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Archive for October 26th, 2022

AG Kokott in Case C-376/20 P, CK Telecoms: legal tests, standards of proof, and the gap in between

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Advocate General Kokott’s Opinion in CK Telecoms came out last week. Her analysis departs markedly from the first instance judgment, which she proposes to set aside.

The various dimensions of the Advocate General’s analysis, taken together, would have a transformative impact on the judicial review of EU merger decisions.

The Opinion takes issue with the substantive and evidential aspects of the General Court’s scrutiny of the original decision. In fact, it refers to both across all grounds of appeal, as if they were two sides of the same coin and as if a substantive matter was an evidential one, and vice versa.

In paras 111 and 124, for instance, Advocate General Kokott argues that the General Court’s substantive analysis is erroneous, and claims that this incorrect analysis ultimately flows from the excessively demanding standard of proof imposed upon the Commission.

A close reading of the Opinion, however, suggests that, in reality, it is all about substantive law, not evidence. References to the applicable standard of proof (as in paras 111 and 124, both mentioned above) are little more than a digression.

The analysis that follows focuses on the core question, which is the legal assessment of mergers under the SIEC test.

The above said, I will also address other controversial, or heterodox, points of the Opinion. Seasoned competition lawyers know that Advocate General Kokott does not hesitate to depart from the case law and from conventional wisdom (i.e. the proverbial zeitgeist), occasionally quite markedly.

This Opinion is not an exception. So much so, in fact that, if the Court were to follow it, these aspects would take EU merger control to a new era.

Legal tests and effective judicial review under the SIEC standard: the question that remained unanswered

When is an impediment to effective competition ‘significant’?

CK Telecoms raised an unprecedented question: in the absence of dominance, when is an impediment to effective competition significant within the meaning of Regulation 139/2004?

The issue is particularly important in the context of horizontal mergers. These transactions entail, by definition, an impediment to effective competition (a source of competitive pressure disappears). As a result, their compatibility hinges exclusively on whether the impediment is significant.

Above all, CK Telecoms exposed the need for the Court of Justice to lay down a legal test to evaluate, case-by-case, this fundamental matter.

The need for an administrable (and reviewable) legal test

Effective judicial review of merger control decisions necessitates an administrable legal test with definite boundaries (that is, one that revolves around a set of clear and well-defined criteria that can be anticipated).

A ‘liquid’ test that lacks definite boundaries (in the sense that the boundaries vary from one case to another) cannot be subject to meaningful judicial review. Such a test would give the competition authority, in effect, the discretion to decide which mergers are compatible with the internal market. And (at least in the EU legal order) administrative authorities do not have any leeway on issues of law.

In its first instance judgment, the General Court addressed the above question directly, both by noting that the Commission’s (liquid) interpretation of the SIEC standard gives it de facto discretion over horizontal mergers and by proposing a legal framework revolving around two cumulative conditions to be satisfied in every instance.

Advocate General Kokott’s analysis

Advocate General Kokott rejects the General Court’s approach, and does so comprehensively. Little in fact, remains of the first instance judgment.

She argues, first, that an impediment to effective competition can be significant in circumstances other than those identified by the General Court (and thus that the legal test laid down at first instance would be overly reductionist and insufficiently accurate; see paras 72-80).

In addition (and this is one of the most interesting points raised in the Opinion, which would alone justify setting aside the first instance ruling), she takes the view that the General Court distorted the original meaning of the decision.

Third, the Opinion dismisses the idea that the Commission’s interpretation of the SIEC standard would give it de facto discretion in relation to horizontal mergers. It claims, in this regard (paras 63 and 111), that it has not been established that the Commission would systematically prohibit all horizontal mergers if its approach were endorsed.

The key legal issue (how is a significant impediment to effective competition evaluated in non-dominance cases) remains unanswered in the Opinion. Advocate General Kokott does not lay down an alternative framework.

The alternative test will have to await the Court of Justice’s judgment and/or the General Court’s ruling following a renvoi.

Heterodox aspects of the Opinion: a break from Tetra Laval

From full to limited review: importing common law standards?

Since the days of Tetra Laval, the standard of judicial review has been clear. Legal and factual issues are subject to full review, with the exception of ‘complex economic assessments’.

Advocate General Kokott proposes to move away from this standard and make limited review the default in merger control. In para 51 of the Opinion, she suggests that the judicial scrutiny of Commission decisions in the area of merger control is confined to manifest errors of assessment.

In Advocate General Kokott’s words: (‘[i]t follows that the review by the EU Courts of a Commission decision relating to concentrations is confined to ascertaining that the facts have been accurately stated and that there has been no manifest error of assessment‘).

This position is not only difficult to square with the relevant EU case law, but also with continental legal traditions. The Opinion is more aligned with the ‘judicial review standard’, which gives greater deference to administrative authorities and which is the norm in jurisdictions like the UK.

Standard of proof: is plausibility enough?

There is another aspect that is foreign to continental traditions but that is prominent in the Opinion, which is the discussion of the applicable standard of proof in merger control cases.

As noted, among others, by Eric Gippini Fournier, this question fascinates common law commentators, but is far less important (and relevant) in EU law.

Advocate General Kokott’s Opinion is remarkable not only because of the extensive discussion of the issue, but because of the meaning attached to the concepts. In particular, her analysis appears to equate ‘plausibility’ and ‘balance of probabilities’ (para 56).

This interpretation will not have been anticipated by many. It is perhaps the first time that the ‘balance of probabilities’ standard (which by definition implies a probability of >50%) is deemed satisfied when the plausibility threshold (which implies a considerably lower probability) is met.

Implications of the Opinion: a new relationship between authority and judge

Some of the aspects of the Opinion, when examined in isolation, may come across as somewhat puzzling. This is true, for instance, of the idea that a legal error is in reality a consequence of the standard of proof administered; or of the idea that the ‘balance of probabilities’ can be equated with ‘plausibility’.

When considered together, however, they make more sense. Whether it is about the legal characterisation of facts, evidence or the standard of review, judicial deference is the overarching theme. An authority-court relationship, in other words, that is more similar to that prevailing in common law systems.

Written by Pablo Ibanez Colomo

26 October 2022 at 10:53 am

Posted in Uncategorized