From Doc. 1 to Doc. 2 - Tulane University Law School

Transcription

TULANE LAW SCHOOL
PARIS INSTITUTE FOR INTERNATIONAL
AND COMPARATIVE LAW
PARIS, FRANCE
SUMMER, 2015
LFRN-4030-01
Antitrust and Merger in European
Union Law
Professor Joel Moneger
These materials are intended for classroom and study purposes only for students
enrolled in Tulane’s Paris Program and may not be reproduced.
WARNING CONCERNING
COPYRIGHT RESTRICTIONS
The Copyright Law of 1976 (United States Code, Title 17)
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[including that made by electronic transmission of reserve
material] for purposes in excess of "fair use," that user may be
liable for copyright infringement.
Joël L. Monéger, Emeritus Professor Jean Monnet, Université Paris- Dauphine
European Union Antitrust and Merger Control
Summer Program in Paris hosted by Paris-Dauphine
(12 Hour-credit-course)
Tentative Syllabus
No specific casebook is to be used in class, but students could refer to:
The Law of the European Union Economic Law and Common Policies, Cases and Materials, by
Alain A. Levasseur, Joël Monéger, Richard F. Scott, Arnaud Raynouard: Carolina Academic
Press, (spring 2013).
Students will use the EU Commission site: http://www.ec.europa.eu
The EU treaty (Dec. 2011), all Regulations and Directives and EU decisions are the EU site. EU Court of
Justice cases are to be found through http://www.curia.europa.eu
There is no prerequisite for taking this class in European Law or in economics or US Antitrust and
Merger control. The course focuses on the legal analysis and comparisons will be made with the
American system (US Sherman and Clayton Acts) from which most of the rules derive.
Students are expected to read the documents before class to allow a better discussion.
Classes are scheduled on a 2-week course.
Exam will be given according the Tulane University School of Law rules.
Computers are welcomed in class in so far as they are used only for Internet connections to the EU sites
(Commission and Court of Justice).
Depending on the preparation and participation in class, students may receive an extra credit.
Office hours will be given in due time.
Joël Monéger: Syllabus for TulaneUniversity Law School Summer Program in Paris-Dauphine, June- July 2015
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Classes will focus on the following subjects
1. Introduction to EU Economic Law: Doc. # 1 & 2
1.1. From the European Coal & Steel Community Treaty (April 18, 1951) to the single market and the
Euro Zone.
1.2. Introduction to Antitrust and Merger Control: jurisdiction: the effect doctrine
Readings:
Doc. # 1
85/202/EEC: Commission Decision of 19 Dec. 1984 (IV/29.72 -Wood pulp)
Doc. # 2
Judgment of the Court 27 Sept. 1988 Joined Cases "wood pulp" 89/85, 104, 114, 116, 117 & 125 to 129/85
2. EU Treaty, Article 101: from Doc. # 3 to 42
Readings: The requirements will be given on a day-to-day basis depending on the time each question requires.
Therefore, the distribution hereafter is only tentative.
2.1. Reading and understanding Art. 101: Doc. 3 to Doc. 12
Doc. # 3
Art. 101 of the TFEU
Doc. # 4:
Protocol (No. 27) annexed to the TFEU
Doc. # 5
Société Technique Minière (L.T.M.) v. Maschinenbau Ulm GmbH (M.B.U.) Case 56/65, [1966] ECR 235
Doc. # 6 Undertaking
Hydrotherm Gerätebeau GMBH v. Compact and Officine Sant' Andrea and Dottore Ingeniere Mario Androli Case
170/83, [1984] ECR 2999
Doc. # 7 Natural persons considered as undertakings
Commission Decision of 2 April 2003 relating to a proceeding pursuant to Article 81 of the EC Treaty (Case
COMP/C. 38.279/F3-French beef)
Doc. # 8 Presumption of liability of the parent company for its subsidiary
Alliance One International, Inc. & others v. EU Commission Judgment of the General Court 27 October 2010, Case
T-24/05 (ECR 2010 II-05329) on appeal EUCJ (Grand Chamber) 19 July 2012, Joined cases C-628/10 P (ECR 2012)
Judgment of the General Court 12 Oct. 2011, Case T-41/05
Doc. # 9 Liability of the parent company
Arkema SA v. European Commission EUCJ 29 September 2011 Case C-520/09P, [2011]
Doc. # 10 Undertaking having an economic activity on a market
Christian Poucet v. Assurances Générales de France et Caisse Mutuelle Régionale du Languedoc - Roussillon 17
Febr.1993, Case C-159/01 and C-160/91, [1993] ECR I-637
Doc. #11 Nature of “services” provided
EU Commission v. Italian Republic, 18 June 1998, Case C-35/96 (1998) ECR I-3851
Doc. #12 Non economic activty
Federación Nacional de Empresas de Instrumentación Cientifica, Médica, Téchnica y Dental (FENIN) v.
Commission of the European Communities Case T-319/99, [2003] ECR II-357
2.2. Art. 101: From Doc. 13 to Doc. 18
Doc. #13 Agreement - Concerted Practice
Case COMP/E-1/37.512-Vitamins Commission Dec. of 21 Nov. 2001: OJ L 6, 10.1.2003, P1-77
Doc. # 14 Object or Effect of Agreements, Decisions, Concerted Practices
Franchise agreement
Pronuptia de Paris GmbH v. Pronuptia de Paris Irmgard Schillgallis Case 161/84, [1986] ECR 353
Doc. #15 Supply agreements and quotas
Stergios Delimitis v. Henninger Bräu AG Case C-234/89, [1991] ECR I-935
Doc. #16 Courage Ltd v. Bernard Crehan and Bernard Crehan v. Courage Ltd. and Others Case C-453/99, [2001]
ECR I-6297
Doc. #17 Horizontal and vertical agreements
See online: Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union
to horizontal cooperation agreements Text with EEA relevance, Official Journal C 011, 14/01/2011 P. 0001 – 0072
Doc. #18 Vertical agreements
See online: Guidelines on Vertical Restraints, 10.5.2010 (Text with EEA relevance), OJ C 130, 19.05.2010, p. 1
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Art. 101 Readings from Doc. #19 to Doc. # 26
Doc. #18 Effect on trade between Member States
Etablissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v. Commission of the European Economic
Community Joined Cases 56 and 58/64, [1966] ECR 299
Doc. #19 Concertation between undertakings inside and outside the EU
Ahlström Osakeyhtiö and others v. Commission (Wood Pulp 2) Joined Cases C-89/85, C-104/85, C-114/85, C116/85, C-117/85 and C-125/85 to C-129/85, [1993] ECR I-1307
Doc. # 21 Guidelines on the Effect on Trade Concept Contained in Articles 81 and 82 of the Treaty (TFEU 101
and 102) (2004/C 101/07; O J C 101/81, 27.4.2004) (Text with EEA relevance)
Doc. #22 Agreement to stop figth between undertakings Art. 101
Case COMP/C.37.750/B2-Brasseries Kronenbourg-Brasseries Heineken Commission Dec. (29 Sept. 2004)
(2005/503/EC) OJ L 184/57, 15.7.2005
Doc. #23 Nullity of the agreement (TFEU, Art. 101(2)
Courage Ltd v. Bernard Crehan and Bernard Crehan v. Courage Ltd and Others Case C-453/99, [2001] ECR I-6297
Doc. #24 Exemptions – Negative Clearance TFEU Art. 101(3)
See online: Communication from the Commission Notice, Guidelines on the Application of Article 81(3) of the
Treaty (TFEU Art. 101(3)), (2004/C 101/08) OJ C 101/97, 27.4.2004
Doc. #25 Block Exemptions
White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty (TFEU 101 and 102)
Commission Programme No 99/027. Com (99) 101 final, 28 April 1999
Doc. #26 Vertical agreements, which generally fall outside the scope of article 101 (1)
3. Art. 102 of the Treaty on the functioning of the EU: From Doc. # 28 to Doc. # 42
3.1. Art. 102 of the Treaty on the functioning of the EU
Readings From Doc.# 28 to Doc. # 37
Doc.# 28 TFEU Article 102 (ex - Article 82)
Doc.# 29 Meaning of the words "Dominant Position"
Competition Policy in Europe and the citizen, 2000, Report from the EU Commission, p. 15
Doc.# 30 Single or Individual Dominance
The Chiquita Banana Case: United Brands v. Commission 76/353/EEC: Commission Decision of 17 December
1975 relating to a Procedure under (OJ L 95, 09.04.1976, pp.1-20)
Doc.# 31 Commission Decision of 9 June 1976 relating to a Proceeding under Article 102 TFEU (OJ, L.223,
16.08.1976, pp. 27-38) (Hoffmann-La Roche group)
Doc.# 32 ECJ: Hoffmann – La Roche & Co. AG v. Commission of the European Communities Vitamins Case, Case
85/76, [1979] ECR 461
Doc. # 33 Commission Decision of 20 June 2001 Relating to a Proceeding Pursuant to Article 102 (ex – Art. 82) of
the EC Treaty COMP/E-2/36.041/PO-Michelin: 2002/405/EC (OJ L 143, 31.5.2002)
Doc.# 34 Statutory Monopoly and dominant position
Commission Decision of 25 July 2001 relating to a Proceeding under Article 102 (ex -Article 82) of the EC Treaty
(2001/892/EC: COMP/C-1/36.915-Deutsche Post AG OJ L 331, 15.1.2001)
Doc.# 35 NV Nederlandsche Banden Industrie Michelin v. Commission: Case 322/81, [1983] ECR 3461
Doc.# 36 Collective or Joint Dominance
Court of First Instance (1st Chamber) of 10 March 1992 – Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG
Vernante Pennitalia SpA v. Commission Joined cases T-68/89, T-77/89, and T-78/89 – ECR 1992 II-01403
Airtours plc v. Commission Case T-342/99, [2002], ECR II-2585
3.2. Art. 102 of the Treaty on the Functioning of the EU: From Doc. # 38 to Doc. # 42
Doc.# 38 Notice on the definition of relevant market for the purposes of Community competition law' (OJ C 372,
09.12.1997, pp. 5-13)
Doc.# 39 Market analysis
Commission Decision No 76/353/EEC of 17 December 1975 Relating to a Procedure under Article 86 (102) of the
Treaty: United Brands (OJ L 95, 09.04.1976, p.1)
Doc.# 40 United Brands Company & United Brands Continental BV v. Commission Case 27/76, [1978] ECR 207
Doc.# 41 Microsoft Corp. v. Commission September 17, 2007 Judgment of the General Court (Grand Chamber)
Case T-201/04, [2007] ECR II-3601-4034
Doc.# 42 Obligation to reopen proceedings for an inappropriate assessment of the markets concerned
Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v. European Commission Judgment
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of the GENERAL COURT (4th Chamber) 15 Dec. 2010 Case T-427/08, [2010] ECR II – 5865 Annulment of
Commission Decision C (2008) 3600 of 10 July 2008 rejecting the complaint lodged by the applicant in Case
COMP/E-1/39097
3.3. Art. 102 of the Treaty on the Functioning of the EU: From Doc. # 43 to Doc. # 52: Main
abuses of a Dominant Position
Doc. # 43 Imposing Unfair Purchase or Selling Prices or Other Unfair Trading Conditions
Commission Decision of 17 Dec. 1975, Relating to a Procedure under Article 86 (now Article 102) of the Treaty
(Chiquita Bananas Case) (Com. Dec No 76/353/EEC, OJ L 95, 09.04.1976, pp.1-20)
Doc. # 44 Predatory Pricing
AKZO Chemie BV v. Commission of the European Communities Case C-62/86, [1991] ECR I-3359
Doc. # 45 France Télécom SA v. Commission EUCJ Case C-202-07 P [2009] ECR I-2369
Doc. # 46 Limiting Production, Markets or Technical Development to the Prejudice of Consumers
Hilti AG v. Commission of the European Communities Case T-30/89, [1991] ECR II-1439
Doc. # 47: Tying and bundling of products The Microsoft case
Commission Decision of 24.03.2004 relating to a proceeding under Article 102 (ex 82) of the EC Treaty (Comp/C3/37.792) Judgment of the General Court (Grand Chamber) Microsoft Corp. v. Commission September 17, 2007
Case T-201/04, [2007] ERC II-3601
Doc. # 48 "Applying Dissimilar Conditions to Equivalent Transactions with Other Trading Parties, Thereby
Placing Them at a Competitive Disadvantage" or exclusive dealing and loyalty bonuses
Michelin NV Case 322/81, [1983] ECR 3461
Doc. # 49 "Making the Conclusion of Contracts Subject to Acceptance by the Other Parties of Supplementary
Obligations Which, by Their Nature or According to Commercial Usage, Have No Connection with the Subject of
Such Contracts"
Centre Belge d'Études de Marché-Télémarketing (CBEM) v. SA Compagnie Luxembourgeoise de Télédiffusion (CLT)
and Information Publicité Benelux (IPB) Case 311/84, [1985] ECR 3261
Doc. # 50 Other Types of "Abuse of a Dominant Position": Refusal to Supply, Essential Facilities….
Istituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v. Commission Joined Cases 6 and
7/73, [1974] ECR 223
Doc. # 51 Abuse of a Dominant Position and Intellectual/Industrial/Commercial Property Rights
Microsoft Corp. v. Commission September 17, 2007 Judgment of the General Court (Grand Chamber) Case T201/04, 2007 ECR II-3601
Doc. # 52 Abuse a dominant position acquired through a merger
Europemballage Corp. and Continental Can Co., Inc. v. Commission s Case 6/72, [1973] ECR 215
4. Merger Control (Council Regulation of the 7 April 2004 on the Control of Concentrations
and Mergers between enterprises). From Doc. # 53 to Doc. # 67
The sessions will allow a first loo kat the European Merger Regulation (EMR): especially Jurisdiction, procedure, decisions
and fines and assessment.
4.1. Jurisdiction to the EU Commission and of Member States
Readings: EMR Articles 1, 3,4, 9, 21 & 22 and Doc. # 53 to Doc. # 55
Doc. # 53 Council Regulation (EC) No 139/2004 of 20 January 2004 on the Control of Concentrations between
Undertakings (the EC Merger Regulation)
Doc. # 54 Speech by Mr. Mario Monti European Commissioner Review of the EC Merger Regulation
(Speech/02/252, Date: 04/06/2002)
Doc. # 55 Communication from the Commission to the Council: Report on the functioning of Regulation No
139/2004
Doc. # 56 Legislation and guidelines or notices applicable to Mergers
4.2. Decisions: The substantive standard: art. 2; and appeal of the decision to the EU Courts
Readings: EMR, Art. 2 and cases: Doc. # 57 Doc. # 67.
Doc. # 57 Creation of a Dominant position by a concentrative joint-venture
Commission Decision 91/619/EEC, 2 Oct. 1991 Aerospatiale- Alenia/de Havilland O.J. L 334, 05/12/1991 p. 42–61
Doc. # 58 Increase of an existing dominant position and approval of a merger subject to obligations/conditions
Decision 97/816/EC, 30July 1997 Boeing/McDonnell Douglas O.J. L 336, 08/12/1997, p. 16-47
Doc. # 59 Merger of Airline Companies
AirLingus/Ryanair Case No COMP/M.4439 – Ryanair/Aer Lingus (June 27, 2007)
Doc. # 60 Aer Lingus Group plc v. Commission, Ryanair Holdings plc Case T-411/07, [2010] ECR II-3691
Judgment of the General Court
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Doc. # 61 Failing Company defence Merger between competitors in a collective dominant position
French Republic and SCPA and EMC v. Commission of the ECs Joined Cases C-68/94 and C-30/95, [1998] ECR I1375
Doc. # 62
Gencor Ltd v. Commission of the European Communities Case T-102/96, [1999] ECR II-753
Doc. # 64 Collective dominance and mergers: assessment and evidence
Airtours plc v. Commission
Court of First Instance (5th Chamber, extended composition) Case T-342/99, [2002] ECR II-2585
Doc. # 65 Leverage power and Nullity of the assessment
Commission Decision 2004/124/EC, Case No. COMP/M. 2416-Tetra Laval/Sidel & Commission v. Tetra Laval BV
Case C-12/03 P, [2005] ECR I-987
Doc. # 66 Commission Decision to Initiate Proceedings
Cargill/Degussa Food Ingredients Case COMP/M.3975
Doc. # 67 Commission Decision Not to Oppose
Crédit Agricole/Banca Intesa/Nextra Investment Management Case COMP/M.4006 (2006/C11/13; O.J. C 11/12,
17.1.2006)
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Readings
1. Introduction to EU Economic Law: From Doc. 1 to Doc. 2
1.1. Introduction to the EU Economic questions: from the European Coal & Steel
Community Treaty (April 18, 1951) to the single market and the Euro Zone.
State?
Why is it so difficult for the EU Member States to choose between a Free Trade Area and a Federal
Compare the free trade rule in the US Constitution and the EU single market.
Do you think that there is a real united single market in the EU or National Markets open to
competition from producers or distributors of other Member States (MS)?
1.2. Introduction to Antitrust and Merger Control
The jurisdiction of the EU Commission applying EU Competition Law to foreign Firms, even with no
subsidiary or department within the EU. Hence, US manufacturers and distributors, which are marketing
their products within the EU, must take into consideration EU Competition rules as they do in the USA for the
Federal Antitrust Laws.
Foreign and EU firms, without discrimination, must abide to Competition rules. Fines might be high
in case of violation or refusal to execute a decision or a judgment (On March 6, 2013, Microsoft has been
fine for half a million € for failing to keep a promise to promote a choice of rival web).
Since 1958, Cartelization or monopolization are considered as a sort of economic cancer, not only
within the Member States but also at the EU level. Competition Law serves also as a tool to creating the
single EU market. Therefore the EU Commission in constant cooperation with the MS Agencies is taking
action against all sorts of violations of the rules inscribed in the Treaty.
Cooperation with the US Administration (Department of Justice and the Federal Trade Commission)
and other National Agencies through out the world is an important development to be considered by
lawyers because of the globalization of trade.
The question of jurisdiction: the effect doctrine
Readings: doc. # 1
85/202/EEC: Commission Decision of 19 December 1984 relating to a proceeding under
Article 85 of the EEC Treaty (IV/29.72 -Wood pulp) Only the English text is
authentic;Official Journal L085, 26/03/1985 P. 0001 – 0052
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community,
Having regard to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85
and 86 of the Treaty (1), as last amended by the Act of Accession of Greece, and in particular Article 3
thereof,
Having regard to the Commission Decision of 29 July 1981 to initiate proceedings in this case,
Having given the undertakings concerned the opportunity to make known their views on the objections
raised by the Commission, pursuant to Article 19 (1) of Regulation No 17 and to Commission Regulation No
99/63/EEC of 25 July 1963 on the hearings provided for in Article 19 (1) and (2) of Council Regulation No 17
(2),
After consultation within the Advisory Committee on Restrictive Practices and Dominant Positions,
Whereas:
PART I
(1) In 1977 the Commission carried out investigations, under Article 14 of Regulation No 17, in
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the pulp industry, referring especially to the behaviour of the addressees of this Decision (3) since
1973. Having discovered a number of restrictive practices and agreements which had not been
notified under Article 4 or 5 of Regulation No 17, the Commission decided, in September 1981, to
initiate proceedings on its own initiative under Article 3 (1) of Regulation No 17 and served on the
addressees of this Decision its Statement of Objections. In order to verify the arguments
contained in the undertakings' replies to the Statement of Objections, the Commission, in
September 1982, requested additional information concerning the years 1974 to mid-1982 under
Article 11 of Regulation No 17. The facts resulting from these investigations by the Commission
can be summarized as follows.
A. The market
I. The product…
II. The producers
(5) 1. Sulphate pulp is produced worldwide by more than 800 firms in over 30 countries. A major
part of the sulphate pulp produced by these firms is used by the firms themselves or their
associated companies (e.g. for papermaking). Only some 40 % of all the bleached sulphate pulp
produced is sold on the open market (2) (so-called market pulp, the subject-matter of this
Decision). More than 50 firms sell market pulp in the Community.
Total output of bleached market pulp in 1981 was roughly 18 million tonnes. Leading producer
countries were Canada (just over six million tonnes), the USA (just over four million tonnes),
Sweden (approximately 2,5 million tonnes and Finland (approximately 1,6 million tonnes) (3).
(6) 2. Most of the US producers form part of the integrated operations of paper-manufacturing
groups whose annual turnovers total several thousand million dollars. The biggest of them sell
more than 300 000 tonnes per year, of which they ship up to 100 000 tonnes per year to the
Community. The Canadian producers are mostly part of integrated groups with annual turnovers
totalling up to US $ 2 000 million. The biggest of them sell over 500 000 tonnes per year and ship
more than 150 000 tonnes to the Community. The (1) Brightness is expressed with reference to a
scale ; the highest theoretical value is 100. (2) The percentage of market pulp varies widely from
country to country and is influenced by the economic situation. (3) The figures are based on FAO,
OECD and Data Resources Incorporated statistics. Swedish producers are also integrated
companies as a rule. Their total turnover is usually less than US $ 1 000 million. The largest of
them sell more than 300 000 tonnes per year and some of them supply almost their entire output
to the Community. In many cases the Finnish manufacturers are also integrated firms. Their
turnovers amount to less than US $ 1 000 million. The largest of them sell some 200 000 tonnes
per year. Ten manufacturers (1) belong to a joint sales organization (Finncell) which markets their
pulp exclusively in its own name and for its own account, fixes prices and distributes incoming
orders between its members. Generally speaking, in so far as total turnover is concerned, the US
and Canadian producers are bigger companies than the Swedish and Finnish producers. The
Swedish and Finnish producers, however, ship larger quantities to the EEC than the US Canadian
producers.
Producers in all four countries often reserve long-term supply arrangements for the major paper
manufacturers in the Community of pulp on the basis of fixed quantities, prices usually being fixed
from quarter to quarter. Several producers have interests in European paper manufacturers. As a
rule, one producer delivers to more than 50 customers in the Community. Finncell has the
greatest number of customers in the Community (some 290 paper manufacturers).
(7) 3. Pulp production and shipment costs within the Community vary according to plant location.
On account of differing trends in the economic situations and exchange rates of the individual
producer countries between 1975 and 1981, there was a marked shift in the relative cost
advantages and disadvantages of the firms to which this Decision is addressed. In 1976, producers
located in both the south-west and the north-west of the USA were at a considerable advantage
as regards costs, while, in 1981, the latter were at a substantial disadvantage. Table 1 shows the
relevant details.
III. The customers
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(9) The European Economic Community is the most important sales area for bleached sulphate
pulp. Of the total sales of approximately 18 million tonnes in 1981, some 6,1 million tonnes were
supplied in the Community (2). The largest shipments went to the Federal Republic of Germany
(just under two million tonnes), to France (over 1,3 million tonnes) and to the United Kingdom
(over 1,1 million tonnes). Barely 0,7 million tonnes (3) were produced in the Community that year.
(10) The Community market is particularly important to the Swedish and Finnish producers, who
ship about two-thirds of their total output of market pulp to the Community. The European
market is of less importance to the North American producers when compared with the much
larger home markets. Shipments to the Community largely help them to diversify and to even out
cyclical fluctuations in the United States.
(11) Bleached sulphate pulp is bought by more than 800 paper manufacturers operating in the
Community. Some 100 of them buy large quantities. Such firms have usually entered into longterm supply agreements. In order to obtain the mixture required for their manufacturing and to
minimize supply risks, they buy bleached sulphate pulp from several producers in different
countries. The major buyers purchase more than 200 000 tonnes of bleached sulphate pulp per
year. Their total turnover amounts to over US $ 1 000 million. They are often linked with pulp
producers whose headquarters are located outside the Community.
…
B. The undertakings concerned
(16) The undertakings concerned are among the leading world producers of bleached sulphate
pulp and among the leading suppliers of European manufacturers. …
E. Common agencies of pulp producers
1. Some of the firms to which this Decision is addressed are represented by a common agent.
(36) (a) Continental Cellulose, a Belgian agent for wood pulp, is the selling agent working on a
commission basis for the following pulp producers: - Stora Kopparbergs-Bergslags AB in Belgium,
- St Anne (for Benelux) and Billerud for Belgium (for Rayon Cellulose), Domtar (Canada) for Europe
(except France),
- Bowater Incorporated for eight European countries,
- Exportles for Belgium and France,
- Norrlands Skogsägares Cellulosa AB.
(37) (b) The US company Central National Corporation is the selling agent working on a
commission basis for several US companies : Allied Papers, for western Europe ; Chesapeake, for
Italy ; Western, worldwide for a certain type of HBK ; Federal Trade Board, for all export markets ;
Temple Eastex, for all export markets ; Brown, for Italy (Brown was acquired by James River in
1980) ; James River-Berlin Gorham Incorporated for Italy.
CNC and its affiliates have other agencies. For example, in Italy, Central National Italia SrL acts for
Billerud, Iggesund and Kopparfors.
CNC's Dutch affiliate sells on behalf of Portucel in Holland.
CNC has also sold on an ad hoc basis for certain other (mostly North American) suppliers
throughout the period 1974 to 1981.
2. Some of the firms to which this Decision is addressed acted as agents for other producers:
(38) (a) The pulp producer Svenska is the selling agent working on a commission basis for the
following pulp producers: - Crown Zellerbach : Svenska's US subsidiary is agent for Crown Pulp in
Europe,- Svenska's German subsidiary is agent for Companhia Portuguesa de Cellulose (Lisbon) in
the Federal Republic of Germany.
(39) (b) Mead USA is commission agent for British Columbia Forest Products in the EEC.
(40) (c) MoDoCell is the agent of St Anne in Italy.
(41) (d) In the meantime the following agreement has been notified:
"Scapsi (SCA "Pulp" Sales International Ltd) a subsidiary of SCA is agent for Nekoosa Papers
Incorporated and Leaf River Forest Products Incorporated in certain European countries."
(42) With the exception of the agreement referred to in paragraph 37 (James River-Berlin Gorham
Incorporated) and the agreement referred to in paragraph 41 (Scapsi-Nekoosa Papers
8
Incorporated and Leaf River Forest Products Incorporated), the other agreements were attacked
in the Statement of Objections as being restrictive of competition. Since then notifications have
been made to the Commission, pursuant to Articles 4 and 5 of Regulation No 17, of the
agreements (1) With exceptions in the fourth quarter of 1977 referred to in paragraph 36, the
Central National Corporation agreements with Allied Papers and with James River-Berlin Gorham
Incorporated referred to in paragraph 37, the Svenska agreement with Crown Zellerbach referred
to in paragraph 38, and the agreement referred to in paragraph 41. Application has also been
made for negative clearance pursuant to Article 2 of the said Regulation (1).
…
LEGAL ASSESSMENT
A. Article 85 (1) (Today Art. 101)
(77) Article 85 (1)(101) of the EEC Treaty prohibits as incompatible with the common market all
agreements between undertakings, decisions by associations of undertakings and concerted
practices which may affect trade between Member States and which have as their object or effect
the prevention, restriction or distortion of competition within the common market, and in
particular those which directly or indirectly fix purchase or selling prices or any other trading
conditions and those which share markets or sources of supply.
I. Article 85 (1) and international law
(78) In so far as the restrictive practices of the undertakings (and their associations) to which this
Decision is addressed perceptibly affected competition within the Community and trade between
Member States, Article 85 (1) applies to them.
1. Jurisdiction of the European Communities
(79) Article 85 of the EEC Treaty applies to restrictive practices which may affect trade between
Member States even if the undertakings and associations which are parties to the restrictive
practices are established or have their headquarters outside the Community, and even if the
restrictive practices in question also affect markets outside the EEC.
In this case all the addressees of this Decision were during the period of the infringement
exporting directly to or doing business within the Community. Some of them had branches,
subsidiaries, agencies or other establishments within the Community. The concertation on prices,
the exchange of sensitive information relative to prices, and the clauses prohibiting export or
resale all concerned shipments made directly to buyers in the EEC or sales made in the EEC to
buyers there. The shipments affected by these agreements and practices amounted to about twothirds of total shipments of bleached sulphate wood pulp to the EEC and some 60 % of EEC
consumption. The agreements and practices appear to have applied to at least the vast majority
of the sales of the relevant product by the parties to and in the EEC during the relevant periods.
The effect of the agreements and practices on prices announced and/or charged to customers
and on resale of pulp within the EEC was therefore not only substantial but intended, and was the
primary and direct result of the agreements and practices.
2. Free trade agreements
(80) The applicability of Article 85 (1) of the EEC Treaty to the Swedish, Finnish, Norwegian and
Portuguese firms to which this Decision is addressed is also not precluded by the free trade
agreements between the European Economic Community on the one hand and Sweden (1),
Finland (2), and Norway (3) and Portugal (4) on the other. While those agreements stipulate that
agreements between undertakings, decisions by associations of undertakings and concerted
practices between undertakings which are anti-competitive are incompatible with the agreements
in so far as they may affect trade between the Community and Sweden, Finland, Norway (Article
23) or Portugal (Article 26), and while they provide for a procedure for eliminating and penalizing
infringements of the rules on competition (Articles 27 and 30), they contain no provision which
prevents the Commission from immediately applying Article 85 (1) of the EEC Treaty where trade
between Member States is affected. In the declarations concerning Articles 23 and 26 of the
9
agreements which were published with the agreements, the Community stated that it would
assess the practices contrary to that Article on the basis of criteria arising from the application of
the rules of Articles 85, 86, 90 and 92 of the EEC Treaty.
II. Concerted price fixing by the firms concerned: see below…
__________________________
Doc. # 2
JUDGMENT OF THE COURT 27 September 1988 Joined Cases 'wood pulp' 89/85, 104, 114, 116,
117 AND 125 TO 129/85
The parties
(1) 89/85 A. Ahlström Osakeyhtiö, Helsinki, (2), Joutseno-Pulp Osakeyhtiö, Joutseno, (3) Kymmene Oy,
Helsinki, successor in title to Oy Kaukas AB, Lappeenranta, (4) Kemi Oy, Kemi, (5) Oy Metsä-Botnia AB,
Kaskinen, (6) Metsäliiton Teollisuus Oy, Espoo, (7) Veitsiluoto Oy, successor in title to Oulu Oy, Oulu, (8)
Oy Wilh. Schaumann AB, Helsinki, (9) Sunila Osakeyhtiö, Sunila, (10) Veitsiluoto Oy, Kemi, (11) Finncell,
Helsinki, (12) Enso-Gutzeit Oy, Helsinki,…applicants, v Commission of the European Communities,
represented by its Legal Advisers, …, defendant; Bowater Incorporated, Darien (Connecticut, USA),
represented by … applicant, v Commission of the European Communities, represented by its Legal Adviser,
…, defendant;
114/85, The Pulp, Paper and Paperboard Export Association, Bethlehem (Pennsylvania, USA), comprising
the United States undertakings: The Chesapeake Corporation, Crown Zellerbach Corporation, Federal Paper
Board Company Inc., Georgia-Pacific Corporation, The Mead Corporation, Scott Paper Company, and
Weyerhaeuser Company, represented by …, applicant, v Commission of the European Communities,
represented by its Legal Adviser, defendant, supported by The United Kingdom, represented by …
intervener;
116/85, St Anne-Nackawic Pulp and Paper Company Ltd, Nackawic (New Brunswick, Canada), represented
by…, applicant, v Commission of the European Communities, represented by its Legal Adviser, …,
defendant;
117/85, International Pulp Sales Company, New York, represented by …, applicant, V Commission of the
European Communities, represented by its Legal Adviser, …, defendant;
125/85, Westar Timber Ltd, Canada, represented by …,applicant, v Commission of the European
Communities, represented by its Legal Adviser, … defendant, supported by The United Kingdom,
represented by …, intervener;
126/85, Weldwood of Canada Ltd, Canada, represented by …, applicant, v Commission of the European
Communities, represented by its Legal Adviser, …, defendant, supported by The United Kingdom,
127/85, MacMillan Bloedel Ltd, Canada, represented by …, applicant, v Commission of the European
Communities, represented by its Legal Adviser, …, defendant, supported by The United Kingdom,
128/85, Canadian Forest Products Ltd, Canada, represented by …, applicant, v Commission of the
European Communities, represented by its Legal Adviser …,defendant, supported by The United Kingdom,
represented by … , intervener;
129/85, British Columbia Forest Products Ltd, Canada, represented by …, applicant,
v Commission of the European Communities, represented by its Legal Adviser, supported by The United
Kingdom, represented by …, intervener;
APPLICATION for a declaration that the Commission Decision of 19 December 1984 relating to a
proceeding under Article 85 of the EEC Treaty (IV/29.725—Wood pulp) (Official Journal 1985, L 85,
p. 1) is void.
THE COURT composed of: Lord Mackenzie Stuart, President, G. Bosco, O. Due, J. C. Moitinho de
Almeida, and G. C. Rodríguez Iglesias, (Presidents of Chambers), T. Koopmans, U. Everling, K.
Bahlmann, Y. Galmot, C. N. Kakouris, R. Joliet, T. F. O'Higgins and F. A. Schockweiler, Judges,
Advocate General: M. Darmon Registrar: H. A. Rühl, Principal Administrator
Having regard to the Report for the Hearing, as amended, and further to the hearing on 12
January 1988, after hearing the Opinion of the Advocate General delivered at the sitting on 25
May 1988,
10
gives the following Judgment
By applications lodged at the Court Registry between 4 and 30 April 1985, wood pulp producers
and two associations of wood pulp producers, all having their registered offices outside the
Community, brought an action under the second paragraph of Article 173 of the EEC Treaty for
the annulment of Decision IV/29.725 of 19 December 1984 (Official Journal 1985, L 85, p. 1), in
which the Commission had established that they had committed infringements of Article 85 of the
Treaty and imposed fines on them.
The alleged infringements consisted of: concertation between those producers on prices
announced each quarter to customers in the Community and on actual transaction prices charged
to such customers (Article 1 (1) and (2) of the decision); price recommendations addressed to its
members by the Pulp, Paper and Paperboard Export Association of the United States (formerly
named Kraft Export Association and hereinafter referred to as 'KEA'), an association of a number
of United States producers (Article 1 (3)); and, as regards Fincell, the common sales organization
of some 10 Finnish producers, the exchange of individualized data concerning prices with certain
other wood pulp producers within the framework of the Research and Information Centre for the
European Pulp and Paper Industry which is run by the trust company Fides of Switzerland (Article
1 (4)).
3 In paragraph 79 of the contested decision the Commission set out the grounds which in its view
justify the Community's jurisdiction to apply Article 85 of the Treaty to the concertation in
question. It stated first that all the addressees of the decision were either exporting directly to
purchasers within the Community or were doing business within the Community through
branches, subsidiaries, agencies or other establishments in the Community. It further pointed out
that the concertation applied to the vast majority of the sales of those undertakings to and in the
Community. Finally it stated that two-thirds of total shipments and 60% of consumption of the
product in question in the Community had been affected by such concertation. The Commission
concluded that: 'The effect of the agreements and practices on prices announced and/or charged
to customers and on resale of pulp within the EEC was therefore not only substantial but intended,
and was the primary and direct result of the agreements and practices.'
4 As regards specifically the Finnish undertakings and their association, Fincell, the Commission
stated in paragraph 80 of the decision that the Free Trade Agreement between the Community
and Finland (Official Journal 1973, L 328, p. 1) contains 'no provision which prevents the
Commission from immediately applying Article 85 (1) of the EEC Treaty where trade between
Member States is affected'.
5 ...
6 All the applicants which have made submissions regarding jurisdiction maintain first of all that
by applying the competition rules of the Treaty to them the Commission has misconstrued the
territorial scope of Article 85. They note that in its judgment of 14 July 1972 in Case 48/69 (ICI
vCommission [1972] ECR 619) the Court did not adopt the 'effects doctrine' but emphasized that
the case involved conduct restricting competition within the common market because of the
activities of subsidiaries which could be imputed to the parent companies. The applicants add that
even if there is a basis in Community law for applying Article 85 to them, the action of applying
the rule interpreted in that way would be contrary to public international law which precludes any
claim by the Community to regulate conduct restricting competition adopted outside the territory
of the Community merely by reason of the economic repercussions which that conduct produces
within the Community.
7 The applicants which are members of the KEA further submit that the application of Community
competition rules to them is contrary to public international law in so far as it is in breach of the
principle of non-interference. They maintain that in this case the application of Article 85 harmed
11
the interest of the United States in promoting exports by United States undertakings as
recognized in the Webb Pomerene Act of 1918 under which export associations, like the KEA, are
exempt from United States anti-trust laws.
8 Certain Canadian applicants also maintain that by imposing fines on them and making reduction
of those fines conditional on the producers giving undertakings as to their future conduct the
Commission has infringed Canada's sovereignty and thus breached the principle of international
comity.
9 The Finnish applicants consider that in any event it is only the rules on competition contained in
the Free Trade Agreement between the Community and Finland that may be applied to their
conduct, to the exclusion of Article 85 of the EEC Treaty, and that the Community should
therefore have consulted Finland on the measures which it envisaged adopting regarding the
agreement in question in accordance with the procedure provided for in Article 27 of that
agreement.
10 …. Incorrect assessment of the territorial scope of Article 85 of the Treaty and incompatibility of the decision with public international law
(a) The individual undertakings
11 In so far as the submission concerning the infringement of Article 85 of the Treaty itself is
concerned, it should be recalled that that provision prohibits all agreements between
undertakings and concerted practices which may affect trade between Member States and which
have as their object or effect the restriction of competition within the common market.
12 It should be noted that the main sources of supply of wood pulp are outside the Community, in
Canada, the United States, Sweden and Finland and that the market therefore has global
dimensions. Where wood pulp producers established in those countries sell directly to purchasers
established in the Community and engage in price competition in order to win orders from those
customers, that constitutes competition within the common market.
13 It follows that where those producers concert on the prices to be charged to their customers in
the Community and put that concertation into effect by selling at prices which are actually
coordinated, they are taking pan in concertation which has the object and effect of restricting
competition within the common market within the meaning of Article 85 of the Treaty.
14 Accordingly, it must be concluded that by applying the competition rules in the Treaty in the
circumstances of this case to undertakings whose registered offices are situated outside the
Community, the Commission has not made an incorrect assessment of the territorial scope of
Article 85.
15 The applicants have submitted that the decision is incompatible with public international law
on the grounds that the application of the competition rules in this case was founded exclusively
on the economic repercussions within the common market of conduct restricting competition
which was adopted outside the Community.
16 It should be observed that an infringement of Article 85, such as the conclusion of an
agreement which has had the effect of restricting competition within the common market, consists
of conduct made up of two elements, the formation of the agreement, decision or concerted
practice and the implementation thereof. If the applicability of prohibitions laid down under
competition law were made to depend on the place where the agreement, decision or concerted
practice was formed, the result would obviously be to give undertakings an easy means of evading
those prohibitions. The decisive factor is therefore the place where it is implemented.
17 The producers in this case implemented their pricing agreement within the common market. It
is immaterial in that respect whether or not they had recourse to subsidiaries, agents, sub-agents,
or branches within the Community in order to make their contacts with purchasers within the
Community.
18 Accordingly the Community's jurisdiction to apply its competition rules to such conduct is
covered by the territoriality principle as universally recognized in public international law.
19 As regards the argument based on the infringment of the principle of non-interference, it
12
should be pointed out that the applicants who are members of KEA have referred to a rule
according to which where two States have jurisdiction to lay down and enforce rules and the
effect of those rules is that a person finds himself subject to contradictory orders as to the
conduct he must adopt, each State is obliged to exercise its jurisdiction with moderation. The
applicants have concluded that by disregarding that rule in applying its competition rules the
Community has infringed the principle of non-interference.
20 There is no need to enquire into the existence in international law of such a rule since it
suffices to observe that the conditions for its application are in any event not satisfied. There is
not, in this case, any contradiction between the conduct required by the United States and that
required by the Community since the Webb Pomerene Act merely exempts the conclusion of
export cartels from the application of United States anti-trust laws but does not require such
cartels to be concluded.
21 It should further be pointed out that the United States authorities raised no objections
regarding any conflict of jurisdiction when consulted by the Commission pursuant to the OECD
Council Recommendation of 25 October 1979 concerning cooperation between member
countries on restrictive business practices affecting international trade (Acts of the organization,
Vol. 19, p. 376).
22 As regards the argument relating to disregard of international comity, it suffices to observe
that it amounts to calling in question the Community's jurisdiction to apply its competition rules
to conduct such as that found to exist in this case and that, as such, that argument has already
been rejected.
23 Accordingly it must be concluded that the Commission's decision is not contrary to Article 85
of the Treaty or to the rules of public international law relied on by the applicants.
(b) KEA
24 According to its Articles of Association, KEA is a non-profit-making association whose purpose
is the promotion of the commercial interests of its members in the exportation of their products
and it serves primarily as a clearing-house for its members for information regarding their export
markets. KEA does not itself engage in manufacture, selling or distribution.
25 It should further be pointed out that within KEA a number of groups have been formed,
including the Pulp Group, to cover the different sectors of the pulp and paper industry. Under
Article 1 of the by-laws of KEA, undertakings may only join KEA by becoming a member of one of
those groups. Article 2 of the by-laws provides that the groups enjoy full independence in the
management of their affairs.
26 It should lastly be noted that according to a policy statement adopted by the Pulp Group,
referred to in paragraph 32 of the contested decision, the members of the group may conclude
price agreements at meetings which they hold from time to time provided that each member is
informed in advance that prices will be discussed and that the meeting is quorate. The unanimous
agreement of the members present is also binding on members who are absent when the
decision is adopted.
27 It is apparent from the foregoing that KEA's price recommendations cannot be distinguished
from the pricing agreements concluded by undertakings which are members of the Pulp Group
and that KEA has not played a separate role in the implementation of those agreements.
28 In those circumstances the decision should be declared void in so far as it concerns KEA.
The question whether or not the competition rules in the Free Trade Agreement between the
Community and Finland are exclusively applicable.
29 It is necessary to determine whether, as the applicants maintain, Articles 23 and 27 of the Free
Trade Agreement have the effect of precluding the application of Article 85 of the EEC Treaty in so
far as trade between the Community and Finland is concerned.
30 It should be noted first of all that, under Article 23 (1) of the Free Trade Agreement, in
particular, agreements and concerted practices which have as their object or effect the restriction
13
of competition are incompatible with the proper functioning of the agreement in so far as they
may affect trade between the Community and Finland. Under Article 23 (2), if a Contracting Party
considers that a given practice is incompatible with Article 23 (1), it may take appropriate
measures in accordance with the procedures laid down in Article 27. In the context of those
procedures it is to consult the other Contracting Party within the Joint Committee in order to
reach agreement on the measures which it proposes to adopt in order to put a stop to the
offending practices. If no agreement can be reached, the Contracting Party concerned may adopt
safeguard measures.
31 It should also be observed that Articles 23 and 27 of the Free Trade Agreement presuppose
that the Contracting Parties have rules which enable them to take action against agreements
which they regard as being incompatible with that agreement. As far as the Community is
concerned, those rules can only be the provisions of Articles 85 and 86 of the Treaty. The
application of those articles is therefore not precluded by the Free Trade Agreement.
32 It should be pointed out finally that in this case the Community applied its competition rules
to the Finnish applicants not because they had concerted with each other but because they took
pan in a very much larger concertation with United States, Canadian and Swedish undertakings
which restricted competition within the Community. It was thus not just trade with Finland that
was affected. In that situation reference of the matter to the Joint Committee could not have led
to the adoption of appropriate measures.
33 Consequently the submission relating to the exclusive application of the competition rules in the
Free Trade Agreement between the Community and Finland must be rejected.
On those grounds,
THE COURT, before giving judgment on all the applicants' submissions, hereby:
(1) Rejects the submission relating to the incorrect assessment of the territorial scope of Article 85 of the
Treaty and the incompatibility of Commission Decision IV/29.725 of 19 December 1984 with public
international law;
(2) Declares Commission Decision IV/29.725 of 19 December 1984 void in so far as it concerns the Pulp,
Paper and Paperboard Export Association of the United States;
(3) Rejects the submission relating to the exclusive application of the competition rules in the Free Trade
Agreement between the Community and Finland;
2. EU Treaty, Article 101: from Doc. # 3 to Doc. # 26
Readings: The requirements will be given on a day-to-day basis depending on the time each
question requires. Therefore, the distribution hereafter is only tentative.
2.1. June 18: Reading and understanding Art. 101: Doc. 3 to Doc. 12
Doc. # 3 Art. 101 excerpt from the Treaty (remember that in the early years, this article was numbered 85
and then 81, but no word has been removed or added)
1. The following shall be prohibited as incompatible with the common market: all agreements
between undertakings, decisions by associations of undertakings and concerted practices which
may affect trade between Member States and which have as their object or effect the
prevention, restriction or distortion of competition within the common market, and in
particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this article shall be automatically void.
14
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
— any agreement or category of agreements between undertakings,
— any decision or category of decisions by associations of undertakings,
— any concerted practice or category of concerted practices, which contributes to
improving the production or distribution of goods or to promoting technical or
economic progress, while allowing consumers a fair share of the resulting benefit,
and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable
to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a
substantial part of the products in question.
Doc. # 4: Protocol (No. 27)
"Considering that the internal market as set out in Article 2 of the Treaty on European
Union includes a system ensuring that competition is not distorted".
Doc. # 5
Société Technique Minière (L.T.M.) v. Maschinenbau Ulm GmbH (M.B.U.)
Case 56/65, [1966] ECR 235
In order to be prohibited as being incompatible with the Common Market under Article 85(1)
(TFEU, 101 (1)) of the Treaty, an agreement between undertakings must fulfill certain conditions
depending less on the legal nature of the agreement than on its effects on "trade between
member states" and its effects on "competition."
Thus as Article 85(1) (TFEU, 101 (1)) is based on an assessment of the effects of an agreement
from two angles of economic evaluation, it cannot be interpreted as introducing any kind of
advance judgment, with regard to a category of agreements determined by their legal nature.
Therefore an agreement whereby a producer entrusts the sale of his products in a given area to a
sole distributor cannot automatically fall under the prohibition in Article 85(1) (TFEU, 101 (1)). But
such an agreement may contain the elements set out in that provision, by reason of a particular
factual situation or of the severity of the clauses protecting the exclusive dealership.
. . . The prohibition of such an agreement depends on one question alone, namely whether,
taking into account the circumstances of the case, the agreement, objectively considered,
contains the elements constituting the said prohibition as set out in Article 85(1) (TFEU, 101 (1)).
The necessity for an agreement "between undertakings"
In order to fall within this prohibition, an agreement must have been made between
undertakings. Article 85(1) (TFEU, 101 (1)) makes no distinction as to whether the parties are at
the same level in the economy (so-called "horizontal" agreements), or at different levels (so-called
"vertical" agreements). Therefore an agreement containing a clause "granting an exclusive right of
sale" may fulfill this condition.
The effects on trade between Member States
The agreement must also be one which "may affect trade between Member States."
This provision, clarified by the introductory words of Article 85 (TFEU Article 101) which refers to
agreements in so far as they are "incompatible with the common market", is directed to
determining the field of application of the prohibition by laying down the condition that it may be
assumed that there is a possibility that the realization of a single market between Member States
might be impeded. It is in fact to the extent that the agreement may affect trade between
Member States that the interference with competition caused by that agreement is caught by the
prohibitions in Community law found in Article 85 (TFEU Article 101), whilst in the converse case it
escapes those prohibitions. For this requirement to be fulfilled it must be possible to foresee with
a sufficient degree of probability on the basis of a set of objective factors of law or of fact that the
agreement in question may have an influence, direct or indirect, actual or potential, on the
pattern of trade between Member States. Therefore, in order to determine whether an
agreement which contains a clause "granting an exclusive right of sale" comes within the field of
15
application of Article 85 (TFEU Article 101), it is necessary to consider in particular whether it is
capable of bringing about a partitioning of the market in certain products between Member
States and thus rendering more difficult the interpenetration of trade which the Treaty is
intended to create.
The effects of the agreement on competition finally, for the agreement at issue to be caught by
the prohibition contained in Article 85(1) (TFEU Article 101(1)) it must have as its "object or effect
the prevention, restriction or distortion of competition within the Common Market".
The fact that these are not cumulative but alternative requirements, indicated by the
conjunction "or", leads first to the need to consider the precise purpose of the agreement, in the
economic context in which it is to be applied. This interference with competition referred to in
Article 85(1) (TFEU Article 101(1)) must result from all or some of the clauses of the agreement
itself. Where, however, an analysis of the said clauses does not reveal the effect on competition
to be sufficiently deleterious, the consequences of the agreement should then be considered and
for it to be caught by the prohibition it is then necessary to find that those factors are present
which show that competition has in fact been prevented or restricted or distorted to an
appreciable extent.
The competition in question must be understood within the actual context in which it would
occur in the absence of the agreement in dispute. In particular it may be doubted whether there
is an interference with competition if the said agreement seems really necessary for the
penetration of a new area by an undertaking. Therefore, in order to decide whether an
agreement containing a clause "granting an exclusive right of sale" is to be considered as
prohibited by reason of its object or of its effect, it is appropriate to take into account in particular
the nature and quantity, limited or otherwise, of the products covered by the agreement, the
position and importance of the grantor and the concessionnaire on the market for the products
concerned, the isolated nature of the disputed agreement or, alternatively, its position in a series
of agreements, the severity of the clauses intended to protect the exclusive dealership or,
alternatively, the opportunities allowed for other commercial competitors in the same products
by way of parallel re-exportation and importation. . . .
Doc. # 6 Concept of Undertaking
Hydrotherm Gerätebeau GMBH v. Compact and Officine Sant' Andrea and Dottore Ingeniere
Mario Androli Case 170/83, [1984] ECR 2999
[10] In Article 1(1) of Regulation No 67/67 Article 85(1) (TFEU, article 101) of the Treaty is
declared inapplicable to agreements "to which only two undertakings are party". There is doubt
about the applicability of that provision because the agreement at issue was concluded between
Hydrotherm on the one hand and three different persons — Mr. Andreoli, a natural person, and
the undertakings Compact and Officine Sant' Andrea — on the other. It is an undisputed fact that
Mr. Andreoli has complete control of both those undertakings.
