A. Merger Control Regimes

In all three jurisdictions, the merger control regime follows an administrative model rather than a court-based one, such as in the US.Footnote ¹⁸ All three systems adopt a two stage approach to merger investigations, with broadly equivalent timetables. In the UK, however, there is a bifurcation of authority between the two stages. The phase one investigation is conducted by the Office of Fair Trading (OFT) whereas the more in-depth investigation at phase two is conducted by the Competition Commission (CC). In the EU, the Directorate General for Competition (DG COMP) of the European Commission conducts merger appraisals. The Commission can take a number of categories of decisions under the EU Merger Regulation (ECMR)Footnote ¹⁹ which may be subject to review before the General Court (GC, formerly the Court of First Instance).Footnote ²⁰ The Commission's role is often characterized as ‘investigator, prosecutor, and adjudicator’, and criticized on that basis, although similar criticisms could also be levelled against the UK and German systems.Footnote ²¹ Some have claimed, however, this is to misunderstand the situation since the Commission is subject to important checks and balances in the exercise of its powers, in particular, judicial review by the GC.Footnote ²²

In Germany, the Federal Cartel Office (Bundeskartellamt (BKartA)) has jurisdiction over mergers under the Act Against Restraints of Competition (ARC).Footnote ²³ Where the merging parties (or other interested parties) make a complaint against a merger decision, in the first instance the complaint is filed with the BKartA (within one month of the decision).Footnote ²⁴ Upon doing so the complaint is also automatically pending before the Oberlandesgericht Düsseldorf (OLG). The BKartA is still allowed to review and amend the challenged decision (although this is not a formal procedure).

The procedural and institutional framework underpinning the UK's merger regime underwent considerable reform with the enactment of the Enterprise Act 2002. Apart from exceptional cases, mergers are assessed by independent agencies against a strict effects-based test. In contrast to the EU and Germany, there is no compulsory notification of mergers, although transactions meeting the relevant jurisdictional thresholds may, subject to a limitation period, be subject to an ex post investigation.Footnote ²⁵ Judicial review cases are heard generally by the Administrative Court but, uniquely for merger decisions, the Competition Appeal Tribunal (CAT) has jurisdiction to hear challenges to merger decisions of both the OFT and CC.

With the recent changes in the UK, there is now a limited role for political intervention across all three jurisdictions, and the merger agencies are, therefore, all functionally independent. Some important qualifications need to be made. In the EU, while DG COMP conducts the substantive assessment of the mergers, formally the final decision on whether to authorize or prohibit a merger is taken by the College of Commissioners.Footnote ²⁶ Furthermore, the Commission is required to liaise with Member States' respective competition authorities through the Advisory Committee.Footnote ²⁷ In limited circumstances, Member States may intervene in a clearance decision where their ‘legitimate interests’ are affected by the merger (notwithstanding the Commission's exclusive competence over mergers meeting the relevant turnover thresholds).Footnote ²⁸ In the UK, the Secretary of State has limited powers to intervene in respect of the public interest, and where he does so, his decision is determinative (although informed by investigations conducted by the agencies).Footnote ²⁹ In Germany, on the application of the parties, the Minister of Economics may allow a merger that was prohibited by the BKartA where the restraint of competition is outweighed by advantages to the economy as a whole or other overriding public interest grounds.Footnote ³⁰

So at an institutional level, we see substantial convergence in the design of agencies, all of whom are generally independent and expert decision-makers. We now turn to the nature of judicial review in each jurisdiction.

B. Judicial Review in Constitutional Context

Judicial review in the EU is concerned primarily with the objective protection and observance of EU law, rather than protection of individual rights per se.Footnote ³¹ Article 19 TFEU, the central rule on legal protection, is framed in objective terms, providing that the court ‘shall ensure that in the interpretation and application of the Treaties the law is observed.’

The guiding principle of judicial review is the checking of the legality of acts of the European institutions, including the EU Commission. In addition to individuals with standing, actions can be brought by another Community institution or a Member State, underlining the Community Courts' role in promoting the legitimacy of EU policy-making, and the balance between the institutions. There is no distinction between constitutional and administrative review. While judicial review does provide for the effective protection of individual rights, the justification for doing so stems from the need to pursue the underlying goals of the Treaty.

The modern administrative law in Germany has been referred to as ‘constitutional law in concrete form’,Footnote ³² with the protection of individual rights being first and foremost the purpose of judicial supervision of the executive.Footnote ³³ The constitutional basis for the work of the courts and for all functions of the State is the Basic Law (Grundgesetz). It heavily influences decision-making and the application of law, laying down the guiding constitutional principles such as the catalogue of directly applicable Basic Rights (Grundrechte) and the rule of law (Rechtsstaatsprinzip). The principle of legality obliges the executive not to act against the law (primacy of law), and permits interference with individual rights only insofar as the law permits. Any individual that suffers from an unjustified intrusion into his basic rights by public power has the right to effective judicial protection.Footnote ³⁴

