Opinion of the Economic and Social Committee on the 'White Paper on modernisation of the rules implementing Articles 81 and 82 of the EC Treaty - Commission programme No 99/027'
23. 2. 2000 EN Official Journal of the European Communities C 51/55 Opinion of the Economic and Social Committee on the ‘White Paper on modernisation of the rules implementing Articles 81 and 82 of the EC Treaty — Commission programme No 99/027’ (2000/C 51/15) On 10 May 1999, the Commission decided to consult the Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the above-mentioned White Paper. The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee’s work on the subject, adopted its opinion on 25 November 1999. The rapporteur was Mr Bagliano and the co-rapporteur was Mr Lustenhouwer. At its 368th plenary session (meeting of 8 December 1999), the Economic and Social Committee adopted the following opinion with 68 votes in favour and two abstentions. Introduction 1) In the field of competition law applicable to undertakings, the EC Treaty sets out general rules applicable to restrictive practices (Article 81) and abuses of dominant position (Article 82) (1). The Treaty empowers the Council to give effect to these provisions (Article 83). 2) In 1962, the Council adopted Regulation 17, the first Regulation implementing Articles 81 and 82. This Regu- lation laid down the system of supervision and enforce- ment procedures, which the Commission has applied for over 35 years without any significant change. 3) Regulation 17 empowers the Commission to apply the prohibitions contained under Articles 81 and 83 directly. At the request of the interested parties (notification), it also gives the Commission sole power to declare the Article 81(1) prohibition inapplicable, by virtue of conditions laid down in Article 81(3). 4) In other words, to use the Community terminology, Regulation 17 gives the Commission the power to ‘author- ise’ — by granting an ‘exemption’ from the prohibition — agreements or practices, ‘notified’ by the interested parties, that would have been subject to the prohibition but are eligible for ‘exemption’ by virtue of the conditions laid down under Article 81(3). (1) This opinion refers to these articles using the numbering adopted in the ‘consolidated’ version of the European Union treaties which came into force on 1 May 1999. 5) The Commission is also given sole power to approve, at the request of the undertakings concerned, a ‘negative clearance’, stating the lack of grounds for applying the Article 81(1) and Article 82 prohibitions. 1. The reform proposed by the White Paper 1. 1. Reasons 1. 1. 1. by Regulation 17 is in need of radical reform. According to the White Paper, the system introduced The main reason for the proposed reform is that in 1. 1. 2. view of the current position of the economy and of the Community integration process, and with the new challenges soon to be facing the European Union — especially regarding enlargement to the countries of central and eastern Europe and Cyprus, it is time to replace the centralised system of responsibility established by the Regulation. In particular, the Commission must be freed from the workload arising from its ‘monopoly’ over the power to grant exemp- tions within the meaning of Article 81(3), in order to ensure effective application of Community competition rules. 1. 1. 3. There are also several other grounds for reform. First of all, the Commission workload is no longer justified and is set to become increasingly burdensome in terms of the time and resources required. Furthermore, this workload no longer allows the Commission to exercise its power of ‘exemption’ efficiently and prevents it from focusing its efforts on major international monopolies and cartels. C 51/56 EN Official Journal of the European Communities 23. 2. 2000 1. 1. 3. 1. The Commission workload is no longer justified, as a system based on precedents and regulatory provisions has now developed that can give undertakings legal certainty. In the early days, Regulation 17 exemption decisions were the only antidote to uncertain interpretation and inexperience. The inefficiency is reflected in the unduly lengthy 1. 1. 3. 2. exemption procedures and the small number of cases that are concluded with a final decision, in spite of all the measures taken to overcome this problem. 1. 1. 3. 3. A further reason for reform, according to the White Paper, is that national authorities and courts are often in a better position than the Commission to take effective action, and generally have the necessary skills and resources. 1. 2. Objectives 1. 2. 1. The reform proposed by the White Paper means switching to a decentralised system for applying Articles 81 and 82, in order to: counter any anti-competitive effects arising from the actions or agreements of companies that have considerable market power, where such effects really exist. 1. 3. Switching from an ‘authorisation’ system to a ‘directly appli- cable exception’ system 1. 3. 