CFI annuls decision prohibiting MCI WorldcomSprint deal

20 January 2005

Indiana de Seze

The European Court of First Instance (CFI) has confirmed that once a planned concentration has been withdrawn by the notifying parties, even in an informal manner, the EC Merger Regulation ceases to apply and the Commission may not prohibit the concentration.

The day after Mr Monti’s comments to the press that he intended to propose to the Commission to block their planned merger, MCI and Sprint sent the Commission a fax stating that they were withdrawing their notification and that they ‘no longer propose[d] to implement the proposed merger in the form presented in the notification’.

The next day, 28 June 2000, the Commission decided to prohibit the planned concentration.

MCI (formerly MCI Worldcom) appealed to the CFI against the prohibition decision.

The Commission argued that the fax did not constitute a formal withdrawal, which would have made a prohibition decision unnecessary. The wording of the fax confirmed that the notifying parties still entertained some hopes of merging their activities in one form or another, despite the opposition of the US authority and the Commission to their proposal.

The CFI ruled that the notifying parties were entitled to expect their fax to be sufficient to result in closure of the file, in accordance with the Commission’s prior administrative practice that had been made public and in the absence of indications to the contrary given by the Commission.

The Commission, at the very least, infringed the legitimate expectation of the notifying parties by adopting the contested decision without first informing them that their letter did not satisfy it and that it intended to adopt a decision pursuant to Article 8(3) of Regulation No 4064/89 unless they supplied it immediately with formal proof of withdrawal of the merger agreement.

The CFI upheld that the distinction drawn by the Commission between the withdrawal of the notification and the withdrawal of the merger agreement was excessively formalistic, ‘even artificial’.

The Commission decision was thus annulled.

Source: Judgment of the CFI in Case T-310/00 MCI, Inc. v Commission, 28 September 2004, available here.