JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber,Extended Composition)

28 April 1999 (1)

(Competition — Regulation (EEC) No 4064/89 — Decision declaring aconcentration incompatible with the common market — Article 22 of RegulationNo 4064/89 — Rights of the defence — Access to the file — Dominant position)

In Case T-221/95,

Endemol Entertainment Holding BV, a company incorporated under Netherlandslaw, established in Zevenend, Netherlands, represented by Onno W. Brouwer andPeter Wytinck, of the Brussels Bar, and Martijn van Empel, of the Amsterdam Bar,with an address for service in Luxembourg at the Chambers of Jacques Loesch,11 Rue Goethe,

applicant,

v

Commission of the European Communities, represented by Wouter Wils, of itsLegal Service, acting as Agent, with an address for service in Luxembourg at theoffice of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendant,

APPLICATION for the annulment of Commission Decision 96/346/EC of20 September 1995 relating to a proceeding pursuant to Council Regulation (EEC)No 4064/89 (IV/M.553 — RTL/Veronica/Endemol) (OJ 1996 L 134, p. 32), which

declared the agreement creating the joint venture Holland Media Groep to beincompatible with the common market,

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Fourth Chamber, ExtendedComposition),

composed of: P. Lindh, President, R. García-Valdecasas, K. Lenaerts, J.D. Cookeand M. Jaeger, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 15 July 1998,

gives the following

Judgment

Relevant provisions

1.

    Article 2 of Council Regulation (EEC) No 4064/89 of 21 December 1989 on thecontrol of concentrations between undertakings (corrected version, applicable inthis case, at OJ 1990 L 257, p. 13) provides:

'1.    Concentrations within the scope of this Regulation shall be appraised inaccordance with the following provisions with a view to establishing whether or notthey are compatible with the common market.

In making this appraisal, the Commission shall take into account:

(a)    the need to maintain and develop effective competition within the commonmarket in view of, among other things, the structure of all the marketsconcerned and the actual or potential competition from undertakingslocated either within or outwith the Community;

(b)    the market position of the undertakings concerned and their economic andfinancial power, the alternatives available to suppliers and users, their accessto supplies or markets, any legal or other barriers to entry, supply anddemand trends for the relevant goods and services, the interests of theintermediate and ultimate consumers, and the development of technical andeconomic progress provided that it is to consumers' advantage and does notform an obstacle to competition.

2.    A concentration which does not create or strengthen a dominant positionas a result of which effective competition would be significantly impeded in thecommon market or in a substantial part of it shall be declared compatible with thecommon market.

3.    A concentration which creates or strengthens a dominant position as a resultof which effective competition would be significantly impeded in the commonmarket or in a substantial part of it shall be declared incompatible with thecommon market.‘

2.

    Article 3(1) states:

'A concentration shall be deemed to arise where:

(a)    two or more previously independent undertakings merge, or

(b)    —    one or more persons already controlling at least one undertaking, or

    —    one or more undertakings

acquire, whether by purchase of securities or assets, by contract or by any othermeans, direct or indirect control of the whole or parts of one or more otherundertakings.‘

3.

    Article 3(3) states:

'For the purposes of this Regulation, control shall be constituted by rights,contracts or any other means which, either separately or in combination and havingregard to the considerations of fact or law involved, confer the possibility ofexercising decisive influence on an undertaking, in particular by:

(a)    ownership or the right to use all or part of the assets of an undertaking;

(b)    rights or contracts which confer decisive influence on the composition,voting or decisions of the organs of an undertaking.‘

4.

    Article 8(2) provides:

'Where the Commission finds that, following modification by the undertakingsconcerned if necessary, a notified concentration fulfils the criterion laid down inArticle 2(2), it shall issue a decision declaring the concentration compatible withthe common market.

It may attach to its decision conditions and obligations intended to ensure that theundertakings concerned comply with the commitments they have entered into

vis-à-vis the Commission with a view to modifying the original concentration plan.The decision declaring the concentration compatible shall also cover restrictionsdirectly related and necessary to the implementation of the concentration.‘

5.

    Article 8(3) states:

'Where the Commission finds that a concentration fulfils the criterion laid downin Article 2(3), it shall issue a decision declaring that the concentration isincompatible with the common market.‘

6.

    Article 11 provides:

'1.    In carrying out the duties assigned to it by this Regulation, the Commissionmay obtain all necessary information from the Governments and competentauthorities of the Member States, from the persons referred to in Article 3(1)(b),and from undertakings and associations of undertakings.

2.    When sending a request for information to a person, an undertaking or anassociation of undertakings, the Commission shall at the same time send a copy ofthe request to the competent authority of the Member State within the territory ofwhich the residence of the person or the seat of the undertaking or association ofundertakings is situated.

3.    In its request the Commission shall state the legal basis and the purpose ofthe request and also the penalties provided for in Article 14(1)(c) for supplyingincorrect information.

4.    The information requested shall be provided, in the case of undertakings,by their owners or their representatives and, in the case of legal persons, companiesor firms, or of associations having no legal personality, by the persons authorisedto represent them by law or by their statutes.

5.    Where a person, an undertaking or an association of undertakings does notprovide the information requested within the period fixed by the Commission orprovides incomplete information, the Commission shall by decision require theinformation to be provided. The decision shall specify what information isrequired, fix an appropriate period within which it is to be supplied and state thepenalties provided for in Articles 14(1)(c) and 15(1)(a) and the right to have thedecision reviewed by the Court of Justice.

6.    The Commission shall at the same time send a copy of its decision to thecompetent authority of the Member State within the territory of which theresidence of the person or the seat of the undertaking or association ofundertakings is situated.‘

7.

    Article 19(2) states:

'The Commission shall carry out the procedures set out in this Regulation in closeand constant liaison with the competent authorities of the Member States, whichmay express their views upon those procedures ...‘

8.

    Article 22(3) provides:

'If the Commission finds, at the request of a Member State, that a concentrationas defined in Article 3 that has no Community dimension within the meaning ofArticle 1 creates or strengthens a dominant position as a result of which effectivecompetition would be significantly impeded within the territory of the MemberState concerned it may, in so far as the concentration affects trade betweenMember States, adopt the decisions provided for in Article 8(2), secondsubparagraph, (3) and (4).‘

Facts

9.

    By Decision 96/346/EC of 20 September 1995 relating to a proceeding pursuant toCouncil Regulation (EEC) No 4064/89 (IV/M.553 — RTL/Veronica/Endemol)(OJ 1996 L 134, p. 32; hereinafter 'the contested decision‘), which was adoptedunder Article 8(3) of Regulation No 4064/89, the Commission declared theconcentration in the form of the creation of the joint venture Holland Media Groepto be incompatible with the common market.

10.

    The parties to that concentration were Compagnie Luxembourgeoise deTélédiffusion SA (hereinafter 'CLT‘), NV Verenigd Bezit VNU (hereinafter'VNU‘), RTL 4 SA (hereinafter 'RTL‘), Endemol Entertainment Holding BV(hereinafter 'Endemol‘) and Veronica Omroep Organisatie (hereinafter'Veronica‘).

11.

    CLT is a broadcasting company incorporated under Luxembourg law which isinvolved in radio, television, publishing and related businesses in various nationalmarkets.

12.

    VNU is a company incorporated under Netherlands law which is involved in thepublishing of consumer media, professional media and databanks. It holds stakesin broadcasting companies, including an indirect minority shareholding of 44.4% ofthe Belgian commercial broadcaster VTM and an indirect 38% shareholding inRTL.

13.

    RTL is a company incorporated under Luxembourg law which supplies televisionand radio programmes, partly in Dutch. Those programmes are broadcast by CLTwhich holds — directly or indirectly — 47.27% of RTL's share capital. CLTultimately controls RTL, which in turn held 51% of the shares in Holland MediaGroep (hereinafter 'HMG‘).

14.

    Veronica is an association established under Netherlands law which, until1 September 1995, operated in the Netherlands television and radio market as apublic broadcasting organisation. It was one of the four public broadcastingorganisations whose programmes were broadcast on the public channel 'Nederland2‘. On 1 September 1995 Veronica left the public broadcasting system to becomea commercial television channel.

15.

    Endemol is a company incorporated under Netherlands law which was created in1994 by the merger of J.E. Entertainment BV and John de Mol CommunicationsBV. The centre of Endemol's activities is in the Netherlands, but it has businesseselsewhere in Europe. Its principal business activities are the production oftelevision programmes, the operation of television studios, the exploitation oftelevision formats (that is to say original programme concepts which can becopied), the production and exploitation of theatrical programmes and theorganisation of events.

