CELEX: 62004TJ0464
Language: en
Date: 2006-07-13
Title: Judgment of the Court of First Instance (Third Chamber) of 13 July 2006. # Independant Music Publishers and Labels Association (Impala, association internationale) v Commission of the European Communities. # Competition - Regulation (EEC) No 4064/89 - Decision declaring a concentration compatible with the common market - Markets for recorded music and on-line music - Existence of a collective dominant position - Risk of creation of a collective dominant position - Conditions - Transparency of the market - Deterrence - Statement of reasons - Manifest error of assessment. # Case T-464/04.

Case T‑464/04
      Independent Music Publishers and Labels Association (Impala, International Association)
      v
      Commission of the European Communities
      (Competition – Regulation (EEC) No 4064/89 – Decision declaring a concentration compatible with the common market – Markets for recorded music and on-line music – Existence of a collective dominant position – Risk of creation of a collective dominant position – Conditions – Transparency of the market – Deterrence – Statement of reasons – Manifest error of assessment)
      Summary of the Judgment
      1.      Competition – Concentrations – Assessment of compatibility with the common market – Creation of a collective dominant position
            significantly impeding effective competition in the common market 
      (Council Regulation No 4064/89)
      2.      Competition – Concentrations – Assessment of compatibility with the common market –Collective dominant position significantly
            impeding effective competition in the common market 
      (Council Regulation No 4064/89, Art. 2(3))
      3.      Competition – Concentrations – Assessment of compatibility with the common market – Creation of a collective dominant position
            significantly impeding effective competition in the common market 
      (Council Regulation No 4064/89, Art. 2(3))
      4.      Competition – Concentrations – Risk of creation or existence of a collective dominant position significantly impeding effective
            competition in the common market 
      (Council Regulation No 4064/89)
      5.      Competition – Concentrations – Declaration of compatibility with the common market on the basis of Article 6(1)(b) of Regulation
            No 4064/89
      (Art. 253 EC; Council Regulation No 4064/89, Art. 6(1)(b))
      6.      Acts of the institutions – Statement of reasons – Obligation – Scope 
      (Art. 253 EC; Council Regulations No 17, Art. 3, and No 4064/89)
      7.      Competition – Concentrations – Examination by the Commission 
      (Council Regulation No 4064/89, Art. 2)
      8.      Competition – Concentrations – Administrative procedure – Statement of objections 
      (Council Regulation No 4064/89, Art. 2)
      9.      Competition – Concentrations – Administrative procedure 
      (Council Regulation No 4064/89)
      10.    Competition – Concentrations – Assessment of compatibility with the common market – Strengthening of a collective dominant
            position significantly impeding effective competition in the common market 
      (Council Regulation No 4064/89, Art. 2(3))
      11.    Competition – Concentrations – Assessment of compatibility with the common market – Creation of or strengthening of a pre-existing
            collective dominant position 
      (Council Regulation No 4064/89, Art. 2(3))
      12.    Competition – Concentrations – Assessment of compatibility with the common market – Creation of a collective dominant position
            significantly impeding effective competition in the common market 
      (Council Regulation No 4064/89)
      1.      In the context of Regulation No 4064/89 on the control of concentrations between undertakings, the Commission is obliged to
         assess, using a prospective analysis of the reference market, whether the concentration which has been referred to it leads
         to a situation in which effective competition in the relevant market is significantly impeded by the undertakings involved
         in the concentration and one or more other undertakings which together, in particular because of factors giving rise to a
         connection between them, are able to adopt a common policy on the market and act to a considerable extent independently of
         their competitors, their customers and, ultimately, of consumers.
      
      Such a prospective analysis requires close examination of, in particular, the circumstances which, in each individual case,
         are relevant for assessing the effects of the concentration on competition in the reference market and the Commission must
         provide solid evidence.
      
      The procedure does not entail the examination of past events – for which often many items of evidence are available which
         make it possible to understand the causes – or 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. Thus, such an analysis makes it necessary to envisage the various chains of cause and effect with a view to ascertaining
         which of them are the most likely.
      
      (see paras 245, 248, 522-523)
      2.      A situation of collective dominance which significantly impedes effective competition in the common market or a substantial
         part thereof may arise following a concentration where, taking into account the actual characteristics of the relevant market
         and of the change to its structure brought about by the completion of the transaction, the concentration would have the consequence
         that, being aware of the common interests, each member of the dominant oligopoly would consider it possible, economically
         rational and therefore preferable to adopt the same policy on a lasting basis on the market with the aim of selling at above
         competitive prices, without having to conclude an agreement or resort to a concerted practice within the meaning of Article
         81 EC, without actual or potential competitors, or customers and consumers, being able to react effectively.
      
      (see para. 246)
      3.      Three conditions must be satisfied in order for collective dominance significantly impeding effective competition in the common
         market or a substantial part thereof to be created following a concentration. First, the market must be sufficiently transparent
         for the undertakings which coordinate their conduct to be able to monitor sufficiently whether the rules of coordination are
         being observed. Second, the discipline requires that there be a form of deterrent mechanism in the event of deviant conduct.
         Third, the reactions of undertakings which do not participate in the coordination, such as current or future competitors,
         and also the reactions of customers, should not be able to jeopardise the results expected from the coordination.
      
      (see para. 247)
      4.      In the context of the control of concentrations between undertakings established by Regulation No 4064/89, although when assessing
         the risk that such a dominant position will be created the Commission is required, ex hypothesi, to carry out a delicate prognosis as regards the probable development of the market and of the conditions of competition
         on the basis of a prospective analysis, which entails complex economic assessments in respect of which the Commission has
         a wide discretion, the finding of the existence of a collective dominant position is itself supported by a concrete analysis
         of the situation existing at the time of adoption of the decision. The determination of the existence of a collective dominant
         position must be supported by a series of elements of established facts, past or present, which show that there is a significant
         impediment of competition on the market owing to the power acquired by certain undertakings to adopt together the same course
         of conduct on that market, to a significant extent, independently of their competitors, their customers and consumers.
      
      It follows that, in the context of the assessment of the existence of a collective dominant position, although the conditions
         which must be satisfied in order for a collective dominant position to be created, which were inferred from a theoretical
         analysis of the concept of a collective dominant position, are indeed also necessary, they may, however, in the appropriate
         circumstances, be established indirectly on the basis of what may be a very mixed series of indicia and items of evidence
         relating to the signs, manifestations and phenomena inherent in the presence of a collective dominant position.
      
      Thus, in particular, close alignment of prices over a long period, especially if they are above a competitive level, together
         with other factors typical of a collective dominant position, might, in the absence of an alternative reasonable explanation,
         suffice to demonstrate the existence of a collective dominant position, even where there is no firm direct evidence of strong
         market transparency, as such transparency may be presumed in such circumstances.
      
      (see paras 250-252)
      5.      When the Commission declares a concentration to be compatible with the common market on the basis of Article 6(1)(b) of Regulation
         No 4064/89 on the control of concentrations between undertakings, it is a necessary and sufficient condition in relation to
         the duty to state reasons that the decision states clearly and unequivocally the reasons why the Commission considers that
         the concentration at issue does not raise serious doubts as to its compatibility with the common market. However, it cannot
         be inferred from that obligation that, in such a hypothetical case, the Commission must provide reasons for its assessment
         of all the matters of law and of fact which may be connected with the notified concentration and/or which were raised during
         the administrative procedure.
      
      (see para. 281)
      6.      In the context of the control of concentrations established by Regulation No 4064/89, the statement of objections is merely
         a preparatory document, the findings of which are purely provisional, and the Commission is obliged to take account of the
         evidence obtained during the administrative procedure and also of the arguments put forward by the undertakings concerned,
         and must drop any objections which might ultimately prove to be unfounded. That applies a fortiori in the case of provisional findings made a number of years previously in the context of the examination of a different concentration
         or of the findings of a different competition authority in a different context.
      
      The final decision must thus be based solely on all the circumstances and evidence relevant for the purpose of the assessment
         of the effects which the proposed concentration will have on competition in the reference markets. It follows that the mere
         fact that the Commission did not explain in the body of the decision the change in its position by comparison with that set
         out in the statement of objections cannot as such constitute a lack of, or an insufficient, statement of reasons.
      
      (see paras 285, 300, 335)
      7.      The basic provisions of Regulation No 4064/89 on the control of concentrations between undertakings, and in particular Article 2,
         confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently,
         review by the Community Courts of the exercise of that discretion, which is essential for defining the rules on concentrations,
         must take account of the margin of discretion implicit in the provisions of an economic nature which form part of the rules
         on concentrations.
      
      Whilst the Community Courts recognise that the Commission has a margin of discretion with regard to economic matters, that
         does not mean that they must refrain from reviewing the Commission’s interpretation of information of an economic nature.
         Not only must the Community Courts, inter alia, establish 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 analysis and whether it is capable of substantiating the conclusions drawn from it.
      
      (see paras 327-328)
      8.      In the context of the control of concentrations between undertakings established by Regulation No 4064/89, the statement of
         objections is merely a preparatory document, the findings of which are purely provisional, and the Commission is obliged to
         take account of the evidence obtained during the administrative procedure and also of the arguments put forward by the undertakings
         concerned, and must drop any objections which might ultimately prove to be unfounded. That applies a fortiori in the case
         of provisional findings made a number of years previously in the context of the examination of a different concentration or
         of the findings of a different competition authority in a different context. That does not mean, however, that the statement
         of objections is wholly without merit or wholly irrelevant. In effect, unless the entire investigative administrative procedure
         is to be deprived of the slightest value, the Commission must be in a position to explain, not in the decision, admittedly,
         but at least in the context of the proceedings before the Court, its reasons for considering that its provisional findings
         were incorrect; but above all, the findings set out in the decision must be compatible with the findings of fact made in the
         statement of objections, in so far as it is not established that the latter findings were incorrect.
      
      (see paras 335, 410)
      9.      Although the procedure for the control of concentrations necessarily relies to a large extent on trust, as the Commission
         cannot be required to ascertain on its own, in the slightest detail, the reliability and accuracy of all the information submitted,
         the Commission cannot, on the other hand, go so far as to delegate, without supervision, responsibility for conducting certain
         parts of the investigation to the parties to the concentration, in particular where those aspects constitute the crucial element
         on which the decision is based and where the data and assessments submitted by the parties to the concentration are diametrically
         opposite to the information gathered by the Commission during its investigation and also to the conclusions which it drew
         from that information.
      
      (see para. 415)
      10.    The market transparency which is necessary for the purpose of identifying a collective dominant position which would be strengthened
         by a concentration is that which allows each member of the dominant oligopoly to be aware of the conduct of the others in
         order to ascertain whether or not they are adopting the same course of conduct, that is to say, which provides it with the
         means of knowing whether the other operators are adopting and maintaining the same strategy. Transparency on the market should
         therefore be sufficient to allow each member of the dominant oligopoly to be aware, sufficiently precisely and immediately,
         of the development of the conduct on the market of each of the other members. The requisite transparency does not mean that
         each member may at any moment be aware of every detail of the precise conditions of each sale made by the other members of
         the oligopoly but must, first, make it possible to identify the terms of the tacit coordination and, second, give rise to
         a serious risk that deviant conduct of such a type as to jeopardise the tacit coordination will be discovered by the other
         members of the oligopoly.
      
      (see para. 440)
      11.    As regards the examination, within the context of the application of Regulation No 4064/89 on the control of concentrations
         between undertakings, of the creation of a collective dominant position significantly impeding effective competition in the
         common market, in order for a situation of collective dominant position to be viable, there must be adequate deterrents to
         ensure that there is a long-term incentive in not departing from the common policy, which means that each member of the dominant
         oligopoly must be aware that highly competitive action on its part designed to increase its market share would provoke identical
         action by the others, so that it would derive no benefit from its initiative.
      
      The mere existence of effective deterrent mechanisms is sufficient, in principle, since if the members of the oligopoly conform
         with the common policy, there is no need to resort to the exercise of a sanction. Furthermore, the most effective deterrent
         is that which has not been used.
      
      As regards, in the same context, the examination of the existence of such a dominant position, the condition relating to retaliation
         may consist, not in ascertaining the mere existence of retaliatory measures, but in examining whether there have been any
         breaches of the common course of conduct which have not been followed by retaliatory measures. In that regard, two cumulative
         elements must be satisfied in order for the fact that no retaliatory measures have been employed to be taken to mean that
         the condition relating to retaliation is not satisfied, namely proof of deviation from the common course of conduct, without
         which there is no need to consider the use of retaliatory measures, and then actual proof of the absence of retaliatory measures.
      
      (see paras 465-466, 468-469)
      12.    Examination of the determination by the Commission of the creation of a collective dominant position must be based on a prospective
         analysis.
      
      As regards, in the context of that examination, the questions of retaliatory measures, the Commission must apply itself not
         to seeking evidence that retaliatory measures have been used in the past but to ascertaining the existence of effective deterrent
         mechanisms. Seeking evidence of the use of retaliatory measures in the past cannot constitute a valid test, as the condition
         is perfectly capable of being satisfied without there having been any retaliatory measures in the past. As the assessment
         of the risk of the creation of a collective dominant position is not, by definition, based on the existence of a prior common
         policy, the criterion relating to the absence of retaliatory measures in the past is wholly irrelevant.
      
      (see para. 537)
JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber) 
      13 July 2006 (*)
      
      (Competition – Regulation (EEC) No 4064/89 – Decision declaring a concentration compatible with the common market – Markets for recorded music and on-line music – Existence of a collective dominant position – Risk of creation of a collective dominant position – Conditions – Transparency of the market – Deterrence – Statement of reasons – Manifest error of assessment)
      In Case T‑464/04,
      Independent Music Publishers and Labels Association (Impala, international association), established in Brussels (Belgium), represented by S. Crosby and J. Golding, Solicitors, and I. Wekstein-Steg, lawyer,
      
      applicant,
      v
      Commission of the European Communities, represented by A. Whelan and K. Mojzesowicz, acting as Agents, 
      
      defendant,
      supported by
      Bertelsmann AG, established in Gütersloh (Germany), represented by J. Boyce, Solicitor, P. Chapatte and D. Loukas, lawyers,
      
      Sony BMG Music Entertainment BV, established in Vianen (Netherlands),
      
      Sony Corporation of America (SCA), established in New York, New York (United States),
      
      represented by N. Levy, Barrister, R. Snelders and T. Graf, lawyers,
      interveners,
      APPLICATION for annulment of Commission Decision C(2004) 2815 of 19 July 2004 declaring a concentration to be compatible with
         the common market and the functioning of the EEA Agreement (Case No COMP/M.3333 – Sony/BMG),
      
      THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Third Chamber),
      composed of M. Jaeger, President, J. Azizi and E. Cremona, Judges,
      Registrar: I. Natsinas, Administrator,
      having regard to the written procedure and further to the hearing on 22 September 2005,
      gives the following
      Judgment
       Facts
      1        The Independent Music Publishers and Labels Association (Impala) is an international association, incorporated under Belgian
         law, whose members are 2 500 independent music production companies.
      
      2        On 9 January 2004 the Commission received notification pursuant to Article 4 of Council Regulation (EEC) No 4064/89 of 21
         December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1), as rectified (OJ 1990 L 257, p. 13)
         and as amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1) (‘the Merger Regulation’), of a
         proposed concentration by which the undertakings Bertelsmann AG (‘Bertelsmann’) and Sony Corporation of America (‘Sony’),
         part of the Sony group, proposed to merge their global recorded music businesses.
      
      3        Bertelsmann is an international media company: its worldwide activities include music recording and publishing; television
         and radio; book, magazine and newspaper publishing; print and media services; and book clubs and music clubs. Bertelsmann
         is active in recorded music through its wholly-owned subsidiary Bertelsmann Music Group ‘BMG’. BMG’s record labels include
         Arista Records, Jive Records, Zomba and Radio Corporation of America (RCA) Records.
      
      4        Sony is globally active in music recording and publishing, industrial and consumer electronics and entertainment. In the recorded
         music sector it acts through Sony Music Entertainment. Sony’s labels include Columbia Records Group, Epic Records Group and
         Sony Classical.
      
      5        The proposed operation consisted in the integration of the global recorded music businesses of the parties to the concentration
         (with the exception of Sony’s activities in Japan) into three or more newly-created companies pursuant to a Business Contribution
         Agreement dated 11 December 2003. In the aggregate, these joint venture companies were to be operated under the name Sony
         BMG.
      
      6        Under the agreement, Sony BMG would be active in the discovery and development of artists (the so-called A&R (‘Artist and
         Repertoire’) activity) and the marketing and sale of the resulting discs. Sony BMG would not be involved in related activities
         such as music publishing, manufacturing and distribution.
      
      7        On 20 January 2004, the Commission sent out questionnaires to a number of players on the market. The applicant replied to
         that questionnaire and lodged a separate submission on 28 January 2005 in which it set out the reasons why in its view the
         Commission should declare the operation incompatible with the common market. The applicant set out its concerns about further
         concentration in the market and the impact that this would have on market access, including in the retail sector, the media,
         the internet and consumer choice.
      
      8        By decision dated 12 February 2004, the Commission found that the notified operation raised serious doubts as to its compatibility
         with the common market and the functioning of the Agreement on the European Economic Area (‘the EEA Agreement’). It therefore
         initiated proceedings pursuant to Article 6(1)(c) of the Merger Regulation.
      
      9        On 24 May 2004 the Commission sent a statement of objections to the parties to the concentration, in which it provisionally
         concluded that the notified operation was incompatible with the common market and the functioning of the EEA Agreement, since
         it would strengthen a collective dominant position in the recorded music market and in the wholesale market for licences for
         online music and would coordinate the parent companies’ behaviour in a way incompatible with Article 81 EC.
      
      10      The parties to the concentration replied to the statement of objections and a hearing took place before the Hearing Officer
         on 14 and 15 June 2004 in the presence of, among others, the applicant.
      
      11      By decision of 19 July 2004, the Commission declared the concentration compatible with the common market pursuant to Article
         8(2) of the Merger Regulation (‘the Decision’).
      
      12      In response to its application of 26 July 2004, the applicant received a non-confidential copy of the decision on 23 September
         2004.
      
       Procedure and forms of order sought by the parties 
      13      By application lodged at the Registry of the Court of First Instance on 3 December 2004, the applicant brought the present
         action.
      
      14      By a separate document lodged on the same date, the applicant requested that the Court should adjudicate on the case under
         an expedited procedure, in accordance with Article 76a of the Rules of Procedure of the Court of First Instance.
      
      15      By letter of 17 December 2004, the Commission expressed its doubts as to whether the action was appropriate for an expedited
         procedure in this case, emphasising, in particular, in addition to the complexity of the case, the difficulties resulting
         from the fact that, in order to explain the grounds of its decision, it would be required to use very voluminous and complex
         data and that such a line of defence would, moreover, require delicate negotiations with the parties to the concentration
         and third parties regarding the extent to which the Commission would be able to disclose confidential information.
      
      16      By statements lodged at the Registry of the Court of First Instance on 10, 11 and 19 January 2005, Bertelsmann, Sony BMG and
         Sony Corporation of America sought leave to intervene in support of the form of order sought by the Commission. Those applications
         were granted by order of the President of the Third Chamber of 4 February 2005.
      
      17      In the meantime, by decision of 13 January 2005, the Court of First Instance, by way of measures of organisation of procedure
         as provided for in Article 64(3)(e) of the Rules of Procedure, invited the parties to take part in an informal meeting on
         24 January 2005 in order to examine the possibility of dealing with the case under an expedited procedure, in the light, in
         particular, of the question raised by the Commission concerning the confidentiality of certain material in the file.
      
      18      By a statement lodged on 18 January 2005, the Commission, in agreement with the applicant, requested a measure of organisation
         of procedure consisting, essentially, in allowing the Commission to submit certain documents and information which had been
         transmitted to it on a confidential basis by communicating them solely to the applicant’s counsel, to the exclusion of the
         applicant itself.
      
      19      By decision of 24 January 2005, the Court, taking note, in particular, of the agreement reached between the applicant and
         the interveners, granted the request for a measure of organisation of procedure. The Court also granted the application for
         an expedited procedure, while stating that that decision might be reconsidered at any time in the light of developments in
         the file and the procedure. A timetable for the submission of pleadings was also drawn up.
      
      20      By a pleading lodged on 11 February 2005, the applicant submitted a request for amendment of the measure of organisation of
         procedure. By letter of 18 February 2005, the defendant and the interveners submitted their observations on that request.
         By letter of 22 February 2005, the applicant withdrew its request for amendment of the measure of organisation of procedure.
      
      21      Meanwhile, on 11 February 2005, the Commission had lodged its defence. On 25 February 2005, Bertelsmann, Sony BMG and Sony
         lodged their statement in intervention.
      
      22      In the meantime, by letter of 15 February 2005, the applicant sought leave to lodge observations on the new information in
         the Commission’s defence. By decision of 21 February 2005, the Court granted that request and gave the defendant permission
         to request leave, by no later than 4 March 2005, to lodge complementary observations, which the defendant did. By letter of
         1 March 2005, the applicant objected to that request. On 14 March 2005 the Commission lodged its complementary observations.
      
      23      Upon hearing the report of the Judge-Rapporteur, the Court (Third Chamber) decided to open the oral procedure and, by way
         of measures of organisation of procedure, requested the Commission to produce a number of documents and to reply in writing
         to a series of written questions. 
      
      24      By letter of 19 September 2005, the Commission requested further time to lodge its answers to the questions put by the Court;
         its request was granted. By letter of 21 September 2005, the Commission lodged its answers to the Court’s questions.
      
      25      The parties presented oral argument and answered the questions put by the Court at the hearing on 22 September 2005.
      
      26      By letter of 26 September 2005, the Commission lodged a number of documents after the hearing and requested leave to be able
         to comment in writing on any observations that might be lodged by the applicant on its answers to the written questions of
         21 September 2005. Its request was granted.
      
      27      On 29 September 2005, the applicant lodged a pleading concerning the Commission’s answers to the written questions put by
         the Court.
      
      28      On 11 October 2005, the Commission lodged its final observations on the applicant’s observations on the Commission’s answers
         to the written questions put by the Court.
      
      29      The applicant claims that the Court should:
      
      –        disregard the documents produced by the Commission in the annexes to its defence;
      –        annul the decision;
      –        in the alternative, annul the decision in so far as it deals with one or other of the following points:
      –        the collective dominant position on the market for licences for online music;
      –        the individual dominant position on the market for the distribution of online music;
      –        the coordination of the respective activities of the parties to the concentration in the field of music publishing;
      –        order the Commission to pay the costs.
      30      The Commission, supported by the interveners, contends that the Court should:
      
      –        dismiss the application as unfounded;
      –        order the applicant to pay the costs.
       Law
      31      In support of its action for annulment, the applicant puts forward five pleas in law, divided into a number of parts. By its
         first plea, the applicant maintains that by not finding that a collective dominant position in the market for recorded music
         existed before the proposed merger and that that dominant position would be strengthened, the Commission infringed Article
         253 EC and made a manifest error of assessment and an error of law. By its second plea, the applicant maintains that by not
         taking the view that the proposed concentration would create a collective dominant position on the market for recorded music,
         the Commission infringed Article 253 EC and made a manifest error of assessment and an error of law. The third plea alleges
         infringement of Article 2 of the Merger Regulation in that the Commission did not consider that a collective dominant position
         on the worldwide market for online music licences would be created or strengthened. By its fourth plea, the applicant maintains
         that, by not taking the view that Sony would achieve an individual dominant position on the market for online music distribution,
         the Commission infringed Article 253 EC and made a manifest error of assessment. By its fifth plea, the applicant maintains
         that, by concluding that the proposed concentration would not have the effect of coordinating the music publishing activities
         of the parties to the concentration, the Commission made a manifest error of assessment and infringed Article 81 EC, in conjunction
         with Article 2(4) of the Merger Regulation.
      
      I –  The evidence annexed to the defence
      A –  Arguments of the parties
      32      The applicant observes that the defence reveals that the Commission relied during the administrative procedure on documents
         and information to which the applicant had access only when it received a copy of the defence, although they played a pivotal
         role since they were used by the Commission to justify its departure from the position taken in the statement of objections,
         namely that the proposed concentration would create or strengthen a collective dominant position and would be incompatible
         with the common market.
      
      33      If the applicant had seen those documents, which contain incomplete information and are misleading, during the administrative
         procedure, it would have been able to demonstrate those fundamental defects and the decision would have been different or,
         at least, would have been required to contain express reasons for rejecting the applicant’s observations. The applicant criticises
         the Commission for having kept those documents to itself and for having relied on them without ever putting them to the test
         of cross-examination or subjecting them to the observations of third parties.
      
      34      While acknowledging that the Commission is obliged to protect business secrets and is under no obligation to disclose all
         the information on the file to third parties during administrative procedures relating to the control of concentrations, the
         applicant maintains that the Commission is not thus entitled to deprive those third parties of the opportunity to present
         their views on the subject; it could, for example, prepare a non-confidential abridged version of the information in question.
      
      35      The applicant makes clear that it is not introducing a plea alleging breach of essential procedural requirements, but maintains
         that the new evidence adduced by the Commission has come too late to save the decision on the substance and that it represents
         an attempt by the Commission to regularise the decision ex post facto. The applicant observes that failure to produce documents
         during the administrative procedure cannot be remedied during the judicial procedure (Case C‑51/92 P Hercules Chemicals v Commission [1999] ECR I-4235, paragraph 78) and submits that the documents in question must be disregarded.
      
      36      The Commission submits that this claim must be rejected.
      
      B –  Findings of the Court
      37      It must be noted at the outset that the evidence which the applicant requests the Court to disregard was produced in the annexes
         to the defence lodged by the Commission in accordance with Article 46 of the Rules of Procedure. The applicant does not indicate
         in what way the production of that evidence by the Commission is contrary to the Rules of Procedure.
      
      38      It must then be noted that neither the grounds on which the applicant seeks to have that evidence disregarded nor even the
         sense of its request are readily apparent.
      
      39      In the first place, although the applicant maintains that the documents produced constitute an attempt to regularise the decision
         ex post facto, it does not claim that those documents were received or drawn up after the adoption of the decision; on the
         contrary, it asserts that they played a pivotal role during the administrative procedure, in that the Commission relied on
         them as a basis for the Decision. Even on the assumption that it were shown to be true, that circumstance could not lead to
         the documents being disregarded. Furthermore, although the applicant criticises the Commission for attempting to regularise
         the Decision ex post facto, it does not allege, at least in support of the present request, that there has been a breach of
         the principle that the statement of reasons must be contained in the decision itself and that it is not sufficient for it
         to be explained for the first time before the Court (Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services and Others v Commission [1998] ECR II-3141, paragraph 95). In any event, the penalty for any failure to provide sufficient reasons is annulment of
         the contested measure and not the exclusion of the documents and the question whether the Decision is supported by a statement
         of reasons of the requisite legal standard will be examined in the present case in the context of the various pleas put forward
         by the applicant.
      
      40      In the second place, while the applicant acknowledges that the Commission is under no obligation to disclose all the information
         on the file to third parties during the administrative procedure relating to the control of concentrations, it observes that,
         according to the case-law, failure to produce documents during the administrative procedure cannot be remedied during the
         judicial procedure. Without its being necessary to examine the scope of the rights of the defence or of access to the file
         by third parties in concentration procedures, it is sufficient to observe that the applicant expressly states that it does
         not intend to introduce a new plea alleging breach of essential procedural requirements. The request cannot therefore be upheld
         in so far as it is based on that ground. In any event, a breach of the rights of the defence can be penalised only where it
         is established that failure to disclose the documents was able to influence the content of the decision in question to the
         detriment of an applicant, which cannot be done without an examination of those documents. 
      
      41      In the third place, the applicant maintains that the documents contain incomplete information and are misleading, and that
         if it had had access to them during the administrative procedure it would have been able to demonstrate their fundamental
         defects, which might have led to a different decision. However, while that circumstance may mean that the evidence adduced
         by the Commission must be assessed with circumspection, it cannot result in the measure sought by the applicant being granted.
         Quite to the contrary, that measure would deprive the applicant of the possibility of demonstrating the alleged unreliability
         or irrelevance of the documents in issue in the context of its pleas alleging a manifest error of assessment.
      
      42      Last, the applicant’s alternative request that the Court should declare that the documents are unconvincing or irrelevant
         must also be rejected, for the same reasons. In any event, that request constitutes a substantive question which will be examined
         in the context of the various pleas and arguments raised in the action.
      
      43      It follows from the foregoing observations that the applicant’s request that the documents produced by the Commission in support
         of its defence be disregarded, or declared irrelevant, must be rejected.
      
      II –  First plea: strengthening of a pre-existing collective dominant position on the market for recorded music 
      44      The first plea is divided into two parts, the first relating to the erroneous nature of the Commission’s assertion that there
         was no collective dominant position on the market for recorded music before the proposed concentration and the second to the
         error resulting from the absence of a finding that that pre-existing collective dominant position would be strengthened by
         the proposed concentration.
      
      A –  Arguments of the applicant 
      1.     First part
      45      As a preliminary point, the applicant observes that both the statement of objections and the decision contain much evidence
         that before the merger the market for recorded music had all the features of a market on which a dominant position prevailed,
         in accordance with the criteria laid down in the case-law (Case T-342/99 Airtours v Commission [2002] ECR II-2585).
      
      46      The applicant submits in that regard, first, that the major record companies (‘the majors’) are described as having all the
         features of a dominant group (high market shares and significant financial strength (recital 53 to the Decision), maintaining
         high price levels (recital 56 to the Decision) and an oligopolistic structure (recital 148 to the Decision)) and therefore
         interdependence.
      
      47      The applicant claims, second, that the Commission found that the market had all the features conducive to tacit agreements
         and facilitated the monitoring of that coordination (points 93 to 116 of the statement of objections) and that it examined
         10 factors indicating tacit agreement, which in the applicant’s submission have not changed since the statement of objections.
         The product is homogenous in its format and consumers purchase discs by multiple artists and of multiple genres, thus making
         room for substitutability (recital 110 to the Decision). The market is highly conducive to coordination and coordination has
         in fact taken place (recital 112 to the Decision). There is a stable customer base (recital 112 to the Decision) and the parties
         to the concentration monitor the retail market (recital 113 to the Decision).
      
      48      Third, the prices suggest the existence of a collective dominant position. There is parallelism of actual net prices (points
         76 to 80 of the statement of objections and recitals 75, 82, 89, 96 and 103 to the Decision). Public selling prices (‘PPDs’)
         are known and the number of reference prices is limited (recitals 111 and 112 to the Decision). Net selling prices are closely
         linked to PPDs (recitals 77, 84, 91, 98 and 105 to the Decision). PPDs and actual net prices are closely aligned and transparent
         and the transparency of average real net prices is not affected by discounts (points 88, 90 and 92 of the statement of objections
         and footnotes 45, 49, 52, 55 and 57 to the Decision).
      
      49      Fourth, the Commission found that there were potentially effective deterrent mechanisms (points 128 to 132 of the statement
         of objections and recital 118 to the Decision) and the majors are not subject to those effective competitive constraints.
      
      50      The applicant maintains that the reasons put forward by the Commission, based on the heterogeneity of the content of albums,
         the insufficiency of price transparency owing to the existence of campaign discounts and the lack of evidence of the slightest
         retaliations, do not make it possible to reject the finding of the existence of a collective dominant position and that the
         Commission’s analysis is vitiated by a lack of reasoning, a manifest error of assessment and an error of law.
      
      a)     Breach of the obligation to state reasons
      51      The applicant maintains that the Decision infringes Article 253 EC because it does not include a statement of the facts and
         law which led the institution in question to adopt them, so as to make possible review by the Court and so that the Member
         States and the nationals concerned may have knowledge of the conditions under which the Community Institutions have applied
         the Treaty (Case 45/86 Commission v Council [1987] ECR 1493).
      
       Product homogeneity 
      52      As regards, first, product homogeneity, the applicant criticises the Commission for not having stated the reason why product
         homogeneity carries more weight than a continuum of substitutability, whereby most consumers purchase music by multiple artists
         and of multiple genres, or than format homogeneity as regards price and transparency. Nor does the Commission indicate why
         the finding that the pricing of albums is quite standardised is invalidated by the general statement that pricing depends
         ‘on the success of the album’. The applicant claims that recital 110 to the Decision contains contradictory findings.
      
       Transparency
      53      As regards, second, transparency, the applicant maintains that the Commission’s statements and arguments concerning discounts,
         which have the effect of negating all the evidence on transparency, are inadequately reasoned.
      
      54      Thus, in the applicant’s submission, the Commission maintains that in the large countries the pricing transparency created
         by the PPDs is eliminated by campaign discounts, but it fails to explain the function of such discounts and their significance
         for the pricing system.
      
      55      Likewise, in respect of the smaller countries, it is not clear why the Commission attached so much importance to campaign
         discounts and not to file discounts, when it asserted in the statement of objections that ‘as in the larger territories, the
         most important discounts in all countries are file discounts’. Nor is there any precise description of what file discounts
         are. The Commission’s assessment of transparency in the smaller countries alternates, without explanation, between the comparison
         of file discounts and campaign discounts, so that it is not clear whether the examination related to campaign discounts or
         file discounts. 
      
      56      The applicant further maintains that the Decision refers only to the evidence on discounts relating to Sony and BMG and does
         not cover the other majors (see recital 71 and footnote 43 to the Decision). The reasoning is therefore incomplete.
      
       Deterrents
      57      As regards, third, deterrents, the Commission does not explain why, even if it were correct, the fact that it did not find
         proof that retaliatory measures were ever used should negate all the evidence of the existence of effective deterrents.
      
       Constraints
      58      Fourth, and last, the Decision, in contrast to the statement of objections, contains no assessment of countervailing market
         power and provides no explanation for that absence, which amounts to a complete absence of reasoning.
      
      b)     Manifest error of assessment
      59      The applicant refers to the decided principle that the Commission makes a manifest error of assessment where, when it is required
         to balance conflicting claims, it gives too much weight to one of them (Case T‑111/00 British American Tobacco International (Investments) v Commission [2001] ECR II-2997, paragraph 58) or where the reasons provided to justify a decision do not in fact support that decision.
         Likewise, where an assessment by the Commission is not supported by certain evidence or certain facts, it must be regarded
         as not having been made in an appropriate and not unreasonable manner (Case C-16/90 Nölle [1991] ECR I-5163). In the applicant’s submission, the assertion that there was no collective dominant position is not supported
         by relevant facts, reasoning or evidence and the Commission has failed to fulfil its obligation to assess all the relevant
         factors.
      
      60      The applicant maintains that the Decision is vitiated by manifest errors of assessment in the determination of product homogeneity,
         transparency and the existence of deterrents, in the assessment of countervailing power and in the analysis of the common
         policy.
      
       Product homogeneity
      61      In the applicant’s submission, the Commission made an error of assessment in taking the view that content heterogeneity prevailed
         over format homogeneity, while accepting that the consumer buys records by many artists and of many genres and that there
         is therefore a ‘continuum of substitutability’. In any event, the parameter relating to product heterogeneity would be relevant
         only if pricing were set on the basis of individual titles and not, as in this case, on the basis of a few reference prices
         (recitals 110 and 111 to the Decision). If the Commission’s logic were followed, there could never be a dominant position
         in intellectual property industries, since there can never be total homogeneity of content.
      
       Transparency
      –       General argument
      62      The applicant maintains that the evidence adduced indicates that the majors’ pricing is certainly sufficiently transparent
         to enable them to align their prices. It submits that the Commission has adduced no evidence to invalidate that analysis,
         but merely inferred from the alleged variation in discounts that transparency could be eliminated or reduced to the point
         at which price alignment would no longer be possible.
      
