Competitors' standing to appeal under the EC merger regulation and the Finnish Competition Act

Author: | Published: 7 Jan 2003
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The recent Airtours, Schneider and Tetra Laval cases have demonstrated that the Court of First Instance is capable of reviewing the legality of the European Commission's acts and, on the basis of its review, reach conclusions dramatically different from those of the Commission. Also, the Finnish Supreme Administrative Court has in July this year overturned the Finnish Competition Council's decision to block the concentration between Finnish telecom company Sonera and its local competitor Loimaan Seudun Puhelin. The above cases prove that an appeal can be a viable option both at the European and national level.

Parties to a concentration always have the right to appeal against a decision by the Commission to prohibit a concentration. Accordingly, the Court of First Instance has, for example, rejected the Commission's claims that actions in merger cases are inadmissible on the ground that the notified transaction can no longer be implemented. However, the parties to the concentration are not the only parties that have an interest in the outcome of the merger case. Competitors of the notifying parties are usually the most active participants in an in-depth merger investigation. But do competitors have standing to appeal in a merger case in front of the Court of First Instance or the Finnish Market Court (formerly the Competition Council)? The purpose of this article is to outline the role of judicial review with respect to the standing to appeal and the grounds of appeal for competitors under the EC Merger Regulation and the Finnish Competition Act.

EC merger regulation

Standing to appeal
The normative basis for appeals by third-party competitors in opposition to decisions by the Commission in merger cases is Article 230(4) of the Treaty of Amsterdam, which states that any natural or legal person may institute proceedings against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to that person.

Competitors have relied on the concepts of "direct and individual concern" in several merger cases. In fact, due to the small number of prohibition decisions by the Commission in the early days of the Merger Regulation, the first appeals against merger decisions were brought by third parties, especially competitors.

For almost four decades, the standing to appeal of third parties has been based on the principles adopted by the European Court of Justice in the Plaumann case, pursuant to which "persons other than those to whom a decision is addressed may only claim to be individually concerned if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of these factors distinguishes them individually just as in the case of the person addressed".

In British Airways/Dan Air, for example, where the appeal by Air France concerned the Commission's finding that the transaction did not have a community dimension, the Court of First Instance found Air France to be directly and individually concerned by the acquisition of Dan Air by British Airways due to the fact that Air France competed on some of the same routes as Dan Air. At the same time, the Court of First Instance distinguished Air France's standing from other air carriers which did not compete on the same routes as the parties to the concentration, indicating that the latter would not be directly and individually concerned.

Even a competitor that cannot prove to have a position different from that of other competitors of the parties to the concentration may have a valid interest in the outcome of a merger decision. In the British Airways/TAT case, the Court of First Instance put special emphasis on the fact that Air France had participated in the Commission procedure under the Merger Regulation. Therefore, taking part in the Commission investigation would appear to be a rational way for a competitor to increase the likelihood of being granted standing to appeal before the Court. It should be noted, however, that participation as such will most likely not be sufficient for a competitor to be granted standing before the Court. If a competitor, however, has been listed as one of the main competitors in the Form CO, and such competitor has actively taken part in the Commission procedure, the chances of succeeding should be considerable better.

The recent decision in Jégo-Quéré could also be interpreted as a decision increasing the possibility of competitors to challenge merger decisions even further. In its decision, the Court of First Instance noted that the strict interpretation of the concept of individual concern, as applied by the court until that time, needed to be reconsidered. Particularly, the Court noted that "the number and position of other persons who are likewise affected by the measure, or who may be so, are of no relevance in that regard". This wording seems to imply that the applicant is no longer required to prove that its position is different from that of the other competitors of the parties to the concentration. Although the case involved an application for annulment of a Commission regulation, one could argue that it also can be deemed to have relaxed the concept of individual concern generally, and therefore, to have broadened the scope of third party competitors having standing to appeal merger decisions. However, no assurance on the "generality" of this new approach of the Court of First Instance can yet be given.

Grounds of appeal
The appeal of third-party competitors in merger cases is limited to the same four grounds set out in Article 230 (2) of the Treaty that apply to appeals by parties to the concentration, namely "lack of competence, infringement of an essential procedural requirement, infringement of the Treaty or of any rule of law relating to its application, or misuse of powers".

In merger cases, the primary basis of an appeal by a third-party competitor would typically be the claim that the Commission has approved a concentration although it creates or strengthens a dominant position as a result of which effective competition will be significantly impeded within the meaning of Article 2(3) of the Merger Regulation and which therefore should have been declared incompatible with the common market. However, the reasonings of a case cannot be appealed if the outcome of the case is not challenged. This has been recently confirmed by the Court of First Instance, for example, in the Coca-Cola case, where the party to the concentration itself, Coca-Cola, challenged the Commission's conclusion on its dominant position without contesting the outcome of the case. The court rejected the appeal by noting that the applicant's challenge to the finding of a dominant position is not admissible and a fortiori, the definition of the relevant market is not admissible either. Consequently, it would also be extremely difficult for competitors to challenge a market definition regardless of how adverse such definition may be, or even the finding of a joint dominance of such competitor, unless the competitor could prove that such erroneous finding has resulted in the merger having been approved on false assumptions and thus in violation of the Merger Regulation.

