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JUDICIAL SCRUTINY OF MERGER DECISIONS IN THE EU, UK AND GERMANY

Published online by Cambridge University Press:  27 January 2011

Michael Harker
Affiliation:
(ESRC Centre for Competition Policy and UEA Law School, University of East Anglia, Norwich, UK). Email: M.Harker@uea.ac.uk.
Sebastian Peyer
Affiliation:
(ESRC Centre for Competition Policy, University of East Anglia, Norwich, UK). Email: S.Peyer@uea.ac.uk.
Kathryn Wright
Affiliation:
(York Law School, University of York). Email: Kathryn.Wright@york.ac.uk

Abstract

The appropriate role of the courts in controlling the discretion of merger authorities has become one of the key issues in European merger law and policy in recent years. This article investigates judicial review of merger decisions, taking a comparative approach by examining cases from the EU, UK and Germany. We observe an apparent increase in the willingness of the EU and UK courts to scrutinize merger decisions, and a long-standing tradition of close scrutiny in Germany. In respect of the EU and UK, we consider agency theory offers a convincing explanation—that increased scrutiny is explained by the need to enhance the credibility of merger policy. In Germany, the constitutional basis of judicial review differs significantly, and the relatively close scrutiny exercised by the court is better explained by the very different constitutional context.

Type
Article
Copyright
Copyright © 2011 British Institute of International and Comparative Law

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References

1 A decision over the appropriate standard of proof which an agency must satisfy, for example, has consequences not merely for the decisional practice of the agency in question, but also the cases it selects, and its overall deployment of resources. A higher standard of proof implies more resources, and perhaps fewer cases.

2 In the EU context, this has been termed ‘Kompetenz-Kompetenz’, see Weiler, J and Haltern, U, ‘The Autonomy of the Community Legal Order—Through the Looking Glass’ (1996) 37 Harvard International Law Journal 41Google Scholar, 1.

3 We refer to the EU throughout (rather than the EC).

4 Hitherto there have been few genuine attempts to consider competition law in comparative perspective (rather than simply different chapters describing different national regimes). One exception is D Gerber, ‘Comparative Antitrust Law’ in M Reimann and R Zimmermann (eds), The Oxford Handbook of Comparative Law (OUP, Oxford, 2007).

5 Principal-agent models have been adapted and applied by political scientists to the problems of delegation. They are used to identify and illuminate the phenomena of hidden information and hidden action with the hope that, in so doing, it will become possible to design mechanisms of control which will better align the actions of the delegatee (the agent) with the preferences of the delegator (the principal). For a detailed exposition see: Elgie, R, ‘The Politics of the European Central Bank: Principal Agent Theory and the Democratic Deficit’ (2002) 9 Journal of European Public Policy 2CrossRefGoogle Scholar, 186; Thatcher, M and Sweet, A Stone, ‘Theory and Practice of Delegation to Non-Majoritarian Institutions’ (2002) 25 West European Politics 1CrossRefGoogle Scholar; Thatcher, M, ‘Delegation to Independent Regulatory Agencies: Pressures, Functions and Contextual Mediation’ (2002) 25 West European Politics 1CrossRefGoogle Scholar, 125.

6 Shapiro, M, ‘Judicial Delegation Doctrines: the US, Britain and France’ (2002) 25 West European Politics 1CrossRefGoogle Scholar, 173, 175.

7 For a discussion in a different context see: Majone, G, ‘The Credibility Crisis of Community Regulation’ (2000) 38 Journal of Common Market Studies 2CrossRefGoogle Scholar, 273; ‘Two Logics of Delegation: Agency and Fiduciary Relations in EU Governance’ (2002) 2 European Union Politics 1, 103.

8 For a discussion in the context of antitrust law see Breyer, S, ‘Economic Reasoning and Judicial Review’ (2009) 119 The Economic Journal F123-F135CrossRefGoogle Scholar.

9 For example, at the EU level, delegation of merger review to the EU Commission has been explained as a method for avoiding strategic action on the part of Member States in promoting ‘national champions’ (for a discussion see Harker, M, ‘Cross-border Mergers in the EU: the Commission versus the Member States’ (2007) 3 European Competition Journal 2CrossRefGoogle Scholar, 503).

10 Shapiro (n 6) 82.

11 With some notable exceptions, few attempts have been made to analyse the role of the court in controlling agencies from an agency theory perspective. For an example see Tolley, MC, ‘Judicial Review of Agency Interpretation of Statutes: Deference Doctrines in Comparative Perspective’ (2003) 31 The Policy Studies Journal 3CrossRefGoogle Scholar, 421.

12 That said, given the inherent complexity in implementing the policy, there are inevitably significant elements of uncertainty around the nature of the commitments made (A Sweet, Stone, ‘Constitutional Courts and Parliamentary Democracy’ (2002) 25 Western European Politics 177CrossRefGoogle Scholar, 86).

