EUROPEAN COMPETITION LAW ANNUAL 2000: The Modernisation of EC Antitrust Policy
EUROPEAN COMPETITION LAW ANNUAL: 2000 The Modernisation of EC Antitrust Policy
Edited by
Claus-Dieter Ehlermann and Isabela Atanasiu
•HARTPUBLISHING
OXFORD - PORTLAND OREGON 2001
Hart Publishing Oxford and Portland, Oregon Published in North America (US and Canada) by Hart Publishing c/o International Specialized Book Services 5804 NE Hassalo Street Portland, Oregon 97213-3644 USA Distributed in the Netherlands, Belgium and Luxembourg by Intersentia, Churchillaan 108 B2900 Schoten Antwerpen Belgium © The contributors severally, 2001 The contributors severally have asserted their rights under the Copyright, Designs and Patents Act 1988, to be identified as the authors of this work Hart Publishing is a specialist legal publisher based in Oxford, England. To order further copies of this book or to request a list of other publications please write to: Hart Publishing, Salter's Boatyard, Folly Bridge, Abingdon Road, Oxford OX1 4LB Telephone: +44 (0)1865 245533 or Fax: +44 (0)1865 794882 e-mail:
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CONTENTS
List of Sponsors Table of Cases
.
INTRODUCTION
vii ix XV
PANEL ONE: COMPATIBILITY, EFFICIENCY, LEGAL SECURITY
1 Panel Discussion Introductory Statement by Mario Monti Discussion 2 Working Papers I Simon Bishop II Ulf Boge III Ian Forrester IV Eleanor Fox V Barry Hawk and Nathalie Denaeijer VI Giuliano Marenco VII Mitsuo Matsushita VIII Petros Mavroidis and Damien Neven IX Ernst-Joachim Mestmacker X Alexander Schaub XI Giuseppe Tesauro
3 13 55 66 75 123 129 145 197 207 223 241 259
PANEL TWO: COHERENCE
1 Panel Discussion
271
2 Working Papers I Christopher Bellamy II Jacques Bourgeois III Laurence Idot IV Ulrich Immenga V Frederic Jenny VI Anne Willem Kist and Maria Luisa Tierno Centella VII Gheorghe Oprescu VIII Emil Paulis IX James Rill X Mario Siragusa XI James Venit
315 323 335 353 360 369 387 399 429 443 457
vi
Contents
PANEL THREE: COURTS AND JUDGES
1 Panel Discussion
477
2 Working Papers I Carl Baudenbacher II Jochen Burrichter III John D. Cooke IV David Edward - V DanGoyder VI Jochem Groning VII Santiago Martinez Lage and Helmut Brokelmann VIII Anne Spiritus-Dassesse IX Sarah S. Vance X Diane P. Wood
521 539 551 564 571 579 593 613 617 627
BIBLIOGRAPHY
639
INDEX
645
LIST OF SPONSORS
Akin, Gump, Strauss, Hauer & Feld L.L.P. Website: http://www.akingump.com Contact: Brussels Office Avenue Louise 65 P.B. No. 7 B-1050 Brussels Tel: (32 2) 535 29 11 Fax: (32 2) 535 29 00 E-mail:
[email protected] Cleary, Gottlieb, Steen & HamUton Website: http://www.cgsh.com Contact: Brussels Office Rue de la Loi 23 B-1040 Brussels Tel: (32 2) 287 20 00 Fax: (32 2) 231 16 61 Howrey Simon Arnold & White Contact: James F. Rill, esq 1299 Pennsylvania Ave., NW Washington, DC 20004 Tel: (001 202) 383 65 62 E-mail:
[email protected] Fax: (001 202) 383 66 10 Martinez Lage & Asociados Contact: Santiago Martinez Lage Madrid Office Calle Serrano 25 28001 Madrid Tel: (34 91) 426 44 70 Fax:(34 91)577 37 74 E-mail:
[email protected] viii
List of Sponsors
Skadden, Arps, Slate, Meagher & Flom L.L.P. Website:
http://www.skadden.com
Contact: Barry Hawk/Henry Huser Brussels Office 523 Avenue Louise B-1050 Brussels Tel: (32 2) 639 03 00 Fax: (32 2) 639 03 39 White & Case, L.L.P. Website:
http://www.whitecase.com
Contact: Brussels Office 1 Place Madou Box 34 B-1210 Brussels Tel: (32 2) 219 16 20 Fax:(32 2)219 16 26 Wilmer, Cutler & Pickering Website: http://www.wilmer.com Contact: Brussels Office Rue dela Loi 15 B-1040 Brussels Tel: (32 2) 285 49 00 Fax: (32 2) 285 49 49
TABLE OF CASES
EC Cases Ahlstrom and Others v Commission, Joined Cases 89, 104, 114, 116, 117 and 125-129/85 [1992] ECR 1-1037. Ahmed Saeed, Case 66/86 [1989] ECR 803. Albany International v Stischting Bedrijfspensioenfonds Textielindusirie, Case C-67/96 [1999] ECR 1-5751. Alcatel/EspacelANT Nachrichtentechnik, Commission Decision, OJ L 31/19 1990. Anic Partecipazioni, Case C-49/92 [1999] ECR 1-4125 Asjes, Joined Cases 209 to 213/84 [1986] ECR 1425. Automec v Commission (Automec II), Case T-24/90 [1992] ECR 11-2223. Banks, Case 313/93 [1994] ECR 1-1279. Banks v British Coal, Case C-128/89 [1994] ECR 1-1209. BATv Reynolds, Joined Cases 142/84 and 156/84 [1987] ECR 4487. Belasco and Others v Commission, Case 246/86 [1989] ECR 2117. Belgische Radio en Televisie et Societe beige des auteurs, compositeurs et editeurs v SVSABAMet NVFonior (BRT-I), Case 127/73 [1974] ECR 51. Bier v Mines de Potasse d'Alsace, Case 21/76 [1976] ECR. BNICv Clair, Case 123/83 [1985] ECR 391. BoeinglMcDonnell Douglas, Commission Decision M877, OJ L 336/16 of 8.12.1997. Boussoisllnterpane, Commission Decision of 15.12.1986 in Case IV/31.302, OJ L 50/30 1987. Brasserie de Haecht v Wilkin (Brasserie de Haecht II), Case 48/72 [1973] ECR 77. British Leylandv Commission, Case 226/84 [1986] ECR 3263. BRT\ Sabam, Case 127/73 [1974] ECR 51. Carbon Gas Technologie, Commission Decision of 8.12.1983 in case IV/29.955, O J L 376/17 1983. Carlo Bagnasco and Others v Banca Popolare di Novara s.c.a., Cassa di Risparmio di Genova e Imperia SpA (Carige), Joined Cases C-215/96 and C-216/96 [1999] ECR 1-179. CILFIT, Case 283/81 [1982] ECR 3415. Coditel SA, Compagnie General pour la Diffusion de la Television and Others v Cine-Vog Films SA and Others, Case 262/81 [1982] ECR 3381. Commission v Anic Partecipazioni, Case C-49/92 P [1999] ECR 1-4125. Commission v France, Case C-159/94 [1997] ECR 1-5815. Commission v Germany, Case C-217/88 [1990] ECR 1-2879.
Table of Cases
Consten SARL & Grundig- Verkaufs-GmbH v Commission, Joined Cases 56/64 and 58/64 [1966] ECR 299. Corbeau, Case C-320/91 [1993] ECR 1-2533. Corte Ingles v Cristina Bldzquez, Case C-192/94 [1996] ECR 1-1281. De Bloos v Bouyer, Case 14/76 [1977] ECR 2359. De Geus v Bosch, Case 13/61 [1962] ECR 89. Delimitis v Henninger Brau, Case 234/89 [1991] ECR 1-935. Direction General de la Defensa de la Competencia v AEBP, case C-67/91 [ 1992] Ecr1-1475. DM Transport SA, Case C-256/97 [1999] ECR 1-3926. Drouot, Case C-357/96 [1998] ECR 1-3075. Eco Swiss China Time v Benetton International, Case C-126/97 [1999] ECR 1-3055. ElopaklMetal Box Odin, Commission Decision, OJ L 209/15 1990. Emmot v Minister for Social Welfare, Case C-208/9 [1991] ECR 1-4269. European Night Services and Others v Commission, Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94 [1998] ECR 11-3141. FacciniDori, Case C-91/92 [1994] ECR 1-3325. Factortime, Case C-213/89 [1992] ECR 1-2433. Francovich v Italian Republic, Joined Cases C-6/90 and C-9/90 [1991] ECR 1-5357. Ford Agricultural Tractors, Commission Decision, OJ L 68/19 1992. Ford-Volkswagen, Commission Decision 93/49/EEC of 23.12.1992, OJ L 20/14 1993. Fotofrost, Case 314/85 [1987] ECR 4199. Frubo v Commission, Case 71/74 [1975] ECR 563. Giry and Guerlain, Joined Cases 253/78 and 1 to 3/79 [1980] ECR 2327. Gottrup Klim Grovvareforeninger v Dansk Landbrugs Grovvareslskab AmbA, Case C-250/92 [1994] ECR 1-5641. Groupement des cartes bancaires, [1994] ECR 11-49. Hoffman La Roche, Case 85/76 [1979] ECR-461. Hugin, Case 22/78 [1979] ECR 1898. John Deere v Commission, Case C-7/95 P [1998] ECR 1-3111. Kali und Salz, [1975] ECR 499. Keck and Mithouard, case C-268/91 [1993] ECR 1-6097. Kledingverkoopbedrijf de Geus en Uitdenbogert v Robert Bosch GmbH and Maatschapppij tot voortzetting van den zaken der Firma Willem van Rijn, Case 13/61 [1962] ECR 89 (see also Opinion of Advocate General Lagrange [1962] ECR 309). KO v de Agostini and TV Shop, Joined Cases C-34/95 and C-36/95 [1997] ECR 1-3843. Konsortium ECR 900, Commission Decision, OJ L 228/31 1990. Kruidvat v Commission, Case T-87/89 [1996] ECR 11-1931, on appeal Case 70/97 P, (judgment of 17.10.1998). Langnese Iglo GmbHv Commission, Case T-7/93 [1995] ECR 11-1533.
Table of Cases
xi
L. C. Nungesser KG and Kurt Eisele v Commission of the European Communities, Case 258/78 [1982] ECR 2015. Louis Erauw-Jacquery SPRL v La Hesbignonne SC, Case 27/87 [1988] ECR 1919. Marshall I, Case 152/84 [1986] ECR 723. Marshall II, Case C-271/91 [1993] ECR 1-4367. Marty v Lauder, Case 127/73 [1980] ECR 2481. Masterfoods, Case C-344/98,(judgment of 14.12.2000, not yet reported). Matra Hachette v Commission, Case T-17/93 [1994] ECR 11-595. Metro v Commission (Metro I), Case 26/76 [1977] ECR 1875. Metro v Commission (Metro II), Case 75/84[1986] ECR 3021. Metropole Television, Case T-528/93 [1996] ECR 11-649. Michelin v Commission, Case 322/81 [1983] ECR 3461. Miller v Commission, Case 19/77 [1977] ECR 131. Nederlandse Vereniging van Banken (1991GSA Agreement), Commission Decision of 8.9.1999 in Cases IV/34.010, IV/33.793, IV/34.234 and IV/34.888, OJ L 271/28 1999. Nordsee v Reedrei Mond, Case 102/81 [1982] ECR 1095. Opel Austria, Case T-l 15/94 [1997] ECR 11-39. Oscar Bronner, Case C-7/97 [1998] ECR 1-7791. Oude Luttikhuis and Others v Verening de Cooperatieve Melkindutries, Case C-399/93 [1995] ECR 1-4515. Papiers Feints de Belgique, Case 73/74 [1975] ECR 1491. Procureur du Roi v Dassonville, Case 8/76 [1974] ECR 837. Pronuptia de Paris GmbH v Pronuptia de Paris Irmgard Schillgalis, Case 161/84 [1986] ECR 353. Rechberger, Case C-140/97 [1999] ECR 1-3499. Remia BVand Others v Commission, Case 42/84 [1985] ECR 2566. Rewe-Zentral v Bundesmonopolverwaltung fur Branntwein (Cassis de Dijon), Case 120/78 [1979] ECR 649. Rurhgas and Thyssengas v Bundeskartellamt, Case C-365/96, cancelled from the Court register by order of 26.3.1998. REWEv Hauptzollamt Kiel, Case 158/80 [1981] ECR 1805. RWE and Stadt Nordhorn v Bundeskartellamt, Case C-34/97, cancelled from the Court register by order of 13.10.1998. Sacchi, Case 155/73 [1974] ECR 409. SA Lancome and Co sparfranee Nederland BV v Etos BV and Albert Heyn Supermarket BV, Case 99/79 [1980] ECR 2511. S.A. Portelange v SA Smith Corona Marchant International and Others, Case 10/69 [1969] ECR 309. Schoeller, Case T-9/93 [1995] ECR 11-1611. Simmenthal, Case 106/77 [1978] ECR 629. Sirena Sri v Eda Sri and Others, Case 40/70 [1971] ECR 69. Societe Technique Miniere v Maschinenbau Ulm, Case 56/65 [1966] ECR 337. Sole distribution agreements for whisky and gin, Commission Decision of 13.12.1985 in Case IV/30.570, OJ L 369/19.
xii
Table of Cases
SPO and Others v Commission, Case T - 29/92 [1995] ECR 11-289 (upheld on appeal. Case C-137/95 P [1996] ECR 1-1613). Stork, Case 1/58 [1959] ECR 17. Suzen, Case C-13/95 [1997] ECR 1-1259. Stork Amstedam, Case T-241/97 [2000] ECR 11-30. Sydhanvnens sten og grus, Case C-209/98 (judgment of 23.5.2000, not yet reported). Syndacat national des fabricants raffineurs d'huile de graissage, Case 172/83 [1983] ECR 555. Tetra Pak v Commission, Case T-51/89 [1990] ECR 11-309. Tipp-Ex v Commission, Case 279/87 [1990] ECR 1-361. Trefilunion v Commission, Case T-148/89 [1995] ECR 11-1063. TWD, Case C-188/92 [1994] ECR 1-0833. Ufex and Others v Commission, Case C-l 19/97 P [1999] ECR 1-1341. Union Royale Beige des Societes de Football Association v. Bosman and Others, Case C-415/93 [1995] ECR 1^921. Van den Bergh Foods Limited, Commission Decision in Cases IV/34.073, IV/34.395 and IV/35.35.436, OJ L 246/1 1998. Van den Bergh Foods Limited, Case T-65/98. Van Gend&Loos, Case 26/62 [1963] ECR 5. Van Landewick (Fedetab), [1980] ECR 3125. Van Munsten, Case C-l65/91 [1994] ECR 1—4661. Van Schjindel, Joined Cases C-430/91 and C-431/91 [1995] ECR 1-4705. VBVB and VBBB, Joined Cases 43/82 and 63/82 [1984] ECR 19. VBVB v VBBB, Case T-17/93 [1994] ERC 11-595. Verband der Sachversicherer, Case 45/85 [1987] ECR 405. Vereniging van Samenwerkende Prijregelende Organisatie in de Bouwnijverheidv Commission, Case T-29/92 [1995] ECR 11-289. Vereniging van Cementhandelaren, Case 8/72 [1972] ECR 977. VGB and Others v Commission, Case T-77/94 [1995] ECR 11-759. Walt Wilhelm v Bundeskartellamt, Case 14/68 [1969] ECR 1. WEA-Filipacchi, Commission Decision 72/480/CEE, OJ L 303/52 1972. XlOpem Group, Commission Decision, OJ L 35/36 1987. Zuchner v Bayerische Vereinsbank, Case 172/80 [1981] ECR 2021.
US Cases Alaska v Safeway, Inc. and Carr-Gottstein Foods Co., Case No. 3AN-99-4371 (Sup. Ct. Alaska 1999). Brown v Allen, 344 U.S. 443 (1953). California Dental Associations v FTC, 526 U.S. 756, 119 S. Ct. 1604 (1999). Chevron U.S.A. Inc. v Natural Resources Defense Council, Inc., 461 U.S. 837 (1984).
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Commonwealth of Pennsylvania v Russell Stover Candies, Inc., 1993-1 Trade Cas. (CCH) (E.D. Pa. 1993). Continental T. V, Inc. v GTE Sylvania, Inc., 433 U.S. 36 (1977). Elliot v Commodities Futures Trading Comm'n, 202 F. Supp. 3d 926 (7th Cir. 2000). Food & Drug Administration v Brown & Williamson Tobacco Corp., 120 S. Ct. 1291 (2000). FTC vBP Amoco, pic, Case No. 000415SI (N.D. Cal. Feb. 4, 2000) FTCvButterworth Health Corp., 1997-2 Trade Cas. (CCH) (6th Cir. 1997). FTCv Cardinal Health, Inc., 12 F. Supp. 2nd 34 (D.D.C. 1998). FTC\ Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997). FTCv Tenet Health Care Corp., 117 F. Supp. 2d 937 (E.D. Mo. 1998). HardfordFire Ins. Co. v California, 509 U.S. 764 (1993). Jefferson Parish Hosp. Dist. No. 2 v Hyde, 104 S. Ct. 1551 (1984). Loeb v Eastman Kodak Co., 183 F 704 (3rd Cir. 1910). McLain v Real Estate Board, 444 U.S. 322. New York v Kraft General Foods, Inc. et al, 926 F. Supp. 321 (S.D.N.Y. 1995). New York v Primestar Partners, L.P., 1993-2 Trade Cas. (CCH) (S.D.N.Y. 1993). Spectrum Sports v McQuillan, 506 U.S. 447. Summit Health v Pinhas, 500 U.S. 322. Toys 'R' US v FTC, No. 98-4107 (7th Cir. 1999). United States v Allied Waste Indus., Inc., 1992-2 Trade Cas. (CCH) (D.D.C. 1999). United States v Cargill, Inc., 1997-2 Trade Cas. (CCH) (W.D.N.Y. 1997). United States v Long Island Jewish Med. Ctr, 983 F. Supp. 121 (E.D.N.Y. 1997). United States v Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (findings of fact); 87 F. Supp. 2d 30 (D.D.C. 2000) (conclusions of law). United States v Primestar Partners, L.P., 1994-1 Trade Cas. (CCH) (S.D.N.Y. 1994). United States v Topco Assocs., Inc., 405 U.S. 596, 629-12 (1972).
INTRODUCTION
On 2-3 June 2000 the European University Institute (EUI) hosted thefifthedition of the Annual EC Competition Law and Policy Workshop. This program, started in 1996 by law professors Giuliano Amato and Claus-Dieter Ehlermann at the Robert Schuman Centre of the EUI, brings together every year top-level policy-makers, academics and legal specialists to discuss critical issues of EC competition policy. The first edition of the Workshop (1996) focused on the problems of implementing competition policy in a federal context.' The second (1997) debated the objectives of competition law and policy.2 The third (1998) analysed how to ensure effective competition in the rapidly evolving market of communications.3 The fourth (1999) examined selected problems of State aid control.4 The fifth edition of the Workshop was devoted to the ongoing debate about the modernisation of EU antitrust law.5 This publication includes a transcript of the discussions and a collection of the writings presented by the participants at thefifthEU Competition Law and Policy Workshop. The event took place one year after the European Commission published the White Paper containing its suggestions for the reform of EC antitrust law enforcement,6 at a stage when consultations on the suggestions were already fairly advanced. The Workshop concentrated on those issues which the White Paper and the ensuing discussions had identified as particularly problematical and controversial. Proceedings were divided into three sessions. Panel One was devoted to the following three aspects of the reform: its compatibility with the EC Treaty; its effects on the efficiency of EC anti-cartel enforcement, and its consequences for undertakings interested in legal security. Panel Two focused on the risks that the reform entails for the coherent application of Article 81 EC Treaty. Panel Three 1
Ehlermann C.-D. and Laudati. L. L., eds. (1997): The Robert Schuman Centre Annual on European Competition Law 1996, The Hague, Kluwer Law International. 2 Ehlermann C.-D. and Laudati. L. L., eds. (1998): European Competition Law Annual 1997—Objectives of Competition Policy, Oxford, Hart Publishing. 3 Ehlermann C.-D. and Gosling L., eds. (2000): European Competition Law Annual 1998—Regulating Communications, Oxford, Hart Publishing. 4 Ehlermann C.-D. and Everson M., eds: European Competition Law Annual 1999: State Aid Control in the European Union—Selected Problems, Oxford, Hart Publishing (forthcoming during Winter 2000/2001). 5 The term 'antitrust' is used to cover in particular Article 81 EC Treaty. Issues concerning the implementation of Article 82 EC Treaty were not discussed during the Workshop. 6 European Commission: White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, OJ C 132 of 12.5.1999.
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concentrated on the specific problems that the reform will generate for national judges, who will become responsible for the interpretation and application of Article 81 (3) EC Treaty. The Workshop revealed broad consensus on the main thrust of the Commission's reform initiative. Yet it also showed that a series of issues have to be considered further and addressed in a formal proposal from the Commission to the Council. Among these issues are: the scope of supremacy of EC competition law with respect to national law; the legal effects of positive (or 'noninfringement') Commission decisions based on Article 81 (3); the legal effects of decisions taken by national competition authorities and by national courts in other Member States; the burden of proof with respect to Article 81 (3); the distribution of cases between the Commission and national competition authorities, as well as among the national authorities themselves. Background. The White Paper suggested a radical departure from the existing EC antitrust law enforcement system. Council Regulation 17/62 reserves to the Commission the power to exempt, according to Article 81 (3) EC Treaty, agreements that fall under Article 81(1) EC Treaty (and that are, therefore, prohibited), provided they have been properly notified. Because of the Commission's exemption monopoly, Article 81 (3) has no direct effect. The White Paper proposes to abolish the system of notifications and the Commission's exemption monopoly. It suggests instead that Article 81 (3) should become directly effective, so that it can be also be applied by national competition authorities (NCAs) and by national courts. The centralisation of the exemption power under Article 81 (3) in the hands of the Commission, and the corresponding notification requirement, have given rise to enormous problems in enforcement. In the early sixties, the Commission was swamped by notifications. In reaction, the Commission adopted so-called 'group exemptions' (i.e. regulations declaring Article 81 (1) inapplicable to whole categories of agreements), and developed the instrument of 'comfort letters', giving a sort of green light to individual agreements. Individual exemption decisions remained extremely rare; their average number did not exceed 5 during the last 5 years. Group exemptions were criticised as anti-economic and over-bureaucratic. Comfort letters were considered to be poor substitutes for formal decisions, because they do not have legal effects, and are, therefore, not able to eliminate the invalidity resulting from Article 81 (1) and (2). In addition, the Commission was not even able to eliminate totally the backlog of pending requests for exemptions. Thus, the Commission never succeeded to manage its exemption monopoly in a satisfactory way. Over the last decade, criticism of the existing antitrust enforcement system intensified. Comparisons were made with the successful application of the 1989 Merger Regulation. The debate on subsidiarity stimulated requests for the abolition of the Commission's exemption monopoly in favour of the NCAs. Until recently, the Commission responded to this largely justified criticism by trying to improve the application of Article 81 within the existing legal framework, e.g. by favouring the decentralised application of Article 81 (1) and (2) by
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xvii
NCAs and national courts, while maintaining the monopoly to adopt exemption decisions under Article 81 (3). In this perspective, the reform suggestions of the White Paper represented not only a legal, but also a 'cultural' revolution. Previous EC Competition Law and Policy Workshops held at the EUI might have contributed to the Commission's change of mind. During the 1996 and 1997 meetings, as one of the participants at the June 2000 Workshop put it, '. . . the faces of Commission officials flushed and blushed to hear severe criticism: the European system . . . did not work, could not work, had to change.' In spite of the traditional criticism of the existing situation, the immediate reactions of the legal and business community to the Commission's reform proposal were sometimes rather sceptical, particularly in Germany, though in the past German voices have been most critical about the centralising effects of Regulation 17/62. During the consultations following the publication of the White Paper, however, the initial scepticism has somewhat diminished. Discussions at the June 2000 Workshop revealed that, in the meantime, a broad consensus seems to have emerged around the Commission's proposals for the decentralisation of EC antitrust enforcement. However, there were also warning views. In addition to the well-known German critics, some participants expressed the fear that the Commission might go too far in its enthusiasm for decentralisation, and that it might jeopardise its essential role in determining and guiding competition law enforcement in the EU. Everybody agreed, nevertheless, on the need for careful preparation of the reform, and in particular on the need to give precise, clear and convincing answers to the issues identified in the debate. The reform was generally considered to be too important for the future of the EU's competition policy to be rushed through the EU's legislative process, thus leaving well-known questions unresolved, reserving them to later administrative decisions of competition authorities and judgements of the courts. The Workshop Proceedings. The annual EC Competition Law and Policy Workshops hosted by the EUI in Florence provide an ideal forum for the informal debate of critical issues in EU competition policy among policy-makers and actors involved in EU competition law implementation. Thefifthedition of the Workshop brought together a group of thirty-three top-level participants, including: high-ranking Commission officials directly involved in the preparation of the reform; judges from the EU and Member State courts, as well as from the US and EFTA; representatives of competition authorities in the Member States and one of the countries candidate to EU membership (Romania); academics; and outstanding practitioners in the field of antitrust. The event was co-chaired by Claus-Dieter Ehlermann and Karel van Miert, former Member of the European Commission responsible for Competition. The proceedings of the Workshop were opened by Professor Mario Monti, Karel van Miert's successor in the Prodi Commission. Professor Monti explained the reasons requiring a fundamental reform of EU antitrust enforcement. He underlined the need for the intensified application of EU competition law both by EU and by NCAs and national courts. This would be achieved by
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establishing a network of competition authorities, based on vertical and horizontal co-operation and mutual assistance, and by giving the national courts their natural role as protectors of private rights derived from the EC Treaty. Professor Monti recognised the risk of divergence that decentralisation will inevitably entail. He expressed, however, his determination to clarify existing rules, thus bringing about in the end more convergence than ever before. Of particular interest is Professor Monti's view that the modernisation of EU antitrust law enforcement through increased decentralisation is a paradigm for the reform of other activities of the European Commission. Panel 1 of the Workshop was devoted to discussing the following issues: (a) the compatibility of the reform envisaged by the Commission in the White Paper with the EC Treaty, (b) whether the reform will enhance the efficiency of EC antitrust policy, (c) whether it will bring about the desired simplification of EC antitrust procedures, but nevertheless ensure sufficient legal certainty for the undertakings concerned. The issue of the compatibility of the Commission's reform proposal with the EC Treaty is discussed in several of the papers prepared for the Workshop. One of the participants in particular elaborated the three main arguments which, in his view, plead against the reform's compatibility with the Treaty. Thefirstargument is that the legal exemption system envisaged by the Commission embodies de facto a 'control of abuse' approach in enforcement, rather than the prohibition approach established by the Treaty. Furthermore, the drafting of Article 81 EC Treaty, and in particular the introductory formula of paragraph 3 ('. . . the provisions of paragraph 1 may however be declared inapplicable ...'—emphasis added), as well as the wording of Article 83 EC Treaty, indicate that the founders of the Treaty intended to establish an administrative authorisation system. Finally, the jurisprudence of the EC Court of Justice (ECJ), and in particular its recognition of the Commission's discretion in applying Article 81 (3), is proof of the fact that Article 81 (3) is incapable of having direct effect. Assigning its implementation to national courts would, de facto, deprive paragraph 1 and 2 of Article 81 of their direct effect. According to this argumentation, the system of administrative authorisation has to be maintained. While the Commission's exemption monopoly may be shared with national competition authorities, Article 81 (3) can not be applied directly by national courts. Though some participants expressed doubts as to whether national judges were capable of applying directly Article 81 (3), or whether it was appropriate and wise, particularly at this stage, to entrust direct application of this provision to them, nobody shared the fundamental legal objections against the envisaged reform. Noteworthy is, in particular, the positive position of present and former members of the Courts in Luxembourg who participated in the Workshop. Defenders of the reform repeated and elaborated the already well-known arguments about: the respect and reinforcement of the prohibition principle established in Article 81(1) and (2); the deliberately ambiguous form of Article
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81 (3) as compared to the clear wording of Article 65 ECSC; the wide scope of Article 83; the similarities between Article 81 (including its paragraph 3) and other Treaty provisions for which the ECJ has recognised direct effect. After all, direct effect is the rule, and not the exception, in EC law. Of particular interest are the findings of two participants who investigated in depth the history of the negotiations leading to the wording of Article 85 EEC Treaty (now 81 EC Treaty). While one of them qualifies the discussions as not focussed and amicable explorations of concepts unfamiliar to negotiators, the other comes to the conclusion that the White Paper is right in its assertion that the divergence of views between the legal exemption versus the administrative authorisation approach was deliberately left open and reserved for future Council legislation. In practice, the absence of direct effect of Article 81 (3) under the actual Regulation 17/62 might not have had as drastic effects as a strictly legal analysis might suggest. One participant underlined that even under the existing authorisation system, national judges have found ways to take into account the outcome of an analysis of Article 81 (3), though this analysis is formally reserved to the Commission. Several participants noted that the switch from the Commission's exemption monopoly to direct effect of Article 81 (3) will have repercussions on the interpretation and application of this provision by the ECJ: the margin of discretion granted to the Commission by the ECJ will disappear. The categories of considerations used explicitly or implicitly in interpreting and applying Article 81 (3) may also change. The 'judicialisation' of Article 81 in its totality may even have repercussions on the Commission's administrative procedures under Regulation 17/62. The Workshop showed consensus that it is urgent to clarify the scope of Article 8(3). It is obvious that this scope depends on the interpretation of Article 81 (1): the broader the reach of Article 81 (1), the greater the need for recourse to Article 81 (3). On the contrary, if Article 81 (1) is interpreted more restrictively, the field of application of Article 81 (3) will shrink correspondingly. The discussion of this issue showed a wide spectrum of opinions. One participant argued in favour of a restrictive interpretation of the requirement of effect on trade between Member States. Others suggested to situate the totality of strictly competition-oriented arguments in Article 81 (1), leaving to Article 81 (3) only non-competition oriented considerations. In such a perspective, the Commission's reform proposal would be misplaced: the Commission should maintain its exemption monopoly under Article 81 (3). The majority of participants seemed, however, to follow the White Paper's 'middle of the road' approach: the notion of 'restriction of competition' has to be interpreted more realistically, in particular taking into account the position of the undertakings concerned on the relevant market, but without situating all the weighting and balancing of economic factors in Article 81 (1). The problem of the borderline between Article 81 (1) and (3) therefore remains, as much as the debate on the legality of taking into account non-competition oriented considerations in Article 81 (3). Recent EC Treaty reforms have increased the number and importance of such considerations, provided for in other parts of
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the Treaty. The need for Commission guidelines on the interpretation of Article 81 (3), recognised by the Director General of DG Competition, has grown correspondingly. Opponents of the Commission's reform suggestions have shown scepticism as to whether the reform will simplify and render more efficient the enforcement of EC antitrust law. German critics point to the fact that the notification and administrative authorisation system has proved to be effective in the context of German antitrust enforcement. One of its advantages is that it enabled the Bundeskartellamt to remain informed on market developments. In line with this experience, the Head of the Bundeskartellamt repeated his recent proposal to oblige undertakings to inform NCAs about their restrictive agreements and to make this information available on the Internet. He noted, however, that other positive aspects of the German experience, like the preventive and deterrent effect of the administrative authorisation system, are generally considered not to exist at EU level. He was joined by others in observing that 'exemptions allow negotiation, and fine tuning' (like fixing a time limit for the validity of an exemption) which will disappear under a legal exemption regime. The great majority of participants welcomed the initiative to abandon the notification and administrative authorisation system. They shared the view expressed in the White Paper and by Commission representatives at the Workshop that requests for exemptions detract the Commission's rare resources from more important work, i.e. dealing with complaints and detecting horizontal, hard core cartels. They also greeted the elimination of the official separation of Article 81(1) and (3). Not everybody was convinced that the elimination of the Commission's exemption monopoly would lead to the desired results, i.e. that NCAs and national courts will use more often Article 81. NCAs might continue to prefer to apply national competition law. National courts depend on private action, i.e. the initiative of undertakings to have recourse to juridical proceedings. Where are the incentives (in addition to the elimination of the exemption monopoly obstacle) to use Article 81 more frequently than in the past? In addition, adequate resources are lacking not only at Commission level. They are also needed at the level of NCAs and national courts. The new approach to Article 81(1), emphasising economic instead of purely legal factors, was generally welcome, though again, German voices warned against an excessive softening of the EC antitrust discipline. Participants noted that this approach would have consequences in terms of the predictability of outcome of the analysis under Article 81 (1). These consequences are not dependent on the choice of systems for the implementation of Article 81 (3). Under the new 'economic' approach, it will indeed be more difficult to foresee whether Article 81 (1) applies than under the traditional, more legalistic interpretation. Part of the old (Commission and ECJ) decisions will not provide guidance for the future. Consequently, the need for Commission guidelines on the interpretation of Article 81 (1) will increase. These guidelines have to be clear and should regularly be updated.
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Whether and to what extent the abolition of individual exemption decisions will add to existing and future uncertainties remained a matter of controversy. The White Paper expresses the view that the legal exemption system will eliminate the major cause of legal insecurity, because the direct effect of Article 81 (3) will dispense of the adoption of individual exemption decisions which, in any case, were rarely taken in the past. Participants from the USA went even further. They considered European preoccupations about the validity of contracts to be exaggerated. For them, legal certainty is not a serious problem. Doesn't business prefer a rule of reason approach to per se prohibitions? Participants reflecting the positions of European business took a different view. Considering the Commission's adamant opposition to any system of voluntary notification (underlined by Prof. Monti in his opening statement), requests for such a system were hardly voiced any more. But the need for individual positive decisions and instruments equivalent to comfort letters continued to be emphasised. Discussions at the Workshop showed that insistent request for Commission guidance in individual cases has had a certain effect on DG Competition. According to the Director General, his DG is disposed to adopt and publish, within reasonable deadlines, reasoned opinions on specific genuinely new issues on the basis of available information, provided the issues are not pending before a Court. On the contrary, the Commission remains hostile to enlarging the narrow limits for positive decisions, now called 'non-infringement' decisions. Such decisions, and their legal nature, remained very controversial. While many practitioners insisted that they were necessary or, at least, extremely useful, others expressed doubts about—or even opposition to—such decisions, which can be considered to be contrary to the logic of the new system. The debate about non-infringement decisions is influenced by two other issues. Thefirstconcerns the NCAs: should they be entitled to adopt such decisions? The Commission remains totally opposed to this perspective, as it apprehends that NCAs might retain divergent interpretations of Article 81 (3). Insofar, the Commission shares the fear that EC competition policy might be re-nationalised. Others, however, consider it to be normal that the process of decentralisation does not stop at non-infringement decisions. The second major problem raised by non-infringement decisions concerns their legal nature. For some, they can only be declaratory in nature, not having any binding effect, at least on national courts. Others considered that they should be binding even under the legal exemption regime. In support of this view, reference was made to general EC law principles, like the duty of cooperation and mutual respect (Article 10 EC Treaty), and the supremacy of EC law. Even representatives of the Commission seemed to be divided on this issue, which was said to be still open among Commission departments. Participants agreed, however, that the formal amendments to Regulation 17/62 should provide an answer to this question.
