1

A Comparative Assessment Of The EU’s Reforms To Merger Control And Antitrust Enforcement

By Nicholas Levy, Sven Frisch & Alexander Waksman∗

In the early 2000’s, EU merger control and EU antitrust enforcement each

underwent significant change. The scale and scope of those changes was, however, very

different. The changes made to Council Regulation 4064/89 (the “Merger Regulation”)1 were

relatively modest, albeit important to address criticisms of the Commission’s then-current

enforcement practice in the wake of the EU courts’ judgments in Airtours, Schneider, and Tetra

Laval. 2 By contrast, the reform of EU antitrust enforcement and the adoption of Council

Regulation 1/2003,3 the legal instrument implementing Articles 1014 and 1025 of the Treaty on

the Functioning of the European Union (“TFEU”) that replaced Council Regulation 17/62, 6

effected sweeping and ambitious change by ending the notification system that had been a

∗ The authors are lawyers in the Brussels office of Cleary Gottlieb Steen & Hamilton LLP. They are grateful to LexisNexis, the publishers of a two-volume book on the EU Merger Regulation, European Merger Control Law: A Guide to the Merger Regulation, authored by Nicholas Levy and Christopher Cook for permitting them to use extracts from that book. They would also like to thank John Temple Lang, Bernd Langeheine, Robbert Snelders, and Thomas Graf for their helpful insights. The views expressed are their own and they bear sole responsibility for any errors or omissions.

1 The Merger Regulation was adopted in 1989 and came into force in 1990. Council Regulation 4064/89 of December 21, 1989, on the control of concentrations between undertakings, 1990 O.J. L257/13; with amendments introduced by Council Regulation 1310/97 on the control of concentrations between undertakings, 1997 O.J. L180/1, corrigendum 1998 O.J. L40/17. In 2004, a revised and significantly recast version of the Merger Regulation came into force. Council Regulation 139/2004 of January 20, 2004, on the control of concentrations between undertakings, 2004 O.J. L24/1.

2 Airtours plc v. Commission (“Airtours”), Case T-342/99 EU:T:2002:146; Schneider Electric v. Commission (“Schneider”), Case T-310/01 EU:T:2002:254; and Tetra Laval v. Commission (“Tetra Laval”), Cases T-5/02 and T-80/02 EU:T:2002:264, upheld by the Court of Justice in Commission v. Tetra Laval B.V. (“Tetra Laval CJ”), Case C-13/03 EU:C:2005:88.

3 Council Regulation (EC) No. 1/2003 of December 16, 2002 on the implementation of the rules on competition laid down in Articles [101] and [102] of the Treaty, 2003 O.J. L1/1.

4 Article 101(1) TFEU prohibits anti-competitive agreements and concerted practices. Agreements or concerted practices that infringe Article 101(1) may benefit from an exemption under Article 101(3).

5 Article 102 TFEU prohibits abusive conduct by dominant companies.

2

feature of EU competition practice for 40 years and decentralizing the enforcement of EU

competition law.

In many ways, both sets of reforms achieved their objectives. However, while

enforcement practice under the Merger Regulation has become increasingly mature and settled in

the intervening period, the Commission’s application of Articles 101 and 102 has in certain

respects become less predictable as new issues and challenges have arisen. Written to mark the

25th anniversary of the Merger Regulation, this article describes the evolution in the

Commission’s application of that Regulation, explains the reforms adopted in the early 2000’s to

EU merger control and EU antitrust enforcement, contrasts the extent to which those reforms

succeeded in achieving their objectives, and considers the challenges that remain.

A. THE EVOLUTION OF EU MERGER CONTROL

On September 21, 1990, the Merger Regulation entered into force, introducing

into EU competition law a legal framework for the systematic review of mergers, acquisitions,

and other forms of concentration. In the intervening period, the Merger Regulation has evolved

from “one of the most dynamic domains in the competition portfolio”7 into a relatively “mature

area of enforcement,”8 “a well-oiled machine which draws on many years of experience.”9 The

following sections describe the Merger Regulation’s 25-year history, charting its evolution from

infancy through a troubled adolescence into the mature legal instrument it is today. As this

historical overview makes clear, the turning point in the Merger Regulation’s evolution came in

the early 2000’s, when, in response to the EU courts’ judgments in Airtours, Schneider, and

Tetra Laval, the Commission proposed a package of reforms that modernized enforcement

practice.

7 Joaquín Almunia, The Past and the Future of Merger Control in the EU, Address at GCR Conference, Brussels, September 28, 2010 (Commission Press Release SPEECH/10/486).

8 Joaquín Almunia, Competition Policy: State of Play and Future Outlook, Address at European Competition Day, Brussels, October 21, 2010 (Commission Press Release SPEECH/10/576).

9 Joaquín Almunia, Policy Objectives in Merger Control, Fordham Competition Conference, New York, September 8, 2011 (Commission Press Release SPEECH/11/561).

3

The coming into force of the Merger Regulation raised a wide array of legal and

practical issues, and the years immediately following its implementation were in large part

devoted to exploring, addressing, and resolving those issues. During this period, the

Commission’s application of the Merger Regulation exceeded the expectations of even the most

optimistic commentators in several important respects: (1) the Commission met the tight

deadlines prescribed in the Implementing Regulation in virtually every case; 10 (2) the

Commission was flexible and open in its application of the procedural rules of the Merger

Regulation; (3) the Commission began to use economic evidence and systematic market testing;

(4) the Commission proved itself able to withstand political pressure; (5) the Commission

worked closely with Member State agencies to develop a common appreciation of competition

law and policy across the EU; and (6) the Commission started the process of fostering

international cooperation with other antitrust authorities around the world, including, in

particular, the U.S. federal agencies.

A significant and disproportionate amount of time during the years immediately

following the entry into force of the Merger Regulation was devoted to addressing issues that

arose from the distinction made between joint ventures that have “as [their] object or effect the

coordination of the competitive behaviour of undertakings which remain independent” (so-called

“cooperative” joint ventures) and “joint venture[s] performing on a lasting basis all the functions

of an autonomous economic entity, which [do] not give rise to coordination of the competitive

behaviour of the parties amongst themselves or between them and the joint venture” (so-called

“concentrative” joint ventures). 11 Because of the substantive and procedural advantages

10 See, e.g., Donald L. Holley, EEC Competition Practice: A Thirty-Year Retrospective, 1992 Fordham Corp. L. Inst. 728 (Barry E. Hawk, ed. 1993) (“The Commission was of course faced with an enormous practical challenge when it began administration of the Merger Regulation, for the adoption of which it had worked so hard. The Commission’s credibility was hanging in the balance. Counsel and the business community soon agreed that the administration of the Merger Regulation was turning out to be a big success. It is rare to see such unanimity on any one point within the Community”).

11 Art. 3(2), Merger Regulation. See, e.g., Philip Lowe, Recent Developments in EC Merger Control, 1994 Fordham Corp. L. Inst. 139 (Barry E. Hawk, ed. 1995) (referring to the “religious mystery [that] surrounds the great theological divide between concentrative and cooperative joint ventures”); and James S. Venit, The Treatment of Joint Ventures Under the EC Merger Regulation—Almost Through the Thicket, 1999 Fordham Corp. L. Inst. 466 (Barry E. Hawk, ed. 2000) (“[T]he original sin of seeking to distinguish cartels from concentrations by means of an analytic test was given a life of its own when the distinction focused on in the 1966 Memorandum found its way into Article 3(2) of the Merger Regulation adopted in December 1989”).

4

associated with forming joint ventures that are reportable under the Merger Regulation,

considerable effort was devoted to structuring joint ventures so as to satisfy the “concentrative”

criteria. 12 Over time, the Commission expanded the circumstances in which a joint venture

would be considered “concentrative”13 and, in 1997, the distinction between “concentrative” and

“cooperative” joint ventures was finally abandoned.14

As to the substantive assessment of reportable transactions, the starting point of

the Commission’s analyses, then as now, was the definition of a relevant market. Cases in which

market definition was central to the Commission’s assessment included DuPont/ICI, where the

Commission’s assessment was based on the identification of distinct markets for different types

of fiber used to produce carpets,15 Nestlé/Perrier, where the Commission identified a market for

mineral water distinct from other non-alcoholic commercial beverages, 16 and Procter &

Gamble/VP Schickedanz (II), where the Commission relied on evidence of consumer behavior to

12 See, e.g., Barry E. Hawk, EC Merger Control, ABA/IBA Conference, June 1994 (“Unlike U.S. law, the EEC Merger Regulation spawned a myriad of technical formalistic questions as to whether a particular transaction falls within its scope of application. … The criteria employed to draw the jurisdictional line … unnecessarily promote forum shopping and restructuring of private transactions”).

13 In the years immediately following the adoption of the Merger Regulation, the Commission considered joint ventures to be “cooperative” where one or more parents were present on the same market as the joint venture or on a closely neighboring market. (See Commission Notice regarding the concentrative and cooperative operations under Council Regulation (EEC) No 4064/89 of December 21, 1989, on the control of concentrations between undertakings, 1990 O.J. C203/10). Beginning in late 1991, the Commission began to accept that joint ventures could be characterized as “concentrative” in situations where only one parent remained active on the same or a related market as the joint venture, provided that parent was the “industrial leader.” (See, e.g., Thomson/Pilkington, Case IV/M.86, Commission decision of October 23, 1991). By 1994, the Commission had accepted that joint ventures would be treated as “concentrative” where only one parent remained active on the same market as the joint venture, irrespective of whether that parent was the “industrial leader.” (See Commission Notice on the distinction between concentrative and cooperative joint ventures under Council Regulation (EEC) 4064/89 of December 21, 1989, on the control of concentrations between undertakings, 1994 O.J. C385/1). The Commission’s reasoning at the time was that coordination within the meaning of the Merger Regulation should be considered to arise only where the formation of a joint venture created a risk of coordination between the joint venture’s parents.

14 Council Regulation 1310/97 on the control of concentrations between undertakings, 1997 O.J. L180/1, corrigendum 1998 O.J. L40/17.

15 Case IV/M.214, Commission decision of September 30, 1992.

16 Case IV/M.190, Commission decision of July 22, 1992.

5

identify separate markets for different feminine protection products.17 In 1997, the Commission

formalized its approach to market definition and adopted the Market Definition Notice.18

The mid-1990’s saw growing maturity, confidence, and sophistication in the

Commission’s substantive review. Commission decisions became increasingly detailed and

lengthy19 and, between 1995 and 1998, the Commission prohibited eight transactions,20 four of

which affected telecommunications and broadcasting markets. The Commission’s concerns in

these cases were based largely on vertical effects. Also during this period, the Commission

began to consider conglomerate or “portfolio” effects in a trilogy of cases involving commercial

beverages: Coca-Cola Enterprises/Amalgamated Beverages GB, 21 The Coca-Cola

Company/Carlsberg A/S, 22 and Guinness/Grand Metropolitan. 23 In Gencor/Lonrho, the

Commission developed and refined its approach towards oligopolistic dominance in a decision

prohibiting the combination of two global suppliers of platinum. In 1998, the Court of Justice

confirmed in Kali und Salz that transactions giving rise to situations of oligopolistic dominance

could be prohibited under the Merger Regulation.24 The Court in Kali und Salz also confirmed

in that case the availability of a “failing firm defense” under the Merger Regulation.

17 Case IV/M.430, Commission decision of June 21, 1994.

18 Commission Notice on the definition of relevant market for the purposes of Community competition law (“Market Definition Notice”), 1997 O.J. C372/03.

19 See, e.g., Skanska/Scancem, Case IV/M.1157, Commission decision of November 11, 1998.

20 Nordic Satellite Distribution, Case IV/M.490, Commission decision of July 19, 1995 (television); RTL/Veronica/Endemol, Case IV/M.553, Commission decision of September 20, 1995 (television); Gencor/Lonrho, Case IV/M.619, Commission decision of April 24, 1996 (platinum); Kesko/Tuko, Case IV/M.784, Commission decision of November 20, 1996 (consumer products retailing); Saint-Gobain/Wacker-Chemie/NOM, Case IV/M.774, Commission decision of December 4, 1996 (abrasive materials); Blokker/Toys “R” Us (II), Case IV/M.890, Commission decision of June 26, 1997 (toy retailing); Bertelsmann/Kirch/Premiere, Case IV/M.993, Commission decision of May 27, 1998 (television); and Deutsche Telekom/BetaResearch, Case IV/M.1027, Commission decision of May 27, 1998 (television).

21 Case IV/M.794, Commission decision of January 22, 1997.

22 Case IV/M.833, Commission decision of September 11, 1997.

23 Case IV/M.938, Commission decision of October 15, 1997.

24 French Republic and Société commerciale des potasses et de l’azote (SCPA) and Entreprise minière et chimique (EMC) v. Commission (“Kali und Salz”), Joined Cases C-68/94 and C-30/95 EU:C:1998:148. The lack of

6

The 10th anniversary of the Merger Regulation’s entry into force in 2000

witnessed an increasingly forceful, confident, and creative approach to its application. This

manifested itself in several ways. First, the Commission prohibited eight transactions between

1999 and 2001,25 and effectively caused several other major transactions to be abandoned.26

Second, the Commission employed an increasingly broad range of competitive harm theories,

including neighboring market and potential entrant theories, 27 conglomerate and portfolio

effects,28 vertical effects,29 and spill-over effects.30 Third, the Commission identified single-firm

any explicit reference to collective dominance in the Merger Regulation had led some commentators to suggest that transactions raising joint dominance concerns could not be prohibited under the Regulation. The Court of Justice in Kali und Salz made a purposive interpretation of the Merger Regulation, emphasizing that to do otherwise would deprive the Regulation of a “not insignificant aspect” that would be inconsistent with EU law.

25 Airtours/First Choice, Case IV/M.1524, Commission decision of September 22, 1999; Volvo/Scania, Case COMP/M.1672, Commission decision of March 14, 2000; MCI WorldCom/Sprint, Case COMP/M.1741, Commission decision of June 28, 2000; SCA/Metsä Tissue, Case COMP/M.2097, Commission decision of January 31, 2001; General Electric/Honeywell, Case COMP/M.2220, Commission decision of July 3, 2001; Schneider Electric/Legrand, Case COMP/M.2283, Commission decision of October 10, 2001; CVC/Lenzing, Case COMP/M.2187, Commission decision of October 17, 2001; and Tetra Laval/Sidel, Case COMP/M.2416, Commission decision of October 30, 2001. For perspective, between 1990 and 1998, the Commission had prohibited 10 transactions.

26 See, e.g., Alcan/Pechiney, Case IV/M.1715, Commission Press Release IP/00/258 of March 14, 2000; and Time Warner/EMI, Case COMP/M.1852, Commission Press Release IP/00/1122 of October 5, 2000.

27 See, e.g., Telia/Telenor, Case IV/M.1439, Commission decision of October 13, 1999; and Air Liquide/BOC, Case COMP/M.1630, Commission decision of January 18, 2000.

