The Normative Community Constraints on National Enforcement Procedures for EC Competition Law

1. The Normative Community Constraints on National Enforcement Procedures for EC Competition Law Michael Frese

2. What do I mean with this title? All the rules and principles deriving from Community source, including proper legislation, general unwritten principles and policy commitments that ‘prescribe’ how the Member States should enforce against competition law contraventions

3. Structure of presentation • Debate • Historical context • Current legislative regime • National autonomy • Community constraints • Plans for further research

4. Debate • Private enforcement / White Paper • Criminalisation - W.Wils, The Optimal Enforcement of EC Antitrust Law, Kluwer 2002 - Cseres, Schinkel,Vogelaar, Criminalization of Competition Law Enforcement, Edward Elgar 2006 - Amendments of penal statutes in the Member States • ‘Optimal utilisation’ of administrative instruments - Commitment decisions - Leniency policies - Direct settlements - Large discretion

5. Debate Centralisation Harmonisation Autonomy Decentralisation

6. The old procedural regime under Reg. 17

7. Historical context Article 9 (1) Reg. 17:“Subject to review of its decision by the Court of Justice, the Commission shall have sole power to declare Article 85 (1) inapplicable pursuant to Article 85 (3) of the Treaty.”Article 9 (3) Reg. 17“As long as the Commission has not initiated any procedure under Articles 2, 3 or 6, the authorities of the Member States shall remain competent to apply Article 85 (1) and Article 86 in accordance with Article 88 of the Treaty”

8. Historical context • From 1997 onwards, the Commission publicly advocated the conferral of powers by the Member States on national authorities to apply the Articles 81(1) and 82 EC Treaty (1997 Cooperation Notice, para. 10, 13, 15). • In 1997 in only 7 of the 15 Member States national authorities were empowered to apply Articles 81(1) and 82 EC Treaty. No such powers existed in the Netherlands, Denmark, Sweden, Austria, Ireland, Finland, Luxemburg and the UK. (source: XXVIIth Report on Competition Policy) • In 1999 in 8 of the 15 Member States national authorities were empowered to apply Articles 81(1) and 82 EC Treaty; the Netherlands joined. (source: XXIXth Report on Competition Policy) • In 2000 in 9 of the 15 Member States national authorities were empowered to apply Articles 81(1) and 82 EC Treaty; Denmark joined. (source: XXXth Report on Competition Policy) • In 2001 in 10 of the 15 Member States national authorities were empowered to apply Articles 81(1) and 82 EC Treaty; Sweden joined. (source: XXXIst Report on Competition Policy). • In 2002 in 12 of the 15 Member States national authorities were empowered to apply Articles 81(1) and 82 EC Treaty. No such powers existed in Finland, Luxemburg and the UK. (source: XXXIInd Report on Competition Policy) • In December 2002 Reg. 1/2003 was adopted. Pursuant to Article 35(1) of the Regulation Member States were required to empower national authorities to apply Articles 81 and 82 EC Treaty before 1 May 2004. • To compare: in 1997 the Articles 81 and 82 were applied by national authorities in eleven cases (three in Germany, four in France, four in Spain) (source: XXVIIth Report on Competition Policy); in 2005 the Commission was informed of some 180 new case investigations (the information requirement only relates to procedures under Article 81 and 82) (source: 2005 Report on Competition Policy).

9. The procedural regime under Reg. 1/2003

10. Centralisation v decentralisation Article 1 (2) Reg. 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. Article 5 Reg. 1/2003: The competition authorities of the Member States shall have the power to apply Articles 81 and 82 of the Treaty in individual cases. For this purpose, acting on their own initiative or on a complaint, they may take the following decisions (…) Article 35 (1) Reg. 1/2003: The Member States shall designate the competition authority or authorities responsible for the application of Articles 81 and 82 of the Treaty in such a way that the provisions of this regulation are effectively complied with. The measures necessary to empower those authorities to apply those Articles shall be taken before 1 May 2004. The authorities designated may include courts. Article 3 (1) Reg. 1/2003: Where the competition authorities of the Member States or national courts apply national competition law to agreements, decisions by associations of undertakings or concerted practices within the meaning of Article 81(1) of the Treaty which may affect trade between Member States within the meaning of that provision, they shall also apply Article 81 of the Treaty to such agreements, decisions or concerted practices. Where the competition authorities of the Member States or national courts apply national competition law to any abuse prohibited by Article 82 of the Treaty, they shall also apply Article 82 of the Treaty.

11. Harmonisation vs. autonomy Rec. 35 Reg. 1/2003: This Regulation recognises the wide variation which exists in the public enforcement systems of Member States Article 35 (2) Reg. 1/2003: When enforcement of Community competition law is entrusted to national administrative and judicial authorities, the Member States may allocate different powers and functions to those different national authorities, whether administrative or judicial. Article 5 Reg. 1/2003: The competition authorities of the Member States (…) may take the following decisions (…) or any other penalty provided for in their national law.