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Panel 2 was devoted to the risks which result from the radical decentralisation of the enforcement of Article 81 for the coherence of EC antitrust law, and the mechanisms envisaged in the White Paper to minimise these risks. It is inevitable that an increase in the number of agents entrusted with the implementation of Article 81 (3) will lead to divergences in the interpretation and application of this provision. Opinions were divided as to the importance of these divergences. Participants from the US seemed least concerned, as they are used to a multitude of public and private actors in the field of antitrust enforcement. They, but also others, considered diversity of solutions to a given problem as an opportunity to arrive at the best result. For them, a 'bottom up' approach in which 'the law bubbles up' is a familiar phenomenon which is one of the great merits of a federal structure. After all, nobody guarantees that a central agency like the Commission has the monopoly of insight and wisdom in enforcing Article 81. Others considered that, in the light of decisions taken so far by national courts under the already directly applicable Articles 81(1) and 82, the risk of divergent decisions will be relatively small. This view is shared by those who do not expect a significant increase in the use of Article 81 by NCAs and national courts. However, there are also those who fear divergent decisions because of the overlapping responsibilities of NCAs, the limited territorial effect of NCA decisions, multiple jurisdictions and forum shopping by private parties. Because of the lack of practical experience with any decentralised application of Article 81 (3), it is difficult to appreciate the importance of these risks. The business community, trying to minimise costs and maximise the benefits of the national market, will probably evaluate them to be higher than political defenders of the subsidiary principle. We have already noted the Commission's hostility to decentralise in favour of NCAs the possibility to adopt non-infringement decisions under Article 81 (3), because it fears a re-nationalisation of the interpretation and application of this provision which would lead to too generous results. It is noteworthy that one of the papers prepared for the Workshop points to the risk that decentralisation might produce the opposite results, i.e. a too strict interpretation and application of Article 81 (3), as NCAs might not take into account the positive effect of certain agreements if these effects present themselves outside the territory for which the NCA is responsible. Consequently, this paper proposes to impose on NCAs a positive comity obligation. There is no doubt that the Commission is determined to maintain its central role as policy-making agency, defining and implementing the future course of EC antitrust policy. Nobody contested the need for such a role, which only the Commission can perform. Participants expressed, however, more or less doubts as to whether the mechanisms envisaged in the White Paper will be sufficient to preserve this indispensable function. The Commission suggests relying essentially on two broad principles in order to minimise the risks resulting from the radical decentralisation of the application of Article 81 (3). The first is co-operation within the network of enforce-
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ment agencies formed by the Commission and the NCAs. The second is the principle of supremacy of EC law over national law. Participants expressed broad support for the main lines of the Commission's approach. They expressed, however, also some concerns, and asked for clarifications or suggested additional mechanisms. The spectrum of opinions was large. It spread from rather general criticism (like 'weaker part of the White Paper', 'lack of detail', insufficient distinction between the problems related to NCAs as opposed to those concerning national courts) to very detailed proposals on how to avoid conflicts and to restore coherence in case of diverging decisions. As the problems of national courts were the subject of a special, third session, the following passages will concentrate on issues pertaining specifically to NCAs. The risk of divergent decisions would be reduced if cases were attributed, within the network of enforcement agencies, according to precise, clear and transparent criteria. As one participant observed, such rules should address not only situations in which several NCAs claim to be competent, but also the opposite problem, i.e. that none of the NCAs wants to deal with a complaint. Whether the criteria envisaged so far are satisfactory remained controversial. They are certainly the subject of ongoing in-depth discussions between the Commission and NCAs. Information about these discussions might have influenced the position of those participants who expressed dissatisfaction with the Commission's approach. While participants certainly agreed in general with the position taken by the Head of the Dutch competition authority, who pleaded in favour of preventive mechanisms for conflict avoidance (information and consultation, instead of approval), others emphasised the continuing need for the Commission to exercise its right under Article 9 of Regulation 17/62 to take over cases, thus assuming responsibility for their outcome. Reference was made in this respect to the functions exercised by the US Supreme Court in settling divergences of opinion among US Circuit Courts of Appeal. Some participants floated even the idea to envisage a right of appeal of the Commission against decisions taken by NCAs. The suggestion to allow such an appeal before the Court of first Instance (CFI) would of course affect the architecture of judicial review under the EC Treaty, and therefore would require an amendment of the Treaty. More generally, it should be noted that Commission interventions in cases pending before a NCA raise problems under the principle of subsidiary. In addition, 'hard' as opposed to 'soft' co-ordination could very well become a disincentive for NCAs to apply EC competition law, instead of using, by preference, national competition law, as they seemed to do until now. The White Paper concentrates on vertical co-operation between the Commission and NCAs. It hardly discusses horizontal co-operation among the NCAs themselves. However, such horizontal co-operation is indispensable for the efficient functioning of the network of administrative enforcement agencies within the EU. During the Workshop, the White Paper's weakness in this respect was observed, and reference was made in particular to: the transfer of
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cases between NCAs; the exchange of confidential information, complicated through confidentiality requirements (which might be particularly acute in the case of information provided in the framework of national leniency programs); the already mentioned positive comity principle; and even the possibility that NCAs might collect evidence in other Member States. The White Paper assumes, without further discussion, that the effect of NCA decisions will continue to be limited to the national territory. Several participants observed that such limitation is contrary to the principles of the internal market. One of them suggested to install a 'conditional' EU-wide effect, the condition being the absence of objections raised by the Commission or another NCA. However, specific requirements for the recognition of EC-wide effect were not discussed. In general, most participants seemed to accept that, at least for the time being, the approach of the Commission is appropriate. The White Paper contains no suggestions for minimum procedural standards that NCAs have to fulfil before decentralisation of the application of Article 81 (3) takes place. That all of them have to be entrusted with the possibility to apply Article 81 (in its entirety) is obvious. The new Regulation replacing Regulation 17/62 should make this absolutely clear. But should they go further and provide for the approximation of minimum requirements for NCAs, like the status of NCAs, their procedures, their instruments of action (such as the possibilities of settlement, the nature and size of sanctions)? A few participants considered that some approximation of national legislation regulating the status, the rights and obligations of NCAs was necessary or, at least, highly desirable. Most participants, however, seemed to agree with the Commission's position that, at this stage, it would not be wise to take such an initiative. It is not surprising that the White Paper does not refer to the substance of national competition law, as the reform deals exclusively with the enforcement of existing EC antitrust law. The substance of national competition law remained also outside the discussions of the Workshop. However, the observation was made that differences between Article 81 (3) and similar, but either narrower or broader national provisions could have an influence on the interpretation and application of Article 81 (3) by the NCAs. The co-existence of EC and national rules, and the consequent 'spillover' from national to EC law could, be one factor leading to conflicting interpretations. We have already mentioned that the risk of such conflicts motivates the White Paper's opposition to the decentralisation of non-infringement decisions to NCAs. The decentralisation of Article 81 (3) is already a challenge for the NCAs of the existing Member States. It is even more such a challenge for the NCAs of acceding new Member States. The so-called Europe Agreements have obliged Central and Eastern European candidates to EU membership to apply the criteria of Article 81 and 82, and to harmonise their national competition law with existing EC competition law. As a result, the existent notification and prior administrative authorisation system was taken over in the national laws of the candidate countries. The reform of EC law should logically lead to a corresponding change of national law in Central and Eastern Europe. Whether
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administrators (and judges) in these countries are sufficiently equipped and qualified to follow the change of systems in the EU remains to be seen. Transitional arrangements (not discussed in detail at the Workshop) might be the appropriate answer. Contrary to the situation under the Europe Agreements, no corresponding harmonisation obligation exists for Member States of the EU. Member States are, therefore, perfectly entitled to maintain their notification and prior administrative authorisation systems, often inspired by the existing EC regime. Participants who specifically addressed the issue recognised, however, that the reform of EC competition law would probably have repercussions on corresponding national law. It is indeed not logical to maintain notification and authorisation requirements taken over from EC competition law at national level, if such requirements are eliminated in EC competition law. It is, however, remarkable that the likely pressure to amend national law was not invoked by anybody as an argument against the reform of the EC antitrust enforcement system. The reader will remember that the principle of supremacy of EC law is for the Commission one of the two main defences against the risk of divergent decisions in a totally decentralised enforcement system. The discussion on the legal effects of non-infringement decisions with respect to NCAs and national courts is—at least in part—a debate about the scope of supremacy of EC antitrust law in the new context of a legal exception system. In addition, the extent to which Article 81 pre-empts the application of national antitrust law is of fundamental importance for the possible reach of such national law. The Workshop demonstrated wide differences of opinion on this question. While representatives of the Commission considered that the reform will enhance the area pre-empted by Article 81, others took the opposite view, i. e., that under the new system, the logic of existent ECJ jurisprudence would leave more scope for national antitrust law. A particularly important point was made by the Head of the Dutch competition authority: if the Commission representatives were right, and the simple fulfilment of the conditions of Article 81 (3) by a given agreement were to preclude the application of national law, the burden of proof with respect to Article 81 (3) might shift to NCAs; such a result would be unacceptable in view of the general consensus that the existing situation with regard to the burden of proof should not be affected by the reform. Participants agreed that, in view of the uncertainties surrounding the supremacy question, it was urgent to give it a clear response in the new Regulation. Another essential point emerging from the debate referred to the Delimitis principle of 'deference' of national courts vis-a-vis the Commission. In particular, some of the participants questioned whether the deference principle remained in place once the Commission's monopoly over the application of Article 81 (3) was abandoned. It was suggested that this issue, closely related to the need for ensuring a coherent application of EC antitrust law in a system of parallel competencies, needed to be clarified in the new Regulation.
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Panel 3 examined the particular problems arising from the envisaged reform for courts and judges. We have already discussed the first and most important issue for national courts, i.e. the question whether Article 81 (3) is capable of having direct effect. The reader will remember that the majority of participants considered that this question had to be answered in the affirmative. Judges are perfectly able to apply Article 81 (3), which is neither fundamentally different from other provisions of the EC Treaty that have direct effect, nor from national law requiring the appreciation of complex economic situations and the balancing of competing economic and non-economic interests and values. We have also mentioned the opinion of some participants that the Commission might overestimate the role that national courts will play under the new system of decentralised enforcement of Article 81. NCAs and national courts have different perspectives and functions. Taking into account European traditions and the lack of US-type incentives for private action under EC competition law, administrative antitrust law enforcement will remain considerably more important than court decisions obtained by private plaintiffs or defendants. The application of competition law is fact-intensive. Under the new, more economically oriented interpretation of Article 81 (1), even more factual evidence will need to be considered. Procedural rules for court proceedings differ widely within the EU. They converge, however, on one important point. In civil (as opposed to administrative) law proceedings, the facts have to be alleged and proved by the parties. They are not investigated ex officio by the judge. For powerful players with deep pockets this is much less of a problem than for their financially weaker adversaries, in particular if financial strength is combined with otherwise easier access to pertinent information, like for the members of a cartel. For opponents of the Commission's reform suggestions, these are important arguments against the decentralisation of the application of Article 81 (3) to national courts. Supporters of the reform recognised this difficulty, but stressed that judges may need help and assistance from the Commission or NCAs. In addition, the natural limits of judicial procedures, particularly for weaker parties, militate in favour of the continued involvement of the Commission (and NCAs). One of the major objections of those who are opposed to the reform is the possible effect on the distribution of the burden of proof. According to the settled case law of the ECJ, under the existing system the party invoking Article 81 (3) has to prove that the conditions of this provision are met. Opponents to the reform assert that under the new system the burden of proof would shift to the party who alleges that the agreement is prohibited, and, therefore, illegal and void. This party would not only have to prove that the conditions of Article 81 (1) are fulfilled, but also that those of Article 81 (3) are not met. A shift of the burden of proof for Article 81 (3) would have major consequences for the Commission, NCAs, and in particular for private actors invoking the illegality of an agreement, who are often the weaker, less well informed parties to a dispute. Participants agreed that a shift of the burden of proof was neither
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intended nor desirable. It was generally recognised that the formal proposal for the new Regulation should clarify this point. The White Paper suggests to consolidate the traditional—but until know rarely used—practice of the Commission assisting national courts, at their request, with relevant information. The White Paper envisages also that the Commission might act in certain court proceedings as amicus curiae. Participants echoed the well-known criticism that the process of 'information' of judges by the Commission might conflict with the requirements of a due process. A certain preference was therefore voiced for the status of amicus curiae, widely practised in the US and praised by the transatlantic participants. However, continental European legal systems do not provide for such a status. Participation as 'intervener' might be more appropriate. In addition, it was observed that the exercise of such procedural rights requires a good knowledge of national judicial proceedings. It was, therefore, suggested to assign this function to NCAs rather than to the Commission, which has to spare in any case its rare resources. That the amicus curiae suggestion is, once more, one of those that need to be elaborated further, is obvious. Reference was also made to a suggestion advanced in the literature, namely to establish within each Member State an EC law Advocate General to advise national courts on questions of EC law in general, and EC antitrust law in particular. Participants welcomed in general the suggestion to concentrate competition law issues in certain, specialised jurisdictions. Such specialised jurisdictions exist in several Member States (but not in the country with the oldest and richest antitrust tradition, where the law is exclusively enforced through courts, i.e. the US). However, attention was drawn to the fact that competition law issues arise, more or less incidentally, in a wide variety of civil proceedings for which concentration in specialised courts might not be desirable. Instead, the specialisation of individual judges, at the appeal court level in particular, might be preferable. Training of judges was of course welcomed. Even better would be the exchange of judges between Member States—but these proposals go far beyond the limited area of EC antitrust law. We have already mentioned the problems that the decentralised application of Article 81 (3) will raise for NCAs in accession countries. Such problems will, of course, also arise with respect to judges of these countries. Transitional arrangements might, again, be the appropriate solution to attenuate these problems. In relation to the problems of overlapping jurisdiction, participants expressed in general the view that the provisions of the Brussels Convention are sufficient to deal appropriately with the problems of forum shopping. But not everybody agreed. Forum shopping might not only be influenced by differences in substantive and procedural national laws, as well as in interpretation and application of Article 81, but also by purely administrative factors, like speed and language. Most courts are notoriously overburdened; the language issue is an even greater problem for the national judiciaries than for national administrations.
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It is obvious that the risk of diverging decisions does not only exist at administrative level. It is even greater for the much more numerous national courts. According to existing Treaty rules, preliminary rulings by the ECJ under Article 234 should avoid or, at least, reduce this risk. Transatlantic participants explained the much more efficient mechanisms provided by US law for coping with problems of 'judicial federalism'. Establishing similar mechanisms in the EU would require far-reaching modifications of national and EU constitutional law. We have already mentioned one suggestion, made with respect to the judicial control of NCA decisions by the CFI. Other suggestions were advanced with respect to preliminary rulings and national courts. One of them concerns the responsibility for giving preliminary rulings. In line with reform ideas advanced by the ECJ, the responsibility for giving preliminary rulings in antitrust matters might be attributed to (or shared with) the CFI. However, preliminary rulings have to be more or less abstract answers to strict legal questions. Such answers were generally considered not to be necessarily helpful in fact-intensive competition cases. This aspect might explain, at least in part, the rather bold suggestion to submit national court judgements to the control of the CFI (and the ECJ). Critical voices considered that the Commission has overlooked the repercussions of the envisaged reform on the judicial architecture of the EC Treaty. It is, however, more likely that the Commission did not want to add to the already numerous and delicate problems mentioned in the White Paper. This consideration explains probably also why the White Paper does not mention differences in Member States' procedural laws, and why it does not even hint to any initiative that would lead to the approximation of such laws. The Workshop seemed to agree on this cautious approach. Participants drew however attention to an issue which, in their view, has to be addressed, i.e. the growing importance of arbitration proceedings. EC competition law is considered to be arbitrable, but belongs to the group of rules that are in the nature of ordre public provisions. Arbitrators are obliged to take into account EC antitrust law issues, because otherwise the party losing the dispute might challenge the validity of the arbitral award in a national court. However, competition law questions coming up in arbitration proceedings cannot be submitted to the ECJ for preliminary rulings, as arbitration tribunals are not courts in the meaning of Article 234. Should arbitrators be given the right to address requests for preliminary rulings to the ECJ? Should they be given the right to request opinions from the Commission or from NCAs? These questions were raised, but not answered. It was, however, considered that the Commission should consider them carefully before it puts forward its formal proposal for the reform of the EC antitrust enforcement system. Before we leave the specific problems of courts and judges, a final point has to be mentioned and which was hotly debated. The White Paper considers that even after afinaljudgement given by a national Court, the Commission should be able to take up the case and decide differently (e.g., denying the applicability of Article 81 (3), provided that the resjudicata effects between the parties of the
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court judgement remain unaffected). A considerable number of participants expressed concern about and even opposition to such an initiative, which seemed to them to be incompatible with constitutional principles such as the separation of powers. The preceding remarks may have raised doubts about our initial observation that a broad consensus seems to have emerged around the Commission's reform suggestion. We would like, however, to confirm our initial statement. The great majority of participants expressed their overall support for the Commission's initiative. Their critical remarks concerned—some times very important— details, but rarely the main thrust of the reform. They warned against a premature and hasty conclusion of the ongoing debate, leading to an insufficiently prepared and thought out proposal that would leave open crucial questions. The reform was generally considered to be too important to be jeopardised by unsatisfactory preparatory work. The Workshop was thus a contribution on the long march to a new, modernised and more efficient system of enforcement of EC antitrust rules. Claus Dieter Ehlermann Isabela Atanasiu EUI Florence, Italy 30 August 2000
PANEL ONE COMPATIBILITY, EFFICIENCY, LEGAL SECURITY
1 OPENING STATEMENT
Opening Speech
THE MODERNISATION OF EC ANTITRUST POLICY Mario Monti Ladies and gentlemen, I am honoured to be here today to give the opening speech at this EC competition workshop on the modernisation of EC antitrust policy, which has brought together such an impressive number of distinguished scholars, practitioners and policy-makers. I am confident that the contributions to, and the discussions of, this workshop will deepen our understanding of the many complex issues raised by the White Paper on modernisation of the enforcement system set out in Regulation 17/62. This will lead us towards our final objective, namely, to replace the present system with a new system of enforcement that will ensure the effective and coherent enforcement of EC competition rules in the coming years. In my introduction this morning I will briefly explain the main aims of the reform proposed by the Commission in the White Paper, and I will give you my thoughts on some of the concerns that have been voiced in respect of the proposal to fundamentally change the present Regulation 17, which was adopted in 1962.
I. Regulation 17/62 and the present environment The enforcement system established by Regulation 17/62 has certainly served us well for many years. In particular, it has allowed the Commission to develop a coherent competition policy for the whole of the Community, contributing greatly to the creation of the internal market. Over the years we have come to think of Regulation 17/62 as a stable and almost sacred companion in an otherwise turbulent world. To change it was almost unthinkable. However, the fact that the Commission is now thinking the unthinkable is a clear indication of the crucial importance that the Commission attaches to this matter. We must adapt Regulation 17/62 to meet the challenges of today and tomorrow. As we all know, the world has changed dramatically since 1962. Particularly in recent years the changes have exceeded even the most far-reaching predictions. Globalisation is increasing and markets evolve at great speeds. The Internet is revolutionising the way that we do business. The introduction of the Euro is creating more transparency and is facilitating capital movements and cross-border transactions. Enlargement will not only considerably expand the Community, but it will also present great challenges in terms of adapting the economies of the applicant countries.
Opening Speech
All these changes and challenges create demands concerning the development of competition policy. Competition law and policy are of fundamental importance to the European Union, European consumers and European industry. The very foundation of the European Union is an open market economy. As is now generally accepted, a competitive economy not only creates benefits for consumers and our societies as a whole, it also ensures the optimal functioning of the Internal Market and the competitiveness of European industry in an increasingly world-wide arena.
II. The overall reform of EC competition policy Considering the importance of competition policy, it is essential that we continuously monitor its effectiveness. The Commission believes that by adapting our rules we can considerably enhance their effectiveness for the benefit of European consumers. That is why the Commission has launched a comprehensive reform of our overall competition policy, reaching from the substantive to the procedural rules applying in thefieldof antitrust, mergers and State aid. The modernisation of Regulation 17/62, although highly important in itself, should not be seen in isolation. It is rather a part of this much larger reform. These reforms pursue the same fundamental objectives, namely: the more efficient enforcement of EC competition rules, less bureaucracy for companies, and the creation of a more level playingfieldfor companies through the development of a common competition culture and more application of Community law.
III. The problems related to the current enforcement system Before dealing with some of the main elements of the White Paper, such as efficiency, coherent application and legal certainty, it is perhaps useful to briefly recall the existing enforcement system and its main perceived deficiencies. Under Regulation 17/62, the prohibition rules of Article 81 (1) and Article 82 have direct effect and can therefore be invoked before national courts. National competition authorities similarly have the power to apply these provisions. On the other hand, the Commission has the exclusive power to grant exemptions under Article 81 (3). An agreement can only benefit from the exemption rule if the Commission has been notified of it and it has received the benefit of an exemption decision. For a long time the Commission has actively sought to encourage the application of EC competition rules by national courts and competition authorities. However, in practice these efforts have been largely in vain. The Commission's
1 - Compatibility, Efficiency, Legal Security
monopoly under Article 81 (3) is a significant obstacle to the enforcement activities of national competition authorities and courts. This obstacle follows from the fact that companies alleged to be in breach of Article 81 (1) quite naturally claim that their agreements meet the conditions of Article 81 (3) and are therefore legal. As the national bodies have no power to apply Article 81 (3), the continuation of their enforcement action is made very difficult. In most cases, a national action must be suspended pending the Commission's decision. This leads to unnecessary delays and creates a clear disincentive to apply EC competition law. The present system has led to a situation where the Commission is virtually the sole enforcer of Community law in an enlarging Union, and where its resources in the area of antitrust are substantially tied up in the handling of notifications. Of course the latter fact would not be a problem if notifications revealed the cases that merit investigation. However, that is not the case. The clarity of the law has increased substantially since 1962, when Regulation 17 was adopted. Companies and their lawyers therefore generally know what is prohibited and what is likely to be exempted. Only the latter cases are 'notified'. Unfortunately, we have good reason to believe that some companies - too many in fact - also engage in practices that are prohibited by the competition rules. For obvious reasons the Commission is never notified of these practices; they are hidden ever more ingeniously from the eyes of the competition authorities. They are therefore resource-intensive to uncover and prosecute. Naturally, the Commission tries both to cope with the notifications and to investigate cartels and other prohibited practices. However, the use we make of our resources is inefficient in terms of protecting competition. The current system therefore no longer ensures effective enforcement of the competition rules. This is a fact that, in my view, clearly justifies fundamental reform.
IV. Efficient enforcement To promote effective protection of competition the new system must enable the Commission to concentrate its resources on the cases that present a real threat to competition to the detriment of consumers. The Commission must step up its prosecution of cartels; of other hard core restrictions such as resale price maintenance, market sharing, restrictions on parallel trade, and exclusive dealings leading to market foreclosure; of state measures that distort competition and of abuses of dominance such as tying, refusal to supply andfidelityrebates. However, in a territory the size of the Community, it is not possible for a single authority to alone enforce the rules effectively. It is also necessary to involve both the national competition authorities and the national courts in the enforcement of EC competition law. In order to do so it is necessary to abolish
Opening Speech
the notification system and the Commission's monopoly over Article 81 (3). This will allow each body forming part of the enforcement system to effectively apply the rules and to concentrate on what it does best. Each authority will have the power to act on the basis of the Community competition rules in respect of agreements or practices affecting trade between Member States. However, the aim is to establish a network of competition authorities with rules on the allocation of cases so as to avoid multiple control, duplication of work or inefficient actions. Generally speaking, parallel action by several competition authorities is not resource efficient since it implies parallel administrative procedures. Furthermore, it could impose significant additional burdens on companies. The basic principle should therefore be that of 'single action'. Effective enforcement by national competition authorities could often require co-operation with, and assistance from, other members of the network. We must therefore establish the necessary basis for horizontal co-operation between the national competition authorities, including the exchange of information and mutual assistance. However, it is also important to set out proper and effective rules for the protection of the rights of undertakings, including rules on confidentiality. Undertakings have a legitimate interest in the protection of the confidentiality of any information exchanged. Both the Commission and national competition authorities should therefore be required not to disclose information collected or received that contains business secrets or is otherwise of a confidential nature. Other safeguards might also be necessary to protect the legitimate interests of companies. Let me now turn to the national courts and their function in the envisaged new system. National courts rule on disputes between two or more parties. Unlike competition authorities, which act in the public interest, the central function of courts is to safeguard the rights of private individuals. Private enforcement by national courts is an essential complement to public enforcement. To realise this one needs to look no further than other areas of Community law. Enforcement of Community law by national courts is the rule and not the exception. National courts have played an essential role in shaping our Community into what it is today: a unique legal order that grants important rights to the citizens. This is important for all of us to bear in mind. Due to the Commission's monopoly on Article 81 (3) we have become accustomed to the courts playing a rather limited role in the antitrust field. Habit, however, should not stand in the way of progress. In the European Union of today I see no valid justification for excluding national courts from the full application of Article 81. This is even more so in the context of the more economic approach adopted by the Commission. Under an economic approach based on the effects of the practice on the market rather than its legal form, the current division of competence under Article 81 is wholly artificial. At present national courts are empowered to assess the negative effects of an agreement due to the direct effect
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of Article 81(1), whereas another body - namely the Commission - must assess the positive effects of the very same agreement. In practice these issues are closely related and one is not more complex than the other. Consequently, they should not be separated.
V. Coherent application The Commission is aware that empowering national competition authorities and national courts to apply Article 81 (3) involves a certain risk of inconsistent application. However, this risk can be addressed and diminished by appropriate measures. I must emphasise that associating national authorities and courts with the enforcement of Community rules is not a re-nationalisation of European Competition law. Far from it: over time, the Commission's proposal will lead to the creation of a common policy and a common approach based on Community law, reducing the scope for inconsistencies. Consistent application requires that the rules are sufficiently clear and that the approaches followed in their application are sufficiently similar. Clarification of the antitrust rules will be an important function of the Commission in the new system. In addition to facing up to this responsibility to develop clear rules and to make public its enforcement policy by means of guidelines and other appropriate instruments, the Commission is envisaging a number of other specific instruments that aim to preserve consistency throughout the system. With regard to the national competition authorities, the aim is to establish a network of competition authorities within which the members increasingly apply the same body of rules, instead of the current situation in which 16 authorities apply 16 (sometimes different) sets of rules. The aim is to widen the application of EC competition law. The application of a common set of rules will greatly promote consistency and the creation of a level playing field throughout the Community. The Commission will remain at the centre of the network and will play a leading role in defining policy and ensuring consistent application. Importantly, the Commission also proposes to retain the current Article 9 (3) Regulation 17/62, according to which the Commission can withdraw a case from a national authority. The network of competition authorities will be a forum for discussion about the common policy and for coordination about cases and issues of common interest. In particular, it is important to ensure that there is prior consultation on prohibition decisions, decisions accepting commitments and decisions withdrawing the benefit of a block exemption. These types of decision merit special attention because they can only be reversed with difficulty once they have been adopted and enforced. Consultation on these types of decisions is
Opening Speech
also important in order to maintain a coherent competition policy, since policy in the new system will, to a significant extent, be developed by means of prohibition decisions and decisions with commitments. Let me now say a few words about consistency as regards national courts. As already mentioned, our proposal essentially means that Article 81 will catch up with the rest of Community law, where national courts already play an essential role. In all these areas, the Court of Justice has been able to maintain coherence and consistency via the Article 234 preliminary reference procedure. The Court of Justice will play the same essential role in the application of Article 81 as a whole. However the Commission is proposing additional instruments. In the 1993 notice on co-operation with national courts, the Commission provides assistance to national courts upon request. This instrument will be maintained and made more efficient by the introduction of a deadline for reply. We expect that the incentive for national courts to obtain input and opinions from the Commission will grow in the future system as they will get the power to apply Article 81. The application of EC competition law is frequently a matter of law and fact. In such cases, the Commission might be able to draw on its own administrative practice to provide valuable assistance to national courts. The Commission is also envisaging a mechanism whereby it could intervene more actively in court proceedings, allowing it to defend the common competition policy before national courts. One such instrument, which is mentioned in the White Paper, could be the right to intervene as amicus curiae. The Commission would then, on its own initiative, submit written observations and/or oral observations to the court hearing the case. Finally, let me turn to the issue of forum shopping and multiple control. Multiple control and forum shopping before national courts should of course be avoided. However, in this respect we are fortunate to be able to rely on the rules of the Brussels Convention. The Brussels Convention establishes rules about how to determine the proper forum in commercial and civil cases. The purpose of the Convention is to prevent parallel proceedings before the courts of different Member States and to avoid conflicts between decisions that might result therefrom. The Convention confers jurisdiction on a limited number of courts that are territorially well placed to deal with the dispute. Once an action has been brought before one national court, all other courts must decline jurisdiction provided that the proceedings concern the same parties, the same cause of action and the same subject matter.
VI. Legal certainty In an open market economy, companies should be encouraged to enter into pro-competitive transactions. Competition law should not only discourage
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anti-competitive practices, it should also encourage those practices that promote competition and consumer welfare. An adequate level of legal certainty is therefore a legitimate and necessary objective. The Commission's White Paper proposal, while aiming to restore the primary task of effective enforcement, fully recognises the need to provide companies with an appropriate degree of legal certainty. That said, I must however emphasise that I see no justification for introducing a voluntary notification system, as is sometimes called for by industry. A voluntary notification system would in effect reinstate the present system and would undermine the principal objective of the reform, namely effective enforcement. It would prevent the Commission from focussing on the cases that present a real threat to competition and would also perpetuate the blocking effect of the current system on the application of EC rules by national courts. Companies must accept responsibility for assessing their own agreements. In fact, most companies already do that, since the Commission is not notified of most agreements. What companies can reasonably expect, however, is an adequate level of predictability and consistent application of the rules that allows them to properly assess how the rules will be applied. In the future, the Commission will put more emphasis on clarifying the rules by focussing on what is prohibited. In fact, the Commission has already started to overhaul the legal framework and to further clarify the rules, thereby facilitating self-assessment. The Commission will also apply a more economic approach that, for many companies, will reduce the risk of being caught by Article 81 (1). Block exemption regulations will be maintained. However, as is clear from the new block exemption regulation on vertical restraints, the Commission is abandoning the present form-based regulations in favour of regulations based on economic effect. This allows the Commission and the national authorities to concentrate on the important cases where the parties have market power, meanwhile creating legal certainty for the vast majority of companies. The Commission will also issue a number of guidelines and this general body of rules will be further clarified by the decisions in individual cases. The Commission will continue its current policy of imposing fines only in cases where it is clearly established that certain behaviour constitutes an infringement. Consequently, there is no risk for undertakings to be fined without having been able to know that they were infringing the law. One should also keep in mind that the direct applicability of Article 81 (3) will, in itself, promote legal certainty, since it massively legalises agreements which fulfil the conditions of Article 81 (3) without the need for a prior Commission decision. In addition, it provides companies with a new defence against claims based on Article 81 (1). At present, only an agreement of which the Commission has been notified, and which it has exempted by a formal decision, can benefit from Article 81 (3). On balance therefore, civil enforceability of agreements will be improved in comparison with the existing system. In addition, the Commission considers that it would be appropriate to introduce a new instrument that would allow it to provide guidance to undertakings
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in cases where there is real doubt as to the application of the competition rules. What we have in mind is a system of opinions whereby companies could put questions to the Commission in cases where the existing general rules, measures and case practice do not provide sufficient guidance. Companies would be required to submit a supporting and explanatory memorandum alongside questions they put to the Commission. On that basis the Commission would issue an opinion in appropriate cases. Such opinions would be reasoned and published, and they would therefore contribute to the overall clarity of the rules. Accordingly, they would not only provide guidance to the companies asking a question but to other undertakings as well. The value of this instrument should not be underestimated, particularly when compared with the current system of comfort letters that are neither reasoned nor published. In this respect, it is important to take account of one of the effects of our more economic approach under Article 81. When one takes a global view of the Commission's proposal and takes due account of the impact of our reform work in the substantivefield,I believe that there will actually be more coherence, predictability and legal certainty in the proposed new system than in the current system.
VII. Conclusion Ladies and gentlemen: let me now conclude. The Commission is aware that reforming the enforcement of European competition rules poses major challenges. I have already mentioned some of these. However, the risks of inaction and complacency are even greater. We must adapt the current system to the radical change in the legal, economic and political environment in which it has to be applied: market integration, the Euro, successive enlargements and globalisation. In so doing we must devise a new system that will live up to the expectations of Europe's citizens. Our primary objective must be to strengthen the enforcement of our rules. I wish you much success in the study of the complex issues that are facing each Panel. The discussions will no doubt improve our understanding and assist us in constructing a new antitrust enforcement system that will ensure the success of EC antitrust policy in the future.
PANEL ONE COMPATIBILITY, EFFICIENCY, LEGAL SECURITY
1 PANEL DISCUSSION
PARTICIPANTS
Carl Baudenbacher Simon Bishop Ulf Boge Jochen Burrichter David Edward Claus-Dieter Ehlermann Ian Forrester Eleanor Fox Barry Hawk Ulrich Immenga
Giuliano Marenco Santiago Martinez Lage Mitsuo Matsushita Mario Monti Damien J. Neven Alexander Schaub Anne Spiritus-Dassesse Giuseppe Tesauro Karel van Miert
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Panel One: Compatibility, Efficiency, Legal Security • KAREL VAN MIERT—Thank you very much indeed for offering us this very clear view on behalf of the Commission. This is certainly very valuable for our further discussions during the Workshop, and also for the Commission itself. The 'input' of the participants around this table will certainly be considered very carefully by the Commission, particularly in view of some of the controversies and contradictions that have surrounded the reform proposal. We have now about ten minutes left for discussion or questions on your contribution as the main speaker of today, and then we will start with Panel One. Obviously, Alex Schaub will come back later to some of these issues and present the views of the Commission. As far as the procedure and timing of the reform is concerned, we have learned that there will probably be a formal Commission proposal by the end of September. • MARIO MoNTi^Before the end of September a proposal will be submitted to the Council. • KAREL VAN MIERT—So this is a very timely meeting, as it takes place even before the formal proposal is on the table. • DAVID EDWARD—Could I ask whether consideration has been given to enforcement in arbitration proceedings, and other alternative dispute resolution procedures? • MARIO SIRAGUSA—One of the big questions I address in my paper is: why should the reform induce national competition authorities to apply EU law? They are currently applying national laws very successfully, and these are themselves inspired by EU law. They apply the case law of the Commission and the European Courts, but in turn this is done by applying national law. I do not see anything in the reform that will induce national competition authorities and national judges to apply EU law. The fact that they can in theory apply Article 85 (3) is not enough in itself to induce this change in the Community environment. • SANTIAGO MARTINEZ LAGE—Does the Commission expect the Member States that copied the EC system of notification and prior administrative approval to also modify their national system? Or could they work with a system of legal exemption at the Community level combined with one of individual exemptions at national level?