It has been observed that German administrative law has had a significant influence on the development of European administrative lawFootnote ³⁵ on the one hand, while in respect of the theory and practice of control of judicial discretion, the German system diverges significantly from the other administrative law systems of the EU, including that of EU law.Footnote ³⁶ Indeed, no other European country has principles governing discretion of this depth and complexity.Footnote ³⁷ There are several reasons why German law employs such a strong model of judicial review in the control of discretion.Footnote ³⁸ The right to judicial review, contained in article 19(4) of the Basic Law, has been interpreted to mandate expansive judicial intervention. In contrast to the EU and UK, the theory underpinning judicial supervision of the executive will admit there is only one correct answer in the exercise of discretion; it is precisely where there is room for two views that judicial review is mandated.Footnote ³⁹

The delegation of discretionary authority is strictly controlled in Germany. First, as a general proposition, discretion is only recognized where it is expressly granted by statute.Footnote ⁴⁰ This requires the use of permissive language; where such language is not used there is generally held to be only one correct answer to a question, irrespective of how imprecise or ambiguous is the relevant legal norm.Footnote ⁴¹

In contrast to the EU and Germany, the UK has a relatively weak model of judicial review. Being unwritten, the UK Constitution is organized around the doctrine of the legislative supremacy of Parliament.Footnote ⁴² The courts have developed a body of law, centred around the doctrine of ultra vires, which is used to ensure that public bodies who exercise statutory powers do so in a way which is consistent with the enabling Act. This is commonly understood to be the central organizing principle of judicial review and it clearly resonates with principal-agent theory. In theory, when deciding a case, it is the intentions of the legislature that are determinative, there being no higher order law to which the courts can turn.Footnote ⁴³

C. The Role of the Reviewing Courts

Judicial review of the decisions of Community institutions is carried out by the GC, with appeal on points of law only to the Court of Justice of the European Union (CJEU).Footnote ⁴⁴ The legal basis for direct judicial review of an EU institution is article 263 TFEU—actions for annulment—which enumerates the grounds of review as being lack of competence, the infringement of an essential procedural requirement, the infringement of the Treaty or of any rule of law relating to its application and the misuse of powers.

In actions for annulment, the Community Courts review the legality of the institution's decision, but they do not have full jurisdiction on the merits of the case.Footnote ⁴⁵ Unlike an appeal, the Community judges are neither competent to reassess the facts underlying a Commission decision, nor substitute their decision for that of the Commission. The review is based on error—the decision can only be annulled if the Commission committed an error of fact, law or assessment.Footnote ⁴⁶ The effect of a GC annulment is to revert the case back to the Commission for a renewed decision.Footnote ⁴⁷ In the instance of mergers, the concentration is subjected to reinvestigation (based on current market conditions).Footnote ⁴⁸ The timetable starts again from the date of the judgment.Footnote ⁴⁹ Both the GC and CJEU are generalist courts. Due to the number of competition cases which come before it, however, the GC could be viewed as a de facto specialist tribunal with increasing economic expertise,Footnote ⁵⁰ particularly as it is configured in chambers, which in practice means that certain judges may develop specialized knowledge.

In Germany, if a merger decision violates procedural or substantive lawFootnote ⁵¹ and, thus, the complainant's rights, the OLG is empowered to strike it down. Both the legal nature of the merger complaint procedure and the competence of the courts are somewhat unusual.Footnote ⁵² The decisions made by the BKartA correspond by their nature with administrative acts (Verwaltungsakte) and can be eliminated if the individual affected initiates an action for annulment (Anfechtungsklage).Footnote ⁵³ Interestingly, the complaint procedure takes place before the OLG, a civil rather than an administrative court, including three specialist competition chambers, with exclusive jurisdiction over merger complaints.Footnote ⁵⁴ Decisions of the OLG are appealable on points of law to the Federal Court of Justice (BGH) where all competition law cases are assigned to the cartel division (First Civil division).

The complaint procedure is not so much aimed at an objective control of accuracy, but serves the protection of individual rights. It is characterized by the investigation principle, unusual before civil courts but similar to the strict judicial review in administrative courts. The OLG reinvestigates the facts of the case, acting on its own initiative.Footnote ⁵⁵ If the court finds a prohibition to be unlawful, it cannot remit the case to the BKartA or replace the original decision. Thus, the merger is permitted by default. If a clearance decision is set aside (in whole or in part), the time limit for the merger assessment begins to run anew from the time of the court's final ruling.Footnote ⁵⁶

While the UK CAT is a specialist tribunal, the substantive grounds on which challenges can be made to merger decisions are expressly limited to the grounds of ordinary judicial review.Footnote ⁵⁷ Judicial review in the UK is often characterized as essentially an interpretative process according to which judges are required to apply Parliament's will as it is expressed or, more often than not, implied in the words of the relevant statute.Footnote ⁵⁸ The grounds of review can be summarizedFootnote ⁵⁹ as being: illegality (whether the public authority has acted within its jurisdiction and directed itself properly in law); fairness (whether the decision has been made in a fair way, having regard to the nature and seriousness of the decision vis-à-vis the individual concerned); and ‘irrationality’ (or ‘Wednesbury unreasonableness’) (whether a decision is so unreasonable that no public authority acting reasonably could have arrived at it). The latter ground, while concerned with merits, it is normally an extremely difficult ground of review for a claimant to make out, especially where the decision in question concerns matters which are paradigmatically for the executive. Reflecting the limited nature of the court's supervisory jurisdiction, when a decision is found by the courts to be unlawful, the decision is remitted to the original decision-maker.