      63      The error of assessment is apparent from the Commission’s own findings that:
      
      –        there is parallelism and relatively similar price development on the part of the majors on average net prices (recitals 75,
         82, 89, 96 and 103 to the Decision);
      
      –        PPDs could be used as a focal point for alignment (see recitals 76, 83, 90, 97 and 104 to the Decision);
      –        PPDs and average net prices have moved closely in parallel (recitals 77, 84, 91, 98 and 105 to the Decision).
      64      The applicant observes that PPDs are transparent, that retail prices are known, that average net prices move in parallel with
         PPDs and that retailers’ margins are known with sufficient accuracy. It follows, in the applicant’s submission, that net prices
         to retailers (that is to say, PPDs less discounts) are transparent in spite of the discounts. That is also clear from the
         statement of objections (points 81 to 92) and from recital 77 to the Decision, which states that ‘[i]f a significant deviation
         from pricing policies was being implemented by the majors through the grant of discounts, this deviation would have been reflected
         in their average net prices’.
      
      65      The applicant claims that the Commission made a manifest error of assessment by placing undue weight on discounts, especially
         campaign discounts, because:
      
      –        it relied on the information provided by Sony and BMG on discounts rather than on the information on the parallelism between
         PPDs and net prices for all of the majors (see footnote 43 to the Decision);
      
      –        according to the information provided by retailers, the discounts are transparent. Twenty of the 26 retailers questioned by
         the Commission stated that the majors were aware of the discounts given by the others. That is particularly true of file discounts,
         the most important discounts, as they are negotiated annually;
      
      –        Sony and BMG produced weekly reports monitoring the retail market which included information on their competitors (recital
         113 to the Decision);
      
      –        for compilations, the majors have joint distribution arrangements and joint ventures in the course of which file discounts
         are revealed;
      
      –        there is a high rate of transfer of senior executives between the record companies;
      –        the weekly charts provide information on sales by title, which makes it easy to detect the titles that become hits and generate
         the bulk of sales (recital 73 to the Decision);
      
      –        according to the Report of the Office of Fair Trading (the United Kingdom competition authority), information on competitors
         is more readily available on the market for recorded music than in any other industry.
      
      66      The applicant observes that, on the basis of those factors, the Commission concluded, at point 81 of the statement of objections,
         that ‘discounts [were] mostly stable and [were] not used to effectively alter pricing policy’. The applicant maintains that
         the facts have not changed since then. 
      
      67      In any event, campaign discounts are generally not used in respect of chart records, which generate about 80% of revenue,
         but only to entice consumers to draw on the list of titles in the back catalogue, and they have little impact on the sample
         which the Commission considered (recitals 70 and 71 to the Decision). Furthermore, as the data relating to campaign discounts
         which the Commission examined related only to Sony and BMG, they are even less relevant.
      
      68      The proportion of the majors’ pricing structure potentially affected by a lack of transparency is therefore small, as may
         be seen from the report annexed to the application which explains the pricing and discounts system in Europe.
      
      69      The applicant maintains that the Commission had sufficient material against which to test its analyses but that it failed
         to do so, in particular, in respect of the evidence concerning retailers. By not properly assessing the facts and attaching
         too much importance to discounts, in particular campaign discounts, the Commission made a manifest error of assessment.
      
      –       General observations on the new evidence 
      70      On the basis of the new information produced by the Commission in the annexes to its defence, the applicant infers that the
         Commission appears to have based its assessment that the market is not transparent on the complexity of the individual variations
         in discounts between customers and between individual titles, and over time. However, the existence of such individual variations,
         which are sometimes considerable, does not preclude the possibility that pricing is governed by a finite number of known structures
         and rules which make average prices predictable and from which any significant and systematic deviation would be apparent.
      
      71      Such rules might not perhaps make it possible to predict the price of each individual release charged to each individual retailer
         and at every point in time, but would none the less make it possible to know, with a sufficient degree of certainty, the net
         prices that would result from a set of PPDs and to establish whether or not competitors were complying with those rules. They
         therefore provide the transparency necessary for the existence of collective dominance. Coordination of behaviour, which is
         apparent in the parallel movement of PPDs and net average prices, might therefore simply emerge on the basis of commonly-known,
         well-understood structures which are capable of being monitored, rather than on the basis of perfect and complete knowledge
         of each individual pricing decision.
      
      72      The applicant maintains that the Commission has not investigated whether the observed parallelism in average prices (both
         gross and net) could have resulted from the coordination of behaviour resulting from such rules, but has concluded rather
         that that was not the case, since there were individual variations, without considering whether those variations were statistically
         significant and had a material impact on averages. 
      
      73      Such rules do not apply to all cases, but to a substantial portion of each major’s sales in each class of record (new releases,
         new artist, full-price catalogue, mid-price catalogue, budget catalogue, etc.), for each of which there is a finite number
         of general retail strategies which govern the vast majority of sales (re-charting a record, participating in retail campaigns,
         buying shop-window positioning, etc.). Those sales strategies may admittedly differ in each territory and according to customers
         (supermarkets, specialist chains, independent stores, etc.), but are none the less finite in number and known by sales personnel.
         Those rules or structures are sufficient to permit price coordination without any need for specific knowledge of net and gross
         prices for individual releases and, moreover, in an environment in which demand for individual titles varies and in which
         the success of albums cannot be predicted with certainty, offer the flexibility necessary to adapt in individual cases without
         undermining the overall pricing structure. 
      
      74      Individual variations must not obscure the fact that overall net prices are closely aligned to gross prices and that that
         is likely to be the case because all undertakings follow certain general rules which make overall pricing highly predictable
         and systematic divergences apparent. There is therefore transparency. 
      
      75      Examination of the new evidence annexed to the defence shows that the Commission has focused on individual variations without
         considering whether they were statistically significant. The Commission has not undertaken a proper statistical analysis of
         the underlying data or considered the significance of price or discount ranges or the relevance of variations within common
         pricing bands, nor has it questioned retailers in order to ascertain whether or not individual variations were within the
         general rules of the pricing system. The Commission has concluded, incorrectly, that the mere existence of variations precluded
         the possibility that that variation is caused by a few isolated cases, while the bulk of sales are subject to prices determined
         on the basis of commonly-known and predictable rules. 
      
      76      Furthermore, the Commission has examined the evidence using flawed methodology and without carrying out the necessary tests.
      
      77      The applicant makes the following general observations on the new evidence adduced by the Commission:
      
      –        a large part of the data is not volume-adjusted for the purpose of assessing the significance of ranges of pricing and discounts.
         Where the data are aggregated correctly – that is to say, between all players and adjusted for volume – variations are much
         less significant;
      
      –        in most cases, the data are not analysed from a statistical point of view and it is therefore impossible to ascertain whether,
         in relation to different classes of products, the variations are significant;
      
      –        with the exception of a small number of data used in the statement of objections, the data compare only the pricing of the
         parties to the concentration. The Commission’s argument that establishing opaque discounting practices between two majors
         is sufficient to reduce transparency is wrong in the light of the fact that Sony and BMG had been performing very differently
         on the market and that, with differing performance across a series of releases, price and discount ranges would vary even
         in a uniform pricing system. Moreover, the parties to the concentration were historically the two most different majors, so
         that the concentration would not only reduce the number of players but also make them more similar;
      
      –        the Commission did not investigate whether there were data within the majors that directly contradicted the alleged variety
         and complexity of pricing, namely budgets or other data which accurately predict net and gross prices and discounts and whose
         construction is parallel between competitors and stable over time;
      
      –        testimony from executives of the parties to the concentration does not focus on key questions – such as the existence of general
         pricing rules and the monitoring of prices – and was not tested. 
      
      78      The Commission’s view that average net prices are the expression of a multitude of quite diverse individual decisions and
         that the latter must be observable with sufficient certainty in order to permit meaningful coordination of net prices is incorrect,
         since it is sufficient that each undertaking can monitor whether the pricing decisions taken by each of the other undertakings,
         across their releases, comply with certain pricing rules in order to make price movements known to each other and to sustain
         tacit collusion.
      
      79      The variations observed by the Commission on the basis of the data supplied by the parties to the concentration, apart from
         being less material than the Commission seems to believe, cannot be taken as evidence of opacity of pricing, because, as in
         any industry in the intellectual property sector in which individual titles’ performance is variable and subject to a diversity
         of marketing activity, but where aggregated slates of such titles conform to generally known rules, it is perfectly possible
         to explain any variation in the range of discounts and prices by reference to a few commonly-known principles.
      
      80      The applicant expresses surprise, moreover, that the Commission has included very little evidence used in the statement of
         objections, some of which was weighted and covered the entire industry, but focused rather on the information supplied by
         Sony and BMG, which lacks those qualities. The differences must therefore be reconciled before the initial data are rejected
         and it does not appear that the Commission has carried out a balanced assessment.
      
      –       Individual examination of the various pieces of evidence 
      81      The testimony of the executives of Sony and BMG set out in Annex B.2 merely confirms that different discounts were given to
         different customers, but does not relate to whether or not those discounts were largely determined by a series of general
         rules. Although the statements emphasise the very complex nature of the pricing mechanism, in reality the annex which seeks
         to demonstrate the complexity of campaign discounts belies that complexity by describing the operation of the discounts on
         a single page. The question that should have been asked was whether there were standard margins associated with different
         pricing categories and whether most of the discounts tended to cluster within narrow ranges. The questions appear to have
         been conceived in such a way as to avoid disclosing the fact that mark-ups could be known as general rules and therefore did
         not need to be known on a release-by-release basis and that there was no need to reverse-engineer individual prices in order
         for one large record company to be able to monitor the prices applied by its competitors. Nor were those questions put to
         retailers, although that would have permitted a comparison of their answers.
      
      82      As regards the annex which shows the percentage of Sony’s and BMG’s gross sales in their top 10 PPDs between 1998 and 2003,
         which, according to the Commission, demonstrates the unpredictability of success and therefore the need for each major to
         monitor the PPDs of more than 80 of its competitors’ albums, the applicant notes certain inconsistencies in the data (such
         as variations in the periods) and claims that the data show nothing other than that the merging parties sell their products
         at different PPDs. That is irrelevant in so far as the Decision states that the PPDs are rather transparent. Furthermore,
         contrary to what the Commission contends, it follows from recital 111 to the Decision that ‘majors only need to monitor the
         pricing points of a limited number of best-selling albums to account for most of the sales’. Nor does that information contradict
         the considerations expressed by the Commission at the hearing, according to which a large majority of each major’s sales was
         accounted for by very few PPDs. It is not necessary to monitor the prices of more than 80 albums, since there are generally
         understood principles and rules; in order to monitor overall respect for coordination, it is sufficient to establish, for
         very few titles, whether those rules have been observed and whether anomalies are systematic. The conclusion which the Commission
         draws from the variation in the percentage of the gross sales of the parties to the concentration is therefore unwarranted.
      
      83      Furthermore, those charts seem to emphasise one factor, namely the unpredictability of success, which contrasts with the key
         statements made in the Decision, that (i) PPDs are transparent and present a focal point for alignment (recitals 76, 83, 90,
         97 and 104 to the Decision); (ii) the monitoring of other majors’ list prices is possible (recitals 76, 83, 90, 97 and 104
         to the Decision); and (iii) the majors only need to monitor the pricing points of a limited number of best-selling albums
         to account for most sales (recital 111 to the Decision). Last, even on the assumption that it is necessary to monitor the
         PPDs of more than 80 albums (or 60 following the concentration), that does not appear to be as onerous a task as the Commission
         suggests.
      
      84      As regards the annexes dealing with the average invoice discounts granted by Sony and BMG to their top 10 customers in four
         out of the five large Member States, the applicant states that it wonders first of all to what extent the differences in average
         invoice discounts reflect differences in treatment of the various customers rather than differences in the relative performance
         of the portfolios of the parties to the concentration, since the strength of the releases of a large record company and its
         business mix (chart releases, supermarket activity, catalogue activity, specialist and campaign activity) would affect the
         average discount granted to customers. Second, any differences in the treatment of customers by the parties to the concentration
         do not imply that their pricing decisions are opaque, since those differences may be systematic and predictable, and stable
         over time.
      
      85      The annex which is supposed to show examples where, according to the parties, there is no correlation or parallel movement
         is irrelevant, as it could be explained by the difference in performance of the portfolios of the parties to the concentration
         and, moreover, shows remarkable similarities (lower discounts granted to the same customer, or discounts changing at the same
         time, or differences that are stable over time). Only the example of customer 1 in Germany is consistent with the view that
         one of the majors can cut effective prices without that being matched by its competitors, but a single specific variation
         during a specific year in a given territory in relation to a specific customer is not convincing. Furthermore, as the charts
         only look at Sony’s and BMG’s data, and as those data are not weighted, the variations are exaggerated. That is particularly
         true of the prospective analysis that the Commission ought to have undertaken, because since the concentration combines two
         undertakings performing very differently it might increase symmetry and homogeneity and therefore the likelihood of tacit
         collusion.
      
      86      As regards the annexes which present supposed evidence of variations in invoice discounts granted by the parties to the concentration
         over a five-year period to their top 10 customers for their top 20 compact discs (‘CDs’), the applicant observes that the
         charts show only ranges of discounts and that these may be misleading, as they show extremes rather than averages and statistically-significant
         variations around those averages. Wide discount ranges might be explained by some rare exceptions, with the vast bulk of discounts
         being at the same level. Furthermore, in addition to their methodological inadequacies, those charts show some interesting
         regularities. For example, in country A both parties to the concentration generally offer higher discounts to wholesalers
         than to supermarkets and general retailers and one of the annexes to the defence shows a surprisingly well-aligned relationship
         between the ranges of discounts. 
      
      87      As regards the annexes which, in the Commission’s contention, show that the parties to the concentration did not follow a
         uniform discount practice, that their practices evolved over time and that in 2003 the breakdowns of the discounts granted
         by the parties to the concentration were not very similar, the applicant again emphasises that the differences found in the
         ranges of discounts over time and between the parties to the concentration could be the result of differences in performance
         and that that does not in any way suggest that discounts are not the consequence of a known set of rules. Furthermore, the
         data presented point rather in the opposite direction from that indicated by the Commission (structure of discounts that are
         quite stable and similar, or converging, and a high correlation factor).
      
      88      The applicant maintains that discount structures do not vary over time as much as the Commission’s analysis suggests. The
         figures show the coefficient of correlation of the discount structure of each of the parties to the concentration in a given
         year and the discount structure for the previous year. Even though the business mix affects discounts, the overall high correlation
         coefficients suggest that discount structures remain relatively stable over time, thus producing fairly predictable net prices
         from transparent PPDs. 
      
      89      Furthermore, the presentation of data in very narrow bands, in combination with particular cut-off points, may accentuate
         the differences (for example, if the discount changes from slightly below 15% to slightly above 15% there is a change in band
         without a significant change in the actual discount). Last, the applicant emphasises that if performance were based on the
         success of Sony’s and BMG’s top 20, there would be a change in prices in a highly competitive market. As that is not the case,
         the applicant concludes that the discount mechanism is not really a strong competitive element or a source of opacity.
      
      90      As regards the annex showing the distribution of net prices for Sony’s and BMG’s top five customers in 2003, the applicant
         submits that the Commission’s inference that different customers make quite different proportions of their purchases from
         a given major in the various net price bands is of questionable relevance, since the transparency and predictability of pricing
         do not require that purchase patterns be the same, or similar, between customers of the two majors. As the determining factors
         for discount levels necessary to achieve sales targets are product mix and the performance of frontline new releases among
         customers, it is difficult to see how the Commission reached the conclusion that there was a difference in the distribution
         of net prices in general for the two majors. 
      
      91      Furthermore, although those data relate only to Sony and BMG, they are none the less more appropriate because they are weighted.
         A more detailed examination of the distributions country by country shows remarkable similarities presented in diagrammatic
         form.
      
      92      Furthermore, the Commission’s conclusion that one of the annexes shows differentiation between Sony and BMG is not consistent
         with the assessment at recitals 74 and 75 to the Decision that their net average prices were relatively similar, which, on
         the balance of probabilities, suggests the use of pricing rules which ensure that the majority of prices are clustered around
         a few price points. Rather than support the view that complex pricing makes prices opaque, that evidence would appear to support
         the opposite view that prices are fairly predictable and similar in spite of the apparent complexity of individual pricing
         decisions.
      
      93      The applicant contends that the annex showing Sony’s quarterly average net prices per album in the most-used PPDs does nothing
         to indicate opacity, as the chart is subject to the range problem, that is to say, it merely shows extremes without analysis
         of weighted averages and variations from averages. Besides, the annex is irrelevant as it relates only to Sony and is not
         comparative.
      
      94      The following annex is also irrelevant, as it is not comparative and seeks only to show that BMG offers retailers different
         types of discount.
      
      95      The applicant also criticises the Commission for not having indicated whether the apparent variations in the level of campaign
         discounts might be explained by a few simple principles. The applicant finds that surprising, since the principles set out
         by the Commission in one of the annexes to its defence suggest that such rules exist in relation to campaign discounts and
         that they are very simple, as follows: 
      
      i)      campaign discounts vary with the size of the order (other than in the specific case of France);
      ii)      campaign discounts vary with the type of customer (for example, in Germany wholesalers and music clubs receive generally higher
         discounts);
      
      iii)      campaign discounts vary with the type of title or release (for example, depending on the artist’s popularity, the target audience);
      iv)      campaign discounts focus on customers with a reputation for selling a particular genre, based on the nature of the retailer
         and the demographics of its customer base;
      
      v)      campaign discounts vary with the nature of the campaign (for example, only one title, or a basket of titles, usually catalogue);
      vi)      campaign discounts vary according to the level of marketing spend that the retailer is prepared to provide in return.
      96      The applicant contends that if those rules are commonly known, it should not be difficult to predict with reasonable accuracy
         the level of discount that a major can be expected to offer to a particular customer for a particular title in a particular
         campaign and therefore to establish whether actual discounts are in line with those rules. The Commission does not appear
         to have investigated that point.
      
      97      Furthermore, as one of the annexes provides data for only a single year, it is not conclusive, since it does not make it possible
         to assess whether discount levels are stable and therefore predictable.
      
      98      As regards the annex consisting of a number of monitoring reports submitted to the Court by the parties to the concentration,
         the applicant observes that that evidence does not suggest that there is no pricing mechanism consisting in a series of general
         rules and guidance on how prices are set. The Commission should have focused not on whether there was specific monitoring
         of individual discounts but on whether there was any necessity for such monitoring since the variations within the pricing
         system are exceptions to the price points which apply to the vast majority of sales. 
      
      99      As regards the annex containing the study prepared by the economics consultancy RBB Economics (‘the RBB study’), which finds
         that a record company would not be in a position to infer wholesale prices from the observed retail prices at which competitors’
         products are sold, the applicant claims that that study concentrates essentially on the pricing of individual releases and
         not on whether there is a systematic link between PPDs and net wholesale prices for the large majority of releases over a
         reasonable period. Different retailers may indeed pursue different strategies when setting their retail prices, but it would
         be surprising if there were no clear-cut and systematic relationship between average retail prices of releases in a particular
         category, sold at a particular retailer, and their effective wholesale prices, over a sufficiently large range of titles and
         over a reasonable period. The fact that there is no single uniform mark-up applied automatically to wholesale prices does
         not mean that retail prices and wholesale prices are unrelated to such an extent that it is impossible to monitor compliance
         with the general pricing principles. There is a general level of mark-up for different categories of product (top price, super
         top price, mid-price, developing artists, budget, etc.).
      
      100    The applicant observes that the study avoids examining the rules of the pricing system and expresses its doubt that the Commission
         subjected the study to examination with retailers or third parties or that it requested the aggregated price and discount
         data that every major must have in its budgets. Nor is there any comparison with the other data already collected. Such an
         examination would have revealed that, contrary to the claims made in the study:
      
      –        there is a systematic link between classes of product if those products are delineated properly to reflect their performance,
         maturity and importance in the customer base;
      
      –        the assertion that retailers do not apply a standard mark-up to wholesale prices is misleading, since it deliberately avoids
         the existence of classes of product and classes of retail campaigns, which are both known and consistent between majors. The
         study ignores the requirement to explain the clustering of discount levels in aggregate around a small number of price and
         discount levels. Variations in mark-ups merely reflect the accommodation of the rules to demand;
      
      –        more generally, the Commission failed to consider the fact that it was examining an industry in the intellectual property
         sector in the recorded music market. The fact that individual releases move through different known and understood price and
         discount categories during their life-cycles does not necessarily imply that there cannot be transparency or even coordination.
      
       Deterrents
      101    The applicant maintains that the Commission failed to examine all possible forms of retaliation, but looked only at those
         relating to compilation joint ventures. Thus, if a major were to introduce a policy of reducing prices to retailers, the others
         might punish that major by inducing retailers to reject the lower price policy by offering them higher discounts and increased
         cooperative advertising. A further deterrent would be to restrict the chart eligibility of the ‘deviant’ major’s lower-priced
         products or products which display unilateral innovation. The criteria for chart eligibility are generally determined by committees
         composed on the whole of record companies, sometimes in conjunction with retailers, and relate in particular to formats or
         minimum prices.
      
      102    The applicant maintains that the Commission made a manifest error of assessment in that, while finding the existence of credible
         deterrents, it concluded that there were no such deterrents, on the ground that it had found no evidence that they had been
         used. The most effective deterrent is the one that does not have to be used.
      
       Constraints
      103    The applicant contends that the Commission’s analysis is incomplete in so far as the decision contains no examination of countervailing
         market power. In the statement of objections, moreover, the Commission found that neither the independents nor retailers imposed
         effective competitive constraints on the majors.
      
       Absence of a proper analysis of common policy 
      104    In the applicant’s submission, the Commission focused its analysis on price competition and wholly neglected a series of other
         issues although, according to the Notice on horizontal mergers (OJ 2004 C 31, p. 5), coordination may take various forms.
      
      105    Thus, the Commission should have considered whether or not it was more beneficial for the majors to compete vigorously for
         market share than to adhere to a common policy. The fact that the majors’ market shares are relatively stable and that changes
         are mainly the consequence of the acquisition of independents or of mergers among themselves indicates an absence of genuine
         price competition or a common policy consisting principally in not engaging in highly competitive actions, especially where
         the market is oligopolistic (Joined Cases 142/84 and 156/84 BAT and Reynolds v Commission [1987] ECR 4487, paragraph 43).
      
      106    Nor did the Commission consider whether the majors had parallel licensing policies for online music or for the signing of
         artists. It did not examine all the features which provide evidence, detailed in points 96 to 116 of the statement of objections,
         that the music markets are ‘particularly conducive to coordination and facilitate the monitoring of such coordination’ (point
         94 of the statement of objections). The Commission none the less identified 10 factors indicating tacit collusion, including
         structural links, licensing and distribution agreements, joint ventures and compilations.
      
      107    The Commission also failed to consider whether the concentration might result in an ability to reduce supply, in terms of
         numbers of new titles or in terms of originality of new releases, or whether it would impoverish creativity, quality and diversity
         in musical choice (see Commission Decision of 7 January 2004 declaring a concentration compatible with the common market and
         the functioning of the EEA Agreement (Case No COMP/M.2978 – Lagardère/Natexis/VUP), OJ 2004 L 125, p. 54, paragraph 674) or
         would have an impact on consumer choice, as it had done in the statement of objections in the EMI/Time Warner case (see point
         55, which deals with marginalisation of the independents and its impact on the choice and diversity of music being offered
         to the public). Last, the analysis took no account of Article 151(4) EC or of cultural diversity.
      
      c)     Misapplication of the law on collective dominance 
      108    The applicant maintains that the Commission made three errors of law.
      
      109    In the first place, the Commission concluded that prices were not transparent, on the ground that it was not certain that
         the transparency was total, when, according to paragraph 62 of Airtours v Commission, paragraph 45 above, the test is whether there is ‘sufficient market transparency’ for all members of the oligopoly to be
         aware ‘sufficiently precisely and quickly’ of the way in which other members’ market conduct is evolving. In this case there
         is sufficient transparency.
      
      110    In the second place, the Commission considered that because of the discounts there is no common policy, but did not establish
         that the discounts led to significant price reductions, so that, in the applicant’s submission, any competition by means of
         the discounting structure is marginal. According to paragraph 60 of Airtours v Commission, paragraph 45 above, however, marginal competition does not in itself invalidate a finding of a collective dominant position.
         The trader must be aware that ‘highly competitive action designed to increase its market share (for example a price cut) would
         provoke an identical reaction by the others’. In particular, the Commission need only prove ‘the lack of effective competition
         between … members of the dominant oligopoly’ and not the elimination of all competition (see, to that effect, Joined Cases
         T-191/98 and T‑212/98 to T-214/98 Atlantic Container Line and Others v Commission [2003] ECR II-3275, paragraph 645).
      
      111    In the third place, the Commission erred in law by basing its analysis on the absence of past evidence of retaliation, whereas
         according to paragraph 195 of Airtours v Commission, paragraph 45 above, the Commission need not necessarily prove that there is a specific ‘retaliation mechanism’ of greater
         or lesser severity but must show the existence of deterrents.
      
      2.     Second part
      112    The applicant observes that, in order to establish whether or not a concentration would strengthen a collective dominant position,
         the Commission must, by way of prospective analysis, examine its impact on the reference markets (Airtours v Commission, paragraph 45 above, paragraphs 58 and 59). However, the Commission carried out no prospective analysis and wholly failed
         to consider the question of the strengthening of the dominant position, since, following a retrospective analysis, it wrongly
         found that there was no pre-existing dominant position capable of being strengthened.
      
      113    To the extent to which the strengthening of the dominant position was examined on the basis of the retrospective analysis,
         the decision is vitiated by a manifest error of assessment for the reasons set out in the first part, while the failure to
         carry out a prospective analysis constitutes an error of law.
      
      B –  Arguments of the Commission
      114    The Commission is of the view that the three grounds of annulment raised by the applicant in respect of the market for recorded
         music overlap to a large extent and that it will be therefore useful to set out, first of all, an account of the reasoning
         in the Decision and of the evidence on which it based its conclusions, before proceeding to examine certain misrepresentations
         of the Decision’s content which appear in the application and then concluding by analysing the specific arguments raised by
         the applicant.
      
      1.     The Commission Decision and the evidence on which it is based 
      a)     Context
      115    As regards the pricing system applicable to recorded music, the Commission explains that each major and each independent record
         company periodically determines a range of different price lists for its CD albums, known as ‘published prices to dealers’.
         Each major normally has more than 50 PPDs of that type, of differing importance, which may be allocated to ‘full-price’, ‘mid-price’
         and ‘budget’ categories, and fixes the list price for every CD album it issues by reference to one of those PPDs. However,
         the net price actually charged by a record company to a customer (a retailer or a wholesaler) is lower than that list price
         owing to invoice discounts (file discounts and campaign discounts), which may vary from customer to customer, over time, or
         (in the case of campaign discounts) from album to album. Each record company negotiates with each of its customers an annual
         file discount (possibly with different rates for pop, classical and television-advertised albums) which applies to all sales
         to that customer. Campaign discounts, on the other hand, are set on a case-by-case basis, for varying durations, for individual
         albums or baskets of albums which the record company wishes to promote; they are not necessarily granted to all customers
         and the amount is not necessarily the same. The Commission draws attention to the fact that the net price of a given album
         to a given customer must be distinguished from the average net price of all albums sold by a given major in a given year,
         which is composed of the sum of all the (potentially widely-varying) net prices for individual albums sold to individual customers,
         divided by the total number of albums sold by the record company concerned.
      
      116    The Commission found that there had been a significant fall in demand for recorded music on CDs since 1999 (recitals 55 to
         59 to the Decision).
      
      b)     The five large markets (Germany, the United Kingdom, France, Italy and Spain)
      117    The Commission states that it initially analysed whether an existing common understanding on prices among the majors could
         be identified in the five large Member States (recitals 69 to 108 to the Decision). It investigated whether there was parallelism
         in prices, by examining movements in the majors’ average net real prices and considering whether any observable parallelism
         could be explained by coordination. In order to do so, the Commission first looked at PPDs as possible focal points and then
         considered whether discounts were aligned and sufficiently transparent to allow efficient monitoring of any coordination in
         respect of net prices (recital 73 to the Decision).
      
       Alignment of average net prices and PPDs 
      118    In the five large markets, the Commission found only a partial similarity between net real prices. In each country, the net
         average real prices of each major moved for most of the time in a range of around 10% or more by reference to the others.
         The Commission considered that such a degree of similarity was not conclusive (recitals 75, 82, 89, 96 and 103 to the Decision),
         for obvious reasons. First, no parallelism of average net real prices was observed. Second, parallelism of behaviour is not
         generally sufficient to establish existing coordination if the mechanisms of that coordination cannot be identified. Third,
         in the present case the Commission did not conclude that movements in each major’s average net prices were or could be known
         by the other majors. Average net prices are the expression of a very large variety of individual pricing decisions and those
         decisions must be capable of being identified with sufficient certainty if they are to permit meaningful coordination of net
         prices.
      
      119    The Commission did in fact find some indications that list prices (that is to say, PPDs) could be used as a basis for alignment.
         In each of the five large Member States, the main part of each major’s total sales (more than 55%, indeed 85% in one country)
         was made using five PPDs and even (with the exception of Spain) between one and three PPDs for half or more of the top 100
         single album CD sales in 2003. Moreover, list prices are relatively transparent since they are shown in the majors’ catalogues
         (recitals 76, 83, 90, 97 and 104 to the Decision).
      
      120    However, the Commission identified two types of obstacles to the use of PPDs as a reference point for tacit coordination on
         net prices and as a means of monitoring compliance with such coordination – one relating to the degree of complexity inherent
         in the PPDs themselves and the other to the complexity and opacity of the relationship between list and net prices.
      
       Complexity and PPDs
      121    As regards PPDs, CD albums are not a perfectly homogenous product, owing to the difference in content (recital 110 to the
         Decision). Although a ‘continuum of substitutability’ permits at least albums of the same genre to be regarded as belonging
         to a single product market (recitals 9 to 13 and 110 to the Decision), CD albums remain differentiated heterogeneous products.
         Consequently, even if the pricing and marketing of CD albums at wholesale level is quite standardised (elements of standardisation
         of wholesale pricing are: the three broad price categories; each major’s standardised set of PPDs; and the fact that file
         discounts and agreed return rates for unsold records are normally determined according to a limited number of parameters),
         individual albums have varying degrees of anticipated and actual success, which influences the initial fixing of the PPD when
         the album is released and subsequent movements in the PPD.
      
      122    Furthermore, owing to the unpredictability of success, each major wishing to make absolutely certain that coordination of
         net prices was being complied with by the other majors would presumably be required to monitor the PPDs of more than 80 albums
         produced by its competitors per annum in a given country (or more than 60 albums of that type per annum following the concentration,
         since each major’s top 20 albums account for a minimum of 30% of its total sales and in many cases over 50% (recital 111 to
         the Decision)). A record company wishing to obtain a more complete picture of the market would face a huge increase in monitoring
         activity, as the top 100 albums of each major would normally account for around 70 to 80% of its total music sales (recital
         71 to the Decision) and such an exhaustive survey would require the monitoring of almost 400 albums. The parties to the concentration
         have submitted evidence that the mix of PPDs for their respective top 20 single CD albums often changed substantially from
         one quarter to the next. Although weekly hit charts facilitate such monitoring by identifying successful titles (recital 112
         to the Decision), they do not eliminate the problem.
      
      123    As regards the finding in the Decision that ‘[there were] some indications that PPDs could have been used as focal points
         for an alignment of the majors’ prices’, the Commission emphasises that that is not a definitive finding. Although the Commission
         found that the monitoring of list prices appeared to be possible, the shifts in use of different PPDs depicted in an annex
         to the defence show that such a monitoring exercise, combined with efforts to identify discounting practices, would at the
         least be resource-intensive.
      
       Alignment and complexity of prices 
      124    In the five large Member States, the Commission identified a close link between the movements of Sony’s and BMG’s average
         gross real prices and average net real prices over a six-year period, with very stable net-to-gross price ratios both across
         albums and over time (recitals 77, 84, 91, 98 and 105 to the Decision). However, the stable relationship between average gross
         and net prices (that is to say, the average discount) of each of the parties to the concentration for all albums in a given
         country inevitably levels out the effects of different types of invoice discounts (file discounts and campaign discounts),
         of differences in invoice discounts (file discounts and campaign discounts) granted to different customers and of differences
         in invoice discounts (essentially campaign discounts) granted for individual albums. The conclusion regarding the stability
         of the ratio of average net and gross prices must also be qualified by the methodological limitations of the analysis. Only
         Sony’s and BMG’s data were taken into account, because the other majors stated that they only billed net prices; and, in order
         to overcome the problem arising from the fact that a given album may have more than one PPD in the course of a given year,
         the parties to the concentration attributed a single gross price to each album corresponding to the PPD at which most copies
         of that album were sold in the year in question (gross sales per album were thus calculated simply as PPD x number of albums
         sold). The gross price recorded for each album and used to calculate each major’s average gross price is therefore an approximation.
      
      125    Furthermore, a stable ratio of average gross to average net prices is not sufficient to prove past or likely future coordination
         in the absence of a demonstrable mechanism enabling the majors to monitor the emergence of that gross-net relationship from
         a multitude of individual pricing decisions. The Commission did not discover sufficient evidence of such a mechanism.
      
      126    The Commission noted, first of all, that Sony’s and BMG’s invoice discounts (file discounts and campaign discounts) were by
         far the most important discounts in every large Member State (with the exception of France in BMG’s case). The overall levels
         of their respective invoice discounts varied to some extent, when expressed as a proportion of their respective aggregate
         gross sales to their top 20 customers in those Member States (the difference between those levels was [confidential] (1) percentage point of their respective aggregate gross sales in Italy, [confidential] percentage points in the United Kingdom and Spain, [confidential] percentage points in Germany and [confidential] percentage points in France).
      
      127    Furthermore, the Commission found no evidence that invoice discounts were sufficiently aligned between the parties to the
         concentration on a customer-by-customer basis in the big Member States to permit an inference of coordination and transparency.
         Recitals 79, 86, 93, 100 and 107 to the Decision record the differences in the total invoice discounts of the two parties
         at individual customer level, expressed as a proportion of gross sales to each individual customer. The Commission found that
         the respective average invoice discounts which they granted to each of their top 10 common customers in the large Member States
         other than France in the period 2000 to 2003 varied by between 2 and 5% (United Kingdom, Germany, Spain) or 1 and 3% (Italy).
         In the United Kingdom, Germany and Spain, the average annual discounts of the two parties to the concentration for some of
         those important customers varied in certain years by more than 5% of their respective gross sales to those customers. In France
         (recital 86 to the Decision), the average invoice discounts granted by the parties to the concentration to each of their common
         top 15 customers varied more markedly, by up to 10%. Given the importance of BMG’s retrospective discounts and ‘contract discounts’
         in France, the Commission also examined total discounts. It found differences between the two parties to the concentration
         of up to 3% in 2003 among this group of customers, and of about 5% for three of them. Those fluctuations were mainly attributable,
         in all the large Member States, to campaign discounts.
      
      128    The Commission also took into account (recitals 79, 86, 93, 100 and 107 to the Decision) data from all the large Member States
         demonstrating that discounts granted by the two parties to the concentration varied on three dimensions:
      
      –        (i) for a given customer, discounts varied over time; 
      –        (ii) for a given customer, discounts varied from album to album; 
      –        (iii) for a given album, discounts varied from customer to customer.
      129    Although the annex to the statement of objections consisting of charts reproducing the average invoice discounts granted by
         the parties to the concentration to each of their top 10 common retailer customers (that is to say, for any given year, total
         invoice discounts to a given customer divided by total gross sales to that customer) in the United Kingdom, Germany, Italy
         and Spain between 2000 and 2003, showed the broad stability of discounts over time (point 88 of the statement of objections),
         the parties to the concentration pointed out, on the basis of the same charts, that their respective treatment of certain
         customers in the United Kingdom, Germany and Spain was markedly different.
      