Until recently, the extent to which the courts were willing to reassess cases in an appeal was uncertain. In the Kali und Salz case, the European Court of Justice held that the Commission enjoys a certain level of discretion in its assessment of a merger and any review of that discretion "must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations". However, as evidenced by the recent Airtours, Schneider and Tetra Laval cases, the Court of First Instance does not hesitate to conduct a full assessment of the Commission's findings, including its assessment of the economic circumstances of the case, if such findings are relevant for examining whether the concentration creates or strengthens a dominant position.

It can be concluded that competitors can, although only on a specific basis, be granted standing to appeal before the Court. If a standing to appeal is granted, the Court of First Instance is ready to fully re-examine the case and the findings of the Commission as evidenced by the recent three cases overturned by the Court. To date, however, the practical relevance of appeals by third-party competitors has been limited.

The Finnish Competition Act

Legal background
In Finland, a general right to challenge the legality of administrative decisions has traditionally been regarded as a fundamental element within a system of legal protection in administrative matters. Access to justice in all administrative cases is defined as a basic right by virtue of Section 21(2) of the Finnish Constitution which states: "Openness of the proceedings as well as the right to be heard, to receive a decision with stated reasons and to appeal the decision as well as any other safeguards of fair trial and good government shall be secured by an Act of Parliament."

Consequently, the right to appeal an administrative decision, such as the decision of the Finnish Competition Authority or the Finnish Market Court (formerly the Competition Council), is guaranteed as a general right in the Finnish Administrative Judicial Procedure Act. The Act is then the starting point in assessing the question of appeal also in competition matters.

In all antitrust analysis concerning Finland it is essential to take into account the special feature of the Finnish merger regime, which is an interplay between two separate competition authorities. The Finnish Act on Restrictions on Competition entitles the Authority to investigate concentrations, while only the Market Court is empowered to block a concentration. The Authority either clears a notified concentration, or requests the Market Court to prohibit it. Interestingly, the Finnish Competition Act remains silent on whether standing exists to appeal the Authority's decision to clear a merger. Is a competitor entitled to appeal to the Authority's decision not to proceed to the Market Court?

Grounds of appeal?
On August 3 2001 the Finnish Competition Authority conditionally approved a concentration between Sonera and a local telephone company Loimaan Seudun Puhelin Oy. Other local telephone companies were opposed to the concentration, as it arguably weakened the local telephone companies' ability to compete with Sonera especially in the market for mobile telephone connections. Loimaan Seudun Puhelin was a founding member of local telephone companies' joint mobile operator DNA Finland Oy. The Council approved the competitors' standing to appeal, and finally blocked the concentration. A number of distinctive markets, in which the dominance would have been created, were referred to in the decision.

Sonera and the Finnish Competition Authority, in turn, launched an appeal with the Supreme Administrative Court in regard to the question whether competitors of parties to a concentration may bring the approved concentration before the Competition Council. Granting right of appeal to competitors would, in Sonera's and the Authority's view, lead to ex post control of concentrations, and hence to a situation which had not originally been sought in the legislation. Opening up the right of appeal to competitors would enable competitors to prolong the implementation of acquisitions, which should be cleared without delay.

The Supreme Administrative Court ruled on July 4 2002 that competitors did not have standing to appeal to the Market Court in the above-mentioned merger. The Supreme Administrative Court overturned the Market Court's decision to prohibit the proposed concentration. The Supreme Administrative Court reasoned that the Authority's decision to approve the concentration did not directly concern the rights, duties or other interests of the competitors.

The wording of the Supreme Administrative Court's ruling excludes the possibility of competitors to appeal against the Authority's decision to clear a concentration. However, the issue whether a competitor is entitled to appeal on the procedural grounds remains open. For example, competitors could aim to obtain standing to appeal if the Authority would exempt a company from the obligation to notify by misinterpreting the concept of control pursuant to the Competition Act.

Findings

The Court of First Instance has already overturned three times since the beginning of this year a decision by the Commission to block a merger. In all of these decisions, the Court has criticized the Commission's factual findings and its analysis. The judgments are also of relevance for the analysis of the Commission's theories of conglomerate effects and leveraging. The Tetra Laval case was the second major merger case after the appeal against the Schneider decision to be dealt with under the new fast-track procedure, introduced in February 2001. Moreover, competition commissioner Mario Monti has recently announced that the Commission is in discussions with the Court of First Instance in order to determine how the current procedure could be further accelerated.

On the basis of the recent cases it can be concluded that the Court of First Instance is willing and capable of reviewing the Commission's findings and conclusions. The mere ability of the parties to have recourse to the Court acts as a constraint on the Commission. However, if the Commission reaches the conclusion that a merger is likely to give rise to serious concerns, it has a duty to intervene. Therefore, it is possible that the Court of First Instance will also disagree with the Commission's approval of a merger in the future. It appears that, for that to happen, the competitors, possibly with the support of suppliers or customers, would have to take on an active role during the Commission's investigation, and furthermore, would have standing to appeal with convincing market analysis.

The situation is different in Finland, where the tasks of the competition authorities in practice exclude third parties' standing to appeal against the Finnish Competition Authority's decision to clear a concentration.


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