16.

    For the purpose of the concentration, Veronica and Endemol set up VeronicaMedia Groep (hereinafter 'VMG‘), a company incorporated under Netherlandslaw in which they respectively held 53% and 47% of the share capital. VMG held49% of the shares in HMG.

17.

    The objective of the concentration was to create HMG, whose business was the'packaging‘ and supply of television and radio programmes broadcast by itself,CLT, Veronica or others to the Netherlands and Luxembourg. All radio andtelevision activities of the parties intended for the Netherlands were transferred toHMG. The assets transferred by RTL included the television channels RTL 4 andRTL 5, the assets related thereto and its rock music radio channel. RTL alsoassigned to HMG the benefit of CLT's broadcasting licence (the 'concession‘), itsbusiness consisting in the supply and packaging of radio and television programmes(mainly in Dutch) to be broadcast in the Netherlands and Luxembourg, and its50% shareholding in IPN SA, the advertising agency which sells advertising time forthe RTL 4 and RTL 5 television channels. The assets transferred by Veronica andEndemol included the Veronica television channel and related assets, andEndemol's radio activities (that is to say its Holland FM Radio channel).

18.

    Endemol and HMG had also entered into a production agreement for a period of10 years, corresponding to HMG's production needs for its three channels. Underthat agreement, Endemol undertook to cover 60% of HMG's needs for Dutch-language productions. HMG agreed in return to buy from Endemol 60%, by value,of its needs for specific programmes. In addition, HMG was granted a right of firstrefusal with regard to new television programme formats and stars launched,bought or discovered by Endemol.

19.

    On 19 April 1995 the Netherlands Government sent a letter to the Commissionunder Article 22(3) of Regulation No 4064/89, requesting it to examine theconcentration, which did not have a Community dimension.

20.

    On 22 May 1995 the Commission adopted a decision pursuant to Article 6(1)(c) ofRegulation No 4064/89, opening the second stage of the procedure laid down bythat regulation.

21.

    As the initiation of a proceeding under Article 22 of Regulation No 4064/89 doesnot have the usual suspensory effect provided for in Article 7(1) of that regulation,the parties were able to implement the concentration as set out in paragraph 17above. Accordingly, from 1 September 1995 the programmes of RTL 4 and RTL5 were broadcast under the broadcasting licence granted to CLT by theLuxembourg authorities. Veronica's programmes were broadcast under abroadcasting licence for commercial programmes granted by the Netherlandsauthorities.

22.

    On 20 September 1995 the Commission adopted the contested decision, declaringthat the agreement to create the joint venture HMG was incompatible with thecommon market because the concentration would lead to the creation of adominant position in the television advertising market in the Netherlands and tothe strengthening of Endemol's dominant position in the market for independentDutch-language television production in the Netherlands, as a result of whicheffective competition in the Netherlands would be significantly impeded.

23.

    The Commission simultaneously invited the parties to propose, within a period ofthree months from notification of the contested decision, appropriate measures forrestoring effective competition in the market for television advertising andindependent Dutch television production in the Netherlands.

Procedure, events after the commencement of the action and forms of order sought

24.

    By application lodged at the Registry of the Court of First Instance on4 December 1995, all the parties to the concentration brought the present action.

25.

    In a document lodged at the Court Registry on 7 May 1996, the applicantsexplained that negotiations were taking place with the Commission with a view toreaching agreement on a modified concentration which the Commission would beable to approve as compatible with the common market.

26.

    By Commission Decision 96/649/EC of 17 July 1996 relating to a proceedingpursuant to Regulation No 4064/89 (IV/M.553 — RTL/Veronica/Endemol) (OJ 1996L 294, p. 14), the concentration, following modification by the parties, was declaredcompatible with the common market, subject to full compliance with the conditionsand obligations contained in commitments entered into by them. Those conditions,which were set out in paragraphs 11 and 12 of that decision, were to the followingeffect:

(a)    Endemol ended its participation in HMG and thus no longer holds sharesin it; under the newly concluded merger agreement RTL holds 65% andVeronica 35% of HMG's shares;

(b)    On 1 January 1997 HMG was required to cease operating RTL 5 as ageneral interest channel and to transform it into an information channel(that is to say, a television channel which is limited to broadcasting newsand news-related programmes) along the lines of a draft business plansubmitted by HMG to the Commission on 1 May 1996. According to thebusiness plan, that channel would in time be operated as a pay televisionchannel deriving most of its income from payment by viewers or cableoperators. Upon the request of the parties, the Commission could extendthe deadline for the transformation of RTL 5 into a news channel by threemonths, if that was absolutely necessary in order for the parties to realisethat transformation. Within a period of five years following the adoptionof the decision, HMG was neither to change the essential character of thatnews channel nor to deviate appreciably from the business plan without theCommission's prior approval.

27.

    That decision was notified to the parties by letter of 25 July 1996.

28.

    Veronica, RTL, CLT and VNU thereupon requested, by letter lodged at the CourtRegistry on 11 September 1996, that they be removed from the list of applicantsin this case.

29.

    By order of the President of the Fourth Chamber, Extended Composition, of7 October 1996, Veronica, RTL, CLT and VNU were removed from the list ofapplicants in this case and ordered to bear their own costs together with four-fifthsof the costs incurred by the defendant up to the date of removal.

30.

    Endemol is thus the only remaining applicant in this action.

31.

    Upon hearing the Report of the Judge-Rapporteur, the Court decided to open theoral procedure without any preparatory inquiry. The applicant and the Commissionwere however requested to reply to certain written questions and to producecertain documents. The applicant and the Commission replied to the questionsasked and produced the requested documents on 6 July 1998.

32.

    In reply to questions put by the Court, the applicant indicated on 6 July 1998 thatit was withdrawing two arguments raised under its fourth plea relating, respectively,to the position of HMG in the television broadcasting market and to the dominantposition of HMG in the television advertising market.

33.

    The parties presented oral argument and answered questions put to them by theCourt at the hearing on 15 July 1998.

34.

    The applicant claims that the Court should:

—    annul the contested decision;

—    order the Commission to pay the costs.

35.

    The Commission contends that the Court should:

—    dismiss the application;

—    order the applicant to pay the costs.

Substance

36.

    The applicant relies on four pleas in law in support of its application. The firstplea is to the effect that the Commission had no competence to adopt thecontested decision because it was authorised to investigate solely the televisionadvertising market and not the television production market. The second pleaalleges infringement of the rights of the defence, in that the applicant was grantedinadequate access to the file. The third and fourth pleas are, respectively, thatessential procedural requirements and Articles 2 and 3 of Regulation No 4064/89were infringed.

1. The first plea, alleging that the Commission lacked competence

Arguments of the parties

37.

    The applicant submits that the Commission was authorised to investigate thetelevision advertising market only and not the television production market. TheCommission's competence in respect of concentrations which have no Communitydimension is dependent upon a request being made by a Member State underArticle 22(3) of Regulation No 4064/89. In the present case, the NetherlandsGovernment requested the Commission to examine the concentration only so faras concerns the television advertising market. It follows that the Commission wasentitled to investigate only that market and could not extend the investigation ofits own motion.

38.

    The fact that the request was restricted to the television advertising market wasexpressly referred to by the Netherlands Government not only in its letter of19 April 1995 but also in the explanatory note accompanying that letter, whichstated that the possible implications for the television advertising market were thereason for which the Netherlands Government wished to have the concentrationexamined under Regulation No 4064/89.

39.

    The Commission argues that Article 22(3) of Regulation No 4064/89 was adoptedin order to ensure effective control of concentrations in cases where a MemberState lacks legislation fulfilling that purpose. Article 22(3) accordingly enables aMember State to request the Commission to examine a case where the nationalsolutions are insufficient to remedy the perceived anti-competitive impact of aconcentration.

40.

    Article 22(3) in no way allows a Member State to submit only one particular aspectof a concentration for consideration by the Commission; on the contrary, itnecessitates consideration of the concentration in toto. Following such a request,the Commission must examine the concentration as if it had a Communitydimension. The powers which it has in that regard would be inappropriate if itwere expected that the Member State concerned should already have identified inits request the competition problem requiring a solution.

41.