13 Shapiro (n 6) 175.

14 ibid.

15 For a review of the various different approaches see Allan, TRS, ‘The Constitutional Foundations of Judicial Review: Conceptual Conundrum or Interpretative Inquiry’ (2002) 6 Cambridge Law Journal 1Google Scholar, 87. For the functionalist perspective see, in particular, Arthurs, HW, ‘Rethinking Administrative Law: A Slightly Dicey Business’ (1979) 17 Osgoode Hall LJ 1 and C Harlow and R Rawlings, Law and Administration (Butterworths, London, 1997) chs 25Google Scholar.

16 In the separate context of proportionality review see Rivers, AJ, ‘Proportionality and Variable Intensity of Review65 Cambridge Law Journal 1, 174CrossRefGoogle Scholar.

17 Shapiro (n 6) 179.

18 For a comparison of the US and EU see A Scott, ‘Tweedledum and Tweedledee?: Regime Dynamics in US and EC Merger Control’ in P Marsden (ed), Handbook on Transatlantic Anti-trust (Edward Elgar, Cheltenham 2007) 77–108.

19 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings [2004] OJ L24 1–22.

20 We refer to the General Court, rather than the Court of First Instance, reflecting the renaming of the court under TFEU. At the court's discretion, and in cases of urgency, an application for judicial review may be heard via an expedited procedure: Rules of Procedure of the Court of First Instance of the European Communities of 2 May 1991 [1991] OJ L 136. The rules have been amended on several occasions. For a consolidated version see <http://curia.europa.eu/en/instit/txtdocfr/txtsenvigueur/txt7.pdf> accessed 20 March 2009.

21 For a comprehensive discussion in the EU context see Wils, W, ‘The Combination of the Investigative and Prosecutorial Function and the Adjudicative Function in EC Antitrust Enforcement: A Legal and Economic Analysis’ (2004) 27 World Competition 201224Google Scholar. The criticism is less apposite in respect of the UK to the extent that phase two decisions are taken by the CC which does not have any control over the cases referred to it by the OFT.

22 See in particular Vesterdorf, B, ‘Judicial Review in EC Competition Law: Reflections on the Role of the Community Courts in the EC System of Competition Law Enforcement’ (2005) 1 Competition Policy International 1, 327Google Scholar.

23 Except, of course, those with a Community dimension which fall within the exclusive competence of the EU Commission. The same applies in respect of the UK.

24 It is also possible to complain directly to the court within the deadline.

25 With the risk to the parties that the transaction may be unwound or, more probably, a remedies package be imposed subsequently as occurred in the Somerfield case (discussed below).

26 By convention, a phase one decision is taken by the Competition Commissioner.

27 ECMR, art 19.

28 ECMR, art 21(4). The non-exhaustive grounds for so intervening include public security, media plurality and prudential rules.

29 For a detailed explanation see A Scott, M Hviid and B Lyons, Merger Control in the United Kingdom (OUP, Oxford, 2006) chs 19–21. Such grounds include media plurality and national security, but the Secretary of State may by Order determine further such grounds.

30 ARC, s 42(1).

31 Schwarze, J, ‘Judicial Review in EC Law—Some Reflections on the Origins and the Actual Legal Situation’ (2002) 51 ICLQ 1733CrossRefGoogle Scholar, which also draws on German law; J Schwarze, European Administrative Law (rev edn Sweet and Maxwell, London 2006) clv. This is in line with the French approach where the main objective of the administrative courts is seen as the objective control of the administration (ibid, clv–clvi). To illustrate the point, the CJEU has held that while the principle of legitimate expectation is common to the laws of both the Community and Germany, the balancing of the interests of the individual against the public interest (in this case the interests of the Community) cannot preclude the application of State Aid rules requiring the revocation of such aid (save for exceptional circumstances) (Case C-5/89 Commission v Germany [1990] ECR I-03437). The case demonstrates the EU law imperative of protecting the EU interest at the expense of individual rights.

32 Schwarze, European Administrative Law (n 31) 117; Nolte, G, ‘General Principles of German and European Administrative Law: A Comparison in Historical Perspective’ (1994) 57 Modern Law Review 2, 191212CrossRefGoogle Scholar, 201. The quote is accredited to the President of the German Federal Administrative Court, F Werner, writing in 1959.

33 Schwarze European Administrative Law (n 31) 125; Nolte (n 32) 205; Arai-Takahashi, Y, ‘Discretion in German Administrative Law: Doctrinal Discourse Revisited’ (2000) 6 European Public Law 1, 6980CrossRefGoogle Scholar, 70.

34 The same applies to domestic artificial persons to the extent that the nature of such rights permits (Article 19(3) of the Basic Law).