[11] In competition law, the term "undertaking" must be understood as designating an economic
unit for the purpose of the subject-matter of the agreement in question even if in law that
economic unit consists of several persons, natural or legal. The requirement of Article 1(1) of
Regulation No 67/67 is therefore fulfilled if one of the parties to the agreement is made up of
undertakings having identical interests and controlled by the same natural person, who also
participates in the agreement. For in those circumstances competition between the persons
participating together, as a single party, in the agreement in question is impossible.
[12] The answer to the first question (referred by the national court) must therefore be that
Regulation No. 67/67 must be applied even if several legally independent undertakings participate
in the agreement as one contracting party provided that those undertakings constitute an
economic unit for the purposes of the agreement. . . ."
16
Doc. # 7 Natural persons considered as undertakings: Commission Decision of 2 April 2003
relating to a proceeding pursuant to Article 81 of the EC Treaty (Case COMP/C. 38.279/F3French beef)
[104] It is settled case-law that ‘the concept of an undertaking covers any entity engaged in an
economic activity, regardless of its legal status and the way in which it is financed'. Even a natural
person may constitute an ‘undertaking' if that person engages in an economic activity. … There is
no doubt that farmers engage in an economic activity, that of producing goods and offering them
for sale. Even though they may be natural persons, therefore, farmers are ‘undertakings' within
the meaning of Article 81 (TFEU, Article 101) of the Treaty.
[106] Slaughterers perform for gain the service of slaughtering animals, and offer the products
of their work for sale. They too are ‘undertakings'.
[107] It is true that some slaughterers are organised in the form of cooperatives; . . . . In reply to
the argument put forward by the FNSEA (Union of farmers) …, it will be enough to point out that
the agreement which is the subject of this Decision is not a matter of the relations between a
cooperative and its members, but an agreement between six distinct entities, namely the
federations to which the Decision is addressed.
[108] It has to be concluded, therefore, that the members of the federations involved are
‘undertakings' within the meaning of Article 81 (TFEU, Article 101) of the Treaty.
Doc. # 8 Presumption of liability of the parent company for its subsidiary
Alliance One International, Inc. & others v. EU Commission
Judgment of the General Court 27 October 2010, Case T-24/05 (ECR 2010 II-05329) on appeal
EUCJ (Grand Chamber) 19 July 2012, Joined cases C-628/10 P (ECR 2012)
Judgment of the General Court 12 October 2011, Case T-41/05
[80] It should be observed that competition law refers to the activities of ‘undertakings’ (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, paragraph 59) and that the concept of an
undertaking refers to any entity engaged in an economic activity, regardless of its legal status and
the way in which it is financed (Joined Cases C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P
and C-213/02 P Dansk Rørindustri and Others v. Commission [2005] ECR I-5425, paragraph 112,
and Case C-97/08 P Akzo Nobel and Others v. Commission [2009] ECR I-8237, paragraph 54).
[81] According to the case-law, in the same context, the concept of an undertaking must be
understood as denoting an economic unit even if in law that economic unit consists of several
persons, natural or legal (Case C-217/05 Confederación Española de Empresarios de Estaciones de
Servicio [2006] ECR I-11987, paragraph 40, and Akzo Nobel and Others v. Commission, paragraph
80 above, paragraph 55; Case T-325/01 Daimler Chrysler v. Commission [2005] ECR II-3319,
paragraph 85).
[83] The infringement of Community competition law must be attributed unequivocally to a
legal person on whom fines may be imposed. For the purposes of applying and enforcing
Commission competition law decisions, it is necessary to identify, as addressee, an entity having
legal personality (see, to that effect, Joined Cases T-305/94 to T-307/94, T-313/94 to T-316/94,
T-318/94, T-325/94, T-328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappij and Others
v. Commission [1999] ECR II-931, paragraph 978).
[84] It is clear from settled case-law that the conduct of a subsidiary may be attributed to the
parent company in particular where that subsidiary, despite having a separate legal personality,
does not decide independently upon its own conduct on the market, but carries out, in all
material respects, the instructions given to it by the parent company, regard being had in
particular to the economic, organisational and legal links between those two legal entities.
Doc. # 9 Arkema SA v. European Commission
EUCJ 29 September 2011 Case C-520/09P, [2011]
17
[37] …, it should be noted that the concept of an undertaking covers any entity engaged in an
economic activity, regardless of its legal status and the way in which it is financed. The Court has
stated that in this context the term ‘undertaking’ must be understood as designating an economic
unit even if in law that economic unit consists of several natural or legal persons, and that when
such an economic entity infringes the competition rules, it is for that entity, according to the
principle of personal responsibility, to answer for that infringement (Case C-90/09 P General
Química and Others v. Commission [2011] ECR I-0000, paragraphs 34 and 35 and the case-law
cited, and Joined Cases C-201/09 P and C-216/09 P Arcelor Mittal Luxembourg v. Commission and
Commission v. ArcelorMittal Luxembourg and Others [2011] ECR I-0000, paragraph 95).
[38] It is clear from settled case-law that the conduct of a subsidiary may be imputed to the
parent company in particular where, although having a separate legal personality, that subsidiary
does not decide independently upon its own conduct on the market, but carries out, in all
material respects, the instructions given to it by the parent company, having regard in particular
to the economic, organisational and legal links between those two legal entities (see Case C-97/08
P Akzo Nobel and Others v. Commission [2009] ECR I-8237, paragraph 58, and General Química
and Others v. Commission, paragraph 37).
[39] In such a situation, since the parent company and its subsidiary form a single economic unit
and therefore form a single undertaking for the purposes of Article 81 EC, the Commission may
address a decision imposing fines on the parent company, without having to establish the
personal involvement of the latter in the infringement (see, Akzo Nobel and Others v. Commission,
paragraph 59, and General Química and Others v. Commission, point 38).
Doc. # 10 Undertaking having an economic activity on a market
Christian Poucet v. Assurances Générales de France et Caisse Mutuelle Régionale du
Languedoc - Roussillon 17 Febr.1993, Case C-159/01 and C-160/91, [1993] ECR I-637
"[17] The Court has held . . . that in the context of competition law the concept of an
undertaking encompasses every entity engaged in an economic activity, regardless of the legal
status of the entity and the way in which it is financed.
[18] Sickness funds, and the organizations involved in the management of the public social
security system, fulfill an exclusively social function. That activity is based on the principle of
national solidarity and is entirely non-profit-making. The benefits paid are statutory benefits
bearing no relation to the amount of the contributions.
[19] Accordingly, that activity is not an economic activity and, therefore, the organizations to
which it is entrusted are not undertakings within the meaning of Articles 85 and 96 of the Treaty. .
Doc. #11 Nature of “services” provided
Commission v. Italian Republic, 18 June 1998, Case C-35/96 (1998) ECR I-3851
"[34] …, the Italian Government contended that although, since they exercise a liberal
profession like lawyers, surveyors or interpreters, customs agents are independent workers, they
nevertheless cannot be regarded as being undertakings within the meaning of Article 85 (TFEU,
Article 101) of the Treaty because the services that they provide are of an intellectual nature and
because the practice of their profession requires authorisation and entails compliance with
certain conditions. Moreover, the Treaty makes a distinction between independent workers and
undertakings, so that not all self-employed activity is necessarily carried on in the context of an
undertaking. In addition, the indispensable organisational factor is lacking, that is to say, the
combination of human, material and non-material resources permanently assigned to the pursuit
of a specific economic goal.
[35] Since independent customs agents are not undertakings, a fortiori the CNSD cannot
constitute an association of undertakings within the meaning of Article 85 of the Treaty.
[36] It must first be noted that, according to settled case-law, the concept of an undertaking
covers any entity engaged in an economic activity, regardless of its legal status and the way in
18
which it is financed . . . and that any activity consisting in offering goods and services on a given
market is an economic activity. . . .
[37] The activity of customs agents has an economic character. They offer, for payment, services
consisting in the carrying out of customs formalities, relating in particular to the importation,
exportation and transit of goods, as well as other complementary services such as services in
monetary, commercial and fiscal areas. Furthermore, they assume the financial risks involved in
the exercise of that activity. . . . If there is an imbalance between expenditure and receipts, the
customs agent is required to bear the deficit himself.
[38] In those circumstances, the fact that the activity of customs agent is intellectual, requires
authorisation and can be pursued in the absence of a combination of material, non-material and
human resources, is not such as to exclude it from the scope of Articles 85 and 86 of the EC
Treaty. . .
Doc. #12 Federación Nacional de Empresas de Instrumentación Cientifica, Médica, Téchnica y
Dental (FENIN) v. Commission of the European Communities Case T-319/99, [2003] ECR II-357
"[36] . . . [I]t is the activity consisting in offering goods and services on a given market that is the
characteristic feature of an economic activity . . . not the business of purchasing, as such. Thus, as
the Commission has argued, it would be incorrect, when determining the nature of that
subsequent activity, to dissociate the activity of purchasing goods from the subsequent use to
which they are put. The nature of the purchasing activity must therefore be determined
according to whether or not the subsequent use of the purchased goods amounts to an economic
activity.
[37] Consequently, an organisation which purchases goods — even in great quantity — not for
the purpose of offering goods and services as part of an economic activity, but in order to use
them in the context of a different activity, such as one of a purely social nature, does not act as an
undertaking simply because it is a purchaser in a given market. Whilst an entity may wield very
considerable economic power, even giving rise to a monopsony, it nevertheless remains the case
that, if the activity for which that entity purchases goods is not an economic activity, it is not
acting as an undertaking for the purposes of Community competition law and is therefore not
subject to the prohibitions laid down in Articles 81(1) EC and 82 EC.
[38] Next, it is appropriate to point out that, in Poucet and Pistre . . . in reaching the conclusion
that the organisations managing the health funds in question in that case were not carrying on an
economic activity and were not, therefore, undertakings for the purposes of Articles 81 EC and 82
EC, the Court relied on the fact that they were fulfilling an exclusively social function, that their
activity was based on the principle of national solidarity and, lastly, that they were non-profitmaking, the benefits paid out being statutory benefits that bore no relation to the level of
contributions. As regards the judgments in Fédération française des sociétés d'assurance and
Others and Albany . . . it should be observed that, in those judgments, the Court confirmed the
approach adopted in Poucet and Pistre . . . albeit that a lesser degree of solidarity in the operation
of those schemes persuaded it that the organisations concerned were in fact undertakings. Those
cases thus leave the principle posited in Poucet and Pistre intact.
[39] It is not disputed in the present case that the SNS, managed by the ministries and other
organisations cited in the applicant's complaint, operates according to the principle of solidarity in
that it is funded from social security contributions and other State funding and in that it provides
services free of charge to its members on the basis of universal cover. In managing the SNS, these
organisations do not, therefore, act as undertakings.
[40] It follows that, in accordance with the rule set out in paragraphs 37 and 38 above, the
organisations in question also do not act as undertakings when purchasing from the members of
the applicant association the medical goods and equipment which they require in order to
provide free services to SNS members. . . ."
19
2.2. Understanding Art. 101: From Doc. 13 to Doc. 18
Doc. #13 Agreement - Concerted Practice
Case COMP/E-1/37.512-Vitamins Commission Dec. of 21 Nov. 2001 OJ L 6, 10.1.2003, P1-77
"[556] Article 81(1) of the Treaty (32) distinguishes ‘concerted practices' from ‘agreements
between undertakings' and ‘decisions by association of undertakings'. The object is to bring within
the prohibition of that article a form of coordination between undertakings which, without having
reached the stage where an agreement properly so called has been concluded, knowingly
substitutes practical cooperation between them for the risks of competition (Case 48/69, Imperial
Chemical Industries v. Commission [1972] ECR 619 at paragraph 64).
[557] The criteria of coordination and cooperation laid down by the case-law of the Court, far
from requiring the elaboration of an actual plan, must be understood in the light of the concept
inherent in the provisions of the Treaty relating to competition, according to which each
economic operator must determine independently the commercial policy which he intends to
adopt in the common market. Although that requirement of independence does not deprive
undertakings of the right to adapt themselves intelligently to the existing or anticipated conduct
of their competitors, it strictly precludes any direct or indirect contact between such operators
the objet or effect of which is either to influence the conduct on the market of an actual or
potential competitor or to disclose to such a competitor the course of conduct which they
themselves have decided to adopt or contemplate adopting on the market. (Joined Cases 40/73
to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and others v.
Commission [1975] ECR 1663)
[558] An ‘agreement' for the purposes of Article 81(1) of the Treaty (TFEU, Article 101) does not
require the same certainty as would be necessary for the enforcement of a commercial contract
at civil law. Moreover, in the case of a complex cartel of long duration, the term ‘agreement' can
properly be applied not only to any overall plan or to the terms expressly agreed but also to the
implementation of what has been agreed on the basis of the same mechanisms and in pursuance
of the same common purpose."
Doc. # 14 Object or Effect of Agreements, Decisions, Concerted Practices Franchise agreement
Pronuptia de Paris GmbH v. Pronuptia de Paris Irmgard Schillgallis Case 161/84, [1986] ECR 353
Pronuptia de Paris GmbH, Frankfurt am Main is the German subsidiary of the French company of
the same name, distributing wedding dresses and related apparel under the trademark
"Pronuptia de Paris" through shops under its direct supervision and through independent retailers
under franchise agreements. The German subsidiary granted a franchise agreement to Mrs.
Schillgalis for three regions. Ms. Schillgalis, as the franchisee, received the exclusive right to use
the trademark "Pronuptia de Paris" whereas the franchisor undertook not to open or supply
competing shops in those regions. Pronuptia de Paris brought an action against Mrs. Schillgalis for
payment of arrears of royalties. The defendant argued that the franchise agreement was contrary
to Article 81 (ex Art. 85) and therefore void.
Judgment
[12] The Commission emphasizes that the scope of Article 85(1) (TFEU 101(1)) is not restricted
to particular types of contracts, and infers that in appropriate circumstances Article 85(1) applies
also to contracts for the assignment of business names and trade-marks, registered or not, and
the provision of services, as well as the supply of goods.
[13] It should be pointed out first of all that franchise agreements . . . are very diverse in nature.
It appears . . . that a distinction must be drawn between different varieties of franchise
agreements. In particular, it is necessary to distinguish between (i) service franchises,… (ii)
production franchises …, and (iii) distribution franchises, … In this judgment the Court is
concerned only with this third type of contract. . . .
20
[15] In a system of distribution franchises of that kind an undertaking which has established
itself as a distributor on a given market and thus developed certain business methods grants
independent traders, for a fee, the right to establish themselves in other markets using its
business name and the business methods which have made it successful. Rather than a method
of distribution, it is a way for an undertaking to derive financial benefit from its expertise without
investing its own capital. Moreover, the system gives traders who do not have the necessary
experience access to methods which they could not have learned without considerable effort and
allows them to benefit from the reputation of the franchisor's business name. Franchise
agreements for the distribution of goods differ in that regard from dealerships or contracts which
incorporate approved retailers into a selective distribution system, which do not involve the use
of a single business name, the application of uniform business methods or the payment of
royalties in return for the benefits granted. Such a system, which allows the franchisor to profit
from his success, does not in itself interfere with competition. In order for the system to work
two conditions must be met.
[16] First, the franchisor must be able to communicate his know-how to the franchisees and
provide them with the necessary assistance in order to enable them to apply his methods,
without running the risk that that know-how and assistance might benefit competitors, even
indirectly. It follows that provisions which are essential in order to avoid that risk do not
constitute restrictions on competition for the purposes of Article 85(1), [now TFEU 101(1)]. That
is also true of a clause prohibiting the franchisee, during the period of validity of the contract and
for a reasonable period after its expiry, from opening a shop of the same or a similar nature in an
area where he may compete with a member of the network. The same may be said of the
franchisee's obligation not to transfer his shop to another party without the prior approval of the
franchisor; that provision is intended to prevent competitors from indirectly benefiting from the
know-how and assistance provided.
[17] Secondly, the franchisor must be able to take the measures necessary for maintaining the
identity and reputation of the network bearing his business name or symbol. It follows that
provisions which establish the means of control necessary for that purpose do not constitute
restrictions on competition for the purposes of Article 85(1) [TFEU Article 101(1)].
[18] The same is true of the franchisee's obligation to apply the business methods developed by
the franchisor and to use the know-how provided.
[19] That is also the case with regard to the franchisee's obligation to sell the goods covered by
the contract only in premises laid out and decorated according to the franchisor's instructions,
which is intended to ensure uniform presentation in conformity with certain requirements. The
same requirements apply to the location of the shop, the choice of which is also likely to affect
the network's reputation. It is thus understandable that the franchisee cannot transfer his shop
to another location without the franchisor's approval.
[20] The prohibition of the assignment by the franchisee of his rights and obligations under the
contract without the franchisor's approval protects the latter's right freely to choose the
franchisees, on whose business qualifications the establishment and maintenance of the
network's reputation depend.
[21] By means of the control exerted by the franchisor on the selection of goods offered by the
franchisee, the public is able to obtain goods of the same quality from each franchisee. It may in
certain cases — for instance, the distribution of fashion articles — be impractical to lay down
objective quality specifications. Because of the large number of franchisees it may also be too
expensive to ensure that such specifications are observed. In such circumstances a provision
requiring the franchisee to sell only products supplied by the franchisor or by suppliers selected
by him may be considered necessary for the protection of the network's reputation. Such a
provision may not however have the effect of preventing the franchisee from obtaining those
products from other franchisees.
[22] Finally, since advertising helps to define the image of the network's name or symbol in the
eyes of the public, a provision requiring the franchisee to obtain the franchisor's approval for all
21
advertising is also essential for the maintenance of the network's identity, so long as that
provision concerns only the nature of the advertising.
[23] It must be emphasized on the other hand that, far from being necessary for the protection
of the know-how provided or the maintenance of the network's identity and reputation, certain
provisions restrict competition between the members of the network. That is true of provisions
which share markets between the franchisor and franchisees or between franchisees or prevent
franchisees from engaging in price competition with each other.
[24] In that regard, the attention of the national court should be drawn to the provision which
obliges the franchisee to sell goods covered by the contract only in the premises specified therein.
That provision prohibits the franchisee from opening a second shop. Its real effect becomes clear
if it is examined in conjunction with the franchisor's undertaking to ensure that the franchisee has
the exclusive use of his business name or symbol in a given territory. In order to comply with that
undertaking the franchisor must not only refrain from establishing himself within that territory
but also require other franchisees to give an undertaking not to open a second shop outside their
own territory. A combination of provisions of that kind results in a sharing of markets between
the franchisor and the franchisees or between franchisees and thus restricts competition within
the network. As is clear from the judgment of 13 July 1966 (Joined Cases 56 and 58/64 Consten
and Grundig v. Commission (1966) ECR 299), a restriction of that kind constitutes a limitation of
competition for the purposes of Article 85(1) [TFEU Article 101(1)] if it concerns a business name
or symbol which is already well-known. It is of course possible that a prospective franchisee
would not take the risk of becoming part of the chain, investing his own money, paying a
relatively high entry fee and undertaking to pay a substantial annual royalty, unless he could
hope, thanks to a degree of protection against competition on the part of the franchisor and
other franchisees, that his business would be profitable. That consideration, however, is relevant
only to an examination of the agreement in the light of the conditions laid down in Article 85(3)
[TFEU Article 101(3)].
[25] Although provisions which impair the franchisee's freedom to determine his own prices are
restrictive of competition that is not the case where the franchisor simply provides franchisees
with price guidelines, so long as there is no concerted practice between the franchisor and the
franchisees or between the franchisees themselves for the actual application of such prices. It is
for the national court to determine whether that is indeed the case.
[26] Finally, it must be added that franchise agreements for the distribution of goods which
contain provisions sharing markets between the franchisor and the franchisees or between the
franchisees themselves are in any event liable to affect trade between Member States, even if
they are entered into by undertakings established in the same Member State, in so far as they
prevent franchisees from establishing themselves in another Member State. . . .
Doc. #15 Supply agreements and quotas
Stergios Delimitis v. Henninger Bräu AG
Case C-234/89, [1991] ECR I-935
Stergios Delimitis entered into a beer supply agreement with Henninger, a brewery. Delimitis, as a
licensee, was to buy a minimum quantity of beer from Henninger, soft drinks from the brewery's
subsidiaries . . . and Delimitis was to lease the café or pub from Henninger. Under the agreement
and an "access clause", Delimitis could, in theory, buy beer and soft drinks from undertakings in
other EC States; however if he failed to buy the minimum quantities from Henniger, he would
have to pay a penalty. For health reasons, Delimitis terminated the contract; the brewery agreed
but demanded payment of the rent and the penalty for failure to purchase the minimum
requirement. Delimitis argued that the agreement was contrary to Article 85 (TFEU Article 101).]
Judgment
[10] Under the terms of beer supply agreements, the supplier generally affords the reseller
certain economic and financial benefits, such as the grant of loans on favourable terms, the
22
letting of premises for the operation of a public house and the provision of technical installations,
furniture and other equipment necessary for its operation. In consideration for those benefits,
the reseller normally undertakes, for a predetermined period, to obtain supplies of the products
covered by the contract only from the supplier. That exclusive purchasing obligation is generally
backed by a prohibition on selling competing products in the public house let by the supplier.
[11] Such contracts entail for the supplier the advantage of guaranteed outlets, since, as a result
of his exclusive purchasing obligation and the prohibition on competition; the reseller
concentrates his sales efforts on the distribution of the contract goods. The supply agreements,
moreover, lead to cooperation with the reseller, allowing the supplier to plan his sales over the
duration of the agreement and to organize production and distribution effectively.
[13] If such agreements do not have the object of restricting competition within the meaning of
Article 85(1) [TFEU Article 101(1)], it is nevertheless necessary to ascertain whether they have the
effect of preventing, restricting or distorting competition.
[15] [. . .] in the present case it is necessary to analyse the effects of a beer supply agreement,
taken together with other contracts of the same type, on the opportunities of national
competitors or those from other Member States, to gain access to the market for beer
consumption or to increase their market share and, accordingly, the effects on the range of
products offered to consumers.
[16] In making that analysis, the relevant market must first be determined. The relevant market
is primarily defined on the basis of the nature of the economic activity in question, in this case the
sale of beer. Beer is sold through both retail channels and premises for the sale and consumption
of drinks . . .
[17] It follows that in the present case the reference market is that for the distribution of beer in
premises for the sale and consumption of drinks . . .
[18] Secondly, the relevant market is delimited from a geographical point of view. It should be
noted that most beer supply agreements are still entered into at a national level. It follows that,
in applying the Community competition rules, account is to be taken of the national market for
beer distribution in premises for the sale and consumption of drinks.
[19] In order to assess whether the existence of several beer supply agreements impedes access
to the market as so defined, it is further necessary to examine the nature and extent of those
agreements in their totality, comprising all similar contracts tying a large number of points of sale
to several national producers. The effect of those networks of contracts on access to the market
depends specifically on the number of outlets thus tied to national producers in relation to the
number of public houses which are not so tied, the duration of the commitments entered into,
the quantities of beer to which those commitments relate, and on the proportion between those
quantities and the quantities sold by free distributors.
[20] The existence of a bundle of similar contracts, even if it has a considerable effect on the
opportunities for gaining access to the market, is not, however, sufficient in itself to support a
finding that the relevant market is inaccessible, inasmuch as it is only one factor, amongst others,
pertaining to the economic and legal context in which an agreement must be appraised. The
other factors to be taken into account are, in the first instance, those also relating to
opportunities for access.
[21] In that connection it is necessary to examine whether there are real concrete possibilities
for a new competitor to penetrate the bundle of contracts by acquiring a brewery already
established on the market together with its network of sales outlets, or to circumvent the bundle
of contracts by opening new public houses. . . .
[22] Secondly, account must be taken of the conditions under which competitive forces operate
on the relevant market. In that connection it is necessary to know not only the number and the
size of producers present on the market, but also the degree of saturation of that market and
customer fidelity to existing brands . . .
[23] If an examination of all similar contracts entered into on the relevant market and the other
factors relevant to the economic and legal context in which the contract must be examined shows
23
that those agreements do not have the cumulative effect of denying access to that market to new
national and foreign competitors, the individual agreements comprising the bundle of agreements
cannot be held to restrict competition within the meaning of Article 85(1) (TFEU Article 101(1)) of
the Treaty. They do not, therefore, fall under the prohibition laid down in that provision.
[24] If, on the other hand, such examination reveals that it is difficult to gain access to the
relevant market, it is necessary to assess the extent to which the agreements entered into by the
brewery in question contribute to the cumulative effect produced in that respect by the totality of
the similar contracts found on that market . . .
[27] The reply to be given to [some of the] questions is therefore that a beer supply agreement
is prohibited by Article 85(1) (TFEU Article 101(1)) of the EEC Treaty, if two cumulative conditions
are met. The first is that, having regard to the economic and legal context of the agreement at
issue, it is difficult for competitors who could enter the market or increase their market share to
gain access to the national market for the distribution of beer in premises for the sale and
consumption of drinks. The fact that, in that market, the agreement in issue is one of a number of
similar agreements having a cumulative effect on competition constitutes only one factor
amongst others in assessing whether access to that market is indeed difficult. The second
condition is that the agreement in question must make a significant contribution to the sealing-off
effect brought about by the totality of those agreements in their economic and legal context. The
extent of the contribution made by the individual agreement depends on the position of the
contracting parties in the relevant market and on the duration of the agreement.
The compatibility with Article 85(1) (TFEU Article 101(1)) of a beer supply agreement containing
an access clause
[28] A beer supply agreement containing an access clause differs from the other beer supply
agreements normally entered into inasmuch as it authorizes the reseller to purchase beer from
other Member States. Such access mitigates, in favour of the beers of other Member States, the
scope of the prohibition on competition which in a classic beer supply agreement is coupled with
the exclusive purchasing obligation. The scope of the access clause must be assessed in the light
of its wording and its economic and legal context.
[31] If the interpretation of the wording of the access clause or an examination of the specific
effect of the contractual clauses as a whole in their economic and legal context shows that the
limitation on the scope of the prohibition on competition is merely hypothetical or without
economic significance, the agreement in question must be treated in the same way as a classic
beer supply agreement. Accordingly, it must be assessed under Article 85(1) of the Treaty in the
same way as beer supply agreements in general.
Doc. #16
Courage Ltd v. Bernard Crehan and Bernard Crehan v. Courage Ltd. and Others Case C-453/99,
[2001] ECR I-6297
All tenants of pubs had to buy their beer exclusively from Courage. Bernard Crehan entered into
two 20-year leases with IEL. The lease contracts required Crehan to buy a fixed minimum quantity
of specified beers at set prices from Courage. Crehan having fallen behind in payment of
deliveries of beer, Courage brought an action. Crehan contested the action on the merits alleging
that the beer tie was contrary to EEC Article 85, now TFEU Article 101.
Judgment
[17] By its first, second and third questions, which should be considered together, the referring
court is asking essentially whether a party to a contract liable to restrict or distort competition
within the meaning of Article 85 of the Treaty can rely on the breach of that provision before a
national court to obtain relief from the other contracting party. In particular, it asks whether that
party can obtain compensation for loss which he alleges to result from his being subject to a
24
contractual clause contrary to Article 85 and whether, therefore, Community law precludes a rule
of national law which denies a person the right to rely on his own illegal actions to obtain
damages.
[19] It should be borne in mind, first of all, that the Treaty has created its own legal order, which
is integrated into the legal systems of the Member States and which their courts are bound to
apply. The subjects of that legal order are not only the Member States but also their nationals.
Just as it imposes burdens on individuals, Community law is also intended to give rise to rights
which become part of their legal assets. Those rights arise not only where they are expressly
granted by the Treaty but also by virtue of obligations which the Treaty imposes in a clearly
defined manner both on individuals and on the Member States and the Community institutions
(see the judgments in Case 26/62 Van Gend en Loos [1963] ECR 1, Case 6/64 Costa [1964] ECR 585
and Joined Cases C-6/90 and C-9/90 Francovich and Others [1991] ECR I-5357, paragraph 31).
[23] Thirdly, it should be borne in mind that the Court has held that Article 85(1) of the Treaty
and Article 86 of the EC Treaty (now Article 82 EC) produce direct effects in relations between
individuals and create rights for the individuals concerned which the national courts must
safeguard ….
[24] It follows from the foregoing considerations that any individual can rely on a breach of
Article 85(1) of the Treaty before a national court even where he is a party to a contract that is
liable to restrict or distort competition within the meaning of that provision.
[26] The full effectiveness of Article 85 of the Treaty and, in particular, the practical effect of the
prohibition laid down in Article 85(1) would be put at risk if it were not open to any individual to
claim damages for loss caused to him by a contract or by conduct liable to restrict or distort
competition.
[27] Indeed, the existence of such a right strengthens the working of the Community
competition rules and discourages agreements or practices, which are frequently covert, which
are liable to restrict or distort competition. From that point of view, actions for damages before
the national courts can make a significant contribution to the maintenance of effective
competition in the Community.
[31] Similarly, provided that the principles of equivalence and effectiveness are respected (see
Palmisani, cited above, paragraph 27), Community law does not preclude national law from
denying a party who is found to bear significant responsibility for the distortion of competition
the right to obtain damages from the other contracting party. Under a principle which is
recognised in most of the legal systems of the Member States and which the Court has applied in
the past (see Case 39/72 Commission v. Italy [1973] ECR 101, paragraph 10), a litigant should not
profit from his own unlawful conduct, where this is proven.
[32] In that regard, the matters to be taken into account by the competent national court
include the economic and legal context in which the parties find themselves and, as the United
Kingdom Government rightly points out, the respective bargaining power and conduct of the two
parties to the contract.
[33] In particular, it is for the national court to ascertain whether the party who claims to have
suffered loss through concluding a contract that is liable to restrict or distort competition found
himself in a markedly weaker position than the other party, such as seriously to compromise or
even eliminate his freedom to negotiate the terms of the contract and his capacity to avoid the
loss or reduce its extent, in particular by availing himself in good time of all the legal remedies
available to him.
[34] Referring to the judgments in Case 23/67 Brasserie de Haecht [1967] ECR 127 and Case C234/89 Delimitis [1991] ECR I-935, paragraphs 14 to 26, the Commission and the United Kingdom
Government also rightly point out that a contract might prove to be contrary to Article 85(1) of
the Treaty for the sole reason that it is part of a network of similar contracts which have a
cumulative effect on competition. In such a case, the party contracting with the person controlling
the network cannot bear significant responsibility for the breach of Article 85, particularly where
in practice the terms of the contract were imposed on him by the party controlling the network.
25
[35] Contrary to the submission of Courage, making a distinction as to the extent of the parties'
liability does not conflict with the case-law of the Court to the effect that it does not matter, for
the purposes of the application of Article 85 of the Treaty, whether the parties to an agreement
are on an equal footing as regards their economic position and function (see inter alia Joined
Cases 56/64 and 58/64 Consten and Grundig v. Commission [1966] ECR 382). That case-law
concerns the conditions for application of Article 85 of the Treaty while the questions put before
the Court in the present case concern certain consequences in civil law of a breach of that
provision.
[36] Having regard to all the foregoing considerations, the questions referred are to be answered
as follows:
- A party to a contract liable to restrict or distort competition within the meaning of Article 85 of
the Treaty can rely on the breach of that article to obtain relief from the other contracting party;
- Article 85 of the Treaty precludes a rule of national law under which a party to a contract liable
to restrict or distort competition within the meaning of that provision is barred from claiming
damages for loss caused by performance of that contract on the sole ground that the claimant is a
party to that contract;
- Community law does not preclude a rule of national law barring a party to a contract liable to
restrict or distort competition from relying on his own unlawful actions to obtain damages where
it is established that that party bears significant responsibility for the distortion of competition.
Doc. #17 Horizontal and vertical agreements
See online: Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the
European Union to horizontal cooperation agreements Text with EEA relevance, Official Journal
C 011, 14/01/2011 P. 0001 – 0072
1. INTRODUCTION
1.1. Purpose and scope
1. These guidelines set out the principles for the assessment under Article 101 of the Treaty on
the Functioning of the European Union of agreements between undertakings, decisions by
associations of undertakings and concerted practices (collectively referred to as "agreements")
pertaining to horizontal co-operation. Co-operation is of a "horizontal nature" if an agreement is
entered into between actual or potential competitors. In addition, these guidelines also cover
horizontal co-operation agreements between non-competitors, for example, between two
companies active in the same product markets but in different geographic markets without being
potential competitors.
2. Horizontal co-operation agreements can lead to substantial economic benefits, in particular if
they combine complementary activities, skills or assets. Horizontal co-operation can be a means
to share risk, save costs, increase investments, pool know-how, enhance product quality and
variety, and launch innovation faster.
3. On the other hand, horizontal co-operation agreements may lead to competition problems.
This is, for example, the case if the parties agree to fix prices or output or to share markets, or if
the co-operation enables the parties to maintain, gain or increase market power and thereby is
likely to give rise to negative market effects with respect to prices, output, product quality,
product variety or innovation.
4. The Commission, while recognizing the benefits that can be generated by horizontal cooperation agreements, has to ensure that effective competition is maintained. Article 101
provides the legal framework for a balanced assessment taking into account both adverse effects
on competition and pro-competitive effects.
5. The purpose of these guidelines is to provide an analytical framework for the most common
types of horizontal co-operation agreements; they deal with research and development
agreements, production agreements including subcontracting and specialization agreements,
purchasing agreements, commercialization agreements, standardization agreements including
standard contracts, and information exchange. This framework is primarily based on legal and
26
economic criteria that help to analyze a horizontal co-operation agreement and the context in
which it occurs. Economic criteria such as the market power of the parties and other factors
relating to the market structure form a key element of the assessment of the market impact likely
to be caused by a horizontal co-operation agreement and, therefore, for the assessment under
Article 101.
Doc. #18 See online: Guidelines on Vertical Restraints, 10.5.2010, (Text with EEA relevance), OJ C
130, 19.05.2010, p. 1
27
Understanding Art. 101 (continue): from Doc. # 18 to Doc. # 26
Doc. #18 Effect on trade between Member States: Agreement prohibiting re export and
partitioning the EU market
Etablissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v. Commission of the European
Economic Community Joined Cases 56 and 58/64, [1966] ECR 299
On April 1, 1957 the German Company Grundig-Verkaufs-GmbH granted to the French Company
Etablissements Consten the exclusive rights in metropolitan France, the Saar and Corsica for the
sale of certain Grundig electronic products. By contract Consten undertook to buy fixed minimum
quantities, to order regularly in advance, to provide appropriate publicity, to maintain a repair
work-shop and stocks of spare parts, to carry out the guarantee and after sale service. Consten
agreed not to sell similar competing products and to refrain from delivering, directly or indirectly,
Grundig products to other countries. Grundig has imposed similar prohibitions on all German
wholesalers and on all sole distributors in other countries. On October 3, 1957, Consten
registered in France the trademark GINT ("Grundig International") for use on all appliances
manufactured by Grundig, including those sold in other markets. Learning that UNEF, a French
company, made several imports of Grundig appliances from German wholesalers into France and
was selling them at lower prices, Consten brought two actions against UNEF for unfair
competition and for trademark infringement. Following an application lodged by UNEF, the
Commission issued a Decision on September 23, 1964 holding that the sole agency contracts and
the agreement on the registration and use of GINT trademark constituted an infringement of
article 81(1) (ex Art. 85). In addition, the decision refused to grant the declaration of
inapplicability under 81(3), for which Grundig previously applied. Consten and Grundig appealed
the Commission's Decision to the ECJ.]
Advocate general Karl Roemer considered that the Commission should have assessed the case in
taking into consideration that there was still competition between brands (interbrand
competition between similar products of different makes) and that it considered only intrabrand
competition. The Court did not follow his conclusions considering the foreclosure of the French
market by the agreement preventing French competitors to buy Grundig products from German
distributors and in breach of the French law of the protection of trademarks.
Judgment
...
The applicants submit that the prohibition in Article 85(1) (TFEU Article 101(1)) applies only to
so-called horizontal agreements. The Italian government submits furthermore that sole
distributorship contracts do not constitute "agreements between undertakings" within the
meaning of that provision, since the parties are not on a footing of equality. With regard to these
contracts, freedom of competition may only be protected by virtue of Article 86 of the Treaty.
Neither the wording of Article 85 (TFEU Article 101) nor that of Article 86 (TFEU Article 102)
gives any ground for holding that distinct areas of application are to be assigned to each of the
two articles according to the level in the economy at which the contracting parties operate.
Article 85(TF EU Article 101) refers in a general way to all agreements which distort competition
within the Common Market and does not lay down any distinction between those agreements
based on whether they are made between competitors operating at the same level in the
economic process or between non-competing persons operating at different levels. In principle,
no distinction can be made where the Treaty does not make any distinction.
Furthermore, the possible application of Article 85 (TFEU Article 101) to a sole distributorship
contract cannot be excluded merely because the grantor and the concessionnaire are not
competitors inter se and not on a footing of equality. Competition may be distorted within the
28
meaning of Article 85(1) (TFEU Article 101(1)) not only by agreements which limit it as between
the parties, but also by agreements which prevent or restrict the competition which might take
place between one of them and third parties. For this purpose, it is irrelevant whether the parties
to the agreement are or are not on a footing of equality as regards their position and function in
the economy. This applies all the more, since, by such an agreement, the parties might seek, by
preventing or limiting the competition of third parties in respect of the products, to create or
guarantee for their benefit an unjustified advantage at the expense of the consumer or user,
contrary to the general aims of Article 85 (TFEU Article 101).
It is thus possible that, without involving an abuse of a dominant position, an agreement
between economic operators at different levels may affect trade between Member States and at
the same time have as its object or effect the prevention, restriction or distortion of competition,
thus falling under the prohibition of article 85(1) (TFEU Article 101(1)).
In addition, it is pointless to compare on the one hand the situation, to which Article 85 (TFEU
Article 101) applies, of a producer bound by a sole distributorship agreement to the distributor of
his products with on the other hand that of a producer who includes within his undertaking the
distribution of his own products by some means, for example, by commercial representatives, to
which Article 85 (TFEU Article 101) does not apply. These situations are distinct in law and,
moreover, need to be assessed differently, since two marketing organizations, one of which is
integrated into the manufacturer's undertaking whilst the other is not, may not necessarily have
the same efficiency. The wording of Article 85 causes the prohibition to apply, provided that the
other conditions are met, to an agreement between several undertakings. Thus it does not apply
where a sole undertaking integrates its own distribution network into its business organization. It
does not thereby follow, however, that the contractual situation based on an agreement between
a manufacturing and a distributing undertaking is rendered legally acceptable by a simple process
of economic analogy — which is in any case incomplete and in contradiction with the said article.
Furthermore, although in the first case the Treaty intended in Article 85 to leave untouched the
internal organization of an undertaking and to render it liable to be called in question, by means
of Article 86, only in cases where it reaches such a degree of seriousness as to amount to an
abuse of a dominant position, the same reservation could not apply when the impediments to
competition result from agreement between two different undertakings which then as a general
rule simply require to be prohibited.
Finally, an agreement between producer and distributor which might tend to restore the
national divisions in trade between Member States might be such as to frustrate the most
fundamental objections of the Community. The Treaty, whose preamble and content aim at
abolishing the barriers between states, and which in several provisions gives evidence of a stern
attitude with regard to their reappearance, could not allow undertakings to reconstruct such
barriers. Article 85(1) (TFEU Article 101(1)) is designed to pursue this aim, even in the case of
agreements between undertakings placed at different levels in the economic process.
The submissions set out above are consequently unfounded. . . .
The concept of an agreement "which may affect trade between Member States" is intended to
define, in the law governing cartels, the boundary between the areas respectively covered by
Community law and national law. It is only to the extent to which the agreement may affect trade
between Member States that the deterioration in competition caused by the agreement falls
under the prohibition of Community law contained in Article 85; otherwise it escapes the
prohibition.
In this connexion, what is particularly important is whether the agreement is capable of
constituting a threat, direct or indirect, actual or potential, to freedom of trade between Member
States in a manner which might harm the attainment of the objectives of a single market between
states. Thus the fact that an agreement encourages an increase, even a large one, in the volume
of trade between states is not sufficient to exclude the possibility that the agreement may
"affect" such trade in the abovementioned manner. In the present case, the contract between
Grundig and Consten, on the one hand by preventing undertakings other than Consten from
29
importing Grundig products into France, and on the other hand by prohibiting Consten from reexporting those products to other countries of the Common Market, indisputably affects trade
between Member States. These limitations on the freedom of trade, as well as those which might
ensue for third parties from the registration in France by Consten of the Gint trade mark, which
Grundig places on all its products, are enough to satisfy the requirement in question. . . .
The applicants and the German government maintain that since the Commission restricted its
examination solely to Grundig products the decision was based upon a false concept of
competition and of the rules on prohibition contained in Article 85(1) (TFEU Article 101(1)), since
this concept applies particularly to competition between similar products of different makes; the
Commission, before declaring article 85(1) (TFEU Article 101(1)) to be applicable, should, by
basing itself upon the "rule of reason", have considered the economic effects of the disputed
contrast upon competition between the different makes. There is a presumption that vertical
sole distributorship agreements are not harmful to competition and in the present case there is
nothing to invalidate that presumption. On the contrary, the contract in question has increased
the competition between similar products of different makes.
The principle of freedom of competition concerns the various stages and manifestations of
competition. Although competition between producers is generally more noticeable than that
between distributors of products of the same make, it does not thereby follow that an agreement
tending to restrict the latter kind of competition should escape the prohibition of Article 85(1)
(TFEU Article 101(1)) merely because it might increase the former.
Besides, for the purpose of applying Article 85(1) (TFEU Article 101(1)), there is no need to take
account of the concrete effects of an agreement once it appears that it has as its object the
prevention, restriction or distortion of competition. Therefore the absence in the contested
decision of any analysis of the effects of the agreement on competition between similar products
of different makes does not, of itself, constitute a defect in the decision. . . .
. . . The infringement which was found to exist by the contested decision results from the
absolute territorial protection created the said contract in favour of Consten on the basis of
French law. . . .
First, Grundig undertook not to deliver even indirectly to third parties products intended for the
area covered by the contract. The restrictive nature of that undertaking is obvious if it is
considered in the light of the prohibition on exporting which was imposed not only on Consten
but also on all the other sole concessionnaires of Grundig, as well as the German wholesalers.
Secondly, the registration in France by Consten of the Gint trade mark, which Grundig affixes to all
its products, is intended to increase the protection inherent in the disputed agreement, against
the risk of parallel imports into France of Grundig products, by adding the protection deriving
from the law on industrial property rights. Thus no third party could import Grundig products
from other Member States of the Community for resale in France without running serious risks. . .
. . . In order to arrive at a true representation of the contractual position the contract must be
placed in the economic and legal context in the light of which it was concluded by the parties. . . .
The situation as ascertained above results in the isolation of the French market and makes it
possible to charge for the products in question prices which are sheltered from all effective
competition. In addition, the more producers succeed in their efforts to render their own makes
of product individually distinct in the eyes of the consumer, the more the effectiveness of
competition between producers tends to diminish. Because of the considerable impact of
distribution costs on the aggregate cost price, it seems important that competition between
dealers should also be stimulated. The efforts of the dealer are stimulated by competition
between distributors of products of the same make. Since the agreement thus aims at isolating
the French market for Grundig products and maintaining artificially, for products of a very wellknown brand, separate national markets within the Community, it is therefore such as to distort
competition in the Common Market.
It was therefore proper for the contested decision to hold that the agreement constitutes an
infringement of Article 85(1) (TFEU Article 101(1)). . . .
30
The applicants maintain more particularly that the criticized effect on competition is due not to
the agreement but to the registration of the trade-mark in accordance with French law, which
gives rise to an original inherent right of the holder of the trade-mark from which the absolute
territorial protection derives under national law.
Consten's right under the contract to the exclusive user in France of the Gint trade mark, which
may be used in a similar manner in other countries, is intended to make it possible to keep under
surveillance and to place an obstacle in the way of parallel imports. Thus, the agreement by
which Grundig, as the holder of the trade-mark by virtue of an inter-national registration,
authorized Consten to register it in France in its own name tends to restrict competition.
Although Consten is, by virtue of the registration of the Gint trade-mark, regarded under French
law as the original holder of the rights relating to that trade-mark, the fact nevertheless remains
that it was by virtue of an agreement with Grundig that it was able to affect the registration.
That agreement therefore is one which may be caught by the prohibition in Article 85(1). The
prohibition would be ineffective if Consten could continue to use the trade-mark to achieve the
same object as that pursued by the agreement which has been held to be unlawful. . . .
Doc. #19 Concertation between undertakings inside and outside the EU
Ahlström Osakeyhtiö and others v. Commission of the European Communities (Wood Pulp 2)
Joined Cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85, [1993]
ECR I-1307
Judgment
[130] . . . So far as concerns concertation on announced prices and the exchange of information
on transaction prices, reference must be made first of all to Article IIa of the Policy Statement of
the Pulp Group. According to that provision, the members of the group are to meet from time to
time in order to fix unanimously prices for sales of pulp, known as "KEA recommended prices",
and they agree to announce those prices to their customers. If, subsequently, the members of
the association deviate from those prices — as they continue to be free to do — they are required
to give advance notification to the manager of the group, who may decide, if necessary, to
convene a further meeting of the group in order to discuss appropriate action.
[131] Since the producers met from time to time in order to agree the "KEA recommended
price", it is clear that the producers belonging to KEA concerted within that association on
announced prices for wood pulp. Similarly, it should be noted that, by undertaking to notify in
advance any price deviating from that which they had fixed by common agreement, they
established a system for the exchange of information on their future conduct that was such as to
restrict competition. . . .
[139] . . . Pursuant to Article 85 (TFEU, 101) of the Treaty, anticompetitive conduct may not be
penalized by the Commission unless it may also affect trade between Member States.
[140] In paragraphs 136 et seq. of its decision, the Commission considers that that is so in the
present case. The uniform price level, resulting from the practices at issue impeded trade which
would otherwise have arisen by reason of the differences in demand, exchange rates and
transport costs. Such trade would have been carried out through independent intermediaries and
paper makers reselling their pulp surpluses on the more buoyant market of another Member
State.
[141] The applicants belonging to KEA challenged that contention on three fundamental
grounds. To begin with, their activities are limited to exportation to the Community and do not
affect trade between Member States. Next, there is practically no trade in the product between
Member States: the few pulp mills in the Community use virtually their entire output in their own
paper plants. Furthermore, having regard to storage costs, paper makers generally buy pulp only
for their own consumption. Finally, the applicants consider that their market share was too small
to have an appreciable impact on trade between Member States.
[142] . . . [A]s the Court has held . . . any agreement whose object or effect is to restrict
31
competition by fixing prices for an intermediate product is capable of affecting intra-Community
trade, even if there is no trade in that intermediary product between Member States, where the
product constitutes the raw material for another product marketed elsewhere in the Community.
In this case, it should be noted that wood pulp accounts for 50% to 75% of the cost of paper and,
consequently, there is no doubt that the concertation which took place on prices for pulp affected
trade in paper between the Member States.
[143] Similarly . . . as the Court has held on several occasions . . . if an agreement is to be capable
of affecting trade between Member States, it must be possible to foresee with a sufficient degree
of probability, on the basis of a set of objective factors of law or fact, that the agreement in
question may have an influence, direct or indirect, actual or potential, on the pattern of trade
between Member States in such a way that it might hinder the attainment of the objectives of a
single market between States.
[144] In this case . . . the exports of the United States producers varied between 14.10% and
17.67% of total consumption of pulp in the Community during the period at issue. Since market
shares of that size are not insignificant, it must be held that concertation on announced prices
and the exchanges of information which took place within KEA were capable of affecting trade
between Member States. . . .
Doc. # 21 Guidelines on the Effect on Trade Concept Contained in Articles 81 and 82 of the
Treaty (TFEU 101 and 102) (2004/C 101/07; O J C 101/81, 27.4.2004) (Text with EEA relevance)
See EU site
. . . The present guidelines spell out a rule indicating when agreements are in general
unlikely to be capable of appreciably affecting trade between EU countries. They are not intended
to be exhaustive. The aim is to set out the methodology for the application of the effect on trade
concept and to provide guidance on its application in frequently occurring situations. Although
not binding on them, these guidelines also intend to give guidance to the courts and authorities of
the EU countries in their application of the effect on trade concept contained in Articles 101 and
102 TFEU.
The effect on trade criterion confines the scope of application of Articles 101 and 102
TFEU to agreements and practices that are capable of having a minimum level of cross-border
effects within the EU.
Analysis of the concept of affecting trade between EU countries requires that three
aspects in particular be addressed:
•
the concept of "trade" is not limited to traditional exchanges of goods and services across
borders. It is a wider concept, covering all cross-border economic activity including
establishment. This interpretation is consistent with the fundamental objective of the Treaty to
promote free movement of goods, services, persons and capital. The requirement that there
must be an effect on trade "between EU countries" implies that there must be an impact on crossborder economic activity involving at least two EU countries;
•
the notion "may affect": the function of the notion "may affect" is to define the nature of
the required impact on trade between EU countries. According to the standard test developed by
the Court of Justice, the notion "may affect" implies that it must be possible to foresee with a
sufficient degree of probability on the basis of a set of objective factors of law or fact that the
agreement or practice may have an influence, direct or indirect, actual or potential, on the
pattern of trade between EU countries. In cases where the agreement or practice is liable to
affect the competitive structure inside the EU, EU law jurisdiction is established;
•
the concept of "appreciability": the effect on trade criterion incorporates a quantitative
element, limiting EU law jurisdiction to agreements and practices that are capable of having
effects of a certain magnitude. Appreciability can be appraised in particular by reference to the
position and the importance of the relevant undertakings on the market for the products
concerned. The assessment of appreciability depends on the circumstances of each individual
case, in particular the nature of the agreement and practice, the nature of the products covered
32
and the market position of the undertakings concerned. In its notice on agreements of minor
importance, the Commission states that agreements between small and medium-sized
enterprises rarely affect trade between EU countries to a significant degree. The Commission
holds the view that in principle agreements are not capable of appreciably affecting trade
between EU countries when the following cumulative conditions are met:

the aggregate market share of the parties on any relevant market within the EU affected by
the agreement does not exceed 5%;

in the case of horizontal agreements, the aggregate annual EU turnover of the undertakings
concerned in the products covered by the agreement does not exceed EUR 40 million.
