Volume 42 | Number 3 Summer 2007
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In the late 1990s the European Commission started to conceive a complete overhaul of its competition policy. In view of the imminent enlargement of the Community to central and eastern Europe and the accession of a great number of new Member States, the Commission feared that it would be less and less able to ensure a satisfactory degree of enforcement of European competition law. In the spring of 1999 it therefore published a White Paper that suggested an entirely new structure for the enforcement of Articles 81 and 82 EC.1 Its most important effect was that it replaced the previous monopoly of the European Commission to grant exemptions under Article 81(3) with a network of national competition authorities, which would be entitled to the direct application of Article 81(3) EC. This decentralisation, which will be outlined in the first part of this paper, is accompanied by a certain change in the application of the substantive provisions. It is probably due to an increased American and Anglo-Saxon influence on European competition law that a shift towards a more economic approach can be observed. Various Commission instruments give evidence of this trend. It comes to the surface most clearly in the new Merger Control Regulation 139/2004, which will be discussed in the second part. A third spectacular change of direction became visible in late 2005 and relates to private enforcement of Articles 81 and 82. The Commission had already hinted at the need for an increased use of private litigation in its early proposals for Regulation 1/2003.2 A Green Paper on this subject was published in December 2005.3
I. Decentralization
Ever since the promulgation of Regulation 17 in 19624 European competition law has been characterized by the Commission’s monopoly to grant exemptions under Article 81(3) EC. While national competition authorities and courts were allowed or even under an obligation to apply the prohibition of restrictive agreements laid down in Article 81(1) EC, they were not in a position to decide whether the case under scrutiny was exempted or not. Since the defendant undertakings usually invoke some justification for their anticompetitive behaviour, complaints lodged with a national competition authority or litigation started in a national court for violation of Article 81 were rather useless. Those who suffered from anticompetitive behaviour preferred to directly address the European Commission. The number of such complaints grew constantly with the accession of new Member States, and the Commission was less and less able to efficiently enforce European competition law.
The Commission used two instruments to cope with the problem. With regard to standard situations it issued block exemption regulations which declared Article 81(1) inapplicable to certain categories of agreements and concerted practices. Moreover, individual applications for exemptions were more and more often answered by so-called comfort letters. Without providing for definite clearance of the respective behaviour, they would state that the Commission, while reserving the right of later investigation, did not see any reason to intervene for the time being. The resulting uncertainty was most clearly felt when contracts containing anticompetitive clauses gave rise to private litigation: Would a national judge be allowed to consider a clause covered by a comfort letter as null and void under Article 81(2) EC, or would that clause have to be respected as valid until further action would be taken by the Commission?5
In view of the imminent enlargement of the Community towards central and eastern Europe and the accession of 10 new Member States, the Commission feared a flood of new cases would cause the situation to become untenable. It therefore gave up its monopoly on granting exemptions. Under Article 1(2) of Regulation 1/2003 “agreements, decisions and concerted practices caught by Article 81(1) of the Treaty which satisfy the conditions of Article 81(3) of the Treaty shall not be prohibited, no prior decision to that effect being required.”6 At the same time the competition authorities of the Member States are deprived of their discretion to apply either national competition law or Articles 81 and 82 when investigating anticompetitive behaviour. While the investigation as such remains discretionary, they have to apply Article 81 and 82 to behaviour that may affect trade between Member States if they decide to initiate proceedings.7 In respect of anticompetitive agreements, Article 3(2) explicitly establishes that Article 81 takes priority over a parallel application of national competition law. This rule and the direct applicability of Article 81(3) EC are supposed to prevent the distortion of the uniform substantive principles of Article 81 by the simultaneous application of national competition law.
But is that presumption justified? Is the obligation to apply uniform substantive standards sufficient to ensure uniform practice? We would be prepared to accept that assumption in the context of uniform private law in, for instance, the law of the international sale of goods or in respect of international transport conventions. But in competition law national interest and political involvement are much stronger than in traditional private law. In this respect the traditions differ widely among the 25 Member States. Economic policy in some of the old Member States, such as France, has always focused on the support of large national corporations whereas the economic policy of other countries, in particular Great Britain and Germany, has traditionally stressed the need for a competitive environment for the sake of consumer welfare and economic freedom. In most of the new Member States, competition law and policy are new achievements. Economic and political leaders of the older generation may have difficulty with competition policy, and the new generation sometimes appears to reject state intervention altogether even if it is meant to protect competition. The divergences are far-reaching and raise serious doubts about the possibility of a uniform competition regime under which administration is largely left to national authorities.
