A top European court yesterday ordered EU antitrust regulators to partially compensate a French firm for wrongfully blocking its takeover bid of a rival, potentially opening up a floodgate to other cases.
Schneider Electric, an electric equipment company, is seeking 1.66 billion euros (US$2.3 billion) in damages from the European Commission for errors it made in blocking its takeover of French rival Legrand.
`MANIFEST FAILURE'
"The grave and manifest failure by the Commission to have regard to Schneider's rights of defense constitutes a sufficiently serious breach of Community law to confer such a right," the European Court of First Instance said.
In October 2001, the Commission blocked Schneider's takeover of Legrand, ruling that the merger of the two French companies would weaken competition on European markets for low-voltage electrical equipment.
LOSS
However, at the time of the ruling, Schneider had already acquired 98 percent of Legrand's shares and subsequently sold the stake at a loss to satisfy the Commission, the EU's top regulator.
Schneider bought its stake in Legrand for 5.4 billion euros in cash and shares and sold it to US private equity fund Kohlberg, Kravis and Roberts and French holding firm Wendel Investissement for 3.63 billion euros in 2002.
`OMISSIONS'
The Luxembourg-based European Court of First Instance in October 2002 annuled the Commission's veto on the deal after finding that its antitrust review of the deal had been riddled with "errors and omissions."
Although the two companies did not try to give another shot at tying the knot, Schneider decided to try to make the European Commission pay for lost time and money.
The company filed 1.66 billion euros in damages in 2004, arguing that given the errors made by the Commission, it overstepped its powers to review mergers for threats to competition on European markets.
A FIRST
A ruling in Schneider's favor marks the first time a company wins damages from the EU's antitrust watchdog, and could open the way for more cases to be brought against the Commission in the future.
British package tours group Airtours, which has since been renamed MyTravel, is also seeking damages from the Commission for blocking its 1999 takeover of First Choice, a decision which the court has also ruled to be flawed.
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