The threshold of EUR 40 million is calculated on the basis of total EU sales excluding tax during the
previous financial year by the undertakings concerned, of the products covered by the agreement
(the contract products). Sales between entities that form part of the same undertaking are
excluded. In order to apply the market share threshold, it is necessary to determine the relevant
market.
The Commission will apply the negative presumption to the application of the concept of affecting
trade to all agreements, including agreements that by their very nature are capable of affecting
trade between EU countries as well as agreements that involve trade with undertakings located in
non-EU countries. Outside the scope of negative presumption, the Commission will take account
of qualitative elements relating to the nature of the agreement or practice and the nature of the
products that they concern.
The positive presumption relating to appreciability in the case of agreements also takes into
account whether and how agreements and practices cover several EU countries, whether they are
confined to a single EU country or to part of a single EU country. Agreements and practices
involving non-EU countries are also dealt with. In the case of agreements and practices whose
object is not to restrict competition inside the EU, it is normally necessary to proceed with a more
detailed analysis of whether or not cross-border economic activity inside the EU, and thus
patterns of trade between EU countries, are capable of being affected.
Doc. #22 "Armistice"
Case COMP/C.37.750/B2-Brasseries Kronenbourg-Brasseries Heineken Commission Dec. (29
Sept. 2004) (2005/503/EC) OJ L 184/57, 15.7.2005
The decision relates to an ‘armistice’ agreement regarding the sale of beer in France for
consumption away from home (on-trade sector). The Commission has gathered evidence showing
that on 21 March 1996, the two main brewery groups in France, Kronenbourg SA and Heineken
France SA and their respective parent companies at the time of the facts, "Groupe Danone" and
Heineken NV, have agreed to put an end at an ‘acquisition war’ of drinks wholesalers. The
agreement aimed at bringing a quick end to the rising costs of acquiring these companies. The
‘armistice’ agreement has never been implemented. Today the brewers have merge.
1. Restriction by subject
[9] It is settled case-law that, for the purpose of applying Article 81(1)(TFEU 101(1)), of the
Treaty, there is no need to take account of the actual effects of an agreement once it appears that
its aim is to prevent, restrict or distort competition within the common market. Since the
agreement at issue in this case had as its object the restriction of competition by requiring a
freeze on acquisitions and by establishing equilibrium between the parties' integrated distribution
networks, the Commission concludes that there is an infringement within the meaning of article
81 of the Treaty even if the agreement did not produce any effects.
2. Appreciable effect on trade between Member States
[10] It is settled case-law that, in order that an agreement between undertakings may affect
trade between Member States, it must be possible to envisage, with a sufficient degree of
probability on the basis of a set of objective factors of law or fact that it may have an influence,
direct or indirect, actual or potential, the pattern of trade between Member states. This is the
case here.
33
[11] The distribution networks of the French breweries constitute one of the main means of
access to the market for foreign breweries that do not have such networks in France. Under
these circumstances, the armistice agreement, which aims at establishing equilibrium at national
level between the integrated distribution networks of Heineken NV/Heineken France SA and
Groupe Danone/Brasseries Kronenbourg SA, could influence the conditions of access to the ontrade market for foreign breweries and thus the volume of importations. Moreover, Interbrew
France, main importer of beer in France, depended and still depends on the distribution networks
of Heineken France SA and Brasseries Kronenbourg SA to distribute an important volume of its
product on the on-trade market in France. An agreement that aims at restricting competition
between the distribution networks of the latter companies could influence the commercial
conditions which these companies propose to Interbrew France for the distribution of its
products.
Doc. #23 Nullity of the agreement (TFEU, Art. 101(2)
Courage Ltd v. Bernard Crehan and Bernard Crehan v. Courage Ltd and Others
Case C-453/99, [2001] ECR I-6297
[20] […] according to Article 3(g) of the EC Treaty (now, TFEU Articles 2 and 3, and Protocol 27),
Article 85 (TFEU Article 101) of the Treaty constitutes a fundamental provision which is essential
for the accomplishment of the tasks entrusted to the Community and, in particular, for the
functioning of the internal market.
[21] Indeed, the importance of such a provision led the framers of the Treaty to provide
expressly, in Article 85(2) of the Treaty (TFEU Article 101(2)), that any agreements or decisions
prohibited pursuant to that article are to be automatically void …
[22] That principle of automatic nullity can be relied on by anyone, and the courts are bound by
it once the conditions for the application of Article 85(1) are met and so long as the agreement
concerned does not justify the grant of an exemption under Article 85(3) of the Treaty (TFEU
Article 101(3))… Since the nullity referred to in Article 85(2) is absolute, an agreement which is
null and void by virtue of this provision has no effect as between the contracting parties and
cannot be set up against third parties . . .
[23] . . . it should be borne in mind that the Court has held that Article 85(1) (TFEU 101(1)) of
the Treaty and Article 86 of the EC Treaty (TFEU Article 102) produce direct effects in relations
between individuals and create rights for the individuals concerned which the national courts
must safeguard.
[24] It follows from the foregoing considerations that any individual can rely on a breach of
Article 85(1) of the Treaty (TFEU Article 101(1)) before a national court even where he is a party to
a contract that is liable to restrict or distort competition within the meaning of that provision.
Doc. #24 Exemptions – Negative Clearance TFEU Art. 101(3)
See online: Communication from the Commission Notice, Guidelines on the Application of
Article 81(3) of the Treaty (TFEU Art. 101(3)), (2004/C 101/08) OJ C 101/97, 27.4.2004
[1] Article 81(3) of the Treaty (TFEU Article 101(3)) sets out an exception rule, which provides a
defense to undertakings against a finding of an infringement of Article 81(1) of the Treaty (TFEU
Article 101(1)). Agreements, decisions of associations of undertakings and concerted practices (1)
caught by Article 81(1) (TFEU Article 101(1)) which satisfies the conditions of Article 81(3) (TFEU
Article 101(3)) are valid and enforceable, no prior decision to that effect being required.
[4] The present guidelines set out the Commission's interpretation of the conditions for
exception contained in Article 81(3) (TFEU Article 101(3)). It thereby provides guidance on how it
will apply Article 81 (TFEU Article 101) in individual cases. Although not binding on them, these
guidelines also intend to give guidance to the courts and authorities of the Member States in their
application of Article 81(1) and (3) of the Treaty (TFEU Article 101(1 and 3)).
[6] The standards set forth in the present guidelines must be applied in light of the
34
circumstances specific to each case. This excludes a mechanical application. Each case must be
assessed on its own facts and the guidelines must be applied reasonably and flexibly.
[9] As an exception to this rule Article 81(3) (TFEU Article 101(3)) provides that the prohibition
contained in Article 81(1) (TFEU Article 101(1)) may be declared inapplicable in case of
agreements which contribute to improving the production or distribution of goods or to
promoting technical or economic progress, while allowing consumers a fair share of the resulting
benefits, and which do not impose restrictions which are not indispensable to the attainment of
these objectives, and do not afford such undertakings the possibility of eliminating competition in
respect of a substantial part of the products concerned.
[10] According to Article 1(1) of Regulation 1/2003 agreements which are caught by Article 81(1)
(TFEU Article 101(1)) and which do not satisfy the conditions of Article 81(3) are prohibited, no
prior decision to that effect being required (8). According to Article 1(2) of the same Regulation
agreements which are caught by Article 81(1) (TFEU Article 101(1)) but which satisfy the
conditions of Article 81(3) (TFEU Article 101(3)) are not prohibited, no prior decision to that effect
being required. Such agreements are valid and enforceable from the moment that the conditions
of Article 81(3) (TFEU Article 101(3)) are satisfied and for as long as that remains the case.
[11] The assessment under Article 81 (TFEU Article 101) thus consists of two parts. The first step
is to assess whether an agreement between undertakings, which is capable of affecting trade
between Member States, has an anti-competitive object or actual or potential (9) anticompetitive effects. The second step, which only becomes relevant when an agreement is found
to be restrictive of competition, is to determine the pro-competitive benefits produced by that
agreement and to assess whether these pro-competitive effects outweigh the anti-competitive
effects. The balancing of anticompetitive and pro-competitive effects is conducted exclusively
within the framework laid down by Article 81(3) (TFEU Art. 101(3)).
[32] The assessment of restrictions by object and effect under Article 81(1) (TFEU Article 101(1))
is only one side of the analysis. The other side, which is reflected in Article 81(3) (TFEU Article
101(3)), is the assessment of the positive economic effects of restrictive agreements.
[34] The application of the exception rule of Article 81(3) (TFEU Article 101(3)) is subject to four
cumulative conditions, two positive and two negative:
(a) The agreement must contribute to improving the production or distribution of goods or
contribute to promoting technical or economic progress,
(b) Consumers must receive a fair share of the resulting benefits,
(c) The restrictions must be indispensable to the attainment of these objectives, and finally
(d) The agreement must not afford the parties the possibility of eliminating competition in
respect of a substantial part of the products in question.
When these four conditions are fulfilled the agreement enhances competition within the
relevant market, because it leads the undertakings concerned to offer cheaper or better products
to consumers, compensating the latter for the adverse effects of the restrictions of competition.
Doc. #25 Block Exemptions
White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty
(TFEU 101 and 102) Commission Programme No 99/027. Com (99) 101 final, 28 April 1999
[19] Since the 1960s, the role of the Commission and the number of cases have expanded
considerably owing to the combined effects of market integration, the accession of new Member
States, the adoption of cooperation agreements with third countries and the globalisation of the
economy. . . .
[20]… An inevitable result of the completion of the internal market and the progressive
integration of national markets was an increase in the number of cases covered by Community
law.
[21] The series of accessions of new Member States has had a mechanical effect on the
geographical scope of the Commission's competence. . . .
35
[22] The Commission's geographical jurisdiction over competition was further expanded by the
agreements concluded with third countries, either prior to accession, or simply as free trade
agreements. The EEA Agreement contains rules based on Articles 85 and 86 ((TFEU 101 Article
(and 102) and empowers the Commission to deal with a majority of the cases in which trade
within the territory covered by the Agreement is affected.
[23] Thus, while the Commission's role has expanded considerably since the 1960s, its means of
action have not changed. . . .
[24] The authorisation system provided for in Regulation No 17 (now Regulation 1/2003) met
the three main requirements identified at the time by the Commission (provision of information
to competition authorities, uniform application of the competition rules in the Community and
legal certainty for undertakings). It allowed a coherent corpus of rules to be developed and
applied uniformly in the Community, thus contributing significantly to the completion of the
internal market. Nevertheless, it is now showing signs of its limitations. . . .
[25] The combination of the ex ante control system provided for in Regulation No 17 (now
Regulation 1/2003), the Commission's limited administrative resources and the complexity of
decision-making procedures meant that, as early as 1967, the Commission was faced with a mass
of 37 450 cases that had accumulated since the entry into force of the Regulation four years
earlier. It was thus essential to make certain adjustments to the system then in force in order to
limit individual notifications, speed up the processing of applications for authorisation and, in
certain cases, encourage complainants to turn to the national courts or authorities. . . .
[28] The Commission started using general notices in 1962 in order to clarify the conditions
under which certain restrictive practices would not normally have the object or effect of
restricting competition and would not therefore be caught by Article 85(1). A notice on exclusive
dealing contracts with commercial agents was published in 1962, followed by a notice concerning
agreements, decisions and concerted practices in the field of cooperation between enterprises
adopted in 1968. In addition, a notice concerning the assessment of certain subcontracting
agreements in relation to Article 85(1) was adopted in 1978. A notice concerning the assessment
of cooperative joint ventures pursuant to Article 85 was adopted in 1993. Intended to allow
undertakings, if necessary with the help of their legal advisers, to determine themselves whether
the restrictive practices to which they were parties were compatible with Community law, the
notices to some extent helped to reduce the number of applications for negative clearance under
Article 2 of Regulation No 17.
[29] In an effort to reduce the number of individual applications for exemption, the Commission,
empowered by the Council, adopted a series of block exemption regulations. Under Article 85(3)
(TFEU Article101), the provisions of Article 85(1) (TFEU Article 101(1)) may be declared
inapplicable to categories of agreements, decisions of associations of undertakings or concerted
practices. The "declaration of inapplicability" thus stems from the rules defining the
characteristics which the restrictive agreements in question must have in order to be regarded,
without prior assessment, as qualifying for exemption under Article 85(3) (TFEU Article 101(3)).
Article 87 of the Treaty (TFEU Article 103) provides that the Council shall adopt any appropriate
regulations or directives to give effect to the principles set out in Articles 85 and 86 (TFEU Articles
101 and 102). . .
See online: Commission Regulation (EU) No. 330/010 of 20 April 2010 on the application of Article
101(3) of the TFEU to categories of vertical agreement and concerted practices (Text with EEA
relevance); Commission Regulation (EU) No. 1217/2010 of 14 December 2010 on the application
of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of
research and development agreements Text with EEA relevance OJ L 335, 18.12.2010, p, 36-42;
Communication from the Commission – Guidelines from the Commission – Guidelines on the
applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal
co-operation agreements Text with EEA relevance OJ C 11, 14.1.2011, p. 1-72; Commission
Regulation (EU No. 461/2010 of 27 May 2010 on the application of Article 101(2) of the Treaty on
36
the Functioning of the European Union to categories of vertical agreements and concerted
practices in the motor vehicle section Text with EEA relevance, OJ L 129, 28/05/2010 p. 52-57.
Additional regulations: Commission Regulations (EU) No 1218/2010 of 14 December 2010 on the
application of Article 101(3) of the Treaty on the Functioning of the European Union to certain
categories of specialisation agreements Text with EEA relevance Official Journal L 335,
18/12/2010 P. 0043-0047; Commission Regulation (EC) No 1459/2006 of 28 September 2006 on
the application of Article 81(3) of the Treaty to certain categories of agreements and concerted
practices concerning consultations on passenger tariffs on scheduled air services and slot
allocation at airports Official Journal L 27, 03/10/2006 P. 0003-0008, Commission Regulation (EC)
No 772/2004 of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of
technology transfer agreements (Text with EEA relevance) Official Journal L 123, 27/04/2004 P.
0011-0017, Commission Regulation (EC) No 772/2004 of 27 April 2004 on the application of
Article 81(3) of the Treaty to categories of technology transfer agreements (Text with EEA
relevance) Official Journal L 123, 27/04/2004 P. 0011-0017.
Doc. #26 VERTICAL AGREEMENTS WHICH GENERALLY FALL OUTSIDE THE SCOPE OF ART. 101 (1)
1. Agreements of minor importance and SMEs
[8] Agreements that are not capable of appreciably affecting trade between Member States or
of appreciably restricting competition by object or effect do not fall within the scope of Article
101(1). The Block Exemption Regulation applies only to agreements falling within the scope of
application of Article 101(1). These Guidelines are without prejudice to the application of
Commission Notice on agreements of minor importance which do not appreciably restrict
competition under Article 81(1) of the Treaty establishing the European Community (de minimis)
or any future de minimis notice.
[9] Subject to the conditions set out in the de minimis notice concerning hardcore restrictions
and cumulative effect issues, vertical agreements entered into by non-competing undertakings
whose individual market share on the relevant market does not exceed 15 % are generally
considered to fall outside the scope of Article 101(1). There is no presumption that vertical
agreements concluded by undertakings having more than 15 % market share automatically
infringe Article 101(1). Agreements between undertakings whose market share exceeds the 15 %
threshold may still not have an appreciable effect on trade between Member States or may not
constitute an appreciable restriction of competition. Such agreements need to be assessed in
their legal and economic context. The criteria for the assessment of individual agreements are set
out in paragraphs (96) to (229).
[10] As regards hardcore restrictions referred to in the de minimis notice, Article 101(1) may
apply below the 15 % threshold, provided that there is an appreciable effect on trade between
Member States and on competition. The applicable case-law of the Court of Justice and the
General Court is relevant in this respect. Reference is also made to the possible need to assess
positive and negative effects of hardcore restrictions as described in particular in paragraph (47)
of these Guidelines.
[11] In addition, the Commission considers that, subject to cumulative effect and hardcore
restrictions, vertical agreements between small and medium-sized undertakings as defined in the
Annex to Commission Recommendation of 6 May 2003 concerning the definition of micro, small
and medium-sized enterprises are rarely capable of appreciably affecting trade between Member
States or of appreciably restricting competition within the meaning of Article 101(1), and
therefore generally fall outside the scope of Article 101(1). In cases where such agreements
nonetheless meet the conditions for the application of Article 101(1), the Commission will
normally refrain from opening proceedings for lack of sufficient interest for the European Union
unless those undertakings collectively or individually hold a dominant position in a substantial
part of the internal market.
37
3. Art. 102 of the Treaty on the functioning of the EU: From Doc. # 28 to
Doc. # 52
3.1. Art. 102 of the Treaty on the functioning of the EU (session 1):
Readings From Doc.# 28 to Doc. # 37
Doc.# 28
TFEU Article 102 (ex - Article 82)
Any abuse by one or more undertakings of a dominant position within the internal market or in a
substantial part of it shall be prohibited as incompatible with the internal market in so far as it may
affect trade between Member States.
Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c)
applying dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the
subject of such contracts.
Doc.# 29: Meaning of the words "Dominant Position"
Competition Policy in Europe and the citizen, 2000, Report from the EU Commission, p. 15
“Efficient businesses are run with a view to conquering markets, to the point where they may
establish very strong positions indeed. A firm holds a dominant position if its economic power
enables it to operate on the market without taking account of the reaction of its competitors or of
intermediate of final consumers. In those circumstances, an enterprise holding a dominant position
may be tempted to abuse that position to increase its income and consolidate its hold on the market
by weakening or eliminating competitors and denying access to the market, for example, by charging
exorbitant purchase or selling prices or by conferring discriminatory benefits on certain customers in
order to control their behaviour. Those practices interfere with competition. The Commission can act
against them and punish their perpetrators severely. Citizens have good reason to be apprehensive of
abuses of this kind, which result in higher prices, restrictions on the availability of products and
services and unfair trading conditions.”
“A firm holds a dominant position if its economic power enables it to operate on the market without
taking account of the reaction of its competitors or of intermediate or final consumers. In appraising
a firm's economic power, the Commission takes account of its market share and also of other factors
such as whether there are credible competitors, whether the firm has its own distribution network,
whether it has favourable access to raw materials, etc.”
Doc.# 30 Single or Individual Dominance
The Chiquita Banana Case: United Brands v. Commission 76/353/EEC: Commission Decision of 17
December 1975 relating to a Procedure under (OJ L 95, 09.04.1976, pp.1-20)
[2] Undertakings are in a dominant position when they have the power to behave independently
without taking into account, to any substantial extent, their competitors, purchasers and suppliers.
Such is the case where an undertaking's market share, either in itself or when combined with its
knowhow, access to raw materials, capital or other major advantage such as trademark ownership,
enables it to determine the prices or to control the production or distribution of a significant part of
the relevant goods. It is not necessary for the undertaking to have total dominance such as would
deprive all other market participants of their commercial freedom, as long as it is strong enough in
38
general terms to devise its own strategy as it wishes, even if there are differences in the extent to
which it dominates individual submarkets. . . .
UBC, as the only undertaking now in the banana market to enjoy all the advantages described
above, is in a position thereby to obstruct the effective competition of its existing competitors to a
substantial degree; potential competitors wishing to establish themselves in the banana market
must overcome the barriers to entry and would need several years before they could achieve all
these advantages. UBC therefore enjoys a degree of overall independence in its behaviour on the
market in question which enables it to hinder effective competition within this part of the
Community. UBC must, therefore, be considered to be in a dominant position.
Doc.# 31 : 76/642/EEC: Commission Decision of 9 June 1976 Relating to a Proceeding under
Article 86 of the Treaty Establishing the European Economic Community (OJ, L.223, 16.08.1976,
pp. 27-38)
(Hoffmann-La Roche group)
[21] Hofmann-La Roche enjoys such a complete freedom of action in the relevant markets enabling
it to impede effective competition within the common market that it has a dominant position in
such markets.
The dominant position results from the following:
— The market share held by Roche for each of the abovementioned vitamins is very considerable
since it ranges from 95% for vitamins B6 and H to 47% (the second producer having only about half
this share) for vitamin A.
— Roche produces a far wider range of vitamins than its competitors. Since the requirements of
many users extend to several groups of vitamins, Roche is able to employ a sales and pricing
strategy which is far less dependent than that of other manufacturers on the conditions of
competition in each market.
In assessing the dominant position of Roche account should be taken of the following. Roche is the
world's largest producer of all vitamins; its turnover exceeds that of all other producers and it has
technological and commercial advantages not possessed by its competitors. Furthermore, since any
entry into the vitamins market requires large and specialized investment and the programming of
capacities over long periods in order to be profitable, it is unlikely that the possibility of entry by
new competitors to the market would at present have any appreciable effect on the position of
Roche.
Doc.# 32 Hoffmann – La Roche & Co. AG v. Commission of the European Communities
Vitamins Case, Case 85/76, [1979] ECR 461
Judgment
[38] Article 102 (then 86) is an application of the general objective of the activities of the
Community laid down by Article 2 and the Protocol 27 (then art. 3 g) of the Treaty namely, the
institution of a system of ensuring that competition in the Common Market is not distorted.
Article 10 (then 86) prohibits any abuse by an undertaking of a dominant position in a substantial
part of the Common Market in so far as it may affect trade between Member States.
The dominant position thus referred to relates to a position of economic strength enjoyed by an
undertaking which enables it to prevent effective competition being maintained on the relevant
market by affording it the power to behave to an appreciable extent independently of its
competitors, its customers and ultimately of the consumers.
[39] Such a position does not preclude some competition, which it does where there is a monopoly
or a quasi-monopoly, but enables the undertaking which profits by it, if not to determine, at least to
have an appreciable influence on the conditions under which that competition will develop, and in
any case to act largely in disregard of it so long as such conduct does not operate to its detriment.
A dominant position must also be distinguished from parallel courses of conduct which are
peculiar to oligopolies in that an oligopoly the courses of conduct interact, while in the case of an
undertaking occupying a dominant position the conduct of the undertaking which derives profits
39
from that position is to a great extent determined unilaterally.
The existence of a dominant position may derive from several factors which, taken separately, are
not necessarily determinative but among these factors a highly important one is the existence of
very large market shares.
[40] A substantial market share as evidence of the existence of a dominant position is not a
constant factor and its importance varies from market to market according to the structure of these
markets, especially as far as production, supply and demand are concerned.
[41] Furthermore, although the importance of the market shares may vary from one market to
another, the view may legitimately be taken that very large shares are in themselves, and save in
exceptional circumstances, evidence of the existence of a dominant position.
An undertaking which has a very large market share and holds it for some time, by means of the
volume of production and the scale of the supply which it stands for – without those having much
smaller market shares being able to meet rapidly the demand from those who would like to break
away from the undertaking which has the largest market share – is by virtue of the share in a
position of strength which makes it an unavoidable trading partner and which, already because of
this secures for it, at the very least during relatively long periods, that freedom of action which is the
special feature of a dominant position….
Doc. # 33 Commission Decision of 20 June 2001 Relating to a Proceeding Pursuant to Article 102
(ex – Art. 82) of the EC Treaty COMP/E-2/36.041/PO-Michelin: 2002/405/EC (OJ L 143, 31.5.2002)
[172] . . . In its judgment in Case 85/76 Hoffmann-La Roche v. Commission the Court said: ‘the
existence of a dominant position may derive from several factors which, taken separately, are not
necessarily determinative but among these factors a highly important one is the existence of very
large market shares'.
[173] The successive analysis of three types of criterion leads to the conclusion that Michelin has a
dominant position on the relevant markets. First, a number of structural indications, the most
important of which is Michelin's market share, point to this conclusion. Second, an analysis of
Michelin's behaviour on the relevant markets brings to light certain attitudes and practices which
are typical of a company in a dominant position. The assessment is confirmed, lastly, by the
position of economic dependence in which specialized dealers find themselves vis-à-vis Michelin, a
necessary trading partner.
Doc.# 34 Statutory Monopoly and dominant position
Commission Decision of 25 July 2001 relating to a Proceeding under Article 102 (ex -Article 82) of
the EC Treaty (2001/892/EC: COMP/C-1/36.915-Deutsche Post AG OJ L 331, 15.1.2001)
[88] The Court of Justice of the European Communities has repeatedly held that a company which
holds a statutory monopoly in a substantial part of the Community may be regarded as having a
dominant position within the meaning of Article 102 (ex - Article 82) of the Treaty. Deutsch Post AG
has been awarded a wide-ranging and exclusive license for the forwarding and delivery of incoming
cross-border letter mail in Germany. By virtue of the exclusive rights granted to it, DPAG is the only
operator controlling the public postal network covering the whole territory of Germany.
[95] Due to the existence of the extensive monopoly and the non-availability of alternative,
nationwide delivery networks, the British Post Office is in practice obliged to use the services of
DPAG in order to get its bulk mailings bound for Germany delivered to the addressees. The facts of
the case illustrate very clearly the lack of alternative delivery solutions available to the British Post
Office and Deutsch Post AG’s ability to act in a manner which is independent not only of the British
Post Office but of Deutsch Post AG’s competitors in the relevant market.
...
[96] The Commission finds that Deutsch Post AG holds a dominant position in the German market
for the forwarding and delivery of incoming cross-border letter mail.
40
Doc.# 35
NV Nederlandsche Banden Industrie Michelin v. Commission of the European Communities
Case 322/81, [1983] ECR 3461
Judgment
[57] . . . A finding that an undertaking has a dominant position is not in itself a recrimination but
simply means that, irrespective of the reasons for which it has such a dominant position, the
undertaking concerned has a special responsibility not to allow its conduct to impair genuine
undistorted competition on the Common Market. . . .
[59] As regards the additional criteria and evidence to which Michelin NV refers in order to disprove
the existence of a dominant position, it must be observed that temporary unprofitability or even
losses are not inconsistent with the existence of a dominant position. By the same token, the fact
that the prices charged by Michelin NV do not constitute an abuse and are not even particularly
high does not justify the conclusion that a dominant position does not exist. Finally, neither the
size, financial strength nor degree of diversification of Michelin NV's competitors at the world level
nor the counter poise arising from the fact that buyers of heavy-vehicle tires are experienced trade
users are such as to deprive Michelin NV of its privileged position on the Netherlands market. . . .
Judgment of the Court of First Instance (1st Chamber) of 10 March 1992 – Società Italiana Vetro
SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v. Commission Joined cases T-68/89,
T-77/89, and T-78/89 – ECR 1992 II-01403
[357] The Court notes that the very words of the first paragraph of Article 86 (Article 102) provide
that “one or more undertakings” may abuse a dominant position. It has consistently been held, as
indeed all the parties acknowledge, that the concept of agreements or concerted practices among
undertakings belonging to the same group if the undertakings form an economic unit .... It follows
that when Article 85 (Article 101) refers to agreements or concerted practices between
“undertakings” it is referring to relations between two or more economic entities which are
capable of competing with one another.
[358] The Court considers that there is no legal or economic reason to suppose that the term
“undertaking” in Article 86 (Article 102) has a different meaning from the one given to it in the
context of Article 85 (Article 101). There is nothing, in principle, to prevent two or more
independent economic entities from being, on a specific market, united by such economic links
that, by virtue of that fact, together they hold a dominant position vis-à-vis to other operators on
the same market. This could be the case, for example, where two or more independent
undertakings jointly have, through agreements or licenses, a technological lead affording them the
power to behave to an appreciable extent independently of their competitors, their customers and
ultimately their consumers . . .
Doc.# 37
Airtours plc v. Commission Case T-342/99, [2002], ECR II-2585
[59] It is apparent from the case law 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 also of consumers
(Kali & Salz, cited above, paragraph 221, and Gencor v. Commission, paragraph 163).
41
[60] The Court of First Instance had held that: There is no reason whatsoever in legal or economic
terms to exclude from the notion of economic links the relationship of interdependence existing
between parties to a tight oligopoly within which, in a market with the appropriate characteristics,
in particular in terms of market concentration, transparency and product homogeneity, those
parties are in apposition to anticipate one another’s behavior and are therefore strongly
encouraged to align their conduct in the market, in particular in such a way as to maximize their
joint profits by restricting production with a view to increasing prices. In such a context, each
trader is aware that highly competitive action on its part designed to increase its market share (for
example a price cut) would provoke identical action by the others, so that it would derive no
benefit from its initiative. All the traders would thus be affected by the reduction in price levels.
(Gencor v. Commission, paragraph 276).
[61] A collective dominant position significantly impeding effective competition in the common
market or a substantial part of it may thus arise as the result of a concentration where in view of
the actual characteristics, of the relevant market and the alteration in its structure that the
transaction would entail, the latter would make each member of the dominant oligopoly, as it
becomes aware of common interests, consider it possible, economically rational, and hence
preferable, to adopt on a lasting basis a common policy on the market with the aim of selling at
above competitive prices, without having to enter into an agreement or resort to a concerted
practice within the meaning of Article 81 EC (see, to that effect, Gencor v. Commission, paragraph
277) and without any actual or potential competitors, let alone customers or consumers, being able
to react effectively.
[62] As the applicant has argued and as the Commission has accepted in its pleadings, three
conditions are necessary for a finding of collective dominance as defined:
- first, each member of the dominant oligopoly must have the ability to know how the other
members are behaving in order to monitor whether or not they are adopting the common policy.
As the Commission specifically acknowledges, it is not enough for each member of the dominant
oligopoly to be aware that interdependent market conduct is profitable for all of them but each
member must also have a means of knowing whether the other operators are adopting the same
strategy and whether they are maintaining it. There must, therefore, be sufficient market
transparency for all members of the dominant oligopoly . . .;
- second, the situation of tacit coordination must be sustainable over time, that is to say, there
must be an incentive not to depart from the common policy on the market. As the Commission
observes, it is only if all the members of the dominant oligopoly maintain the parallel conduct that
all can benefit. The notion of retaliation in respect of conduct deviating from the common policy is
thus inherent in this condition. . . .
- third, to prove the existence of a collective dominant position to the requisite legal
standard, the Commission must also establish that the foreseeable reaction of current and future
competitors, as well as of consumers, would not jeopardize the results expected from the common
policy.
[63] The prospective analysis which the Commission has to carry out in its review of concentrations
involving collective dominance 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 & Salz, paragraph 222). As the Commission itself has emphasised, at
paragraph 104 of its decision of 20 May 1998 Price Waterhouse/Coopers & Lybrand (Case
IV/M.1016) (OJ 1999 L 50, p. 27), it is also apparent from the judgment in Kali & Salz that, where
the Commission takes the view that a merger should be prohibited because it will create a situation
of collective dominance, it is incumbent upon it to produce convincing evidence thereof. The
evidence must concern, in particular, factors playing a significant role in the assessment of whether
a situation of collective dominance exists, such as, for example, the lack of effective competition
42
between the operators alleged to be members of the dominant oligopoly and the weakness of any
competitive pressure that might be exerted by other operators….
[286] The Decision is not specific about the strong economic links between the major operators or
the way in which they increase the interdependence of the integrated tour operators.
43
3.2. Art. 102 of the Treaty on the Functioning of the EU: Doc. # 38 to Doc. # 42
Doc.# 38
‘Notice on the definition of relevant market for the purposes of Community competition law' (OJ C372, 09.12.1997, pp. 5-13).
(2) Market definition is a tool to identify and define the boundaries of competition between firms. It
serves to establish the framework within which competition policy is applied by the Commission. The
main purpose of market definition is to identify in a systematic way the competitive constraints that
the undertakings involved face. The objective of defining a market in both its product and geographic
dimension is to identify those actual competitors of the undertakings involved that are capable of
constraining those undertakings' behaviour and of preventing them from behaving independently of
effective competitive pressure. It is from this perspective that the market definition makes it possible
inter alia to calculate market shares that would convey meaningful information regarding market
power for the purposes of assessing dominance or for the purposes of applying Article 101 (then
Article 85). . . .
Definition of relevant product market and relevant geographic market
(7) The Regulations based on Articles 101 and 102 of the Treaty [. . .] have laid down the following
definitions, Relevant product market are defined as follows:
‘A relevant product market comprises all those products and/or services which are regarded as
interchangeable or substitutable by the consumer, by reason of the products' characteristics, their
prices and their intended use'.
(8) Relevant geographic markets are defined as follows: ‘The relevant geographic market comprises
the area in which the undertakings concerned are involved in the supply and demand of products or
services, in which the conditions of competition are sufficiently homogeneous and which can be
distinguished from neighboring areas because the conditions of competition are appreciably
different in those area'.
(9) The relevant market within which to assess a given competition issue is therefore established by
the combination of the product and geographic markets. . . .
(10) . . . Under the Community's competition rules, a dominant position is such that a firm or group
of firms would be in a position to behave to an appreciable extent independently of its competitors,
customers and ultimately of its consumers. Such a position would usually arise when a firm or group
of firms accounted for a large share of the supply in any given market, provided that other factors
analyzed in the assessment (such as entry barriers, customers' capacity to react, etc.) point in the
same direction.
(11) The same approach is followed by the Commission in its application of Article 102 (then Article
86) of the Treaty to firms that enjoy a single or collective dominant position. . . . Markets may also
need to be defined in the application of Article 101 (then Article 85) of the Treaty, in particular, in
determining whether an appreciable restriction of competition exists or in establishing if the
condition pursuant to Article 101 (then Article 85(3)(b)) for an exemption from the application of
Article 101 [then Article 85(1)] is met. . . .
Doc.# 39 Market analysis
Commission Decision No 76/353/EEC of 17 December 1975 Relating to a Procedure under Article
86 (102) of the Treaty: United Brands (OJ L 95, 09.04.1976, p.1)
World banana market
Bananas are a highly perishable product grown in the tropics all the year round and imported into
the temperate zones. The main growing areas are as follows:
countries in Central America and the northern part of Southern America, known as "the dollar area
countries", accounting for 66% of world exports;
.. Jamaica and the Windward Islands, the United Kingdom's traditional suppliers, and Guadeloupe
and Martinique, the French overseas departments, altogether with 16%;
44
… certain of the African States associated with the EEC, such as the Ivory Coast, Somalia, Cameroon
and Madagascar;
…certain other countries, including China, the Canary Islands, Israel and the Philippines.
The Member States of the EEC import roughly a third of the total of world banana exports. In 1974
imports amounted to 1,978,000 metric tons, . . . 30% went to Germany, 25% to France, 16% to Italy,
15% to the United Kingdom, 6% to the Netherlands, 4.75% to the Belgo-Luxembourg Economic Union
(BLEU), 2% to Denmark and 1.75% to Ireland. . . .
Under Article 86 (now Article 102) of the Treaty, any abuse by one or more undertakings of a
dominant position within the common market or in a substantial part of it is prohibited as
incompatible with the common market in so far as it may affect trade between Member States.
Undertakings are in a dominant position when they have the power to behave independently
without taking into account, to any substantial extent, their competitors, purchasers and suppliers.
…
The relevant market consists of bananas of all varieties, whether branded or unbranded. It is not the
fruit market in general, as UBC has claimed in its reply to the Commission's statement of objections,
but rather the market for bananas, for which there is a separate demand. It might be asked whether
other varieties of fruit are acceptable as substitutes, or regarded as such by the consumer by reason
of their nature, price or use. However, research carried out by the Food and Agricultural Organization
(FAO) has shown that the prices or available quantities of other fruits have very little influence on the
prices and availabilities of bananas, and this applies not only to those fruits which are available all the
year round, such as oranges and apples, but also to most seasonal fruits . . . It is [ . . . ] fair to
conclude that the effects of the prices and availabilities of other types of fruit are too brief, too
ineffective and too sporadic, applying to different fruit in different places, for such other fruit to be
regarded as forming part of the same market as bananas or as a substitute therefor. It should also
not be overlooked that bananas form a very important part of the diet of certain sections of the
Community such as the very young, the sick and the very old. The choice of bananas is thus a matter
of customer preference, and customers do not readily accept other fruits as a substitute.
The relevant geographical market consists of a substantial part of the Community, comprising the
BLEU (Belgo-Luxemburg Economic Union), Denmark, Germany, the Netherlands and Ireland.
Economic conditions in this part of the Community allow importer/distributors to carry on their trade
in bananas normally and there are no noticeable economic obstacles in the way of UBC as compared
with other importer/distributors. The whole structure of UBC's European operations, with their
concentration on its Rotterdam subsidiary, is geared to the marketing of its bananas from a single
center for the whole of that part of the Community. The cost of transport is not so high as to prevent
UBC's distributor/ripeners from collecting their bananas from ports as distant as Bremerhaven or
Rotterdam. These ports also supply customers as far afield as Switzerland and Austria. UBC is even
prepared, despite the length and inconvenience of the journey from Rotterdam to Dublin, to market
in Ireland bananas unloaded by it in Rotterdam from the same ships which supply other Community
countries. The other Member States of the Community, France, Italy and the United Kingdom, must
however, be excluded from this geographical definition of the market, notwithstanding the
significant presence of UBC in these countries, due to the special circumstances which exist there.
Such circumstances include the import arrangements and trading conditions in these countries and
the fact that bananas of various types and origin are sold there. Accordingly the relevant
geographical market is that part of the Community referred to above. It is in respect of this market
that it must be examined whether UBC has the power to hinder effective competition.
UBC has, on the basis of the figures for 1971 to 1974, supplied some 40% of the bananas sold in the
Community and had a market share of about 45% in that part of the Community consisting of the
BLEU, Denmark, Germany, Ireland and the Netherlands. The Scipio Group is a customer of UBC,
though buying its bananas fob Central or South American ports, and thus cannot in all the
circumstances be considered to be a genuine competitor. There is no indication that it behaves in a
competitive manner towards UBC. [ . . . ] UBC's two major competitors are considerably weaker, and
its other competitors, many of them operating in a single Member State only, have even smaller
45
market shares. Notwithstanding a slight drop in sales in 1974, UBC's market share has remained
relatively stable in recent years and there are no indications to suggest that any substantial change is
imminent.
Furthermore, since 1967 UBC's marketing policy has been concentrated on the sale of bananas under
the Chiquita brand. . . . The reorganization of the greater part of its banana activities so as to be able
to maintain a marketing policy based on the sale of bananas under its Chiquita brand has given and
enabled UBC to keep an appreciable advantage over its competitors, who have had to adjust to
UBC's policy. [ . . . ] This ability of UBC to supply large quantities of bananas of uniform quality
provides UBC with a great advantage over its competitors, since it enables UBC to make its
advertising campaigns much more effective. The current popularity of the Chiquita brand puts UBC in
a powerful position on a substantial part of the Community banana market. The fact that it sells in all
Member States enables it to organize its distribution so as to be more flexible and to divert supplies
so as to take advantage of price differences as between Member States; few of its competitors,
working in one country or in part only of the Community, can do this, and few of them have the
resources to finance advertising campaigns of the scale undertaken by UBC to launch and publicize
its Chiquita brand.
UBC's ability to pursue a marketing policy based on the sale of bananas under the Chiquita brand is
due to the following facts.
The strong vertical integration of its banana business from the plantation to marketing affords UBC a
distinct advantage in marketing a highly perishable product with a short shelf life and enables its
bananas to be distributed more quickly and more efficiently than those of its competitors which do
not have these advantages. In UBC's case, this is reinforced by the fact that it also operates in other
areas complementing its banana trade, such as packaging, telecommunications, sea and rail
transport, and chemicals.
UBC has a very important position in a number of tropical banana-producing countries as a result of
its control of plantations and of the numerous contractual and financial links which it has in these
countries. It has therefore considerable control over sources of supply. UBC also has a very important
position on the world banana market, in which it controls some 35% of the world's entire banana
exports.
…
UBC, as the only undertaking now in the banana market to enjoy all the advantages described above,
is in a position thereby to obstruct the effective competition of its existing competitors to a
substantial degree; [. . .] UBC therefore enjoys a degree of overall independence in its behaviour on
the market in question which enables it to hinder effective competition within this part of the
Community. UBC must, therefore, be considered to be in a dominant position.
3. UBC is abusing its dominant position in a number of ways. (See below section 2: Abuse of a
Dominant Position)
Doc.# 40 United Brands Company & United Brands Continental BV v. Commission Case 27/76,
[1978] ECR 207
Judgment
[1] United Brands Company (hereinafter referred to as "UBC") of New York and its representative
United Brands Continental B.V. (hereinafter referred to as "UBCBV") by an application registered at
the court on 15 march 1976 petitioned the court to set aside the Commission Decision of 17
December 1975 which was later published in Official Journal L 95 of 9 April 1976 to which the
quotations in this judgment refer.
...
[10] In order to determine whether United Brand Continental BV (UBC) has a dominant position on
the banana market it is necessary to define this market both from the standpoint of the product and
from the geographic point of view
….
46
[12] As far as the product market is concerned it is first of all necessary to ascertain whether, as the
applicant maintains, bananas are an integral part of the fresh fruit market, because they are
reasonably interchangeable by consumers with other kinds of fresh fruit such as apples, oranges,
grapes, peaches, strawberries, etc. or whether the relevant market consists solely of the banana
market which includes both branded bananas and unlabeled bananas and is a market sufficiently
homogeneous and distinct from the market of other fresh fruit.
...
[22] For the banana to be regarded as forming a market which is sufficiently differentiated from
other fruit markets it must be possible for it to be singled out by such special features distinguishing
it from other fruits that it is only to a limited extent interchangeable with them and is only exposed
to their competition in a way that is hardly perceptible.
...
[31] The banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling,
a constant level of production which enable it to satisfy the constant needs of an important section
of the population consisting of the very young, the old and the sick.
...
[34] It follows from all these considerations that a very large number of consumers having a constant
need for bananas are not noticeably or even appreciably enticed away from the consumption of this
product by the arrival of other fresh fruit on the market and that even the personal peak periods only
affect it for a limited period of time and to a very limited extent from the point of view of
substitutability.
[35] Consequently the banana market is a market which is sufficiently distinct from the other fresh
fruit market.
[39] The applicant points out that the geographic market where an undertaking's economic and
commercial power is taken into consideration should only comprise areas where the conditions of
competition are homogeneous. . . .
[44] The conditions for the application of Article 86 (now Article 102) to an undertaking in a
dominant position presuppose the clear delimitation of the substantial part of the Common Market
in which it may be able to engage in abuses which hinder effective competition and this is an area
where the objective conditions of competition applying to the product in question must be the same
for all traders…
[51] The effect of the national organization of these three markets (France, UK and Italy) is that the
applicant's bananas do not compete on equal terms with the other bananas sold in these States
which benefit from a preferential system and the Commission was right to exclude these three
national markets from the geographic market under consideration.
[52] On the other hand the six other States are markets which are completely free, although the
applicable tariff provisions and transport costs are of necessity different but not discriminatory, and
in which the conditions of competition are the same for all.
[53] From the standpoint of being able to engage in free competition these six States form an area
which is sufficiently homogeneous to be considered in its entirety. . . .
[57] It follows from all these considerations that the geographic market as determined by the
Commission which constitutes a substantial part of the Common Market must be regarded as the
relevant market for the purpose of determining whether the applicant may be in a dominant
position.
[58] The Commission bases its view that UBC has a dominant position on the relevant market on a
series of factors, which, when taken together, give UBC unchallengeable ascendancy over all its
competitors: its market share compared with that of its competitors, the diversity of its sources of
supply, the homogeneous nature of its product, the organization of its production and transport, its
marketing system and publicity campaigns, the diversified nature of its operations and finally its
vertical integration.
[59] Having regard to all these factors, the Commission takes the view that UBC is an undertaking in a
dominant position enjoying a degree of general independence in its behaviour on the relevant
47
market which enables it to hinder to a large extent any effective competition from competitors who
can only if need be secure the same advantages after great exertions spread over several years, a
prospect which does not encourage them to embark upon such a course, especially after failing
several times to obtain these advantages.
….
[63] Article 102 (then Article 86) is an application of the general objective of the activities of the
Community laid down by Article 3(f) (now Article 2 and Protocol 27) of the Treaty: the institution of
a system ensuring that competition in the Common Market is not distorted.
[64] This article prohibits any abuse by an undertaking of dominant position in a substantial part of
the Common Market in so far as it may affect trade between Member States.
[65] The dominant position referred to in this article relates to a position of economic strength
enjoyed by an undertaking which enables it to prevent effective competition being maintained on
the relevant market by giving it the power to behave to an appreciable extent independently of its
competitors, customers and ultimately of its consumers.
[66] In general, a dominant position derives from a combination of several factors which, taken
separately, are not necessarily determinative.
[70] UBC is an undertaking vertically integrated to a high degree. . . .
[77] At the production stage UBC . . . knows that it can comply with all the requests which it receives.
[78] At the stage of packaging and presentation on its premises, UBC has at its disposal factories,
manpower, plant and material which enable it to handle the goods independently. . . .
[80] At the carriage by sea stage it has been acknowledged that UBC is the only undertaking of its
kind which is capable of carrying two thirds of its exports by means of its own banana fleet. . . .
[83] It has perfected new ripening methods in which its technicians instruct the distributor/ripeners
of the Chiquita banana. . . .
[85] It is acknowledged that at the stage where the goods are given the final finish and undergo
quality control, UBC not only controls the distributor/ripeners which are direct customers, but also
those who work for the account of its important customers such as the Scipio group. . . .
[121] UBC's economic strength has thus enabled it to adopt a flexible overall strategy directed
against new competitors establishing themselves on the whole of the relevant market.
[122] The particular barriers to competitors entering the market are the exceptionally large capital
investments required for the creation and running of banana plantations, the need to increase
sources of supply in order to avoid the effects of fruit diseases and bad weather (hurricanes, floods),
the introduction of an essential system of logistics which the distribution of a very perishable product
makes necessary, economies of scale from which newcomers to the market cannot derive any
immediate benefit and the actual cost of entry made up inter alia of all the general expenses
incurred in penetrating the market such as the setting up of an adequate commercial network, the
mounting of very large-scale advertising campaigns, all those financial risks, the costs of which are
irrecoverable if the attempt fails.
[123] Thus, although, as UBC has pointed out, it is true that competitors are able to use the same
methods of production and distribution as the applicant, they come up against almost insuperable
practical and financial obstacles.
...
[129] The cumulative effect of all the advantages enjoyed by UBC thus ensures that is has a dominant
position on the relevant market….
Doc.# 41 Microsoft Corp. v. Commission September 17, 2007
Judgment of the General Court (Grand Chamber) Case T-201/04, [2007] ECR II-3601-4034
[480] Microsoft’s arguments in respect of the definition of the relevant product market concern the
second of the three markets identified by the Commission in the contested decision (…), namely, the
work group server operating systems market. The Commission describes those systems as being
48
designed and marketed to deliver collectively file and print sharing services and group and user
services to a relatively small number of client PCs linked together in a small or medium-sized network
(…).
[481] Microsoft contends…., that the Commission defined that second market too
restrictively…Microsoft’s objective is challenging the Commission’s definition of the market is
essentially to establish that the evolution of the market is different from that described (in) the
contested decision and does not represent the elimination of all competition.
[482] The Court notes at the outset that in so far as the definition of the product market involves
complex economic assessments on the part of the Commission, it is subject to only limited review by
the Community judicature (see, to that effect, Case T-342/99 Airtours v. Commission [2002] ECR II2585, paragraph 26). However, this does not prevent the Community judicature from examining the
Commission’s assessment of economic data. It is required to decide whether the Commission based
its assessment on accurate, reliable and coherent evidence which contains all the relevant data that
must be taken into consideration in appraising a complex situation and whether it is capable of
substantiating the conclusions drawn from it (see, to that effect, Commission v. Tetra Laval,
paragraph 89 above, paragraph 39).
…
[484] In arriving at the contested definition of the product market, the Commission took into account
the demand-side substitutability and the supply-side substitutability of the products. It must be
borne in mind that, as stated in the Commission Notice on the definition of the relevant market for
the purposes of Community competition law (OJ 1997 C 372, p. 5), point 7, "a relevant product
market comprises all those products and/or services which are regarded as interchangeable or
substitutable by the consumer, by reason of the products’ characteristics, their prices and their
intended use".
As indicated at point 20 of that notice, moreover, supply-side substitutability may also be taken into
account when defining markets in those situations in which its effects are equivalent to those of
demand substitution in terms of effectiveness and immediacy. That means that suppliers are able to
switch production to the relevant products and market them in the short term without incurring
significant additional costs or risks in response to small and permanent changes in relative prices.
[485] The Court would point out straight away that the definition of the second market is not based
on the idea that there a separate category of server operation systems exclusively implementing the
file and print services and user and group administration services. Quite to the contrary….the
Commission expressly acknowledges that work group server operating systems may also be used to
carry out other tasks, and, in particular, may run ‘non-mission critical’ applications…., the
Commission’s definition is based in fact on the finding that the capacity of work group server
operating systems to supply collectively file and print services and also user and group administration
services constitutes, without prejudice to the other tasks which they are capable of performing, an
essential feature of those systems, and that those systems are primarily designed, marketed,
purchased and used to provide those services.
[486] As regards, in the first place, demand-sided substitutability, the Commission concludes….to the
contested decision that ‘there are no products that….exercise sufficient competitive pressure on
work group server operating systems such that they should be included in the same relevant product
market’.
