Memorandum by Svenskt Näringsliv
(Confederation of Swedish Enterprise)
The Confederation of Swedish Enterprise greatly
appreciates the invitation by the relevant Committee of the House
of Lords to comment on the proposal.
THE PROPOSAL
1. The CBI has proposed a new, so-called
judicial panel be set up under Article 225a ECT. This panel would
be a specialised entity, dealing exclusively with competition
cases. In particular, the panel is meant to handle mergers, in
order to overcome current delays in the review process.
EC MERGER CONTROL
2. The assessment of a proposed merger and
its likely future impact on competition is a complex exercise.
It involves particular difficulties, ie, when it comes to market
dynamics and efficiencies. Already defining the relevant market(s)
often proves controversial, althemore so as it sometimes more
or less decides the outcome of the whole case. The EC Merger Regulation
(ECMR) is using a wide range of assessment criteria, but it does
not provide a comprehensive analytical model. Merger assessment
is simply not an exact science and it contains a clearly speculative
element. It is therefore hardly surprising that in some cases
the parties and the Commission come out in fundamental disagreement
over the analysis.
3. The blocking of a merger can have drastic
consequences for the companies concerned. However, mergers caught
by the ECMR are also structural deals of a European dimension,
and hence of great importance to the overall economy. In many
cases the mere size is virtually staggering. Obviously, erroneous
decisions may have wide detrimental ripple effects.
4. An effective appeals and review process
will not only provide legal certainty for the parties; by ensuring
proposed mergers are properly appraised it will also shield the
economy at large against distortive interventions. The importance
of the guidance given by the EC Courts should not be underestimated,
and is clearly illustrated by recent juris prudence (eg Air
Tours, Tetra/Sidel, Sony/BMG).
5. The impact of merger control is not merely,
and not even primarily a question of the number of cases formally
dealt with. Obviously, it affects what structural rearrangements
will even be considered, and this effect "beneath the surface"
is likely to be the most significant. Arguably, dissuasion is
also intended, to some extent. However, in some cases it may be
due to the procedure itself, rather than the deal possibly being
proved anticompetitive in the end. To avoid this, merging parties
should be able to feel confident they can take their case the
full distance while the deal is still alive.
DOES TIME
MATTER?
6. The importance of fast handling of merger
notifications is well reflected in, and illustrated by, the strict
time limits imposed on the Commission by the ECMR.
7. There are several reasons why implementation
speed is crucial to successful mergers. Apart from obvious administrative
needs (removal of duplicate systems and double standards etc),
the full realisation of synergies and other efficiencies often
requires a forceful integration within a fairly short period.
Likewise, addressing differences in corporate culture has to start
immediately. Profiling, marketing, customer and investor relations,
and corporate communications need to be handled quickly and distinctively,
so as to establish awareness and credibility. In short, implementation
has to be fast, firm and full.
8. Also, when a merger is left hanging in
the air for any significant amount of time, doubts about the viability
of the deal arises very quickly, externally and internally. The
uncertainty sends entities concerned into an accelerating negative
spin. For instance, what often happens is that key persons start
leaving, and customers begin looking for other suppliers, whereas
eg distributors may question whether they should seek new relationships.
In such a situation, the corporate image easily becomes blurred,
causing further decrease in goodwill and trade mark assets. Investors
turn cold. Substantial and unacceptable losses of corporate value
could be incurred. Delays beyond what the deal can "take"
mean it has to be abandoned.
9. Therefore, any merger control procedure,
appeals included, has to take place within a commercially relevant
timeframe. Unless a Commission decision can be challenged, and
the final decision obtained inside that period, the appeals principle
will mostly be an illusory right. Also, in cases where the Commission
has approved the notified merger, a protracted appeals procedure
opens an opportunity for third parties to have it "killed"
just by exposing it to the delay.
NEED FOR
ACTION AT
UNION LEVEL
10. Proposed structural deals of course
have differing degrees of "durability"—some are
extremely time sensitive, whereas others are more capable of withstanding
prolonged handling. Practically no deal, however, will survive
any substantial period of uncertainty, as already pointed out.
Experience shows that in terms of official approvals the full
cycle should, as a rule of thumb, not exceed 10-12 months. In
our view, this is a target maximum, and some mergers will still
not make it till the end. It would, however, provide a realistic
timeframe for a significant and sufficient proportion of the cases.
It would thereby also strengthen the credibility of the control
scheme as such.
11. Taking account of the time limits set
for the Commission by the ECMR (25 plus 90 working days), there
would be about six months left for appeals to take place within
a commercially relevant period of time. That is also realistic,
in our view.
