By: Alex

By: Alex

Not all Commission decisions have the same value. For any particular point of law or economic analysis, some are more valuable precedents than others.

Merger control provides a good example. Phase one merger decisions are not necessarily reliable when it comes to assessing the gravity of the competition problem, or the appropriateness of the remedy. For example, I was in a case several years ago where, based on the parties’ own projections, the merged entity would have a commanding market share. The Phase I investigation suggested that the projections were plausible.

However, there was a real chance that a more detailed investigation would show that the concerns were not borne out – the market was rapidly developing, entry by other parties was possible. This would have required a second phase investigation to determine.

But the parties did not want a second phase. For perfectly legitimate commercial reasons, the parties wanted to close the case in Phase I. So they offered remedies sufficient to remedy the competition concerns assuming the concerns were borne out. An early clearance was more valuable to them than the remedies.

So what is the appropriate Commission response?

One possibility is that the Commission says that a Phase II investigation is necessary to see if the concerns are borne out and / or if the remedies are proportionate. That seems rather tough on the parties, and is legally questionable – does the Commission have the legal right to refuse remedies that are clearly sufficient, even if it has concerns that a detailed investigation might suggest they are overkill?

So Phase I remedy decisions have to be approached with some caution. Maybe there was a real problem, or maybe the parties simply wanted a quick decision.
Similarly when looking at decisions imposing fines, the Commission has to take every factor into account that might affect the size of the fine in the particular case – but it doesn’t have to take every factor into account that will not affect the size of the fine.

If the Commission uses an interpretation of the fining guidelines favourable to a company but which makes no difference to the fine in a particular case then that cannot necessarily be relied upon by another company where the interpretation would make a difference.

For example, the Commission guidelines provide that the value of sales will be based on the turnover in the last year of the cartel, unless that year was not representative, in which case an average turnover over the years of the cartel might be more appropriate. But if the turnover of the last year of the cartel was low, and that turnover nevertheless led to fines that would have been greater than the 10% cap, then the Commission may nevertheless take the last year for simplicity, knowing that it will make no difference to any of the addressees of the decision.

This does not mean that the decision is a good precedent for when it is or is not appropriate to use turnover of the last year as opposed to turnover over the years of the cartel.

A similar point would apply to any other factor that would tend to increase the fine if the fine would anyway be capped.

So decisions have to be read with understanding – or perhaps scepticism. Not all decisions are created equal.