Monti throws Drauz to the lions to save reputation

Competition Commission faces scathing criticism as two more decisions overturned by the CFI


“This is the kind of week you get once every 10 years,” said Linklaters partner Alec Burnside. Following two crucial rulings by the Court of First Instance (CFI), last week ended dramatically, when Competition Commissioner Mario Monti gave an unplanned press conference at which he admitted the regulator’s record on merger control had been damaged, but pledged to regain the trust of the legal community. He also fatally sidelined the head of the Mergers Task Force (MTF) Gotz Drauz.

Last week, the commission lost appeals against two more merger decisions in the CFI, with both Schneider-Legrand and Tetra Laval-Sidel overturned.

On the Schneider case, as on the earlier Airtours appeal, the CFI’s language was scathing, but its criticism in Tetra was moderated. It also appears that Tetra may not have fundamentally damaged the Commission’s controversial economic bundling theories, which are important in the GE Honeywell case and the Microsoft investigation.

In the most dramatic twist of the press conference, Monti was accompanied by the new head of the Directorate General of Competition Philip Lowe and it was announced that Lowe would take personal responsibility for the MTF. It was rumoured that Drauz would become Deputy Director of DG Competition, but now it seems that Drauz has been thrown to the lions. It is unclear whether or not he will stay at DG Competition.

Much of the rest of Monti’s announcement had been widely trailed in the press. One lawyer said: “Reading between the lines, the commission realises there is a head of steam building up. But Monti made it clear that he isn’t considering fundamental reforms.”

The commission has showed no sign that it will bow to demands for an external review panel in merger decisions, rather, it stuck with the previous line of using devil’s advocate panels.

The machinations of EU politics have been evident throughout the merger control debacle. The European Court is now queuing up to promote an independent US-style judicial body, while the CFI seems to be relishing its new vigilante role.

Meanwhile, some UK competition lawyers believe that this will have an impact on the operations of the Office of Fair Trading (OFT). DLA, which is involved with both the football shirts cartel investigation and the toys and games probe, hopes to use the ruling to lever more information from the OFT. DLA, acting for Manchester United, JJB Sports and JD Sports, claims this supports its argument that a regulator operating a quasi-judicial system should reveal information that helps the case of those accused of operating a cartel, although other lawyers say Schneider is just a restatement of old law.

DLA partner Mike Pullen, who is working for JD Sports, said: “It shouldn’t be for the OFT to judge whether any evidence can be used in our defence or not.”

Martin Rees, also from DLA ,who is representing JJB Sports, added: “The OFT response has been vague so far, they are still considering what to do.”

In recent cases, including one involving Bacardi, lawyers have tried to judicially review a regulatory investigation before the regulator has issued a final ruling.

However, the regulator has backed down before it could be determined whether or not judicial review was possible.