A. Law: The Interpretation of (Indefinite) Legal Norms

The application of rules may have a discretionary element; they have to be defined in respect of both meaning and relevance (the rule's applicability).Footnote ⁶² In this regard, Dworkin makes an important distinction between discretion in the strong and the weak sense.Footnote ⁶³ In the present context, this distinction is highly relevant to the issue of agencies' interpretation of legal norms. If discretion exists in the strong sense, then the agency will be given some degree of deference in deciding how a statutory term (or rule) should be interpreted. Conversely, if discretion exists in the weak sense, then the courts will hold that there is one correct answer, to be determined ultimately by the court, to the question of the meaning of the legal norm (the ‘right-answer thesis’).Footnote ⁶⁴ The distinction between rules and discretion is not straightforward, therefore, and we observe a divergence of approach across our jurisdictions.

In respect of questions of law, neither in the EU nor in Germany is there any deference shown to the merger agencies. According to EU law, there is no margin of appreciation left to the Commission in its interpretation of either the EU Treaty or secondary legislation (such as the ECMR).Footnote ⁶⁵ Even in respect of highly specialized terms, such as the meaning of ‘collective dominance’ for the purposes of article 2 of the ECMR, the GC in Airtours specified in precise terms the criteria which the Commission must apply.Footnote ⁶⁶ This is despite the fact that the concept of collective dominance—or coordinated effects—is based on game theoretic principles the interpretation of which, it might be argued, requires a high level of expertise.

In Germany, there is no discretion in the interpretation of legal provisions, even in respect of ambiguous legal terms.Footnote ⁶⁷ The strict control of statutory terms is mandated by the (constitutional) right to effective judicial review, making the approach particularly resistant to change.Footnote ⁶⁸ The rigour of the court's scrutiny requires the court to intervene in highly specialized areas, resulting in a shift of the locus of decision-making from the agency to the court.Footnote ⁶⁹

In the UK, as with other common law systems most notably the US, the general approach has been to allow administrative agencies some discretion in the interpretation of statutory terms, including in competition cases.Footnote ⁷⁰ In the South Yorkshire Transport case decided under antecedent merger legislation—the Fair Trading Act 1973—the House of Lords warned against the dangers of ‘taking an inherently imprecise word, and by redefining it thrusting on it a spurious degree of precision’.Footnote ⁷¹ Similarly, in IBA Health v OFT,Footnote ⁷² the Court of Appeal chided the CAT for trying to ‘rewrite’ section 33 of the Enterprise Act 2003Footnote ⁷³ relating to the OFT's duty to refer a merger to the CC.Footnote ⁷⁴

The bright line distinction between the meaning of a legal norm and its application has been questioned. There are two core arguments. First, it has been recognized that to maintain that the interpretation of a legal norm will only yield one correct answer is often a ‘fiction’;Footnote ⁷⁵ the use of open-textured, ambiguous and incomplete statutory provisions in the delegation of administrative powers must leave open some ‘margin of appraisal’ on the part of the agency in the interpretation of a statute. While questions of law are normally for the courts, and the courts are the final arbiters of what the law is, an important distinction should be made between administrative law where the agency applies the law in the first instance, on the one hand, and civil or criminal law, on the other, where it is the court which is applying the law de novo. This leads to the second argument. Specialist agencies are often in a better position than the generalist courts to resolve ambiguities and interpret technical, legal terms. The interpretation of a statute in a way which promotes effective public policy may depend more on the expertise of the agency rather than the limited knowledge and modes of reasoning employed by the courts.Footnote ⁷⁶

In comparing the approaches of the courts, regard should be had to the important differences between the UK's common law system with that of the EU and German codified systems. First, in respect of interpretation, the UK courts tend to adopt a literal approach, whereas the Community Courts tend to adopt a purposive/teleological approach.Footnote ⁷⁷ Second, in this area, the constitutional setting of judicial review appears to be vital. In Germany, the control of administrative discretion mandated by the constitutional right to effective review, appears to produce the somewhat counter-intuitive result that the more complex a legal norm, the more it should be open to challenge.Footnote ⁷⁸

The use by the legislature of indefinite legal concepts can be seen as a mode of delegation whereby the agency, especially in complex or technical spheres, is required to clarify the ‘normative programme’ in context.Footnote ⁷⁹ This appears to reflect the approach of the UK courts. One adverse consequence of severely limiting discretion, as in the EU and Germany, might be to force the legislature to enact more detailed and complex rules in the first place, but such complexity may in turn ‘paralyse … the ability of the administration to ensure a proper balance of interests in individual cases’.Footnote ⁸⁰

