Case T-151/05

Nederlandse Vakbond Varkenshouders (NVV) and Others

v

Commission of the European Communities

‛Competition — Concentrations — Markets for the purchase of live pigs or sows for slaughter — Decision declaring the concentration compatible with the common market — Definition of the relevant geographic market — Duty of care — Duty to state reasons’

Judgment of the Court of First Instance (Third Chamber), 7 May 2009 II ‐ 1227

Summary of the Judgment

A proper definition of the relevant market is a necessary precondition for the assessment of the effects of the concentration on competition. It follows from Article 9(7) of Regulation No 139/2004 on the control of concentrations between undertakings and from point 8 of the Commission notice on the definition of relevant market for the purposes of Community competition law that the relevant geographic market comprises the area in which the undertakings concerned are involved in the supply of the products or services in question; in which the conditions of competition are sufficiently homogeneous; and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas. For the purposes of defining the geographic market, account must be taken of a number of factors, such as the nature and characteristics of the products or services concerned, the existence of entry barriers, consumer preferences, the existence, in the area concerned as compared with neighbouring areas, of appreciable differences in the market share of undertakings, or price differences. With regard to a concentration in the market for the purchase of pigs, the Commission is entitled to decide that the definition of the relevant geographic markets for the products concerned, namely, the markets for the purchase of live pigs and live sows for slaughter, covers the territory lying within a radius of 150 km around the three main pig-breeding areas of a Member State. The fundamental question for the purposes of defining the geographic market is whether, if there were to be a small but sustainable reduction in the purchase price in the areas concerned, the customers of the parties to the concentration and, in particular, the breeders of pigs for slaughter, would switch to slaughterhouses located elsewhere and would be willing to transport their animals over a distance of 150 km to competing slaughterhouses, with the result that such a drop in prices would not be profitable for the body which emerged from the concentration. The fact that the majority of pigs for slaughter are usually transported over distances under 150 km does not therefore constitute, in itself, a decisive factor for defining the relevant market. Furthermore, the Commission was entitled to conclude that the temporary suspension or limitation of exports as a result of epizootic outbreaks of disease does not restrict the relevant market to national or regional level, and does not therefore constitute a determining fact for the purposes of defining the geographic market. (see paras 50-52, 112, 122, 130, 131)

In regard to concentrations between undertakings, judicial review of assessments by the Commission concerning the definition of relevant markets is carried out by reference to a test of whether there was a manifest error of assessment. In so far as the definition of the relevant market involves complex economic assessments on the part of the Commission, the definition of the relevant market is subject only to limited review by the Community judicature. (see paras 53, 80)

Although it is true that the legality of a Commission decision must be assessed on the basis of the information available to it at the time when the measure was adopted and that an applicant cannot therefore rely, before the Community judicature, on facts that were not put before the Commission in the course of the administrative procedure, that case-law cannot be relied on, in a general manner, with regard to annexes which are produced for the first time before the Community Courts. In so far as the production of an annex before the Community Courts is not an attempt to alter the legal and factual framework previously submitted to the Commission for the purposes of the adoption of a decision, but contributes to a line of argument in the simple exercise of the rights of the defence, such an annex must be regarded as admissible. (see paras 58, 63)

In the scheme of Regulation No 139/2004 on the control of concentrations between undertakings, the legal basis for the decisions adopted by the Commission in the context of the first phase of the procedure is Article 6 thereof, whereas the legal basis for decisions adopted in the context of the second phase of the procedure is Article 8, and both of those articles must be interpreted in the light of the criteria set out in Article 2 of that regulation. When the Commission considers, at the end of the first phase, that a concentration does not raise serious doubts as to its compatibility with the common market, it is correct to base its decision on Article 6(1)(b) of Regulation No 139/2004. When the Commission reaches the opposite conclusion and decides to initiate the second phase of the procedure, it still has to adopt a decision based on Article 6 of the regulation — specifically, on Article 6(1)(c) thereof — and not on Article 8. The Commission cannot, in any circumstances, adopt a decision under Article 8 of Regulation No 139/2004 at the end of the first phase of the procedure. (see paras 67, 68)

Although the Commission must give an account of its reasoning if a decision goes appreciably further than the previous decision-making practice, economic operators have no grounds for a legitimate expectation that a previous decision-making practice, that is capable of being varied when the Community institutions exercise their discretion, will be maintained. In particular, in regard to control of concentrations, they cannot entertain such a legitimate expectation on the ground that the Commission had defined markets in a particular way in a previous decision, since the Commission — and, a fortiori, the Court — is not bound by the findings made in such a decision. (see para. 136)

Having regard to the clear division of powers on which Regulation No 139/2004 on the control of concentrations between undertakings is based, decisions taken by the national authorities cannot be binding upon the Commission in proceedings for the control of concentrations. The Commission and the national competition authority give their decisions, in their respective fields of competence, in the light of different criteria. (see para. 139)