28 See, e.g., General Electric/Honeywell, Case COMP/M.2220, Commission decision of July 3, 2001 (transaction prohibited, inter alia, because of concern as to post-merger bundling of General Electric engines with Honeywell avionics and aerospace components); and Tetra Laval/Sidel, Case COMP/M.2416, Commission decision of October 30, 2001 (transaction prohibited, inter alia, because of concern that Tetra Laval would leverage its dominant position in aseptic packaging into Sidel’s leading position in the closely neighboring PET packaging market). Overturned on appeal (Cases T-5/02 and T-80/02 EU:T:2002:264) and subsequently approved (Case COMP/M.2416, Commission decision of January 13, 2003).

29 See, e.g., AOL/Time Warner, Case COMP/M.1845, Commission decision of October 11, 2000 (remedies required, inter alia, because of concern that AOL could foreclose Time Warner’s entertainment content competitors from obtaining access to AOL’s Internet access and on-line services).

30 See, e.g., Volvo/Scania, Case COMP/M.1672, Commission decision of March 14, 2000 (Commission required Volvo, the acquirer, to sell a non-controlling minority shareholding in a competitor active on the market directly affected by the transaction and required Renault, the vendor, to sell a non-controlling minority shareholding in a competitor active on a neighboring market).

7

dominance concerns where the post-transaction market shares would have been below 40%.31

Fourth, the Commission endeavored to expand and develop the original notion of collective

dominance.32 Fifth, the Commission applied the Merger Regulation’s procedural rules more

rigorously, including, in particular, those barring consideration of remedies offered out-of-time.33

Sixth, the Commission became more demanding in regard to the scope, implementation, and

detail of remedies, including by vetting potential purchasers of divested businesses more

carefully 34 and proposing greater use of independent trustees to monitor compliance with

remedies.35

These developments attracted comment and some criticism. First, it was said that

the significantly increased number of notifications 36 and the enhanced scope and detail of

Commission investigations had strained the Commission’s resources,37 and that the informality

31 See, e.g., Carrefour/Promodes, Case COMP/M.1684, Commission decision of January 25, 2000 (remedies required to address concern that the merging parties, which accounted for 20–30% of consumer products sold to French supermarkets, could exert market power over suppliers).

32 See Airtours/First Choice, Case IV/M.1524, Commission decision of September 22, 1999 (transaction prohibited on the basis of a concern that four companies would together have a position of joint dominance in a dynamic market with no evidence or finding of the existence of an effective retaliation mechanism). Overturned on appeal. Airtours, supra n 10.

33 See, e.g., Volvo/Scania, Case COMP/M.1672, Commission decision of March 14, 2000 (transaction prohibited where Commission rejected remedies offered after the expiry of the three-month period provided for in the Merger Regulation).

34 See, e.g., TotalFina/Elf, Case COMP/M.1628, Commission decision of February 9, 2000 (Commission vetoed selection of company chosen to acquire divested businesses). See too Mario Monti, The Main Challenges for a New Decade of EC Merger Control, Speech at the EC Merger Control 10th Anniversary Conference, Brussels, September 15, 2000 (Commission Press Release SPEECH/00/331) (“[e]ven if suitable assets can be identified, the parties’ commitment simply to divest those assets regardless of who buys them will not be adequate. … I have not hesitated to reject a package of buyers proposed by TotalFina Elf because we considered that they did not have the incentives to effectively bring competition to the market for sale of petrol in French motorways”).

35 See, e.g., Model Text for Trustee Mandates (available at http://ec.europa.eu/competition/mergers/ legislation/trustee_mandate_en.pdf) and Model Text for Divestiture Commitments (available at http://ec.europa.eu/competition/mergers/legislation/template_commitments_en.pdf). See also Best Practice Guidelines to the Model Texts, available at http://ec.europa.eu/competition/mergers/legislation/best_practice_commitments_trustee_en.pdf.

36 In 1991, the first full year in which the Merger Regulation was in force, 63 transactions were notified. In 2000 and 2001, the comparable figures were 345 and 335.

37 See, e.g., Peter Sutherland, Global Consolidation: Views on Future Market Dynamics, EC Merger Control: Ten Years On (London: International Bar Association, 2000), p. 70 (“It is clear that the MTF needs more resources immediately to deal with existing transaction volumes”). See too Colin Overbury, Postscriptum, EC Merger

8

and flexibility that had characterized the early years had given way to a more bureaucratic

approach. Second, it was suggested that the possibility open to the Commission since March 1,

1998, to condition phase I approval decisions on undertakings had occasionally led the

Commission to seek remedies that were arguably not merited by the concerns identified. Third,

the Commission’s limited resources were at times said to have encouraged undue reliance on

(and insufficient skepticism of) third-party testimony, especially that submitted by competitors.

Fourth, concern was expressed as to the degree to which the Commission had at times relied on

speculation about future anti-competitive conduct as a ground for challenging transactions, in

particular in the context of conglomerate mergers. (The Commission’s prohibition of General

Electric/Honeywell generated particularly strong criticism from senior U.S. antitrust officials38

and an assertive response from the Commission.39) Fifth, it was suggested that DG COMP had

become less susceptible to external review and scrutiny than before.40

Control: Ten Years On (London: International Bar Association, 2000), p. 450 (“There is no doubt that the resources of the MTF are now stretched to the limit. During the time that I was the Director, there was an annual average of about 55 decisions. With some 32 officials available to examine the notified cases, the ratio of decided notifications to case handler was less than 2:1 .... The annual ratio of cases to each official has now risen to nearly 8:1, which represents a fourfold increase in their workload in less than seven years. Even if one takes into account the increased competence which the officials have undoubtedly gained through intense experience, which is, in any event, balanced by the increasingly complex and sophisticated nature of the transactions submitted for control, such an increase cannot be good”).

38 See, e.g., Charles A. James, International Antitrust in the 21st Century: Cooperation and Convergence, OECD Global Forum on Competition, Paris, October 17, 2001, available at http://www.usdoj.gov/atr/public/speeches/9330.pdf. (“[The Commission’s decision] is neither soundly grounded in economic theory nor supported by empirical evidence, but rather, is antithetical to the goals of sound antitrust enforcement”); Statement of Assistant Attorney General Charles A. James on the EU’s decision regarding the GE/Honeywell acquisition, US Department of Justice Press Release of July 3, 2001 (“Clear and longstanding U.S. antitrust policy holds that the antitrust laws protect competition, not competitors. Today's EU decision reflects a significant point of divergence”).

39 See, e.g., Mario Monti, Commissioner Monti Dismisses Criticism of the GE/Honeywell Merger Review and Rejects Politicization of the Case (Commission Press Release SPEECH/01/855 of June 18, 2001).

40 See, e.g., Joseph Gilchrist, former Hearing Officer of the Commission, Rights of Defence and the Role of the Hearing Officer in EU Merger Cases, 2001 Global Competition 19 and 20, who conceded that “[i]t is difficult to pinpoint exactly the causes and relative importance of the factors making for this disquiet,” but identified, inter alia, “the unique position of the European Commission in being effectively investigator, prosecutor, jury, judge and executioner in its own cause” and “the methods by which solutions to perceived competition problems are negotiated between the parties and the Merger Task Force.”

9

Most fundamentally, however, the Commission’s role as investigator, prosecutor,

and judge in EU merger control was called into question.41 The principal criticism made was

that the same Commission officials assess the evidence, state the case against a notified

concentration, determine how far that case is proved, and decide whether to approve or prohibit a

transaction. A comparison was drawn with the United States, 42 where the prospect of

independent judicial review is said to exert discipline on decision making, irrespective of

whether a given transaction is challenged or abandoned.43 The impression had also developed

that, since the Merger Regulation’s adoption, certain of the internal checks and balances on

Commission decision making in competition cases had become less effective.44 Among other

41 See, e.g., Donna Patterson and Carl Shapiro, Trans-Atlantic Divergence in GE/Honeywell: Causes and Lessons, 17 Antitrust, Fall 2002 p. 18 (“The most fundamental process difference between the U.S. and EU system is the fact that U.S. authorities must obtain an order from an independent judicial authority prior to blocking a transaction. By contrast, the Competition Commission plays the role of investigator, prosecutor and judge in each transaction that it reviews”). See also William J. Kolasky, Mario Monti’s Legacy: A U.S. Perspective, 1 Competition Policy International, 155, 167 (2005) (“It is often noted that in merger cases the Commission acts as investigator, judge, and prosecutor. Unlike in the United States where the DOJ must obtain an injunction to prevent a merger, Commission decisions are not, in the normal course of events, subject to judicial review. The knowledge that facts will have to stand up to judicial scrutiny and that witnesses will have to survive the cauldron of cross-examination acts as a disciplining tool on DOJ officials. The Commission’s decision-making, on the other hand requires essentially only self-discipline”). See too Jack Welch, then-Chairman of General Electric, following the Commission’s prohibition of the General Electric/Honeywell transaction, complained that “it’s very difficult to be in a process where the prosecutor is also the judge,” The Prosecutor is Also the Judge, Time, July 16, 2001, p. 42.

42 The U.S. antitrust agencies do not authorize concentrations. Rather, they review them and, for those concentrations considered likely to lessen competition, either negotiate conditions upon which they will not litigate in court or challenge the merger before a judge, who decides whether to enjoin a merger. For concentrations found unlikely to lessen competition, the U.S. agencies simply refrain from challenging the transactions.

43 See, e.g., William J. Kolasky, Conglomerate Mergers and Range Effects: It’s a Long Way from Chicago to Brussels, George Mason University Symposium, Washington, D.C., November 9, 2001, available at http://www.usdoj.gov/atr/public/speeches/9536.pdf. (“If we decide in the U.S. to challenge a merger, we know we may have to go to court to convince a federal judge, by the preponderance of the evidence after an evidentiary hearing, that the merger may substantially lessen competition. This means that we know our witnesses will be exposed to the crucible of cross-examination before an independent fact-finder …. After just six weeks at the agency, I cannot overstate how much knowing we may have to prove our case to an independent fact-finder disciplines our decision-making”).

44 See, e.g., The Review of the EC Merger Regulation, 32nd Report of the House of Lords Select Committee on the European Union, HL Paper 165, Session 2001–02, para. 4 (“The top priority for reform should be to ensure objectivity and fairness in the ECMR process. The many concerns about due process are best addressed by improving the procedural safeguards in the current system. Efforts must focus on improving the internal checks and balances in the ECMR regime. To achieve this, the Commission should take the following action: (1) Responsibility for the consideration of cases in Phase I and Phase II should be divided between two separate teams of officials; (2) The role of the Hearing Officer should be strengthened so that they take a prominent role in the negotiation of remedies; and (3) The Commission needs to strengthen its overall capacity for economic analysis in merger cases. In particular, DG Competition should appoint a Chief Economist”).

10

things, the reforms of the role of the Hearing Officer introduced in 2001 had been limited

because the Hearing Officer’s role was confined to dealing with procedural matters, not

substantive issues, legal arguments, or conclusions drawn from the evidence. 45 Certain

commentators, including the then-President of the General Court, went as far as to suggest that

the Commission might consider handing over its authority to block mergers to the Court of

Justice.46

The seminal event in the evolution of the Merger Regulation came in 2002 when

the General Court annulled three of the prohibition decisions adopted by the Commission in

1999–2001 (i.e., Airtours, Schneider, and Tetra Laval). These judgments, two of which were

conducted under the Court’s fast-track procedure (Schneider and Tetra Laval), were scathing in

their criticism of the Commission’s appreciation of the facts and treatment of evidence. (By way

of example, the Court in Airtours undertook a detailed factual analysis that identified “errors,

omissions and inconsistencies of utmost gravity.” 47) The Court’s judgments received wide

coverage in the media and caused the Commission to conduct a swift review of the underlying

weaknesses in its application of the Merger Regulation.48 Immediately following publication of

45 See, e.g., John Temple Lang, former Hearing Officer of the Commission, who observed of the 2001 changes that “most of the benefit of [the recent reform] has been taken away again, by providing very clearly that the Hearing Officer is only intended to comment on procedure and not on substance. In other words, he may say whether the companies have been given a chance to speak, but not whether what they said was right or not. This does little or nothing to get over the objection that the Commission is both ‘prosecutor’ and ‘judge.’” Quoted by Mark Griffiths, Is the Commission Toughening Its Stance on Mergers?, The European Lawyer, July–September 2001, p. 13.

46 See David Lawsky, Interview with Judge Bo Vesterdorf, former President of the General Court, Reuters News Service, September 19, 2002 (“Bo Vesterdorf, President of the EU [General Court], told Reuters in an interview that the Commission would do well to look at the U.S. system, where the federal government needs court approval to stop a merger. In the cautious phrasing of a jurist, Vesterdorf said, ‘The Commission might consider whether the sole responsibility to prohibit mergers should remain with the Commission, or whether one should change the system into something like the U.S. system.’ In the United States, he noted, ‘if (a merger) is to be prohibited, (the government) must to go court’”).

47 Airtours, supra n 10, para. 404.

48 See, e.g., Francesco Guerrera and Guy de Jonquières, ‘Something Is Rotten Within Our System,’ Financial Times, October 28, 2002 (“The European Union’s top economic policemen have been put on trial—and found guilty. Three times in five months, European Commission vetoes of high-profile corporate mergers have been overturned by the EU’s second highest court. The unprecedented defeats, coupled with scathing reprimands by the court, are more than just a crushing blow for Mario Monti, Europe’s competition commissioner, and his elite team of enforcers. By cutting the Commission down to size, the [General Court]—the lower chamber of the Luxembourg-based [Courts of the European Union]—has sparked the beginning of a revolution in the way the EU regulates mergers”).

11

the Court’s judgment in Tetra Laval, then-Commissioner Monti conceded that “our record in the

merger area is less glorious after these Court rulings.”49

In response to the Court’s judgments in Airtours, Schneider, and Tetra Laval, the

Commission acknowledged that “the system put in place in 1990 [was] showing some signs of

strain”50 and recognized that a “radical”51 package of measures was needed to allay criticism,

ensure that future decisions would be based on firm evidence and solid investigative techniques

that could be tested against “the cold metal of economic theory,”52 and maintain the existing

institutional framework in which the Commission approves or prohibits mergers. 53 The

Commission expressed determination that “these setbacks [should not be allowed] to distort our

view of the Community’s merger control policy,” and resolved to “transform them into an

opportunity for even deeper reform than originally envisaged”54 in the relatively modest Green

Paper of 2001.55

On December 11, 2002, the Commission approved a “comprehensive merger

control reform package, which is intended to deliver a world class regulatory system for firms

seeking approval for their mergers and acquisitions in the Community.”56 The package included

49 Quoted in European Court Deals Crushing Blow to Monti’s Merger Policy, The Independent, October 25, 2002.

50 Mario Monti, Europe’s Merger Monitor, The Economist, November 9, 2002.

51 Philip Lowe, Future Directions for EU Competition Policy, International Bar Association, Fiesole, Italy, September 20, 2002 (“we will propose radical changes in areas where radical changes are needed”).

