European Commission v Alrosa Company Ltd.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• Writing for the Court: Schiemann
• ECLI: ECLI:EU:C:2009:555
• Docket Number: C-441/07
• Date: 17 September 2009
• Procedure Type: Recurso de casación - fundado

OPINION OF ADVOCATE GENERAL

Kokott

delivered on 17 September 2009 (1)

Case C‑441/07 P

Commission of the European Communities

v

Alrosa Company Ltd

(Appeal – Competition – Abuse of a dominant position (Article 82 EC and Article 54 EEA) – World market for the production and supply of rough diamonds – Commitments by the dominant undertaking – Commission decision to make the commitments binding (Article 9 of Regulation (EC) No 1/2003) – Principle of proportionality – Contractual freedom – Right to a fair hearing)

Table of contents

I – Introduction

II – Legal framework

A – Regulation No 1/2003

B – Regulation No 773/2004

III – Background to the dispute and administrative procedure

IV – The judicial proceedings

V – Assessment of the grounds of appeal

A – First ground of appeal: substantive points connected with the principle of proportionality

1. Preliminary remark on the applicability of the principle of proportionality

2. Requirements relating to the proportionality of decisions on commitments (first part of the first ground of appeal)

3. Specific examination of the proportionality of the decision on commitments (second part of the first ground of appeal)

a) The exceeding of the limits of judicial review by the Court of First Instance

i) Existence of a margin of assessment enjoyed by the Commission

ii) Infringement by the Court of First Instance of the margin of assessment enjoyed by the Commission

b) The other criticisms raised by the Commission regarding the approach taken by the Court of First Instance

i) The alleged ‘distortion of the scope of the preliminary assessment’

ii) The unbalanced consideration of Alrosa’s claims and interests

iii) Erroneous legal classification of the notice pursuant to Article 27(4) of Regulation No 1/2003

iv) The alleged infringements of Article 82 EC

– Disregard of De Beers’ position as a producer

– Disregard of the possibility of abusive behaviour by bidders in connection with auctions

B – Second ground of appeal: Right to be heard in administrative proceedings

1. Preliminary question: Is the second ground of appeal nugatory?

2. Examination of the second ground of appeal

a) Inadequate reasoning (first part of the second ground of appeal)

b) The ultra petita rule and the right to a fair hearing (second part of the second ground of appeal)

i) The ultra petita rule

ii) The right to a fair hearing

c) The effects on the Commission’s decision of a possible defect relating to the right to be heard (fourth part of the second ground of appeal)

d) The scope of Alrosa’s right to be heard (third part of the second ground of appeal)

i) Preliminary remark

ii) The complaint raised by the Commission

C – Interim conclusion

VI – Assessment of the action brought at first instance by Alrosa

A – The formal lawfulness of the decision at issue (first plea)

1. Alrosa’s right to a fair hearing

2. Object of Alrosa’s right to be heard

3. No infringement of Alrosa’s right to be heard

B – The substantive lawfulness of the decision at issue (second and third pleas)

1. Infringement of Article 9 of Regulation No 1/2003 (second plea)

a) The right to offer commitments under Article 9 of Regulation No 1/2003

b) Imposing a time-limit on the validity of a decision on commitments

c) Interim conclusion

2. Infringement of Article 82 EC, Article 9 of Regulation No 1/2003 and the principles of contractual freedom and proportionality (third plea)

a) Contractual freedom (first part of the third plea)

b) Proportionality (second part of the third plea)

i) The existence of a competition problem

ii) The appropriateness and necessity of the unilateral commitments by De Beers

iii) Proportionality in the narrower sense

iv) Alleged discrimination against Alrosa

v) Interim conclusion

C – Interim conclusion

VII – Costs

VIII – Conclusion

I – Introduction

1. What requirements stem from the principle of proportionality where the European Commission, acting as the competition authority, accepts commitments (2) offered by one undertaking which affect the interests of another undertaking and makes them binding? The present appeal proceedings hinge on this question, which has considerable importance for the future development of European competition law. The answer to the question will determine the scope of the new power to adopt binding decisions on commitments accorded to the Commission under Article 9 of Regulation (EC) No 1/2003. (3) However, the judgment of the Court of Justice could also have an impact on other areas of competition law, in particular the law on State aid and merger control.