The Commission has been aware of the risks inherent in decentralization. The concept underlying Regulation 1/2003 provides for replacement of the Commission’s monopoly—not by the decisions taken by single national authorities, but by a network composed of the Commission and the competition authorities of the Member States which are put under an obligation of close cooperation. The mechanisms of information and consultation are set forth in various provisions of Regulation 1/2003 and in further Community instruments (in particular a common declaration8 and a so-called network communication9). In this context only some basic structures can be explained.
A basic issue relates to the allocation of cases to a national competition authority. Given the effects doctrine which has been espoused by many national competition laws of Member States, anticompetitive behaviour affecting trade between Member States will often give rise to investigations conducted by two or more competition authorities of different countries. Their respective competence cannot be doubted, but it goes without saying that parallel proceedings conducted in several Member States may generate excessive costs and lead to contradictory results. Article 13 of Regulation 1/2003 therefore allows Member States to suspend or terminate proceedings in view of proceedings initiated by the authority of another Member State. Contrary to the objection of lis alibi pendens in civil procedure, it is not necessarily the court first approached that will conduct the proceedings. Rather, the allocation of a case will be decided by a consultation between the Member States involved and the Commission.
According to the network communication, the case should be allocated to the authority best suited for that purpose.10 While some relevant considerations are set forth in the communication, their mutual relation is unclear. For example, the case may be allocated to the authority of a Member State where most of the relevant proof is located, but it would also be possible for the case to be left to the authority of another Member State which has the resources for investigation at the relevant time. After two years of operation, officials of the Commission and of national competition authorities appear to be highly satisfied with the results.
We know much less, however, about the evaluation by industry. The discretionary character of case allocation may generate unforeseeable risks and high costs for businesses. Take the example of criminal sanctions for the responsible managers, which exist only in some Member States, such as Great Britain or Slovakia. Suppose that a case, which has its centre of gravity in a country such as Germany, where criminal sanctions are unknown, is allocated by the discretion of the network to the Slovak or the British competition authorities. Could we really assume that such discretionary case allocation would be in line with basic rights such as those enshrined in Article 6 of the European Human Rights Convention11 and in Article 47 of the Charter of Basic Rights?12
Regulation 1/2003 provides for many obligations in the field of information and consultation.13 It also allows the competition authorities of Member States to carry out investigations on behalf of the competition authority of another Member State in order to establish whether there has been an infringement of Article 81 or 82.14 It must, however, be stressed that this type of cooperation is voluntary. How can we expect a thorough investigation into a cross-border cartel if Member States’ authorities are not obligated to carry out investigation requests from the national authorities of other Member States? The underlying assumption is that the national competition authority designated by the network is to carry out such a comprehensive inquiry into all effects of anticompetitive behaviour wherever they are felt within the Community. This assumption may be optimistic, however. Regulation 1/2003 does not put the designated competition authority under an obligation to extend its investigation beyond the national boundaries of its own state. Given the difficulties of taking evidence abroad and the delay caused by transnational cooperation, national competition authorities are likely to limit their investigations to their respective national territories. If that is true, the case allocation mechanism has to be questioned. If an anticompetitive behaviour affects several Member States and the national authority designated by the network only investigates the effects felt in its own territory, case allocation may lead to underpunishment since the effects in other Member States will not be taken into account by the investigating authority when fixing the amount of the fine.
To sum up, decentralization may intensify the public enforcement of Articles 81 and 82. On the other hand the structure of the European competition network as enshrined in Regulation 1/2003 is conceptually incomplete and inconsistent; it will most probably lead to underpunishment. This is underpinned by the final observation that there is no mutual recognition and enforcement of decisions within this network of competition authorities. Regulation 1/2003 is no more than a first step towards a true network of competition authorities.