1. The Commission considers that in order to reach the desired objectives, the current ‘exemption’ system must be replaced with a ‘directly applicable exception’ system. In other words, under the proposed reform, explicit authoris- ation will no longer be required of the Commission to lift the prohibition on agreements and restrictive practices, within the meaning of Article 81(3). Providing the conditions listed under Article 81(3) are met, the non-applicability option will apply automatically from the moment the agreement or practice otherwise liable to contra- vene Article 81(1) is introduced. — ease the unjustified and overly costly workload placed on the Commission by the current system; This new system is termed the ‘directly applicable exception’ system as the exemption will be provided directly by law in each specific case. — enable the Commission to invest the appropriate amount of effort and resources in fulfilling its main institutional duties in the competition field; — involve the national authorities and courts to good effect in implementing the competition rules relating to under- takings; — maintain the Commission’s role in steering, directing, monitoring and intervening, with a view to ensuring the effective and coherent application and development of Community law; — eliminate the risk of abuse, which (in the Commission’s experience) is inherent in the system of ‘notification’ for ‘exemption’ under Article 81(3) (1). 1. 3. 2. The only exception to this new rule would be that the Commission will retain the power to adopt block exemption regulations and adopt specific exemptions for ‘production joint venture’ agreements. The Commission intends to make frequent use of the block exemptions, using regulations with a wider scope of appli- cation than before, based on economic rather than formal legal considerations (2). Under the reform, ‘production joint venture’ agreements, though currently prohibited or exempt as agreements within the meaning of Article 81, will become subject to the Merger Regulation procedure. A further objective is to apply competition rules 1. 2. 2. using criteria that are more economic and less formal than in the past, in order to focus more intensely on the need to 1. 4. Potential impact of the reform proposed by the White Paper (1) According to the White Paper, notification is sometimes used as a delaying tactic, to avoid the risk of fines under Regulation 17, and to secure suspension of any national legal proceedings pending the Commission decision. Notification of an agreement actually provides a form of immunity from anti-trust rules by suspending the related fines. 1. 4. 1. Agreements that comply with the conditions laid down under Article 81(3) will be considered valid from the moment they are concluded. (2) This approach has already been applied under the forthcoming general regulation on vertical restraints, OJ C 270, 24. 9. 1999. 23. 2. 2000 EN Official Journal of the European Communities C 51/57 As Commission authorisation will not be necessary, there will no longer be any obstacle preventing the national competition authorities and courts responsible from applying Article 81 in its entirety. The national courts and authorities will also therefore be free to conduct a thorough examination of the facts and figures submitted to them without having to suspend proceedings pending a Commission pronouncement (thus eliminating the feared danger of abuses). In this respect, the White Paper proposal constitutes a vital addition to the provisions already made in the notices on cooperation with national courts and authorities (1), for the purposes of applying Article 81 in a more diffuse and decentralised manner. According to the rationale underpinning the pro- 1. 4. 2. posed reform, ‘decentralisation’ and the ‘directly applicable exception’ system are therefore closely interlinked; the appli- cation of one necessarily involves the existence of the other. The effective decentralised application of Article 81 would not be possible unless the national courts and authorities were able to examine grounds for exemption [Article 81(3)] as well as evidence of infringement. On the other hand, in the event of a complaint by a third party, the inability to defend the ‘directly applicable exception’ before a national court or authority (responsible, under the decentralised system, for examining evidence of infringement) would prejudice the right of defence of the undertakings concerned, which under the reform would no longer be able to protect themselves using the notification procedure. 1. 5. The ‘other measures’ foreseen by the White Paper 1. 5. 1. research into various other measures. The White Paper makes provision or recommends These are aimed largely at ensuring the reform works and achieving the various complementary objectives (mentioned under para. 1. 2. 1 above). 1. 5. 2. of the Member States. A number of the measures will be the responsibility First and foremost is for those Member States that have not already done so to grant to their respective competition authorities the power to implement Articles 81 and 82. It will not, however, be necessary to grant the same power to the national courts, as this has already been done by the Treaty, according to the interpretation of the Court of Justice. (1) Commission Notices of 13. 2. 1993 and 15. 10. 1997. 1. 5. 3. teeing the Commission’s steering and monitoring role. Other measures are aimed at preserving and guaran- Here, it is accepted that the steering role will require the adoption of general measures such as notices and regulations, as well as specific measures. The specific measures will include the power of the Commission to adopt decisions on more important cases or cases that raise new competition issues. 