    The Commission adds that, in the present case, the Netherlands Government didnot confine its request to the television advertising market. It is clear from itsletter to the Commission that it requested the Commission to examine thecompatibility of the concentration as a whole with Regulation No 4064/89. Itmerely indicated that, in its view, the concentration would not significantlystrengthen the parties' position except in the television advertising market and thatthe reason for its request to the Commission was its concern in that regard. Noris there any suggestion in the explanatory note accompanying its letter to theCommission that it was asking the Commission to investigate only the televisionadvertising market.

Findings of the Court

42.

    Article 22(3) of Regulation No 4064/89 provides that the Commission may, at therequest of a Member State, examine whether a concentration which has noCommunity dimension is compatible with that regulation. The scope of theCommission's examination is circumscribed solely by the terms of Article 22. Thus,for example, Article 22(5) provides that the Commission is to take only themeasures strictly necessary to maintain or restore effective competition within theterritory of the Member State at the request of which it intervenes. On the otherhand, Article 22 grants no power to the Member State either to control theCommission's conduct of the investigation once it has referred the concentrationin question to it or to define the scope of the Commission's investigation.

43.

    Furthermore, it is clear from the documents before the Court that, contrary to theapplicant's submissions, the Netherlands Government did not seek to restrict theCommission's examination of the concentration at issue.

44.

    The letter of 19 April 1995 which the Netherlands Government sent to theCommission shows that it expected the Commission to examine the concentration

as a whole and not just one aspect of it. The first paragraph of the letter reads asfollows:

'With reference to Article 22(3) of Regulation No 4064/89, I request you, on behalfof the Netherlands Government, to ascertain whether the joint venture betweenRTL, CLT, VNU, Veronica and Endemol is consistent with the merger controlregulation.‘

45.

    It is also apparent from the third paragraph of that letter that, while theNetherlands Government sought to draw the Commission's attention to thetelevision advertising market in particular, it nevertheless did not seek tocircumscribe the scope of the Commission's investigation. That paragraph states:

'So far as the Netherlands Government can judge, the partnership will take theform of a concentration ... The Netherlands Government ... considers it desirablethat further attention be devoted to the question whether the concentration couldlead to the creation or strengthening of a dominant position as a result of whicheffective competition would be significantly impeded in the television advertisingmarket in the Netherlands.‘

46.

    That conclusion is borne out by the fact that, in its opinion of 5 September 1995pursuant to Article 19 of Regulation No 4064/89 on the preliminary draft of thecontested decision, the advisory committee supported the Commission's view thatits examination had to relate to the concentration as a whole and not just toparticular aspects of it. The committee was unanimous on the point, theNetherlands representative having registered his agreement in that regard.

47.

    The first plea must accordingly be rejected as unfounded.

2. The second plea, alleging infringement of the rights of the defence

Arguments of the parties

48.

    The applicant contends that the Commission infringed its rights of defence in theway in which it dealt with its right of access to the file.

49.

    Rights of the defence include the right of the undertakings concerned to obtainaccess to the documents relied on by the Commission in order to be able tocomment on their veracity and relevance. The Commission has an obligation tooffer to the undertakings involved in Article 85(1) proceedings all documents,whether in their favour or otherwise, which it has obtained during the course of theinvestigation, save where the business secrets of other undertakings, the internaldocuments of the Commission and other confidential information are involved

(Joined Cases T-10/92, T-11/92, T-12/92 and T-15/92 Cimenteries CBR and Othersv Commission [1992] ECR II-2667, paragraph 41).

50.

    Although that case-law has been developed in cases concerning proceedings underArticles 85 and 86 of the Treaty, the applicant submits that when the principle thatthe rights of the defence are to be protected is applied to proceedings underRegulation No 4064/89, it cannot result in any lesser right of access to documentsin the Commission's file. Article 18 of Regulation No 4064/89, like Article 13 ofCommission Regulation (EC) No 3384/94 of 21 December 1994 on thenotifications, time-limits and hearings provided for in Regulation No 4064/89(OJ 1994 L 377, p. 1), which was the implementing regulation in force at the time,contains provisions concerning the right to a hearing which are identical toArticle 19(1) of Council Regulation No 17 of 6 February 1962, First Regulationimplementing Articles 85 and 86 of the Treaty (OJ, English Special Edition1959-1962, p. 87) and Article 4 of Regulation No 99/63/EEC of the Commission of25 July 1963 on the hearings provided for in Article 19(1) and (2) of CouncilRegulation No 17 (OJ, English Special Edition 1963-64 p. 47). It is therefore clearthat the case-law cited applies fully to proceedings under Regulation No 4064/89.

51.

    The applicant states that the file to which the parties to the concentration weregranted access was manifestly incomplete, mainly because the Commission hadreplaced many documents emanating from parties involved in the market with non-confidential summaries which did not indicate the identity of those parties. TheCommission even refused to disclose the identity of undertakings which had notrequested confidentiality, on the ground that such disclosure would allow the partiesto the concentration to deduce which were the other companies. The applicantaccepts that this position could be defensible as regards the Commission's firstquestionnaire to independent producers, which was sent to five independentproducers of television programmes, but that it is difficult to understand in the caseof the second general questionnaire which was sent to all of the other independentproducers listed in the Nederlands Omroep Handboek 1994/5 (Handbook of theNetherlands Broadcasting Office; hereinafter 'the Handbook‘).

52.

    In the absence of any indication as to the identity of the companies which replied,those non-confidential summaries present a misleading picture of market conditionsand, without knowing the identity of those companies, the applicant is not in aposition to respond to the claims.

53.

    The applicant also complains that the table of contents provided with thedocuments to which the parties to the concentration were given access did notindicate either the nature or the content of those documents. It claims that thetable should have provided them with information which was sufficiently detailedto enable them to ascertain whether the documents described were likely to berelevant for their defence.

54.

    It claims that the parties to the concentration were not granted access to theanswers of IDTV, an independent producer, to which a specific questionnaire wassent by the Commission. Furthermore, no questionnaire was sent to D & DProductions International BV, the Dutch subsidiary of the Belgian productioncompany D & D, or to Sleeswijk Entertainment BV, which was acquired by D & D.

55.

    The applicant alleges that the Commission acquired new documents after theparties to the concentration had been granted access to the file and that they werenever informed of that fact or given the opportunity to see those documents. TheCommission's conclusion that the in-house production of the public broadcasterswas essentially for their own use can only be explained by the fact that it gatheredinformation after the hearing. If that conclusion is based on information providedby the parties to the concentration, which is less likely, it is vitiated by a manifesterror of fact.

56.

    The applicant also complains that replies were obtained by the Commission bytelephone and never passed on to the parties to the concentration. The applicantwas therefore unable to make known its views on that information. Moreover, asthat information is in any event unverifiable, the Commission should not have usedit. The gathering of information by telephone is contrary to the fundamentalprinciples of the rights of the defence in competition cases. Not only may suchinformation be misunderstood, but there is no written legal requirement obligingthe person questioned to give exact figures, unlike the case of a request forinformation, which contains a clear warning as to the penalties should theinformation be incorrect. Furthermore, the gathering of information by telephoneis manifestly contrary to the intention of the Community legislature and to theprovisions adopted by it, and amounts in fact to a refusal by the Commission toapply Community law. Practical difficulties encountered by the Commission cannotrelieve it of its obligation to apply Regulation No 4064/89.

57.

    The Commission accepts that the principles governing access to the file inproceedings under Articles 85 and 86 of the Treaty must also apply in proceedingsunder Regulation No 4064/89. However, because decisions on concentrations aresubject to a very strict timetable in order to protect the interests of the partiesinvolved in a concentration, the specific application of those principles mustreconcile the protection of the parties' rights of defence and the wider publicinterest in effective scrutiny of concentrations.

58.

    Access to the summaries of the replies which were given to the questionnaires sentto independent producers was sufficient to enable the applicant to contest theevidence obtained, as the summaries clearly showed the views of third parties onthe likely consequences of the concentration. The credibility of those views is notaffected by the identity of the persons who expressed them. What matters is thatthey illustrate the concerns of the players in the production market and the strengthof the reasoning expounded in support of their views. The applicant was therefore

able to respond to any assertion put forward by a third party with which itdisagreed.

59.

    The Commission explains that, in order to be able to discharge its public duty ofreviewing concentrations, it must be in a position to obtain full and frank viewsfrom third parties potentially affected. It must also be able to guarantee that theircomments will be treated in confidence (judgment in Case T-65/89 BPB Industriesand British Gypsum v Commission [1993] ECR II-389, paragraph 33, as confirmedin Case C-310/93 P BPB Industries and British Gypsum v Commission [1995] ECRI-865, paragraphs 26 and 27).