35 For a discussion of the influences of national administrative law on Community administrative law see Schwarze, J, ‘Developing Principles of European Administrative Law’ [1993] Public Law 229Google Scholar.

36 Nolte (n 32) 196.

37 See generally Arai-Takahashi (n 33) and Schwarze European Administrative Law (n 31) 114–127.

38 Before the Second World War, in the positivist tradition there was a very strong scepticism in Germany over the efficacy of judicial review. The courts were merely concerned with ensuring that the strict requirements and bounds of the law were respected, without any pleas to substantive concepts such as fundamental rights or substantive justice. On the historical development of German judicial review, on which the paper draws, see Nolte (n 32) 198–205 and Schwarze European Administrative Law (n 31) 114–116.

39 Nolte (n 32) 208.

40 ibid 196.

41 ibid. Legal doctrine maintains a sharp distinction between three elements of administrative action. First, the interpretation and determination of Tatbestand (the constituent elements or definition of a provision). Second, the application of the interpreted legal norm to concrete facts (Subsumtion). Thirdly, the appraisal and determination of a certain legal effect (Rechtsfolge). In strict terms, the operation of administrative discretion is limited to the third element only, with the courts having full control over the first and second. For a full explanation, on which this article draws, see Arai-Takahashi (n 33).

42 As a consequence that the courts are incompetent generally to question the validity of an Act of the UK Parliament, subject to the limited exception where there is a conflict with EU law: see Case C-213/89 R v Secretary of State for Transport, ex parte Factortame [1990] ECR I-2433 (CJEU) and R v Secretary of State for Transport, ex parte Factortame (No. 2) [1990] 3 WLR 856 (HL).

43 Although regard should be had to the Human Rights Act 1998 which provides that statutes should be construed so far as is possible in a manner consistent with Convention rights (s 3).

44 According to art 58 of the Statute of the Court, an appeal lies on the grounds of lack of competence of the General Court, a breach of procedure before it which adversely affects the interests of the appellant, or the infringement of Community law by the General Court. On appeal the CJEU's judgment may replace that of the GC, but in certain circumstances the CJEU may simply set aside the judgment and revert the case to the GC for reconsideration.

45 The Court has unlimited jurisdiction on the merits for fines (art 261 TFEU)—that is, it may cancel, reduce or even increase them—with the rationale that stricter scrutiny is desirable where sanctions are imposed.

46 The GC has full jurisdictional control over errors in the proof or accuracy of facts (Case T-342/00 Petrolessence and SG2R v Commission [2003] ECR II-1161 [101]); and errors of law (see further below).

47 On appeal, the CJEU can determine the case itself or refer it back to the GC. The former only occurs where the GC had considered all the applicant's pleas but made an error of law vitiating the whole judgment. Acts of Community institutions are assumed to be valid until they are annulled by the Community Courts.

48 ECMR, art 10(5).

49 The merging parties should submit a new notification, or supplement the original notification where new information is relevant.

50 In 2004–2008, 172 out of a total 2409 completed cases were competition cases, to which could be added 234 State aid cases, making 406. Not a high percentage, but second only to intellectual property (561 completed cases) in terms of subject matter: European Court of Justice Annual Report 2008—Statistics of Judicial Activity of the Court of First Instance, available at <http://curia.europa.eu/jcms/upload/docs/application/pdf/2009-03/ra08_en_tpi_stat.pdf> as accessed 11 November 2009.

51 ARC, 35f.

52 K Schmidt, ‘section 63 GWB para 3’ in U Immenga and E-J Mestmäcker (eds), Wettbewerbsrecht (4th edn, CH Beck, München, 2007). Sometimes the term ‘appeal’ is used to denote the ‘complaint’. To avoid confusion with the appeal (on legal grounds) to the BGH, the term ‘complaint’ will be used for actions challenging a decision of the BKartA in the first instance.

53 The ARC also provides for other types of claims.

54 ARC, s 92(1)1 in accordance with Regulation of 22 November 1994, GVBl. NRW 1067. The OLG replaced the Kammergericht (KG) of Berlin as exclusive complaint court in 1999.

55 ARC, s 70(1). While the parties decide on the subject matter of the dispute the court is not bound by the wording of the complaint and may carry out all necessary investigations in order to establish the facts.

56 ARC s 40(6).

57 Enterprise Act 2002, s 120.

58 Since the courts are concerned with upholding the (express or implied) intentions of Parliament, judges are said not to draw upon principles or values exogenous to the legislation concerned. It is also the case that there are no fundamental individual rights or guarantees which can be upheld in the face of a conflicting Act of Parliament.

59 Council for Civil Service Unions v Minister for the Civil Service [1985] AC 374, 410–411 (Lord Diplock). The heads of review are brought within the doctrine of ultra vires by statutory implication: for example, in respect of irrationality or fairness it is implied that Parliament does not intend for powers delegated by it to be exercised in an irrational or unfair way. It is important to note that the grounds of review—themselves based in common law—should not be viewed as static. Rather, they vary over time and have tended to expand with increased judicial activism.