      130    As regards the applicant’s observation that ‘[i]t is far from clear … that differences in discounts obtained by the top 10
         customers reflect differences in treatment rather than differences in the relative performance of the portfolios of each of
         the … parties [to the concentration]’, the Commission observes that if that is far from clear, even to an observer with access
         to complete data, it is difficult to imagine how the majors, in conditions of tacit coordination and quite imperfect market
         information, could eliminate ‘interference’ caused by portfolio mix in order to get an accurate picture of underlying discount
         practice or policy.
      
      131    The annex to the defence reproducing evidence provided by Sony and BMG covering a five-year period, shows, in each of the
         five large Member States, the variation within what are sometimes quite wide ranges in the invoice discounts granted by each
         of them to their top 10 customers for their respective top 20 single CD albums in a given year, which represent an important
         part of overall turnover for the majors, so that observable, equivalent treatment at the level of both PPDs and discounts
         would be an essential component of any coordination of net prices. Each table tends to show, for a given major in a given
         country, that certain customers received quite divergent discounts in a given year or over a number of years for those best-selling
         albums and also that there were a number of marked differences in the highest and/or lowest discounts granted to different
         customers in a given year, even for customers in the same category (for example, wholesalers, specialist retailers or supermarkets).
      
      132    Furthermore, comparison of the tables in that annex for Sony and BMG for any given country permits the conclusion that the
         discounts granted by each of them to any given customer in any given year often varied considerably as regards both the highest
         and lowest discounts granted during that period and the range between those two figures.
      
      133    The Commission questions the relevance of the applicant’s conclusion that the tables reveal ‘interesting regularities’ and
         observes that any such ‘regularities’ do not detract from the importance of variation in discounts as evidence of the complexity
         and opacity of net pricing.
      
      134    The annex presenting a breakdown into bands of the discounts granted by the parties to the concentration for their respective
         top 20 CD albums between 1998 and 2003 in the five large Member States, permitted the Commission to ascertain the proportion
         of sales of their respective top 20 single CD albums to all customers made by each of the two majors at a given discount (expressed
         in narrow bands of 2.5%) by reference to the list prices (PPDs) of the albums concerned. More generally, the vertical column
         for each year in those tables shows that, whatever the year or the country, neither of the two majors followed a uniform discounting
         practice even for that restricted selection of their best-selling albums. The horizontal rows, relative to the different narrow
         bands of discounts, also show that the respective discounting practices of both parties to the concentration varied over time,
         from year to year.
      
      135    Furthermore, one of the annexes to the defence shows that, for the year in question, the breakdowns of the discounts granted
         by Sony and BMG respectively on their top 20 albums in 2003 were appreciably different.
      
      136    The applicant’s observation that the differences in the ranges of discounts do not preclude their being based on a known series
         of rules rests on the false presumption that if a set of rules were known, that would suffice for all of the majors to be
         confident that those rules would be respected.
      
      137    The Commission observes that the correlation analysis carried out by the applicant relates to a single party’s discounts over
         time and not to alignment between the parties to the concentration. Furthermore, even if that analysis showed that the discount
         structures of each party to the concentration were relatively stable over time, in spite of changes in the business mix, that
         would actually confirm the Commission’s argument that figures for average net prices can mask considerable fluctuations at
         the level of albums or customers. Last, contrary to the applicant’s contention, the narrow discount bands (of 2.5%) in the
         charts in fact make the analysis less sensitive to small changes in discounts. 
      
      138    The Commission also contends that the applicant’s observations to the effect that some of the charts show, rather, stability
         over time or a high correlation factor between the parties to the concentration are unfounded.
      
      139    The annex setting out, for the five large Member States, the distribution of net prices to the top five customers of each
         of the parties to the concentration, shows:
      
      –        (i) that the distribution of net prices is quite different for the two majors, both in general and for specific customers;
         and
      
      –        (ii) that the way in which purchases by different customers from a given record company are divided between different net
         price bands varies considerably. This observation holds true even for customers in the same category (such as wholesalers,
         specialist retailers, supermarkets), to the extent to which more than one customer in a given category features in the table.
      
      140    The Commission agrees with the applicant that variations in the distribution of the net prices paid by important customers
         to the different majors may be attributable to differences in their purchasing patterns and in the majors’ product mix. However,
         those variations are by no means irrelevant. Even if a major were able to discover the different net prices paid for different
         albums of another major by a common customer (which, on the available evidence, seems unlikely), it would be unable to tell
         whether those prices reflected adherence to the necessarily complex rules posited by the applicant or deviation from those
         rules, unless it had, at the very least, much more information about the albums to which those prices related.
      
      141    Furthermore, if product mix and varying levels of success were to account for all or the greater part of the weighted variations
         in price distribution shown in that annex, that would also indicate the futility of any attempt at coordination based on overall
         average net prices, as contended by the applicant.
      
      142    The Commission disputes the relevance of the evidence which the applicant puts forward in order to show that the documents
         annexed to the defence do not demonstrate significant price variation.
      
      143    Furthermore, the Commission also has evidence, concerning the PPDs of the high-price category, that specific very important
         customers of one of the two parties to the concentration had each paid to that major, over the course of a year (2003), different
         net prices (in other words, they were granted different discounts) for albums having the same PPD. The range between the highest
         and the lowest net price paid for albums at a given PPD is often substantial.
      
      144    It follows from the evidence submitted by BMG concerning the proportion of the total average discount granted to each of its
         top 10 customers in one country (country E) that average campaign discounts per customer varied between around 8.5% and 13%
         and greatly exceeded average file discounts (which ranged between 3% and 10%) for virtually all customers, while in another
         country (country C) the average campaign discount (varying between 2% and 5%) was roughly half or more of the highest generally
         applicable discount, that is to say, excluding a special wholesaler discount. In the three other countries (country B, country
         D and country A), the level of average campaign discounts varied markedly from customer to customer, being between 0.5% and
         12.5%, 0.5% and 13% and around 2.5% and 14.5% respectively. In all three countries, average campaign discounts far exceeded
         average file discounts for one top customer, while they were much smaller for others.
      
      145    Contrary to the applicant’s contention, the fact that each of those annexes shows differences in the net pricing or discounting
         of only one of the notifying parties does not render them irrelevant. The fact that a single major’s discounts vary across
         different customers (including customers of the same type, who might be expected to be interested in similar elements of its
         product mix), indicates that even if a competitor were to acquire knowledge of the discounts granted by that major to one
         customer, that knowledge could not be extrapolated to that major’s overall discounting practices. Moreover, the terms of coordination
         covering individual customers as well as customer types would be much too complex.
      
      146    The Commission also received ‘witness statements’ indicating that, for the same record company, campaign discounts are granted
         for frontline albums as well as for back catalogue.
      
      147    That is confirmed by the annex consisting of charts submitted by the parties to the concentration showing, for each of the
         five large countries, the invoice discounts granted by each of them to its top common customers for the best-selling albums
         in 2002, with very similar, full-price PPDs. The Commission observes that, for any given major and customer, the file discount
         should be stable across albums in any given year, and infers that the variation in invoice discounts granted by a given major
         to a given customer for different albums with the same PPD must be attributable to campaign discounts granted at some stage
         to the frontline albums in question. The charts reveal such variations in the invoicing practices of each of the notifying
         majors vis-à-vis at least some of its customers in all the countries concerned.
      
      148    The Commission emphasises that the applicant criticises its failure to examine ‘some simple principles that would differentiate
         albums at the same price point and that might explain differences in the level of campaign discounts’, but, when describing
         those principles, cites six criteria which, being in principle compatible with each other, would cause a vast increase in
         the number of combinations of rules potentially applicable to campaign discounts alone. The Commission maintains that the
         applicant makes no attempt at quantification, which must be essential if the terms of coordination on price are to make it
         possible to predict with reasonable accuracy the level of discount for a given title during a given campaign – and, of course,
         to establish whether actual discounts are consistent with those rules or deviate from common pricing principles.
      
      149    The variations in campaign discounts are shown in a number of examples: different types of customers were granted different
         levels of discount for albums of a certain musical genre; different customers were granted different discounts for the same
         album; the same customer was granted different discounts for different albums; the same customer was granted discounts limited
         in time for a given album.
      
      150    Last, the Commission’s general conclusion that ‘the level of the different majors’ discounts varied to some extent’ in the
         large markets (recitals 78, 85, 92, 99 and 106 to the Decision) is also supported by economic evidence regarding the discounts
         given by the five majors. On the basis of the information obtained by the Commission from the five majors concerning their
         invoice discounts in 2003, the economic consultants advising the parties to the concentration reached the following conclusion
         in the RBB study:
      
      ‘We also compare the distribution of invoice discounts granted by Parties A, B, C, D and E in each of the five main countries
         in 2003. The analysis shows that there are significant differences in the distribution of invoice discounts granted by the
         majors. This confirms that the majors’ pricing policies are currently not aligned.’
      
       Transparency of discounts
      151    The Decision states that, according to several customers in the large Member States, the majors had ‘some knowledge’ of their
         competitors’ (more stable) file discounts (see footnotes 45, 49, 52, 55 and 57 to the Decision). That issue was discussed
         at length at the hearing before the Commission. The parties to the concentration claimed that a number of the positive responses
         referred to PPDs alone or failed to distinguish between PPDs and discounts. Only five responses (from Belgium, France and
         Italy) out of a total of 36 accessible responses from all countries specifically stated that there was some transparency on
         discounts; the opposite view was expressly taken in 11 responses. On the basis of the retailers’ responses, of the ‘witness
         statements’ by the national executives of Sony and BMG and of the absence of discount information from the sales representatives’
         monitoring reports submitted to it, the Commission concluded that although certain retailers perceived that the majors had
         a certain awareness of the other majors’ pricing policies, that awareness could relate to PPDs, which are relatively transparent,
         and to a certain extent to file discounts, which are negotiated annually, but was unlikely to extend to campaign discounts,
         which are negotiated on a case-by-case basis. The majors’ ongoing relations with a stable customer base (recital 112 to the
         Decision) could allow them to obtain some information on annual discounts but do not appear to be conducive to transparency
         on short-term campaigns.
      
      152    The Commission found that campaign discounts were less transparent than file discounts and that their monitoring would require
         careful observation of retail-market promotions (recitals 80, 87, 94, 101 and 108 to the Decision) but that the systems of
         weekly reports by Sony’s and BMG’s sales forces (which included observations on competitors) did not achieve the requisite
         degree of transparency of those discounts. In particular, the Commission did not find sufficient evidence that monitoring
         of retail prices or contacts with retailers permitted the majors to overcome the transparency deficit as regards discounts,
         in particular campaign discounts.
      
      153    The market monitoring reports submitted by the parties to the concentration do not contain the type of detailed information
         on competitors’ discounts that would permit effective monitoring of net prices of individual albums to different customers.
         In other countries, moreover, the reports are much shorter or even non-existent. BMG’s representatives, in particular, submit
         formal monitoring reports only in France and Austria.
      
      154    Although the Commission agrees that it cannot easily prove that there is no pricing mechanism in the form of a series of general
         rules, it observes that the applicant has not taken the trouble to provide positive proof of how such a pricing mechanism
         would be devised and then applied to myriad individual contracts, or of how it would be enforced.
      
      155    The Commission also expresses surprise that the applicant should directly question the need for monitoring in order to establish
         collective dominance.
      
      156    The Commission’s conclusion concerning the inefficacy of retail monitoring is also based on the complexity and opacity of
         retail pricing. A study submitted by the parties to the concentration shows (i) that there are large variations in the retail
         prices charged by major retailers for comparable CD albums within each major price segment (full-price, mid-price and budget)
         and (ii) that retail pricing is as complex as wholesale pricing. Furthermore, for any given album in the top five selection,
         retail prices often vary both over time, in the case of any given retailer, and, in a much more pronounced fashion, as between
         retailers at any given moment.
      
      157    The evidence indicates that intensive monitoring by the majors of shifts in retail pricing by each retailer for each important
         album would not permit a major to infer the net pricing practices (PPD minus invoice discount) of its main competitors for
         a given album. Retailers do not systematically apply the same mark-up to the wholesale price at a given time either to all
         categories of albums or even to all albums in the more restricted full-price category (table 2.1).
      
      158    Last, the Commission found no demonstrable relationship between retail prices and the invoice discounts granted for albums
         at the same PPD. On the contrary, the study submitted by the parties to the concentration tends to show that, both for full-price
         albums and for other albums, the variations in retail price for a given album at a given time in a variety of different retail
         outlets had no specific relationship with the invoice discounts granted to those retailers for that album (table 3.1).
      
      159    Given such varied and unpredictable retail pricing practices, a major could not conclude with confidence that a given retailer
         would apply the same level or pattern of mark-up for other majors’ equivalent albums as for its own and could not form a reliable
         view of its competitors’ net prices, either for any given album or in the aggregate, on the basis of the ratio of retail price
         to wholesale price applied by a given retailer in respect of its own albums, taken either singly or as a whole.
      
      160    The Commission emphasises that the applicant’s assertion that ‘it would be surprising if there were no clear-cut and systematic
         relationship between average retail prices of releases in a particular category, sold at a particular retailer, and their
         effective wholesale prices, over a sufficiently large range of titles and over a reasonable period of time’ is unsupported
         by any evidence. A sufficiently high degree of aggregation over albums and time will tend to mask the variation at the level
         of individual titles – often with high levels of sales – with which tacit coordination on price must inevitably be concerned.
         A major cannot reliably establish on the basis of the retail-wholesale price relationship for its own albums – which, as the
         applicant insists throughout its observations, represent, at any given time, a specific product mix – whether that relationship
         also holds good for the other majors.
      
      161    The Commission submits that the applicant’s criticisms of the RBB study and of the Commission’s alleged failure to submit
         that study to operators on the market are confined to a number of unsubstantiated assertions.
      
       Structural links
      162    As regards compilations, the parties to the concentration showed that the partners to a joint venture receive only an average
         discount figure (without breakdowns by discount or by customer) on sales of the relevant compilation album. In the light of
         the observed variations in discounting practices over albums, customers and time, of the importance of campaign discounts
         and of the likely differences in campaign discounts for compilations and for single albums, compilations could not ensure
         the necessary transparency and are therefore not relevant to the Commission’s analysis.
      
      163    Likewise, distribution or licensing arrangements rarely bring together more than two majors and would therefore not be an
         adequate vehicle for the multilateral exchange of the very complex information on all majors’ net-pricing practices which
         would be necessary for tacit coordination on that basis. Last, as royalty negotiations in respect of music publishing are
         collective and take place between national associations of record companies (both majors and independents) and national collecting
         societies (representing publishers and authors), and do not address the pricing of recorded music, the Commission concluded
         that they were not relevant for the purposes of analysing transparency.
      
       Retaliation
      164    It is apparent from recitals 114 and 118 to the Decision that the Commission did not seek to verify the existence of possible
         credible retaliation mechanisms (it identified a number of potentially credible mechanisms), but sought, rather, to determine
         chiefly whether the observed degree of parallelism and discount stability at certain very general levels of analysis could,
         in spite of the complexity of individual net pricing decisions, the dispersion of individual net prices on several dimensions
         and the apparent lack of sufficient transparency, be attributable to tacit coordination. Clear evidence of retaliatory action
         by the other majors in response to a ‘deviation’ from the habitual levels of average net prices or average invoice discounts
         could have constituted an indicator (although clearly not a decisive one) of the existence of coordination. The lack of evidence
         of retaliation, in the form of a generalised recourse to greater price competition or at the level of compilations, online
         music or publishing, can be regarded as a ‘negative’ indicator that the observed degree of alignment at an aggregate level
         was not the product of tacit coordination.
      
      165    As regards the more general question whether there are sufficiently credible retaliation mechanisms to sustain coordination
         on the recorded music market, the Commission clearly regarded the possible exclusion of the deviator from compilation albums
         or refusal to participate in its own compilations as being (apart from a return to price competition) the potential method
         most deserving of attention. The elements set out by the Commission in recitals 116 and 117 to the Decision are not conclusive.
         On the one hand, the majors do indeed have a network of compilation agreements with each other (recital 116 to the Decision)
         and those albums account for a substantial part of the recorded music market (between 15 and 20%) and for the most part enjoy
         very high sales (recital 115 to the Decision). On the other hand, a combination of artists from different labels appears to
         be a key factor in such success (recital 115 to the Decision), with compilations involving two or three majors being by far
         the most successful (recital 116 to the Decision). By necessary implication, recourse to that retaliation mechanism could
         mean sacrificing the additional profits that might accrue from a compilation featuring the deviator’s artists. In the light
         of that mix of incentives and disincentives, and in the absence of evidence that such retaliation had been either used or
         threatened in the past, the Commission was unable to conclude that a mechanism which ‘could, in general, represent credible
         possibilities for retaliation by the majors’ was, or would be, sufficiently credible to sustain past or future coordination.
      
      c)     The other Member States 
      166    In the other, smaller, Member States, the main part of each major’s total sales (between [50-60%] and [90-100%]) was made
         using five PPDs and (with the exception of Austria) two PPDs of each major represented between [30-40%] and [60-70%] of each
         major’s total CD sales in 2003.
      
      167    Furthermore, invoice discounts showed a significant variation on a customer-by-customer basis for each of the parties to the
         concentration. The smallest range between the highest and lowest average discounts granted by one of the parties to that concentration
         to its top 10 customers (top five in Ireland) was 5.7%, while the range between the highest and lowest average discount granted
         to a top 10 customer was not less than 10% in any country, for both notifying parties.
      
      168    The Commission observed (recitals 148 to 152 to the Decision) that there were a number of similarities between the markets
         in the small countries and the five large markets. On the basis of the evidence adduced for the small countries, it was impossible
         to demonstrate that there was genuine tacit coordination among the majors on those markets.
      
      2.     Misrepresentation of the Decision in the application
      169    The Commission recalls, as a preliminary point, that a statement of objections is only a preparatory act of a provisional
         character (Case 60/01 InternationalBusinessMachines v Commission [1981] ECR 2639) and that the Commission is not specifically required to give reasons for departing from its provisional
         views. It is not sufficient for the applicant to observe that the characteristics of the market did not change during the
         period between the statement of objections and the adoption of the Decision. Although that may be largely true as an objective
         matter, it is certainly not true as regards the extent of the Commission’s knowledge and understanding of the market. In reaching
         its final position, the Commission gave due regard to the merging parties’ detailed submissions in response to the statement
         of objections. 
      
      170    The Commission observes that on a number of points the applicant gives a distorted view of the Decision.
      
      171    First of all, the Decision does not state that the majors have ‘all the features of a dominant group’.
      
      172    Nor does the Decision find that the majors were able to maintain high prices. Rather, recital 56 to the Decision finds that
         there has been a decrease in prices, albeit not as marked as that claimed by the parties to the concentration, and recital
         58 to the Decision refers only to a perceived high price level of CDs.
      
      173    Last, the Commission did not find in the Decision that the market bears all the features conducive to tacit coordination.
         The Decision does not state, in particular, that coordination actually takes place, but at the most that the Commission had
         found certain indications of coordination (recital 109 to the Decision). Although the Decision notes, at recitals 112 and
         113, that there is a certain stability in the customer base and that monitoring takes place, it does not find that such monitoring
         is sufficient to overcome the lack of transparency of discounts, in particular campaign discounts.
      
      3.     First part
      a)     Breach of the obligation to state reasons
      174    The Commission considers it appropriate to set out the general requirements of Article 253 EC before examining the specific
         arguments developed by the applicant.
      
      175    First, the Commission maintains that it is important to distinguish between an alleged failure to state sufficiently clear
         reasons for the adoption of an act and the provision of reasons which are erroneous as a matter of fact, assessment or law,
         which is a matter of substance rather than a breach of essential procedural requirements and does not constitute a breach
         of Article 253 EC (Case T-84/96 Cipeke v Commission [1997] ECR II-2081, paragraphs 46 and 47, and Case T‑295/94 Buchmann v Commission [1998] ECR II-813, paragraphs 44 and 45).
      
      176    Second, the Commission observes that, according to settled case-law, the statement of reasons required by Article 253 EC must
         be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution
         which adopted the measure, and that the Commission is not required to discuss all the issues of fact and of law raised by
         every party during the administrative procedure, but must have regard to the context and also to all the legal rules governing
         the matter in question.
      
      177    Among the relevant contextual factors is the level of prior knowledge of relevant facts or considerations on the part of the
         persons concerned by an act, it being understood that industry knowledge may be expected of certain persons or may be acquired
         through the close involvement of the persons concerned in the procedure leading to the adoption of the act or in a related
         procedure. The need for promptness in the control of concentrations has also been deemed to be relevant for the purpose of
         determining the adequacy of a statement of reasons.
      
      178    Where certain relevant facts are covered by the obligation of professional secrecy laid down in Article 287 EC, the competent
         institution must none the less ensure that the essential content of its reasoning is communicated to the persons concerned.
      
      179    Where the meaning of the text is not immediately clear, Article 253 EC is not infringed if ambiguities in the statement of
         reasons can be resolved by a normal effort of interpretation.
      
      180    Furthermore, the Court of Justice has held that ‘the Commission is not obliged to explain any differences in relation to the
         statement of objections, since that is a preparatory document containing assessments which are purely provisional in nature
         and are intended to define the scope of the administrative proceedings’.
      
      181    Last, if a concentration does not modify, or modifies only to a very limited extent, the competitive situation in a given
         market, the Commission cannot be required to set out specific reasoning on that point. Nor does the Commission fail to fulfil
         its duty to state reasons if, in its decision, it does not include specific reasons concerning the assessment of a number
         of aspects of the concentration which it considers to be manifestly irrelevant or insignificant or plainly of secondary importance
         for the assessment of the concentration.
      
       Product homogeneity 
      182    As regards the applicant’s complaint that the finding in respect of product homogeneity is insufficiently reasoned, the Commission
         maintains that it did not find that ‘content homogeneity should carry more weight than format homogeneity’, but merely concluded
         that both aspects should be taken into account. Likewise, the standardisation of many aspects of the wholesale CD pricing
         process (using the most common PPDs and annual discounts for each customer) is not ‘overruled’, but rather qualified, by the
         reference to the role of success in the pricing of individual albums. In short, single CD albums are not comparable to barrels
         of crude oil and the possibility of considering different CD albums to be on the same market (by way of a continuum of substitutability)
         does not make them perfectly homogenous, from the point of view of the product itself or of the pricing process. The result
         is not ‘a series of contradictory findings’ but a reflection of a complex reality.
      
       Transparency
      183    The applicant cannot claim not to have understood the Decision on the ground that the Commission provided no definition of
         what it means by ‘campaign discounts’, since the applicant is an industry association which participated actively in the discussions
         at the Commission’s oral hearing and which itself claims familiarity with the function of such discounts. In any event, the
         Decision explains to the requisite legal standard what the various types of discounts cover (see recitals 78, 79, 85, 92,
         93, 99, 100, 106, 107 and 113).
      
      184    Likewise, the applicant is wrong to claim that the general analysis of the smaller countries undertaken by the Commission
         at recital 148 et seq. does not cover file discounts. The Commission merely observes, at recital 150 to the Decision, that
         file discounts are the most important in all countries, but then proceeds to analyse the wider category of invoice discounts
         (which include file discounts and campaign discounts), as it had already done country by country at recitals 119 to 146. There
         is neither confusion nor uncertainty there.
      
      185    In the Decision, the Commission attaches great importance to campaign discounts, because it is net prices that count for the
         purposes of effective coordination. ‘Some knowledge’ of file discounts is not sufficient if campaign discounts can account
         for fluctuations in discounts for certain customers over time and from album to album as significant as those referred to
         at recitals 79, 86, 100 and 107 to the Decision.
      
      186    The Commission examined the other majors’ discounts, but as those figures could not be revealed to the notifying parties,
         they could not be included in the Decision. Nor was it necessary to include them, because the opaque discounting practices
         of two majors were sufficient to defeat effective monitoring of net prices by all majors. Moreover, the applicant’s own submissions
         on pricing are based on the premiss that all record companies construct their net prices in the same way.
      
       Deterrents
      187    It is clear from the Decision (in particular recital 114) that the Commission examined the threatened or actual use of potential
         retaliatory mechanisms in the past as a secondary means of verifying whether a degree of price alignment at an aggregate level
         was attributable to tacit coordination. In the absence of evidence of their actual use, the Commission was unable to take
         a final position on the sufficiency of the various potential retaliatory mechanisms mentioned in the Decision.
      
       Constraints
      188    As the conditions for a finding of actual or future collective dominance are cumulative, the Commission did not need to reach
         a conclusion on the countervailing power of competitors and consumers and therefore did not need to provide reasons in that
         regard.
      
      b)     Manifest error of assessment and error of law 
      189    Being of the view that they overlap, the Commission examines the grounds of annulment alleging manifest error of assessment
         and error of law together. 
      
      190    By way of preliminary points, the Commission makes two observations.
      
      191    First, as regards the argument that where the Commission is required to balance conflicting claims it must not place too much
         weight on one of them, the Commission refers to the discretion which it enjoys when making complex economic assessments and
         submits that the Decision is extremely measured in its conclusions and that the applicant does not refer on this point to
         any element in the evidence available to the Commission which in its view was given too much or too little weight.
      
      192    Second, as regards the assertion that a decision which does not record sufficiently detailed factual evidence in support of
         its conclusions is vitiated by a manifest error of assessment, the Commission states that that is essentially a question of
         reasoning and contends that it is under no obligation to set out in its decisions the details of the often voluminous (and
         confidential) evidence which it has taken into consideration. It is sufficient for it to state clearly the general tenor of
         the evidence which it has examined and the reasons for the conclusions which it has drawn from that evidence, in such a way
         as to permit the interested parties, and in particular those who have industry knowledge and have already been closely involved
         in the administrative procedure, to form their own view of the legality of those conclusions. In the present case, the various
         assessments made in the Decision of the way in which the recorded music markets function is supported by substantial amounts
         of complex evidence.
      
       Product homogeneity
      193    The Commission contends that the applicant errs in suggesting that content heterogeneity is irrelevant on the ground that
         prices are set on the basis of a limited number of reference prices. Reference prices relate only to list prices for albums,
         not to invoice discounts. In particular, campaign discounts vary, inter alia, according to the particular album.
      
      194    The Commission claims that a collective dominant position may be difficult to detect in markets characterised by product differentiation,
         in particular where such differentiation ‘exacerbate[s] informational problems in non-transparent markets’ (see the Commission
         Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings
         (OJ 2004 C 31, p. 3, point 45)).
      
       Transparency
      195    Before examining the applicant’s various assertions, the Commission considers it necessary to comment on four fundamental
         errors in the application; two are legal or conceptual errors and two concern the interpretation of the Decision.
      
      196    In the first place, the applicant makes a fundamental conceptual error where it presumes that a finding of a considerable
         degree of parallelism in the majors’ average net prices, or of considerable stability in a given major’s average discounts,
         constitutes sufficient evidence both of tacit coordination and of the transparency to sustain such coordination on the terms
         identified. A certain degree of alignment or stability at an aggregate level cannot be a substitute for cogent and consistent
         evidence that there is the transparency necessary to permit undertakings in an oligopoly situation to monitor each other’s
         market conduct; and, in the absence of evidence of sufficient transparency, it cannot be presumed that when each undertaking
         in an oligopoly situation reached its decisions on market conduct it had sufficiently precise knowledge of the conduct of
         its competitors.
      
      197    In the second place, the applicant makes a basic legal error where it criticises the Commission for having relied upon evidence
         relating to discounts without finding that discounting led to significant price reductions and where it states that competition
         as regards discounting is in reality quite marginal. That assertion is wholly unfounded: the average invoice discounts of
         the parties to the concentration represent a very significant proportion of their average gross sales (see recitals 78, 85,
         92, 99, 56, 122, 125, 128, 131, 134, 137, 140, 143 and 146 to the Decision) and certain customers and albums benefit from
         even greater discounts (see recitals 79, 86, 93, 100 and 107 to the Decision). Discounts are therefore a highly important
         element of the price-formation process and are perhaps the most likely and certainly the least transparent means whereby a
         major could effect ‘a highly competitive action designed to increase its market share (for example a price cut)’. The Commission’s
         concern with transparent discounts is not directly related to verifying whether in the past the majors followed a putative
         common policy, but to ascertaining whether the undertakings in an oligopoly situation could themselves have sustained (or
         could sustain after the concentration) such a common policy through adequate mutual surveillance. It was therefore unnecessary
         to show that one or more majors had in fact lowered prices by means of significant additional discounting by comparison with
         the others.
      
      198    In the third place, the applicant makes a fundamental error of interpretation of the Decision when it criticises the Commission
         for confusing the ‘sufficient market transparency’ of Airtours v Commission, paragraph 45 above, with a requirement of total transparency applied in the Decision. The Decision refers consistently to
         ‘a sufficient degree of transparency’ (recitals 73, 80, 87, 94, 101 and 108 to the Decision). The applicant also ignores the
         nature of the Commission’s inquiry into the pricing system. The Commission examined the components of the net price of an
         album to an individual customer (PPD, file discount, possible campaign discount) and concluded that a sufficient degree of
         transparency would be necessary in respect of all components if a major were to be reasonably confident that it knew the true
         net pricing practices of another major, as manifested at the level of customers and albums. The Commission was unable to reach
         such a conclusion in the face of evidence of rather transparent PPDs, some evidence of a certain transparency of file discounts,
         and strong evidence of the opaque and complex character of campaign discounts.
      
      199    In the fourth place, the applicant again made a fundamental error of interpretation when it stated that the Commission found
         that PPDs and average net prices move in parallel. That assertion is false. The Commission found that, on each of the large
         markets, the notifying parties’ average gross real prices and average net real prices moved in parallel (recitals 77, 84,
         91, 98 and 105 to the Decision), but not that average discounts were the same for both parties to the concentration (recitals
         78, 85, 92 and 99 to the Decision). The Commission emphasises that discounts vary according to the customer and to the album,
         and over time (see recitals 79, 86, 93, 100 and 107 to the Decision, and the discussion of the underlying evidence). The evidence
         does not show that a given PPD will be systematically reduced by a fixed and predictable discount, irrespective of those variables.
      
      200    The Commission maintains, next, that it must correct or clarify certain of the applicant’s assertions:
      
      –        the relatively similar price development of the majors took place in a range which usually exceeded 10%;
      –        the use of a limited number of key PPDs as a focal point is qualified by the need to monitor, at a minimum, more than 80 successful
         albums a year, with changing PPDs;
      
      –        retail prices are public and therefore observable in principle, but it would be difficult for the majors to observe their
         constant shifts across retailers and over time;
      
      –        there is no evidence that the monitoring reports of the parties to the concentration on certain markets contain useful information
         on competitors’ net pricing or retailers’ margins;
      
      –        the applicant provides no evidence whatsoever to support its claim that retailers’ margins are transparent and known to a
         high degree of accuracy; this bare assertion is contradicted by the evidence in the case-file which shows that retail pricing
         is complex and unpredictable. The Commission’s finding that a significant deviation from pricing policies via discounts would
         be reflected in a major’s average net prices is irrelevant to this question. It is, in fact, doubly irrelevant: (i) it relates
         to a phenomenon which, had it occurred, the Commission would have been able to observe using its powers of investigation but
         which would not have been apparent to any individual major because neither the majors’ overall discounts nor their average
         net prices are transparent; and (ii) the interaction of overall discounts and average net prices shows nothing about the existence
         of a fixed and transparent relationship between retail prices and wholesale net prices;
      
      –        there is little reliable evidence suggesting that the majors have detailed knowledge of each other’s file and campaign discount
         levels, and considerable evidence to the contrary, including the objective complexity of campaign discounts, which vary, in
         particular, across customers, albums and time;
      
      –        the Commission’s focus on the discounts granted by the parties to the concentration was sufficient to negate the necessary
         degree of mutual transparency among undertakings in an oligopoly situation that is necessary if tacit coordination is to function;
      
      –        cooperation among some majors on compilations and distribution is unlikely to reveal sufficient information about the complex
         individual discounting decisions of all the majors;
      
      –        the applicant provides no proof of what it alleges to be the high transfer rate of executives between majors, nor does it
         prove that that transfer rate is higher than in other concentrated industries, or that the knowledge of complex discounting
         practices, which vary at the level of individual albums with a limited shelf life, which an executive has at the time of leaving
         one major would be useful for very long or would sustain coordination among all majors;
      
      –        although published charts make it easier to identify the top albums, they rarely give information on PPDs and never on discounts;
      –        the Decision cannot be criticised simply because it differs from the statement of objections.
      201    Contrary to the applicant’s contention, it is not ‘relatively easy’ to establish discount levels and it is practically impossible
         to do so for campaign discounts. The applicant’s assertion that campaign discounts represent between one quarter and one third
         of all discounts may, as a general matter, be accepted as a basis of discussion, but it must be qualified in a number of respects.
      
      202    First, the overall level of campaign discounts probably varies from one major to another, as does the level of discounts generally.
      
      203    Second, the average figures in the case-file indicate that campaign discounts represented a rather higher proportion of invoice
         discounts in a number of countries in 1998; invoice discounts have the greatest immediacy for customers’ purchasing decisions
         on specific albums.
      
      204    Third, this average figure does not faithfully translate the extraordinary complexity and opacity of the distribution of campaign
         discounts over albums, customers and time. Although it may well be the case that the other terms of participation in campaigns
         are relatively standardised and simple, the evidence before the Commission plainly contradicts any suggestion of standardisation
         or simplicity in the weekly negotiation of the amount and period of such campaigns and of the eligibility of individual albums
         or customers.
      
      205    Fourth, the very fact that campaign discounts are targeted at selected albums and selected marketing periods and that the
         amount is adjusted for each retailer probably enables those discounts to have a greater effect on sales of the albums in question.
      
      206    More important still is the fact that the applicant does not adduce decisive proof that the Commission erred in considering
         that campaign discounts were highly relevant to markets where each major’s top 100 albums represent the greater part of its
         total sales in a given year and country, since many of these albums were not chart albums.
      
      207    On the other hand, the Commission had at its disposal evidence which suggests that even some of Sony’s and BMG’s most successful
         full-price albums benefited from campaign discounts.
      
      208    The Commission further submits that the evidence regarding the actual application of campaign discounts at any given moment
         is relevant only for the purpose of assessing the actual degree of alignment of net prices (whereas it considered in the Decision
         that discounts in general were not sufficiently aligned to support an inference of the existence of a common policy). However,
         discount transparency is relevant to the question whether there is sufficient inherent transparency in the pricing system
         for the majors to be able to detect accurately and in good time whether one of them is deviating from a common policy on net
         prices for albums by increasing campaign discounts. Apart from its unfounded comments on the transparency of retailer margins,
         the applicant has offered no argument or concrete evidence on the latter point, so that its plea must necessarily fail in
         any event.
      
      209    The Commission maintains that the finding regarding the degree of net-price transparency in the market for recorded music
         was clearly not based on ‘speculation’ or an ‘unsubstantiated and subjective doubt’, but rather on concrete evidence of the
         highly complex and insufficiently transparent manner in which the elements of the final net price (PPD, file discount and
         campaign discount) are determined for the sale of a given album, with a specific content, to a given customer. In those circumstances,
         the available evidence could not be interpreted as proving, on the balance of probabilities, the existence of sufficient transparency
         to permit adequate and timely monitoring of a common policy in respect of prices.
      
