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Archive for March 18th, 2019

EU Judicial Review: Major Antitrust Implications of Recent State Aid Cases

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Blinkers

We competition lawyers often wrongly approach our discipline in isolation from the wider context in which it is applied. This is also true when it comes to judicial review. We tend to forget that antitrust is only a fraction of what the EU Courts and EU judges do, and that what they do in other areas might also have major implications in ours.

A perfect illustration of what I’m saying lies in two State aid judgments: C‑300/16 P, Frucona Kosice, and the very recent T-865/16, Fútbol Club Barcelona v Commission.

Both cases relate to how the Court approaches judicial review of complex economic assessments when the burden of proof is on the Commission. This, as you know, is an issue common to antitrust, mergers and State aid, and also to other areas of EU law. As you also know, in these cases the EU Courts apply a “manifest error of assessment” standard. Pursuant to the Tetra Laval formulation (which GC President Jaeger has called “the forgotten paragraph”), in these cases “the Court must establish “not only whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it”.

The first case is Frucona Košice.  Here, the CJEU clarified that “the information ‘available’ to the Commission includes that which seemed relevant to the assessment to be carried out in accordance with the case-law (…) and which could have been obtained, upon request by the Commission, during the administrative procedure” (71). The CJEU then observed that the Commission had “failed to obtain” (80) “all the relevant information” (81) and confirmed the annulment of the Decision.

I had already briefly discussed this case on the blog some time ago, in relation to how the Commission intended to apply the lessons from the Intel Judgment (see here). As I said then, the Frucona Judgment confirmed that the Commission cannot just sit and wait for the dominant company to bring all the necessary evidence to establish a point at a stage where the burden remains on the Commission (for competition law purposes, that would be at the state of identifyinga prima facie restriction under 101(1) or at the stage of ascertaining “intrinsic capability” to restrict competition within 102). Remember the difference between the burden of proof and the evidential burden? If not, click here.

All this was confirmed and expanded on just a few days ago in the FC Barcelona v Commission case, where the Court annulled a decision declaring that certain Spanish fiscal rules granted State aid to some football clubs (the Court’s press release available here). The Judgment (not yet available in English, can be found here).

Specifically, the GC ruled that when the Commission is confronted, during the administrative proceedings, with evidence capable of leading to “doubt” as to a relevant aspect of the case, it is then obliged to undertake measures of enquiry. Failure to do this can result in the Commission not meeting its burden of proof, which in turn might lead to the annulment of the Decision. This Judgment is based on…the Frucona Košice precedent.

In a nutshell:

-FC Barcelona argued that the Commission’s decision had not properly assessed one aspect of the case (the idea was that it had assessed a tax scheme looking only at the nominal tax rate and not to other constituent elements that cannot be dissociated from the tax scheme), and that, had it done so, it would have come to a different conclusion. FC Barcelona invoked the Commission’s duty to conduct its investigation actively, fully and impartially, seeking to gather, by means such as RFIs, any information available to it, including both inculpatory and exculpatory evidence (para. 38).

-The Commission argued that it had based the decision on the information submitted to it by the Spanish authorities and that no additional measures of enquiry were necessary. It contended that the applicant’s arguments were “simplistic and possibly erroneous” and that in any event they had not been put forward by the applicant during the administrative proceedings (para. 41);

-The Court observed, however, that “the Commission, who bears the burden of proof (…) enjoyed the possibility of requesting, within the limits of its investigatory obligations within the administrative proceedings, any information necessary to conduct its assessment” (para. 59, citing in turn para. 71 of Frucona Košice). The Court notes that the information contained in the decision did not exclude the possibility that the applicants’ argument may have been well founded (paragraph 60 in fine). In paragraphs 66 and 67 the Court finds that at the time of adopting the contested decision it had at its disposal elements that “should have led it to doubt” its approach, and that since these elements were not addressed the EC failed to meet its burden of proof. This means that the evidence to be put forward by the company must not be sufficient to prove a point, but simply to lead to doubt.

-The Court also addresses the Commission’s point that the applicant had not raised the necessary arguments during the administrative proceedings, noting that they had been raised by another party (Real Madrid; ironically, in a way Real has won the case for Barcelona…), and that therefore the Commission failed to establish its case having regard to the data at its disposal at the time of adopting the Decision.

-The GC dismissed a parallel application by another applicant in exactly the same situation, but which failed to raise this legal argument (Athletic Bilbao, in case T-679/16).

The bottomline(s):

  • The Courts recognizes the Commission’s ample powers and will often defer to its assessment on substance, but for this trust to exist the Commission will at the very least need to show that it has not avoided any relevant issues, and that it has pursued all relevant leads.
  • Some key members of the EU Courts had also signalled some of this. As noted by Vice-President Van der Woude, cases like Cartes Bancaires or Intel raise questions for which answers “can be found in the burden of proof that rests upon the Commission pursuant to Article 2 of Regulation 1/2003”. Read that in the context of the Judgments discussed above and connect the dots.
  • These developments are here so stay. It won’t be difficult for the Commission to continue to win cases if it incorporates this logic into its day-to-day. If that does not happen, we are likely to witness a series of annulments based on this logic. This, of course, is assuming that lawyers understand the underlying logic, make sure to submit the relevant info during the administrative proceedings and raise the issue in Court. [My bet is that I will be making a few future cross references back to this prediction]

 

Written by Alfonso Lamadrid

18 March 2019 at 6:31 pm

Posted in Uncategorized