The need for expertise and specialist knowledge supplies a key justification for the delegation of discretionary powers. The credibility of policy, however, also calls for transparent and predictable rules. As recent changes in antitrust laws from formal to more effects-based, economic approaches typify, an impatience with juridified mediating rules has led to an increasing emphasis on goal-based, purposive decisions: what Galligan terms the pursuit of ‘substantive rationality’.Footnote ⁸¹ The source of legitimacy in the exercise of discretionary powers stems in part from ‘how well they realize specified goals, not whether [decisions] have been made by the impartial application of fixed rules’.Footnote ⁸² While merger law is an area one would associate with great complexity and variability—implying a highly discretionary approach—the underlying policy goal of maximizing efficiency also requires a framework of rules which are predictable and transparent. It appears that insofar as legal determinations are concerned, the courts in the three jurisdictions appear to attach different weight to these imperatives.

B. Determinations of Fact

While discretion appears to be limited to those instances where there is a choice for the decision-maker between alternative courses of action, it may also be true to speak of discretion being present in the determination of facts. The identification of relevant facts, and the interpretation of those facts in the application of the rule, necessarily involves some element of ‘choice’ on the part of the decision-maker.Footnote ⁸³ Facts are susceptible to subjective interpretation given the ambiguities, and sometimes conflicting, nature of the evidence. Furthermore, discretion is exercised to the extent that the decision-maker may have to decide upon both the methods by which facts are ascertained, the weight to be attached to different types of evidence, and in deciding what level of evidence is sufficient.Footnote ⁸⁴ We discuss how the courts have resolved these issues in each of our jurisdictions.

In respect of determinations of fact, review by the GC is said to be intense, apparently leaving ‘no room for discretion on the part of the Commission’.Footnote ⁸⁵ This is the case notwithstanding the prospective nature of the Commission's task in analysing (anti-) competitive effects. According to the Advocate General Tizzano, the issue for the court is to ‘… verify objectively and materially the accuracy of certain facts and the correctness of the conclusions drawn in order to establish whether certain known facts make it possible to prove the existence of other facts to be ascertained.’Footnote ⁸⁶ On the other hand, where the review concerns ‘complex economic assessments’ by the Commission, ‘… review is necessarily more limited, since the [court] has to respect the broad discretion inherent in that kind of assessment and may not substitute its own point of view for that of the body which is institutionally responsible for making those assessments’.Footnote ⁸⁷ Given this, there is an important distinction to make at the outset between what is a primary fact, on the one hand, and what is an assessment of, or inference drawn, from primary facts, on the other.Footnote ⁸⁸ The simplicity of this distinction belies the complexity of determining the type of question being addressed. As Vesterdorf states:

In respect of the primary facts, the court must ascertain whether the evidence relied on is factually accurate, reliable and consistent, and also satisfy itself that the evidence is sufficient basis for the complex assessment.Footnote ⁹⁰ It must also consider whether any possible omissions on the part of the Commission are capable of calling into question its finding(s).Footnote ⁹¹

In respect of the difference between primary facts and the ‘complex economic assessments’ of facts, there appears to be no general rule or definition which has been devised by the court. Examples of questions which involve complex economic assessments may be said to include market definition,Footnote ⁹² the existence of barriers to entry or of dominance.Footnote ⁹³ Other questions could fall into either category depending on the nature of the particular case.Footnote ⁹⁴ So while it is an apparently clear distinction, in practice it is one which is likely to vary from case to case, not least determined both by the availability of evidence and situations where evidence of equal probative value is pulling in opposite directions.Footnote ⁹⁵

In the UK, there is some conflicting case law over which is the correct test for a court to apply when reviewing determinations of fact. There is a consistent line of case law which would suggest that the Wednesbury test, and hence a high level of deference, is the operative test in this context.Footnote ⁹⁶ Nevertheless, Carnworth LJ in IBA Health made clear that there is no general rule precluding a reviewing court from overturning a decision where it was clear that the original decision-maker's finding(s) of fact did not support that decision.Footnote ⁹⁷ It was, in his view, unnecessary for the CAT ‘to rely on some special dispensation from the ordinary principles of judicial review’.Footnote ⁹⁸ These principles were sufficiently flexible to embrace the specific context in which it was operating, including specialized expertise of the Tribunal.Footnote ⁹⁹ In his view, the question before the CAT—whether the evidence before the OFT was sufficient to dispel the uncertainties over the potential substantial lessening of competitionFootnote ¹⁰⁰—was a question ‘wholly suitable for evaluation by a court’ involving ‘no policy or political judgment … such as would be regarded as inappropriate for review …’.Footnote ¹⁰¹ Those authorities which were cited in support of the proposition that factual issues could only be overturned under the more restrictive Wednesbury test concerned a mix of both policy and factual determinations and were, therefore, distinguishable from the present case.Footnote ¹⁰²