52 J.A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper & Brothers, 1942).

53 See too Mario Monti, Europe’s Merger Monitor, The Economist, November 9, 2002, who summarized the objectives of the Commission’s proposals as follows: “[T]o improve the Commission’s decision-making process, making sure that our investigations of proposed mergers are more thorough, more focused, and—most importantly—more firmly grounded in sound economic reasoning, with due regard for the rights of the merging partners and of third parties.”

54 Mario Monti, Merger Control in the European Union: A Radical Reform, speech at the European Commission/IBA Conference on EU Merger Control, Brussels, November 7, 2002 (Commission Press Release SPEECH/02/545).

55 Green Paper on the Review of Council Regulation 4064/89, COM(2001) 745/6 final, available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52001DC0745&from=EN.

56 Commission Press Release IP/02/1856 of December 11, 2002.

12

a proposal for a wide-ranging revision of the Merger Regulation (the “Draft Merger

Regulation”),57 Draft Horizontal Mergers Guidelines,58 and Draft Best Practices Guidelines.59

Announcing the proposals, then-Commissioner Monti predicted that “[t]he reforms will

significantly improve our merger control system making it, I believe, a model to be emulated

worldwide.”60 Following extensive discussion with Member State competition agencies, the

Commission’s proposals were agreed in November 2003,61 adopted in January 2004,62 and came

into force on May 1, 2004. They had several elements.

First, the Commission clarified the law in three significant ways:

(1) Although the Commission declined to adopt an SLC test, it recast the

substantive test under the Merger Regulation in an effort to capture

horizontal mergers in oligopolistic markets that are not prone to tacit

collusion and where a position of single firm dominance will not be

created, but which nevertheless raise market power concerns due to

unilateral effects resulting from the elimination of competition between

the merging firms. This clarification was intended to address any

“enforcement gap” between the dominance and SLC tests,63 and to ensure

57 Proposal for a Council Regulation on the control of concentrations between undertakings, COM(2002) 711. As noted at the outset, agreement was reached on a recast version of the Merger Regulation in November 2003 (see Commission Press Release IP/03/1621 of November 27, 2003).

58 Commission Guidelines on the appraisal of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, 2002 O.J. C331/18. These Guidelines were adopted in early 2004. Commission Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings, 2004 O.J. C31/05 (“Horizontal Mergers Guidelines”), available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2004:031:0005:0018:EN:PDF.

59 DG Competition Best Practice Guidelines on the conduct of EC merger control proceedings. These Guidelines were adopted in January 2004, available at http://ec.europa.eu/competition/mergers/ legislation/proceedings.pdf.

60 Mario Monti, Commission Adopts Comprehensive Reform of EU Merger Control, Commission Press Release IP/02/1856 of December 11, 2002.

61 Commission Press Release IP/03/1621 of November 27, 2003.

62 Commission Press Release IP/04/70 of January 20, 2004.

63 See, e.g., Richard Whish, Substantial Lessening of Competition/Creation or Strengthening of Competition, Speech at the International Competition Network’s First Annual Conference, Naples, September 28–29, 2002 (“The

13

that the EU and U.S. agencies applied broadly similar analytical

frameworks. The recast substantive test is whether a merger “significantly

impedes effective competition.” 64 The Commission indicated that “a

significant impediment to effective competition [will] generally result

from the creation or strengthening of a dominant position.”65

(2) With respect to collective dominance, the Commission accepted the

analytical framework applied by the General Court in Airtours, which

identified three cumulative conditions that must be met to support a

finding of collective dominance: (i) in light of the characteristics of the

relevant market, each member of the oligopoly must know how the other

members are behaving in order to be able to adopt the same policy; (ii)

members of the oligopoly must be deterred over time from departing from

that policy; and (iii) that policy must be able to withstand challenge by

competitors and customers. In affirming that collective dominance is

based on a demonstrable risk of sustainable tacit collusion, the

Commission aligned its approach with that of the U.S. courts and

agencies.

(3) The Commission recognized that assessments made under the Merger

Regulation should “take account of any substantiated and likely

efficiencies put forward by the undertakings concerned” as “[i]t is possible

that the efficiencies brought about by the concentration [may] counteract

critical question … is whether there are some mergers that cannot be controlled under the dominance standard … and yet which are the subject of legitimate economic concern to competition authorities. Is there a third type of case which lies beyond single firm and/or collective dominance? Is there an ‘empty box’ which Article 2(3) of the ECMR does not address? If there is, does the SLC test cover it?”); and Sir John Vickers, How to Reform the EC Merger Test?, speech at the International Bar Association Conference, Brussels, November 8, 2002 (“In sum, it cannot safely be assumed that the existing ECMR dominance test covers all anti-competitive mergers of concern. The test needs to change”).

64 Art. 2(3), Merger Regulation, supra n 1.

65 Recital 26, Merger Regulation, ibid.

14

the effects on competition, and in particular the potential harm to

consumers, that it might otherwise have.”66

Second, with respect to the substantive assessment of mergers, the Commission

adopted its long-awaited Horizontal Mergers Guidelines. These Guidelines, which the

Commission considered to be “one of the cornerstones of the comprehensive reform of

Community merger control,”67 were intended to explain its enforcement standards, “provide a

sound economic framework for the assessment of concentrations,” 68 and give Commission

decision making “new transparency and clarity.”69 The Horizontal Mergers Guidelines explain

how mergers should be analyzed and identifies the factors that may mitigate an initial finding of

competitive harm. The adoption of the Horizontal Mergers Guidelines was intended to create a

more predictable climate for the assessment of reportable transactions and to achieve benefits in

the EU similar to those achieved by the implementation in 1982 of the first version of the U.S.

Horizontal Merger Guidelines. Because of the similarities between the Horizontal Mergers

Guidelines and the 2010 U.S. Horizontal Merger Guidelines, EU merger enforcement has since

become more closely aligned with U.S. merger control.70 In November 2007, the Commission

66 Recital 29, Merger Regulation, ibid.

67 Commission adopts merger control guidelines, Commission Press Release IP/03/1744 of December 16, 2003 (“This is the first time the Commission sets out comprehensively the analytical approach it takes when assessing the competitive impact of mergers between competing firms. By providing clear and detailed guidance to the legal and business communities as to whether a deal is likely to face regulatory problems or not they will enhance the predictability of merger control in Europe”).

68 Recital 28, Merger Regulation, supra n 1.

69 Philip Lowe, Developments in EC Competition Policy, Richards Butler Annual Competition Forum, London, November 29, 2002, available at http://ec.europa.eu/competition/speeches/text/ sp2002_044_en.pdf.

70 See, e.g., Mario Monti, Convergence in EU-US Antitrust Policy Regarding Mergers and Acquisitions: An EU Perspective, UCLA Law First Annual Institute on US and EU Antitrust Aspects of Mergers and Acquisitions, Los Angeles, February 28, 2004 (Commission Press Release SPEECH/04/107) (“[J]ust before Christmas [2003], the EU Commission, for the first time, adopted comprehensive guidelines setting out its approach to the analysis of the likely competitive impact of merger between competing firms: in substantive terms, there is little to distinguish the approach we set out to that of our U.S. counterpart agencies …. A European competition lawyer who picks up the U.S. federal antitrust agencies’ Merger Guidelines, or who delves into one of the U.S. federal courts’ recent merger control judgments, will—I think—be struck by how much common ground is shared between the U.S. and EU approaches to merger analysis”).

15

issued Guidelines on the assessment of non-horizontal mergers, including conglomerate mergers

(the “Non-Horizontal Mergers Guidelines”).71

Third, following the Court’s judgments in Airtours, Schneider, and Tetra Laval,

the Commission recognized that “the level of proof required by the [General Court] is high,

which implies that the Commission’s enquiries should be more extensive and detailed than at

present.”72 Accordingly, with a view to “strengthen[ing] further the economic underpinnings of

[its] competition analysis” and permitting “more rigorous testing of the economic models we

apply in our investigations,” the Commission undertook an “across-the-board increase in the

economic expertise in our case teams.”73 In July 2003, the Commission appointed its first Chief

Economist to provide methodological guidance on economic policy, general guidance in

individual cases, and detailed support in complex cases, in particular those requiring

sophisticated quantitative analysis.74

Fourth, in an effort to improve internal decision making, the Commission

implemented a range of measures, including: (1) deepening the nature and extent of Member

State involvement; 75 (2) giving additional resources to and expanding the mandate of the

71 Commission Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings, 2008 O.J. C265/6, available at http://ec.europa.eu/ competition/speeches/text/sp2002_034_en.pdf.

72 Mario Monti, EU Competition Policy, 2002 Fordham Corp. L. Inst. 87 (Barry E. Hawk, ed. 1993).

73 Philip Lowe, Future Directions for EU Competition Policy, International Bar Association, Fiesole, Italy, September 20, 2002 (“[T]his economic function needs in our view to be closely associated with the day-to-day work of our case teams, giving guidance on analytical methodology, giving upstream advice on the direction of investigations and direct assistance in the most complex cases. An independent opinion on the economic aspects of a case should also be available to the Commissioner and the Commission and should be in the file”). Available at http://ec.europa.eu/competition/speeches/text/sp2002_034_en.pdf.

74 Mario Monti, EU Competition Policy, 2002 Fordham Corp. L. Inst. 87 (Barry E. Hawk, ed. 1993) (“Obviously this new role will have to be defined carefully. I believe it needs to be closely associated with the day-to-day work of our case teams, giving guidance on analytical methodology, advice on the direction of investigations and direct assistance in the most complex cases. At the same time, it will provide to the Competition Commissioner … an independent opinion on the economic aspects of a case before he proposes a final decision to the Commission”).

75 See, e.g., Philip Lowe, The Interaction Between the Commission and Small Member States in Merger Review, The Competition Authority Merger Review Day, Dublin, October 10, 2003 available at http://ec.europa.eu/competition/speeches/text/sp2003_037_en.pdf (“At present we are looking at how the functioning of the Advisory Committee on Concentrations might be improved and strengthened. Some Member

16

Commission’s Hearing Officers, 76 the independent officials charged with ensuring that

companies’ rights of defense are respected;77 (3) establishing a unit devoted to scrutiny and

policy; 78 (4) dissolving the Merger Task Force, the cadre of around 60 specialized officials

established in 1990 to apply the Merger Regulation, and progressively integrating those officials

into the various sectoral Directorates of DG COMP;79 and (5) forming and systematically using a

peer-review “panel” system, independent of Commission case teams, to scrutinize the case

team’s conclusions with a “fresh pair of eyes” at key points of the inquiry80 and thereby provide

“a real and effective internal check on the soundness of the investigators’ preliminary

conclusions.”81 Although this initiative fell short of proposals intended to divorce the initial

States have taken the opportunity of the ongoing reforms in the area of EU merger control to call for a strengthening of the Advisory Committee. Particular concern has been expressed about the short time within which the Advisory Committee must absorb key documentation relating to individual merger cases. There have also been some calls for the meetings to be conducted more effectively and for the Committee’s opinion to be rendered more transparent”).

76 The Terms of Reference of Hearing Officers in Certain Competition Proceedings, Commission decision of May 23, 2001 (2001 O.J. L162/21). Three main changes were effected: (1) the Commission accepted that Hearing Officers need no longer be Commission officials and would in future report directly to the Competition Commissioner; (2) Hearing Officers were empowered to intervene before the submission of a draft decision to the Competition Commissioner; and (3) the Hearing Officer’s report would in future be made available to each national competition authority.

77 See, e.g., Philip Lowe, Review of the EC Merger Regulation—Forging a Way Ahead, speech at the European Commission/IBA Conference on EU Merger Control, Brussels, November 8, 2002, available at http://ec.europa.eu/competition/speeches/text/sp2002_035_en.pdf. (“[T]he more resources that the Hearing Officers have at their disposal, the greater the likelihood is that they will be able to exercise their mandate in the truly independent way that their mandate implies”).

78 See, e.g., Philip Lowe, Review of the EC Merger Regulation—Forging a Way Ahead, speech at the European Commission/IBA Conference on EU Merger Control, Brussels, November 8, 2002 (“[t]his ‘Scrutiny Office’ [will] follow cases throughout their development and organise panels at key moments, for example before statements of objection are issued and on final decisions in the second phase of a merger investigation”).

79 Commission Press Release IP/03/603 of April 30, 2003.

80 See, e.g., Philip Lowe, The design of competition policy institutions for the 21st century – the experience of the European Commission and DG Competition, [Fall 2008] Competition Policy Newsletter, p. 9 (“The primary objective of this exercise is to provide assistance to the case team in particularly complex cases with a view to ensuring that the foundations of the case are robust. The Peer Review Panel may identify areas where further work is necessary to sustain an objection and how this might be carried out”).

81 Mario Monti, Europe’s Merger Monitor, The Economist, November 9, 2002. See too Joaquín Almunia, Due Process and Competition Enforcement, IBA – 14th Annual Competition Conference 2010, Florence, September 17, 2010 (Commission Press Release SPEECH/10/449) (“scrutiny is very close and very careful … contentious cases can be analysed by a ‘peer review’ panel which reports its findings directly to me”).

17

investigative team from the group of officials assigned to carry out in-depth investigations,82 it

nevertheless introduced an important degree of internal oversight that serves as a check on

decision-making. Finally, the Commission adopted Best Practices Guidelines on the conduct of

EU merger control proceedings addressing “the day-to-day handling of merger cases and the

Commission’s relationship with the merging parties and interested third parties, in particular

concerning the timing of meetings, transparency, and due process in merger proceedings.”83

These reforms are widely considered to have succeeded in addressing the

criticisms made of the Commission in the early 2000’s and, over the past decade, the

Commission’s practice has matured to a point where it is increasingly predictable and settled.

First, the Commission’s substantive appraisal has evolved considerably.

(1) Following the Court’s judgments in Airtours, Schneider, and Tetra Laval,

the economic sophistication of the Commission’s decisions continued to

evolve. 84 The increased emphasis on quantitative analysis in turn

accelerated the trend towards greater use of economics and economists in

EU merger control.85 The Commission recognized that its assessments

82 See, e.g., Kai-Uwe Kühn, Reforming European Merger Review: Targeting Problem Areas in Policy Outcomes, The Use of Economics in EC Competition Law, IBC Conference, Brussels, January 30, 2002, p. 19 (“I would suggest to either split the Merger Task Force into an investigative and a decision making branch or, alternatively, leave only investigative powers to the MTF and leave decision making to another entity in DG Competition. What is crucial is that both branches have the same level in the organizational hierarchy. This separation could leave much of the existing structure in place. Case teams would be conducting phase 1 of the merger and could decide whether to start a more in depth investigation as phase 2. If phase two were reached the case team would investigate further and either clear the merger or put together the statement of objections. From this point onwards the control over the process would shift to the decision making body. It would receive the parties’ responses to the statement of objections, conduct the oral hearing and then write a decision on the basis of the submitted papers, the oral hearing, and the inclusion of any advisory bodies that would be maintained. I would also give the decision making body the power to consult with external expert advice at some point in the procedure”).