[487] In arriving at that conclusion, the Commission established, first, that it followed from the
information gather in the 2003 market enquiry that work group servers performed a distinct set of
linked tasks which were demanded by consumers.
[488] The Court considers that that finding is confirmed by the evidence in the file and that Microsoft
has raised no argument which disproves it.
[489] In its request for information of 4 June 2003, the Commission asked the organisations
concerned whether within those organisations a particular type of server was used to supply file and
print services and group and user administrative services (first part of question 1). Of the 85
organisations which answered that question, 70 (approximately 82.3%) said that that was so.
49
[490] The Commission also asked the organisations whether they considered that those services
constituted a ‘set of server tasks that “go together”’. Of the 83 organisations which answered that
question, 51 (61.4%) endorsed that proposition.
…
[495] First, those findings must be qualified. Thus, in their response to question 1 of the request for
information of 4 June 2003, a number of the organisations questioned stated that in their operations
internal email or collaboration services were performed on specialist servers and they distinguished
those services from the other work group services mentioned by the Commission…
[496] Second, as the Commission observes…., the 2003 market enquiry also shows that when
organisations use a given operating system to supply file or print services, they generally use the
same operating system to supply user and group administration services….
[498] Furthermore … the customer statements produced by Microsoft during the administrative
procedure confirm the correctness of the Commission’s analysis.
…
[527] In the second place, the question of supply-side substitutability is analyzed by the Commission
(in) the contested decision.
[528] The Commission considers that ‘other operating system vendors, including in particular
vendors of server operating systems, would not be able to switch their production and distribution
assets to work group server operating systems without incurring significant additional costs and risks
and within a time framework sufficiently short so as to consider that supply-side considerations are
relevant in this case’….More specifically, the Commission rejects the argument developed by
Microsoft…., that there is a ‘virtually instantaneous supply-side substitution’, in that it is sufficient to
‘disable’ the ‘more complex functionalities’ in higher-end server operating systems in order to obtain
a product comparable to a work group server operating system.
[529] It is clear to the Court that, in the body of its pleadings, Microsoft puts forward no specific
argument capable of calling in question the analysis carried out by the Commission in the recitals to
the contested decision referred to above. In the reply, it merely makes the general assertion that
‘[t]he cost of modification in many cases would be zero’ and ‘in the other cases….would be
negligible’, without even indicating whether it thereby intends to contest the Commission’s finding
that there was no supply-side substitutability.
[530] In those circumstances, the Court finds that Microsoft has not established that the Commission
manifestly erred when it concluded that there was no supply-side substitutability in this case.
[531] The Court concludes from the foregoing that the Commission was correct to define the second
product market as the work group server operating systems market.
….
[559] Last, as regards the abusive refusal to supply, it must be borne in mind that in the contested
decision the Commission takes issue with Microsoft for having used, by leveraging, its quasimonopoly on the client PC operating systems market to influence the work group server operating
systems market (….). In other words, Microsoft’s abusive conduct has its origin in its dominant
position on the first product market (…). Even if the Commission were wrongly to have considered
that Microsoft was in a dominant position on the second market (…) that could not therefore of itself
suffice to support a finding that the Commission was wrong to conclude that there had been an
abuse of dominant position by Microsoft.
Doc.# 42 Obligation to reopen proceedings for inappropriate assessment of the markets concerned
Confédération européenne des associations d’horlogers-réparateurs (CEAHR) v. European
Commission Judgment of the GENERAL COURT (4th Chamber) 15 Dec. 2010 Case T-427/08, [2010]
ECR II – 5865 Annulment of Commission Decision C (2008) 3600 of 10 July 2008 rejecting the
complaint lodged by the applicant in Case COMP/E-1/39097
Summary of the facts:
The applicant, the Confédération européenne des associations d’horlogers-réparateurs (European
50
confederation for watch repairer associations; CEAHR), a non-profit making association with seven
national associations of six Member States representing the interests of independent watch repairers
lodged, on 20 July 2004, a complaint with the European Commission against several undertakings
active in the watch manufacturing sector (‘the Swiss watch manufacturers’). It alleged the existence
of an agreement or a concerted practice between manufacturers and the abuse of a dominant
position resulting from their refusal to continue to supply spare parts to independent watch
repairers.
On the 28 April 2005, the Commission stated that it had found no evidence of the existence of a
concerted practice or of an agreement between the Swiss manufacturers of luxury watches. It
considered that there was no separate market in repair and maintenance services, those services
being a feature of the highly competitive luxury watch market. It concluded that there was no
refusal to continue to supply spare parts.
On 10 July 2008, pursuant to Article 7(1) of Commission Regulation (EC) No 773/2004 of 7 April
2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81[EC] and
82[EC] (OJ 2004 L 123, p. 18) the Commission adopted a Decision C (2008) 3600, rejecting the
complaint on the ground that there was insufficient Community interest in continuing an
investigation. It stated that it had examined the primary market or market segment for luxury and
prestige watches, as well as two after markets, namely the market for spare parts and the market for
repair and maintenance services which were of limited size and thus of limited economic importance.
It concluded prima facie that those two after markets were not distinct markets and that, therefore,
a dominant position did not exist, with the result that the question of the existence of abuse was
irrelevant.
On 24 September 2008, the applicant CEAHR brought an action asking the Court to annul the
contested decision on the basis of five pleas. The first plea alleges an erroneous assessment of the
existence of a Community interest and illegalities in relation to the finding of the size of the market
and its economic importance. The second plea was based upon an erroneous definition of the
relevant market].
Judgment
[22] The applicant submits that the Commission…failed to identify the market, to quantify its size and
to describe its economic importance, thereby infringing its duty to give reasons. Similarly, the
Commission failed to take account of the fact…that independent watch repairers in the 27 Member
States are affected by the practices of Swiss watch manufacturers…
[32] Furthermore, the Court considers that the extent of the territory concerned is necessarily
relevant for the size of the market or markets concerned by the complaint and for the economic
importance of that or those markets….
[33] Thus, by failing to take note of that aspect in its assessment of the size of the market concerned
and of its economic importance, the Commission infringed its obligation to take into consideration all
the relevant matters of law and of fact and to consider attentively all the matters of fact and of law
which the applicant brought to its attention.
…
[35] …The Commission stated…that it had undertaken its investigation on the assumption that ‘the
luxury/prestige watches market [was] a separate (relevant) primary market’ and that it had therefore
‘examined the market for luxury/prestige watches as the primary market, as well as two aftermarkets – one for the repair and maintenance [services] of luxury/prestige watches, and one for
spare parts for [such] watches’. It is also apparent…(it) worked on the assumption that the two after
markets did not constitute independent relevant markets, but had to be considered together with
the primary market….
[37] However…the Commission itself stated that … (the) complaint concerned a restriction of
competition ‘on the market for… [watch] repair and maintenance [services]’…
[39] Accordingly, it is impossible for the Court to establish with certainty whether the Commission’s
finding concerning the limited size of the relevant market(s) relates to the market for luxury/prestige
51
watches, the watch repair and maintenance services market for such watches or both of those
markets….
[41] In the absence of an absolute point of reference, which could be in the form of figures or
estimations…, the mere references to the relative sizes of those markets in comparison to the others
do not enable the Court to assess the accuracy of the finding that the complaint concerns, at most, a
market of limited size and, thus, the economic importance of that market is also limited….
[45] ….There was no rule of law requiring the Commission to determine the size of the market or
markets to which the complaint relates. By contrast, since it decided to rely on the finding that ‘the
complaint concern[ed] at most the market (segment) of a limited size and thus its economic
importance [was] also limited’ to justify its position that there was insufficient Community interest in
continuing the investigation of the complaint, the Commission had a duty to give sufficient reasons
for that finding…
[49] Accordingly, the applicant’s complaints relating to the limited size and economic importance of
the market (sector) to which the complaint relates must be upheld…
[65] According to settle case-law, review by the Courts of the European Union of the Commission’s
exercise of the discretion conferred on it in this regard must not lead them to substitute their
assessment of the Community interest for that of the Commission, but focuses on whether the
contested decision is based on materially incorrect facts, or is vitiated by an error of law, manifest
error of appraisal or misuse of powers (Case T-115/99 SEP v. Commission [2001] ECR II-691,
paragraph 34, and Piau v. Commission, cited in paragraph 26 above, paragraph 81).
[66] Similarly, in so far as the definition of the relevant market involves complex economic
assessments on the part of the Commission, it is subject to only limited review by the Courts of the
European Union (see, to that effect, Cae4 T-201/04 Microsoft v. Commission [2007] ECR II-3601,
paragraph 482, and Case T-151/05 NVV and Others v. Commission [2009] ECR II-1219, paragraph 53).
[67] The concept of the relevant market in fact implies that there can be effective competition
between the products or services which form part of it and this presupposes that there is a sufficient
degree of interchangeability between all the products or services forming part of the same market in
so far as a specific use of such products or services is concerned (see, to that effect, Case 85/76
Hoffmann-La Roche v. Commission [1979] ECR 461, paragraph 28, and Case T-340/03 France Télécom
v. Commission [2007] ECR II-107, paragraph 80). The interchangeability or substitutability is not
assessed solely in relation to the objective characteristics of the products and services at issue, but
the competitive conditions and the structure of supply and demand on the market must also be
taken into consideration (Case 322/81 Michelin v. Commission [1983] ECR 3461, paragraph 37, and
Case T-219/99 British Airways v. Commission [2003] ECR II-5917, paragraph 91).
[68] It is also apparent from the Commission notice on the definition of the relevant market for the
purposes of Community competition law (OJ 1997 C 372, p. 5, paragraph 7) that "[a] relevant product
market comprises all those products and/or services which are regarded as interchangeable or
substitutable by the consumer, by reason of the products’ characteristics, their prices and their
intended use".
[Summary of 69/70/71] [The Court is quoting points 17 and 56 of the notice where the Commission
says that the analysis of substitutability must be undertaken with care and that the Commission
worked on a presumption that there was a primary product market for luxury/prestige watches, and
two after markets – repair and maintenance and spare parts for such watches and then that the after
markets did not constitute separate relevant markets.]
[72] The applicant essentially puts forward… that the Commission wrongly considered that the watch
repair and maintenance services market and ‘the spare parts market’ did not constitute separate
markets, but had to be examined together with the luxury/prestige watch market. It also maintains
that spare parts which are specific to a given brand are not substitutable, with the result that every
producer holds a monopoly in respect of the specific spare parts which it produces.
[76] ….the applicant complains that the Commission failed to take account, in the contested decision,
of the fact that spare parts which are specific to a given brand are not substitutable.
52
[79] […] the spare parts market for primary products of a particular brand may not be a separate
relevant market in two situations: first, if it is possible for a consumer to switch to spare parts
manufactured by another producer; second, if it is possible for the consumer to switch to another
primary product in order to avoid a price increase on the market for spare parts….
[84] In the first place, as regards the possibility for the consumer to switch to spare parts
manufactured by other producers, it should be noted, at the outset, that for the purposes of the
case-law and the notice on the definition of the relevant market,…. the issue of the existence of such
a possibility and, thus, the issue as to whether there is a single market for spare parts or there are
numerous spare parts markets specific to certain brands, depends primarily on the existence of a
sufficient degree of substitutability of the spare parts manufactured by the various producers.
[85] In that regard, it is apparent from the wording of the contested decision that the Commission
chose to not expressly take a stance on the substitutability of the spare parts manufactured by the
various producers…
[88] ….the applicant produced copies of the decision of the Swiss competition authorities in
Case ETA SA Manufacture horlogère suisse (Recueil des décisions et communications des autorités
suisses de concurrence, 2005/1, p. 128) and of a provisional position, dated 12 July 2002, of the
Netherlands competition authority concerning a complaint similar to the one lodged with the
Commission. The Netherlands competition authority considered that ‘the spare parts for the watches
concerned [were] linked with the brand and [were] not substitutable’, with the result that there
were numerous markets, that is to say a market for specific spare parts belonging to each brand. The
Swiss competition authority considered that the watch components compatible with a specific family
of watches were not substitutable with components which are compatible with other families, with
the result that the components and spare parts manufactured by ETA belonged to a number of
relevant markets.
[89] ….Consequently, the Commission was not entitled to base its decision on that hypothesis
when defining the relevant market in the present case.
[93] ….due to the complexity involved in repairing and maintaining watches, the demand for spare
parts does not, in principle, come from watch users, but from specialists who provide those services.
Therefore, from the point of view of the consumer, a price increase for spare parts is normally
included in the price of those services….
[95] In that regard, it is apparent […] that the total cost of repair and maintenance services for
those watches over a ten-year period remains, for the majority of models, less than 5% of the
purchase price of a new watch. Accordingly, it is evident that a moderate price increase for spare
parts remains a negligible sum in comparison to the price of a new luxury/prestige watch.
[102] On the basis of the foregoing, it must be concluded that the Commission did not show,
….that consumers who already own luxury/prestige watches may reasonably switch to another
primary product in order to avoid a price increase for spare parts….
[105] ….the mere possibility for the consumer to choose from several brands on the primary
market is not sufficient to treat the primary market and the after markets as a single market….
[106] […] the Commission has not shown, in the contested decision, that price increases of a
specific producer on the after markets would have any effect on the volume of its sales on the
primary market….
[107] Accordingly, it is apparent from the foregoing that the Commission has not shown that
consumers who already own a luxury/prestige watch may reasonably switch to another primary
product in order to avoid a price increase for spare parts, or that, in general, the price of spare parts
has an impact on competition between primary products. Consequently, it has not shown that a
moderate price increase for spare parts by a particular producer would cause a shift in demand to
watches from another producer, rendering such an increase unprofitable. Thus, it made a manifest
error of assessment in examining them together as forming part of a single relevant market.
[108] That conclusion is supported by the fact that, as is apparent from the decision of the Swiss
competition authority in Case ETA SA Manufacture horlogère suisse, ETA is the largest manufacturer
53
of components and spare parts for Swiss watches, including for luxury/prestige watches. However,
ETA does not manufacture complete watches. According to the case-law, if certain economic
operators are specialized and are active solely on the aftermarket of a primary market that
constitutes in itself a strong indication of the existence of a specific market (see, to that effect and by
analogy, Hilti v. Commission, cited in paragraph 105 above, paragraph 67).
[109] Therefore, it
cannot be ruled out that, […] separate brand-specific markets for spare parts existed as a function of
their substitutability.
[152] Given that the Commission based its conclusion that there was a low probability of an
infringement of Article 102 TFEU on the fact that the Swiss watch manufacturers did not hold a
dominant position, the manifest error of assessment committed in relation to the definition of the
relevant market also vitiates that conclusion.
54
3.3. Art. 102 of the Treaty on the Functioning of the EU (3rd session); From Doc. # 43 to
Doc. # 52 Main abuses of a Dominant Position
Doc. # 43 Imposing Unfair Purchase or Selling Prices or Other Unfair Trading Conditions
Commission Decision of 17 December 1975 Relating to a Procedure under Article 86 (now Article
102) of the Treaty (Chiquita Bananas Case) (Com. Dec No 76/353/EEC, OJ L 95, 09.04.1976, pp.120)
(a) In the first place it prohibits its distributor/ripeners in the BLEU, Denmark, Germany (including
the Scipio Group), Ireland and the Netherlands from reselling green bananas supplied by UBC;
whether this requirement is formally written into its general conditions of sale or whether it is
imposed by other means, it nevertheless constitutes an abuse of a dominant position. . . .
[ . . . ] UBC's prohibition on the resale of green UBC bananas therefore amounts to a prohibition on
exports and thus maintains effective market segregation. . . .
(b) UBC is also abusing its dominant position by, both at Bremerhaven and at Rotterdam, charging
its distributor/ripeners in the Member States concerned differing prices for Chiquita bananas for
equivalent transactions without objective justification. These differences can in some weeks reach
as much as 30 to 50% . . .
The only exception is Ireland, where UBC sells its bananas in Dublin. However, the cost of carriage
by road and ferry from Rotterdam to Dublin does nothing to reduce the price gap; on the contrary,
a comparison of the delivered Rotterdam prices for bananas to be sold CIF Dublin and the prices
charged at Bremerhaven or Rotterdam to other customers shows a gap that is wider still. Despite
the additional transport charges, prices CIF for Irish customers are still lower than those F.O.R. for
customers in the other Member States concerned.
This policy of differing prices has been applied by UBC since 1971 in the case of customers from the
BLEU, Germany and the Netherlands, and was extended at the beginning of 1973 to Denmark and
in November 1973 to Ireland. Such a practice has the effect of tending to maintain substantially
differing price levels in each of the Member States in question. . . . Competition is thereby
distorted.
In this case the differences in price charged by UBC to its customers in the various Member States
are wide. No objective justification for this has been advanced by UBC, or indeed, discovered by the
Commission. [ . . . ] For an undertaking in a dominant position, a policy of systematically setting
prices at the highest possible level, resulting in wide price differences, cannot be objectively
justified, particularly where that undertaking maintains market segregation. . . .
Such a policy of differing prices accordingly constitutes an abuse of a dominant position, in that
UBC is applying dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage.
(c) UBC has also abused its dominant position by charging unfair prices to certain of its
distributor/ripeners. The marketing policy of UBC has resulted in the segregation of the market in
question and has enabled UBC to charge prices for Chiquita bananas which are sheltered from
effective competition. The Court of Justice has ruled that a wide variation in price which is not
justified on objective grounds can be a determining factor of an abuse within the meaning of Article
86 of the EEC Treaty. In this case the differences in price for Chiquita bananas charged by UBC to its
customers in the various Member States are wide, particularly in view of the fact that the product is
a food product which is widely consumed. These differences in price cannot be justified objectively.
UBC's lowest prices are those charged to its customers in Ireland. . . .
Prices charged for the substantial quantities sold to customers in Germany (other than the Scipio
Group), Denmark, the Netherlands and the BLEU are considerably higher, sometimes by as much as
100%, than the prices charged to customers in Ireland, and accordingly produce a very substantial
profit. UBC's prices are excessive in relation to the economic value of the product supplied. . . .
(d) Finally, UBC has abused its dominant position by ceasing to supply its Chiquita bananas to one
of its most important customers among the distributor/ripeners, which had reconstructed its
ripening facilities in 1967/68 in order to be able to distribute Chiquita bananas. The withdrawal of
55
supplies was made on the grounds that the distributor/ripener concerned had taken part in an
advertising campaign for bananas of a competing brand.
The effect of the withdrawal of supplies was to damage the business interests of the firm
concerned. . . . Moreover, the reason given by UBC for its refusal to continue to supply, namely that
Olesen had taken part in a competitor's advertising campaign, cannot justify such behaviour on the
part of an undertaking in a dominant position, such as UBC.
These abuses by UBC of its dominant position are capable of affecting trade between Member
States to an appreciable extent…. The Commission was upheld by the Court (See: United Brands
Company and United Brands Continental BV v. Commission Case 27/76, [1978] ECR 207
Doc. # 44 Predatory Pricing
AKZO Chemie BV v. Commission of the European Communities Case C-62/86, [1991] ECR I-3359
Summary (from the Commission Decision): AKZO Chemie BV is a subsidiary of the large Dutch
chemical group, AKZO. AKZO Chemie sells, among other products, organic peroxides. One subproduct of organic peroxide is Benzoyl peroxide used as a flour additive to bleach the flour. AKZO
holds a substantial share of the world market and the European market for organic peroxides. ECS,
a UK company, is a producer of bleaching agents, which it sells on the UK market although its share
of that market is far less than that of AKZO. ECS proceeded to sell organic peroxides to the German
company BASF. It sold benzoyl peroxide to BASF at a lower price that AKZO, the major supplier of
BASF. Meetings took place between the executives of both companies, AKZO and ECS. It is reported
that AKZO threatened ECS with significant price reductions (even below production costs) of its
flour additives if ECS did not withdraw from the market for organic peroxides for the "plastics"
sector. ECS filed an action before the High Court (London) and obtained an injunction against AKZO
but the latter did not comply with the injunction. ECS then complained to the Commission which
imposed a fine on AKZO and ordered it to terminate its behavior.
Judgment
[63] According to the contested decision . . . AKZO had abusively exploited its dominant position by
endeavoring to eliminate ECS from the organic peroxides market mainly by massive and prolonged
price-cutting in the flour additives sector.
[64] According to the Commission, Article 102 does not make costs the decisive criterion for
determining whether price reductions by a dominant undertaking are abusive. . . . Such a criterion
does not take any account of the general objectives of the EEC competition rules as defined in
Article 3(f) of the Treaty and in particular the need to prevent the impairment of an effective
structure of competition in the common market. A mechanical criterion would not give adequate
weight to the strategic aspect of price-cutting behaviour. There can be an anti-competitive object in
price-cutting whether or not the aggressor sets its prices above or below its own costs, whatever
the manner in which those costs are understood. . . .
[65] A detailed analysis of the costs of the dominant undertaking might, however, according to the
Commission, be of considerable importance in establishing the reasonableness or otherwise of its
pricing conduct. The exclusionary consequences of a price-cutting campaign by a dominant
producer might be so self-evident that no evidence of intention to eliminate a competitor is
necessary. On the other hand, where the low pricing could be susceptible of several explanations,
evidence of an intention to eliminate a competitor or restrict competition might also be required to
prove an infringement. . . .
[69] It should be observed that, as the Court held in its judgment in Case 85/76 Hoffman-La Roche
v. Commission . . . the concept of abuse is an objective concept relating to the behaviour of an
undertaking in a dominant position which is such as to influence the structure of a market where,
as a result of the very presence of the undertaking in question, the degree of competition is
weakened and through recourse to methods which, different from those which condition normal
competition in products or services on the basis of the transactions of commercial operators, has
the effect of hindering the maintenance of the degree of competition still existing in the market or
56
the growth of that competition.
[70] It follows that Article 102 prohibits a dominant undertaking from eliminating a competitor and
thereby strengthening its position by using methods other than those which come within the scope
of competition on the basis of quality. From that point of view, however, not all competition by
means of price can be regarded as legitimate.
[71] Prices below average variable costs (that is to say, those which vary depending on the
quantities produced) by means of which a dominant undertaking seeks to eliminate a competitor
must be regarded as abusive. A dominant undertaking has no interest in applying such prices
except that of eliminating competitors so as to enable it subsequently to raise its prices by taking
advantage of its monopolistic position, since each sale generates a loss, namely the total amount of
the fixed costs (that is to say, those which remain constant regardless of the quantities produced)
and, at least, part of the variable costs relating to the unit produced.
[72] Moreover, prices below average total costs, that is to say, fixed costs plus variable costs, but
above average variable costs, must be regarded as abusive if they are determined as part of a plan
for eliminating a competitor. Such prices can drive from the market undertakings which are
perhaps as efficient as the dominant undertaking but which, because of their smaller financial
resources, are incapable of withstanding the competition waged against them. . . .
...
[102] Moreover, all these quotations can only be explained by AKZO's intention to damage ECS and
not by its endeavour to restore its profit margins. A note prepared by one of AKZO's
representatives [ . . . ] shows that AKZO established the prices offered to Allied Mills in January
1981 by calculating that they were well below those charged to Allied Mills by ECS. This shows that
AKZO's intention was not solely to win the order, which would have induced it to reduce its prices
only to the extent necessary for this purpose. In addition, in quoting to Allied Mills a price equal to
that offered to Spillers by ECS, AKZO's objective was to set its prices at the lowest level possible
without infringing the undertaking that it had given in the High Court in London not to reduce its
selling prices for benzoyl peroxide with the aim of eliminating ECS.
[103] The Commission was therefore right in considering that AKZO had offered and supplied flour
additives to Allied Mills and mills in the Allied group at unreasonably low prices with the aim of
damaging ECS's viability. . . .
[113] AKZO has not denied that it charged differing prices to buyers of comparable size. It has,
furthermore, not advanced arguments to show that these differences related to the quality of the
products sold or to special production costs.
[114] The prices charged by AKZO to its own customers were above its average total costs, whereas
those offered to customers of ECS were below its average total costs.
[115] AKZO is thus able, at least partly, to set off losses resulting from the sales to customers of ECS
against profits made on the sales to the "large independents" which were among its own
customers. This behaviour shows that AKZO's intention was not to pursue a general policy of
favourable prices, but to adopt a strategy that could damage ECS. The complaint is therefore
substantiated. . . .
Doc. # 45 Predatory prices (2)
France Télécom SA v. Commission Case C-202-07 P [2009] ECR I-2369
Summary of the Judgment of the EUCJ
(Key words) Competition – Dominant position – Abuse – Practice of charging prices lower than a
certain level of costs (Article 82 EC now Article 102)
The possibility of recoupment of losses suffered by the application, by an undertaking in a
dominant position, of prices lower than a certain level of costs does not constitute a necessary
precondition to establishing that such a pricing policy is abusive. That does not preclude the
Commission from finding such a possibility of recoupment of losses to be a relevant factor in
assessing whether or not the practice concerned is abusive, in that it may, for example where
prices lower than average variable costs are applied, assist in excluding economic justifications
57
other than the elimination of a competitor, or, where prices below average total costs but above
average variable costs are applied, assist in establishing that a plan to eliminate a competitor exists.
Moreover, the lack of any possibility of recoupment of losses is not sufficient to prevent the
undertaking concerned reinforcing its dominant position, in particular, following the withdrawal
from the market of one or a number of its competitors, so that the degree of competition existing
on the market, already weakened precisely because of the presence of the undertaking concerned,
is further reduced and customers suffer loss as a result of the limitation of the choices available to
them (see par. 110-112).
Judgment
(Summary of facts) Wanadoo Interactive SA (‘WIN’) was part of the France Télécom group active in
France in the Internet access services sector including ADSL (asymmetric digital subscriber line)
services. The Commission found that from March 2001 to October 2002 ‘[WIN] infringed Article 82
[EC] (now 102) by charging for its eXtense and Wanadoo ADSL services predatory prices that did
not enable it to cover its variable costs until August 2001 or to cover its full costs from August 2001
onwards, as part of a plan to pre-empt the market in high-speed internet access during a key phase
in its development’. In Article 2 of that decision, the Commission ordered WIN to bring the
infringement to an end and, in Article 4 of the decision, imposed a fine on it of EUR 10.35 million
(Commission decision of 16 July 2003 Case COMP/38.233 – Wanadoo Interactive).
On October 2003, WIN (a subsidiary of France Télécom since Sept. 1, 2004), brought an
action before the Court of First Instance that was dismissed by the judgment under appeal of the 30
January 2007 (Case T-340/03 France Télécom SA v. Commission [2007] ECR II-107). In its action for
annulment, WIN claimed that the Commission failed to establish that WIN had abused its dominant
position by charging predatory prices for the services concern from March 2001 to October 2002
and had erred in law on a number of occasions. By its appeal, France Télécom SA (‘France Télécom)
asked the Court to set aside the judgment of the Court of First Instance…
[8] Referring inter alia to Case C-62/86 AKZO v. Commission [1991] ECR I-3359 and Case C-333/94 P
Tetra Pak v. Commission [1996] ECR I-5951, (para 130 of the judgment), the Court of First Instance
noted that, ‘first, prices below average variable costs give grounds for assuming that a pricing
practice is eliminatory and that, if the prices are below average total costs but above average
variable costs, those prices must be regarded as abusive if they are determined as part of a plan for
eliminating a competitor’.
[9] Having so stated, the Court of First Instance… found that… the Commission, in order to calculate
the rate of recovery of costs, had chosen the adjusted costs method of calculation. That method is
described in the judgment… (Paragraph 132) in the following terms: "… According to the principle
of depreciation of assets, the Commission spread the costs of acquiring customers over 48 months.
On that basis, it made a separate assessment of adjusted variable costs and adjusted full costs,
stating that the Court of Justice lays down two tests for cost recovery, depending on whether or not
the actions of the dominant firm form part of a plan to eliminate competitors. …"
[10] As the Court of First Instance stated (para 138), in applying the adjusted costs method, the
Commission held (that):
"… The prices applied by WIN did not enable it to recover its variable costs until August 2001 or its
full costs from January 2001 to October 2002 …, there being no doubt that, considering the level of
recovery of variable costs; the full costs were not recovered by August 2001."…
[16] With regard to the arguments concerning the test of predation, first, in paragraphs 182 to 186
of the judgment under appeal, the Court rejected the arguments put forward by WIN concerning
the existence of an absolute right for an economic operator to align its prices, in good faith, with
those previously charged by one of its competitors where those prices are lower than that
operator’s costs. [17] …., the Court pointed out that dominant undertakings have specific
obligations and may, accordingly, be deprived of the right to adopt courses of conduct which are
not in themselves abuses and which would be acceptable if adopted by a non-dominant
undertaking.
58
[18] …. the Court held (paragraph 187) as follows: ‘WIN cannot therefore rely on an absolute right
to align its prices on those of its competitors in order to justify its conduct. Even if alignment of
prices by a dominant undertaking on those of its competitors is not in itself abusive or
objectionable, it might become so where it is aimed not only at protecting its interests but also at
strengthening and abusing its dominant position.’
[19] Second, the Court rejected WIN’s allegation that it did not have a plan of predation and
reduction in competition.
...
[21] In that regard, the Court noted (paragraphs 195 to 198) that the case-law provides that in
order for it to find that predatory prices are being charged, the Commission is required to provide
sound evidence of the existence of a strategy of ‘pre-emption’ of the market where the prices
applied by an undertaking in a dominant position are not sufficient to cover its total cost.
...
[23] Under reference to AKZO v. Commission and TetraPak v. Commission, the Court held,
(paragraph 228) that the Commission was not required to provide such evidence. Where the prices
applied by an undertaking in a dominant position are lower only than its full costs, the Commission,
although required to adduce evidence of an additional factor, that is, of the existence of a plan to
‘pre-empt’ the market, is not also required to establish the possibility of recouping the losses.
The first ground of appeal, alleging a failure to state reasons in the judgment under appeal
[32] Contrary to the appellant’s argument, it must be stated in the present case that the Court of
First Instance gave sufficient reasons why the Commission was not required to prove that WIN had
the possibility of recouping its losses.
[33] …. [T]he Court of First Instance (paragraph 224) first pointed out that in AKZO v. Commission,
(paragraphs 71 and 72), and Tetra Pak v. Commission, (paragraph 41), the Court held, first, that
prices below average variable costs must always be considered abusive and, second, that prices
below average total costs but above average variable costs are only to be considered abusive if an
intention to eliminate can be shown.
[37] It must be held that the judgment under appeal sets out sufficiently clearly the reasons which
led the Court to find that the circumstances giving rise to the present case, in particular the
relationship between the level of prices applied by WIN were analogous to those in Tetra Pak v.
Commission, and to find, accordingly, that proof of recoupment of losses does not constitute a
necessary precondition to a finding of predatory pricing.
The second part of the first ground of appeal, alleging that an undertaking in a dominant position
has the right to align its prices on those of its competitors
[41] In the context of an appeal it is necessary to bear in mind that the purpose of review by the
Court of Justice is, primarily, to examine to what extent the Court of First Instance took into
consideration, in a legally correct manner, all the arguments upon which the appellant relies (see,
to that effect, Case C-185/95 P Baustahlgewebe v. Commission [1998] ECR I-8417, paragraph 128;
Case C-359/01 P British Sugar v. Commission [2004] ECR I-4933, paragraph 47; and Joined Cases
C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P Dansk Rørindustri and Others v.
Commission [2005] ECR I-5425, paragraph 244).
[42] …. [T]he Court of First Instance… responded amply to the arguments put forward by WIN….
[43] Accordingly, (paragraph 176) the Court noted, that recital 315 of the Commission decision
contests WIN’s right to align its prices on those charged by its competitors only in so far as the
exercise of that option ‘would result in its not recovering the costs of the service in question’.
[46] ….The Court recalled that, although the fact that an undertaking is in a dominant position
cannot deprive it of the right to protect its own commercial interests if they are attacked and such
an undertaking must be allowed the right to take such reasonable steps as it deems appropriate to
protect those interests, it is not possible, however, to countenance such behaviour if its actual
purpose is to strengthen that dominant position and abuse it.
59
[47] It was on the basis of that case-law that the Court of First Instance thus found, (paragraph 187)
that WIN cannot rely on any absolute right to align its prices on those of its competitors in order to
justify its conduct where that conduct constitutes an abuse of its dominant position….
...
[78] …., the Court of First Instance (paragraphs 136 and 137) explained that the method followed by
the Commission consisted in spreading over the average lifetime of a subscription, equal to 48
months, only non-recurrent variable costs, that is, the customer acquisition costs. According to the
approach adopted by the Commission in the contested decision, the undertaking’s objective is not
to produce an instantaneous profit but… ‘to achieve a level of recovery of recurrent costs (network
costs and production costs) which is sufficient to ensure that the margin between revenue and
recurrent costs will, within a reasonable time, also cover the non-recurrent variable costs invested
in the commercial development of the particular product’.
[79] In application of that method, the Commission analyzed WIN’s pricing policy between January
2001 and October 2002 and concluded that, during that period, WIN had applied prices lower than
a certain level of its adjusted costs.
[80] It follows that the failure to take into account the revenues and costs subsequent to the period
during which the infringement lasted, but included in the period of 48 months in question, flows
directly from the application to the present case of the method of calculating the rate of recovery
of costs chosen by the Commission….
[82] It follows that the fourth ground of appeal must be rejected as unfounded.
[88] The sixth ground of appeal consists of two parts….
The second part of the sixth ground appeal, alleging infringement on Article 82 EC (now Article 102).
[95] …, the appellant claims that the CFI infringed Article 82 EC (now Article 102) inasmuch as it
found that a plan of predation existed solely on the basis of subjective factors, while the article
requires proof of an objectively identifiable plan to eliminate competition based on objective
indications, such as, inter alia, threats to competitors or selective price cuts in respect of
competitors’ customers….
[98] It is apparent (paragraphs 199 and 215) that, although the Court of First Instance referred to a
‘strategy to preempt’ the market by WIN, it nonetheless deduced this from objective factors such
as that undertaking’s internal documents.
The seventh ground of appeal, alleging that the Court of First Instance infringed Article 82 EC (now
Article 102), inasmuch as it refused to take account of the impossibility of recouping the losses….
[104] In that context, in prohibiting the abuse of a dominant market position in so far as trade
between Member States is capable of being affected, Article 82 EC (now Article 102) refers to
conduct which is such as to influence the structure of a market where the degree of competition is
already weakened and which, through recourse to methods different from those governing normal
competition in products or services on the basis of the transactions of commercial operators, has
the effect of hindering the maintenance of the degree of competition still existing in the market or
the growth of that competition (Hoffman-La Roche v. Commission, paragraph 91; Case 322/81
Nederlandsche Banden-Industrie-Michelin v. Commission [1983] ECR 3461, paragraph 70; AKZO v.
Commission, paragraph 69; and Case C-95/04 P British Airways v. Commission [2007] ECR I-2331,
paragraph 66).
….
[107] In particular, it must be found that an undertaking abuses its dominant position where, in a
market the competition structure of which is already weakened by reason precisely of the presence
of that undertaking, it operates a pricing policy the sole economic objective of which is to eliminate
its competitors with a view, subsequently, to profiting from the reduction of the degree of
competition still existing in the market….
[109] Thus, the Court of Justice has held, first, that prices below average variable costs must be
considered prima facie abusive inasmuch as, in applying such prices, an undertaking in a dominant
position is presumed to pursue no other economic objective save that of eliminating its
competitors. Secondly, prices below average total costs but above average variable costs are to be
60
considered abusive only where they are fixed in the context of a plan having the purpose of
eliminating a competitor (see AKZO v. Commission, paragraphs 70 and 71, and Tetra Pak v.
Commission, paragraph 41).
[110] Accordingly, contrary to what the appellant claims, it does not follow from the case-law of the
Court that proof of the possibility of recoupment of losses suffered by the application, by an
undertaking in a dominant position, of prices lower than a certain level of costs constitutes a
necessary precondition to establishing that such a pricing policy is abusive. In particular, the Court
has taken the opportunity to dispense with such proof in circumstances where the eliminatory
intent of the undertaking at issue could be presumed in view of that undertaking’s application of
prices lower than average variable costs (see, to that effect, Tetra Pak v. Commission, paragraph
44).
111] That interpretation does not, of course, preclude the Commission from finding such a
possibility of recoupment of losses to be a relevant factor in assessing whether or not the practice
concerned is abusive, in that it may, for example where prices lower than average variable costs are
applied, assist in excluding economic justifications other than the elimination of a competitor, or,
where prices below average total costs but above average variable costs are applied, assist in
establishing that a plan to eliminate a competitor exists.
[112] Moreover, the lack of any possibility of recoupment of losses is not sufficient to prevent the
undertaking concerned reinforcing its dominant position, in particular, following the withdrawal
from the market of one or a number of its competitors, so that the degree of competition existing
on the market, already weakened precisely because of the presence of the undertaking concerned,
is further reduced and customers suffer loss as a result of the limitation of the choices available to
them.
[113] The Court of First Instance was right therefore to hold, in paragraph 228 of the judgment
under appeal, that demonstrating that it is possible to recoup losses is not a necessary precondition
for a finding of predatory pricing.
Doc. # 46 Limiting Production, Markets or Technical Development to the Prejudice of Consumers"
Hilti AG v. Commission of the European Communities
Case T-30/89, [1991] ECR II-1439
Facts: from the opinion of Mr. Advocate General Jacobs
[3] The nail guns manufactured by Hilti are a technologically advanced means of making secure
fastenings in the construction industry. The guns are used together with cartridge strips, cartridges
and nails as a "powder-actuated fastening" (or "PAF") system which fires the nails into different
materials as required; such a system is not however suitable for use with all types of materials. The
cartridges provide the explosive power of the system, and each cartridge strip holds a number of
cartridges, which enables the gun to be repeatedly used without the need to reload cartridges.
Nails which are compatible with the guns manufactured by Hilti are manufactured and supplied by
other firms, as well as by Hilti itself. Bauco and Profix are two such independent manufacturers of
nails which can be used in Hilti nail guns. In what follows, all references to "cartridge strips" and
"nails" are to components intended to be used in nail guns manufactured by Hilti. Such
components are referred to in the Commission's decision as "consumables".
[5] The abusive conduct alleged by the Commission consisted in Hilti' s exercise of its market power
as a producer of nail guns, cartridge strips and nails in such a way as to hinder the entry into and
penetration of the market for nails by independent nail producers, or otherwise to damage their
business. Such conduct will however only be contrary to Article 102 if Hilti did indeed occupy a
dominant position on at least one of the markets in question.
Judgment
A: Hilti's behaviour
[16] With regard to Hilti's behaviour the Commission states that:
- Hilti pursued a policy of supplying cartridge strips to certain end users or distributors (such as
plant-hire companies) only when such cartridge strips were purchased with the necessary
61
complement of nails ("tying" of cartridge strips and nails).
- It also attempted to block the sale of competitors' nails by a policy of reducing discounts for
orders of cartridges without nails. The reduction of discounts was — again according to the
Commission - based substantially on the fact that the customer was purchasing nails from Hilti's
competitors.
- Hilti exerted pressure on independent distributors, notably in the Netherlands, not to fulfill
certain export orders, notably to the United Kingdom.
- It had a policy of not supplying cartridges to independent nail manufacturers, in particular the
interveners.
- Hilti admitted to a policy of refusing to supply cartridge strips, even to long standing customers,
where it thought that the cartridge strips ordered might be sold on to independent nail
manufacturers.
- It acknowledged that it refused to honor the guarantees on its tools when non-Hilti nails were
used.
- Lastly, Hilti applied selective or discriminatory policies directed against the businesses of both
competitors and competitors' customers - normally (the Commission claims) in the form of
selective price cuts or other advantageous terms.
B: The economic consequences of Hilti's behaviour
[17] According to the decision, this commercial policy on Hilti's part had the effect of enabling it to
limit the market penetration of independent nail and cartridge strip producers who wished to sell
consumables for Hilti nail guns. Hilti was able to charge very different prices on the markets of the
different Member States and make very large mark-ups on its different products. . . .
[21] On the adoption of the contested decision, the Commission issued a press release summarizing
it on 24 December 1987. That press release included the following paragraph:
"This behaviour constitutes very serious breaches of the rules of competition in that it was an
attempt to squeeze small new entrants out of the market and deprive consumers of a choice of
suppliers. It constituted an attempt by Hilti to reinforce its already dominant position and enabled it
in fact to charge very different prices in different Member States. Consequently an exemplary fine
was considered appropriate."
...
[66] The Court takes the view that nail guns, cartridge strips and nails constitute three specific
markets. Since cartridge strips and nails are specifically manufactured, and purchased by users, for
a single brand of gun, it must be concluded that there are separate markets for Hilti-compatible
cartridge strips and nails, as the Commission found in its decision. . . .
[67] With particular regard to the nails whose use in Hilti tools is an essential element of the
dispute; it is common ground that since the 1960s there have been independent producers,
including the interveners, making nails intended for use in nail guns. Some of those producers are
specialized and produce only nails, and indeed some make only nails specifically designed for Hilti
tools. That fact in itself is sound evidence that there is a specific market for Hilti-compatible nails.
[68] Hilti's contention that guns, cartridge strips and nails should be regarded as forming an
indivisible whole, "a powder-actuated fastening system" is in practice tantamount to permitting
producers of nail guns to exclude the use of consumables other than their own branded products in
their tools. However, in the absence of general and binding standards or rules, any independent
producer is quite free, as far as Community competition law is concerned, to manufacture
consumables intended for use in equipment manufactured by others, unless in doing so it infringes
a patent or some other industrial or intellectual property right. Even on the assumption that, as the
applicant has argued, components of different makes cannot be interchanged without the system
characteristics being influenced, the solution should lie in the adoption of appropriate laws and
regulations, not in unilateral measures taken by nail gun producers which have the effect of
preventing independent producers from pursuing the bulk of their business.
[77] The conclusion must be that the relevant product market in relation to which Hilti's market
position must be appraised is the market for nails designed for Hilti nail guns.
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[89] The Commission has proved that Hilti holds a market share of around 70% to 80% in the
relevant market for nails. That figure was supplied to the Commission by Hilti following a request by
the Commission for information . . .
...
[92] In this case it is established that Hilti holds a share of between 70% and 80% in the relevant
market. Such a share is, in itself, a clear indication of the existence of a dominant position in the
relevant market . . .
[100] As regards Hilti's selective and discriminatory policies towards its competitors and their
customers, it is quite clear from the documents cited by the Commission at paragraph 40 of its
decision that Hilti did indeed pursue such policies. The strategy employed by Hilti against its
competitors and their customers is not a legitimate mode of competition on the part of an
undertaking in a dominant
inasmuch as it is liable to deter other undertakings from establishing themselves in the market. The
inescapable conclusion is therefore that the Commission had good reason to hold that such
behaviour on Hilti's part was improper.
On second appeal, the EUCJ dismissed the appeal against the Commission Decision's: Hilti AG v.
Commission of the European Communities, Case C-53/92 P, [1994] ECR I-667,
Doc. # 47 Tying and bundling of products The Microsoft case: Commission Decision and Judgment
of the General Court
Commission Decision of 24.03.2004 relating to a proceeding under Article 102 (ex 82) of the EC
Treaty (Comp/C-3/37.792 Microsoft)
Summary of the Microsoft case
The Microsoft case is one of the European Commission’s highest profile competition cases. After a
long and in depth investigation made after a settlement in the USA with the US Department of
Justice and Attorneys from different States and Microsoft Corporation, the Commission taking into
account the complaint lodged by Sun Microsystems years before, fined Microsoft for its practice of
bundling various types of software together in a single package. Its media player was bundled with
the Windows operating system. The Commission decided that Microsoft had been unfair to
consumers by depriving them of the possibility to elect freely software for music, as it used to be
possible before such action, especially for RealNetworks system which was the most popular
software. In addition, the EU Commission considered that Microsoft kept prices artificially high and
stifled innovation in the software industry and that it had refused to deal by stopping to offer with
Windows complete interoperability information to workgroup software competitors, therefore
impeding them to use their own software with Windows.
A long battle with the EU Commission on the degree of information that it should give to its rivals
went on and on, Microsoft considering that it had no duty to cooperate and to give access to
elements protected by intellectual property law.
At first, the Commission decided that Microsoft had such a duty to disclose all information and
protocols for full interoperability. Second, the Commission ordered Microsoft to offer unbundled
Windows software without the “free” package of its media player. Finally, Microsoft was fined for
non-compliance with the orders of the Commission and fined € 497 million.
An action against the Commission decision was brought before the Court of First Instance of the
European Communities (now the General Court) on 7 June 2004 by Microsoft Corporation,
Washington (USA).
The applicant claimed that the Court should:
- annul the Commission Decision of 24 March 1004 or, in the alternative, annul or substantially
reduce the fine imposed;
- order the Commission to bear the costs
By separate legal document lodged at the Court Registry on 25 June 2004, Microsoft filed an
application for suspension from operation of Article 4, Article 5(a) to (c) and Article 6(a) of the
contested decision.
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By order of 2 December 2004 in Case T-201/04 R Microsoft v. Commission [2004] ECR II-4463, the
President of the Court dismissed that application and reserved the costs.
Microsoft did not pay until the judgment of the General Court in September 2007. The final amount
with interests for refusing to obey the EU Commission decisions and the periodic penalties
amounted to € 1.2 billion (around $1.8 billion). Even if the fine appeared to be pretty high, it must
be compared with the dividends paid to the shareholders the very same year; they amounted to
$12 billion. In an other case, on March 6, 2013, Microsoft was fined up to $ 720 millions for refusing
to comply with a commitment made compulsory by the Commission.
Judgment of the General Court (Grand Chamber) Microsoft Corp. v. Commission September 17,
2007 Case T-201/04, [2007] ERC II-3601
One must point out that Microsoft Corp., the applicant, was supported by several interveners: The
Computing Technology Industry Association, Inc., Illinois (USA), DMDsecure.com BV (Netherlands), MPS
Broadband AB (Sweden), Pack Micro Technology plc (UK), Quantel Ltd (UK), Tandberg Television Ltd (UK),
Association for Competitive Technology, Inc. (USA), TeamSystem SpA (Italy), Mamut ASA (Norway), and Exor
AB (Sweden).
The Commission, as the defendant, was supported by other interveners: Software & Information Industry
Association (USA), Free Software Foundation Europe eV (Germany), Audiobanner.com (USA), and European
Committee for Interoperable Systems (ECIS) (Belgium).
The application is for annulment of Commission Decision 2007/53/EC relating to a proceeding
pursuant to Article 102 (formerly Article 82 [EC]) and Article 54 of the EEA Agreement against
Microsoft Corp. (Case COMP/C-3/37.702 – Microsoft) or, in the alternative, annulment or reduction
of the fine imposed on the applicant in that decision.
Excerpts from the judgment of the General Court
[51] In parallel with the Commission’s investigation, Microsoft was the subject of an investigation
for violation of the United States antitrust legislation.
[52] In 1998, the United States of America, 20 States and the District of Columbia brought
proceedings against Microsoft under the Sherman Act. Their complaints concerned the measures
taken by Microsoft against Netscape’s Internet Navigator and Sun’s Java technologies. The States
concerned also brought actions against Microsoft for violation of their own antitrust legislation.
[53] After the United States Court of Appeals for the District of Columbia Circuit (‘the Court of
Appeals’), on appeal by Microsoft against the judgment of 3 April 2000 of the United States District
Court for the District of Columbia (‘the District Court’), had given its judgment on 28 June 2001,
Microsoft reached a settlement with the United States Department of Justice and the Attorneys
General of nine States (‘the United States settlement’) in November 2001, in which two types of
commitment were given by Microsoft.
[54] First, Microsoft agreed to draw up the specifications of the communication protocols used by
the Windows server operating systems in order to ‘interoperate’, that is to say, to make them
compatible with the Windows client PC operating systems and to grant third parties licences
relating to those specifications on specific conditions.
[55] Second, the United States settlement provides that Microsoft must allow original equipment
manufacturers (‘OEMs’) and end users to activate or to eliminate access to its middleware.
Windows Media Player is one of the products in that category, as defined in the United States
settlement. Those provisions are intended to ensure that suppliers of media software can develop
and distribute products that function properly with Windows.
[56] Those provisions were confirmed by a judgment of the District Court of 1 November 2002. On
30 June 2004, the Court of Appeals, on appeal by the State of Massachusetts, affirmed the
judgment of the District Court of 1 November 2002. Pursuant to the United States settlement, the
Microsoft Communications Protocol Program (‘the MCPP’) was set up in August 2002.
Pleas in law and main arguments (from the judgment):
The applicant contested the decision of the Commission, which found two abuses of a dominant
position by the applicant and imposed a fine of EUR 497,196,304 on the applicant. In the decision,
the Commission found that the applicant has refused to supply “Interoperability Information” and
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allow its use for the purpose of developing and distributing work group server operating system
products. Secondly, the Commission found that the applicant made the availability of the “Windows
Client PC Operating System” conditional on the simultaneous acquisition of Windows Media Player.
Firstly, the applicant claims in support of its application that the Commission erred in
finding that the applicant infringed Article 102 (ex - Article 82) EC by refusing to supply
communications protocols to competitors and to allow the use of that proprietary technology in
competing work group server operating systems.
According to the applicant, the conditions required by the European Courts before a dominant
undertaking is obliged to license its intellectual property rights are not met in the present case. … ,
the technology which it is ordered to license is not indispensable to achieve interoperability with
Microsoft PC operating systems; the alleged refusal to supply the technology did not prevent the
emergence of new products on a secondary market and, finally, did not have the effect of excluding
all competition on a secondary market.
Furthermore, the applicant claims that the contested decision wrongly denied that the applicant
could rely on its intellectual property rights as an objective justification for its alleged refusal to
supply the technology and instead advanced a new and legally defective balancing test invoking
public interest in disclosure.
The applicant also submits that no license for the purpose of developing software in the EEA was
ever requested and that the applicant was under no duty to regard Sun’s request as giving rise to
any special responsibility under Article 102 (ex - Article 82) EC.
