, in particular inasmuch as, first, the assessment of such a transaction may involve a prospective analysis covering a period of time stretching well into the future and, second, the specific conduct of the merged entity may determine to a great extent what effects the concentration has. Thus, the chains of cause and effect following a merger may be dimly discernible, uncertain and difficult to establish. That being so, the quality of the evidence produced by the Commission in order to form a sound basis for a decision declaring a concentration incompatible with the common market is particularly important, since that evidence must support the Commission’s conclusion that, if such a decision were not adopted, the economic changes envisaged by it would be plausible (Commission v Tetra Laval, paragraph 60 above, paragraph 44; see also, to that effect, Tetra Laval v Commission, paragraph 58 above, paragraph 155).

67 In this instance, the Commission found in the contested decision that the merger would entail, in the first place, direct vertical integration between the manufacture of engine starters and engines, in the second place, conglomerate effects and, in the third place, horizontal overlaps on certain markets.

68 It is apparent from the description of conglomerate effects in the contested decision that, in the Commission’s view, the merger would immediately, or at the very least within a very short time, alter the conditions of competition on certain markets as a result of those effects, and would thereby result in the creation or the strengthening of dominant positions on those markets because of the power and commercial opportunities resulting from the dominant position already held on the first market (see paragraphs 325 et seq. and 399 et seq. below). However, it must be pointed out that those consequences would have only followed from the merger in so far as the merged entity had adopted certain behaviour after the merger, which the Commission considered to be likely. That behaviour, in the Commission’s view, was the foreseeable extension to new markets, following the transaction, of certain commercial practices harmful to competition which the Commission had identified on the part of one or other of the parties to the merger, before the merger took place.

69 In those circumstances, the Commission had the onus to provide convincing evidence to support its conclusion that the merged entity would probably behave in the way foreseen. If it did not behave in that way, the combination of the positions of the two parties to the merger on neighbouring but distinct markets could not have led to the creation or strengthening of dominant positions, since those respective positions of the parties would not have had any commercial impact on one another.

Treatment of factors which might deter the merged entity from behaving in the ways predicted in the contested decision

70 In its judgment in Tetra Laval v Commission, paragraph 58 above, the Court held that, although it is appropriate to take account of the objective incentives to engage in anti-competitive practices which a merger creates, the Commission must also consider the extent to which those incentives would be reduced, or even eliminated, owing to the illegality of the conduct in question, in particular in the light of the prohibition on abuse of a dominant position laid down in Article 82 EC, of the likelihood of their detection, of action taken by the competent authorities, both at Community and national level, and of the financial penalties which could ensue (paragraph 159 of the judgment). In its observations on the statements in intervention, the applicant invoked that decision in support of its argument that certain of the practices considered by the Commission to be likely to create or strengthen dominant positions would not in fact take place.

71 In its judgment in Commission v Tetra Laval, paragraph 60 above (paragraphs 74 to 78), the Court of Justice held that the Court of First Instance was right to consider that the likelihood of the adoption of certain future conduct had to be examined comprehensively, that is to say taking into account both the incentives to adopt such conduct and the factors liable to reduce, or even eliminate, those incentives, including the possibility that the conduct is unlawful.

72 However, the Court of Justice also held that it would run counter to the preventive purpose of Regulation No 4064/89 to require the Commission to examine, for each proposed merger, the extent to which the incentives to adopt anti-competitive conduct would be reduced, or even eliminated, as a result of the unlawfulness of the conduct in question, the likelihood of its detection, the action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue. Consequently, it held that the Court of First Instance had erred in law in so far as it rejected the Commission’s conclusions as to the adoption by the merged entity of the anti-competitive conduct at issue in that case (Commission v Tetra Laval, paragraph 60 above, paragraphs 76 and 77).

73 It follows from the foregoing that the Commission must, in principle, take into account the potentially unlawful, and thus sanctionable, nature of certain conduct as a factor which might diminish, or even eliminate, incentives for an undertaking to engage in particular conduct. That appraisal does not, however, require an exhaustive and detailed examination of the rules of the various legal orders which might be applicable and of the enforcement policy practised within them, given that an assessment intended to establish whether an infringement is likely and to ascertain that it will be penalised in several legal orders would be too speculative.

74 Thus, where the Commission, without undertaking a specific and detailed investigation into the matter, can identify the unlawful nature of the conduct in question, in the light of Article 82 EC or of other provisions of Community law which it is competent to enforce, it is its responsibility to make a finding to that effect and take account of it in its assessment of the likelihood that the merged entity will engage in such conduct (see, to that effect, Commission v Tetra Laval, paragraph 60 above, paragraph 74).

