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Archive for December 12th, 2018

Servier and the myth that one could not challenge market definition

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myths

We have not yet had time to read  carefully analyze the Servier Judgment rendered today by the General Court and I’m afraid we’ll need the weekend to process a few hundred pages in French and to comment on the many interesting points it surely raises. Expect to hear from us about this case early next week.

For now, and as an appetizer, I’ll just say that the outcome of the case and a mere read of the press release confirms something we had been saying for a while: Courts do carefully review market definitions when asked to, and are open to annulling them when justified.

The perception that applicants have low probability of success in overturning the Commission’s decisions on the point of market definition is (was?), in my view, based on a mere statistical analysis of the cases in which the GC was receptive to the applicants’ arguments.

There is certainly a surprising paucity of precedents in which market definition had played a significant role, but that is not the Court’s fault. Sousa Ferro observed, in a 2015 piece, that within a universe of 608 annulment proceedings concerning substantive competition issues, the issue of market definition was only raised in 134 cases (22%). Within those, the Commission decision under appeal was only wholly or partly annulled in 5 cases (3.75%) on the basis of an incorrect or insufficiently justified market definition, whilst in another 4 cases the Court expressed some dissatisfaction with the market definition but without annulling the decisions at issue.  The article concluded that “applicants have only succeeded in persuading the Court that the Commission erred in its delineation of the market in 6.7% of the cases where the issue was raised”.

Whilst interesting, the figures presented in this recommendable article (one among the very few on the subject) may not provide the full picture. The selection of cases considered includes all types of competition cases, including those in which market definition was not required from the Commission (e.g. cartel cases) as well as, admittedly, the “very large number of cases” in which a precise definition would not have altered the Commission’s findings and that, consequently, failed to be examined by the Court.  The analysis understandably also fails to account for the way in which arguments were pleaded or substantiated.

Other commentators – including experienced Commission litigators in high-profile abuse of dominance cases (remember Eric Gippini’s “It’s the dominance stupid!” intervention at one of our workshops) coincide in underlining the paucity of challenges to market definition and dominance in many of the abuse of dominance cases litigated within the past 20 years.

Note, for example, that market definition – and dominance – were not contested in a number of the leading abuse of dominance cases in the EU, including Intel, Tomra, Deutsche Telekom and Michelin II. And we haven’t had many other abuse of dominance cases brought before the Courts in the past few years.

Full annulments of market definition are certainly rare, although not unprecedented, as shown long ago by Continental Can, some time ago in Tetra Laval (merger case), more recently in CEAHR (concerning a decision to reject a complaint) and today in Servier. But the objective reality is that the Court has most often (albeit admittedly not always) undertaken a very thorough review of market definitions, and this regardless of the outcome of the case. If one looks closely at the case law, this has happened both in cases where the GC referred to the manifest error of assessment standard (e.g. Clearstream or Astra Zeneca) and in cases where it did not (see e.g. Wanadoo or Telefónica). And the same is true of merger control cases, such as Tetra Laval or NVV.

So don’t let labels such as that of the “manifest error” standard fool you. A careful read of the formulation of the Tetra Laval standard of review (what President Jaeger has called “the forgotten paragraph”), and particularly an analysis of how it has been implemented in practice, reveals that Courts have a wide margin of review and that they can intervene whenever they are persuaded about possible gaps in the Commission’s analysis. [Btw, this confirms what our friends Fernando Castillo and Eric Gippini say in their excellent book, that “practice shows that the manifest error concept captures much more than a decision that is facially or self-evidently wrong. In a way, manifest is whatever the judges consider to be manifest”].

The trend is much more evident in recent years, and my take is that it is here to stay, particularly after  KME and Chalkor and perhaps even more following the Court’s enlargement.

And this makes sense, for if everyone were easily found dominant in a narrowly defined market, then the special responsibility would become ordinary and one could easily abuse the notion of abuse. Servier’s lawyers, who clearly did not buy the myth, actually made this point at the oral hearing citing the Bicycle Repair Man Monty Python sketch, showing how ordinary it would become if everyone were superman.

The bad news is that we may run out of material to continue this saga of posts….  😉

Written by Alfonso Lamadrid

12 December 2018 at 7:17 pm

Posted in Uncategorized