12. Today, however, the normal procedure
before the Community Courts extends far beyond that (three to
four years), and even the CFI "fast track" has an expected
duration of around 12 months, sometimes more. Also, under the
expedited procedure the grounds for appeal are limited, and it
is therefore not suited for all cases. It is clear the time factor
constitutes a major, or even decisive, obstacle against bringing
an appeal. This is causing loss of rights on an ongoing basis,
and it can be safely assumed to have an unintended chilling effect
on legitimate and much needed structural change. The situation
is characterised by "you have the right to appeal, and you
may win, but will still have lost the merger". This is untenable
and should be rectified as soon as possible.
A PRAGMATIC REFORM
13. What matters for business is the end
result, ie that the problem is effectively resolved. As long as
the chosen solution works satisfactorily, the exact organisational
arrangement is a secondary matter. We believe the issue at hand
to be of such importance and urgency that it merits stand-alone
action. In order to have a reform in the near future, the project
should not be allowed to branch out, or to be blocked by difficulties
that need not be addressed for this purpose. We think a major
statutory overhaul must be avoided in this context; that might
be desirable in a wider perspective, but is bound to be a cumbersome
and time-consuming process. Therefore, a "light touch"
reform should be sought. However, we are of the opinion that a
specialised entity of some kind will be necessary for a sustainable
solution.
JUDICIAL PANEL
OR REFORM
OF THE
CFI
14. The most straight-forward response to
the problem would perhaps be to have a "competition chamber"
of the CFI. That would require the introduction of special procedural
rules, tailor-made for competition cases, ie, alleviating the
translation requirements. As we understand it, that is not possible
at present. Reportedly, the CFI is unable to move further than
what has already been achieved by the merger "fast track".
If that is correct, we support the proposal for a judicial panel.
JURISDICTION OF
THE COMPETITION
COURT/JUDICIAL
PANEL
15. The loss of rights and the economic
costs caused by the current procedural order for merger cases
more than justify rapid legislative action. However, it does not
make much sense to set up a Competition Court and let it deal
with mergers only. That would be an obvious waste of expertise
and resources. It should handle at least Article 81 and 82 cases
as well. In those cases, time constraints do not generally cause
the same acute problems as with mergers, but there are time sensitive
cases also in this category. Furthermore, there is no reason why
cases should take longer than they need to. The Competition Court
should be able to hear cases on procedural points and due process.
We do not believe possible delimitation issues vs. the CFI to
be overly problematic.
16. Arguably a specialised competition court
should have jurisdiction on "all" competition cases.
Some of that may however prove controversial, and, if so, should
not be allowed to block the project. In particular, if there is
strong opposition against putting state aid under the jurisdiction
of the new Court, then those cases should remain with the CFI,
so the reform can go forward.
COMPOSITION OF
THE COMPETITION
COURT
17. Judges should be appointed on their
professional merits, ie their knowledge and expertise in competition
matters. Nationality should not be a decisive criterion. A procedure
similar to the one put in place for the Civil Service Tribunal
could be used. Economists qualified to hold judicial office would
bring valuable competence to the Court, but economic assessments
as such can be brought in evidence.
18. As for the ad hoc secondment of national
judges, it is not fully clear to us what the purpose would be.
There may also be legal difficulties attached to the proposal.
If there is a case for "assistant rapporteurs" time
will tell.
APPEALS FROM
THE COMPETITION
COURT
19. As regards merger cases, the new Court
is intended to resolve the problem of delays. Therefore it must
be ensured that appeals within the court system do not defeat
the very purpose of the reform. This requires speedy handling,
restrictions and probably priority rules. What the exact mechanism
should look like needs to be given further consideration. If appeals
to the CFI will be on points of law only, there seems to be little
justification for a specialised chamber.
20. In this context, we would like to point
to the need for explicit timeframes also in the court procedure
(merger cases). Such limits would be extensible with the consent
of the parties, or if there are compelling reasons for a prolongation.
FUTURE ROLE
OF THE
CFI—PRELIMINARY REFERENCES
21. There is a serious time problem with
the preliminary references, generally. It takes years for national
courts to get the answer from the ECJ. This can be assumed to
become exacerbated by the enlargement, and, in the field of competition
law, by the Modernisation. The setting up of a Competition Court
should free resources at the CFI. One could well imagine the CFI
taking over preliminary competition rulings from the ECJ. However,
this is not essential for the reform in question. As for cases
like Courage vs Crehan, we feel they should not be shifted
from the ECJ. It was about Member States' obligations under the
Treaty as regards damages, although the particular case had a
competition context.
3 November 2006
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