60 This section does not offer a complete analysis of all merger review cases. In comparison to both the EU and UK, the number of cases in Germany is relatively large. Since the introduction of merger control with the second amendment of the Act Against Restraints of Competition in 1973 until the end of 2007, 171 mergers were prohibited. In addition to challenged clearances, a large number of prohibitions were subject to judicial review before the KG/OLG and the BGH.

61 DJ Galligan, Discretionary Powers (Clarendon, Oxford, 1986) 6–7; Dworkin, RM, ‘The Model of Rules’ (1967) 35 U Chi L Rev 1, 1446CrossRefGoogle Scholar, 32–40.

62 K Hawkins, ‘Using Legal Discretion’ in DJ Galligan (ed), A Reader on Administrative Law (OUP, Oxford, 1996) 247–273, 259.

63 RM Dworkin (n 61) 32–40. In the strong sense, the decision-maker sets the standard(s) according to which discretion is exercised, whereas in the weak sense, the decision-maker is merely interpreting and applying a standard set by an external authority, for example, by the courts or the legislature. There is a further weak sense, where the decision maker's decision is regarded as final, and cannot be reviewed and reversed by any other official. For a critique see Galligan (n 61) 14–20.

64 Galligan posits that veracity of the strong/weak distinction depends in turn on the right-answer thesis, which is difficult to maintain in the context of a mature and complex legal system. (Galligan (n 61) 16–17).

65 Vesterdorf (n 22) 12–15. As a leading text puts it: ‘The Community Courts will normally treat the meaning of terms such as State aid, worker, services, goods, capital, agreement, and other such provisions as questions of law. Their general approach is simply to substitute judgment on these questions of law for that of the initial decision-maker. The CJEU or GC will lay down the meaning of the disputed term, and if the Commission interpretation is at variance with this then it will be annulled.’ (P Craig and G de Burca, EU Law: Text, Cases and Materials (OUP, Oxford, 2008) 569).

66 Case T-342/99 Airtours v Commission [2002] ECR II -4381 [62].

67 This has led to the courts exercising an ‘unrestrained’ and ‘virtually appellate’ control over such issues as the competency of candidates for certain professions (see Arai-Takahashi (n 33) 74; Nolte (n 32) 196).

68 Nolte (n 32) 204. Some commentators have claimed that German administrative law now recognises what is termed the ‘normative authorisation doctrine’, according to which the courts allow specialist agencies to have some autonomy in the design of their normative programmes (Oster, JS, ‘The Scope of Judicial Review in the German and U.S. Administrative Legal System’ (2008) 9 German Law Journal 10, 1267, 12691270Google Scholar). While this was recognised by the Federal Administrative Court on one notable occasion (BVerwGE 39, 203), the courts have consistently followed the orthodox approach.

69 Arai-Takahashi (n 33) 77.

70 In the US, the Chevron doctrine provides a level of deference to administrative agencies in the interpretation of Federal statutes (Chevron v Natural Resources Defense Council 467 US 837 (1984)). There is a vast literature on the Chevron doctrine which has been subsequently narrowed by the Supreme Court. See Sunstein, CR, ‘Law and Administration after Chevron’ (1990) 90 Columbia Law Review 2071CrossRefGoogle Scholar.

71 R v Monopolies and Mergers Commission, ex parte South Yorkshire Transport Ltd [1993] 1 WLR 23, 29 (Lord Mustill).

72 [2003] CAT 27; [2004] EWCA Civ 142.

73 In somewhat tortuous language, section 33 provides: ‘The OFT shall … make a reference to the Commission if the OFT believes that it is or may be the case that … [the merger] may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.’ (Emphasis added.) Section 22 makes provision for an identical duty but where the merger in question has been completed. While both are framed as duties, the language used necessarily involves an element of discretion.

74 For a detailed discussion see Scott, A, ‘The Cutting of Teeth: IBA Health v OFT’ [2004] Journal of Business Law 672Google Scholar; Alesi, F, ‘UK Merger Review and Section 33: Was the CAT Not Right’ (2004) 25 ECLR 8Google Scholar, 470.

75 As Arai-Takahashi observes, ‘indefinite legal concepts require different evaluations on the basis of particular contexts, and there cannot exist one correct solution’ ((n 32) 77).

76 Tolley (n 11) 421.

77 This difference of approach in the interpretation of statutes tends to be linked to differences in the form of legislation; UK statutes tend to be more detailed and complex, whereas EU law tends to be written in more broad-brush terms (for a discussion see Bridge, J, ‘National Legal Tradition and Community Law: Legislative Drafting and Judicial Interpretation in England and the European Community’ (1981) 19 Journal of Common Market Studies 4CrossRefGoogle Scholar, 351).