Additionally, the applicant claims that the Commission failed to take into account the obligations
imposed on the European Communities by the World Trade Organization’s Agreement on Trade
Related Aspects of Intellectual Property (TRIPS) when applying Article 102 (ex - Article 82) EC to the
facts of this case.
Secondly, the applicant invokes that the Commission erred in determining that the applicant
infringed Article 102 (ex - Article 82) EC by making the availability of its PC operating systems
conditional on the simultaneous acquisition of media functionality referred to as Windows Media
Player.
According to the applicant, the contested decision is based on a speculative foreclosure theory
according to which the widespread distribution of media functionality in Windows may, at some
undetermined point in the future, lead to a situation in which content providers and software
developers will encode almost exclusively in Windows Media formats. The applicant submits that
this theory is inconsistent with the Commission Decision regarding the AOL/Time Warner
concentration (2000/78/EC Comm. Dec. OJ 2000 L 268, p. 28) as well as with the evidence on file
showing that content providers continue to encode in multiple formats.
The applicant also submits that the contested decision ignores the benefits flowing from
the applicant’s business model, which entails the integration of new functionality into Windows in
response to technological advances and changes in customer demand.
Also, according to the applicant, the contested decision fails to meet the conditions required to
establish a violation of Article 102 (ex - Article 82) EC, and in particular, point (d) thereof. The
applicant submits that Windows and its media functionality are not two separate products. The
applicant claims furthermore that the contested decision fails to demonstrate that the alleged tying
and tied products are not connected naturally or by commercial usage. In addition, the applicant
submits that the contested decision fails to take into account the obligation imposed on the
European Communities by TRIPS when applying Article 102 (ex - Article 8) EC to the facts of the
case and that the remedy imposed is disproportionate.
Thirdly, the applicant submits that the requirement that the applicant appoints and remunerates a
trustee to monitor its compliance with the decision, and receive and investigate complaints, is
unlawful as being ultra vires. The applicant states that the powers delegated to the trustee are
investigatory and enforcement powers normally belonging to the Commission which cannot be
delegated.
Finally, the applicant submits that there is no basis for imposing any fine on the applicant in light of
65
the legal novelty of the finding of abuse. The applicant also claims that the amount of the fine is
plainly excessive.
The General Court upheld the Commission but on the appointment and payment of the trustee…]
[314] While Microsoft and the Commission are thus agreed that the refusal at issue may be
assessed under Article 82 EC on the assumption that it constitutes a refusal to license intellectual
property rights, they disagree as to the criteria established in the case-law that are applicable in
such a situation.
[315] Thus, Microsoft relies, primarily, on the criteria laid down in Magill and IMS Health,
paragraph 107 above, and, in the alternative, on those laid down in Bronner, paragraph 112 above.
[316] The Commission, on the other hand, contends that an ‘automatic’ application of the criteria
laid down in IMS Health, paragraph 107 above, would be ‘problematic’ in this case. It maintains
that, in order to determine whether such a refusal is abusive, it must take into consideration all the
particular circumstances surrounding that refusal, which need not necessarily be the same as those
identified in Magill and IMS Health, paragraph 107 above. Thus it explains at recital 558 to the
contested decision, that ‘[t]he case-law of the European Courts … suggests that the Commission
must analyse the entirety of the circumstances surrounding a specific instance of a refusal to supply
and must take its decision [on the basis of] the results of such a comprehensive examination’.
[317] At the hearing, the Commission, questioned on this issue by the Court, confirmed that it had
considered in the contested decision that Microsoft’s conduct presented three characteristics
which allowed it to be characterised as abusive. The first consists in the fact that the information
which Microsoft refuses to disclose to its competitors relates to interoperability in the software
industry, a matter to which the Community legislature attaches particular importance. The second
characteristic lies in the fact that Microsoft uses its extraordinary power on the client PC operating
systems market to eliminate competition on the adjacent work group server operating systems
market. The third characteristic is that the conduct in question involves disruption of previous
levels of supply.
[318] The Commission contends that in any event the criteria recognised by the Court of Justice in
Magill and IMS Health, paragraph 107 above, are also satisfied in this case.
[319] In response to those various arguments, the Court observes that, as the Commission rightly
states at recital 547 to the contested decision, although undertakings are, as a rule, free to choose
their business partners, in certain circumstances a refusal to supply on the part of a dominant
undertaking may constitute an abuse of a dominant position within the meaning of Article 82 EC
unless it is objectively justified.
[320] The Court of Justice thus considered that a company in a dominant position on the market in
raw materials which, with the aim of reserving such raw materials for the purpose of manufacturing
its own derivatives, refused to supply a customer which was itself a manufacturer of those
derivatives, and was therefore likely to eliminate all competition on the part of that customer,
abused its dominant position within the meaning of Article 82 EC (Joined Cases 6/73 and 7/73
Commercial Solvents v. Commission [1974] ECR 223; see, concerning a refusal to supply a service,
Case 311/84 CBEM [1985] ECR 3261).
[321] In Case 238/87 Volvo [1988] ECR 6211, the Court of Justice, on a reference for a preliminary
ruling under Article 234 EC, was asked whether the refusal by a car manufacturer which was the
proprietor of a design right covering car body panels to license third parties to supply products
incorporating the protected design must be considered to be an abuse of a dominant position
within the meaning of Article 82 EC. In its judgment, the Court of Justice emphasised that the right
of a proprietor of a protected design to prevent third parties from manufacturing and selling or
importing, without his consent, products incorporating the design constitutes the very subjectmatter of his exclusive right. The Court of Justice concluded (paragraph 8) that ‘an obligation
imposed upon the proprietor of a protected design to grant to third parties, even in return for a
reasonable royalty, a licence for the supply of products incorporating the design would lead to the
proprietor thereof being deprived of the substance of his exclusive right, and that a refusal to grant
such a licence cannot in itself constitute an abuse of a dominant position’. The Court of Justice
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added, however, that ‘the exercise of an exclusive right by the proprietor of a registered design in
respect of car body panels [might] be prohibited by Article [82 EC] if it involve[d], on the part of an
undertaking holding a dominant position, certain abusive conduct such as the arbitrary refusal to
supply spare parts to independent repairers, the fixing of prices for spare parts at an unfair level or
a decision no longer to produce spare parts for a particular model even though many cars of that
model [were] still in circulation, provided that such conduct [was] liable to affect trade between
Member States’ (paragraph 9).
[322] In Magill, paragraph 107 above, the Court of Justice, on appeal, had also been called upon to
adjudicate on the question of the refusal by a dominant undertaking to license a third party to use
an intellectual property right. That case concerned a decision in which the Commission had found
that three television companies had abused their dominant position on the market represented by
their respective weekly programme listings and the market for the television guides in which those
listings were published by relying on their copyright in those listings to prevent third parties from
publishing complete weekly guides to the programmes broadcast by the various different television
channels. The Commission had therefore ordered those television companies to supply their
advance weekly programme listings to each other and to supply them to third parties on request
and on a non-discriminatory basis and to permit reproduction of those listings by those third
parties. The Commission had also stipulated that any royalties requested by the television
companies should they choose to grant reproduction licences should be reasonable.
[323] In Magill, paragraph 107 above (paragraph 49), the Court of Justice, referring to Volvo,
paragraph 321 above, stated that ‘the exclusive right of reproduction form[ed] part of the author’s
rights, so that refusal to grant a licence, even if it is the act of an undertaking holding a dominant
position, cannot itself constitute abuse of a dominant position’. Still with reference to Volvo,
paragraph 321 above, the Court of Justice explained, however, that ‘the exercise of an exclusive
right by the proprietor may, in exceptional circumstances, involve abusive conduct’ (paragraph 50).
[324] The Court of Justice considered that the following circumstances were relevant for the
purpose of establishing that the conduct of the television companies in question was abusive. In
the first place, their refusal concerned a product (the television channels’ weekly program listings)
the supply of which was indispensable to the exercise of the activity in question (the publication of
a complete weekly television guide) (paragraph 53). In the second place, the refusal prevented the
appearance of a new product, a comprehensive weekly guide to television programmes, which the
television companies in question did not offer and for which there was a potential consumer
demand, which constituted an abuse under Article 82(b) EC (paragraph 54). In the third place, the
refusal was not justified (paragraph 55). Finally, in fourth place, the television companies, by their
conduct, had reserved to themselves a secondary market, the market for weekly television guides,
by excluding all competition on that market (paragraph 56).
[325] In Bronner, paragraph 112 above, the Court of Justice, on a reference for a preliminary ruling
under Article 234 EC, had been requested to rule on whether the refusal by a press group holding a
very large share of the daily newspaper market in Austria, and operating the only nationwide
newspaper home-delivery scheme in Austria, to allow the publisher of a rival newspaper to have
access to that scheme for appropriate remuneration, or to allow that publisher to purchase certain
complementary services from the group, constituted an abuse of a dominant position contrary to
Article 82 EC.
[326] In its judgment (paragraph 38), the Court of Justice first of all observed that although in
Commercial Solvents v. Commission and CBEM, paragraph 320 above, it had held that the refusal by
an undertaking holding a dominant position on a given market to supply an undertaking with which
it was in competition on a neighbouring market with raw materials and services respectively, which
were indispensable to carrying on the rival’s business, constituted an abuse, it had done so to the
extent that the conduct in question was likely to eliminate all competition on the part of that
undertaking.
[327] Next, the Court of Justice stated (paragraph 39) that at paragraphs 49 and 50 of Magill,
paragraph 107 above, it had held that the refusal by the owner of an intellectual property right to
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grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself
constitute abuse of a dominant position, but that the exercise of an exclusive right by the
proprietor may, in exceptional circumstances, involve an abuse.
[328] Last, the Court recited the exceptional circumstances which it had established in Magill,
paragraph 107 above, and stated (paragraph 41): "[E]ven if that case-law on the exercise of an
intellectual property right where applicable to the exercise of any property right whatever, it would
still be necessary, for [that] judgment to be effectively relied upon in order to plead the existence of
an abuse within the meaning of Article [82 EC] in a situation such as that which forms the subjectmatter of the … question, not only that the refusal of the service comprised in home delivery be
likely to eliminate all competition in the daily newspaper market on the part of the person
requesting the service and that such refusal be incapable of being objectively justified, but also that
the service in itself be indispensable to carrying on that person’s business, inasmuch as there is no
actual or potential substitute in existence for that home-delivery scheme."
[329] In IMS Health, paragraph 107 above, the Court of Justice again ruled on the conditions in
which a refusal by an undertaking holding a dominant position to grant to a third party a licence to
use a product protected by an intellectual property right might constitute abusive conduct within
the meaning of Article 82 EC.
[330] The Court of Justice first of all confirmed (paragraph 34), with reference to Volvo, paragraph
321 above, and Magill, paragraph 107 above, that, according to settled case-law, the exclusive right
of reproduction formed part of the rights of the owner of an intellectual property right, so that
refusal to grant a license, even if it is the act of an undertaking holding a dominant position, cannot
in itself constitute abuse of that position. The Court of Justice also observed (paragraph 35) that it
was clear from that case-law that exercises of an exclusive right by the owner might, in exceptional
circumstances, involve abusive conduct. Next, after reciting the exceptional circumstances found to
exist in Magill, paragraph 107 above, the Court held (paragraph 38) that it followed from that caselaw that, in order for the refusal by an undertaking which owns a copyright to give access to a
product or service indispensable for carrying on a particular business to be treated as abusive, it
was sufficient that three cumulative conditions be satisfied, namely, that that refusal prevents the
emergence of a new product for which there is a potential consumer demand, that it is unjustified
and that it is such as to exclude any competition on a secondary market.
[331] It follows from the case-law cited above that the refusal by an undertaking holding a
dominant position to license a third party to use a product covered by an intellectual property right
cannot in itself constitute an abuse of a dominant position within the meaning of Article 82 EC. It is
only in exceptional circumstances that the exercise of the exclusive right by the owner of the
intellectual property right may give rise to such an abuse.
[332] It also follows from that case-law that the following circumstances, in particular, must be
considered to be exceptional:
– in the first place, the refusal relates to a product or service indispensable to the exercise of a
particular activity on a neighbouring market;
– in the second place, the refusal is of such a kind as to exclude any effective competition on that
neighboring market;
– in the third place, the refusal prevents the appearance of a new product for which there is
potential consumer demand.
[333] Once it is established that such circumstances are present, the refusal by the holder of a
dominant position to grant a licence may infringe Article 82 EC unless the refusal is objectively
justified.
[334] The Court notes that the circumstance that the refusal prevents the appearance of a new
product for which there is potential consumer demand is found only in the case-law on the exercise
of an intellectual property right.
[335] Finally, it is appropriate to add that, in order that a refusal to give access to a product or
service indispensable to the exercise of a particular activity may be considered abusive, it is
necessary to distinguish two markets, namely, a market constituted by that product or service and
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on which the undertaking refusing to supply holds a dominant position and a neighbouring market
on which the product or service is used in the manufacture of another product or for the supply of
another service. The fact that the indispensable product possibility of identifying a separate market
(see, to that effect, IMS Health, paragraph 107 above, paragraph 43). Thus, the Court of Justice
held, at paragraph 44 of IMS Health, or service is not marketed separately does not exclude from
the outset the paragraph 107 above, that it was sufficient that a potential market or even a
hypothetical market could be identified and that such was the case where the products or services
were indispensable to the conduct of a particular business activity and where there was an actual
demand for them on the part of undertakings which sought to carry on that business. The Court of
Justice concluded at the following paragraph of the judgment that it was decisive that two different
stages of production were identified and that they were interconnected in that the upstream
product was indispensable for supply of the downstream product.
….
(ii) The indispensable nature of the interoperability information
[369] As already pointed out at paragraph 207 above, the Commission adopted a two-stage
approach in determining whether the information at issue was indispensable, in that, first of all, it
considered what degree of interoperability with the Windows domain architecture non-Microsoft
work group server operating systems must achieve in order for its competitors to be able to remain
viably on the market and, second, it appraised whether the interoperability that Microsoft refused
to disclose was indispensable to the attainment of that degree of interoperability….
[374] …The Court observed, in particular, that the Commission had concluded that, in order to be
able to compete viably with Windows work group server operating systems, competitors’ operating
systems must be able to interoperate with the Windows domain architecture on an equal footing
with those Windows systems.
[376] Next, Microsoft criticises the fact that the Commission appraised the requisite degree of
interoperability according to what in its view was necessary to allow designers of non-Microsoft
work group server operating systems to remain viably on the market.
[377] It is sufficient to observe, in that regard, that the Court has already confirmed, at paragraph
229 above, the correctness of the approach thus adopted by the Commission.
[378] Finally, Microsoft claims that it is not necessary for its competitors’ work group server
operating systems to attain the degree of interoperability required by the Commission in order for
them to be able to remain viably on the market.
[379] It must be emphasised that the Commission’s analysis of that question in the contested
decision is based on complex economic assessments and that, accordingly, it is subject to only
limited review by the Court.
[386] …., the Court considers that the interoperability of work group server operating systems with
client PC operating systems is even more important in the case of Windows client PC operating
systems.
[387] Microsoft’s dominant position on the client PC operating systems market exhibits, as the
Commission states at recitals 429 and 472 to the contested decision, ‘extraordinary features’, since,
notably, its market shares on that market are more than 90% (recitals 430 to 435 to the contested
decision) and since Windows represents the ‘quasi-standard’ for those operating systems.
[388] As the Windows operating system is thus present on virtually all client PCs installed within
organisations, non-Windows work group server operating systems cannot continue to be marketed
if they are incapable of achieving a high degree of interoperability with Windows.
[389] In the third place, the Court observes that, according to the contested decision, it is important
that non-Windows work group server operating systems can interoperate not only with Windows
client PC operating systems but also, more generally, with the Windows domain architecture.
[390] More specifically, the Commission considers that, in order to be able to be viably marketed,
non-Windows work group server operating systems must be capable of participating in the
Windows domain architecture – which consists of an ‘architecture’….
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[391] The Court therefore finds that Microsoft has not established that that assessment is
manifestly incorrect.
[422] The Court also concludes…. that the absence of such interoperability with the Windows
domain architecture has the effect of reinforcing Microsoft’s competitive position on the work
group server operating systems market, particularly because it induces consumers to use its work
group server operating system in preference to its competitors’, although its competitors’
operating systems offer features to which consumers attach great importance.
[426] …. interoperability considerations play a key role in decisions concerning the acquisition of
work group server operating systems….
[435] …., it is sufficient to observe that Microsoft itself has recognised, both in its written pleadings
and in answer to a question put to it at the hearing, that none of its recommended methods or
solutions made it possible to achieve the high degree of interoperability which the Commission
correctly required in the present case.
[436] It follows….that Microsoft has not demonstrated that the circumstance that the
interoperability information was indispensable was not present in this case.
(iii) Elimination of competition
The definition of the relevant product market
[482] The Court notes at the outset that in so far as the definition of the product market involves
complex economic assessments on the part of the Commission, it is subject to only limited review
by the Community judicature (see, to that effect, Case T-342/99 Airtours v. Commission [2002] ECR
II-2585, paragraph 26). However, this does not prevent the Community judicature from examining
the Commission’s assessment of economic data. It is required to decide whether the Commission
based its assessment on accurate, reliable and coherent evidence which contains all the relevant
data that must be taken into consideration in appraising a complex situation and whether it is
capable of substantiating the conclusions drawn from it (see, to that effect, Commission v. Tetra
Laval).
[484] …., the Commission took into account the demand-side substitutability and the supply-side
substitutability of the products. It must be borne in mind that, as stated in the Commission Notice
on the definition of the relevant market for the purposes of Community competition law (OJ 1997 C
372, p. 5), point 7, ‘[a] relevant product market comprises all those products and/or services which
are regarded as interchangeable or substitutable by the consumer, by reason of the products’
characteristics, their prices and their intended use’. As indicated at point 20 of that notice,
moreover, supply-side substitutability may also be taken into account when defining markets in
those situations in which its effects are equivalent to those of demand substitution in terms of
effectiveness and immediacy. That means that suppliers are able to switch production to the
relevant products and market them in the short term without incurring significant additional costs
or risks in response to small and permanent changes in relative prices….
[486] As regards, in the first place, demand-side substitutability, the Commission concludes at
recital 387 to the contested decision that ‘there are no products that … exercise sufficient
competitive pressure on work group server operating systems such that they should be included in
the same relevant product market’….
[559] Last, as regards the abusive refusal to supply, it must be borne in mind that in the contested
decision the Commission takes issue with Microsoft for having used, by leveraging, its quasimonopoly on the client PC operating systems market to influence the work group server operating
systems market (….). In other words, Microsoft’s abusive conduct has its origin in its dominant
position on the first product market (….). Even if the Commission were wrongly to have considered
that Microsoft was in a dominant position on the second market (….) that could not therefore of
itself suffice to support a finding that the Commission was wrong to conclude that there had been
an abuse of a dominant position by Microsoft.
The applicable criterion
[560] In the contested decision, the Commission considered whether the refusal at issue gave rise
to a ‘risk’ of the elimination of competition on the work group server operating systems market
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(….). Microsoft contends that that criterion is not sufficiently strict, since according to the case-law
on the exercise of an intellectual property right the Commission must demonstrate that the refusal
to license an intellectual property right to a third party is ‘likely to eliminate all competition’, or, in
other words, that there is a ‘high probability’ that the conduct in question will have such a result.
[561] The Court finds that Microsoft’s complaint is purely one of terminology and is wholly
irrelevant. The expressions ‘risk of elimination of competition’ and ‘likely to eliminate competition’
are used without distinction by the Community judicature to reflect the same idea, namely that
Article 82 EC does not apply only from the time when there is no more, or practically no more,
competition on the market. If the Commission were required to wait until competitors were
eliminated from the market, or until their elimination was sufficiently imminent, before being able
to take action under Article 82 EC, that would clearly run counter to the objective of that provision,
which is to maintain undistorted competition in the common market and, in particular, to
safeguard the competition that still exists on the relevant market….
[563] …. What matters, for the purpose of establishing an infringement of Article 82 EC, is that the
refusal at issue is liable to, or is likely to, eliminate all effective competition on the market. It must
be made clear that the fact that the competitors of the dominant undertaking retain a marginal
presence in certain niches on the market cannot suffice to substantiate the existence of such
competition.
[564] Last, it must be borne in mind that it is for the Commission to establish that the refusal to
supply gives rise to a risk of the elimination of all effective competition…. the Commission must
base its assessment on accurate, reliable and coherent evidence which comprises all the relevant
data that must be taken into consideration in order to assess a complex situation and which are
capable of substantiating the conclusions drawn from them.
….
[593] The above factors confirm that Microsoft’s refusal has the consequence that its competitors’
products are confined to marginal positions or even made unprofitable. The fact that there may be
marginal competition between operators on the market cannot therefore invalidate the
Commission’s argument that all effective competition was at risk of being eliminated on that
market….
[618] It follows from all of the foregoing that the Commission did not make a manifest error of
assessment when it concluded that the evolution of the market revealed a risk that competition
would be eliminated on the work group server operating systems market….
[619] Microsoft’s very high market share on the work group server operating system market has
the consequence that a very large number of technicians possess skills which are specific to
Windows operating systems.
[620] The Court therefore concludes that the circumstance that the refusal at issue entailed the risk
of elimination of competition is present in this case.
(iv) The new product
[643] It must be emphasised that the fact that the applicant’s conduct prevents the appearance of
a new product on the market falls to be considered under Article 82(b) EC, which prohibits abusive
practices which consist in ‘limiting production, markets or technical developments to the …
prejudice of consumers’….
[647] The circumstance relating to the appearance of a new product, as envisaged in Magill and
IMS Health, paragraph 107 above, cannot be the only parameter which determines whether a
refusal to license an intellectual property right is capable of causing prejudice to consumers within
the meaning of Article 82(b) EC. As that provision states, such prejudice may arise where there is a
limitation not only of production or markets, but also of technical development.
[649] The Court finds that the Commission’s findings at the recitals referred to in the preceding
paragraph are not manifestly incorrect.
[650] …. the Commission was correct to observe, (recital 694)…. that ‘[owing] to the lack of
interoperability that competing work group server operating system products can achieve with the
71
Windows domain architecture, an increasing number of consumers are locked into a homogeneous
Windows solution at the level of work group server operating systems’.
[651] It must be borne in mind that it has already been stated at paragraphs 371 to 422 above that
Microsoft’s refusal prevented its competitors from developing work group server operating
systems capable of attaining a sufficient degree of interoperability with the Windows domain
architecture, with the consequence that consumers’ purchasing decisions in respect of work group
server operating systems were channelled towards Microsoft’s products….As interoperability
problems arise more acutely with work group server operating systems in that range of products
than with those of the preceding generation (….), the increasing uptake of those systems merely
reinforces the ‘lock-in’ effect referred to in the preceding paragraph.
[652] The limitation thus placed on consumer choice is all the more damaging to consumers
because…., they consider that non-Microsoft work group server operating systems are better than
Windows work group server operating systems with respect to a series of features to which they
attach great importance, such as ‘reliability/availability of the … system’ and ‘security included with
the server operating system’.
[653] …. the Commission was correct to consider that the artificial advantage in terms of
interoperability that Microsoft retained by its refusal discouraged its competitors from developing
and marketing work group server operating systems with innovative features, to the prejudice….of
consumers. That refusal has the consequence that those competitors are placed at a disadvantage
by comparison with Microsoft so far as the merits of their products are concerned, particularly with
regard to parameters such as security, reliability, ease of use or operating performance speed.
[655] The Commission was careful to emphasise, in that context, that….the same specification can
be implemented in numerous different and innovative ways by software designers.
[656] Thus, the contested decision rests on the concept that, once the obstacle represented for
Microsoft’s competitors by the insufficient degree of interoperability….has been removed, those
competitors will be able to offer work group server operating systems which,….will be
distinguished….with respect to parameters which consumers consider important.
[657] …. Microsoft’s competitors would not be able to clone or reproduce its products solely by
having access to the interoperability information covered by the contested decision. ….The Court
also notes that the protocols whose specifications Microsoft is required to disclose in application of
the contested decision represent only a minimum part of the entire set of protocols….
[659] Last, Microsoft’s argument that it will have less incentive to develop a given technology if it is
required to make that technology available to its competitors.…is of no relevance to the
examination of the circumstance relating to the new product, where the issue to be decided is the
impact of the refusal to supply on the incentive for Microsoft’s competitors to innovate and not on
Microsoft’s incentives to innovate. That is an issue which will be decided when the Court examines
the circumstance relating to the absence of objective justification.
[660] In the third place, the Commission is also correct to reject as unfounded Microsoft’s assertion
during the administrative procedure that it was not demonstrated that its refusal caused prejudice
to consumers (recitals 702 to 708 to the contested decision).
[661] First of all,…. contrary to Microsoft’s contention, consumers consider non-Microsoft work
group server operating systems to be better than Windows work group server operating systems
on a number of features to which they attach great importance….
[664] Last, it must be borne in mind that it is settled case-law that Article 82 EC covers not only
practices which may prejudice consumers directly but also those which indirectly prejudice them by
impairing an effective competitive structure (Case 85/76 Hoffmann-La Roche v. Commission [1979]
ECR 461, paragraph 125, and Irish Sugar v. Commission, paragraph 229 above, paragraph 232). In
this case, Microsoft impaired the effective competitive structure on the work group server
operating systems market by acquiring a significant market share on that market.
[665] The Court concludes from all of the foregoing considerations that the Commission’s finding to
the effect that Microsoft’s refusal limits technical development to the prejudice of consumers
72
within the meaning of Article 82(b) EC is not manifestly incorrect. The Court therefore finds that the
circumstance relating to the appearance of a new product is present in this case.
(v) The absence of objective justification
Doc. # 48 "Applying Dissimilar Conditions to Equivalent Transactions with Other Trading Parties,
Thereby Placing Them at a Competitive Disadvantage" or exclusive dealing and loyalty bonuses
NV Nederlandsche Banden Industrie Michelin v. Commission of the European Communities
Case 322/81, [1983] ECR 3461
Judgment
[2] Michelin NV is the Netherlands subsidiary of the Michelin group. It is responsible for the
production and sale of Michelin tires in the Netherlands, where it has a factory for the production
of new tires for vans and lorries.
[3] In Article 1 of the Decision in question the Commission declared that during the period between
1975 and 1980 Michelin NV infringed Article 86 of the EEC Treaty on the market in new
replacement tires for lorries, buses and similar vehicles by:
(a) Tying tire dealers in the Netherlands to itself through the granting of selective discounts on an
individual basis conditional upon sales "targets" and discount percentages, which were not clearly
confirmed in writing, and by applying to them dissimilar conditions in respect of equivalent
transactions; and
(b) Granting an extra annual bonus in 1977 on purchases of tires for lorries, buses and the like and
on purchases of car tires, which was conditional upon attainment of a "target" in respect of car tire
purchases.
The Commission fined Michelin NV 680 000 ECU or HFL 1 833 184.80.
The application of Article 102 to a system of target discounts
[71] In the case [ . . . ] of the grant by an undertaking in a dominant position of discounts to its
customers the Court has held in its judgments of 16 December 1975 in Joined Cases 40 to 48, 50, 54
to 56, 111, 113 and 114/73 Cooperatieve Vereniging "Suiker Unie" UA and others v. Commission
(1975) ECR 1663 and of 13 February 1979 in Case 85/76 Hoffmann-la Roche v. Commission (1979)
ECR 461 that in contrast to a quantity discount, which is linked solely to the volume of purchases
from the manufacturer concerned, a loyalty rebate, which by offering customers financial
advantages tends to prevent them from obtaining their supplies from competing manufacturers,
amounts to an abuse within the meaning of Article 86 of the Treaty. . .
[82] That effect was accentuated still further by the wide divergence between Michelin NV's market
share and those of its main competitors. If a competitor wished to offer a dealer a competitive
inducement for placing an order, especially at the end of the year, it had to take into account the
absolute value of Michelin NV's annual target discount and fix its own discount at a percentage
which, when related to the dealer's lesser quantity of purchases from that competitor, was very
high. Despite the apparently low percentage of Michelin NV's discount, it was therefore very
difficult for its competitors to offset the benefits or losses resulting for dealers from attaining or
failing to attain Michelin NV's targets, as the case might be. . . .
[84] All those factors were instrumental in creating for dealers a situation in which they were under
considerable pressure, especially towards the end of a year, to attain Michelin NV's sales targets if
they did not wish to run the risk of losses which its competitors could not easily make good by
means of the discounts which they themselves were able to offer. Its network of commercial
representatives enabled Michelin NV to remind dealers of this situation at any time so as to induce
them to place orders with it.
[85] Such a situation is calculated to prevent dealers from being able to select freely at any time in
the light of the market situation the most favourable of the offers made by the various competitors
73
and to change supplier without suffering any appreciable economic disadvantage. It thus limits the
dealers' choice of supplier and makes access to the market more difficult for competitors. Neither
the wish to sell more nor the wish to spread production more evenly can justify such a restriction of
the customer's freedom of choice and independence. The position of dependence in which dealers
find themselves and which is created by the discount system in question is not therefore based on
any countervailing advantage which may be economically justified.
[86] It must therefore be concluded that by binding dealers in the Netherlands to itself by means of
the discount system described above Michelin NV committed an abuse, within the meaning of
Article 86 of the Treaty, of its dominant position in the market for new replacement tires for heavy
vehicles. The submission put forward by the applicant to refute that finding in the contested
decision must therefore be rejected.
Discrimination against certain dealers
[87] In a second submission, concerning the discount system in general, the applicant challenges
the Commission's finding that its discount system involved the application of dissimilar conditions
to equivalent transactions with dealers within the meaning of Article 86(c) inasmuch as different
discounts were granted to dealers in comparable situations. Michelin NV maintains that the
discounts are not discriminatory and that the differences between the rates of discount received by
different dealers are due to the application of a discount scale based on the dealer's total
purchases from Michelin NV in the previous year.
[88] To justify its finding, the Commission in the procedure before the court relied upon a
comparison of the discounts received by various dealers with the annual quantities of heavy-vehicle
tires purchased by them and upon a table showing the number of tires sold in the various tire
categories in respect of which different rates of discount were granted in 1976 and pointed out a
number of inconsistencies and anomalies which in its view emerged from them and demonstrated
the existence of discrimination.
[89] However, it is clear from what has been stated regarding the operation of the discount system
that the amount of the annual variable discount depended primarily on the dealer's turnover in
Michelin tires without distinction of category and not on the number of heavy-vehicle tires
purchased by the dealer . . .
[90] Although a system based on individual sales targets fixed or agreed every year for each dealer
necessarily involves certain differences between the rates of discount granted to different dealers
for the same number of purchases and although in addition Michelin NV has admitted that it could
not apply its scale of discounts mechanically, as some dealers did not accept an automatic
reduction in the discount as a result of a reduction in turnover, it has not been established that
such differences in treatment between different dealers are due to the application of unequal
criteria and that there are no legitimate commercial reasons capable of justifying them. It is not
therefore possible to infer from such differences that Michelin NV discriminated against certain
dealers.
Doc. # 49
Art. 102- e: "Making the Conclusion of Contracts Subject to Acceptance by the Other Parties of
Supplementary Obligations Which, by Their Nature or According to Commercial Usage, Have No
Connection with the Subject of Such Contracts"
Centre Belge d'Études de Marché-Télémarketing (CBEM) v. SA Compagnie Luxembourgeoise de
Télédiffusion (CLT) and Information Publicité Benelux (IPB)
Case 311/84, [1985] ECR 3261
Judgment
[3] It appears from the documents before the court that Centre belge is a trading company which,
since 1978, has been studying the technique known as ‘tele-sales' or ‘telemarketing', whereby an
advertiser places in one of the media, in the present case television, an advertisement carrying a
74
telephone number which those at whom the advertisement is aimed may call either to obtain
information on the product offered or to respond to the advertising campaign in some other way.
[4] Centre belge organized its first telemarketing operation on the RTL television station in 1982. In
1983 it concluded an agreement with information publicity for a period of 12 months which gave it
the exclusive right to conduct telemarketing operations on the RTL station aimed at the Benelux
market. The telephone number shown to television viewers was that of Centre belge, which made
its telephone lines and team of telephonists available to advertisers and to the television station.
[5] On the expiry of that agreement information publicity notified advertisers that from April 1984
RTL would no longer accept advertising ‘spots' involving an invitation to make a telephone call
unless the telephone number used in Belgium was that of information publicity. It was against that
notice that Centre belge brought an action for an injunction before the tribunal de commerce,
claiming inter alia that it constituted an abuse of a dominant position within the meaning of Article
102 (then 86) of the EEC Treaty.
[8] [. . .] the vice-president of the tribunal de commerce stayed the proceedings and referred the
following question[s] to the court for a preliminary ruling.
...
[19] The [. . .] question asks whether an undertaking holding a dominant position on a particular
market, by reserving to itself or to an undertaking belonging to the same group, to the exclusion of
any other undertaking, an ancillary activity which could be carried out by another undertaking as
part of its activities on a neighbouring but separate market, abuses its dominant position within the
meaning of Article 86 (now Article 102).
[20] Centre belge considers that such conduct constitutes an abuse under several provisions of
Article 86 (now Article 102). Where a television station subjects the sale of broadcasting time for
any telemarketing operation to the use of the telephone number of an exclusive advertising agent
belonging to the same group, such conduct amounts to a refusal of sale to other telemarketing
undertakings. As regards advertisers, such conduct amounts to the imposition of an associated
service and the limitation of markets prohibited by Article 86(d) and (b). Ultimately it enables the
agent to impose on advertisers unfair prices contrary to Article 86 (now Article 102) (a).
[24] [ . . . ] in the commission's view, [ . . . ] information publicity subjects the conclusion of
contracts to the acceptance of supplementary obligations which have no connection with the
subject of the contracts, and that is contrary to Article 86 (now Article 102) (d).
[27] It must [ . . . ] be held in answer to the second question that an abuse within the meaning of
Article 86 (now Article 102) is committed where, without any objective necessity, an undertaking
holding a dominant position on a particular market reserves to itself or to an undertaking belonging
to the same group an ancillary activity which might be carried out by another undertaking as part of
its activities on a neighbouring but separate market, with the possibility of eliminating all
competition from such undertaking.
Doc. # 50 Other Types of Abuse of a Dominant Position: Refusal to Supply, Essential Facilities….
Istituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v. Commission
Joined Cases 6 and 7/73, [1974] ECR 223
Commercial Solvents (CSC), an American corporation and the parent company of Istituto
Chemioterapico Italiano (ICI), was supplying nitropropane or aminobutanol to ICI, so that the latter
could sell it to Laboratorio Chimico Farmaceutico Giorgio Zoja (Zoja). Zoja would then use the
chemicals to develop ethambutol, a derivative drug used in the treatment of tuberculosis. After
four years of supplying the substances to Zoja, CSC decided to cease the distribution to that
company and have ICI manufacture the derivative drug in order for CSC to enter the market
themselves. Considering the fact that all the other suppliers on the market were either too small or
still in the experimental period, Zoja notified the Commission about CSC refusal to supply the
chemicals which it needed for its own production.
Judgment
[24] It appears from the documents and from the hearing that the suppliers of raw material are
75
limited, as regards the EEC, to Istituto, which, as stated in the claim by CSC, started in 1968 to
develop its own specialties based on ethambutol, and in November 1969 obtained the approval of
the Italian government necessary for the manufacture and in 1970 started manufacturing its own
specialties. When Zoja sought to obtain further supplies of aminobutanol, it received a negative
reply. CSC had decided to limit, if not completely to cease, the supply of nitropropane and
aminobutanol to certain parties in order to facilitate its own access to the market for the
derivatives.
[25] However, an undertaking being in a dominant position as regards the production of raw
material and therefore able to control the supply to manufacturers of manufacturing these
derivatives (in competition with its former customers) act in such a way as to eliminate their
competition which in the case in question, would amount to eliminating one of the principal
manufacturers of contrary to the objectives expressed in Article 3(f) of the Treaty and set out in
greater detail in Articles 85 (now Article 101) and 86 (now Article 102), it follows that an
undertaking which has a dominant position in the market in raw materials and which, with the
object of reserving such raw material for manufacturing its own derivatives, refuses to supply a
customer, which is itself a manufacturer of these derivatives, and therefore risks eliminating all
competition on the part of this customer, is abusing its dominant position within the meaning of
Article 86 (now Article 102). . . .
[32] The prohibitions of Articles 85 (now Article 101) and 86 (now Article 102) must in fact
be interpreted and applied in the light of Article 3(f) (TFEU Article 2 and Protocol 27) of the Treaty,
which provides that the activities of the Community shall include the institution of a system
ensuring that competition in the Common Market is not distorted, and Article 2 of the Treaty,
which gives the Community the task of promoting "throughout the Community harmonious
development of economic activities". By prohibiting the abuse of a dominant position within the
market in so far as it may affect trade between Member States, Article 86 (now Article 102)
therefore covers abuse which may directly prejudice consumers as well as abuse which indirectly
prejudices them by impairing the effective competitive structure as envisaged by Article 3(f) (TFEU
Article 2 and Protocol 27) of the Treaty.
[33] The Community authorities must therefore consider all the consequences of the conduct
complained of for the competitive structure in the Common Market without distinguishing
between production intended for sale within the market and that intended for export. When an
undertaking in a dominant position with the Common Market abuses its position in such a way that
a competitor in the Common Market is likely to be eliminated, it does not matter whether the
conduct relates to the latter's exports or its trade within the Common Market, once it has been
established that this elimination will have repercussions on the competitive structure within the
Common Market.
[34] Moreover the contrary argument would in practice mean that the control of Zoja's production
and outlets would be in the hands of CSC and Istituto. Finally its cost prices would have been so
affected that the ethambutol produced by it would possibly become unmarketable.
Doc. # 51 Abuse of a Dominant Position and Intellectual/Industrial/Commercial Property Rights
Microsoft Corp. v. Commission September 17, 2007
Judgment of the General Court (Grand Chamber) Case T-201/04, 2007 ECR II-3601
[312] It must be borne in mind that Microsoft’s argument is that its refusal to supply
interoperability information cannot constitute an abuse of a dominant position within the meaning
of Article 82 EC because, first, the information is protected by intellectual property rights (or
constitutes trade secrets) and, second, the criteria established in the case-law which determine
when an undertaking in a dominant position can be required to grant a licence to a third party are
not satisfied in this case.
[313] It must also be borne in mind that the Commission contends that there is no need to decide
whether Microsoft’s conduct constitutes a refusal to license intellectual property rights to a third
party, or whether trade secrets merit the same degree of protection as intellectual property rights,
76
since the strict criteria against which such a refusal may be found to constitute an abuse of a
dominant position within the meaning of Article 82 EC (now Article 102) are in any event satisfied in
the present case (see paragraphs 284 to 288 above).
[665] The Court concludes from all of the foregoing considerations that the Commission’s finding
to the effect that Microsoft’s refusal limits technical development to the prejudice of consumers
within the meaning of Article 82(b) EC (now Article 102) is not manifestly incorrect. The Court
therefore finds that the circumstance relating to the appearance of a new product is present in this
case.
(v) The absence of objective justification
[688] The Court notes, as a preliminary point, that although the burden of proof of the existence
of the circumstances that constitute an infringement of Article 82 EC (now Article 102) is borne by
the Commission, it is for the dominant undertaking concerned, and not for the Commission, before
the end of the administrative procedure, to raise any plea of objective justification and to support it
with arguments and evidence….
[690] The Court considers that, even on the assumption that it is correct, the fact that the
communication protocols covered by the contested decision, or the specifications for those
protocols, are covered by intellectual property rights cannot constitute objective justification within
the meaning of Magill and IMS Health, paragraph 107 above. Microsoft’s argument is inconsistent
with the raison d’être of the exception which that case-law thus recognizes in favor of free
competition, since if the mere fact of holding intellectual property rights could in itself constitute
objective justification for the refusal to grant a licence, the exception established by the case-law
could never apply….
[691] It must be borne in mind that… the holder of an intellectual property right can exploit that
right solely for his own benefit constitutes the very substance of his exclusive right. Accordingly, a
simple refusal, even on the part of an undertaking in a dominant position, to grant a licence to a
third party cannot in itself constitute an abuse of a dominant position within the meaning of Article
82 EC (now Article 102). It is only when it is accompanied by exceptional circumstances such as
those hitherto envisaged in the case-law that such a refusal can be characterised as abusive and
that, accordingly, it is permissible, in the public interest in maintaining effective competition on the
market, to encroach upon the exclusive right of the holder of the intellectual property right by
requiring him to grant licences to third parties seeking to enter or remain on that market….
[693] …., the fact that the technology concerned is secret is the consequence of a unilateral
business decision on Microsoft’s part…. there is no reason why secret technology should enjoy a
higher level of protection than, for example, technology which has necessarily been disclosed to
the public by its inventor in a patent-application procedure.
[….]
[698] Microsoft merely put forward vague, general and theoretical arguments on that point.
Thus, as the Commission observes at recital 709 to the contested decision, in its response of 17
October 2003 to the third statement of objections Microsoft merely stated that ‘[d]isclosure would
… eliminate future incentives to invest in the creation of more intellectual property’, without
specifying the technologies or products to which it thus referred.
[699] In certain passages in the response referred to in the preceding paragraph, Microsoft
envisages a negative impact on its incentives to innovate by reference to its operating systems in
general, namely both those for client PCs and those for servers.
[700] In that regard, it is sufficient to note that, at recitals 713 to 729 to the contested decision,
the Commission quite correctly refuted Microsoft’s arguments relating to the fear that its products
would be cloned. It must be borne in mind, in particular, that the remedy prescribed in Article 5 of
the contested decision does not, and is not designed to, allows Microsoft’s competitors to copy its
products (see paragraphs 198 to 206, 240 to 242 and 656 to 658 above).
[701] It follows that it has not been demonstrated that the disclosure of the information to which
that remedy relates will significantly reduce – still less eliminate – Microsoft’s incentives to
innovate.
77
[702] In that context, the Court observes that…, it is normal practice for operators in the industry
to disclose to third parties the information which will facilitate interoperability with their products
and Microsoft itself had followed that practice until it was sufficiently established on the work
group server operating systems market. Such disclosure allows the operators concerned to make
their own products more attractive….
Doc. # 52 Abuse a dominant position acquired through a merger
Europemballage Corp. and Continental Can Co., Inc. v. Commission s Case 6/72, [1973] ECR 215
Excerpts from Commission Decision of 9 December 1971, OJ 1972, L 7, Europemballage Corporation and
Continental Can Co., Inc.
Continental Can Company, Inc. of New York was charged by the Commission to have
infringed ex - Art. 86, now TFEU Article 102 (ex - Article 82), by abusing its dominant position in a
substantial part of the Common Market for light metal containers and for the machines used by
canners to close the cans. Continental Can owned more than 85% of the shares of a West German
maker of cans and machines, Schmalbach. Continental Can had granted licenses from to several
European canners, whereas other canners had licenses from American Can. Among Continental
Can licensee were a British corporation, Metal Box, a French corporation, Carnaud, and a Dutch
undertaking Thomassen & Drijver-Verblifa N.V. In 1969, Continental Can decided to acquire some
of the above listed European undertakings through a wholly-owned subsidiary, Europemballage.
Carnaud refused to join [Metal Box being a British corporation was outside the Common Market at
that time]. Only Thomassen agreed to proceed with the acquisition of 80% of its shares and
convertible debentures. The Commission failed to convince Continental Can, Europemballage, the
Dutch and German subsidiaries to “desist”; it then adopted a decision stating that Continental Can
held a dominant position in West Germany for metal cans and metal caps for glass jars, and that it
had a dominant position in the Netherlands, where it had eliminated, basically, any competition.
As a result, the Commission argued, Continental Can and Europemballage had abused their
dominant position. [The decision also raised the issue of “merger” as being contrary to EEC art. 86,
now TFEU Art. 102 (ex 82). On this issue, see below Chapter Ten on Mergers].
Judgment
[14] The applicants argue that according to the general principles of international law, Continental,
as an enterprise with its registered office outside the common market, is neither within the
administrative competence of the Commission, nor under the jurisdiction of the Court of Justice. [ . .
. ] Moreover, the illegal behaviour against which the commission was proceeding should not be
directly attributed to Continental, but to Europemballage.
[15] The applicants cannot dispute that Europemballage, founded on 20 February 1970, is a
subsidiary of Continental. The circumstance that this subsidiary company has its own legal
personality does not suffice to exclude the possibility that its conduct might be attributed to.
[16] It is certain that Continental caused Europemballage to make a take-over bid to the
shareholders of TDV in the Netherlands [ . . . ] thus this transaction, [ . . . ] is to be attributed not
only to Europemballage, but also and first and foremost to Continental. Community law is
applicable to such an acquisition, which influences market conditions within the Community. The
circumstance that Continental does not have its registered office within the territory of one of the
Member States is not sufficient to exclude it from the application of Community Law.
[18] In Articles 1 and 2 of the Commission’s decision of 9 December 1971 Continental Can is
blamed for having infringed Article 86 of the EEC Treaty (now TFEU Article 102) by abusing the
dominant position which it allegedly held through Schmalbach-Lubeca-Werke Ag of Brunswick
(hereinafter called SLW) in a substantial part of the common market in the market for light metal
containers for meat, meat products, fish and crustacea as well as in the market for metal closures
for glass jars. According to Article 1 the abuse consists in Continental having acquired in April
1970, through its subsidiary Europemballage, about 80 per cent of the shares and debentures of
TDV. By this acquisition competition in the containers mentioned was practically eliminated in a
substantial part of the common market.
[19] The applicants maintain that the Commission by its decision, based on an erroneous
78
interpretation of Article 86 of the EEC Treaty (now TFEU Article 102), is trying to introduce a
control of mergers of undertakings, and thus exceeding its powers.
[20] [….] The question is whether the word “abuse” in Article 86 refers only to practices of
undertakings which may directly affect the market and are detrimental to production or sales, to
purchasers or consumers, or whether this word refers also to changes in the structure in a
substantial part of the common market.
[22] In order to answer this question, one has to go back to the spirit, general scheme and wording
of Article 86(now TFEU Article 102), as well as to the system and objectives of the Treaty. [….]
[23] Article 86 (now TFEU Article 102) is part of the chapter devoted to the common rules on the
Community’s policy in the field of competition. This policy is based on Article 3(f) (now Article 3(g)
and Protocol 27) of the Treaty according to which the Community’s activity shall include the
institution of a system ensuring that competition in the common market is not distorted. [….]
[24] But if Article 3(f) (now Article 3(g) and Protocol 27) provides for the institution of a system
ensuring that competition in the common market is not distorted, then it requires a fortiori that
competition must not be eliminated. [….]This requirement is so essential that without it
numerous provisions of the Treaty would be pointless. Moreover, it corresponds to the precept of
Article 2 of the Treaty according to which one of the tasks of the Community is "to promote
throughout the Community a harmonious development of economic activities". Thus the
restraints on competition which the Treaty allows under certain conditions because of the need to
harmonize the various objectives of the Treaty are limited by the requirements of Articles 2 and 3.
Going beyond this limit involves the risk that the weakening of competition would conflict with
the aims of the common market.
[25] [ . . . ] The restraint of competition which is prohibited if it is the result of behavior falling
under Article 85 (now Article 101), cannot become permissible by the fact that such behavior
succeeds under the influence of a dominant undertaking and results in the merger of the
undertakings concerned. In the absence of explicit provisions one cannot assume that the Treaty,
which prohibits in Article 85 (now Article 101) certain decisions of ordinary associations of
undertakings restricting competition without eliminating it, permits in Article 86 (now Article 102)
that undertakings, after merging into an organic unity, should reach such a dominant position that
any serious chance of competition is practically rendered impossible. Such a diverse legal
treatment would make a breach in the entire competition law which could jeopardize the proper
functioning of the common market. If, in order to avoid the prohibitions in Article 85 (now Article
101), it sufficed to establish such close connections between the undertakings that they escaped
the prohibition of Article 85 (now Article 101) without coming within the scope of that of Article
86 (now Article 102), then, in contradiction to the basic principles of the common market, the
partitioning of a substantial part of this market would be allowed [. . .]
[26] [….] As may further be seen from letters (c) and (d) of Article 86(2) (now TFEU Article 102(2)),
the provision is not only aimed at practices which may cause damage to consumers directly, but
also at those which are detrimental to them through their impact on an effective competition
structure, such as is mentioned in Article 3(f) of the Treaty. Abuse may therefore occur if an
undertaking in a dominant position strengthens such position in such a way that the degree of
dominance reached substantially fetters competition, i.e. that only undertakings remain in the
market whose behaviour depends on the dominant one.
[27] [….] The strengthening of the position of an undertaking may be an abuse and prohibited
under Article 86 of the Treaty, regardless of the means and procedure by which it is achieved, if it
has the effects mentioned above.
[30] In order to justify its thesis, the commission viewed the consequences of the disputed merger
from various angles. In this respect a distinction has to be made in the statement of reasons for its
decision between four essential elements:
(a) the present market share of the combined undertakings in the products concerned,
(b) the relative proportions of the new unit created by the merger compared to the size of potential
competitors in this market,
(c) the economic power of the purchasers vis-a-vis that of the new unit, and
79
(d) the potential competition of either the manufacturers of the same products, who are situated in
geographically distant markets, or of other products made by manufacturers situated in the common market.
In examining these various factors the decision on the one hand is based on the very high market
share already held by SLW in metal containers, on the weak competitive position of the
competitors remaining in the market, on the economic weakness of most of the consumers in
relation to that of the new unit and on the numerous legal and factual links between continental
and potential competitors; and, on the other hand, on the financial and technical difficulties
involved in entering a market characterized by a strong concentration.
[31] The applicant contests the exactitude of the data on which the commission bases its decision.
