Bertelsmann AG and Sony Corporation of America v Independent Music Publishers and Labels Association (Impala).

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• Date: 10 July 2008

Case C-413/06 P

Bertelsmann AG and Sony Corporation of America

v

Independent Music Publishers and Labels Association (Impala)

(Appeals – Competition – Control of concentrations between undertakings – Sony BMG joint venture – Appeal against the annulment of a Commission decision declaring a concentration compatible with the common market – Judicial review – Scope – Standard of proof – Role of the statement of objections – Strengthening or creation of a collective dominant position – Statement of reasons for a decision approving a concentration – Use of confidential information)

Summary of the Judgment

1. Competition – Concentrations – Assessment of compatibility with the common market – Standard of proof – Identical in cases where a concentration is approved and where it is prohibited

(Council Regulation No 4064/89, Arts 2(2) and (3), 6(1), 8(1) and 10(6))

2. Competition – Concentrations – Administrative procedure – Statement of objections – Provisional nature

(Arts 81 EC and 82 EC; Council Regulation No 4064/89, Art. 18(3); Commission Regulation No 447/98, Art. 13(2))

3. Competition – Concentrations – Examination by the Commission – Adoption of a decision holding a concentration to be compatible with the common market – Judicial review

(Council Regulation No 4064/89, Art. 18(3))

4. Competition – Concentrations – Administrative procedure – Observance of the rights of the defence – Submission of arguments in reply to the statement of objections – Right of the notifying parties

(Council Regulation No 4064/89, Arts 11, 14, 15, 18(3) and 19; Commission Regulation No 447/98, Arts 3(1) and 13(2))

5. Competition – Concentrations – Assessment of compatibility with the common market – Creation or strengthening of a collective dominant position significantly impeding effective competition in the common market – Criteria

(Art. 81 EC; Council Regulation No 4064/89, Art. 2(3))

6. Competition – Concentrations – Examination by the Commission – Economic assessments – Judicial review – Limits

(Council Regulation No 4064/89, Art. 2)

7. Acts of the institutions – Statement of reasons – Obligation – Scope – Decision applying the rules relating to concentrations between undertakings

(Art. 253 EC; Council Regulation No 4064/89, Art. 8(2))

8. Actions for annulment – Grounds – Infringement of essential procedural requirements – Infringement of the duty to state reasons in relation to a decision authorising a concentration – To be considered of the Court’s own motion

(Arts 230 EC and 253 EC; Council Regulation No 4064/89, Arts 2, 6(1), 8(1) and 10(6))

1. There is nothing in Article 2(2) or (3) of Regulation No 4064/89 on the control of concentrations between undertakings which states that it imposes different standards of proof in relation to decisions approving a concentration, on the one hand, and decisions prohibiting a concentration, on the other. The prospective analysis called for in relation to the control of concentrations, which 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 significant impediment to effective competition, makes it necessary to envisage various chains of cause and effect with a view to ascertaining which of them is the most likely. It cannot therefore be inferred from the regulation that there is a general presumption that a notified concentration is compatible with, or incompatible with, the common market.

That interpretation of Regulation No 4064/89 is not invalidated by Article 10(6), which provides that a notified concentration is to be deemed compatible with the common market where the Commission has not taken a decision on the compatibility of that concentration within the prescribed period. That provision is a specific expression of the need for speed, which characterises the general scheme of the regulation and which requires the Commission to comply with strict time-limits for the adoption of the final decision. It is, however, an exception to the general scheme of the regulation, which is laid down in particular in Articles 6(1) and 8(1), according to which the Commission is to rule expressly on the concentrations which are notified to it.

Furthermore, it is true that the decisions of the Commission as to the compatibility of concentrations with the common market must be supported by a sufficiently cogent and consistent body of evidence and that in the context of the analysis of a ‘conglomerate-type’ concentration 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. However, it cannot be deduced from that that the Commission must, particularly where it pursues a theory of collective dominance, comply with a higher standard of proof in relation to decisions prohibiting concentrations than in relation to decisions approving them. The essential function of evidence is to establish convincingly the merits of an argument or, as in the case of the control of concentrations, to support the conclusions underpinning the Commission’s decisions. Furthermore, the fact that an issue of collective dominance does, or does not, arise, cannot of itself have an impact on the standard of proof which applies. The inherent complexity of a theory of competitive harm put forward in relation to a notified concentration is a factor which must be taken into account when assessing the plausibility of the various consequences such a concentration may have, in order to identify those which are most likely to arise, but such complexity does not, of itself, have an impact on the standard of proof which is required.

It follows that, where it has been notified of a proposed concentration pursuant to Regulation No 4064/89, the Commission is, in principle, required to adopt a position, either in the sense of approving or of prohibiting the concentration, in accordance with its assessment of the economic outcome attributable to the concentration which is most likely to ensue.

(see paras 46-52)

2. In proceedings for the control of concentrations, the statement of objections is a procedural and preparatory document which, in order to ensure that the rights of the defence may be exercised effectively, delimits the scope of the administrative procedure initiated by the Commission, thereby preventing the latter from relying on other objections in its decision terminating the procedure in question. It is therefore inherent in the nature of the statement of objections that it is provisional and subject to amendments to be made by the Commission in its further assessment on the basis of the observations submitted to it by the parties and subsequent findings of fact. The Commission must take into account the factors emerging from the whole of the administrative procedure, in order either to abandon such objections as have been shown to be unfounded or to amend and supplement its arguments, both in fact and in law, in support of the objections which it maintains. Thus, the statement of objections does not prevent the Commission from altering its standpoint in favour of the undertakings concerned

It follows that the Commission is not obliged to maintain the factual or legal assessments set forth in the statement of objections. On the contrary, it must give as reasons for its ultimate decision its final assessments based on the situation existing at the time the formal proceedings are closed. Furthermore, the Commission is not obliged to explain any differences with respect to its provisional assessments set out in the statement of objections.

The fact that the Commission is, by contrast to the position under Articles 81 EC and 82 EC, subject to strict time-limits in the control of concentrations, has no effect on the provisional nature of the statement of objections. The effective exercise of the rights of the defence requires that the arguments of the parties to a proposed concentration be taken into account in proceedings for the control of concentrations in the same way as the arguments of the parties affected by proceedings initiated under Articles 81 EC or 82 EC.

(see paras 63-66)

3. The Court of First Instance is not necessarily precluded from using the statement of objections in order to interpret a decision of the Commission relating to the control of concentrations, particularly as regards the examination of its factual basis. That is the case notwithstanding the preparatory and provisional nature of the document and despite the fact that the Commission is not obliged to explain any differences in the final decision by comparison with the statement of objections.

However, the Court of First Instance commits an error of law where, in its examination of the line of argument alleging the existence of manifest errors of assessment, it does not merely use the statement of objections as a basis for verifying the correctness, completeness and reliability of the factual material which underpinned the contested decision, but treats a particular category of conclusions set out in that statement as established, without demonstrating the reasons for which, notwithstanding the final position adopted by the Commission in the contested decision, those elements should be considered as being established beyond dispute. Apart, possibly, from non-controversial elements which, for example, by reason of their empirical and verifiable nature are obvious to such a degree that they cannot be contested, it should not be assumed that assessments made in a statement of objections cannot be modified in the light of the replies to such a statement. It can happen that, in their reply to the statement of objections, the notifying parties will supplement or clarify their ‘case’ regarding the functioning of the market...