75 It follows that, although the Commission is entitled to take as its basis a summary analysis, based on the evidence available to it at the time when it adopts its merger-control decision, of the lawfulness of the conduct in question and of the likelihood that it will be punished, it must none the less, in the course of its appraisal, identify the conduct foreseen and, where appropriate, evaluate and take into account the possible deterrent effect represented by the fact that the conduct would be clearly, or highly probably, unlawful under Community law.

76 Accordingly, in the following sections of this judgment, it is necessary to consider whether the Commission founded its prospective analysis of the likelihood of conglomerate effects on sufficiently convincing evidence, and whether it took due account of the principles mentioned above.

5. Failure to show effective competition would be significantly impeded

a) Arguments of the parties

77 The applicant submits that according to Article 2(2) and (3) of Regulation No 4064/89, in order to prohibit a merger, the Commission must establish, first, that the merger creates or strengthens a dominant position and, secondly, that that dominant position significantly impedes effective competition in the common market. The cumulative nature of those conditions is confirmed by the travaux préparatoires of Regulation No 4064/89, from which it is apparent that the second condition was introduced at the suggestion of the Economic and Social Committee and at the request of the French Government. Their cumulative nature has been confirmed by the Court of First Instance, in particular in Case T-2/93 Air France v Commission [1994] ECR II-323, paragraph 79, and in Tetra Laval v Commission, paragraph 58 above.

78 The Commission must show that each of those conditions has been satisfied. In particular, the Commission must establish that there is a high probability that anti-competitive effects will occur and not merely that they might occur, it must quantify those effects and show that they will result from the merger rather than from pre-existing market conditions. That requirement is particularly important in cases such as the present, in which the merger is conglomerate, since it is accepted that such mergers rarely have anti-competitive effects.

79 According to the applicant, the Commission failed in the contested decision to consider whether the merger resulted in any significant impediment to effective competition. In fact, with regard to each of the markets in which the Commission considers that a dominant position would be created or strengthened, it merely concludes, by vague, unquantified assertions, that competitors will be foreclosed in those markets and that there will be a negative effect on competition.

80 The only mention in the contested decision of the second limb of the test in Article 2 of Regulation No 4064/89 appears in the overall conclusion at recital 567. It is evident that the Commission merely assumed that the alleged creation or strengthening of dominant positions in the relevant markets automatically entailed the anti-competitive effects required by the second condition in Article 2 of that regulation.

81 Moreover, the Commission cannot contend that the satisfaction of the second condition was implicitly established in the course of the examination of whether dominant positions were created or strengthened. It is not sufficient to ‘recycle’ the facts used for a finding of dominance and use them, without further analysis, to substantiate a conclusion that competition was significantly impeded. The inevitable consequence of such a failure in the analysis is that the contested decision must be annulled. The applicant submits that the contested decision must stand alone. Therefore, no account can be taken of evidence put forward by the Commission and the interveners subsequent to that decision.

82 The absence of any reasoning concerning the application of the second condition in Article 2 of Regulation No 4064/89 is also a blatant infringement of the obligation to state reasons inasmuch as the applicant was not informed of the grounds on which the Commission considers that the merger in fact gives rise to a significant impediment to effective competition.

83 The Commission acknowledges that there is an academic dispute as to whether Article 2 of Regulation No 4064/89 contains a single or two‑fold test but considers it to be of little importance. It submits that it is necessary to focus on whether a dominant position has been created or strengthened, and to treat the distortion of competition as a consequence of that. In any event, assuming that the test is a two-fold one, the Commission and Rockwell submit that, in the present case, the probable effects of the merger were examined extensively and in great detail in the decision.

b) Findings of the Court

84 It follows from well-established case-law of the Court of First Instance that Article 2(2) and (3) of Regulation No 4064/89 lays down two cumulative conditions, relating, first, to the creation or strengthening of a dominant position and, second, to the fact that competition will be significantly impeded in the common market as a result (see, to that effect, Air France v Commission, paragraph 77 above, paragraph 79; Case T­‑290/94 Kaysersberg v Commission [1997] ECR II‑2137, paragraph 156; and Tetra Laval v Commission, paragraph 58 above, paragraph 146). Accordingly, a concentration can be prohibited only if the two conditions laid down by Article 2(3) of the regulation are both met.

85 It is appropriate to bear in mind in that regard that the dominant position referred to in Article 2(2) and (3) of Regulation No 4064/89 concerns a situation where one or more undertakings have economic power which would enable them to prevent effective competition from being maintained in the relevant market, by giving them the opportunity to act to a considerable extent independently of their competitors, their customers and, ultimately, of consumers (Case T‑102/96 Gencor v Commission [1999] ECR II‑753, paragraph 200).

