EU Court Of Justice Confirms Annulment Of Commission Prohibition Decision Due To A Procedural Irregularity

On 16 January 2019, the Court of Justice of the European Union (CJEU) dismissed the appeal by the European Commission (Commission) against the 2017 judgment of the General Court of the European Union (GCEU). This annuls the Commission's decision to block the proposed acquisition of TNT Express NV (TNT) by United Parcel Services (UPS) in its entirety (C-265/17 P). The judgment reminds the Commission that it must maintain a balance between the need for speed and the observance of the rights of the defence in merger proceedings.

IN DEPTH

Background

By decision on 30 January 2013, the Commission blocked the proposed acquisition of TNT by UPS (Case M.6570).

On 7 March 2017, the GCEU annulled the Commission's decision in its entirety on the grounds that (i) the Commission infringed UPS's rights of defence by failing to communicate to UPS the final version of an econometric model on which it relied in its prohibition decision and that (ii) UPS might have been better able to defend itself if it had at its disposal the final version of that model.

The Commission challenged the GCEU judgment before the CJEU. First, the Commission argued that it was not required to communicate the final econometric analysis to UPS. Second, the Commission claimed that even if UPS's rights of the defence had been infringed, the GCEU should have dismissed UPS's plea alleging infringement of the rights of the defence as ineffective because a significant impediment to effective competition ("SIEC") could in any event be established in Denmark and the Netherlands without having to rely on the econometric model concerned.

CJEU Judgment

Infringement of the Rights of the Defence

The CJEU rejected the Commission's argument that the Commission was not required to communicate the final econometric analysis to UPS. Failure to do so was contrary to the principle of observance of the rights of the defence and Article 18(3) EUMR. Article 18(3) EUMR requires the Commission to base its decisions only on objections in respect of which the interested parties have been able to comment and establishes a right of access to the file.

For the CJEU, "[o]bservance of the rights of the defence before the adoption of a decision relating to merger control [...] requires the notifying parties to be put in a position in which they can make known effectively their views on the accuracy and relevance of all the factors that the Commission intends to base its decision on [italics added]" (paragraph...