A top European court has ordered EU competition regulators to partially compensate French firm Schneider for wrongfully blocking its takeover bid of a rival, potentially opening a floodgate to other cases.
Schneider Electric, an electric equipment company, is seeking €1.66 billion in damages from the European Commission for errors it made in blocking its takeover of French rival Legrand.
'The grave and manifest failure by the Commission to have regard to Schneider's rights of defence constitutes a sufficiently serious breach of Community law to confer such a right,' the European Court of First Instance said.
The amount that Schneider is to be awarded still has to be determined, the Luxembourg-based court said. Commission spokesman Jonathan Todd said it would study the ruling carefully.
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.
At the time of the ruling, Schneider had already acquired 98% of Legrand's shares and subsequently sold the stake at a loss to satisfy the Commission.
In October 2002, the EU court annulled the Commission's veto on the deal after finding that its review was riddled with 'errors and omissions'. Although the two companies did not try to merge again, Schneider decided to try to make the European Commission pay for lost time and money.
The ruling marks the first time a company has won damages from the EU's competition 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.
Ryanair has said it will be appealing the Commission's decision to block its proposed takeover of Aer Lingus.