12. Holding on to the principle of institutional autonomy • Compare with regulation in the fields of: - Fisheries (Regulation 2847/93) - Environment (C-176/03 and C-440/05) • Reasons? - Parallel powers of the Commission (Art. 4, 7-9, 23, 24 Reg. 1/2003) - Pre-emption power (Art. 11 (6) Reg. 1/2003 - Necessity and suitability of harmonising or unifying enforcement procedures * Flexibility/unpredictability * Enforcement principles

13. Enforcement principles of Community law

14. Initiation of proceedings Investigatory powers Dealing with evidence Standard of proof Sanctioning powers Judicial review Elements of enforcement system

15. Initiation of proceedings “It should be noted that the various provisions requiring national authorities to exercise a certain amount of supervision to ensure that the relevant provisions of Community law (…) are observed merely expressly confirm a duty which Member States already have by virtue of the principle of cooperation laid down in [ex] Article 5 of the Treaty.” (Judgment of the Court of 21 September 1983, Deutsche Milchkontor, Joined Cases 205-215/82, para. 42) “the Commission is under no obligation to rule on the existence or otherwise of an infringement it cannot be compelled to carry out an investigation” (Judgment of the Court of First Instance of 18 September 1992, Automec v Commission (II), Case T-24/90, para. 76) “the national authorities must proceed, with respect to infringements of Community law, with the same diligence as that which they bring to bear in implementing corresponding national laws.” (Judgment of the Court of 21 September 1989, Greek Maize, Case 68/88, para. 25)

16. Investigatory powers “76 (…) Such conclusions [manifestly excessive or disproportionate use of investigation powers] could be envisaged only if the Commission sought to conduct investigations despite having sufficient evidence or if the investigations were manifestly intended to gather more evidence than was necessary to establish the existence and scope of the infringement.” 77 The Court cannot (…) appraise, as an absolute value, the Commission’s ‘need for evidence’. (…) We cannot determine, a priori and with precision, beyond what threshold the Commission’s request for evidence is unnecessary or excessive. For the most part, the ‘need for evidence’ can be assessed only in relative terms.” 78 [Even when the Commission has sufficient evidence to establish an infringement, mjf] “it is nevertheless justified in seeking to determine whether the infringement became more serious as time passed and affected a wider area. I would even go so far as to say that it is the Commission’s duty to do so, since otherwise it could not properly fulfil its wider task – wider than its specifically ‘repressive’ role – under the Treaty, namely ensuring that the competition rules are applied.” (Opinion of AG Darmon of 18 May 1989, Orkem v Commission, Case 374/87)

17. Dealing with evidence “29. (…) given that there is no legislation at Community level governing the concept of proof, any type of evidence admissible under the procedural law of the Member States in similar proceedings is in principle admissible. 30. Consequently (…) it is for the national authorities to determine, according to the principles of their national law on evidence, whether, in the specific case before them, and in the light of all the circumstances, the place where the offence or irregularity was committed has been proved to their satisfaction; for example, it is for them to determine whether, for instance, particular testimony is to be admitted or not, and whether it should be considered to have probative force. In particular, it is for the national authorities to assess the reliability of a witness who participated in the transportation operation affected by the irregularity at issue.” (Judgment of the Court of 23 March 2000, Met-Trans and Sagpol, Joined Cases C-310, 406/98.) “Not only must the Community Courts, inter alia, establish whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it.” (Judgment of the Court of 15 February 2005, Tetra Laval, Case C-12/03 P, para. 39)

18. Standard of proof “It is self-evident that where there are no admissions on the part of the participating undertakings, it is often not possible to unravel all those threads in an administrative procedure in which most of the evidence is based on written documents. Of course, in cases of this nature there are also limits on how far it is necessary to go into the finest detail. For technical reasons of a legal nature, it may therefore be justifiable to make do, if necessary, with a slightly broader description of each party’s participation. (...) (...) that legal system resists the overstretching of its requirements to include the provision of a detailed account and detailed evidence on points on which this will rarely be possible and where the presumed perpetrators are themselves responsible for getting into such a situation, so that some relaxation of the requirements of proof must be regarded as unobjectionable. Otherwise, in many cases the Commission would in all likelihood have to abandon prosecution from the outset in cases where there is unquestionably an unlawful cartel but where it is not possible to adduce detailed proof of each party’s involvement in the cartel’s activities. Such a result would in practice rob Article 85 of much of its effectiveness.” (Opinion of AG Vesterdorf of 10 July 1991, Rhône-Poulenc v Commission, Case T-1/89, para. I. D. 7. (p. II-952).)

19. Sanctioning powers “23 It should be observed that where Community legislation does not specifically provide any penalty for an infringement or refers for that purpose to national laws, regulations and administrative provisions, Article 5 [now Article 10] of the Treaty requires the Member State to take all measures necessary to guarantee the application and effectiveness of Community law. 24 For that purpose, whilst the choice of penalties remains within their discretion, they must ensure in particular that infringements of Community law are penalized under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive.” (Judgment of the Court of 21 September 1989, Greek Maize, Case 68/88)

20. Judicial review “That although as a general rule [the Court] undertakes a comprehensive review of the question whether or not the conditions for the application of Article [81 (1) of the Treaty] are met, its review of such appraisals [of complex economic matters] made by the Commission is necessarily limited to verifying whether the relevant rules on procedure and on the statement of reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of appraisal or a misuse of powers.” (Judgment of the Court of 17 November 1987, BAT and Reynolds v Commission, Joined Cases 142,156/84, para. 62) “Whilst the Court recognises that the Commission has a margin of discretion with regard to economic matters, that does not mean that the Community Courts must refrain from reviewing the Commission’s interpretation of information of an economic nature. Not only must the Community Courts, inter alia, establish whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it. Such a review is all the more necessary in the case of a prospective analysis required when examining a planned merger with conglomerate effect” (Judgment of the Court of 15 February 2005, Tetra Laval, Case C-12/03 P, para. 39)

21. Preliminary conclusions and aims for further research Conclusions: Member States are less autonomous in setting up an enforcement system than Reg. 1/2003 might suggest. Enforcement principles of Community law govern the different phases of decentralised enforcement. Further research: The application of these principles will be further developed. National jurisdictions will be considered in the light of these principles.

22. Thank you for your attention. All comments are welcomed at: M.J.Frese@uva.nl