83 Commission Press Release IP/03/1744 of December 16, 2003.

84 See, e.g., Siemens/Drägerwerk/JV, Case COMP/M.2861, Commission decision of April 30, 2003; and General Electric/Instrumentarium, Case COMP/M.3083, Commission decision of September 2, 2003.

85 See, e.g., William E. Kovacic and Carl Shapiro, Antitrust Policy: A Century of Economic and Legal Thinking, Journal of Economic Perspectives, 2000, p. 19 (“Today, the links between economics and the law have been institutionalized with increasing presence of an economic perspective in law schools, extensive and explicit

18

should be “more and more refined and based on dynamic and complex

assessments, rather than on a mere ‘static approach’ relying on

overlaps.” 86 Commission decisions reflected considerably greater

emphasis on economic evidence, including quantitative and econometric

analyses generated by the Chief Economist’s team.87 In October 2011, the

Commission adopted a set of Best Practice Guidelines for the submission

of economic evidence and data collection in merger and non-merger cases,

which is intended to “formulate best practices concerning the generation

as well as the presentation of relevant economic and empirical

evidence.”88

judicial reliance on economic theory, and with the substantial presence of economists in the government antitrust agencies”).

86 Götz Drauz, former Deputy Director General for Mergers, Conglomerate and Vertical Mergers in the Light of the Tetra Judgment, [Summer 2005] Competition Policy Newsletter, pp. 35–39. See too Lowri Evans, Deputy Director General DG COMP, The role of economics in modern competition policy, International League of Competition Law Congress 2008, Hamburg, September 26, 2008 (SPEECH) (“it is now normal for quantitative analysis to help shape our approach … [although] such analysis is used only as a complementary tool … [and] will never replace our qualitative analysis”); and Alberto Bacchiega, Stéphane Dionnet, Mario Todino, Chloé Macewen, Johnson & Johnson/Guidant: Potential Competition and Unilateral Eeffects in Innovative Markets, [Autumn 2005] Competition Policy Newsletter, pp. 87–94. (“[T]he [Johnson & Johnson/Guidant] investigation confirms the gradual shift in emphasis in the Commission’s analysis when it comes to mergers between differentiated products. Consistent with the new Commission guidelines on horizontal mergers, in the assessment of the effects of the merger more emphasis was put on the issue of closeness of substitution and the relevance of the competitive constraint being removed, rather than on the conventional concepts of single dominance and market definition”).

87 See, e.g., Ryanair/Aer Lingus, Case COMP/M.4439, Commission decision of June 27, 2007 (Chief Economist’s Team conducted a series of economic studies, including a price correlation study and two regression analyses that replicated studies conducted by each party, to evaluate the competitive constraint that each party exercised on the other); Google/DoubleClick, Case COMP/M.4731 Commission decision of March 11, 2008 (Chief Economist’s Team engaged in a detailed empirical analysis of the key assumptions underlying various horizontal and non-horizontal theories of harm advanced by complainants); Friesland Foods/Campina, Case COMP/M.5046, Commission decision of December 17, 2008 (Chief Economist’s Team made extensive use of retail scanner data to conduct a series of econometric analyses designed to determine whether the parties’ branded dairy products were close substitutes); StatoilHydro/ConocoPhillips, Case COMP/M.4919, Commission decision of October 21, 2008 (which concerned the merger of two motor fuel retailers, the Chief Economist’s Team performed an econometric analysis to measure the extent to which ConocoPhillips’ service stations had constrained the pump prices at closely neighboring stations operated by Statoil); and Kraft Foods/Cadbury, Case COMP/M.5644, Commission decision of January 6, 2010 (Chief Economist’s Team analyzed pricing and sales data to determine the extent to which the merging companies’ chocolate tablet brands exerted competitive constraints on each other in the U.K.).

88 DG Competition – Best practices for the submission of economic evidence and data collection in cases concerning the application of Articles 101 and 102 TFEU and in merger cases (“Economics Best Practices

19

(2) The adoption of the Horizontal Merger Guidelines and the new substantive

test, which focuses on whether reportable transactions “significantly

impede effective competition,” including, but not only, by creating or

strengthening a dominant position, formalized the Commission’s emphasis

on assessing the competitive dynamic that will be lost by a transaction.

The Commission therefore increasingly endeavored to assess the nature

and intensity of competition between the merging parties in unilateral

effects cases 89 and to quantify the incentives to implement foreclosure

strategies in vertical effects cases.90

(3) As for collective dominance, the combination of the Airtours judgment,

the EU’s adoption of a new substantive test that increased the scope for,

and emphasis on, unilateral effects analyses, and the greater analytical and

evidentiary rigor applied with respect to coordinated effects cases reduced

the incidence of transactions being successfully challenged on grounds of

collective dominance, and the Commission brought few coordinated

effects cases, the most prominent being ABF/GBI Business.91

(4) As to conglomerate mergers, in late 2005, the General Court upheld the

Commission’s General Electric/Honeywell prohibition decision, although

the grounds on which it did so were narrow and, in respect of the most

controversial aspects of the decision—namely, its reliance on alleged

vertical and conglomerate effects—the Court found that the Commission

had committed manifest errors.92 Following the EU courts’ judgments in

Guidelines”), available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2011:1216: FIN:EN:PDF.

89 See, e.g., Oracle/PeopleSoft, Case COMP/M.3216, Commission decision of October 26, 2004.

90 See, e.g., TomTom/TeleAtlas, Case COMP/M.4854, Commission decision of May 14, 2008; and Nokia/NAVTEQ, Case COMP/M.4942, Commission decision of July 2, 2008.

91 Case COMP/M.4980, Commission decision of April 16, 2008.

92 General Electric Company v. Commission (“General Electric”), Case T-210/01 EU:T:2005:456.

20

Tetra Laval and General Electric, the Commission applied a more

rigorous analytical framework in assessing conglomerate mergers that has

led to fewer such transactions being challenged. The Commission

approved a number of conglomerate mergers, including Cisco/Tandberg,93

NewsCorp/BskyB,94 and Intel/McAfee.95 The more systematic analytical

framework developed in the Commission’s decisional practice was

reflected in the Non-Horizontal Mergers Guidelines adopted in November

2007.96 As a result, there was little practical difference in the substantive

assessment of conglomerate mergers undertaken by the Commission and

its U.S. counterparts.97

(5) Finally, the Commission has approved two transactions on the basis of the

“failing firm” defense, including Aegean/Olympic (II),98 which had been

prohibited in 2011, and has over time shows greater willingness to take

positive account of efficiencies, 99 although the absence of any formal

93 Case COMP/M.5669, Commission decision of March 29, 2010.

94 Case COMP/M.5932, Commission decision of December 21, 2010.

95 Case COMP/M.5984, Commission decision of January 26, 2011.

96 Commission Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings, 2008 O.J. C265/6, available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:265:0006:0025:EN:PDF.

97 See, e.g., Mats A. Bergman, Malcolm B. Coate, Maria Jakobsson and Shawn W. Ulrick, Merger Control in the European Union and The United States: Just The Facts, [2011] 7 No. 1 European Competition Journal, pp. 89–125 (concluding on the results of a comparative analysis of concentrations subject to intense scrutiny by the EU and U.S. agencies, “the evidence does not support the hypothesis that the EU focuses more on non-horizontal matters than the U.S.”).

98 Case COMP/M.6796, Commission decision of October 9, 2013.

99 See, e.g., UPS/TNT Express, Case COMP/M.6570, Commission decision of January 30, 2013; and Deutsche Börse/NYSE Euronext, Case COMP/M.6166, Commission decision of February 1, 2012, paras. 1145–1342.

21

methodology for assessing merger-related efficiencies continued to attract

critical comment, including from former Chief Economists.100

Second, in respect of procedure, the extensions to the Commission’s deadlines,

together with the increased importance attached to gathering and assessing quantitative and other

evidence, as well as internal business planning documents, 101 has resulted in a general

lengthening of the merger clearance timetable, in particular in more complex phase II cases.102

The Commission has devoted increasing resources to more complex cases, reducing the length of

unconditional approval decisions concerning non-problematic transactions and exploring ways to

simplify notification requirements in respect of such cases. In a package of reforms adopted in

2013, the Commission expanded the number of concentrations eligible for notification under the

simplified procedure to “reduce the administrative burden and cost for business at a time when it

needs it most.”103

100 Damien Neven, fomer Chief Economist, Improving enforcement in the current regime, Concurrences No.4-2014 (“[A]n improvement in the Commission’s evaluation of efficiencies in mergers would lead to better enforcement. … [A] more precise delineation of the public policy grounds that can be brought to bear on [efficiencies in] transactions would be welcome”); Lars-Hendrik Röller, Efficiencies in EU Merger Control: Do They Matter?, in Claus-Dieter Ehlermann and Mel Marquis (eds.), European Competition Law Annual 2010: Merger Control in European and Global Perspective, pp. 67-68 (“In the end, efficiencies have never been decisive in EU merger decisions. Since the economic rationale of merger is to create efficiencies, this finding is rather disappointing. … The role of dynamic efficiencies is even more limited than static efficiencies. … Given the economic importance of dynamic efficiencies, it may be time to be more explicit about what kind of dynamic efficiencies are acceptable”). See too Jrissy Motis, Damien Neven, and Paul Seabright, Efficiencies in Merger Control, in Fabienne Ilzkovitz and Roderick Meikeljohn (eds.), European Merger Control: Do We Need an Efficiency Defense?, 2010, pp. 303–317; and Lars-Hendrik Röller, Challenges in EU Competition Policy, Empirica, Vol. 38, No. 3, pp. 287–314.

101 See, e.g., Syniverse/MACH, Case COMP/M.6690, Commission decision of May 29, 2013, para. 18 (Commission relied on approximately 7,000 internal emails and other documents provided by the parties); and INEOS/Solvay/JV, Case COMP/M.6905, Commission decision of May 8, 2014, para. 54 (notifying parties were required to provide over 14,000 internal documents).

102 The average time between notification and Commission decisions has lengthened from 109 working days in 2002, with proceedings ranging from 74 days (ENBW/ENI/GVS, Case COMP/M.2822, Commission decision of December 17, 2002) to 167 days (Tetra Laval/Sidel, Case COMP/M.2416, Commission decision of January 30, 2002) to 119 days in 2007, with proceedings ranging from 93 days (Kronospan/Constantia, Case COMP/M.4525, Commission decision of September 19, 2007) to 154 days (Ryanair/Aer Lingus (I), Case COMP/M.4439, Commission decision of June 27, 2007).

103 Mergers: Commission Adopts Package Simplifying Procedures Under the EU Merger Regulation – Frequently Asked Questions, December 5, 2013, Commission MEMO IP/13/1098.

22

Third, the Commission’s remedies policy and practice evolved considerably.

Following the October 2005 publication of its Merger Remedies Study, 104 which identified

serious design and/or implementation flaws in many of the remedies considered in the Study, the

Commission examined remedy proposals more systematically and rigorously in an effort to

confirm the independence, viability, and competitiveness of divestiture packages. Among other

things, the Commission placed increasing emphasis on the long-term competitive viability of

divestiture packages, vetted potential purchasers of such packages more carefully, required “up-

front buyer” solutions in a number of cases, and made greater use of independent trustees to

monitor compliance with remedies. In October 2008, the Commission adopted a revised

Remedies Notice that “imposes more stringent information requirements on the parties,” 105

codified the Commission’s decisional practice, and took account of judgments of the EU

courts. 106 The Commission has applied increasingly rigorous and exacting standards to the

evaluation of remedies. 107 In recent years, the Commission has required up-front buyer

commitments in an increasing number of cases, including INEOS/Solvay/JV,108 Hutchison 3G

UK/Telefonica Ireland,109 Holcim/Lafarge,110 and IMS Health/Cegedim Business.111

104 Merger Remedies Study, Public Version of DG Comp Staff Paper, October 2005, available at http://ec.europa.eu/competition/mergers/legislation/remedies_study.pdf. See also Alexander Kopke, Merger Remedies Study, [Autumn 2005] Competition Policy Newsletter, pp. 3–5.

105 Commission Staff Working Document Accompanying the Report from the Commission on Competition Policy 2008, Brussels, July 23, 2009, SEC (2009) 1004 final.

106 Commission Notice on remedies acceptable under the Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 (2008 O.J. C 267/1), available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:267:0001:0027:EN:PDF.

107 See, e.g., UPS/TNT Express, Case COMP/M.6570, Commission decision of January 30, 2013 (Commission prohibited a transaction following the merging parties’ failure to identify an “up front” buyer); and Ryanair/Aer Lingus (III), Case COMP/M.6663, Commission decision of February 27, 2013 (Commission prohibited a transaction notwithstanding the identification of two “up front” buyers).

108 Case COMP/M.6905, Commission decision of May 8, 2014.

109 Case COMP/M.6992, Commission decision of May 28, 2014.

110 Case COMP/M.7252, Commission decision of December 15, 2014.

111 Case COMP/M.7337, Commission decision of December 19, 2014.

23

The success of the measures adopted by the Commission following Airtours,

Schneider, and Tetra Laval has defused calls for the EU to adopt a judicially based system of

merger control. 112 By ensuring that decisions rendered following the 2004 reforms were

increasingly well reasoned and firmly based in fact, law, and sound economics, the Commission

successfully preserved its power to vet mergers. Should, however, complaints resurface about

the perceived absence of checks and balances on Commission decision making and the lack of

effective judicial review, the EU’s institutions might again be under pressure to consider further

reforms.

B. THE EVOLUTION OF EU ANTITRUST ENFORCEMENT

The entry into effect of the EC Treaty in 1958, and the adoption four years later of

Council Regulation 17, 113 introduced an entirely new system of antitrust law enforcement in

Europe. In the years that followed, the Commission and the EU courts developed and refined an

array of legal issues concerning the application of what are now Articles 101 and 102.114

In respect of Article 101, the Commission has historically focused on challenging

vertical restraints on inter-State trade that frustrated the creation of a common market, 115

112 See, e.g., Joaquín Almunia, Due Process and Competition Enforcement, IBA – 14th Annual Competition Conference 2010, Florence, September 17, 2010 (Commission Press Release SPEECH/10/449) (“One advantage of our [administrative] model over the judicial system is that it has helped us take forward the analytical part of our work. When you think how a pure judicial system could work in a Union composed by 27 Member States, with different cultures, different systems, this advantage appears quite clearly. Over the years, we have established a system that incorporates the very best economic analysis into competition enforcement”).

113 Council Regulation No. 17/62 of February 6, 1962, First Regulation implementing Articles [101] and [102] of the Treaty, 1962 O.J. No. 13/204. For an overview of the origins and application of Regulation 17, see Lorenzo Frederico Pace and Katja Seidel, The Drafting and the Role of Regulation 17: A Hard-Fought Compromise, in Kiran Klaus Patel and Heike Schweitzer (eds.), The Historical Foundations of EU Competition Law, 2013, pp. 54 et seq.