78 As Nolte observes, the constitutional backdrop ‘… [h]as contributed to the paradoxical result that the traditional continental distinction between administrative courts and ordinary courts, a distinction which originally symbolised that administrative action was only subject to a lesser form of judicial review, in Germany now has the opposite effect of encouraging specialised judges to conduct a very searching form of review’ ((n 32) 205).

79 Arai-Takahashi (n 33) 77.

80 Schwarze (n 31) 276. Alternatively, there is evidence that increasing the complexity of rules may actually result in more discretion, not less. It has been shown empirically that increased complexity in rules may lead to more not less discretion (see Hawkins (n 62) 260 and the references cited therein).

81 Galligan (n 61) 76.

82 ibid.

83 Hawkins (n 62) 260.

84 ibid citing DJ Galligan, Discretionary Powers: A Legal Study of Official Discretion (Clarendon, Oxford, 1986) 34–35.

85 Vesterdorf (n 22) 15.

86 Case C-12/03P Commission v Tetra Laval [2005] ECR I-987 [86].

87 ibid.

88 On the distinction between ‘simple’ or ‘brute’ facts and inferences or conclusions drawn from the primary facts by a process of reasoning or analysis (for example, whether there is a causal relationship between two events) see Marshall, G, ‘Provisional Concepts and Definitions of Fact’ (1999) 18 Law and Philosophy 5447Google Scholar, 451. A third category is that of ‘classification’: the ‘bringing of things, actions or events within the scope of a general description, rule or concept, whether linguistic or legal’ (ibid, 451).

89 Vesterdorf, B, ‘Standard of Proof in Merger Cases: Reflections in the Light of Recent Case Law of the Community Courts’ (2005) 1 ECJ 3Google Scholar, 15.

90 Advocate General Opinion in Commission v Tetra Laval (n 104) [39].

91 Case T-201/01 General Electric v Commission [2005] ECR II-5575 [42]–[44] and [48].

92 Vesterdorf (n 22) 15.

93 Napp Pharmaceutical Holdings Ltd v Director General of Fair Trading [2002] CAT 5 [26].

94 Vesterdorf (n 22) 16–17.

95 We return to the control of economic assessments and inferences from facts in more detail in the following section.

96 See P Craig, Administrative Law (Thomson, London, 2003) 503–504 (noting the change of approach over time).

97 IBA Health (n 72) [94]–[96]. He referred in particular to the speech of Lord Radcliffe in Edwards v Bairstow [1956] AC 14 (HL). The case concerned the issue of whether a particular transaction was ‘an adventure in the nature of trade’ which the House of Lords accepted was ‘an inference of fact’. Lord Radcliffe had made plain that the courts were entitled to overturn such an inference of fact where the ‘true and only reasonable conclusion’ drawn from the primary facts found by the original decision maker contradicted that inference (p 36).

98 IBA Health (n 72) [100].

99 ibid.

100 With the consequence that there was no duty to refer the matter to the CC.

101 IBA Health (n 72) [100].

102 ibid [97–98]. This was true even in respect of R v DGT ex parte Cellcom where Lightman J appeared to espouse a light-touch approach for the court in reviewing regulatory decisions ([1999] ECC 314, 331).

103 Unichem v OFT [2005] CAT 8 [174].

104 Unichem (n 103) [174].

105 ibid.

106 Somerfield v Competition Commission [2006] CAT 4 [128].

107 See Tesco Stores v Secretary of State for the Environment [1995] 1 WLR 759, 764 (Lord Keith).

108 Somerfield (n 106) [131].

109 ibid [176].

110 ibid [177]. Nevertheless, the CAT looked to each of Somerfield's substantive points on the alleged deficiencies of the evidence relied on by the Commission and rejected each one (ibid [178]–[182]).

111 Somerfield (n 106) [183].

112 This is the position for administrative law generally. The requirement of re-interrogating the facts is said to be a mechanism of correcting for inequality of arms as between private individuals and better-informed public authorities (Arai-Takahashi (n 33) 71; Schwarze European Administrative Law (n 31) 124).

113 BGH of 24 June 2003 (Habet/Lekkerland) WuW/E DE-R 1163, 1167; KG of 02 July 1982, (Texaxo-Zerssen) WuW/E OLG 2663, 2674.

114 Karsten Schmidt (n 52) s 70 para 4.

115 KG of 02 July 1982, Kart 21/80 (Texaco/Zerssen), WuW/E OLG 2663. The KG regarded the BKartA's market assessment insufficient due to the fact that it was based on mere general statements. It refused, however, to carry out further investigations that would have been necessary in order to gather specific evidence for the existence of a future oil shortage.

116 KG of 26 May 1981, Kart 14/80 (Braun/Almo) WuW/E OLG 2539, 2542; OLG Düsseldorf of 18 October 2006, Kart 2/05 (SES/DPC).

