PRESS RELEASE No 84/02
22 October 2002
Judgments in Cases T-310/01 and T-77/02
Schneider Electric SA v Commission
THE COURT OF FIRST INSTANCE ANNULS THE COMMISSION'S DECISIONS PROHIBITING
THE CONCENTRATION BETWEEN SCHNEIDER AND LEGRAND AND ORDERING THEM TO SEPARATE
The Commission's economic analysis is vitiated by errors and omissions
which deprive it of probative value, save in relation to French sectoral markets.
The Court of First Instance gives two judgments today in relation to the actions
brought by the French group Schneider Electric against the Commission's veto
of its merger with Legrand, another French producer of low-voltage electrical
equipment, and against a second Commission decision ordering that the two companies
should accordingly be separated. Only a little more than three months have elapsed
between the hearings and today's judgments, as a result of the expedited procedure
obtained by Schneider in May 2002 in consideration of its reducing the number
of arguments in its application. The Commission had postponed the date by which
the two undertakings had to be separated, in order to allow the Court of First
Instance to rule in time.
According to the Commission, the effects of this operation on competition
affect all materials used for the distribution of electricity and the control
of electric circuits at various levels (household, office, factory). That covers
a large range of products from distribution panels to cable supports to power
points and switches.
The annulment of the Commission's first decision results from a twofold
assessment by the Court of First Instance:
- in the first part of its assessment, it challenges
the Commission's economic analysis in support of its banning of the merger,
accepting that analysis only in relation to French sectoral markets;
- in the second part, concerning those markets alone, it considers the procedure followed by the Commission when examining the proposal and finds a procedural irregularity which constitutes an infringement of defence rights, having regard to the discrepancy between the statement of objections and the Commission's decision.
First, the Court of First Instance finds several obvious errors, omissions and contradictions in the Commission's economic reasoning. For example, having cited the national dimension of the geographical markets in order to demonstrate the strengthening or the creation of a dominant position for the merged entity, the Commission bases its assessment of the impact of the concentration operation on transnational, global considerations, extrapolated from a single market without demonstrating its relevance at the national level. Similarly, its demonstration of the key position in relation to wholesalers generated by the merger of the two companies is supported only by general data, whereas more precise analyses on the national scale would have been more relevant and convincing.
Moreover, in the absence of a precise country-by-country examination of the
markets affected, the argument based on potential portfolio effects of brands
and an unequalled range of products does not convince the Court of First Instance.
The fact that Schneider holds large shares in post- terminal wiring accessories
markets in Nordic countries, and that Legrand is more established in the South
of Europe does not permit the inference that the products of the Schneider-Legrand
group will cover all electric products. That led the Commission to overestimate
the economic power of the group. Similarly, the Court finds, the Commission
overestimated the economic power of the merged entity when assessing the group's
market shares in relation to the underestimated shares of its two main competitors
(Siemens and ABB), without taking into account the internal sales of components
for electric panels which the latter carry out with their specialised subsidiaries.
The figures and data concerning the Italian and Danish markets combine to
cast doubt on the Commission's conclusions.
Notwithstanding the gaps found in the assessment of the impact of the operation,
the Court of First Instance acknowledges that, in relation to the French sectoral
markets where the two companies hold considerable shares, the Commission's conclusion
as to the dominant position and the elimination of competition may be accepted,
having regard to the factual evidence produced.
It is thus solely in relation to the French markets affected
by the concentration that, in the second part of its assessment, the Court of
First Instance examines Schneider's argument that there was a substantial change
in the nature of the Commission's objections between the statement of those
objections which it gave to the parties and the final decision which is being
challenged here. The statement of objections is designed to allow the undertaking
to propose solutions to the problems identified and to make its defence known
before the Commission adopts a final decision. In the statement of objections
which was notified, the emphasis was placed on the 'overlapping' of Schneider-Legrand's
activities in certain markets and the strengthening of Schneider in relation
to wholesalers resulting therefrom. In the decision which forms the subject-matter
of the dispute, the Commission uses the term 'association', which refers to
two preponderant positions held in a single country by two undertakings in two
distinct but complementary sectoral markets. The sense of the objection being
different, Schneider found itself unable to propose appropriate corrective measures.
By proceeding in that way and not allowing Schneider to make appropriate offers
to withdraw, the Commission infringed defence rights.
This judgment therefore annuls the prohibition decision. The Court of First
Instance adds that, if the issue of the compatibility were to be re-examined
(if Schneider maintains its wish to acquire Legrand), the procedure must recommence
with the drawing up of a precise statement of objections and relate only to
French markets, which are the only markets to have been identified as being
affected by the implementation of the merger.
As for Case T-77/02 concerning the second Commission decision, requiring Legrand
and Schneider to separate and legally based on the decision prohibiting the
merger, the annulment of that latter decision automatically entails the annulment
of the second decision which is devoid of foundation.
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