Judgments nº T-5/02 of Court of First Instance of the European Communities, October 25, 2002

• Resolution Date: October 25, 2002
• Issuing Organization: Court of First Instance of the European Communities
• Decision Number: T-5/02

JUDGMENT OF THE COURT OF FIRST INSTANCE (First Chamber)

25 October 2002 (1) (Competition - Regulation (EEC) No 4064/89 - Decision declaring a concentration incompatible with the common market - Rights of the defence - Horizontal and vertical effects - Foreseeable conglomerate effects - Leveraging - Potential competition - General effect of reinforcement)

In Case T-5/02,

Tetra Laval BV, established in Amsterdam (Netherlands), represented by A. Vandencasteele, D. Waelbroeck, A. Weitbrecht and S. Völcker, lawyers,

applicant,

v

Commission of the European Communities, represented by A. Whelan and P. Hellström, acting as Agents, with an address for service in Luxembourg,

defendant,

APPLICATION for annulment of Commission Decision C (2001) 3345 final of 30 October 2001 declaring a concentration to be incompatible with the common market and the EEA Agreement (Case No COMP/M.2416 - Tetra Laval/Sidel),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (First Chamber),

composed of: B. Vesterdorf, President, J. Pirrung and N.J. Forwood, Judges,

Registrar: D. Christensen, Administrator,

having regard to the written procedure and further to the hearing on 3 and 4 July 2002,

hereby gives the following

Judgment

Legal background

1.

Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (OJ 1989 L 395, p. 1, corrected version in OJ 1990 L 257, p. 13, as amended by Council Regulation (EC) No 1310/97 of 30 June 1997 (OJ 1997 L 180, p. 1), hereinafter ‘the Regulation’) provides for a system of control by the Commission of concentrations having a ‘Community dimension’ as defined by Article 1(2) of the Regulation.

2.

Article 2 of the Regulation states:

‘1. Concentrations within the scope of this Regulation shall be appraised in accordance with the following provisions with a view to establishing whether or not they are compatible with the common market.

In making this appraisal, the Commission shall take into account:

(a) the need to maintain and develop effective competition within the common market in view of, among other things, the structure of all the markets concerned and the actual or potential competition from undertakings located either within or outwith the Community;

(b) the market position of the undertakings concerned and their economic and financial power, the alternatives available to suppliers and users, their access to supplies or markets, any legal or other barriers to entry, supply and demand trends for the relevant goods and services, the interests of the intermediate and ultimate consumers, and the development of technical and economic progress provided that it is to consumers' advantage and does not form an obstacle to competition.

2. A concentration which does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared compatible with the common market.

3. A concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it shall be declared incompatible with the common market.

   ...’

   3.
   Article 4 of the Regulation requires the party acquiring control, or the parties acquiring joint control, of another undertaking to notify the concentration within a week to the Commission, which is required by Article 6(1) to examine that notification ‘as soon as it is received’. Article 6(1)(c), read in conjunction with Article 10(1), provides that the Commission is to initiate proceedings in respect of a notified concentration within one month, and at most six weeks, where it finds that the concentration falls within the scope of the Regulation ‘and raises serious doubts as to its compatibility with the common market’.
   4.
   Once proceedings have been initiated in respect of a notification, the decision-making powers of the Commission are fixed by Article 8 of the Regulation. Under Article 8(3), ‘[w]here the Commission finds that a concentration fulfils the criterion laid down in Article 2(3) ..., it shall issue a decision declaring that the concentration is incompatible with the common market’. Under Article 10(3), such decisions ‘must be taken within not more than four months of the date on which the proceedings are initiated’.
   5.
   Although Article 7(1) of the Regulation provides that a concentration is not to be put into effect either before its notification or until it has been declared compatible with the common market, the implementation of a public bid that has been notified to the Commission may, in accordance with Article 7(3), proceed ‘provided that the acquirer does not exercise the voting rights attached to the securities in question or does so only to maintain the full value of those investments and on the basis of a derogation granted by the Commission under paragraph 4’.
   6.
   Article 18 of the Regulation, which concerns the hearing of the parties and of third parties, provides:

   ‘1. Before taking any decision provided for in Article 7(4), Article 8(2), second subparagraph, and (3) to (5), and Articles 14 and 15, the Commission shall give the persons, undertakings and associations of undertakings concerned the opportunity, at every stage of the procedure up to the consultation of the Advisory Committee, of making known their views on the objections against them.

