Co-operation between the Commission and national authorities

Table of Literature and Cases:

Literature

In order of publishing date

Books:

C.S. Kerse

E.C. Antitrust Procedure 3rd ed. 1994: Sweet and Maxwell ISBN 0-421-50310-6

Paul Craig, Gráinne De Búrca EU LAW 2nd edition

1998: Oxford University Press ISBN 0-19-876510-X

Christian Keim

Der institutionelle Rahmen im Wettbewerbsrecht der Europäischen Union und mögliche Reformmodelle. 1998: Lang

ISBN 3-631-32607-6

Essays:

Ehlermann, C.D.

„The Contribution of EC Competition Policy to the Single Market“ 1992 29 Common Market Law Review 257

Shaw, J.

„Decentralization and Law Enforcement in EC Competition Law 1995/15 Legal Studies 128

Riley, A.

„The European Cartel Office: A Guardian without Weapons?“ 1997 European Competition Law Review 3

Cases

In numerical order

127/73 BRT v. SABAM 1974 ECR 51

48/72 Brasserie de Haecht SA v. Wilken 1973 ECR 77

142+156/84 BAT and Reynolds Industries v. Commission 1987 ECR 4487 209-213/84, Ministère Public v. Asjes and others; 1986 ECR 1425 T-24/90 Automec v. Commission (II) 1992 ECR II-2223

Table of Abbreviations

In alphabetical order

DG IV Directorate General IV

ECT European Community Treaty

EEC European Economic Community

MS Member State

NA National Authorities

Reg. Regulation

A. Introduction

With the introduction of the principle of subsidiarity in the ECT¹ and the idea of a European Union which operates as closely as possible to its citizens encourages in terms of competition law the decentralisation of decision-making as far as possible to national institutions. One possibility to achieve this aim could be a more intense co-operation. As the preamble to Reg.17/62² demands from the Commission and the competent authorities of the Member States to act „in close and constant liaison“, the legislator obliged the Commission and the national competition authoritie s to co-operate in many stages of EC competition law procedure. E.g. in the request for information under A.11 of Reg.17/62 from the Commission to national authorities, in investigations by national authorities ordered by the Commission under A.13(1) of Reg.17/62, and in the other way through the Commission´s support in national investigations according to A.13(2) of the regulation mentioned above. But in the areas of mere exchange and sharing of information as mentioned, there are mostly occuring no proble ms in the co-operation between the Commission and the national authorities³. Therefore the following essay tries to focus and analyse the conflicts in the allocation of cases on competition issues under the Articles 81 and 82 of the ECT. A special look on the Commissions Co-operation Notice⁴, which directed the debate towards active co-operation⁵ will be also given.

B. Distribution of competence

For a functioning co-operation between the Commission and the NA it is important to draw a clear line of distinction between cases handled by the Commission and those dealt by the NA. Examining the procedural competence between the two institutions it is useful to look at the basic guidelines of Community law provisions distributing competence.

I. Situation when the Treaty of Rome came into force

In the years between the coming into force of the Treaty of Rome 1958 and of Regulation 17 in 1962, the Community competition law only consisted of the Articles 85 and 86 of the European Economic Community. The creation and interpretation of these provisions was a matter of the MS and their competition authorities. The Commission was not involved in antitrust issues. But these two provisions mentioned above have been applied only very seldom, as many MS simply had not competition authorities (1960 only Germany had is own competition rules and authority, the Bundeskartellamt). Another reason was that most of the legal systems of the MS had no provisions distributing the competence about the application of Articles 85 and 86 EEC to their competent authorities⁶. To improve the situation, the Council released the Reg.17/62.