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• MARIO MONTI—We have the confident expectation that the reform, far from being a re-nationalisation of antitrust enforcement, would contribute to a wider application of Community law. Perhaps where our views differ is on the weight of the present situation, whereby Article 81 (3) is not directly applicable by national bodies, as an impeding factor in relation to the application of Community law. In our view, removing this obstacle would also mean removing an important factor now playing against the application of Community law. I should also stress—and I am sure that Mr Schaub and the other representatives of the Commission here present will argue this in more depth—that I see an indirect effect of this reform playing in favour of a wider and deeper application of EC competition law: this is the 'network effect' that, in our view, this reform will bring about among the different national competition authorities. On the last question, about national enforcement systems that rely on notification and prior administrative approval: will the legal exemption aspect introduced by the reform have an impact on the evolution of the national systems that are presently based on notification? Again, I would like others more knowledgeable from the Commission to comment on this later. My view is that in principle there is no immediate implication in the sense that adoption of the reform should bring about changes in the architecture of national competition laws as far as notification is concerned; though in the medium term we would expect national competition laws to take stock of any improvement we expect to be brought about at the Community level, so that there could be some change induced by 'imitation' if the Community system worked well, as we expect it will. On the first question, related to arbitration proceedings, I wonder whether Mr Schaub or Mr Marenco would like to step in? • CLAUS-DIETER EHLERMANN—I would suggest that we leave this argument for discussions under Panel Three. It is an argument that comes up in several of the written contributions for this Workshop, and it is the first time that arbitration is raised as a serious concern in a meeting like this. • DAVID EDWARD—One of our concerns is that the Commission's White Paper speaks of the European Court of Justice as a mechanism for ensuring consistency in the enforcement of EC antitrust law. At present, however, there is no possibility for arbitrators or people conducting alternative dispute resolution to make references to the European Court of Justice. • KAREL VAN MIERT—This will be addressed tomorrow, during Panel Three, as it is really a very important issue. • CLAUS-DIETER EHLERMANN—Mr Monti mentioned opinions as one of the Commission's replies to criticism about lack of legal certainty for companies in the new enforcement system. This is a sort of compensation for not accepting
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the possibility of 'voluntary notifications', that Mr Siragusa, for instance, pleaded and fought for so vigorously last October. Another thing that strikes me is the Commission's reluctance to allow for the so-called 'positive decisions', to be shared under a decentralised enforcement system with national competition authorities. I would be curious to know the Commission's position on sharing this modality of giving guidance to industry (or their lawyers), on whether an agreement is or is not covered by Article 81 (3): should this be decentralised too, or kept close to the Commission? • MARIO MONTI—A first approximate answer is that it would be consistent with the aim of developing a well functioning network of national competition authorities if there was some sharing on this aspect, unless there are technical reasons against such sharing that escape me at this stage. Even before the adoption of this reform, in several areas of EC competition policy, including merger control, there are recent examples of much deeper co-operation between the Commission and national competition authorities than in the past. This is also a sign of developing a common competition culture, which I am sure will be highly beneficial once this reform is in place. May I just add a more general remark. The debate that takes place here is not directly concerned with the linkages between this reform and the position of the Commission as a European institution. Yet I would like to stress, and this is part of my deep inner motivation in pushing politically for this reform, there is great consistency between the reform of Regulation 17/62 and the structural reforms in other areas of EC competition policy, such as mergers and state aid control, that we are currently bringing forward. At the same time, there is great consistency between what we are trying to do in the area of competition and the new role that the European Commission would like to play. I do not want to enter into the discussion on whether the White Paper is, or is not, an example of a march towards subsidiarity. In my view, technically it is so. At any rate, with this reform I see the Commission focusing on its core activities and ensuring a better discharge of its obligations. This is something that, at this historical stage, the Commission would like to do and needs to do for most of its activities. It may be of interest for you to know that my colleagues at the Commission look at this reform in thefieldof EC antitrust enforcement as an interesting example that could perhaps have a broader validity in terms of helping the Commission to narrow down its activities to the core and perform them better. This will be one of the key issues in the White Paper on Governance that the Commission intends to present in the course of next year. • KAREL VAN MIERT—Thank you very much, Mario. Perhaps an additional remark from my side: I think that more coherence between national competition rules and the European ones was the result of a process of 'soft harmonisation'. The Commission always refused to take formal steps in this direction, as we were very confident that, step by step, the Member States would introduce
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systems similar to the European one, even Great Britain. I can remember very vividly the time when DGIV and I came to the conclusion that we should propose reform of the EC antitrust enforcement system. At that time, the British authorities were finally changing their own competition system in light of the existent European one. So we went to see the British government and said, 'it's a little bit unfortunate, now you are finally adapting your system to the European one and we are already thinking of changing our own system. We can understand that you might have some second thoughts now about your reforms. We are going ahead with what we have considered, and please, you go ahead as well. If later on we need Europe to change further, you can reconsider it. You can go ahead. We go ahead.' I think that is the way things have to proceed in Europe. Therefore, Mario, I think what has happened previously will continue to happen in the future, but this is just a more general remark I wanted to make on the basis of my personal experience. Thank you very much indeed also for informing us about further steps in the direction of the adoption of the reform. We shall see how this debate continues once the proposal is before the Council of Ministers, but it is good to see that things proceed as scheduled and that the Commission is pursuing this reform as has previously been agreed. We will now continue with Panel One: compatibility, efficiency, legal security—three vital items that are related to this reform. I invite Professor Bishop to start the discussion. As an economist, he will make a valuable contribution to this debate. • SIMON BISHOP—Let me say straight away that, in general, I am in agreement with the overall approach in the White Paper. Indeed, as an economist, I welcome any move towards a more economic effect-based approach in the enforcement of EC antitrust rules. This is not only for commercial self-interest, but also out of the belief that the reform will actually help the implementation of public policy. I have been asked to look in my written contribution at two questions. The first is whether the existing case law provides adequate guidance for the application of EC antitrust rules by national bodies. The second is whether 'positive decisions' are indeed no longer required. It seems to me that these questions are really sort of one, wrapped up together. I think it is a bold statement to say 'we had forty years of case law, and therefore parties and their legal advisors can determine whether something is contrary to Community law or not'. The White Paper is a radical change not only in terms of the implementation of EC antitrust rules. The introduction of an economic based enforcement system means that after the implementation of the White Paper the new EC competition policy will be different from the old one. On this basis, how can the old case law provide an adequate guide for new case law? Indeed, an economic effect-based approach introduces in some sense increasing uncertainty. Barry Hawk says in his written contribution as well that, the more economic-oriented the approach in enforcement, the more uncertainty
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there will be. An economic based approach to enforcement means basically the implementation of the rules on a case-by-case basis. Therefore, a particular practice that is prohibited in one industry might have pro-competitive effects in a completely different industry, even if implemented by firms with the same market shares, or even higher market shares. In the White Paper there is a sort of recognition that the new policy will be different from the old one, otherwise why should we need Guidelines and Notices for clarifying the new situation? One particular enforcement area dear to my heart is that of firms with high market shares (since these are most, or many, of my clients). Where does the new enforcement system leave them? I would hesitate to use the word 'dominant' in relation to suchfirms.Firms with high market shares are not necessarily anti-competitive, and an economic effect-based approach to enforcement should recognise this. Many agreements that firms with large market share enter into are pro-competitive, so the notion that firms considered 'dominant' cannot obtain an exemption under Article 81 (3) strikes me to be at odds with the new approach. Moreover, since the economic effects of a particular practice can vary from industry to industry, where does this leave afirmwith a high market share? If the practice is prohibited in industry A, does it necessarily mean that it is going to be anti-competitive in industry B? Or, under other circumstances, is industry B completely different? Often it will be the case that the circumstances are not completely different, so we cannot know a priori whether a given practice is anti-competitive or pro-competitive. It therefore seems to me that large firms will need some guidance under the new enforcement system, because it is a bit naive to say that firms know when they are doing the wrong thing. In certain cases they will know, for instance if the firms are engaging in a cartel; but if a firm has introduced a selective distribution agreement, for example, how can it know whether the agreement is contrary to EC antitrust rules or not? Under an economic effect-based enforcement system, it could be either, even if the firm has a high market share. I therefore believe there is a need for 'positive decisions'. I do not know, however, whether such decisions should be taken following 'voluntary notification', or in another way. At any rate, under the new system the Commission should be required to issue a decision whenever opening an investigation, be it a negative or a positive decision. In some sense, this would mirror what happened under the Merger Regulation, where the issuing of decision after decision, both positive and negative, helped transparency, and helped people understand where the policy was going. In sum, an economic effect-based approach to enforcement does not imply that firms with high market shares always do bad things. This is an economic fact, and such firms will need some guidance in the future. • KAREL VAN MIERT—I would now like to invite Mr Boge, the new President of the German Cartel Office, to comment. I have worked for a long time with his predecessor, but unfortunately I do not have the privilege to work with him
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that much anymore. Mr Boge is going to speak in particular about the abolition of the notification system and some issues related to the decentralisation of enforcement.
• ULF BOGE—First, I would like to thank you very much for being invited to this workshop, and to thank Commissioner Monti for the clear picture he gave us on the next steps in the preparation of the reform. As you all know very well, the Bundeskartellamt supports the objectives of the Commission's reform proposal. However, we consider it particularly important that the reform should not lead to any reduction in the substantive level of protection of competition in the European, and indirectly in the national enforcement systems. This aim is the most important for all of us. Mr Marenco dealt in detail with the question of the compatibility of the Commission's reform proposal with the EC Treaty in his written contribution for this workshop. In his opinion, the reform proposal can be realised by merely adopting a new Regulation to replace Regulation 17/62, without amending the EC Treaty. Other lawyers think differently, and I regret that Professor Mestmacker cannot be with us today, because this was one of the main topics he has dealt with in the past. However, I do not want to go into the details of this legal dispute here, and would prefer to concentrate instead on matters of content. In my opinion, there is no doubt that the changes proposed in the White Paper will have a direct and appreciable effect on national competition laws and their application. This is the reason why, at the start, the Bundeskartellamt had major objections to the abolition of the notification and prior authorisation system that had proved successful in German enforcement practice. During consultations between the Commission and the Member States, however, the Bundeskartellamt proposed a compromise solution in this respect. The aim of this proposal is to achieve the necessary transparency under the new system by means of an obligation on the part of the enterprises to simply inform the competition authorities of their co-operation agreements. This information could thereafter be made available on both the web of the national competition authorities and that of the Commission. I would be pleased to go back to this proposal in more detail later on. Another reason for our proposal is that we should find a way to work together with the other competition authorities, and not to work against each other. We need competition advocacy, and we can only do it if we work together. I do not wish to criticise the more economic approach to enforcement suggested by the White Paper and mentioned here, but we are concerned about the ideas expressed in the recent draft block exemption regulations and guidelines for horizontal agreements; those view horizontal agreements as positive in principle, and consider them to have potential anti-competitive effects only when associated with market power. Our concern is that this might considerably weaken the ban on cartels. More careful consideration should be given to
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whether we really want to send the signal that horizontal agreements other than pricefixing,production and market allocation agreements are generally acceptable, or are acceptable if they fall below an appreciable market share threshold. As far as the allocation of cases between national competition authorities is concerned, the Commission's reform proposal includes a list of allocation criteria, which certainly appears to be practicable. This would probably lead to results similar to those achieved by an assessment based on economic or competitive criteria. As to ensuring a uniform application of EC antitrust law, this requires a consistent system of types of decisions and appropriate mechanisms of co-operation and co-ordination. The competition authorities of the Member States will then be able to assume more responsibility in the enforcement of EC antitrust law, even if some do not have much enforcement experience. The consultation and co-ordination mechanisms envisaged for both the Commission and the national competition authorities with respect to prohibition and positive decisions or withdrawal of the benefit of block exemption regulations appear to be quite suitable means for achieving enforcement consistency. At the same time, the obligations to provide information should be kept as simple as possible, and decisions should be dealt with in more detail by the Advisory Committee only in really important cases. Questions arise in relation to the Commission's so-called 'positive decisions', which are not exactly in line with the direct applicability of Article 81 (3), and should therefore be abandoned in favour of consistency in the new system. In any case, small and medium-sized enterprises should not be subject to stricter decisions than the large companies, which by their very nature are more likely to be able to point out the existence of a significant Community interest. I also believe that attempting to solve the problem of legal certainty by means of positive decisions and opinions is not without problems. If the purpose of the reform is to encourage undertakings to assume greater responsibility, a certain level of legal uncertainty in the 'grey areas' of enforcement is a logical consequence, or just the other side of the same coin. Of course, this will not prevent competition authorities from continuing to hold, in critical cases, informal discussions with the undertakings concerned. But we should not try to fool ourselves and the business community: the degree of legal certainty attainable by giving binding exemption decisions cannot be achieved with positive decisions, opinions or informal discussions. No detailed investigation has been carried out yet as to how the national courts will apply EC antitrust law in practice, and what the effects of decentralisation will be in this respect. We would welcome it if the competence to apply Article 81 (3) was to be concentrated in a few specialised courts, as has been the case in Germany for many years. France decided to do likewise, but it is unlikely that all Member States wish to follow this course. The Commission made a range of proposals destined to alleviate the potential conflict between decentralisation and the need to ensure coherence in enforcement. Among these are the obligation for national courts to provide information to the Commission about cases involving the application of
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Articles 81 (1) and (2), the possibility for the Commission to intervene as amicus curiae in national court proceedings, and perhaps even the right for the Commission to appeal against decisions by national courts. In addition, the Commission intends to lay down guidance on the interpretation of EC antitrust rules by means of issuing 'positive decisions', opinions and policy guidelines. However, such proposals are not without risk. On the one hand, the desired effect of reducing the Commission's workload may unintentionally be endangered by such proposals. On the other hand, the independence of the judiciary cannot be infringed, and the principle of the separation of powers must be observed. The highest national courts and the European Court of Justice will ultimately guarantee that EC antitrust law is applied uniformly. I would like to sum up by saying that the objectives of the reform cannot be all achieved to the fullest extent at the same time. It might therefore be only a question of optimising the results of the reform by introducing an information system such as that suggested by the Bundeskartellamt. Our proposal is meant to ensure that our common goal, which is to guarantee effective competition on the single market, is not jeopardised. • IAN FORRESTER—It was an enormous pleasure to have participated in the first meetings of this workshop, and it is intriguing to see that the 'parents', or 'the fathers of the church', who upheld the traditional order of things at previous meetings, are now suddenly so enthusiastic to reform that those who originally pointed to the necessity of reform have become nervous, alarmed and worried about what the 'children' are getting up to. I argued in the past that there were three possible reforms, or three possible 'families of reform', to address the well-known problems of the existing enforcement system. The first was that the Commission could change its approach to the interpretation of Article 85, the second was that it could share its enforcement responsibilities with others; and the third was that the Commission could take more decisions by changing its own internal procedures. The White Paper proposes thefirsttwo of these reforms, and implicitly— though here I might exaggerate—suggests decreasing the number of its own decisions. I warmly welcome the notion of reform and I want to offer some reassurance to the Commission about why the proposed reforms are broadly constitutional, but I also want to add one or two warnings. The biggest pleasure in writing my paper for this workshop was browsing through the Council's archives and looking—like Giuliano Marenco, although in a sense in competition with him—at what the fathers of the Treaty discussed back in 1956 and 1957. It is plain from reading those documents that they were confused, and I think it's fair to conclude that the text of the Treaty was not intended to limit our interpretation of it in any special way today. The best proof of this is that, in April 1958, the British Embassies in the six Member States wrote to ask: 'What does this mean? Articles 85 (1) and (3) are very confusing. Please ask the European Commission to explain to us.' At the meetings
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that followed in Brussels, the Italians said: 'Well, very interesting. Let's give a long answer.' The Germans said: 'Let's be brief, and the French said 'Let's not even give a temporary reply, because that would oblige us to give a complete reply later, and we don't know what the answer should be.' Therefore, if in 1958 it was unclear what the Treaty was actually meant to mean, it seems legitimate for the Commission to look at things with fresh eyes in the year 2000.1 submit that the Treaty provisions would pursue three objectives: first, the punishment and prohibition of the unacceptable; second, intelligent examination of doubtful matters with a view to giving prompt guidance and; third, abstinence from interfering in benign matters. I therefore consider that overall the Commission's reform proposals make good constitutional sense. I do, however, have a number of practical concerns. The first is related to the apparently diminished role that the Commission assigns to itself in the new enforcement system. At the moment, the entity best equipped to take EC antitrust decisions is the European Commission. It has the power to gather evidence, it has enormous experience and great prestige; it is in a leadership position in EC antitrust law enforcement. That is the good news. The bad news is that some Member States are not in such good condition. The legal diversity of Europe is in some ways a source of pride, but in other ways it should be a source of embarrassment. It is highly probable that some national competition authorities will do their job well, some will do it badly, and some will not do it at all. This has to be recognised up front when proposing a major reform of the system. Are there reforms the Commission could make, which would help to alleviate the enforcement difficulties that we are familiar with? I believe that the European Commission takes too few decisions in the application of Articles 81 and 82. The Commission produces admirable decisions in thefieldof merger control, but in the area of Articles 81 and 82 it takes maybe a dozen, or fifteen, decisions per year. This is far too few. The Commission thinks about many things, but decides too few. If the Commission were to set itself deadlines, it would be a great improvement. Deadlines of 45 days, or 75 day—it doesn't matter; deadlines after which something is going to happen—a transaction will be approved or whatever. There are examples, notably in the Scottish criminal jurisdiction, where deadlines are a real nuisance, but if you comply by them, the system works well. Deadlines are a spur to efficiency, and not the toleration of the present situation, whereby there are no deadlines for not deciding. At present it is much easier to prevent a decision from being taken than to procure the making of a decision, and it is not uncommon for decisions to take five years before they are delivered, or sometimes even longer. That is far too long. The abandoning of the existing enforcement procedures that work well should be done only if the outcome will be better. I believe that lawyers exaggerate the legal certainty conferred by the present system, but legal recklessness is another matter. If the Commission were to say 'we are not going to get involved in uninteresting cases in the future. We will only get into the 'sexy cases', those which have high profile and high importance, and the others the
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Member States should look after,' this would be a waste of the Commission's resources, which could be more effectively deployed by taking more decisions, subject of course to judicial review. I know that judges are 'repulsive, interfering, unreasonable individuals', and lawyers are 'nasty, unfair people who say unkind things about good civil servants . ..' Yet an agency will never work well if its goal is perfection. The Commission cannot achieve a 100% positive record before the European Courts, and if it aimed at that it would not be doing a good job. Therefore short, pragmatic, intelligible decisions as in the field of merger control, which imply taking a position and answer to a particular problem, those are useful decisions that the European Court can deal with in an appropriate way. My last observation is on the subject of notifications. I believe there is a market for authoritative guidance on EC antitrust law, and at the moment the Commission has a dominant position in that market. One of the particularities of this 'market-place' is that few others are well equipped to do the job, and if the Commission were to say 'notifications never, consultation never, look after yourselves', that would be wrong, because an interplay between the outside and the inside is highly commendable in any enforcement field. On the subject of opinions, be they binding opinions or 'guidance' opinions, the Commission implies that these are not too far away from re-introducing a 'reformed' notification system. I believe the Commission is too hostile to the possible perpetuation of the notification system, which is currently flawed because of the lack of deadlines. To sum up, the Commission is to be warmly commended for proposing the reform, and a reform that is 'constitutional', or compatible with the Treaty, but the difficulties of getting to a broader, wider, more consistent enforcement system are underestimated in the White Paper. The reform could be bettered if coupled with an internal revision of the Commission's procedures. • KAREL VAN MIERT—I can tell you one thing that we never did consider: guidelines on how to find out whether cases are 'sexy' or not—unless this was done in DG IV behind my back. But, as far as I know, there is no such document in preparation. Now I would like to invite Professor Eleanor Fox, who is going to tackle the question of legal certainty. Let me quote one sentence from her Paper, 'I believe that it [the reform] can be implemented efficiently with no meaningful loss of legal certainty' Eleanor, if you could explain to the audience why this is so, as I do agree with you. • ELEANOR FOX—If you will allow me, I will start in a different place than legal certainty, and come to that later on. This is an enormous opportunity to get things right or get things better. I was asked to look in my written
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contribution for this workshop at the main things that are wrong with the current enforcement system. I came up with four, and some, but not all, have been extensively talked about. I will give you my list of four problems, or 'lost opportunities'. Then I will suggest how I think these problems could be solved. Finally I will touch upon remaining problems, including legal certainty. My list of four of course includes, first, the notification and prior authorisation system. The system does create busy work, and it shifts the resources of the Commission to areas with the least pay-off. That is clearly a problem, and it must certainly be addressed. The second problem is that the Article 81 (1)—Article 81 (3) dichotomy is an artificial segmentation and an artificial barrier. If this is an artificial barrier, is not the European Union against it? The problem is not just that under 81 (1) you look at negative aspects and under 81 (3) you look at the positive ones. Under 81 (1) the threshold is so low that it catches restraints that should not need justification. I will come back to that. The third problem is constituted by the ambiguities and difficulties under 81 (3). The first point under this heading is the extent to which exemptions can be given for anti-competitive agreements on the grounds of social policy or economic policy. The second is the extensive discretion that the Commission now has, and that national agencies will possibly get under the new system, in granting conditions under which deals can go through. The fourth problem relates to national courts. Under the current system there is clearly an inefficiency of enforcement in national courts. National courts cannot adjudicate on 81(3) justifications, and that is clearly handicapping national courts, and is very inefficient. Afinalpoint in relation to national courts, still in the context of the 'fourth problem': there is an enormous loss of opportunity resulting, from not enlisting the national competition authorities and courts to work together to enforce law, to become engaged with the law, to root themselves in the competition culture. Now the solutions to these problems, some of which have already been proposed. Problem number one, the notification and prior authorisation system, could be solved at least 90% of the way, and maybe more, by simply abolishing the notification and prior authorisation requirement without a devolution of enforcement. Problems number two and three, related to Article 81(1) and (3), could be solved by integrating the competition analysis under 81 (1) and leaving the granting of exemptions for anti-competitive agreements to the Commission, not to national competition authorities, so that whether an agreement is anti-competitive or not is decided under a 'broader' 81 (1). Problem number four, the lost opportunities for enlisting the national courts and national competition authorities and the inefficiency of handicapping the national courts by stopping them in their tracks when they come to an 81 (3) problem, could be solved by broadening the scope of 81 (1) and bringing all competition analysis under it. Of course, this is not exactly what the Commission proposes, and I believe will create problems when enforcement devolves towards national courts. First of all, national agencies and possibly
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courts will have .the power to grant exemptions. It seems to me that the power to exempt anti-competitive agreements for, say, environmental policy reasons, is dangerous to devolve. In addition, national agencies and possibly courts will have the power to grant conditional exemptions. Although the courts will probably have to consult the Commission in such cases, I question whether this is wise. The solutions I would propose include, of course, abolishing the notification and prior authorisation system, bringing the competition analysis under Article 81 (1) and authorising national bodies to perform full competitive analysis with the Commission reserving the power to grant exemptions. In relation to coherence, uniformity and legal certainty under the new enforcement system: I do not think these are significant problems where there is a rule of law. I also think that it is very useful to have a certain amount of diversity coming out of the national courts'jurisprudence. There seems to be a perception that national courts are not supposed to be diverse or independent, but harnessed agents in the service of the Commission. A different model ought to be considered whereby national courts and national competition agencies become more autonomous in applying Community law, and not necessarily the Commission's interpretation of Community law. There are three areas of enforcement in which I believe this should be so. The first is the scope of Article 81 (1), though the European Courts have already expanded the scope of analysis under 81 (1) in European Night Services.1 The second is the viability of Consten and Grundig2 in light of intensified interbrand competition. The third is the application of EC antitrust rules to 'foreclosure' types of restraints, such as in the ice-cream cases. I believe these are all controversial enforcement areas. It would be helpful and useful for the European law to be bubbling up with more than one thinker lighting the sparks, and with cases eventually decided by the Court of First Instance and the European Court of Justice. Worrying so much about uniformity is not necessarily good. Just two points to conclude. First, it is possible that there will be very little practical change as an outcome of the reform. National courts already have the authority to apply 81(1) and 82, and they sometimes already do a full competitive analysis in actions to enforce private contracts, which the courts will have now the power to adjudicate on the whole, that the change will occur. Finally, I hope the reform will not be just a system of minimal devolution, and that national authorities and courts will be engaged in applying EC competition rules and establishing networks of co-operation. Networking and cross-fertilisation will be very helpful and enriching to the whole system.
1 Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services and Others v Commission [1998] ECR 11-3141. 2 Joined Cases 56 and 58/64 Consten and Grudig v Commission [1966] ECR 299.
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• BARRY HAWK—Claus Ehlermann asked me to give, in my written contribution for this workshop, a US perspective on legal certainty. I do not know if I am going to give a particularly 'US perspective', but I would like to suggest some fundamental notions or ideas relevant to legal certainty. Some of these notions or ideas are so fundamental that they might strike many of you as banal. My excuse for mentioning them is that I sometimes wonder, particularly when I hear the anguished cries for legal certainty of some of my European friends, whether some of these fundamental notions are either not recognised or have been rejected on good grounds. First, I think it's helpful to define what we mean by 'legal certainty'. There are at least two, and I will suggest even three, important different meanings of this concept. The first is legal certainty about the predictability of the outcome of a case, or 'uncertainty about liability'. The second is uncertainty about the legal consequences flowing from the finding of a violation, or 'uncertainty about penalties'. In other words, uncertainty as to whether you are going to be fined or not. An almost unique European phenomenon within the same category is uncertainty about the enforceability of contractual provisions falling under 81 (1). The third is uncertainty about jurisdiction, which raises a very different set of considerations from those related to the predictability of outcome or the predictability of penalty. I shall not spend time on it, as this is more about a choice of law or how to resolve conflicts between jurisdictions, and there is a huge body of knowledge on how to address issues of uncertainty about fora. As to predictability about the outcome, I think there is clearly a tension between economics and legal certainty in competition law, as Simon Bishop has already pointed out. This is competition law, not real property law, and there is no need to run in and notify. In property law one must have stability and know who owns the property, so one registers a title back to the Doomsday Book if necessary. In competition law the need for stability or legal certainty is not the same, especially if one wants some economics in it. The more economicsoriented the approach in enforcement, the less legal certainty there is going to be. There is tension and a trade-off between the two. The only way to ensure absolute legal certainty is to have a. per se rule of prohibition or a per se permission rule. With per se rules there is no inquiry into the effects of particular agreements—be it in terms of price, output, market share or market power—or into their justifications. Agreements are classified as either lawful or unlawful, and the outcome is totally predictable. The difficulty consists of deciding what categories of agreements fall under the per se prohibition. A fundamental judgment must be made in order to identify those categories of agreements that have so few redeeming (or competitive) benefits and cause so much harm so as to justify the sacrifice of cases on the margin. Despite the differences of statutory structure and the horrible bifurcation of Article 81, per se rules of prohibition in the EU are largely similar to those in the US. They concern hard-core cartel practices, minimum retail price maintenance and—in the EC—certain restraints in vertical agreements because of
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market integration. However, in European Night Services71 the Court of First Instance does everything but use the term 'per se rule'. In fact, if Eleanor Fox, or I, or anyone else wrote a casebook on comparative antitrust, the European Night Services judgment should be in it. It is one of the best decisions ever written, contrasting very nicely with the US Supreme Court's mysterious decision in California Dental.* There is, however, a price to pay for legal certainty, because per se rules involve a certain degree of arbitrariness. The issue arises even before actual enforcement, because a decision must be taken as to which categories of agreements fall under the per se rules. These are policy judgments that are to be made. There may be categories of agreements that, generally speaking, are almost always beneficial and are so rarely harmful that they can be permitted on a per se basis. It is difficult to find such an example in US law; one may be exclusive distribution agreements, but then only if not associated with market power. In the EU, the best examples of per se permissive rules are block exemptions on vertical restraints. The introduction of a market power threshold in the new block exemption on vertical restraints is the cause of this renewed passion about legal certainty. The introduction of market share analysis sacrifices legal certainty, yet market power considerations make the rules more economically meaningful. If, however, there are a lot of agreements that cannot be classified as 'always lawful' or 'always unlawful', then what is to be done? Their assessment requires an inquiry into the effects (good and bad, beneficial and harmful) of each particular agreement. In the US we call that 'rule of reason', and I went into this in some length in my paper. There is far more uncertainty under the US law, or under the 'rule of reason', than has ever been dreamt of under Article 81 (1) and (3). As an example of this, read the US Supreme Court's latest attempt to talk about the rule of reason in California Dental, which was a complete disaster. If societies go through three stages, (e.g. barbarism, civilisation, and decadence) then maybe we have become decadent, since the Supreme Court tries to figure out what is the rule of reason under Section 1 of the Sherman Act. So, read European Night Services, do not read California DentaP. As to legal uncertainty about the consequences of a violation, or legal uncertainty about fines, I think that is a red herring under Article 81. In almost all cases you know whether you are going to be fined or not. I therefore do not think fines are an issue, and the legal consequence of a violation is the unenforceability of the contract. The US law on unenforceability of contracts violating antitrust rules is almost identical to the EC law. If a forty-year-old contract is found to violate antitrust rules, it has always been unlawful. It has never been enforceable. In the United States there is no debate about legal uncertainty on the enforceability of contracts. Firms, both European and US ones, prefer the highly uncertain US rule of reason. In fact, they love the uncer3 4
See above. California Dental Associations v FTC, 526 U.S. 756, 119 S. Ct. 1604 (1999).