2. The background to this dispute is a commitment offered to the Commission by De Beers in 2006 to avert the accusation of abuse of a dominant position (Article 82 EC). As the worldwide market leader in the diamond trade, De Beers undertook in future not to purchase any more rough diamonds from Alrosa, the second largest producer, bringing to an end a long-standing trading relationship between the two groups. By a decision under Article 9 of Regulation No 1/2003, the Commission made that commitment by De Beers binding. (4) Alrosa considers that decision to be disproportionate and also takes the view that its right to be heard has been infringed. Before the Court of First Instance Alrosa obtained the annulment of the decision at issue. (5) The Commission has lodged the present appeal against that judgment.

3. The dispute between the Commission and Alrosa illustrates how difficult it can be in an individual case to strike a fair balance between the interest in effective enforcement of competition law and the individual interests of undertakings while not disregarding either their procedural rights or procedural economy.

II – Legal framework

4. The legal framework for this case is formed, in addition to Article 82 EC and Article 54 EEA, by various provisions of Regulation (EC) No 1/2003 and Regulation (EC) No 773/2004. (6)

A – Regulation No 1/2003

5. By Regulation No 1/2003, which has applied since 1 May 2004, (7) the law on procedure in competition cases was modernised and the powers of the Commission as the Community’s competition authority were enhanced.

6. The Commission’s new powers include Article 9 of Regulation No 1/2003, which is entitled ‘Commitments’ and is worded as follows:

‘1. Where the Commission intends to adopt a decision requiring that an infringement be brought to an end and the undertakings concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment, the Commission may by decision make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission.

2. The Commission may, upon request or on its own initiative, reopen the proceedings:

(a) where there has been a material change in any of the facts on which the decision was based;

(b) where the undertakings concerned act contrary to their commitments; or

(c) where the decision was based on incomplete, incorrect or misleading information provided by the parties.’

7. Reference should also be made to Article 7 of Regulation No 1/2003; that provision is entitled ‘Finding and termination of infringement’ and Article 7(1) provides:

‘Where the Commission, acting on a complaint or on its own initiative, finds that there is an infringement of Article 81 or of Article 82 of the Treaty, it may by decision require the undertakings and associations of undertakings concerned to bring such infringement to an end. For this purpose, it may impose on them any behavioural or structural remedies which are proportionate to the infringement committed and necessary to bring the infringement effectively to an end. …’

8. Article 27 of Regulation No 1/2003, which lays down rules on hearing of the parties, complainants and others, states:

‘1. Before taking decisions as provided for in Articles 7, 8, 23 and Article 24(2), the Commission shall give the undertakings or associations of undertakings which are the subject of the proceedings conducted by the Commission the opportunity of being heard on the matters to which the Commission has taken objection. The Commission shall base its decisions only on objections on which the parties concerned have been able to comment. Complainants shall be associated closely with the proceedings.

2. The rights of defence of the parties concerned shall be fully respected in the proceedings. They shall be entitled to have access to the Commission’s file, subject to the legitimate interest of undertakings in the protection of their business secrets. …

3. If the Commission considers it necessary, it may also hear other natural or legal persons. Applications to be heard on the part of such persons shall, where they show a sufficient interest, be granted. …

4. Where the Commission intends to adopt a decision pursuant to Article 9 or Article 10, it shall publish a concise summary of the case and the main content of the commitments or of the proposed course of action. Interested third parties may submit their observations within a time limit which is fixed by the Commission in its publication and which may not be less than one month. Publication shall have regard to the legitimate interest of undertakings in the protection of their business secrets.’

B – Regulation No 773/2004

9. By Regulation No 773/2004, which entered into force on 1 May 2004, the Commission adopted implementing provisions for Regulation No 1/2003. (8)

10. Article 10 of Regulation No 773/2004 was worded as follows at the time when the decision at issue was adopted:

‘1. The Commission shall inform the parties concerned in writing of the objections raised against them. The statement of objections shall be notified to each of them.

2. The Commission shall, when notifying the statement of objections to the parties concerned...