114 See, e.g., Donald L. Holley, EEC Competition Practice: A Thirty-Year Retrospective, 1992 Fordham Corp. L. Inst. 694 (Barry E. Hawk, ed. 1993).

115 See, e.g., Consten and Grundig v. Commission, Case 56/64 EU:C:1966:41, confirming Grundig-Consten, Case IV/3344, Commission decision of September 23,1964; Brasserie de Haecht v. Wilkin-Janssen, Case 23/67 EU:C:1967:54; and Walt Wilhelm v Bundeskartellamt, Case 14/68 EU:C:1969:4. See also Ian Forrester, Competition Structures for the 21st Century, 1994 Fordham Corp. L. Inst., p. 505 (Barry E. Hawk, ed. 1995), p. 453 (“Probably the most surprising feature for an American observer of the first 15 years of Commission decisions would have been the preoccupation with the market integration function of the competition rules. A high percentage of the decisions punished the contractual imposition of obstacles to cross-border distribution of goods”); and Sigfrido M. Ramirez Perez and Sebastian van der Scheuer, The Evolution of the Law of Articles 85 and 86 EEC:

24

applying EU competition rules expansively to a wide range of practices found to directly or

indirectly restrict trade within the EU.116 The Commission has also applied antitrust rules to

price-fixing and other similar conduct, imposing its first fine in 1969117 and defining the notion

of a concerted practice in 1972.118 In the years preceding the adoption of Council Regulation

1/2003, the Commission also devoted considerable time to examining voluntary notifications of

agreements and concerted practices. 119 In 1967, in an effort to reduce the number of

notifications and to provide clarity as to the Commission’s thinking, the first block exemption

regulation was adopted,120 and other block exemption regulations followed. Even then, however,

processing voluntary notifications represented the principal activity of the Commission. Prior to

the adoption of Council Regulation 1/2003, the Commission also routinely adopted decisions

granting individual exemptions under Article 101(3), thereby providing guidance to counsel and

companies. 121 Between 1962 and 2004, the Commission issued 197 infringement decisions

under Article 101.

Ordoliberalism and its Keynesian Challenge, in Kiran Klaus Patel and Heike Schweitzer (eds.), The Historical Foundations of EU Competition Law, 2013, p. 42 (“from the case law of the Court in the 1960s, it is safe to conclude that the Court saw in Article [101] in the first place an instrument to remove hindrances to market integration”).

116 See, e.g., BMW Belgium, Case IV/29146, Commission decision of December 23, 1977; Distillers, Cases IV/28859 and IV/29440, Commission decision of July 28, 1978; Moët et Chandon, Case IV/30188, Commission decision of November 27, 1981; John Deere, Case IV/30809, Commission decision of December 14, 1984; Sperry New Holland, Case IV/30839, Commission decision of December 16, 1985; and Tipp-Ex, Case IV/31192, Commission decision of July 10, 1987.

117 Quinine, Case IV/26623, Commission decision of July 16, 1969.

118 Matières Colorantes, Case IV/26.267, Commission decision of July 24, 1969, upheld on appeal in ICI v. Commission, Case 48/69 EU:C:1972:70.

119 See, e.g., Wouter Wils, The Modernization of the Enforcement of Articles 81 and 82 EC: A Legal and Economic Analysis of the Commission’s Proposal for a New Council Regulation Replacing Regulation No. 17, Fordham International Law Journal, Vol. 24, Issue 5, 2000, p. 1678 (“[i]n the first years of the application of Regulation No. 17, almost 40,000 agreements were notified to the Commission”).

120 Commission Regulation No. 67/67 on the application of Article 85(3) of the Treaty to certain categories of exclusive dealing agreements.

121 See e.g., Case IV/33814 Ford/Volkswagen, Commission decision of January 28, 1993, upheld in Matra Hachette v. Commission, Case T-17/93 EU:T:1994:89; Case IV/32.173 Continental/Michelin, Commission decision of October 11, 1988; Case IV/30937 Pronuptia, Commission decision of December 17, 1986; Case IV/30.717

25

As to Article 102, the focus of the Commission’s enforcement activity from the

outset was on exclusionary abuses and, in particular, exclusive arrangements and loyalty-

inducing rebates.122 (Even today, exclusionary abuses continue to account for the large majority

of Commission cases.123) In United Brands, the Commission signaled a readiness to define

markets narrowly by reference to demand-side substitution and to apply Article 102 broadly to a

variety of abuses. 124 Subsequent decisions challenged refusals to supply, 125 acquisitions of

control, 126 tying, 127 and predatory pricing. 128 The Commission has pursued few exploitative

abuse cases,129 in part, so it has recognized, because “[t]he case law of the Court of First Instance

Uniform Eurocheques, Commission decision of December 10, 1984; and Case IV/847 SABA, Commission decision of December 15, 1975, upheld in Metro v. Commission, Case 26/76 EU:C:1977:167.

122 Hoffmann-La Roche v. Commission, Case 85/76 EU:C:1979:36, upholding Case IV/29020 Vitamins, Commission decision of June 9, 1976.

123 Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM(2014) 453 final, July 9, 2014, para. 14.

124 United Brands v. Commission, Case 27/76 EU:C:1978:22, upholding Case IV/26.699 Chiquita, Commission decision of December 17, 1975.

125 Commercial Solvents v. Commission, Cases 6 & 7/73 EU:C:1974:18, upholding Case IV/26911 CSC-ICI, Commission decision of December 14, 1972. See also RTE and ITP v. Commission, Case C-241/91 P EU:C:1995:98, and ITP v. Commission, Case T-76/89 EU:T:1991:41, upholding Case IV/31851 Magill, Commission decision of March 21, 1989.

126 Europemballage and Continental Can v. Commission, Case 6/72 EU:C:1973:22, upholding Case IV/26811 Continental Can Company, Commission decision of December 9, 1971; and British American Tobacco Company Limited and R.J. Reynolds Industries Inc. v. Commission (“Philip Morris”), Case 142/84 and 156/84 ECLI:EU:C:1987:490, upholding Cases IV/30.342 and IV/30.926 Philip Morris Rembrandt, Commission decision of March 22, 1984.

127 Tetra Pak v. Commission, Case C-333/94 P EU:C:1996:436, and Tetra Pak v. Commission, Case T-83/91, upholding Case IV/31043 Tetra Pak II, Commission decision of July 24, 1991.

128 Akzo Chemie v. Commission, Case C-62/86 EU:C:1991:286, upholding Case IV/30.698 Akzo Chemie, Commission decision of December 14, 1985.

129 See, e.g., Case IV/28.851 General Motors Continental, Commission decision of December 19, 1974, reversed in General Motors, Case 26/75 EU:C:1975:150; Case IV/26.699 Chiquita, Commission decision of December 17, 1975, reversed (as regards unfair prices) in United Brands v. Commission, Case 27/76 EU:C:1978:22; Case IV/30.615 British Leyland, Commission decision of July 2, 1984, upheld on appeal in British Leyland v. Commission, Case 226/84 EU:C:1986:421; and Case COMP/36.915 Deutsche Post AG – Interception of cross-border mail, Commission decision of July 25, 2001. See too John Temple Lang, After 40 Years: Development of European Competition Law, 2014 Fordham Comp. L. Inst. 423 (Barry E. Hawk, ed. 2015), pp. 593-594 (“The Commission avoids bringing any cases involving excessive prices or any other conduct that would naturally be classified as exploitative”).

26

and the European Court of Justice as well as the decisional practice of the Commission provide

little guidance on how to determine whether a price must be considered unfair in itself.”130

Likewise, the Commission has only rarely challenged price discrimination, generally only in

conjunction with other forms of abuse.131 Between 1962 and 2004, the Commission issued 49

infringement decisions under Article 102.

Over the course of the 1990’s, the Commission’s application of Articles 101 and

102 came under critical scrutiny. Three principal observations were made at the time. First, it

was said that the Commission devoted too much time and resource to handling voluntary

notifications of agreements and practices at the expense of investigating cartels and abusive

conduct. 132 Second, it was contended that the Commission took insufficient account of

economic tools in its enforcement practice, relying instead on a formalistic interpretation of the

130 Case COMP/36568 Scandlines Sverige v. Port of Helsingborg, Commission decision of July 23, 2004, para. 217. See, however, Commission sends Statement of Objections to Gazprom – Factsheet, Commission MEMO/15/4829 of April 22, 2015 (“The Commission’s preliminary conclusion, as outlined in the Statement of Objections, is that Gazprom has charged unfair prices in five Central and Eastern European countries”).

131 See John Temple Lang, After 40 Years: Development of European Competition Law, 2014 Fordham Comp. L. Inst. 423 (Barry E. Hawk, ed. 2015), p. 594 (“The Commission, while occasionally saying that conduct found abusive on other grounds was unlawful also because it involved discrimination, brought almost no cases involving only discrimination”). See, however, Case IV/35.703 Portuguese Airports, Commission decision of February 10, 1999, upheld in Portuguese Republic v. Commission, Case C-163/99 EU:C:2001:189; and Case COMP/38096 PO/Clearstream, Commission decision of June 2, 2004, upheld in Clearstream Banking v. Commission, Case T-301/04 EU:T:2009:317.

132 See e.g., Alexander Schaub, then-Director-General of DG COMP, Modernization of EC Competition Law: Reform of Regulation No. 17, Fordham International Law Journal, Vol. 23, No. 3, 1999, p. 753 (“Our experience has shown that the notification system hardly contributes to the protection of competition … The substantial number of notifications, which in their large majority do not pose significant competition problems, does however distract the Commission from pursuing grave infringements of competition law, particularly those that are never notified”); Mario Siragusa, The Millenium approaches: Rethinking Article 85 and the Problems and Challenges in the Design and Enforcement of the EC Competition Rules, Fordham International Law Journal, Vol. 21, No. 3, 1998, pp. 660-661 (“the Commission's excessive workload has meant that it has not been able to concentrate on important and politically sensitive cases. Many serious restrictions of competition therefore escape the Commission's attention because of its excessive focus on cases having only minor restrictive consequences”); Barry Hawk and Laraine Laudati, Antitrust Federalism in the United States and Decentralization of Competition Law Enforcement in the European Union: A Comparison, Fordham International Law Journal, Vol. 20, No. 1, 1996, p. 47 (“In the European Union, the decentralization movement is motivated by the need to find solutions to the excessive caseload of DG IV, generated in large measure by its notification system, which its own machinery cannot handle”); and Margrethe Vestager, Perspectives on Europe, London School of Economics, Commission Press Release of November 20, 2015 (“[a]t the turn of the century, our antitrust enforcement system was under severe pressure … The Commission was drowning in notifications. We had no scope to focus on the most important issues”).

27

applicable rules.133 Third, it was suggested that the Commission should share jurisdiction to

apply EU competition rules with national agencies and courts.134

In the early 2000’s, EU antitrust enforcement underwent significant change. At

the Commission’s instigation, the Council approved a significant and wide-ranging package of

reforms. Voluntary notifications on “Form A/B” were abolished and national competition

authorities and courts were empowered to apply Articles 101 and 102135 in an effort to allow the

Commission to focus on areas of priority.136 The Commission’s powers of investigation and

enforcement were also enhanced and a network established to facilitate coordination and

information exchange between national authorities, national courts, and the Commission. In

many respects, Council Regulation 1/2003 has been a success.

133 See, e.g., Barry Hawk, System Failure: Vertical Restraints and EC Competition Law, Common Market Law Review (Vol. 32 Issue 4), 1995, p. 975-977 (criticizing the “anaemic nature of the economic analysis under [101(1)], and occasionally even under [101(3)]”); and James Venit, Slouching Towards Bethlehem: The Rule of Reason and Notification in EEC Antitrust Law, Boston College International and Comparative Law Review (Vol. 10 Issue 1), 1987, p. 34 (“the burden of its administrative tasks has sometimes led the Commission to prefer ‘simple’ legal rules to economic analysis, despite the fact that one of the primary justifications for the concentration of power in the Commission's hands is that only it is qualified to make the complex economic judgments required under both Articles [101(1)] and [101(3)]”).

134 See General Report of the confidence of FIDE, the Fédération Internationale pour le Droit Européen Application nationale du Droit européen de la concurrence, vol. II 265-296 (Stockholm, 1998).

135 See, e.g., Philip Lowe, former Director-General of DG COMP, The Role of the Commission in the Modernisation of EC Competition Law, Speech at the UKAEL Conference on Modernisation of EC Competition Law: Uncertainties and Opportunities, London, January 23, 2004, available at ec.europa.eu/competition/speeches/text/sp2004_007_en.pdf (modernization “is about harmonization of the substantive European competition rules and its decentralised application,” the latter of which entails “the discontinuation of the notification system”).

136 See, e.g., Mario Monti, EU Competition Policy After May 2004, Speech at the Fordham Annual Conference on International Antitrust Law and Policy, New York, October 24, 2004, Commission Press Release SPEECH/03/489 (“The antitrust modernization, with the abolition of the notification system, will oblige the Commission to adopt a more proactive stance in antitrust enforcement. Indeed, the Commission will have to rely more on complaints and own initiative investigations. A reinforcement of DG Competition’s sector analysis capabilities as well as of its tools to gather market information and monitor markets will be necessary. This change, together with the establishment of the joint responsibility of the Commission and national competition authorities and courts to enforce the EU antitrust rules, will lead to a better and more effective sharing of enforcement tasks between the Commission and national authorities”).

28

First, national agencies have applied EU competition rules with growing

confidence.137 A decade after Council Regulation 1/2003 entered into effect, national agencies

have become the principal enforcers of Articles 101 and 102.138 Coordination and convergence

has been facilitated by the European Competition Network (“ECN”),139 which has managed to

ensure the uniform implementation of Articles 101 and 102 “not only because convergence was a

legal requirement but also because all members have been eager to play by the book and,

furthermore, to go for voluntary convergence on procedural issues.” 140 Most recently, the

Commission has proposed measures to strengthen national agencies’ application of Articles 101

and 102.141

Second, few today would choose to re-introduce the system of voluntary

notification abolished in 2004 to free Commission resources to focus on areas of priority142

137 See, e.g., Commission Staff Working Document accompanying the Communication from the Commission to the European Parliament and Council, Ten Years of Antitrust Enforcement under Regulation 1/2003, July 9, 2014, SWD(2014) 231/2, para. 6 (“The NCAs have become an essential pillar of the application of the EU competition rules”).

138 From 2005 to 2014, 1,433 antitrust investigations were initiated by national agencies, and 153 by the Commission (ECN ‘Aggregate figures on antitrust cases,’ available at http://ec.europa.eu/competition/ecn/statistics.html). See also Wouter Wils, Ten Years of Regulation 1/2003 – A Restrospective, JECLAP, Vol. 4, No. 4, p. 295 (“Ten years after the adoption of Regulation 1/2003, there can be no doubt that, as far as the national competition authorities and the functioning of the European Competition Network are concerned, the new enforcement system has been a major success, beyond expectations … The national competition authorities have …, in quantitative terms, become the primary public enforcers of Articles 101 and 102 TFEU”).

