The European Commission’s Reexamination of the SonyBMG Merger: A Precedent-Setting Attempt to Jump the Fence

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Caroline Pauwels, Ben Van Rompuy, Jul 22, 2008

On July 13, 2006, the European Court of First Instance annulled the European Commission’s decision authorizing the creation of Sony BMG, a joint venture incorporating the worldwide recorded music businesses of Sony and Bertelsmann. In its 2004 clearance decision, the Commission had concluded that the merger would not create or strengthen a collective dominance position on the part of the majors (i.e., Universal, Sony BMG, Warner, and EMI). In Impala v. Commission, however, the CFI harshly criticized the decision because it found that the evidence relied on by the Commission was not capable of substantiating this conclusion. Notwithstanding the fact that the European Court of Justice has now set aside Impala because of a number of identified errors of law, the judgment continues to raise fundamental questions about the standard of proof incumbent on the Commission when dealing with merger cases. The 2004 Sony/BMG decision indeed should be seen in light of the CFI’s consecutive annulment of three prohibition decisions in 2002: Airtours v. Commission, Schneider Electric v. Commission, and Tetra Laval v. Commission. The resoluteness by which the CFI criticized the Commission for its analysis of the evidence and questioned the rigor of its decisions in these judgments was unprecedented. The three judgments, which were delivered over a five-month period, gave rise to a flood of criticism of the Commission’s merger analysis and opened a debate about the economic soundness of its decisions.

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This article analyzes the new clearance decision in light of the Impala judgment and, subsequently, assesses whether or not Impala is imposing too high of a standard of proof on the Commission. It argues that the Commission has made a successful attempt to meet the Community Court’s standard, but that it is questionable that the Commission will be able to jump the fence again in a similar fashion under normal procedural circumstances. First, the article gives a brief overview of the previous case law on the standard of proof incumbent on the Commission in EC merger control. Second, the CFI’s criticisms on 2004 clearance decision are discussed, as well as the wider implications of Impala for the Commission’s evidentiary burden in the context of EC merger control. Third, the second clearance decision is analyzed in light of the Impala judgment. Subscribers can download the entire article available in the column on the left.