Competition and trade law: Collective dominant positions - ECJ ruling in France v Commission

An important ruling from the ECJ, in France v Commission (ECJ 31.3.98 in Joined Cases C-68/94 French Republic v Commission and C-30/95 SCPA and EMC v Commission) has clarified the concept of joint dominance in relation to the EU Merger Control regulation.

In 1993, the Commission was notified of a proposed concentration between Kali und Salz and Mitteldeutsche Kali. Whilst K&S/MdK would not have overall market dominance, the Commission objected to the close links between K&S and SCPA, a subsidiary of the EMC group which was the sole K&S distributor in France. The Commission found that setting up the new Kali and Salz GmbH would lead to the creation of a dominant market position by K&S/MdK and SCPA -a duopolistic dominant position. In 1994, the Commission adopted a decision declaring the concentration compatible with the common market, subject to the parties undertaking to establish in the Community their own distribution organisation and terminate co-operation with SCPA as distribution partner in France. The French Republic sought annulment of the whole contested decision, while SCPA sought annulment of the conditions imposed.

The applicants submitted that the Merger Regulation does not apply in cases where there is a collective dominant position between the parties and third companies. After careful examination, the ECJ concluded that a concentration which creates or strengthens a dominant position of the parties concerned with an entity not involved in the concentration must be covered by the Merger Regulation and therefore that collective dominant positions do not fall outside the scope of the Merger Regulation.

However, the applicants also challenged the Commission's assessment of the dominant duopoly. In this respect, the ECJ found that the Commission had not established that the concentration would give rise to a collective dominant position on the part of the parties and SCPA which was liable to significantly impede competition in the relevant market. In particular, a market share of approximately 60%, sub-divided between the companies, did not point exclusively to the existence of a collective dominant position on the part of the undertakings concerned. The alleged links between the parties and SCPA relating to supplies in France also did not conclusively prove the existence of a joint dominant position. Further, the ECJ found that the existence of an agreement between K&S and SCPA, which was declared incompatible with Article 85 of the Treaty twenty years before notification of the proposed concentration, constituted extremely weak and insignificant evidence of the absence of competition between K&S and SCPA and ultimately between the joint venture and SCPA. Since an annulment limited to the conditions and obligations of the Commission decision is not possible without the substance of the decision being altered, the ECJ therefore annulled the whole of the operative part of the contested decision.

This judgment has made it clear that the concept of joint dominance under the Merger Control Regulation is the same as that expounded in the Italian Flat Glass decision in relation to Article 86 of the Treaty and is that of a joint or collective dominant position. Therefore specific economic and structural links or interdependence of business decisions between the undertakings are required, in order to prove the existence of joint dominance.