139 See, e.g., Neelie Kroes, Many Achievements, More to Do, Speech at the International Bar Association Conference: Private and Public Enforcement of EU Competition Law – 5 years on, Brussels, March 12, 2009, Commission Press Release SPEECH 09/106 (“The ECN model of co-ordination and co-operation is a triumph. Our coherent application of the rules is widely regarded as a model for other regulators and policy communities”).

140 Bruno Lasserre, The Future of the European Competition Network, in C. Baudenbacher (ed.), Current Developments in European and International Competition Law, 21st St Gallen International Competition Law Forum, 2014.

141 Commission consults on boosting enforcement powers of national competition authorities, Commission Press Release IP/15/5998 of November 4, 2015 (quoting Competition Commissioner Margrethe Vestager, “For over ten years, national competition authorities have played a key role in enforcing EU antitrust rules alongside the Commission. Thanks to this cooperation at EU and national levels, competition rules have been applied more thoroughly and effectively than would otherwise have been possible”). See also Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM(2014) 453 final, July 9, 2014.

142 See, e.g., Philip Lowe, former Director-General of DG COMP, 10 Years of Regulation 1/2003: Challenges and Reform, Speech at the 10th GCLC Annual Conference, Brussels, November 6, 2014 (“Having gained the benefits for Europe of a self-assessment system, it would surely be ill-advised to give into pressure for either the

29

(including, in particular, the detection of price-fixing, bid-rigging, and market-sharing

agreements143). Companies and their counsel have embraced self-assessment, assisted by the

Commission’s adoption of a series of block exemption regulations concerning vertical, 144

R&D, 145 and specialization agreements. 146 The Commission has also provided valuable

substantive guidance on horizontal cooperation agreements,147 and has formalized its procedural

rules in Best Practices Guidelines148 and DG COMP’s Antitrust Manual of Procedures.149

Third, the Commission has to a great extent succeeded in focusing on areas of

priority. The measures adopted by the Commission to detect and penalize cartels – the Leniency

Program,150 Fining Guidelines,151 and Settlement Program152 – are considered a success, even by

Commission or national authorities to provide 101(3) exemption decisions when requested on a general basis. That would be a step backwards into an antitrust world dominated by demands for legal certainty rather than by action against the most harmful anticompetitive practices”).

143 See, e.g., Mario Monti, International Antitrust – A Personal Perspective, Speech at the Fordham Corp. L. Inst., October 7, 2004, New York, Commission Press Release SPEECH/04/449 (“At the Commission, our enforcement priorities focus on the most serious obstacles to competition: cartels and government restraints of competition”); and Joaquín Almunia, Cartels: the priority in competition enforcement, Speech at the 15th International Conference on Competition: A Spotlight on Cartel Prosecution, April 14, 2011, Berlin, Commission Press Release SPEECH/11/268 (“Cartels are the top priority in competition enforcement”).

144 Commission Regulation (EU) No 330/2010 of April 20, 2010, on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, 2010 O.J. L102/1.

145 Commission Regulation (EU) No 1217/2010 of December 14, 2010. on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements, O.J. L335/36.

146 Commission Regulation (EU) No 1218/2010 of December 14, 2010, on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements, 2010 O.J. L335/43.

147 Commission Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, 2011 O.J. C11/1.

148 Commission notice on best practices for the conduct of proceedings concerning Articles 101 and 102 TFEU, available at http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52011XC1020(02)&from=EN.

149 Antitrust Manual of Procedures, Internal DG Competition working documents on procedures for the application of Articles 101 and 102 TFEU, March 2012. See too John Temple Lang, The Strengths and Weaknesses of the DG Competition Manual of Procedure, Journal of Antitrust Enforcement, February 2013.

150 Commission Notice on immunity from fines and reduction of fines in cartel cases, 2006 O.J. C298/17.

30

those who have reservations over the level of fines imposed by the Commission, as well as

certain aspects of Commission policy (including, in particular, the imposition of fines based on a

presumption of parental liability; 153 and the treatment of certain types of conduct, including

information exchange,154 as anti-competitive “by object,” thereby relieving the Commission of

any need to demonstrate any anti-competitive effect155). Sector inquiries have also been a useful

innovation156 that have informed Commission enforcement policy.157 The past decade has seen a

151 Commission Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003, 2006 O.J. C210/2.

152 Council Regulation (EC) 622/2008 of June 30, 2008 amending Regulation (EC) No 773/2004, as regards the conduct of settlement procedures in cartel cases, 2008 O.J. L171/3; Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases, 2008 O.J. C167/1.

153 See, e.g., John Temple Lang, How can the problem of the liability of a parent company for price fixing by a wholly-owned subsidiary be resolved?, 37 Fordham International Law Journal 1481 (2013-2014), p. 1510 (“The objective of a rational policy should not be to fine the parent irrespective of how it has behaved, although that is close to being the legal position today, at least in the view of the Commission.”); Julian Joshua, Yves Botteman, and Laura Atlee, ‘You Can’t Beat the Percentage’ – The Parental Liability Presumption in EU Cartel Enforcement, Global Competition Review, The European Antitrust Review 2012, p.8 (“Lip service is paid to due process by the insistence that the presumption is rebuttable, but the reality is that the bar is set so high that it is difficult to envisage any but the most exceptional circumstances in which the holding company of major industrial group will not have the legal power and obligation to exercise some form of influence over its subsidiaries. Taking it right to the top appears to be the Commission’s deliberate policy”); and Antoine Winckler, Parent’s Liability: New case extending the presumption of liability of a parent company for the conduct of its wholly owned subsidiary, Journal of European Competition Law and Practice, Vol. 2, No. 2, 2011, p. 233 (“the cases in which the parent’s liability can be rebutted will remain at best exceptional, if not completely elusive”).

154 Jorge Padilla, The Elusive Challenge of Assessing Information Sharing Among Competitors under the Competition Laws, OECD Roundtable on Information Exchange Between Competitors, 2010, pp. 440–444.

155 See, e.g., Alison Jones, Left Behind by Modernisation? Restrictions by Object under Article 101(1), European Competition Journal, Vol. 6, No. 3; and Hans Zenger and Mike Walker, Theories of Harm in European Competition Law: a Progress Report, in Jacques Bourgeois and Denis Waelbroeck (eds.), Ten Years of Effects-Based Approach in EU Competition Law, 2010, pp. 196–200. The EU Courts’ recent jurisprudence has been inconsistent (see, e.g., Opinion of Advocate General Wathelet in Toshiba Corporation v. Commission, Case C-373/14 P EU:C:2015:427, para. 51 (“It is no misnomer to describe that case-law as inconsistent”)). On the one hand, the Court of Justice in Cartes Bancaires appeared to narrow the concept of a “by object” restriction to “coordination [that] reveals in itself a sufficient degree of harm to competition” (Groupement des cartes bancaires v. Commission, Case C-67/13 P EU:C:2014:2204), while a more recent judgment upheld the broad interpretation relied upon by the Commission that arguably does not require a showing that a restriction is capable of having a material adverse effect on competition (Dole v. Commission (“Dole”), Case C-286/13 P EU:C:2015:184).

156 Over the last decade, the Commission has undertaken sector inquiries into gas and electricity (2005), business insurance and retail banking (2005), pharmaceuticals (2008), and e-commerce (2015). Information derived from those inquiries has formed the basis of subsequent enforcement initiatives. See, e.g., Financial Services Sector Competition Inquiry – Frequently Asked Questions, Commission MEMO/05/204 (“The knowledge gained about the

31

range of initiatives in the energy, 158 financial services, 159 pharmaceuticals, 160

telecommunications,161 and high-tech sectors.162

market can form the basis of specific enforcement initiatives at a later stage”); and E.ON/GDF, Case COMP/39.401, Commission decision of July 8, 2009 (Commission decision followed the sector inquiry into the gas and electricity industries).

157 See Neelie Kroes, Fact-based competition policy – the contribution of sector inquiries to better regulation, priority setting and detection, Speech at the 13th International Conference on Competition and the 14th European Competition Day, Munich, March 26, 2007, Commission Press Release SPEECH/07/186 (sector inquiries “help direct the Commission’s attention to where enforcement cases should be opened by uncovering evidence … The improved understanding these inquiries give us also informs the Commission’s policy decisions about the framework for the market concerned, helping us to regulate better”). For a critical assessment of the Commission’s sector inquiries, see Ian Forrester, Ex Post Assessment of Regulation 1/2003, Global Competition Policy, October 29, 2008; and Gregory Olsen and Bryony Roy, The New World of Proactive EC Antitrust Enforcement? Sector Inquiries by the European Commission, Antitrust, Vol. 21, No. 3.

158 See, e.g., Commission decision of April 29, 2015, initiating an inquiry on capacity mechanisms in the electricity sector pursuant to Article 20a of Council Regulation (EC) No 659/1999 of March 22, 1999; Commission sends Statement of Objections to Gazprom, Commission Memorandum of April 22, 2015; Case COMP/39315 ENI, Commission decision of September 29, 2010; Case COMP/39317 E.ON Gas, Commission decision of May 4, 2010; Case COMP/39316 Gaz de France, Commission decision of December 3, 2009; and Case COMP/39402 RWE, Commission decision of March 18, 2009. See too Dominik Schnichels and Fabien Valli, Vertical and horizontal restraints in the European gas sector – lessons learnt from the DONG/DUC case, [Summer 2003] Competition Policy Newsletter, p. 60 (“This case as well as some other cases recently concluded demonstrate the way in which the European Commission applies its competition policy in the European gas sector. All cases complement the liberalisation process in the energy sector promoted by the European Commission”).

159 See e.g., Case COMP/39398 Visa MIF, Commission decision of February 26, 2014; Commission sends Statement of Objections to MasterCard on cross-border rules and inter-regional interchange fees, Commission Press Release IP/15/5323 of July 9, 2015; Commission sends Statement of Objections to Crédit Agricole, HSBC and JPMorgan for suspected participation in euro interest rate derivatives cartel, Commission Press Release of May 20, 2014; and Case COMP/38606 Groupement des Cartes Bancaires, Commission decision of October 17, 2007.

160 See e.g., Case COMP/39226 Lundbeck, Commission decision of June 19, 2013; Case COMP/39612 Servier, Commission decision of July 9, 2014; and Case COMP/39685 Fentanyl, Commission decision December 10, 2013.

161 See e.g., Case COMP/39523 Slovak Telekom, Commission decision of October 15, 2014; Case COMP/39839 Telefónica and Portugal Telecom, Commission decision of January 23, 2013; Case COMP/39525 Telekomunikacja Polska, Commission decision of June 22, 2011; and Case COMP/38784 Telefónica, Commission decision of July 4, 2007.

162 See, e.g., Case COMP/37792 Microsoft, Commission decision of March 24, 2004, upheld on appeal in Microsoft v. Commission, Case T-201/04 EU:T:2007:289; Case COMP/39530 Microsoft (tying), Commission decision of December 16, 2009. More recently, see Commission opens two formal investigations against chipset supplier Qualcomm, Commission Press Release IP/15/5383 of July 16, 2015; Commission decision of May 6, 2015, initiating an inquiry into the e-commerce sector pursuant to Article 17 of Council Regulation (EC) No 1/2003; Commission sends Statement of Objections to Google on comparison shopping service and opens separate formal investigation on Android, Commission Press Release IP/15/4780 of April 15, 2015; Case COMP/39939 Samsung –

32

In four important respects, however, the Commission’s practice following the

adoption of Council Regulation 1/2003 has not evolved in the way many expected. This is not

because the objectives of Council Regulation 1/2003 were not fulfilled – to a large extent, they

were – but rather because the Commission’s enforcement practice generated a series of new

questions and issues that require attention, thought, and clarity of purpose to resolve.

First, the Commission’s enforcement practice under Article 101 (other than in

respect of cartels) has been less consistent that was anticipated when Council Regulation 1/2003

was adopted. At that time, it was envisaged that “Commission policy on competition would

continue to be reflected in prohibition decisions in individual cases, and these would be of great

importance as precedents. As the Commission would be concentrating its attention on the most

serious restrictions, the number of individual prohibition decisions can be expected to increase

substantially.”163 In practice, this prediction has failed to materialize,164 largely because (unlike

its practice under the Merger Regulation, where detailed, motivated decisions are published in

every case) the Commission has adopted few non-cartel infringement decisions,165 exemption

decisions under Article 101(3), 166 and inapplicability decisions under Article 10 of Council

Enforcement of UMTS standard essential patents, Commission decision of April 29, 2014; and Case COMP/39985 Motorola - Enforcement of GPRS standard essential patents, Commission decision of April 29, 2014.

163 White Paper, Modernization Of The Rules Implementing Articles 85 And 86 Of The EC Treaty, April 28, COM(1999) 027, April 28, 1999, para. 87. See also Alexander Schaub, then-Director-General of DG COMP, Modernization of EC Competition Law: Reform of Regulation No. 17, Fordham International Law Journal, Vol. 23, No. 3, 1999, p. 763 (“the Commission will concentrate on combating serious infringements by individual prohibition decisions. These will set precedents, shape European competition policy, and provide further orientation for national decision makers”).

164 See Wouter Wils, Ten Years of Regulation 1/2003 – A Restrospective, JECLAP, Vol. 4, No. 4, p. 295 (“this prediction may have been too optimistic”).

165 Between May 1, 2004 and December 31, 2014, the Commission adopted 13 (non-cartel) decisions under Article 101, of which nine imposed fines. Two of those decisions concerned territorial restrictions (Souris Topps, Case COMP/37.980, Commission decision of May 26, 2004; and SEP and others/Automobiles Peugeot SA, Cases COMP/36.623, 36.820, and 37.275, Commission decision of October 5, 2005).

166 See, e.g., Alison Jones, Left Behind by Modernisation? Restrictions by Object under Article 101(1), European Competition Journal, Vol. 6, No. 3, p. 654 (“the lack of decision practice under Article 101(3), combined with the tightening and narrowing of the Article 101(3) criteria and the risk of fines, has created greater uncertainty and concern over the issue of whether, and if so when, agreements containing [hardcore] restraints are likely to satisfy Article 101(3)”). See, however, Alexander Italianer, former Director-General of DG COMP Competitor agreements under EU competition law, 40th Annual Conference on International Antitrust Law and Policy, Fordham

33

Regulation 1/2003. Also, contrary to expectations at the time Council Regulation 1/2003 was

adopted,167 the Commission has not issued guidance letters that develop the law and signal the

Commission’s position on novel issues. 168 Instead, the Commission has come to rely on

commitment decisions rendered under Article 9 of Council Regulation 1/2003 as its principal

enforcement mechanism under Article 101 (and, to an even greater extent, Article 102). 169

Because commitment decisions are brief and only lightly motivated, and do not involve findings

of fact or law, they cannot readily serve as legal precedent and typically provide only general

guidance on the Commission’s thinking,170 making it difficult for companies, national agencies,

Comp. L. Inst., New York, September 26, 2013, Commission Press Release SPEECH 13/07 (“reports of the death of Article 101(3) for object restrictions have been greatly exaggerated”).

