Collective dominance and the Merger Reform - an assessment within the framework of of the annulment of the Commissions three prohibition decisions, Airtours/First Choice, Schneider/Legrand and Tetra Laval/Sidel.

The enlargement of the European Union is upon us&semic a more advanced economic reasoning is developing&semic the European Commission receives an increased number of cases&semic a more developed and complex market stresses an increased sophistication of analysis and, finally, the Commission is exposed to an increased scrutiny by the European courts. All these factors are relevant in order to understand the motive behind the reform of the merger control. In each field of law there comes a time when regulations must be evaluated and revised. Due to the development of society and, not least, the rapid growth and changes within the European Union, it is essential that the system for controlling the common market is updated. The increased willingness of the courts to scrutinise the Commission's decisions is an important driving force behind the comprehensive merger review. The Commission has recognised the courts' readiness to assess its merger investigations. Through the rigorous criticisms of the Commission's decisions to prohibit the proposed mergers of Airtours/First Choice, Schneider/Legrand and Tetra Laval/Sidel, the Commission thought the time ripe to clarify the existing rules of merger control. In the above mentioned cases, the CFI criticised the Commission's decisions for being deficient in its economic and procedural approach, and the discussions which followed gave extra urgency to merger reform. Another significant issue was the emergence and development of the notion of collective dominance. Collective dominance has grown to become a common concept with the law of competition, but at the time the previous Merger Regulation was created, collective dominance was not extensively recognised as a concept and was therefore not explicitly mentioned in the legal texts. Due to this, there have been years of uncertainty as to how, and to what extent, collective dominance can be used in order to prohibit a merger within an oligopolistic market. The notion of collective dominance has developed through the case law of the European courts&semic nevertheless, due to the absence of a clear definition of the scope of collective dominance, uncertainty for both the undertakings as well as for the Commission in the application of these rules has been the case. The new Merger Regulation recognises and includes the concept of collective dominance and this is intended to lead to an enhanced legal certainty for the undertakings concerned. On 27 November 2003, the Council unanimously agreed upon the merger reform and 20 January 2004, the formal adoption of the law took place. The adjusted Merger Regulation entered into force on 1 May 2004 and the first merger cases are now being handled under the new rules. The merger reform consists of a revised Council Merger Regulation, Commissions guidelines on the appraisal of ''horizontal mergers'', a set of best practice guidelines for merger investigations, as well as internal reforms designed to strengthen the objectivity and soundness of the Commissions decision-making in merger cases. The new Merger Regulation, has abandoned the previous test of dominance - applied when assessing whether a merger should be declared incompatible with the common market - and replaced it with a new test which refers to mergers which ''significantly impede effective competition'' (the SIEC test). Dominance is now but one factor, which is specifically referred to within the Regulation, which should be taken into account. How this will affect the substantive test in practice remains to be seen. It is quite possible to argue that it is no more than a mere formal change of the wording. However, it may also lead to a more drastic change in merger control where the Commission considers the harm done to the competitive structure of the market as the decisive factor, instead of relying on the dominant position of the undertakings concerned when assessing if a proposed merger should be prohibited. The Commission also proposed a package of non-legislative measures in order to improve the internal working procedures. In the annulments of the three cases cited above, the CFI criticised the Commission for its incomplete economic and procedural approach and, in order to diminish the risk of similar outcomes in the future, a Chief Competition Economist was appointed and a ''peer review panel'' introduced. The circumstances mentioned above are only a few examples of the developments within the field of merger control. The Commission has lately suffered from harsh criticism, and I believe that a lot of work must be done in order for it to re-establish its credibility. The introduction of the modernisation package is a promising start in the process to restore its trustworthiness, but the results of the reform have yet to be seen