Subsequently in Unichem the CAT attempted to explain its approach to a review of the exercise of the section 33 duty to refer. It described the approach as being ‘multi-layered’: the first question was whether the OFT had ‘properly evaluated the primary facts of the case’, the second being whether, on the basis of those facts, the OFT's conclusion or belief that there was an insufficient likelihood of substantial lessening of competition was reasonable.Footnote ¹⁰³ While being careful not to jettison the Wednesbury test, it observed that the reviewing function ‘may properly be more intense than it would be if issues of policy or politics were involved’.Footnote ¹⁰⁴ In sum the CAT was entitled ‘acting in a supervisory rather than appellate capacity, to determine whether … conclusions are adequately supported by evidence … [and] that all material factual considerations have been taken into account’.Footnote ¹⁰⁵

In Somerfield, the CAT nevertheless followed the traditional Wednesbury approach in scrutinising a divestment package imposed by the CC.Footnote ¹⁰⁶ It held that, within the confines of that test, the weight that a decision-maker attaches to a particular piece of evidence is for the decision-maker—and not for the court—unless the conclusion drawn from the evidence is unreasonable in the Wednesbury sense.Footnote ¹⁰⁷ Given the restrictive nature of the test, and the need to determine remedial matters ‘expeditiously’, it held itself to be ‘extremely reluctant to entertain applications … based on lack of or misinterpretation of evidence, unless the groundwork has been properly laid out’ by the applicant, not least because otherwise the CC ‘does not have a full opportunity to deal with the matter in its defence’.Footnote ¹⁰⁸ As to the interpretation of evidence by the CC, the CAT held that where evidence was unclear or contradictory, in drawing inferences from it the CC was to be given a wide margin of discretion:

The CAT further held that the CC was entitled to look at all available evidence ‘in the round’ and the weight given to evidence was a matter for the CC,Footnote ¹¹⁰ subject to the proviso that the weight attached to any piece(s) of evidence was neither ‘perverse’ nor ‘a manifest error of appreciation’.Footnote ¹¹¹

So while we observe a move towards more intense review of factual determinations, this has been justified in two main ways. First, the new regime, with institutional separation of the merger authorities from political actors, has legitimated more intense review. This is consistent with agency theory: the new system removes an ex post control—namely the ability of the Secretary of State to depart from the agency's recommendations—justifying the imposition of a more intense ex post control in the form of a heightened standard of review. Second, the intensity of the ex post control is further justified by the CAT being an expert tribunal rather than a generalist court. Nevertheless, the CAT itself will mediate the intensity of review in recognition of the expertise of the authority under review, hence the more limited review for the CC as compared with the OFT.

In Germany, the position is quite different from that of both the EU and UK. Under section 70(1) ARC the OLG is required (as was its predecessor the Kammergericht (KG)) to reinvestigate the facts de novo and ex officio where a complaint is brought to it.Footnote ¹¹² This duty to reinvestigate the facts is unique to the German system. However, despite the wording of section 70(1) it appears from the case law that the complaint court does not engage in a full review of facts. As has been clarified by the BGH on a number of occasions, the first comprehensive investigation into the facts must be carried out by the BKartA.Footnote ¹¹³ Furthermore, the ex officio examination of the complaint court is also constrained by the matter in dispute; only those facts relevant for the decision of the OLG are to be reviewed.Footnote ¹¹⁴ On that account, the OLG may rely on some of the factual findings of the BKartA. In Texaco/Zerssen the KG outlined how the task of investigating the facts is divided between the BKartA and the court and stressed that the first comprehensive investigation was to be done by the BKartA and will not be carried out by the court,Footnote ¹¹⁵ a practice which has been followed consistently.Footnote ¹¹⁶ Nevertheless, drawing the line between the court's duty to reinvestigate and its reliance on ascertained evidence has not been easy.Footnote ¹¹⁷

In addition to the refinements of the de novo review of facts, the courts have also restricted the ex officio investigation duty insofar as the complainant needs to offer some substantiation to his allegations; simply rejecting the findings of the BKartA does not force a complete reinvestigation of facts.Footnote ¹¹⁸ The decision of the OLG not to reassess facts in the E.ON/Stadtwerke Eschwege merger was affirmed on appeal by the BGH.Footnote ¹¹⁹ The court stated that where a market data inquiry is carried out by the BKartA, the OLG can normally make use of the results, even if the complainant is denied access to underlying documentation and evidence. Unless precise objections regarding the concealed data have been made, there is no ex officio obligation of the court to double-check the reliability of the evidence.Footnote ¹²⁰

One mechanism assisting the court in complying with its investigatory duty is the ability to call on the BKartA to gather further evidence on its behalf, another feature unique to the German system.Footnote ¹²¹ There are a number of cases where the court commissioned the BKartA with additional investigations, especially regarding markets and market shares.Footnote ¹²²

This does raise due process concerns since in the complaint proceedings the BKartA's role is similar to that of a respondent.Footnote ¹²³ However, as the BGH pointed out,Footnote ¹²⁴ part of the rationale relates to the BKartA's superior expertise making it best suited to fulfil the task of factual investigation.Footnote ¹²⁵ To guard itself against a possible bias on the part of the BKartA selecting and presenting facts to the court, the OLG acknowledged that evidence brought forward by the BKartA is not considered to have equivalent probative value to that resulting from the court's own investigation.Footnote ¹²⁶