      210    As regards the applicant’s argument that a finite number of known and knowable structures and rules make average prices predictable,
         the Commission observes that a degree of similarity in the way in which average net prices for albums develop is not sufficient
         to show coordination, since prices may display considerable alignment in competitive as well as collusive contexts, as undertakings
         respond to similar external factors (for example, prices of common inputs) and also to each other’s market behaviour. The
         Commission maintains that the applicant is confusing the identification of terms of coordination (‘known and knowable … rules’)
         with the means employed to monitor compliance with those rules (‘the requisite transparency’), more especially because no
         major has access in the normal course of events to all, or at least the most significant, pricing data of all of the majors
         in all of the categories of albums and customers covered that would be necessary in order to establish average net prices.
      
      211    Furthermore, while the applicant accepts that those rules and retail strategies may lead to prices and discounts which vary
         considerably according to the categories of discs or customers, it has not indicated what the rules would be or how they would
         be determined through tacit coordination for such a wide variety of circumstances. The majors would be unable to determine
         whether shifts in each other’s average net prices were attributable to deviation or to shifts in product mix and product success
         without having detailed information in good time on those changes in the composition and fortunes of their respective product
         offerings; and the Commission has not found sufficient evidence that they had access to such detailed information.
      
      212    The applicant cannot merely assert that coordination would actually take place at the level of broad policy decisions by each
         major on overall discount budgets and margins, without indicating what the content of such a decision might be or how those
         terms of coordination might be inferred, or how compliance with them could be monitored, by the majors. The Commission is
         under no obligation to investigate such vague and unsubstantiated arguments.
      
      213    As regards the applicant’s criticism of the method whereby most of the data presented by the Commission were not volume-adjusted,
         the Commission contends that the question of the appropriateness of a given method cannot be dissociated from the proposition
         which that method is intended to prove or disprove. Although the compilation of weighted data is indeed important for the
         purpose of detecting whether or not there is underlying alignment among the majors, either generally or in respect of certain
         types of albums (for example, top 20 albums), that weighting of the data is not relevant for the purposes of examining complexity
         and its effects on transparency. It is still necessary to examine the variability in the prices of individual titles in order
         to understand the level of complexity in pricing and the degree of transparency in the market.
      
      214    The Commission reiterates that it is unrealistic to envisage terms of coordination based on average net prices. It notes,
         however, that its figures regarding the level of observable similarity (in the absence of parallelism) in the majors’ average
         net prices in the Decision were volume-adjusted and that the same applies to the charts based on average annual invoice discounts
         granted to different common customers of the parties to the concentration. Considerable amounts of other data presented in
         the defence are also volume-weighted, and in each case that follows from the nature of the exercise. 
      
      215    All the abovementioned items of volume-adjusted evidence are potentially relevant for the purpose of determining whether or
         not there is a high degree of alignment in the majors’ practices or as regards the question whether or not pricing is complex,
         which is important for the purpose of assessing transparency. In the latter context, the issue of volume adjustment is of
         no great relevance. Variability of net prices or discounts across titles and customers (even of the same type) and over time
         is important, regardless of the respective amounts sold. Thus, the annexes to the defence show that, even for the top 20 albums
         of each party to the concentration, there are wide variations in discounts. If the majors are not equipped to monitor such
         variations sufficiently closely, a major would be able to deviate from any terms of coordination on net prices by giving large
         discounts, particularly campaign discounts, without being detected. That applies a fortiori if the terms of coordination are designed to be flexible; a considerable amount of discounting in excess of the tacitly-understood
         norm would then need to be detected in order for the other majors to be sufficiently sure that the undertaking concerned was
         deviating.
      
      216    As regards the analysis of correlations carried out by the applicant and the implicit criticism of the Commission for not
         having conducted tests on the data, the Commission again observes that the question of methodology cannot be assessed in the
         abstract, without reference to the subject-matter of the investigation, namely whether there is a degree of alignment indicative
         of coordination and whether there is transparency permitting the monitoring of market behaviour.
      
      217    The Commission notes, first of all, that the parties to the concentration presented a considerable amount of correlation data
         during the administrative procedure which showed correlation factors that were generally low, but that it none the less treated
         those contributions with considerable prudence.
      
      218    Similarly, a degree of stability over time of the discounts granted by a given major is not in itself evidence of coordination,
         as, once again, it might be largely the consequence of stable factors such as customer size, types of music purchased, etc.
         Even a high degree of statistical predictability does not demonstrate the existence of coordination, for a number of reasons:
         rational individual decisions may be highly predictable; without the information which would permit such levels of predictability
         to be estimated, this remains an interesting intellectual possibility without practical consequences; and, likewise, without
         access to information on actual practice, it is impossible to verify whether the prediction (continued compliance with a putative
         common understanding) holds true. Even if the majors were in a position to apply such statistical tools to each other’s past
         pricing practices, that would be no substitute for market monitoring.
      
      219    The Commission observes that, contrary to the applicant’s assertion, it did not ‘reject’ the data used in the statement of
         objections, which were volume-weighted and industry-wide, in favour of the data provided by the parties to the concentration,
         which were neither. Many of those data are cited in the Decision (for example, on the degree of similarity of average net
         prices) and some are annexed to the defence. What the Commission did, rather, was to amend its provisional conclusion concerning
         what could be proved by those data, in the light of the additional data and arguments submitted by Sony and BMG.
      
       Deterrents and constraints 
      220    The Commission contends that since it had found that one of the three cumulative conditions (transparency) was not satisfied,
         it did not make a manifest error of assessment or an error of law by not taking a position on the other two.
      
       Analysis of the common policy
      221    The Commission submits, first of all, that the applicant’s complaint is based upon a factually incorrect premiss, namely that
         the conclusion regarding transparency relates exclusively to ‘but one form of discount, the campaign discount’. Although campaign
         discounts have an essential place in the analysis, the analysis concerned more generally the mode of price setting, which
         overall is very complex at album and customer level, and also over time, and in the same way PPDs and file discounts.
      
      222    The Commission further contends that the applicant makes a manifest error of law in so far as it seems to suggest that if
         the Commission were able to prove that it would be beneficial for the majors to adhere to a common policy, then the transparency
         deficit would be less important. That thesis is inconsistent with the case-law. In the absence of sufficient transparency
         to permit monitoring and deterrence to function, the Commission is not aware of – and the applicant does not suggest – any
         other means of proving that a tacit anti-competitive common policy would be beneficial to a group of undertakings in an oligopoly
         situation and therefore rational.
      
      223    Although relatively stable market shares may create a context favourable to the emergence of collective dominance, they do
         not suffice to establish actual or likely tacit coordination in the absence of sufficient evidence that such coordination
         is rational, in accordance with the cumulative economic conditions for collective dominance endorsed in Airtours v Commission, paragraph 45 above. The applicant provides no additional evidence that would indicate the existence of a common policy of
         avoiding ‘highly competitive actions’. There are therefore no grounds on which to hold that the Commission made a manifest
         error of assessment in failing to identify such a common policy on the part of the majors.
      
      224    As regards consumer choice and cultural diversity, the Commission first of all notes that if it is not required to state in
         a final decision its reasons for departing from the provisional conclusions reached in the statement of objections in a given
         case, that must apply a fortiori where it departs from the conclusions reached in a statement of objections issued four years previously in a different case.
         It then observes that the applicant does not expressly cite any substantive argument or evidence pointing towards a coordinated
         impoverishment of creativity, quality or diversity in musical choice.
      
      4.     Second part
      225    The Commission maintains that the three grounds of appeal concerning its failure to conclude that a collective dominant position
         would be strengthened by the merger add nothing to those relating to the prior existence of such a collective dominant position.
         Should the applicant succeed in respect of one of the latter grounds, the Decision will be annulled in any event, while should
         it fail, it will follow that the Commission was correct not to address what the applicant alleges to be the reinforcing effects
         of the concentration.
      
      C –  Arguments of the interveners
      1.     Preliminary observations
      226    Before examining the applicant’s various pleas and arguments, the interveners consider it necessary to make four broad observations
         concerning the context in which the Decision was adopted and must be assessed and four general remarks in respect of the action.
      
      227    First, the Commission carried out an extraordinarily thorough investigation lasting more than six months. From the outset,
         the parties to the concentration provided very substantial data and explanations concerning the European music industry and
         the impact of the concentration on competition, in particular on CD prices, cultural diversity, consumer choice, independent
         record companies’ competitive opportunities, the development of online music and the risk of coordination of the activities
         retained by Sony and BMG. By means of several questionnaires, containing more than 250 questions and sent to approximately
         1 240 operators on the markets (the parties to the concentration, other majors, independents, retailers, authors, publishers,
         online distributors), the Commission sought and obtained a wealth of data and information on all the relevant questions. The
         parties to the concentration provided more than 30 million reference prices and economists made a detailed assessment of the
         five majors’ average net prices in the five large countries. A number of independents do not share the applicant’s concerns
         but consider that the concentration will increase their competitive opportunities. On the basis of all of those data, of the
         opinions of two highly-respected industrial economists, of detailed analyses of wholesale and retail price data in the RBB
         study and detailed explanations provided by the parties to the concentration in the response to the statement of objections
         or at the hearing, the Commission concluded that its initial concerns, in particular the risk of collective dominance, were
         unfounded.
      
      228    Second, the applicant misunderstands the purpose and legal status of the statement of objections, the main function of which
         is to enable the parties to the concentration fully to understand the Commission’s preliminary objections so that they have
         the opportunity to put forward counter-arguments and counter-evidence (see Article 18(1) and (3) of the Merger Regulation).
         When faced with evidence of errors, the Commission must abandon such objections as have been shown to be unfounded (Joined
         Cases C-204/00 P, C-205/00 P, C-211/00 P, C‑213/00 P, C‑217/00 P and C-219/00 P Aalborg Portland and Others v Commission [2004] ECR I-123), as it has done in 14 out of 62 cases during the last five years. The Commission’s administrative process
         was subject to full internal checks and balances, the administrative procedure ensured that all the interested parties had
         ample opportunity to present argument and evidence and the Advisory Committee voted in favour of unconditional clearance.
      
      229    Third, competition authorities from across the world (the United States, Australia, Canada, the Czech Republic, Hungary, Poland,
         Romania, Russia, Switzerland, Mexico and South Africa) all concluded that the transaction should be unconditionally authorised
         and none of those decisions was challenged. Nor did any national competition authority which had previously examined the music
         industry market in Europe consider that it was subject to tacit coordination (see, in particular, the Office of Fair Trading’s
         conclusion of September 2002 that collective dominance was ‘not proven’).
      
      230    Fourth, the concentration represents a pro-competitive response to the decline (a 20% fall in the price of CDs in three years,
         unauthorised downloading of music from the internet, increased competition from alternative leisure products, such as films
         on DVD) and continuing change in the music industry. The instability of demand and uncertainty about future business models
         make tacit collusion – which is already unlikely, given the characteristics of the market – even more difficult to achieve
         or to sustain (Airtours v Commission, paragraph 45 above, paragraph 139, and point 45 of the Guidelines on horizontal mergers). Likewise, as industry conditions
         are very different from those existing at the time of the Commission’s review of the merger between EMI and Time Warner in
         2000, the Commission’s conclusions in that case, which were by nature provisional, are irrelevant.
      
      231    Fifth, the reasoning in the Decision is clear, convincing and supported by the abundant weight of the underlying evidence,
         given that the Commission is not required to provide reasons for its assessments of all the matters of law and of fact (see
         Case T-374/00 Verband der freien Rohrwerke and Others v Commission [2003] ECR II-2275, paragraphs 185 to 187). The application shows that the applicant has understood the grounds on which
         the concentration was approved.
      
      232    Sixth, prohibition decisions require something more than a pure ‘balance of probabilities’ standard, since in the event of
         uncertainty as to whether or not a transaction is compatible, the interest of the undertakings seeking to carry out the transaction
         must prevail (Opinion of Advocate General Tizzano in Case C-12/03 P Commission v Tetra Laval [2005] ECR I-987, at I-992, points 74 to 79).
      
      233    Seventh, the interveners recall that, while the Court of First Instance undertakes a full review of matters of law and of
         fact, it has jurisdiction to review only manifest error as regards complex economic assessments of the type made in the context
         of the assessment of the creation or strengthening of a collective dominant position (Case T-342/00 Petrolessence and SG2R v Commission [2003] ECR II-1161, paragraph 101). However, on numerous occasions the applicant invites the Court to substitute its own
         assessment for that of the Commission, by maintaining, for example, that the Commission placed undue weight on product heterogeneity
         and discounts.
      
      234    Eighth, as regards the collective dominance test, the question is not whether the undertakings have an incentive to collude
         but whether they have the ability, in light of the characteristics of the market, tacitly to achieve and sustain the terms
         of coordination (Airtours v Commission, paragraph 45 above, paragraph 62). It is particularly important to evaluate whether the market is sufficiently transparent.
      
      2.     Examination of the applicant’s arguments
      a)     Campaign discounts
      235    The interveners claim that in so far as price coordination cannot be achieved or sustained without sufficient transparency
         of actual net wholesale prices, the finding that campaign discounts are not transparent is in itself sufficient to support
         the Decision.
      
      236    The Decision correctly established the link between, on the one hand, the content heterogeneity of albums and, on the other
         hand, the wide variations in campaign discounts and the resulting lack of transparency for net wholesale prices. The purported
         evidence shows that campaign discounts are significant both for chart albums and for catalogue albums, that they vary considerably
         by customer, by album and over time and that they were not aligned between the majors. As those discounts are variable, no
         reliable inferences can be made merely from observing PPDs. Likewise, retailers’ margins vary considerably from one release
         to another and over time and therefore do not permit net prices to be inferred from retail prices. Furthermore, Sony and BMG
         did not methodically monitor competitors’ retail prices or systematically obtain reliable information from retailers on discounts
         offered by competitors. Last, the alleged evidence shows that record companies had not engaged in retaliatory conduct, even
         in the face of highly volatile price movements, which deprives any sanction mechanism of credibility.
      
      b)     Lack of alignment
      237    The data relating to average net prices, PPDs and invoice discounts show not alignment but, at the most, development which
         is similar in part, and they do not permit a finding of price coordination.
      
      238    The data on average net prices show: (i) a high degree of complexity; (ii) a wide dispersion and variability; (iii) a substantial
         volatility in the majors’ ‘rankings’; (iv) a wide range in the majors’ prices; and (v) an absence of parallelism.
      
      239    A large proportion of top 100 sales is generated outside the PPDs identified in the Decision (see recitals 76, 83, 90, 97
         and 107 to the Decision).
      
      240    It follows from the annexes to the defence that invoice discounts and net prices varied widely between the majors.
      
      c)     Lack of transparency
      241    The Decision found no convincing evidence of transparency, even on elements of price other than campaign discounts. The cautious
         references in the Decision understate the full force of the underlying evidence of the absence of sufficient transparency.
         Thus, apart from the fact that in some countries PPDs are neither known nor readily accessible, record companies do not have
         accurate information on the PPDs used for a given album at any specific time. File discounts are not sufficiently transparent
         to be tacitly coordinated. Of the 161 retailers questioned, only 5 stated that competitors had some awareness of each other’s
         discounts, while 10 expressly stated that they did not.
      
      3.     Various aspects not mentioned in the Decision 
      242    The interveners claim that the theories of potential harm to competition examined also fail on many points not mentioned in
         the Decision. In the first place, the Commission wrongly concentrated on average net prices, whereas coordination could not
         take place on average prices, as individual album prices are not set with a view to obtaining a certain average net price,
         and that average is in any event not observable by the other majors. Averages can mask significant divergence in individual
         album prices. In the second place, PPDs do not serve as focal points for alignment. Each major uses, even for its top albums,
         a wide variety of different PPDs that vary over time for the same disc. In the third place, market shares are not stable and
         a small swing in market share can make an enormous difference in terms of profitability. 
      
      D –  Findings of the Court
      1.     General considerations
      243    The applicant maintains that the considerations relating to product homogeneity, market transparency, deterrence and the absence
         of constraints, which served as the basis for the finding that the majors did not have a collective dominant position on the
         markets for recorded music before the proposed concentration, are vitiated by insufficient reasoning, a manifest error of
         assessment and an error of law.
      
      244    Before examining the applicant’s various complaints, the Court considers it appropriate first of all to make a number of observations
         on the concept of a collective dominant position, then briefly to explain the investigation method which the Commission used
         in reaching the conclusion in issue, and also the various relevant factors and elements concerning the application in the
         present case of the concept of a collective dominant position, as set out in the decision, and, last, to identify the grounds
         on which the Commission concluded in the Decision that there was no pre-existing collective dominant position.
      
      2.     Concept of collective dominance
      245    It follows from the case-law of the Court of Justice that in the case of an alleged collective dominant position, the Commission
         is obliged to assess, using a prospective analysis of the reference market, whether the concentration which has been referred
         to it leads to a situation in which effective competition in the relevant market is significantly impeded by the undertakings
         involved in the concentration and one or more other undertakings which together, in particular because of factors giving rise
         to a connection between them, are able to adopt a common policy on the market and act to a considerable extent independently
         of their competitors, their customers and, ultimately, of consumers (Joined Cases C-68/94 and C-30/95 France and Others v Commission (known as ‘Kali und Salz’) [1998] ECR I-1375, paragraph 221).
      
      246    The Court of First Instance has held that a situation of collective dominance which significantly impedes effective competition
         in the common market or a substantial part thereof may therefore arise following a concentration where, taking into account
         the actual characteristics of the relevant market and of the change to its structure brought about by the completion of the
         transaction, the concentration would have the consequence that, being aware of the common interests, each member of the dominant
         oligopoly would consider it possible, economically rational and therefore preferable to adopt the same policy on a lasting
         basis on the market with the aim of selling at above competitive prices, without having to conclude an agreement or resort
         to a concerted practice within the meaning of Article 81 EC, without actual or potential competitors, or customers and consumers,
         being able to react effectively (see, to that effect, Case T-102/96 Gencor v Commission [1999] ECR II‑753, paragraph 276).
      
      247    In Airtours v Commission, paragraph 45 above, paragraph 62, the Court of First Instance held, as stated at recital 68 to the Decision in the present
         case, that the three following conditions must be satisfied in order for collective dominance as defined to be created. First,
         the market must be sufficiently transparent for the undertakings which coordinate their conduct to be able to monitor sufficiently
         whether the rules of coordination are being observed. Second, the discipline requires that there be a form of deterrent mechanism
         in the event of deviant conduct. Third, the reactions of undertakings which do not participate in the coordination, such as
         current or future competitors, and also the reactions of customers, should not be able to jeopardise the results expected
         from the coordination.
      
      248    It follows from the case-law of the Court of Justice (Kali und Salz, paragraph 245 above, paragraph 222) and of the Court of First Instance (Airtours v Commission, paragraph 45 above, paragraph 63) that the prospective analysis which the Commission is required to carry out in the context
         of the control of concentrations, in the case of collective dominance, requires close examination of, in particular, the circumstances
         which, in each individual case, are relevant for assessing the effects of the concentration on competition in the reference
         market and that the Commission must provide solid evidence.
      
      249    It must be observed that, as is apparent from the very wording of those judgments, that case-law was developed in the context
         of the assessment of the risk that a concentration would create a collective dominant position and not, as in the context
         of the first part of the present plea, of the determination of the existence of a collective dominant position. 
      
      250    However, although when assessing the risk that such a dominant position will be created the Commission is required, ex hypothesi, to carry out a delicate prognosis as regards the probable development of the market and of the conditions of competition
         on the basis of a prospective analysis, which entails complex economic assessments in respect of which the Commission has
         a wide discretion, the finding of the existence of a collective dominant position is itself supported by a concrete analysis
         of the situation existing at the time of adoption of the decision. The determination of the existence of a collective dominant
         position must be supported by a series of elements of established facts, past or present, which show that there is a significant
         impediment of competition on the market owing to the power acquired by certain undertakings to adopt together the same course
         of conduct on that market, to a significant extent, independently of their competitors, their customers and consumers. 
      
      251    It follows that, in the context of the assessment of the existence of a collective dominant position, although the three conditions
         defined by the Court of First Instance in Airtours v Commission, paragraph 45 above, which were inferred from a theoretical analysis of the concept of a collective dominant position, are
         indeed also necessary, they may, however, in the appropriate circumstances, be established indirectly on the basis of what
         may be a very mixed series of indicia and items of evidence relating to the signs, manifestations and phenomena inherent in
         the presence of a collective dominant position. 
      
      252    Thus, in particular, close alignment of prices over a long period, especially if they are above a competitive level, together
         with other factors typical of a collective dominant position, might, in the absence of an alternative reasonable explanation,
         suffice to demonstrate the existence of a collective dominant position, even where there is no firm direct evidence of strong
         market transparency, as such transparency may be presumed in such circumstances.
      
      253    It follows that, in the present case, the alignment of prices, both gross and net, over the last six years, even though the
         products are not the same (each disc having a different content), and also the fact that they were maintained at such a stable
         level, and at a level seen as high in spite of a significant fall in demand, together with other factors (power of the undertakings
         in an oligopoly situation, stability of market shares, etc.), as established by the Commission in the Decision, might, in
         the absence of an alternative explanation, suggest, or constitute an indication, that the alignment of prices is not the result
         of the normal play of effective competition and that the market is sufficiently transparent in that it allowed tacit price
         coordination.
      
      254    However, as the applicant has based its line of argument on an incorrect application of the various conditions that must be
         satisfied in order for there to be a collective dominant position, as defined in Airtours v Commission, paragraph 45 above, and, in particular, the condition relating to market transparency, rather than on the theory that a
         finding of a common policy over a long period, together with the presence of a series of other factors characteristic of a
         collective dominant position, might, in certain circumstances and in the absence of an alternative explanation, suffice to
         demonstrate the existence of a dominant position, as opposed to the creation of such a position, without its being necessary
         positively to establish market transparency, the Court will confine itself, in its examination of the pleas in law put forward,
         to ascertaining that the Decision properly applied the conditions defined in Airtours v Commission. Without its even being necessary to consider whether the opposite approach would lead the Court to step outside the framework
         of the dispute as defined by the parties, or whether it would merely constitute an application of the law in the context of
         a plea raised by the applicant, the Court must follow the approach thus outlined, in view of the inter partes principle, since
         that issue has not been discussed before the Court.
      
      3.     The Commission Decision 
      255    The relevant elements of the Decision for the purpose of examining the first plea may be summarised as follows.
      
      256    The Commission’s findings in respect of the various product and geographic markets are not disputed by the parties. At recital
         12 to the Decision, the Commission considered that ‘… it [was] not necessary to decide whether distinct product markets based
         on genre exist and whether there is a distinct product market for compilations’. At recital 15, it found that ‘…, the relevant
         geographic markets [were] … considered to be national’.
      
      257    Likewise, it is not disputed that the various national markets have an oligopolistic structure, with the five majors holding,
         depending on the country, between 72 and 93% of the market and numerous much smaller record companies (‘the independents’),
         which represent approximately [15-20%] of the market. 
      
      258    The five majors are characterised, moreover, by (i) a global presence, (ii) partial vertical integration, (iii) an upstream
         investment in music publishing and in the broadcasting and online music markets, (iv) considerable financial power which enables
         them to offer more attractive financial benefits to artists and (v) a vast and diversified portfolio of contract artists and
         a significant list of existing titles. 
      
      259    Furthermore, changes in demand show that sales have been in decline since 1999 (having fallen by 13% in the EEA between 1999
         and 2002 and by more than 7% between 2002 and 2003). However, prices have remained quite stable. The Commission’s market investigation
         also pointed to explanations other than those put forward by the parties to the concentration for that fall in sales, namely:
         the perceived high price level of CDs, the general economic downturn, the record companies’ failure to meet consumers’ tastes,
         the absence of quality content and of innovative artists and the record companies’ failure to adapt to the technological challenges
         of the internet.
      
      260    As regards the methodology employed by the Commission, it is stated at recital 69 to the Decision that, in assessing whether
         there was an existing collective dominant position, the Commission analysed whether in the previous three to four years the
         five majors had in fact pursued a coordinated price policy. 
      
      261    To that end, the Commission first analysed the development of average net prices on a quarterly basis for the top 100 single
         albums of each major, which represented at least 70 to 80% of their total music sales, in the five largest Member States,
         as in the Commission’s view average prices are an appropriate means of assessing parallelism in pricing. The Commission thus
         analysed the development of average net prices, PPDs, gross-to-net price ratios and invoice and retrospective discounts (recital
         72 to the Decision). 
      
      262    Second, the Commission examined the possibility that, on the basis of parallelism in average prices, price coordination could
         have been reached using list prices as focal points. 
      
      263    Third, the Commission analysed whether the different majors’ discounts were aligned and sufficiently transparent to allow
         efficient monitoring of any price coordination, also at the level of net prices (recital 73 to the Decision).
      
      264    The Commission’s findings, which are couched in virtually identical terms for each of the five large countries, may be summarised
         thus:
      
      –        the Commission states that it ‘found some parallelism in net average real prices and a relatively similar price development
         of the majors’, but that ‘these observations were, as such, not conclusive enough to constitute sufficient evidence of coordinated
         pricing behaviour in the past’; ‘[t]herefore, the Commission further investigated whether additional elements, namely list
         prices and discounts, were aligned and sufficiently transparent to provide sufficient evidence for coordination’;
      
      –        the Commission ‘found some indications that PPDs could have been used as focal points for an alignment of the majors’ prices
         in France’. Depending on the country, each major generated with three of its main PPDs 55 to 80% of the total of the top 100
         net sales of single albums in 2003. The Commission thus considers that ‘[i]n the light of those observations, the list prices
         of top albums seem to be rather aligned’ (the United Kingdom, France and Italy, or aligned ‘to a certain extent’ in Germany
         and Spain);
      
      –        the Commission also found that the PPDs were rather transparent, since they appear in the majors’ lists. It therefore seems
         possible to monitor other majors’ list prices;
      
      –        net selling prices are closely linked to gross prices (PPDs), given the parallel development of Sony’s and BMG’s average gross
         prices and real average net prices over the last six years and also the very great stability, at any time, of the net price/gross
         price ratio, all albums taken together;
      
      –        however, the Commission found some variation at the level of discounts applied by the various majors and also differences
         of between 2 and 5 percentage points between Sony’s and BMG’s invoice discounts for the greater part of their 10 principal
         customers and more than 5 percentage points for some customers in some years (the situation is somewhat different on the French
         market);
      
      –        the parties to the concentration submitted data which reveal that the invoice discounts for a given customer vary over time
         and from album to album and that the discounts granted for a specific album vary from customer to customer. The market investigation
         revealed that those fluctuations resulted essentially from campaign discounts, which are used more flexibly than file discounts,
         which are generally fixed annually. It cannot be shown, on the basis of those observations, that invoice discounts are sufficiently
         aligned between the parties to the concentration (the situation is somewhat different for France);
      
      –        as regards the transparency of discounts, the replies of customers … to the Commission’s market investigation revealed, on
         the whole, that the majors had some knowledge of the file discounts granted by their competitors, given their permanent interaction
         with the same customers. It is apparent, however, that campaign discounts are less transparent than file discounts and that
         monitoring campaign discounts also requires careful observation of developments in discounts of that type on the retail market.
         Although the Commission found that both Sony and BMG set up a system of weekly reports by their sales forces, it was unable
         to demonstrate that those reports ensured a sufficient degree of transparency of the campaign discounts granted by competitors.
         
      
      265    The Commission concluded, next, at recital 109 to the Decision, that ‘[a]s the results of [its] detailed analysis of the majors’
         price development in the five largest Member States showed some indications of coordinated behaviour which were as such, however,
         not sufficient to establish existing collective dominance, [it had] further analysed whether the markets for recorded music
         were characterised by features facilitating collective dominance’. 
      
      266    To that end, the Commission examined product homogeneity (recital 110 to the Decision), market transparency (recitals 111
         to 113 to the Decision) and the use of retaliation (recitals 114 to 118 to the Decision). 
      
      267    As regards product homogeneity, the Commission found that the heterogeneity of the content and the implications for pricing
         reduce transparency in the market and make tacit collusion more difficult since it requires some monitoring on the level of
         individual albums.
      
      268    As regards market transparency, the Commission considered that the majors only need to monitor the pricing points of a limited
         number of best-selling albums to account for most of the sales. However, the Commission observes that further monitoring on
         album level is needed, in particular in relation to campaign discounts, and that this could make tacit collusion more difficult
         (recital 111 to the Decision).
      
      269    As regards retaliation, recital 118 to the Decision states that the Commission found no evidence that retaliatory measures
         had been used in the past, which would have been evidence of a collective dominant position. 
      
      270    Without expressing at this stage of the decision any conclusion as to the existence of a collective dominant position in the
         five large countries, the Commission proceeded to examine the markets in the smaller countries, and made similar findings.
         
      
      271    In particular, the Commission observed that there is a high degree of parallelism between the various majors’ PPDs. As in
         the large countries, the most important discounts in the small countries are file discounts. Invoice discounts are not standard
         and are not public knowledge, and transparency in the market is therefore reduced. Given the relevance of the invoice discounts
         and the differences between them, the Commission did not find sufficient evidence to show that a parallelism of average net
         prices could be ascribed to tacit collusion between the majors, even if there was considerable alignment of PPDs and those
         PPDs could, in principle, be used as a focal point for tacit collusion (recital 150 to the Decision).
      
      272    In addition, the considerations relating to product homogeneity, market transparency and retaliation for the large countries
         are also valid for the smaller countries of the EEA.
      
      273    The Commission concluded at recital 153 that ‘[o]n this basis, there is not sufficient evidence to conclude that there is
         an existing collective dominant position of the … majors in the national markets for recorded music [in the smaller countries]’.
      
      274    On the basis of the foregoing considerations, the Commission concluded at recital 154 that there was not sufficient evidence
         to establish that the proposed transaction would lead to the strengthening of an existing collective dominant position in
         the markets for recorded music in any of the EEA countries.
      
      275    It follows from the foregoing that that was on the basis of product homogeneity, market transparency and also the use of retaliation
         that the Commission concluded that there was no collective dominant position.
      
      276    That is confirmed at recital 157, which is worded as follows:
      
      ‘[a]s discussed in the section on the strengthening of a collective dominant position, the markets for recorded music display
         certain features which indicate a conduciveness to collective dominance. However, the Commission has not found sufficient
         evidence that the … majors have held a collective dominant position in the past, in particular due to the deficits in actual
         transparency, the partly heterogeneous product characteristics and the lack of actual evidence as regards retaliatory action
         in the past’.
      
      277    It is in the light of those considerations that the Court must examine the various complaints put forward by the applicant.
      
      4.     Transparency
      a)     The complaint alleging inadequate reasoning
      278    The applicant maintains, in essence, that the Decision does not explain to the requisite legal standard the reasons why discounts,
         in particular campaign discounts, hinder the transparency necessary to allow the development of a collective dominant position.
      
      279    By way of preliminary observation, the Court observes that, according to settled case-law, the statement of reasons required
         by Article 253 EC must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning
         followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain
         the reasons for the measure and to enable the competent Community Court to exercise its power of review. The requirements
         to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure
         in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom
         it is of direct and individual concern, may have in obtaining explanations (see Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63 and the case-law cited).
      
      280    The question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only
         to its wording but also to its context and to all the legal rules governing the matter in question (Case C-56/93 Belgium v Commission [1996] ECR I-723, paragraph 86, and Case T-290/94 Kaysersberg v Commission [1997] ECR II-2137, paragraph 150).
      
      281    When the Commission declares a concentration to be compatible with the common market on the basis of Article 6(1)(b) of the
         Merger Regulation, it is a necessary and sufficient condition in relation to the duty to state reasons that the decision states
         clearly and unequivocally the reasons why the Commission considers that the concentration at issue does not raise serious
         doubts as to its compatibility with the common market. However, it cannot be inferred from that obligation that, in such a
         hypothetical case, the Commission must provide reasons for its assessment of all the matters of law and of fact which may
         be connected with the notified concentration and/or which were raised during the administrative procedure (see Verband der freien Rohrwerke and Others v Commission, paragraph 231 above, paragraph 185 and the case-law cited).
      
      282    The Court must examine, first of all, the impact of the circumstance, emphasised by the applicant, that the Commission had
         concluded emphatically in the statement of objections that the concentration was incompatible with the common market on the
         ground, in particular, that a collective dominant position existed before the proposed concentration and that the market for
         recorded music was transparent and particularly conducive to coordination.
      
      283    This fundamental U-turn in the Commission’s position may indeed appear surprising, particularly in view of the late stage
         at which it was made. In effect, as may be seen from the case-file and from the oral argument before the Court, throughout
         the administrative procedure the Commission considered, on the basis of all the information which it had received, during
         an investigation lasting five months, both from the various operators on the market and from the parties to the concentration,
         that the market was sufficiently transparent to allow tacit collusion on prices, and that it was only in the wake of the arguments
         submitted by the parties to the concentration, assisted by their economic adviser, at the hearing on 15 and 16 June 2004 that,
         without carrying out any fresh market investigations, it adopted the opposite position and, on 1 July 2004, sent the draft
         decision to the Advisory Committee.
      
      284    However, as the Commission correctly submits, it follows from the case-law (BAT and Reynolds v Commission, paragraph 105 above) that, when the Commission rejects an application under Article 3 of Council Regulation No 17 of 6 February
         1962, First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-62, p. 17), it
         is sufficient for it to set out the reasons why it did not consider it possible to show the existence of an infringement of
         the competition rules, but it is not obliged to explain any differences by comparison with the statement of objections, since
         that is a preparatory document containing assessments which are purely provisional in nature and are intended to define the
         scope of the administrative procedure vis-à-vis the undertakings forming the subject of that procedure, or to discuss all
         the points of fact and of law dealt with during the administrative procedure. In Aalborg Portland and Others v Commission, paragraph 228 above, the Court of Justice referred to the provisional nature of a statement of objections and to the Commission’s
         obligation to take into account the elements resulting from the administrative procedure, in order, in particular, to drop
         any objections which may have proved unfounded.
      
      285    Admittedly, that case-law was developed in respect of proceedings for the application of Articles 81 EC and 82 EC and not
         in the specific field of the control of concentrations, where the need to observe the mandatory time-limits governing the
         adoption of decisions by the Commission does not allow it to extend its investigation, thus reducing the likelihood that the
         Commission will fundamentally alter its position as the administrative procedure advances. In its final observations, moreover,
         the Commission emphasised that the measures of investigation carried out after the hearing consisted essentially in consulting
         the operators on the market concerning the proposed commitments and did not deal with the objections raised against the notified
         concentration. However, the fact remains that the statement of objections is merely a preparatory document and that the final
         decision must be based solely on all the circumstances and evidence relevant for the purpose of the assessment of the effects
         which the proposed concentration will have on competition in the reference markets. It follows that the mere fact that the
         Commission did not explain in the body of the decision the change in its position by comparison with that set out in the statement
         of objections cannot as such constitute a lack of, or an insufficient, statement of reasons.
      
      286    Furthermore, the Commission also relies on the decided principle that if a concentration does not modify, or modifies only
         to a very limited extent, the competitive situation in a given market, the Commission cannot be required to set out specific
         reasoning on that point, and that it likewise does not fail in its duty to state reasons if, in its decision, it does not
         include specific reasons concerning the assessment of a number of aspects of the concentration which it considers to be manifestly
         irrelevant or insignificant. While those assertions are correct, it must be held that they are irrelevant in the context of
         the present complaint. First, the present complaint relates not to a limited modification brought about by the concentration
         but to the situation existing before the concentration and, second, it is not in dispute that the absence of sufficient transparency
         on the market constitutes the essential, and indeed the only, ground on which the contested finding that there was no pre-existing
         collective dominant position rests.
      