1. 5. 4. The possibilities for action and other measures and principles will also have the highly important role of arranging for the coordination and linkage of the activities of the national authorities, within the bounds of the Commission’s steering role. According to the Commission, (White Paper para. 91), ‘After 35 years of application of the Community compe- tition rules, the time has come to make better use of the complementarity that exists between the national authorities and the Commission, and to facilitate the application of the rules by a network of authorities operating on common principles and in close collabor- ation. ’ 1. 5. 4. 1. Genuine coordination will also require an infor- mation system on cases pending and decisions adopted, involving the courts and competition authorities of all Member States as well as the Commission. Responsibility for coordi- nation will lie principally with the Commission. Success will depend, however, on the cooperation of the other members of the network. There are also plans to give the advisory committee 1. 5. 4. 2. (with Member State representation) a new and more effective role coordinating the decisions of the Commission and the competition authorities. 1. 5. 4. 3. Commission action will be possible before or even after definitive decisions are adopted, should the Commission not agree or be obliged to act in order to maintain the coherence of the system. Furthermore, the Commission will be able to remove a case from the jurisdiction of a national authority and deal with it itself or pass it on to another national authority. Should the Commission observe that the impact of a particular case largely concerns a single Member State, it will be able to pass the case on to the relevant authority in the Member State concerned. 1. 5. 4. 4. Similarly, when a national authority concludes that a given case is of Community interest and requires Commission intervention, it should in turn be able to pass that case on to the Commission. C 51/58 EN Official Journal of the European Communities 23. 2. 2000 1. 5. 4. 5. The White Paper states that the transfer of a case from one authority to another should also involve transferring the evidence collected in the former to the latter. organised following the reform, both to provide an incentive for undertakings and for the sake of efficiency. There is also a plan to raise the level of fines. 1. 5. 5. Other measures are designed to ensure that Com- munity law takes precedence over national competition laws and that the decisions taken by the various authorities and courts are consistent. (See 2. 3. 5) 2. Comments To this end, the regulation implementing the 1. 5. 5. 1. reform will contain a general provision whereby ‘national’ competition decisions and rules may not obstruct the full application of the block exemption regulations to be adopted by the Commission. In adopting the white paper, the Commission has taken a courageous and ground-breaking initiative which responds to a widely-felt need. 2. 1. The importance of the reform proposed in the White Paper there is no specific mention of However, the possibility and scope for national authorities or courts to choose for themselves whether to apply Community or national law in cases where both are applicable. 2. 1. 1. The proposal seemingly focuses on amendments to a procedural regulation that is over 37 years old, and whose reform has been on the agenda for years. However, the content and the implications of the document go much further. 1. 5. 5. 2. On the question of consistency, the White Paper states (Point 103) that it ‘may also be necessary to strengthen the principle that the application of national or Community law by national courts or authorities should be consistent with the application of Community competition law by the Commission’. The courts will however remain subject to the principles established by the European Court of Justice, and reiterated in the notice (see footnote 4) on their activities, to ensure that decisions are consistent. 2. 1. 2. The replacement of the ‘authorisation’ system with a ‘directly applicable exception’ system is much more than a mere procedural arrangement extending ‘full’ powers — for the application of Article 81 in its entirety — not only to national competition authorities but also to national courts. The proposed reform goes far beyond procedural arrange- ments, and it must be examined from that standpoint. On several occasions, the White Paper refers to the possibility of appealing to the Court of Justice to solve questions of interpretation and avoid inconsistencies. 2. 1. 3. Although, as the Commission points out, the switch from an ‘authorisation’ system to a ‘directly applicable excep- tion’ system will not involve amending the Treaty, it will have a major impact in more general terms. 1. 5. 5. 3. It is important to remember, however, that there is potential conflict between a decision on a case to which the directly applicable exception has been applied under Article 81(3) and a decision on the same case where a tougher national law has been applied. The White Paper makes only the general statement that it would be ‘advisable to establish mechanisms to avoid such conflicts in the first place’. The Commission will be able to intervene as ‘amicus curiae’ in proceedings before ordinary courts. 