In a number of cases, judges have referred to their own experience and knowledge in order to assess, for example, the substitution of products or consumer preferences. This appears to underline the fact that the court has full jurisdiction over facts. For example, in Texaco/Zerssen Footnote ¹²⁷ the judges, considering the intensity and structure of competition in the market for light fuel oil, concluded, on the basis of their knowledge, that final consumers observe the market, compare prices and look for the best deal. The judges considered themselves being part of a relevant group of consumers and drew a parallel between their own experience (as final consumers) and the conduct of larger customers and bulk buyers.Footnote ¹²⁸ In a later merger decision the BGH confirmed that a judge or member of the BKartA being among the relevant group of consumers can make the necessary appraisal on basis of his own life experience.Footnote ¹²⁹ According to the BGH, the complaint judge, whose task is to assess the facts, is obliged to define the decisive market since the definition essentially depends on the (factual) circumstances in the market, a matter within the full control of the OLG.Footnote ¹³⁰

By way of summary, in the EU review by the GC of factual determinations is intense, leaving little room for discretion on the part of the Commission. In justifying this approach, Vesterdorf argues that the GC was created in part for the purpose reviewing ‘comprehensively and rigorously the factually complex decisions that the Commission adopts in the field of competition’.Footnote ¹³¹ There is nonetheless some room for discretion even in this area where the evidence pulls in different directions. In the UK, there appears to be some convergence, where the depoliticization of the regime has been used explicitly to justify more control over factual determinations. It is difficult, however, to marry up the subsequent case law, in particular the Somerfield decision. This might be due to the fact that the issue concerns merger remedies, where there is considerable discretion given to the merger authority (the CC) in its assessment of evidence—an explanation consistent with the judicial review of merger commitments in the EU cases.Footnote ¹³²

Part of the justification for a more intense review may be the specialist nature of the CAT, although regard should be had to the governing statute requiring that it applies the same grounds of review as the ordinary (generalist) administrative courts. Furthermore, context clearly matters. There is an importance distinction to be drawn between the OFT's role under phase I and the CC's role under phase II, in terms of the deference shown by the court. Again we note the resonance with our central hypothesis. With functional independence of the agency, the courts imply a need for heightened scrutiny of factual decisions, but the level of scrutiny is mediated by factors such as the depth of the investigation and the relative expertise of the agency.

The German system is the most interventionist, with the OLG having the duty to reinvestigate the facts de novo—although in practice this duty has been qualified with the requirement that the complainant offers some substantiation to its allegation that the factual determination is incorrect (in effect, a requirement that an error is disclosed by the complainant, close to the requirement of EU law). Nevertheless, the role of the court is an interventionist one, and some of the features of the system clearly distinguish it from the EU and especially the UK. For example, the court is required to substitute its own findings of fact on finding of a defect, rather than merely remitting the case back to authority. Likewise, the judges are entitled to draw upon their own experience and expertise.

C. The Control of Discretion

We noted in the previous section the difficulty of distinguishing between primary facts, on the one hand, and inferences drawn from facts (including economic assessments), on the other. We now turn to judicial scrutiny of the latter types of determination.

In the EU, whereas questions of law and fact can be challenged on the basis of mere error, complex economic assessments by the Commission can be overturned by the court only where there is a ‘manifest error of appraisal’.Footnote ¹³³ It is in the area of competition law that the standard of review has been most developed. The classic formulation can be found in Aalborg Portland, an article 81 EC (now article 101 TFEU) case:

In the merger context, the language used has varied slightly, with the CJEU in the Kali and Salz case referring to a ‘certain discretion, especially with respect to assessments of an economic nature’.Footnote ¹³⁵ In consequence, when defining the rules on concentrations, the reviewing court must take into account the ‘discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations’.Footnote ¹³⁶

Much has been written (which we do not rehearse here) on the recent landmark EU merger review cases and an apparently heightened standard of review relative to the manifest error test.Footnote ¹³⁷ Far less has been said about the institutional reasons for respecting this discretionary margin in the first place. One rationale of this margin of discretion derives from the constitutional role of judicial review in the EU legal system and the core principle of institutional balance. Arguably this principle denotes a non-hierarchical relationship between the Commission and the Court.Footnote ¹³⁸ As Advocate General Tizzano stated in Tetra Laval, ‘[t]he Court may not substitute its own point of view for that of the body which is institutionally responsible for making those assessments’.Footnote ¹³⁹

A second and related rationale for this margin of discretion is that DG COMP has greater economic expertise than the Community courts. The GC had previously explicitly recognized in Petrolessence that it should not substitute its own assessment for that of the Commission.Footnote ¹⁴⁰ Likewise, in that case, the GC reiterated the need for the claimant to demonstrate a manifest error.Footnote ¹⁴¹ The trio of annulled prohibition decisions in 2002 in Airtours,Footnote ¹⁴²Schneider Footnote ¹⁴³ and Tetra Laval,Footnote ¹⁴⁴ do appear to demonstrate the GC's willingness to more closely scrutinize the Commission's treatment of economic evidence, particularly when it uses novel economics theories to reach its conclusions.Footnote ¹⁴⁵ In Tetra Laval the CJEU appeared to approve of this approach, being careful to distinguish between the complex economic assessment itself, over which there is a margin of discretion, and the Commission's ‘interpretation’ of evidence of an ‘economic nature’:

