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

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2007:790
• Court: Court of Justice (European Union)
• Docket Number: C-413/06
• Date: 13 December 2007
• Celex Number: 62006CC0413
• Procedure Type: Recurso de anulación

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 13 December 2007 ¹(1)

Case C‑413/06 P

Bertelsmann AG and

Sony Corporation of America

Other parties to the proceedings:

Independent Music Publishers and Labels Association (Impala),

Sony BMG Music Entertainment BV and

Commission of the European Communities

(Appeal – Competition – Control of concentrations between undertakings – Joint venture between Sony and Bertelsmann (‘Sony BMG’) – Markets for recorded music, on-line music, and music publishing – Collective dominant position –Commission clearance decision – Extent of investigation – Requirements for evidence – Duty to state reasons – Use of confidential information – Articles 2, 8 and 10 of Regulation (EEC) No 4064/89 – Interest in pursuing an appeal)

Table of contents

I – Introduction

II – Legal framework

III – Background to the dispute and the course of the procedure

A – The concentration

B – The problem of collective market dominance

C – Administrative procedure and the Commission’s first clearance decision

D – The proceedings at first instance

E – Appeal proceedings

F – New administrative proceedings and the Commission’s second clearance decision

IV – Preliminary questions to analysis of the appeal

A – Admissibility of the individual grounds of appeal

1. Admissibility of the fifth ground of appeal

2. Admissibility of the remaining grounds of appeal

3. Interim conclusion

B – Whether the appeal is capable of achieving the result sought

1. The alleged failure of the appellants to challenge a decisive passage of the judgment under appeal

2. The grounds of the judgment under appeal which do not support its operative part

3. Interim conclusion

C – Continuing existence of interest in pursuing the appeal

V – Whether the appeal is well founded

A – Extent of investigation and justification required of the Commission in relation to clearance decisions (first, second, third and sixth grounds of appeal)

1. Standard of reasoning for merger clearance decisions (first and third part of the sixth ground of appeal)

a) Whether clearance decisions may be challenged on the ground of failure to state reasons

b) Extent of the duty to state reasons

– The judgment under appeal

– Analysis

c) Miscellaneous matters

d) Interim conclusion

2. The Court of First Instance’s references to the statement of objections (first ground of appeal and second part of the sixth ground of appeal)

a) The Court of First Instance’s approach in general to the relationship between the clearance decision and the statement of objections

– The judgment under appeal

– Analysis

b) The specific references by the Court of First Instance to the statement of objections

c) Interim conclusion

3. The evidential value of factual assertions in the response to the objections (second ground of appeal; first part of the third ground of appeal)

a) The judgment under appeal

b) Analysis

4. Standard of proof for clearance of concentrations (second part of the third ground of appeal)

a) The alleged asymmetry between the requirements for clearance decisions and prohibition decisions in the Merger Regulation

– Merger control decisions are based on prognoses

– Symmetry of the requirements for clearances and prohibitions

– No general presumption of compatibility with the common market

– Interim conclusion

b) The standard of proof applied by the Court of First Instance in the present case

c) Interim conclusion

B – Limitations on the Court of First Instance’s power to analyse the facts and the evidence (fourth ground of appeal)

1. The Commission’s discretion and judicial review thereof

a) The judgment under appeal

b) Analysis

2. The alleged distortion of evidence

a) Paragraph 425 of the judgment under appeal

b) Paragraph 427 of the judgment under appeal

c) Paragraph 434 of the judgment under appeal

3. Interim conclusion

C – The use of undisclosed evidence in the judgment under appeal (seventh ground of appeal)

D – Interim conclusion

VI – The supposed cross appeal

VII – Costs

VIII – Conclusion

I – Introduction

1. The present case presents an opportunity to develop the Court’s case-law in the area of EC merger control. In essence it concerns the question – a most important one in practice – of the extent of the investigation and reasoning which may be required of the Commission where it authorises a concentration between undertakings.

2. The background to this case is a merger control procedure concerning the markets for recorded music, on-line music and music publishing. At the end of 2003, Bertelsmann and Sony agreed that they would integrate their global recorded music businesses. Following initial doubts, by Decision dated 19 July 2004 (2) (‘the first clearance decision’) the Commission approved this proposed concentration.

3. The Independent Music Publishers and Labels Association (‘Impala’), an international association governed by Belgian law to which 2 500 independent music production undertakings belong, complained about the concentration. On its application, by judgment dated 13 July 2006 (3) (‘the judgment under appeal’) the Court of First Instance annulled the first clearance decision.

4. An appeal by Bertelsmann and Sony against the judgment under appeal has been brought before the Court of Justice. In essence, the appellants argue that the Court of First Instance applied excessive legal requirements for a Commission clearance decision and for the judicial review of that decision.

5. However, there is a preliminary question as to whether the appellants still have any legal interest in pursuing their appeal given that in the meantime, on 3 October 2007, their concentration was cleared once more by the Commission.

II – Legal framework

6. The legal framework in the present case consists of Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings (‘the Merger Regulation’) (4) as amended by Council Regulation (EC) No 1310/97. (5)

7. Concentrations with a Community dimension within the meaning of the Merger Regulation are subject to a prohibition on implementation and must be notified to the Commission (Articles 4 and 7 of the Merger Regulation). The Commission appraises them as to their compatibility with the common market (Article 2(1) of the Merger Regulation).

8. Whether a concentration is cleared or prohibited depends on whether it 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. On that point Article 2(2) and (3) of the Merger Regulation provide as follows:

‘(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.’

9. The merger control procedure consists of two phases. The first phase is simply a preliminary examination of the proposed concentration. If this raises serious doubts as to the concentration’s compatibility with the common market, there follows in a second phase a formal procedure which the Commission is required to initiate in terms of Article 6(1)(c) of the Merger Regulation. (6)

10. The Commission’s powers of decision in the formal procedure are laid down in Article 8 of the Merger Regulation as follows:

‘(1) … all proceedings initiated pursuant to Article 6(1)(c) shall be closed by means of a decision as provided for in paragraphs 2 to 5.

(2) Where the Commission finds that, following modification by the undertakings concerned if necessary, a notified concentration fulfils the criterion laid down in Article 2(2) …, it shall issue a decision declaring the concentration compatible with the common market. …

(3) Where 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.

…’

11. Before a prohibition decision may be taken under Article 8(3) of the Merger Regulation, the parties to the concentration are given a hearing. For this purpose the Commission sends them a written statement of objections, to which they may respond in writing and, as the case may be, orally. On this matter Article 18 of the Merger Regulation provides as follows: (7)

‘(1) Before taking any decision provided for in Article … 8 … (3) to (5) …, 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. …’

12. The whole merger control procedure is characterised by a requirement for speed, which is realised by a finely balanced, comparatively strict system of time-limits and which seeks to limit the length of merger control proceedings. (8) If the Commission does not make a decision as to compatibility with the common market within the specified time-limit, there is a deemed clearance in respect of which Article 10(6) of the Merger Regulation provides as follows:

‘Where the Commission has not taken a decision in accordance with Article 6 (1) (b) or (c) or Article 8 (2) or (3) within the deadlines set …, the concentration shall be deemed to have been declared compatible with the common market …’

13. As regards the...