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tain US rule of reason as opposed to a per se prohibition rule. European firms complaining about legal uncertainty under Article 81 never mention the uncertainty under Section 1 of the Sherman Act, because when we shifted in the US from per se prohibition of vertical and territorial customer restraints to rule of reason, they were very happy. In the second place, the rule of reason is good for defendants. It is good for the manufacturers, because it is far more costly to prove unreasonableness than to prove a. per se violation. I believe this explains why there is almost no debate about legal uncertainty under Section 1 of the Sherman Act, even though I would suggest there is far more legal uncertainty under the rule of reason of the Sherman Act than under Article 81. • KAREL VAN MIERT—Thank you very much for this stimulating and outspoken contribution. I now invite Mr Giuliano Marenco to present his contribution. Almost two years ago, when we started the internal discussions at DGIV about the reform, I asked the Commission's Legal Service to be part of the exercise and tell us whether our proposal was in line with the Treaty. Giuliano Marenco played a very important role in the whole debate, and I am personally very thankful for all he did. • GIULIANO MARENCO—The question of the reform's compatibility with the Treaty has been raised mainly by the German government and in German academic circles. My impression is that, with the passing of time, interest in this subject is diminishing, so that I am afraid that the last two persons to be interested in it are Professor Mestmacker and myself. Three kinds of objections to compatibility have been made. The first objection, and I believe that Professor Mestmacker was particularly interested in this, is that a legal exception system would run counter to the direct applicability of 81 (1), which, as he says quite rightly, enshrines the prohibition principle. According to Professor Mestmacker, a legal exception system embodies a control of abuse system rather than a prohibition system. I believe that this is a misunderstanding, and this is not what the Commission wants. The Commission does not want to institute a control of abuse system. A legal exception system means that a restrictive agreement which does not fulfil the four conditions of 81 (3) is void and prohibited from the beginning, and does not have to wait for a decision by the administrative authority to be so, as would be the case in a control of abuse system. The second objection is about the drafting of 81 (1) and (3), and in particular the introductory formula of 81 (3), which says that the provisions of 81 (1) can be declared inapplicable to agreements fulfilling its four conditions. It has been claimed that this formula must mean that a prior administrative decision is necessary. I have tried to find an answer to this objection by elaborating on the vagueness of this formula, which is not as clear as the supporters of the
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present system maintain, and above all by insisting on the fact that the Treaty delegates to the Council the adoption of rules implementing the provisions of 81 (3). Such a legislative program would be practically empty if the Treaty itself had already organised a particular enforcement system. I have also looked at the Travaux Preparatories of the Treaty, like Ian Forrester, and I share with him the view that this has been the most amusing part of the exercise. However, I do not share Ian's conclusion that the authors of the Treaty had vague ideas. Every time I reflect on the structure and the wording of the Treaty of Rome I feel obliged to think that the authors of the Treaty were particularly lucid and intelligent, and could foresee the future in a way that we could not imagine. My conclusion on the historical aspect is that, although there is no express confirmation of this, the authors of the Treaty deliberately did not decide which system should govern 81 (3), but instead left this task to the Council. The third objection is about the non-justiciability of 81 (3) because of the complex economic assessments involved in its application. Here I have one main response. It is true, as the opponents of the reform say, that the European Courts have professed self-restraint in the review of the Commission's exemption decisions, but I think that this self-restraint is not a result of the Treaty. It is rather the result of the system set up by the Regulation 17/62, to the extent that it gave to an administrative authority the task of applying the four conditions in 81 (3). It is inevitable that the review of the Courts is limited to what an administrative judge does in respect of administrative decisions. If this system is changed, the more penetrating control of the ordinary judge should prevail. However I have not been able to answer to the main and most interesting question: that is, why has opposition as to the compatibility of the reform with the Treaty come mainly from one country? I have asked my old friend and mentor, Norbert Koch, who was in the Bundeskartellamt, in DG IV and in the Commission's Legal Service. He has very wide experience, but even talking to him I have not found a satisfactory answer. Maybe it will come out of this debate. • KAREL VAN MIERT—Thank you very much indeed, Mr Marenco. I would not dare to answer that last question either, although from time to time I might be tempted. I invite now Professor Matsushita to give us the benefit of a view from someone from far away, but that person being someone who is very knowledgeable about what is happening in Europe. • MITSUO MATSUSHITA—I am from far away, and perhaps outside of the context of this European reform. My view is that of a layman, yet I believe that the debate surrounding this reform is quite relevant in so far as our situation in Japan is concerned. I am referring in particular to the deregulation of the economy, which in Japan has become an important issue. In a regulated economy, different kinds of regulations authorise certain activities, and their effects
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are similar to the prior authorisation system in EC competition law. Such regulations are currently being done away with, one by one. For example, just about one month ago, the Japanese competition law was amended to remove the exemption of 'natural monopolies—such as gas, electricity etc.—from its scope of application. Therefore, now the prior exemption is gone and competition law applies; this causes anxiety within industry as to what will happen. At present, both the Ministry for International Trade and Industry and the Fair Trade Commission in Japan are working to come up with some kind of guidelines on the application of competition rules to various industries. As far as I understand, this sort of situation is somewhat similar to what happens in Europe. I would like to make a few comments on the White Paper, and about Article 81 (1) and (3). I must confess that it is really difficult for me to understand the relationship between Article 81 (1) and (3). If you look at Article 81 (1), it prohibits agreements restricting competition within the Community. Article 81 (3) says that all agreements coming under the scope of Article 81(1), including distribution agreements, can be exempted from the prohibition if they benefit consumers and do not eliminate competition in a substantial part of the relevant market. Yet if the agreements satisfying the exemption requirements under Article 81 (3) do not eliminate competition on a substantive part of the relevant market, why do they fall under the scope of Article 81 (1). In other words, why are they prohibited? And if they are indeed prohibited, why can an exemption be granted? It seems to me that there is some sort of a conceptual difference between those two provisions. Article 81 (3) might just confirm the fact that the agreements satisfying its requirements are not unlawful under Article 81 (1). I feel that the relationship between these two paragraphs of Article 81 should be clarified. The White Paper proposes that the existent notification and prior authorisation system should be replaced by a system whereby national courts apply Article 81 (3) directly. The premise of this proposal seems to be that an agreement can be judged as lawful under Article 81 (3) without needing prior administrative approval. This will be accomplished by amending Regulation 17/62, but without changing the basic provisions in the Treaty. This also seems to endorse the view that the nature of Article 81 (3) is not really supporting a new legal situation. In Japan we had the concept of the so-called 'depression cartels', which eliminated competition completely yet were accepted on industrial policy grounds. Such agreements were approved regardless of their effects on competition. This situation is, however, quite different from that under Article 81 (3), because the application of the latter includes competition assessments. My next point is about the decentralised enforcement system proposed by the White Paper. If there are a number of agencies granting authorisation instead of just one, there will of course be divergent interpretations of the law, and there may be some risk involved in this. This is not really a European problem only; we will have that same problem in Japan when courts decide on antitrust
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cases (there are about 100 such cases already). There are, of course, differences between enforcement in civil courts and enforcement by competition agencies. Though it seems to me that, as long as the European Court of Justice makes the final judgment, there will be convergence in the long run. Meanwhile, what is probably needed is some sort of communication mechanism between the national competition authorities, national courts and the European Commission. A few concluding remarks: the first is that, under the new system, the interpretation of Article 81 (1) and (3) will probably be more 'integrated'. This will lead to a more 'rule of reason' approach in the application of Article 81(1). The second remark is that the new enforcement system will reduce the scope for Commission intervention and increase the role of the judiciary. This is a trend we are also aiming at in Japan. Of course, there is a risk of interference with the independence of the judiciary, but I believe that an increased role for the judiciary is an essential feature of a deregulated economy. • KAREL VAN MIERT—The following presentation is that of the paper coauthored by Professors Petros Mavroidis and Damien Neven. Professor Neven will take the floor on behalf of both. • DAMIEN NEVEN—The basic framework of our paper can be summarised in one phrase: diversity is an opportunity, and divergence is a risk, but the challenge of decentralisation is to capitalise on the benefits of diversity—such as the creativity and professionalism of national competition authorities—while reducing the risks of divergence without reintroducing centralisation through the back-door. This is to say that trying to ensure consistency in enforcement by introducing alternative mechanisms leading again to centralisation would defeat the whole purpose of the reform. In our view, the system of multiple enforcement envisaged in the White Paper could be improved on two accounts. The first is that more attention should be paid to the benefits of diversity and the need to capitalise on its benefits, in line with what Eleanor said earlier. We think that the US experience is extremely valuable from this perspective, yet little attention has been paid so far to the US 'experiment', though some useful lessons can be drawn from it. As to the second account, we argue that in the White Paper the Commission understated, or underplayed, two important sources of divergence in enforcement. The first, and rather obvious, source of divergence is associated with differences in the institutional frameworks of national competition authorities. National competition authorities pursue different objectives, operate within different institutional frameworks and have different constraints. Some might be more independent than others, some might be more transparent than others, and some might be more responsive to the problems of business than others. To the extent that such institutional constraints vary substantially across the
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Member States, this will be an important sort of divergence in the new enforcement system. We suggest in our paper that, in order to address this potentially important source of divergence, the Commission should perhaps impose certain institutional standards on the Member States, for example, transparency requirements such as the publication of decisions and possibly also criteria for the nomination of head officials or regarding the status of civil servants. Let me now turn to what we regard as a more serious source of divergence, to the extent that it can lead to some fragmentation of the internal market. The system envisaged by the White Paper is likely to lead to simultaneous multiple enforcement, in other words, it is likely to lead to numerous instances whereby several national competition authorities will consider the same complaint or the same case. We believe that such occurrences have been underplayed by the Commission in the White Paper. The reason for such occurrence is associated with the test for determining whether EU law applies. The test is whether trade between the Member States is affected. This test is very simple to apply under the current enforcement framework where there is a single enforcer, because exactly how trade is affected does not matter; what matters is that trade between the Member States is affected. However, the matter is no longer so clear when there are several enforcers. To give an example illustrating this point, consider an agreement between an Italian and a Greek ferryboat operator. Obviously, one thing is that both the Greek and the Italian national competition authorities could handle a complaint about the agreement, but the question arises whether the Portuguese competition authority, for example, or the Luxembourgeoise competition authority, could also handle such a complaint. What then would be the competence test? In such cases, should something be added to the usual test as to whether trade between the Member States is affected? We tend to believe that there should be no additional tests, simply because all the White Paper does is to enlarge the set of enforcers. The White Paper does not in any way alter the mechanism that triggers jurisdiction, so there is no reason why an additional requirement should be introduced. One can thus expect that Member States will very easily assert jurisdiction with respect to particular cases and can be expected to actually handle the complaints received. In a simultaneous multiple enforcement system, one must take into account the incentives under which national competition authorities act. It is realistic to assume that national competition authorities respond to incentives coming from their national constituencies. They are responsible in front of their national Parliaments, to their governments, to the citizens of their countries, and they will make decisions taking into account their national interests. They will not take into account, in a systematic fashion, the effects of their decisions outside their own jurisdictions. Let us now think what the consequences would be of a system of simultaneous multiple enforcement coupled with the incentive mechanisms that I just mentioned. To illustrate the case, think about a complaint against an agreement that only makes economic sense if implemented throughout the Community, and not
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only in one Member State. In an enforcement system such as that we were discussing, it only takes one Member State to ban such an agreement. This means that simultaneous multiple enforcement will generally be more restrictive than enforcement by a single enforcer at a central level. Indeed, whereas a single enforcer might implicitly, at least, balance positive and negative effects across the Community, national enforcers will not do so—they will only focus on the effects of the agreement in their own jurisdictions. Hence, what will be required for such an agreement to be allowed is the absence of negative effects in sixteen Member States! This a serious concern, to the extent that it will lead to an enforcement system that is biased against agreements with a European-wide scope, and in particular against agreements having effects across different Member States, which in the end is one of the main objectives of the internal market. We consider that the solutions considered in the White Paper in order to counter-act such effects are not sufficient. I have no time to discuss this in more detail here, but in our paper we have effectively proposed additional measures. The first, simple and obvious additional measure is related to incentives, which is the underlying problem in this case. That would be to introduce a positive comity obligation for the national competition authorities, which would thus have to take into account effects in other Member States in their decisions. Yet, as we argue in our paper, this is unlikely to be sufficient, and would have to be supplemented with a stronger 'safety' mechanism. We can think of two such mechanisms. One relates to the allocation of cases, and the other consists of having the Commission play the role of umpire by retaining Article 9 of Regulation 17/62. However, as we argue in our paper, the Commission's role of umpire in the context of Article 9 should be further clarified, in particular with respect to the circumstances in which the Commission will take over particular cases. In this respect, the US experience is again extremely useful, as the US Supreme Court can also intervene in well-defined circumstances and take over particular cases. Our main conclusion is that, under the new enforcement system, the Commission, in its role of umpire, would have to manage regulatory intervention as well as resolve conflicts. • KAREL VAN MIERT—Thank you very much. I suggest that we return to this rather crucial issue later on during the discussions. I now invite Professor Ulrich Immenga to take the floor on behalf of Professor Mestmacker, and if you could be just as outspoken as he is, that would be welcome. • ULRICH IMMENGA—I will now be speaking on behalf of Professor Mestmacker, who apologises for not being able to be with us today, as he has been ill for the last few days. Professor Mestmacker asked me to present what he considers the most important points in his written contribution for this workshop, some of which have already been discussed here. The first relates to the compatibility of the reform with the Treaty, an issue that has been discussed here before, so I will not return to this point. Another
1- Compatibility, Efficiency, Legal Security
33
issue is that of the direct applicability of 81 (3). Eleanor Fox and others have already mentioned this as well, but Professor Mestmacker was going to examine this point more in depth and consider the Commission's reform proposal as a kind of constitutional challenge. I quote from Professor Mestmacker's paper: 'The direct applicability of Article 81 (1) does not follow from Regulation 17/62, but from the Treaty itself. The European Court of Justice stressed that Regulation 17/62 did not, and could not, modify the effects of Article 81 (1) and 81 (2). The Court has consistently ruled that Article 81 (1) and (2) are, by their very nature, susceptible of creating direct effects in relation to individuals, thus creating for these individuals rights that the courts of Member States must safeguard. In interpreting the concept of 'national authorities' in Article 9(3) of Regulation 17/62, the Court distinguished between national competition authorities and national courts. As far as national courts are concerned, Regulation 17/62 could not take away their competence to apply Article 81 (1), because that would deprive individuals of rights conferred upon them by the Treaty, by virtue of direct applicability of Article 81 (1).' Then I quote briefly from the ECJ decision in the Marty Lauder case: 'Since the prohibitions contained in Article 81 (1) and 82 tend by their very nature to produce direct effects in relation to individuals, those articles create direct rights for the individuals concerned that national courts must safeguard. To deny, by virtue of Article 9 Regulation 17/62, the national courts'jurisdiction to provide that safeguard would mean to deprive individuals of rights that they hold under the Treaty itself.'5 And Prof. Mestmacker continues: 'It follows that a Regulation such as that contemplated by the Commission, providing for the inapplicability of Article 81 (1) when the conditions for an exemption are met, is compatible with the Treaty only if it does not interfere with the direct applicability of Article 81 (1). This depends upon the direct applicability of Article 81 (3): if the exemption provision, contrary to the Commission's assumption, does not satisfy the requirements of direct applicability, then the tying of Article 81 (1) to Article 81 (3) would deprive the former of its direct applicability. The most important indications as to whether Article 81 (3) is directly applicable can be encountered in the European Courts' decisions reviewing Commission decisions that granted or refused to grant exemptions. The European Court of Justice and the Court of First Instance have consistently held that the Commission is entitled to a wide margin of discretion in such cases. The veryfirstleading decision reviewing the application of Article 81 (3) by the Commission outlined the limitation of judicial review: the Commission, the Court observed, must render difficult economic judgments. The judicial review of such judgments is restricted to finding whether the relevant facts were correctly ascertained, and the law was correctly applied to the facts. In later decisions, the principle of limited judicial review in Article 81 (3) cases is spelled out in greater detail. In other words, the ECJ will not replace the
Case 37/79 Marty Lauder [1980] ECR 2481.
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Commission's expert judgment with its own, and will not enter into a balancing of the economic advantages and disadvantages of a cartel. It has been argued that, even though Article 81 (3) is predicated upon a margin of discretion, it is nevertheless directly applicable because it does not provide for political discretion. This is a distinction that has no basis in the case law of the ECJ. In dealing with the limitations of judicial review in Article 81 (3) cases, the ECJ starts by observing that the Commission is responsible for the shaping and implementation of Community competition policy, and this calls for complex economic judgments. This applies to decisions in individual cases as well as to Regulations providing group exemptions under Article 81 (3). In a recent study for the Commission,6 the authors reiterate the Court's jurisprudence as to the complexity of economic judgments involved in the application of Article 81 (3), and the consequently political character of these decisions. The Court's jurisprudence shows that the conditions for granting exemptions under Article 81 (3) are not suited to judicial review, therefore a Regulation providing for the application of Article 81 as a whole would deprive Article 81 (1) of its direct applicability. Such a Regulation would infringe the Treaty' In his paper, Professor Mestmacker also addresses the particularities of the application of Article 81 as a whole in national court proceedings. His argumentation follows upon the previous discussion on the kind of judicial review performed by administrative courts. I would consider his argumentation on this point as a counter-proof to the understanding that private enforcement in national courts cannot be compared with judicial review in administrative courts. However, this is my own interpretation, and I will continue quoting from Professor Mestmacker's paper: 'The Commission expects the application of Article 81 as a whole in proceedings of three kinds: contractual liability proceedings (between parties to an agreement), noncontractual liability proceedings (between a third party and one or more of the parties to an agreement), and applications for injunctions. In dealing with private enforcement, the narrow limits of Community law must be observed. The only Community law sanction is Article 81 (2), providing for the invalidity of restrictive agreements. All other sanctions and remedies are a matter of national civil law. There are, nevertheless, important indirect effects of Article 81 (2) in tort and unfair competition law. For private enforcement to be effective, there is obviously a trade-off between the legal certainty of the parties to an agreement and the effective protection of third parties' rights. The Commission appears to be more concerned with the legal certainty of parties to an agreement than with the protection of potential victims.' • KAREL VAN MIERT—This argument will be taken up again tomorrow. I would like now to invite Alexander Schaub, the Director General of DG COMP, and then the last speaker of the first Panel, Mr Tesauro.
6
European Commission: Die Anwendung der Art. 85 und 86 des EG- Vertrages durch
die Gerichte der Mitgliedstaaten, Catalogue no. CV-O6-97-812-DE-C, available at http://www.europa.eu.int/comm/competition/publications/SUDIES, p. 133, no. 87.
1 — Compatibility, Efficiency, Legal Security
• ALEXANDER SCHAUB—I have been asked to deal in my written contribution for this Workshop with two issues that are not directly inter-linked. The first is why the German critics of the proposed reform are wrong, and the second concerns 'non-infringement decisions'. As the second topic seems to be much more sensitive, controversial and relatively open at this stage, I will start with it. In the White Paper it was proposed that in the new enforcement system the Commission should have the power to adopt individual positive decisions, or 'non-infringement decisions', as we now prefer to call them. Such decisions would declare that a particular agreement is not infringing Article 81, and would be of declaratory nature. In our view, constitutive decisions such as the present exemption decisions, creating rights for the past, present and future, and that can be revoked by the Commission only, are not compatible with the legal exemptions system envisaged in the White Paper. They would conflict with the sharing of enforcement competencies. I believe that, so far, this is broadly accepted. However, the fact that the Commission non-infringement decisions will be of declaratory nature does not mean that they will be without legal effects. The effects depend on the operative part of the decision. I would agree that the current negative clearance decisions bind only the Commission, since according to Article 2 of Regulation 17/62 they merely state that the Commission finds that there are no grounds for it to intervene. A decision declaring that a particular agreement is not infringing Article 81 would, in my view, have stronger legal effects. It would establish the Commission's substantive assessment based on the facts available to it, and would have certain effects on national courts. If the facts on which such decision is based change materially, national courts would obviously be free to come to a different conclusion. Such a finding would in no way be in conflict with the Commission's decision. If, however, the facts are exactly the same, in my view national courts must take into account that a Commission decision is a Community act, subject to a separate system of judicial control. Although national courts apply Community law and play a very important role in its enforcement, they are not competent to review the validity of Community acts. This is the sole responsibility and competence of the Community Courts. When the Commission and the national courts adopt decisions in the field of EC competition law, they both apply the primary rules of the Treaty. If a Commission decision is annulled on substantive grounds, it is because the decision violates the Treaty, or in other words, is invalid. In the Community legal order only the Community Courts are competent to declare the Commission's decisions invalid. If a national court declares null and void an agreement that was the subject of a definitive Commission non-infringement decision, it is calling into question the validity of the Commission's decision. Therefore, in my view, in such cases the national court must make reference to the European Court of Justice based on Article 235 EC Treaty. Furthermore, if the Commission non-infringement decision has not yet been adopted, or it is not yet definitive, the national courts are obliged to avoid decisions in conflict with it, otherwise the uniform application of Community
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competition law and legal certainty would be threatened. As it is clear from the Delimitis judgment,7 such conflicts can be avoided in a number of ways: the national court can ask the Commission for an opinion, can follow the Commission's decision, it can suspend proceedings or make a reference for preliminary ruling to the European Court of Justice. We fully acknowledge that these are very complex issues, on which different views are possible and indeed are held within our own institution, which as of today does not yet have an official point of view in this respect. Much of this complexity has to do with the fact that the issue involves the relationship between two legal orders applying the same body of rules, but which are nevertheless assigned distinct tasks. Hopefully, the European Court of Justice will cast new and valuable light on the relationship between the Commission, the national courts and the Community Courts when rendering the judgment expected in the famous Masterfoods case.8 I wanted to add that divergences of views on this issue are based on the idea that the principle of separation of powers makes it impossible that decisions by an administrative body bind the jurisdiction of courts. In my view, however, the issue is not one of separation of powers, but of separation of judicial control systems. The decisions of a Community body can only be reviewed by Community courts. Let me very briefly add an important point that was not clarified in the White Paper, which is why we consider it desirable that the Commission be empowered to adopt non-infringement decisions. In the Community legal order the Commission is responsible for the implementation and orientation of Community competition policy. In the new enforcement system, Community competition policy will primarily be developed by means of general instruments, such as Block Exemption Regulations and Guidelines, and by means of individual prohibition decisions. In our opinion, however, the Commission should also be able to influence Community competition law enforcement through the adoption of non-infringement decisions. This will allow the Commission to provide guidance on the Commission's approach to new competition issues. It will also allow the Commission to influence the orientation of Community competition law enforcement in a system of parallel competencies. The Commission is the only authority that covers the entire Community territory. It therefore has a special responsibility to ensure consistent application of Community law. Non-infringement decisions are not exemption decisions in disguise. They would only be adopted exceptionally, in the Community public interest, and never just at the request of undertakings. • GIUSEPPE TESAURO—I will only make some telegraphic considerations. On the issue of the compatibility of the reform with the Treaty, I think that most 7
Case 234/89 Delimitis v Henninger Brau [1991] ECR 1-935. Case C-344/98 Masterfoods Ltd. v HB Ice Cream Ltd, on reference for a preliminary ruling from the Supreme Court of Ireland, judgment of 14.12.2000 (not yet reported) 8
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of the pertinent observations were already made. I think that the wording of Article 81 (3) leaves open the question of how the exemptions to the general prohibition should be administered. This formulation is broad enough to admit both ways of enforcing the prohibition system. The only limit it establishes is compliance with the prohibition principle, and that is the objective of the White Paper, I believe. Another argument against the compatibility of the reform proposal with the Treaty is that it deprives Article 81 (1) of direct applicability by tying it in with Article 81 (3). I think that the problem with Article 81 (3) is not one of direct effect—Article 81 (3) can have direct effect, of course—but whether national authorities and courts are competent to apply it. According to Article 9(3) Regulation 17/62, national competition authorities and national judges do not have the competence to apply 81 (3). The direct effect of Article 81 (3) would not be a problem if national bodies had the authority to apply it. Point 50 of the Delimitis judgment9 is already clear on this subject: national competition authorities and national judges already have the competence to look at the 81 (3). I also think that all the problems of legal certainty and enforcement efficiency under the new system are best approached by looking at Articles 81 and 82 as part of the wider Community legal system. I have a question for myself and for you: are Articles 81 and 82 really different from Articles 28 and 30? I do not think so. The entire Community legal system is made of rules and exemptions. If the Community legal system as a whole has been applied by national authorities and national judges, why not Articles 81 and 82 as well? What is the difference? Enforcement is 'much more difficult' for whom? National competition authorities are specialised bodies, and I do not think that it is much more difficult for judges to apply 81 (3) than the old and dear Article 36. There are of course good judges and bad judges, but this is a rule of life. There are judges that are not very familiar with economic issues, but can an 'economic animal' be found among our best judges in the Court of First Instance and the European Court of Justice? I do not feel that we must be afraid on this point. The real problem, of course, is the difference in nature, in terms of the rules applied and in terms of the legal consequences of the decisions taken by national competition authorities. From the legal certainty point of view, a word about the Commission putting some strange objects on the table (such as decisions that are not really decisions, or papers that are 'non-papers'), which I think is dangerous. We are now in a system of comfort letters, 'spiritual comfort' letters. The judge has some difficulty in finding the real nature of this kind of object: communications, resolutions, comfort letters, non-infringement decisions. This could be seen as an element of legal insecurity. Of course it is a good system for the lawyers. But what is a non-infringement decision? What is the legal value and/or the consequence of positive or non-infringement decisions? 9
See above.
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Panel Discussion
• KAREL VAN MIERT—We now have an hour left for discussions. After the stimulating contributions of this morning, I do not think there is any need to stimulate further, though perhaps for a second we might come back to the question of whether the proposed reform is in line with the Treaty or not. Mr Marenco could perhaps go into the arguments that have been made by Professor Immenga on behalf of Professor Mestmacker. Then Alex Schaub could perhaps explain very briefly why this type of arguments were mainly invoked in Germany. • GIULIANO MARENCO—The argumentation against the compatibility of the reform with the Treaty is, if I understand well, extremely complex. It consists of saying that the direct applicability of 81 (1) will not be able to deploy its effects to the extent that 81 (1) is applied together with 81 (3) and the latter is not justiciable. This line of argumentation links two kinds of problems: the question of the direct applicability of Article 81(1) and the question of the justiciability of Article 81 (3). On direct applicability, I think that everybody agrees with Professor Mestmacker that Article 81 (1) embodies the prohibition principle, and anything that would weaken it would run counter to the Treaty. On that point, as I said earlier on, it is wrong to say that the legal exception system weakens the prohibition principle. On the contrary, it implies a stronger and more stringent application of the prohibition principle than under the current system. The current enforcement system has some gaps as to direct applicability and the application of the prohibition principle. One is that notified agreements are immune from fines. Another is that, with the Commission's exemption monopoly, in practice it is not possible for national judges to apply the prohibition principle under Article 81 (1). We all know how difficult it is for judges to decide on one half of a rule when the other half cannot be applied. A legal exception system is therefore a more stringent application of the prohibition principle. The real question in Professor Mestmacker's argument is, however, whether 81 (3) is justiciable. There is a declaration of self-restraint in the judicial review of Commission decisions based on Article 81 (3) on the part of the Community Courts, which is accompanied in fact by a very penetrating control of the reasoning followed by the Commission in its exemption decisions. The European Courts have more than once annulled Commission exemption decisions (for example, in the Eurotunnel and the European Night Services cases10). Yet even if there is some kind of self-restraint, I believe this is the result of the system set up by Regulation 17/62, which provided for an administrative decision to be taken on the applicability of 81 (3). Once this power is centralised with the administration, it is inevitable that the Court's review of the administration's dealings be limited to an administrative type of judicial review. The 10
Case C-408/95 Eurotunnel [1997] ECR 1-6315; European Night Services as cited above.
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self-restraint of the Court is nothing else but the traditional self-restraint of administrative judges in the review of administrative decisions. Once the new Regulation has suppressed the current system and replaced it with a system in which 81 (3) is directly applicable, the judges will have no longer reason to limit the scope of their review.
• ALEXANDER SCHAUB—The primary objective of the reform is clearly to improve the efficiency of EC competition law enforcement, and not to reduce the workload of the Commission. From this perspective, the criticism—(coming particularly from German circles) that the reform will actually reduce efficiency is very serious, and we have taken it very seriously. The main arguments invoked by those criticising the Commission's reform proposal from this perspective were as follows. One argument is that the reform would imply the abandoning of the prohibition system and a switch to a control of abuse system. It has already been explained that this is a total misunderstanding. Ten days ago I had the opportunity to discuss this with Professor Mestmacker and I got the feeling that he would no longer really insist on this argument; he admitted that there might indeed have been a misunderstanding. The White Paper did not make it sufficiently clear that illegal agreements would be invalid ab initio under the new enforcement system. Having clarified this aspect, I do not think that this argument remains important. A second argument is that the legal exemption system as a concept can only be less efficient than the present system, and I think that Giuliano Marenco has already replied to this. A third argument, that has been often repeated, is that without the notification system the Commission will no longer know anything about the market. Professor Moschel and Dieter Wolf made this argument. This seems to me a rather amazing and unfounded argument, because we have a lot of knowledge about the market coming from much better sources than notifications. On the other hand, we do not get a lot of useful information from notifications. The really critical cases are not only 'notified', but they are normally accompanied by complaints that are sometimes more informative about the case than the notification itself. Apart from these specific points, we generally believe that the present notification and prior authorisation system is not particularly efficient. First of all, there is no obligation to notify, and agreements are therefore increasingly being 'notified' only when the parties expect a negative clearance or exemption. In other cases, they are often not notified. Second, the notification system creates a largely unproductive workload. This comes back to our experience that, as of now, notifications are neither a very useful source of information, nor a very useful starting point for an investigation. Third, we believe—and this point has been detailed in the White Paper—that the present system prevents a proactive and focused enforcement effort. It is instead the source of unnecessary
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delays in the handling of complaints and ex officio cases. And finally, in my view, culturally speaking the worst disadvantage is that a notification system places the wrong focus for enforcement. • ULRICH IMMENGA—I would like first to return to the issue of whether Article 81 (3) is justiciable. One aspect that has not been discussed here yet is that there is a clear difference between the Commission, which is not an independent cartel office, and national bodies. In its enforcement activity, the Commission must consider different Treaty objectives in the context of Article 81 (3): industrial policy, employment creation, and others, as it happened in the Volkswagen-Ford case.'' No national body, be it the competition authority or national courts, can consider the Treaty objectives in such a way, and I therefore believe that it is very important to reduce the scope of application of Article 81 (3). My second remark concerns the 'German objections' you have mentioned. One aspect that was only briefly discussed until now is whether the change contemplated by the Commission can be made through the adoption of a Regulation, or whether the Treaty itself must be changed. For example, one important issue is how to apply block exemptions. I think these are two very important points that have to be considered in order to understand the German point of view. • ULF BOGE—Alex Schaub mentioned that he was asked the question 'why the German critics are wrong'. I do not see this as a question. If somebody puts this question to Alex Schaub, then he has to answer it, and I understand that he hesitated a little bit because the question implies that it is wrong that the Germans are critical. I wonder if anybody has the wisdom to say what is right and what is wrong. I think we started a discussion in April 1999, and the Commission made a proposal, and at that time there was one proposal to reach the objectives we had. I will say it again: we never had problems with the objectives of the reform, as you know. The problem was: is the Commission's proposal the right way to achieve them? I think one must also take a look at history. About forty years ago, we had a discussion about which approach to take in Germany. It was then very clear that, for a variety of reasons, we wanted to have a notification system. The main reason was, however—and here there is no difference with respect to the current debate—that we wanted to have the most effective competition enforcement system. With respect to the current debate, I would say that a 'German concern' exists only in a very broad sense. Points of view differ in various German circles in so far as the legal aspect of the reform is concerned. Can modernisation be achieved by simply modifying Regulation 17/62, or should the EC Treaty be 11
Commission Decision 23/49/EEC Ford-VW of 23.12.1992, OJ L 20/14 of 28.1.1993
1 — Compatibility, Efficiency, Legal Security
amended? I am not a lawyer, though I have learned a lot from lawyers, and I wonder indeed which side is right. We have very respectable people in Germany who say it is impossible to bring about a reform without modifying the Treaty. Professor Immenga mentioned this and Professor Mestmacker was very clear on this point. In Germany we also have a 'Monopoly Commission', the most important body concentrating on the enforcement of competition rules, and if such a Commission has a very clear opinion on a matter I think it must be taken seriously. I am not the person to say whether it is right or wrong, but I wonder what we can do to find out which position is the right one. If there were a way of getting a clear picture on this, it would help as far as competition enforcement and legal certainty are concerned. It is up to the EC to decide to do it or not, and to find a way to do it. If the German Monopoly Commission and the German government are right—they have the same opinion on this point— what will happen within the next ten years when the first case goes to the European Court of Justice? I know this takes time—five or ten years—therefore I do not know when such a decision will have to be made. But what would happen if they were right after all? Mr Marenco said nobody could explain to him why this situation has occurred. I am sure he knows the Report of the German Monopoly Commission, and I think it is explained there. I believe he knows the history of the German enforcement system, and how it was developed. In contrast to Brussels, Germany has had very positive experiences with the notification system. We have had no problems with the existing system; you had a problem in applying it. We then said in Germany "yes, of course, one should try to modernise the European system". The only question was how to do it, how to reach our common objectives. I believe the debate with the so-called 'German critics that were wrong' lasted over one and a half years, and my judgment is that it went well. I think that critics and questions are natural at the beginning. As far as I know, many of the Member States had the same queries about the reform as those raised in Germany, and in the process the Commission understood many of the problems with the reform proposal as well. I would say there was aflexibleapproach over these months of discussion, and the Commission's opinions were modified after April 1999. We have Working Groups for the most serious topics, and I think they work well. As I said in my opening remarks, we are trying to help the process. In the end, this showsflexibilityafter a year or so of debate. I mentioned earlier that a 'compromise proposal' made by the Bundeskartellamt. From our point of view, the issue of legal certainty for companies is not really the most important issue. I agree that one has to ask, as Mr Hawk did: 'what is legal certainty?' When we advised the countries of the exSoviet Union, we always told them: 'what you need is a clear legal system, otherwise there will be no investment.' To ensure legal certainty for companies in our countries means something totally different. Uncertainty is a reality in political matters, and you never know what could happen if you go to court. It is in the hands of God, I was told, if you go to court. You never know what the outcome will be in political matters, why should it be different in competition
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policy? However, if national competition authorities do not have the power to say 'OK, this is the acceptance under Article 81 (3)', then the burden is left to companies. There is also another problem that has not been mentioned yet: the difference between small and medium-sized companies and large companies. I think that as far as the 'grey zone' is concerned, it is much easier for large companies to obtain legal advice from their own lawyers, to ask others or to make an economic study. In so far as Article 81 (3) is concerned, something must be said about what is going on in the market. Large companies can pay for such studies, be they economic or judicial, but what about small and medium-sized companies falling under the threshold for the application of EC rules? This is a problem we still have to solve. My last point is that we must clarify the fact that our main objective is to protect competition. Legal certainty for companies cannot be our first objective. This also means that competition authorities must be given the power to gather information and the opportunity to ask questions of the companies. • CLAUS-DIETER EHLERMANN—The debate about compatibility is not only a German debate; this is exaggerated. There is also Professor M. R. Mok, who was an EC official in the early sixties and lived the history of Regulation 17/62, who said from the very beginning that there was a big compatibility problem. He draws his objections from the Bosch judgment of the European Court of Justice.12 The House of Lords might have been impressed by Dieter Wolf's statement about the incompatibility of the new enforcement system with the Treaty. The House of Lords implicitly makes the suggestion that it might be wise to amend the Treaty to clarify the situation and to substitute the word 'declare' in Article 81 (3) with a word that more clearly follows the direction of the new system. My second point is that the debate about the direct effect of Article 81 (3) is a debate about substance. Nobody here today has been able to explain exactly what is in and what is not in Article 81 (3). Among other reasons, this is so because there are so very few Commission decisions based on Article 81 (3), and even fewer decisions have been looked at critically by the Court. Are 'extracompetition' objectives to be considered under Article 81 (3)? This leads us back to the debate we had in 1997 in our European University Institute/RoBert Schuman Centre Workshop about the objectives of competition policy. More than anything else, decentralisation sharpens the debate about the substance and the content of Article 81 (3). Should it be only economics, in part with Article 81 (1), or more than economics? As David Edward pointed out in his paper, the Maastricht Treaty has not facilitated things by introducing as generalising other policy objectives, like environment, consumer protection and health, etc. 12
Case 13/61 Bosch [1962] ECR 89.
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• ELEANOR FOX—I have two remarks regarding the claim of incompatibility. One follows directly from Claus Ehlermann's point. One claim of incompatibility, as reported by Professor Immenga from Professor Mestmacker's paper, is that no national body can consider Treaty provisions containing EU industrial policy objectives. Why not allow national courts and national competition authorities to grant exemptions only on competition or efficiency grounds, thus excluding any possibility that national courts may apply industrial policy considerations under Community law? I think that if every Member State has the power to apply industrial policy under Community law, you will have greater uncertainty and much more industrial policy than you have today. My second remark relates to the claim that Article 81 (3) is not justiciable. I thought that Professor Tesauro made a very interesting point about Articles 28 and 30. The Cassis de Dijon13 exemptions can and are meant to be applied by national courts. I would like to hear why, if this can be done under Article 28, it cannot be done under Article 81 (3). • MARIO SIRAGUSA—I would like to go back to some of the other questions that were discussed this morning. I was very interested in what Alex Schaub said that there is a re-consideration of the role of the Commission in the new enforcement system, at least in the sense of issuing 'positive decisions'. The White Paper left very little room for that kind of Commission decisions, but I see that the Commission is finally starting to see the light. As Alex Schaub announced today, there will continue to be positive decisions made by the Commission. I think it is very important to have positive decisions, because of what Claus Ehlermann was saying. If we are moving towards a system in which national courts and national competition authorities apply Article 81 (3), it is very important that they have instructions about how to interpret Article 85 (3), for all the reasons you were discussing. What is the content of Article 81 (3)? The best way to clarify this is to continue to have a flow of Commission decisions interpreting the conditions for the granting of exemptions under Article 81 (3). It is true that this can also be done through Guidelines and Notices, but the best way is through case law. The greatest achievement of the European competition enforcement system has been to develop a body of case law (decisions of the Commission, the Court of First Instance and the Court of Justice). I would see the Commission renouncing its role of decision-maker as a great problem that allows it to generate jurisprudence and influence the application of the rules. Second, if there will be 'positive decisions' made by the Commission, what will their role and effects be? There is a very important change implied here. Under the present system— and here I share some of the 'German concerns'— 13 Case 120/78 Rewe-Zentral v Benndesmonopolverwaltung fur Branntwein [1979] ECR 649.
