The European Court of Justice has set aside a judgment of the European Court of First Instance granting damages for the loss incurred by a company arising from the Commission’s breach of the merger review procedure.

In 2001, the European Commission blocked the merger between Schneider and Legrand because it would significantly impede competition in France. The Commission also ordered Schneider to divest its existing interest in Legrand. These decisions were annulled by the CFI, however, on the grounds that the Commission infringed the rights of defence. On reconsidering, the Commission again blocked the transaction and ordered Schneider to divest its interest in Legrand. Schneider subsequently sold its interest in Legrand.

In 2003, Schneider brought an action for damages of approximately EUR 1.7 billion against the Commission for the loss it claimed it had sustained because of the illegality of the original Commission decision. The CFI found that there was cause for damages, in particular for the costs incurred for the resumed merger procedure and for part of the reduction in the sale price that Schneider had to concede to the potential buyer to postpone the sale.

The ECJ, however, partially overruled this finding. As regards the loss of value of Schneider’s interest in Legrand, the ECJ found that no causal link existed between the claimed damages and the Commission’s decision. The timing of the sale was Schneider’s decision alone, and it was not relevant that the sale was subject to a private penalty agreement with the buyer if the sale did not proceed by a certain date. The ECJ did, however, uphold the damages claim for the costs incurred in the renewed merger procedure such as legal costs.

The judgment of the ECJ provides the Commission with legal protection to take merger decisions without facing potentially huge claims for damages in the event that those decisions are subsequently annulled.