117 In Metro/Kaufhof the BGH reminded the KG of its reinvestigation duty criticizing it for relying on the BKartA's findings which did not support a conclusion regarding alternative sources of supply (BGH of 11 March 1986, KVR 2/85 (Metro/Kaufhof) WuW/E BGH 2231). The BGH pointed out that it would have been the role of the KG to investigate the structure of the demand side in the relevant market even if the KG agreed with the factual assessment of the BKartA. In a later merger case the investigation of facts by the KG was found to be adequate (BGH of 07 March 1989, KVR 3/88 (Kampffmeyer/Plange), WuW/E BGH 2575, 2577).

118 Denoted in OLG Düsseldorf of 04 May 2005, Kart 19/04, (Deutsche Bahn/KVS Saarlouis) [46].

119 Bundesgerichtshof of 11 November 2008, KVR 60/07 (E.ON/Stadtwerke Eschwege).

120 Such precise objections may be a motion to take evidence has been missed out or supplementary evidence was not taken into account.

121 As was previously noted, in the EU and UK, upon a finding of factual error, the case is remitted back to the agency.

122 See, for instance, OLG Düsseldorf of 29 September 2006, Kart 40/01 (Sanacorp/ANZAG); OLG Düsseldorf of 18 October 2006, Kart 2/05 (SES/DPC); OLG Düsseldorf of 11 April 2007, Kart 6/05 (Rhön-Grabfeld).

123 Karsten Schmidt (n 52) section 67 para 3. Commissioning the BKartA with further investigations appears to play a dual role. On the one hand, the competition authority is providing expertise. On the other hand, its defendant-like status may imply a bias and an interest in winning the case in order to prevent potential damage to its reputation and/or budget.

124 BGH of 24 June 2003, KVR 14/01 (HABET/Lekkerland) WuW/E DE-R 1163.

125 ibid. ‘Indeed, the law assumes that, as a rule, the court, and not the cartel authority, investigates complementarily in judicial proceedings. However, it is consistent with established practice that extensive investigation, for which the complaint court is not equipped and which would, thus, overburden it, are undertaken by the cartel authority.’ (Translation by the authors).

126 Karsten Schmidt (n 52) s 70 para 9.

127 KG of 02 July 1982, Kart 21/80, (Texaco/Zerssen), WuW/E OLG 2663.

128 ibid 2673.

129 The judges found that the BKartA was right to refer to the life experience of its members of staff because they belong to the relevant group of consumers while considering the exchangeability of niche science journals with general popular science journals. BGH of 22 September 1987, KVR 5/86, (Gruner+Jahr/Zeit II), WuW/E BGH 2433, 2437. The OLG has relied on the own personal experience of its judges in various decision and confirmed, that the BKartA was entitled to do so as well. See, for instance, OLG Düsseldorf of 15 June 2005, Kart 25/04, (National Geographic II) 3.

130 This appraisal of factual circumstances cannot be fully reviewed by the appeal court (BGH of 02 October 1984, KVR 5/83, (Gruner+Jahr/Zeit), WuW/E BGH 2112, 2121.

131 Vesterdorf (n 22) 15–16.

132 For example, Cases T-87/05 EDP v Commission [2005] ECR II-3745 [151]; T-282/02 Cementbouw Handel & Industrie v Commission [2006] ECR II 319 [53]–[54]; T-177/04 EasyJet v Commission [2006] ECR II-1931 [44]–[45], discussed below.

133 ‘Manifest’ means that the Commission's ‘failure to observe legal provisions is so serious that it appears to arise from an obvious error of evaluation’ Case T-156/98 RJB Mining v Commission [2001] ECR II-337 [87].

134 Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P Aalborg Portland A/S and Others v Commission [2004] ECR I-123 [279].

135 Joined Cases C-68/94 and C-30/95 France and Others v Commission [1998] ECR I-1375 (Kali and Salz) [223].

136 Kali and Salz [224].

137 See, for example, Bay, MF and Calzado, J Ruiz, ‘Tetra Laval II: The Coming of Age of the Judicial Review of Merger Decisions’ (2005) 28 World Competition 433Google Scholar; Vesterdorf (n 22); Bailey, D, ‘Standard of Proof in EC Merger Proceedings: A Common Law Perspective’ (2003) 40 Common Market Law Review 845Google Scholar.

138 J Bast, ‘Legal Instruments’ in A Von Bogdandy and J Bast (eds), Principles of European Constitutional Law (Hart, Oxford, 2006) ch 9.

139 (n 86) (emphasis added). He went further: ‘the rules on the division of powers between the Commission and the Community judicature, which are fundamental to the Community institutional system, do not allow the judicature to go further and particularly to enter into the merits of the Commission's complex economic assessments or to substitute its own point of view for that of the institution’ [88].