1. 5. 6. With a view to dedicating more resources to combat cartels and abuses of dominant position, the White Paper provides for other measures designed to facilitate preparatory inquiries and the gathering of evidence. Indeed, the genuinely active involvement of the national bodies — not only in managing but also to a degree in forming Community competition policy — will be an innovation with major repercussions in time. In contrast to court decisions, exercising the power to 2. 1. 4. grant authorisations always leaves ample room for evaluation. The content of an exemption ‘decision’ will never coincide with that of a ‘judgement’ relating to a ‘directly applicable exception’ based on Article 81(3). (For instance, an exemption decision must specify the duration of the exemption and any conditions to which it is subject. Judgements, in contrast, are necessarily limited to stating whether or not a prohibition is applicable. ) A distinction may thus gradually emerge between both the scope and impact of these instruments. The measures for strengthening powers of inquiry should include the obligation for undertakings to provide Commission officials with full information during investigations. Arrange- ments for notifications and claims will be more thoroughly The ample room for manoeuvre enjoyed by the 2. 1. 5. Commission until now in its examinations with regard to Article 81(3) must fit into the context of a competition policy. 23. 2. 2000 EN Official Journal of the European Communities C 51/59 In the drafting of block exemption regulations and also in the individual exemption decisions, the Commission has managed to inject a degree of flexibility into the application of compe- tition policy, so that it fits in with other Community policies (see 2. 3. 6. 8). In the Commission’s reply to the ESC opinion on the XXVIth Report on Competition Policy (1995) (1) it is explicitly recognised that: ‘. in its scrutiny of individual cases pursuant to Article 85(3) [now Article 81(3)] and in keeping with the principle of proportionality, it [the Commission] weighs up the restrictions on competition that result from the agreement and the environmental objectives to be attained. ’ Examples could also include the related issue of merger control, for which different assessment criteria are adopted although in substance they are necessarily homogeneous. The 13th recital of Regulation (EEC) No 4064/89 on merger control explicitly states that ‘. the Commission must place its appraisal within the general framework of the achievement of the fundamental objectives referred to in Article 2 of the Treaty, including that of strengthening the Community’s economic and social cohesion, referred to in Article 130a’. 2. 2. The advantages of the reform The Committee believes that the reform could lead to a substantial improvement in the application of Community competition rules. Whilst the Committee supports the pro- posals in principle, the concerns outlined below under point 2. 3. need to be resolved satisfactorily before any reforms are implemented. The proposed reform meets requirements with regard to both the efficiency of the application of the rules themselves and the specific interests of SMEs and of business in general. 2. 2. 1. A m o r e e f f e c t i v e C o m m u n i t y s y s t e m f o r s a f e g u a r d i n g c o m p e t i t i o n The Committee believes that, given its motives, 2. 2. 1. 1. objectives and probable effects, and inasmuch as it meets the need for companies to have legal certainty, as mentioned under point 2. 3. 6, the reform should do much to consolidate and further develop the Community integration process. 2. 2. 1. 2. important, namely: In this respect, the aim of the White Paper is very — to strive harder and more effectively to combat anti- competitive cartels and abuses of dominant position, and (1) SEC(97) 628. — to address, at source, the danger that a given act or practice can effectively become ‘immune’ from competition law simply by the use of a notification. All those concerned — small, medium-sized and large under- takings, consumers, and anyone directly or indirectly involved with a company’s activities, above all the workers, — will benefit. 2. 2. 1. 3. With the end of the notification system, and the consequent substantial reduction in the number of cases, the proposed system will reduce the burden and cost of safeguarding competition at Community level. The elimination of the notification system signals the end of an essentially ‘bureaucratic’ activity, which has become a major obstacle to the efficient safeguarding of competition. ‘Decentralisation’ will not however simply offload the Com- mission’s work onto the national authorities and courts, with an attendant risk of diverting resources from their respective institutional duties. On the contrary, it will enable all the authorities and bodies concerned to focus on the most serious issues. 2. 2. 1. 