It cannot be concluded from SLW’s market share, amounting to 70 to 80 per cent in meat cans, 80
to 90 per cent in cans for fish and crustacea and 50 to 55 per cent in metal closures with the
exception of crown corks — percentages which moreover are too high and could not be proved by
the defendant — that this undertaking dominates the market for light metal containers. The
decision, moreover, excluded the possibility of competition arising from substitute products (glass
and plastic containers) relying on reasons which do not stand up to examination. The statements
about possibilities of real and potential competition as well as about the allegedly weak position of
the consumers are therefore, in the applicants' view, irrelevant.
[32] For the appraisal of SLW’s dominant position and the consequences of the disputed merger,
the definition of the relevant market is of essential significance, for the possibilities of competition
can only be judged in relation to those characteristics of the products in question by virtue of which
those products are particularly apt to satisfy an inelastic need and are only to a limited extent
interchangeable with other products.
[33] In this context Recitals Nos. 5 to 7 of the second part of the decision deal in turn with a
"market for light containers for canned meat products", a "market for light containers for canned
seafood", and a "market for metal closures for the food packing industry, other than crown corks",
all allegedly dominated by SLW and in which the disputed merger threatens to eliminate
competition. The decision does not, however, give any details of how these three markets differ
from each other, and must therefore be considered separately. Similarly, nothing is said about how
these three markets differ from the general market for light metal containers, namely the market
for metal containers for fruit and vegetables, condensed milk, olive oil, fruit juices and chemicotechnical products. In order to be regarded as constituting a distinct market, the products in
question must be individualized, not only by the mere fact that they are used for packing certain
products, but by particular characteristics of production which make them specifically suitable for
this purpose. Consequently, a dominant position on the market for light metal containers for meat
and fish cannot be decisive, as long as it has not been proved that competitors from other sectors
of the market for light metal containers are not in a position to enter this market, by a simple
adaptation, with sufficient strength to create a serious counterweight.
[35] Since there are in the decision no data on the particular characteristics of metal containers for
meat and fish and metal closures (other than crown corks) designed for the food packing industry,
whereby these goods constitute separate markets which could be dominated by the manufacturer
holding the highest share of this market, it is for this reason characterized by an uncertainty which
has an effect on the other statements from which the decision infers the absence of real or
potential competition in the market in question. [. . .]
[36] It can be concluded from all this that some undertakings which have begun to manufacture
their own containers were able to overcome the technological difficulties, yet the decision does not
contain any criteria for evaluating the power of competition of these undertakings. These
considerations show further contradictions which, likewise, affect the validity of the decision
contested.
[37] All this leads to the conclusion that the decision has not, as a matter of law, sufficiently shown
the facts and the assessments on which it is based. It must therefore be annulled.
80
4. Merger Control (Council Regulation of the 7 April 2004 on the Control of
Concentrations and Mergers between enterprises). From Doc. # 53 to Doc. # 67
The sessions will allow a first look at the European Merger Regulation (EMR): especially
Jurisdiction, procedure, decisions and fines and assessment.
4.1. Jurisdiction to the EU Commission and of Member States
Readings: EMR Articles 1, 3,4, 9, 21 & 22 and Doc. # 53 to Doc. # 55
Doc. # 53 Council Regulation (EC) No 139/2004 of 20 January 2004 on the Control of
Concentrations between Undertakings (the EC Merger Regulation (Text with EEA relevance)
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and in particular Articles 83 and 308
thereof,
Having regard to the proposal from the Commission,
Having regard to the opinion of the European Parliament,
Having regard to the opinion of the European Economic and Social Committee,
Whereas:
Excerpts from the recitals
(1) Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations
between undertakings has been substantially amended. Since further amendments are to be
made, it should be recast in the interest of clarity.
(3) The completion of the internal market and of economic and monetary union, the enlargement
of the European Union and the lowering of international barriers to trade and investment will
continue to result in major corporate reorganizations, particularly in the form of concentrations.
(4) Such reorganizations are to be welcomed to the extent that they are in line with the
requirements of dynamic competition and capable of increasing the competitiveness of European
industry, improving the conditions of growth and raising the standard of living in the Community.
(5) However, it should be ensured that the process of reorganization does not result in lasting
damage to competition; Community law must therefore include provisions governing those
concentrations which may significantly impede effective competition in the common market or in
a substantial part of it.
(8) The provisions to be adopted in this Regulation should apply to significant structural changes,
the impact of which on the market goes beyond the national borders of any one Member State.
Such concentrations should, as a general rule, be reviewed exclusively at Community level, in
application of a “one-stop-shop” system and in compliance with the principle of subsidiarity.
Concentrations not covered by this Regulation come, in principle, within the jurisdiction of the
Member States.
(9) The scope of the application of this Regulation should be defined according to the
geographical area of activity of the undertakings concerned and be limited by quantitative
thresholds in order to cover those concentrations which have a Community dimension….
(17) The Commission should be given exclusive competence to apply this Regulation, subject to
review by the Court of Justice.
(18) The Member States should not be permitted to apply their national legislation on
competition to concentrations with a Community dimension, unless this Regulation makes
provision therefor. The relevant powers of national authorities should be limited to cases where,
failing intervention by the Commission, effective competition is likely to be significantly impeded
within the territory of a Member State and where the competition interests of that Member State
cannot be sufficiently protected otherwise by this Regulation. The Member States concerned
must act promptly in such cases; this Regulation cannot, because of the diversity of national law,
fix a single time limit for the adoption of final decisions under national law.
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(34) To ensure effective control, undertakings should be obliged to give prior notification of
concentrations with a Community dimension following the conclusion of the agreement, the
announcement of the public bid or the acquisition of a controlling interest. Notification should
also be possible where the undertakings concerned satisfy the Commission of their intention to
enter into an agreement for a proposed concentration and demonstrate to the Commission that
their plan for that proposed concentration is sufficiently concrete, for example on the basis of an
agreement in principle, a memorandum of understanding, or a letter of intent signed by all
undertakings concerned, or, in the case of a public bid, where they have publicly announced an
intention to make such a bid, provided that the intended agreement or bid would result in a
concentration with a Community dimension. The implementation of concentrations should be
suspended until a final decision of the Commission has been taken. However, it should be
possible to derogate from this suspension at the request of the undertakings concerned, where
appropriate. In deciding whether or not to grant a derogation,...
(38) In order to appraise concentrations, the Commission should have the right to request all
necessary information and to conduct all necessary inspections throughout the Community.
…The Commission should, in particular, have the right to interview any persons who may be in
possession of useful information and to record the statements made.
(39) In the course of an inspection, officials authorized by the Commission should have the right
to ask for any information relevant to the subject matter and purpose of the inspection; they
should also have the right to affix seals during inspections (not for more than 48 hours),
particularly in circumstances where there are reasonable grounds to suspect that a concentration
has been implemented without being notified; that incorrect, incomplete or misleading
information has been supplied to the Commission; or that the undertakings or persons concerned
have failed to comply with a condition or obligation imposed by decision of the Commission….
(42) For the sake of transparency, all decisions of the Commission which are not of a merely
procedural nature should be widely publicized. While ensuring preservation of the rights of
defense of the undertakings concerned, in particular the right of access to the file, it is essential
that business secrets be protected. The confidentiality of information exchanged in the network
and with the competent authorities of third countries should likewise be safeguarded.
(43) Compliance with this Regulation should be enforceable, as appropriate, by means of fines
and periodic penalty payments. The Court of Justice should be given unlimited jurisdiction in that
regard pursuant to Article 229 of the Treaty. ….
HAS ADOPTED THIS REGULATION:
Article 1 Scope
1. Without prejudice to Article 4(5) and Article 22, this Regulation shall apply to all
concentrations with a Community dimension as defined in this Article.
2. A concentration has a Community dimension where:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more
than EUR 5000 million; and
(b) the aggregate Community-wide turnover of each of at least two of the undertakings
concerned is more than EUR 250 million,
unless each of the undertakings concerned achieves more than two-thirds of its aggregate
Community-wide turnover within one and the same Member State.
3. A concentration that does not meet the thresholds laid down in paragraph 2 has a
Community dimension where:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more
than EUR 2500 million;
(b) in each of at least three Member States, the combined aggregate turnover of all the
undertakings concerned is more than EUR 100 million;
(c) in each of at least three Member States included for the purpose of point (b), the aggregate
turnover of each of at least two of the undertakings concerned is more than EUR 25 million;
and
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(d) the aggregate Community-wide turnover of each of at least two of the undertakings
concerned is more than EUR 100 million,
unless each of the undertakings concerned achieves more than two-thirds of its aggregate
Community-wide turnover within one and the same Member State.
4.
5.
Article 2 Appraisal of concentrations
1. Concentrations within the scope of this Regulation shall be appraised in accordance with the
objectives of this Regulation and the following provisions with a view to establishing whether or
not they are compatible with the common market.
In making this appraisal, the Commission shall take into account:
(a) the need to maintain and develop effective competition within the common market in view of,
among other things, the structure of all the markets concerned and the actual or potential
competition from undertakings located either within or outwith the Community;
(b) the market position of the undertakings concerned and their economic and financial power, the
alternatives available to suppliers and users, their access to supplies or markets, any legal or other
barriers to entry, supply and demand trends for the relevant goods and services, the interests of
the intermediate and ultimate consumers, and the development of technical and economic
progress provided that it is to consumers' advantage and does not form an obstacle to
competition.
2. A concentration which would not significantly impede effective competition in the common
market or in a substantial part of it, in particular as a result of the creation or strengthening of a
dominant position, shall be declared compatible with the common market.
3. A concentration which would significantly impede effective competition, in the common market
or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant
position, shall be declared incompatible with the common market.
4. To the extent that the creation of a joint venture constituting a concentration pursuant to
Article 3 has as its object or effect the coordination of the competitive behaviour of undertakings
that remain independent, such coordination shall be appraised in accordance with the criteria of
Article 81(1) and (3) of the Treaty, with a view to establishing whether or not the operation is
compatible with the common market.
5. In making this appraisal, the Commission shall take into account in particular:
- whether two or more parent companies retain, to a significant extent, activities in the same
market as the joint venture or in a market which is downstream or upstream from that of the joint
venture or in a neighbouring market closely related to this market,
- whether the coordination which is the direct consequence of the creation of the joint venture
affords the undertakings concerned the possibility of eliminating competition in respect of a
substantial part of the products or services in question.
Article 3 Definition of concentration
1. A concentration shall be deemed to arise where a change of control on a lasting basis results
from:
(a) the merger of two or more previously independent undertakings or parts of undertakings, or
(b) the acquisition, by one or more persons already controlling at least one undertaking, or by one
or more undertakings, whether by purchase of securities or assets, by contract or by any other
means, of direct or indirect control of the whole or parts of one or more other undertakings.
2. Control shall be constituted by rights, contracts or any other means which, either separately or
in combination and having regard to the considerations of fact or law involved, confer the
possibility of exercising decisive influence on an undertaking, in particular by:
(a) ownership or the right to use all or part of the assets of an undertaking;
(b) rights or contracts which confer decisive influence on the composition, voting or decisions of
the organs of an undertaking.
3. Control is acquired by persons or undertakings which:
83
(a) are holders of the rights or entitled to rights under the contracts concerned; or
(b) while not being holders of such rights or entitled to rights under such contracts, have the
power to exercise the rights deriving therefrom.
4. The creation of a joint venture performing on a lasting basis all the functions of an autonomous
economic entity shall constitute a concentration within the meaning of paragraph 1(b).
5. A concentration shall not be deemed to arise where:
(a) credit institutions or other financial institutions or insurance companies, the normal activities
of which include transactions and dealing in securities for their own account or for the account of
others, hold on a temporary basis securities which they have acquired in an undertaking with a
view to reselling them, provided that they do not exercise voting rights in respect of those
securities with a view to determining the competitive behaviour of that undertaking or provided
that they exercise such voting rights only with a view to preparing the disposal of all or part of
that undertaking or of its assets or the disposal of those securities and that any such disposal
takes place within one year of the date of acquisition; that period may be extended by the
Commission on request where such institutions or companies can show that the disposal was not
reasonably possible within the period set;
(b) control is acquired by an office-holder according to the law of a Member State relating to
liquidation, winding up, insolvency, cessation of payments, compositions or analogous
proceedings;
(c) the operations referred to in paragraph 1(b) are carried out by the financial holding companies
referred to in Article 5(3) of Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article
54(3)(g) of the Treaty on the annual accounts of certain types of companies(6) provided however
that the voting rights in respect of the holding are exercised, in particular in relation to the
appointment of members of the management and supervisory bodies of the undertakings in
which they have holdings, only to maintain the full value of those investments and not to
determine directly or indirectly the competitive conduct of those undertakings.
Article 4 Prior notification of concentrations and pre-notification referral at the request of the notifying
parties
1. Concentrations with a Community dimension defined in this Regulation shall be notified to the
Commission prior to their implementation and following the conclusion of the agreement, the
announcement of the public bid, or the acquisition of a controlling interest.
Notification may also be made where the undertakings concerned demonstrate to the
Commission a good faith intention to conclude an agreement or, in the case of a public bid, where
they have publicly announced an intention to make such a bid, provided that the intended
agreement or bid would result in a concentration with a Community dimension.
For the purposes of this Regulation, the term "notified concentration" shall also cover intended
concentrations notified pursuant to the second subparagraph. For the purposes of paragraphs 4
and 5 of this Article, the term "concentration" includes intended concentrations within the
meaning of the second subparagraph.
2. A concentration which consists of a merger within the meaning of Article 3(1)(a) or in the
acquisition of joint control within the meaning of Article 3(1)(b) shall be notified jointly by the
parties to the merger or by those acquiring joint control as the case may be. In all other cases, the
notification shall be effected by the person or undertaking acquiring control of the whole or parts
of one or more undertakings.
3. Where the Commission finds that a notified concentration falls within the scope of this
Regulation, it shall publish the fact of the notification, at the same time indicating the names of
the undertakings concerned, their country of origin, the nature of the concentration and the
economic sectors involved. The Commission shall take account of the legitimate interest of
undertakings in the protection of their business secrets.
4. Prior to the notification of a concentration within the meaning of paragraph 1, the persons or
undertakings referred to in paragraph 2 may inform the Commission, by means of a reasoned
84
submission, that the concentration may significantly affect competition in a market within a
Member State which presents all the characteristics of a distinct market and should therefore be
examined, in whole or in part, by that Member State.
The Commission shall transmit this submission to all Member States without delay. The Member
State referred to in the reasoned submission shall, within 15 working days of receiving the
submission, express its agreement or disagreement as regards the request to refer the case.
Where that Member State takes no such decision within this period, it shall be deemed to have
agreed.
Unless that Member State disagrees, the Commission, where it considers that such a distinct
market exists, and that competition in that market may be significantly affected by the
concentration, may decide to refer the whole or part of the case to the competent authorities of
that Member State with a view to the application of that State's national competition law.
The decision whether or not to refer the case in accordance with the third subparagraph shall be
taken within 25 working days starting from the receipt of the reasoned submission by the
Commission. The Commission shall inform the other Member States and the persons or
undertakings concerned of its decision. If the Commission does not take a decision within this
period, it shall be deemed to have adopted a decision to refer the case in accordance with the
submission made by the persons or undertakings concerned.
If the Commission decides, or is deemed to have decided, pursuant to the third and fourth
subparagraphs, to refer the whole of the case, no notification shall be made pursuant to
paragraph 1 and national competition law shall apply. Article 9(6) to (9) shall apply mutatis
mutandis.
5. With regard to a concentration as defined in Article 3 which does not have a Community
dimension within the meaning of Article 1 and which is capable of being reviewed under the
national competition laws of at least three Member States, the persons or undertakings referred
to in paragraph 2 may, before any notification to the competent authorities, inform the
Commission by means of a reasoned submission that the concentration should be examined by the
Commission.
The Commission shall transmit this submission to all Member States without delay.
Any Member State competent to examine the concentration under its national competition law
may, within 15 working days of receiving the reasoned submission, express its disagreement as
regards the request to refer the case.
Where at least one such Member State has expressed its disagreement in accordance with the
third subparagraph within the period of 15 working days, the case shall not be referred. The
Commission shall, without delay, inform all Member States and the persons or undertakings
concerned of any such expression of disagreement.
Where no Member State has expressed its disagreement in accordance with the third
subparagraph within the period of 15 working days, the concentration shall be deemed to have a
Community dimension and shall be notified to the Commission in accordance with paragraphs 1
and 2. In such situations, no Member State shall apply its national competition law to the
concentration.
6. …
Article 5 Calculation of turnover
1. Aggregate turnover within the meaning of this Regulation shall comprise the amounts derived
by the undertakings concerned in the preceding financial year from the sale of products and the
provision of services falling within the undertakings' ordinary activities after deduction of sales
rebates and of value added tax and other taxes directly related to turnover. The aggregate
turnover of an undertaking concerned shall not include the sale of products or the provision of
services between any of the undertakings referred to in paragraph 4.
85
Turnover, in the Community or in a Member State, shall comprise products sold and services
provided to undertakings or consumers, in the Community or in that Member State as the case
may be.
2. By way of derogation from paragraph 1, where the concentration consists of the acquisition of
parts, whether or not constituted as legal entities, of one or more undertakings, only the turnover
relating to the parts which are the subject of the concentration shall be taken into account with
regard to the seller or sellers.
However, two or more transactions within the meaning of the first subparagraph which take place
within a two-year period between the same persons or undertakings shall be treated as one and
the same concentration arising on the date of the last transaction.
3. In place of turnover the following shall be used:
(a) for credit institutions and other financial institutions, the sum of the following income items as defined in
Council Directive 86/635/EEC(7), after deduction of value added tax and other taxes directly related to those
items, where appropriate:
(i) interest income and similar income;
(ii) income from securities:
- income from shares and other variable yield securities,
- income from participating interests,
- income from shares in affiliated undertakings;
(iii) commissions receivable;
(iv) net profit on financial operations;
(v) other operating income.
The turnover of a credit or financial institution in the Community or in a Member State shall comprise the
income items, as defined above, which are received by the branch or division of that institution established in
the Community or in the Member State in question, as the case may be;
(b) for insurance undertakings, the value of gross premiums written which shall comprise all amounts received
and receivable in respect of insurance contracts issued by or on behalf of the insurance undertakings,
including also outgoing reinsurance premiums, and after deduction of taxes and parafiscal contributions or
levies charged by reference to the amounts of individual premiums or the total volume of premiums; as
regards Article 1(2)(b) and (3)(b), (c) and (d) and the final part of Article 1(2) and (3), gross premiums
received from Community residents and from residents of one Member State respectively shall be taken into
account.
4. Without prejudice to paragraph 2, the aggregate turnover of an undertaking concerned within the meaning
of this Regulation shall be calculated by adding together the respective turnovers of the following:
(a) the undertaking concerned;
(b) those undertakings in which the undertaking concerned, directly or indirectly:
(i) owns more than half the capital or business assets, or
(ii) has the power to exercise more than half the voting rights, or
(iii) has the power to appoint more than half the members of the supervisory board, the administrative board
or bodies legally representing the undertakings, or
(iv) has the right to manage the undertakings' affairs;
(c) those undertakings which have in the undertaking concerned the rights or powers listed in (b);
(d) those undertakings in which an undertaking as referred to in (c) has the rights or powers listed in (b);
(e) those undertakings in which two or more undertakings as referred to in (a) to (d) jointly have the rights or powers
listed in (b).
5. Where undertakings concerned by the concentration jointly have the rights or powers listed in paragraph
4(b), in calculating the aggregate turnover of the undertakings concerned for the purposes of this Regulation:
(a) no account shall be taken of the turnover resulting from the sale of products or the provision of services
between the joint undertaking and each of the undertakings concerned or any other undertaking connected
with any one of them, as set out in paragraph 4(b) to (e);
(b) account shall be taken of the turnover resulting from the sale of products and the provision of services
between the joint undertaking and any third undertakings. This turnover shall be apportioned equally amongst
the undertakings concerned.
Article 6 Examination of the notification and initiation of proceedings
1. The Commission shall examine the notification as soon as it is received.
(a) Where it concludes that the concentration notified does not fall within the scope of this
Regulation, it shall record that finding by means of a decision.
(b) Where it finds that the concentration notified, although falling within the scope of this
Regulation, does not raise serious doubts as to its compatibility with the common market, it shall
86
decide not to oppose it and shall declare that it is compatible with the common market.
A decision declaring a concentration compatible shall be deemed to cover restrictions directly
related and necessary to the implementation of the concentration.
(c) Without prejudice to paragraph 2, where the Commission finds that the concentration notified
falls within the scope of this Regulation and raises serious doubts as to its compatibility with the
common market, it shall decide to initiate proceedings. Without prejudice to Article 9, such
proceedings shall be closed by means of a decision as provided for in Article 8(1) to (4), unless the
undertakings concerned have demonstrated to the satisfaction of the Commission that they have
abandoned the concentration.
2. Where the Commission finds that, following modification by the undertakings concerned, a
notified concentration no longer raises serious doubts within the meaning of paragraph 1(c), it
shall declare the concentration compatible with the common market pursuant to paragraph 1(b).
The Commission may attach to its decision under paragraph 1(b) conditions and obligations
intended to ensure that the undertakings concerned comply with the commitments they have
entered into vis-à-vis the Commission with a view to rendering the concentration compatible with
the common market.
3. The Commission may revoke the decision it took pursuant to paragraph 1(a) or (b) where:
(a) the decision is based on incorrect information for which one of the undertakings is responsible
or where it has been obtained by deceit,
or
(b) the undertakings concerned commit a breach of an obligation attached to the decision.
4. In the cases referred to in paragraph 3, the Commission may take a decision under paragraph 1,
without being bound by the time limits referred to in Article 10(1).
5. The Commission shall notify its decision to the undertakings concerned and the competent
authorities of the Member States without delay.
Article 7 Suspension of concentrations
1. A concentration with a Community dimension as defined in Article 1, or which is to be examined
by the Commission pursuant to Article 4(5), shall not be implemented either before its notification
or until it has been declared compatible with the common market pursuant to a decision under
Articles 6(1)(b), 8(1) or 8(2), or on the basis of a presumption according to Article 10(6).
2. Paragraph 1 shall not prevent the implementation of a public bid or of a series of transactions in
securities including those convertible into other securities admitted to trading on a market such
as a stock exchange, by which control within the meaning of Article 3 is acquired from various
sellers, provided that:
(a) the concentration is notified to the Commission pursuant to Article 4 without delay; and
(b) the acquirer does not exercise the voting rights attached to the securities in question or does
so only to maintain the full value of its investments based on a derogation granted by the
Commission under paragraph 3.
3. The Commission may, on request, grant a derogation from the obligations imposed in
paragraphs 1 or 2. The request to grant a derogation must be reasoned. In deciding on the
request, the Commission shall take into account inter alia the effects of the suspension on one or
more undertakings concerned by the concentration or on a third party and the threat to
competition posed by the concentration. Such a derogation may be made subject to conditions
and obligations in order to ensure conditions of effective competition. A derogation may be
applied for and granted at any time, be it before notification or after the transaction.
4. The validity of any transaction carried out in contravention of paragraph 1 shall be dependent
on a decision pursuant to Article 6(1)(b) or Article 8(1), (2) or (3) or on a presumption pursuant to
Article 10(6).
This Article shall, however, have no effect on the validity of transactions in securities including
87
those convertible into other securities admitted to trading on a market such as a stock exchange,
unless the buyer and seller knew or ought to have known that the transaction was carried out in
contravention of paragraph 1.
Article 8 Powers of decision of the Commission
1. Where the Commission finds that a notified concentration fulfils the criterion laid down in
Article 2(2) and, in the cases referred to in Article 2(4), the criteria laid down in Article 81(3) of the
Treaty, it shall issue a decision declaring the concentration compatible with the common market.
2. Where the Commission finds that, following modification by the undertakings concerned, a
notified concentration fulfils the criterion laid down in Article 2(2) and, in the cases referred to in
Article 2(4), the criteria laid down in Article 81(3) of the Treaty, it shall issue a decision declaring
the concentration compatible with the common market.
The Commission may attach to its decision conditions and obligations intended to ensure that the
undertakings concerned comply with the commitments they have entered into vis-à-vis the
Commission with a view to rendering the concentration compatible with the common market.
3. Where the Commission finds that a concentration fulfils the criterion defined in Article 2(3) or,
in the cases referred to in Article 2(4), does not fulfil the criteria laid down in Article 81(3) of the
Treaty, it shall issue a decision declaring that the concentration is incompatible with the common
market.
4. Where the Commission finds that a concentration:
(a) has already been implemented and that concentration has been declared incompatible with
the common market, or
(b) has been implemented in contravention of a condition attached to a decision taken under
paragraph 2, which has found that, in the absence of the condition, the concentration would fulfil
the criterion laid down in Article 2(3) or, in the cases referred to in Article 2(4), would not fulfil the
criteria laid down in Article 81(3) of the Treaty,
the Commission may:
- require the undertakings concerned to dissolve the concentration, in particular through the
dissolution of the merger or the disposal of all the shares or assets acquired, so as to restore the
situation prevailing prior to the implementation of the concentration; in circumstances where
restoration of the situation prevailing before the implementation of the concentration is not
possible through dissolution of the concentration, the Commission may take any other measure
appropriate to achieve such restoration as far as possible,
- order any other appropriate measure to ensure that the undertakings concerned dissolve the
concentration or take other restorative measures as required in its decision.
In cases falling within point (a) of the first subparagraph, the measures referred to in that
subparagraph may be imposed either in a decision pursuant to paragraph 3 or by separate
decision.
5. The Commission may take interim measures appropriate to restore or maintain conditions of
effective competition where a concentration:
(a) has been implemented in contravention of Article 7, and a decision as to the compatibility of
the concentration with the common market has not yet been taken;
(b) has been implemented in contravention of a condition attached to a decision under Article
6(1)(b) or paragraph 2 of this Article;
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(c) has already been implemented and is declared incompatible with the common market.
6. The Commission may revoke the decision it has taken pursuant to paragraphs 1 or 2 where:
(a) the declaration of compatibility is based on incorrect information for which one of the
undertakings is responsible or where it has been obtained by deceit; or
(b) the undertakings concerned commit a breach of an obligation attached to the decision.
7. The Commission may take a decision pursuant to paragraphs 1 to 3 without being bound by the
time limits referred to in Article 10(3), in cases where:
(a) it finds that a concentration has been implemented
(i) in contravention of a condition attached to a decision under Article 6(1)(b), or
(ii) in contravention of a condition attached to a decision taken under paragraph 2 and in
accordance with Article 10(2), which has found that, in the absence of the condition, the
concentration would raise serious doubts as to its compatibility with the common market; or
(b) a decision has been revoked pursuant to paragraph 6.
8. The Commission shall notify its decision to the undertakings concerned and the competent
authorities of the Member States without delay.
Article 9 Referral to the competent authorities of the Member States
1. The Commission may, by means of a decision notified without delay to the undertakings
concerned and the competent authorities of the other Member States, refer a notified
concentration to the competent authorities of the Member State concerned in the following
circumstances.
2. Within 15 working days of the date of receipt of the copy of the notification, a Member State,
on its own initiative or upon the invitation of the Commission, may inform the Commission, which
shall inform the undertakings concerned, that:
(a) a concentration threatens to affect significantly competition in a market within that Member
State, which presents all the characteristics of a distinct market, or
(b) a concentration affects competition in a market within that Member State, which presents all
the characteristics of a distinct market and which does not constitute a substantial part of the
common market.
3. If the Commission considers that, having regard to the market for the products or services in
question and the geographical reference market within the meaning of paragraph 7, there is such
a distinct market and that such a threat exists, either:
(a) it shall itself deal with the case in accordance with this Regulation; or
(b) it shall refer the whole or part of the case to the competent authorities of the Member State
concerned with a view to the application of that State's national competition law.
If, however, the Commission considers that such a distinct market or threat does not exist, it shall
adopt a decision to that effect which it shall address to the Member State concerned, and shall
itself deal with the case in accordance with this Regulation.
In cases where a Member State informs the Commission pursuant to paragraph 2(b) that a
concentration affects competition in a distinct market within its territory that does not form a
substantial part of the common market, the Commission shall refer the whole or part of the case
relating to the distinct market concerned, if it considers that such a distinct market is affected.
4. A decision to refer or not to refer pursuant to paragraph 3 shall be taken:
(a) as a general rule within the period provided for in Article 10(1), second subparagraph, where
the Commission, pursuant to Article 6(1)(b), has not initiated proceedings; or
(b) within 65 working days at most of the notification of the concentration concerned where the
Commission has initiated proceedings under Article 6(1)(c), without taking the preparatory steps
in order to adopt the necessary measures under Article 8(2), (3) or (4) to maintain or restore
effective competition on the market concerned.
5. If within the 65 working days referred to in paragraph 4(b) the Commission, despite a reminder
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from the Member State concerned, has not taken a decision on referral in accordance with
paragraph 3 nor has taken the preparatory steps referred to in paragraph 4(b), it shall be deemed
to have taken a decision to refer the case to the Member State concerned in accordance with
paragraph 3(b).
6. The competent authority of the Member State concerned shall decide upon the case without
undue delay.
Within 45 working days after the Commission's referral, the competent authority of the Member
State concerned shall inform the undertakings concerned of the result of the preliminary
competition assessment and what further action, if any, it proposes to take. The Member State
concerned may exceptionally suspend this time limit where necessary information has not been
provided to it by the undertakings concerned as provided for by its national competition law.
Where a notification is requested under national law, the period of 45 working days shall begin on
the working day following that of the receipt of a complete notification by the competent
authority of that Member State.
7. The geographical reference market shall consist of the area in which the undertakings
concerned are involved in the supply and demand of products or services, in which the conditions
of competition are sufficiently homogeneous and which can be distinguished from neighbouring
areas because, in particular, conditions of competition are appreciably different in those areas.
This assessment should take account in particular of the nature and characteristics of the
products or services concerned, of the existence of entry barriers or of consumer preferences, of
appreciable differences of the undertakings' market shares between the area concerned and
neighbouring areas or of substantial price differences.
8. In applying the provisions of this Article, the Member State concerned may take only the
measures strictly necessary to safeguard or restore effective competition on the market
concerned.
9. In accordance with the relevant provisions of the Treaty, any Member State may appeal to the
Court of Justice, and in particular request the application of Article 243 of the Treaty, for the
purpose of applying its national competition law.
Article 10 Time limits for initiating proceedings and for decisions
1. Without prejudice to Article 6(4), the decisions referred to in Article 6(1) shall be taken within
25 working days at most. That period shall begin on the working day following that of the receipt
of a notification or, if the information to be supplied with the notification is incomplete, on the
working day following that of the receipt of the complete information.
That period shall be increased to 35 working days where the Commission receives a request from
a Member State in accordance with Article 9(2)or where, the undertakings concerned offer
commitments pursuant to Article 6(2) with a view to rendering the concentration compatible with
the common market.
2. Decisions pursuant to Article 8(1) or (2) concerning notified concentrations shall be taken as
soon as it appears that the serious doubts referred to in Article 6(1)(c) have been removed,
particularly as a result of modifications made by the undertakings concerned, and at the latest by
the time limit laid down in paragraph 3.
3. Without prejudice to Article 8(7), decisions pursuant to Article 8(1) to (3) concerning notified
concentrations shall be taken within not more than 90 working days of the date on which the
proceedings are initiated. That period shall be increased to 105 working days where the
undertakings concerned offer commitments pursuant to Article 8(2), second subparagraph, with a
view to rendering the concentration compatible with the common market, unless these
commitments have been offered less than 55 working days after the initiation of proceedings.
The periods set by the first subparagraph shall likewise be extended if the notifying parties make a
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request to that effect not later than 15 working days after the initiation of proceedings pursuant
to Article 6(1)(c). The notifying parties may make only one such request. Likewise, at any time
following the initiation of proceedings, the periods set by the first subparagraph may be extended
by the Commission with the agreement of the notifying parties. The total duration of any
extension or extensions effected pursuant to this subparagraph shall not exceed 20 working days.
4. The periods set by paragraphs 1 and 3 shall exceptionally be suspended where, owing to
circumstances for which one of the undertakings involved in the concentration is responsible, the
Commission has had to request information by decision pursuant to Article 11 or to order an
inspection by decision pursuant to Article 13.
The first subparagraph shall also apply to the period referred to in Article 9(4)(b).
5. Where the Court of Justice gives a judgment which annuls the whole or part of a Commission
decision which is subject to a time limit set by this Article, the concentration shall be re-examined
by the Commission with a view to adopting a decision pursuant to Article 6(1).
The concentration shall be re-examined in the light of current market conditions.
The notifying parties shall submit a new notification or supplement the original notification,
without delay, where the original notification becomes incomplete by reason of intervening
changes in market conditions or in the information provided. Where there are no such changes,
the parties shall certify this fact without delay.
The periods laid down in paragraph 1 shall start on the working day following that of the receipt
of complete information in a new notification, a supplemented notification, or a certification
within the meaning of the third subparagraph.
The second and third subparagraphs shall also apply in the cases referred to in Article 6(4) and
Article 8(7).
6. Where the Commission has not taken a decision in accordance with Article 6(1)(b), (c), 8(1), (2)
or (3) within the time limits set in paragraphs 1 and 3 respectively, the concentration shall be
deemed to have been declared compatible with the common market, without prejudice to Art. 9.
Article 11 Requests for information
1. In order to carry out the duties assigned to it by this Regulation, the Commission may, by
simple request or by decision, require the persons referred to in Article 3(1)(b), as well as
undertakings and associations of undertakings, to provide all necessary information.
2. When sending a simple request for information to a person, an undertaking or an association of
undertakings, the Commission shall state the legal basis and the purpose of the request, specify
what information is required and fix the time limit within which the information is to be provided,
as well as the penalties provided for in Article 14 for supplying incorrect or misleading
information.
3. Where the Commission requires a person, an undertaking or an association of undertakings to
supply information by decision, it shall state the legal basis and the purpose of the request,
specify what information is required and fix the time limit within which it is to be provided. It shall
also indicate the penalties provided for in Article 14 and indicate or impose the penalties provided
for in Article 15. It shall further indicate the right to have the decision reviewed by the Court of
Justice.
4. The owners of the undertakings or their representatives and, in the case of legal persons,
companies or firms, or associations having no legal personality, the persons authorised to
represent them by law or by their constitution, shall supply the information requested on behalf
of the undertaking concerned. Persons duly authorised to act may supply the information on
behalf of their clients. The latter shall remain fully responsible if the information supplied is
incomplete, incorrect or misleading.
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5. The Commission shall without delay forward a copy of any decision taken pursuant to
paragraph 3 to the competent authorities of the Member State in whose territory the residence
of the person or the seat of the undertaking or association of undertakings is situated, and to the
competent authority of the Member State whose territory is affected. At the specific request of
the competent authority of a Member State, the Commission shall also forward to that authority
copies of simple requests for information relating to a notified concentration.
6. At the request of the Commission, the governments and competent authorities of the Member
States shall provide the Commission with all necessary information to carry out the duties
assigned to it by this Regulation.
7. In order to carry out the duties assigned to it by this Regulation, the Commission may interview
any natural or legal person who consents to be interviewed for the purpose of collecting
information relating to the subject matter of an investigation. At the beginning of the interview,
which may be conducted by telephone or other electronic means, the Commission shall state the
legal basis and the purpose of the interview.
Where an interview is not conducted on the premises of the Commission or by telephone or other
electronic means, the Commission shall inform in advance the competent authority of the
Member State in whose territory the interview takes place. If the competent authority of that
Member State so requests, officials of that authority may assist the officials and other persons
authorised by the Commission to conduct the interview.
Article 12 Inspections by the authorities of the Member States
1. At the request of the Commission, the competent authorities of the Member States shall
undertake the inspections which the Commission considers to be necessary under Article 13(1), or
which it has ordered by decision pursuant to Article 13(4). The officials of the competent
authorities of the Member States who are responsible for conducting these inspections as well as
those authorised or appointed by them shall exercise their powers in accordance with their
national law.
2. If so requested by the Commission or by the competent authority of the Member State within
whose territory the inspection is to be conducted, officials and other accompanying persons
authorised by the Commission may assist the officials of the authority concerned.
Article 13 The Commission's powers of inspection
1. In order to carry out the duties assigned to it by this Regulation, the Commission may conduct
all necessary inspections of undertakings and associations of undertakings.
2. The officials and other accompanying persons authorised by the Commission to conduct an
inspection shall have the power:
(a) to enter any premises, land and means of transport of undertakings and associations of
undertakings;
(b) to examine the books and other records related to the business, irrespective of the medium on
which they are stored;
(c) to take or obtain in any form copies of or extracts from such books or records;
(d) to seal any business premises and books or records for the period and to the extent necessary
for the inspection;
(e) to ask any representative or member of staff of the undertaking or association of undertakings
for explanations on facts or documents relating to the subject matter and purpose of the
inspection and to record the answers.
3. Officials and other accompanying persons authorised by the Commission to conduct an
inspection shall exercise their powers upon production of a written authorisation specifying the
subject matter and purpose of the inspection and the penalties provided for in Article 14, in the
production of the required books or other records related to the business which is incomplete or
where answers to questions asked under paragraph 2 of this Article are incorrect or misleading. In
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good time before the inspection, the Commission shall give notice of the inspection to the
competent authority of the Member State in whose territory the inspection is to be conducted.
4. Undertakings and associations of undertakings are required to submit to inspections ordered by
decision of the Commission. The decision shall specify the subject matter and purpose of the
inspection, appoint the date on which it is to begin and indicate the penalties provided for in
Articles 14 and 15 and the right to have the decision reviewed by the Court of Justice. The
Commission shall take such decisions after consulting the competent authority of the Member
State in whose territory the inspection is to be conducted.
5. Officials of, and those authorised or appointed by, the competent authority of the Member
State in whose territory the inspection is to be conducted shall, at the request of that authority or
of the Commission, actively assist the officials and other accompanying persons authorised by the
Commission. To this end, they shall enjoy the powers specified in paragraph 2.
6. Where the officials and other accompanying persons authorised by the Commission find that an
undertaking opposes an inspection, including the sealing of business premises, books or records,
ordered pursuant to this Article, the Member State concerned shall afford them the necessary
assistance, requesting where appropriate the assistance of the police or of an equivalent
enforcement authority, so as to enable them to conduct their inspection.
7. If the assistance provided for in paragraph 6 requires authorisation from a judicial authority
according to national rules, such authorisation shall be applied for. Such authorisation may also
be applied for as a precautionary measure.
8. Where authorisation as referred to in paragraph 7 is applied for, the national judicial authority
shall ensure that the Commission decision is authentic and that the coercive measures envisaged
are neither arbitrary nor excessive having regard to the subject matter of the inspection. In its
control of proportionality of the coercive measures, the national judicial authority may ask the
Commission, directly or through the competent authority of that Member State, for detailed
explanations relating to the subject matter of the inspection. However, the national judicial
authority may not call into question the necessity for the inspection nor demand that it be
provided with the information in the Commission's file. The lawfulness of the Commission's
decision shall be subject to review only by the Court of Justice.
Article 14 Fines
1. The Commission may by decision impose on the persons referred to in Article 3(1)b,
undertakings or associations of undertakings, fines not exceeding 1 % of the aggregate turnover
of the undertaking or association of undertakings concerned within the meaning of Article 5
where, intentionally or negligently:
(a) they supply incorrect or misleading information in a submission, certification, notification or
supplement thereto, pursuant to Article 4, Article 10(5) or Article 22(3);
(b) they supply incorrect or misleading information in response to a request made pursuant to
Article 11(2);
(c) in response to a request made by decision adopted pursuant to Article 11(3), they supply
incorrect, incomplete or misleading information or do not supply information within the required
time limit;
(d) they produce the required books or other records related to the business in incomplete form
during inspections under Article 13, or refuse to submit to an inspection ordered by decision
taken pursuant to Article 13(4);
(e) in response to a question asked in accordance with Article 13(2)(e),
- they give an incorrect or misleading answer,
- they fail to rectify within a time limit set by the Commission an incorrect, incomplete or
misleading answer given by a member of staff, or
- they fail or refuse to provide a complete answer on facts relating to the subject matter and
purpose of an inspection ordered by a decision adopted pursuant to Article 13(4);
(f) seals affixed by officials or other accompanying persons authorised by the Commission in
accordance with Article 13(2)(d) have been broken.
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2. The Commission may by decision impose fines not exceeding 10 % of the aggregate turnover of
the undertaking concerned within the meaning of Article 5 on the persons referred to in Article
3(1)b or the undertakings concerned where, either intentionally or negligently, they:
(a) fail to notify a concentration in accordance with Articles 4 or 22(3) prior to its implementation,
unless they are expressly authorised to do so by Article 7(2) or by a decision taken pursuant to
Article 7(3);
(b) implement a concentration in breach of Article 7;
(c) implement a concentration declared incompatible with the common market by decision
pursuant to Article 8(3) or do not comply with any measure ordered by decision pursuant to
Article 8(4) or (5);
(d) fail to comply with a condition or an obligation imposed by decision pursuant to Articles
6(1)(b), Article 7(3) or Article 8(2), second subparagraph.
3. In fixing the amount of the fine, regard shall be had to the nature, gravity and duration of the
infringement.
4. Decisions taken pursuant to paragraphs 1, 2 and 3 shall not be of a criminal law nature.
Article 15 Periodic penalty payments
1. The Commission may by decision impose on the persons referred to in Article 3(1)b,
undertakings or associations of undertakings, periodic penalty payments not exceeding 5 % of the
average daily aggregate turnover of the undertaking or association of undertakings concerned
within the meaning of Article 5 for each working day of delay, calculated from the date set in the
decision, in order to compel them:
(a) to supply complete and correct information which it has requested by decision taken pursuant
to Article 11(3);
(b) to submit to an inspection which it has ordered by decision taken pursuant to Article 13(4);
(c) to comply with an obligation imposed by decision pursuant to Article 6(1)(b), Article 7(3) or
Article 8(2), second subparagraph; or;
(d) to comply with any measures ordered by decision pursuant to Article 8(4) or (5).
2. Where the persons referred to in Article 3(1)(b), undertakings or associations of undertakings
have satisfied the obligation which the periodic penalty payment was intended to enforce, the
Commission may fix the definitive amount of the periodic penalty payments at a figure lower than
that which would arise under the original decision.
Article 16 Review by the Court of Justice
The Court of Justice shall have unlimited jurisdiction within the meaning of Article 229 of the
Treaty to review decisions whereby the Commission has fixed a fine or periodic penalty payments;
it may cancel, reduce or increase the fine or periodic penalty payment imposed.
Article 17 Professional secrecy
1. Information acquired as a result of the application of this Regulation shall be used only for the
purposes of the relevant request, investigation or hearing.
2. Without prejudice to Article 4(3), Articles 18 and 20, the Commission and the competent
authorities of the Member States, their officials and other servants and other persons working
under the supervision of these authorities as well as officials and civil servants of other authorities
of the Member States shall not disclose information they have acquired through the application of
this Regulation of the kind covered by the obligation of professional secrecy.
3. Paragraphs 1 and 2 shall not prevent publication of general information or of surveys which do
not contain information relating to particular undertakings or associations of undertakings.
Article 18 Hearing of the parties and of third persons
1. Before taking any decision provided for in Article 6(3), Article 7(3), Article 8(2) to (6), and
Articles 14 and 15, the Commission shall give the persons, undertakings and associations of
undertakings concerned the opportunity, at every stage of the procedure up to the consultation
of the Advisory Committee, of making known their views on the objections against them.
2. By way of derogation from paragraph 1, a decision pursuant to Articles 7(3) and 8(5) may be
taken provisionally, without the persons, undertakings or associations of undertakings concerned
being given the opportunity to make known their views beforehand, provided that the
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Commission gives them that opportunity as soon as possible after having taken its decision.
3. The Commission shall base its decision only on objections on which the parties have been able
to submit their observations. The rights of the defence shall be fully respected in the proceedings.
Access to the file shall be open at least to the parties directly involved, subject to the legitimate
interest of undertakings in the protection of their business secrets.
4. In so far as the Commission or the competent authorities of the Member States deem it
necessary, they may also hear other natural or legal persons. Natural or legal persons showing a
sufficient interest and especially members of the administrative or management bodies of the
undertakings concerned or the recognised representatives of their employees shall be entitled,
upon application, to be heard.
Article 19 Liaison with the authorities of the Member States
1. The Commission shall transmit to the competent authorities of the Member States copies of
notifications within three working days and, as soon as possible, copies of the most important
documents lodged with or issued by the Commission pursuant to this Regulation. Such documents
shall include commitments offered by the undertakings concerned vis-à-vis the Commission with
a view to rendering the concentration compatible with the common market pursuant to Article
6(2) or Article 8(2), second subparagraph.
2. The Commission shall carry out the procedures set out in this Regulation in close and constant
liaison with the competent authorities of the Member States, which may express their views upon
those procedures. For the purposes of Article 9 it shall obtain information from the competent
authority of the Member State as referred to in paragraph 2 of that Article and give it the
opportunity to make known its views at every stage of the procedure up to the adoption of a
decision pursuant to paragraph 3 of that Article; to that end it shall give it access to the file.
3. An Advisory Committee on concentrations shall be consulted before any decision is taken
pursuant to Article 8(1) to (6), Articles 14 or 15 with the exception of provisional decisions taken
in accordance with Article 18(2).
4. The Advisory Committee shall consist of representatives of the competent authorities of the
Member States. Each Member State shall appoint one or two representatives; if unable to attend,
they may be replaced by other representatives. At least one of the representatives of a Member
State shall be competent in matters of restrictive practices and dominant positions.
5. Consultation shall take place at a joint meeting convened at the invitation of and chaired by the
Commission. A summary of the case, together with an indication of the most important
documents and a preliminary draft of the decision to be taken for each case considered, shall be
sent with the invitation. The meeting shall take place not less than 10 working days after the
invitation has been sent. The Commission may in exceptional cases shorten that period as
appropriate in order to avoid serious harm to one or more of the undertakings concerned by a
concentration.
6. The Advisory Committee shall deliver an opinion on the Commission's draft decision, if
necessary by taking a vote. The Advisory Committee may deliver an opinion even if some
members are absent and unrepresented. The opinion shall be delivered in writing and appended
to the draft decision. The Commission shall take the utmost account of the opinion delivered by
the Committee. It shall inform the Committee of the manner in which its opinion has been taken
into account.
7. The Commission shall communicate the opinion of the Advisory Committee, together with the
decision, to the addressees of the decision. It shall make the opinion public together with the
decision, having regard to the legitimate interest of undertakings in the protection of their
business secrets.
Article 20 Publication of decisions
1. The Commission shall publish the decisions which it takes pursuant to Article 8(1) to (6), Articles
14 and 15 with the exception of provisional decisions taken in accordance with Article 18(2)
together with the opinion of the Advisory Committee in the Official Journal of the European
Union.
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2. The publication shall state the names of the parties and the main content of the decision; it
shall have regard to the legitimate interest of undertakings in the protection of their business
secrets.
Article 21 Application of the Regulation and jurisdiction
1. This Regulation alone shall apply to concentrations as defined in Article 3, and Council
Regulations (EC) No 1/2003(8), (EEC) No 1017/68(9), (EEC) No 4056/86(10) and (EEC) No
3975/87(11) shall not apply, except in relation to joint ventures that do not have a Community
dimension and which have as their object or effect the coordination of the competitive behaviour
of undertakings that remain independent.
2. Subject to review by the Court of Justice, the Commission shall have sole jurisdiction to take the
decisions provided for in this Regulation.
3. No Member State shall apply its national legislation on competition to any concentration that
has a Community dimension.
The first subparagraph shall be without prejudice to any Member State's power to carry out any
enquiries necessary for the application of Articles 4(4), 9(2) or after referral, pursuant to Article
9(3), first subparagraph, indent (b), or Article 9(5), to take the measures strictly necessary for the
application of Article 9(8).
4. Notwithstanding paragraphs 2 and 3, Member States may take appropriate measures to
protect legitimate interests other than those taken into consideration by this Regulation and
compatible with the general principles and other provisions of Community law.
Public security, plurality of the media and prudential rules shall be regarded as legitimate
interests within the meaning of the first subparagraph.
Any other public interest must be communicated to the Commission by the Member State
concerned and shall be recognised by the Commission after an assessment of its compatibility
with the general principles and other provisions of Community law before the measures referred
to above may be taken. The Commission shall inform the Member State concerned of its decision
within 25 working days of that communication.
Article 22 Referral to the Commission
1. One or more Member States may request the Commission to examine any concentration as
defined in Article 3 that does not have a Community dimension within the meaning of Article 1
but affects trade between Member States and threatens to significantly affect competition within
the territory of the Member State or States making the request.
Such a request shall be made at most within 15 working days of the date on which the
concentration was notified, or if no notification is required, otherwise made known to the
Member State concerned.
2. The Commission shall inform the competent authorities of the Member States and the
undertakings concerned of any request received pursuant to paragraph 1 without delay.
Any other Member State shall have the right to join the initial request within a period of 15
working days of being informed by the Commission of the initial request.
All national time limits relating to the concentration shall be suspended until, in accordance with
the procedure set out in this Article, it has been decided where the concentration shall be
examined. As soon as a Member State has informed the Commission and the undertakings
concerned that it does not wish to join the request, the suspension of its national time limits shall
end.
3. The Commission may, at the latest 10 working days after the expiry of the period set in
paragraph 2, decide to examine, the concentration where it considers that it affects trade
between Member States and threatens to significantly affect competition within the territory of
the Member State or States making the request. If the Commission does not take a decision
within this period, it shall be deemed to have adopted a decision to examine the concentration in
accordance with the request.
The Commission shall inform all Member States and the undertakings concerned of its decision. It
may request the submission of a notification pursuant to Article 4.
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The Member State or States having made the request shall no longer apply their national
legislation on competition to the concentration.
4. Article 2, Article 4(2) to (3), Articles 5, 6, and 8 to 21 shall apply where the Commission
examines a concentration pursuant to paragraph 3. Article 7 shall apply to the extent that the
concentration has not been implemented on the date on which the Commission informs the
undertakings concerned that a request has been made.
