Short Reads

Successful challenges to merger decisions seem to be the exception

Successful challenges to merger decisions seem to be the exception

Successful challenges to merger decisions seem to be the exception

06.06.2019 NL law

The General Court recently confirmed the high degree of discretion enjoyed by the European Commission in the context of merger control decisions, particularly with respect to assessments of an economic nature.

EU courts must ensure only that the evidence put forward is factually accurate, reliable and consistent, contains all the relevant data that must be taken into consideration in appraising a complex situation and is capable of substantiating the conclusions drawn from it.

The General Court upheld a 2016 decision of the European Commission approving the telecom joint venture between Vodafone and Liberty Global in the Netherlands. The appeal was brought by KPN, a competitor offering fixed- and mobile-network services in the Netherlands. KPN argued that the Commission erred with respect to (i) the definition of the relevant market, (ii) the assessment of the vertical effects of the joint venture and (iii) the duty to state reasons.

The General Court dismissed all three grounds of appeal. With respect to (i) market definition, the General Court (re)confirmed the high degree of discretion afforded to the Commission in merger control decisions, particularly with respect to economic assessments. It concluded that the Commission did not exceed the bounds of its discretion by not further segmenting the market for the wholesale supply of premium pay TV sports channels. In reaching this conclusion, the General Court essentially satisfied itself that the Commission had applied the correct tests (e.g., assessing demand-side substitutability) and considered the relevant evidence (e.g., feedback from its market investigation and expert reports).

Similarly, with respect to (ii) vertical effects, the General Court dismissed KPN's argument that the Commission erred by examining the effects of input foreclosure in relation to mobile networks only. Once again, the General Court confirmed that the Commission had applied the correct tests (e.g., assessing the likelihood of anti-competitive foreclosure against the likely counterfactual scenario) and considered the relevant evidence (e.g., combined shares in the upstream market).
Finally, with respect to (iii) the duty to state reasons, the General Court noted that it is not necessary for the Commission to go into all the relevant facts and points of law in a decision, to define its position on matters which are of secondary importance or to anticipate potential objections. The Commission will satisfy it duty to state reasons if it sets out the facts and legal considerations having "decisive importance" in a decision.

The judgment confirms the limited role of EU courts in reviewing (the substance of) merger control decisions where the Commission takes the necessary (procedural) steps. Put simply, EU courts will defer to the Commission's economic assessment where they are satisfied that the Commission applied the correct legal tests and relied on the appropriate evidence.

Notably, in 2017, KPN successfully challenged a 2014 Commission decision approving Liberty Global's acquisition of Ziggo. In that case, the General Court agreed that the Commission erred by failing to assess vertical effects in one of two identified market sub-segments (i.e., premium pay-TV sports channels). The Commission subsequently re-reviewed and re-approved the merger in a decision which is currently being appealed by KPN. The General Court's judgment in the present case suggests that successful challenges to merger control decisions (like KPN's earlier appeal) are indeed the exception and not the new rule.

 

This article was published in the Competition Law Newsletter of June 2019. Other articles in this newsletter:

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