II. Situation according to Regulation 17/62

With the aim to ensure uniform application of competition rules⁷ in the whole Community, this regulation

completed the material provisions. As well as it was intended to fill the institutional and procedural vacuum in E.C. antitrust procedure until 1962. Concerning the essential question in co-operation, of who is competent in handling competition cases, A.9 of Reg.17 distributes primary competence to the Commission. It has the duty to ensure the application of the Articles 81 (ex-85) and 82 (ex-86) ECT. With respect to ex offico procedures the Commission is totally free, it alone determines whether to investigate or not. The same way as it enjoys wide discretion to treat a complaint or not⁸. The CFI certified this practice in the famous Automec II case⁹, where the applicant tried to get a mandatory injunction from the Commission. It rejected based on the lack of Community interest, and according to the fact that the Italian courts had already taken cognisance of the matter. However only the Commission has been granted the power to declare A.81(1) ex-85 applicable pursuant to A.81(3) ECT. The NA have according to A.9(3) Reg.17 only subsidarian competence in applying A.81(1). Referring to the Brasserie de Heacht SA v.Wilkin II case¹⁰ the court confirmed also the application of A.81(2) through NA. This means that they can initiate a procedure, as long as the Commission does not act itself¹¹. But as the Commission has limited powers of enforcement, it could authorise the NA to take the necessary measures to remedy the situation¹². Out of A.9 Reg.17 and A.85 (ex-89) ECT are arising the major problems for the co-operation between the Commission and the NA. The first is, that Reg.17 does not define the term „national authority“. What is a NA and therefore the Commissions partner to speak to in the MS? Secondly it is not clear, when the Commission will act and what is happening, if the Commission is starting a procedure after the NA already has started its own?

a) Who is the competent national authority ?

As noted above, Reg.17 does not define „competent authorities“. This is because the term is deriving from the Treaty itself¹³. In BRT v. SABAM¹⁴ the ECJ explained which authorities are falling under the formulation in A.9(3) Reg.17. They are „such authorities that derive their competence direct from

A.84(ex-88) ECT.“ Also courts in the MS especially entrusted with the task of applying domestic

legislation on competition are falling under this term. For a more detailed identification the ECJ described in the Air tariffs¹⁵ case the NAs as the „administrative authorities in the MS entrusted with the task of applying domestic legislation on competition subject.“¹⁶ These explanations are showing that the authority referred to in A.9(3) Reg.17 has to fulfil the following two preconditions:

(1) Member States must enact the appropriate enabling legislation allowing their NA effectively to apply EC competition law and/or corresponding national competition rules.
(2) Member States must establish their own anti-trust authorities which are in charge of implementing those rules.

Referring to the first precondition it is on the national law to determine which body is a national competition authority. Such authorities derive their competence to enforce the Community rules by virtue of A.84 ECT. In the context of the latter condition it is not sufficient to establish an antitrust administration on paper only. Adequate resources must be allocated to allow the authority to function effectively¹⁷. The total number of competition authorities in a MS can be more than one. But it would be impractical for the Commission to communicate with more than one antitrust authority. Therefore it is the practice for the MS to specify the NA which will be the partner for the Commission.

b) When does the Commission start a procedure ?

In the analyse under point B.II. it became clear, that the Commission is free to choose cases which it wants to handle. Ideally the Commission would choose only those cases which require action by the centre. Characteristics of such cases are:

(1) the interstate nature of a case
(2) the special economic complexity
(3) the character as a leading case or the political significance¹⁸ These characteristics will be discussed later in the context of part C.

c) Conflict: NA have started procedure before the Commission

In the preceding discussion under point C.I.2. we have seen, that the NAs have only subsidiariän powers to handle a case. This means as long as the Commission is not acting, the NAs can proceed. But if the Commission is starting own procedure, the NAs jurisdiction is halted. The ECJ agreed with this practice as the cases AG Moncini and BAT and Reynolds¹⁹ are showing. In the inverted situation where the Commission later closes the file, the NAs jurisdiction my return.