Following that judgment, there appears to be a heightened standard of review in cases such as MCI,Footnote ¹⁴⁷GE,Footnote ¹⁴⁸ and Impala Footnote ¹⁴⁹ (although the latter has been curtailed by the subsequent Sony BMG appeal in the CJEU).Footnote ¹⁵⁰ The GC's reasoning in Tetra Laval led the Commission to protest that the test was no longer whether the applicant had established that the Commission had committed a manifest error of assessment, but whether it had cast sufficient doubts on the convincing nature of Commission's case.Footnote ¹⁵¹ In Schneider, the court considered that it could uphold a Commission decision even if it was incomplete, as long as it enabled the GC to conclude that the concentration was incompatible with the common market, which appears very close to substituting its decision for that of the Commission.Footnote ¹⁵² Most recently, in Sun Chemical Group, the GC engaged in some degree of economic assessment itself in deciding whether the Commission had followed its horizontal merger guidelines.Footnote ¹⁵³

We note, therefore, an increased intensity of review in relation to economic assessments made by the Commission. In one sense this may be consistent with our hypothesis—that the increasing discretionary nature of merger law—with a move from a formal to an effects-based approach—increases the need for the court to more intensively scrutinize the Commission's decisions. Two points are of particular note. First, the GC itself is arguably a more expert body than the CJEU—the latter espouses the ‘manifest error’ standard and it is more concerned with the systemic coherence of EU law as a whole, aligning it with other policy areas. Second, it is also the case that the standards which structure the way in which the decision is made, while being extra-legal, are derived from economics and are therefore capable of objective justification.Footnote ¹⁵⁴

As a general proposition, discretionary authority is strictly controlled in Germany. In scrutinizing the exercise of discretion—once the legal norm(s) and facts have been established—the courts apply a proportionality test which ensures that the individual affected is not placed under an excessive burden.Footnote ¹⁵⁵ In applying this test, the agency is given a certain margin of discretion (Ermessensspielraum) which varies according to the context of the decision in question, from deferential to meticulous and rigorous scrutiny.Footnote ¹⁵⁶ This is the only element of a discretionary decision where the court will entertain the possibility of a range of (legal) outcomes.

In theory the BKartA, as an administrative agency, enjoys a margin of discretion (whenever the law provides for it), and prospective merger analyses necessarily involve some element of judgement. The words of the substantive test, however, appear to leave little room for discretionary judgement.Footnote ¹⁵⁷ It is only where the undertakings concerned offer commitments, which would allow a clearance subject to conditions, that the BKartA can exercise discretion on the merits.Footnote ¹⁵⁸

In cases where discretionary power is given to the BKartA, section 71(5)1 ARC states that:

The correct reading of this section is contentious. Some identify a clarification of the common administrative law doctrine whereby the courts will only control whether the authority has ‘overstepped the boundaries’ of its discretion.Footnote ¹⁶⁰ If the administration has the legal power to choose one measure out of a number of distinct but legally permissible alternatives, it is not for the court to overrule this decision simply because another alternative would be superior from the judge's point of view.Footnote ¹⁶¹ However, according to others, the section's effect is to give the OLG full jurisdiction over decisions of the BKartA.Footnote ¹⁶² Accordingly and relying on this provision, the courts have gone beyond administrative law doctrine and thoroughly scrutinized merger decisions including the BKartA's substantive assessments from the beginning of merger control in 1973.Footnote ¹⁶³ That includes the establishing of legal norms—the so-called margin of appraisal for indefinite legal concepts—and ‘real’ discretion regarding the legal consequences.Footnote ¹⁶⁴ By way of example, in one of the first merger decisions, the KG comprehensively reviewed the assessment of facts (albeit incorrectly in substance as was ruled later by the BGHFootnote ¹⁶⁵) replacing the BKartA's market share computation with its own calculations.Footnote ¹⁶⁶ A margin of appreciation for the BKartA, especially concerning economic questions such as definition of markets, apparently did not and does not exist.Footnote ¹⁶⁷ It has been argued that the special administrative procedure under the ARC aims at a thorough review of decisions in order to counterbalance the wide discretion stemming from imprecise terms in the statutory provisions.Footnote ¹⁶⁸ This is notwithstanding the fact that the court also strictly controls the interpretation of ambiguous legal norms.

