Memorandum by Michel Petite, Director
General, Legal Service, and Philip Lowe, Director General, DG
Competition
SUMMARY
The present document sets out the preliminary
views of the Legal Service and the Directorate General for Competition
of the European Commission on the enquiry of the House of Lords
Select Committee (Sub-Committee E) on the need to create an "EU
Competition Court".
10 JANUARY 2007
It is argued that there is at present no compelling
evidence, in terms of case load, lack of expertise on the part
of the Court of First Instance (CFI), or other considerations
that would render the creation of a new judicial panel necessary.
Reducing the time for judicial review of merger
decisions from the current 10 months on average to six months
seems currently feasible with the recently introduced changes
in the CFI and with the introduction of a few more changes in
its methods of organisation and rules of organisation of procedure.
In particular, it has not been demonstrated
that the legitimate objective of aiming to reduce to six months
the review of a small number of merger cases (seven on average
per year) would justify such an important transformation of the
CFI into a court of appeals for all competition cases (on which
jurisdiction would also be conferred for references for preliminary
rulings).
It appears, therefore, that the potential advantages
from the possible creation of a new judicial panel do not outweigh
the numerous disadvantages such an important change would entail
for the present judicial structure of the European Community.
I. INTRODUCTION
The House of Lords Select Committee on the European
Union (Sub-Committee E) has launched an enquiry into the need
for an "EU Competition Court" following an initiative
of the Confederation of British Industry (CBI).
In response to the enquiry conducted by the
Sub-Committee, the present document sets out the preliminary views
of the directly concerned services of the European Commission:
the Legal Service and the Directorate General for Competition.
However, it can in no way be regarded as stating an official position
of the European Commission.
II. BACKGROUND
The CBI paper proposes the creation of a new
judicial panel based on Article 225a EC Treaty. The CBI paper
considers that the new panel could operate more rapidly and in
particular could review merger decisions in a period of six months.
This period is asserted to be the maximum undertakings can normally
bear if they are to keep a proposed merger alive and proceed with
the merger in the event that the Commission's decision prohibiting
a merger or imposing conditions would be reversed. The new judicial
panel would carry out the same type of judicial control that is
currently performed by the CFI, namely control of legality and
full jurisdiction for fines.
Although the perceived problem of timely review
of Commission decisions appears to be largely confined to the
area of merger control, the CBI paper proposes that the new judicial
panel would have jurisdiction for all types of competition cases.
Moreover, the CBI paper proposes that the CFI could also take
over jurisdiction for requests for preliminary rulings in the
competition field. The CBI paper submits that the number of such
requests is expected to increase following the modernisation in
the application of the EC competition rules. The CFI would then
become an appeals court for all competition cases, ie assume on
appeal the same jurisdictional role as that entrusted at present
to the Court of Justice.
The new judicial panel would be composed of
nine judges that would form three chambers. The principal advantage
of the new panel would consist in the fact that its rules of procedure
could be tailor-made for a speedy review of mergers, which would
also be facilitated by the expected specialisation of the judges.
In particular, it could offer the parties the opportunity to choose
the language of the case and thus deal with cases in a language
other than French. The CBI reports that it has explored these
matters with the CFI and found that such changes do not seem possible
within its existing structure and working methods.
III. GENERAL
FRAMEWORK OF
EUROPEAN MERGER
CONTROL AND
IMPORTANCE OF
JUDICIAL REVIEW
Effective judicial control is an indispensable
feature of EC merger control and antitrust enforcement. Timely
judicial review is of primary importance for the parties concerned.
However, the structure of judicial control in the European Union
is also a fundamental institutional choice. There is no doubt
that the CBI proposal would change very substantially the current
judicial structure in the Community. The possible advantages and
disadvantages of creating a judicial panel, therefore, should
be assessed broadly and not with regard to a single parameter,
ie speed in adjudicating merger decisions, however important.
It should be noted that the European merger
control is considered to be an effective system. The Merger Regulation
provides for a "one-stop-shop" for all concentrations
that have Community dimension and ensures a transparent and very
rapid decision-making procedure. From 1990 to end of August 2006,
3,146 merger cases were notified to the European Commission. Of
these, 155 cases went into second-phase examination and there
have been only 19 Commission prohibition decisions. During these
15 years, 83 appeals in total have been filed against 63 Commission
decisions. Of the 19 prohibition decisions, only 10 have been
appealed, resulting so far in 4 annulments and 5 dismissals.
It is generally recognised that the two European
Courts provide meticulous review of the Commission's merger decisions
and that the current judicial system does not lack in substantive
effectiveness.
IV. IS THE
CREATION OF
A NEW
JUDICIAL PANEL
TO REVIEW
MERGER DECISIONS
NECESSARY?