4. The move away from formal legal interpretation criteria — which in the past weighed down the application of Community competition law — will also reduce the number of cases, the effectiveness and cost-efficiency of the system. to the further benefit of With mainly economic interpretation criteria, it should no longer be possible to make interpretations on the basis of the letter of the law rather than the intention of the Article 81(1) prohibition, which in the past extended its scope and thus also that of the exemption. The advantages deriving from the reduction in the number of cases subject to examination by all the authorities concerned will easily offset the workload associated with the exchange of information between the national institutions and between them and the Commission; this ‘exchange’ will be a key factor in the smooth running of the system. 2. 2. 1. 5. The switch from the ‘authorisation’ system to the ‘directly applicable exception’ system will necessarily involve a radical change in company behaviour regarding competition issues. Given that up to now the ‘prior notification’ system has taken the responsibility away from companies to some extent, Commission is right to suggest that the switch will make them more accountable. C 51/60 EN Official Journal of the European Communities 23. 2. 2000 It will be up to companies to assess very carefully whether their own agreements and initiatives could cause competition problems and/or result in penalties. 2. 2. 2. 3. Decentralisation will in principle make it possible for SMEs to appeal to (and if necessary defend themselves institutions (competition authorities and before) national courts) directly. Meanwhile, the analyses which companies will be required to conduct in order to complete these assessments should, in time, sow the seeds for a competition culture, which will be the main means of ensuring an effective system for safeguarding competition. 2. 2. 2. 4. in a number of ways, with particular benefit undertakings: The effect will be to improve the current situation to smaller — the proceedings will generally be heard in the language of 2. 2. 1. 6. is decentralisation. One of the most important aspects of the reform the country, Here, the Committee must agree that the national courts and in particular the national authorities should be in the best position to act effectively and swiftly to eliminate the local (but no less important) effects of anti-competitive activity. The increased role of these institutions in implementing Community law could also make a major contribution to the harmonious development of the Community and the effective consolidation of the system. 2. 2. 1. 7. More frequent application of Article 81(1) at national level should also stimulate the application of Article 82 nationally (abuse of a dominant position), given the complementary objectives of the two articles. All this should lead to more widespread and meticulous implementation of Community competition rules, and result in a gradual strengthening of the system as a whole. 2. 2. 2. B e n e f i t s f o r S M E s The reform will be of specific benefit to SMEs. 2. 2. 2. 1. With the switch to the ‘directly applicable excep- tion’ system, agreements will be legitimate from the start, removing the need to follow extremely lengthy procedures involving unforeseeable risks. This will substantially increase legal certainty and transparency, two factors of particular importance to SMEs. Moreover, the lifting of the requirement to apply for exemption under Article 81(3) will remove the workload and costs associated with the Regulation 17 notification procedure. The simplification brought about by the new 2. 2. 2. 2. system will make it easier to safeguard the rights of undertak- ings that consider themselves to have been injured by unfair competition. It will become easier to win damages, as companies will no longer run the risk of proceedings being suspended or uncertainty as to whether the Commission will grant an exemption for the agreements in question. — the cost of proceedings, including logistical costs and the costs of any assistance, will be significantly lower, — cases will be easier to manage — it will also be easier to explain and understand local issues, which are often vital for making a more precise competition-related examination of the agreements and practices of small and medium-sized enterprises. 2. 2. 2. 5. position, will also be of substantial benefit to SMEs. The future focus on economic criteria and market The majority of these companies should benefit from the new block exemption regulations, which will free them of the burden of self-assessment imposed by the ‘directly applicable exception’ system. 2. 2. 3. A d v a n t a g e s f o r b u s i n e s s i n g e n e r a l The business world as a whole will benefit from 2. 2. 3. 1. the advantages described above. After all, the reform responds to needs expressed by all the operators involved. For this reason, in recent years, the Commission has launched various initiatives all with the aim of making the system more efficient. In spite of those efforts, the main problems have 2. 2. 3. 2. persisted. The procedures are costly, the proceedings are lengthy and there is no legal certainty: more often than not, companies are obliged to implement agreements before the Commission has been able to examine them in depth. All this runs counter to the objectives of Community legislation as represented by the 1962 ‘prior authorisation’ system. ‘Comfort 2. 2. 3. 3. letters’, with which the Commission attempted to address the operational difficulties, are not legally binding, as the Commission and the Court of Justice have acknowledged on several occasions. Comfort letters provide nothing more than an initial response, or rather a general pointer. They can protect companies from Commission action 23. 