III. Conclusion of chapter B

Examining the conditions of the secondary law in form of Reg.17, it became obvious that this Regulation partly filled the gaps that have been existing in Communities antitrust law before it was introduced. But on the background of the enlargement of the Community since 1962 and the increasing complexity of international trade structures, the procedure to deal with EC antitrust cases represented by Reg.17 is not satisfying any more. Especially the centralised enforcement according to A.9 Reg.17 is blocking active and efficient co-operation between the Commission and the NA. On the one hand, effective enforcement in the larger EU requires more activity than the Commission and its staff could ever develop. On the other hand co-operation is blocked by the legal uncertainty in who is dealing with a specific case, caused by the free discretion of the Commission with respect to ex officio procedures. As well as on the reason of the Commissions monopoly in handling cases under A.81(3) ECT. Private enforcement in national courts provided by the direct effect²⁰ of Community law can not compensate the problems occuring. To increase the efficiency in co-operation, the Directorate General IV. discussed the problems, and the Commission released its Notice on Co-operation between National Competition Authorities and the Commission in Handling Cases Falling within the Scope of Articles 85 or 86 of the EC Treaty. We will now focus on the discussion and the notice as it is necessary to get a deeper understanding of the problems roughly presented in the preceding text.

C. The discussion on reform and the Notice on Co-operation

The general thrust of competition law enforcement has remained centred around the Commission. Facing the problems arising as we have seen above, the Commission has taken steps for solution after a preceding discussion.

I. The discussion on co-operation

Before looking on the discussion about co-operation between the Commission and national authorities, it is of interest to note that there are similarities to the one about the relationship between the Commission and national courts. Here the Commission stated already in 1983 that the „machinery for enforcing Community competition law is thereby to some extent decentralised“²¹ and „unavoidable“²². This is showing that the actual dispute is only one detail in a long chain of changes within EC Competition Law. In 1993 the DG IV launched an in-depth reflection on increased co-operation with the NAs. The results have been fixed in the 24th Competition Report.

a) about criteria for the distribution of cases

As seen above under B.II., even under Reg.17 the Commission is free in selecting cases. But ideally there would be a „qualitative criteria“²³ according to which the cases would be distributed. Basis for this criteria should be the factor „primarily national impact“. The DG IV tried to concretise this term with the following descriptions:

(1) Cases might be dealt by national authorities, if the effects are located mainly in a single MS. The Commission only will act on the basis of A.9(3) Reg.17, if a question of Community interest will arise in such a case.
(2) The case must involve infringements of A.81(1) ECT which probably do not satisfy the conditions of A.81(3), to prevent a double proceeding as A.81(3) is falling under the sole competence of the Commission.
(3) On the national level, effective protection must be insured through the precautions taken to put the NAs in the position to apply and enforce EC competition law. For more details see the description under B.II.a..
Out of these criteria especially point (2) is problematic. If the NAs will handle cases falling under 81(1)

ECT, they have to be sure that the agreement in question is not or could not exempted by the Commission. Therefore the problem of distribution of cases is closely linked with the discussion about the monopoly under A.81(3).

b) about the Commissions monopoly to grant exemptions under A.81(3) ECT

In its discussion the DG IV shaped out two possible scenarios where A.81(3) could possibly cause problems for a improved co-operation between the Commission and the NA. The first scenario is that a agreement between undertakings has not been duly notified to the Commission. In this case it would be on the NA authority to check if the agreement is covered by a block exemption. Secondly if the undertakings have notified an agreement to the Commission, it is on the NA authority to evaluate the possibility that the agreement would be exempted. The question of importance is how the NAs could practically evaluate this possibility. What are the measures?