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the Commission has very powerful means to shape policy and influence enforcement. The monopoly over the application of Article 81 (3) gives the Commission a tool to shape its policy. If the Commission issues a decision under Article 81 (3), everybody has to respect it. The jurisprudence of the European Court of Justice clearly indicates that national competition authorities and national judges are bound by such decisions. Even the application of national law cannot deprive Article 81 (3) decisions of their effects. Under the new system, the effects of Commission decisions are jeopardised. The discussion of these aspects in the White Paper is very poor. The White Paper even went so far as to say that Commission 'positive decisions' will have no binding effect. Now the Commission is going back on this a little. I saw in Emil Paulis' paper that the Commission is trying—rightly so—to say that, on the basis of the principles in the Treaty, a Commission 'positive decision' must have some binding effect as it is a Community act. Still, we are moving towards a situation in which such decisions will have a much less clear binding effect. The Commission is giving up the only clear tool of competition policy-making that, together with the block exemption regulations and individual decisions, has been the central pillar of the entire construction of our system. My third observation is concerned with the role of the European Courts under the new enforcement system. The main problem with the reform proposal is the weakening of the role of the Commission, and not the inability of judges to apply EC competition rules. I have great admiration for the judiciary. My proposal has always been to reduce the extensive application of Article 81 (1). It is not that I fear judges, but there is a fundamental distinction between EC competition rules and other provisions of the Treaty. Articles 28 and 30 always concern conflicts of laws, or whether national laws and regulations are in compliance with the Treaty, which is a totally different matter to that we are talking about here. Here we are talking about companies making investments across Europe, shaping alliances throughout Europe, engaging in certain behaviour over a number of years in the future, and where economic considerations are a very important part of the discussion. This is not a question of interpreting national law and determining whether it is in compliance with the Treaty, it is a question of forecasting and reviewing market situations and assessing whether a particular agreement has some redeeming virtue qualifying it for an exemption under Article 81 (3), which I think is a different exercise to the application of Articles 28 and 30. • IAN FORRESTER—Since the Commission is engaged in a fundamental procedural and substantive housecleaning, I think it is good that we give attention also to Article 81 (1). In the very beginning it was decided by the Commission, understandably for those times, that it was by the tolerant use of Article 81 (3) and not by the tolerant use of Article 81(1) that all sensitive decisions were to be made. That was decided forty years ago, and we understand why. That was a procedural disaster for the Commission because it created an inescapable
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demand for a scarce resource—exemptions—and only the Commission could deliver those. Finally, that demand became crippling, and that is why we're talking about reform today. I believe that, functionally speaking, the proposed reform will not have such a big effect on how national courts approach individual matters, because I believe that today—illogical and inconsistent with the German view, though it might be—a national judge wants to do a complete job. Once he accepts that the competition law issue is present, he wants to find a solution to it so that he can go on and the parties can be told what the relevant law is. I therefore believe that, functionally, a national judge today makes a comprehensive appraisal of what the situation is, except where the Commission has shown a likelihood that it is going to pre-empt him. I believe that agreements in the past were or were not enforced before national Courts, not because they were or were not 'notified' but because of their contents. That is going to be the same in the future. In practice, judges armed with the power to apply Article 81 (3) will do so, and it will not be such a big difference. It is a good thing. But remember that the Commission has not yet abandoned the original error, which was to give too great a power, too great a scope, too great an importance, to Article 81 (1). As part of the reform process, it is not enough to say merely that Article 81 (1) and (3) come together. I submit that the scope of Article 81(1) must also be re-calibrated, so that fewer agreements are caught by it, and thereby reducing everyone's workload and the opportunity for frivolous distractions by purely theoretical disputes. • CARL BAUDENBACHER—I shall take up an issue that has been touched upon by Professors Ehlermann and Immenga. Some feel—particularly in Germany, but not only—that the whole modernisation exercise will lead to a situation in which the Commission will have more possibilities to take industrial policy goals into account, as well as other policy goals outside competition policy. I have two questions in this respect. First, is this so? Second, isn't this unavoidable to a certain extent? I am not only thinking of the Maastricht Treaty, but also of what happened in Seattle. It seems to me that employment issues will be back on the table again after Seattle, and to a much greater extent than was the case in the last ten years. Another observation: if you look at afieldof European law that is very close to competition law, namely public procurement law, you will see that we have all these ideas of taking criteria outside pure competition ones into account, and all this is dealt with in an open way. If we take seriously what Giuseppe Tesauro has said, namely that competition policy is just like any other policy under the EC Treaty, then we should probably hold our eyes open and we should say: 'isn't it unavoidable that this is going to happen in the future?' • JOCHEM BURRICHTER—I would like to cover two points. The first relates to the argument that civil courts are not able to apply Article 81 (3) because the European Courts have granted a certain degree of discretion to the
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Commission regarding the application of this provision. I totally agree with Mr Marenco, that this is the mere consequence of making the exemption procedure an administrative procedure. I would like to add that this might also be a consequence of the reluctance of the European Courts to deal with facts. Practitioners have deplored this practice. Very often and unfortunately this is still the case even after the establishment of the Court of First Instance. In my view, this is one of the reasons why this discretion has been granted, because even review of administrative decisions it is not necessarily limited to a kind of 'control of discretion'. In other jurisdictions, for example in Germany, the courts totally and fully review the decisions of the national competition authorities and do not grant them any discretion that they are not able to control. In Germany we have also had the possibility in the past to grant exemptions for rationalisation cartels, and the courts have clearly taken the liberty to examine whether the conditions for a rationalisation were fulfilled or not, whether the authority has applied the criteria correctly or not. This will also continue into the future, because we have taken over the criteria of Article 81 (3) in the new paragraph 7 of the German Competition Statute. I am sure that the German courts will take the liberty to control the application of these criteria. It also has been said that policy considerations are part of the application of Article 81 (3). I really cannot find anything in the conditions for the granting of an exemption under 81 (3) that allows a general reference to policy considerations. I would be more than happy if, in the application of Article 81 (3) by the courts, this nonsense would be abolished, if there has ever been a practice of this kind. The time is more than mature to avoid that mistake. My second comment refers to what Mr Schaub disclosed, namely DG COMP's considerations concerning 'positive' or 'non-infringement' decisions. Mario Siragusa has already explained why it is absolutely necessary to have such decisions in the future. I would back the idea that such decisions should be binding on national courts and national competition authorities, because the principle of primacy of EC law over national law clearly justifies such a binding effect. I even would invite the Commission to go a step further, in the sense that the Commission should even be able to over-rule decisions of national courts (for example, when a national court established that this provision was not applicable in a case where the decisive question was that of the applicability of Article 81 (3)). In extraordinary cases, the Commission should have the possibility and the competence to over-rule such judgments, even if they are res judicata. What would be the alternative otherwise? Let us imagine that a national court wrongly applied Article 81, the parties do not appeal the decision and no reference is made to the European Court of Justice. In such a case, the only possibility for the Commission would be to introduce a violation procedure against the Member State. This is legally and politically very complicated because a court acts independently. Giving the Commission the possibility of using a decision annulling a national court's decision in such a case would be a milder way in which to correct a wrong decision (which will occur and cannot be avoided), and it would guarantee more coherence in enforcement.
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• JAMES VENIT—I was puzzled by the request earlier this morning for more decisions from the Commission, although having heard Ian Forrester's second set of remarks, I begin to understand that maybe these would be decisions limiting the scope of Article 81. But it seems to me that there are a couple of fundamental points to be made on this issue. I think that there is a convergence of views on them, despite the smoke that might indicate that there is not much of a convergence. It is essential for a regulatory authority to set its own agenda and not to allow that agenda to be determined in a binding way by the consumers of the 'product' the authority is producing. Conversely, that authority should have the discretion to allow third parties to address it on issues that the authority regards as important. I think what all this means is that you have to get rid of the system of mandatory notification—that requires the Commission to deal with the 'notified' agreement—but you have to allow the process of complaints pass issues that might be interesting up to the regulator, and then let the regulator decide if it wants to deal with it. If it does not, the courts are of course available to deal with those problems. This is a very fundamental point that has been recognised in the reform proposal. I think a lot of the dissatisfaction that we heard earlier from the Bar as to lack of legal certainty under the new enforcement system or the impossibility to request opinions from the Commission will be rectified by limiting the number of positive decisions that the Commission can adopt. I have been involved in cases where, for instance, I am advising the client of the risk of fines. If one followed the classic judgment, I would have said 'yes, you do have a risk of fines and therefore you can't do this'. Under the notification system, we have been able to notify clients of 'grey area' agreements and spark a rather interesting debate within the Commission about a very important policy issue. Those opportunities should be preserved, but they can be preserved without a system of formal notification. From my perspective, the request to maintain 'voluntary' notifications would be irresponsible coming from those of us who have said for so long that the current system is not functioning. In fact, exemption decisions do not provide legal certainty because there are so few of them. It would be wrong for us to come back now and say that we are terribly concerned about the issue of legal certainty. I think the Commission is in the process of getting the balance right. We, the members of the Bar, have a responsibility to acknowledge that and to make constructive suggestions. But we also have to recognise that moving to this new world is not going to change the reality of what has been going on for a long time, which is basically companies deciding on their own, following the advice of their legal counsel, as to what is a reasonable course of conduct in terms of risk assessment and what is not. I am a little bit puzzled to hear from my own colleagues a kind of a pulling back from the reform and towards the way in which the old system has actually been working. Given that fact, it's very important to have reality and the formal rules accord with each other.
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• GIUSEPPE TESAURO—Just a few words about the 'non-infringement' or 'positive decisions'. They are no problem at all, yet it is necessary to know whether such decisions are binding or not. My second point: a judgment could be wrong of course, but not only in the Member States, also in Luxembourg. Also Commission decisions could be wrong. We cannot reason on the basis of a paradox, of the extreme, of a crazy judgment. A crazy judgment is now possible, and will be possible also in the future. A crazy judgment is normal. It is the rule of our life, and we must also consider the hypothesis of a crazy judgment. • ANNE SPIRITUS-DASSESSE—Under the current enforcement settings, when a national judge is confronted with a case, he has to deal with it. He cannot wait for a Commission decision. In some cases, the judge has to decide if the contract is valid or not, and from this perspective he already has to take Article 81 (3) into account. He might wait for the Commission to carry out an economic evaluation, because he has this option, but he has to make a decision in cases in which he cannot wait, and this implies looking at Article 81 (3) and considering whether the Commission is likely to give an exemption or not. When the Commission has not been notified of the agreement at all, the judge has to deal with the case and has to make a decision because the period preceding a notification will never be covered by an exemption decision of the Commission. If the parties claim they will make a notification, this is alright, but it is for the future. The paradox is that, in such cases, the same contract can be declared invalid for the period before the notification, before it is clear whether or not it is valid for the future. With the notification, the parties might bring to the ' Commission even new elements modifying the original contract. A judge confronted with such a situation under the new system can act and play a dynamic role, instead of being bound to say 'for this period the contract is invalid and for the future we will see'. He could tell the parties 'you have to bring some kind of modification to the contract, then we can go forward'. During this time, the parties can consult each other or go back to the Commission. There are a lot of possibilities, and I think that this is one of the positive aspects of the reform with respect to national judges. What I mean is economicflexibility.The judge has to do something more 'economic' than just making legal assessments. I think this is perhaps the opportunity to give the judges a moreflexiblerule. I would like to add two general considerations. One is in line with what Mr Tesauro said earlier. As judges, we have to apply not only Articles 81 and 82, we have to apply all the provisions of the Treaty if they have direct effects. So what can happen in a competition case? The case must be decided on the base of Articles 81(1) and (3), we have to deal with the case very fast even if the case is not clear. We cannot wait for a Commission decision. In cases brought on the basis of Article 81, although the judge is not presented with sufficient evidence to conclude whether he is confronted with an anti-competitive behaviour or agreement, he may nonetheless be able to reach a 'negative' decision if he can
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deduce from the evidence before him that illegal state aid is also involved. Indeed, illegal state aid is a matter of Community public policy. The national judge has the obligation to take into consideration EC rules on state aid, though of course such rules will be applied in conformity with national procedural rules. Somebody was speaking earlier about the objectives of the Treaty. Of course, the national judge has to apply all Treaty provisions, and in this perspective he has to look at the objectives of the Treaty. We have to apply the previous Article 5 of the Treaty, Articles 28 and 30, and the Treaty provisions on State aid; we have to apply a lot of rules. These rules grow every day. The problem is that many people consider that national law and European law are two separate things. I do not think this is so, I think there is only one law; I think there is one European law that includes national law. Even if a national judge applies national law, he has to take into consideration that a Community Directive might exist, for example, and that the national law has to be interpreted in the light of this Directive even if the case is purely national. We would otherwise be in total contradiction with the economic reality. The judge has a major role to play in the application of all Treaty provisions, and also the application of other Community legal instruments. My last comment is about legal certainty. From my point of view, there is no legal certainty at present, even when the Commission gives an exemption. If a case is brought before a national judge, the parties have executed the agreement the terms of this agreement are different from those that had been brought before the Commission and that were subject to an exemption. Then of course the judge cannot say: 'I am bound by the exemption'. He has to look at reality. The problem is what the judge should do, because he can ask the European Court of Justice for preliminary rulings only on legal issues, not factual ones. I am not sure whether, in such cases, the national judge can ask the European Court of Justice for a preliminary ruling. He would probably have to go back to the Commission and ask what its position is on the matter. All this confusion originates from the separation that has been made between national law and European law. This is one of the reasons of the misunderstanding. • ALEXANDER SCHAUB—I wanted to express my strong agreement with three points made during this discussion. The first is the point made by Mario Siragusa: we clearly need more Commission decisions on the substance of European competition rules, and not less. The purpose of the reform is to achieve this. How? There will be more decision-makers; not only the Commission, but also national competition authorities and national courts, and we will therefore have considerably more decisions. As you know, only five percent of the notifications are now closed with formal decisions. We have a lot of these strange animals called 'comfort letters', that were validly criticised by the companies up to the point when we started the reform. Then, all of a sudden, they discovered how marvellous these comfort letters are.
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My second point concerns what Ian Forrester has said on the old issue of Article 81 (1). Mario Siragusa is the world's greatest expert on this, and we have discussed it here in Florence from the very beginning. I remember that the first year when we discussed it, the conclusion of the majority was 'what a pity that in the European legal culture we cannot tackle a change from one day to another of what has been practised over forty years'. At that time, the majority was saying 'as we can't do it in this way, we have to do it in a different way', but I fully agree that this does not mean we should forget about a certain reconsideration of Article 81 (1). In the early years a very broad interpretation of Article 81 (1) was not at all crazy. On the contrary, it was very intelligent, because when you start to develop a Europe-wide competition policy from scratch, it makes a lot of sense to have a broad area under control. Today it does not make such sense anymore, and I would very much favour what I think the Courts in Luxembourg are already doing, that is to be progressively more restrictive in interpreting the criteria of Article 81 (1), though without disruption in its application. This can only be a progressive exercise, and I think the Commission could pursue this exercise more actively. And maybe it could and should be pursued more actively by the Courts in Luxembourg also. The third point is about the role of the judge. I must say I find our continued discussion about this more and more surrealistic. We are in the 21st century, where every normally constructed person can easily discover that in our society not only legal aspects, but also directly intertwined economic and complicated technological aspects, are of major importance whether we like it or not. In such a new context, to remain with the idea that a judge can at best decide some legal stuff, but one cannot by definition expect that he has any economic or any technological understanding, seems to me to indicate a total resignation from society. We need judges at the level of what the society in this century needs, and I do not have the slightest doubt that the judges can do it. The funny thing is that most of the judges, as we have heard during this debate, have no fundamental hesitation. It is only the arrogant 'non-judges' who come to the conclusion that unfortunately these poor and regrettable human beings are not up to the job. • BARRY HAWK—I have a concrete proposal to make for the September draft Regulation. The proposal rests on many of the ideas and questions that were raised this morning, starting with Mr Marenco's very fundamental point that we do not know what the scope of 81 (3) is. Maybe you could just tell the Council of Ministers to adopt my proposal and be done with it The proposal is that, first, the full competition analysis should go into Article 81 (1), and second, only the 'non-competition analysis' should be kept under Article 81 (3) (environmental, industrial policy, employment, or whatever). However, those 'non-competition' objectives must be enumerated and go into Article 81 (3). In addition, the Commission should retain the monopoly to grant exemptions under Article 81 (3), and then publish its exemption decisions explaining why it
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decided to exempt an anti-competitive agreement for environmental, industrial policy, employment reasons etc. • SIMON BISHOP—My comments really echo what Barry Hawk just said from an economic perspective. Doing the whole economic analysis under Article 81 (1) makes a lot of sense. But if you want to maintain the distinction between Article 81 (1) and (3), it seems that the Commission's proposal to introduce market share thresholds determining the scope of Article 81 (1) is the right way to go, provided that we keep an open mind about agreements falling outside the market share threshold. Then the competition analysis can be done under Article 81 (3). Under this sort of approach, the objectives of Article 81 (3) should be totally clear because we are talking about introducing a more economic effect-based approach to enforcement, in which the whole focus is on consumer welfare and the economic impact of agreements. This has nothing to do with environmental standards, or employment considerations, or even Single Market issues. To the extent that these are still important in European policy, I think each of these objectives should be clearly distinguished, and it must be recognised that there will be major tension between competition objectives and something like Single Market objectives in some cases. • SANTIAGO MARTINEZ LAGE—I will not refer now to the role of national courts—as I think that is the subject of one of tomorrow's panels—but to the role of the Commission. Mr Monti started this morning by saying that the Commission thinks it's making an inefficient use of its limited resources, and so from now on it wants to concentrate on important problems and leave nonimportant problems to national judges and national competition authorities. Along the same line, the White Paper stated that the Commission thinks that it is receiving too many notifications, and most of them concern innocuous, inoffensive agreements and uninteresting matters. As a practitioner I do not share this affirmation. I think—and I could say that most practitioners, I hope, would share my opinion—that we 'notify' only of agreements that really raise problems. A lot of other agreements are not 'notified'. Another belief of the Commission, as expressed by Alexander Schaub, is that the Commission's mission is not to grant individual legal certainty but to implement EC competition policy. In my opinion, this way of thinking does not sufficiently evaluate the very important preventive function that the Commission is performing through the present notification system (in the sense that, when we 'notify' agreements that raise delicate issues, the Commission immediately reacts by saying 'be aware that we do not grant immunity from fines ...', or sometimes might warn: 'we will withdraw immunity fromfines,be aware that you have problems with your agreement'). The parties to the agreement should modify the agreement in such cases. Very often, with or without a comfort letter from the Commission, or without a formal notification, the Commission manages to avoid allowing an anti-competitive agreement to enter
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into force and damage the market. If there will be only a posteriori control in the future, this may happen only years later. Those who have suffered damages can be compensated, but the market has already suffered the damage. The Commission should consider more seriously the possibility of voluntary notifications, a real tool for making competition policy. This is in line with Claus Ehlermann's thesis, and that of Mario Siragusa. I would be in favour of a kind of voluntary notification system and a right to obtain 'positive decisions' following such notifications. I think this would also help the Commission to prevent some dangerous agreements from entering into force and leaving the remedy of their consequences until two or three years later. • KAREL VAN MIERT—Thank you all very much indeed for your valuable contributions. Let me just wrap up this session by telling you that if I ever had the slightest impression that the White Paper and the updating of the EC competition rules would lead to a less effective European competition policy, I would never have taken the responsibility for that. But I continue to believe very strongly that this updating and modernising does lead to a more effective competition policy. Second, there has been this debate about what other policy considerations might be included under Article 81 (3), such as industrial policy. We are bound to create a real internal market. So we have to think ahead. I do not believe that with the new enforcement system we will have a real problem in the sense that the Commission might include old-fashioned industrial policy considerations in the application of EC competition rules. We have already got rid of that and it is hard to see how it could return, particularly at the level of the European Commission. Do not forget that we now have a European economy that is much more market-driven, and it will continue to be much more marketdriven in the future. EC competition policy has been used to integrate economies, that is true, and I never did apologise for that. We chose to try to stimulate and integrate the European economy through the application of competition rules. This is what we have been doing by applying Article 86, and this is something that is gradually becoming part of a fully-fledged European competition policy. On the day that a real integrated market is reached through the Euro and the Economic and Monetary Union, this aspect of our job will be reduced. One should not forget about it when we are talking about introducing a new competition policy approach for the next decades. Within the Commission we have moved from a formalistic legal approach to being completely open-minded about economic and technological realities and developments. This is a trend that will continue into the future. There will be less certainty in some respects; this is part of this development. As a last thing, I want to say: you have been talking here about crazy judges; there might even be crazy Commissioners, but not crazy Competition Commissioners!
PANEL ONE COMPATIBILITY, EFFICIENCY, LEGAL SECURITY
WORKING PAPERS
I Simon Bishop Modernisation of the Rules Implementing Articles 81 and 82
I. Introduction In April 1999 the EC Commission unveiled its proposals for reform of the rules implementing Article 81 in a White Paper.l The White Paper includes some radical proposals to decentralise the implementation of Community competition rules to Member States and to give a greater focus to economic analysis. One of the key issues raised by these proposals is the issue of legal certainty. In particular, the intention for the analysis under Article 81 to be based more on an assessment of economic effects suggests a case-by-case analysis in which the role of formalistic rules of thumb is necessarily limited. Under the proposals there will therefore be a trade-off between economic analysis and legal certainty. This paper assesses the arguments put forward in the White Paper in the sense that 'legal certainty' will be largely unaffected by the proposed changes. In particular it assesses two issues: a) whether the application of EU competition law is sufficiently transparent and known so that the business community will be able to limit any legal uncertainty to an acceptable level, and b) whether under the proposed system, individual positive decisions and comfort letters are no longer needed. The remainder of this paper is organised as follows. Section II provides an overview of the White Paper and the general issues raised by it. Section III discusses whether business will be able to assess the likely competition law consequences of contracts into which they will enter. In particular, this section assesses whether the case law provides an adequate guide. Section IV discusses whether under the proposed system individual positive decisions and comfort letters are no longer required.
II. Too much paper and not enough competition analysis In the White Paper the Commission states that a change in its procedural framework is required to ensure a balance between effectiveness of policy and simplification of control. Procedural change is required due to the ever-increasing 1 European Commission: White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, OJ C 132 of 12.5.1999.
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burden on the European Commission to deal with notifications under Article 81. This burden created by the current enforcement of Article 81 has two sources. First, the Commission, in applying Article 81 (1), has adopted a very broad interpretation of what constitutes a restriction of competition. Article 81 (1) states that all agreements that restrict competition are unlawful unless they meet certain conditions that allow for an exemption under Article 81 (3). This implies that nearly all contracts between firms are caught by Article 81 (1). In consequence, the Commission has come dangerously close to concluding that all contracts are therefore in breach of 81 (I).2 Second, agreements that breach 81 (1) are void and unenforceable before they are notified to the Commission, and only the Commission has the power to grant an exemption to such agreements under Article 81 (3). The need for notification of all restrictive agreements to the Commission has led to a mountain of paperwork and bureaucracy devoted to trivial agreements, and at the same time has prevented the Commission from devoting its time to the important issues. In addition, attempts to relieve the scarce resources within the Commission have had a stifling effect on business. Although the Commission has developed tools such as block exemptions in order to ease the burden, the formalistic nature of these tools has tended to divorce Commission policy from a more rigorous analysis.3 Given this situation, change is clearly required. With refreshing candour, the White Paper summarises the situation as follows: 'It is essential to adapt the system so as to relieve companies from unnecessary bureaucracy, to allow the Commission to become more active in pursuit of serious competition infringements, and to increase and stimulate enforcement at national level.'4
1. The options for reform—and the Commission's preference There are two broad categories of options outlined in the White Paper. One is to stay with the existing authorisation system, in which the Article 81 prohibition can be lifted only by an act of the EC enforcement agency. The other is a move to a directly applicable exemption system, whereby the Article 81 prohibition does not apply to agreements that do not meet certain criteria. Such a system avoids the need for prior notification. 2
The European Courts have on several occasions indicated that this is too restrictive an interpretation, but these indications do not seem to have changed the Commission's practice. 3 However, the Commission has successfully reduced notifications in a manner that has better economic rationale through its de minimis notice (European Commission: Notice on agreements of minor importance which do not fall under Article 85(1) of the Treaty establishing the European Community, OJ C 372 of 9.12.1997). 4 White Paper, paragraph 10.
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The White Paper considers reforms of the existing authorisation system. But none of these really deals with the problems associated with that system. It is therefore unsurprising that the White Paper comes out clearly in favour of a radical shift to a directly applicable exemption system.5 The key feature of this proposal is that agreements will no longer need to be validated in advance by the Commission in order to be lawful. This places a responsibility on businesses to take a view on whether their agreements meet the criteria for exemption. At the same time, it places a responsibility on the Commission and the member state competition authorities to give guidance oh when agreements will be considered lawful.
III. Shifting the burden to business? The introduction of a directly applicable exemption system raises the issue of legal certainty. Under any system of law, it is desirable that firms should be able to enter into contracts reasonably secure in the knowledge that these contracts will be enforceable. But under Article 81, the danger that contracts may be rendered void by a legal challenge on the grounds that they contain restrictions that should have been notified to the Commission has been one of the main factors behind the excessive burden on the system.6 The proposed move to a directly applicable exemption system removes the element of legal uncertainty created by the problems of non-enforceability of contracts that, whilst they are benign, contain some element of restrictiveness. However, such a system still contains an element of commercial uncertainty where an existing agreement is found to be anti-competitive—i.e. the agreement (a) falls within the scope of Article 81 (1) and (b) does not warrant an exemption under Article 81 (3). What is more, this element of uncertainty is to be increased by the Commission's proposals to withdraw the old block exemptions which provide safe harbour to any agreement that meets a certain standardised form, and to make the new set of block exemptions conditional on some kind of market power test, embodied in a market share threshold. Yet in economic terms, such a change is entirely justified. Although Article 81 applies to all agreements that entail 'the prevention, restriction or distortion of competition', this immediately raises the question of when competition is prevented, restricted or distorted. The current interpretation holds that many agreements may be 5
Of the authorisation system options, the third, involving an ability to do ex post analysis, seems to have the greatest appeal. 6 In a few high profile cases, firms have been challenged in the courts on the enforceability of contracts that had not been notified. Thus, for example, the singer/songwriter George Michael tried unsuccessfully to escape from his recording contract with CBS/Sony on the grounds that it should have been notified but was not.
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covered by Article 81 (1), regardless of the market position of the parties involved or of the economic impact of the agreement. In other words, the legal interpretation of what constitutes a restriction is extremely wide. Such a wide interpretation captures many agreements that have adverse effects for competition. From a policy perspective, whether an agreement can be retained to prevent, distort or restrict competition depends on its impact on market outcomes and its precise form. Standard economic theory states that, unlessfirmspossess and exercise market power, they are unable to affect adversely competition. In other words, in the absence of market power, agreements between firms do not restrict or distort competition. To illustrate this point, consider a shoe manufacturer who wishes to restrict the supply of its products only to those retailers who agree not to stock the products of other manufacturers. Is such an exclusivity agreement anti-competitive? The answer is that it depends on the facts of the particular case. For example, if the shoe manufacturer has a relatively small market share of retails sales of shoes—say 10 per cent—then it is unlikely that the exclusivity agreement would adversely affect competition, since competing shoe manufacturers can easily gain access to other retail outlets not subject to such restrictions. On the other hand, if the shoe manufacturer were able to sign up 90 per cent of shoe retail outlets the impact on competition might be different. It is therefore clear that the same type of agreement can have widely different impact on competition. A restriction agreed between two firms with no market power has different economic effects from an identical set of terms concluded by parties with appreciable market power. Modern competition law enforcement must take business reality into account. The White Paper's proposal to conduct a more economic approach to the application of Article 81 (1) is to be welcomed. Hence, the move towards an economic effect-based approach in enforcement will involve the evaluation of complex economic issues where it is hard to draw generalisations between cases, despite superficial similarities. This raises the question of how undertakings are to know whether their agreements fall foul of the law. It might be argued that the ex post prohibition of agreements found to be anti-competitive raises no particular concerns for the enforcement of Community competition rules. But such arguments rest on the assumption that those businesses that fall outside the proposed block exemptions are able to determine with precision whether their agreements either fall outside Article 81 (1)—a relatively straightforward issue to assess—or qualify for an exemption under Article 81 (3)—a much more complex task. Most agreements—with the notable exception of explicit cartel agreements—cannot be said a priori to be anti-competitive. Indeed, in many cases, a given agreement may have both proand anti-competitive effects that require a careful assessment of the relative balance between them. Given that that the new enforcement system is bound to create some additional uncertainty, the crucial question is how does the Commission propose to
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limit the damage. The White Paper claims that there are four areas in which predictability (if not certainty) will be created:7 —The existence of 40 years experience of implementation and case law; —The use of wide ranging block exemptions based on market share thresholds; —The adoption of Commission guidelines and individual decisions to clarify the scope of its application of Articles 81 (1) and 81 (3); and —The implementation of preventive and corrective mechanisms to ensure consistent and uniform application of Community law by national authorities and courts. 1. The existence of 40 years experience of implementation and case law The White Paper suggests that business will be able to infer the treatment of specific agreements by reference to the lessons that can be learnt from the 40 years of case law and decision-making practice, which is said to have 'largely clarified' the law. This is a bold statement to make, for two reasons. First, the fact that the Commission is proposing a radical change in implementation, the removal of block exemptions from undertakings with market shares above certain thresholds (likely to be set at a level below that traditionally signifying dominance), and a more economic approach to the application of Article 81, indicates that the new regime will differ significantly from the old one. Any decision-based 'precedent' that can be gleaned from the old system is therefore likely to provide an unreliable guide to future policy and enforcement. Second, and more importantly, the adoption of a more economic approach reduces the usefulness of 'precedent' when assessing the likely competitive effects within a particular industry. As discussed above, a particular type of agreement can have widely different effects on competition depending on the particular characteristics of the industry—including inter alia the market position of the undertakings concerned, the nature of the products or services and the nature of competition. This assessment is necessarily complex and must properly be conducted on a case-by-case basis. Precedent provides only minimal guidance. 2. The use of wide-ranging block exemptions based on market share thresholds The White Paper promises new block exemptions that will cover a much wider range of agreements—'the vast majority'. The effect of these new block These are to be found at para. 78 of the White Paper.
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exemptions will be to give those undertakings that are able to benefit from them greater freedom in running their respective business. This is an admirable intention that should be welcomed and supported. However, while this commitment provides legal certainty for many undertakings, for those to whom the proposed block exemptions do not apply, this is not the case. This wider range of block exemptions is to be conditional on the firms involved falling below a market share threshold. The Commission's current thinking on vertical restraints, for example, involves a near per se approval for all vertical restraints, provided the relevant market share lies below a 30 per cent 'market power' threshold. Such an approach is justified on the basis of economic theory. However, there remain some important issues to be resolved. First, for those firms that do not fall below the market share threshold, legal uncertainty will remain. It is likely that many undertakings with market shares above the relevant market share threshold will not wish to enter into contracts before undertaking a detailed legal and economic assessment. Even those that do enter into agreements, legal uncertainty may persist for some time. Second, there is the issue of market definition. Although the framework for defining relevant markets is now widely accepted, it would be wrong to see market definition as simply a mechanistic task. Moreover, market definition under Article 81 and Article 82 raises a number of difficulties that are not encountered in merger inquiries.8 This means that market definition and any subsequent market share analysis can sensibly play only a screening role. The market share threshold approach is appropriate, therefore, only if the competitive effects of agreements entered into by undertakings with market shares above the threshold, including those with dominant market shares, are genuinely assessed without prejudgment.
3. The adoption of Commission guidelines and individual decisions to clarify the scope of application of Articles 81 (1) and 81 (3) The Commission also promises enforcement guidelines and more published decisions aimed at explaining its enforcement policy in those difficult areas where firms exceed the market share safe harbours. This is in principle good news, signifying the Commission's determination to enter into an open debate on the economic objectives of competition law with industry and its external legal advisers. Such a debate should help clarify where the often hazy line between pro- and anti-competitive effects is to be drawn. However, the stated need for such enforcement guidelines and published decisions is at odds with the claim that existing case law provides sufficient guidance to future implementation. The application of Community competi8 See Baker S. and S. Bishop: Market Definition in Non-merger Inquiries, Research Paper for the Office of Fair Trading (forthcoming).
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tion law is therefore likely to continue to evolve and may entail some seemingly radical departures from previous case law. Indeed, it is the proposed change in the analytic approach that warrants the need for such publications. As the White Paper notes, the forthcoming notices and guidelines that explain the Commission's policy and provide guidance for the application of Community competition rules by national authorities are particularly well suited to the interpretation of rules of an economic nature.9
4. Ensuring the consistent application of Community competition rules As noted above, one of the stated reasons for the proposed reforms is the need to deal with the ever-increasing burden on the European Commission to deal with notifications under Article 81. As the White Paper notes: 'In an enlarged Community with more than twenty Member States, centralised detection of, and action against, infringements of the competition rules will be increasingly inefficient and inappropriate. Application of the rules will have to be decentralised more to the Member States' competition authorities and to the national courts.'10 The decentralisation of European competition law enforcement to national competition authorities and to national courts appears to offer a ready solution to this problem. Yet we should not pretend that such a proposal raises no concerns. The devolution of greater powers to implement Community competition policy brings with it the possibility of inconsistency in the application of those rules. That fear is recognised by the Commission, and the White Paper promises to implement a series of measures to ensure consistent and uniform applications of the EC Competition rules throughout the Community. It is not clear how such safeguards would work in practice. Even at the level of specialised antitrust authorities, differences in approach and interpretation of competition law exist throughout the Community. This can be seen even in dealings with the Commission, where the composition of the case team can have an important bearing on the approach taken in the case. These differences in approach are likely to be even more evident once the enforcement of EC competition law is devolved to the Member States. These differences arise both from different rationales for the establishment of national competition laws, and, to even a greater extent, from different legal traditions. While there is convergence between Member States in the area of competition law, these differences in approach still persist, and that needs to be recognised. Moreover, national courts are not well equipped to deal with competition issues. The application of EU competition involves addressing complex 9 10
White Paper, paragraph 86. White Paper, paragraph 42.
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economic issues, and the Commission's own reforms will require national courts to keep up with higher enforcement standards. While the same fundamental economic issues have always been present in the application of Community competition rules, the Commission's own approach in enforcement is becoming increasingly more economics-based. This trend will raise difficulties in the consistent implementation of Community competition law by the national bodies. National courts are often reluctant or unable to consider some of the core economic issues that are routinely raised in competition matters. My own experiences before national courts illustrates some of these difficulties. In one case, the national court was required to consider some detailed econometric analysis on an issue contested by experts on both sides. It was clear that the judge had neither the necessary training nor the support to evaluate properly the competing claims. In another case, the relevant national court was asked to assess whether an agreement infringed Article 81. Although largely sympathetic to the economic analysis that was presented to him, the judge remarked that this type of case was better dealt with by the specialised competition authority, which, in his words, was more able to assess the economic arguments. This is not to denigrate the ability of the judges, but merely to point out that the evaluation of economic issues, particularly those of an empirical nature, is particularly complex. Indeed, similar views were expressed by Mr Justice Ferris, a UK High Court judge, to the House of Lords' EC Select Committee on the reform of EC competition law procedures. When asked about the ability of judges to apply the kind of complex economic criteria required by Article 81 (3) of the EC Treaty, and which are, of course, replicated in the UK Competition Act, Mr Justice Ferris stated that 'the sort of feeling that judges can decide economic issues to my mind is wholly misplaced . . . They cannot make value judgements except in a very limited field, certainly not in relation to general economic questions.' In principle, these are not insurmountable problems. Indeed, it should be recognised that the courts pay an important role in the implementation of US antitrust rules, as the recent Microsoft case illustrated. However, the role played by US courts is rather different to that envisaged by the White Paper for the national courts of Member States. One possibility would be for judges to be given training in the application of competition law on both legal and economic aspects.11 Yet even such training introduces its own delays and level of bureaucracy. A further area of concern is whether the implementation of Community competition rules by national competition authorities and national courts creates greater scope for protectionism. The White Paper raises this possibility with reference to those Member States that have chosen to remain outside the 1 ' Training for judges was recently suggested by the Confederation of British Industry in relation to the introduction of the UK Competition Act 1998. This new competition law is closer to the EC competition law model.
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Euro. Yet such protectionism is as likely, if not more likely to arise within the Euro-zone countries, particularly those where the culture of national champions has been traditionally prevalent.