Where a notification pursuant to Article 4 is not required, the period set in Article 10(1) within
which proceedings may be initiated shall begin on the working day following that on which the
Commission informs the undertakings concerned that it has decided to examine the
concentration pursuant to paragraph 3.
5. The Commission may inform one or several Member States that it considers a concentration
fulfils the criteria in paragraph 1. In such cases, the Commission may invite that Member State or
those Member States to make a request pursuant to paragraph 1.
Article 23 Implementing provisions
1. The Commission shall have the power to lay down in accordance with the procedure referred
to in paragraph 2:
(a) implementing provisions concerning the form, content and other details of notifications and
submissions pursuant to Article 4;
(b) implementing provisions concerning time limits pursuant to Article 4(4), (5) Articles 7, 9, 10
and 22;
(c) the procedure and time limits for the submission and implementation of commitments
pursuant to Article 6(2) and Article 8(2);
(d) implementing provisions concerning hearings pursuant to Article 18.
2. The Commission shall be assisted by an Advisory Committee, composed of representatives of
the Member States.
(a) Before publishing draft implementing provisions and before adopting such provisions, the
Commission shall consult the Advisory Committee.
(b) Consultation shall take place at a meeting convened at the invitation of and chaired by the
Commission. A draft of the implementing provisions to be taken shall be sent with the invitation.
The meeting shall take place not less than 10 working days after the invitation has been sent.
(c) The Advisory Committee shall deliver an opinion on the draft implementing provisions, if
necessary by taking a vote. The Commission shall take the utmost account of the opinion
delivered by the Committee.
Article 24 Relations with third countries
1. The Member States shall inform the Commission of any general difficulties encountered by
their undertakings with concentrations as defined in Article 3 in a third country.
2. Initially not more than one year after the entry into force of this Regulation and, thereafter
periodically, the Commission shall draw up a report examining the treatment accorded to
undertakings having their seat or their principal fields of activity in the Community, in the terms
referred to in paragraphs 3 and 4, as regards concentrations in third countries. The Commission
shall submit those reports to the Council, together with any recommendations.
3. Whenever it appears to the Commission, either on the basis of the reports referred to in
paragraph 2 or on the basis of other information, that a third country does not grant undertakings
having their seat or their principal fields of activity in the Community, treatment comparable to
that granted by the Community to undertakings from that country, the Commission may submit
proposals to the Council for an appropriate mandate for negotiation with a view to obtaining
comparable treatment for undertakings having their seat or their principal fields of activity in the
Community.
4. Measures taken under this Article shall comply with the obligations of the Community or of the
Member States, without prejudice to Article 307 of the Treaty, under international agreements,
whether bilateral or multilateral.
Article 25 Repeal…
Article 26 Entry into force and transitional provisions…
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This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 20 January 2004. For the Council The President C. McCreevy
Doc. # 54 Speech by Mr. Mario Monti European Commissioner Review of the EC Merger
Regulation (Speech/02/252, Date: 04/06/2002)
In June 2000, the European Commission decided to launch a major review of the Merger
Regulation after a decade of intensive operation. In December 11 last, a Green Paper outlining
possible avenues for reform of the Merger Regulation was adopted by the Commission. […]
[…] One of the key features of the Merger Regulation has been the “one-stop-shop”, and this is
rightly cherished by the business community in particular. But the “one-stop-shop” model does
not imply that a case should in all circumstances be dealt with by the Commission: if a transaction
is dealt with by a single authority in the Community (whether the Commission or a national
authority), the same benefits in terms of reduced costs and burdens for the merging parties, and
indeed for the resources of public authorities, are still achieved.
The evidence shows, however, that a significant number of transactions scrutinized at national
level throughout the EU are the subject of notification in a multiplicity of Member States. This
phenomenon will inevitably be aggravated in an enlarged EU.
That is why the Green Paper set forward ideas aimed, on one hand, at tackling the phenomenon
of intra-EU multi-jurisdictional filings and, on the other hand, at rendering more effective the
mechanism for case allocation between the Commission and Member States.
The substantive test
[…] The Green Paper launched a reflection on the merits of the dominance test enshrined
in Article 2 of the Merger Resolution, and in particular invited comment on how the effectiveness
of this test compares with that used in many other jurisdictions (and notably in the US), namely
that mergers should not be allowed to proceed if they engender a “substantial lessening of
competition” (SLC). […]
Efficiencies
There is admittedly a lack of clarity, within the Community and indeed more widely, about
what precise consideration should be given to efficiencies and how these should be defined and
measured.
Most respondents consider that the Commission should, as part of a sound economicsbased merger control policy, take efficiencies into account in conducting its analysis of the overall
effects likely to be produced by a proposed merger. In other words, they consider that there
should be an “efficiency defense” that could mitigate a finding of dominance. I share this
approach.
I have said this before, but let me clarify it once and for all: there is no such thing as a socalled “efficiency offence” in EU merger control law and practice. In other words, the Commission
does not rely on the fact that efficiencies resulting from a merger are likely to have the effect of
reducing or eliminating competition in the relevant market (for example, by enabling lower prices
to be charged to customers), as a ground for opposing a proposed transaction.
There is some divergence among respondents, however, regarding what should be the
scope of a possible “efficiency defense” mitigating a finding of dominance. […]
[I]n my view it is appropriate to maintain a touch of “healthy skepticism” with regard to
efficiency claims, particularly in relation to transactions which appear to present competition
problems. But it is important to provide as much clarity as possible as to how efficiency
considerations are taken into account in merger control.
Procedural issues
A “stop-the-clock” provision for the consideration of remedies
[…] a weakness in the current merger investigation timetables, namely a “time squeeze”
which gives companies insufficient time to have their remedy proposals properly considered…the
Green Paper suggested that the Regulation could provide for a “stop-the-clock” provision, which
would operate at the parties’ request. […]
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Doc. # 55 Communication from the Commission to the Council: Report on the functioning of
Regulation No 139/2004
1.
Council Regulation (EEC) No 4064/89, the "EC Merger Regulation", entered into force on
21 September 1990. The EC Merger Regulation applies to concentrations which are deemed to
have a Community dimension, i.e. where the turnover of the parties concerned satisfy the
thresholds set out in Article 1 of the EC Merger Regulation.
2.
One of the main principles of the EC Merger Regulation is the exclusive jurisdiction of the
Commission with respect to concentrations having a Community dimension. The concept that the
Commission should have sole competence to deal with mergers with a Community dimension
follows from the principle of subsidiarity. From the viewpoint of the European business
community, the Commission's exclusive jurisdiction also provides a "one-stop-shop" advantage,
which is widely regarded as an essential part of keeping the regulatory costs associated with
cross-border transactions at a reasonable level. In addition, the Commission's exclusive
jurisdiction to vet such mergers is an important element in providing a "level playing field" for the
concentrations that were bound to result from the completion of the internal market. This
principle is widely accepted as the most efficient way of ensuring that all mergers with a
significant cross-border impact are subject to a uniform set of rules.
3. […] The EC Merger Regulation had not fully succeeded in creating a level playing field and a set
of coherent rules for this category of cases.
4. The adoption of the recast EC Merger Regulation on 20 January 2004 (also referred to as the
"EC Merger Regulation") was the next step to further improve the merger case allocation
between the Commission and the Member States.
5. The recast EC Merger Regulation introduced a number of substantive and procedural changes.
The review had found that, notwithstanding the introduction of the threshold under Article 1(3),
there was still further scope for improved case allocation between the Commission and the
national competition authorities ("NCAs"). Therefore, while the turnover thresholds set out in
Articles 1(2) and 1(3) were left unchanged, a set of voluntary pre-notification referral mechanisms
was introduced in order to "further improve the efficiency of the system for the control of
concentrations within the Community". The principles guiding the system were those that
decisions taken with regard to the referral of cases should take due account "in particular which is
the authority more appropriate for carrying out the investigation, the benefits inherent in a 'onestop-shop' system, and the importance of legal certainty with regard to jurisdiction".
Doc. # 56 Main applicable legislation and guidelines or notices on European Competition Law:
Rules applicable to Mergers (ed April 2010)
Council Regulation (EC) No 139/2004 of January 2004 on the control of concentrations between
undertakings (the EC Merger Regulation), OJ L 24/1, 29 January 2004.
Commission Regulation (EC) No 802/2004 of 7 April 2004 implementing Council Regulation (EC) No
130/2004 (published in OJ L 133, 30.04.2004, p.1) amended by Commission Regulation (EC) No 1033/2008
of 20 October 2008 (published in OJ L 279, 22.10.008, p. 3)
Annex I: Form CO relating to the notification of a concentration pursuant to Regulation (EC) No 139/2004,
consolidated with amendments introduced by Commission Regulation (EC) No 1033/2008 – Consolidated
version of 23 October 2008;
Annex II: Short Form Co for the notification of a concentration pursuant to Regulation (EC) No 139/2004,
consolidated with amendments introduced by Commission Regulation (EC) No 1033/2008 –
Annex III: Forms RS Reasoned Submission (Form RS), Regulation (EC) No 1309/2004, consolidated with
amendments introduced by Commission Regulation (EC)78 No 1033/2008; Annex IV: Form RM relating to
the information concerning commitments submitted pursuant to article 6(2) and article 8(2) of Regulation
(EC) No 139/2004, introduced by Commission Regulation (EC) No 1033/2008 – Consolidated version of 23
October 2008.
Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of
concentrations between undertakings, OJ C 95, 16 April 2008, p. 1;
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Commission Notice on a simplified procedure for treatment of certain concentrations under Council
Regulation (EC) No 139/2004, OJ C 56, 5 March 2005, p. 32;
Commission Notice on case referral in respect of concentrations, OJ C 56, 5 March 2005, p. 2;
Commission Notice on the definition of the relevant market for the purposes of Community competition
law, OJ C 372, 9 December 1997, p. 5;
Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
concentrations between undertakings, OJ C 265, 18 October 2008, p. 6;
Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under
Commission Regulation (EC) No 802/2004, OJ C 267, 22 October 2008, p.1;
Commission Notice on restrictions directly related to and necessary to concentrations, OJ C 56, 5 March
2005, p. 24;
Commission Notice on the rules for access to the Commission file in case pursuant to Articles 81 and 82 of
the EC Treaty, Articles 53, 53 and 57 of the EEA Agreement and Council Regulation (EC) No 139/2004, OJ C,
22 December 2005, p. 7.
EEA Agreement Articles 53-65 of the EEA Agreement of 1 August 2007; Protocol 24 of the EEA Agreement of
30 January 2010.
2011/EU/US Practices on Cooperation in Merger Investigations; US-EU Merger Working group
(http://www.ftc.gove/bc/international/docs/agree_eurocomm.pdf)
4.3. Decisions: The substantive standard: art. 2; and appeal of the decision to
the EU Courts
Readings: EMR, Art. 2 and cases: Doc. # 57 Doc. # 67.
Doc. # 57 Creation of a Dominant position by a concentrative joint-venture
Commission Decision 91/619/EEC, 2 October 1991 Aerospatiale- Alenia/de Havilland
O.J. L 334, 05/12/1991 p. 42–61
…
(3) Aerospatiale is a French company active in the aerospace industries. Its product range includes
civil and military aircraft and helicopters, missiles, satellites, space systems and avionics. Alenia is
an Italian company predominantly active also in the aerospace industries. Its product range
includes civil and military aircraft, satellites, space systems, avionics, and air and maritime traffic
control systems. Aerospatiale and Alenia jointly control the Groupement d'Intérêt Économique
(GIE) Avions de Transport Régional (ATR) which was set up in 1982 in order jointly to design,
develop, manufacture and sell regional transport aircraft. There are currently two ATR regional
turbo-prop aircraft on the market.
(4) De Havilland, which is a Canadian division of Boeing, only manufactures regional turbo-prop
aircraft. The former de Havilland Corporation (DHC) was nationalized by the Canadian
Government in 1982 and sold to Boeing in 1986. There are currently two de Havilland regional
turbo-prop aircraft on the market.
(5) The notified operation is a concentration in the form of a concentration joint venture within the
meaning of Article 3 of the Merger Regulation since:
- de Havilland will be run by an operating company which will be jointly controlled by
Aerospatiale and Alenia, and
- the activities of Aerospatiale and Alenia in regional turbo-prop aircraft (commuters) have
already been concentrated in the GIE ATR since 1982.
(26) It follows from these figures that:
- in the relevant product market of 40 to 59 seats the new entity would obtain about 64 % of
the world market and about 72 % in the Community,
- in the relevant product market of 60 seats and above, the new entity would have about 76
% of the world market and about 74 % in the Community,
- ATR and DHC after a merger would obtain worldwide a share of about 50 % of the overall
commuter market and about 65 % in the Community.
4. Impact of the concentration
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D. Summary of effect of the proposed concentration on the commuter markets
(51) The combined entity ATR/de Havilland will obtain a very strong position in the world and
Community commuter markets of 40 seats and over, and in the overall world and Community
commuter market, as a result of the proposed concentration. The competitors in these markets
are relatively weak. The bargaining ability of the customers is limited. The combination of these
factors leads to the conclusion that the new entity could act to a significant extent independently
of its competitors and customers, and would thus have a dominant position on the commuter
markets as defined.
(52) The proposed concentration would create a dominant position even if the parties' definition
of the relevant product market as that of the overall market of 20 to 70-seat aircraft were
considered correct . . .
ATR would increase its market share in this market from 29 to 50 % worldwide and from 49 to 65
% within the Community . . .
The extremely strong position which would be obtained by ATR/de Havilland in the higher
segments together with the other structural factors as outlined above leads to the conclusion that
a dominant position would also be created on an overall market of aircraft of 20 to 70 seats.
E. Potential entry into the market (53)–(64)
(55) [. . .] there is no doubt that the presence of substantial and fixed entry costs significantly
reduces the entry response by others to any successful aircraft by one manufacturer.
(56) [. . .] a new entrant into the market would face high risk [. . .] (57) For these reasons it is
considered that it would not be rational to now enter the commuter aircraft market. [ . . . ]
F. Other general considerations (65)–(71)
V. Conclusion
(72) For the reasons outlined above, it is considered that the proposed concentration would lead
to a situation whereby the combined entity ATR/de Havilland could act to a significant extent
independently of its competitors and customers on the world markets as defined for commuters
of 40 to 59 seats and 60 seats and over. The proposed concentration therefore creates a
dominant position on the world markets. Furthermore, according to the above analysis, this
dominant position is not merely temporary and will therefore significantly impede effective
competition. It is considered that such a dominant position is also created even if the relevant
product market is the overall 20 to 70-seat market.
The conditions of competition in the Community commuter markets are not appreciably different
from those prevailing in the overall world markets. The market shares of the new entity would be
similar in both the world and Community markets for commuters of 60 seats and over, and even
higher in the Community market for commuters of 40 to 59 seats than in the world market. These
markets are also relatively more important in the Community than in the rest of the world. As to
the overall market of 20 to 70 seats, the market shares of the new entity would be higher in the
Community than in the rest of the world. It is considered therefore that the proposed
concentration creates a dominant position which significantly impedes effective competition in
the common market within the meaning of Article 2 (3) of the Merger Regulation.
Doc. # 58 Increase of a dominant position and approval of a merger subject to
obligations/conditions
Commission Decision 97/816/EC, 30 July 1997 Boeing/McDonnell Douglas O.J. L 336,
08/12/1997, p. 16–47
Summary of the case
A few months after the decision prohibiting the merger of de Haviland with the European jointventure of Aerospatiale/Alenia, an agreement was signed (1991) between the EU Commission and
the US government to set up a system which could both prevent and help solve the many
difficulties that arise in the enforcement of competition decisions on both sides. The idea was to
build a subtle equilibrium between the need to cooperate towards a better and fairer competition
in the world and, also, to accommodate the special and important interests that would be
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involved in initiating procedures and issuing measures. After a few years when the USA decided
to rethink and reorganize the funding for research in manufacturing military aircrafts, a merger
between Boeing and McDonnell Douglas was judged to be the best alternative to increase
efficiency and savings. For many observers in the USA, because these two US aircraft
manufacturers had no production facilities in the EU although an important share of the European
airlines market, there was little doubt that this envisaged merger was an “American” matter
because of its military implications and because US Federal research funds were given to both
firms. It was also felt that the proposed merger being backed by the Federal government, it
should not fall under any other control than control by the United States.
In 1996, both the US government and the EU Commission were notified of the existence
of an agreement between MDC and Boeing whereby the former would become a subsidiary of the
latter. On the basis of the 1991 agreement, the FTC on the US side and the Commission on the
European side launched extensive bilateral exchanges of information, views and positions. The
EU Commission was very much in doubt that the agreement would be compatible with the
antitrust regulations of the EU particularly because Boeing had exclusive sale agreements for a
twenty year period with three major American airlines (American, Continental and Delta). The
Commission estimated that the agreement would ensure that the merging companies would have
about 11% of the market for the next generation of aircrafts. On the other hand, the merger was
cleared rather easily by the FTC which considered that, even if Boeing had 60% of the market of
large commercial aircrafts, it should not stand in the way of the merger of Boeing with a
potentially failing aircraft manufacturer, McDonnell Douglas. The EU Commission made it very
clear that if the merger were to go through and be approved by the FTC, the merger would be
considered to have taken place without the consent of the Commission and, therefore, the
Commission could not only impose heavy fines on the “merged partners” but, in addition, could
seize some aircrafts made by Boeing. Despite the involvement of politicians on both sides, the EU
and the USA were “at war” over the 1991 agreement. In the end, President Clinton, of the USA,
and the President of the Commission worked out a settlement in the final hours before the
Commission could take any action against Boeing.
Excerpts from the Decision of the Commission
Commission Decision 97/816/EC, 30July 1997 Boeing/McDonnell Douglas O.J. L 336,
08/12/1997, p. 16-47 [Excerpts]
I. THE PARTIES
(3) Boeing is a United States corporation whose shares are publicly traded. Boeing operates in
two principal areas: commercial aircraft, and defense and space…
(4) MDC is a US corporation whose shares are publicly traded. MDC operates in four principal
areas: military aircraft; missiles, space, and electronic systems; commercial aircraft; and financial
services…
II. THE OPERATION
(5) On 14 December 1996, Boeing and MDC entered into an agreement by which MDC would
become a wholly owned subsidiary of Boeing.
III. THE CONCENTRATION
(6) The operation constitutes a concentration within the meaning of Article 3 of the Merger
Regulation since Boeing acquires within the meaning of Article 3 (1) (b) of the Regulation control
of the whole of MDC.
IV. THE COMMUNITY DECISION
(7) Boeing and MDC have a combined aggregate worldwide turnover in excess of ECU 5 billion
(Boeing ECU 17 billion, MDC ECU 11 billion). Each of them has a Community-wide turnover in
excess of ECU 250 million (Boeing […] (4), MDC […]), but they do not both achieve more than two
thirds of their aggregate Community-wide turnover within one and the same Member State. The
notified operation therefore has a Community Decision.
V. THE IMPACT OF THE OPERATION WITHIN THE EUROPEAN ECONOMIC AREA
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(10) It is therefore evident that the operation is of great significance in the EEA as it is in the world
market of which the EEA is an important part.
VI. COOPERATION WITH THE US AUTHORITIES
VII. COMPETITIVE ASSESSMENT
A. RELEVANT PRODUCT MARKETS
1. New large commercial aircraft
2. Second-hand aircraft
B. RELEVANT GEOGRAPHICAL MARKET
C. EFFECTS OF THE CONCENTRATION OF THE MARKET FOR LARGE COMMERCIAL JET AIRCRAFT
I. Current structure of the market for large commercial jet aircraft
1. The competitors
(21) There are currently three competitors on the worldwide market for large commercial jet
aircraft: Boeing, Airbus and MDC…
2. The customers
3. Market shares
(37) The very high market shares of Boeing already indicate a strong position in the overall market
for large commercial aircraft as well as in the two markets proposed in the notification . . .
The market power of Boeing, allowing it to behave to an appreciable extent independently of its
competitors, is an illustration of dominance, as defined by the Court of Justice of the European
Communities in its judgment in Case 322/81 Michelin v. Commission.
4. Market segments
5. Fleet in service
(42) [. . .] it should be noted that Boeing has not only by far the largest fleet in service, but also by
far the broadest product range and it offers a family of aircraft which covers all conceivable
segments of large commercial aircraft.
6. Exclusive deals
(43) Boeing has recently entered into exclusive arrangements for the supply of large commercial
jet aircraft to American Airlines (American), Delta Airlines (Delta), and Continental Airlines
(Continental) . . .
(46) [. . .] It is estimated that 14 400 new aircraft will be delivered worldwide between 1997 and
2016, of which about 2 400 are on firm order with Boeing, MDC or Airbus. There thus remains an
open market for about 12 000 aircraft. However, Boeing's exclusive deals including options and
purchase rights, account for an estimated 13 % of this open market (or over 30 % of the US
market).
7. Future market growth
8. Potential competition
9. Conclusion
(52) [. . .] the Commission has reached the conclusion that Boeing already enjoys a dominant
position on the overall market for large commercial aircraft as well as on the markets for narrowbody and wide-body aircraft.
II. Strengthening of Boeing's dominant position
(53) The proposed concentration would lead to a strengthening of Boeing's dominant
position in large commercial aircraft through:
- the addition of MDC's competitive potential in large commercial aircraft to Boeing's existing
position in this market,
- the large increase in Boeing's overall resources and in Boeing's defence and space business
which has a significant spill-over effect on Boeing's position in large commercial aircraft and
makes this position even less assailable.
1. Impact of MDC's commercial aircraft business
2. Overall effects resulting from the defiance and space business of MDC
VIII. CONCLUSION
(113) For the reasons outlined above, the Commission has reached the conclusion that the
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proposed concentration would lead to the strengthening of a dominant position through which
effective competition would be significantly impeded in the common market within the meaning
of Article 2 (3) of the Merger Regulation.
IX. REMEDIES
A. UNDERTAKINGS SUBMITTED BY BOEING
(114) With a view to removing the competition concerns, Boeing has given the Commission the
following undertakings:
(115) Boeing proposal on leveraging of DAC installed base
1. Boeing undertakes to provide the following structural remedy: for a period of 10 years Boeing
will maintain DAC in a separate legal entity and will supply to the Commission a report certified by
an independent auditor [. . .]. The report will also be made available to the public. On these
conditions, Boeing will have the right to manage fully the separate legal entity and make all
business decisions it deems appropriate. [ . . . ]
2. Boeing commits to providing customer support for DAC aircraft at the same high quality level
provided for Boeing aircraft. [ . . . ]
3. Boeing agrees it will not withhold or threaten to withhold support for DAC aircraft [. . .] or
penalize or threaten to penalize an operator with respect to support for its DAC aircraft [. . .
because the operator proposes to purchase another manufacturer's aircraft. [ . . . ]
4. Boeing will not use its privileged access to the existing fleet in service of DAC aircraft in order to
leverage its opportunities for persuading current DAC operators to purchase Boeing aircraft. [ . . . ]
(116) Boeing proposal on exclusive agreements
Boeing will not enter into any additional exclusive agreements until 1 August 2007 except for
those campaigns in which another manufacturer has offered to enter into an exclusive
agreement.
Boeing will not enforce its exclusivity rights under the agreements with American, Delta and
Continental announced on 21 November 1996, 20 March 1997 and 10 June 1997, respectively.
An exclusive agreement for the purposes of this undertaking means a contractual commitment by
a customer not to purchase or lease any other aircraft manufacturer's commercial jet aircraft or
within a specific range of maximum take-off gross weight capability or to purchase a fixed
percentage of aircraft from one manufacturer.
(117) Boeing proposal on patents
(118) Boeing proposal on transparency of R& D projects
(119) Boeing proposal on suppliers
B. ASSESSMENT
(123) [. . .] the package of undertakings submitted by Boeing contains a combination of structural
and behavioral elements. In the specific circumstances explained above, relating in particular to
the manifest absence of any possible buyer for DAC, the Commission accepts this combination of
undertakings, which should be treated as a whole, and considers that, on balance, they
adequately address the competition problems identified in the present decision and removes the
concerns about a strengthening of Boeing's dominant position in the market for large commercial
aircraft. To ensure full compliance by Boeing with its commitments, in application of Article 8 (2),
second subparagraph, the Commission shall monitor this compliance. In particular, Boeing shall
allow the Commission, or any expert appointed by the Commission, access to internal data
relevant to the implementation of this monitoring, and, whenever requested by the Commission,
be prepared to discuss its compliance with the commitments.
X. FINAL CONCLUSION
(124) Consequently, the Commission concludes that, subject to full compliance with the
commitments made by Boeing, as set out in recitals 114 to 119, the proposed concentration will
not create or strengthen a dominant position as a result of which effective competition would be
significantly impeded in the common market or in a substantial part of it,
HAS ADOPTED THIS DECISION:
Article 1
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Subject to full compliance by Boeing with the conditions and obligations contained in the
commitments as set out in recitals 114 to 119 of this Decision and with the obligation to submit to
monitoring of its compliance with these commitments as set out in recital 123, the concentration
by which the Boeing Company acquires control of the whole McDonnell Douglas Corporation is
declared compatible with the common market and the functioning of the EEA Agreement.
Doc. # 59
Merger of Airline Companies Case No COMP/M.4439 – Ryanair/Aer Lingus (June 27, 2007)
Summary:
Shortly after the privatization of Aer Lingus by the Irish Government in 2006, Ryanair acquired
on the stock market 19.16% of the share capital of Aer Lingus. Then on 23 October 2006, it
launched a public bid for the entire share capital of Aer Lingus and notified the Commission a
week later of its planned takeover. During the public bid, Ryanair bought further shares and on
26 November 2006 it held 25.17% of Aer Lingus’s share capital.
Ryanair is an Irish-based “low-cost” airline, offering point-to-point scheduled air transport
services on more than 400 routes across Europe. With more than 40 million passengers carried in
2006, Ryanair is one of the largest airlines in the world.
Aer Lingus, former Irish “flag”-carrier, had adopted a business model similar to Ryanair and
offered mainly “low-cost” point-to-point short-haul flights. Aer Lingus operated more than 80
routes and carried more than 8.6 million passengers in 2006. Aer Lingus’ activities are limited to
routes to and from Ireland, operating from Dublin, Shannon and Cork.
Their position is particularly strong to and from Dublin, where the merged entity would have
accounted for around 80% of all intra-European traffic.
In line with its approach in previous airline merger cases, the Commission analyzed the effects of
the merger on the routes on which both companies’ activities overlap.
The Commission’s extensive in-depth investigation of the case (involving contacts with dozens of
airlines, other third parties, a consumer survey at Dublin airport and various quantitative
analyses) showed that Aer Lingus and Ryanair competed directly with each other on 35 routes to
and from Ireland. On 22 of these routes, the merger would have left customers with a monopoly.
On the remaining routes, Aer Lingus and Ryanair were each other’s closest competitors and the
merger would have significantly reduced consumer choice, with the merged entity holding market
shares of over 60%. On 27 June 2007 the Commission adopted a decision declaring that Ryanair’s
planned takeover of Aer Lingus was in breach of Article 2 of the EMR. The acquisition would have
combined the two leading airlines operating from Ireland that currently compete vigorously
against each other. The Commission considered that the merger would have harmed consumers
by removing this competition and creating a monopoly or a dominant position on 35 routes
operated by both parties. This would have reduced choice and, most likely, led to high prices for
more than 14 million EU passengers using these routes to and from Ireland each year.
The investigation revealed that most airlines were unlikely to enter into direct competition
against a merged Ryanair/Aer Lingus in Ireland, first because the merged entity would be able to
operate from the very large bases of Ryanair and Aer Lingus in Ireland, and second because
Ryanair had a reputation of aggressive retaliation against any entry attempt. The likelihood of
entry was further reduced by peak-time congestion at Dublin airport and other airports on
overlap routes.
The Commission’s investigation and market test of remedies offered by Ryanair demonstrated
that these remedies were inadequate to remove the competition concerns. In particular the
limited number of airport “slots” offered was not likely to lead to an appropriate competition.
Following the Commission’s decision Ryanair bought further shares brining its shareholding in
Aer Lingus’s capital to 29.3%. Ryanair brought action against that decision before the General
Court (Case T-342/07).
Aer Lingus requested the Commission to order Ryanair to divest all of its shares in Aer Lingus. In
its decision dated 11 October 2007, the Commission refused to grant that request, stating that it
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was not in its power under the EMR to order Ryanair to divest its shareholding since the takeover
had not been implemented and Ryanair only held a minority shareholding which did not enable it
to exercise either de jure or de facto control over Aer Lingus.
Aer Lingus brought an action against that decision before the General Court (Case T-411/07). By
order of 18 March 2008, the President of the General Court rejected the parallel application made
by Aer Lingus for interim measures to prevent Ryanair from exercising its voting rights.
The Commission decision took 514 pages to cover all points and proposals made by the merging
parties Ryanair as the predator and Aer Lingus as the prey. The same happened in Court. In two
very lengthy and detailed judgments of July 6, 2010, the General Court confirmed the EU
Commission decisions.
On the substance, the General Court upheld the Commission for deciding that the merger would
have created dominant positions on a number of routes from or to Dublin, Cork and Shannon
which would be monopolistic or very significant and thus sufficient, in themselves, to validate the
Commission’s finding that the implementation of the merger must be declared incompatible with
the common market.
In the second judgment, the General Court was right, for lack of legal power, to order Ryanair to
divest its shareholding in Aer Lingus.
Excerpts from the Commission Decision
7.10 Possible efficiencies are not likely to outweigh the competitive harm
1099. In the notification…., Ryanair emphasized the potential for substantial efficiencies
brought about by the proposed transaction, which would allegedly benefit customers (1370).
7.10.1. The principles
1100. According to recital 29 in the preamble to the Merger Regulation and the Horizontal
Merger Guidelines, it is possible that efficiencies brought about by a merger counteract the
effects on competition and in particular the potential harm to consumers that it might otherwise
have. Parties to a concentration may thus detail the efficiency gains generated by the
concentration that are likely to enhance the ability and the incentive of the merged entity to act
pro-competitively for the benefit of consumers. Typical examples of such efficiencies include cost
savings, new product introduction and service or product improvement. Efficiency claims need to
be verifiable (namely reasoned, quantified and supported by internal studies and documents if
necessary). To counteract the anticompetitive effects of a merger, such efficiencies must be likely
to benefit consumers (and in particular, to benefit directly customers in the relevant markets
where competition concerns have been identified) and could not have been achieved to a similar
extent by means that are less anticompetitive than the proposed concentration (the so called
“merger specificity”). The three conditions – verifiability, merger specificity and consumer benefit
– are cumulative.
1101. According to the Horizontal Merger Guidelines, to declare compatible with the common
market a transaction for which competition concerns have been identified, the Commission
should be in a position to conclude, on the basis of sufficient evidence that: “the efficiencies
generated by the merger are likely to enhance the ability and the incentive of the merger entity to
act pro-competitively for the benefit of consumers, thereby counteracting the adverse effects on
competition which the merger might otherwise have”.
1102. Moreover, the Horizontal Merger Guidelines, state that “the incentive on the part of the
merged entity to pass efficiency gains on to consumers is often related to the existence of
competitive pressure from the remaining firms in the market and from potential entry”. It is
further indicated that: “It is highly unlikely that a merger leading to a market position
approaching that of a monopoly, or leading to a similar level of market power, can be declared
compatible with the common market on the ground that efficiency gains would be sufficient to
counteract its potential anti-competitive effects”.
1103. In light of these principles and of the anti-competitive effects identified above and in
view of the very high market shares of Ryanair/Aer Lingus on the relevant markets, any
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efficiencies, even if they were found to be verifiable, merger specific, and likely to benefit
consumers, would have to be particularly substantial to prevent the significant impediment to
effective competition set out above.
7.10.2. Ryanair’s claims
1104. ….Ryanair submits that the merger would not give rise to unilateral effects due to
efficiency gains and its particular business model.
1105. Ryanair indicated that the efficiencies brought about by the proposed transaction
would derive mainly from operational cost savings, as a result of (i) larger scale and (ii)
rationalization within Aer Lingus once Ryanair’s business model (and related expertise in
generating lower costs and greater efficiencies) would be applied to it (including via the
introduction of better and more innovative management). These savings would concern several
fields: staff costs, aircraft ownership costs, maintenance costs, airport charges and ground
operational costs, ancillary sales and finally, distribution efficiencies.
1106. Ryanair provided some detailed calculations as well as complementary information upon
the Commission’s request. Initial post-merger efficiencies are estimated by Ryanair as
summarized in the following table. [Table 3: Cost savings to be realized on Aer Lingus according to
Ryanair (million EUR per annum) Source: Ryanair's reply of 25 January 2007 (folio no. 1795) to
Commission's questionnaire of 11 January 2007.]
1107. On staff costs, Ryanair argues that it could "feasibly reduce Aer Lingus’ total staffing by
approximately 1000-1500, or roughly [...] of Aer Lingus’ current staff numbers"1376,
including both clerical and cabin staff. Ryanair also argued that this reduction in cabin staff
would not be detrimental to the service level because it would be coupled with better work
practices. For instance, the contribution of cabin crew to completing the boarding of the aircraft
and the cleaning function, the outsourcing for catering, etc.
1108. On aircraft ownership costs, Ryanair claims that the savings will mainly derive from the
better bargaining position of the combined group coupled with Ryanair's experience in
negotiating discounts on large aircraft orders. It also points out that it could make available at no
cost some of the 67 Boeing aircraft for which Ryanair has an option until 2012 (that is to say, price
has already been negotiated but there is no "firm" order, yet) to replace the 14 Airbus aircraft
that Aer Lingus currently leases (and the contracts for which will expire between 2009 and 2012),
generating a considerable cost reduction, according to Ryanair.
1109. On maintenance costs (representing together with staff costs around [60-70%] of the
claimed savings), Ryanair estimates that its scale (Ryanair's fleet is of around 120 Boeing aircraft)
would allow it to negotiate more favourable maintenance contracts for the much smaller fleet
currently available to Aer Lingus (around 35 Airbus aircraft). These costs would be even lower if
Aer Lingus were to switch to a Boeing fleet, namely by reducing the need for duplicate spare parts
or dual rated engineers.
1110. On airport charges and ground operational costs, Ryanair argues that the main potential
for savings derives from scale in all airports where both airlines currently operate. In fact, many of
Ryanair's discount deals with airports are conditional on delivering a certain minimum number of
passengers per year. By adding Aer Lingus' passengers to Ryanair's ones better discounts could be
achieved (or at least thresholds would be more likely attained).
1111. On distribution (and advertising) costs, all savings claimed by Ryanair would stem from
shifting Aer Lingus' sales model to a near 100% online sales model based on Ryanair's online
platform. In addition, the "internet exposure" created by ryanair.com would reduce the need for
Aer Lingus to use alternative advertising and marketing means.
1112. Ryanair submits that these efficiencies that would be brought about by the proposed
transaction cannot be obtained by any alternative transaction and would not be achieved by the
companies individually in the absence of the merger, for instance through on-going (or planned)
reorganization of Aer Lingus and/or internal growth. In support of this statement, Ryanair argues
that it substantially outperforms Aer Lingus on a wide range of efficiency measures, such as
operational punctuality, fewer lost bags and a lower flight cancellation level. Therefore, each of
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the efficiencies achieved as a result of the merger would be timely, likely and concentrationspecific. Also in terms of merger-specificity, Ryanair claims that Aer Lingus shows no signs of
implementing changes on its own initiative and even when such changes happened in the past
(namely a reduction of its staff by up to 50%) there was little or no change in Aer Lingus's service
levels.
1113. Ryanair argues that these efficiency gains will be passed on to consumers in terms of
reduced fares, higher frequencies and more routes for passengers, and better quality products
and services. Cost savings realized within Aer Lingus would enable it to be more competitive and
to enhance its product offering, while Ryanair would benefit from Aer Lingus's brand and image
on routes where it is not currently present.
1114. Ryanair argues that the claimed cost savings would in no way affect Aer Lingus' quality of
service. The service levels would either be maintained or, more likely, improved. According to
Ryanair, Aer Lingus' mid frills service would be maintained, which involves the current brand,
flights to major capital city and regional city airports, allocated seating and a business class service
on long haul flights.
1115. Although most of the claimed cost savings concern (short-run) fixed costs, Ryanair claims
that "the established track record Ryanair enjoys of converting low costs to low fares throughout
its network"1377 would ensure that efficiencies are passed on to consumers.
7.10.3. Aer Lingus' position
1116. In its submissions and replies to the Commission's questionnaires1378, Aer Lingus
argues that Ryanair's claims "appear to be based on incorrect facts and/or adopt a counterfactual
that ignores the improvements in operational efficiency achieved by Aer Lingus over the past few
years as well as its plans for future cost-cutting measures".
1117. On the counterfactual, Aer Lingus argues the following.
Some of the savings put forward considered by Ryanair derive from not comparing like-withlike, namely not considering that part of Aer Lingus' business (and therefore fleet and staff) is
allocated to long-haul flights, while Ryanair is only active on short-haul flights. A comparison
limited to Aer Lingus short-haul business would result in much lower or no savings (for instance in
staff costs or airport charges).
Ryanair seems to assume that it could simply translate its business model (and related costs)
to Aer Lingus and that Aer Lingus would not be able to realise any savings in the absence of the
merger. This is strongly opposed by Aer Lingus, by putting forward past and planned savings as
well as the fact that some costs are simply non-compressible (such as airport charges in primary
airports) or not dependent on scale (such as fuel costs, which depend more on an appropriate
hedging).
Cost reductions will not automatically translate into lower fares and are more likely to result in
lower quality of the service offered by Aer Lingus in respect of aspects that are relevant for its
current customers (such as seat allocation).
Claimed reduction of aircraft costs would arise only under the assumption of realizing the book
value from the sale of the current Aer Lingus' fleet and its replacement with an asset (namely
Ryanair's options on new Boeing aircraft), which is currently valued in Ryanair's accounts "around
32% below the current Aer Lingus (and market) aircraft cost despite the need to meet substantial
transaction costs. The implication is that Ryanair’s Boeing option price is well below the current
market value of a Boeing 737-800, and the options are extremely valuable. Seen in this light, the
Ryanair proposal has no efficiency effect at all, and in fact it has no real effect on the merged
entity. It simply involves Ryanair transferring existing options for 28 Boeing aircraft with a value of
approximately €42 million into the accounts of its Aer Lingus subsidiary. The analysis above is
correct on the assumption that the scenario only involves a reshuffling of existing assets".
Most of the efficiencies identified by Ryanair are the result of its buyer power. According to
Aer Lingus a number of these savings do not represent efficiencies as they would not raise total
welfare and primarily represent a transfer of rents from one party (for example, shareholders of
Airbus or Boeing in the case of aircraft costs, airports in the case of airports charges) to another
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(the new entity). Aer Lingus states that this critique applies to all of the savings (apart from staff
costs) claimed by Ryanair.
1118. As regards the incorrect nature of the facts on which Ryanair's claims are based, Aer
Lingus argues the following.
Some savings are not netted out of the reduced revenues that they would generate (such as
those deriving from ending the cargo service) or do not consider the costs attached (such as the
costs of outsourcing some tasks).
Aer Lingus also opposes the view that cabin crew can be reduced and that turnaround time is
compressible to 25 minutes.
(i) As regards cabin crew, Aer Lingus argues that Ryanair's figures are wrong and that Aer
Lingus is already running at the legal minimum of 4 cabin crew on A320 and 5 on A321.
(ii) As regards turnaround, Aer Lingus argues that 40 minutes is the standard turnaround (not
55, apart from when a meal break is provided to the crew) and that 25 minutes are possible only
in secondary airports where Ryanair operates but not in primary, congested airports.
1119. Based on the above, Aer Lingus opposes the estimation provided for many of the savings
claimed by Ryanair, with an impact on verifiability, merger specificity and pass-on to consumers.
7.10.3.1. Verifiability
1120. Focusing in particular on the largest savings claimed by Ryanair, that is to say, staff costs,
aircraft costs, aircraft utilization and maintenance costs, representing all together around [8090]% of the efficiency gains claimed by Ryanair (EUR [150-200m] of the total EUR [200-250m], see
table 4 below), some of the erroneous assumptions and inaccuracies invoked by Aer Lingus
support its claim that these savings would not be attainable or are, in any case excessive. Aer
Lingus also points to various cost savings it has already achieved in the areas of airport costs, fuel
management, maintenance and distribution through re-negotiating agreements with the relevant
suppliers. Aer Lingus provides its own estimates of the savings that it considers more reasonable
and attainable.
1121. Overall, Aer Lingus' estimate of possible cost savings is significantly below Ryanair's
projections, as shown by table 4 below…
7.10.3.2. Merger specificity
1122. Aer Lingus also contests the merger-specificity of the claimed efficiencies. It argues that
it can achieve those savings on its own, based on past and on-going internal policies. Aer Lingus
claims to have focused heavily on cost reduction and productivity since 2001. It claims also that it
has reduced unit costs across the organization by 47% since that year. This focus on costs is set to
continue independently of the proposed concentration. At the time of the Aer Lingus IPO, Aer
Lingus told investors that it would "focus relentlessly on costs (Ryanair/Aer Lingus Staff costs,
Aircraft costs, Airport charges, improved aircraft utilization, Fuel and oil costs, Maintenance costs,
Distribution costs and Advertising costs).
1123. Based on this, Aer Lingus argues that even the savings claimed by Ryanair that are
verifiable (that is to say, which are acknowledged by Aer Lingus in substance and size) would not
be merger-specific.
7.10.3.3. Pass-on to consumers
1124. Aer Lingus also argues, in particular via a paper prepared by its economic consultants,
that the "virtuous circle" argument (that is to say, Ryanair would have the incentive to pass lower
costs on to consumers in terms of lower fares because those lower fares will create higher
volumes and lead to even lower costs, and so on) is flawed because it assumes that Ryanair would
be immune from competition. On the contrary, the fact that it would be immune from
competition on some routes and not on others, would result in the normal profit-maximizing
scenario of lowering fares on the routes where there is competition and simply increasing margins
where Ryanair is immune from competition.
1125. Finally, Aer Lingus claims that Ryanair fails to "shed any light on the extent to which this
particular merger would reduce marginal (incremental) costs [… in relation] to output expanding
efficiencies".
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1126. Aer Lingus concludes that even if Ryanair could demonstrate some verifiable and
merger-specific efficiency gains, and even if these might be passed on to consumers on some
routes, the pass-on would be limited (or inexistent) on the Dublin routes where the transaction
would eliminate effective competition.
7.10.4. Commission's assessment
1127. The Commission has reviewed the material submitted by Ryanair and Aer Lingus. It
welcomes the efforts by the Merging Parties to assess whether the claimed efficiencies meet the
relevant criteria of verifiability, merger specificity and benefit consumers as well as to provide
indications of their magnitude. For the reasons set out below, the Commission has reached the
conclusion that none of the claimed efficiencies meets all the necessary criteria to be taken into
consideration. Moreover, even if these criteria were met, the claimed efficiency gains would in all
likelihood be insufficient in magnitude to reverse the anti-competitive effects identified above in
Sections 7.1-7.9.
7.10.4.1. General principles
1128. A basic principle underlying the efficiency section of the Horizontal Merger Guidelines is
the assumption that companies generally pursue profit maximization strategies. The potential for
efficiencies to offset any anticompetitive merger effects is assessed under the same assumption.
1129. Ryanair's submission on merger efficiencies1384 and its response to the Statement of
Objections rely in part on the notion that "Ryanair's business model is radically different from the
various models used by any other airline in Europe"1385. Ryanair argued that it is not in
competition with other airlines but with other uses of disposable income. Further, Ryanair claims
that "[g]iven that Ryanair's model is growth dependent and that growth relies entirely on fare
reductions to generate it, there is no realistic prospect whatsoever of Ryanair increasing its fares."
The company reacts indignantly to the suggestion, that it might not pass on efficiencies and that
"it will simply use lower costs as an excuse to raise margins".
1130. However, as shown in detail above (see e.g. Section 7.4), Ryanair is clearly in
competition with other airlines and adjusts its fares both upwards and downwards in response to
competitive conditions and costs. Other elements also show that Ryanair is able to increase
prices in order to maximize profits. For example, in a report on its latest financial results, Ryanair
indicates that inter alia competitors' price increases (through fuel surcharges) led it to raise its
own average fare (yield) by 7%. In 2005, Ryanair increased its average fare by 2%.
Conversely, in Ryanair's 2004 annual report, increased capacity and "a profusion of lower
fares offered by flag carriers and startup airlines" is blamed for a 14% decline in yields. Also,
Ryanair's industry-leading 22% operating margin (in FY 2006) would appear to be consistent with
normal profit-maximizing conduct.
1131. Hence, despite Ryanair's arguments, there are no indications that any increase in
Ryanair's market power would automatically benefit consumers.
7.10.4.2. Verifiability
1132. Ryanair's efficiency claims are based on documents produced for the purposes of the
merger procedure. The basic line of argument is that Ryanair will apply its management skills and
important elements of its business model to Aer Lingus, which will thereby lower its costs towards
Ryanair's existing levels. Some claimed efficiencies also relate to the increased scale of the
combined business.
1133. The Commission considers that several of Ryanair’s efficiency claims rely on very strong
assumptions which cannot be independently verified. In particular, the proposition that Ryanair
will be able to fully transfer its business model, and in particular the related cost levels to Aer
Lingus without offsetting downgrades in product characteristics and revenue appears highly
optimistic. Ryanair presents no objective or convincing evidence in this respect other than a
general confidence in "Ryanair's more ruthless management style" compared to Aer Lingus. There
appear not to exist business documents, dated pre-merger, which objectively and independently
assess the scope for efficiency gains from acquiring Aer Lingus. The Commission considers that
such documents are critical to show, first, that Ryanair’s business model is different, non-
110
replicable and superior to that of Aer Lingus and, secondly, that its cost structure can be
successfully replicated in Aer Lingus’ post-merger.
1134. Ryanair points to its integration of a previous acquisition, the KLM subsidiary "Buzz", as
an example of its successful track record in implementing efficiencies. However, that airline was
entirely absorbed into Ryanair. That is, contrary to the premises of the present efficiency claim,
the Buzz brand disappeared, the entire Buzz fleet was withdrawn (returned to lessors) within 18
months of the acquisition and services to most primary airports were discontinued.1392 Rather
than supporting Ryanair's efficiency claim, the Buzz acquisition, thus, sheds further doubt on the
assumptions underlying Ryanair's cost projections.
1135. Therefore, the Commission has not found any verifiable evidence that the claimed
efficiencies can be realized when measured against the three most relevant dimensions of
interest for consumers, namely fares, frequencies and service quality (for each route). It has not
been demonstrated that Ryanair can reduce Aer Lingus costs without offsetting reductions in
service quality (different airports, different use of the crew, etc.).
1136. The same concern applies to the claims made about possible reductions in advertising
costs. The Commission notes that if Ryanair plans to maintain the Aer Lingus brand and quality
differentiation, it will continue to be necessary for Aer Lingus to follow its own, differentiated
marketing strategy. Indeed, it may be necessary to maintain advertising expenditures in order to
ensure that consumers do not identify Aer Lingus with Ryanair.
1137. With respect to aircraft ownership costs, it seems likely that Ryanair acquired the
options for new aircraft for the purposes of developing its own business. Transferring the options
to Aer Lingus would mean that Ryanair forgoes the opportunity of expansion planned in the
absence of the merger. Even if Ryanair had no alternative use for the new aircraft in its own (as
opposed to Aer Lingus') fleet, there would still be opportunity costs, because it could alternatively
sell the new aircraft to another airline for an immediate profit. This opportunity cost exists as long
as Ryanair's negotiated delivery price remains below the "spot market" price. In other words, the
opportunity cost of the aircraft's alternative use is exactly equal to the claimed efficiency (and
thereby makes it irrelevant). Transferring options from Ryanair to Aer Lingus at below market
prices would amount to no more than a rent transfer.
1138. In addition, assuming that the efficiency did exist (that is to say, that the two foregoing
caveats did not apply), the assumptions under which of aircraft ownership costs are quantified
seem particularly optimistic, notably in terms of the possibility to realize the book value of Aer
Lingus' fleet.
1139. As regards airport charges and ground operations costs, the Commission notes that
these are often regulated and thus fixed, particularly at the primary airports used by Aer Lingus.
This may also be one explanation for Ryanair's relatively higher success in negotiating lower
airport charges. However, cost reductions from merely switching Aer Lingus services to secondary
airports would in themselves not constitute efficiencies.
1140. Furthermore, the hostile nature of the takeover may complicate integration of the two
companies (especially if Ryanair obtained less than 100% of Aer Lingus' shares) and thus reduce
the likelihood that claimed efficiencies can be achieved. Significant uncertainties remain about
Ryanair's ability to reduce Aer Lingus costs, in particular, staff costs, without reducing the quality
of service which currently allows Aer Lingus to somewhat differentiate its product in relation to
Ryanair.
1141. In conclusion, the Commission finds that it cannot verify the efficiencies claimed by
Ryanair so as to be reasonably certain that these efficiencies are likely to materialize. Ryanair’s
claims are often based on mere assertions such as that Aer Lingus' unit costs can be reduced to its
own levels, without explaining to what extent this would be at the expense of other elements
beneficial to consumers, such as quality of service or airport location. In addition, it appears from
the absence of any supporting documents pre-dating the bid that Ryanair itself did not
systematically assess the scope for efficiencies when preparing its bid for Aer Lingus. The
111
supporting documents submitted by Ryanair were prepared specifically for the purposes of the
Commission's merger procedure.
1142. Ryanair's efficiency claim, therefore, fails to meet the criteria of verifiability.
Nevertheless, for the sake of completeness, the following sections provide an assessment of the
merger specificity of Ryanair's efficiency claims and of the potential consumer benefits.