Here the DG IV suggested in cases where the Commission already formally opened the procedure, simply to ask the Commission about its intentions. If not, the NA authority should simply ask the Commission about its opinion to the agreement. Resulting out of this suggested practice of co-operation in the exchange of information, the workgroup faced the problem of undertakings protecting themselves from national proceedings by notifying to the Commission. Even if this would only be a delaying tactic, the Commission would be obliged to open a procedure which would stop the NA from acting²⁴. Here the workgroup suggested to the Commission just to refuse basing on A.9(3) Reg.17 to open the procedure. The Spanish Banks case has shown, that this practice can work out. Here the Spanish Competition Court opened a prohibition procedure after the notification. The Association of Spanish Banks then pointed out, that the Commission has formally opened the procedure. Based on the principle deriving out of A.9(3) Reg.17 the NA should not have been any more competent to handle the case. DG IV responded that in the opinion of the Commission the practices were not exemptable and that it was therefore inappropriate to open the procedure. Finally the court held that the practices were contrary both national law and of A.81(1) ECT. The future will show in such cases, if the undertakings are learning out of this case and will not any more insist only for the gain of time on a final statement of the Commission.

II. The Notice on co-operation

In 1997 the Commission released its Notice on co-operation between the Commission and the NA. As it is highly influenced by the discussion within DG IV, it reproduces at many stages the conclusions made in the 24th Competition report. Especially concerning the basic question of distribution it sets out the same ideas as mentioned above under point C.I.a.. In the situation of notifications during a running national proceeding, so called „dilatory“ notifications the Commission says that it „will not examining them as a matter of priority“²⁵. Therefore the NA will have the chance to proceed. It suggests that the NAs have the better opportunities to enforce competition law due to their resources and closeness to the domestic market²⁶. It indicates that NAs can deal with complaints not involving the application of A.81(3) ECT. Enterprises are asked based on economic reasons for all involved parties to contact more the NAs than the Commission in the question of even applying Community law. For this reasons it admonish the MS to take the appropriate measures²⁷ to apply Community law as we have analysed above. Referring to the case Bundeskartellamt

v. Volkswagen²⁸ the notice makes clear that exempted agreements can not be prohibited by NAs.

Concerning cases handled by the NAs first, they should systematically inform the Commission. In Exchange the Commission will at any time give assistance to the NA in seeking for any legal and economic information.

D. Conclusion

The recent development in the question concerning co-operation between the Commission and the NA has shown that the Commission itself realised the problems, that it would have been facing if it would still insist on centralised enforcement. Anyway the system is still based on Reg.17/62, which only filled the gaps in application until 1962. The 1997 Notice only shows the Commissions new willingness really to co-operate. As the basic legal skeleton is the same as in the years before. Right now the discussion about the relationship between the two players only resulted into a changing interpretation of existing provisions. But without new legislation in this areas some problems can not be handled properly. This is especially shown by the problem of „dilatory notifications“, where the Commission saw in its notice only a very tricky way of solution by seeing these cases as ones of minor priority. Even the criteria about the distribution of cases between the Commission and the NAs are partly not shaped out very well. So for example the measure of „national impact“. As the economic situation is rapidly changing within the established Common Market, more and more competition cases will be of interstate relevance. Under this circumstances even the number of agreements which could fall under the block exemption according to A.81(3) ECT like the development of new technologies between e.g. chemical undertakings will increase. Will the Commission really be prepared, with its very limited resources, to ensure the proper, legal secure and efficient application of Community law ?

On the other hand not even today all MS have enacted proper national rules that would allow their NA to apply Community competition law. This is especially interesting if the MS want to share one day the Commissions monopoly to grant exemptions under A.81(3) ECT. To do so it would be necessary if national legislation would recognise the validity of decisions of NA throughout the EU. But before realising this task it is necessary to ask if a deep co-operation between the Commission and the NA in sharing the application of EC antitrust procedure will improve this. One reason against can be that the policy-making and executive nature of the Commission´s functions make it impossible to expect that the competition criteria set out in the Notice will be respected understandable. This has been reinforced by the perceived lack of transparency in the procedures under which the Commission adopts merger decisions²⁹. Another argument against could arise out of gap between the different legal cultures and opinions on competition law in the MS on the one side, and the limited resources of the Commission on the other side. A closer co-operation in distributing cases over only roughly defined terms could endanger antitrust procedure. Reason could be the efforts that have to be made to control correct distribution. Who would ensure that the right cases are distributed to the right authority? The Commission as the „webmaster“ in the centre of a net of NA? It should be clear that in such a situation the Commission still needs large resources to check national cases e.g. for their possible Community interest and to provide information to the NA. Therefore it is at the moment necessary to have a more centralised system until the jurisdiction and the discussion about co-operation have defined the distributional criteria more detailed. Otherwise forum shopping and widely diverging and confusing decisions about distribution would be the result. Another form of co-operation between the national and the Community level could be the installation of a European Cartel Office which was under discussion at the Inter-Governmental Conference in 1997. Such a institution and its independence in contrast to the Commission could be offer the transparency, speed and efficiency that is necessary for a functioning co-operation. Model for it could be the federal competition authority in Germany, the Bundeskartellamt. The discussion is going on.

