Luxembourg, 22/10/2002 (Agence Europe) - The First Chamber of the Court of First Instance (made up of Bo Vesterdorf (Denmark), Nicholas Forwood (UK) and Hubert Legal (France), the latter being the rapporteur for this case) has annulled the European Commission's decisions vetoing the merger of French electrical companies Schneider and Legrand. The Court found various omissions in the Commission's economic analysis in support of banning the merger, "accepting that analysis only in relation to French sectoral markets". Concerning the French sectoral markets, considering "the procedure followed by the Commission", the Court "found a procedural irregularity which constitutes an infringement of defence rights, having regard to the discrepancy between the statement of objections and the Commission's decision".
The Court notes that "if Schneider maintains its with to acquire Legrand", "the procedure must recommence" (at the Commission) "with the drawing up of a precise statement of objections and relate only to French markets, which are the only markets to have been identified as being affected by the implementation of the merger". The Court notes that "the Commission bases its assessment on the impact of the concentration operation on transnational, global considerations, extrapolated from a single market without demonstrating its relevance at the national level. Similarly, its demonstration of the key position in relation to wholesalers generated by the merger of the two companies is supported only by general data, whereas more precise analyses on the national scale would have been more relevant and convincing."
In terms of the procedural irregularities noted by the Court, it remarks that "in the statement of objections which was notified, the emphasis was placed on the "overlapping" of Schneider-Legrand's activities in certain markets … the Commission uses the term "association", which refers to two preponderant positions held in a single country by two undertakings in two distinct but complementary sectoral markets. The sense of the objection being different, Schneider found itself unable to propose appropriate corrective measures," commented the Court.
Commission assesses the ruling
Amelia Torres, spokesperson for Competition Commissioner Mario Monti, said on Tuesday that the Commission had noted the ruling and was studying it in great detail, reacting to the Court of Justice's ruling. The case in question was the first merger case where the Commission used the simplified procedure (procedure launched in 2002 for dealing with urgent Commission business). Torres said it was too early at this stage to comment on any further action the Commission may decide to take. (It has 60 days in which to make an appeal).
A priori, the Court of First Instance shares the Commission's views, in that it recognises that the French market would have been severely affected by the merger, noted Torres, seizing the opportunity to point out that the Court's ruling showed the Commission was not "judge and jury" for competition, as was sometimes made out. She said there was a Court in Luxembourg that was the judge and the Commission did its best in line with the merger regulation, making an economic analysis and basing itself on the Court case law, which is there to guide it. She admitted that the Commission sometimes made mistakes and that the merger regulation (in force since 1989) had shortcomings in terms of its decisions -making procedure and its economic analysis of certain mergers. She pointed out that following publication of Commissioner Monti's Green Paper in December 2001, the Commission had launched a wide-scale consultation process to assess the regulation's shortcomings. She described the regulation as a solid instrument, some of whose elements had launched a wide-scale consultation process to assess the regulation's shortcomings. She described the regulation as a solid instrument, some of whose elements were widely appreciated. She concluded by explaining that before the end of the year, Monti would be publishing a raft of reform proposals with a view to adopting a new draft regulation.
Since 1989; the Commission has vetoed 18 mergers out of more than 2100 deals notified to it. Nine of the eighteen decisions were appealed against and the Court has ruled on five of the appeal cases to date. In three of the rulings, it supported the Commission's view, while in two others (Airtours/First Choice in June and Schneider/Legrand in October) it decided to annul the Commission's veto. The Court is expected to issue is ruling on the Tetra Laval/Sidel deal on Friday. This annulment of the Commission's decision means that Schneider is now at liberty to plan a merger again with Legrand, which would again have to be sent to the Commission for analysis. Last week, the Commission gave the green light to Legrand shares being sold to Wendel and KKR investment funds. Schneider does, however, have an option to end the sale in the event of the Commission's decision being annulled by the Court of First Ruling. The group has not yet decided on its position, stating in a press release that Schneider Electric took great pleasure in noting the Court's ruling and that its board would be assessing the consequences of the ruling in the near future.