• The European Commission’s Discretion to Reject Competition Complaints Reviewed by the General Court
  • March 8, 2012 | Author: Stephen C. Tupper
  • Law Firm: Greenberg Traurig Maher LLP - London Office
  • The EU’s system of competition law enforcement is heavily dependent upon administrative intervention on the part either of the European Commission (the “Commission”) or its counterpart competition authorities in the 27 Member States.  Comparatively, the U.S. antitrust system is more self-regulating, with civil actions commonplace and private parties more willing to litigate their differences on what is compliant with the antitrust laws.  Therefore, in the EU, relief from the damages caused by anticompetitive conduct is frequently inextricably tied to the ability of the victims to persuade the Commission to intervene and fight for their cause.

    The law that governs the duties and responsibilities of the Commission in deciding whether to pursue a complaint is, consequently, an important and developing area of procedural law.  Numerous cases have been brought before the European courts challenging Commission decisions to reject complaints. In the U.S., a court cannot challenge a Department of Justice or Federal Trade Commission decision not to investigate or to institute a suit sought by a claimant. Such action is possible in the EU.  Until now, however, the courts have set the bar high by inferring a broad measure of discretion to the Commission in deciding whether to accept a complaint and commence an investigation into the complained of activity.  Much turns, in this respect, on the somewhat vague notion of whether the Commission considers an investigation to be “in the Community’s interest.”  This, the courts say, is a matter for the Commission.  They have, generally speaking, proven reluctant to replace the Commission’s judgment concerning enforcement priorities with their own.

    Increasingly, however, the European courts have found other techniques to fetter the Commission’s discretion. Two new sets of complainants recently tried their luck in persuading the General Court in Luxembourg to overturn Commission refusals to investigate.  The first involved a complaint lodged against the makers of Swiss luxury watches and the other against the manufacturers of Ink-jet printers.  In the former, the General Court ruled against the court and sent the matter back to the Commission for reconsideration; in the latter, the Commission upheld the Commission’s decision to reject the complaint. This article briefly examines how these two cases moved the law in this area, and which case may prove more permanent - “time” or “ink” so to speak - in terms of setting the future trend for this area of the law in the EU.

    Swiss Watch Makers.[1]

    The complaint in this case was brought by the European Confederation of Watch Repairers.  It alleged that the Swiss luxury watch makers had deployed a number of measures designed to prevent supplies of spare parts to independent watch repairers and were, therefore, guilty of either concerted practices or of the abuse of a collectively dominant position, leading to the unlawful exclusion of competition in the after-market for watch repair and maintenance.  After some preliminary inquiries, in July 2008, the Commission formally rejected the complaint and declined to investigate further.

    The Confederation appealed and the General Court of the European Union upheld the appeal.  In doing so, the court confirmed, as it invariably does, that the Commission retains a wide discretion to decide which cases it investigates.  This discretion, however, is not infinite, according to the court.  In all instances, the Commission is required to take into account all of the facts and law put before it by the complainants and must, when rejecting a complaint, provide full and complete reasoning sufficient to allow the court to understand and review the grounds upon which the Commission’s decision was based.

    In the Swiss Watch Makers case, the court found that the Commission had failed to take into account a number of factors when assessing the size and importance of the relevant market.  Moreover, the Commission had failed to make it clear, when concluding that the market was insufficiently important to merit an investigation, whether it was referring to the primary luxury watch market or to the underlying market for repair and maintenance. Consequently, concluded the court, it was unable to test the accuracy of the Commission’s principal findings.  These manifest errors vitiated the Commission’s decision.

    The Commission sought to bolster its case by suggesting that because the Confederation had alternative avenues available to them, such as complaining to the relevant national authorities, this gave the Commission free license to reject the complaint.  The court did not agree, pointing out that the anticompetitive effects spanned five Member States, thereby making a Commission investigation more sensible and efficient than five separate national investigations.

    Ink-jet Printers.[2]

    The origins and substantive framework for this decision has a distinct resemblance to the Swiss Watch Makers case. A complaint was lodged by the European Federation of Ink and Cartridge Manufacturers. The Federation alleged that various original equipment manufacturers of ink-jet printers and printer supplies had illegally taken steps to exclude ink-jet cartridge re-manufacturers from the ink after-markets.  In May 2009, the Commission decided to reject the complaint on the grounds that there was no evidence of an infringement; and none of the OEMs were dominant in either the primary or after-markets.  Importantly, the Commission had investigated these markets on two earlier occasions and had failed to uncover an infringement.

    The Federation appealed.  As one might expect, the General Court adopted its familiar analytical approach. In this instance, however, the court found that the Commission had properly considered the Federation’s evidence and had sufficiently articulated the reasons for its decision.

    The court went on to add that the Commission is not required to go on a “fishing expedition” to try to uncover evidence of an infringement.  If the facts needed to prove the allegations would only be available after an in-depth investigation, the court ruled, the Commission is entitled to weigh the effort required to obtain the evidence in its decision.  The court went on to review the Commission’s reasons for rejection, concluding that it was unable to uncover any manifest error.  Accordingly, the appeal was denied.

    Conclusions

    The path to success for rejected complainants in the EU is now more clearly sign-posted.  Whereas the general wisdom has been that the Commission’s power to reject is more or less limitless, the General Court has now demonstrated emphatically that the Commission cannot afford to be complacent.

    The Swiss Watch Makers decision will doubtless provoke “a re-think” at the Commission.  Since that decision, the Commission may be paying more careful attention to the quality of its legal reasoning when rejecting complaints.  Either that or it may find ways of closing down an investigation without the need to reach a formal decision.  While this may seem to some to be a dereliction of duty, the Commission would doubtless defend itself on grounds of hard-nosed pragmatism in the face of a rising demand for its services.

    Given the complexities of EU competition law, however, the Commission should be able to find defensible grounds for rejecting most complaints.  Nevertheless, it may have to recheck its reasoning carefully before issuing its final decisions — or find that the courts will do that for it.  Consequently, as “time” fades away, it may be the “ink” that will prove more durable.

    [1] Confederation europeene des associations d'horlogers-reparateurs (CEHAR) v. European Commission, Case T-427/08, 15 December 2010.
    [2] European Federation of Ink and Ink Cartridge Manufacturers v. European Commission, Case T-296/09, 24 November 2011.