2. 2000 EN Official Journal of the European Communities C 51/61 (unless new evidence is brought to light). However, in contrast to exemption decisions, comfort letters give companies no real their guarantee against complaints as to the validity of agreements made by third parties (or even their own partners) to a national court or authority. Furthermore, despite their heavy outlay of resources and time, comfort letters do nothing to develop a system whereby companies can enjoy the necessary legal certainty and peace of mind. Such letters are confidential, and in most cases present no arguments. For all these reasons, they are not a reliable precedent, and cannot contribute to the development of the system in the way that the Regulation 17 decisions always have. 2. 3. Measures to address the difficulties and dangers inherent in the implementation of the reform 2. 3. 1. N e e d t o a d o p t p r e l i m i n a r y a n d / o r a c c o m p a n y i n g m e a s u r e s The Committee feels it has a duty to point out the difficulties and dangers of implementing the reform proposed by the White Paper without first adopting appropriate ‘preliminary measures’, even if this means delaying the reform, however urgently it is needed. The planned reform must be accompanied by a specific programme of preliminary and/or accompanying measures, both to help prepare the ground and to provide an initial response to the most pressing demands. 2. 3. 2. M e a s u r e s n e c e s s a r y f o r i n v o l v i n g t h e i n i m p l e m e n t i n g t h e n a t i o n a l c o u r t s r e f o r m 2. 3. 2. 1. It is first necessary to establish whether the con- ditions exist for switching from the existing centralised author- isation system to one that heavily involves the national courts. 2. 3. 2. 2. While companies and national authorisation bodi- es have definitely been party to the development of the Community ‘culture’ of competition, national courts have been so to a lesser extent (and in a different way). specialised in civil and commercial law while others do not. The way courts deal with Community issues has thus developed differently in the various Member States. Therefore, without appropriate measures, there is little or no chance that the national courts will react in basically the same way to the reform. The danger is that it will prove impossible to implement the reform in a uniform manner throughout the Community, and that the unity of the system will thus be jeopardised. 2. 3. 2. 3. The varying situations in individual countries may also lead to inconsistencies and differences in interpretation, which the more mobile companies (and those located in the countries with the most favourable conditions) could exploit to the detriment of others and of the coherence of the entire system. The time taken over civil and commercial 2. 3. 2. 4. law proceedings in the various Member States is often incompatible with the speed and urgency required by competition issues. Without radical changes, a case involving various levels of appeal could take longer than the already lengthy Community procedures necessitating reform. Furthermore, the rules on the responsibilities and activities of the courts are often extremely rigid and in general not easily wed with the flexible contacts needed to work the system proposed by the White Paper. 2. 3. 2. 5. Although the dangers that have been highlighted require full attention, it should be possible to deal with them if the right measures are taken and quickly. The Committee also believes that many of the measures to eliminate or reduce these dangers must be taken directly by the Member States. However, a major effort can and must be made to achieve this objective by the EU, at all institutional levels. 2. 3. 2. 6. First of all, the relevant authorities and courts must be directly involved in the consultations that the Commission is conducting on this subject. These consultations could generate important answers to a number of preliminary issues that need a practical response, regarding for instance: — the real reasons for the limited application of Community competition legislation by the national courts; Decision-making practices and rules in the courts of the various Member States vary enormously, as do deadlines and procedures. Furthermore, some countries have courts that are — specific obstacles giving rise to this situation, in addition to the lack of jurisdiction to apply Article 81(3); C 51/62 EN Official Journal of the European Communities 23. 2. 2000 — the need for special training in the courts; — the need and scope for various types of cooperation and division of responsibilities between courts and competition authorities in order to make mutually beneficial use of resources and skills. 2. 3. 2. 7. Secondly, a detailed training programme should be set up to familiarise courts with the new duties and issues they will have to face. From now on, universities and cultural, economic and legal institutions should also be involved in order to step up training and information measures. Lastly, 2. 3. 2. 