60.

    The fact that not all the questionnaires sent had been replied to at the time whenthe applicant had access to the file does not devalue the evidence on which theCommission relied. Most of the more substantial independent producers listed inthe Handbook did respond to the questionnaire sent to them, so that the repliesavailable to the Commission when it drew up the statement of objectionsrepresented the views of the most important players in the market for Dutch-language television production.

61.

    The Commission states that the table of contents provided the parties to theconcentration with general information as to the nature of the data gathered.

62.

    Also, they did have access to the replies of IDTV and D & D, by means of non-confidential summaries.

63.

    The Commission confirms that no documentary evidence was obtained by it after26 July 1995, the date on which the parties inspected the file. It is, however,correct that independent producers who had not replied to the questionnaires werecontacted by telephone after that date. That fact was brought to the attention ofthe parties during the hearings but they did not ask to see the extra informationgathered in this way. That information related solely to the number of hours oftelevision programmes produced by the undertaking questioned and to the valuein guilders of those programmes. Since the information was of a kind which onlythe responding undertaking could have known accurately, its disclosure to theparties would not have enabled them to challenge it. Consequently, even if therehad been a procedural defect, which the Commission disputes, it would not haveprejudiced the applicant.

64.

    The Commission explains, finally, that it would have been disproportionate to usethe procedure under Article 11(5) of Regulation No 4064/89 in a case such as thiswhere most of the undertakings concerned are very small. It was thereforeappropriate for the Commission to supplement the written replies which it hadreceived with telephone enquiries.

Findings of the Court

Access to non-confidential summaries

65.

    It is clear from the case-law that the procedure for access to the file in competitioncases is intended to allow the addressees of a statement of objections to examineevidence in the Commission's files so that they are in a position effectively toexpress their views on the conclusions reached by it in its statement of objectionson the basis of that evidence. The right of access to the file is justified by the needto ensure that the undertakings in question are able properly to defend themselvesagainst the objections raised in that statement (Cimenteries CBR, cited above,paragraph 38).

66.

    However, the case-law also makes it clear that access to certain documents may berefused, in particular in the case of documents or parts thereof containing otherundertakings' business secrets, internal Commission documents, informationenabling complainants to be identified where they wish to remain anonymous andinformation disclosed to the Commission subject to an obligation of confidentiality(Case T-65/89 BPB Industries and British Gypsum, cited above, paragraph 29, asconfirmed in Case C-310/93 P, paragraphs 26 and 27).

67.

    The Court has previously held that, while undertakings have a right to protectionof their business secrets, that right must nevertheless be balanced againstsafeguarding the rights of the defence (Case T-36/91 ICI v Commission [1995] ECRII-1847, paragraph 98). The Commission may therefore be required to reconcilethe opposing interests by preparing non-confidential versions of documentscontaining business secrets or of other sensitive information (ICI v Commission,paragraph 103).

68.

    The Court considers that the same principles are applicable to access to the filesin concentration cases examined under Regulation No 4064/89, even though theirapplication may reasonably be adapted to the need for speed, which characterisesthe general scheme of that regulation (Case T-290/94 Kaysersberg v Commission[1997] ECR II-2137, paragraph 113).

69.

    In the present case, it is not disputed that some independent producers replied tothe Commission's questionnaires on the condition that their identity was not to berevealed by the Commission to the parties to the concentration. It follows that theCommission cannot be criticised for having concealed the identity of thoseundertakings and provided the parties only with non-confidential summaries of theirreplies.

70.

    Furthermore, in order to enable the Commission to comply with that condition, itwas necessary for it not to reveal the identity of the other independent producers,who had not sought confidentiality before replying to the Commission'squestionnaires. As the Commission points out, the replies to the questionnairesgive information on the market segment in which a particular respondent operates.

In those circumstances, the Commission could not rule out the possibility of theparties deducing the identity of the producers who had asked for their replies tobe treated confidentially were it to disclose the identity of those who had not doneso.

71.

    Besides, as the Commission states, in the present case the replies to thequestionnaires contained only the views of the third parties on the likelyconsequences of the concentration. The non-confidential summaries made thoseviews clear. It was thus not necessary to know the identity of the third parties inquestion in order to be able to challenge the views expressed.

72.

    Accordingly, the fact that the applicant had access only to non-confidentialsummaries of the replies to the questionnaires sent to the independent producersdoes not amount to an infringement of its rights of defence.

Presentation of the table of contents

73.

    The presentation of the table of contents adopted by the Commission correspondsto that previously approved by the Court in its judgment in Case T-65/89 BPBIndustries and British Gypsum, cited above, paragraphs 29 to 33, and confirmed bythe Court of Justice on appeal (Case C-310/93 P, cited above).

74.

    In the present case, it is not disputed that the documents on the file to which theparties to the concentration had access on 26 July 1995 were presented inchronological order and that the Commission had prepared a summary list of all279 documents which made up the file. That list, produced in Annex 16 to theapplication, contained information of two kinds. First, it gave a breakdown of thedocuments by type. For that purpose, a classification under 13 headings wasnotified to the companies concerned (annual reports, internal notes, requests forinformation and so forth). The list contained, for each document or group ofdocuments, an indication of the key figure or, as the case may be, figurescorresponding to the heading under which the document or group of documentsfell. Secondly, the list indicated, for each document or group of documents,whether it was accessible to the companies concerned, partially accessible to them,confidential or not relevant.

75.

    It is apparent that the parties were refused access to five categories of documents,namely: (i) documents for purely internal Commission purposes; (ii) certaincorrespondence with the Member States; (iii) certain replies to requests forinformation made under Article 11 of Regulation No 4064/89; (iv) certaincorrespondence with third parties; and (v) one or more studies.

76.

    The applicant has no real grounds for complaining that the Commission refused itaccess to purely internal documents, which, as the Court has previously held, didnot have to be disclosed (see paragraph 66 above). An identical answer must be

given in respect of the correspondence with the Member States and certain thirdparties, to which the Commission was entitled to refuse access on the basis of itsconfidential nature. So far as concerns the replies to requests for informationaddressed by the Commission to third parties, the Court has already held that, inthe present case, the Commission did not infringe the rights of the defence byproviding only non-confidential summaries of some of those replies (seeparagraphs 69 to 72 above).

77.

    As regards the study or studies which were mentioned in the summary list referredto by the applicant in its reply and were not provided to the applicant, theCommission mentions only two studies in the contested decision and the statementof objections sent pursuant to Article 18 of Regulation No 4064/89. Those studieswere, respectively, an econometric study for the purposes of the investigation,prepared by KPMG Management Consulting, and a study entitled Media inEurope, Europe Media Cost Comparison 1993, prepared by Young & Rubicam. A copy of the first study was sent to the parties and a copy of the second wasincluded in the file to which the parties had access on 26 July 1995. TheCommission does not refer to any other study in the contested decision or in thestatement of objections and the applicant has provided no concrete information tothe effect that those documents could have been based on information gatheredfrom such a study.

78.

    It follows that the way in which the Commission presented the table of the filecontents in this case does not infringe the rights of the defence.

The replies of IDTV and Sleeswijk-D & D

79.

    The applicant does not dispute the Commission's assertion that the applicant hadaccess to the non-confidential summaries of the replies of IDTV and Sleeswijk-D & D. This ground of challenge must therefore be rejected.

Documents alleged to have been acquired after the applicant inspected the file

80.

    The Court considers that the applicant has not substantiated its claim that theCommission acquired new documents concerning the Netherlands televisionproduction market after the applicant had obtained access to the file and that itfailed to disclose them to the applicant. In its application, the applicant hadreferred, in particular, to the first three sentences of paragraph 89 of the contesteddecision, which state:

'The in-house production of the public broadcasters is essentially used for theirown purposes. Although these productions are sometimes offered on theinternational market, they are normally not offered to other broadcasters in the

Dutch TV market. There is, therefore, no direct competition between in-houseproduction and programmes produced by independent producers which are offeredon the market.‘

81.

    However, the Commission demonstrated at the hearing that the first two sentencesare taken from the statement of objections and the parties' reply theretorespectively. The statement of objections is dated 18 July 1995 and thus precedesthe parties' inspection of the file on 26 July 1995. The third sentence merely drawsthe logical conclusion from the first two sentences and does not contain any newinformation.

82.

