COMPETITION : SCHNEIDER ELECTRIC WINS DAMAGES CLAIM.

In a unique judgement, the EU Court of First Instance has ordered the European Commission to compensate a company after wrongly prohibiting a merger. In the first-ever case of its kind (Case T-351/03), French industrial giant Schneider Electric had claimed over 1.6 billion for losses stemming from the Commission's prohibition of its merger with fellow French electrical company Legrand in 2001.

On 10 July, the CFI agreed that the Commission's "unlawful conduct" did give rise to a damages claim. However, though certainly not Pyrrhic, Schneider's victory could not be described as complete, as the Court has put a very narrow interpretation on both the basis of this non-contractual liability and the types of loss for which Schneider can claim. The company has made no comment on the decision.

Nevertheless, the judgement does not bode well for the Commission as it faces another such claim. My Travel (formerly Airtours) is reportedly seeking 760 million losses following the Commission's block on its purchase of First Choice in 1999 (Case T-212/03). This prohibition was annulled by the Court in June 2002 (Case T-342/99).

THE GENESIS

In 2001, two large French industrial companies agreed to become one and after notification to the Commission, Schneider acquired 98% of Legrand as it was entitled to under French law. But, in an October bombshell, the Commission declared the merger incompatible with the Common Market and went on to order, in January 2002, that the happy couple split up. It is from then that Schneider's damages clock starts ticking for both the decisions were annulled on appeal in 2002. There was money lost in the split from Legrand. There was also money lost in a second abortive attempt to merge. After the appeal, the merger procedure was restarted with the Brussels regulator but, failing to satisfy the Commission, Schneider was forced to abandon the deal completely and sell off its remaining interests in Legrand to Wendel-KKR, in December 2002.

MANIFEST DISREGARD

The Commission, claimed Schneider, in its handling of the original merger procedure, had "manifestly and seriously exceeded the limits of its discretion". Schneider pointed to "numerous errors," including lack of fairness, orchestration of relations between the parties, intransigence on details of the separation and, in particular, infringement of its rights of defence. It is solely on this last plea that the Court makes its finding.

The CFI first of all pointed out that for...