5. Summary The proposals contained in the White Paper are to a large degree predicted on the belief that undertakings are more than able to understand and foresee how Community competition rules will be implemented. But the foregoing considerations indicate that those businesses falling outside any new block exemption rules will face considerable legal uncertainty as to the applicability of their agreements.12 Such uncertainty will increase the burden on business. While business will be able to conduct their own legal and economic analysis prior to entering into agreements, and thereby reduce legal uncertainty somewhat, only in rare instances will such analysis provide unambiguous answers as to the outcome of any potential Commission investigation.
IV. A need for individual positive decisions and comfort letters The proposed changes will require the Commission to provide on-going guidance not only to national competition authorities but also to undertakings. In this sense, there is a need for published Commission decisions, both of prohibition and positive ones. It can also be argued that one of deficiencies of the current system is that it leads to too few published decisions. This not only hinders transparency, but also the development of a consistent policy approach. Moreover, this can be contrasted with Commission's approach to the control of mergers, where a decision is published following each notification, whether or not a detailed investigation is required.13 The adoption of market share thresholds will allow the Commission to focus on fewer cases, allowing a more detailed analysis of the issues arising in those particular cases. This, combined with the requirement to publish a decision, will help to shape the Commission's policy in a consistent and coherent manner. The White Paper states that positive decisions need only be taken in exceptional cases, where it may be necessary to provide guidance on the Commission's approach to certain restrictions. Yet, as mentioned above, one type of agreement properly exempted in one case need not necessarily qualify 12
As noted above, a distinction can be drawn between cartel agreements where the illegality of the agreement is clear and other types of agreements where this is usually not the case. 13 Unless the notification is withdrawn.
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for being exempted in other circumstances. It is, therefore, important that decisions be adopted whenever the Commission opens an investigation. Under the EC Merger Regulation, the publication of the Commission's decisions has probably done more to generate transparency and consistency than any other development in EC competition law. The same should be true in the application of Article 81, once a series of reasoned Commission decisions dealing with proand anti-competitive agreements between firms possessing some market power builds up. In particular, positive decisions will be needed for those undertakings whose market share lies above the block exemption thresholds to be introduced by the Commission. In those cases where the agreement does not give rise to anticompetitive effects, and therefore meets the criteria of 81 (1), a positive decision, or at a minimum a comfort letter, should be issued. In the absence of such a decision, the undertaking will continue to face legal uncertainty as to whether its methods of commercial activity are acceptable or liable for challenge in the future. Under these circumstances, pro-competitive investments may be severely affected. Positive decisions, as well as negative ones, will therefore provide important signals as to the likely application of Article 81 (3), especially to undertakings with market shares above levels traditionally associated with dominance.
V. Conclusions The basic thrust of the White Paper is a welcome one. The application of Article 81 needs to be transformed from a drawn out paper shuffling exercise into one that reflects the reality of real-world markets. The proposals contained in the White Paper represent part of a general and welcome shift towards greater emphasis on economics in the application of competition law in Europe. However, a number of issues remain unresolved by the proposals. As an economist, I would point to the following: 1. The reliability of market share threshold tests. Market share thresholds play a crucial role in limiting uncertainty to those cases where a firm has market power, but no one who has experience with the application of competition law will imagine that market share tests provide unambiguous guidelines. Moreover, it is important that market shares are not seen as a tolerance threshold in which agreements entered into by undertakings falling outside the proposed block exemptions, particularly those with a dominant market share, are perceived as being per se anti-competitive. 2. Article 81 's 'schizophrenic' nature. Many of the problems encountered in Article 81 cases arise from the Commission's dual role as a competition agency and as guardian of the Single Market. Refusal to acknowledge that
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these objectives may conflict can reduce the transparency of the decisionmaking process.14 3. The sheer 'newness' of the challenge the Commission is facing. As discussed above, existing case law provides little useful guidance and the approach set out in the White Paper requires the Commission to invent a whole new approach to the economic analysis of restrictive agreements. Of course, there are models (e.g. the US model) from which to learn, but the learning curve the Commission is facing is a steep one. The Commission must have the confidence to break with tradition if it is to take the right path in policy development. The Commission's quest for modernisation in this area is to be both welcomed and supported. While the proposed new system will generate uncertainties of its own, the benefits of a less formalistic assessment and a streamlined procedure are clear. Indeed, in many cases, those who now shout loudest about the unpredictability and the 'chaos' created by the proposed reforms will be those who have in the past complained most bitterly about the 'straight-jacket effect' of the existing system.
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For example, where pro-competitive effects of exclusive sale territories can only properly be achieved by market segmentation.
II Dr. UlfBoge The Discussion on the Modernisation of EC Antitrust Policy: An Update on the Bundeskartellamt's Point of View
I. Preliminary remarks Since the publication of the White Paper over a year ago, the Commission's reform proposals have been intensively discussed and commented upon. Various working groups and meetings of Directors-General have, in the meantime, contributed towards clarifying the position of the Member States. Progress has also been made on the content of the reform itself. The Fifth EU Competition Law and Policy Workshop is a good opportunity to take stock of the situation and to gain insight into the latest developments in the discussion. In response to numerous comments, some of them critical, the Commission has specified its proposals in a series of non-papers. On this basis it has been possible to discuss the main problem areas in more detail, particularly those concerning the compatibility of the reform with the EC Treaty, the different types of decisions and their effects under the new system, the achievement of coherence by setting up a network of competition authorities, the role of the courts and,finally,the issue of legal certainty for undertakings. This discussion, which is still in full swing, is important and necessary. The Commission, which in the initial stages focused mainly on just defending its approach against Member States' objections, has recently been more prepared to enter into a real debate. There is, of course, no doubt that the changes to European competition law enforcement procedures proposed in the White Paper will have a direct and appreciable effect on national competition legislation and on its application. The expected pressure towards harmoriisation under the new enforcement system would make it impossible for Germany to maintain its system of preventive control. In addition, the Bundeskartellamt would be placed under a new framework of conditions relating to the decentralised application of Article 81 of the EC Treaty. Yet the possible need to adapt is no reason for the Bundeskartellamt to refrain from participating in the discussion. The ultimate aim of the reform can only be to more effectively enforce the principle of competition. The Commission too has declared that it does not desire any reduction in the level of protection for competition. And that is precisely the reason why we will have to look into all the questions involving the competitive effects of the new procedural rules. It is therefore a good thing that the Commission is not putting anyone under pressure, and that it set the year 2003 as the target date for starting to implement the reform.
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Whether the proposals contained in the White Paper can be realised merely by introducing a new regulation, therefore without amending the EC Treaty, is a matter that has not been fully clarified. Yet we do not wish to go into that debate at this stage. The topics of interest here are, above all: —The fundamental decision concerning the abolition of the notification and prior administrative approval system in conjunction with the re-evaluation of horizontal co-operation; and —The issue of decentralisation and how it can be implemented as consistently as possible. Let us look first at the points that are more likely to cause problems.
II. The abolition of the notification and prior administrative approval system It is well known that, from the start, there were major objections in Germany to the proposal that the notification and prior administrative approval system be completely abolished. In Germany's experience, the obligation to notify enables important information to be obtained, opens up room for manoeuvre and has a preventive, deterrent effect on undertakings. Discussions with the other Member States and the Commission, however, have shown that, of those positive aspects of a notification system that Germany considers important, namely transparency and the preventive function, at least the latter is not convincing at the European level. One reason for this might be that notifications do not have any preventive effect in the Commission's enforcement practice. However, the transparency function of the notification system would also to a large extent disappear in the new system, despite its high practical relevance. By contrast to the area of vertical agreements, in the case of horizontal agreements it cannot be automatically assumed that there will be an influx of complaints in cases of restraints of competition, as there is no conflict of interests among those involved in the agreements.
1. The introduction of an information system on horizontal agreements Considering the above, we introduced into the discussion a proposal in the sense that the necessary degree of transparency be achieved by obliging enterprises to briefly inform the national competition authorities of their co-operation arrangements. This information would simultaneously be made available to the public, for example on the Internet. Vertical agreements would be
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exempted from this information obligation, as would horizontal agreements covered by block exemptions. The legal effectiveness of agreements would remain unaffected as long as the criteria for exemption under EC Article 81(3) were fulfilled, as no decision would have to be taken. Competition authorities and affected third parties would, however, be able to act and obtain more detailed information if they saw reason to do so. In this way, a kind of early warning system would be created in the so-called 'grey area'. With it would come a degree of de facto legal certainty, as cartel authorities and third parties would be informed at an early stage. However, no legitimate expectations would be involved in this procedure. The obligation to provide brief information of this kind would be an appropriate, suitable and necessary corrective measure in order to create transparency if the preventive exemption system was to be called into question. Unless such an amendment to the reform proposal is made, it is hardly conceivable that the reform would be widely accepted in Germany.
2. Leniency programs for hard-core cartels Hard-core cartels would, of course, be just as unlikely to notify in a directly applicable exemption system as they were under the current enforcement system. In Germany, we have been thinking hard for some time now about how cartels could be more robustly combated. The most important step we have undertaken was to recently announce a leniency program. This is influenced by the corresponding Commission notice, but it is also based on the American model of automatic leniency for the first undertaking to report a cartel. 3. The reassessment of horizontal co-operation agreements Along with the abolition of the requirement to obtain an exemption, the more economic effect-based approach in enforcement envisaged by the Commission also causes headaches in the Bundeskartellamt. The term itself does, of course, have positive connotations. But the term alone will not automatically achieve the common goal of more efficient competition law enforcement in the Member States. If 'more economic' ultimately meant that all horizontal agreements involving market shares of 15% or less would not fall under Article 81 (1), this might be 'more economic' for the competition authorities and the courts. However, suppose there is no longer any competition in the German furniture industry, for example, becausefivelarge manufacturers have joint buying arrangements that are all below this threshold. In this case, we would have not a 'more', but a 'less' economic approach. It is therefore clear at this juncture that reform of the
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procedural law cannot be viewed in isolation from current considerations about substantive law. As far as reforming the block exemption regulations for vertical agreements is concerned, there have been discussions about the fact that such agreements should be re-evaluated in the future, and why this is so. However, a similar discussion about horizontal agreements still has to take place. The recent draft block exemption regulations on specialisation and on research and development, as well as the directives for applying Article 81 of the EC Treaty to certain main types of horizontal co-operation agreements, take a new approach, namely that horizontal agreements have anti-competitive effects only when associated with market power. This means that the previously applicable requirements for an appreciable effect with respect to Article 81(1) will be considerably raised. We have the impression that a new competition policy model is being developed, along the lines of the rule of reason approach taken in US antitrust. In particular, the new distinction between agreements which merely have the effect of restraining competition and those in which such a restraint is the object of the agreement is reminiscent of the American distinction between agreements 'may well be reasonable' and those are 'per se unreasonable'. In justifying its new approach, the Commission refers to numerous judgements of the European Court of Justice. Yet if one examines this jurisprudence, one discovers that it mainly relates to vertical restraints. Therefore the Bundeskartellamt has considerable doubts as to whether the Court's jurisprudence does in fact permit such conclusions to be drawn. Another question is whether one can actually say that horizontal agreements are not necessarily damaging. From our perspective, there are major differences between horizontal and vertical agreements. Restraint of competition by vertical agreements is usually limited to the fact that there is a natural conflict of interests between the supplier and the purchaser, whereas competitors at the same stage of production or distribution generally have the same aims. The anti-competitive potential of horizontal agreements is thus much higher. Of course, this does not mean that horizontal agreements cannot also promote competition. That is, after all, the reason why there are exemptions from the ban in German competition law as well. Yet we should carefully consider whether we really want to send a definite signal that horizontal agreements other than price-fixing, production and market allocation agreements, are generally acceptable (or are acceptable if they fall below an appreciable market share threshold). Finally, like the draft block exemption regulations, the current version of the directives leaves much room for interpretation and manoeuvre, even in the area of hard-core restraints such as price-fixing and market sharing. This gives the Commission considerable discretionary powers and therefore room for manoeuvre in decision-making, which is a matter that really has to be discussed.
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These questions concerning the level of protection in substantive law terms are closely related to the modernisation of procedural law and require further clarification.
III. Decentralised enforcement First of all, it should be emphasised once more that the Bundeskartellamt fully supports the broad objectives of the White Paper. The Bundeskartellamt also believes that a refom of the existent enforcement system is urgently needed. This also applies to efforts towards greater decentralisation. For years the Bundeskartellamt has been advocating an extension of the competence to apply Article 81(3) towards the competition authorities of Member States, thereby doing justice to the increased significance of the principle of subsidiarity. The President of the Commission, Mr Prodi, has on several occasions emphasised his commitment to bringing Europe closer to its citizens by applying this principle more intensively. The Directorate-General for Competition is following this course by abandoning its exemption monopoly. However, decentralising enforcement brings with it problems such as how best to distribute the cases and how to ensure uniformity in the way the law is applied. These problems were already manifest during the notification and prior administrative approval system, yet they would become more acute during the transition towards a directly applicable exemption system. Regardless of how decentralisation is organised, a reasonable solution needs to be found to these questions. 1. The allocation of cases The Commission suggests that the allocation of competencies should be based on a number of criteria, including the nature of the case, the size of the relevant geographic market, the extent to which intervention would be effective in ending a contravention of the law, appropriate punishment and the location of the evidence. This list of criteria certainly appears to be practicable, and the results would probably be similar to those achieved by basing the allocation system on an assessment of the economic and competitive focus, as the Bundeskartellamt suggested in an earner Working Paper on decentralisation. However, all in all, we should not overestimate the potential for conflict of competencies. 2. Coherence and legal certainty By far the most difficult question is how to ensure the uniform application of EC competition law. This requires, above all, a consistent system of
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types of decisions and appropriate mechanisms of co-operation and coordination. Questions arise in relation, for example, to the so-called Commission positive decisions and opinions. Neither of these types of decisions is strictly in line with the directly applicable exemption system, and they should therefore be abandoned in favour of consistency in the new approach. If the aim is that under the new system undertakings assume greater responsibility, a certain level of legal uncertainty in the 'grey area' is simply the other side of the same coin. Of course, that will not prevent competition authorities from continuing in the future to informally discuss critical agreements with the undertakings. This is what it will boil down to in practice anyway. And this also makes sense if we do not want to have courts that are unable to operate because of their burdensome caseloads. The President of the European Court of First Instance has already expressed concerns of this kind. The degree of legal certainty that could previously be achieved through Commission binding exemption decisions cannot be achieved through declaratory decisions and informal discussions. Nevertheless, if one decides in favour of a directly applicable exemption system, this is partly because in the past Commission formal exemption decisions were issued only on rare occasions, and frequently such decisions have not been requested in European competition law enforcement. If under the new enforcement system the Commission will issue positive decisions and opinions, what form should these take? Certain criteria have been developed about when the Commission should issue opinions, yet there is still not enough clarity about their practical value and field of application. It is suggested that the Commission should be able to issue positive decisions in cases raising particularly important issues from the perspective of the Community interest, whereas national competition authorities should issue exemption decisions only when a formal decision is required in order to settle a case under national law. This would mean that the Bundeskartellamt would probably not be able to use this type of decision without a change in its procedural law. Yet it is precisely because the Bundeskartellamt regards them as being alien to the concept of a directly applicable exemption rule that it sympathises with the idea of comprehensively restricting the scope of application of such decisions. However, this should not lead to small and medium-sized enterprises being placed in worse positions than large companies. It is only natural that the latter will more easily be able to point out the existence of a significant Community interest. Conversely, small and medium-sized enterprises might have a greater need for clarification, because they are less likely to have the resources necessary to carry out a competition law analysis of their own. This is why it should be made possible for the national competition authorities to act to a greater extent on their own initiative, even if some of them do not yet have many years of experience in applying European law. The consultation and co-ordination mechanisms that are envisaged for both the Commission and the national
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competition authorities before making prohibition and approval decisions or withdrawing the benefit of block exemption regulations to certain agreements appear to be quite suitable means of achieving the required measure of uniformity. At the same time, the obligations to provide information should be kept as simple as possible, and decisions should be dealt with in more detail by the Advisory Committee only in really important cases.
3. National courts No detailed investigation has yet been carried out as to how the national courts will apply EC competition law in practical terms and what will be the effect of decentralisation from this perspective. Coherent application of EC competition rules would certainly be more easily ensured if the competence to deal with competition cases is concentrated in a few specialised courts. This is the case in Germany, and France is also planning to introduce a similar procedure. But not all Member States will follow this course. The Commission made a range of proposals on how to alleviate the inherent conflict between decentralisation and coherence in enforcement, such as comprehensive obligations to provide information, an amicus curiae function for the Commission, or even its right to appeal against decisions by national courts. It has also laid down instructions on how to interpret the EC competition rules, through positive decisions, opinions or guidelines. However, these 'safety mechanisms' are not totally unproblematic, among other things because of the fact that the desired reduction in the Commission's workload might again be unintentionally lost. At the same time, Germany believes that the courts' independence must not be infringed upon and the principle of the separation of powers must be observed. The topic of coherence should not be concluded without stating that, in our view, the highest national courts and the European Court of Justice are ultimately the guarantee that the law will be uniformly applied.
IV. Summary To sum up, the objectives of the reform, namely to apply the law more efficiently and less bureaucratically, to ensure legal certainty for undertakings, and to achieve decentralisation and coherence, objectives that we all aspire to, cannot all be achieved to their full extent at the same time. These objectives can, however, be optimised by placing the right emphasis on each. By proposing an information system, the Bundeskartellamt is attempting to find an effective compromise among these objectives. Above all, this will prevent the one outcome nobody involved in the debate wants: a watering down or undermining of the principle of competition.
Ill Ian S. Forrester, Q. C.! The Modernisation of EC Antitrust Policy: Compatibility, Efficiency, Legal Security
A Constitution cannot make itself; somebody made it, not at once but at several times. It is alterable; and by that draweth nearer Perfection; and without suiting itself to differing Times and Circumstances, it could not live. Its Life is prolonged by changing seasonably the several Parts of it at several times.2
I. Introduction The European Commission has proposed big changes to European competition law, the biggest changes since 1962, in terms both of substance and procedure. Change has been called for since at least twenty years, and resisted for about eighteen years. It is interesting that Director General Ehlermann presided over an administration which, broadly speaking, set its face against such fundamental reforms (though there were occasional flutters of boldness in theoretical individual decisions). Yet, translated to Florence, he has encouraged the discussion of outrageous heresies. Whether Dr. Ehlermann is to be regarded as a Luther (an insider who became a successful outsider), or as a Becket or Savonarola or Tyndall3 (three clerics who died violently but whose efforts are better judged by posterity), it is sure that these meetings of a small number of enforcers, professors, academics and practitioners have contributed to the process of reform. Indeed, at the preceding meetings of this group in Florence in 1996 and 1997 (and 1998, to some extent), the faces of Commission officials flushed and blushed to hear severe criticisms: the European system of interpreting and applying the Treaty's basic rule on anti-competitive conduct did not work, could not work, had to change. These remarks were not new, but the circumstances were different: the new Director General confronted by his persecutors, confronted by the statistics of a case-load which was impossibly 1 The author gratefully acknowledges the very generous assistance and advice offered by his colleague Ann Stanley, as well as a number of other helpful persons who have answered technical, policy and legal questions. 2 This quotation from the seventeenth political figure, Lord Halifax, appears in Senator Jordan's Preface to the annotated version of the Constitution of the United States of America, published by the Congress in 1972. 3 William Tyndall believed in lay access to the Bible. He emigrated from England to Vilvoorde, near Brussels, for peace to continue his translation efforts, but was captured there by secret agents of Henry VIII of England.
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heavy if old doctrines were maintained, allowed some staff to voice heresy, to think seriously about radical change, and finally to propose it. The last century's approach to enforcement of competition by the European Commission was too much dominated by textual analysis of written clauses rather than by economic analysis of business reality. The system as established following the adoption of Regulation 17/624 did not function properly, and sometimes did not function at all. The problem had several elements: • Article 81 (I) 5 was given a broad scope and caught all sorts of agreements, including those which were basically pro-competitive but which contained restrictive clauses. There was little analysis of the merits or seriousness of the restriction, merely a noting of its presence, which entailed the consequent triggering of Article 81 (1). • This meant that thousands of basically desirable agreements were caught by the prohibition of Article 81 (1), void under Article 81 (2), andfinableunder Regulation 17/62. Only an exemption could cure these hazards; and only the Commission could issue an exemption. • Decisions by the Commission were rare because every decision was a major piece of rule-making, not a mere response to an individual problem. Perfection and comprehensiveness were the goals, not adequacy. • There was not enough application of the law in a transparent and procedurally predictable manner. Because too many agreements were prohibited, most agreements could not receive an exemption. • A theoretically necessary but practically unavailable exemption was therefore not a source of legal certainty, but of legal uncertainty. • To avoid this uncertainty, block exemption regulations came to be regarded as black letter, obligatory standards, and failure to respect them was dangerous and close to illegal. Various commentators suggested how the Commission could react to the unsatisfactory procedural situation. I argued that there were three ways.6 It could share more responsibility with the Member States, whose enforcement resources are notionally limitless; or relax its interpretation of Article 81 (1) to release basically benign agreements from the difficulties of needing an exemption which was practically unobtainable; or render the taking of decisions very much simpler and quicker, so that an individual decision became no more than an answer to a specific problem rather than a long, public, detailed ex cathedra pronouncement of general importance. I argued that richness of output rather 4 Council Regulation 17/62: First Regulation Implementing Articles 85 and 86 of the Treaty, 1956-1962 OJ Spec. Ed. 5 This paper will use the new numbering given to the articles of the EC Treaty based on Article 12 of the Treaty of Amsterdam (e.g. Article 81, 82, etc.), except in passages quoted verbatim and in contexts where use of the old numbering is more appropriate from a historical perspective. 6 Forrester I. (1994): 'Competition Structures for the 21st Century', Fordham Corporate Law Institute, Matthew Bender & Company, Inc.
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than perfection should be the goal. To general surprise, the reforms have been more radical than expected, with both procedural and substantive aspects. We were asked to consider whether the proposed reforms of the competition rules are workable, whether they are constitutional in the sense that they match the Treaty of Rome, and whether the world of law and business will be better off once they are implemented. I will consider these questions from the historical, textual and practical viewpoints, as to which I have three themes: legal certainty; the desirability of retaining a notification system; and the discrepancy between the new law being adopted in Brussels and the old law being received into the competition laws of the Member States and, a fortiori, the candidate States to the East. As to that discrepancy, I fear that the law which is likely to be applied nationally may well be old-fashioned: the process of decentralisation is very laudable in principle, in that it promises more enforcement, more law and a better permeation of competition law doctrines into the daily lives of regulators and business people; yet there is a risk that the law applied locally may be the old unreformed doctrines which the European Commission wishes to abandon, doctrines preoccupied by textual analysis and black-letter rules, rather than the reality of how a given marketplace works.
II. Can the reforms be squared with the words of the Treaty? 1. Historical The most enjoyable portion of this paper has been the conducting of some legal archaeology. I felt it would be pleasing to know whether and how the founding fathers had discussed what we are today discussing. If the drafters had crafted Article 85 (1), (2) and (3) of the Treaty of Rome with the firm confidence that effective enforcement could be achieved only by a rigid and wide-reaching prohibition which could be cured only by a Commission decision, then the Commission's Directorate General for Competition ought to be very cautious before scrapping the regime so presciently crafted by giants with legendary names like Spaak and Snoy et d'Oppuers. It is of course true that the European Court of Justice has not so far found it appropriate to go back to the Minutes of early intergovernmental meetings to interpret the Treaty. It has not referred in its judgments to the Minutes of meetings at the Messina Conference, or of drafting sessions at Val Duchesse, the castle on the eastern edge of Brussels where the negotiations took place. These documents might be said to be equivalent to the Federalist Papers, a famous dialogue between famous founding fathers about the future governance of the United States (centralised or decentralised power?), and sometimes cited as relevant to the framers' original intent. These and other early authorities are sometimes invoked in US constitutional
11
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debates, although sparingly. Chief Justice Marshall said that the framers of the Constitution expected that it should endure for ages to come and consequently be adapted to various crises in human affairs. It has never been suggested in Europe that EC constitutional doctrines must be interpreted according to the original intent of the founding fathers, nor in light of the Minutes of the drafting of the Treaty of Rome. Although there were many similarities between French agricultural rules and the EEC agricultural regime, the Court has never looked at the former for help in understanding the latter. However, the Court does make a comparative law review of national laws and jurisprudence in appropriate cases.7 So a 'bad' historical precedent would not be an incurable impediment to reform. However, a positive or favourable historical indicator could be helpful reassurance that the new regime is not contradicted by the earliest records relating to competition law. A request was therefore made to the keepers of the Council's Archives, and in March 2000 Ann Stanley and I spent some happy hours browsing.8 The documents available are the French language Minutes kept by the forerunners of the Council Secretariat, along with a few texts from the States involved.9 Those documents can be corroborated by an article written by Arved Deringer in 196310 and by early books on competition law.11 I have also spoken to some of the now-retired officials who worked in the Competition Directorate General in the early 1960s. 1.1. The big issues to be settled During the six months from September 1956 to February 1957, the negotiators had the task of reaching consensus on the competition law portion of the Treaty. There were broadly three models. The German approach contemplated preventive control: an anti-competitive arrangement should be void unless approved. The French approach left more authority to the enterprise, so that the arrangement could be implemented without prior approval, but could be rendered retroactively void by the authorities. The Dutch (there was also a Belgian-Dutch variant) provided for compulsory notification and provisional validity; if the competition authority showed that it was abusive, the invalidity 7 See the as-yet-unpublished papers presented at the colloquium on The Role of Comparative Law in the Emergence of European Law organised by the Swiss Institute of Comparative Law, Lausanne, April 2000. 8 The patience, good humour and creativity of the staff in charge of the Archives of the Council, notably Mr. Sanchez Martin, are warmly to be commended. 9 Giuliano Marenco of the Commission Legal Service has indulged in some parallel archaeology, and has set forth the references to all the documents to which he refers in a table. For posterity's benefit, a similar table is annexed to this article. 10 Deringer A. (1963): 'Les regies de la concurrence au sein de la CEE', 54 Revue du marche commun, 256-66. 11 Such as that by the late Graupner R. (1965J: The Rules of Competition in the European Economic Community, Martinus Nijhoff, one of the first serious studies in English of the subject.
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would take effect only prospectively. There was concern about price discrimination and refusals to supply based on grounds of nationality and even race or religion. There were thus a lot of what would now seem extraneous issues, and there were also real divergences both as to what were the enforcement targets and how enforcement should be structured. The secretariat of the Intergovernmental Conference for the Common Market and Euratom prepared a chart, dated September 24, 1956, which showed the main lines of divergence. It is attached as an annex to this article. In early September 1956,12 the German delegation considered that the provisions on this topic should use as their starting point the prohibition of agreements/cartels. However, exceptions should be allowed for certain kinds of agreements/cartels, it being clearly understood that these exceptions would be subject to checks against abuse.13 Conversely, the French delegation wanted a system similar to its own legal exception system,14 and was supported by Belgium, '[which] considered that it might be desirable, for psychological reasons, to replace the absolute prohibition of agreements/cartels by the notion of checks against abuse.'15 The French proposal was the closest to what finally emerged: 1. All situations or practices involving arrangements or monopolies with the object, or which may have the effect, of hindering the exercise of competition, are incompatible with the Common Market, in particular: —fixing or determining resale or sale prices; —restricting or controlling production, technical development and investments; —partitioning markets, products, customers and sources of supply; —permitting the absorption or domination of the market for a product by an undertaking or group of undertakings.
12
The following quotation, and all subsequent quotations of texts from this early period of Community history, are unofficial translations prepared for the purposes of this article. The original French texts are given in footnotes. 13 '. . . la delegation allemande a insiste pour que les dispositions en cette matiere partent du principe de I'interdiction des ententes. Des exceptions devraient toutefois etre admises pour certaines formes d'ententes, etant bien entendu que ces exceptions seraient soumises au controle d'abus.' Excerpt from the Minutes of Meetings of the Common Market Group (extrait du Proces-Verbal des reunions du Groupe du marche commun), Sept. 3-5,1956, Council Archives, CM3/NEGO/236, doc. MAE 252/56 at II(B); see also Sections 1 and 6, German Law Against Restraints of Competition of July 27,1957, published in R. Graupner (1965), supra note 11, Appendix B. 14 Deringer A. (1963), supra note 10; see also Articles 59bis and 59ter of the French Price Ordinance No. 45-1483 of June 30,1945, as supplemented and amended, published in R. Graupner (1965), Appendix C, supra note 11. 15 '[qui] s'est demande s'il ne serait pas opportun de substituer, pour des raisons psychologiques, le principe du controle des abus a celui de I 'interdiction absolue des ententes.' Extract from the Minutes, supra note 13; this was September 1956.
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2. Situations or practices whose authors are able to prove that they effectively contribute to the improvement of production or putting into circulation, or to the development of technical and economic progress, may be exempted from the above provisions. [The authors] must also show that the consumer receives a legitimate share of the profit resulting from these measures. 3. (Provisions concerning State and public service monopolies to be inserted).16
1.2. Discriminations based on nationality, race or religion There is no sign, however, that the delegations attributed overwhelming importance to what we are discussing forty-four years later in Florence. They were looking at older doctrines. Should price discrimination based on nationality be prohibited? Should discrimination be addressed in the competition articles or in a separate Treaty provision? At the end of October 1956, there was apparently unanimity among the Delegations 'to limit the ban on discrimination to those practices which are effected within the Common Market and where the operators who are treated differently are in competition with each other. .. Moreover, the making of price differentials in comparable transactions in order to obtain a dominant position should not be dealt with by the ban on discrimination but within the framework of rules on unfair competition.'11 The reasoning seemed to be that, although the Single Market's replacement of the six national markets would seem to necessitate a general prohibition of discrimination on the basis
16 I. Sont incompatibles avec le marche commun toutes les situations oupratiques d'ententes ou de monopole ayantpour objet oupouvant avoir pour effet d'entraver I'exercice de la concurrence, en particulier:
—enfixant ou en determinant lesprix de revient ou de vente; —en restreignant ou en controlant la production, le developpement technique et les investissements; •—en repartissant les marches, produits, clients et sources d'approvisionnement; —enpermettant I 'absorption ou la domination du marche d'un produit par une entreprise ou un groupe d'entreprises. 2. Peuvent etre relev&es des dispositions precedentes, les situations ou pratiques dont les auteurs sont en mesure dejustifier qu'elles contribuent effectivement a I 'amelioration de la production ou des debouches, ou au developpement duprogres technique et economique. Us devront egalement justifier que le consommateur obtient une part legitime dans le profit qui decoule de ces mesures. 3. (Dispositions a inserer concernant les monopoles d'etat et services publics). Id. Annex (Doc. Mar. Com. 17). 17 'pour limiter I'interdiction de discrimination aux discriminations qui sont commises a Vinterieur du marche commun et ou les partenaires a des transactions qui sont traitees de facon differentielle, sont en concurrence entre eux. .. En outre, il semble que les majorations ou minorations deprix operees, lors de transactions comparables, en vue d'obtenir une position dominante sur le marche ne devraient pas etre traitees dans le cadre de I 'interdiction de discrimination, mais devraient faire Vobjet de dispositions eventuelles relatives a la concurrence deloyale.' Note of Oct. 26, 1956 du President du Groupe du Marche Commun, Council Archives, CM3/NEGO/217, Doc. MAE 468 f/56.
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of nationality, 'the opening up of the common market is not a reason to forbid discriminations committed for non-commercial motives, especially since discriminations based on non-commercial motives such as religious or political beliefs are rarely encountered in commercial life.'18 The Chairman of the Groupe du marche commun therefore proposed as a basis of discussion the following text: Within the Common Market, it shall be prohibited to apply dissimilar terms in similar situations to buyers or sellers in competition with each other (according to their nationality), in particular to ask from them or offer to them different prices.19 Indeed, the working group discussed a number of versions of Treaty articles that would have formally condemned discrimination in economic matters based upon nationality. In mid-November 1956, the full text of Article 4Oa20 as proposed by the Chairman of the working group read: Discriminatory practices carried out by commercial partners in competition with one another for reasons of nationality are prohibited within the Common Market.* (However, undertakings are not prohibited from establishing their offers on the basis of the conditions offered by other undertakings with regard to delivery). * The German and Italian delegations have proposed that this article be deleted. However, in a conciliatory spirit, the Italian delegation would be prepared to agree to the article being worded as follows: 'If it is established that competition in the Common Market is distorted by discriminatory practices whose effect is to place buyers or sellers in the other Member States at a disadvantage owing to their nationality, the Council may, on a proposal from the Commission, unanimously adopt regulations with a view to prohibiting such discrimination.'21 18
'. . . I'ouverture du marche commun nest pas ... un motif de reprimer d'autres discriminations commises pour des motifs non commerciaux, d'autant plus que les discriminations fondees sur Vorigine ou sur les convictions politiques ou religieuses, par exemple, ne jouent guere de role dans la vie commerciale.' Id. 19 '// est interdit, a Vinterieur du marche commun, d'appliquer des conditions inegales a des transactions comparables, avec des acheteurs ou vendeurs en concurrence entre eux (suivant lew nationalite) et notamment de leur demander ou de leur offrir des prix differents.' Id. 20 Article 40 dealt with the principle of discrimination on grounds of nationality. Article 40a contained t h e prohibition of discrimination. Article 41 dealt with antidumping. Article 42 was the ancestor of Article 85 (1). T h e numbering of the Articles and paragraphs, however, changed week by week. 21 Sont interdites a Vinterieur du Marche commun les pratiques discriminatoires exercees, en raison de la nationalite, a Vegard de partenaires commerciaux en concurrence entre eux. * (Toutefois il nest pas interdit aux entreprises d'etablir leurs offres d'apres les conditions offertespar d'autres entreprises, a I'endroit de la livraison). * Les delegations allemande et italienne ont propose de supprimer cet article. Toutefois, dans un esprit de conciliation, la delegation italienne serait disposee a accepter que cet article soil redige comme suit: 'S'il est constate que la concurrence dans le Marche commun est faussee par la pratique de discriminations ayant pour effet de desavantager des acheteurs ou des vendeurs des
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Two weeks later, the delegations had agreed to eliminate the Article concerning discrimination on the basis of nationality.22 It is evident that the wisdom of dealing with anticipated nationalist commercial behaviour in the private sector was vigorously discussed and then discarded. With respect to discriminatory rules adopted for the public sector, it was decided that the promulgation of these should be prohibited, rather than prohibiting that they be obeyed. 1.3. A discursive early review of competition problems The French and the German delegates had a difference in approach as to whether unilateral price discrimination by a non-dominant company should be legal.23 The drafters also pondered whether abusive monopolies should be addressed together with cartels or in a separate provision. The French view was dirigiste, suspicious of price discrimination, perhaps rather tolerant of horizontal arrangements under supervision. The conflicting approaches to enforcement emerge clearly:24 • M. Muller-Armack (D) noted that: 'the question of discrimination or price differentials should not necessarily be considered from the point of view of practices which harm competition. Dumping, dual pricing etc. are often perfectly compatible with a free market. When it does not give rise to abuse and is not based on discrimination for reasons of nationality, discrimination in itself is in no way harmful to the competition regime but, on the contrary, is one of its normal features.'25 autres Etats membres en raison de leur nationalite, le Conseil, sur proposition de la Commission, peut prendre a I'unanimite tout reglement en vue de I 'interdiction de ces discriminations. ' Proposal submitted by t h e President with a view to drawing up provisions relating to o b s t r u c t i o n s to c o m p e t i t i o n , N o v e m b e r 14, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . M A E 541 f/56. 22 T h e working group considered that: 'the field of application of the provisions concerning discrimination for reasons of nationality goes beyond the scope of the competition rules, and that these provisions, which contain one of the fundamental principles of the Common Market, should be placed at the beginning of the Treaty, for example as Article 2bis' ('le champ d'application des dispositions concernant la discrimination en raison de la nationalite depasse le domaine des regies de concurrence et que ces dispositions, contenant un des principes fondamentaux du marche commun, auraient leur place au debut du Traite, par exemple, comme article 2bis.'). Projet de proces-verbal des reunions d u G r o u p e tenues les 2 7 - 2 9 Nov. 1956, C o u n c i l Archives, C M 3 / N E G O / 1 4 6 , D o c . M A E 785 f/56 (Dec. 10, 1956). 23 M e m o interne of Sept. 7, 1956, Fascicule 5, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . M A E / S e c . 29/56. 24 Id. 25 'La question de la discrimination ou de la differentiation de prix ne doit pas etre envisagee necessairement sous Vangle des pratiques nuisibles a la concurrence. Dumping, double-prix, etc sont souvent parfaitement compatibles avec un libre marche. Les discriminations en elles-memes, lorsqu'elles ne donnent pas lieu a des abus et ne remontent pas a des discriminations de nationalite, ne prejugent en rien le regime de la concurrence mais, au contraire, representent un aspect normal de celui-ci.