    As regards the letter of 25 August 1995 from the Nederlandse Vereniging vanErkende Reclame Adviesbureaus (Netherlands Association of AdvertisingAgencies) to the Commission, since the applicant has withdrawn the argument asto the Commission's analysis of the position of HMG in the television advertisingmarket (see paragraph 32 above), it is unnecessary to examine the questionwhether the Commission's treatment of that letter infringed the rights of thedefence.

Gathering of information by telephone

83.

    It is not in dispute that the Commission sent a letter pursuant to Article 11 ofRegulation No 4064/89, with a questionnaire annexed, to all the independentproducers listed in the Handbook and that it then contacted by telephone thosewho had failed to reply in order to ascertain the number of hours of televisionprogrammes produced by them in 1994 and the value in guilders of theprogrammes. It needed those figures in order to estimate the size of theindependent television production market and the proportion of that market heldby the applicant.

84.

    Article 11 of Regulation No 4064/89 is intended to enable the Commission togather all the information needed in order for it to carry out the tasks assigned toit by that regulation. When the Commission sends a request for information to aperson, it is required to state the legal basis and the purpose of the request as wellas the penalties laid down for supplying incorrect information. However, Article 11does not require the undertakings contacted to reply in writing. In the presentcase, most of the major undertakings did in fact provide written replies. Havingregard to the need for speed, which characterises the general scheme of RegulationNo 4064/89 (Kaysersberg, cited above, paragraph 113), the Commission chose toobtain by telephone the replies of the undertakings which had been sent a letterunder Article 11 but had not yet replied. Since the majority of the undertakingscontacted in that way also provided the replies needed for the Commission'sanalysis, thus meeting their obligations under Article 11, it would have beenexcessive to use the formal procedure referred to in Article 11(5).

85.

    It follows that the Commission did not infringe Article 11 of Regulation No 4064/89when, in order to complete its investigations, it contacted by telephone theundertakings to which it had already sent a letter under that provision and whichhad not replied.

86.

    While Regulation No 4064/89 was not infringed, it is still necessary, inasmuch as itis common ground that the information gathered by telephone was not submittedas such to the applicant, to establish whether the Commission thereby infringed therights of the defence within the meaning of the case-law referred to above(paragraph 65).

87.

    Under that case-law, in order to hold that the rights of the defence have beeninfringed, it is sufficient for it to be established that the non-disclosure of thedocuments in question might have influenced the course of the procedure and thecontent of the decision to the applicant's detriment (ICI v Commission, cited above,paragraph 78).

88.

    An infringement of the rights of the defence must be examined in relation to thespecific circumstances of each particular case (ICI v Commission, paragraph 70).

89.

    The Court thus notes, first, that the information gathered by telephone was usedby the Commission in order to calculate the applicant's share of the market forindependent Dutch-language television production, which it estimated at 'clearlymore than 50%‘. That global figure was notified to the applicant at the hearingon 8 August 1995. The Commission also calculated from that information themarket share of the 10 other largest producers in the market. The Commissionhad already indicated to the applicant, in the statement sent to it pursuant toArticle 18 of Regulation No 4064/89 on 18 July 1995 and at the time of the parties'inspection of the file on 26 July 1995, that, in its view, the applicant had a marketshare of around 60%. At the same time it had also provided an initial estimate ofthe market shares of the five other largest producers. The applicant had thus hadthe opportunity to comment on those estimates in writing in the parties' statementof defence, lodged on 4 August 1995, and to discuss the Commission's revisedfigures at the hearing itself.

90.

    Secondly, it is not in dispute that the information in question, as supplied by theindividual undertakings, concerned solely the number of hours of televisionprogrammes produced by them as independent producers in 1994 and the value ofthose programmes. Only those undertakings could provide that informationaccurately. It follows that even if the Commission had disclosed the information,which was, moreover, of a confidential nature, the applicant would not have beenable to challenge it.

91.

    Accordingly, the Commission did not infringe the applicant's rights of defence byfailing to disclose that information in the form in which it was provided byindividual producers.

3. The third plea, alleging infringement of essential procedural requirements

Arguments of the parties

92.

    The applicant maintains that many new and important matters of fact and of lawemerged at the hearing of 8 August 1995. As a result, the advisory committee andthe college of Commissioners could not have had full knowledge of the materialfacts in the case, because they were not provided with a report containing theminutes of the hearing. The fact that the hearing was recorded on audio cassettesdoes not remedy that breach of an essential procedural requirement, with the resultthat the contested decision must be annulled.

93.

    The Commission replies in effect that it is not required to draw up official minutesof hearings in cases falling under Regulation No 4064/89, nor could the failure tosupply such minutes to the advisory committee or to the Commissioners haveinfluenced the outcome of the proceedings in this case.

Findings of the Court

94.

    It is clear from the wording of Article 15(5) of Regulation No 3384/94 that theCommission is required merely to record the statements made by each personheard at a formal hearing. It is not however required to draw up minutes of sucha hearing, unlike the procedure under Article 9(4) of Regulation No 99/63, whichprovides that the essential content of the statements made by each person heard'shall be recorded in minutes which shall be read and approved by him‘.

95.

    It follows also that the applicant cannot contend that such minutes should havebeen sent to the Commissioners or to the members of the advisory committeebefore the contested decision was adopted.

96.

    This plea must therefore be rejected as unfounded.

4. The fourth plea, alleging infringement of Articles 2 and 3(1) and (3) of RegulationNo 4064/89

97.

    In its fourth plea, the applicant disputes the validity of the conclusion reached bythe Commission that its stake in HMG strengthened its dominant position in themarket for independent Dutch-language television production in the Netherlands. It puts forward two main grounds of challenge. First, it did not hold a dominant

position in the relevant market. Secondly, its participation in the concentration didnot strengthen its position in that market.

The applicant's dominant position

98.

    The applicant submits, on the one hand, that the Commission incorrectly definedthe relevant market as the market for independent Dutch-language televisionproduction and, on the other, that even if the Commission's narrow definition ofthe relevant market could be accepted, the applicant could not be considered tohold a dominant position in that market.

Incorrect definition of the relevant market

— Arguments of the parties

99.

    The applicant contends that the Commission wrongly defined the relevant marketin that it considered that the market for independent production of Dutch-languagetelevision programmes was separate from the market for in-house productions ofthe public broadcasters. The three grounds put forward by the Commission tojustify that conclusion are misconceived, namely that the public broadcastersproduce different types of programmes from the applicant, that the production ofthe public broadcasters is primarily for their own use, and that the publicbroadcasters are not in a position to decide freely whether to produce aprogramme themselves or to commission it from an independent producer.

100.

    First, the Commission was wrong in considering that the public broadcastersproduce different programmes from the applicant's. They produce entertainmentprogrammes which are comparable to its own, and it produces low-budget gameshows, talk shows and 'infotainment‘. In 1994 the big entertainment showsrepresented only 35% of its production in terms of value and 16.7% in terms ofhours produced.

101.

    Second, the production of the public broadcasters is not primarily intended for theirown use. The applicant points out that the public broadcasters have offered 345programmes on the international market through the sales agency NederlandseOmroepprogramma Stichting (NOS, an umbrella organisation which providesadministrative services to the public broadcasting bodies), whereas its internationalcatalogue is limited to 80 programmes.

102.

    Third, it is incorrect that a public broadcaster cannot choose freely whether toproduce a programme itself or to commission it from an independent producer. Some broadcasters have very substantial in-house production departments, whileothers appear to have much more limited resources. The Commission's argument

that, because of their considerable investment, the public broadcasters have nochoice but to produce in-house, is therefore not in line with the Commission'sfactual description of the market. Furthermore, if a broadcaster has sufficient staffand facilities for a significant number of productions, that makes it easier for it tochoose between in-house and external production.

103.

    The Commission maintains, first, that the public channels have a marked tendencyto purchase high value entertainment programmes from outside while producingin-house those programmes which are inherent in their role as public broadcastersand low-value filler programmes. The applicant is much stronger in the field of bigentertainment programmes. While it produces only 13.3% in terms of the totalduration of programmes broadcast in the Netherlands, it accounts for 17.8% ofproduction by value. Its production therefore costs 42% more per hour thanproduction in the rest of the market, a fact which clearly shows that its productionmix is very different.

104.

    Secondly, the Commission observes that in-house productions are not sold on, atleast not in the Netherlands. Even though NOS offers 345 programmes producedby the public broadcasters on the international market, those international saleshave no effect on the Netherlands market.

105.