86 It must also be recalled that, in relation to abuse of a dominant position within the meaning of Article 82 EC, the Court of Justice has held that abuse of a dominant position may occur if an undertaking in a dominant position strengthens such a position in such a way that the degree of dominance reached substantially impedes competition, that is to say that only undertakings remain in the market whose behaviour depends on the dominant one (Case 6/72 Europemballage and Continental Can v Commission [1973] ECR 215, paragraph 26). It follows from that decision that the strengthening of a dominant position may in itself significantly impede competition and do so to such an extent that it amounts, on its own, to an abuse of that position.

87 It follows, a fortiori, that the strengthening or creation of a dominant position, within the meaning of Article 2(3) of Regulation No 4064/89, may amount, in particular cases, to proof of a significant impediment to effective competition. That finding does not mean that the second condition laid down in Article 2 of Regulation No 4064/89 is, from a legal perspective, subsumed within the first, but merely that it may be apparent from a single factual analysis of a given market that the two conditions are met.

88 The factors which may be invoked by the Commission in order to establish that an undertaking’s competitors lack freedom of action to the degree necessary for a finding that a dominant position has been created or strengthened with regard to that undertaking are often the same as those which are relevant in an appraisal of whether, as a result of such creation or strengthening, competition will be significantly impeded in the common market. Indeed, a factor which significantly affects the freedom of competitors to determine their commercial policy independently is also liable to result in effective competition being impeded.

89 It follows that, where it is apparent from the recitals to a decision finding a notified concentration to be incompatible with the common market – including those recitals dedicated to analysing whether a dominant position has been created or strengthened – that the transaction will produce significant anti-competitive effects, the decision should not be regarded as unlawful merely because the Commission has not expressly, and specifically, linked its description of those matters to the second condition in Article 2 of Regulation No 4064/89; and this is so irrespective of whether the lawfulness of the decision is being considered from the point of view of the requirement to state reasons laid down in Article 253 EC, or of the substance of the case. Indeed, any other approach would impose a purely formal obligation on the Commission, requiring it to repeat some of the same recitals, firstly in its analysis of whether a dominant position is created or strengthened in a given market and, a second time, in relation to the analysis of significant impairment of competition in the common market.

90 In this instance, the Commission expressly stated, at recital 567 of the contested decision, that ‘[f]or all those reasons’ the proposed merger would lead to the creation or strengthening of a dominant position on a number of different markets as a result of which effective competition in the common market would be significantly impeded (for the full citation, see paragraph 46 above). Contrary to the applicant’s claim in that regard, and consistently with the contentions advanced by the Commission before the Court, in particular at the hearing, it is clear from that general conclusion that the Commission considered that the two conditions in Article 2 of Regulation No 4064/89 were satisfied in relation to each of the markets expressly mentioned, and not merely by reason of the cumulative effect of the findings relating to all those markets (see paragraph 47 above).

91 Moreover, the Commission expressly stated in certain passages of the contested decision that the creation or strengthening of a dominant position for the merged entity on certain markets would substantially impede competition. In particular, the specific findings made in the contested decision on the immediate effects of the merger on the market for large regional jet aircraft engines suffice to establish that the strengthening of the applicant’s dominant position on that market would result in effective competition being significantly impeded in the common market (see recital 428 et seq. of the contested decision).

B – Pre-existing dominance on the market for large commercial jet aircraft engines

1. Introduction

92 In the contested decision, the Commission held that prior to the merger the applicant was dominant on the market for large commercial jet aircraft engines, a finding which is disputed by the applicant. The Commission bases that conclusion, in essence, on (i) the size of the applicant’s market share, aggregated for these purposes with that of the CFMI joint venture in which it participates with Snecma (recitals 45 to 83 of the contested decision), (ii) the commercial advantages deriving from the vertical integration of the manufacture of large commercial jet aircraft engines with the financial strength of GE Capital and the aircraft purchasing and leasing activity of GECAS (recitals 107 to 145), (iii) an analysis of the state of competition on the market (recitals 163 to 170) and, lastly, (iv) the lack of competitive and commercial constraints from the applicant’s competitors and customers (recitals 173 to 228). The applicant’s pre-merger dominant position is a cornerstone of the Commission’s analysis, since a number of the limbs of the reasoning in the contested decision, in particular those listed in the following paragraph, are based on it.

