Société Coopérative de Production SeaFrance S.A. v Competition and Markets Authority (1st Respondent) DFDS A/S (2nd Respondent)
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lord Justice Tomlinson,Sir Colin Rimer |
| Judgment Date | 15 May 2015 |
| Neutral Citation | [2015] EWCA Civ 487 |
| Date | 15 May 2015 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C3/2015/0226 |
[2015] EWCA Civ 487
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE COMPETITION APPEAL TRIBUNAL
Roth J., President, Professor John Beath, Joanne Stuart OBE)
123541214
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justice Tomlinson
and
Sir Colin Rimer
Case No: C3/2015/0226
Mr Daniel Beard QC and Mr Rob Williams (instructed by Reynolds Porter Chamberlain LLP) for the Appellant
Mr Paul Harris QC and Mr Ben Rayment (instructed by The Competition and Markets Authority) for the First Respondent
Mr Meredith Pickford QC and Ms Ligia Osepciu (instructed by Hogan Lovells International LLP) for the Second Respondent
Hearing dates: 11–12 March 2015
Société Coopérative de Production SeaFrance S.A. (which I shall call "the SCOP"), a company incorporated in France as a workers' co-operative, appeals against the dismissal by the Competition Appeal Tribunal (Mr Justice Roth, Professor John Beath and Joanne Stuart OBE) ("CAT 2") of its application under section 120 of the Enterprise Act 2002 (" EA02") for judicial review of the decision of the CMA that its merger control powers extended to the acquisition of certain assets of the former cross-Channel ferry operator, SeaFrance SA ("SeaFrance"). In a nutshell, the question was whether part of the activities of the business of SeaFrance, or just a collection of its assets, was acquired. The SCOP contends that the CMA erred in law in concluding that the statutory conditions for its intervention had arisen. The challenge is not, therefore, to the recommendations of the CMA but to the technical question of statutory jurisdiction. In addition, no-one contests the jurisdiction of the CMA on territorial grounds.
Summary of the appeal and my conclusion
I shall have to consider the matters in detail, but this summary is intended to provide an overview of the rest of the judgment.
Summary of the background and this appeal
The control of mergers in the UK is the responsibility by the Competition and Markets Authority ("CMA"), the first respondent to these proceedings. There are three stages. The responsibility for these stages was formerly divided between the Office of Fair Trading ("OFT") and the Competition Commission, but the CMA is now responsible for all of them by virtue of changes made by the Enterprise and Regulatory Reform Act 2013. Those three stages may be described as follows. First, the CMA satisfies itself that certain conditions are fulfilled. One of these conditions is that the CMA believes that there is or may be a "relevant merger situation" (section 22(1) of the Enterprise Act 2002 (" EA02")) (The expression "relevant merger situation" is summarised in the next paragraph and defined in paragraph 14, below.) Second, the CMA must make a reference (formerly to the Competition Commission but now to itself) where it considers that the merger situation may lead to a substantial lessening of competition in the UK ( section 22(1) EA02). Third, the Competition Commission must carry out an inquiry: it must decide if a relevant merger situation has occurred and whether it may result in a substantial lessening of competition ( section 35 EA02). In the present case, all these stages have been completed. This appeal is concerned only with one of the questions which arises at the third stage, namely whether a relevant merger situation has been created.
Under the EA02, a relevant merger situation arises where two or more enterprises cease to be distinct or there is a proposal that they should do so. That means that they must be brought under common control or ownership. The definition of "enterprise" is important: it is defined by section 129(1) EA02 as "the activities, or part of the activities, of a business". A "business" is widely defined by the same provision as including "a professional practice and … any other undertaking which is carried on for gain or reward or which is an undertaking in the course of which goods or services are supplied otherwise than free of charge". The importance for this appeal is that part of a business's activities must be acquired. It is not enough that just assets ("bare assets") are acquired. There can be, however, a narrow dividing line between these two situations. The transfer of goodwill or intellectual property or human resources (formally or informally) can tip the balance and lead the competition authority to the conclusion that, in reality, part of a business was acquired. The Competition Appeal Tribunal ("the CAT") may be asked to intervene but it can only do so applying the principles of judicial review.
