July 12, 2007
The fall-out from Schneider
The European Commission has been keen to play down the significance of Wednesday’s court ruling in the Schneider/Legrand case. In a precedent-setting decision, the European Court of First Instance ordered Brussels to pay damages to Schneider for wrongly blocking a merger with its French rival six years ago.
The antitrust watchdog stressed that it was held liable only for a fraction of the €1.66bn in damages claimed by Schneider. It also pointed out that the number of potential claimants was small - a view shared by most competition lawyers and antitrust experts. Indeed, at first glance it would appear the ruling only applies to the four companies that saw their mergers blocked by Brussels, but later managed to get the ruling overturned in court.
For the sake of European taxpayers, one can only hope that is true. But there are two other potential claimants that could inflict real financial pain on the EU regulator.
What follows is, of course, highly speculative. But what’s the point of a blog if you cannot explore the wilder, dreamier shores of European antitrust enforcement?
The first case I have in mind is Sony/BMG. The Commission waved through the deal in 2004, but in a startling move the European Court of First Instance overturned the clearance last year, sending the Commission and the companies back to square one. Sony/BMG has since refiled its merger notification to Brussels, and is waiting for a new ruling.
Few expect the Commission to block the deal second time round. But if the Commission did muster the courage to do so, it would now face not only howls of protest from the companies, but most likely also a hefty claim for damages. Since the - presumably vast - losses resulting from the unwinding of a three-year old merger would be entirely down to the Commission’s poor analysis in 2004, Sony and BMG would be well placed to sue the pants of the EU regulator.
An even more menacing prospect may yet arise from the Commission’s landmark antitrust battle with Microsoft. The US software giant has appealed a Brussels ruling from 2004 that imposed a record fine and forced Microsoft to change its products and business practices. The ruling is due in September, and most observers believe the group has at least a serious chance of winning its case.
If that happens - and Microsoft decides to sue - we would be talking about serious money. The group was, after all, forced to develop and market an entirely new version of Windows. It was forced to spend many thousands of man hours to draw up technical information to be licensed to its competitors. Based on the March 2004 ruling, it was subsequently told to rejig Windows Vista - the new operating system that came out last year. Given the size of Microsoft’s sales, and the level of detailed requirements imposed by the Commission, its financial losses must have been very serious indeed.
Caveats? Of course. For a start, the Commission could clear the Sony/BMG deal and win the Microsoft appeal. Moreover, while the court said the regulator was liable in principle, it also took a pretty restrictive stance on the kinds of damages it will award. It is also just about conceivable that Microsoft would not wish to inflict further harm on a regulator it has to do business with for many years to come.
But Neelie Kroes, the EU competition commissioner, cannot count on such factors. The stakes for her and her team of antitrust officials just keep on getting higher.
