Judgment

Neutral citation:

[2013] CAT 30

Published:

4 Dec 2013

Download:

Summary:

Judgment of the Tribunal in connection with applications by Groupe Eurotunnel S.A. (“Eurotunnel”) and the Société Coopérative de Production Sea France S.A. (the “SCOP”) for a review under section 120 of the Enterprise Act 2002 (“the Act”) of a decision by the Competition Commission (“the Commission”) contained in a report dated 6 June 2013, which sets out the Commission’s conclusions as regards the completed acquisition by Eurotunnel of certain assets of the former SeaFrance S.A (“SeaFrance”) (the “Decision”).

The Commission decided that a relevant merger situation had been created within the meaning of section 23(3) and (4) of Act and that the merger might be expected to result in a substantial lessening of competition in the markets for the supply of transport services on the short sea to passengers and to freight customers. By way of remedy, the Commission prohibited Eurotunnel from operating ferry services at the port of Dover from a date six months after the date of the order to implement the remedy and, in the meantime, permitted Eurotunnel to divest two of the three vessels it had acquired from the liquidator of SeaFrance.

The SCOP challenged the Commission’s jurisdiction to consider the acquisition on the basis that its conclusion that a relevant merger situation had been created was wrong. Both applicants challenged the Decision on natural justice grounds and on the basis that the remedy imposed was disproportionate. Eurotunnel also contended that the Commission had failed to explore certain relevant issues and/or had wrongly failed to take into account matters relevant to its Decision.

In relation to the SCOP’s four jurisdictional challenges:

1. The Tribunal dismissed the SCOP’s challenge to the Commission’s finding that Eurotunnel and the SCOP were “associated persons” within the meaning of section 127(4)(d) of the Act.
2. The Tribunal dismissed the SCOP’s argument that, even if Eurotunnel and the SCOP were “associated persons”, the Commission had erred in finding that the acquisition brought two enterprises within common control.
3. The Tribunal agreed that the Commission had erred in finding that Eurotunnel and the SCOP had ceased to be “distinct enterprises” (by reason of Eurotunnel’s “material influence”) within the meaning of section 26 of the Act. However, in light of the Tribunal’s conclusion on the SCOP’s grounds 1 and 2, there was no need for the Commission to rely on section 26 to found jurisdiction and, accordingly, it was not necessary to remit the question of “material influence” back to the Commission.
4. The Tribunal agreed that the Commission had erred in its consideration of whether Eurotunnel had acquired an “enterprise”, as defined in section 129(1) of the Act. The Tribunal doubted whether the facts, as found by the Commission, supported a conclusion that Eurotunnel had acquired something more than “bare assets”. Accordingly, to a limited extent, the SCOP’s fourth ground succeeded and the Tribunal remitted the question of whether Eurotunnel/SCOP had acquired an enterprise to the Commission.

In relation to the natural justice challenges:

1. For the reasons set out in the Judgment, the Tribunal dismissed Eurotunnel’s argument that the Commission’s procedures were generally unfair and in breach of the rules of natural justice.
2. The Tribunal dismissed the specific challenges made by Eurotunnel and the SCOP in relation to the adequacy of the information that was provided to them by the Commission during the investigation. The Tribunal considered that, on the particular issues raised by Eurotunnel, the Commission had conveyed to Eurotunnel the gist of the case it had to answer. While the Tribunal considered that there was no justification for the Commission to withhold, as it did, certain information from the SCOP, the SCOP had in fact had sufficient opportunity to address the point against it, and it took that opportunity.

The Tribunal rejected the Commission’s contention that Eurotunnel’s natural justice challenge had been brought out of time.

The Tribunal also dismissed Eurotunnel’s argument that the Commission had failed to explore certain relevant issues and/or had wrongly failed to take into account matters relevant to its Decision.

In relation to the challenges to the proportionality of the remedy imposed:

1. The Tribunal dismissed Eurotunnel’s argument that the remedy was disproportionate because it went beyond requiring operations to be reduced to below the minimum efficient scale identified by the Commission.
2. The Tribunal dismissed the SCOP’s argument that the Commission had erred in its assessment of the proportionality of its proposed remedy because it failed to take proper account of the irremediable damage which the remedy would do to the SCOP’s business, particularly as regards the loss of the jobs created by MyFerryLink SAS.

Accordingly, the Tribunal concluded that the natural justice challenges, the challenges to the Commission’s alleged failure to address certain issues, and the challenges to the nature of the remedy imposed by the Commission all failed. However, the Tribunal remitted to the Commission the question of whether it had jurisdiction and, in particular, whether two enterprises had ceased to be distinct within the meaning of section 26(1) of the Act, such that a relevant merger situation arose within the meaning of section 35(1)(a) of the Act. Specifically, the Tribunal required the Commission to consider whether Eurotunnel/SCOP had acquired an “asset” or an “enterprise”. To that extent, and for that reason alone, the Tribunal quashed the Decision.

This is an unofficial summary prepared by the Registry of the Competition Appeal Tribunal.