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M. Donnedieu de Vabres (F) 'on the contrary, insisted on the need to draw up precise legal rules with regard to price discrimination and differentials.' He further noted that: 'not all arrangements and concentrations should be condemned, since they may be compatible with economic progress.'26 M. Muller-Armack (D) stated that: 'a clear distinction should be drawn between monopolies and oligopolies on the one hand, and cartels on the other. Monopolies and oligipolies are not necessarily . . . incompatible with a competition regime. What must be abolished ... [are] the abuses to which certain monopolistic situations might lead.'27 He suggested: 'for cartels,. . . the principle of an absolute prohibition, while foreseeing the need to authorise the existence of certain cartels which could exceptionally be compatable with a competition regime.' M. Donnedieu de Vabres (F) responded that: 'the meaning of the French word "arrangement" does not correspond to the term "kartell" used by the Germans. It has a wider meaning, which is why it requires a more supple regulatory regime than that proposed by Mr. Muller-Armack. Moreover, authorised exceptions must have a special character, and be allowed on a case by case basis and not generally, as the French Delegation [sic] seems to accept.'28 M. Van Tichelen (B) 'declared that for psychological reasons it was dangerous to provide for condemnation of arrangements in principle, but that it would be advisable to let certain arrangements continue to exist for some time.'29 M. Linthorst-Homan (NL) responded that: 'psychological arguments must not win out against the objective needs of the Common Market, and that— for commercial and financial circles—it would be better to know the contents and scope of the Treaty from the outset instead of being obliged to dither in a situation of uncertainty.'30 26
'au contraire, insiste sur la necessite d'elaborer une reglementation juridique precise en matiere de discriminations et de differenciation deprix... .ilnefaudraitpas condamner toutes les ententes et toutes les concentrations, car ellespourraient etre compatibles avec le progres economique.' 27 'ilfaut bien distinguer entre monopoles et oligopoles d'un cote et cartels de Vautre. Les monopoles et les oligopoles ne sont pas necessairement . . . incompatibles avec un regime de concurrence. Ce qu'il faut supprimer. . . [sont] les abus auxquels certaines situations monopolistiquespourraient aboutir ... [q]uant aux cartels,.. . leprincipe de I'interdiction absolue, tout enprevoyant la necessite d'autoriser Vexistence de certains cartels, qui, exceptionnellement, pourraient etre compatibles avec un regime de concurrence.' 28 'le terme 'entente' au sens francais du mot, ne correspond pas a celui de 'kartell' employe par les allemands. Ilestplus large que le second et voila pourquoi ilexige une regiementation plus souple que celle prevue par M. Muller-Armack. En outre, les exceptions autorisees devraient avoir un caractereparticulier, etre admises Caspar cas et nonpas d'une facon generate comme semble I'admettre la delegation francaise' [sic]. 29 'declare qu'il est dangereux, pour des raisons psychologiques, de prevoir une condamnation duprincipe des ententes, mais qu'ilserait opportun de laisser subsister certaines ententes pendant quelque temps.' 30 'les raisons d'ordre psychologique ne doivent pas I'emporter sur les necessites objectives du marche commun et qu'il vaut mieux—pour les milieux commerciaux et
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• M. Muller-Armack (D) suggested as a solution to 'the problem of sanctions against the formation of arrangements',31 the adoption of 'the principle of the declaration of nullity "ipso jure".' • M. Van Tichelen (B) favoured notification: 'imposing an obligation to notify on undertakings.'32 Thus at the beginning of the drafting process, the founding fathers were by no means agreed either on what constituted problems or on what the remedies might be. The notions of refusal to supply and price discrimination which French law did not discard until 1996, forty years later, were much debated. The notion of nullity now provided in Article 81 (2) is mentioned first by the German delegate. It appears one month later in a Note by the Chairman of the Groupe du Marche Commun:33 'The abusive exploitation of a dominant position in the market must be governed by the same principles whether that position results from the scale of production of an undertaking or from an arrangement between several undertakings. However, there are differences between the situation of agreements and that of monopolies, which must be taken into account when drawing up the legal requirements concerning them. Thus, for example, one of the characteristics of agreements is that they are likely to hinder or prevent competition, and legal requirements should be introduced bearing in mind this effect and the extent to which it is produced or sought. With regard to monopolies, on the other hand, the more complete the monopoly, the less probable is it that any competition likely to be compromised or eliminated will exist. As a result, what should be prohibited in the case of monopolies is not hindrance of competition but only abuse of the dominant position in the market. . . . Finally, sanctioning the annulment of legal operations which lead to the acquisition of a dominant position in the market should probably apply only to agreements.'34 financiers—de connaitre des le debut le contenu et la portee du Traite plutot que d'etre obliges de se balancer dans une situation d!incertitude.' 31 ' le probleme des sanctions contre la formation des ententes . . . le principe de la declaration de nullite "ipso jure."' 32 ''I'imposition aux entreprises I 'obligation de I'enregistrement.' 33 D o c . M A E 468 f/56, supra note 17. 34 Lexploitation abusive a"une position dominante sur le marche doit etre regie par les mimes principes, que cette position resulte de I'ampleur de la production d'une entreprise ou d'une entente entre plusieurs entreprises. Toutefois, il existe entre les ententes et les monopoles des differences de situation dont ilfaut tenir compte en redigeant les prescriptions qui les concernent. C'est ainsi, par exemple, qu'une des caracteristiques des ententes est qu'elles sont susceptibles d'entraver ou d'empecher la concurrence, et c'est en consideration de cet effet et dans la mesure oil cet effet seproduit ou est recherche qu'ily a lieu de les introduire. En revanche, en ce qui concerne les monopoles, la concurrence susceptible d'etre compromise ou eliminee existe d'autant moins que le monopole en question est plus parfait. En consequence, dans le cas des monopoles, ce nest pas lefait d'entraver la concurrence, mais bien seulement I'abus de la position dominante sur le marche qui pourrafaire I'objet d'une interdiction. . . . Enfin, il parait opportun de reserver aux seules ententes la sanction de la nullite des operations juridiques qui conduisent a I'acquisition d'une position dominante sur le marche.
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At the beginning of November 1956 the Expert Group issued a proposal which also contained a provision embodying the notion of nullity:35 Agreements or decisions prohibited by virtue of paragraph 1 above [referring to the prohibition paragraph] are null and void in law and may not be relied on before any Member State jurisdiction.36 Agreements declared under the terms of paragraph 2 above [referring to the exemption paragraph] but prohibited by the Commission37 are equally null and void in law.
The delegations' positions on the proposed text can be culled from the following exchange:38 • Muller-Armack (D) 'expressed his full preference for a ban in principle on agreements, which was also accepted by the German legislation. B u t . . . this principle did not seem to be really envisaged in the proposal. . . , since even if point 1 [of the first article] provided for this ban, point 2 introduced too many exceptions. For this reason it would be preferable not to retain the 'principle of a ban' at international level, when this principle was not accepted in German national legislation; it would be more advisable simply to include in the Treaty a general declaration stating the incompatibility of arrangements with the Common Market, and to leave it up to the Member States themselves to make sure that this principle is put into practice during the first phase, through close collaboration and reciprocal consultation.'39 • M. Van Tichelen (B) 'declared he was very worried about the effect which the German proposal seemed likely to have on the objectives assigned to the Treaty and asked whether Mr. Muller-Armack would be prepared to adopt a
35 Projet de Redaction, Nov. 12, 1956, Council Archives, CM3/NEGO/217, Doc. MAE 527 f/56. A long document with some useful illustrations of alternative approaches to the drafting of the Articles. 36 'Les accords ou decisions interdits en vertu du paragraphe 1 ci-dessus sont mils de plein droit et nepeuvent etre invoques devant aucune juridiction des Etats membres.... La meme nullite frappe les accords declares aux termes du paragraphe 2 ci-dessus mais interdits par la Commission. 37 Reservation expressed by the Belgian expert; he would prefer the prohibition t o be laid down by a court. 38 Memo interne du groupe du marche commun of Nov. 13-15, 1956, Fascicule 10, Council Archives, CM3/NEGO/236, Doc. MAE/Sec. 70. 39 'exprime toute sa preference pour le critere de I'interdiction de principe des ententes, qui est egalement accepte par la legislation allemande. Mais,... ce principe ne semble pas etre reellement envisage dans le projet. . . , car si le (1 [du premier article] prevoit cette interdiction, le (2 introduit trop d'exceptions. Pour cette raison il serait preferable . . . de ne pas se tenir au 'principe de I'interdiction,' sur le plan international, alors que ce mime principe nest pas accepte par la legislation nationale allemande; il vaudrait mieux se limiter a inscrire dans le Traite une declaration generate qui enonce Vincompatibilite des ententes avec le Marche commun, en laissant aux Etats membres eux-memes le soin de veiller a la realisation de ce principe au cours de la premiere etape, moyennement une collaboration etroite et une consultation reciproque.'
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less extreme position if all the other delegations were ready to accept the principle of the ban adopted in the German legislation.'40 M. Muller-Armack (D) 'replied that his position on this problem was inspired by concern that should the proposed Treaty contain a ban in principle on arrangements, it would encounter strong opposition from certain circles with vested interests.'41 M. Hyzen (NL) 'drew the Group's attention to the hybrid nature of the proposal drawn up by the experts, which seemed to be a mixture of two different systems, one involving a ban and the other simply control of abuses. He ended by saying that every possible effort must be made to reach one single solution.'42 M. Donnedieu de Vabres (F) stated that 'a statement that arrangements and monopolies were incompatible and must be banned should not be abandoned. The fact that national laws on this subject were not harmonised was not an insurmountable obstacle. National laws should transpose the Treaty provision on agreements and monopolies, so that after a certain time international legislation could be drawn up.'43 M. Catalano (I) 'supported the German argument in favour of purely and simply deleting [the first article] which, unlike Mr. Muller-Armack, he thought was wholly superfluous, if not dangerous, since all transactions would be caught by the ban on discrimination which it laid down.'44
In parallel to these discussions in November 1956 about what we would call enforcement choices, the drafters' debate on prohibiting price discrimination on the basis of nationality was proceedings tied to their discussion on whether the rules enunciated in the Treaty should be directly applicable to the Member States. The President noted that most of the Member States at least agreed that
40 'se declare tres preoccupe par les consequences que la proposition allemande semble entrainer a I'egarddes objectifs assignes au Traite et demande a M. Muller-Armack s'il est pret a revenir sur des positions moins reculees au cas ou toutes les autres delegations seraient pretes a accepter leprincipe de I 'interdiction adopte par la legislation allemande.' 41 'reponden disant que sa position a I'egard de ceprobleme est suggereepar le soucique le projet du Traite, au cas oil il enonce le principe de I 'interdiction des ententes, nefasse I'objet d'une forte opposition venant de certains milieux interesses.' 42 'appelle Vattention du Groupe sur le caractere hybride du Projet etablipar les experts qui semble melanger deux systemes diffirents: celui de I'interdiction et celui du simple controle d'abus. II conclut en disant qu'il fautfaire tout effort possible pour aboutir a une solution unique.' 43 'il nefaudrait pas renoncer a I'enonciation de I 'incompatibility des ententes et des monopoles et a celui de leur interdiction. Lefait que les legislations nationales ne soientpas harmonisees a ce sujet nest pas un obstacle insurmontable. Les legislations nationales devraient incorporer les dispositions du Traite en matiere d'ententes et monopoles, defacon qu'apres un certain temps une legislation internationalpourra etre etablie.' 44 'se rallie a la these allemande de la suppression pure et simple [du premier article] qu'il considere, a I'oppose de M. Muller-Armack, absolument superflue si non dangereux, car Vinterdiction des discriminations qu'il enonce nepeut que frapper toute transaction.'
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the Treaty should only contain fundamental legal principles.45 He concluded that because the delegations could not reach an agreement on the text proposed by the Expert Group, they would refer the matter to a 'groupe restreint' which would consider: 1. a draft compromise setting out the principle of a prohibition of agreements and monopolies, to be drawn up jointly by the German, French and Italian delegations; 2. a draft compromise which would be presented by the President of the Common Market Group; and 3. a proposal setting out the principle of control of abuses regarding agreements and monopolies, to be presented by the Dutch delegation.46 In late November, the working group considered a set of draft competition articles, in which appear both nullity and the prohibition of discrimination on the basis of nationality:47 • first Article: • Discriminatory practices on grounds of nationality by commercial partners in competition with one another are prohibited within the Common Market. • The Council, acting on a proposal from the Commission, may adopt by qualified majority any legislation with a view to prohibiting such discriminatory practices. • second Article: • (reminder: question of anti-dumping legislation) • third Article: (1) All agreements between undertakings, all decisions by associations of undertakings and all concerted practices which are likely to affect trade between Member States and whose aim or effect is to prevent, restrict or distort competition within the Common Market are prohibited, in particular those which consist of: [list of 5 practices, much as they appear in what became Article 85 (1)] 45
M e m o interne of Sept. 7, 1956, Fascicule 5, supra note 23. 1. un projet de compromis formulant le principe de Vinterdiction des ententes et monopoles, a elaborer conjointement par les delegations allemande, frangaise et italienne; 2. un projet de compromis qui sera presente par le President du Groupe du Marche commun; et 3. une proposition formulant le principe du contrdle d'abus en matiere d'ententes et monopoles a presenter par la delegation neerlandaise. Projet de Proces-Verbal of Nov. 13-15, 1956, Council Archives, C M 3 / N E G O / 1 4 5 , D o c . M A E / 5 3 9 f/56; see also Projet de R e d a c t i o n p a r la delegation neerlandaise, of Nov. 15, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/547 f/56, a n d Tableau synoptique des projets d'articles of Sept. 24, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/325 f/56 (annexed to this paper). 47 Projet de redaction sur les regies de concurrence, Nov. 20, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/602 f/56. 46
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(2) These prohibitions will not apply to agreements between undertakings, decisions by associations of undertakings and concerted practices with regard to which those concerned can supply proof that they contribute towards improving the production or distribution of products or promoting technical or economic progress, and that users receive a fair share of the resulting profits, and that they do not • impose on those concerned restrictions which are not indispensable for the achievement of these objectives, • give these undertakings the possibility, for a substantial part of the products in question, to fix prices, limit production or market openings or eliminate competition from other undertakings. (3) agreements or decisions which are prohibited by virtue of the previous paragraph are null and void in law and may not be relied on before any Member State jurisdiction.48 It is curious that the third paragraph, establishing nullity, refers back to the second paragraph, which was the precursor of the exemption. Did the drafters consider that nullity should be inflicted upon agreements prohibited by virtue of the second paragraph (as not eligible for an exemption)? If so, we could conclude that the drafters did not, at least at this point, interpret Article 85 as necessarily establishing a prior authorisation system. Only those agreements 48
Article 1 Sont interdites a I'interieurdu marche commun les pratiques discriminatoires exercees, en raison de la nationality, a I'egarddepartenaires commerciaux en concurrence entre eux. Le Conseil, sur proposition de la Commission, peut prendre a la majorite qualifiee tout reglement en vue de I'interdiction de ces discriminations. Article 2 (pour memoire: question de la legislation anti-dumping) Article 3 (1) Sont incompatibles avec le marche commun et interdits tous accords entre entreprises, toutes decisions d'associations d'entreprises, et toutes pratiques concertees qui sont susceptibles d'affecter le commerce entre les Etats membres et qui ont pour objet ou pour effet d'empecher, de restreindre ou defausser lejeu de concurrence a I'interieur du marche commun et notamment ceux qui consistent a: [suit une liste de pratiques interdites plus ou moins telles que celles de iArticle 85] (2) Seront releves des interdictions precedentes les accords entre entreprises, les decisions d'associations d'entreprises et les pratiques concertees au sujet desquels la preuve peut etre fournie par les interesses qu'ils contribuent a ameliorer la production ou la distribution des produits ou a promouvoir le progres technique ou economique, tout en reservant aux utilisateurs une part equitable du profit qui en resulte et sans • imposer aux entreprises interessees des restrictions qui ne sont pas indispensables a la realisation de ces objectifs, • donner a ces entreprises la possibility, pour une partie substantielle des produits en cause, de fixer lesprix, de limiter la production ou les debouches ou d'eliminer la concurrence d'autres entreprises. (3) les accords ou decisions interdits en vertu duparagrapheprecedent sont nuls deplein droit et nepeuvent etre invoques devant aucune juridiction des Etats membres.
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falling within the prohibition of the first paragraph and not benefiting from the exceptions laid out in the second paragraph would be automatically null and void. One week later, the nullity provision had been changed, and referred back to the paragraph concerning the prohibition, not the exemption!49 Unfortunately, the archival documents do not provide any explanation for the change. Another week brought a further change: the nullity provision, still located in the third paragraph, refers to agreements prohibited by 'the present article.'50 This version is very close to what ultimately became Article 85 of the Treaty, save that paragraphs (2) and (3) are reversed. The drafting group was charged with determining whether the removal of the words 'sont nuls de plein droif would weaken the scope of the paragraph. Thus, the drafters considered that it might be enough that an agreement could not be invoked before a national court. But in a draft dated February 14, 1957, the nullity paragraph was eliminated and the notion incorporated into the first paragraph containing the prohibition: Sont incompatibles avec le marche commun, interdits et nuls de plein droit, tous accords.. . 51 It was not until the late date of February 23, 1957 that the order of the paragraphs appears as it does in the final form of the Treaty.52 At this time, there was also discussion of whether the nullity should be prospective only, and whether the intervention of a national authority would be necessary to establish nullity. It is clear that the nullity provision bounced around frequently before definitively arriving in Article 85 (2), its final rest place. The provision was in paragraphs (3), (2), and (1) at different times. The uncertainty related not merely to its numbering, but, more importantly, to its functioning. Upon which triggering event was the agreement to be void, and from when did the nullity run? Having looked at the texts, it seems impossible to say that they clearly favour one answer more than another. I think it is fair to say that the two paragraphs could be regarded as complementary, each being a part of a single analysis but they cannot—in my view— be regarded as favouring either the control of abuse theory or the prohibition of restrictions theory. Nor do the words or travaux preparatoires indicate the relative weights to be accorded to Article 85 (1) and (3). Were the energy, authority, skills and resources of the enforcing agency to be deployed principally in applying paragraph (1) or paragraph (3)? The Minutes do not much help us as to the nature of the exemption process. Is the agreement which is 49 Projet de Redaction, Nov. 28, 1956, Council Archives, C M 3 / N E G O / 2 1 7 , Doc. M A E 657 f/56. 50 Redaction approuvee, Dec. 6, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/788 f/56. 51 Projet de redaction of Feb. 14, 1957, Council Archives, C M 3 / N E G O / 2 3 6 . 52 We found n o explanation of why Articles 40(1), (2) and (3) became Articles 85 (1), (3) and (2).
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caught by Article 85 (1) unlawful because it restricts competition but curable by Article 85 (3) because it serves broad competition goals despite its restrictive features? In this case, the entirety of the analysis would be a competition law analysis. Or might the role of Article 85 (3) be to extend to the agreement the benefit of general economic and social goals? In either case, there is a two-step process. Now, the Commission got itself into early difficulties by finding too easily restrictive features that necessitated the use of the exemption mechanism. Instead of blessing the agreement under Article 85 (1) as benign in its entirety, the Commission used the costly remedy of Article 85 (3) (costly because the apparatus of formally deciding to grant an exemption was far too burdensome). Thus to the extent that Article 85 was based on a prohibition theory, then it was used too promiscuously.53 As a result, Article 85 (3) was used for the wrong purpose, to confirm the overall legitimacy of the deal, as opposed to . being reserved for the special occasions where the deal called out for creative thinking, tolerance or the grant of a short-term exceptional approval. A simpler way of saying this is to observe that if negative clearances had been issued more frequently, the Commission could have kept up with the demand for exemptions by sharing the task of blessing agreements with national courts. By contrast, under the regime adopted, national courts had no function, at least in theory, once they had concluded Article 85 (1) applied. The words as the drafters left them are clearly based on a prohibition. The reforms would mean that an agreement containing a restrictive feature would no longer be void until exempted; it would be void if its restrictive features did not satisfy the criteria prescribed in paragraph (3), rather than solely because it had restrictive features. That change is, at least in theory, a profound one. (I argue below that, in practice, the change is not an important one.) However, I do not find in the travaux preparatoires evidence that the drafters would have opposed such an outcome. The travaux preparatoires indicate, I submit, that the drafters could legitimately expect three features in European competition law enforcement measures. First, the prohibition and punishment of the unacceptable. Second, the intelligent and pragmatic examination of doubtful matters with a view to determining in a timely manner whether they are acceptable. Third, abstention from interference in benign matters. Granting direct effect to paragraph (3) is not inconsistent with that division; nor does it seem inconsistent with what the drafters intended. The debate in 1956 and 1957 was not as focused and as scientific as the one we are conducting forty-five years later. The delegates were exploring in a basically amicable and collegiate manner concepts that were unfamiliar to most of them.
53
Read a competition decision like AlcatellEspacelANTNachrichtentechnik, 1990 OJ L 32/19, which lumbers through a series of reasons why jurisdictionally the deal falls within the Commission's clutches (changes in the parties' level of autonomy in various respects), and then records the many virtues of the deal.
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1.4. British doubts about what it all meant While thefinishedversions of Articles 85, 86 and 87 of the Treaty of Rome may have pleased the drafters, they left many questions unanswered. On April 10, 1958, the British Embassy in Paris addressed to the French Government an aide-memoire recording that there was: uncertainty in commercial and legal circles in the United Kingdom about the effect of Articles 85,86 and 88 ... on current and future commercial contracts between parties in the United Kingdom on the one hand and parties in the countries of the European Economic Community on the other.54 The UK presented a number of pertinent questions, such as: In order that this uncertainty may be resolved, Her Majesty's Embassy would be grateful if the Ministry of Foreign Affairs would provide answers to the following questions: 1. Article 88 of the Treaty of Rome provides that until the entry into force of the provisions adopted in application of Article 87, the authorities of Member States shall, in accordance with their respective municipal law and with the provisions of Articles 85 and 86, rule upon the admissibility of any understanding and upon any improper advantage taken of a dominant position in the Common Market. To what extent, and in what ways, does the ratification of the Treaty of Rome affect or modify existing municipal law in thisfieldin France? Is a party to a pre-existing contract entitled to repudiate it if it falls within the prohibited class of contracts indicated in Article 85(1) and (2) and is not saved by Article 85 (3)? Would the ordinary commercial courts apply Article 85 if the dispute were brought before them by another party to the contract? (b) What would be the position in the event of any conflict between the substantive rules of existing municipal law in France and Articles 85 and 86 of the Treaty of Rome? 3. Is it possible to say what further legislative steps, if any, in connection with private restrictive practices, are required or contemplated by the Government of France as a consequence of the ratification of the Treaty of Rome? 4. In the event that the answers to these questions indicate that there is doubt whether or how far Articles 85 and 86 are of direct, immediate and independent application in France during the interim period, what steps if any are contemplated by the Government of France to resolve this doubt?55 On June 12, 1958, the French Permanent Representation proposed that the aide-memoire should be examined by a working group of the six Member States 54 Aide-Memoire of April 10, 1958 from U K Embassy in Paris to French Government, Council Archives, CM2/1958/748. Identical memoranda were submitted by embassies in four other capitals. The sixth memorandum perhaps got lost. 55 Aide-Memoire of April 10,1958, of U K Embassy in Paris to French Government, Council Archives, CM2/1958/748.
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in order to achieve a common line (or, if this were not possible, parallel lines).56 The Commission's reaction was unease. In a memorandum dated June 19,1958, the Competition Directorate General expressed its fears: The Commission fully understands the French desire to avoid any increase in existing levels of uncertainty about the interpretation of these articles, which could arise if six countries were to give different replies to the questions from the British government.57 The Commission (disingenuously or optimistically) expressed its desire to put an end as quickly as possible to this uncertainty, and asked for time to find 'a practical solution.' It asked the Member States to give it some more time; and at the fourteenth meeting of Coreper in Strasbourg on June 20 and 21, 1958, there was a discussion of the subject.58 The Commission offered to propose an answer even before the summer holidays. The Italian delegation favoured a precise and comprehensive answer, but the French feared the need to offer a very complete and thorough reply, and proposed to send not a provisional answer which would in its turn call for an exhaustive follow up, and therefore favoured a simple answer. Belgium was troubled by the fact that there was no competition law in Belgium (has much changed?), and felt the need to offer reassurance to the British. The Netherlands favoured six different replies. Predictably, the outcome was the constitution of a working group which—rapidly—produced a common reply stating that: The co-existence, foreseen by Article 88 of the Treaty, of national laws with the provisions of Articles 85 and 86 of the Treaty—a co-existence which national courts will eventually have to recognise—poses a problem of interpretation which can only be resolved definitively by the case-law of the Court of Justice in the context of the competence which is granted to it by the Treaty. Further, according to Article 89 of the Treaty, the Commission of the Community is charged—when it takes up its duties—with ensuring that the principles laid down in Articles 85 and 86 are applied, which could lead the Commission to adopt a position on this subject. The attention of the Commission has therefore been drawn to the questions raised. The Commission has informed the Government of . . . that it intends, in the shortest possible time, to decide on its position on the most urgent practical questions regarding the application of these Articles. These questions include the problem of what procedure should be followed in order to put an end as soon as possible to the present uncertainties emphasised in the memorandum from the United Kingdom.59 56
N o t e of June 12, 1958 from French Permanent Representation, Council Archives, CM2/1958/748. 57 Commission Memorandum of June 19, 1958, COM/58/132, Council Archives, CM2/1958/748 ('La Commission comprendpleinement le desir frangais d'eviter I'incertitude actuelle sur I'interpretation de ces articles, qui pourrait se produire au cas ou les six pays donneraient des reponses differentes aux questions du Gouvernement britannique.'). 58 Extrait d u Proces-Verbal de la 14eme Reunion du Coreper, June 20-21, 1958, Council Archives, CM2/1958/748, Doc. 636 f/58. 59 La coexistence, prevuepar Varticle 88 du Traite, des legislations nationales et des dispositions des articles 85 et 86 du Traite—coexistence dont lesjuridictions nationales auront
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This was agreed on July 11, 1958. So far as the Archives could reveal, the Commission never did produce its definitive reassurance about the effects of the Treaty of Rome on industrial property rights and exclusive territorial licensing. 1.5. Conclusion on the archival evidence The drafters were not contemplating the competition rules in the way that we have come to examine them. The text of Articles 85 and 86 was drafted in six months, the actual order of the paragraphs of Article 85 was still unsettled only days before the signing of the Treaty, and the preamble was forgotten until just ten days before signing.60 The year after signature, neither the Member States nor the Commission were able to respond to the UK's questions about how the competition rules would affect executed agreements. The drafters probably did not fully realise the implications that these provisions would have in the ensuing years. These conclusions lead to the following remarks. First, there was no single will or goal on the part of the drafters about the nature of the challenge to be confronted. Moreover, their concerns, to the extent they are discernible, are—not surprisingly—different to those of today's enforcers. They were Babes in the Wood by today's standards. They were evidently worried about price discrimination, especially based on nationality. They were worried about what we would now call intra-Community dumping and anti-dumping measures. A reading of the Minutes does not suggest that they were unanimous in seeing competition as an instrument for deregulation, for adapting business structures and for stimulating economic efficiency and consumer welfare. Second, they certainly looked at every possible variant, procedurally speaking. Should restrictive agreements be prohibited? Unenforceable? Void? eventuellement a connaitre—pose un probleme d'interpretation qui ne pourra etre definitivement tranche que par la jurisprudence de la Cour de Justice dans le cadre de la competence qui lui est attribute par le Traite. Par ailleurs, selon I'article 89 du Traite, c'est a la Commission de la Communaute qu'incombe la tache de veiller—des son entree en fonctions—a Vapplication des principesfixes par les articles 85 el 86, ce quipourrait amener la Commission a prendre position a ce sujet. C'est pour cette raison que Vattention de la Commission a ete appelee sur les questions posees. La Commission a fait part au Gouvernement de . . . de son intention de fixer, dans leplus court delai, sa position vis-a-vis des questions pratiques les plus urgents concernant Vapplication des articles mentionnes. Parmi ces questions figure le probleme de la procedure a suivre afin de mettre fin, le plus tot possible, aux incertitudes actuelles soulignees dans Vaide-memoire du Royaume- Uni. Draft reply by the 6 Governments to the Memorandum from the United Kingdom, Council Archives, CM2/1958/748, Doc. 678 f/58. 60
Commission europeene, DG X et Conseil Universitaire Europeen pour l'Action Jean Monnet (1999): 40 ans des Traites de Rome ou la capacite des Traites d'assurer les avancees de la construction europeenne, Actes du Colloque universitaire de Rome organise a la memoire d'Emile Noel, Rome, March 26-27,1997 (Bruxelles, Bruylant), at p. 63.
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Incapable of being relied on before national courts? Invalid after being declared unenforceable by national courts? Ex tune, ex nuncl There were no obvious winners or losers. What they produced was an amalgam of several countries' preferences. Third, the new regime was based upon a text drafted by a committee, a diplomatic compromise. The drafters' governments were themselves unsure of the implications of that text only one year after its drafting had been completed. My impression is of well-intentioned confusion about a range of problems, rather than a focussed, purposeful debate on accurately identified issues. Fourth, Community law has moved on. Now it has the benefit of primacy over inconsistent national law, and of direct effect. The direct effect of Articles 85 and 86 was only established in my professional lifetime in BRTv SABAM.61 These judge-made creations are so important that it is not surprising the earliest texts were obscure without them, and that in judgments such as Portelange62 and Bosch63 the Court found these issues difficult. As a result of all the foregoing, I submit that the answer to the question regarding the compatibility of the White Paper proposals lies primarily in the text of the Treaty itself, as explained by the European Courts and learned commentaries.
III. Textual considerations Can we fairly read Article 85 as allowing what the Commission favours? 1. The ECSC Treaty as a recent example The ECSC Treaty, signed in Paris on April 18, 1951, explicitly provides for prior authorisation. Article 65(1) contains a simple prohibition: All agreements between undertakings, decisions by associations of undertakings and concerted practices tending directly or indirectly to prevent, restrict or distort normal competition within the common market shall be prohibited, and in particular those tending: 61
Case 127/73 Belgische Radio en Televisie et societe beige des auteurs, compositeurs et editeurs v SV SABAM et NVFonior (BRT-I) [1974] ECR 51; commented on by the a u t h o r in ' C o m p l e m e n t o r O v e r l a p ? Jurisdiction of National a n d C o m m u n i t y Bodies in Competition M a t t e r s After S A B A M ' , 1974 C o m m o n Market Law Review, 171. 62 Case 10/69 S.A. Portelange v SA Smith Corona Marchant International and others [1969] E C R 309. 63 Case 13/61 Kledingverkoopbedrijf de Geus en Uitdenbogerd v Robert Bosch GmbH and Maatschappij tot voortzetting van de zaken der Firma Willem van Rijn [1962] E C R 89.
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(a) tofixor determine prices; (b) to restrict or control production, technical development or investment; (c) to share markets, products, customers or sources of supply. Article 65(2) gives the High Authority/Commission the power to authorise certain categories of agreement: However, the High Authority shall authorise specialisation agreements or joint-buying or joint-selling agreements in respect of particular products, if itfindsthat: (a) such specialisation or such joint-buying or -selling will make for a substantial improvement in the production or distribution of those products; (b) the agreement in question is essential in order to achieve these results and is not more restrictive than is necessary for that purpose; and (c) the agreement is not liable to give the undertakings concerned the power to determine the prices, or to control or restrict the production or marketing, of a substantial part of the products in question within the common market, or to shield them against effective competition from other undertakings within the common market. Authorisations may be granted subject to specified conditions and for limited periods. In such cases, the High Authority shall renew an authorisation once or several times if itfindsthat the requirements of subparagraphs (a) to (c) are still met at the time of renewal. The High Authority shall revoke or amend an authorisation if it finds that as a result of a change in circumstances the agreement no longer meets these requirements, or that the actual results of the agreement or of the application thereof are contrary to the requirements for its authorisation. Thus the drafters of the EEC Treaty had before them the example of Article 65 of the ECSC Treaty. They were confronted with a broad range of possible control mechanisms. Arguably, the most compelling Community precedent would be Article 65, a prohibition of illegal conduct curable under limited conditions by the Commission and by no one else. They elected not to follow it. This seems to confirm the constitutional propriety of ascribing to other bodies the grant of exemptions under the Treaty of Rome.
2. Article 85 (3) does not prescribe who shall decide upon exemptions Paragraph (3) states that the provisions of paragraph (1) may, however, be declared inapplicable.. . . There is no specification of which body may do the declaring: the Commission? The national courts? National regulators or competition authorities? It is clear from the Minutes already quoted that the delegates considered many hypotheses and came to a conclusion that did not decide for the future. When a Treaty, which in other respects is very precise about which institution shall do what, fails to specify who shall act, it means that the identity of the actor is left open. There are therefore good textual grounds for concluding that
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the Treaty of Rome contemplated exemptions being granted other than by the Commission. Nothing in Articles 87 to 89 of the EEC Treaty contradicts this conclusion. 3. Subsidiarity It is also relevant that the Treaty has taken formal note of the doctrine of subsidiarity. Article 3b, as amended by the Treaty on European Union, now reads: The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.