167 Commission Notice on informal guidance relating to novel questions concerning Articles 81 and 82 of the EC Treaty that arise in individual cases (guidance letters), 2004 O.J. 101/78. See too Céline Gauer, Lars Kjolbye, Dorothe Dalheimer, Eddy de Smijter, Dominik Schnichels, and Maija Laurila, Regulation 1/2003 and the Modernisation Package fully applicable since 1 May 2004, [Summer 2004] Competition Policy Newsletter, p. 2 (“it also seems reasonable that in a limited number of cases, where a genuinely novel question concerning Articles 81 or 82 arises, the Commission may, subject to its other enforcement priorities, provide guidance to undertakings in writing (guidance letter)”).

168 The Commission has disclosed that “[only] a few approaches have been made to the Commission” for guidance letters since entry into force of Council Regulation 1/2003 and that “none of them fulfilled the conditions for a request for a guidance letter set out in the Notice.” See Commission Staff Working Document accompanying the Communication from the Commission to the European Parliament and Council, Ten Years of Antitrust Enforcement under Regulation 1/2003, July 9, 2014, SWD(2014) 230/2, note 274.

169 Between May 1, 2004 and December 31, 2014, the Commission adopted 31 Article 9 commitments decisions, of which 18 addressed alleged infringements of Article 102, 12 addressed alleged infringements of Article 101, and one addressed alleged infringements of both Articles 101 and 102.

170 See e.g., concerning settlements in Article 102 cases, Professor Richard Whish, “[Without infringement decisions] how does the law develop? What is the law in cases like Google or Samsung? I suspect I will never find out.” Quoted by Faaez Samadi, Whish: Be Wary of DG Comp Settling Too Many Cases, Global Competition, November 12, 2013. See too Ian Forrester, Creating New Rules or Closing Easy Cases? Policy Consequences for public enforcement of settlements under Article 9 of Regulation 1/2003, EU Competition Law and Policy Workshop, 2008, p. 10, available at http://www.eui.eu/Documents/RSCAS/Research/Competition/Forrester-2008.pdf) (“Neither do [commitments] help clarify what the law is, but – worse or better – they may advance what the authority believes the law should be. It would be regrettable if a succession of commitment decisions never tested judicially were to establish a new set of legal norms clearer and stricter than the norms established via judicial precedents”); Mario Siragusa and Erika Guerri, Antitrust Settlements under EC Competition Law: The Point of View of the Defendants, in Claus-Dieter Ehlermann and Mel Marquis (eds.), European Competition Law Annual 2008, p. 203 (“Only clear-cut cases should be eligible for settlement proceedings. When a clarification of the law is needed, for example because of the complex nature of the facts and evidence relied on, the Commission should opt for fully adversarial proceedings and thereby pave the way for effective judicial review”); and Frederic Jenny, Worst Decision of the EU Court of Justice: The Alrosa Judgment in Context and the Future of Commitment Decisions, 38 Fordham International Law Journal 701, 2015, p.735 (“uneasiness about the risk that the Commission could misuse or overuse commitment decisions exists because of problems at three levels: the lack of clear procedural

34

and courts to determine the Commission’s reasoning, in particular as to the probative value of

economic evidence in a particular situation and/or whether a given agreement or practice will

benefit from an individual exemption.171 Although commitment decisions are often explained by

Commission officials,172 the Commission’s Annual Report on Competition Policy, which for

many years provided valuable insight into cases that were not the subject of formal decisions,

including because they were closed, has become increasingly condensed and no longer discusses

individual cases in a way that provides guidance to national courts, national agencies, companies,

and counsel.173

Second, in a number of important areas, including vertical restraints, hub-and-

spoke agreements, and on-line distribution, the Commission has allowed Member State agencies

to assume a leadership role, including in situations involving complex matters with cross-border

implications that would benefit from a consistent position across the EU. Perhaps the most

notable example concerns the application of EU and national antitrust rules to on-line hotel

booking sites, where several national antitrust agencies undertook parallel investigations into the

arrangements for the adoption of commitment decisions in Regulation 1/2003, practices of the Commission which do not seem to be always in line with Regulation 1/2003 or with the basic principles of the rights of defendants, and lack of oversight of the substance of enforcement decisions by the Courts”). For a contrary view, see Wouter Wils, 10 Years of Commitment Decisions Under Article 9 of Regulation 1/2003: Too Much of a Good Thing?, June 12, 2015, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2617580.

171 See, e.g., Denis Waelbroeck and Massimo Merola, Towards an Optimal Enforcement of Competition Rules in Europe: Time for a Review of Regulation 1/2003?, 2013, p. 67 (“the absence of positive Article [101(3) TFEU] decisions … creates a lack of transparency as regards how [the] cumulative criteria [of Article 101(3) TFEU] can be fulfilled in practice. This is particularly problematic in the context of litigation (or arbitration), where the question of the application of Article [101(3) TFEU] is most likely to arise in practice. In particular, the lack of transparency surrounding the application of Article [101(3) TFEU] may help explain … an inclination by national judges to shy away from making positive applications of Article [101(3) TFEU]”).

172 The Commission’s Competition Policy Brief contains papers by DG COMP officials about important cases and policy issues. The Commission’s Competition Merger Brief focuses on merger control.

173 By way of example, the Commission’s last five Competition Policy Reports (2010–2014) averaged 24.6 pages, compared to 362.6 pages in the five years preceding the entry into force of Council Regulation 1/2003 (1999–2003). See Valentine Korah, Future Competition Law, Working Paper IV, in Claus-Dieter Ehlermann and Laraine Laudati (eds.), European Competition Law Annual 1997: Objectives of Competition Policy, p. 528 (“Unfortunately, the contributions on individual cases have become shorter in an endeavor to reduce the translations necessary”).

35

same contractual provisions and reached different conclusions.174 Although the Commission

oversaw certain of these national investigations,175 and senior Commission and national agency

officials have downplayed the significance of this development,176 it would be regrettable if

other cross-border cases of similar complexity were reviewed by multiple agencies, each

reaching its own view. The Commission has also allowed certain national agencies to take the

lead in challenging non-controlling minority shareholdings. Again, this is surprising as the Court

of Justice has confirmed that such shareholdings may run afoul of Articles 101 and/or 102,177 the

Commission considers that such shareholdings can raise competition concerns, 178 and the

174 In 2015, the French, Italian, and Swedish antitrust agencies accepted commitments from Booking.com following parallel investigations into most favored nation clauses (“MFNs”) (see Decision 15-D-06 Booking.com, Autorité de la Concurrence, decision of April 21, 2015; Decision 25422 Booking.com, Autorità Garante della Concorrenza e del Mercato, decision of April 21, 2015; and Decision 596/2013 Booking.com, Konkurrensverket decision of April 15, 2015), while the German Federal Cartel Office issued an infringement decision, upheld on appeal by the Dusseldorf Higher Regional Court (Case VI - Kart. 1/14 (V), decision of January 9, 2015), prohibiting the use of price-parity provisions in the MFNs in question that went further than those effectively permitted in the commitments accepted in France, Italy, and Sweden. (The provisions in question had also attracted scrutiny from the Austrian, Hungarian, Swiss, and U.K. agencies.) See Tom Webb, No reservations, Global Competition Review, Vol. 18, No. 7, August 12, 2015. The U.K. Office of Fair Trading and the German Federal Cartel Office also conducted parallel investigations into price parity agreements entered into by Amazon, although both investigations were closed in 2013 following the announcement of changes to Amazon’s practices (see Amazon abandons price parity clauses for good, Federal Cartel Office press release of November 26, 2013; and OFT welcomes Amazon’s decision to end price parity policy, OFT press release of August 29, 2013).

175 Commission announces the launch of market tests in investigations in the online hotel booking sector by the French, Swedish and Italian competition authorities, Commission Press Release IP/14/2661 of December 15, 2014 (“The Commission is coordinating the national [i.e., French, Italian, and Swedish] investigations”).

176 See Andreas Mundt, President of the Federal Cartel Office, An interview with Andreas Mundt, Global Competition Review, Vol. 18, No. 7, August 12, 2015 (“[i]t is not at all necessary for the Commission to deal with all the novel issues – in fact, in some areas it has left the floor to the national authorities in recent years”); and Alexander Italianer, Competition Policy in the Digital Age, 47th Innsbruck Symposium, Innsbruck, March 7, 2014, Commission Press Release SPEECH 14/01 (“NCAs have been leading the way … Although the OFT and BKA have adopted different remedies, they have identified the same threats to competition”).

177 The EU Courts have confirmed the application of Articles 101 and 102 to the acquisition of non-controlling minority shareholdings and/or the exercise of rights attached to such shareholdings: and British American Tobacco Company Limited and R.J. Reynolds Industries Inc. v. European Commission (“Philip Morris”), Case 142/84 and 156/84 ECLI:EU:C:1987:490.

178 White Paper, supra n 171; and Staff Working Document 2014, supra n 172.

36

Commission covets similar powers to those national agencies whose merger control rules apply

to the acquisition of such shareholdings.179

Third, the Commission’s application of Article 102 has continued to attract

criticism. Among other things, it has been said that the definition of an exclusionary abuse lacks

clarity, that the Commission should embrace an effects-based approach and routinely engage in

rigorous economic analysis, and that uncertainty remains concerning the types of practices that

may infringe Article 102. As to the definition of an exclusionary abuse, differing approaches

have been adopted by the EU courts in British Airways, 180 Post Danmark, 181 Tomra,182 and

Intel.183 The Commission’s Article 102 Guidance Notice was therefore designed, in part at least,

179 The two principal national agencies whose respective merger control rules apply to the acquisition of non-controlling minority shareholdings are the German Federal Cartel Office and the U.K. Competition and Markets Authority. Between 10 and 15% of transactions challenged by the German Federal Cartel Office have involved non-controlling minority shareholdings. See J P Schmidt, “Germany: Merger control analysis of minority shareholdings – A model for the EU?” (2013) Competition Law Journal, No. 2, p. 208. In the U.K., the incidence of such shareholdings being challenged has been low, although two of the most prominent recent U.K. merger decisions, BSkyB/ITV (British Sky Broadcasting Group PLC/ITV PLC, Competition Commission Final Report (December 14, 2007)) and Ryanair/Aer Lingus (Ryanair Holdings plc and Aer Lingus Group Plc, Competition Commission Final Report (August 28, 2013). Confirmed on appeal by the Competition Appeal Tribunal (1219/4/8/13 Ryanair Holdings PLC v Competition and Markets Authority [2014] CAT 3). Confirmed on appeal by the Competition Appeal Tribunal (1219/4/8/13 Ryanair Holdings PLC v Competition and Markets Authority [2014] CAT 3)), involved minority shareholdings that the U.K. agency ordered should be partially divested.

180 British Airways v. Commission, Case C-95/04 EU:C:2007:166, upholding British Airways v. Commission, Case T-219/99 EU:T:2003:343 (which confirmed Virgin/British Airways, Case IV/D-2/34.780, Commission decision of July 14, 1999). See too Kelyn Bacon, European Court of Justice Upholds Judgment of the European Court of First Instance in the British Airways/Virgin Saga, Competition Policy International, Vol. 3, No. 2.

181 Post Danmark A/S v. Konkurrencerådet (“Post Danmark”), Case C-209/10 EU:C:2012:172. See too Ekaterina Rousseva and Mel Marquis, Hell Freezes Over: a Climate Change for Assessing Exclusionary Conduct under Article 102 TFEU, JECLAP, Vol 4, No. 1.

182 Tomra Systems and others v. Commission (“Tomra”), Case C-549/10 P EU:C:2012:221, upholding Tomra Systems and others v. Commission, Case T-155/06 EU:T:2010:370 (which confirmed Prokent-Tomra, Case COMP/E-1/38.113, Commission decision of March 29, 2006). See too Luc Peeperkorn and Ekaterina Rousseva, Article 102 TFEU: Exclusive Dealing and Rebates, JECLAP, Vol. 2, No. 1.

183 Intel v. Commission (“Intel”), Case T-286/09 EU:T:2014:547, confirming Intel, Case COMP/37.990, Commission decision of May 13, 2009. Intel’s appeal against the General Court’s judgment is pending. See too James Venit, Case T-286/09 Intel v Commission – The Judgment Of The General Court: All Steps Backward And No Step Forward, European Competition Journal 2014; Paul Nihoul, The Ruling of the General Court in Intel: Towards the End of an Effect-based Approach in European Competition Law?, JECLAP, Vol. 5, No. 8; Richard Whish, Intel v Commission: Keep Calm and Carry on!, JECLAP, Vol. 5, No. 9; Damien Geradin, Loyalty Rebates after Intel: Time for the European Court of Justice to Overrule Hoffmann-La Roche, Journal of Competition Law and Economics 2015, Vol. 11, No. 3 (forthcoming).

37

to clarify the Commission’s analytical framework.184 It failed, however, to distinguish clearly

between anti-competitive foreclosure and foreclosure arising from legitimate competition. 185

The Guidance Notice has also generated uncertainty as to the Commission’s readiness to engage

in rigorous economic analysis in Article 102 cases. Although the Notice sought to advance an

economic, effects-based analytical framework, 186 which was generally welcomed, 187 the

184 Commission Communication – Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, 2009 O.J. C45/7 (“Guidance Notice”). See too Antitrust: Guidance on Commission enforcement priorities in applying Article 82 to exclusionary conduct by dominant firms – frequently asked questions, Commission MEMO/08/761 of December 3, 2008 (“The Guidance Paper develops and explains theories of harm on the basis of a sound economic assessment for the most frequent types of abusive exclusionary behaviour, and thereby provides greater clarity and predictability as to the circumstances that are liable to prompt an intervention by the Commission”).

185 See, e.g., Treatment of Exclusionary Abuses under Article 82 of the EC Treaty, Final Report of a CEPS Task Force, 2009, p. 13 (“The Commission is right to distinguish between anti-competitive foreclosure and legitimate foreclosure: however, the distinction is not made clearly enough, and is not applied consistently and clearly throughout the Guidance paper”); and Robert O’Donoghue and Jorge Padilla, The Law and Economics of Article 102 TFEU, 2013, p. 245 (“A particular failure is that there is very little articulation in the Guidance Paper of what is anticompetitive, and what distinguishes legitimate competition conduct from abusive conduct”). See too John Temple Lang, After Fifty Years – What is Needed for a Unified European Competition Policy, 21st St Gallen International Competition Law Forum, May 15 and 16, 2014. pp. 24–28 (“there are now no fewer than four approaches to the definition of exclusionary abuse”).

