In July 2006, the House of Lords overturned the Court of Appeal's (CA) first ever decision to award damages for breach of competition law.
In this case, Crehan, a publican, had been awarded damages by the CA against Inntrepreneur, a pub company, on the grounds that a beer-tie clause in his lease infringed the prohibition on anti-competitive agreements, as it obliged him to buy most of his beer from Courage, rather than allow him to take advantage of lower beer prices elsewhere.
The key question was whether Crehan could rely on a previous European Commission beer-tie decision that related to a different pub company, in order to establish that competition law had been infringed in this present case. Although the CA had agreed to permit this reliance, the House of Lords disagreed, stating that previous decisions may only be relied upon if they relate to the same parties and the same subject matter: the fact that the present case related to the same market (i.e. beer) in the earlier decisions was not sufficient to found a claim.
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This judgment will be welcomed by many large companies as it appears to narrow the scope for bringing damages' actions for breach of competition law. However, companies engaged in anti-competitive conduct remain at risk of damages' actions and the House of Lords’ decision does not undermine claimants' rights in this respect. (Under competition law, claimants seeking compensation can ‘piggy-back’ an Office of Fair Trading (OFT) or European Commission infringement decision and claim damages in either the High Court or the specialist Competition Appeal Tribunal (CAT)). This case provides a stark warning to would-be litigants and defendants of the costs and time (a total of 13 years here) involved in bringing or defending such a claim. Although this outcome means that an award of damages for breach of competition law has yet to be confirmed by a UK court, it is well known that several damages' actions have settled privately out of court. Moreover, with the European Commission busy finalising its Green Paper on the development of private law damages' actions in national courts, companies should be reexamining whether their competition compliance policies limit their potential exposure to the everincreasing prospect, despite the ruling in Crehan, of third party actions for damages.
In 2004 Sony and Bertelsmann Music Group (BMG) agreed to merge their recorded music businesses, including the discovery and development of artists and the recording and marketing of their music. Initially the Commission had been concerned that the reduction of major players in the market for recorded music from five to four might create or strengthen a collective dominant position between the remaining four major record companies. Following an in-depth investigation, however, the Commission eventually approved the merger unconditionally. Subsequently, Impala, a trade association representing independent music companies, lodged an action before the CFI, claiming that the Commission committed a number of manifest errors in its assessment. The CFI has now allowed Impala's appeal and annulled the Commission's decision, having concluded that the Commission's arguments did not meet ‘the requisite legal standard’ and were marred by ‘a manifest error of assessment’.
Sony and BMG have announced that they will jointly appeal the CFI’s judgment.
Court Of First Instance Annuls European Commission's Decision To Approve 50/50 Joint Venture Between Sony And Bertelsmann Music Group
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This is the first time that a Commission decision approving a merger has been annulled by the CFI. Although this transaction was considered under the old merger regime, the case will still be relevant when considering the application of the new rules. Following the annulment of three of its decisions in 2002, the Commission had implemented a number of measures to improve its economic analysis and procedures. Given the CFI's heavy criticism of the Commission's analysis and reasoning in this judgment, it is likely that the Commission's information requests will be even more demanding in the future, unless the ECJ eventually overturns completely the CFI’s ruling.
It is worth noting that Impala was ordered to pay a quarter of its own costs, despite winning the case, given its behaviour during the procedure.
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