    Third, the Commission contends that the option of a 'make or buy‘ decision islargely illusory. Where a public broadcaster has invested substantially in in-houseproduction facilities, those facilities will represent a significant cost, much of whichwill be sunk costs. There is therefore no short-term choice but to use thosefacilities to the greatest extent possible. Since broadcasters without in-houseproduction facilities are not faced with such a decision, they can hardly beconsidered to exercise influence over the independent production market.

— Findings of the Court

106.

    Before considering the Commission's definition of the relevant market, it should beobserved that the basic provisions of Regulation No 4064/89, in particular Article 2thereof, confer a discretion on the Commission, especially with respect toassessments of an economic nature. Consequently, review by the Communityjudicature of the exercise of that discretion, which is essential for defining the ruleson concentrations, must take account of the discretionary margin implicit in theprovisions of an economic nature which form part of the rules on concentrations(Joined Cases C-68/94 and C-30/95 France and Others v Commission [1998]ECR I-1375, paragraphs 223 and 224).

107.

    In the present case, the Commission defined the market correctly, in that itconcluded that the independent production of Dutch-language televisionprogrammes was a separate market from the market for in-house productions ofthe public broadcasters.

108.

    First, programmes produced by independent producers can be substituted only inpart for programmes produced by the public broadcasters. The public broadcastersproduce themselves, for the most part, the programmes essential to their role aspublic broadcasters and the low-value filler programmes. By contrast, it is notdisputed that the applicant, which is by far the most important independentproducer in the Netherlands, is much stronger in the field of big entertainmentprogrammes, which account for 35% of its production. According to the figuresprovided by the Commission, which the applicant has not contested, its hourlyproduction costs are 42% higher than those in the rest of the market, a fact whichclearly shows that its programmes have a different profile.

109.

    Second, although certain programmes produced by the public broadcasters are soldon the international market, those sales have no effect on the Netherlands market. The applicant concedes that, so far as concerns the Netherlands market, the in-house production of the public broadcasters is essentially intended for their ownuse. There is thus no direct competition between the in-house production of thepublic broadcasters, whose programmes are not, as a rule, offered to otherbroadcasters in the Netherlands market, and the programmes produced by theindependent producers which are offered on that market.

110.

    Third, the Commission could reasonably conclude that a public broadcaster wasgenerally not in a position to choose whether to produce a programme itself or tocommission it from an independent producer.

111.

    On the one hand, the applicant has not refuted the Commission's argument thatpublic broadcasters with significant in-house production activities have madesubstantial investment for that purpose, having, in particular, taken on thenecessary production staff, a major element in the cost of producing a programme. In those circumstances, it was reasonable for the Commission to conclude that ifpublic broadcasters were to increase significantly the number of commissions placedwith independent producers, to the detriment of their in-house production, theywould nevertheless have to bear the cost of their in-house production capacitywithout obtaining a return on the investment made in terms of programmesproduced. Such a policy would not be commercially feasible, at least not in thelong run.

112.

    On the other hand, the Commission's argument that, because of their substantialinvestment, the public broadcasters have no choice but to produce theirprogrammes themselves is not invalidated by the fact that certain broadcasters haveonly very modest production departments, because it is clear that suchbroadcasters, lacking means of production themselves, must therefore commissionprogrammes from independent producers.

No dominant position of the applicant in the relevant market

— Arguments of the parties

113.

    The applicant maintains that, even on the Commission's narrow definition of themarket, it cannot be regarded as holding a dominant position. There are 97producers in the Netherlands market. Only 29 producers replied in writing to theCommission's questionnaires and the information provided by the others over thetelephone is not reliable. The Commission therefore calculated the applicant'smarket share on the basis of incomplete evidence.

114.

    The Commission infers from the fact that the applicant was unaware of theproducers not included in the Handbook, which cited the names of 85 producersincluding the applicant itself, that they were so small as to be completelyinsignificant for the purposes of its analysis of the market.

115.

    It points out that very high market shares are considered to be extremely importantwhen determining whether an undertaking holds a dominant position. Anundertaking which holds a large and firm market share for a long period is likelyto become an unavoidable trading partner, so that a dominant position could insuch circumstances be inferred from the market share alone. In the present case,the applicant held a market share of more than 50% and was by far the largestoperator on the market.

116.

    The applicant also submits that the other factors relied on by the Commission inconcluding that the applicant held a dominant position in the relevant market aremisconceived.

117.

    First, it is incorrect that it has preferential access to foreign formats which are thenadapted to the Dutch audience. It had produced only 38 programmes based onforeign formats in the previous three years and not in excess of 60 as theCommission claimed. It appears that the Commission relied on certain subjectivereplies from its competitors which are wholly unreliable because those competitorsdid not know precisely which formats were owned by it.

118.

    Besides, 45 of the 143 programmes which it produced in 1994 were not based ona format. Also, several of the popular formats which it uses are owned bybroadcasters. It is incorrect that the applicant owned the most popular Dutchformats.

119.

    The Commission considers that it demonstrated satisfactorily that the applicantowned a large number of the most popular Dutch formats and had preferentialaccess to foreign formats. In stating that the applicant had preferential access tothose formats, it was only recording the view of many of the applicant's competitorsthat it was in a strong position, in particular because it had the capital base topurchase programmes by entering into 'output deals‘ (contracts with broadcastersfor a specified volume of programmes). In 1993/94 the applicant produced half ofthe most popular non-sports entertainment programmes.

120.

    Second, the applicant states that it is not correct that it has a large number of themost popular Dutch television personalities under contract.

121.

    Nor is its presence in the theatrical field a matter of importance for televisionpersonalities, because hardly any of them make use of that opportunity. It is alsoirrelevant that it has its own agency for stars. It merely has an agency which dealswith scheduling for events, and it has no power to enter into contracts ofengagement on behalf of its stars.

122.

    The Commission states in reply that it concluded, in the light of the concernsexpressed by other operators on the production market, that the applicant hadmany of the most popular Dutch television personalities under contract, often onan exclusive basis. The fact that they make little use of the opportunities forappearing other than on television is hardly important: the existence of thoseopportunities may lead them to choose to work with the applicant rather than withanother company, thereby strengthening its position. In any event, it neverconsidered that this was a particularly important factor in establishing theapplicant's dominant position.

123.

    Third, the applicant states that the Commission wrongly assumed that profits madein other countries were liable to strengthen its position in the Netherlands. Thoseresources are used in the first place to develop the subsidiaries in the variouscountries concerned.

124.

    The Commission maintains that the applicant's large-scale activities outside theNetherlands strengthen its dominant position in the Netherlands market. Itssubsidiaries give it preferential access to the international market and increase theresources of the whole group when financing major productions or determiningwhich further investment might be most profitable. That can be seen particularlyfrom the fact that it is the largest supplier to RTL Germany, which is itself theleading German commercial television station.

125.

    Fourth, the applicant submits that a number of facts put forward by it butneglected by the Commission prove that it does not hold a dominant position. Firstof all, it is not able to exclude existing competition or prevent the entry ofnewcomers, several companies having entered the Netherlands production marketin recent years. Nor are its customers dependent on it, as is shown by the fact thatpublic broadcasters boycotted it following the creation of HMG and gave up threevery popular programmes. Furthermore, the Commission failed to take sufficientaccount of the future growth of the television production market and of the factthat that growth would not benefit it. Thus, the new private channel, SBS, did notsign a production agreement with it, Kindernet, a second new channel, was tocompete directly with RTL 4, and a third channel, Euro 7, did not intend tocommission productions from it in 1995.

126.

    The Commission states that the undertakings which have succeeded in establishingthemselves in the Netherlands market in recent years needed an established partnerin that market. D & D joined with Sleeswijk, which was already a major Dutchproducer. Grundy entered the Netherlands market through a joint venture with theapplicant. It is therefore clear that even large international groups cannot enterthe Netherlands market without the support of existing market players.

127.

    It adds that, while developments in the Netherlands television market would resultin increased demand from all channels, the largest increase in demand by valuewould certainly be for additional programming for Veronica. Since the applicantwas the main supplier to Veronica and would thenceforth have the benefit of aproduction agreement and a structural link by virtue of its joint control with RTLover HMG, it was very difficult to believe that most of Veronica's additionalprogramming would not be supplied by it. Furthermore, since Veronica wasfinancially the strongest broadcaster, its requirements were likely to include moreof the expensive dramas and entertainment programmes in which the applicant wasparticularly strong. On the other hand, the three other new private channels wouldhave lower budgets and their production requirements would be relativelyinsignificant.