According to the orthodox theory, in the UK judicial review is not concerned with the merits of a decision. Indeed, were this otherwise it is often said that a court would be acting unconstitutionally by substituting its view for that of the public body (a supreme) Parliament chose to make the decision.Footnote ¹⁶⁹ Furthermore, in respect of economic regulation (including competition law), the courts have traditionally shown agencies a high level of deference.Footnote ¹⁷⁰ As was discussed previously, the approach in the merger context has shifted significantly, partly as a result of the institutional and procedural reforms under the Enterprise Act 2002. While section 120(4) of that Act specifically limits the jurisdiction of the CAT to that of judicial review,Footnote ¹⁷¹ in the IBA Health case the CAT was attempting to rely on its status as a specialist tribunal as permitting it to depart from the standard Wednesbury test governing the exercise of discretion,Footnote ¹⁷² stating that the test was one simply of (objective) ‘reasonableness’.Footnote ¹⁷³ While the Court of Appeal did not approve of its attempt to rework the Wednesbury formulation,Footnote ¹⁷⁴ it held that this was not the correct test for factual determinations, in respect of which the court was entitled to ask whether they were ‘reasonable’.Footnote ¹⁷⁵ In other words, with respect to questions of fact, the court's jurisdiction was not circumscribed by the Wednesbury test. Irrespective of the use of subjective language, the absence of a political or policy dimension rendered the question as being one of fact and, in regard to such questions, there ‘is no doubt that the [CAT] is entitled to enquire whether there was adequate material to support that conclusion … .’Footnote ¹⁷⁶ The real significance of the case is that the Court of Appeal read down the application of the Wednesbury test by defining ‘discretion’ in narrow terms, ie, applying only to decisions with a political or policy dimension. There followed some confusion in subsequent cases over the nature of discretion. For example in Unichem v OFT the CAT held that for a decision without a policy or political dimension, the use of the word discretion with its ‘connotation of policy’ was not appropriate;Footnote ¹⁷⁷ the ‘more correct concept is one of a margin of judgment’.Footnote ¹⁷⁸

Subsequent case law demonstrates that the level and type of scrutiny depends very much on institutional factors and the need to ensure that the court's reviewing function does not undermine the implementation of the policy. The CAT had an opportunity to revisit the appropriate standard of review in Somerfield v Competition Commission. Footnote ¹⁷⁹ In this case, the review was against a decision of the CC, rather than the OFT, and concerned the imposition of merger remedies.Footnote ¹⁸⁰ Looking to the relevant statutory provisions under which the Commission was operating, the CAT concluded that it was entitled to a ‘clear margin of appreciation’ in deciding what action was ‘reasonable and practicable’ for remedying the substantial lessening of competition.Footnote ¹⁸¹ It also stressed the ‘considerable experience’ that Commission members had ‘particularly in business and commercial matters’ and its entitlement ‘to bring that experience to bear when reaching judgments on particular matters’.Footnote ¹⁸² Similarly, in Stericycle v Competition Commission Footnote ¹⁸³ the CAT were faced with a challenge to the CC's decision to require the appointment of a hold separate manager as an interim measure during the course of its inquiry.Footnote ¹⁸⁴ The powers were expressed in broad terms allowing for the intervention where actions of the firm ‘might prejudice’ the outcome of the reference, signifying a ‘relatively low threshold of expectation’ that the ultimate remedies might be impeded.Footnote ¹⁸⁵ The Commission was entitled to intervene, therefore, where it considered there was ‘at least some risk of that happening’.Footnote ¹⁸⁶ While the CC must exercise its interim powers ‘reasonably and proportionately’ it did enjoy ‘a considerable margin of appreciation’.Footnote ¹⁸⁷ The task for the Tribunal was whether the appointment of a hold separate manager ‘was within the range of decisions open to it as a reasonable decision-maker’.Footnote ¹⁸⁸ This is a well known reworking of the Wednesbury test. Furthermore, the fact that alternative (perhaps less restrictive) remedies were available to the CC did not render the decision unreasonable.Footnote ¹⁸⁹ This would appear to distinguish the test from that of proportionality.

In the area of discretion, in the strict sense of a choice between alternatives, we note evidence of a strong convergence of the UK system towards that of the EU. The case law is somewhat contradictory. Initially, the Wednesbury test was limited to those decisions with connotations of policy. The change of approach has been justified explicitly by the procedural reforms made under the Enterprise Act 2002. As Carnworth LJ noted, the Act has led to the cessation largely of the role of the Secretary of State and the abandonment of the ‘public interest’ test in favour of an explicit competition-based test.Footnote ¹⁹⁰ This judicial recognition of the depoliticization of merger control, with the consequence it has for an increase in the judicial scrutiny of merger control, is the most significant aspect of the case, at least from our point of view. Whereas under the previous regime, the decisions in merger cases were taken ultimately by a politician, now the decisions of the independent competition agencies are determinative. This justifies the court tightening the ex post control it has over the authorities, a result consistent with agency theory. At the EU level we see evidence of an increased level of scrutiny in merger cases. While there has been no comparable shift in the locus of decision-making (as in the UK), one argument that has been used to explain the increased levels of scrutiny of the court has been the need for credible decision-making, especially in the light of a move towards a more effects-based analysis. The German system appears to be the most stable and is the one where the courts have the most control over merger decisions. This is more likely explained by the constitutional foundations of judicial review in that jurisdiction, in particular, the central importance of effective judicial protection of private rights.