      287    In the light of those preliminary remarks, the Court will examine whether the Decision contains a sufficient statement of
         reasons for the finding that the market is not sufficiently transparent to permit coordination of prices.
      
      288    The examination of the question of the transparency of the market is dealt with in a dedicated section, at recitals 111 to
         113 to the Decision. It is apparent, however, that the Decision also contains argument relating to transparency in the section
         dealing with the examination of the common understanding of the five majors on prices in the five large Member States, at
         recitals 69 to 108, to which the section dealing with transparency makes reference, and also in the section dealing with the
         assessment of the existence of a collective dominant position on the markets of the smaller countries, at recitals 148 to
         153, to which the section dealing with transparency makes no reference. The Court must therefore examine in turn the reasons
         set out in those three sections.
      
      289    As regards the section on transparency, it must be observed, by way of preliminary remark, that it contains only three recitals,
         although according to the Decision, and still more so according to the position defended by the Commission in its written
         submissions to the Court, in the present case transparency is the essential, and indeed the only, ground for the assertion
         that there is no collective dominant position on the markets for recorded music. It should also be noted that it is not concluded
         in that section that the market is not transparent, or even that it is not sufficiently transparent to allow tacit collusion.
         At the very most, it is stated, first, at recital 111 in fine, that the need to carry out monitoring at album level, in particular for campaign discounts, ‘could reduce transparency in
         the market and may make tacit collusion more difficult’ and, second, at recital 113 in fine, that ‘[h]owever, the Commission has not found sufficient evidence that, by monitoring retail prices or by contacts with
         retailers, the majors have overcome in the past the deficits as regards the transparency of discounts, in particular campaign
         discounts as described for the five larger Member States’. Clearly, such vague assertions, which fail to provide the slightest
         detail of, in particular, the nature of campaign discounts, the circumstances in which such discounts might be applied, their
         degree of opacity, their size or their impact on price transparency, cannot support to the requisite legal standard the finding
         that the market is not sufficiently transparent to allow a collective dominant position.
      
      290    Next, it appears that, apart from the two extracts mentioned above, all the factors set out at recitals 111 to 113 to the
         Decision, far from demonstrating the opacity of the market, show, on the contrary, that the market was transparent. 
      
      291    Thus, recital 111 refers to the limited number of pricing points and to the fact that the majors need to monitor only the
         pricing points of a limited number of best-selling albums to account for most of the sales, since the top 20 titles each year
         account for at least half of the annual sales in any one country.
      
      292    What is even more, recital 112 states that there ‘are further devices in the market which increase transparency and could
         facilitate the monitoring of an agreement’. These include, first of all, the publication of weekly hit charts which provide
         information on sales at title level and make it very easy to identify instantly what titles become hits, which, it is explained,
         ‘greatly facilitates monitoring on the part of the majors’. Next, the Decision states that the nature of the market for recorded
         music is such that ‘[i]n order for a music retailer to be successful, it needs to carry products from all majors’ and that
         ‘[a]s a consequence, the industry is characterised by long-term stable relationships between retailers and all majors’. The
         Commission also observes that ‘[m]oreover, a large part of the majors’ sales of recorded music is channelled to a limited
         number of customers’ and concludes that ‘[t]his situation of a limited number of players in the market is conducive to the
         adoption of cooperative strategies on behalf of the majors and also facilitates the monitoring and information flow’.
      
      293    It must be stated that that list of devices and of factors that increase transparency and facilitate the monitoring of compliance
         with the collusion continues in the final recital in the section dealing with transparency in the market. The Commission states
         at recital 113 that a ‘further source of transparency is the monitoring of the retail market’. It specifies in that regard
         that ‘[t]he market investigation revealed that Sony and BMG [had] set up a system of weekly … reports, which include information
         on competitors’. Last, the Commission states that the investigation ‘also confirmed that the major record companies’ sales
         forces [were] in regular and permanent contact with retailers and wholesalers as negotiations of promotional support and of
         campaign discounts often [took] place on a weekly basis’.
      
      294    It follows from the foregoing that, in the section of the Decision dealing with the examination of transparency, the Commission
         not only did not conclude that the market was opaque or not sufficiently transparent to allow a collective dominant position,
         but, moreover, mentioned only factors capable of giving rise to great transparency in the market and of facilitating the monitoring
         of compliance with collusion, with the sole exception of the rather limited and unsubstantiated assertion that campaign discounts
         could reduce transparency and make tacit collusion more difficult. It must therefore be stated that that section could clearly
         not, in itself, be considered to support to the requisite legal standard the assertion that the market was not sufficiently
         transparent.
      
      295    The Court must next examine whether such reasoning is to be found in the section dealing with the common understanding of
         the majors on pricing.
      
      296    By way of preliminary observation, it is useful to bear in mind that the method followed and the findings made are, subject
         to very slight variations, the same for the markets of the five large countries, so that the following observations in respect
         of the United Kingdom apply, mutatis mutandis, to all five large markets.
      
      297    After noting what was in part a similar development in the majors’ net average real prices in the United Kingdom, the Commission
         states, at recital 75 to the Decision, that it then investigated whether additional elements, namely list prices and discounts,
         were aligned and sufficiently transparent to provide sufficient evidence of coordination.
      
      298    It should be noted, by way of preliminary observation, that in the present section the Commission seeks to examine whether
         the majors’ conduct is capable of demonstrating the existence of coordination. In its written submissions to the Court, however,
         the Commission emphasised on a number of occasions the need not to confuse the common understanding of the players on the
         market with evidence of the transparency of the market, stating that even a substantial alignment of the conditions applied
         would not be capable of demonstrating the transparency of the market. It follows that, according to the Commission’s own theory,
         the findings relating to the majors’ pricing practices and discounts have no relevance for the purpose of determining transparency
         on the market. In those circumstances, the observations set out in that section should not make it possible to compensate
         for the inadequate reasoning described above. However, as that theory is not consistent with the Decision, the Court finds
         it necessary to examine whether the findings made in that section may provide sufficient reasons for the finding that there
         was no transparency on the market.
      
      299    As regards, first, the PPDs, the Commission found that each major generated with its three most important PPDs more than 80%
         of its total top 100 single album CD net sales in 2003 and that, in addition, one or two PPDs within a range of 17 pence (between
         GBP 8.98 and GBP 9.15) accounted for more than 47% of the top 100 sales (the figures were quite similar in the other large
         countries: one or two PPDs in a range of EUR 0.36 – between EUR 12.55 and EUR 12.91 –, for example, represented more than
         60% of the top 100 sales in Italy). The Commission concluded that ‘list prices of the best-selling albums appear thus to be
         rather aligned’. That is a prudent conclusion to say the least, as the alignment was in fact very marked. 
      
      300    It should be observed, moreover, in that regard that, in the statement of objections, the Commission had not found that prices
         were merely ‘rather aligned’ but indeed that they were ‘substantially aligned’ (according to point 82 of the statement of
         objections, ‘… the PPDs are placed very close together …’, and point 87 refers to a ‘… substantial alignment …’). As regards
         the top 20 discs, the Commission had even mentioned virtually total alignment (see points 85 and 86 of the statement of objections),
         but that element of analysis was not repeated in the Decision, although when questioned on that point at the hearing the Commission
         did not maintain that the analysis was incorrect and could not explain its reasons for suppressing that element of analysis.
         Furthermore, recital 72 to the Decision mentions only four elements forming the basis of the analysis of the common understanding
         on pricing, whereas point 75 of the statement of objections also referred to a fifth element. Although, as recalled above,
         the statement of objections is only a provisional document, and although the Commission is perfectly entitled, and indeed
         obliged, to modify its position in the light of the information which it has obtained in the course of its investigation,
         it cannot suppress certain relevant elements on the sole ground that they might not be consistent with its new assessment.
      
      301    In any event, even considering only the observations set out in the Decision, the Commission concluded that list prices were
         rather aligned.
      
      302    Likewise, recital 76 to the Decision states that the PPDs are ‘rather transparent as they are available in the majors’ catalogues’
         and that ‘[m]onitoring of other majors’ list pricing appears therefore to be possible’. Although that assessment, too, is
         very prudent and very subdued by comparison with that made in the statement of objections (point 81 of the statement of objections
         indicated that ‘[t]he Commission found that it is extremely easy for majors to monitor the PPDs at which new expected hit
         albums are released because those PPDs are publicly available in the major’s catalogues’), the fact remains that it underlines
         a further element that favours the transparency of the market. The fact that gross prices (list prices) are public knowledge
         assuredly assumes considerable importance for transparency in pricing.
      
      303    It is thus apparent that, according to the very terms of the Decision, list prices, from both of the aspects examined by the
         Commission, namely alignment and transparency, constitute a factor of market transparency.
      
      304    As regards, second, discounts, recital 78 to the Decision states that the Commission found that ‘the level of the different
         majors’ discounts varied to some extent’ and that ‘invoice discounts are [by comparison with the other forms of discount (co-op
         payments and retrospective discounts)] by far the most important discounts’. It then verifies, first, the alignment of invoice
         discounts and, second, their transparency.
      
      305    As regards the alignment of discounts, recital 79 to the Decision states that ‘[o]n a customer-by-customer basis …, the Commission
         found a certain degree of fluctuation and also differences of 2-5 percentage points between Sony’s and BMG’s invoice discounts
         for most of their top 10 customers, and of more than 5 percentage points for some customers in some years’. That recital also
         mentions that ‘these fluctuations are mainly the result of campaign discounts[,] which are more flexibly used than file discounts
         that are regularly fixed on an annual basis,’ and concludes that ‘[o]n the basis of these observations, it [could not] be
         established that invoice discounts [were] sufficiently aligned between the Parties [to the concentration]’.
      
      306    It should be observed, as a preliminary point, that, as indicated above, the analysis therefore relates to the conduct adopted
         by the majors and not to the objective characteristics of the market, so that that finding is at the most of relative relevance
         for the purpose of assessing the degree of transparency on the market. The Commission emphasised, in that regard, that the
         finding of parallelism of the net average prices of the majors or of significant stability in the average discounts of a given
         major did not constitute evidence either of tacit coordination or of the necessary transparency and that the ‘degree of alignment
         or stability at an aggregate level cannot be a substitute for cogent and consistent evidence that there is sufficient transparency
         to permit [undertakings in an oligopoly situation] to monitor each other’s market conduct’. It must be concluded that the
         examination of the alignment of discounts does not, according to the Commission, constitute an appropriate test to assess
         the transparency of the market since, according to the Commission, even the alignment of discounts cannot demonstrate such
         transparency. The test will be appropriate only if it makes it possible to establish both transparency and lack of transparency.
         However, in so far as that argument of the Commission, as indicated above, does not find sufficient support in the Decision,
         the Court will examine whether the observations set out at recitals 78 and 79 demonstrate to the requisite legal standard
         the absence of transparency on the market.
      
      307    It should be noted, first of all, that the variation in the general levels of invoice discounts applied by the parties to
         the concentration, as referred to at recital 78 to the Decision, is very low, namely [confidential] between 2 and 5% of their aggregate gross sales in the United Kingdom. In Italy, that variation is virtually nil, namely
         [confidential] between 0 and 5% (recital 99 to the Decision). Likewise, the differences of between 2 and 5% [confidential] between the invoice discounts applied by the parties to the concentration for most of their largest customers, described
         at recital 79 to the Decision, are very low. It follows that the data in recitals 78 and 79, and in the corresponding recitals
         for the other large countries, cannot justify the conclusion that the invoice discounts are not sufficiently aligned.
      
      308    It is apparent, next, that, according to the actual wording of the Decision, that low variation seems to be devoid of significance.
         According to recital 77 to the Decision, ‘[t]he Commission’s analysis showed that transaction net prices are closely linked
         to gross prices (PPDs) as, for both Sony and BMG, their average gross real prices and average net real prices have moved closely
         in parallel over the last six years as also reflected by very stable net to gross price ratios across albums and time’. Contrary
         to the Commission’s contention, moreover, recital 77 to the Decision does not merely record a parallel development solely
         of average gross and net prices for all albums (that is to say, the stability of the average discount on all sales), which
         would thus conceal any differences in the discounts granted for individual albums: that recital also describes the stability
         of discounts by individual album and over time. In effect, if the second part of the sentence in recital 77 referred, as the
         Commission contends, to the ratio of gross and net prices, it would be superfluous, as such a ratio is synonymous with the
         gap between gross and net prices, the stability of which is observed in the first part of the sentence. That emerges very
         clearly from the authentic version of the Decision, since that version uses the word ‘ratios’, in the plural (‘very stable
         net to gross price ratios across albums and time’). Point 90 of the statement of objections also states, moreover, that the
         Commission found that ‘net to gross price ratios were very stable across albums and across time for those individual releases
         examined by the Commission’. Likewise, point 75(iv) of the statement of objections states that the Commission analysed the
         development of gross and net sales of individual albums, stating in footnote 47 that ‘[a]n analysis for the gross and net
         prices was made individually for BMG’s and Sony’s top 10 albums in 2002’.
      
      309    Furthermore, it follows from the last sentence of recital 77 to the Decision that discounts are not capable of really affecting
         the transparency of the market as regards prices resulting from, in particular, public list prices, since it is stated that
         ‘[i]f a significant deviation from pricing policies was being implemented by the majors through the grant of discounts, this
         deviation would have been reflected in their average net prices’.
      
      310    In addition, although the Commission claims in its written submissions that the data relating to average net prices or to
         average discounts are not capable of establishing alignment or coordination and that all that matter are the individual decisions
         setting prices, it must be stated that that argument finds no support in the Decision. Thus, recital 70 to the Decision states
         that ‘[i]n the Commission’s view average prices are an appropriate means to assess parallelism in the pricing behaviour of
         the majors’. Furthermore, if, as the Commission contended before the Court, the observations relating to pricing policy were
         not relevant in assessing transparency, it would follow that the observations on discounts set out at recitals 78 to 80 to
         the Decision (and at the corresponding recitals for the markets in the other large countries) would not be capable of containing
         the reasons for the absence of transparency, since discounts are a component of prices and are analysed in the context of
         the examination of coordination on pricing.
      
      311    It follows from the foregoing that the observations relating to the alignment of invoice discounts set out at recitals 78
         and 79 to the Decision (and at the corresponding recitals for the other large countries) cannot substantiate the assertion
         that there is insufficient transparency on the market.
      
      312    As regards transparency of discounts, recital 80 to the Decision states that ‘a majority of the [United Kingdom] customers’
         responses to the Commission’s market investigation indicated that the major record companies have some knowledge of their
         competitors’ file discounts due to their permanent interaction with the same customer base’. That finding is repeated, in
         identical terms, for the five large countries (recitals 87, 94 101 and 108 to the Decision) While there is no need, in the
         context of the examination of the complaint alleging breach of the obligation to state reasons, to examine the merits of that
         finding, it is already clear that it appears to present the degree of transparency of the market in a very muted form by reference
         to the evidence on which it is based. In particular, in the case of Italy, it is scarcely possible to understand how the Commission
         was able to consider that ‘a majority’ of the customers’ responses revealed that the majors had only ‘some knowledge’ of their
         competitors’ discounts, when footnote 55 to the Decision states that ‘[f]ive out of five of the Italian retailers which replied
         to the question said that majors are aware of each other’s PPDs and discounts’. Likewise, in the case of France, footnote
         49 states that three out of four retailers said that majors were aware of each other’s PPDs and discounts. 
      
      313    The Court observes, next, that for none of the countries concerned do the explanatory footnotes draw any distinction between
         file discounts and campaign discounts: thus the Commission’s reasons for inferring from the customers’ responses that the
         majors had some knowledge only of file discounts and not of campaign discounts are not apparent.
      
      314    In any event, it must be held that, according to the Decision itself, the Commission considered that there was a certain transparency
         of file discounts. 
      
      315    It is thus apparent that the only element of opacity found in the contested decision consists in the assertion, at recital
         80 (and at the corresponding recitals for the other large countries), that ‘[h]owever, it appears that campaign discounts
         are less transparent than file discounts and that their monitoring requires also a careful observation of promotional developments
         on the retail market’. 
      
      316    It should be noted, first of all, in that regard, that campaign discounts are not said to be opaque; the Decision merely states
         that they are ‘less transparent than file discounts’ and that their monitoring requires careful observations. It is also stated
         that the Commission found that both Sony and BMG had set up a system of weekly reports by their sales forces, although it
         could not be established that those reports ensured a sufficient degree of transparency of the campaign discounts.
      
      317    It must be borne in mind, next, that, as is apparent from the second sentence of recital 150 to the Decision, the most important
         discounts in all countries are file discounts. It follows that, according to the Decision itself, campaign discounts have
         only a limited impact on prices. Likewise, it follows from recital 77 that over the previous six years discounts (both file
         discounts and campaign discounts) had not affected the agreed policy on prices.
      
      318    It should also be observed that the Decision does not state that the market is opaque, or even that it is not sufficiently
         transparent to allow coordination of prices, but at the most that campaign discounts are less transparent, although the Decision
         does not provide the slightest information as regards their nature, the circumstances in which they are granted or their actual
         importance for net prices, or their impact on the transparency of prices.
      
      319    It should further be borne in mind that, as stated above, the Commission described in the Decision numerous elements and factors
         which favour the transparency of the market and facilitate the monitoring of compliance with a collusive arrangement.
      
      320    It follows that the few assertions relating to campaign discounts contained in the section of the Decision dealing with the
         examination of the coordination of prices in the large countries, in so far as they are imprecise, unsupported, and indeed
         contradicted by other observations in the Decision, cannot demonstrate the opacity of the market or even of campaign discounts.
         Those assertions are confined, moreover, to indicating that campaign discounts are less transparent than file discounts, but
         do not explain how they would be relevant for the transparency of the market and do not make it possible to understand how
         they in themselves might compensate for all the other factors of transparency of the market identified in the Decision and
         thus eliminate the transparency necessary for the existence of a collective dominant position.
      
      321    As regards, last, the observations in the section of the Decision dealing with the assessment of the situation in the smaller
         countries, the Commission observes, first of all, at recital 149 to the Decision, that the use of PPDs is quite similar to
         their use in the large countries. It observes, in that regard, that the essential part of sales is made on a few PPDs and
         that the use of PPDs shows parallelism between the majors, stating that ‘[a]s can be seen from the figures stated for each
         of the smaller countries, for the Netherlands and Belgium the two most important PPDs for both Sony and BMG are virtually
         identical’. The Commission concluded that there was a considerable degree of similar development between the majors’ PPDs.
         It thus follows from recital 149 that the Commission found, in the smaller countries, a transparency and an alignment of PPDs
         that were even more marked than in the large countries.
      
      322    As regards the discounts granted in the smaller countries, it must be stated that the section in question contains no observation
         relating to campaign discounts and that those discounts are not mentioned. Quite to the contrary, the Commission states at
         recital 150 to the Decision that, as in the five large countries, the most important discounts in all the smaller countries
         are file discounts. 
      
      323    Furthermore, although the Commission states that a very wide range of discounts are granted by Sony and BMG, that those discounts
         vary on a customer-by-customer basis, and that the range also differs between BMG and Sony, and that they are not public knowledge
         and that transparency in the market is reduced, it provides no figures relating to their size or the extent to which they
         vary. Nor is there any explanation of whether and, if so, the reasons why the characteristics of the market do not, as in
         the large States, at the very least render the file discounts transparent. Likewise, it is not indicated whether the discounts
         (file discounts and/or campaign discounts) lead to different net prices, although the assertion that ‘the Commission has not
         established that there is sufficient evidence to show that a parallelism of average net prices could be ascribed to tacit
         collusion’ seems rather to indicate that they do not. 
      
      324    It follows that the section dealing with the smaller countries, too, contains no reasoning for the finding that the market
         is not transparent on account of the campaign discounts. In any event, the situation existing in the smaller countries cannot
         constitute a valid ground for the finding relating to the degree of transparency in the markets in the large countries.
      
      325    It follows from all of the foregoing that the complaint alleging insufficient reasoning for the finding relating to the transparency
         of the market is well founded, which in itself is reason to annul the Decision.
      
      326     In the interest of completeness, the Court will none the less examine, in addition, the applicant’s complaints and arguments
         that the elements put forward by the Commission in order to demonstrate the insufficiency of the transparency of the market
         are vitiated by a manifest error of assessment. 
      
      b)     The complaint alleging a manifest error of assessment
      327    It must be borne in mind, first of all, that the basic provisions of the Merger Regulation, in particular Article 2, confer
         on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review
         by the Community Courts of the exercise of that discretion, which is essential for defining the rules on concentrations, must
         take account of the margin of discretion implicit in the provisions of an economic nature which form part of the rules on
         concentrations (Kali und Salz, paragraph 245 above, paragraphs 223 and 224; Commission v Tetra Laval, paragraph 232 above, paragraph 38; Gencor v Commission, paragraph 246 above, paragraphs 164 and 165; Airtours v Commission, paragraph 45 above, paragraph 64; Case T-80/02 Tetra Laval v Commission [2002] ECR II-4519, paragraph 119; and Case T-210/01 General Electric v Commission [2005] ECR II-0000, paragraph 60).
      
      328    However, the Court of Justice has held that:
      
      ‘Whilst the Court recognises that the Commission has a margin of discretion with regard to economic matters, that does not
         mean that the Community Courts must refrain from reviewing the Commission’s interpretation of information of an economic nature.
         Not only must the Community Courts, inter alia, establish 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 analysis and whether it is capable of substantiating the conclusions drawn from it’ (Commission v Tetra Laval, paragraph 232 above, paragraph 39).
      
      329    It is in the light of those considerations that the Court must examine whether the Commission’s assessments relating to the
         transparency of the market are vitiated by a manifest error.
      
      330    The applicant observes, first of all, that before the Decision was adopted the markets for recorded music had been considered
         sufficiently transparent to allow a collective dominant position.
      
      331    The applicant recalls in that regard that when examining the proposed merger between EMI and Time Warner the Commission had
         found that the market for recorded music was characterised by ‘standard pricing products’ and was ‘very transparent’ (see
         points 37, 38 and 57 of the statement of objections in respect of the proposed EMI/Time Warner merger).
      
      332    The applicant further submits that in its Report of September 2002 on the market for recorded music in the United Kingdom
         (‘Wholesale supply of compact discs’), the Office of Fair Trading also considered that the market presented a high degree
         of transparency and identified a series of factors (in particular, the weekly publication of hit parades, sales in common
         and regular visits to retailers in order to check stocks) that made more information on competitors available than in many
         other industries (see point 114 of the statement of objections). 
      
      333    Last, the applicant claims that in the present case, after a first examination of the proposed concentration between Sony
         and Bertelsmann, notified on 9 January 2004, and a first market investigation, in particular among retailers and the majors,
         the Commission, by decision of 12 February 2004, concluded that the transaction raised serious doubts as to its compatibility
         with the common market and therefore initiated the procedure in accordance with Article 6(1)(c) of the Merger Regulation.
         In the course of that procedure, the Commission pursued its investigation and sent a series of requests for information to
         the parties to the concentration (on 19 February, 5 March, 17 March, 23 March, 1 April and 10 May 2004), to the other majors
         (on 11 March and 10 May 2004) and also to the various players on the market (see also the questionnaire to retailers of 16
         April 2004). On the basis of all the data and information obtained, and also of the discussions with Sony and Bertelsmann,
         the Commission on 24 May 2004 issued a statement of objections in which it concluded provisionally that the transaction was
         incompatible with the common market, notably because it would strengthen a collective dominant position on the market for
         recorded music.
      
      334    The applicant emphasises that in the statement of objections the Commission, first, found a parallelism in the majors’ prices,
         both gross and net, and, second, considered that the market was sufficiently transparent to permit the development of a collective
         dominant position of the majors and the monitoring of collusion on prices (see, in particular, point 93 of the statement of
         objections). At points 94 to 115 of the statement of objections, the Commission analysed, in that regard, 10 factors which
         make the market for recorded music particularly conducive to coordination and facilitate the monitoring of such coordination.
         The Commission thus identified (a) product homogeneity, (b) the limited number of PPDs, (c) the limited number of relevant
         albums, (d) the weekly publication of hit-parades, (e) customer stability, (f) the relative stability of market shares, (g)
         the high number of contacts owing to the vertical integration of the majors, (h) the high number of structural links between
         majors, such as joint ventures for compilations and distribution and also licensing and distribution agreements, (i) joint
         participation in industry associations and (j) joint negotiation of copyright.
      
      335    While it is thus apparent that, contrary to the assessment made by the Commission in the Decision, the market in question
         was regarded both by the Commission and by the United Kingdom competition authority in respect of the United Kingdom market
         as being very transparent and in any event as being sufficiently transparent to permit the necessary monitoring of tacit coordination
         of prices, that sole circumstance cannot in itself establish that the opposite position adopted by the Commission in the Decision
         is vitiated by a manifest error of assessment. First, the findings of a national competition authority are not in any way
         binding on the Commission for the purposes of its analysis and, second, as observed above, the statement of objections is
         merely a preparatory document, the findings of which are purely provisional, and the Commission is obliged to take account
         of the evidence obtained during the administrative procedure and also of the arguments put forward by the undertakings concerned,
         and must drop any objections which might ultimately prove to be unfounded. Naturally, that observation applies a fortiori in the case of provisional findings made a number of years previously in the context of the examination of a different concentration
         or of the findings of a different competition authority in a different context. That does not mean, however, that the statement
         of objections is wholly without merit or wholly irrelevant. In effect, unless the entire investigative administrative procedure
         is to be deprived of the slightest value, the Commission must be in a position to explain, not in the decision, admittedly,
         but at least in the context of the proceedings before the Court, its reasons for considering that its provisional findings
         were incorrect; but above all, the findings set out in the decision must be compatible with the findings of fact made in the
         statement of objections, in so far as it is not established that the latter findings were incorrect.
      
      336    The applicant then maintains, primarily, that all the evidence obtained by the Commission and set out both in the statement
         of objections and in the Decision indicates that the prices applied by the majors are transparent and certainly sufficiently
         transparent to permit tacit coordination. The Commission adduced no evidence establishing that the market was opaque but merely
         inferred from the alleged variations in discounts that they could reduce transparency. The applicant formulates a series of
         complaints relating to the considerations on discounts and contends that the Commission accorded excessive importance to discounts,
         in particular campaign discounts, without having even examined their relevance.
      
      337    The Court will examine in turn the complaints and arguments relating to the factors of market transparency set out in the
         Decision and then those which seek to challenge the alleged factors of opacity, comparing them at the same time with the arguments
         and evidence put forward by the defendant and the interveners, even though numerous elements and arguments are interconnected
         and although the assessment of transparency on the market must be based on a global analysis of all the relevant elements.
      
       Factors of transparency identified in the Decision 
      338    It must be borne in mind, in the first place, that the majors’ gross prices to their customers (retailers, supermarkets, etc.)
         are public, since they feature in their catalogues. That indisputably constitutes a very important source of price transparency.
         Admittedly, recital 76 to the Decision states only that ‘the PPDs are rather transparent as they are available in the majors’
         catalogues. Monitoring of other majors’ list pricing appears therefore to be possible’. However, that muted formulation cannot
         qualify the finding of transparency of gross prices, as the Commission did not adduce, either in the Decision or during the
         proceedings before the Court, any evidence with a view to explaining that gross prices were only ‘rather transparent’. In
         the statement of objections (point 81), moreover, the Commission observed that ‘it is extremely easy for majors to monitor
         the PPDs at which new expected hit albums are released because those PPDs are publicly available in the major’s catalogue’.
      
      339    It should be emphasised, in the second place, that it is indicated in the Decision that although the parties to the concentration
         stated that they used more than 100 PPDs, the Commission found that each major generated, with its three main PPDs, depending
         on the country, between more than 55% and more than 80% of its top 100 sales. That concentration of the essential part of
         album sales on a very limited number of reference prices, which is confirmed by the majors’ replies, has the effect of facilitating
         coordination of prices, as the Commission stated, moreover, at point 96 of the statement of objections (‘This pricing system
         facilitates coordination since it provides easily interpretable information about the level at which the majors are pricing
         most of their sales’).
      
      340    In its defence, the Commission did, admittedly, discuss the complexity of fixing gross prices, in that individual albums have
         varying degrees of success, which influences the initial fixing of the PPD when the album is released and subsequent changes
         in the PPD, so that it is difficult to determine whether an album’s PPD is altered in order to support declining success or
         as part of a strategy of ‘deviation’. It must be stated, first, that that argument finds no support in the Decision and even
         contradicts the findings therein. As stated above, the Commission found, at recital 76 to the Decision (and at the corresponding
         recitals for the other countries) that although the majors stated that they use more than 100 PPDs, they use only two or three
         PPDs for the essential part of their sales. Furthermore, recital 110 to the Decision states that, ‘[d]espite the heterogeneity
         of the content, the way in which albums are priced and marketed on the wholesale level appears to be quite standardised’.
         It should then be observed that, as the degree of success of an album is known at any time because of the hit parades, the
         majors could, contrary to the Commission’s contention, easily determine whether or not the change in an album’s PPD comes
         within the agreed price policy.
      
      341    In the third place, recital 111 to the Decision reads as follows:
      
      ‘[d]espite the fact that sales of albums take place in few price points, the variety of albums priced at different list prices
         could complicate the monitoring of a tacit agreement. However, majors only need to monitor the pricing points of a limited
         number of best selling albums to account for most of the sales. Data provided by the [parties to the concentration] show that
         the top 20 titles each year account for at least half the yearly sales for BMG in all countries except Germany’ (see also
         point 85 of the statement of objections). 
      
      342    In its defence, however, the Commission claimed that, as the degree of future success is not foreseeable with complete certainty
         before a given album is released (or the duration of its success after its release), successful coordination would require
         the constant monitoring of PPDs on a much larger number of individual albums than the number of albums subsequently deemed
         to have made the greatest contribution to each major’s turnover. 
      
      343    It must be stated that that line of argument finds no support in the Decision, where it is indicated that the majors need
         monitor only the reference prices of a limited number of albums among the best sellers in order to monitor the bulk of sales.
         That monitoring, incidentally, is largely facilitated by the hit parades, which supply at any time a very precise indication
         of the developing success of the various albums. 
      
      344    Furthermore, as the applicant rightly observes, the Decision also states that ‘[t]he Commission found some indications that
         PPDs could have been used as focal points for an alignment of the majors’ prices’. The Commission’s assertion that that finding
         is not final can clearly not be upheld, as the Decision, by definition, constitutes the ultimate stage in the procedure involving
         the examination of the concentration and as the Commission refers to no other element in the Decision that would invalidate
         or moderate that finding. At the very most, the Commission relies on the fact that the parties to the concentration submitted
         evidence demonstrating that the combinations of PPDs corresponding to their respective top 20 albums frequently changed considerably
         from one quarter to another and that the unpredictability of success obliged each major to monitor the PPDs of more than 80
         albums (or 60 albums after the concentration) produced by its competitors. However, that assertion was specifically not reiterated
         in the Decision and, on the contrary, is contradicted by the findings set out therein. 
      
      345    It must also be stated that the data prepared by the economic advisers to the parties to the concentration, quite apart from
         the fact that it is impossible to see how they might permit the conclusion which the Commission draws from them, are unclear
         and do not appear to be reliable. Thus, it is surprising, to say the least, that the PPDs were able to increase, from one
         quarter to another, in the proportions indicated [confidential]. 
      
      346    In any event, the number of albums which, according to the Commission, would have to be monitored does not seem to be so high
         as to render the exercise impossible or even particularly onerous or costly, a fortiori since, as the Commission acknowledges, the weekly charts considerably facilitate monitoring.
      
      347    It follows from the foregoing that three factors referred to in the Decision – the public nature of gross prices (PPDs), the
         limited number of reference prices and the limited number of albums to be monitored – are capable of giving rise to a high
         level of transparency of prices. 
      
      348    Furthermore, as stated at recital 112 to the Decision, ‘[t]here are further devices in the market which increase transparency
         and could facilitate the monitoring of an agreement’.
      
      349    In the first place, the Decision states, at recital 112, that ‘[t]he publication of weekly hit charts with information on
         sales at title level makes it very easy to identify instantly what titles become hits and generate the bulk of sales’. The
         charts are thus an important source of transparency, since they make it possible not only to identify, at any time, the best
         selling albums but also to ascertain whether the albums are sold at a price corresponding with their level of success, as
         PPDs are public. The Decision states, moreover, that ‘[s]uch availability of weekly public information on sales at the title
         level greatly facilitates monitoring on the part of the majors’.
      
      350    In the second place, the market is ‘characterised by long-term stable relationships between retailers and all majors’, as
         each retailer needs to carry the products of all the majors (recital 112 to the Decision).
      
      351    In the third place, there is, according to the Decision, only a limited number of players on the market, a large part of the
         majors’ sales of recorded music being channelled to a limited number of customers. As stated at recital 112 in fine, that situation ‘is conducive to the adoption of cooperative strategies on behalf of the majors and also facilitates the
         monitoring and information flow’.
      
      352    In the fourth place, the Commission found that there was monitoring of the retail market. According to recital 113, ‘[t]he
         market investigation revealed that Sony and BMG [had] set up a system of weekly … reports, which include[d] information on
         competitors’. 
      
      353    In its defence, the Commission does, admittedly, claim that the reports submitted to it by the parties to the concentration
         contained no information on discounts and that it was unable to demonstrate that those reports guaranteed a sufficient degree
         of transparency of the campaign discounts granted by competitors. 
      
      354     It should be observed in that regard, first of all, that, whatever the degree of precision of the information on gross, net
         or retail sales prices or discounts contained in those reports, they constitute, as the Decision, moreover, states, an additional
         factor of the transparency of the market. It follows from the weekly reports submitted by the Commission, moreover, that those
         reports contain information on stocks of the competition’s albums and their developments. 
      
      355    It should be observed, next, that the reports in question are merely a few examples of weekly reports produced by the parties
         to the concentration themselves.
      
      356    [Confidential]
      
      357    [Confidential]
      
      358    [Confidential]
      
      359    [Confidential]
      
      360    [Confidential]
      
      361    In the fifth place, recital 113 to the Decision states that the majors’ sales forces are in regular and permanent contact
         with retailers and wholesales, as negotiations of promotional support and of campaign discounts often take place on a weekly
         basis. Although there is nothing unusual about contacts with retailers, the frequency of the contacts allowed the sales forces
         to obtain more specific information about the competition and the conditions applied by competitors and to follow, virtually
         in real time, developments in the success of the competitors’ various albums. That is a fortiori so in the present case since, as stated at recital 112 to the Decision, the nature of the market is such that each retailer
         must carry products from all majors, so that each major is in permanent contact with all its competitors’ customers and is
         thus able to obtain specific information on the conditions applied by those competitors. It is also stated that a large part
         of the sales is channelled to a limited number of customers. Those factors are such as to create a high degree of transparency
         on the market. The Commission concluded, moreover, at recital 112 to the Decision that that situation ‘is conducive to the
         adoption of cooperative strategies on behalf of the majors and also facilitates the monitoring and information flow’.
      
      362    It follows from those five additional factors that the already strong transparency resulting from the first three factors
         mentioned above (in particular the publication of selling prices) is increased even further. It should be observed, in that
         regard, that at point 116 of the statement of objections the Commission had concluded, moreover, that ‘the structure of the
         market [was] such that information flow[ed] easily and monitoring on the part of the majors of each other’s policies [was]
         routine’.
      
      363    The Court must now examine whether the factors on which the Commission relied as a source of opacity on the market are sufficiently
         significant to preclude the conclusion that the market is sufficiently transparent to permit monitoring of compliance with
         the common policy adopted on pricing. 
      