7.10.4.3. Merger specificity
1143. In addition, a number of efficiencies claimed by Ryanair are likely to be not merger
specific. In particular, the claimed reduction in staff costs, improved aircraft utilization, and
reductions in fuel and distribution costs could also be achieved by Aer Lingus independently of the
proposed merger. Indeed, since 2001 Aer Lingus has built a significant track record of reducing
unit costs, as outlined in Section 7.3.2. The fact that the airline has placed more emphasis on
vertical product differentiation than Ryanair cannot by itself be taken as an indication of
inefficiency. Its ability to compete successfully against Ryanair on most of its short-haul network,
to the contrary, would seem to indicate that Aer Lingus has chosen an efficient price/ quality
combination. Likewise, Ryanair's professed low esteem of Air Lingus' new management team does
not constitute evidence that the airlines will not continue to implement possible efficiencies. In
the absence of the merger, Aer Lingus will continue to be exposed to competition from Ryanair,
which in itself provides incentives to remain an efficient operator.
1144. With respect to the efficiencies related to reductions in maintenance charges and
aircraft costs, it seems, as argued by Aer Lingus, that these (and other) savings, to the extent they
can be achieved, would largely represent a re-distribution of rents in intermediate markets,
rather than real efficiencies. Such a transfer of rents from one party (for instance the airports) to
another (the new entity) would not lead to any change in welfare. In addition, as explained above
(Section 7.10.4.2), the transfer of Ryanair aircraft delivery options to Aer Lingus at below market
prices would merely constitute a rent transfer between the Merging Parties. Similar arguments
apply to fuel hedging contracts and other rents originating in financial market transactions.
1145. In any case, even if cost reductions through rent transfers from third Merging Parties
(such as aircraft manufacturers) were considered as merger-specific efficiencies, they affect
essentially fixed, rather than marginal, costs. While the Horizontal Merger Guidelines do not
explicitly limit the notion of efficiencies to reductions in marginal costs, a pass-on of cost
reductions within a reasonable timeframe is less likely for fixed cost reductions because they do
not immediately affect a firm's profit maximizing price/output decisions.
7.10.4.4. Benefits to consumers
1146. Ryanair argues that reductions in aircraft operating costs affect the airline's "marginal"
decision whether or not to operate a flight on a certain route. "Such cost reductions have an
effect similar to the reduction in the 'hurdle rate' of return that must be earned in order to make
any given flight profitable, which in turn will increase the number of potential flights that can be
profitably operated."
1147. The Commission accepts that the argument that lower fixed entry costs into a route
lower the yield levels at which entry becomes profitable, and that such entry tends to increase
competition for a given route, is valid in principle. It is essentially an argument about long-run
competitive equilibrium. This raises two important questions:
(i) the degree of certainty and timeliness of any pass-on, and
(ii) whether pass-on will benefit the consumers affected by the merger.
1148. With regard to certainty and timeliness, the claimed fixed cost efficiencies would not
affect Ryanair's price setting decisions on existing flights. Any consumer benefit would materialize
only when and if Ryanair opted to increase frequencies on existing routes (which would ceteribus
paribus lower the average fare it can achieve on those routes) or if and when it opened a new
route that was not viable before the fixed-cost reduction but became so after the merger. Even if
the claimed efficiencies were realized, any consumer benefit would therefore not be immediate
but conditional on a chain of events and thus considerably less certain than the price effect of a
marginal cost reduction (which would create immediate incentives for price reductions).
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1149. The benefits of fixed cost efficiencies would in theory be most felt on "thin" routes that
are at present not viable1399. However, since Ryanair only argues that Aer Lingus' costs can be
brought down towards its own levels, there would be no change compared to the pre-merger
situation. Ryanair's "hurdle yield" and, thus, the scope of potential profitable routes would not
change, even if all claimed efficiencies were realized.
1150. By contrast, on existing overlap routes, the immediate effect of the merger lies in the
internalization of Ryanair's and Aer Lingus' pricing and output decisions. The combined airline
(assuming profit maximizing conduct) would have an incentive to raise prices on these routes
because, due to the very high combined market shares, any diversion of passengers between the
Ryanair and Aer Lingus brands would largely (and entirely on the routes moving from duopoly to
monopoly) remain within the merged group. Theoretically, this effect could be counteracted if
and when fixed-cost efficiencies made it profitable for Ryanair to add extra frequencies to the
affected routes, which would in turn put downward pressure on prices. Given the extremely high
combined market shares, often approaching monopoly levels, and the fact that the claimed
efficiencies extend largely to the Aer Lingus brand, it is highly unlikely that the price-reducing
effect of such efficiencies would be sufficient to reverse the price increase from the horizontal
overlap and consequent loss of competition.
7.10.5. Conclusion on efficiencies
1151. In conclusion, the efficiencies claimed by Ryanair are not verifiable and are not merger
specific. Even if they were, these efficiencies would affect Aer Lingus' fixed (aircraft operating)
costs, which makes it uncertain that they would benefit consumers. Finally, as set out in the
Horizontal Merger Guidelines "[i]t is highly unlikely that a merger leading to a market position
approaching that of a monopoly, or leading to a similar level of market power, can be declared
compatible with the common market on the ground that efficiency gains would be sufficient to
counteract its potential anti-competitive effects".
1152. In the light of these principles and of the anti-competitive effects identified in Sections
7.1 to 7.9, the Commission concludes that the merger does not give rise to efficiencies that would
counteract the significant impediment to effective competition resulting from the notified
transaction.
Doc. # 60 Aer Lingus Group plc v. European Commission, Ryanair Holdings plc
Case T-411/07, [2010] ECR II-3691
Judgment of the General Court
7. On 5 October 2006, that is to say three days after Aer Lingus’ shares were first listed,
Ryanair announced its intention to launch a public bid for the entire share capital of Aer Lingus
(‘the public bid’). That public bid was launched on 23 October 2006, and the time-limit for
accepting the bid was initially set as 13 November 2006, which was later extended by Ryanair
until 4 December 2006, then again until 22 December 2006.
8. Just before announcing its intention to launch a public bid, Ryanair had acquired on the
market a shareholding of 16.03% in the capital of Aer Lingus. On 5 October 2006 Ryanair
increased that shareholding to 19.21%. Shortly thereafter Ryanair acquired further shares, so that
it held 25.17% of Aer Lingus by 28 November 2006. That shareholding remained unchanged until
August 2007 when, notwithstanding the adoption, on 27 June 2007, of the Commission of the
European Communities decision referred to in paragraph 15 below, Ryanair acquired a further
4.3% of the capital of Aer Lingus, increasing its shareholding to 29.3%.
9. On 30 October 2006, the proposed concentration by which Ryanair was to acquire, for the
purposes of Article 3(1)(b) of the merger regulation, control of Aer Lingus by the public bid was
notified to the Commission in accordance with Article 4 of that regulation (‘the notified
concentration’ or ‘the concentration’).
10. The Commission considers that the concentration assessed in the present case has not
been implemented. Ryanair has not acquired control of Aer Lingus and the [Ryanair] decision also
excludes that Ryanair acquires control of Aer Lingus in the future by way of the notified operation.
113
The transactions that have been carried out during the Commission’s proceedings can therefore
not be considered as part of an implemented concentration.
11. In this respect it is necessary to point out that the 25.17% minority stake does not grant
Ryanair de jure or de facto control of Aer Lingus within the meaning of Article 3(2) of the … EMR.
Even though minority shareholdings may in certain circumstances lead to a finding of control …,
the Commission has no indications that such circumstances are present in this case.’ [….]
12. The suggested interpretation of the acquisition of the minority shareholding as a “partial
implementation” covered by Article 8(4) of the … EMR is difficult to reconcile with the wording of
that provision, which clearly refers to a concentration that “has already been implemented”. As
the decisive element of a concentration under the EMR – the acquisition of control – is missing,
there is no concentration which “has already been implemented” and the parties thus cannot be
required to “dissolve the concentration”. The Commission’s competence is limited to situations in
which the acquirer has control over the target. The purpose of decisions under Article 8(4) of the
… EMR is to address the negative effects on competition that are likely to result from the
implementation of a concentration as defined in Article 3 of the … EMR. In the present case, such
negative effects cannot occur, since Ryanair has not acquired, and may not acquire, control of Aer
Lingus by way of the proposed concentration.
13. In this respect, the current case clearly differentiates from the situation in past cases
where Article 8(4) of the EMR was applied, such as Tetra Laval/Sidel … or Schneider/Legrand …,
where the public bid had already been successfully completed and the acquirer had acquired
control of the target.’
...
[28] In so far as Article 8(5) of the merger regulation uses the same expression as Article 8(4)
to identify the situations in which the Commission may act, and given that, in the present case, no
concentration has been implemented, the Commission rejects, for the same reasons, Aer Lingus’
request to adopt interim measures pursuant to Article 8(5) of that regulation (see points 15 to 17
of the contested decision).
[59] In order to assess the lawfulness of the contested decision in the light of the power
invested in the Commission to require an undertaking to dissolve a concentration, in particular
through the disposal of all the shares acquired in another undertaking, the reference point must
be the relevant moment established by Article 8(4) of the merger regulation, which envisages a
‘concentration’ which ‘has already been implemented’ and which ‘has been declared
incompatible with the common market’. […]
[60] In that regard, the contested decision was indeed adopted at a time when the
Commission had declared that the concentration notified by Ryanair was incompatible with the
common market. Since the Commission did not address the issue of Ryanair’s minority
shareholding in Aer Lingus in the Ryanair decision, which found the notified concentration to be
incompatible under Article 8(3) of the merger regulation, it could still do so in a separate decision
adopted on the basis of the final sentence of Article 8(4) of that regulation.
[61] However, as is correctly stated in the contested decision, the other condition laid down in
Article 8(4) of the merger regulation is not satisfied, since the notified concentration has not been
implemented. In the present case, from the moment when the decision finding incompatibility
with the common market was adopted, it was no longer possible for Ryanair, de jure or de facto,
to exercise control over Aer Lingus or to exercise decisive influence on that undertaking.
[62] From a legal point of view, the concept of concentration used in the merger regulation is
important since it provides the basis for the Commission’s powers under that regulation. The
merger regulation applies to all concentrations with a Community dimension (Article 1(1)). The
concept of concentration is defined in Article 3 of the regulation. Under Article 3(1), a
concentration is deemed to arise where there is a change of control on a lasting basis which
results, for example, from the merger of two undertakings or the acquisition by an undertaking of
the control of another undertaking. Article 3(2) states that that control is constituted by rights,
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contracts or any other means which confer the possibility of exercising decisive influence on the
undertaking concerned.
[63] Thus, any transaction or group of transactions which brings about ‘a change of control on
a lasting basis’ by conferring ‘the possibility of exercising decisive influence on the undertaking
concerned’ is a concentration which is deemed to have arisen for the purposes of the merger
regulation. Such concentrations have the following characteristics in common: where before the
operation there were two distinct undertakings for a given economic activity, there will only be
one after it. Unlike in the case of a merger in which one of the two undertakings concerned ceases
to exist, the Commission thus has to determine whether the result of the implementation of the
concentration is to confer on one of the undertakings the power to control the other, that is to
say a power which it did not previously hold. That power to control is the possibility of exercising
decisive influence on an undertaking, in particular where the undertaking with that power is able
to impose choices on the other in relation to its strategic decisions.
[64] It is apparent from the above that the acquisition of a shareholding which does not, as
such, confer control as defined in Article 3 of the merger regulation does not constitute a
concentration which is deemed to have arisen for the purposes of that regulation. On that point,
European Union law differs from the law of some of the Member States, in which the national
authorities are authorized under provisions of national law on the control of concentrations to
take action in connection with minority shareholdings in the broader sense (see paragraphs 21
and 49 above).
[65] Contrary to the applicant’s claims, the concept of concentration cannot be extended to
cases in which control has not been obtained and the shareholding at issue does not, as such,
confer the power of exercising decisive influence on the other undertaking, but forms part, in a
broader sense, of a notified concentration examined by the Commission and declared
incompatible with the common market following that examination, without there having been
any change of control within the above meaning.
[66] The Commission is not granted such a power under the merger regulation. According to
the actual terms used in Article 8(4) of the regulation, the power to require the disposal of all the
shares acquired by an undertaking in another undertaking exists only ‘to restore the situation
prevailing prior to the implementation of the concentration’. If control has not been acquired, the
Commission does not have the power to dissolve the concentration. If the legislature had wished
to grant the Commission broader powers than those laid down in the merger regulation, it would
have enacted a provision to that effect.
…
[76] The bounds of the powers invested in the Commission for the purposes of merger control
would be exceeded if it were accepted that the Commission may order the divestment of a
minority shareholding on the sole ground that it represents a theoretical economic risk when
there is a duopoly, or a disadvantage for the attractiveness of the shares of one of the
undertakings making up that duopoly.
[77] An examination of the Commission’s previous practice shows, in any event, that all the
decisions adopted to date by the Commission under Article 8(4) of the merger regulation concern
concentrations which have already been implemented, in which the target company had ceased
to be an independent competitor of the purchasing company. Unlike in the present case, those
decisions did not concern the applicability of Article 8(4) to the concentration at issue, but merely
the measures appropriate to restore the competition which had been eliminated by the
implementation of the concentration. Those measures may vary from one case to the next
depending on the circumstances of the specific case. The Commission’s previous practice in
relation to the treatment of minority shareholdings under Article 8(4) of the merger regulation
can thus not usefully be invoked to call into question the criteria laid down in that provision.
[78] Consequently, the Commission cannot be accused of infringing Article 8(4) of the merger
regulation by considering that no concentration had been implemented in the present case and
that it did not have the power to require Ryanair to dispose of its shareholding in Aer Lingus. Only
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if such a shareholding had enabled Ryanair to control Aer Lingus by exercising de jure or de facto
decisive influence on it, which is not the case here, would the Commission, have had such a power
under the merger regulation.
[84] […] The Commission was correct to consider, in points 12 and 13 of the contested
decision, that Ryanair’s minority shareholding in Aer Lingus could not be regarded, in the present
case, as the ‘partial implementation’ of a concentration capable of giving rise to a measure
adopted on the basis of Article 8(4) and (5) if found to be incompatible with the common market.
[85] Given that Ryanair did not actually take control of Aer Lingus, the disputed shareholding
cannot be assimilated to a ‘concentration’ which ‘has already been implemented’, even if the
operation by which that shareholding was acquired has been declared incompatible with the
common market. […]
[87] Consequently, in spite of the finding that there was a single concentration and the finding
that the concentration was incompatible with the internal market, as set out in the Ryanair
decision, the Commission justified to the required legal and factual standard, in the contested
decision, its decision not to adopt a measure pursuant to Article 8(4) of the merger regulation. […]
[90] Like the Commission, the Court points out that Article 21(3) of the merger regulation
states that ‘[n]o Member State shall apply its national legislation on competition to any
concentration that has a Community dimension’ and that it thus does not confer the power on
the Commission to adopt a measure producing binding legal effects of such a kind as to affect Aer
Lingus’ interests. The Commission can therefore not be criticized for having reiterated, in its
response, the legal framework applicable to the present case and the consequences to be drawn
from it, in particular in so far as concerns the actions provided for in Article 226 EC and Article 234
EC. […]
Doc. # 61 Failing company defence: Kali und Salz Case
Merger between competitors in a collective dominant position.
Kali und Salz AG was a subsidiary of BASF, a giant manufacturer of chemicals in the EU and in
Germany. The only competitor, the French firm Société commerciale des potasses et de l’ azote
(SCPA) declared that it was not interested in merging with any East German mining firm.
French Republic and SCPA and EMC v. Commission of the ECs
Joined Cases C-68/94 and C-30/95, [1998] ECR I-1375
90. The French Government criticizes the Commission for applying the Regulation incorrectly
by authorizing, through the use of the ‘failing company defense’ and without imposing any
conditions, a concentration leading to the creation of a monopoly on the German potash market.
91. As regards the incorrect use of the ‘failing company defense’, the French Government
notes that this defense is derived from United States antitrust legislation, under which a
concentration may not be regarded as causing a dominant position to come into being or
strengthening it if the following conditions are met:
(a) one of the parties to the concentration is in a position such that it will be unable to meet
its obligations in the near future;
(b) it is unable to reorganize successfully under Chapter 11 of the Bankruptcy Act;
(c) there are no other solutions which are less anticompetitive than the concentration; and
(d) the failing undertaking would be forced out of the market if the concentration were not
implemented.
92. The Commission, it is submitted, referred to the ‘failing company defense’ without taking
into account all the criteria used in the United States antitrust legislation, in particular those
mentioned at (a) and (b), whereas only application of the United States criteria in full ensures that
a derogating mechanism is established whose application does not have the effect of aggravating
a competitive situation already in decline.
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100. The Commission concedes that in the contested decision it did not adopt the American
‘failing company defense’ in its entirety. However, it fails to see how that could affect the
lawfulness of its decision.
101. It considers, moreover, that it has shown to the necessary legal standard that the criteria
it used for the application of the ‘failing company defense’ were indeed satisfied in the present
case.
106. The German Government submits that, under Article 2(3) of the Regulation, a
concentration may be prohibited only if it will worsen conditions of competition. There is no
causal link between the concentration and its effect on competition where the identical
worsening of conditions of competition is to be expected even without the concentration. That
will be the case when the three conditions applied by the Commission are satisfied.
109.The Court observes at the outset that under Article 2(2) of the Regulation, a
‘concentration which does not create or strengthen a dominant position as a result of which
effective competition would be significantly impeded in the common market or in a substantial
part of it shall be declared compatible with the common market’.
110. Thus if a concentration is not the cause of the creation or strengthening of a dominant
position which has a significant impact on the competitive situation on the relevant market, it
must be declared compatible with the common market.
112. It must be observed, first of all, that the fact that the conditions set by the Commission
for concluding that there was no causal link between the concentration and the deterioration of
the competitive structure do not entirely coincide with the conditions applied in connection with
the United States ‘failing company defense’ is not in itself a ground of invalidity of the contested
decision. Solely the fact that the conditions set by the Commission were not capable of excluding
the possibility that a concentration might be the cause of the deterioration in the competitive
structure of the market could constitute a ground of invalidity of the decision.
113. In the present case, the French Government disputes the relevance of the criterion that it
must be verified that the acquiring undertaking would in any event obtain the acquired
undertaking’s share of the market if the latter were to be forced out of the market.
114. However, in the absence of that criterion, a concentration could, provided the other
criteria were satisfied, be considered as not being the cause of the deterioration of the
competitive structure of the market even though it appeared that, in the event of the
concentration not proceeding, the acquiring undertaking would not gain the entire market share
of the acquired undertaking. Thus, it would be possible to deny the existence of a causal link
between the concentration and the deterioration of the competitive structure of the market even
though the competitive structure of the market would deteriorate to a lesser extent if the
concentration did not proceed.
115. The introduction of that criterion is intended to ensure that the existence of a causal link
between the concentration and the deterioration of the competitive structure of the market can
be excluded only if the competitive structure resulting from the concentration would deteriorate
in similar fashion even if the concentration did not proceed.
116. The criterion of absorption of market shares, although not considered by the Commission
as sufficient in itself to preclude any adverse effect of the concentration on competition,
therefore helps to ensure the neutral effects of the concentration as regards the deterioration of
the competitive structure of the market. This is consistent with the concept of causal connection
set out in Article 2(2) of the Regulation.
119. In light of the foregoing, the Commission cannot be criticized for finding that MdK was no
long economically viable and for considering that it was probable that, on its own, MdK would
continue to accumulate losses even if Treuhand provided the funds envisaged for restructuring
purposes in the proposed concentration.
124. It follows from the foregoing that the absence of a causal link between the concentration
and the deterioration of the competitive structure of the German market has not been effectively
called into question. Accordingly, it must be held that, so far as that market is concerned, the
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concentration appears to satisfy the criterion referred to in Article 2(2) of the Regulation, and
could thus be declared compatible with the common market without being amended.
Consequently, contrary to the French Government’s assertion, it is not possible without
contradicting that premises to require the Commission, with respect to the German market, to
attach any condition whatever to its declaration of the concentration’s compatibility.
Doc. # 62 Gencor Ltd v. Commission of the European Communities Case T-102/96, [1999] ECR II753
Facts: from the Judgment of the Court
[1] Gencor Ltd (‘Gencor') is a company incorporated under South African law. . . .
[2] Impala Platinum Holdings Ltd (‘Implats') is a company incorporated under South African law
bringing together Gencor's activities in the platinum group metal (‘PGM') sector. Held as to 46.5%
by Gencor and 53.5% by the public, [. . .]
[3] Lonrho Plc (‘Lonrho') is a company incorporated under English law. It is the parent company
of a diversified group with interests in mining and metals, [. . .]
[4] Eastern Platinum Ltd (‘Eastplats') and Western Platinum Ltd (‘Westplats'), generally known
under the name of Lonrho Platinum Division (‘LPD'), are companies incorporated under South
African law which bring together Lonrho's activities in the PGM sector. They are held as to 73% by
Lonrho and as to 27% by Gencor through its subsidiary Implats. . . .
The proposed concentration
[5] Gencor and Lonrho proposed to acquire joint control of Implats and, through that
undertaking, of Eastplats and Westplats (LPD), [. . .]
[6] Following the transaction, Implats was to have sole control of Eastplats and Westplats.
Implats was to be held as to 32% by Gencor, 32% by Lonrho and 36% by the public . . .]
[20] By Decision 97/26/EC of 24 April 1996 (O.J. 1997 L 11, p. 30; ‘the contested decision'), the
Commission declared, pursuant to Article 8(3) of the Regulation, that the concentration was
incompatible with the common market and the functioning of the EEA Agreement, because it
would have led to the creation of a dominant duopoly position between Amplats and Implats/LPD
in the world platinum and rhodium market as a result of which effective competition would have
been significantly impeded in the common market.
Judgment of the Court
[199] The prohibition enacted in Article 2(3) of the Regulation reflects the general objective
assigned by Article 3(g) of the Treaty, namely the establishment of a system ensuring that
competition in the common market is not distorted (first and seventh recitals in the preamble to
the Regulation). The prohibition relates to concentrations which create or strengthen a dominant
position as a result of which effective competition would be significantly impeded in the common
market or in a substantial part of it.
[200] The dominant position referred to is concerned with a situation where one or more
undertakings wield economic power which would enable them to prevent effective competition
from being maintained in the relevant market by giving them the opportunity to act to a
considerable extent independently of their competitors, their customers and, ultimately, of
consumers.
[201] The existence of a dominant position may derive from several factors which, taken
separately, are not necessarily decisive. Among those factors, the existence of very large market
shares is highly important. Nevertheless, a substantial market share as evidence of the existence
of a dominant position is not a constant factor. Its importance varies from market to market
according to the structure of those markets, especially so far as production, supply and demand
are concerned . . .
[202] In addition, the relationship between the market shares of the undertakings involved in
the concentration and their competitors, especially those of the next largest, is relevant evidence
of the existence of a dominant position. That factor enables the competitive strength of the
competitors of the undertaking in question to be assessed (Hoffmann-La Roche, paragraph 48).
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[203] Accordingly, the fact that the Commission has relied in other concentration cases on
higher or lower market shares in support of its assessment as to whether a collective dominant
position might be created or strengthened cannot bind it in its assessment of other cases
concerning, in particular, markets in which the structure of supply and demand and the conditions
of competition are different.
[204] Thus, since there is no reliable evidence that the mineral water market and/or the potash
market examined in the Nestlé-Perrier case and the Kali und Salz case, on the one hand, and the
platinum and rhodium market under consideration in this case, on the other, have fundamentally
similar characteristics, the applicant cannot rely on any differences in the market shares held by
the members of the oligopoly which were taken into account by the Commission in one or other
of those two cases in order to call into question the market-share threshold adopted as indicative
of a collective dominant position in this case.
[205] Furthermore, although the importance of the market shares may vary from one market
to another, the view may legitimately be taken that very large market shares are in themselves,
save in exceptional circumstances, evidence of the existence of a dominant position (Case C-62/86
Akzo v. Commission [1991] ECR I-3359, paragraph 60). An undertaking which has a very large
market share and holds it for some time, by means of the volume of production and the scale of
the supply which it stands for — without those having much smaller market shares being able
rapidly to meet the demand from those who would like to break away from the undertaking
which has the largest market share — is in a position of strength which makes it an unavoidable
trading partner and which, already because of this, secures for it, at the very least during
relatively long periods, that freedom of action which is the special feature of a dominant position
(Hoffmann-La Roche, paragraph 41).
[206] It is true that, in the context of an oligopoly, the fact that the parties to the oligopoly
hold large market shares does not necessarily have the same significance, compared to the
analysis of an individual dominant position, with regard to the opportunities for those parties, as a
group, to act to a considerable extent independently of their competitors, their customers and,
ultimately, of consumers. Nevertheless, particularly in the case of a duopoly, a large market share
is, in the absence of evidence to the contrary, likewise a strong indication of the existence of a
collective dominant position.
[207] In the instant case, as the Commission stated in the contested decision (paragraphs 81
and 181), Implats/LPD and Amplats would, following the concentration, each have had a market
share of about 30% to 35%, that is to say a combined market share of approximately 60% to 70%,
in the world PGM market and approximately 89% of the world PGM reserves. Russia had a 22%
market share and about 10% of world reserves, the North American producers held a 5% market
share and 1% of world reserves, and the recycling undertakings had a 6% market share. It was
probable that, after Russia had disposed of its stocks, that is to say in all likelihood in the two
years following the contested decision, Implats/LPD and Amplats would each have had a market
share of about 40%, that is to say a combined market share of 80%, which would have constituted
a very large market share.
[208] Thus, having regard to the allocation of market share between the parties to the
concentration and to the gap in market share which would open up following that concentration
between, on the one hand, the entity arising from the merger and Amplats and, on the other, the
remaining platinum producers, the Commission was entitled to conclude that the proposed
concentration was liable to result in the creation of a dominant position for the South African
undertakings.
[219] . . . the Commission states, without challenge from the applicant, that the platinum
industry has an inflexible cost structure with high fixed costs, a fact which means that, in platinum
mining, output cannot be varied significantly even if a number of operating shafts make little or
no contribution to profitability [ . . . ]
[222] Consequently, given the similarity in the market shares, shares of world reserves and
cost structures of the undertakings at issue, the Commission was entitled to conclude that,
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following the concentration, the interests of Amplats and Implats/LPD with regard to the
development of the market would have coincided to a higher degree and that this alignment of
interests would have increased the likelihood of anti-competitive parallel behaviour, for example
restrictions of output.
[264] The applicant claims that the Commission did not take account of the case-law of the
Court of First Instance ( SIV and Others v. Commission [1992] ECR II-1403; the ‘Flat Glass' case)
which, in the context of Article 86 of the Treaty, requires for findings of collective dominance that
there be structural links between the two undertakings, for example through a technological lead
by agreements or licenses, which give them the power to behave independently of their
competitors, of their customers and, ultimately, of consumers. In the instant case, the
Commission has failed to demonstrate the existence of structural links or to prove that the
merged entity and Amplats intended to behave as if they constituted a single dominant entity.
That failure also infringes the obligation to state reasons laid down in Article 190 of the Treaty.
[270] The Commission states, first, that in its previous decision-making practice it had not
always relied on the existence of economic links in order to make a finding of collective
dominance, and second, that the Court of First Instance, in its judgment in the ‘Flat Glass' case
(paragraph 358), did not lay down the existence of economic links as a requirement or restrict the
notion of economic links to the structural links relied on by the applicant. The Commission is
therefore entitled to understand that notion as including the relationship of interdependence
which exists between the members of a tight oligopoly.
[271] In addition, even assuming that the Court of First Instance did lay down a requirement of
economic links in the context of Article 86 of the Treaty that does not mean that the same
requirement should exist in connection with the control of concentrations.
[272] Furthermore, even if the notion of economic links were to be construed in a narrower
sense, there were, despite the applicant's tendency to underestimate them, a number of such
links between the parties to the proposed concentration and Amplats which could have
reinforced the common interest of the members of a tight oligopoly (paragraphs 155, 156 and 157
of the contested decision).
[273] In its judgment in the Flat Glass case, the Court referred to links of a structural nature
only by way of example and did not lay down that such links must exist in order for a finding of
collective dominance to be made.
[274] It merely stated (at paragraph 358 of the judgment) that there is nothing, in principle, to
prevent two or more independent economic entities from being united by economic links in a
specific market and, by virtue of that fact, from together holding a dominant position vis-à-vis the
other operators on the same market. It added (in the same paragraph) that that could be the
case, for example, where two or more independent undertakings jointly had, through agreements
or licenses, a technological lead affording them the power to behave to an appreciable extent
independently of their competitors, their customers and, ultimately, of consumers.
[275] Nor can it be deduced from the same judgment that the Court has restricted the notion
of economic links to the notion of structural links referred to by the applicant.
[276] Furthermore, there is no reason whatsoever in legal or economic terms to exclude from
the notion of economic links the relationship of interdependence existing between the parties to
a tight oligopoly within which, in a market with the appropriate characteristics, in particular in
terms of market concentration, transparency and product homogeneity, those parties are in a
position to anticipate one another's behavior and are therefore strongly encouraged to align their
conduct in the market, in particular in such a way as to maximize their joint profits by restricting
production with a view to increasing prices. In such a context, each trader is aware that highly
competitive action on its part designed to increase its market share (for example a price cut)
would provoke identical action by the others, so that it would derive no benefit from its initiative.
All the traders would thus be affected by the reduction in price levels.
[277] That conclusion is all the more pertinent with regard to the control of concentrations,
whose objective is to prevent anti-competitive market structures from arising or being
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strengthened. Those structures may result from the existence of economic links in the strict sense
argued by the applicant or from market structures of an oligopolistic kind where each undertaking
may become aware of common interests and, in particular, cause prices to increase without
having to enter into an agreement or resort to a concerted practice.
[278] In the instant case, therefore, the applicant's ground of challenge alleging that the
Commission failed to establish the existence of structural links is misplaced.
[279] The Commission was entitled to conclude, relying on the envisaged alteration in the
structure of the market and on the similarity of the costs of Amplats and Implats/LPD, that the
proposed transaction would create a collective dominant position and lead in actual fact to a
duopoly constituted by those two undertakings.
[280] To the same end, it was also entitled to take into account the economic links referred to
in paragraphs 156 and 157 of the contested decision.
(i) Conclusion
[297] It follows from all of the foregoing that the Commission was fully entitled to conclude
(paragraph 219 of the contested decision) that the concentration would have led to the creation
of a dominant duopoly on the part of Amplats and Implats/LPD in the platinum and rhodium
market, as a result of which effective competition would have been significantly impeded in the
common market within the meaning of Article 2 of the Regulation. It also follows that the
reasoning in the contested decision fulfils the requirements laid down by Article 190 of the Treaty.
[298] Since all the grounds of challenge put forward by the applicant have been rejected, the
pleas under consideration must be rejected as well .
Doc. # 64 Collective dominance and mergers: assessment and evidence
Airtours plc v. Commission
Court of First Instance (5th Chamber, extended composition) Case T-342/99, [2002] ECR II-2585
Application for annulment of Commission Decision C(1999) final of 22 September 1999
declaring a concentration to be incompatible with the common market and the EEA Agreement
(Case IV/M.1524 – Airtours/First Choice), 2000/276/EC (OJ 2000 L 93, p. 1).
Facts from the judgment
On 29 April 1999, Airtours plc, a tour operator and supplier of package holidays in UK,
announced its intention to acquire all the shares of its competitor, First Choice plc. Airtours
notified the proposed merger to the Commission pursuant to Article 4 of Council Regulation (EEC)
No 4064/89/EEC of 21 December 1989.
On 3 June 1999, the Commission considered that the merger gave rise to serious doubts as to
its compatibility with the common market and opened an investigation. On July 9, 1999, it sent
the applicant a statement of objections under Article 18 of Regulation No 4064/89, in which it set
out the reasons why it took the view, prima facie, that the proposed merger would give rise to a
collective dominant position in the United Kingdom short-haul foreign package holiday market.
The applicant replied to the statement of objections on 25 July 1999. On September 7th, Airtours
submitted two sets of commitments in order to allay the competition concerns which had been
identified.
In its decision of 22 September 1999, the Commission declared that the concentration was
incompatible with the common market and the operation of the EEA under Article 8(3) of
Regulation No 4064/89 on the ground that it would create a collective dominant position in the
United Kingdom market for short-haul foreign package holidays, as a result of which competition
would be significantly impeded in the common market. The post-merger situation showed that
three main actors would remain on the market concerned: Airtours with 3%, Thomson with 27%
and Thomas Cook with 20% and a myriad of small competitors shared the remaining 21% without
any power to compete on a market where demand was stagnant with low price sensibility and
absence of evolution.
On 2 December 1999 the applicant brought the present action to have the Decision of the
Commission annulled.
Judgment
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[16] The applicant relies on four pleas in law in support of its application. The first plea alleges
that there were manifest errors of assessment in the definition of the relevant product market
and infringement of Article 253 EC. The second plea alleges infringement of Article 2 of Regulation
No 4064/89, breach of the principle of legal certainty in so far as the Commission applied a new
and incorrect definition of collective dominance in its assessment of the present case…The third
plea alleges infringement of Article 2 of Regulation No 4064/89 – in that the Commission found
that the transaction created a collective dominant position…The fourth plea alleges infringement
of Article 8(2) of Regulation No 4064/89 and breach of the principle of proportionality inasmuch
as the Commission did not accept the undertakings proposed by the applicant.
After a thorough analysis of the Decision, the Court of First Instance [now the General Court]
held that the adequate evidence in support of its finding.
1: The Court stated (paragraphs 58-59) 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 the competitors, their customers, and also of
consumers.” (Kali & Salz, paragraph 221) …
2: It further stated (paragraph 63) that “the evidence must concern, in particular, factors such
as, for example, the lack of effective competition between the operators alleged to be members of
the dominant oligopoly and the weakness of any competitive pressure that might be exerted by
other operators”.
It added (paragraph 192) that “the prospective analysis of the market necessary in any
assessment of an alleged collective dominant position must not only view that position statically
at a fixed point in time – the point when the transaction takes place and the structure of
competition is altered – but must also assess it dynamically, with regard in particular to its internal
equilibrium, stability, and the question as to whether any parallel anti-competitive conduct to
which it might give rise is sustainable over time."
The Court was of the opinion that the market was not transparent and that it was and will be
difficult to develop a tacit coordination among the three main actors (paragraph 169). The Court
held (paragraph 172) that the Commission failed in establishing that the main competitors would
be able to monitor the total amount of holidays offered by each of the others (paragraph 171). In
paragraph 62 of the judgment, the Court stated that “three conditions are necessary for the
creation of a collective dominant position significantly impeding effective competition in the
common market or a substantial part of it:
-first, each member of the dominant oligopoly must have the ability to know how the
other members are behaving in order to monitor whether or not they are adopting the
common policy. In that regard, it is not enough for each member of the dominant oligopoly to be
aware that interdependent market conduct is profitable for all of them but each member must
also have a means of knowing whether the other operators are adopting the same strategy and
whether they are maintaining it. There must, therefore, be sufficient market transparency for all
members of the dominant oligopoly to be aware, sufficiently precisely and quickly, of the way in
which the other members’ market conduct is evolving;
-second, the situation of tacit coordination must be sustainable over time, that is to say, there
must be an incentive not to depart from the common policy on the market. As the Commission
observes, it is only if all the members of the dominant oligopoly maintain the parallel conduct that
all can benefit. The notion of retaliation in respect of conduct deviating from the common policy
is thus inherent in this condition. In that context, the Commission must not necessarily prove that
there is a specific retaliation mechanism involving a degree of severity, but it must none the less
establish that oligopoly to depart from the common course of conduct to the detriment of the
other oligopolists. For a situation of collective dominance to be viable, there must be adequate
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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;
-third, it must also be established that the foreseeable reaction of current and future
competitors, as well as of consumers, would not jeopardize the results expected from the
common policy. Where the Commission takes the view that a concentration between
undertakings should be prohibited because it will create a situation of collective dominance, it is
incumbent upon it to produce convincing evidence thereof.”
3: The Court gives a clear lesson to the Commission when it is about to decide “whether a
collective dominant position exists, one of the questions which the Commission is required to
address is whether the concentration referred to it would result in effective competition in the
relevant market being significantly impeded. If there is no significant change in the level of
competition obtaining previously, the merger should be approved because it does not restrict
competition (paragraph 82).
For the purpose of determining whether there is a collective dominant position, the stability of
historic market shares is a factor conducive to the development of tacit collusion, inasmuch as it
facilitates the division of the market instead of stimulating fierce competition, each operator
referring to its historic market share in order to fix its production in proportion thereto.
“Economic theory regards volatility of demand as something which renders the creation of a
collective dominant position more difficult. Conversely, stable demand, thus displaying low
volatility, is a relevant factor indicative of the existence of a collective dominant position, in so far
as it makes “deviations” from the common policy (that is, cheating) more easily detectable, by
enabling them to be distinguished from capacity adjustments intended to respond to expansion
or contraction in a volatile market (paragraph 133).”
After such an in depth analysis:
“In the light of all the foregoing, the Court concludes that the Decision, far from basing its
prospective analysis on cogent evidence, is vitiated by a series of errors of assessment as to factors
fundamental to any assessment of whether a collective dominant position might be created. It
follows that the Commission prohibited the transaction without having proved to the requisite
legal standard that the concentration would give rise to a collective dominant position of the three
major tour operators, of such a kind as significantly to impede effective completion in the relevant
market (paragraph 294).”
Doc. # 65 Leverage power and Nullity of the assessment
Commission v. Tetra Laval BV Case C-12/03 P, [2005] ECR I-987
Commission Decision 2004/124/EC, Case No. COMP/M. 2416-Tetra Laval/Sidel (excerpts)
"(1) On 18 May 2001, the Commission received a notification pursuant to Article 4 of Regulation
(EEC) No 4064/89 (the Merger Regulation) of a proposed concentration whereby Tetra Laval SA,
France, belonging to the group Tetra Laval BV (Tetra), the Netherlands, intends to acquire within
the meaning of Article 3(1)(b) of the Merger Regulation control of the French company Sidel SA
(Sidel) by way of a public bid announced on 27 March 2001.
(2) After examination of the notification, the Commission concluded that the notified operation
fell within the scope of Regulation (EEC) No 4064/89 and that it raised serious doubts as to its
compatibility with the common market and the EEA Agreement. On 5 July 2001, the Commission
decided in accordance with Article 6(1) (c) of the Merger Regulation to initiate proceedings in this
case.
(5) Tetra, the notifying party, is a privately held group of companies, which is active in the
design and manufacture of equipment, consumables and ancillary services for the processing,
packaging and distribution of liquid-food (known as the Tetra Pak packaging business). Tetra's
business includes traditional carton packaging, where it is the worldwide market leader, and more
limited activities in the plastic packaging sector. Tetra is also engaged in the supply of equipment,
123
systems, accessories and consumables to dairy farm production and animal husbandry
(6) Sidel is a company involved in the design and production of packaging equipment and
systems, in particular, blow molding machinery, barrier technology and filling machines for PET
(polyethylene terephthalate) plastic bottles. Sidel is the worldwide leader for the production and
supply of blow-molding machines. The company also has activities in engineering, conveying,
overwrapping and palletizing, health and beauty.
(7) On 27 March 2001, Tetra Laval SA announced a public bid for all outstanding shares in
Sidel. Tetra Laval SA is a privately held company established under French law for the purpose of
holding Sidel's shares acquired through the public bid. It is a wholly owned subsidiary of Tetra.
The Commission considered that the merger would lead to an increase in the dominant position
and declared that the merger resulting from the takeover bid launched by Tetra on Sidel could not
be accepted; the Commission ordered its dismantling.
The General Court issued two judgments [Case T-5/02, [2002] ECR II-4381; T-80/02 [2002] ECR II4519] each one annulling a previous Decision of the Commission [2004/124, 2004 O.J. L 43/13;
2004/103, 2004 O.J. L 38/1].
The Commission brought appeals against both judgments of the CFI.
The ECJ held that a decision ordering a separation of undertakings is illegal as a result of the
illegality of an earlier decision declaring a merger incompatible with the Common Market.]
Judgment
The first ground of appeal
[19] By its first ground of appeal, the Commission complains that the Court of First Instance,
whilst claiming to apply the test of manifest error of assessment, in fact applied a different test
requiring the production of convincing evidence'. In doing so, the Court of First Instance infringed
Article 230 EC by failing to take account of the discretion conferred on the Commission with
regard to complex factual and economic matters. It also infringed Article 2(2) and (3) of the
Regulation in that it applied a presumption of legality in respect of concentrations with
conglomerate effect. [ . . . ]
[21] In paragraph 120 of the judgment under appeal, the Court of First Instance (General Court)
interpreted Article 2(3) of the Regulation as follows:
… Conversely, the Commission is bound to declare a concentration falling within the scope of
application of the Regulation compatible with the common market where the two conditions laid
down in that provision are not fulfilled. [
[23] In paragraph 146 of the judgment under appeal, the Court of First Instance interpreted the
Regulation, in so far as it applies to conglomerates, as follows:
"It should be observed, first, that the Regulation, particularly at Article 2(2) and (3), does not
draw any distinction between, on the one hand, merger transactions having horizontal and
vertical effects and, on the other hand, those having a conglomerate effect. It follows that,
without distinction between those types of transactions, a merger can be prohibited only if
the two conditions laid down in Article 2(3) are met. Consequently, a merger having a
conglomerate effect must, like any other merger (see paragraph 120 above), be authorized
by the Commission if it is not established that it creates or strengthens a dominant position
in the common market or in a substantial part of it and that, as a result, effective
competition will be significantly impeded".
[24] With respect to the impact on competition of a conglomerate-type merger and to the
Commission's analysis in that regard,
the Court of First Instance held as follows:
[148] It is necessary first to determine whether a merger transaction creating a competitive
structure which does not immediately confer on the merged entity a dominant position may
nevertheless be prohibited under Article 2(3) of the Regulation, when in all likelihood it will allow
that entity, as a result of leveraging by the acquiring party from a market in which it is already
dominant, to obtain in the relatively near future a dominant position on another market in which
the party acquired currently holds a leading position, and when the acquisition in question has
124
significant anti-competitive effects on the relevant markets.
[150] The Court observes that, in principle, a merger between undertakings which are active on
distinct markets is not usually of such a nature as immediately to create or strengthen a dominant
position due to the combination of the market shares held by the parties to the merger. The
factors which are of significance for the relative positions of competitors within a given market
are generally to be found within the market itself, namely in particular the market shares held by
the competitors and the conditions of competition on the market. It does not follow, however,
that the conditions of competition on a market can never be affected by factors external to that
market.
[153] Consequently, in a prospective analysis of the effects of a conglomerate-type merger
transaction, if the Commission is able to conclude that a dominant position would, in all
likelihood, be created or strengthened in the relatively near future and would lead to effective
competition on the market being significantly impeded, it must prohibit it [ . . . ]
Findings of the ECJ as to the first ground of appeal
[39] Whilst the Court recognizes 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 situation and whether it is capable of substantiating the
conclusions drawn from it. Such a review is all the more necessary in the case of a prospective
analysis required when examining a planned merger with conglomerate effect.
[42] A prospective analysis of the kind necessary in merger control must be carried out with great
care since it does not entail the examination of past events [. . .] 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.
[43] Thus, the prospective analysis consists of an examination of how a concentration might alter
the factors determining the state of competition on a given market in order to establish whether
it would give rise to a serious impediment to effective competition. Such an analysis makes it
necessary to envisage various chains of cause and effect with a view to ascertaining which of
them are the most likely.
[44] The analysis of a conglomerate-type' concentration is a prospective analysis in which, first,
the consideration of a lengthy period of time in the future and, secondly, the leveraging necessary
to give rise to a significant impediment to effective competition mean that the chains of cause
and effect are dimly discernible, uncertain and difficult to establish. That being so, the quality of
the evidence produced by the Commission in order to establish that it is necessary to adopt a
decision declaring the concentration incompatible with the common market is particularly
important, since that evidence must support the Commission's conclusion that, if such a decision
were not adopted, the economic development envisaged by it would be plausible.
[51] It follows from all of the above considerations that the first ground of appeal is unfounded.
The second ground of appeal
[52] By its second ground of appeal, the Commission complains that the Court of First Instance
infringed Articles 2 and 8 of the Regulation in that it required the Commission to take account of
the impact which the illegality of certain conduct would have on the incentives for the merged
entity to engage in leveraging and to assess, as a possible remedy, the commitment not to engage
in abusive conduct.
[54] . . . in a number of ways, Tetra/Sidel . . . would have the ability to tie carton packaging
equipment and consumables with PET packaging equipment and, possibly, preforms (in particular
barrier-enhanced preforms). Tetra/Sidel would also have the ability to use pressure or incentives
(such as predatory pricing or price wars and loyalty rebates) so that its carton customers buy PET
equipment and, possibly, preforms from ... Tetra/Sidel and not from its competitors or converters.
[55] In response to the Commission's criticisms, Tetra proposed to enter into various
125
commitments. However, the Commission took the view that those commitments could not be
regarded as eliminating the competition concerns identified by it effectively [. . .]
[56] [. . .] the Court of First Instance held as follows:
[159] [ . . . ] it must be stated that, although the Regulation provides for the prohibition of a
merger creating or strengthening a dominant position which has significant anti-competitive
effects, these conditions do not require it to be demonstrated that the merged entity will, as a
result of the merger, engage in abusive, and consequently unlawful, conduct. Although it cannot
therefore be presumed that Community law will not be complied with by the parties to a
conglomerate-type merger transaction, such a possibility cannot be excluded by the Commission
when it carries out its control of mergers.
Accordingly, when the Commission, in assessing the effects of such a merger, relies on foreseeable
conduct which in itself is likely to constitute abuse of an existing dominant position, it is required
to assess whether, despite the prohibition of such conduct, it is none the less likely that the entity
resulting from the merger will act in such a manner or whether, on the contrary, the illegal nature
of the conduct and/or the risk of detection will make such a strategy unlikely. While it is
appropriate to take account, in its assessment, of incentives to engage in anti-competitive
practices, such as those resulting in the present case for Tetra from the commercial advantages
which may be foreseen on the PET equipment markets, the Commission must also consider the
extent to which those incentives would be reduced, or even eliminated, owing to the illegality of
the conduct in question, the likelihood of its detection, action taken by the competent authorities,
both at Community and national level, and the financial penalties which could ensue.
[160] Since the Commission did not carry out such an assessment in the contested decision, it
follows that, in so far as the Commission's assessment is based on the possibility, or even the
probability, that Tetra will engage in such conduct in the aseptic carton markets, its findings in this
respect cannot be upheld.
[57] Examining the forms of leveraging in detail, the Court of First Instance held as follows:
[224] It must [. . .] be found that the merged entity's possible means of leveraging would be quite
limited.
Findings of the Court as to the second ground of appeal
[77] It follows that, at the stage of assessing a proposed merger, an assessment intended to
establish whether an infringement of Article 82 EC is likely and to ascertain that it will be
penalized in several legal orders would be too speculative and would not allow the Commission to
base its assessment on all of the relevant facts with a view to establishing whether they support
an economic scenario in which a development such as leveraging will occur.
[78] Consequently, the Court of First Instance erred in law in rejecting the Commission's
conclusions as to the adoption by the merged entity of anti-competitive conduct capable of
resulting in leveraging on the sole ground that the Commission had, when assessing the likelihood
that such conduct might be adopted, failed to take account of the unlawfulness of that conduct
and, consequently, of the likelihood of its detection, of action by the competent authorities, both
at Community and national level, and of the financial penalties which might ensue. [ . . . ]
[85] With respect to consideration of the behavioral commitments offered by Tetra, the Court of
First Instance was right to hold, [. . .] that the fact that Tetra had, in the present case, offered
commitments relating to its future conduct was a factor which the Commission had to take into
account when assessing the likelihood that the merged entity would act in such a way as to make
it possible to create a dominant position on one or more of the relevant markets for PET
equipment.
[89] It follows from the examination of the second ground of appeal as a whole that, although the
Court of First Instance erred in law by rejecting the Commission's conclusions as to the adoption
by the merged entity of conduct likely to result in leveraging, it was nevertheless right to hold, [. .
.], that the Commission ought to have taken account of the commitments submitted by Tetra with
regard to that entity's future conduct. Accordingly, whilst the ground of appeal is well founded in
part, it cannot call into question the judgment under appeal in so far as it annulled the contested
126
decision since that annulment was based, inter alia, on the Commission's refusal to take account
of those commitments.
Doc. # 66 Commission Decision to Initiate Proceedings
Cargill/Degussa Food Ingredients Case COMP/M.3975
On 14 December 2005, the Commission decided to initiate proceedings in the abovementioned case after finding that the notified concentration raises serious doubts as to its
compatibility with the common market. The initiation of proceedings opens a second phase
investigation with regard to the notified concentration. The decision is based on Article 6(1)(c) of
Council Regulation (EC) No 139/2004.
The Commission invites interested third parties to submit their observations on the proposed
concentration to the Commission.
In order to be fully taken into account in the procedure, observations should reach the
Commission not later than 15 days following the date of this publication. Observations can be
sent to the Commission by fax (No (32-2) 296 43 01 or 296 72 44) or by post, under reference
COMP/M.3975 — Cargill/Degussa Food Ingredients, to the following address: European
Commission Competition DG Merger Registry J-70 B-1049 Brussels
Doc. # 67 Commission Decision Not to Oppose
Crédit Agricole/Banca Intesa/Nextra Investment Management Case COMP/M.4006
(2006/C11/13; O.J. C 11/12, 17.1.2006)
On 14 December 2005, the Commission decided not to oppose the above notified
concentration and to declare it compatible with the common market. This decision is based on
Article 6(1) (b) of Council Regulation (EC) No 139/2004.
127

From Doc. 1 to Doc. 2 - Tulane University Law School

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