93 First, the vertical overlap resulting from the applicant’s purchase of Honeywell’s engine-starter manufacturing activities would lead, in the Commission’s view, to the strengthening of the applicant’s pre-merger dominance on the market for large commercial jet aircraft engines. Second, the Commission’s analysis concerning the creation of a dominant position on the various markets for avionics and non-avionics products, as a result of the influence which the applicant can exercise through its subsidiaries, turns on the existence of its dominant position on the market for large commercial jet aircraft engines. Third, the opportunity for bundling, which the Commission claims would exist in the future, hinges on the existence of that dominant position and would lead, inter alia, to the strengthening of that position.

94 It is therefore necessary to review separately (i) the merits of the contested decision as regards the applicant’s dominant position on the market for large commercial jet aircraft engines (in the present section) and (ii) the merits of the three limbs of the contested decision referred to in the previous paragraph (later on in the judgment).

2. Arguments of the parties

95 In the applicant’s submission, the Commission was wrong to conclude that GE was, prior to the merger, dominant in the market for large commercial jet aircraft engines (that is to say, aircraft with more than 100 seats, a range of more than 2 000 nautical miles and a cost in excess of USD 35 million). GE observes that a dominant position arises from the strength of an undertaking, which enables it to act independently on the market. The situation obtaining on the relevant market, as described in recent Commission decisions in the aeronautical sector, shows that GE is not in a position to act independently and that its main competitors, in particular Rolls-Royce and Pratt & Whitney (‘P&W’), are not at risk of being foreclosed from the market. The Commission’s entire analysis collapses owing to the absence of pre-merger dominance on the part of GE.

96 As regards the Commission’s use of the market-share figures cited in the contested decision, the applicant submits that market shares are of limited utility in assessing dominance in a bidding market. As the Commission’s practice in the aeronautical sector shows, the market for aircraft engines is a bidding market in which suppliers compete for infrequent high-value contracts. For each new aircraft platform, airframe manufacturers opt for one or several engines specially developed for that platform. Consequently, irrespective of past wins, each competitor with a product to offer has strong incentives to bid at the next round of competitions. Thus, historical market figures do not accurately reflect the actual competitive intensity that exists in the market, as is illustrated by the recent history of that industry. The applicant rejects the assessment that a 50% share of the market for large commercial jet aircraft engines is sufficient to establish dominance.

97 Second, the calculation of the applicant’s market shares in the contested decision is artificial, since the Commission arbitrarily chose to use certain market share measurements rather than others. In particular, the Commission and Rolls-Royce err by basing their calculations on figures for engines on aircraft still in production, since such a definition not only excludes P&W engines on aircraft no longer in production, but also takes no account of engine orders for aircraft not yet in service, the latter being the most important factor in the assessment of competition on the market.

98 The applicant also maintains that the Commission was wrong to add its relatively small market share to that of the CFMI 50/50 joint venture (recital 15 of the contested decision; see also recitals 45 and 46) formed by the applicant and the French undertaking Snecma. Furthermore, as the United States’ Department of Justice has observed, GE’s allegedly high market share is essentially accounted for by the fact that CFMI is the exclusive engine supplier for a single type of aircraft, the Boeing B737, the most successful commercial aircraft in aviation history. Therefore the Commission is wrong to attribute to the applicant all future revenue streams from that market share. Furthermore, the Commission cannot properly combine the market share of CFMI with its mixed bundling theory given that Snecma has no interest in approving a pricing strategy that would favour Honeywell products. Finally, the Commission’s approach is at variance with the approach taken by the Commission in Decision No 2000/182/EC of 14 September 1999 relating to a proceeding pursuant to Article 81 of the EC Treaty (Case IV/36.213/F2 – GEAE/P&W) (OJ 2000 L 58, p. 16; ‘the Engine Alliance decision’), in which it treated the applicant and CFMI as separate undertakings.

99 Third and finally in relation to market shares, the importance of those historical market shares is overestimated by the Commission, which incorrectly takes the view that the applicant would be able to build on them in the future. In that regard, the applicant rejects the Commission’s argument that airlines’ fleets are being standardised, as a result of which those airlines tend to purchase their engines from a single engine manufacturer in order to reduce the costs associated with maintenance of their aircraft engines. GE states that commonality is very limited even within one engine family and that, in addition, the success of the CFM56 engine on the Boeing B737 produces no incentive to purchase the CF6 or GE90 engine families. The responses of airline companies to the Commission confirm that standardisation is a secondary factor in engine selection.

100 Furthermore, as regards the finding that the applicant could act independently on the relevant market, the applicant complains that the Commission has failed