Case C-12/03 P
Commission of the European Communities
v
Tetra Laval BV
(Appeal – Competition – Regulation (EEC) No 4064/89 – Decision declaring a ‘conglomerate-type’ concentration incompatible with the common market – Leveraging – Scope of judicial review – Factors to be taken into consideration – Behavioural commitments)
Opinion of Advocate General Tizzano delivered on 25 May 2004
Judgment of the Court (Grand Chamber), 15 Feburary 2005
Summary of the Judgment
- Competition – Concentrations – Examination by the Commission – Assessments of an economic nature – Conglomerate-type concentration – Discretion as regards assessment – Review by the Court – Limits
(Council Regulation No 4064/89, Art. 2)
- Competition – Concentrations – Assessment of compatibility with the common market – Conglomerate-type concentration – Presentation of a close prospective examination supported by convincing evidence
(Council Regulation No 4064/89, Art. 2(2) and (3))
- Competition – Concentrations – Assessment of compatibility with the common market – Conglomerate-type concentration – Taking into account of foreseeable anti‑competitive conduct capable of resulting in leveraging – Whether permissible – No obligation on the Commission to assess its likelihood having regard to the risks inherent in its adoption by an undertaking
(Art. 82 EC; Council Regulation No 4064/89, Art. 2(2) and (3))
- Competition – Concentrations – Examination by the Commission – Commitments by the undertakings concerned capable of rendering the notified operation compatible with the common market – Taking into account of behavioural and structural undertakings
(Council Regulation No 4064/89 Arts 2 (2) and (3) and 8 (2))
- Competition – Concentrations – Assessment of compatibility with the common market – Taking into account of the elimination or significant reduction of potential competition tending to reinforce a dominant position – Whether permissible – Obligation of the Commission to establish the alleged reinforcement – Mere finding as to the existence of a clear dominant position on the part of the acquiring undertaking not sufficient
(Council Regulation No 4064/89, Art. 2(1), (2) and (3))
- The basic provisions of Regulation No 4064/89 on the control of concentrations between undertakings, in particular Article 2, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review by the Community Courts of the exercise of that discretion, which is essential for defining the rules on concentrations, must take account of the margin of discretion implicit in the provisions of an economic nature which form part of the rules on concentrations.
Whilst the Court recognises that the Commission has a margin of discretion with regard to economic matters, that does not mean that the Community Courts must refrain from reviewing the Commission’s interpretation of information of an economic nature. Not only must the Community Courts, inter alia, establish whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex 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.
(see paras 38-39)
- A prospective analysis of the kind necessary in merger control must be carried out with great care since it does not entail the examination of past events – for which often many items of evidence are available which make it possible to understand the causes – or of current events, but rather a prediction of events which are more or less likely to occur in future if a decision prohibiting the planned concentration or laying down the conditions for it is not adopted.
Thus, 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.
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.
(see paras 42-44)
- The Commission’s analysis of the effects of a conglomerate-type concentration must comprise a comprehensive examination of the probability of the adoption of anti-competitive conduct capable of resulting in leveraging, that is to say, it must take into account both the incentives to adopt such conduct and the factors liable to reduce, or even eliminate, those incentives, including the possibility that such conduct is unlawful.
However, it would run counter to the purpose of prevention of Regulation No 4064/89 on the control of concentrations between undertakings to require the Commission to examine, for each proposed merger, the extent to which the incentives to adopt anti-competitive conduct would be reduced, or even eliminated, as a result of the unlawfulness of the conduct in question, the likelihood of its detection, the action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue.
Such an assessment would make it necessary to carry out an exhaustive and detailed examination of the rules of the various legal orders which might be applicable and of the enforcement policy practised in them. Moreover, if it is to be relevant, such an assessment calls for a high probability of the occurrence of the acts envisaged as capable of giving rise to objections on the ground that they are part of anti-competitive conduct.
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 penalised 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.
(see paras 74-77)
- As regards commitments offered by the undertakings concerned which are capable of rendering the notified concentration compatible with the common market, the principle is that these must enable the Commission to conclude that the concentration at issue will not create or strengthen a dominant position within the meaning of Article 2(2) and (3) of Regulation No 4068/89 on the control of concentrations between undertakings. It is to be inferred from that principle that the categorisation of a proposed commitment as behavioural or structural is immaterial and that the possibility cannot automatically be ruled out that commitments which are prima facie behavioural, for instance a commitment not to use a trade mark for a certain period or to make part of the production capacity of the entity arising from the concentration available to third-party competitors or, more generally, to grant access to essential facilities on non-discriminatory terms, may also be capable of preventing the emergence or strengthening of a dominant position.