In this case, the relevant business was that of SeaFrance which operated passenger and freight ferry services between Calais and Dover. It had modern, specially designed vessels for this purpose, including the SeaFrance Rodin and the SeaFrance Berlioz. It went into administration in June 2010, and then into liquidation in November 2011. It ceased to trade in January 2012. Its remaining employees were then made redundant. Eventually Groupe Eurotunnel SA ("GET") acquired its ferries. It also acquired customer lists and so on. GET and the SCOP acted as associates for the purpose of this bid. Many of SeaFrance's former employees applied for positions with the SCOP, which entered into a contract with GET to operate the ferries and provide the employees.
On 6 June 2013, the Competition Commission issued a report ("the Competition Commission Report") in which it concluded that there was a merger situation but this conclusion was challenged before the Competition Appeal Tribunal (Marcus Smith QC, Heriot Currie QC and Dermont Glyn) [2013] CAT 30 ("CAT 1"). On 4 December 2013, CAT 1 directed that the matter was remitted back to the Competition Commission for further consideration of whether it had jurisdiction. The Competition Commission's functions were taken over by the CMA on 1 April 2014.
In its final report, entitled Eurotunnel/SeaFrance merger inquiry remittal – Final decision on the question remitted to the Competition and Markets Authority by the Competition Appeal Tribunal on 4 December 2013 and consideration of possible material change of circumstances under section 41(3) ("the Remittal Report"), dated 27 June 2014, the CMA decided that it had jurisdiction.
The SCOP made a further application to the CAT challenging this conclusion.
By order dated 9 January 2015, the Competition Appeal Tribunal rejected the SCOP's application to set aside the report of the CMA. The SCOP appeals against that decision to this court.
Summary of conclusion
In this judgment, I consider in detail the arguments of the SCOP, but I conclude for the reasons given below that it has not shown that the CMA came to a decision which was irrational or wrong in law. The CMA could rationally take the view that, even though SeaFrance has been placed in liquidation, and even though its employees have been declared redundant, GET/SCOP acquired its business. The CMA made some errors in the way it described the events but the conclusion which it reached was inevitable. This summary must of course be read with my detailed reasons below.
Structure of this judgment
This judgment is organised as follows:
1. Framework for UK competition authorities' merger control (paras. 12 to 22)
2. Facts said to give rise to a merger situation (paras 23 to 29)
3. Position of the L'Autorité de la concurrence (French regulator) (para. 30)
4. Competition Commission Report, Eurotunnel 1 and remittal (paras. 31 to 44)
5. CMA's Remittal Report (paras. 45 to 59)
6. Decision of CAT 2 (under appeal) (paras. 60 to 71)
7. Arguments on this appeal (paras. 72 to 109)
8. Discussion and Conclusions (paras. 110 to 128)
Annex: MMC report in AAH Holdings/Medicopharma
Framework for UK competition authorities' merger control
The CMA (as successor to the Office of Fair Trading which was named in the legislation as originally enacted) has to make a decision as to whether a relevant merger situation has been created. Thus (using the legislation as now in force), section 35(1) EA02 provides:
(1) Subject to subsections (6) and (7) and section 127(3), the [CMA] shall, on a reference under section 22, decide the following questions—
(a) whether a relevant merger situation has been created; and
(b) if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
Section 35(1) therefore requires a division whether a relevant merger situation has in fact been created. The material wording appeared in the section as originally enacted.
The relevant part of the definition of "relevant merger situation" reads as follows:
(2) For the purposes of this Part, a relevant merger situation has also been created if—
(a) two or more enterprises have ceased to be distinct enterprises at a time or in circumstances falling within section 24; and…
( EA02, section 23(2)(a))
Note that there must be two or more enterprises and so the mere acquisition of bare assets is not enough. Section 24 EA02 (referred to in section 23) imposes time limits on the making of a reference, and there is no issue on those time limits.
The term "enterprise" is defined in section 129(1) EA02:
"enterprise" means the activities, or part of the activities, of a business
The same subsection also provides a definition of...
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