140 (n 73).

141 ibid.

142 Case T-342/99 [2002] ECR II-2585.

143 Case T-310/01 [2002] ECR II-4071 and T-77/02 [2002] ECR II-4201 (divestiture).

144 Case T-5/02 [2002] ECR II-4381; CJEU appeal (n 86).

145 See further Vesterdorf (n 22) 23–25.

146 See (n 86).

147 Case T-310/00 MCI v Commission [2004] ECR II-3253.

148 Case T-201/01 General Electric v Commission [2005] ECR II-5575.

149 Case T-464/04 Impala v Commission [2006] ECR II-2289.

150 Case C-413/06 P Bertelsmann and Sony Corporation of America v Impala and Commission [2008] ECR I-4951. The CJEU ruled the GC had treated certain conclusions set out in the statement of objections (SO) as established, rather than provisional [73], and had required the Commission to apply a too demanding probative standard to the evidence and arguments put forward by the merging parties in reply to the SO [95]. In contrast, other merger cases have followed the traditional ‘manifest error’ approach (for example, Cases T-87/05 EDP v Commission [2005] ECR II-3745 [151]; T-282/02 Cementbouw Handel & Industrie v Commission [2006] ECR II 319 [53]–[54]; T-177/04 EasyJet v Commission [2006] ECR II-1931 [44]–[45]. This may be because they relate to commitments of the parties, analogous to the Somerfield case in the UK (see below).

151 Commission's arguments under the first ground of appeal in Tetra Laval (n 86) [19].

152 See (n 143) [212].

153 Case T-282/06 Sun Chemical Group and others v Commission [2007] ECR II-2149. It stated that it must be ascertained whether the Commission failed to follow its own horizontal merger guidelines by not examining whether the merging parties were close competitors [70]. The Court then assessed itself whether the parties were close competitors; the role of smaller producers as alternative credible suppliers; and the possibility of consumers switching suppliers [75].

154 Although the freedom of action of the agency is constrained by the need to produce a convincing theory of harm if the merger is to be prohibited, economics is not an exact science to the extent that the choice of expert may well have a bearing on the choice being made.

155 Arai-Takahashi (n 33) 74; Nolte (n 32) 201–202.

156 Arai-Takahashi ibid. According to Nolte, the proportionality test is applied in an over-extensive manner by the courts ((n 32) 202 and the cases cited therein). The exercise of discretion may also be controlled on the grounds of failure to act, excess, or abuse of discretion (Arai-Takahashi (n 33) 74–75; Schwarze (n 31) 277).

157 Section 36(1) ARC provides: ‘A concentration which is expected to create or strengthen a dominant position shall be prohibited by the Bundeskartellamt unless the undertakings concerned prove that the concentration will also lead to improvements of the conditions of competition and that these improvements will outweigh the disadvantages of dominance.’

158 Immenga and Velken, ‘section 40 para 40’ in Immenga and Mestmäcker (n 52).

159 Section 71(5)2 ARC limits judicial control by stating that the appraisal of the general economic situation and trends shall not become subject to judicial review. This is addressed to macro-economic questions which fall to the government to determine. Otherwise, the court would interfere with political decision making and constrain the scope for governmental evaluation (Heinrich Halbey, ‘Kartellbehörder und richterliche Kontrolle—Zur Auslegung des § 70 Abs. 4 GWB’ (1968) Wettbewerb in Recht und Praxis, 349, 352).

160 ibid.

161 This approach seems akin to the ‘range of reasonable reasons’ concept known in the UK.

162 Schmidt (n 52) s 71 para 37 (n 80).

163 BGH of 05 May 1968, WuW/E BGH 907, 911; Schmidt (n 52) s 71 para 37.

164 Schmidt (n 52) s 71 para 36.

165 BGH of 21 February 1978, KVR 4/77 (GKN/Sachs), WuW/E BGH 1501.

166 KG of 01 December 1976, Kart 15/76 (GKN/Sachs), WuW/E OLG 1745, 1749.

167 There are numerous cases in which the courts have reassessed the BKartA's market definition, for instance, for vacuum cleaner bags (OLG Düsseldorf of 30 April 2003, VI Kart 9/00 (V), (Staubsaugerbeutelmarkt)); journals (KG of 24 November 1982, Kart 11/81, (Gruner+Jahr/Zeit), AG 1983, 284, and OLG Düsseldorf of 15 June 2005, VI Kart 25/04, (National Geographic II) WuW/E DE-R 1501); grocery wholesale markets (KG of 16 October 1984, Kart 14/83, (Metro/Kaufhof), WuW/E OLG 3367); and gas (KG of 23 March 1977, Kart 11/76, (Erdgas Schwaben) WuW/E OLG 1895).