(see para. 86)
- It follows from Article 2 (1) of Regulation No 4064/89 on the control of concentrations between undertakings that the Commission, when assessing the compatibility of a concentration with the common market, must take account of a number of factors, such as the structure of the relevant markets, actual or potential competition from undertakings, the position of the undertakings concerned and their economic and financial power, possible options available to suppliers and users, any barriers to entry and trends in supply and demand.
Accordingly, the mere fact that the acquiring undertaking already holds a clear dominant position on the relevant market, although constituting an important factor, does not in itself suffice to justify a finding that a reduction in the potential competition which that undertaking must face constitutes a strengthening of its position.
The potential competition represented by a producer of substitute products on a segment of the relevant market is only one of the set of factors which must be taken into account when assessing whether there is a risk that a concentration might strengthen a dominant position. It cannot be ruled out that a reduction in that potential competition might be compensated by other factors, with the result that the competitive position of the already dominant undertaking remains unchanged.
(see paras 125-127)
JUDGMENT OF THE COURT (Grand Chamber)15 February 2005(1)
(Appeal – Competition – Regulation (EEC) No 4064/89 – Decision declaring a ‘conglomerate-type’ concentration incompatible with the common market – Leveraging – Scope of judicial review – Factors to be taken into consideration – Behavioural commitments)
In Case C-12/03 P,
appellant,
applicant at first instance,
THE COURT (Grand Chamber),,
after hearing the Opinion of the Advocate General at the sitting on 25 May 2004,
gives the following
…
221 In the case of an alleged collective dominant position, the Commission is therefore 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 correlative factors which exist 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.
‘156 In the present case, the leveraging from the aseptic carton market, as described in the contested decision, would manifest itself – in addition to the possibility of the merged entity engaging in practices such as tying sales of carton packaging equipment and consumables to sales of PET packaging equipment and forced sales (recitals 345 and 365) – firstly, by the probability of predatory pricing by the merged entity (recital 364, cited in paragraph 49 above); secondly, by price wars; and, thirdly, by the granting of loyalty rebates. Engaging in these practices would enable the merged entity to ensure, as far as possible, that its customers on the carton markets obtain from Sidel any PET equipment they may require. The contested decision finds that Tetra holds a dominant position on the aseptic carton markets, that is to say, the markets for aseptic carton packaging systems and aseptic cartons (recital 231, see paragraph 40 above), a finding which is not disputed by the applicant.
162 It follows from the foregoing that it is necessary to examine whether the Commission based its analysis of the likelihood of leveraging from the aseptic carton markets, and of the consequences of such leveraging by the merged entity, on sufficiently convincing evidence. In the course of that examination it is necessary, in the present case, to take account only of conduct which would, at least probably, not be illegal. In addition, since the anticipated dominant position would only emerge after a certain lapse of time, by 2005 according to the Commission, its analysis of the future position must, whilst allowing for a certain margin of discretion, be particularly plausible.’
‘217 The leveraging methods referred to in recital 364 of the contested decision (cited in paragraph 49 above) are based on Tetra’s dominant position on the aseptic carton markets. Given, in particular, Tetra’s commitment to divest itself of its preforms operations, the leveraging would be carried out by two types of measures: first, through pressure leading to tied sales or sales which bundle equipment and consumables for carton packaging jointly with PET packaging equipment. That pressure could be put on Tetra customers needing to continue to use carton packaging for some of their production and especially those customers with long-term agreements with Tetra for their carton packaging needs (recital 365, cited in paragraph 50 above). Second, measures could be adopted to offer incentives, such as predatory pricing, price wars and loyalty rebates.
“Tetra Pak shall not practice predatory or discriminatory prices and shall not grant to any customer any form of discount on its products or more favourable payment terms not justified by an objective consideration. Thus, discounts on cartons should be granted solely according to the quantity of each order, and orders for different types of carton may not be aggregated for that purpose.”
261 However, the contested decision fails to provide sufficiently convincing evidence to demonstrate the allegedly specific characteristics of SBM machines used for packaging sensitive products. Admittedly, a combined machine specifically designed for filling carbonated drinks cannot be used for juices. However, that far from proves that low- and high-capacity SBM machines, even ones tailored before sale to the specific wishes of their purchasers, do not remain generic machines, as argued in essence by the applicant, that is to say, capable of packaging several types of products.