   ...

3. The Commission shall base its decision only on objections on which the parties have been able to submit their observations. The rights of the defence shall be fully respected in the proceedings. Access to the file shall be open at least to the parties directly involved, subject to the legitimate interest of undertakings in the protection of their business secrets.

   ...’

   7.
   Article 13(3) of Commission Regulation (EC) No 447/98 of 1 March 1988 on the notifications, time-limits and hearings provided for in Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings (OJ 1998 L 61, p. 1) provides:

   ‘After having addressed its objections to the notifying parties, the Commission shall, upon request, give them access to the file for the purpose of enabling them to exercise their rights of defence.

   The Commission shall, upon request, also give the other involved parties who have been informed of the objections access to the file in so far as this is necessary for the purposes of preparing their observations.’

   8.
   Article 17 of Regulation 447/98, entitled ‘Confidential information’, provides:

   ‘1. Information, including documents, shall not be communicated or made accessible in so far as it contains business secrets of any person or undertaking, including the notifying parties, other involved parties or of third parties, or other confidential information the disclosure of which is not considered necessary by the Commission for the purpose of the procedure, or where internal documents of the authorities are concerned.

2. Any party which makes known its views under the provisions of this Chapter shall clearly identify any material which it considers to be confidential, giving reasons, and provide a separate non-confidential version within the time limit fixed by the Commission.’

   Factual background

   9.
   On 27 March 2001, Tetra Laval SA, a privately held company incorporated under French law and a wholly owned subsidiary of Tetra Laval BV (hereinafter ‘Tetra’ or ‘the applicant’), a holding company belonging to the Tetra Laval group, announced a public bid for all outstanding shares in Sidel SA (hereinafter ‘Sidel’), a French publicly quoted company. On the same day, Tetra Laval SA acquired roughly 9.75% of the shares in Sidel from Azeo (5.56%) and Sidel's directors (4.19%).
   10.
   The bid was in cash at EUR 50 per share and, in accordance with French law, was unconditional. Acceptance of the bid was unanimously recommended by the Board of Directors of Sidel and was also approved by Sidel's major shareholders. The joint offer document from Tetra Laval SA and Sidel was approved on 11 April 2001 by the stock exchange committee. Following publication on 14 April 2001, the bid was officially opened for the period 17 April to 22 May 2001. It provided that, in the event of the bid being successful, the shares of Tetra SA would be quoted again in the week beginning 11 June 2001, subject to the restrictions in Article 7(3) of the Regulation.
   11.
   Pursuant to the bid, Tetra acquired approximately 81.3%, of the outstanding shares in Sidel. After the closing of the bid, the applicant acquired certain additional shares, making its current holdings roughly 95.20% of the shares and 95.93% of the voting rights in Sidel.
   12.
   Tetra comprises, inter alia, the Tetra Pak company, which is mainly active in the area of liquid food carton packaging, where Tetra Pak is the world-wide market leader. Tetra also has more limited activities in the plastic packaging sector, mainly as a converter (which consists of manufacturing and supplying empty packaging to producers who then fill the packaging themselves), particularly of high density polyethylene (hereinafter ‘HDPE’) bottles.
   13.
   Sidel is involved in the design and production of packaging equipment and systems, particularly stretch blow moulding machines (hereinafter ‘SBM machines’), which are used in the production of polyethylene terephthalate (hereinafter ‘PET’) plastic bottles. It is the world-wide leader for the production and supply of SBM machines. It is also active in barrier technology, used to make PET compatible with products which are sensitive to gas and light, as well as in the manufacture of filling machines for PET and, to a lesser extent, HDPE bottles.
   14.
   On 18 May 2001, the operations by which Tetra acquired its shareholding in Sidel were notified to the Commission.
   ...