128.

    It states, finally, that it has shown that the revenue of the public broadcasters woulddecline in the future, which made an increase in the purchase of high-valueprogrammes unlikely. It is incorrect that the in-house production capacity of thepublic broadcasters could have any significant competitive impact on theindependent production market.

— Findings of the Court

129.

    It is appropriate to consider at the outset the method used by the Commission forcalculating the applicant's share of the market for independent Dutch-languagetelevision production in the Netherlands.

130.

    First, the Commission was right to calculate the market shares of the variousproducers by reference to the value of programmes and not the number of hoursproduced. The applicant has not disproved the results of the Commission'sinvestigation, which showed that the hourly value of television productions rangedfrom NLG 30 000 to NLG 300 000. In those circumstances, market share can bevalidly calculated only on the basis of value and not volume.

131.

    Second, the Commission's calculation of the applicant's market share is reasonable. It is clear from the written replies given by the Commission to the Court that theCommission had sent questionnaires to 84 independent producers, not only 75 asstated in the pleadings. Those 84 producers were all the producers referred to inthe Handbook other than the applicant itself. According to notes made during theinvestigation of the case, the Commission received written information from 29

producers, which related, inter alia, to the number of hours of televisionprogrammes produced in 1994 and to the value in guilders of those programmes. It also obtained information by telephone from 37 other producers on those twomatters. It thus received replies from 78% of the 84 producers. It then estimatedthe value of the hours produced by the 18 producers for which it had noinformation, on the basis of the information supplied by other producers with asimilar number of employees. Finally, it took into account the data provided by theapplicant itself in order to calculate the size of the total market and the marketshare held by the applicant.

132.

    The Commission thus did not err by stating in the contested decision that theapplicant's market share was 'clearly more than 50%‘.

133.

    Furthermore, the Commission has demonstrated in its reply to one of the Court'swritten questions that, even though it had to include an estimate of the value of theprogrammes produced by a producer which was among the 29 which had repliedin writing but which had failed to supply the necessary figure, that would not havealtered its estimate of the applicant's market share, which would still have beenclearly more than 50%.

134.

    It is necessary to examine next whether the Commission was right to conclude that,in this case, the applicant held a dominant position in the relevant market. According to settled case-law, a particularly high market share may in itself beevidence of the existence of a dominant position, in particular where, as here, theother operators on the market hold only much smaller shares (Case 85/76Hoffmann-La Roche v Commission [1979] ECR 461, paragraph 41, Case C-62/86Akzo v Commission [1991] ECR I-3359, paragraph 60, and Case T-30/89 Hilti vCommission [1991] ECR II-1439, paragraphs 91 and 92).

135.

    The Commission found, on the basis of its investigations, that the second mostimportant producer held a market share of between 5% and 10%, four otherproducers each held market shares of between 2% and 5%, and the five otherlargest producers each held market shares of between 1% and 2%, while all theother producers held a market share of less than 1% each. In those circumstances,the Commission did not manifestly err in its assessment when it concluded that theapplicant held a dominant position in the relevant market.

136.

    The Commission also referred to the applicant's further strengths which gave it aposition far superior to that of its competitors. The Court will consider those otherfactors in turn.

137.

    First, so far as concerns the applicant's preferential access to foreign formats, theapplicant has not refuted the Commission's argument that it was in a strongposition because of it its capital base, which enabled it to purchase programmes byentering into 'output deals‘. As the Commission explained at the hearing, it is

easier for a producer to obtain the necessary formats when it has already signeda contract with a broadcaster for a specified volume of programmes. Contrary tothe applicant's submission, that explanation is not invalidated by the fact that thecontract generally does not specify the content of the programmes. Thefundamental point is that the producer already has a contract with a broadcasterguaranteeing that it will be able to produce a certain number of hours ofprogrammes.

138.

    As regards formats in general, the applicant has not disputed that in 1993/94 itproduced half of the most popular non-sports entertainment programmes and that24 of those 28 programmes were based on a format. In those circumstances, theCommission's conclusions are not affected either by the fact that a third of theprogrammes produced by the applicant in 1994 were not based on a format or bythe fact that, according to the applicant, broadcasters, and not itself, owned otherpopular formats.

139.

    The Commission was also correct in its assertion that the applicant had producedmore than 60 programmes based on foreign formats in the three years precedingthe concentration, as was demonstrated by the list which the applicant had itselfsubmitted to the Commission as an annex to its reply of 14 July 1995 to theCommission's request for information of 7 June 1995, and is included in Annex 11to the application. It is clear from that list that the figure of 38 programmesmentioned by the applicant in fact refers to the number of foreign formats usedduring that period and not to the number of programmes produced on the basisof those formats.

140.

    Nor could the Commission ignore the opinion of other producers, of broadcastersand of other private channels, which had considered that the applicant owned alarge number of the most popular Dutch formats and enjoyed preferential accessto foreign formats.

141.

    Second, the applicant's statement that a large number of television personalities are either linked to broadcasters or freely available to anyone is not sufficient to refutethe Commission's assessment that it had a high number of the most popular Dutchtelevision personalities under contract. So far as concerns the opportunities forthose personalities to appear elsewhere than on television and the fact that theapplicant has its own agency for stars, even if, as the Commission acknowledges,those are not important factors in establishing the applicant's dominant position,it cannot be ruled out that they may strengthen its position in the market to someextent.

142.

    Third, as regards activities outside the Netherlands, the applicant has not refutedthe Commission's argument that the applicant's large-scale activities outside theNetherlands may strengthen its position in the Netherlands market, given that itssubsidiaries give it preferential access to the international market and increase theresources of the group as a whole.

143.

    Fourth, the other facts put forward by the applicant do not substantiate itsargument. While it is true that other companies entered the Netherlandsproduction market during the years preceding the concentration, the applicant hasnot disproved that those new entrants needed an established partner in thatmarket, at least initially. As regards the alleged boycott of the applicant by certainpublic broadcasters following the announcement of HMG's creation, it is to beobserved that, as the applicant itself states, the applicant supplied 88.2% of itsproduction in 1994 to the channels Veronica, RTL 4 and RTL 5, and it wastherefore not unreasonable for the Commission to conclude that such a boycottwould have only minor significance.

144.

    Nor has the applicant shown in what way the Commission was wrong in consideringthat Kindernet and Euro 7 would be very low budget channels, inasmuch asKindernet planned to concentrate mainly on children's daytime programmes andEuro 7 was in essence to be a news and documentary channel, and that theirproduction requirements would therefore be relatively insignificant in value. Furthermore, the programmes produced by the applicant are of no interest toEuro 7. Nor has the applicant disputed that Veronica's programme budget wasalmost three times the budget of SBS.

145.

    Moreover, the applicant has not proved that the Commission was wrong inconsidering that most of the additional demand for Dutch-language productionswould come from Veronica, which would need programmes for four and a half daysof extra broadcasting — while the public broadcasters would have to fill only twoand a half days — following Veronica's departure as a public broadcaster. Since theapplicant was already Veronica's main supplier, it was also reasonable for theCommission to conclude that most of Veronica's additional programming would besupplied by it.

146.

    In view of all of the foregoing, the Commission correctly defined the relevantmarket and the applicant's share of it, and was right in concluding that theapplicant held a dominant position in that market.

147.

    This argument must accordingly be rejected as unfounded.

Strengthening of the applicant's dominant position

148.

    The applicant submits that the Commission wrongly concluded, first, that VMG,together with RTL, exercised joint control over HMG and, secondly, that theapplicant's participation in the concentration strengthened its position in the marketfor independent Dutch-language television production in the Netherlands.

HMG not jointly controlled by VMG and RTL

— Arguments of the parties

149.

    The applicant states that HMG was composed of four bodies, namely the generalmeeting of shareholders, the shareholders' committee, the managing board and theprogramme directors. The managing board had to obtain the prior agreement ofthe general meeting of shareholders for the majority of important businessdecisions, including decisions concerning the strategy of HMG, the three-yearbusiness plan and annual budget, important capital investments and bonds or loans. The 'overall programming concept‘ was also part of that list, as were theappointment and dismissal of the programme directors and of theDirector/Secretary-General.

150.

    VMG and RTL had an equal number of representatives in the general meeting ofshareholders. However, the applicant, joining forces with Veronica in VMG, hada minority interest, because VMG held only 49% of the capital of HMG and underLuxembourg law, to which HMG was subject, VMG and RTL voted not accordingto the number of representatives but according to their respective holdings.