186 Antitrust: Consumer Welfare at Heart of Commission Fight Against Abuses by Dominant Undertakings, Commission Press Release IP/08/1877 of December 3, 2008 (“The guidance paper sets out an economic and effects-based approach to exclusionary conduct under EC antitrust law”). In 2003, then Director-General of DG COMP Philip Lowe conceded that the Commission, “unlike under [Article] 81 and on mergers, … [had] never had a comprehensive reassessment of practice under Article 82 in the light of economic thinking” (Philip Lowe, Speech at the Fordham Corp. L. Inst., October 23, 2003, New York). See too Sir John Vickers, Abuse of Market Power, Speech at the 31st conference of the European Association for Research in Industrial Economics, September 3, 2004, Berlin; James Venit, Article 82: The Last Frontier – Fighting Fire With Fire?, Fordham Law Journal, Vol. 28, No. 4, 2004; and Brian Sher, The Last of the Steam-Powered Trains: Modernising Article 82, ECLR, Vol. 25, 2004, No. 5.

187 See, e.g., Ariel Ezrachi, The European Commission Guidance on Article 82 EC – The Way in which Institutional Realities Limit the Potential for Reform, Oxford Legal Studies Research Paper No. 27/2009, August, 2009, pp. 11-12 (“The introduction of effect based variants in the Commission’s analysis is to be welcomed. It reduces the risk of over regulation and of chilling competition, which may result from formalistic analysis”); Nicolas Petit, From Formalism to Effects? The Commission’s Communication on Enforcement Priorities in Applying Article 82 EC, World Competition Law and Economic Review (Kluwer Law International 2009 Volume 32 Issue 4), p. 503 (“The adoption of the Communication marks a welcome economic sophistication of the Commission’s Article 82 EC enforcement policy”); Luc Peeperkorn and Katja Viertiö, Implementing an Effects-Based Approach to Article 82, [2009] 1 Competition Policy Newsletter; and Philippe Choné, The Communication from the Commission on Article 82: A welcome advance in antitrust enforcement, Concurrences, No. 2-2009. For critical commentary, see, e.g., Philip Marsden, Some Outstanding Issues from the European Commission’s Guidance on Article 102 TFEU: Not-So-Faint Echoes of Ordoliberalism, in Frederico Etro and Ioannis Kokkoris (eds.), Competition Law and the Enforcement of Article 102, 2010, pp. 53-72; and James Killick and Assimakis Komninos, Schizophrenia in the Commission’s Article 82 Guidance Paper: Formalism Alongside Increased Recourse to Economic Analysis, Global Competition Policy, February 2009.

38

methodology proposed for determining whether rebates and discounts are unlawful was

considered impracticable by many practitioners, 188 was questioned by certain Commission

officials,189 and has not been consistently applied by the Commission’s Legal Service before the

EU courts.190 As a result, uncertainty remains as to the scope for advancing economic evidence

and effects-based arguments in Article 102 cases.191 Uncertainty has also been generated by the

Commission’s progressive expansion of the categories of conduct found to deviate from “normal

competition,” or “competition on the merits.” Absent a clear definition of these concepts in the

courts’ jurisprudence, 192 they have been “defined according to what the EU institutions or

188 See, e.g., John Temple Lang, After Fifty Years – What is Needed for a Unified European Competition Policy, 21st St Gallen International Competition Law Forum, May 15 and 16, 2014. pp. 24–28 (describing the Guidance Notice’s proposals about retroactive rebates as “impractical and inadequately-considered” and liable “to lead a cautious company to keep its prices up, which is the opposite of what competition law is supposed to do”); and Lars Kjolbye, Rebates Under Article 82 EC: Navigating Uncertain Waters, ECLR, Vol. 31, No. 2, p. 66 (“the theoretical simplicity of an approach based on calculating the contestable share hides its practical complexity”).

189 See, e.g., Wouter Wils, Commission Hearing Officer writing in a personal capacity, The Judgment of the EU General Court in Intel and the So-Called ‘More Economic Approach’ to Abuse of Dominance, World Competition Law and Economic Review (Kluwer Law International 2014 Volume 37 Issue 4), pp. 405-434 (the “(post-Chicago (consumer) welfarist approach” on which the “proponents of the so-called ‘more economic approach’ to abuse of dominance rely … takes an unduly narrow view of the benefits of undistorted competition, by considering only the value of maximal achievement (consumer welfare or efficiency), while neglecting the process values of undistorted competition (including the right to compete on the merits, and equality of opportunity between economic operators” … “the as-efficient-competitor test [proposed in the Guidance Notice] is not fit for the purpose of assessing the legality under Article 102 TFEU of the use of exclusivity rebate systems by undertakings in a dominant position”).

190 See, e.g., Jean-François Bellis, U.S. and EU Antitrust: Forty Years Later (1974-2014), 2014 Fordham Comp. L. Inst. 423 (Barry E. Hawk, ed. 2015), p. 656 (“The Legal Service feels very comfortable with the old case law of the Court. … The Legal Service is not interested at all in a more economic approach to Article 102”).

191 See, e.g., Alexander Italianer, The Object of Effects, Speech at CRA Annual Brussels Conference – Economic Developments in Competition Policy, Commission Press Release Speech/10/576 of December 10, 2014 (“For Article 102 some claim, by contrast, that the General Court in the Intel judgment criticizes the effects-based approach we have been advocating in recent years, in particular in our Guidance Paper. I find this claim overstated. Intel obviously will have consequences, but I would like to make it clear today that our effects based approach is still very much alive”). See too Alison Jones and Brenda Sufrin, The European Way – Reflections on the Intel Judgment, Competition Law and Policy Debate, Vol. 1, No. 1, p. 40 (“An important issue … is whether the ‘modernisation’ of Article 102 is mortally wounded”); Maurits Dolmans and Thomas Graf, Dealing with Intel Intelligently Delineating the Scope and Limits of the Court’s Ruling, Competition Law and Policy Debate, Vol. 1, No. 1, p. 76 (“some of the language used by the Court [in Intel] could be understood as rendering the boundaries for ‘by nature’ abuses more vague and amorphous, which risks capturing conduct that is neutral or even positively beneficial for consumers”).

192 See, e.g., National Grid v. Gas and Electricity Market Authority [2010] EWCA Civ 114, para. 41 (“Nor do the authorities support [the] depiction of ‘normal competition’ as a concept with a legal definition, or at least a sufficiently hard-edged concept that it can be determined as a matter of law whether a particular factual situation does or does not amount to normal competition. An equivalent expression used in some cases is ‘competition on the

39

national authorities happen to conclude is an abuse in each case.”193 In recent years, Article 102

has been applied to the enforcement of standard essential patents,194 the provision of incorrect

representations to a national patent office, 195 allegedly vexatious litigation, 196 and conduct

alleged to favor a dominant company’s downstream business.197

Fourth, when the Commission disbanded the Merger Task Force in 2001, one of

its objectives was to extend to antitrust enforcement the discipline and expedition that

characterized practice under the Merger Regulation. 198 That ambition has yet to be fully

realized. Antitrust investigations are often protracted – investigations spanning five or 10 years

are not uncommon 199 – and the Commission is slow to close cases. 200 Further, although

merits’ but that is far from being a legal definition or the expression of a sufficiently hard-edged concept to enable factual situations to be included within it or excluded from it as a matter of law”).

193 Robert O’Donoghue and Jorge Padilla, The Law and Economics of Article 102 TFEU, 2013, p. 219. See too Jean-Yves Art and Pablo Ibáñez Colomo, Judicial Review in Article 102 TFEU, in Frederico Etro and Ioannis Kokkoris (eds.), Competition Law and the Enforcement of Article 102, 2010, p. 99 (“The perception among many scholars and practitioners is that … the scope of Article 102 TFEU has turned into a virtually all-encompassing provision whose limits are difficult to discern and predict”).

194 Motorola, Case COMP/39.985, Commission decision of April 29, 2014.

195 AstraZeneca, Case COMP/37.507, Commission decision of July 19, 2006, upheld by the General Court in AstraZeneca v. Commission (“AstraZeneca”), Case T-321/05 EU:T:2010:266, which was in turn upheld by the Court of Justice in AstraZeneca v. Commission, Case C-457/10 P EU:C:2012:770.

196 ITT Promedia, Case COMP/35.268, Commission decision of May 21, 1996, upheld by the General Court in ITT Promedia v. Commission, Case T-111/96 EU:T:1998:183.

197 Commission sends Statement of Objections to Google on comparison shopping service; opens separate formal investigation on Android, Commission Press Release IP/15/4780 of April 15, 2015.

198 Mario Monti, European Commission Competition Policy, 2003 Fordham Corp. L. Inst., p. 446 (Barry E. Hawk, ed. 2003) (the reorganization of DG COMP following the disbandment of the Merger Task Force “will also facilitate the spread of the best practices developed in the last thirteen years in the Merger Task Force to the whole of the Directorate General for Competition”).

199 By way of example, the Commission’s 2009 Intel infringement decision was rendered nine years after the Commission first received a complaint. See Intel, Case COMP/37.990, Commission decision of May 13, 2009, para. 5. The Commission’s 2005 Coca-Cola commitments decision was likewise rendered 9 years after the Commission first received a complaint. See Coca-Cola, Case COMP/A.39.116/B2, Commission decision of June 22, 2005, para. 12. In SkyTeam, the Commission closed its investigation in 2012, almost 10 years after it opened its investigation and six years after issuing a statement of objections. See SkyTeam, Case COMP/37.984, Commission decision of January 23, 2012.

40

experience varies and one should be wary of making overly-broad generalizations, antitrust

investigations are typically less transparent than merger review:201 There is also less consistency

concerning the reliance placed on business testimony and economic evidence. Also, unlike in

the case of merger review, where the Commission routinely appoints “scrutiny panels” to act as a

check on the investigating officials, the Commission’s practice under Articles 101 and 102 is less

consistent. 202 As a result, concerns have continued to be voiced about the Commission’s

handling of antitrust investigations.203

C. ANALYSIS AND CONCLUSION

The Commission’s application of the Merger Regulation following the reforms

implemented in the wake of the Airtours, Schneider, and Tetra Laval judgments is widely

considered to have been a success. Although there will inevitably be legal and practical

developments, including advances in forensic tools and economic modeling, that shape its future

application, the Merger Regulation is an increasingly mature legal instrument. At least as

importantly, Commission practice has developed to a point where counsel are generally able to

predict with reasonable certainty the analytical framework that will be applied in any given case,

200 By way of example, the Commission’s Cement and Related Products investigation (Case COMP/39520) was recently closed seven years after dawn raids had been conducted and without any statement of objections having been issued.

201 See, e.g., European Parliament, Directorate General for Internal Policies, Citizens’ Rights and Constitutional Affairs, Administrative Procedures in the Area of EU Competition Law (2011), p. 32 (“In the area of Articles 101 and 102 … there is still ample room for improvement … access to the file and general transparency of the proceedings should be further improved”).

202 A 2005 OECD report estimated that scrutiny panels were used around 10–12 times annually by the Commission, of which around 60% were employed in merger investigations and 30% in antitrust investigations. See OECD Country Studies, European Commission – Peer Review of Competition Law and Policy, 2005, pp. 39–40, available at http://www.oecd.org/eu/35908641.pdf.

203 See, e.g., James Venit, Human All Too Human: The Gathering and Assessment of Evidence and the Appropriate Standard of Proof and Judicial Review in Commission Enforcement Proceedings Applying Articles 81 and 82, in Claus-Dieter Ehlermann and Mel Marquis (eds.), European Competition Law Annual 2009: Evaluation of Evidence and its Judicial Review in Competition Cases, pp. 191 et seq.; Ian Forrester, Due process in EC competition cases: A distinguished institution with flawed procedures, 34 European Law Review, December 2009, p. 836; John Temple Lang, Three Possibilities for Reform of the Procedure of the European Commission in Competition Cases under Regulation 1/2003, in C. Baudenbacher (ed.), Current Developments in European and International Competition Law, 17th St Gallen International Competition Law Forum, 2010.

41

the economic and other evidence that will likely be considered probative, the duration of the

Commission’s review, and the probable outcome.

The challenge for the Commission will be to maintain the standards that have

characterized the Merger Regulation’s application to date; to continue to identify ways in which

the administrative burden placed on notifying parties can be reduced, thereby expediting merger

review and avoiding unnecessary (and costly) data-gathering; to explore the scope for approving

more transactions without the need for lengthy, motivated decisions, thereby freeing resources

for complex cases; to avoid the temptation to extend the Merger Regulation’s jurisdictional

ambit to the acquisition of non-controlling minority shareholdings; to encourage the

harmonization of national rules and procedures; and to continue to render sensible, well-reasoned

decisions substantiated by sound data and hard evidence.

The reforms implemented through Council Regulation 1/2003 were also largely

successful in achieving their stated objectives. Yet, while the enforcement of EU merger control

has progressively become more settled, new issues and challenges have arisen in respect of the

Commission’s enforcement of EU antitrust rules. In a number of ways, this is unsurprising.

Merger control is, after all, a more discrete area of practice where there are relatively few

potential theories of harm. Informed by U.S. experience, the Commission was also well-placed

to develop and apply a sound analytical framework and establish rules and forensic tools for the

evaluation and generation of economic and other evidence. The Commission’s exclusive

competence over concentrations that fall within the ambit of the Merger Regulation, the

existence of mandatory reporting requirements and prescribed deadlines, together with the

discipline imposed on the Commission by the need to write reasoned decisions in every case,

have also functioned to ensure consistency and facilitate transparency. Finally, the criticisms

made following the Airtours, Schneider, and Tetra Laval judgments concerning the perceived

absence of checks and balances on the investigating officials and the need to improve internal

decision making within the Commission have largely been addressed by institutional changes.

There are also significant differences between EU merger control and EU antitrust

enforcement that make comparisons overly simplistic. Among other things, antitrust

enforcement covers a wide array of types of conduct, including distribution agreements, price

fixing agreements, information exchange, R&D, production, distribution, and other joint

42

ventures and forms of collaboration, IP licenses, and many different types of unilateral conduct,

as well as myriad theories of harm. In addition, the broad range of possible procedural outcomes

creates impediments to consistent and transparent enforcement practice. Further, new issues

inevitably arise, including, over the past decade, as a result of e-commerce and the digital

economy. Finally, the Commission’s concurrent jurisdiction with national agencies and courts

has created challenges and uncertainties, making harmonization and coordination both difficult

and ever-more important.204

Notwithstanding the important differences between EU merger control and EU

antitrust enforcement, the challenge for the Commission in the coming years will be to bring to

the application of EU antitrust rules the same rigor, consistency, and predictability that today

characterizes EU merger control. Among other things, this would involve a commitment to

greater procedural consistency (including shorter investigations, deadlines for important

milestones in those investigations, clarity as to the procedural status of a given investigation, and

more consistent treatment of economic and other evidence), as well as greater transparency

concerning the Commission’s enforcement priorities, as well as the factual and legal reasoning in

specific cases, including cases that are closed or settled by commitments. Finally, the

Commission should renew its commitment to coordinating policy among national agencies and

re-assert its historic role as the intellectual leader among European antitrust agencies.

204 Opinion of Advocate General Wahl in Groupement des cartes bancaires v. Commission, Case C-67/13 P EU:C:2014:1958, para. 59 (“caution is all the more necessary because the analytical framework that the Court is led to identify will be imposed both on the Commission and on the national competition authorities, whose awareness and level of expertise vary”).