Deutsche Bahn (T-289/11 and T-290/11)

On 31 March 20111, the Commission carried out unannounced inspections at the premises of Deutsche Bahn AG and some of its subsidiaries because it believes that Deutsche Bahn AG may have breached Article 102 TFEU.

Actions were brought by Deutsche Bahn AG and its subsidiaries against the Commission’s decision2 authorising the surprise inspections in accordance with Article 20 of Regulation 1/2003. The applicants claims that the inspections infringe

  1. their fundamental right to inviolability of their premises since the large-scale inspections took place without prior authorisation from a judicial authority;
  2. their fundamental right to an effective legal remedy because of the lack of possibility of prior judicial review of the inspection decision;
  3. their rights of defense since the inspections were disproportionate and constitute a non-specific “fishing expedition” and;
  4. the principle of proportionality since the rebate system in the supply of electromotive power has been  monitored by the authorities and the German courts many times and found compatible with competition law.

The present action closely reminds the Colas Case3 of the European Court of Human Rights, where inspectors of the French competition authority entered the premises of the applicant’s companies’ head or branch offices, without any prior warrant issued by a judge, in order to obtain and seize numerous documents containing evidence of unlawful agreements. The European Court of Human Rights ruled that this constituted a violation of Article 8 of the European Convention of Human Rights4. It concluded that the relevant legislation and practice should afford adequate and effective safeguards against abuse and added that ‘the impugned operations in the competition field cannot be regarded as strictly proportionate to the legitimate aims pursued”.

It is not the first time that parties question the Commission’s powers to conduct dawnraids without prior judicial authorisation. As the Union now has included the European Convention of Human Rights in to its corpus of law, following the entry into force of the Treaty of Lisbon, it will be interesting to see how the General Court will deal with this issue. This case may also test which court in the end has the final say in these matters: the European Court of Justice in Luxembourg or the European Court of Human Rights in Strasbourg.

Western Digital (T-452/11)

On 30 May 2011, the Commission opened separate in-depth investigations under the EU Merger Regulation into two proposed concentrations in the hard disk drive ("HDD") sector. The first transaction concerns the planned acquisition of the HDD business of Korean firm Samsung by Seagate Technology of the US. The second transaction concerns the planned acquisition of the storage business of Japan's Hitachi by Western Digital Corporation of the US.

Seagate notified its transaction one day before Western Digital did, although Western Digital started pre-notification discussions with the Commission before Seagate. According to the priority rule applied by the Commission in parallel transactions (i.e., transactions between different parties concerning the same market(s)), the first merger has to be assessed looking at the market as it currently exists. The second transaction’s competitive effects, however, are assessed assuming that the first transaction is approved. In concentrated markets, e.g., the first transaction resulting in a three to two merger or a four to three scenario, whereby the second transaction will reduce competition even further, this may result in the first deal being cleared while the second is blocked.

Western Digital received a statement of objections listing potential competition problems with its planned purchase whereas Seagate did not receive such document. This implies that the first transaction in any case will be approved, whereas all possibilities (including a blocking of the deal) are still open for the second transaction.

In August 20115, Western digital filed an action against the Commission decision to give priority to the review of the Seagate deal. The outcome of this challenge is eagerly awaited as the priority rule, depending on the timeline for the parallel deals, sometimes strikes as being arbitrary.