Belgium: Brussels Court Of Appeal Annuls Once More Decision To Lift In Part Kinepolis Merger Commitments

On 21 November 2018, the Brussels Court of Appeal (the "Court") held that the decision of the Belgian Competition Authority (Belgische Mededingingsautoriteit / Autorité belge de la Concurrence) ("BCA") to partially lift specific merger commitments imposed on Kinepolis was unlawfully taken and therefore annulled the decision. 

This is the second time in 2018 that a decision of the BCA was annulled in the never-ending legal saga in the Belgian cinema sector.  On 28 February 2018, the Court annulled BCA's earlier decision to partially lift specific commitments imposed on Kinepolis holding that the decision was ill-reasoned (see VBB on Belgian Business Law, Volume 2018, No. 3, pp. 4-5, available at www.vbb.com). 

The case started in November 1997, when the former Belgian Competition Council (later replaced by the BCA) cleared the concentration between the Claeys and Bert groups to establish the Kinepolis group. That decision was conditional upon several commitments, for an indefinite period of time, including the obligation on Kinepolis to obtain the prior approval from the BCA concerning any form of growth, including organic growth (i.e., any increase in the number of screens or seats operated by Kinepolis).

In 2010, following a four-year legal battle, Kinepolis succeeded in having the commitments partially lifted. On 31 March 2017, nearly twenty years after the adoption of the merger decision, Kinepolis tried to have all commitments removed.  After analysing the necessity of the remaining commitments which were aimed at preventing a restriction of competition in the prevailing market structure at the time, the BCA decided on 31 May 2017 to lift the restriction on organic growth, subject to a two-year transition period, leaving however the other remaining commitments in place, i.e., those preventing Kinepolis from: (i) growing through acquisition without prior approval from the BCA; (ii) obtaining exclusive or priority rights to distribute films; and (iii) concluding programming agreements with independent cinema owners (see VBB on Belgian Business Law, Volume 2017, No. 5, pp. 7-8, available at www.vbb.com).

This decision was appealed by two competing cinema companies, Euroscoop and I-Magix. In its judgment of 28 February 2018, the Court found that the Competition College had provided insufficient reasons as to why it fully lifted the commitment preventing Kinepolis from growing organically, whereas the College of Competition Prosecutors had limited its proposal to lifting the commitment with respect to small organic growth only. The Competition College also insufficiently reasoned its decision to create a two-year transition period (see VBB on Belgian Business Law, Volume 2018, No. 3, pp. 4-5, available at www.vbb.com). 

Following the Court's annulment of the 31 May 2017 decision, the BCA reopened the case and adopted a new decision on 26 April 2018. This decision was again appealed by competing cinema company Euroscoop and again annulled by the Court. 

In its judgment of 21 November 2018, the Court examined the consequences of its annulment of BCA's decision of 31 May 2017. The Court stated that, following the annulment, "[f]or the Competition College of the BCA to take a (new) decision, it is indispensable that the full procedural framework, as prescribed in Book IV of the [Code of Economic Law], should be adhered to. It cannot be the case that the Competition College of the BCA, in identical composition, limits itself to take some sort of "amending decision", i.e., a decision that attempts to reason slightly better an annulled decision – which was annulled due to its lack of reasoning -, which means that the Competition College of the BCA cannot maintain its decision by essentially complementing the reasoning of the annulled decision (to remedy the lack of reasoning and to leave the decision otherwise unchanged)." 

The Court continued that, following BCA's reopening of the case, the president of the Competition College had not composed the Competition College differently and the proceedings had not resumed as prescribed by law. This deprived Euroscoop of its right to object to the composition of the Competition College, which comprised the same individuals who had adopted the previously annulled decision of 31 May 2017. 

The latest Court judgment constitutes yet another setback for Kinepolis. The BCA will have to examine again, ab initio this time, its request of March 2017 for the full lifting of the 1997 merger commitments and a differently composed Competition College,  will have to take, for the third time, a decision on this request. Notices indicating that such a new procedure had started were published in the Belgian Official Journal on 7 January 2019 and on 10 January 2019.   

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