       Elements capable of rendering the market opaque
      364    In spite of the numerous sources of transparency on the market described above, the Commission, as is apparent from recital
         157 to the Decision, concluded that there was no collective dominant position owing to the deficits found in actual transparency.
      
      365    It follows from the section dealing with the examination of the transparency of the market that that assessment relies on
         the assertion, at recital 111 to the Decision, that ‘further monitoring on album level is needed in particular in relation
         to campaign discounts’. That recital further indicates that ‘[t]he market investigation shows that this could reduce transparency
         in the market and may make tacit collusion more difficult’ and that ‘[t]he Commission has not found sufficient evidence to
         conclude that these difficulties [had] been overcome in the past’. In that regard, recital 113 to the Decision states that
         the Commission ‘[had] not found sufficient evidence that, by monitoring retail prices or by contacts with retailers, the majors
         [had] overcome in the past the deficits as regards the transparency of discounts, in particular campaign discounts’. It follows
         that it was because of discounts, or at least campaign discounts, that the Commission considered that the market was not sufficiently
         transparent to allow the establishment of a collective dominant position.
      
      366    It should be observed, as a preliminary point, that the Commission did not conclude in the Decision that, because of the discounts,
         the market was not transparent, or even that the discounts affected transparency or the degree of transparency necessary to
         permit a collective dominant position, but that, at the most, they might ‘make tacit collusion more difficult’. In those circumstances,
         and in the light of the public, and therefore transparent, nature of the PPDs, and of all the other factors which, according
         to the same words of the Decision, increase the transparency of the market and facilitate monitoring of compliance with an
         agreement, the observations and considerations in the section dealing with the examination of the transparency of the market
         do not, as the Court held in the context of the complaint relating to a statement of reasons, justify the finding that the
         market is not sufficiently transparent.
      
      367    However, in the section dealing with the examination of the common understanding on prices, the Commission found, in identical
         terms for the five large countries, fluctuations in discounts, resulting essentially from campaign discounts, and indicated
         that it had been unable to demonstrate a sufficient degree of transparency of campaign discounts (recitals 79 and 80 to the
         Decision for the United Kingdom, and recitals 86 and 87, 93 and 94, 100 and 101 and 107 and 108, respectively, for the other
         large countries). 
      
      368    The Commission’s assessment rests on the idea, put forward expressly in its written submissions and implicit in the Decision,
         that tacit collusion on prices can be effective only if it relates to net selling prices, that is to say, in the present case,
         PPDs minus discounts. There would be no point in having a common understanding at the level of PPDs, and in being able to
         monitor compliance with that arrangement, if secret and opaque discounts eliminated the effects of that coordination of list
         prices.
      
      369    It is apparent from the Decision (recital 73) that the majors grant discounts of several types: invoice discounts (file or
         campaign), retrospective discounts and payments under commercial cooperation agreements. It is common ground that only invoice
         discounts were considered relevant by the Commission for the purpose of assessing transparency. First, according to recital
         73 (and also according to recital 151), the investigation showed that ‘co-op spending’ was rather a kind of marketing payment
         than a proper discount and, second, retrospective discounts, according to recitals 78, 92, 99 and 106 to the Decision, are
         absent or weak and, as stated at recital 151 to the Decision, ‘as the purpose of these discounts is a kind of “loyalty rebate”,
         [they] do not have an immediate effect on price competition’. All the recitals to the Decision relating to the transparency
         of discounts (recitals 111 and 113 in the section dealing with transparency and recitals 79 and 80 in the section on the common
         understanding on prices for the United Kingdom and the corresponding recitals for the other large States) contain only observations
         on the transparency of invoice discounts (file or campaign). Likewise, in its written submissions to the Court, the Commission
         referred only to the lack of transparency of invoice discounts. 
      
      370    It must be stated, first of all, that recitals 111 and 113 contain no specific findings, but in reality merely refer to the
         observations developed in the section dealing with the examination of the common understanding on prices (that is to say,
         recitals 79 and 80 for the United Kingdom and the corresponding recitals for the other countries, which are formulated in
         exactly the same terms). 
      
      371    It should be emphasised, however, that the reference concerns, at least expressly, only campaign discounts and not file discounts.
         Recital 111 refers to the need for monitoring on album level ‘in particular in relation to campaign discounts’ and, furthermore,
         recital 113 in fine mentions the ‘deficits as regards the transparency of discounts, in particular campaign discounts as described for the five
         large Member States’. It thus follows from the observations in the section dealing with transparency that opacity results
         only from campaign discounts. That analysis is confirmed, moreover, by recitals 79 and 80. Thus, recital 79 to the Decision
         states that fluctuations in discounts ‘are mainly the result of campaign discounts[,] which are more flexibly used than file
         discounts that are regularly fixed on an annual basis’. Likewise, recital 80 to the Decision states that the majors ‘have
         some knowledge of their competitors’ file discounts due to their permanent interaction with the same customer base’ and that
         ‘campaign discounts are less transparent than file discounts’. At no point in the Decision is it claimed, still less is it
         demonstrated, that file discounts are opaque or insufficiently transparent.
      
      372    In its written submissions to the Court, the Commission also acknowledged that file discounts are rather transparent, in so
         far, notably, as they are fixed on an annual basis and apply to all the customer’s sales (at what may be different rates for
         pop music, classical music or TV-advertised albums), and put forward arguments solely with a view to establishing the opacity
         of campaign discounts alone. In its defence, it also explained that it had accorded such importance to campaign discounts
         because of the need to monitor all the components of net prices, as the relatively transparent PPDs and some knowledge of
         file discounts were not sufficient if significant opaque campaign discounts were the source of fluctuations in net prices.
         Likewise, the Commission indicated in its submissions that it was unable to conclude that the majors knew with certainty the
         any other major’s real practices in fixing net prices ‘in the face of evidence of rather transparent PPDs, some evidence of
         a certain transparency of file discounts, and strong evidence of the opaque and complex character of campaign discounts’.
         Last, in its final observations, the Commission even expressly indicated that it had concluded in the Decision that there
         was ‘a material degree of transparency for both PPDs and file discounts’.
      
      373    Accordingly, it follows both from the Decision itself and from the arguments developed by the Commission before the Court
         that the only alleged element of opacity of the market resulted from the lesser transparency of the campaign discounts.
      
      374    It must be emphasised, first of all, that only recital 80 to the Decision (and the corresponding recitals 87, 94, 101 and
         108 for the other four large States, which are drafted in identical terms) was expressly aimed at the transparency of discounts.
         That recital states that, ‘[a]s regards transparency of discounts, a majority of the … responses to the Commission’s market
         investigation indicated that the major record companies have some knowledge of their competitors’ file discounts due to their
         permanent interaction with the same customer base. However, it appears that campaign discounts are less transparent than file
         discounts and that their monitoring requires also a careful observation of promotional developments on the retail market’.
         
      
      375    It should be observed, in that regard, that for most of the large countries the responses mentioned in the footnotes to recitals
         80, 87, 94, 101 and 108 to the Decision indicate a higher degree of transparency than that referred to in the Decision. Thus,
         footnote 55 states that ‘[f]ive out of five of the Italian retailers which replied to the question said that majors are aware
         of each other’s PPDs and discounts’; the proportion is three out of four for French retailers, while the fourth stated that
         it was unable to comment (see footnote 49). With the exception of a single United Kingdom customer, for none of the other
         countries does the explanatory footnote indicate that at least one retailer replied that the majors are not aware of discounts.
         Likewise, with the exception of a single retailer out of eight in Germany, no retailer, according to the explanatory footnotes,
         stated that the majors were only partly aware of each other’s discounts. 
      
      376    It should further be pointed out that none of the explanatory footnotes states that the retailers’ replies indicated that
         the majors were aware only of file discounts and not of campaign discounts, as the responses refer only to discounts, without
         distinguishing between them.
      
      377    Accordingly, it must be held that the evidence, as mentioned in the Decision, does not support the conclusions drawn from
         it.
      
      378    It is apparent, next, that the conclusions drawn from that evidence in the Decision are also markedly different from the findings
         made in the statement of objections. 
      
      379    Thus, the statement of objections indicated at point 81 that ‘the Commission considers that there is sufficient evidence that
         majors are aware of each other’s commercial terms’. What is more, it follows from the statement of objections that that is
         not so much an assessment by the Commission, that might be modified, but, rather, a finding of fact resulting from its investigation.
         Point 92 of the statement of objections states that ‘information obtained from retailers indicates that not only are majors
         aware of each other’s list prices but they are also aware of each other’s discounts and commercial practices. Some major retailers
         in France, the United Kingdom and Germany have communicated to the Commission that they believe that the majors are well aware
         of each other[’s] commercial terms’. Likewise, explanatory note 54 to the statement of objections reports that retailers declared
         that the ‘majors are fairly well acquainted with the range of discounts that their competitors gave. It is widely known that
         the discounts on commercial operations granted by the recording companies are known by the majors[’] commercial teams. A customer
         declared [that] the majors knew each other’s discounts within 0.5%-1 %’. The Commission continues, at point 92 of the statement
         of objections, in the following terms: ‘[m]any retailers also think it is a common practice to use the terms of conditions
         obtained from one of the majors to leverage a position with the other majors’, citing, in explanatory note 55, the following
         response of a retailer: ‘… in commercial negotiations reference is made to the conditions and discounts operated by other
         majors. The small number of suppliers make it fairly easy for majors to get a complete picture of the conditions they apply
         and to align themselves accordingly’. Last, although this is an assessment rather than a finding, the Commission indicated
         at point 129 of the statement of objections that ‘the market investigation confirmed that the major record companies’ sales
         forces are in regular and permanent contact with retailers and wholesalers … In combination with the publication of various
         charts, the major record companies can thereby readily monitor whether any other majors grants additional discounts for hits
         albums’.
      
      380    A reading of the Commission’s defence, moreover, raises still further questions. At footnote 45, accompanying paragraph 51
         of the Commission’s defence, the Commission states that ‘[t]he notifying parties argued that a number of the positive responses
         referred to PPDs alone or failed to distinguish between PPDs and discounts. Only five responses … out of a total of 36 accessible
         responses from all countries specifically stated that there was some transparency on discounts; the opposite view was expressly
         taken by 11 respondents’. While the first sentence does admittedly indicate that this is only an argument put forward by the
         parties to the concentration, the second sentence, on the contrary, is presented as a finding of fact by the Commission. It
         must be stated that that assertion is in manifest contradiction with the presentation of the retailers’ responses in the Decision,
         where, as stated above, footnotes 49, 52, 55 and 57 indicate that most retailers had replied that the majors were aware of
         their competitors’ discounts, with no indication that this constituted only partial or imprecise knowledge, and none (with
         the exception of a single United Kingdom retailer) had stated that the discounts were not transparent. The Commission’s argument
         cannot therefore be followed. Furthermore, the Commission’s defence refers only the responses of 36 retailers, whereas there
         are at least 42 responses, which, moreover, the parties to the concentration commented on in their paper on transparency of
         17 June 2004.
      
      381    Next, it is apparent from the Commission’s answers to the written questions put by the Court that the conclusions which it
         drew from the investigation among retailers may be explained, in part, by the fact that it followed the line of argument developed
         by the parties to the concentration in their response to the statement of objections and in a paper on transparency lodged
         on 17 June 2004 after the hearing before the Commission, where they argued that the positive responses of retailers which
         did not specify whether they were referring to PPDs and/or to discounts should be disregarded. 
      
      382    Before examining the merits of that explanation, the Court must first of all express its surprise at the belated stage at
         which it was presented. As the degree of transparency constitutes the essential issue in the present case, it is difficult
         to understand that that explanation, relating to the principal element, is not to be found either in the Decision or, above
         all, in the defence, or even in the supplementary observations, but was put forward only on the eve of the hearing in answer
         to a specific question put by the Court.
      
      383    As regards the merits of the argument, it must be borne in mind that the questionnaire which the Commission sent to retailers
         asked the following question: ‘According to the experience of your purchasing department, are record companies aware of their
         competitors’ PPDs and discounts?’ As the applicant has correctly observed, there is no valid reason to consider that the affirmative
         replies (which, moreover, are sometimes expressed in very categorical terms, such as ‘of course’, ‘absolutely’ or ‘certainly’)
         of the retailers which did not specify whether they were referring to prices and/or discounts cannot be taken into consideration.
         An answer to the question as formulated, whether in the affirmative or in the negative, must logically be understood to refer
         to both points in issue if it contains no restriction or additional detail. On the hypothesis that the Commission considered
         that there was none the less still some doubt as to the precise meaning of the responses, it was incumbent upon it, especially
         in the light of the importance which that point assumed for the Decision, to ascertain that precise point with the retailers
         in question, which, moreover, it could have done within a very short time.
      
      384    In any event, it must be stated that the assertion of the notifying parties, endorsed by the Commission, that ‘only five out
         of a total of 36 responses indicated expressly that there was some transparency, while the opposite point of view was expressly
         put forward in 11 responses’ is manifestly incorrect.
      
      385    As regards what are alleged to be the 11 responses indicating expressly that there is no transparency for discounts, it must
         be observed that it follows from Sony’s and BMG’s paper of 17 June 2004, first of all, that the alleged figure is 10 responses
         and not 11 (see p. 213) and that, in reality, the paper mentions only seven, only four of which relate to the large countries
         forming the subject of the principal examination in the Decision. It is apparent, moreover, that virtually none of those four
         responses can be read as containing an expressly negative response. It is clear that the response [confidential], ‘Unserer Meinung nach kennen sie die PPDs der Konkurrenten’ (‘in our opinion they know their competitors’ PPDs’), cannot
         be understood as indicating expressly that the majors are not aware of their competitors’ discounts. The other response relating
         to the German market states ‘Nicht im Detail, aber sie wissen i.R. wie hoch die Rock-Bottom Preise des Mitbewerbers sind’
         (‘not in detail, but they are aware of the competition’s absolute minimum price’), which does not constitute an expressly
         negative response either. The response on page 61 [confidential] relating to the United Kingdom market is the only expressly negative response (‘PPDs – Yes. Discounts – No’), but it immediately
         states ‘[a]lthough, if an album is discounted across retail the subsequent decrease in the general retail price will be obvious
         to the whole market’. Last, the other allegedly negative response [confidential] mentioned in the paper of 17 June 2004 (‘We are not aware that record companies are aware of their competitors’ PPDs and
         discounts’) is not in the file. In effect, the other four responses relating to the United Kingdom market (according to both
         the Decision and the documents submitted to the Court by the Commission, five United Kingdom retailers responded), indicated,
         respectively, ‘PPDs – Yes Discounts – Within 0.5%-1%’ (p. 56), ‘Of course’ (p. 58), ‘Yes’ (p. 63), ‘Record companies are very
         well aware of their competitors’ PPDs. ... believes they are also fairly well acquainted with the range of discounts that
         their competitors give’ (p. 65) (this retailer also states, in response to the next question, that ‘in commercial negotiations
         reference is made to the conditions and discounts operated by other majors’ and that ‘[t]he small number of competing suppliers
         makes it fairly easy for the majors to get a complete picture of the conditions they apply and to align theirs accordingly’).
         It must be stated that, far from being expressly negative, all the United Kingdom customers’ responses clearly reveal quite
         strong transparency in both PPDs and discounts. 
      
      386    It follows, moreover, from an examination of the retailers’ responses submitted by the Commission on the eve of the hearing
         that those responses do not support the conclusions which the Commission drew from them. Numerous responses reveal that the
         discounts were transparent or that the majors were aware of them. 
      
      387    It follows from the foregoing that the Commission’s assessment of the retailers’ responses is vitiated by a manifest error.
      
      388    As regards, next, the distinction which the Decision draws between the transparency of file discounts and the transparency
         of campaign discounts, it is apparent from the defence that it was on the basis of the analysis which the parties to the concentration
         made of the retailers’ responses, the declarations of the national executives of Sony and BMG and the monitoring reports of
         the commercial representatives that the Commission concluded that, while transparency could affect PPDs and, to a certain
         extent, file discounts, it probably did not extend to campaign discounts, which are negotiated on a case-by-case basis.
      
      389    None of those three sources can support the conclusion drawn by the Commission. In the first place, as stated above, the Commission’s
         assessment of the retailers’ responses, in accordance with the analysis carried out by the parties to the concentration, is
         vitiated by a manifest error. Furthermore, none of the retailers’ responses, whether positive or negative, draws a distinction
         between file discounts and campaign discounts. In the second place, mere declarations by the representatives of the parties
         to the concentration clearly cannot constitute valid proof of the opacity of the campaign discounts. In the third place, the
         commercial representatives’ weekly monitoring reports, which include information on competitors, constitute, as explained
         at recital 113 to the Decision, a further source of transparency. Accordingly, even on the assumption that they do not contain
         very detailed information on discounts, in particular campaign discounts, they are not in any event capable of establishing
         the opacity of campaign discounts. Furthermore, as observed above, [confidential].
      
      390    It follows from the foregoing that the assessment of the transparency of the market made in the Decision is vitiated by a
         manifest error in so far as it relies on elements which are not capable of supporting the conclusions drawn from them.
      
      391    In the interest of completeness, however, the Court will examine the arguments relating to the variation and the complexity
         of the campaign discounts.
      
      392    At recitals 79, 86, 93, 100 and 107 to the Decision, the Commission noted a certain degree of fluctuation and also differences
         between Sony’s and BMG’s invoice discounts for most of their main customers in the five large countries (2 to 5% in the United
         Kingdom, Germany and Spain; 1 to 3 % in Italy, the situation being slightly different in France but in the same order as regards
         size if all discounts are taken into account). The Decision also states:
      
      ‘In addition, the [parties to the concentration] submitted data according to which invoice discounts for a given customer
         varied over time and from album to album, and discounts for a given album varied from customer to customer. The market investigation
         indicated that these fluctuations are mainly the result of campaign discounts[,] which are more flexibly used than file discounts’.
      
      393    In its defence, the Commission produced numerous tables with the aim of showing the variation and complexity of discounts.
         These, it claimed, showed that campaign discounts are less transparent than file discounts and that monitoring them would
         require a detailed observation of promotions on the retail market and the Commission had not discovered sufficient evidence
         to show that the majors had proceeded in that way. In its defence, the Commission stated that it had examined the components
         of the net price of an individual album (PPD, file discount, possible campaign discount) and had concluded that a sufficient
         degree of transparency of all of those components would be necessary in order for a major to be reasonably certain that it
         knew another major’s actual methods of fixing net prices, as expressed at the level of customers and albums, and that it ‘could
         not so conclude in the face of evidence of rather transparent PPDs, some evidence of a certain transparency of file discounts,
         and strong evidence of the opaque and complex character of campaign discounts’.
      
      394    That line of argument on the part of the Commission calls for the following observations.
      
      395    In the first place, it is surprising that the Commission should rely on variations in discounts to establish the absence of
         transparency. In its written submissions to the Court, the Commission emphasised on numerous occasions the irrelevance of
         the stability or parallelism of net prices or discounts for the purpose of assessing the transparency of the market. Thus,
         in particular, it maintained that significant stability in a record company’s (average) discounts cannot constitute proof
         of the necessary transparency, that the Commission’s interest in the transparency of discounts did not have the object of
         ascertaining whether the majors had followed a policy, that the evidence relating to the actual application of campaign discounts
         at a given moment was relevant for the sole purpose of assessing the actual degree of price alignment, that close alignment,
         at no matter what level, could in any event not be regarded as sufficient evidence of coordination, that a certain degree
         of stability over time of the discounts granted by a record company was not proof in itself and that even a high degree of
         statistical predictability did not demonstrate the existence of coordination. 
      
      396    Likewise, in their paper of 17 June 2004 on the absence of evidence on price transparency, which was submitted after the hearing
         before the Commission, the parties to the concentration maintained that Question 28 of the Phase II customer questionnaire
         (‘Have you observed any alignment of PPDs, discounts or other terms and conditions among the [majors]?’) had no connection
         with price transparency (‘[c]learly, by its very terms, this question does not address the issue of price transparency’).
      
      397    In the second place, it must be borne in mind that the only observations on discounts in the section of the Decision dealing
         with the examination of transparency of the market (recitals 111 to 113 to the Decision) merely refer, so far as campaign
         discounts are concerned, to the findings made in the section dealing with the examination of the common understanding on pricing
         in the five large countries (in other words, recitals 77 to 80 for the United Kingdom and the corresponding recitals for the
         other large countries). At recital 70 to the Decision, however, the Commission, in order to determine whether the majors had
         in fact pursued a policy of coordinating their prices, stated that ‘average prices [were] an appropriate means to assess parallelism
         in the pricing behaviour of the majors’. It follows that, according to the Decision itself, for the purpose of assessing transparency,
         the Commission considered that it was able to rely on average figures, and not on specific variations, including for campaign
         discounts. 
      
      398    At the very least, it is not apparent that the Commission undertook a serious examination of specific variations in campaign
         discounts and of the impact of campaign discounts on the market or on prices. It follows from recital 72 to the Decision,
         moreover, which refers to the various elements analysed by the Commission, that only the average data on invoice discounts
         were examined (see footnote 43 to the Decision). Both in the statement of objections and during the administrative procedure
         the Commission contended that the data relating to prices, both gross and net, and to average discounts permitted it to assess
         the existence of a collective dominant position and, therefore, also to assess whether the market was sufficiently transparent.
         Only after the hearing on 14 and 15 June 2004 did the Commission modify its assessment and adopt the argument put forward
         by the parties to the concentration that the complexity and the variations of campaign discounts eliminated the necessary
         transparency, but without carrying out any new market investigations in order to test the validity of these new conclusions.
      
      399    In the third place, the arguments and evidence relating to the alleged variations in campaign discounts put forward by the
         Commission in the Decision and in its written submissions to the Court call, moreover, for a series of observations relating,
         first, to their degree of opacity and, second, to their relevance.
      
      –       The opacity of campaign discounts 
      400    It should be observed, as a preliminary point, that neither in the Decision nor even in any of its written submissions to
         the Court did the Commission define precisely what campaign discounts are, the conditions in which they are granted and to
         which they are subject, their frequency, their amount or the type of albums to which they are supposed to apply. It appears
         to emerge from the file, however, and in particular from the rare extracts from competitors’ responses produced by the Commission,
         that they are specific discounts, of quite a high percentage, granted for a given volume of specific albums and for a limited
         period, in specific cases, typically in order to shift significant stocks.
      
      401    According to recital 79 to the Decision (and the corresponding recitals for the other large countries), ‘the [parties to the
         concentration] submitted data according to which invoice discounts for a given customer varied over time and form album to
         album, and discounts for a given album varied from customer to customer’. Although that recital to the Decision mentions the
         most general category of invoice discounts, there is reason to consider that the observation in reality concerns only campaign
         discounts. As is apparent from the Decision and from the Commission’s pleadings, file discounts are negotiated with each customer
         for a full year and applicable to all sales made by the customer in question. The Commission goes on to state, at recital
         79 to the Decision, that these fluctuations are mainly the result of campaign discounts. The Commission contends that these
         three types of variation (by customer, by album and over time) render campaign discounts opaque. In support of that assertion,
         the Commission annexed to its defence a series of tables which are supposed to demonstrate these different variations (‘the
         new evidence’).
      
      402    In that regard, it should be observed at the outset that, as the applicant has correctly claimed, a campaign discount seems,
         in essence, destined to become public knowledge. Logically, a campaign discount, which is of a high percentage and is added
         to the file discount, will be granted to a retailer by a record company only on condition that the retailer passes the discount
         on to the final consumer (in the form of a clear reduction in price or a better position in the display) with a view to increasing
         sales of the album to which the discount applies. That is a fortiori so since, as stated at point 115 of the statement of objections, royalties are calculated on an album’s PPD and not on its
         net price, so that it is in the majors’ interest to limit discounts as much as possible.
      
      403    It must be stated, next, that the only three extracts from competitors’ responses to the request for information under Article
         11 of the Merger Regulation produced by the Commission before the Court, far from confirming the Commission’s assertion, show,
         on the contrary, that campaign discounts are rather public and transparent. 
      
      404    Thus, according to one major’s response, ‘[promotional discounts] can be used in relation to a new release, to promote a new
         artist, to support a new retail store, to support a particular sales programme or campaign (this typically covers an entire
         category of records) or to promote a specific event. This type of discount can represent a significant proportion of a PPD
         [confidential] and is important [from] the perspective that it is targeted to drive certain sales’. 
      
      405    The information concerning the conditions in which campaign discounts are granted, which is to be found in the only other
         response of the majors produced by the Commission, also tends to indicate that such discounts relate to very specific events
         which are easily detectable by competitors. The major in question states that campaign discounts ‘are discounts offered in
         relation to particular promotional campaigns. They are tied to particular releases or groups of releases. If for example,
         an artist is on tour to promote a new album, a discount may be offered at maximising sales volumes for that album around the
         time of that artist’s tour. Similarly, some seasonal stock (such as releases containing Christmas-related music) might have
         a particular campaign associated with [them]. Campaign discounts are sometimes aimed at sales in relation to older releases
         that are no longer strong sellers. Typically, … will seek to sell a large discounted quantity of a particular release (or
         a series of related releases) to a retailer who then sells those records at a special offer price. Discounts for new releases
         are sometimes given on pre-orders of particular new releases, with the purpose of securing a high presence at the point of
         sale. … This type of discount tends to be given for new or breaking artists, where … wishes to boost sales through a focused
         promotional campaign’.
      
      406    Last, it follows from the independent producer’s response, first, that campaign discounts are visibly reflected in a lower
         selling price to the consumer and a better position in the shop for the relevant albums and, second, campaigns are often initiated
         by the retailers themselves, which invite the various producers to participate (see also, to that effect, the declarations
         of Sony’s and BMG’s representatives), which thus allows them to be aware of the existence of the campaign discounts.
      
      407    It follows that none of the information from third parties, either in the Decision or in the new evidence produced by the
         Commission, confirms that campaign discounts are opaque. 
      
      408    It follows from recital 79 to the Decision and from the Commission’s written submissions to the Court, however, that the parties
         to the concentration provided data showing that campaign discounts are not sufficiently aligned, in that they vary over time,
         from customer to customer and from album to album. The Commission and the interveners contend, in substance, that owing to
         the variations in and the complexity of campaign discounts, the market is not sufficiently transparent.
      
      409    In that regard, it should be borne in mind, first of all, that the Commission had concluded at points 88 to 90 of the statement
         of objections, on the basis of an examination of the data of all the majors, that discounts varied but were stable, that apart
         from a few exceptions the differences were rather limited, and that there was absolutely no evidence that discounts were used
         in order to make fundamental modifications to pricing policies or, in particular, to affect average net prices of new hit
         releases, as gross price to net price ratios were stable over time and from album to album.
      
      410    Although, as recalled above, the Commission is indeed entitled to modify the assessments which it made during the administrative
         procedure, in particular in order to take account of the observations of the parties concerned, and is not required to state
         its reasons for doing so in the decision, the findings made in the decision must be capable of being justified, at least at
         the stage of the proceedings before the Court, by reference to the findings of fact made previously, if necessary by demonstrating
         how the previous findings were incorrect. In the present case, however, as the applicant rightly submits, the Commission did
         not re-examine the data relating to the discounts granted by all the majors but merely justified its conclusions by reference
         solely to the data provided by the parties to the concentration.
      
      411    In its defence, the Commission did, admittedly, claim that it examined the other majors’ discounts, but that as those figures
         could not be disclosed to the parties to the concentration, they could not be included in the Decision. However, that argument
         cannot be followed.
      
      412    In the first place, it follows clearly from the Decision (see, in particular, recital 79 and footnote 43 to the Decision),
         from other points in the Commission’s submissions (see, in particular, the passage in the defence where the Commission states
         that ‘[o]nly Sony and BMG data were taken into account because the other majors [had] stated that they only bill net prices’)
         and the new evidence lodged by the Commission, that the assessment inferred from the variations in discounts in the Decision
         is based solely on the data relating to the discounts granted by the parties to the concentration. At no recital to the Decision,
         moreover, is there any indication that the Commission examined the data relating to the discounts granted by the other majors,
         nor, a fortiori, any indication that those discounts show the complexity of and the variations in the campaign discounts.
      
      413    In the second place, the Commission clearly cannot maintain that in the context of its examination of a proposed concentration
         it cannot take into consideration, and where appropriate base its conclusions on, the data of the other operators on the market.
         That argument would in most cases make it impossible to examine the compatibility of a proposed concentration with the common
         market. It must be stated, moreover, that most of the factors other than discounts (market shares, gross/net prices, etc.)
         examined in the Decision are based on the data of the various operators on the market.
      
      414    In the third place, the Commission, which in its final observations, lodged after the hearing, emphasises the constraints
         resulting from the strict deadlines that govern the procedure for the examination of proposed concentrations and the need
         to observe the rights of the defence of the notifying parties, claimed that numerous allegations by the applicant to the effect
         that the Commission did not properly investigate certain essential questions connected with the objections identified and
         should also have investigated other objections, are based on a misconception of the procedure for the control of concentrations,
         in that the investigation into the competition problems raised by a concentration essentially takes place before the statement
         of objections. Although the applicant cannot effectively criticise the Commission for not having investigated problems first
         raised before the Court, a number of which, moreover, are manifestly inadmissible on the ground that they were developed only
         in the reply or in the observations which the applicant lodged after the hearing, that observation on the Commission’s part
         ignores two aspects. First, it is common ground that at the beginning of the procedure the Commission identified the problem
         of transparency and discounts and that it questioned both third parties and the parties to the concentration in that regard.
         Second, the time-constraints also have the effect that the parties to the concentration cannot wait until the last minute
         before submitting evidence to the Commission with a view to refuting objections raised at the proper time by the Commission,
         since the Commission would then no longer be in a position to carry out the necessary investigations. In such a hypothetical
         situation, that evidence must at the very least be particularly reliable, objective, relevant and cogent if it is to be capable
         of validly refuting the objections raised by the Commission.
      
      415    It must be observed at the outset in that regard that it follows both from the wording of recital 79 to the Decision (‘the
         [parties to the concentration] submitted data’) and from the examination of the new evidence (annexed to the defence) that
         the findings relating to campaign discounts are not only based solely on the data relating to the parties to the concentration
         but that, in addition, the tables setting out those data were prepared by those parties (or their economic advisers) according
         to a methodology and on the basis of data selected by the parties themselves, while there is no indication that the Commission
         ascertained whether they were accurate, relevant or objective and representative. Although, as the Commission stated at the
         hearing, the procedure for the control of concentrations does indeed rely to a large extent on trust, as the Commission cannot
         be required to ascertain on its own, in the slightest detail, the reliability and accuracy of all the information submitted
         to it, it cannot, on the other hand, go so far as to delegate, without supervision, responsibility for conducting certain
         parts of the investigation to the parties to the concentration, in particular where, as in the present case, those aspects
         constitute the crucial element on which the decision is based and where the data and assessments submitted by the parties
         to the concentration are diametrically opposite to the information gathered by the Commission during its investigation and
         also to the conclusions which it drew from that information.
      
      416    In the fourth place, the applicant emphasised, without being contradicted by the Commission, and as the Commission acknowledges
         at point 146 of the statement of objections, that Sony and BMG had achieved very different performances during the years covered
         by the investigation. As the strength of releases is capable of influencing prices and discounts, the tables which examine
         only the data of those two parties tend to increase the variations.
      
      417    In the fifth place, examination of the new evidence produced by the Commission, in the light of the foregoing considerations,
         calls for yet a further series of observations. 
      
      418    In its defence, the Commission states that it relied on the data annexed thereto in order to arrive at the conclusion that
         discounts varied on three dimensions (over time, from album to album and from customer to customer). 
      
      419    The Court observes in that regard, first of all, that of all that purported evidence only one of the annexes was drawn up
         by the Commission itself, although here, too, it relied solely on the data relating to the discounts granted by Sony and BMG.
         The annex in question consists of diagrams showing the average invoice discounts granted by the parties to the concentration,
         for the years 2000 to 2003, to each of their top 10 common customers in the large countries, with the exception of France,
         as the Commission had found that the data submitted in respect of France were inconsistent. In the statement of objections
         (point 88), the Commission had relied on those diagrams in order to show the overall stability of discounts. The Commission
         did not dispute the accuracy of that assessment before the Court, but merely indicated that the parties to the concentration
         had claimed that their respective treatment of certain customers was markedly different and enclosed in an annex an extract
         from their observations. It must be stated, however, that those observations are not capable of calling in question the general
         impression gained from those diagrams. Thus, for the Italian market, which shows stability and an established parallelism,
         although, as the parties to the concentration point out, two customers did admittedly receive discounts significantly lower
         than those received by the other customers, it is all the more significant that those low discounts were granted by Sony and
         BMG to precisely the same two customers, that they were at virtually the same level for both majors and that they varied in
         a parallel manner.
      
      420    As regards the tables annexed to the defence, which, in the Commission’s submission, show that the distribution of the invoice
         discounts granted by Sony and BMG respectively for their top 20 albums in each of the five large Member States was appreciably
         different, the Court observes, first of all, that they concern the most general category of invoice discounts and not only
         campaign discounts and that, as the applicant observed, the differences in the ranges of discounts over time could be the
         result of differences in performance and do not preclude the discounts being based on a known set of rules. 
      
      421    It must be observed, next, that although the breakdown of the ranges of discounts between 1998 and 2003 actually varies over
         time and from country to country, it varies in a similar manner for both parties to the concentration, both over time and
         by country. That emerges even more clearly from the table comparing the breakdown of discounts granted for 2003 in each of
         the five large countries, in so far as, although the breakdown is variable from one country to another, the discounts granted
         by both parties to the concentration develop in a parallel manner (see, in particular, the data relating to countries A and
         C). Thus, while in country A Sony’s and BMG’s discounts are essentially concentrated in the range [confidential], they are mainly in the range [confidential] and [confidential] in country B, in the range [confidential] for country C and in the higher ranges for countries D and E. It is thus apparent from those tables in the annexes not only
         that the breakdown of discounts between the different brackets within each country is rather similar but that, in addition,
         the variations from country to country are also very similar.
      
      422    As regards, more specifically, campaign discounts, the Commission refers essentially to two of its annexes to support its
         theory that campaign discounts are opaque because of their extreme complexity and their importance. However, it is apparent
         that the tables in those annexes, which concern only the discounts granted by Sony and BMG for a single year and were drawn
         up entirely by those undertakings, cannot be considered sufficiently relevant and reliable.
      
      423    Thus, as regards the tables, which compare the invoice discounts granted by the parties to the concentration to their top
         six customers for their top-selling albums in 2002 ‘listed at similar prices’, it should be noted, in particular, that in
         its response to the written questions put by the Court, the Commission indicated that the PPD chosen for each country represented
         one of the respective parties’ most important PPDs in terms of sales generated, while observing, however, that for Germany,
         for example, the PPDs chosen were the third and fourth most important PPDs for BMG and the most important and sixth most important
         PPDs for Sony. Since it is stated in the Decision that the parties to the concentration achieved the bulk of their sales using
         one or two, or a maximum of three, PPDs, the question arises as to the extent to which the albums taken into consideration
         actually represent their best-selling albums. Furthermore, it follows from a footnote referring to the tables that numerous
         albums had their PPDs changed during the year, which appears to be capable of having had an impact on the discounts granted
         and therefore of increasing the comparative variations. Likewise, it is apparent from those tables that BMG’s data relate
         to 2002, while Sony’s relate to the financial year 2002/03. 
      
