Posted by Chantal Lavoie on 21 September 2016
In a judgment delivered on 15 September 2015 involving Morningstar vs European Commission, the General Court was asked to consider whether commitments offered by Thompson Reuters to the European Commission in the context of an abuse of dominance investigation were sufficient to address the competition concerns identified. The appeal provided the court with a rare opportunity to review the adequacy of commitments. After the Alrosa judgment, this is only the second ruling by the Court of Justice of the European Union relating to commitment decisions adopted under Article 9 of Regulation 1/2003. To date, no appeals of commitment decisions have been successfully upheld on substantive grounds. The ruling in Morningstar confirms the wide discretion of the European Commission in adopting commitment decisions and the very limited scope for review which the Court of Justice of the European Union is willing to exercise over such decisions.
Morningstar is a consolidated real-time datafeed provider and a competitor of Thomson Reuters. Morningstar was seeking the annulment of a commitment decision addressed to Thomson Reuters. The commitment decision was adopted under Article 9 of Regulation 1/2003 to address concerns that restrictions imposed by Thomson Reuters regarding the use of Reuters Instrument Codes (RICs) prevented customers from switching datafeed providers, thereby giving rise to an abuse of a dominant position in the market for consolidated real-time datafeeds. The commitments offered by Thomson Reuters consisted in allowing its customers and third-party developers to enter into license agreements to use RICs and in providing the information necessary to allow its customers to switch provider. Competitors of Thomson Reuters such as Morningstar were excluded from the scope of these licenses.
The appeal raised a preliminary issue, namely whether Morningstar had standing to lodge the appeal. The General Court concluded, in line with existing case-law, that Morningstar had standing because it was directly and individually concerned by the commitment decision. The General Court based itself on the fact that (i) the situation of Morningstar on the market was directly affected by the commitments which explicitly excluded competitors from entering into the license agreements; and (ii) Morningstar was individually concerned by the decision because it participated actively in the administrative procedure into Thomson Reuters’ conduct and such conduct arguably had negative effects on Morningstar’s business.
Substantive review of the adequacy of commitments
The General Court reiterated the wide discretion enjoyed by the European Commission in accepting or rejecting commitments. In line with the conclusions of the Court of Justice in Alrosa, the General Court referred to the need for the European Commission to carry out complex economic assessments including ‘forward-looking analysis’ in order to assess the adequacy of commitments; and the fact that the Court of Justice of the European Union cannot substitute its own economic assessment for that of the European Commission.
The General court’s role in this appeal was therefore limited to assessing whether the European Commission was manifestly wrong in accepting the commitments offered by Thomson Reuters. The judicial review consisted therefore in reviewing whether:
(i) the evidence relied upon by the European Commission:
(a) was factually accurate;
(b) was reliable and consistent;
(c) contained all the information to be taken into account to assess a complex situation;
(d) capable of substantiating conclusions drawn from it; and
(ii) the commitments were proportional, namely by examining that:
(a) the commitments were “sufficient” ;
(b)the commitments responded “adequately” to the concerns by reference to the seriousness and extent of the concerns and the interests of third parties; and
(c) less onerous commitments have not been offered to address those concerns adequately.
The General Court concluded that the commitments were sufficient to address the European Commission’s concerns that the restrictions imposed by Thomson Reuters created substantial barriers for customers to switching provider. The fact that other commitments could have addressed the concerns and been more favourable to competitors was not viewed as a valid ground to annul the decision. In fact, the objective of the commitments was not focused on the competitors but rather on giving customers the ability to switch provider. The argument that, since the adoption of the commitments, no customer has switched provider was rejected. Such argument cannot be used to argue that the commitments are not effective. The assessment regarding the adequacy of the commitments must be made with regard to the facts existing at the time the commitment decision was adopted; these facts show that the commitments were sufficient at the time to address the competition concerns. Also, whilst competitors could have been included within the scope of the licence terms offered by Thomson Reuters, the General Court concluded that the European Commission did not make a manifest error of assessment by considering that this was not necessary to address the concerns identified.
Finally the General Court rejected the argument that the commitment decision infringes the principle of proportionality. The principle of proportionality means in this instance that the commitments must not exceed what is necessary and appropriate to attain the objective sought and that least onerous commitments addressing adequately the concerns have not been offered. The General Court noted that, whilst the European Commission is not entitled under Article 9 of Regulation 1/2003 to require more onerous comments, it is entitled to accept commitments offered by parties going beyond “that which the Commission itself could have imposed on them in a decision that it adopted in accordance with Article 7” (prohibition decision).
The appeal provided the General Court with a rare opportunity to review a commitment decision adopted by the European Commission. To our knowledge, only one other ruling on this issue has been delivered by the Court of Justice of the European Union (Alrosa). One of the reasons for the limited number of challenges is that third parties have difficulty in showing standing before the General Court as they are not addresses of the commitment decision. As for the addresses of the decision, they are unlikely to have an interest in challenging a decision based on commitments they have themselves offered.