A number of arguments have been advanced in
favour of the creation of a new judicial panel. Firstly, it is
argued that depending on the composition, resources and procedural
arrangements, a new competition court would be able to speed up
the review process by applying greater flexibility regarding the
procedures to be used and the language regime, within the limits
of what is possible without undermining a proper hearing of the
parties. Secondly, the expected benefits would come not only from
the additional nine judges to be appointed but also from the specialisation
they would progressively acquire by hearing only competition cases.
Thirdly, it is argued that the new panel solution would free the
CFI of competition cases, thus increasing the resources available
to deal with cases in other areas.
On the other hand, the new panel solution would
give rise to many disadvantages, in respect of the weight and
prominence of competition matters in the European judicial system,
that effectively rule out the need for its establishment for the
moment. Indeed, it would risk creating a divide between competition
and other Community law cases, especially with regard to the crucial
role and involvement of the Court of Justice in the interpretation
and application of Community law. In addition, as it will be explained
below, the need to create such a new competition panel has not
been made successfully for a number of other reasons.
These issues will be now discussed in turn.
(i) Case load considerations
The available statistics show that the number
of new applications for annulment in the competition field as
a whole has, after a peak in 2002 (61 applications), returned
since 2003 to a figure around 42 cases per year. This represents
on average about 10 per cent of incoming cases every year. The
CFI has been issuing on average 37 orders and judgments in such
cases per year in the same period. Generally, however, the main
case load in the competition field derives from decisions imposing
fines in hardcore cartel cases.
In the merger field, specifically, the case
load varies with the fluctuation of merger activity, but is generally
not considerable in numbers in relation to the overall case load
of the CFI. [1]From
2000 until end of October 2006 (ie a period of almost seven years),
only 40 cases have been introduced before the CFI in the field
of merger control (ie less than six cases per year). [2]Merger
cases do not present a substantial percentage (about 15 per cent)
of the total number of competition law cases.
The number of 42 competition law cases per year
should be compared with the 98 new applications on trademark cases
in 2005. Moreover, the creation of a separate tribunal for staff
matters has liberated the CFI of approximately one third of its
former case load (such type of cases representing 32.2 per cent
or 151 out of 469 actions in 2005). The new staff tribunal has
only started to operate at the beginning of 2006 and it seems
pre-mature to dismiss the impact this development will have on
the workload of the CFI.
Furthermore, it should be noted that the number
of judges of the CFI has increased by 66 per cent since 2004 (from
15 to 25 judges, soon to go up 27 as of 2007), and that the number
of legal secretaries (referendaires) has virtually doubled, due
both to the increase in judges and the allocation of three rather
than two legal secretaries to each judge. The impact these increases
will have on the CFI's rate of output per year has not yet been
properly estimated in the competition field, although the general
productivity of the CFI in terms of orders and judgments rendered
rose by 37 per cent in 2005 relative to the previous year.
It appears, therefore, that the available evidence
as regards the CFI's case load does not show the existence of
an urgent need to create a new judicial panel for competition
cases.
(ii) Timeliness of procedures
The length of time to decide merger cases in
2000 was on average more than two years. Since then, major improvements
have been achieved through the introduction and successful use
of the expedited procedure ("fast-track"). This procedure
has allowed the CFI to conclude the review of complex merger cases
within approximately 10 months. [3]
Although further reduction from 10 to SIX months
of the time needed to complete expedited merger procedures is
desirable, the CBI paper has not demonstrated that such further
reduction is possible only with the creation of a new judicial
panel.
Firstly, a new judicial panel would obviously
need to maintain the high standards applied by the CFI in terms
of thoroughness of review and quality of judicial control. Like
the CFI, it would need to ensure the rights of parties to defend
their case through meaningful written and oral submissions. These
considerations introduce a natural limit to the reduction of time
for judicial review.
The CBI paper further submits that translations
are the principal problem and that further reduction of the time
needed could be achieved by the judicial panel's ability to operate
in a language other than French where the parties agree. To avoid
misunderstanding, there is a need to distinguish between the language
of procedure of a case (ie potentially any of the official languages
of the EU) and the internal working language by the CFI (which
is currently French). Indeed, a judicial panel based on Article
225a EC should, as a matter of principle, be prepared to operate
on a multilingual basis as far as concerns the language of procedure.
The rules of procedure of the CFI allow the applicant to choose
the language of proceedings and the Commission—invariable
defendant in competition cases—defends itself in that language,
irrespective of the language chosen. The rules of procedure also
allow for the possibility of choosing the language of a case by
joint request of the parties. [4]The
same provision ensures that the parties are obliged to provide
any documents in another language together with a translation.
It appears therefore that any delays due to translation are rather
due to the internal working methods of the CFI. If translation
is a real problem, it can be tackled by the CFI already now. [5]It
seems reasonable to consider all possible means of addressing
such issues by measures of internal organisation of procedure,
while the question of making an important institutional change
(with the proposed creation of a new judicial panel) should be
considered from a broader judicial perspective.