168 Schmidt (n 52) s 71 para 37; Bundesgerichtshof of 05 May 1968, WuW/E BGH 907, 911. As the BGH pointed out (n 130): ‘A limitation of the competence to review on the part of the complaint court does not result from the fact that the BKartA would have discretion regarding the question of whether to clear or prohibit a merger; only in choosing remedies (Bedingungen und Auflagen) is discretion of the cartel authority is possible […]’ (Translation by the authors).

169 If Parliament had intended there to be a right of appeal (to the courts) on the merits of a decision, it would have legislated for such a right.

170 For a discussion of the case law see Harker, M, ‘UK Utility Regulation: Licences, Commitment and Judicial Review’ (2005) 76 Annals of Public and Cooperative Economics 5CrossRefGoogle Scholar.

171 Section 120(4) provides that in determining an application for review the CAT ‘… shall apply the same principles as would be applied by a court on an application for judicial review’.

172 On this basis, the CAT stated that it was ‘unpersuaded’ that there was a direct ‘readover’ to section 120 from cases where the courts had shown a level of deference to specialized decision-makers in the competition and regulatory spheres (IBA Health (n 72) [220]).

173 IBA Health (n 72) [225] (emphasis supplied).

174 The Vice-Chancellor stated: ‘Plainly unreasonableness in the ordinary and natural meaning of the word is different from Wednesbury unreasonableness. If [the] CAT was seeking to apply the former meaning as the test of Wednesbury unreasonableness they were wrong to do so’ (IBA Health (n 72) [61]).

175 IBA Health (n 72) [64].

176 IBA Health (n 72) [93] (references omitted).

177 Unichem (n 103) [171–172].

178 Unichem (n 103) [172].

179 Somerfield (n 106).

180 The case concerned the terms of a divestiture remedy which the CC imposed upon Somerfield after it had acquired a number of stores from a competitor supermarket chain. In particular, Somerfield challenged the CC's decision requiring the divestment of acquired rather than pre-existing stores, arguing that both would have the effect of restoring the status quo ante. For a detailed discussion see M Harker, ‘UK Merger Remedies under Scrutiny’ (2007) JBL 620.

181 Somerfield (n 106) [87–88]. See in particular Enterprise Act 2002, ss 34, 35 and 41. The approach was followed in Celesio v OFT [2006] CAT 9.

182 Somerfield (n 106) [123]. The Commission was concerned that sale of the existing (and less attractive) stores would not attract suitable buyers within a reasonable timeframe so as to correct the substantial lessening of competition. The CAT held that, in this regard, inferences on saleability it had drawn from the relative unprofitability of the existing stores was not ‘outwith the [Commission's] margin of appreciation’ (ibid.).

183 [2006] CAT 21.

184 Enterprise Act 2002, s 81. The CAT's starting point was to look to provisions which enabled the CC to impose interim remedies on a merged entity in an instance where the integration of the businesses may prejudice the effectiveness of the remedies package decided ultimately by the CC. Section 81 permits interim measures, including the appointment of a hold separate manager, in order to avoid pre-emptive action on the part of the merged firms. ‘Pre-emptive action’ is defined as ‘action which might prejudice the reference or impede the taking of action under this Part which may be justified by the Commission's decision on the reference’ (Enterprise Act 2002, s 80(10)).

185 Stericycle (n 183) [129].

186 ibid (original emphasis).

187 ibid [130].

188 ibid [149].

189 ibid.

190 IBA Health (n 72) [79].

191 Law's horizontal expansion, the most common meaning of juridification, relates to the expansion of legal regulation to activities which were previously there was none. For a survey of its differing usages see Blichner, LC and Molander, A, ‘Mapping Juridification’ (2008) 14 European Law Journal 1Google Scholar, 36. For narrative based on juridification in other areas of competition law see, for example, Wilks, S, ‘Agency Escape: Decentralization or Dominance of the European Commission in the Modernization of Competition Policy’ (2005) 18 Governance 3CrossRefGoogle Scholar, 431; Maher, I, ‘Juridification, Codification and Sanction in UK Competition Law’ (2000) 63 Modern Law Review 4CrossRefGoogle Scholar, 544.

192 DJ Gerber, Law and Competition in Twentieth Century Europe: Protecting Prometheus (OUP, Oxford, 1998) chapter 9.

193 Schwarze, J, ‘Enlargement, the European Constitution, and Administrative Law’ (2004) 53 ICLQ 969984CrossRefGoogle Scholar, 972.

194 Indeed, in Tetra Laval, the Commission argued unsuccessfully before the CJEU that the GC had exceeded its reviewing function. For a discussion see Lang, J Temple, ‘Two Important Merger Regulation Judgments: The Implications of Schneider-Legrand and Tetra Laval-Sidel’ (2003) 28 European Law Review 2Google Scholar, 259.

195 Although here the strict control of legal norms is mandated by the right to effective judicial control.

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