As regards the substantive test for review, the ruling follows the line drawn out by the Court of Justice in Alrosa in favour of a narrow judicial review of commitment decisions. This is unsurprising, even though the Alrosa judgment has been heavily criticised by part of the legal community for granting too wide a discretion to the European Commission in adopting commitment decisions. Indeed it is fair to say that commitment decisions adopted under Article 7 of Regulation 1/2003 come under lighter judicial scrutiny than infringement decisions adopted under Article 7 of Regulation 1/2003.
A few points worth noting which arise from the Morningstar judgment:
- The General Court does not put into question whether the European Commission had identified the right competition concerns. Indeed, the ruling does not debate whether the competition concern should only have been the barriers for the customers to switching provider which the restrictions of Thomson Reuters gave rise to. The judicial review was limited to considering if there was a manifest error of assessment by reviewing the adequacy of the commitments against the concerns identified. The General Court highlights the complexity of economic assessments which the European Commission is required to make to identify competition concerns as justification for not embarking on a wider review which would require substituting its own economic assessment for that of the European Commission. Whilst the argument has a logical value and there are legal limitations as to the powers of review of the Court of Justice of the European Union, the consequence is that commitment decisions are subject to very limited judicial scrutiny.
- The General Court’s finding that the principle of proportionality was not infringed is not fully satisfying. Indeed, the fact that Thomson Reuters did not offer less onerous commitments and that the European Commission was entitled under Article 9 to accept (but not require) more onerous commitments is arguably too formalistic and incomplete. Indeed, two prior and arguably less onerous packages of commitments were offered by Thomson Reuters but rejected by the European Commission before the third package was market tested and approved. The General Court does not explain why it did not consider these prior commitments as constituting “less onerous commitments that also address those concerns adequately”. Taking into account the objectives of competition policy under Article 102 TFEU which are the same whether a commitment decision or infringement decision is adopted, it also seems unsatisfactory to argue that more onerous commitments could not be imposed by the European Commission by means of an infringement decision under Article 7 of Regulation 1/2003 but can under Article 9 of Regulation 1/2003 on the ground that the commitments are not imposed by the European Commission but offered by the undertaking.
- The ruling raises the question whether the European Commission will be further encouraged going forward to prefer commitment decisions over infringement decisions within the context of its antitrust enforcement policy. There are many reasons why commitment decisions have had so much success both from the perspective of the European Commission and parties to competition investigations. With this judgment, the Court of Justice of the European Union confirms once again that commitment decisions are subject to limited judicial review and therefore should be a preferred route from the enforcer’s procedural perspective. Nevertheless, the European Commission has also indicated recently that other considerations weigh in the balance, particularly as regards Article 102 investigations. As Commissioner Verstager told the Financial Times in March 2015 in the context of the Google search investigation when a statement of objections was issued paving the way for a possible infringement decision: “It’s very important not to make a habit out of settlements. They are much more quick and much more smooth and everyone can move on, but still you need occasion to develop [case law] and only our judges and going to court can do that.” Since Commissioner Verstager took office in November 2014, there has been a notable change in the proportion of commitment decisions adopted vs infringement decisions under Article 102. Based on numbers provided by Bruegel in a 2014 policy brief, the European Commission adopted between May 2004 and 31 December 2013 a total of 29 commitment decisions compared to 18 infringement decisions, for a ratio of 75% commitment decisions under Article 102 and a ratio of 48% commitment decisions under Article 101. Since 1 January 2014 (which would include decisions adopted under Commissioner Almunia’s term which ended in October 2014), a reverse trend in relation to Article 102 decisions is visible: Between 1 January 2014 to date (and including the infringement decision adopted on 20 September 2016 in ARA in relation to the Austrian waste management market), one third of the decisions adopted under Article 102 have been commitment decisions, compared to 75% at the end of 2013. Conversely, an overwhelming proportion of Article 101 decisions have been adopted under the Article 9 commitments procedure. Time will tell whether these statistics signal a new trend.
 The Court of Justice of the European Union consists of two courts: the Court of Justice and the General Court.
 See on this topic the OECD paper prepared by Jean-François Bellis on 7 June 2016 as background material entitled EU commitment decisions: What makes them so attractive?
 Mario Mariniello, Commitments or Prohibitions: The EU Antitrust Dilemna, 1 Bruegel Policy Brief 2 (2014).
 Since 1 January 2014, two commitment decisions have been adopted under Article 102, namely BEH Electricity and Samsung. During the same period, 4 infringement decisions have been adopted under Article 102. These are: Slovak Telekom; BEH Electricity; OPCOM/Romanian Power Exchange; Motorola - Enforcement of GPRS standard essential patents. These numbers are based on DGComp’s case search tool.
 Since 1 January 2014, 80% of the decisions under Article 101 have been commitment decisions. These are: VISA MIF; Container Shipping; Skyteam members; Paramount commitments in Cross-border access to pay-TV investigation. During the same period, only one of the Article 101 decisions (representing 20% of the Article 101 decisions) have been infringement decisions. This is Perindopril (Servier). This infringement decision related to both Articles 101 and 102. For purposes of this exercise and to avoid double counting as regards the total number of decisions under Article 101 and 102, the decision has been counted as an Article 101 decision.