(iii) Specialisation of judges as a factor
to build expertise
The proposition that in other contexts there
may be need for specialisation of Community courts is of no relevance
because in this case there is no indication whatsoever that the
CFI is not equipped with sufficient expertise to rule on competition
matters. Indeed, the CFI was created in 1989 precisely to deal
with competition law cases and has clearly acquired such expertise.
Should a degree of specialisation nonetheless appear desirable
at some stage, this can be achieved through appropriate case allocation
measures inside the CFI.
(iv) Importance of competition law in the
judicial structure of the EC Treaty
The possibility to create judicial panels was
introduced in order to discharge the CFI of cases that do not
involve complex analysis in order to free up resources for its
important task of reviewing competition cases. [6]Judicial
review of Commission decisions in the competition and merger fields
does not correspond to this rationale. Indeed, these are often
highly complex cases. The potential effects and precedent value
of court rulings in the competition field can—depending
on the case—be considerable.
There seems to be some tension between the creation
of a new judicial panel and the significance of competition in
the EC Treaty. According to Article 3g EC, the activities of the
European Community include a system ensuring that competition
in the internal market is not distorted. According to Article
4 EC, the Member States and the Community shall act in accordance
with the principle of an open market economy with free competition.
It is also a particular feature of the European legal system that
the substantive competition rules on anticompetitive agreements
and abuses of dominant positions are enshrined in the Treaty text,
ie in primary law.
Moreover, the allocation of competition cases
to a new judicial panel would require—as the CBI paper suggests—that
appeals against its decisions would have for consistency reasons
to be decided by the CFI, not the Court of Justice. [7]But
the solution of creating a new panel would introduce a divide
between competition matters and other areas of EC law of general
application. In terms of substance, this is immediately pertinent
for state aid cases (if not also allocated to the panel) and for
matters arising from the specific legislation that was introduced
to open certain sectors to competition or for Article 86 EC cases.
There is also a wider concern that especially the crucial role
of the Court of Justice in our judicial structure would be impaired
or diminished, as its supervisory role would be distanced from
the experience arising out of competition cases. Moreover, questions
of consistency can arise with regard to institutional issues,
questions of administrative law, rights of defence, etc. Therefore,
although the possibility of transferring preliminary references
to the CFI is legally foreseeable, this would seem incongruent
in the area of competition law in view of the important role competition
plays in the functioning of the internal market. [8]
Articles 225 and 225a EC provide that panel
decisions can, after a decision by the CFI on appeal, be subject
of a further review before the Court of Justice where there is
a serious risk of the unity or consistency of Community law being
affected. So if a new panel were to be created, the involvement
of the Court of Justice would be necessary to ensure overall consistency
of Community law. In such a case, this would be counterproductive
in terms of shortening the time for judicial review as it will
introduce a third level of judicial review.
More importantly, however, consistency between
cases arising from Commission competition decisions and cases
submitted to the Court of Justice in requests for preliminary
rulings could also become a real issue because preliminary questions
relating to the interpretation of competition rules are often
inextricably linked to questions relating to the interpretation
of other Treaty provisions. Furthermore, the CBI paper proposes
to allocate such procedures to the CFI also because the number
of such references is expected to grow following the modernisation
reform with the introduction of Regulation 1/2003. But so far
there is no evidence to support this statement. References in
the competition field in 2005 amounted to just seven out of 221
requests for preliminary rulings by national courts. [9]
V. OTHER RELEVANT
CONSIDERATIONS
There are a number of other considerations to
take into account in the examination of other possible ways to
improve the CFI's procedures in order to reduce the time for judicial
review of merger decisions. As regards the expedited procedure,
different factors may be at work in: (i) cases brought by the
merging parties, and (ii) cases brought by third parties.
As regards merging parties, they will often
wish to prioritise speed in the case of a challenge to a prohibition
or divestiture decision, in order to be able to "keep the
deal alive". This consideration, however, may be less important
in the case of conditional authorisation cases, or certain types
of cases of challenge to jurisdiction, because the "deal"
is not put in immediate danger. [10]
In the case of actions brought by third parties,
the applicants may not always wish to emphasise speed (as the
present relatively low number of requests for expedited procedure
illustrates). Although third parties plead in some cases that
it is important for them, as competitors or clients, to have a
speedy result regarding the future structure of the market (in
the case of challenges to authorisation decisions), it may be
that, in other cases, third parties perceive greater advantage
in the merging parties being subject to a prolonged period of
uncertainty. However, even when the expedited procedure is sought
by a third-party applicant, proceedings may be complicated by
a number of factors:
(a) the applicant may have sight of evidence
relied on by the Commission only upon receipt of the defence;
(b) production of such evidence can involve
difficult and time-consuming questions of confidential treatment;
(c) the merging parties will normally wish
to intervene and to make a written statement in intervention.