Although the existence of a dominant position must be assessed on a case-by-case basis according to the circumstances of the case, recital 32 in the preamble to Regulation No 139/2004 on the control of concentrations between undertakings states that concentrations which, by reason of the limited market share of the undertakings concerned, are not liable to impede effective competition may be presumed to be compatible with the common market. An indication to this effect exists, in particular, where the market shares of the undertakings concerned do not exceed 25% either in the common market or in a substantial part of it. The Commission can therefore correctly consider that it is not necessary to take the competitive assessment any further with regard to certain markets concerned by a concentration if it finds that, following the concentration, the parties’ market shares would be less than 20%. (see paras 149, 151)

With regard to control of concentrations, the Commission has a discretion, especially with respect to assessments of an economic nature. Respect for the safeguards guaranteed by the Community legal order in administrative procedures, such as the duty of care, is therefore even more important in that area. In the abovementioned area, respect for the duty of care requires the Commission to examine carefully and impartially all the relevant aspects in the individual case. The Commission must therefore determine with the necessary care the elements of fact and of law which are essential to the exercise of its discretion by gathering all the facts which are necessary in order to exercise that discretion and which might affect the result of the decision-making process. That duty implies, first, that the Commission must take account of the facts and the information provided to it by the notifying parties or by any third party taking an active part in the procedure, and, secondly, that it must, if necessary, seek to discover those facts through market investigations or requests for information from market operators. However, with regard to control of concentrations, the Commission’s obligation to respect the rights guaranteed by the Community legal order in administrative procedures — hence also its obligation to comply with the duty of care — must be interpreted in a way which is compatible with the need for speed which characterises the general scheme of Regulation No 139/2004 on the control of concentrations between undertakings and which requires the Commission to meet tight deadlines when it exercises its discretion. In view of that need and those deadlines, the Commission cannot be required, in the absence of evidence indicating that information provided to it is inaccurate, to verify all the information it receives. Although the diligent and impartial examination which the Commission is obliged to carry out in the context of that procedure does not permit it to base itself on facts or information which cannot be regarded as accurate, the abovementioned need for speed presupposes that it cannot itself verify down to the last detail the authenticity and reliability of all the information it receives, since the procedure for the control of concentrations is based, of necessity and to a certain extent, on trust. Moreover, the legislation on the control of concentrations provides for various measures in order to discourage and punish the communication of inaccurate or misleading information. The notifying parties have an express obligation to make a full and honest disclosure to the Commission of the facts and circumstances which are relevant for the decision — that obligation being confirmed by Article 14 of Regulation No 139/2004 — and the Commission may also revoke the decision on compatibility if it is based on incorrect information for which one of the undertakings is responsible or where it has been brought about by deceit. (see paras 164-166, 184, 185)

The Commission does not act in breach of its duty to state reasons if, when exercising its power to examine concentrations, it does not include precise reasoning in its decision as to the appraisal of a number of aspects of the concentration which appear to it to be manifestly irrelevant or insignificant or plainly of secondary importance to the appraisal of the concentration. Such a requirement would be difficult to reconcile with the need for speed and the tight procedural deadlines which the Commission is required to meet when exercising its power to examine concentrations and which form part of the particular circumstances of proceedings for control of such operations. It follows that where the Commission declares a concentration to be compatible with the common market on the basis of Article 6(1)(b) of Regulation No 139/2004 on the control of concentrations between undertakings, the requirement to state reasons is satisfied where that decision clearly sets out the reasons for which the Commission considers that the concentration in question — where appropriate, following modification by the undertakings concerned — does not raise serious doubts as to its compatibility with the common market. In that regard, while it is true that the Commission is not obliged, in the statement of reasons for decisions adopted under Regulation No 139/2004, to take a position on all the information and arguments relied on before it, including those which are plainly of secondary importance to the appraisal it is required to undertake, it none the less remains the case that it is required to set out the facts and the legal considerations which are of decisive importance in the conceptual framework of the decision. (see paras 192-194)

In the context of the procedure for the Community control of concentrations, the right to be heard is expressly granted, by Article 18(4) of Regulation No 139/2004 on the control of concentrations between undertakings and Article 16(1) of Regulation No 802/2004 implementing Regulation No 139/2004, to third parties who show that they have a sufficient interest. Those third parties have a right to be heard by the Commission, if they so request, in order to make known their views on the harmful effects on them of the proposed concentration notified, but such a right must nevertheless be reconciled with the observance of the rights of defence of the parties to the concentration and with the primary aim of the regulation, which is to ensure effectiveness of control as well as legal certainty for the undertakings to which the regulation applies. The fact that a third party cannot express himself in his own language during a meeting with the Commission cannot vitiate the administrative procedure unless it is shown that that fact had harmful consequences, such as the impossibility for the third party to express certain facts or arguments, thereby preventing the Commission from taking them into account in its assessment. (see paras 201, 202, 211)