When the European Merger Control Regulation (EMCR) was adopted, there was uncertainty about whether the EU Courts would act as an effective check on the Commission’s enforcement, and exert discipline on its decisions in the same way as U.S. courts discipline the U.S. federal agencies’ determinations of whether mergers should be allowed to proceed. There was also uncertainty as to the scope for timely judicial review. History has proven the sceptics wrong. The EU Courts have played a highly significant role in shaping the law and holding the Commission to account. Although the EU Courts have recognised that judicial deference is embedded in the EU system of merger control, they have nevertheless been ready to subject Commission decisions to careful and comprehensive review. The courts have also protected merging companies’ rights of defence, striking down decisions that have been insufficiently substantiated or based on findings inadequately presented to the merging parties during the administrative process. The EU Courts have also been responsive to criticism about the limited scope for timely judicial review in merger cases, introducing in 2001 an expedited or “fast-track” procedure. Finally, and most importantly, the EU Courts have helped to shape the law.
This note, available here, describes the EU Courts’ contribution to merger control and identifies some of the leading judgments rendered at the national level, where courts have also played an active role in shaping merger control.
Section I discusses the nature of judicial review by the EU courts.
Almost 30 years after the entry into force of the EMCR, only around 50 of the approximately 6,500 decisions rendered by the Commission have been appealed, although the incidence of appeals has increased in recent years. In total, the EU Courts have overturned 12 Commission decisions (in whole or in part), including five prohibition decisions (of only 30 rendered since the EMCR came into force), six approval decisions, and one decision rejecting a request for a waiver of commitments. Despite the limited number of cases, the impact of judicial review has been significant. The most influential judgments rendered by the EU Courts were the trilogy of cases decided in 2002, when the EU Courts overturned three Commission prohibition decisions in scathing terms, leading to the reform of the European merger control regime.
The EU Courts’ review of merger decisions rendered has been “close, comprehensive, and effective.” Although technically limited to administrative review, the courts have come close to engaging in full reviews on the merits. EU Courts have over time imposed a heightened evidentiary standard on the Commission. Meeting that standard has protracted the EUMR review periods and increased the burden on both the Commission and merging parties. In addition, the courts have played an important role in clarifying an array of questions, such as the jurisdictional scope of EU merger control; the burden and standard of proof to both approve and prohibit transactions; the legal standards to evaluate the lawfulness of transactions; the failing firm defences; or the use of remedies. In addition, the courts have showed themselves increasingly willing to quash merger decisions for procedural improprieties, and has even ordered that damages be paid for losses incurred as a result of an unlawful prohibition decision.
Section II then discusses judicial review by a number of EU national courts, beginning with France.
In the landmark Coca-Cola case, the Council of State held that it had jurisdiction to review all merger control decisions rendered by the French Competition Authority (“FCA”). This includes decisions in relation to gun jumping and breaches of commitments, as well as jurisdiction over procedural aspects and the merits of the FCA’s decisions. Concerning procedure, this has led to the quashing of decisions for failure of the right body of the FCA to approve commitments (Direct 8), and failure to respect third-party rights to be heard (Interbrew). On substance, the Council of State has in a number of cases focused on commitments given to secure approval of transactions to verify that (i) they sufficiently addressed the risk of anticompetitive effects otherwise generated by the transaction, and/or (ii) they were proportionate. Decisions have also been quashed for failure to sufficiently consider the evidence and its potential effects (Société Royal Philips Electronic).
Section II also looks at judicial review of merger decisions in Germany.
Merger control decisions are subject to review by the Düsseldorf Court of Appeals (“DCA”) and the Federal Court of Justice (“FCJ”). Phase I clearances are not subject to judicial review, and parties to a merger cleared unconditionally do not have standing to challenge the merger clearance. On the other hand, ministerial authorisations of a transaction prohibited by the Federal Cartel Office can be – and have on occasion been – suspended by the Düsseldorf Court (e.g. Edeka/Tengelmann).
Section II then reviews judicial review of merger decisions in Italy.
Merger control decisions of the Italian Competition Authority (“ICA”) have been subject to relatively limited review. Nonetheless, the courts have made some significant contributions to the development of the Italian merger control regime. This is particularly the case in two areas. Concerning jurisdiction, the Italian courts have helped define the scope of legal concepts such as ‘concentration’ and ‘control’ for the purposes of merger control. Concerning remedies, the Italian administrative courts validated the ICA’s practice of de facto accepting remedies in Phase I (a possibility not provided for by legislation), by allowing the parties to withdraw the notification and re-notify a revised transaction that includes remedial measures. The courts have also upheld remedies imposed on markets other than those on which a concentration is found to create or strengthen a dominant position, to the extent that divestitures in those markets were indispensable for the creation of a new, credible competitor.
Section II also discusses judicial review of merger decisions in Spain.
As in other jurisdictions, the Spanish courts have guided the development of the merger control regime. As in Italy, the case law has focused on jurisdiction and remedies. On jurisdiction, the case law has touched on matters such as gun jumping and the delimitation of notification thresholds. Regarding remedies, the Supreme Court has explained that they may be adopted only in those markets where competition concerns have been identified; and clarified that the CNMC may not interpret commitments beyond their wording, but may require more precise and detailed language to reduce the scope for discrepancies.
Finally, Section II discusses the judicial review of merger decisions in the UK.
The UK courts have made significant contributions to the development of U.K. merger control. As to jurisdiction, the Supreme Court defined the concept of a “merger” expansively (Eurotunnel), while other courts have adopted a similarly expansive approach to ‘change of control’ (BSkyB/ITV). There have been numerous judgments on substantive matters as well, but it is perhaps more interesting that some judgments on procedural matters have led to calls to changes in existing rules. For example, the CAT encouraged the CMA to give “urgent consideration” to revising the statutory deadlines for mergers; and the CMA’s Merger Assessment Guidelines were amended to take into account a Court of Appeal ruling that the CMA may refer a merger for Phase 2 review if it holds a reasonable and more than “fanciful” belief that it could substantially lessen competition and must make a referral if it believes that a merger is more likely than not to result in a substantial lessening of competition.
This is a high level overview of judicial developments concerning merger control in Europe. What it may lack in depth, it more than compensates for in breadth and insight born of experience. In effect, it is common for papers such as these to be submitted by lawyers at large law firms, since they are in a privileged position to obtain information on developments across jurisdictions from their various offices.
Given its very nature, it is somewhat unfair to expect extensive analysis in papers such as these. But this is not to say that practitioners cannot do depth.