151.

    Under clause 3.4 of the merger agreement, the general meeting was to attempt toresolve problems by consent. If no consensus was reached, the question was to beput on the agenda of the next general meeting where 'the relevant proposal shallbe capable of adoption by simple majority of the votes cast at such meeting‘. Inpractice, that means that RTL, with 51% of the voting rights, had a majority at thatsecond meeting.

152.

    The applicant refers to the judgment in Case T-2/93 Air France v Commission[1994] ECR II-323, where the fact that major decisions of the board had to betaken by at least one representative of TAT SA and one of British Airwayssupported the conclusion that there was indeed joint control, and considers thatRTL had exclusive control because it was impossible for shareholders other thanRTL to block major decisions.

153.

    The shareholders' committee of HMG, which also had an identical number ofrepresentatives of RTL and of VMG, took decisions unanimously but hadcompetence only in respect of the issues listed in clause 3.3 of the mergeragreement, that is to say rights relating to the normal protection of minorityshareholders, which had nothing to do with the programming of HMG.

154.

    The applicant concludes therefrom that the Commission has not submitted anyconvincing argument or evidence to support its conclusion that the applicant,through its structural link to HMG, was in a position to influence the generalstrategy of HMG in programming and programme purchasing so as to strengthenits position in the market for independent production (paragraph 100 of thecontested decision).

155.

    It adds that, as it had only a minority holding in HMG, it did not satisfy theconditions, laid down by the Court of Justice in Joined Cases 142/84 and 156/84BAT and Reynolds v Commission [1987] ECR 4487 (hereinafter 'the Philip Morrisjudgment‘), under which a shareholding of one competitor in another may becaught by the prohibition in Article 85 of the Treaty. The concentration did nottherefore pose any competition problems.

156.

    The Commission points out that it concluded that HMG was jointly controlled byRTL and VMG because the most important strategic decisions taken by themanaging board had to have the prior approval of the general meeting ofshareholders. Although RTL could in theory impose its will eventually, it was notconceivable that it would do so having regard to the period of time which was laiddown in the procedure set out in clause 3.4 of the merger agreement and to thefact that HMG and RTL had to maintain good relations with the applicant, sinceit was HMG's principal programme supplier under the production agreement. Itfollows that VMG exercised a decisive influence over HMG owing to the fact that,in practice, major decisions concerning it had to be taken jointly by RTL andVMG. It submits in that regard that the applicant misconstrues Air France vCommission, cited above.

157.

    It adds that the shareholders' committee existed in order to resolve issues requiringthe consent of all the shareholders. A decision to make substantial changes in theprofile, positioning or programming format of any of the three channels had to betaken unanimously. A similar procedure was necessary in order to change thegeneral terms of the contracts of the staff of the channels. The requirement thatsuch changes could only be authorised unanimously goes beyond what is necessaryto protect the interests of a minority shareholder and thus supports theCommission's view that HMG was jointly controlled.

158.

    The Commission considers, furthermore, that the Philip Morris judgment is notrelevant to this case.

— Findings of the Court

159.

    Under Article 3(3) of Regulation No 4064/89, control is constituted by rights,contracts or any other means which, either separately or in combination and havingregard to the considerations of fact or law involved, confer the possibility ofexercising decisive influence on an undertaking.

160.

    In the light of the considerations of fact and law in this case, the Commission wascorrect in concluding that VMG (Veronica and the applicant) and RTL exercisedjoint control over HMG.

161.

    Under the merger agreement, the most important strategic decisions had to beapproved by the general meeting of shareholders before being put before themanaging board. Those decisions covered, in particular, the strategy of HMG, thethree-year business plan and annual budget, important investments, the 'overallprogramming concept‘ and the appointment and dismissal of the programmedirectors and of the Director/Secretary-General.

162.

    In accordance with clause 3.4 of the merger agreement, issues submitted to thegeneral meeting had to be decided by consensus. The agreement of RTL andVMG had therefore to be sought for all those decisions and, if a consensus couldnot be obtained, a period of 15 days was laid down during which therepresentatives of RTL and VMG had to use all endeavours to reach such aconsensus. Only after those two stages could a final decision be adopted by simplemajority vote, when RTL, with 51% of the voting rights, had a majority.

163.

    Furthermore, the shareholders' committee, which took decisions by unanimous vote,had to give its prior approval to certain decisions of the managing board whichwent beyond what is necessary to protect the interests of a minority shareholder. Thus, a decision changing substantially the profile, positioning or programmingformat of any of the three channels could only be taken unanimously. The samewas true of a decision creating a new channel which would compete directly withone of the three existing channels. Accordingly, those aspects of HMG's strategyand of its 'overall programming concept‘ were necessarily subject to unanimousagreement between RTL and VMG.

164.

    It follows that the Commission could reasonably conclude that RTL and VMG hadjoint control over HMG, having regard to the provisions of the merger agreement. It is therefore unnecessary to consider the applicant's arguments concerning RTL'salleged exclusive control and the Philip Morris judgment.

No strengthening of the applicant's position in the relevant market

— Arguments of the parties

165.

    The applicant submits that its stake in HMG did not enable it to exercise anyinfluence on either HMG's general programming or its purchase of programmes. Its alleged ability to prevent access of other producers to HMG is based on thealleged joint control when, so far as concerns RTL 4, RTL 5 and Veronica, it hadalready been the main supplier of RTL and Veronica for five years and their imagehad therefore already been determined to a large extent by its programmes overthat period. Thus, its position was not strengthened, nor was competition impeded,by the creation of HMG.

166.

    The Commission considers that the parent companies could not manage HMGproperly unless they were in agreement on the most important strategic decisions.

It is inconceivable that the applicant's acquisition of a stake was solely a financialinvestment which did not procure for it the benefit of decisive influence over HMG. The Commission's essential concern was therefore to prevent the structural linksbetween the applicant and HMG from closing the market in question to otherproducers and strengthening its position in that market.

— Findings of the Court

167.

    The Commission did not err in its assessment by concluding that, because of thestructural link created between the parties to the concentration and the jointcontrol which the applicant was therefore to exercise with RTL over HMG, inagreement with Veronica, the applicant had henceforth ensured a vast market forits production. Without that structural link it would have been realistic to envisagethe possibility of other producers providing a much larger proportion of HMG'sadditional programme requirements. It was not possible for any other producer inthe Netherlands to benefit from a guaranteed outlet for its productions nor toinfluence a broadcaster's programme acquisition policy. That conclusion could onlybe reinforced by the terms of the production agreement (see paragraph 18 above).

168.

    Furthermore, the parties themselves had stated that the supply relationship linkingthe applicant to RTL and Veronica was a major factor in determining the imageof RTL 4, RTL 5 and Veronica and that it would be equally important for thesuccess of HMG. They had also acknowledged that the purpose of theconcentration was partly to enable the applicant to reduce the risk to which it wasexposed in producing new programme formats, in that the concentration wouldensure that the applicant's income from the new formats was maximised. It wastherefore reasonable for the Commission to conclude that the applicant wouldprovide its most promising programmes or those of proven appeal to HMG, to thedetriment of other broadcasters.

169.

    In those circumstances, the Court finds that the applicant has not proved that theCommission exceeded the limits of its discretion or that it manifestly erred whenit concluded that the effect of the concentration would be to strengthen theapplicant's dominant position in the market for independent Dutch-languagetelevision production in the Netherlands and that effective competition in themarket would thus be significantly hindered.

170.

    It follows that this argument must be rejected and, therefore, that the applicationmust be dismissed in its entirety.

Costs

171.

    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the applicant has been unsuccessful it must, having regard to thedefendant's pleadings and to the order of the President of the Fourth Chamber,Extended Composition, of 7 October 1996, be ordered to bear, in addition to itsown costs, one fifth of those incurred by the defendant before the withdrawal ofVeronica, RTL, CLT and VNU together with all of those incurred by the defendantafter their withdrawal.

On those grounds,

THE COURT OF FIRST INSTANCE (Fourth Chamber, ExtendedComposition),

hereby:

1.    Dismisses the application;

2.    Orders the applicant to bear, in addition to its own costs, one fifth of thecosts incurred by the defendant until the withdrawal of the parties on7 October 1996 together with all of those incurred subsequently.

LindhGarcía-Valdecasas Lenaerts             Cooke                        Jaeger

Delivered in open court in Luxembourg on 28 April 1999.

H. Jung

P. Lindh

Registrar

President

1: Language of the case: English.