      424    Last, and in any event, although those tables are complicated to read owing to the fact that they juxtapose Sony’s and BMG’s
         data alternatively, whereas the comparison must be made between the discounts granted by each of the parties to the concentration
         to its various customers and not between the discounts granted for the albums of one of those parties by reference to the
         discounts granted to the other party’s albums, careful examination of the tables shows that the variations appear ultimately
         to be rather limited. It should further be observed in that regard that it follows from point 75 of the statement of objections
         and from footnote 47 thereto that the Commission had analysed Sony’s and BMG’s gross and net prices individually for their
         top 10 albums and had concluded, at point 90 of the statement of objections, that ‘[n]et to gross price ratios were stable
         across albums and across time for those individual releases examined’. Neither the Commission nor the interveners have asserted,
         still less demonstrated, that that finding was incorrect.
      
      425    As regards the tables, which are intended to show the maximum campaign discounts granted by Sony and BMG for their best-selling
         albums, it must be pointed out that they contain a great number of errors, the effect of which is to increase those discounts.
         In effect, the calculation of the differential between minimum and maximum discounts by customer (which, in the Commission’s
         submission, is equivalent to the campaign discount) made for each of the parties to the concentration was carried out incorrectly,
         in most cases, in consideration of the discounts granted by the other party, whereas, as the Commission itself explains, that
         calculation must be made on the basis of the differential between the minimum and maximum discounts granted by one and the
         same party to its various customers.
      
      426    It follows from those two examples that, apart from the necessary caution with which the various tables produced by the parties
         to the concentration must be considered, in so far as those tables were drawn up according to parameters which were chosen
         by the parties themselves and which, moreover, are not always clear, the possibility arises that they may be affected by material
         errors, which, in the present case, even a cursory examination can reveal.
      
      427    In any event, even on the assumption that the various tables drawn up by the parties to the concentration and produced by
         the Commission are in fact capable of establishing the more or less important variations alleged, the fact remains that, as
         the applicant has rightly observed, those variations are of doubtful relevance in so far as, first, they show only brackets
         without analysing the weighted averages and variations by reference to the averages and, second, they do not preclude the
         possibility that those variations may, at least for an industry professional, be explained quite readily on the basis of a
         number of general or specific rules governing the grant of discounts, in respect of which the Commission did not carry out
         the necessary investigations.
      
      428    Although, as the Commission emphasised, the applicant admittedly did not explain precisely what those various rules governing
         the grant of campaign discounts are, or, according to the Commission, referred to too high a number of such rules, which would
         render their application complex and therefore not particularly transparent, the fact remains that, as already stated, the
         Commission did not carry out an investigation in the market in that regard or, at least, did not adduce any evidence of the
         opacity of campaign discounts, apart from the tables drawn up by the parties to the concentration, which, in addition to their
         imperfections, were in any event intended solely to establish the existence of certain variations in campaign discounts but
         do not demonstrate that the explanation for those variations might not be more or less readily apparent to an industry professional.
         Nor is the applicant to be criticised for not having demonstrated that that was so, since the tables do not specify the albums,
         the customers, the amounts of the discounts or the times at which they were granted and since neither the applicant nor the
         Court is therefore in a position to ascertain whether the discounts were granted in accordance with what the applicant claims
         are the general rules of the sector. 
      
      429    As regards the Commission’s argument that the criteria according to which campaign discounts are generally granted are so
         numerous that they render their application opaque, it must be observed, first of all, that the applicant explained that for
         the various categories of discs (new releases, new artist, ‘full price’ catalogue, ‘mid price’ catalogue, ‘budget’ catalogue)
         there is a limited number of general sales strategies (re-charting of a disc, participation in promotional campaigns, purchase
         of in-store space), which may differ to a certain extent according to the type of customer (supermarkets, specialist chains,
         independent stores). Although the combination of variables necessarily has the effect of increasing the hypothetical situations,
         the Commission has not demonstrated that the exercise would be rendered excessively difficult for a market professional. It
         should be observed, next, that the account given by the parties to the concentration themselves of the few principles governing
         the grant of campaign discounts also tends to confirm the existence of the general rules alleged by the applicant and also
         of their lack of excessive complexity. Last, it should be observed that even quite a high number of rules, of apparent complexity,
         even, perhaps, difficult to list exhaustively, does not necessarily prevent a professional from determining relatively easily
         whether those rules are, a priori or taken as a whole, being observed. Thus, the rules of correct behaviour or of etiquette
         would require voluminous works in order to be described in detail, but a person only slightly familiar with those rules can
         none the less readily determine whether another person’s conduct essentially complies with those rules. 
      
      430    In any event, as the applicant emphasised, it is not apparent either from the Decision or from the evidence adduced by the
         Commission that the Commission investigated the existence of generally-known rules governing the grant of campaign discounts
         or the possibility that the majors could determine whether the discounts granted by the other majors are consistent with those
         rules or whether they deviate from the common principles.
      
      431    The applicant further maintained that net prices for retailers were transparent in so far as retailers’ mark-ups are generally
         transparent and are known with a high degree of accuracy.
      
      432    In its defence, the Commission contended, in that regard, that its conclusion that retail monitoring was ineffective was also
         based on the complexity and opacity of retail pricing. It maintains that it follows from the joint study annexed to its defence
         that intensive monitoring of retail sales would not allow a major to infer the net pricing practices (PPD minus invoice discount)
         of its competitors for any given album, on the ground that retailers do not always systematically apply the same mark-up to
         the wholesale price at any given time, either to all albums or even to all albums in the more limited full-price category.
         The Commission submits that it found no demonstrable relationship between retail prices and the invoice discounts granted
         for albums at the same PPD.
      
      433    It is sufficient to observe in that regard that none of the recitals to the Decision mentions that alleged impossibility of
         determining net selling prices to retailers on the basis of retail prices using reverse engineering. Nor is there any indication
         in the file that the Commission, during the administrative procedure, carried out the slightest examination as regards the
         relationship between retail selling prices and gross selling prices, or even gathered information on retail prices. Neither
         the line of argument developed by the Commission in its defence nor the joint study annexed to the defence can therefore be
         taken into consideration.
      
      434    It should be observed, moreover, that, as the applicant claimed, the study drawn up by the economic advisers to the parties
         to the concentration does not present data that are sufficiently reliable, relevant and comparable and does not support the
         conclusions which the Commission draws from it. Even on the assumption that it is established, the circumstance that not all
         retailers always systematically apply the same mark-up to the wholesale price is, in any event, irrelevant. While it is indeed
         probable that the different types of retailer (supermarkets, independents, specialist chains, etc.) apply different mark-up
         policies, and that there are differences within each category of operators, and even differences for each individual operator,
         according to the types of album or their degree of success, it is very unlikely, on the other hand, and the study contains
         no data in that regard, that a retailer will apply a different sales policy for the same type of album. As all the retailers
         are customers of all the majors, each major is thus able to observe the mark-up applied by a particular retailer to its own
         albums and thus to infer the mark-up that it normally applies to its competitors’ albums with similar characteristics. Last,
         it should be observed that according to the declaration of Sony’s and BMG’s sales managers for France, ‘in general, retail
         prices are set by adding VAT to the PPD of a particular album’.
      
      435    It follows from the foregoing considerations that the new evidence submitted by the Commission does not appear to be sufficiently
         reliable, relevant or cogent to establish the opacity of campaign discounts.
      
      436    Last, it should further be pointed out, in the interest of completeness, that should the campaign discounts not be transparent
         because the retailer, on the assumption that it is authorised to do so, does not pass the discount on to the final consumer
         but keeps it to increase his profit, the Commission has not explained how that would be relevant in the present case. Although
         in the case of perfectly homogenous products a secret and opaque discount granted to a retailer by a producer may be relevant
         for the purpose of assessing the transparency necessary for tacit coordination, in so far as that discount allows the producer
         to increase its sales to the detriment of the other members of the oligopoly, the same does not necessarily apply in the case
         of sales of different products to intermediaries. Thus, in the present case, as each disc is different, a retailer, which
         purchases from the majors solely in order to resell to the final consumer, will not, in principle, buy fewer discs from a
         given major unless the final consumer is encouraged by the effect of the campaign discount to purchase instead the disc of
         the competing major which granted the retailer that campaign discount. Furthermore, although that is possible, indeed probable,
         neither the Commission nor the interveners contended, still less did they demonstrate, that where a campaign discount is granted
         the retailer is unable to return any unsold discs. In those circumstances, a campaign discount granted to a retailer by a
         major which is not transparent owing to the fact that it is not passed on to the final consumer does not seem likely to have
         an effect on the volume of sales of the album concerned or to harm a common pricing policy resulting from the tacit coordination.
         At the very least, the Commission ought to have examined and explained how a campaign discount which was opaque because it
         was not passed on by the retailer might have constituted an obstacle to the necessary transparency of the market in so far
         as it does not conceal conduct capable of harming the tacit coordination.
      
      –       The relevance of the campaign discounts 
      437    The applicant formulates a series of complaints whereby it maintains, in substance, that the Commission was wrong to rely
         on the need for complete transparency on the market, that it did not examine the relevance of campaign discounts for the purpose
         of assessing the transparency of the market and that it did not show that campaign discounts eliminate or reduce the requisite
         transparency in so far as they are of only marginal concern to chart albums or best-selling albums and do not really affect
         net prices, particularly in that they represent only one quarter to one third of all discounts. 
      
      438    As regards, in the first place, the complaint that the Commission confused the requirement for sufficient market transparency,
         as defined in Airtours v Commission, paragraph 45 above, with a requirement for total transparency applied in the Decision, it must be held that, as the Commission
         correctly observes, none of the recitals to the Decision makes any reference to the need for total transparency. 
      
      439    However, the Court must ascertain whether, in practice, the Commission required total transparency or, at least, transparency
         greater than that necessary to permit a collective dominant position. 
      
      440    As established at paragraph 62 of Airtours v Commission, paragraph 45 above, the necessary transparency is that which allows each member of the dominant oligopoly to be aware of
         the conduct of the others in order to ascertain whether or not they are adopting the same course of conduct, that is to say,
         that it must have the means of knowing whether the other operators are adopting and maintaining the same strategy. Transparency
         on the market should therefore be sufficient to allow each member of the dominant oligopoly to be aware, sufficiently precisely
         and immediately, of the development of the conduct on the market of each of the other members. The requisite transparency
         does not mean that each member may at any moment be aware of every detail of the precise conditions of each sale made by the
         other members of the oligopoly but must, first, make it possible to identify the terms of the tacit coordination and, second,
         give rise to a serious risk that deviant conduct of such a type as to jeopardise the tacit coordination will be discovered
         by the other members of the oligopoly.
      
      441    The Commission explains that it ‘looked at the components of the net price of an individual album to an individual customer
         – PPD, file discount, possible campaign discount – and essentially concluded that a sufficient degree of transparency would
         be necessary in respect of all components for one major to be reasonably confident that it knew the true net pricing practices
         of another, as manifested at the level of customers and albums’. It follows from that explanation that, although the Decision
         mentions, without further detail, only sufficient transparency, the Commission appears to have required a particularly high
         level of transparency.
      
      442    Likewise, the Commission contends, in particular, that the importance of campaign discounts is the consequence of the fact
         that ‘[i]f the majors are to coordinate net prices, they must be able to monitor all of their components – the relatively
         transparent PPDs and the various invoice discounts’. The Commission states, in that regard, that ‘“[s]ome knowledge” of the
         more important file discounts is simply not enough if campaign discounts can account for fluctuations in discounts (i.e. net
         price instability) for certain customers over time and from album to album as significant as those noted in recitals 79, 86,
         93, 100 and 107 [to the Decision], and are shown to be less transparent’. 
      
      443    It should be observed, in that regard, first, that, apart from the numerous other factors of transparency mentioned at recitals
         111 to 113 to the Decision (in particular, permanent contacts with a customer base which is stable, limited and common to
         all the majors, and also the weekly publication of the charts), the Commission considered in the Decision that both gross
         prices and file discounts were transparent. Although in its written submissions to the Court the Commission qualified the
         degree of transparency of those two essential components of net prices, and did so, moreover, in rather variable proportions,
         depending on the arguments to which it was responding, it expressly indicated in its final observations that it had concluded
         that there was ‘a material degree of transparency for both PPDs and file discounts’.
      
      444    Second, it is difficult to describe the fluctuations for which campaign discounts are alleged to be responsible as being ‘as
         significant’, as the Decision mentions differences of 2 to 5 percentage points for the United Kingdom, Germany and Spain,
         1 to 3 percentage points for Italy and up to 3 percentage points for France for most of the top customers (or principal common
         customers). Furthermore, as the applicant maintained and as the Commission acknowledged (notably at paragraph 13 of its complementary
         observations), different product mixes and varying degrees of success, and also the type of customers, may explain the variations
         in discounts, so that it cannot be inferred that the rather weak variations found are in fact attributable to campaign discounts.
      
      445    As regards, in the second place, the complaints whereby the applicant seeks to challenge the relevance of the discounts, it
         must be borne in mind, first of all, that, as the applicant observes, the Commission found at recitals 77, 84, 91, 98 and
         105 to the Decision that net prices were closely linked to gross prices, since both Sony’s and BMG’s average gross real prices
         and average net real prices had moved in parallel over the previous six years. Although the Commission claimed in its written
         submissions to the Court that the data relating to average prices could eliminate the individual variations, it is clear,
         first, that it is indicated at recital 70 to the Decision that average prices are an appropriate means to assess parallelism
         in pricing behaviour and, second, that in any event recital 77 to the Decision also notes that net-to-gross price ratios across
         albums and time are very stable. As file discounts are fixed for a given customer and for a given year, it is impossible to
         see how the variable campaign discounts can affect the net prices of the albums concerned.
      
      446    Serious doubt seems to be cast on the relevance of discounts in general, moreover, by the assessments of the Commission itself.
         Thus, at points 88 and 89 of the statement of objections, the Commission had indicated that ‘[a]fter examination of the data[,]
         the Commission has found that retailer discounts do not alter the relative prices of the [m]ajors’ and that ‘[t]here is absolutely
         no evidence of discounting being used to fundamentally alter pricing’. Although, as observed above, the Commission is certainly
         entitled to modify what, by definition, are the provisional assessments made in the statement of objections, the assessments
         and conclusions set out in the decision must be compatible with the findings of fact made during the administrative procedure,
         unless the Commission demonstrates, at the very least in proceedings before the Community Courts, that they were incorrect.
         The observation that there was no evidence that discounts significantly affected prices constitutes a finding of fact rather
         than an assessment. In any event, the Commission does not appear to have changed its views on that point, since recital 77
         to the Decision states that ‘[i]f a significant deviation from pricing policies was being implemented by the majors through
         the grant of discounts, this deviation would have been reflected in their average net prices’.
      
      447    It must be stated, in the third place, that the Decision does not contain the slightest information capable of showing the
         effective impact that campaign discounts would have on the net prices of the albums concerned. The only indication in that
         regard is at recital 150 to the Decision and tends rather, on the contrary, to deny that they have such an impact, since it
         states that ‘[a]s in the larger territories, the most important discounts in all countries are file discounts’. The Commission
         did, admittedly, suggest at the hearing that this was a typographical error, but it none the less itself repeated the same
         observation in its defence. It must be borne in mind, moreover, that in the statement of objections, which was drawn up after
         a five-month investigation during which the Commission had questioned the majors and independent producers and also the retailers
         about the respective importance of the various types of discounts, including campaign discounts (see, in particular, Questions
         19 and 24 of the questionnaires sent to retailers and competitors on 20 January 2004), the Commission did not even consider
         it necessary to mention campaign discounts.
      
      448    When invited by the Court to indicate the total value of campaign discounts as a percentage of total sales of the 100 or 20
         best-selling albums of each of the five majors (that is to say, the average campaign discount granted on those albums), and
         also the relative value of campaign discounts by reference to file discounts for those albums, the Commission replied that
         it was impossible to calculate them on the basis of the information in its file. 
      
      449    It follows from the foregoing observations that the Commission concluded that there was insufficient transparency on the market,
         in spite of the transparency of gross prices and file discounts and the numerous other factors of transparency identified
         in the Decision, on the sole ground that campaign discounts are less transparent, without having considered whether those
         campaign discounts represent a sufficiently significant element of the price of the albums concerned to have a real impact
         on the transparency of the prices of those albums. It follows that the applicant’s complaint that the Decision is vitiated
         by a manifest error of assessment in that the Commission did not examine or, at the very least, did not establish to the requisite
         legal standard the relevance of campaign discounts is well founded.
      
      450    That finding cannot be called in question by the Commission’s assertion that other information submitted during the administrative
         procedure enabled it to conclude that campaign discounts were an essential element of pricing and to calculate the average
         campaign discounts for 2002 applied to all albums. In particular, the elements on which that argument rests cannot be considered
         to be sufficiently consistent, reliable or relevant or to be capable of justifying the conclusions drawn from them.
      
      451    In the first place, the chronology of the investigation gives no indication that the Commission examined the relevance of
         campaign discounts for the assessment of the degree of transparency of the market, or a fortiori that such an examination could be carried out on the basis of all the relevant and reliable data. It must be borne in mind,
         in that regard, that until the hearing on 14 and 15 June 2004, the Commission had concluded, provisionally, admittedly, on
         the basis of its examination of all the evidence gathered during its investigation, that a collective dominant position existed
         before the concentration and, in particular, that the market and the discounts were transparent and that the discounts were
         not capable of affecting the coordination of prices. In the light of the responses of the majors and competitors, and also
         of the retailers, on the respective importance of the various discounts, in particular file discounts and campaign discounts,
         the Commission did not deem it necessary to mention campaign discounts in the statement of objections (at least in so far
         as is apparent from the confidential version produced before the Court). There is no indication in the file, and the Commission
         has not maintained, that at that stage it carried out the slightest examination in relation to campaign discounts. Nor is
         it apparent that in the brief period between the hearing on 14 and 15 June 2004, following which the Commission modified its
         assessment, and the draft Decision being sent to the Advisory Committee on 1 July 2004, the Commission carried out any investigation
         in order to ascertain the relevance of campaign discounts or, moreover, their degree of transparency. The sole measure of
         investigation carried out after the hearing to which the Commission makes reference consists, moreover, in a request for information
         dated 21 June 2004 and sent to the notifying parties, concerning not the relevance of campaign discounts but the majors’ market-monitoring
         activities. As stated above, moreover, serious doubt is cast on the representative nature of the monitoring reports prepared
         by Sony’s and BMG’s commercial representatives in response to the request by the confidential documents produced by the applicant.
         Last, in its final observations, the Commission itself emphasises that the notifying parties’ right to be heard limits the
         possibilities of a further investigation after the hearing and precludes wide consultation with the operators on the market
         in respect of the objections. According to the Commission, the measures of investigation carried out after the hearing consisted
         essentially in consulting the operators on the market about the proposed commitments and do not address the objections formulated
         against the notified concentration.
      
      452    In the second place, although the Commission indicated in its answers to the written questions put by the Court that the information
         provided by the notifying parties during the administrative procedure had enabled it to calculate the average campaign discounts,
         it none the less admitted at the hearing that it had not made those calculations itself and had been obliged to leave to the
         economic advisers to the parties to the concentration the task of explaining how the discounts had been calculated for all
         of the albums but not for the 20 or 100 best-selling albums, although the investigation and the data collected by the Commission
         related only to those albums.
      
      453    In the third place, although the Commission indicated that the calculations had been carried out on the basis of the data
         which served as the basis for one of the annexes to the defence, that annex contains only data relating to BMG and not to
         Sony.
      
      454    In the fourth place, the data do not appear to be sufficiently consistent, reliable or relevant. 
      
      455    First of all, the tables provided by the Commission in response to the questions put by the Court relate only to 2002, without
         any explanation of the reasons why that year was chosen by the notifying parties, whereas the Decision concerns prices and
         discounts between 1998 and 2003. Likewise, although for BMG the proportion of gross sales is calculated for the 10 principal
         customers, it concerns only the 5 to 10 biggest customers (depending on the country), without any explanation in that regard.
         It should also be observed that the brackets of campaign discounts mentioned in the tables (which concern all albums for the
         entire customer base) do not correspond to those mentioned in the tables in other annexes (which concern only the 20 best-selling
         albums to the 10 best customers). As the number of albums and customers taken into consideration in the tables is much wider
         than that referred to in those annexes, the maximum campaign discount in the tables [confidential] should be equal to or greater than the maximum campaign discount in the annexes concerned for the same year [confidential]. The total of the invoice discounts of each of the notifying parties, and also the differential between the discounts granted
         by each of them, are also different from those mentioned in the Decision. Admittedly, the Decision relates to the top-selling
         albums in 2003, unlike the tables, which relate to all albums sold in 2002, but that merely goes to confirm that the result
         may be different according to the parameters chosen and that it is essential that the Commission retain control of the operations,
         or at least that it ascertain the relevance of the data submitted by the parties to the concentration.
      
      456    Next, it must be stated that, in so far as they relate to the average campaign discount for all albums sold and not the 100
         or 20 best-selling albums, the tables lack relevance since they presume what they are specifically required to establish,
         namely that campaign discounts also play a significant role for the best-selling albums or the new hit releases and that,
         as the applicant maintains, they do not principally concern the albums at the bottom of the list. The Commission’s argument
         that, given the important contribution which the 100 best-selling albums make to total revenue from music sales, it would
         be surprising if the average levels of campaign discounts calculated for all albums sold were not significantly reflected
         in the price of the 100 best-selling albums, since that would mean that average campaign discounts which were a multiple of
         the general average were applied to all the other albums, cannot be followed. Although the Decision contains no information
         in that regard and although the Commission has provided scarcely any information in its written submissions, the only elements
         in the file tend to indicate that campaign discounts are actually at a high, or indeed a very high, level. Thus, in response
         to the Commission’s questionnaire, one major indicated that ‘[t]his type of discount [might] represent a significant proportion
         of the PPD (for example, up to [confidential])’. Likewise, the tables produced by the Commission, which contain estimates of the maximum campaign discounts, mention the
         discount rates granted by the notifying parties to their top 10 customers, which are often very high and may be as much as
         [confidential]. Those estimates are described by the Commission as prudent, moreover, since the figures are given on an annual basis, whereas
         a campaign discount is normally limited in time. Since, even according to the table produced by the Commission, campaign discounts
         represent only a low average percentage of the selling price [confidential] of all albums sold, they should therefore apply only to quite a small number of albums. Last, as stated above, only the
         declarations by the majors produced by the Commission tend to indicate that campaign discounts apply to individual cases (artist
         on tour, some seasonal stock, older releases that are no longer strong sellers). In those circumstances, it cannot be presumed
         that the average rates of campaign discounts granted to all albums are representative of the campaign discounts granted to
         the 100 best-selling albums, or a fortiori to new hit releases. It must be borne in mind, furthermore, in that regard that at points 87 and 90 of the statement of objections
         the Commission had indicated that it considered that the price lists of new releases were used to coordinate and monitor pricing
         policies and that it had found no evidence that discounts were used to alter substantially the average net prices of new hit
         releases.
      
      457    In the fifth place, even on the assumption that the tables are accurate and representative, it must be stated that campaign
         discounts represent only a very small part of the gross selling price of albums in three of the five large countries for BMG
         [confidential]% in country B, [confidential]% in country C and [confidential]% in country D and in two of the five large countries for Sony [confidential]% in country C and [confidential]% in country D. Contrary to the Commission’s contention, moreover, the tables cannot be considered to show that the two notifying
         parties’ average campaign discounts differ very widely in most countries, since in three countries out of five the difference
         between Sony’s and BMG’s campaign discounts is below [confidential]%. According to the Decision, each country constitutes a market; and a concentration which creates or strengthens a dominant
         position with the consequence that effective competition is significantly impeded in respect of a single one of the markets
         in question must be declared incompatible with the common market. In those circumstances, even on the assumption that campaign
         discounts can be considered less transparent, unless the Commission proposed to apply a requirement of total transparency,
         it ought at least to have explained in the Decision how, in spite of their minimum real effect on prices and the presence
         of the numerous factors of transparency identified in the Decision, the campaign discounts were capable of eliminating the
         sufficient transparency of the market necessary to permit a collective dominant position.
      
      458    In any event, explanations proffered during the proceedings before the Court or, a fortiori, checks relating to an essential aspect of the Decision cannot compensate for a lack of investigation at the time of the
         adoption of the decision and eliminate the manifest error of assessment by which the Decision is thus vitiated, even if that
         error had no effect on the outcome of the assessment (see, by analogy, Case C-353/01 P Mattila v Council and Commission [2004] ECR I-1073, paragraphs 31 and 37).
      
      c)     Conclusion on transparency 
      459    It follows from the foregoing considerations that the findings made in the Decision concerning the transparency of the market
         are not supported by a statement of reasons of the requisite legal standard and are vitiated by a manifest error of assessment
         in that they do not rest on an examination of all the relevant data that must be taken into consideration and are not capable
         of supporting the conclusion that the market is not sufficiently transparent to permit a collective dominant position.
      
      5.     Homogeneity
      460    As regards the criterion relating to product homogeneity, it must be borne in mind that, at recital 157 to the Decision, the
         Commission concluded that there was no dominant position, referring in that regard, as well as to the deficits in actual transparency
         and the lack of evidence as regards retaliatory action in the past, to the partly heterogeneous product characteristics. 
         However, it must be pointed out that at recital 110 to the Decision, which deals with the examination of product homogeneity,
         the Commission emphasised, first, that the format of recorded music was homogenous, second, that in spite of the heterogeneity
         of the content, the way in which albums are priced and marketed on the wholesale level appeared to be quite standardised and,
         last, that, with respect to discounts and agreed return rates for unsold records, the majors did not usually distinguish between
         genres or types of albums. Then, contradicting – at least apparently – that assertion, and without providing further explanation,
         the Commission added that pricing naturally also depended on the success of the album and that further differentiation on
         individual album level was made as regards campaign discounts. It concluded from the foregoing that the heterogeneity in the
         content and its abovementioned implications for pricing reduced transparency.
      
      461    It follows that the Commission considered that the elements of heterogeneity identified affected only the campaign discounts.
         As stated above, however, the elements identified in the Decision and the arguments put forward by the Commission in its written
         submissions do not suffice to establish the finding that the market did not present the requisite degree of transparency for
         a collective dominant position to be able to exist. Accordingly, the – contradictory – findings concerning the elements of
         product homogeneity are not in themselves capable of leading to the conclusion that such a collective dominant position did
         not exist on the market.
      
      462    It should be observed, moreover, that the fact that the product is heterogeneous, at least as regards its content, and that,
         as would be expected, its price varies from album to album, confers quite special significance on the finding made by the
         Commission itself at recitals 76 and 77 in respect of the United Kingdom market (and at the recitals corresponding to the
         other markets) that the list prices of the best-selling albums appeared to be rather aligned and that transaction net prices
         were closely linked to gross prices.
      
      6.     Retaliation 
      463    At recitals 114 to 118 to the Decision, the Commission considered whether the majors had in the past adopted any ‘retaliatory
         measures’ against any one of their number and concluded that it had found ‘no indications that, in response to a major’s deviation
         from a common policy, other majors [had] been excluded from compilation joint ventures, or that there [had] been a (temporary)
         return to competitive behaviour as a retaliatory measure’ and that it had not even found that ‘threats of such retaliatory
         measures [had] been made’.
      
      464    The applicant contends that that finding is vitiated by a lack of reasoning, a manifest error of assessment and an error of
         law. The complaints developed under those three parts overlap and consist, in substance, in contesting the fact that the Commission
         based its analysis on the absence of proof that retaliatory measures had been used in the past when it ought only to have
         ascertained whether any effective deterrent mechanisms existed.
      
      465    It follows from the case-law (Airtours v Commission, paragraph 45 above, paragraph 62) that in order for a situation of collective dominant position to be viable, there must
         be adequate deterrents to ensure that there is a long-term incentive in not departing from the common policy, which means
         that each member of the dominant oligopoly must be aware that highly competitive action on its part designed to increase its
         market share would provoke identical action by the others, so that it would derive no benefit from its initiative (see, to
         that effect, Gencor v Commission, paragraph 246 above, paragraph 276).
      
      466    The mere existence of effective deterrent mechanisms is sufficient, in principle, since if the members of the oligopoly conform
         with the common policy, there is no need to resort to the exercise of a sanction. As the applicant observes, moreover, the
         most effective deterrent is that which has not been used.
      
      467    Furthermore, the Commission expressly stated at points 128 to 132 of the statement of objections that exclusion from compilation
         joint ventures constitutes a particularly effective deterrent mechanism, and although the Decision does not recognise it in
         such express terms, it confirms that analysis, contrary to what the Commission contends in its written submissions. After
         explaining at recitals 115 and 116 to the Decision the economic importance of multi-artist or multi-label compilations, which
         represent approximately 15 to 20% of the overall market for recorded music, and emphasising that the appearance on an album
         of artists from more than one record company appears to be a key factor for the success of a compilation, the Commission states
         at recital 117 to the Decision that ‘[i]n case of a persistent deviation by one major, the other majors could therefore exclude
         the deviator from the conclusion of new joint ventures, or they could refuse to license their songs for the deviator’s compilations,
         or they could even terminate some of the existing joint ventures’. Last, recital 118 to the Decision states that the Commission
         had, however, found no indications that other majors had been excluded from compilation joint ventures or that threats of
         such retaliatory measures had been made, while making clear that ‘these measures could in general represent credible possibilities
         for retaliation by the majors in the markets for recorded music’.
      
      468    However, as this plea relates to the finding of the existence of a collective dominant position, and not to its creation,
         it might be considered that the condition relating to retaliation may consist, not, as was the case in Airtours v Commission, paragraph 45 above, in ascertaining the mere existence of retaliatory measures, but in examining whether there have been
         any breaches of the common course of conduct which have not been followed by retaliatory measures. Although the Decision does
         not indicate that the test for establishing the existence of a collective dominant position must be different, and although
         the Commission did not so contend in its pleadings either, the Court will none the less examine whether the findings made
         in the Decision satisfy that test.
      
      469    Two cumulative elements must be satisfied in order for the fact that no retaliatory measures have been employed to be taken
         to mean that the condition relating to retaliation is not satisfied, namely proof of deviation from the common course of conduct,
         without which there is no need to consider the use of retaliatory measures, and then actual proof of the absence of retaliatory
         measures. However, it must be stated that on neither of these aspects is the necessary proof set out in the Decision.
      
      470    First, neither in the section dealing with retaliation nor even in the rest of the Decision did the Commission clearly identify
         any case whatsoever of a breach of the common pricing policy. In its defence, the Commission did admittedly rely on two cases
         in which divergence from the common policy were found in the Decision (in the United Kingdom in 2000 and 2001, recital 74,
         and in Germany, with a slower development on the part of one of the majors, recital 88). However, it is not apparent from
         the Decision that those cases were regarded as breaches of the common policy, but only as showing that parallelism of prices
         was not achieved at any moment.
      
      471    Second, and in any event, it must be stated that the Commission, when questioned by the Court at the hearing about the measures
         of investigation which it had carried out in order to reach the conclusion that it had found no indications that retaliatory
         measures had been used in the past, or even that threats of such retaliatory measures had been made, was not in a position
         to indicate the slightest step which it had completed or undertaken for that purpose. Furthermore, in so far as, at the stage
         of the statement of objections, the Commission’s investigation had concentrated on ascertaining the existence of credible
         deterrent measures and not on the effective exercise of retaliatory measures, and in so far as it was only after the hearing
         before the Commission that the Commission modified its assessment of the concentration, it is not apparent when or how the
         Commission could have effectively sought to establish whether there was evidence that retaliatory measures had been used.
         It follows from the file, moreover, that after the hearing the Commission carried out no further investigation of the market.
         The only measures of inquiry could therefore have consisted in sending a question to the notifying parties, of which the Commission
         adduced no evidence before the Court, and the notifying parties were clearly unlikely to provide evidence of retaliatory measures
         to the Commission.
      
      472    Last, it must be stated that the Commission’s argument that ‘[c]lear evidence of retaliatory action by the other majors in
         response to a “deviation” from the habitual levels of average net prices or average invoice discounts could have constituted
         an indicator (although undoubtedly not a decisive one) that coordination was taking place, despite the difficulty in identifying
         sufficiently clear terms of coordination and sufficiently effective means of monitoring respect for such terms’ cannot be
         upheld. First, that assertion contradicts the Decision, according to which ‘[i]ndications for retaliatory action in the past
         could be seen as pointing to the existence of a collective dominant position in the markets for recorded music’ (recital 114
         to the Decision) and ‘[t]he Commission in this case has therefore found no evidence that these means have been used or threatened
         in the past as element for the proof of an existing collective dominant position’. Second, the Commission’s line of argument
         is tantamount to maintaining that its examination of the condition relating to retaliation was insufficient, since even ‘clear
         evidence of retaliatory action’ could constitute only an indicator that was ‘undoubtedly not … decisive’.
      
      473    It follows from the foregoing that the applicant’s complaint that the assessments in the Decision relating to retaliation
         are vitiated by an error of law and a manifest error of assessment is well founded.
      
      474    Since those assessments, as is apparent in particular from recital 157 to the Decision, constitute an essential ground on
         which the Decision rests, the Decision must be annulled.
      
      7.     Conclusion as regards the first plea
      475    It follows from the foregoing that the assertion that the markets for recorded music are not sufficiently transparent to permit
         a collective dominant position is not supported by a statement of reasons of the requisite legal standard and is vitiated
         by a manifest error of assessment in that the elements on which it is based are incomplete and do not include all the relevant
         data that ought to have been taken into consideration by the Commission and are not capable of supporting the conclusions
         which are drawn from them. As that assertion constitutes, as is evident both from the Decision, and in particular recital
         157 thereto, and from the discussion before the Court, an essential ground on which the Commission concluded in the Decision
         that there was no collective dominant position, the Decision must be annulled on that ground alone. 
      
      476    Likewise, as the analysis in respect of retaliation is vitiated by an error of law, or at the very least by a manifest error
         of assessment, and as that analysis constitutes the other essential ground on which the Commission concluded in the Decision
         that there was no collective dominant position, that defect also provides a ground for annulment of the Decision.
      
      477    Last, in so far as it is necessary, it must further be stated that, as follows, whether explicitly or by implication, from
         all of the foregoing considerations, none of the arguments put forward by the interveners is capable of invalidating those
         conclusions and that a number of them are even contradicted in the Decision.
      
      478    As regards, in the first place, the preliminary observations formulated by the interveners, it must be stated that they have
         already been rejected or are irrelevant. Thus, the alleged circumstance that the Commission carried out an extraordinarily
         thorough investigation is not in itself capable of showing that the Commission did in fact gather, analyse and correctly assess
         all the relevant data. It should further be observed, in that regard, that the interveners emphasise that they provided at
         the outset very substantial data and explanations concerning the music industry in Europe. However, it is apparent from the
         file that on the basis of that information and of the other information obtained in the market during an investigation lasting
         almost five months the Commission had concluded in the statement of objections that the concentration was incompatible with
         the common market and that it was only after the parties to the concentration and their economic advisers had presented argument
         at the hearing on 14 and 15 June 2004 that the Commission altered its assessment and, two weeks later, sent the Advisory Committee
         a draft decision approving the concentration. Likewise, the fact that competition authorities around the world approved the
         concentration is irrelevant. Last, the argument that the concentration represents a pro-competitive response to the decline
         in the music industry, and in particular to the fall in the price of CDs, must also be rejected. Not only is the Decision
         not based on an alleged balancing of the various advantages and disadvantages of the concentration but, in addition, the arguments
         which the interveners derive from changing demand were expressly rejected at recitals 55 to 59 to the Decision.
      