I do not find attractive the notion of subsidiarity as a constitutional principle, but it has been adopted, and it is difficult even for an anti-subsidiarity-ist like myself to deny that it supports the proposition that national decision-making is not a priori inferior to Community decision-making. The local court or competition agency is likely to know the facts more thoroughly than a European agency. So decentralisation is consistent with the Treaty.
4. Do Article 81(1) and Article 81 (3) constitute a single text? A more difficult textual question is whether one can fairly read Articles 81 (1) and 81 (3) together. This is a genuine and challenging legal problem with substantive and procedural consequences. Where only the Commission was in charge of the analysis, it did not make a great difference. If the agreement was basically desirable in its totality, but contained restrictive clauses, the exemption decision would recite a litany of restrictions, and then a counterpoint of beneficial effects. The Commission was regularly encouraged to be bolder in applying Article 85 (1) in such a way as to find that clauses which notionally limited the economic freedom of the parties were nonetheless not anti-competitive in that their dispositions were a natural concomitant of a basically pro-competitive agreement. The ease with which clauses could be found restrictive meant that enterprises were reluctant to pursue formal exemption since obtaining one always involved the risk of being asked to make heavy concessions as the price of approval. This phenomenon muddled the debate about the respective roles of Article 85 (1) and (3). Was the function of Article 85 (3) to cure, by reference to indus-
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trial policy, the competitive restrictions identified in Article 85 (1)? Or was it to be used only in the gravest cases, on pure competition grounds, where the criteria established by Article 81 (3) for the grant of an exemption had been stringently verified? If we looked at the decisions, however, the debate became irrelevant. The Commission's practice was not completely consistent, but generally if it granted an exemption it noted 'restrictive clauses' plus 'economic benefits', and then granted an exemption. Sometimes, there would be a bolder decision in which the restrictive features were minimised.64 Commission decisions, however, usually proceeded to a classical textual analysis of restrictive clauses, followed by a curative recital of their wholesome economic effects. Functionally, therefore, paragraphs (1) and (3) have been read together in the Commission's practice. This had big implications for the enforcement of the law. The Commission was unable to deliver the exemption decisions for which its theoretical jurisdictional reach created a need.65 Indeed, I submit that the core difficulty is not a textual problem at all but a problem of practicalities, of how the European Commission chose to structure its enforcement efforts. In the early 1960s, when Regulation 17/62 was being drafted, the staff of DG IV had no special reason to be optimistic about the receptivity of businesses, their lawyers or even national judges to novel doctrines, promulgated by a young bureaucracy, still less the use of competition law as a tool for cross-frontier market integration. Naturally, the officials were reluctant to see their creature stifled at birth. So they decided that the basic prohibition should be interpreted as having a broad reach. It would be by the tolerant use of Article 81 (3) rather than by the mild use of Article 81 (1) that sensitive choices were to be made. Producing a volume of decisions commensurate with the jurisdictional reach implicit in a broad interpretation of Article 81 (1) proved to be beyond the capacities of the Commission. The procedures adopted were too cumbersome, too thorough, too perfectionist, too slow. Some early decisions were taken very briskly66 but others took years, even decades.67 The enforcement system effectively broke down; certainly specialist practitioners in Brussels had an 64 {Consortium ECR 900, OJ L 228/31 1990, for example, or ElopaklMetal Box Odin, OJ L 209/15 1990, in which the Commission recited a lot of good reasons why the deal made sense as pro-competitive; dozens of decisions used this kind o f reasoning in the past, but always as justification for granting a n exemption under Article 81 (3), as opposed to negative clearance under Article 81 (1). 65 This approach to paragraph (1) may yet cripple the decentralisation effort, since if the authorities to whom power of enforcement is newly-given follow the example of the European Commission from 1970 to 1999, they will create for themselves the same kind of difficulty as the Commission is trying to escape. Too many deals caught by the prohibition, too many candidates for exemptive treatment, too much procedural manipulation by using unanswered notifications as proof of legality. 66 Decision 72/480/CEE WEA-Filipacchi OJ L 303/52 1972, raced from opening t o adoption in barely seven months. 67 Decision 93/46/EEC Ford Agricultural, O J L 2 0 / 1 1993, is one, maybe unfair, example.
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advantage over non-specialists elsewhere. It was easier to prevent a decision being taken than to achieve the taking of a decision. Doubts and theoretical disputes could delay controversial decisions for years or forever. Victory in defending a client accused of an infringement would lie in the absence of defeat; that is to say in the non-taking of a negative decision rather than the taking of a favourable decision. Thus the proposed reforms are largely a reaction to the Commission's inability to enforce the system rationally. When the key documents were adopted over thirty years ago, expectations about how they would be enforced were different.
5. Are the Bosch and Portelange judgments relevant? This is an appropriate moment to note the early judgments of the Court of Justice, where the Court had to consider the effect on 'old agreements', antedating the Treaty of Rome or Regulation 17/62, of the new competition rules. Did a restrictive agreement become void from the moment of its signature, from the moment of the Treaty's entry into force, from 1962, or from the moment of the notification? Or did it remain valid unless condemned? And if condemned, from what moment should the nullity run? The Bosch68 and Portelange69 cases offered an opportunity for the Court to consider how the competition rules ought rationally to be enforced. In Bosch, speaking of 'old agreements', those signed before the entry into force of Regulation 17/62, the Court said: . . . the authors of the Regulation seem to have envisaged also that at the date of its entry into force there would be subsisting agreements to which Article 85 (1) applied but in respect of which decisions under Article 85 (3) had not yet been taken, without such agreements thereby being automatically void. The opposite interpretation would lead to the inadmissible result that some agreements would already have been automatically void for several years without having been so declared by any authority, and even though they might ultimately be validated subsequently with retroactive effect. In general it would be contrary to the general principle of legal certainty—a rule of law to be upheld in the application of the Treaty—to render agreements automatically void before it is even possible to tell which are the agreements to which Article 85 as a whole applies.70
This seems consistent with the view that Article 85 is not a prohibition to which a potential cure is attached, but a conditional prohibition that applies if the cure is unavailable. Thus these paragraphs contradict the 'German view' that the reforms are improperly abandoning a regime of prohibition of infringements and adopting a regime of controlling abuses. They also contradict 68 69 70
Case 13/61 Bosch [1962] E C R 89. Case 10/69 Portelange v Smith Corona [1969] E C R 309. See Bosch at § 52.
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Commission practice, which was indeed to regard the denial of an exemption as having retroactive effect. The Court thought it would be wrong to prohibit and render void an agreement that might subsequently be validated retroactively. However, the Court then discussed Article 85 (2) which . . . seems to regard Articles 85 (1) and (3) as forming an indivisible whole. The Court was writing in an age when it was expected that the notification system would work rationally, with filing, examination and favourable or unfavourable response following each other in a rational manner and with reasonable speed. In Portelange,11 the Court maybe noted the possibility of a problem of delay. It stated: 15. In view of the absence of any effective legal means enabling the persons concerned to accelerate the adoption of a decision under Article 85 (3)—the consequences of which are all the more serious the longer such a decision is delayed—it would be contrary to the general principle of legal certainty to conclude that, because agreements notified are notfinallyvalid so long as the Commission has made no decision on them under Article 85 (3) of the Treaty, they are not completely efficacious. 16. Although the fact that such agreements are fully valid may possibly give rise to practical disadvantages, the difficulties which might arise from uncertainty in legal relationships based on the agreements notified would be still more harmful. 20. It must therefore be concluded that the agreements mentioned in Article 85 (1) of the Treaty, duly notified in accordance with Regulation No 17, are of full effect so long as the Commission has made no decision under Article 85 (3) and the provisions of the said regulation.
I do not see in this judgment a definitive statement about whether Article 85 (1) and (3) shall be applied in a sequential or in a unitary fashion. Both the Portelange and the Bosch judgments were considering practical procedural problems. They do not prove or disprove the Commission's case: they were rational responses to the procedural situation as the Court could imagine it. They were adopted when all parties could reasonably expect that a notification would be examined promptly and decided with only moderate delay. It would therefore be unreasonable for the denial of an exemption to have retroactive consequences that went back a very long way. As we have learned, however, very few notifications lead to a formal decision and none are decided quickly. One may imagine that, confronted with such a procedural situation, the Court would wish to follow whatever approach was not inconsistent with the words of the Treaty and was most likely to deliver a procedurally rational framework within which business people could organise their affairs with a reasonable level of stability. The Bosch and Portelange judgments are best read as the Court's reasonable expression of opinion as to how the notification system should work. I do not see them as making fundamental pronouncements relevant for all time in different procedural contexts. In any event, we should not feel
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Portelange at §§ 15, 16 and 20.
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constrained by very early judgments when.the Court was feeling its way (remember that the Court made early mistakes. Sirena v Eda12 is probably the clearest).
6. Self-help and the rule of reason Although the notion that ancillary restraints could be pro-competitive was helpful, and although the European Court was notably encouraging when it had a chance to bless a more robust approach to Article 85 (1), the Commission was reluctant to contemplate a reading of Article 85 (1) which allowed businesses on their own to conclude that a deal with restrictive clauses and procompetitive effects was textually tolerable. My usual analogy for students is to say that DGIV was a catholic jurisdiction in which the affirmative approval of the priest was necessary: the layman was forbidden to discern the right path by consulting his conscience alone. He was eligible to receive blessing only after having made a full confession. To quote the White Paper,73 The Commission has already adopted this approach to a limited extent and has carried out an assessment of the pro- and anti-competitive aspects of some restrictive practices under Article 85 (1). This approach has been endorsed by the Court of Justice.47 However, the structure of Article 85 is such as to prevent greater use being made of this approach: if more systematic use were made under Article 85 (1) of an analysis of the pro-and anti-competitive aspects of a restrictive agreement, Article 85 (3) would be cast aside, whereas any such change could be made only through revision of the Treaty. It would at the very least be paradoxical to cast aside Article 85 (3) when that provision in fact contains all the elements of a 'rule of reason'. (Footnote47 referring to the Maize Seed1* and Pronuptiali cases omitted.) The Commission warned against . . . diverting Article 85 (3) from its purpose, which is to provide a legal framework for the economic assessment of restrictive practices and not to allow application of the competition rules to be set aside because of political considerations.76
72
C a s e 40/70 Sirena Sri v Eda Sri and Others [1971] E C R 69. E u r o p e a n C o m m i s s i o n : White Paper on the modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, C O M (1999) 101 Final (Apr. 1999), § 57; 1999 O J C 132/1 [hereinafter White Paper]. 74 Case 258/78 L. C Nungesser KG and Kurt Eisele v Commission of the European Communities [1982] E C R 2015. 75 Case 161/84 Pronuplia de Paris Gmbh v Pronuptia de Paris Irmgard Schillgalis [1986] E C R 353 76 Mat§57. 73
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The Commission had already started changing its mind (but was unwilling to voice doubts in public) when the intriguing judgment in Night Services11 emerged. There, the Court of First Instance offered its version of the point at which Article 85 (3) should become relevant: . . . The Commission submits that, whilst the analysis of an agreement must take account of its economic context, it does not follow that the rule of reason—a concept which the Court of Justice has hitherto declined to embrace—should be resorted to . . . Consequently, it is necessary to balance the competitive benefits and harms of an agreement in relation to the granting of exemptions under Article 85 (3) of the Treaty but not in respect of the appraisal of restrictions on competition—which were, contrary to the United Kingdom's contention, fully explained in the decision—in accordance with Article 85 (I).78 Before any examination of the parties' arguments as to whether the Commission's analysis as regards restrictions of competition was correct, it must be borne in mind that in assessing an agreement under Article 85 (1) of the Treaty, account should be taken of the actual conditions in which it functions, in particular the economic context in which the undertakings operate, the products or services covered by the agreement and the actual structure of the market concerned (judgments in Delimitis, cited above, Gottrup-Klim, cited above, paragraph 31, Case C-399/93 Oude Luttikhuis and Others v Verenigde Cooperatieve Melkindustries [1995] ECR 1-4515, paragraph 10, and Case T-77/94 VGB and Others v Commission [1997] ECR 11-759, paragraph 140), unless it is an agreement containing obvious restrictions of competition such as price-fixing, market-sharing or the control of outlets (Case T-l 48/89 Trefilunion v Commission [1995] ECR 11-1063, paragraph 109). In the latter case, such restrictions may be weighed against their claimed pro-competitive effects only in the context of Article 85 (3) of the Treaty, with a view to granting an exemption from the prohibition in Article 85 (I).19 (emphasis added) The route chosen by the Commission in the White Paper is faithful to its traditional doctrines: The whole of Article 85 would then become a directly applicable provision which individuals could invoke in court or before any authority empowered to deal with such matters. This interpretation would have the effect of making restrictive practices which are prohibited by Article 85 (1), but which meet the tests of Article 85 (3) lawful as from the time they were concluded, without the need for any prior decision. Similarly, restrictive practices that restricted competition would be unlawful once the conditions of Article 85 (3) are no longer fulfilled. This new framework would mean that restrictive practices would no longer have to be notified in order to be validated. The arrangements for implementing Article 85 as a.whole would then be identical to those for Article 85 (1) and Article 86.80
77 Joined Cases T-374/94, T-375/94, T - 3 8 4 / 9 4 a n d T-388/94 European Services and others v Commission [1998] E C R 11-3141. 78 Id. at §134. 79 Id. at §136 80 White Paper, supra note 73 at § 69.
Night
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It is difficult to predict whether the analysis of a directly-effective Article 85(1) and (3) would follow the liberal approach espoused in Gottrup Klim81 and European Night Services,62 or the old approach in the joint venture cases like Alcatel, quoted above,83 or X/Open.84 As noted elsewhere, I suggest that in jurisdictions where competition doctrines are new, or where the European Commission's policy serves as the role model for the local enforcement agency, there is a risk that it will be by the application of the exempted part of the equation that most sensitive decisions are made. In conclusion, I do not think, however, that there is a strong textual case against reading Article 81(1) and Article 81 (3) together as a unity.
IV. Practical considerations 1. Legal certainty Legal certainty or legal security (the terms seem synonymous) is very frequently invoked as a prime concern for those responsible for enforcing the competition rules. Advocates General, article writers, and the Commission itself have each stated on various occasions how important it was to ensure legal certainty. The absence of such certainty would typically be due to the unavailability of a formal Commission exemption decision, or due to the inherent uncertainty of a competitive situation in which a formal clearance or condemnation had not yet emerged. I have never been wholly convinced that an absence of legal certainty was such a terrible thing; or indeed that the achievement of legal certainty about the application of the competition rules was in truth feasible. Competition law exists to encourage competition, not to prescribe or regulate rigidly or definitively. It is a plastic legal discipline. Its goal is to ensure the opportunity for economic operators to pursue prosperity in the marketplace and to engage in economic strife with each other. It is not realistic to imagine that a business manager can expect a high degree of legal certainty as to his 81 Case C-250/92 Gettrup Klim Grovvareforeninger v Dansk Landbrugs Grovvareselskab AmbA [1994] E C R 1-5641. 82 Joined cases T-374/94, T-375/94, T-384/94 and T-388/94, [1998] E C R 11-3141. 83 See supra note 53. 84 For a very conservative approach to Article 85 (1) see XlOpen Group, O J L 35/36 1987, where the Commission found that the information exchange and related non-disclosure agreements did not infringe Article 85 (1). On the other hand, the combination of the restrictions on membership and the fact that, even though the resulting standards were to be open and public, members would have access to them sooner than non-members, were caught by Article 85 (1) but exempted. One may wonder, as ever, whether this methodological contortion was really useful in order t o reach the conclusion that the whole arrangement was valid under the competition rules (the agreement was operated for almost a year before being notified).
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competitive situation. There are certain matters in running a business where legal certainty is expected and indeed demanded. The formal requirements for the execution of a binding contract of employment must be known, and if they are not known or are constantly changing, business people can properly feel let down by legislators and judges. The terms of the law governing the lease of office premises or the effectiveness of a bank loan must be clear, and their application ought to be predictable. In private life, the rules governing the formal validity of a will and the constraints upon a testator's freedom to dispose of his assets as he chooses, are precisely defined by the law, and prudent people organise their affairs accordingly. By contrast, any business is today exposed to swings in the respective values of foreign currencies, changes in how business is conducted due to the Internet and e-commerce, continually growing social costs, the emergence of new products, and the gradual de-regulation of many markets which, in former years, were heavily regulated. The uncertainties posed for a business by these external political, fiscal, monetary, economic and social factors, to say nothing of changes in customer taste and the perpetually unforeseeable course of events, are far more significant and arguably far more threatening than the doubts attributable to the unpredictability of the outcome of any competition law dispute. As long ago as the 1970s, prudently run companies were looking at the possibility of filing a notification with the European Commission, and concluding that this was one invitation they would not take up. Such companies would say to themselves that while it would be agreeable to have the formal confirmation of the European Commission that the arrangement to which they were party was valid and enforceable, there were countervailing drawbacks. The filing of a notification could draw attention to a transaction that might otherwise go unnoticed. More particularly, obtaining the Commission's approval could involve months and years of negotiation and concession. In most cases, the Commission's approval was not manifested by any formal decision. The heart of the doctrine concerning whether a notification was desirable was therefore based on a fiction, namely that most notifications led to a formal disposition by the Commission's services. It can thus be observed that many companies have decided over the years that they will not exercise their option to file a notification requesting an exemption. They accept some diminution in the legal certainty governing their affairs, but do not regard this as troublesome.
2. Fictitious advantages of the reforms At least one rationale for the change seems disingenuous. For example, it is contended that ... undertakings' legal certainty will remain at a globally satisfactory level, and in certain respects will even be strengthened. Thus, instead of depending on the Commission adopting an exemption decision, undertakings will be able to obtain
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immediate execution of their contracts before national courts, with effect from the date of their conclusion, provided that the conditions of Article 85 (3) are satisfied. There is no presumption that restrictive practices are void under Article 85: the prohibition contained in this provision is applicable only when the conditions of prohibition are met.85
I call this fiction because companies did not find themselves having to wait for an exemption before being able to enforce a contract. In terms of legal certainty as that is conceived by the Commission, companies will not be better off. They will execute agreements containing clauses with restrictive features. If commercially convenient, they will endeavour to avoid complying with the contract on the grounds of competition law. There will be complaints or requests for the Commission's intervention to cure an uncertainty. The Commission's comments, whether framed as a formal decision (rare in the past and rare in the future) or in a simple administrative letter, will be given very great weight. While comfort letters did not formally solve the theoretical problem that only an exemption could cure a situation where there was a restrictive clause in a benign relationship, in actual practice I have never once encountered a judge who took the formal position that the agreement was necessarily damned since the Commission had not issued its formal blessing.
3. The supposed dangers of change Supporters of the German view contend that by eliminating the automatic prohibition of paragraph (1), there is a danger of a loosening of the protections against anti-competitive agreements. On this basis, since the prohibition only bites once the grant of an exemption is refused, doubtful agreements and even plainly unacceptable agreements, will effectively remain provisionally valid until they are denied an exemption; by contrast, at the moment doubtful agreements fall under the prohibition of Article 85 (2) regardless of whether they might be said to be eligible for an exemption. Thus the victim of an illegal agreement might be forced to respect it, being unable to invoke its nullity in the absence of an affirmative decision in its favour, whereas today he could invoke nullity without needing to discuss whether an exemption might be available. This is a substantial shift in the legal architecture of the competition rules. However, in my submission it will not make fundamental changes in practical outcome. At the moment, if Article 81 (1) is invoked before a national court, and if the court finds the presence of clauses deemed restrictive by the European Commission, in theory the court should either refrain from acting until the Commission has decided whether an exemption will be available, or should apply Article 81 (2). In actual practice, however, most judges are inclined to decide a case by enforcing or not enforcing the terms of an agree85
White Paper, supra note 73 at § 78.
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ment rather than by doing an incomplete job. Thus in actual practice the courts are today not greatly hindered by the Commission's monopoly over the granting of exemptions; and I presume that judges who feel comfortable with competition law matters will welcome the new power to grant exemptions. Conversely, unlawful agreements upon which one party seeks to rely are unlikely to be enforced, regardless of the fact that in strict theory they would be enforceable for so long as an exemption has not been refused. In the same way as agreements in the past were prosecuted and threatened with fines, not because of their not having been notified but because of their contents and effects, so agreements in the future will be threatened with nullity and fines not because they have not been granted an exemption, but because of their contents and effects. Functionally, Article 81 (1) and (3) are today read together. Functionally, they will be read together under the new regime. Neither outcome appears more or less likely to lead to genuine injustice.
4. Enforcement before thirty entities Europe is not a judicially uniform continent. In certain countries, judges are well paid and honoured, the court system receives high amounts of public funding, the orderly handling of litigation is a high priority of the central government, and litigants and lawyers involved in the process are correspondingly fortunate. In other countries, judges are poorly paid, back-logs of judicial business extend to years, procedures are formalistic, slow and unpredictable. Litigation in any country is to be approached only reluctantly, but in the latter countries it is quite unlikely to yield timely satisfaction (I refrain from using the word 'justice'). Three contiguous extremes may be noted. Litigation before the High Court in England is luxury justice, costly and risky, but efficient and relatively rapid. In the Netherlands, kortgedinge procedures are in effect interim interlocutory hearings that can be heard within a few weeks of the initiation of litigation. Very often the first hearing, although notionally merely preliminary, constitutes the entirety of the proceedings. Those who want a quick answer can obtain one in a brisk and common sense atmosphere. In Belgium, the situation is very different. The judicial backlog is immense and it is not uncommon for ten years to elapse between the initiation of the litigation and its disposition upon appeal. I lack personal experience, but it is commonly stated that litigation in Scandinavian countries is relatively rapid and efficient, whereas litigation before the Italian civil courts can be painfully slow. There are explanations for why the courts are so organised in each of the countries, and there is no early prospect of approximation of the different systems. It must also be acknowledged that there are huge differences in the experience, skill and resources of national competition agencies. Austria and Belgium are two countries where competition law enforcement is in serious difficulties. Although the need for an independent Kartellamt in Austria has been
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recognised for years, and although a number of studies have been commissioned, and although there is cross-party agreement that the application of competition law needs to be improved, there appears little likelihood of change in the near future. The Ministry of Economics has the job of acting as competition authority, but it seems widely accepted that this is not successful. No competition agency has the right to apply Articles 81 and 82 of the EC Treaty. The Belgian Conseil de la Concurrence issued its second report with respect to the period 1994 to 1995. It has never issued a further report. In its second report, it stressed, as it had done in itsfirstreport, that due to staff and equipment shortages, it was able only partly to fulfil its duties under the Law of August 5, 1991, on the protection of economic competition. The reports acknowledge that the Conseil de la Concurrence has, on a number of occasions, been unable to deploy officials to examine a merger within the statutory deadline. The Conseil de la Concurrence lacks books on competition law, legal periodicals, economic periodicals, filing cabinets, computers, and even enough officials who have fluency in Dutch and French. As protest about these inadequacies, the seven members of the Conseil de la Concurrence resigned. I may also observe that the decisions taken do not always carry complete conviction. In one case of which I have heard, the Conseil approved a joint venture between fruit and vegetable traders on the grounds that the parent companies and the joint venture would be active in different markets, the one being active in the long-term market for the sale of fruit and vegetables, the parent companies being active in daily operations. It was alleged that there were considerable spill-over effects between the two markets, but the joint venture was cleared nonetheless. Other countries have very effective competition agencies. The Italian Autorita Garante della Concorrenza e del Mercato has had a tremendous impact in a short time led by eminent figures, and is well-funded and enjoying strong popular support. Likewise in France, the Conseil de la Concurrence and the DGCCRF at the Ministry of Economic Affairs are widely regarded as knowledgeable, vigorous and effective. The German and Dutch agencies are similarly well-regarded, and in due course the UK, which has lacked an effective system of dealing with small cartels, will probably be endowed with a good regime. A report on each Member State's competition agency is beyond the scope of this paper. The point remains that there are substantial divergences. It is sometimes argued that national judges cannot be trusted to do a good job of working with the unfamihar economic doctrines involved in applying the competition rules. If judges are trusted to handle subjects like medical negligence, taxation, white-collar crime, and the calculation of damages in a vast range of circumstances, it seems unreasonable and elitist to deem them incapable of applying the competition rules. That said, the judges of certain countries are more familiar with competition law arguments than others, and this will hinder the invocation of EC competition law claims or defences before certain courts. Thus, Belgian, English and Dutch judges, to name only three, are unlikely to be nervous of confronting European competition law questions, whereas Portuguese and Greek judges might be.
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Decentralising the government of a country can mean transferring authority from the central government to regional or local administrations. The roles and powers of the administrations to receive the new authority will be well known. If, tomorrow, the job of selecting the schoolbooks for primary pupils were to be effected by East Lothian District Council as opposed to a Scottish or UK Ministry, there is no doubt that the Council will know its task and be equipped to discharge it. By contrast, decentralising from the Directorate General for Competition to fifteen national authorities and more than fifteen judicial systems (regional judicial systems such as Scotland) represents quite a leap in the dark. Some agencies and courts are efficient, other are not. If the decentralisation were to work badly, substantial prejudice could occur for businesses located in Member States where enforcement is inefficient. The natural response will be forum shopping, which could take the form of pre-emptive action by initiating litigation in a slow jurisdiction, or by seeking to engage the attention of an efficient agency in a matter that is not primarily within its jurisdiction. There will be many matters where more than one court jurisdiction or enforcement agency could be involved. Indeed, such is the trend to globalisation that it would not be surprising for three or four countries to have an interest in a particular controversy. The existing mechanisms for cross-border enforcement cooperation appear to be non-existent or rudimentary in many cases. While the goal of sharing enforcement responsibility with the Member States is plainly desirable, the European Commission will have an immense responsibility to coordinate, educate and mediate. It should also be ready to decide, in cases where this is appropriate, and I submit that the White Paper seems to contemplate something close to abstention in a wide range of situations. To the contrary, I would submit that since the Commission is the premier competition law agency in Europe, with excellent prestige, resources and experience, those resources ought to be available for deciding competition cases. To exaggerate the proposition, it would be disappointing if the Commission were to become merely a spectator of imperfect national enforcement of the competition rules that have been largely shaped by Commission enforcement action. Pursuing this theme, the Commission must have an enforcement role more extensive than major cartels, legislation, major mergers, and coordination. Today, businesses with a competition problem can obtain guidance in Brussels: one-stop-shopping. The Commission's proposals go too far, I submit, in assuming that the move from centralised to decentralised enforcement will necessarily be a good thing. In many cases, especially at the beginning, substantial confusion seems likely. More precisely, there is a risk of wrong decisions, unjust decisions, or no decisions, and a step backwards from the level of enforcement, albeit imperfect, that we have today. Welcoming the proposal to share responsibility with national entities having resources beyond those of the Commission is not inconsistent with expressing alarm about the short- and medium-term problems which will probably arise if the Commission does not heavily and actively involve itself in the process of absorption into the Member States. The
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Commission is traditionally very cautious about taking a position in cases pending before a national court. Because so much weight is attached to its opinion, what it says may effectively decide the competition point in dispute rather than merely giving guidance. The Commission therefore expresses itself very cautiously and the formulation of its replies to a request for assistance from a national court will normally take months. Possibly because of the Commission's reluctance to take a false step in influencing the outcome of private litigation, its formal assistance has been requested on only a few occasions. Helping the process of decentralisation will involve giving help to national courts more quickly and less cautiously than has been the case in the past.
5. Notifications The Commission dislikes notifications because they clog its in-box. This seems surprising, at least by reference to the volume of notifications recorded in the Annual Reports on Competition Policy. In 1998, there were 216 notifications; in 1999, there were 162 notifications. These numbers do not seem to be an excessive burden for a skilled administration with long experience and immense inhouse knowledge. Moreover, a fair number of those must relate to transactions that are now eligible for a block exemption pursuant to the new doctrines on vertical restraints. In addition, a number are presumably principally national rather than European in scope. I therefore question whether the disadvantages to the Commission of notification are so serious as to outweigh the advantages of giving it thoroughly-documented, carefully-drafted descriptions of why particular transactions are to be regarded, in their entirety, as pro-competitive. When the private sector volunteers sensitive and potentially embarrassing information to a public authority, the public authority is better informed about market developments and techniques, learns who the big players are, understands where the controversies may lie, is better equipped to do its job, and is invited to guide major enterprises on how to respect the competition rules. These are important benefits. The notification system is capable of being abused. First, there is the notion of the so-called dilatory notification. The Commission's Notice on Cooperation with National Authorities86 defines dilatory notification as o n e where a firm, threatened with a decision banning a restrictive practice which a national authority is posed to take under Article 85 (1) or under national law, notifies the disputed agreement to the Commission a n d asks for it to be exempted under Article 85 (3). 8 7
86
E u r o p e a n Commission: Notice on Cooperation between National Courts and the Commission in applying Articles 85 and 86 of the EEC Treaty, O J C 39/6 1993. 87 W.at§55.
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Another category of potential abuse is what I call notification to achieve the higher moral ground, as follows. A firm enters an agreement. The agreement could be said to be caught by Article 81(1) and there are doubts about whether the other contracting party might wish, in the future, for commercial reasons, to try to wriggle out of the contract, invoking the competition rules. Filing a notification offers the notifying party the opportunity to claim the higher moral ground; the Commission has been informed about the deal and has not challenged it. As a result, the transaction is presumptively valid under the competition rules. The vice in this situation is not the requesting of the Commission's approval for a transaction, but the possibility that silence on the part of the Commission may be misrepresented as proving the agreement's acceptability. The problem is curable by deadlines. If the Commission were obliged to respond to every notification within, let us say, forty-five days, the problem would be eliminated. There is a market for authoritative guidance on competition law matters. In the context of the Merger Regulation,88 the Commission is arguably the world leader in delivering such guidance. In the context of Article 81 (1), it could do better if it were less perfectionist and worked to brisk deadlines. While I accept that the Commission is not slamming the door in the face of those who wish to seek its guidance, I am not convinced that abandoning the notification entirely would be an appropriate response to the problem of supposed administrative overload through having had to examine less than two hundred filings.89
6. Application in countries candidate for accession and other third countries Obligations to adopt and apply competition rules are imposed by the Europe Association Agreements of 1993 and 1994 upon Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Bulgaria, Slovenia; by Europe Association Agreements of 1998 upon Lithuania, Estonia and Latvia; by Partnership and Cooperation Agreements of 1995 upon Russia, Belarus, Ukraine, Moldova; and by Mediterranean Agreements of 1995, 1996, 1997 and 1998 upon Tunisia, Morocco, Jordan, the Palestinian Authority and Israel. Like obligations are imposed upon Turkey, and upon Norway, Liechtenstein and Switzerland. The commonest method of implementation of these Treaty obligations has been for the third country to reproduce more or less faithfully the language of Articles 81 and 82 of the EC Treaty. My anecdotal experience suggests that enforcement agencies in Eastern Europe are most comfortable 88
Council Regulation 4064/89 on the control of concentrations between undertakings, OJ L 257/14 1990. 89 If resources are n o t available, why n o t levy a charge of, say, €10,000 p e r notification?
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when applying a black-letter rule as set forth in a block exemption regulation, which they are likely to examine as if it was prescriptive and obligatory. Yet, the presence or absence of key clauses should not deliver certainty. Competition rules should move away from clause-driven unenforceability, for example whether know-how, which is the subject of an exclusive licence, should be recorded in writing in order for the licence to be exempted. These difficulties are well known to competition law specialists; and the Commission's theorists are correcting them. However, I question how the new enforcement jurisdictions will deal with their new responsibilities. Advising lawyers in these countries, practising before these administrations, certainly suggests that the competition law that is being exported from Europe to the East is the old law and not the new law. Again, the problem is capable of being solved, but it calls for the energetic involvement of the European Commission. We are talking about competition, not aesthetics. Our criticisms of the new regime should be rooted in practicalities. Will the new system work better than the old one? A system which may contain paradoxes and inconsistencies but which functions well is to be preferred over a perfectly conceived system that does not function. I therefore commend the boldness of the Commission. It observed that the system is not functioning. It has adopted a path that will yield many more decisions applying the competition rules, some of which will be good and some of which will be bad. In thisricherjurisprudence, there will be imperfections and injustices, but by the end of this decade, we should see the wholesome effects of the entering into daily business life of competition rules at national and international level. The difficulties of getting to that happy condition have been underestimated in the White Paper.
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ANNEX 1: COUNCIL ARCHIVES—SUMMARY OF TOPICS DISCRIMINATION* Projet allemand
Projet fran; ais
Art. 42 Est incompatible avec le marche commun et interdit le fait pour une entreprise de desavantager, dans des transactions comparables 1 , des acheteurs ou vendeurs en concurrence entre eux, en raison de leur nationality.
Art. X(Doc. Mar. Com. 37) Sont interdites a l'interieur du marche commun les majorations ou minorations de prix et les modifications des conditions de vente operees pour des transactions comparables 1 , a l'egard d'acheteurs ou de vendeurs en concurrence entre eux.
* These charts are based on a document found at the Council Archives entitled: Tableau synoptique des projets d'articles soumis par les experts des delegations concernant les regies de concurrence applicables aux entreprises, MAE 325 f/56, CM3/NEGO/236 (only the formatting has been changed). 1 Cette expression doit etre interpretee comme visant une inegalite dans les conditions faites a l'acheteur, qui depasse l'inegalite que justifie la difference de nature des transactions comparees.
Projet belgo/neerlandais
Sont incompatibles avec le Marche Commun et a interdire, dans la mesure oil le commerce entre Etats membres s'en trouve affecte, a) l'exploitation abusive, par les entreprises publiques ou privees d'une position dominante sur le marche; b) les accords entre entreprises dont Papplication constitue une entrave injustifiee a l'exercice de la concurrence. Ces pratiques abusives peuvent resulter notamment: —de lafixationde prix ou conditions de transaction; —de discriminations a l'egard des
Projet neerlandais
Sont interdites a l'interieur du marche commun les majorations ou minorations de prix et les modifications des conditions de vente operees pour des transactions comparables,' a l'egard d'acheteurs ou de vendeurs en concurrence entre eux, lorsque ces pratiques sont operees: a) en application de reglementations
Projet francais
Sont incompatibles avec le marche commun toutes les situations ou pratiques d'ententes ou de monopole ayant pour objet ou pouvant avoir pour effet d'entraver l'exercice de la concurrence, en particulier: —en fixant les prix; —en restreignant ou en controlant la production, la vente, le developpement technique et les investissements; —en repartissant les marches, produits, clients et sources d'approvisionnement; —en permettant l'absorption ou la domination du marche d'un produit par une entreprise ou un groupe
Projet allemand
Sont incompatibles avec le marche commun et interdits, dans la mesure oil le commerce entre Etats membres s'en trouve affecte, tous accords entre entreprises ayant pour objet ou pour consequence d'entraver la concurrence, notamment —en fixant les prix; —en restreignant ou en controlant la production, la vente, le developpement technique et les investissements; —en repartissant les marches, produits, clients et sources d'approvisionnement.
ENTENTES*
I
publiques;2 b) pour obtenir une position dominante sur le marche; c) pour des motifs autres que commerciaux. acheteurs ou des vendeurs en concurrence entre eux dans la conclusion des contrats; —