More generally, in cases where the merging parties
already benefit from a presumptively valid authorisation decision
on which they can rely to implement the transaction, the merging
parties' incentives relative to speed may change. At the price
of the prolongation of the period of uncertainty relative to the
(implemented) concentration, the parties may prefer to prioritise
quality and depth of argument over speed. [11]
The different perspectives of merging parties
and third parties on speed may also have an impact on the case
load and on "access to justice", but there does not
appear to be a major problem in this regard. It may be the case
that merging parties would challenge more prohibition decisions
if they had greater assurance of obtaining a judgment "in
time" to implement their transaction. However, the number
of prohibition decisions has historically been rather small and
the great majority of prohibition decisions since 2000 have been
challenged (five out of seven). [12]
It is not clear whether greater speed would
unleash pent-up demand to challenge the more numerous conditional
authorisation decisions. Companies may be happy to adhere to the
"bargain" with the Commission that obtains authorisation
for their transaction. It is also easier for companies to "pocket"
the authorisation and to challenge the conditions (especially
if the remedies are behavioural in character over a longer period,
so that all is not played out in six to nine months after the
decision is adopted, as is often the case for divestment of assets),
so if they have not done so in large numbers to date, it may be
supposed that this is not a field where current timing of proceedings
leads to a "denial of justice".
As far as concerns third-party actions against
authorisation decisions, it is striking that many third-party
applicants have not sought the expedited procedure. It does not
appear likely that considerable numbers of third-party actions
are deterred by the current likely timing of such proceedings.
VI. CONCLUSION
The potential advantages from the possible creation
of a new judicial panel to review merger decisions do not appear
to outweigh the numerous disadvantages this would entail for the
present judicial structure of the Community. There is at present
no compelling evidence, in terms of case load, lack of expertise
on the part of the CFI, or other considerations that would render
the creation of a new judicial panel necessary.
It has not been demonstrated that the legitimate
objective of aiming to reduce to six months the review of a small
number of merger cases (seven on average per year) would justify
a transformation of the CFI into a court of appeals for all competition
cases (on which jurisdiction would also be conferred for references
for preliminary rulings).Reducing the time for judicial review
of merger decisions from the current 10 months on average to 6
months seems feasible with the recently introduced changes in
the CFI and with the introduction of a few more changes in its
methods of organisation and rules of organisation of procedure.
4 December 2006
1 The number of Commission decisions of all types in
the merger field against which applications for annulment were
brought, was nine in 2003 (in that year, 466 applications were
lodged before the CFI generally), four in 2004 (536 new applications
overall), five in 2005 (469 new applications overall), and seven
so far in 2006. Back
2
This figure relates to cases notified to the Commission by 31
October 2006 and does not take into account interim measures proceedings
(T-77/02 R Tetra Laval, T-80/02 R Schneider Electric and T-417/05
R), or the two pending actions for damages (T-201/03 MyTravel,
and T-351/03 Schneider Electric). Back
3
Although in 2005-06 it took seven months in two cases: EDP (T-87/05)
and Endesa (T-417/05), and 19 months in one case: Impala (T-464/04). Back
4
See Article 35 of the rules of procedure of the CFI. Back
5
Both the CFI and the ECJ need to have an internal working language,
which has so far been French. The choice of the internal working
language can of course change by a decision of the Courts. Back
6
This is illustrated by the recent creationof a Tribunal for staff
matters. Back
7
It appears that the appeal rate from the CFI to the Court of Justice
has been around 25 per cent out of which on average 15 per cent
of its judgments have been annulled or modified. This is fortunately
not a very high but not an insignificant rate either in terms
of quality of justice dispensed. Back
8
Moreover, it should be noted that in several Member States the
first level judicial review of decisions by their national competition
authorities have been entrusted to courts at appeal court level,
the second level of appeal being the national supreme courts (examples
include France and Germany). Back
9
It should also be noted that this type of cases often raises questions
of general nature: examples include the Masterfoods case (C-344/98),
CIF case (C-198/01), and Syfait case (C-53/03). Back
10
As regards divestiture remedies, it may even be open to the parties
to seek injunctive relief to avoid having to dispose of assets
irrevocably before judgment. Back
11
This may be less the case in prohibition cases, as a judgment
in their favour after a certain time period may not suffice to
"resurrect" the transaction. Back
12
The decisions in M.2097 SCA/Metsa Tissue and M.2187 CVC/Lenzing
were not challenged. Legal challenges were taken in Cases M.1741
MCI, M.2220 GE/Honeywell, M.2283 Schneider/Legrand, M.2416 Tetra
Laval/Sidel, and M.3440 ENI/EDP/GDP. Back
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