8. further efforts are required to continue legislative harmonisation, using notices, recommendations and decisions, where appropriate. The Committee hopes in particular that it will be possible to harmonise the various aspects that might give rise to ‘forum shopping’. As yet, only a few legal systems have adopted legislative principles or mechanisms involving an application of national competition law that tallies in essence with that of Community competition law. 2. 3. 3. 3. For all the above reasons, preliminary measures must be adopted similar to those foreseen for the courts. Otherwise, the ‘network’ upon which much of the success of the new system will depend, will not function. 2. 3. 4. C o n d i t i o n s a n d r e q u i r e m e n t s f o r t h e a d o p t i o n o f n o t i c e s a n d b l o c k e x e m p - t i o n s u n d e r t h e n e w s y s t e m 2. 3. 4. 1. The Committee accepts the role given by the White Paper to interpretative notices and block exemption regulations, to be adopted by the Commission. For instance, taking a broader approach (in harmony with the Helsinki principles), the duration of proceedings and levels of court should, as far as possible, be compatible with the requirements of business and be standard throughout the European Community. Similarly, the courts’ investigative and decision-making powers should be standardised. It would seem essential, however, that the close connection (that has always existed in the past) between the adoption of these general instruments and the decision-making activity of the Commission be maintained. One of the fundamental features of Community competition law, which has con- tributed to the efficiency and success of Commission action, is its ‘methodical’ approach. The Committee is also in favour of setting up specialised courts (or special sections) in all the national systems to deal solely with competition law, as this would contribute significantly to the efficiency of the new set-up. Even when adopting ‘general’ instruments, the Commission has always referred back to its experience acquired in dealing with individual cases; this feature must be preserved. 2. 3. 3. M e a s u r e s o f i n c r e a s e n a t i o n a l c o m p e t i t i o n a u t h o r i t i e s t h a t m u s t t h e i n v o l v e m e n t a d o p t e d b e 2. 3. 4. 2. All companies must be able to benefit, in principle, from the experience gained in applying competition law and from the guidance provided by notices and block exemption regulations. t o t h e 2. 3. 3. 1. Involving the national competition authorities will, though to a differing extent, have similar dangers and necessi- tate similar measures to those recommended for the courts. While competition law should be applied on the basis largely of economic criteria, these criteria must be identical for all types of company, unless it can be proved that the impact on competition genuinely differs. However, the national competition authorities will probably have fewer problems in terms of ‘culture’ or lack of experience. There are also differences in the degree to which they are used to, and institutionally equipped for, working with the Commission. 2. 3. 3. 2. However, with these institutions too, there are major differences between the Member States as regards the experience, resources and procedures available. First, there are major differences regarding the implementation of Community law. It is an established fact that not all the national authorities have the power to apply Community law directly. Moreover, their powers and their degree of autonomy with regard to the executive may also differ. 2. 3. 5. S a f e g u a r d i n g t h e u n i t y a n d c o h e r e n c e o f t h e s y s t e m a n d e n s u r i n g t h a t C o m - m u n i t y ( s e e 1. 5. 5 ) p r e c e d e n c e l a w t a k e s 2. 3. 5. 1. In view of the nature of the Commission proposal, safeguarding the unity and coherence of the system will be the area carrying the greatest risks. For this reason, it will require the greatest legal imagination in order to pinpoint the most suitable preliminary and accompanying measures. In switching from a highly centralised system to a decentralised system, there will always be a risk of losing the elements that hold the system together. 23. 2. 2000 EN Official Journal of the European Communities C 51/63 This is all the more true since the switch is taking place in the still highly diverse Community legal system. Furthermore, the national bodies that are to implement the decentralised system do not yet all appear to be ready to take on the responsibilities that this system will impose on participating bodies. The enlargement of the European Union to the countries of central and eastern Europe will raise several very serious and urgent problems in this respect. 2. 3. 5. 2. The risk of fragmentation is heightened by the fact that decentralisation must take place in conjunction with the shift from an ‘authorisation’ system to a ‘directly applicable exception system’. This will reduce the number of provisions with ‘erga omnes’ effect [exemption decisions under Article 81(3)], with the result that it will not longer be legally impossible for there to be several assessments of the same agreement by one or more bodies. 2. 3. 5. 3. The picture is further blurred by the diverse nature, powers and intervention measures of the competition authorities and courts that will be helping to implement the new system. Another possible source of 2. 3. 5. 