Finally we can fix the conditions that are necessary to improve the co-operation between the Commission and the national competition authorities:

(1) The criteria for the distribution of cases have to be further discussed and filled out by the ECJ´s and CFI´s jurisdiction.
(2) The member states have to enact appropriate rules and give their authorities the necessary resources.
(3) The co-operation between the national competition authorities itself has to be inproved.
(4) The Reg.17/62 has to be modified in order to deal with „dilatory notifications“.
(5) The Commission needs anyway more resources to stay functioning in the enlarged Community.
(6) The establishment of a European Cartel Office could improve transparency.

[...]

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¹ See Article 5 (ex-3b) of the ECT

² See Council Regulation 17 of February 6, 1962; First Regulation implementing Articles 85 (new 81) and 86 (new 82) of the Treaty

³ abbreviated in the following text as NA

⁴ See Commission notice on co-operation between national competition authorities and the Commission in handling cases falling within the scope of Articles 85 (new 81) or 86 (new 82) of the EC Treaty 1997 OJ C313/1

⁵ See Kerse C. , E.C. Antitrust Procedure 4th ed. , 10.29

⁶ See for more details and the referring footnotes in the text of: Keim ; „ Der institutionelle Rahmen im Wettbewerbsrecht der EU“ 1998 p.60

⁷ See the preamble to Reg.17/62

⁸ see Ehlermann, Implementation of EC Comp. Law by NA; 1996 ECLR pp. 90-91

⁹ see Case T-24/90,Automec v. Commission (II)

¹⁰ see case 48/72 1973 ECR 77

¹¹ see Keim a.a.O. aa.) p.64

¹² see Kerse, E.C. Antitrust Procedure, 3rd ed. 1994 5.02

¹³ see Kersee; a.a.O. 5.01

¹⁴ see Case 127/73, BRT v. SABAM 1974 ECR 51 grounds 18 and 19 of the judgement 4

¹⁵ see Cases 209-213/8 4, Ministère Public v. Asjes and others; 1986 ECR 1425

¹⁶ see para. 55 of the case mentioned under footnote 14

¹⁷ see Kerse a.a.O. 5.03

¹⁸ see Ehlermann a.a.O. p.90

¹⁹ see Cases 142+156/84 BAT and Reynolds Industries v. Commission 1987 ECR 4487

²⁰ see for the direct effect of A.81(1) and 82 BRT v. SABAM case 127/73 1974 ECR 51 5

²¹ See the XIII th Report on Competition Policy (1983) para. 217

²² See statment of the Director-General of DG IV Ehlermann in „The Contribution of EC Competition Policy to the Single Market“ , p.280

²³ See Ehlermann a.a.O. p.91

²⁴ see Ehlermann a.a.O. p.92

²⁵ see Notice a.a.O. number 55

²⁶ see Notice a.a.O. number 7

²⁷ see Notice a.a.O. numbers 15-17

²⁸ see case C-266/93 Bundeskartellamt v. Volkswagen AG und VAG Leasing GmbH 7

²⁹ see Riley, The European Cartel Office: A Guardian without weapons ?“ 1997; ECLR 3 8