Case C‑413/06 P, Bertelsmann and Sony

>> Judgment CFI set aside because it had required detailed description of each of the factors underpinning Commission decision declaring concentration compatible with common market

Bertelsmann and Sony were two international media companies which had notified to the Commission their intent to integrate their global recorded music businesses into three or more newly-created companies.

Commission Decision 2005/188 declared that concentration to be compatible with the common market and the functioning of the EEA Agreement.

By the present appeal, Bertelsmann and Sony requested the Court to set aside the judgment of the Court of First Instance in
Case T-464/04 Impala v Commission [2006], in which the CFI annulled this Commission Decision.

The grounds of appeal relied on concerned (1) the manner in which the Court of First Instance carried out its review, particularly with respect to questions of proof, (2) the concept of a collective dominant position, and (3) the findings of the Court of First Instance with respect to the failure of the contested decision to state adequate reasons.

The Court of Justice first of all held that it could not be inferred from Regulation 4064/89 that there was a general presumption that a notified concentration was compatible with, or incompatible with, the common market.

The decisions of the Commission as to the compatibility of concentrations with the common market must be supported by a sufficiently cogent and consistent body of evidence.

However, it could not be deduced from that that the Commission must, particularly where it pursued a theory of collective dominance, comply with a higher standard of proof in relation to decisions prohibiting concentrations than in relation to decisions approving them.

Therefore, where it had been notified of a proposed concentration pursuant to Regulation 4064/89, the Commission was, in principle, required to adopt a position, either in the sense of approving or of prohibiting the concentration, in accordance with its assessment of the economic outcome attributable to the concentration which was most likely to ensue.

The Court held that the Commission had a margin of assessment with regard to economic matters for the purposes of the application of the substantive rules of Regulation 4064/89, in particular Art. 2.

Review by the Community judicature of a Commission decision relating to concentrations was confined to ascertaining that the facts had been accurately stated and that there had been no manifest error of assessment.

The Court of First Instance must not substitute its own economic assessment for that of the Commission for the purposes of applying the substantive rules of Regulation 4064/89.

However, the Community judicature must establish whether the evidence relied on was factually accurate, reliable and consistent but also whether that evidence contained all the information which must be taken into account in order to assess a complex situation and whether it was capable of substantiating the conclusions drew from it.

The Court of Justice inter alia held that the CFI could not, without committing an error of law, find that the Commission had failed to comply with the duty to provide an adequate statement of reasons for the contested decision.

It would be unreasonable to require, as did the Court of First Instance in the judgment under appeal, a detailed description of each of the factors underpinning the contested decision, such as the nature of campaign discounts, the circumstances in which they might be applied, their degree of opacity, their size or their specific impact on price transparency. (see, by analogy:
Joined Cases 275/80 and 24/81 Krupp Stahl v Commission [1981]; and Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985]).

The Court of Justice reiterated that the duty to state adequate reasons in decisions was an essential procedural requirement which must be distinguished from the question whether the reasoning was well founded, which was concerned with the substantive legality of the measure at issue.

The reasoning of a decision consisted in a formal statement of the grounds on which that decision was based. If those grounds were vitiated by errors, the latter would vitiate the substantive legality of the decision, but not the statement of reasons in it, which might be adequate even though it set out reasons which were incorrect.

The Court of First Instance furthermore committed an error of law in relying, as a basis for the annulment of the contested decision, on documents submitted on a confidential basis, since the Commission itself could not have used them for the purposes of adopting that decision by reason of their confidential nature. That error of law was not, in any event, capable of invalidating the finding of the Court of First Instance in the judgment under appeal that, in substance, the contested decision should be annulled on the ground of its inadequate reasoning.

The Court held that, under Art. 61(1) of the Statute of the Court of Justice, if the appeal was well founded, the Court of Justice was to quash the decision of the Court of First Instance. It might itself give final judgment in the matter, where the state of the proceedings so permitted , or refer the case back to the Court of First Instance for judgment. The present case was not in a state where judgment might be given. The case must therefore be referred back to the Court of First Instance.

Text of Judgment ECJ

Text of Judgment CFI