On August 17, 2020, the General Court ordered the Commission to pay EUR 270,250 in recoverable costs to UPS.[1] UPS’ application for costs followed its successful 2017 action for annulment of the Commission’s January 30, 2013, veto of UPS’ takeover of TNT.[2]

Procedural Background

UPS had originally sought total costs of over EUR 1.5 million from the Commission, claiming for: (i) lawyers’ fees; (ii) economists’ fees; and (iii) professional disbursements that UPS incurred during the court proceedings which eventually resulted in the annulment of the Commission’s prohibition decision.[3]

Following a (perhaps inevitable) disagreement between UPS and the Commission on the exact amount of costs, UPS submitted on January 9, 2020, an application for the recovery of costs pursuant to Article 170(5) of the Rules of Procedure of the General Court, which dictates that “if there is a dispute concerning the costs to be recovered, the party concerned may apply to the General Court to determine the dispute… the General Court shall give its decision by way of an order from which no appeal shall lie.”

The General Court’s Legal Criteria

According to Article 140 (b) of the Rules of Procedure, recoverable costs include “expenses necessarily incurred by the parties for the purpose of the proceedings, in particular the travel and subsistence expenses and the remuneration of agents, advisers or lawyers.” The legal criteria on the basis of which the General Court was called to make its assessment regarding the appropriate amount of recoverable costs included:

  • The subject matter and nature of the proceedings, the case significance from the point of view of EU law, and the difficulties presented by the case
  • The financial interest that the parties had in the proceedings; and
  • The amount of work generated by the case for the agents or advisers

The General Court’s Substantive Assessment

The General Court accepted that the “the action was of a complex nature” and that the value of the transaction was significant (“estimated at EUR 5.2 billion”), but following a detailed assessment of the total amount of working hours that UPS’ lawyers had charged (1,871.1 hours), it found the amount of work that was generated for the case to be excessive.

In its assessment, the General Court criticized various tasks and the way they were performed by UPS’ legal advisers, including the long hours spent on formatting of annexes. The Court further criticized duplication of work, mentioning that multiple lawyers had appeared to deal with the same task (e.g., in the context of drafting and reviewing the reply).

The relationship between the administrative procedure and the court procedure

An interesting aspect of the General Court’s decision relates to the relationship between the administrative procedure and the ensuing judicial proceedings, with respect to the attribution of recoverable costs for each stage. The Court mentioned that the “contested decision concerned issues that had already been the subject of significant debate between UPS and the Commission following the statement of objections and throughout the administrative procedure, so that the content of the contested decision was not entirely unfamiliar to UPS’ lawyers.” As a result, and due to what it perceived as UPS’ lawyers’ previous familiarity with the material of the case, the Court determined that the amount of working hours spent in the court proceedings should be significantly reduced.

The impact of the winning plea on costs and the difference between lawyers and economists

With respect to the work spent on the various different legal pleas seeking annulment of the prohibition decision, it is noteworthy that the General Court treats recoverable costs differently in the case of lawyers’ fees compared to economists’ fees. As far as lawyers’ fees are concerned, the General Court rejected the Commission’s argument that only the work related to the “winning” plea (in this case, the infringement of UPS’ rights of defense) should be compensated and mentions that “account must be taken of the costs incurred by the applicant’s legal advisers for the purpose of drafting all the pleas of the action.” On the contrary, the General Court deems as recoverable costs for economists only those which were “objectively necessary,” explaining further that these only related to “the analysis of the impact of the merger on prices and the Commission’s econometric model,” i.e., to the “winning” plea on the basis of which the EC’s decision was overturned.

A discouraging signal also for damages actions?

Notwithstanding the General Court’s willingness to take a fulsome approach to the recovery of legal costs as a matter of principle, the court’s order does reflect a highly conservative calculation of costs in practice, with UPS recovering only a fraction of its total fees. The approach taken by the General Court may nonetheless be viewed as considerably more favorable to companies than in the U.K., where the Court of Appeal recently held that the U.K. national competition authority is not required to pay the legal costs of a company that brings a successful challenge to its decisions.[4]

It remains to be seen whether the pending damages actions that have been filed by UPS and ASL (the proposed remedy purchaser that the Commission rejected by prohibiting the transaction) against the Commission will prove much additional comfort. Existing precedent suggests that UPS and ASL may find themselves disappointed by the General Court’s generosity resulting from these actions: in 2007, Schneider was awarded only EUR 50,000 of the EUR 1.66 billion it claimed for losses incurred by the Commission’s (similarly annulled) decision to prohibit Schneider’s acquisition of Legrand.[5]

The limited scope for recovery of professional costs and damages, as well as the excessive lengthy court procedure (where in this case the General Court’s costs order comes more than 7 years after the Commission’s original prohibition decision) continue to highlight the practical difficulties of litigating a Commission prohibition decision. In practice, few companies consider the significant time and resources needed to challenge a merger prohibition decision to be worthwhile. The result is that many contested assessments by the Commission go unchallenged (including in cases where merging parties do not believe there are any competitive concerns, but feel compelled to offer remedies to avoid a prohibition), and that the essential role of the General Court in holding the Commission to account is more often than not only a theoretical disciplining force.

[1]      United Parcel Service v. Commission (Case T-194/13 DEP) EU:T:2020:371. FedEx, which intervened in support of the Commission during UPS’ appeal at the General Court, was also ordered to pay EUR 56,000 euros. As explained below, UPS’ action for damages is still pending (separately) in front of the General Court.

[2]      See United Parcel Service v. Commission (Case T-194/13) EU:T:2017:144, annulling UPS/TNT (Case COMP/M.6570), Commission decision of January 30, 2013.

[3]      Commission v. United Parcel Service (Case C-265/17 P) EU:C:2020:655

[4]      Competition and Markets Authority v Flynn and Pfizer [2020] EWCA Civ 617., summarized on pages 4 and 5 of the Cleary Gottlieb U.K. Competition Law Newsletter for April and May 2020. While the judgment related to an overturned antitrust decision, and has not been directly applied to a merger decision, the CMA can likely be expected to argue that the same rule applies in both types of case.

[5]      See Commission v. Schneider Electric (Case C-440/07 P) EU:C:2010:324, Order of the Court of Justice of June 9, 2020.