      479    As regards, in the second place, the arguments whereby the interveners seek to challenge the merits of applicant’s complaints
         relating to campaign discounts, it is sufficient to state that they are indissociable from the Commission’s arguments and
         have already been rejected above or cannot be taken into consideration in so far as they are expressly contradicted by findings
         made in the Decision. Thus, the argument alleging that prices were not aligned and the assertion that a large proportion of
         the top 100 sales is generated outside the PPDs identified in the Decision were expressly rejected in the Decision. Likewise,
         the assertion that the Decision minimises the weight of the underlying arguments on the absence of sufficient transparency
         is irrelevant. It is not for the Court to rule on the compatibility of the concentration with the common market, but to review
         the lawfulness of the findings made in the Decision. It must be stated, in addition, that the interveners’ assertions that
         the PPDs are neither known nor accessible, or that file discounts are not sufficiently transparent, are expressly contradicted
         by the findings in the Decision.
      
      480    Last, as regards, in the third place, the arguments relating to the various points not mentioned in the Decision, it is sufficient
         to state that they are wholly irrelevant, as the Court’s examination is limited to a review of the lawfulness of the Decision.
      
      481    The Court none the less considers it necessary, in the interest of completeness, to examine the second plea in law.
      
      III –  Second plea: creation of a collective dominant position on the markets for recorded music
      A –  Arguments of the applicant 
      482    The applicant observes that the Commission devoted less than a page to considering whether the concentration would create
         a collective dominant position. While stating that in some oligopolistic markets the reduction in the number of players might
         lead to the creation of a collective dominant position for the remaining players and that whether or not that occurs will
         essentially depend on the characteristics of the market, the Commission did not identify those decisive characteristics but
         merely referred to the analysis carried out in that regard of the collective dominant position pre-existing the concentration
         before concluding, at recital 157 to the Decision, that it did not find ‘sufficient evidence to prove that the reduction of
         the majors from five to four represents a change substantial enough to result in the likely creation of collective dominance’,
         particularly as regards transparency and retaliation. 
      
      1.     Error of law
      483    In the applicant’s submission, the Commission made three errors of law in applying the collective dominant position test.
      
      a)     Failure to carry out a prospective analysis 
      484    The applicant submits that the Commission erred in applying the law on collective dominant positions by failing to carry out
         a prospective analysis in order to determine whether a collective dominant position would be created as a result of the concentration.
         The test of whether a concentration creates such a position is fundamentally different from the test used to determine whether
         a collective dominant position already exists, which requires an ex post analysis, whereas the former requires an ex ante analysis, which must be carried out by reference to the level of competition existing on the market before the concentration.
      
      485    It follows from Airtours v Commission, paragraph 45 above, that the prospective analysis must not only take into account the situation in relation to that position
         at the time at which the transaction takes place but must also assess it dynamically, having regard, in particular, to the
         ‘internal equilibrium, stability and the question as to whether any parallel anticompetitive conduct to which it might give
         rise is sustainable over time’. However, it is clear from recital 157 to the Decision that, instead of carrying out the requisite
         separate prospective analysis the Commission arrived at its finding on the basis of the same – ex post – evidence as it used in reaching the conclusion that there was no collective dominant position before the concentration.
      
      486    However, the ex-post analysis is not conclusive. The Commission did, admittedly, establish that ‘the markets for recorded music display[ed] certain
         features which indicate[d] a conduciveness to collective dominance’ (recital 157 to the Decision), but merely indicated that
         it had not found sufficient evidence that collective dominance already existed, so that any change in the factors that increased
         the possibility of tacit collusion should have been analysed very carefully. The only evidence examined by the Commission
         was a record of what had happened in the past, which constitutes a tacit admission by the Commission that it carried out no
         prospective analysis. 
      
      b)     Transparency
      487    The applicant maintains that, when ascertaining whether a collective dominant position would be created, the Commission made
         an error of law, for the same reasons as those presented in the context of the first plea, by using a test of total market
         transparency, whereas, according to Airtours v Commission, paragraph 45 above, it is necessary to ascertain only whether the market is sufficiently transparent to permit coordination
         of conduct.
      
      c)     Deterrents
      488    The applicant criticises the Commission for not having carried out a prospective analysis in order to ascertain the existence
         of deterrents and for having relied on the conclusion which it had reached by wrongly relying on the absence of evidence of
         retaliation in the past, in the context of the strengthening of a pre-existing collective dominant position, in order to reject
         any argument that the reduction from five to four majors would facilitate retaliation on the market. 
      
      489    In the context of the prospective analysis which the Commission ought to have carried out, the finding that there were measures
         that could represent credible possibilities for retaliation on the part of the majors (recital 118 to the Decision) should
         have been deemed sufficient evidence, particularly once the number of majors was reduced to four. 
      
      d)     Constraints
      490    The applicant maintains that the Commission erred in law by wholly failing to consider the third condition laid down in Airtours v Commission, paragraph 45 above, when ascertaining the existence of a collective dominant position, namely the capacity of customers
         or competitors to jeopardise by their actions the results of any common policy adopted by the majors.
      
      2.     Breach of the obligation to state reasons
      491    The applicant claims that the prospective analysis which the Commission must carry out in order to ascertain the risk of the
         creation of a collective dominant position entails a thorough examination of the circumstances relevant to the effect of the
         concentration on the market. First, in the statement of objections the Commission did not even consider the possibility that
         a collective dominant position would be created and, second, in the Decision, the Commission’s analysis is neither prospective
         nor detailed. In the applicant’s submission, the Commission concluded from the fact that it had not established the existence
         of a collective dominant position that there was not sufficient evidence to show that a dominant position would be created
         in the future.
      
      492    The applicant contends that if the Commission had carried out the requisite prospective analysis, it would have had to address
         the following questions:
      
      –        The extent to which the reduction in the number of majors would mean:
      (i) that the majors would become more interdependent on each other owing to the reduction in the number of players from five
         to four;
      
      (ii) that a market which by all accepted standards is concentrated before the concentration becomes significantly more concentrated
         following the concentration;
      
      (iii) that coordination between the majors would be even easier to monitor and to sustain over time and that price transparency
         would also be further enhanced owing to the symmetry which would facilitate monitoring, including on the all-important chart
         market;
      
      (iv) that it would become easier to identify a focal point and maintain a common understanding of what would be in the joint
         interest of the majors because the number of majors would be reduced;
      
      (v) that the balance between the long-term gains from adhering to the collusive agreement and the short-term gains from undercutting
         rivals would shift when there were fewer firms on the market.
      
      –        The extent to which the level of symmetry in the market would increase, since Sony BMG would be similar in size and market
         share to Universal, followed closely by the other two majors, EMI and Time Warner, also with symmetrical market shares. That
         point is important, because symmetry in size and market shares makes tacit collusion easier to maintain. Sony BMG and Universal
         would have a combined market share of 50% of the world market for recorded music and their share would be closer to 60 to
         70% of the all-important chart market, the significance of which the Commission failed to consider. That market segment is
         important both for current competition and as an indication of long-term market power, since new releases become back catalogue;
      
      –        The extent to which symmetry would be increased and competition reduced because two majors which had produced different results
         during recent years would now become only one;
      
      –        The extent to which the available deterrents would become more effective; 
      –        The extent to which the independents would become even more dependent on the majors, in particular because the number of unavoidable
         trading partners available to the independents would be reduced by 20%;
      
      –        The extent to which any competitive counterweights to the majors would be weakened.
      493    In the applicant’s submission, the Commission did not carry out a detailed examination of any of those points and, accordingly,
         its finding that a collective dominant position would not be created (recital 158 to the contested decision) is unsupported
         by any reasoning or rests on manifestly inadequate reasoning.
      
      3.     Manifest error of assessment
      494    The failure to carry out a prospective analysis also constitutes an error of assessment. The Commission relied on past evidence
         concerning the pre-existing collective dominant position without examining in detail the impact of the changes that would
         be brought about by the concentration. Furthermore, that purported evidence was also itself defective, for the reasons stated
         in the first plea.
      
      495    While the Commission briefly notes that transparency will be increased, it gives no detailed indication of the level to which
         it will be increased or of the impact which that will have, but merely points to a lack of sufficient evidence. The Commission
         should also have considered the extent to which the reduction in the number of players on the market would facilitate tacit
         collusion and make it more attractive, since profits would be shared among fewer firms. The Commission gives no indication
         of what evidence has been assembled, of the way in which that evidence is insufficient or of what evidence would be necessary.
      
      496    As regards retaliation, the analysis is based on past evidence relating to a period when, according to the Commission, there
         was no collective dominant position. The Commission has not considered the question of potential retaliation after the concentration.
      
      497    The applicant observes that the Commission was on the point of finding that a collective dominant position existed before
         the concentration, but that it wrongly deemed the evidence insufficient. The fact that it reached the same conclusion in respect
         of the market after the concentration, which increased transparency, indicates a manifest error of assessment.
      
      498    Last, the applicant submits that the Commission’s finding is particularly striking because, four years earlier, it had found
         that the EMI/Time Warner merger would create a collective dominant position on the market for recorded music.
      
      B –  Arguments of the Commission
      1.     Error of law
      a)     Absence of a prospective analysis
      499    The Commission contends that the applicant’s allegations that it failed to carry out a prospective analysis and relied upon
         exactly the same ex post evidence as in its analysis of the possible prior existence of a collective dominant position, when the tests are fundamentally
         different, are unfounded. It begins by making two general observations.
      
      500    First, decisions involving the control of concentrations must always be based on a prospective analysis, because the decision
         whether or not a concentration is compatible with the common market turns on the changes in the market likely to be caused
         by the as-yet-unimplemented transaction (Kali und Salz, paragraph 245 above, paragraphs 109 to 111). It is therefore necessary, in all cases, to base the prospective analysis on
         a clear picture of competitive conditions before the concentration. The evidence already compiled and assessed regarding current
         market conditions (which can hardly be described as ex post evidence) remains relevant as the starting-point for the analysis.
      
      501    Second, the assessment of the possible current existence of a collective dominant position entails consideration of the same
         four conditions as the assessment of the possible creation of such a dominant position: evidence of tacit coordination, sufficient
         transparency, risk of retaliation, constraint by competitors and customers (Case T-193/02 Piau v Commission [2005] ECR II-209, paragraph 111). Where, as in this case, a negative response has already been given to one or more of those
         questions in respect of the current situation, the prospective analysis will necessarily concentrate on ascertaining whether
         or how the concentration might cause a positive answer to be given in the foreseeable future.
      
      502    As its conclusion that there was insufficient evidence of an existing collective dominant position was based essentially on
         the fact that the condition of sufficient transparency was not satisfied, the Commission was chiefly concerned with the effect
         of the concentration on that parameter. If the concentration automatically led to a reduction in the number of bilateral relationships,
         from 10 to 6, which, in principle, would facilitate monitoring, that essentially arithmetical observation was not decisive,
         primarily because the barriers to transparency were attributable not to the number of majors to be monitored but to the complexity
         of the majors’ individual decisions fixing the net pricing of individual albums, with heterogeneous content and varying commercial
         success, for individual customers, using a combination of PPDs, file discounts and campaign discounts. As regards invoice
         discounts, the limited information available (which relates primarily to file discounts) is in any event more likely to be
         obtained from customers than from other majors, and the concentration does not change the relationship of the remaining majors
         with a customer base which will not change as a result of the concentration. It was for that reason that the Commission concluded
         – prospectively – that there was insufficient evidence that the change in the market structure which the concentration should
         bring about would facilitate transparency to such an extent that the level of transparency required for the creation of a
         collective dominant position would be achieved (recital 157 in fine to the Decision).
      
      503    The Commission submits that those elements constitute a sufficient prospective analysis of the cumulative conditions for a
         collective dominant position.
      
      b)     Transparency
      504    The Commission maintains that as the applicant’s argument merely reiterates an argument first presented under the first plea,
         it is equally unfounded in the present context.
      
      c)     Deterrents and constraints
      505    Although it took the view at recital 157 to the Decision that there was insufficient evidence that the transaction would facilitate
         retaliation, the Commission did not take a definitive position on that point in order to found its assessment. Once it had
         concluded that it did not have evidence establishing that pricing would be sufficiently transparent to permit effective monitoring,
         there was no longer any need to examine either the issue of retaliation or the question of countervailing power from the aspect
         of the ‘creation’ rather than from that of the ‘strengthening’ of a collective dominant position.
      
      2.     Breach of the obligation to state reasons 
      506    The Commission contends that most of the criticisms formulated by the applicant have nothing to do with a lack of reasoning.
         The Commission’s alleged failure to take account of various factors concerns the lawfulness of the assessment and not the
         reasons. If the Commission did not arrive at a conclusion on certain points, it follows that it was not required to provide
         reasons for that non-existent conclusion.
      
      507    It would be inadmissible for the applicant to attempt at a later stage in these proceedings to transform its ground of annulment
         from one of procedure (lack of reasoning) to one of substance (error of law and manifest error of assessment) and the patent
         irrelevance of its specific arguments to the application of Article 253 EC constitutes a sufficient basis for rejecting this
         ground of annulment.
      
      508    It is therefore purely in the alternative that the Commission briefly examines those arguments.
      
      509    As regards the applicant’s assertion that the analysis must be detailed, the Commission refers to its observations under the
         previous plea.
      
      510    The fact that the Commission did not deal with the possible creation of a dominant position in the statement of objections
         has no relevance to the sufficiency of the reasons stated in the Decision. As regards its alleged assumption that it had insufficient
         evidence to build upon its conclusions on the absence of an existing collective dominant position, the Commission refers to
         the discussion of the nature of the prospective analysis.
      
      511    The increase in the level of concentration on the markets for recorded music and of the degree of symmetry in market shares,
         as well as a possible increase in the level of interdependence between the majors, do not contribute to any material extent
         to removing the obstacles to coordination which were identified in the analysis of the possible current existence of a collective
         dominant position, namely the complexity and lack of evidence of sufficient transparency of the overall price-fixing process
         (PPD + file discount + campaign discount) for individual albums and individual customers over time.
      
      512    Although a more concentrated market may alter in the abstract incentives to pursue a common policy, it does not in this case
         have a material effect on the fundamental disincentive resulting from the inability of the undertakings in an oligopoly situation
         to detect and, consequently, to punish and deter deviation. In the absence of sufficient transparency, the majors cannot be
         sure that one of them will not attempt to benefit from both the long-term gains of tacit coordination and the short-term gains
         of undercutting its rivals, and such uncertainty renders tacit coordination unstable and unsustainable.
      
      513    The applicant’s observations on symmetry should also be rejected, on the ground that there is no apparent relationship between
         symmetry and transparency.
      
      514    Last, the applicant’s remaining arguments relate essentially to the second and third cumulative conditions for sustainable
         collective dominance. The Commission was not required to take a position on those conditions once it had established that
         there was insufficient evidence that the first condition would be satisfied.
      
      3.     Manifest error of assessment
      515    The applicant’s assertions concerning the lack of a prospective assessment must be rejected for the reasons set out in the
         section dealing with an error of law.
      
      516    The applicant’s arguments concerning the incentives which prompt undertakings in an oligopoly situation to adopt a common
         policy should again be rejected, on the ground that they ignore the absence of sufficient transparency.
      
      517    The applicant’s theory that, because the reduction in the number of majors would bring about an overall increase in the likelihood
         of tacit coordination, the Commission should have concluded that a collective dominant position would be created unless the
         concentration had other characteristics that would make tacit coordination less likely, wholly ignores the distinct character
         of the different conditions for sustainable collective dominance. The fact that there is an increase in the level of concentration
         on the relevant markets should not entail a corresponding reduction in the evidential requirements as regards the separate
         condition of sufficient transparency, if such increased concentration is not itself shown to make a material difference to
         the assessment of the latter condition.
      
      518    Last, the Commission reiterates that the lawfulness of the Decision cannot be judged against the yardstick of the provisional
         conclusions in the two statements of objections, one of which was issued four years previously in a different case.
      
      C –  Arguments of the interveners
      519    The interveners claim that the decision to open the Phase II investigation shows that the Commission considered from the outset
         both the possibility of the creation and that of the strengthening of a collective dominant position. The Commission was correct
         to focus on the intrinsic features of the market and in particular on whether prices were sufficiently transparent to permit
         tacit coordination to occur (Gencor v Commission, paragraph 246 above, paragraph 227). Since the characteristics of the market concerning prices did not support the conclusion
         that there had been collusion in the past, the Commission correctly concluded that the reduction in the number of majors from
         five to four would be insufficient to overcome the material obstacles to tacit collusion (Airtours v Commission, paragraph 45 above, paragraphs 75 and 76).
      
      520    The characteristics of the market remained incompatible with tacit coordination both on prices and on other factors (number,
         originality, creativity, cultural diversity of new releases, signing of artists). Among these, the interveners claim that
         recorded music is a heterogeneous product; that the majors have a strong incentive to maximise sales of ‘hits’; that decisions
         on prices and discounts are adopted for each release both at the time of release and also over its lifetime, and from one
         individual retailer to another; that record companies exercise discretion with regard to the PPD on release and over time,
         reflecting the subjective judgment of the marketing personnel; that all of the companies grant various discounts and incentives,
         which are unknown to their competitors and which vary over time, from one album to another and from one retailer to another;
         and, last, that, as discounts are unpredictable and invisible, no reliable inferences about net prices can be made from observing
         PPDs, so that even if coordination of PPDs did occur, it would not impact on actual prices.
      
      D –  Findings of the Court
      521    The applicant maintains, in substance, that the assertion that the concentration would not bring about the creation of a collective
         dominant position on the market for recorded music is not sufficiently reasoned and is vitiated by a manifest error of assessment
         and an error of law.
      
      522    It must be borne in mind that when the Commission examines the risk that a collective dominant position will be created, it
         must ‘assess, using a prospective analysis of the reference market, whether the concentration which has been referred to it
         leads to a situation in which effective competition in the relevant market is significantly impeded by the undertakings involved
         in the concentration and one or more other undertakings which together, in particular because of factors giving rise to a
         connection between them, are able to adopt a common policy on the market and act to a considerable extent independently of
         their competitors, their customers, and [ultimately] of consumers’ (Kali und Salz, paragraph 245 above, paragraph 221; Gencor v Commission, paragraph 246 above, paragraph 163; and Airtours v Commission, paragraph 45 above, paragraph 59). The prospective analysis which the Commission must carry out in the context of the control
         of concentrations, as it relates to a collective dominant position, ‘calls for close examination in particular of the circumstances
         which, in each individual case, are relevant for assessing the effects of the concentration on competition in the reference
         market’ (Kali und Salz, paragraph 245 above, paragraph 222, and Airtours v Commission, paragraph 45 above, paragraph 63).
      
      523    That is all the more true since the analysis ‘does not entail the examination of past events – for which often many items
         of evidence are available which make it possible to understand the causes – or 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’ (Commission v Tetra Laval, paragraph 232 above, paragraph 42). Thus, ‘[s]uch an analysis makes it necessary to envisage the various chains of cause
         and effect with a view to ascertaining which of them are the most likely’ (Commission v Tetra Laval, paragraph 43).
      
      524    It is in the light of those considerations that the Court must consider whether the Commission properly analysed the risk
         of the creation of a collective dominant position.
      
      525    It should be observed, at the outset, that the examination carried out in that regard in the Decision was extremely succinct.
         
      
      526    The Commission states at recital 156 that ‘the features of the market are pivotal for the question whether or not such a concentration
         leads to the creation of collective dominance’.
      
      527    The Commission’s analysis in that regard is limited to the following considerations at recital 157 to the Decision, which
         is worded as follows:
      
      ‘As shown in the analysis as to the strengthening of a collective dominant position, it cannot be concluded from the observable
         degree of parallelism in average prices that there is an existing collective dominance of the majors in the markets for recorded
         music. The reduction of the majors from five to four leads to an increase in transparency as the number of bilateral competitive
         relations goes down from 10 to 6. This in principle would facilitate the monitoring of the respective markets. As discussed
         in the section on the strengthening of a collective dominant position, the markets for recorded music display certain features
         which indicate a conduciveness to collective dominance. However, the Commission has not found sufficient evidence that the
         five majors have held a collective dominant position in the past, in particular due to the deficits in actual transparency,
         the partly heterogeneous product characteristics and the lack of actual evidence as regards retaliatory action in the past.
         With respect to the creation of a collective dominant position of the majors in the markets for recorded music, the Commission,
         while taking into account the general facilitation of coordination among the remaining four players, has not found sufficient
         evidence to prove that the reduction of the majors from five to four represents a change substantial enough to result in the
         likely creation of collective dominance. In particular, the Commission has not found sufficient evidence that a reduction
         from five to four majors would facilitate transparency and retaliation to such an extent that the creation of a collective
         dominant position of the remaining four majors has to be anticipated.’
      
      528    It must be stated that these few observations, which are so superficial, indeed purely formal, cannot satisfy the Commission’s
         obligation to carry out a prospective analysis and to examine carefully circumstances which, according to each particular
         case, may prove relevant for the purposes of assessing the effects of the concentration on competition in the reference market,
         particularly where, as in the present case, the concentration raises serious problems. Independently of the Court’s findings
         in respect of the first plea in law, it follows both from the fact that the Commission had to engage in lengthy discussion
         in the Decision in order to conclude that there was no collective dominant position before the concentration and from the
         fact that it had concluded in the statement of objections, after an investigation lasting five months, that such a position
         did exist before the concentration, that the question whether the fusion between two of the five majors might create a collective
         dominant position raises, for even stronger reasons, serious problems requiring a thorough examination. As that examination
         was not carried out, it follows, on that ground alone, that the second plea in law is well founded.
      
      529    In the interest of completeness, the Court will none the less examine whether the findings in respect of transparency and
         retaliatory measures are also vitiated by an error of law or of assessment.
      
      530    It follows from recital 157 to the Decision, and in particular from the final sentence thereof, that the Commission’s conclusion
         that the concentration does not represent a sufficiently significant change to entail the probable creation of a collective
         dominant position is expressly based on the conditions relating to the transparency of the market and to the retaliatory measures.
      
      531    As regards transparency, it must be borne in mind, first of all, that it was found, in the context of the first plea, that
         the Commission’s finding that campaign discounts have the effect of reducing transparency to the point of preventing the existence
         of a collective dominant position is not sufficiently reasoned and is vitiated by manifest errors of assessment.
      
      532    Furthermore, as regards an assessment of the risk of the creation of a collective dominant position, the Commission could
         not rely solely on the existing situation but was required to carry out a prospective analysis and to take into consideration
         the modifications resulting from the concentration in issue. Recital 157 to the Decision, although laconic to say the least,
         mentions, in addition, in that regard that coordination between the four remaining players will be made easier. However, the
         Decision contains no examination of the question whether the concentration, notably because it entails a reduction in the
         number of albums to be monitored, will make the market sufficiently transparent to permit the development of a collective
         dominant position. It must be borne in mind in that regard, moreover, that the Commission had found in the statement of objections
         that ‘the proposed concentration would facilitate the monitoring of price coordination as each major would only be required
         to take account of the pricing behaviour of three other majors. As a result, PPDs would focus even more on a very narrow range
         of pricing point accounting for the largest part of the top selling albums. Transparency of discounts would also be increased
         as the majors also need to monitor three other players in their store visits and contacts with retailers’. 
      
      533    It follows that the observations relating to transparency do not support the analysis according to which the concentration
         is not likely to create a collective dominant position.
      
      534    As regards the retaliatory measures, it should be noted, first of all, that the Commission’s assertion in the defence that
         it did not take a position on the adequacy of the various possible retaliatory mechanisms and that its assessment did not
         turn on the issue is not compatible with the Decision, as is clear from recital 157 to the Decision. 
      
      535    Likewise, the argument of the Commission and the interveners that there was no need to examine the question of retaliatory
         measures once the Commission had concluded that it had no evidence establishing that price-fixing would be sufficiently transparent
         to permit effective monitoring must be rejected, since the Decision is expressly based on the absence of retaliatory measures
         and the Court cannot substitute its assessment for that of the Commission and rectify the Decision. In any event, the argument
         cannot succeed, since it has been held that the assertion that the market was not sufficiently transparent, or a fortiori the assertion that it would not become sufficiently transparent following the concentration, is not supported by a statement
         of reasons of the requisite legal standard and is vitiated by a manifest error of assessment.
      
      536    It should be observed, next, that in the Decision the Commission was content to refer to the examination carried out in respect
         of the existence of a collective dominant position and to indicate that it had not found sufficient evidence that the concentration
         would facilitate ‘retaliation to such an extent that the creation of a collective dominant position of the remaining four
         majors [had] to be anticipated’.
      
      537    In the context of that examination, however, the Commission, as is apparent from the first plea, concentrated not on ascertaining
         the existence of effective deterrent mechanisms but on seeking evidence that retaliatory measures had been employed in the
         past. That approach constitutes in any event a misinterpretation of the condition set out in Airtours v Commission, paragraph 45 above, as regards the examination of the determination of the creation of a collective dominant position, since
         that examination must be based on a prospective analysis. It is clear that, in that context, seeking evidence that retaliatory
         measures have been used in the past cannot constitute a valid test, as the condition is perfectly capable of being satisfied
         without there having been any retaliatory measures in the past. As the assessment of the risk of the creation of a collective
         dominant position is not, by definition, based on the existence of a prior common policy, the criterion relating to the absence
         of retaliatory measures in the past is wholly irrelevant. The Decision is therefore vitiated by an error on that point.
      
      538    It follows, moreover, from the Decision and from the case-file that such credible and effective deterrent measures do actually
         appear to exist in the present case and, in particular, the possibility of sanctioning a deviating major by excluding it from
         compilations. In the statement of objections, moreover, the Commission had clearly found that that deterrent measure was effective
         and the Decision provides no explanation of the reasons why it would not ultimately be effective. Quite to the contrary, the
         analyses set out at recitals 115 to 118 to the Decision are such as to confirm the effective nature of that deterrent measure.
         After explaining, at recitals 115 and 116 to the Decision, the economic importance of compilations of several artists or labels,
         which represent approximately 15 to 20% of the total market for recorded music, and emphasising that the appearance on an
         album of artists from more than one record company appears to be a key factor for the success of a compilation, the Commission
         states at recital 117 to the Decision that ‘[i]n case of a persistent deviation by one major, the other majors could therefore
         exclude the deviator from the conclusion of new joint ventures, or they could refuse to license their songs for the deviator’s
         compilations, or they could even terminate some of the existing joint ventures’. Last, recital 118 to the Decision states
         that the Commission, however, found no indications that other majors had been excluded from compilation joint ventures in
         the past or that threats of such exclusion had been made, while observing that ‘these measures could in general represent
         credible possibilities for retaliation by the majors in the markets for recorded music’. 
      
      539    Accordingly, the Commission could not, without making an error, rely on the fact that there was no evidence that retaliatory
         measures had been used in the past to conclude that the concentration was not likely to give rise to the creation of a collective
         dominant position.
      
      540    It should further be observed that, as stated in the context of the first plea, the Decision does not mention a single case
         in which a major departed from the common pricing policy without entailing a retaliatory measure, and the Commission, questioned
         in that regard by the Court, was unable to indicate the slightest inquiry which it had made in order to conclude that it had
         found no evidence that retaliatory measures, or the threat of such measures, had been used in the past.
      
      541    It follows from the foregoing that the second ground of annulment is also well founded.
      
      IV –  General conclusion
      542    It follows from all of the foregoing considerations that the first and second pleas in law are well founded in that the Decision
         is vitiated by, first, inadequate reasoning and, second, a manifest error of assessment in so far as the elements forming
         the basis of the Decision do not constitute all the relevant data that must be taken into consideration and are not sufficient
         to support the conclusions drawn from them. 
      
      543    It follows that, without there being any need to examine the plea relating to the strengthening or the creation of a collective
         dominant position on the wholesale market for online music licences or the plea relating to the coordination of the respective
         activities of the parties to the concentration in the sphere of music publishing, the Decision must be annulled. 
      
       Costs
      544    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
         applied for. According to Article 87(3) of the Rules of Procedure, however, where each party succeeds on some and fails on
         other heads, or where the circumstances are exceptional, the Court may order that costs be shared or that each party bear
         its own costs. Last, Article 87(4) of the Rules of Procedure provides that the Court may order an intervener to bear its own
         costs.
      
      545    In the present case, the Decision must be annulled and the applicant has requested that the Commission be ordered to pay the
         costs. However, it is also necessary to take account of the following circumstances.
      
      546    As regards the applicant, it must be stated that while it strenuously insisted that, in spite of its complexity, which the
         Commission correctly emphasised, the case should be dealt with under the expedited procedure, it did not conduct itself accordingly,
         although in its decision granting the application for an expedited procedure the Court had expressly stated that the decision
         could be withdrawn in the light of developments in the case. While the Court could indeed have put an end to the expedited
         procedure, it was necessary to take account of the objective urgency of the case and of the considerable effort already made
         by all the parties, which made that possibility less and less appropriate as time passed. However, an attitude adopted by
         the applicant, which was scarcely compatible with the letter or the spirit of the expedited procedure, became progressively
         worse through the various stages of the procedure.
      
      547    In the first place, the volume of the application and the number of pleas in law and arguments greatly exceed the recommended
         norms for the expedited procedure and the applicant did not produce an abbreviated version of its application or withdraw
         certain pleas. 
      
      548    In the second place, although the measure of organisation of procedure aimed at permitting access to certain documents or
         confidential matters had just been negotiated and implemented with the Commission, the interveners and the Court, by means
         of both the exchange of diverse memoranda and an informal meeting of the Court, the applicant sought an amendment of that
         measure, which gave rise to significant objections on the part of the other parties, before eventually withdrawing that request.
         
      
      549    In the third place, after requesting and obtaining the right – which is not customary in an expedited procedure – to lodge
         a statement in response to the evidence adduced by the Commission in its defence, the applicant wrongly objected to the Commission
         being granted leave to lodge complementary observations in reply, in accordance with the adversarial principle. 
      
      550    In the fourth place, after insisting on obtaining a hearing promptly, the applicant stated that it was not available on any
         of the four dates proposed by the Court, thus delaying the hearing by several months. 
      
      551    In the fifth place, after being granted leave, quite exceptionally, to lodge observations after the hearing, on condition
         that they were strictly confined to the Commission’s answers to the written questions put by the Court, the applicant, as
         the Commission rightly pointed out, lodged a pleading of more than 50 pages, excluding annexes, in which, inter alia, it put
         forward numerous arguments and evidence wholly unrelated to those questions and introduced new arguments and evidence.
      
      552    Furthermore, although the applicant was successful as regards the collective dominant position on the market for recorded
         music, its claim that all the evidence lodged by the Commission as annexes to its defence should be disregarded was rejected.
         Likewise, its claims relating to the alleged dominant position held by Sony on the markets for the online distribution of
         music are wholly unfounded, if only on the ground that at the time of adoption of the Decision SonyConnect had no market share,
         while other players, in particular Apple, already held a significant position.
      
      553    As regards the Commission, it is a matter for regret that, on a number of points, its observations depart, sometimes quite
         appreciably, from the analyses made in the Decision, with the consequence that the applicant and the Court were constantly
         obliged to make abnormal checks. Thus, for example, the assertions that, owing to the fact that recourse to the retaliatory
         mechanism consisting in excluding a member who deviated from the common policy of compilations could entail the sacrifice
         of the benefits generated by a compilation, the Commission was not in a position to conclude that this was a credible mechanism
         or that it did not take a position on the question of retaliation, manifestly do not correspond with the conclusions referred
         to at recitals 115 to 118 to the Decision, which, on the contrary, recognise the effectiveness of that retaliatory mechanism
         (as already expressly stated, moreover, at points 128 to 132 of the statement of objections) but claim that the Commission
         found no evidence of its having been implemented. Likewise, the Commission’s assertion that it concluded at recital 169 to
         the Decision that the transparency of the market for licences for online music was limited owing to the non-existence of generally-known
         gross prices of licences does not correspond to the assertion, also found in the Decision, that ‘transparency in the market
         for online licences is in any case higher than in the traditional market for recorded music’.
      
      554    In the light of the foregoing considerations, the Court considers on a fair assessment of the circumstances, first, that the
         Commission must be ordered to bear its own costs and to pay three quarters of those incurred by the applicant and, second,
         that the interveners must bear their own costs, in accordance with Article 87(4) of the Rules of Procedure.
      
      On those grounds,
      THE COURT OF FIRST INSTANCE (Third Chamber)
      hereby:
      1.      Annuls Commission Decision C(2004) 2815 of 19 July 2004 declaring a concentration to be compatible with the common market
            and the functioning of the EEA Agreement (Case No COMP/M.3333 – Sony/BMG);
      2.      Orders the Commission to bear its own costs and to pay three quarters of those incurred by the applicant;
      3.      Orders the applicant to bear one quarter of its costs;
      4.      Orders the interveners to bear their own costs.
      
      
      
               Jaeger 
            
            
               Azizi 
            
            
               Cremona
            
         Delivered in open court in Luxembourg on 13 July 2006.
      
      
      
               E. Coulon
            
             
            
                     M. Jaeger
            
         
      Table of contents
      Facts
      Procedure and forms of order sought by the parties
      Law
      I –  The evidence annexed to the defence
      A –  Arguments of the parties
      B –  Findings of the Court
      II –  First plea: strengthening of a pre-existing collective dominant position on the market for recorded music
      A –  Arguments of the applicant
      1.  First part
      a)  Breach of the obligation to state reasons
      Product homogeneity
      Transparency
      Deterrents
      Constraints
      b)  Manifest error of assessment
      Product homogeneity
      Transparency
      –  General argument
      –  General observations on the new evidence
      –  Individual examination of the various pieces of evidence
      Deterrents
      Constraints
      Absence of a proper analysis of common policy
      c)  Misapplication of the law on collective dominance
      2.  Second part
      B –  Arguments of the Commission
      1.  The Commission Decision and the evidence on which it is based
      a)  Context
      b)  The five large markets (Germany, the United Kingdom, France, Italy and Spain)
      Alignment of average net prices and PPDs
      Complexity and PPDs
      Alignment and complexity of prices
      Transparency of discounts
      Structural links
      Retaliation
      c)  The other Member States
      2.  Misrepresentation of the Decision in the application
      3.  First part
      a)  Breach of the obligation to state reasons
      Product homogeneity
      Transparency
      Deterrents
      Constraints
      b)  Manifest error of assessment and error of law
      Product homogeneity
      Transparency
      Deterrents and constraints
      Analysis of the common policy
      4.  Second part
      C –  Arguments of the interveners
      1.  Preliminary observations
      2.  Examination of the applicant’s arguments
      a)  Campaign discounts
      b)  Lack of alignment
      c)  Lack of transparency
      3.  Various aspects not mentioned in the Decision
      D –  Findings of the Court
      1.  General considerations
      2.  Concept of collective dominance
      3.  The Commission Decision
      4.  Transparency
      a)  The complaint alleging inadequate reasoning
      b)  The complaint alleging a manifest error of assessment
      Factors of transparency identified in the Decision
      Elements capable of rendering the market opaque
      –  The opacity of campaign discounts
      –  The relevance of the campaign discounts
      c)  Conclusion on transparency
      5.  Homogeneity
      6.  Retaliation
      7.  Conclusion as regards the first plea
      III –  Second plea: creation of a collective dominant position on the markets for recorded music
      A –  Arguments of the applicant
      1.  Error of law
      a)  Failure to carry out a prospective analysis
      b)  Transparency
      c)  Deterrents
      d)  Constraints
      2.  Breach of the obligation to state reasons
      3.  Manifest error of assessment
      B –  Arguments of the Commission
      1.  Error of law
      a)  Absence of a prospective analysis
      b)  Transparency
      c)  Deterrents and constraints
      2.  Breach of the obligation to state reasons
      3.  Manifest error of assessment
      C –  Arguments of the interveners
      D –  Findings of the Court
      IV –  General conclusion
      Costs
      * Language of the case: English.
      
      1 Confidential data omitted.