4. fragmentation and incoherence is the fact that all the bodies involved will often be faced with a choice between two differing sets of rules that do not always agree: the national rules and the Community rules. 2. 3. 5. 5. cases to be decided. A final complicating factor is the very nature of the An ‘economic’ approach to competition involves making an assessment on the basis of the impact of an agreement on the market in question, irrespective of where the agreement was drawn up or implemented or where the parties to it are located. Furthermore, with the ‘economic’ approach, the time when the agreement came into being or the act took place may also be irrelevant. The impact may and often does change over time, in the same way that a single agreement or practice can have a differing impact on different markets. All this will reflect in turn on both the choice of the law applicable and the choice of which body should carry out the if the action affects the markets of assessment. In theory, several Member States simultaneously, the laws of all those States are applicable and all the national bodies have the power to judge in the absence of: — supranational legislation applicable in all these Member States, — or legislative or agreed principles imposing the application of that legislation, or of a specific national law, and/or providing exclusive power to apply supranational legis- lation [e. g. Regulation 17 for Article 81(3)]. 2. 3. 5. 6. The Commission is certainly aware of the com- plexity of the issues and of the difficulty of coming up with definitive solutions. Therefore, the White Paper sets out various measures to address the many problems and also refers to the need for further research. The Committee notes and welcomes the open and responsible approach taken by the Commission. The present comments and suggestions represent its initial response. However, the concerns raised by the proposal are understanda- ble as illustrated by the risks and difficulties underlined in the present opinion. The danger of the ‘fragmentation of the single market’ and the ‘renationalisation’ of competition law are particular sources of concern. In the Committee’s view, these concerns could be to some extent allayed by first adopting robust preparatory and accompanying measures. 2. 3. 5. 7. For the Committee, flexibility in the system and in the sharing out of responsibilities is one of the main objectives, but it will only be achieved if a number of safeguards are set in place. Appropriate measures must be devised to: — guarantee the necessary flexibility and the establishment of a genuine ‘network’; and — enable companies to tell which authority will be respon- sible for implementing the relevant procedure and what may be the outcome, and, more generally, defend their right to a defence most effectively. Special measures must also be aimed at ensuring effective cooperation between the competition authorities and the ordinary courts, in order to tap all possible synergistic effects and secure greater consistency. 2. 3. 5. 8. To this end, one important element will be a precise definition of ‘Community interest’, since this interest must be at stake for a case to be dealt with directly by the Commission rather than by a decentralised authority; the definition should as far as possible be based on objective criteria. The same must apply for the opposite scenario, i. e. the transfer of a case which is not deemed to be of ‘Community interest’ from the Commission to a decentralised authority or even from one authority to another. C 51/64 EN Official Journal of the European Communities 23. 2. 2000 However, provision must also be made for a binding general principle that the arrogation and transfer of cases must be conducted within a short timeframe, in line with business requirements. also be open to appeal to a supranational court of law, with full powers of examination that also cover the substance of the case. (1) A cut-off point must thus be established — either after a certain period of time or after a certain action has been completed — after which the Commission can no longer revise an adopted decision or transfer a case. 2. 3. 5. 9. The decision to transfer cases from one authority to another, and/or to group together previously separate cases with a view to ensuring the effectiveness and cost-efficiency of the system, must be taken on the basis of known criteria and must in no way prejudice the right of companies to confidentiality and to the protection of their industrial secrets. The principle must also be upheld whereby confidential evidence may only be used for the case and purpose for which it was gathered, in accordance with the principles set by the extensive case law already existing on the subject. The use of presumption and other evidence must be tempered by the need to strike the right balance between achieving efficiency and safeguarding companies’ legitimate interests. 2. 3. 5. 10. Moreover, clear mechanisms must be put in place to secure the unity of the system and to prevent conflicting decisions. Prevention cannot be based solely on the abstract recognition of the Commission’s power to arrogate or intervene. Prior provision must be made for the conditions, procedures and legal effect of the exercise of that power. Therefore, precise rules are needed to guarantee the legal effect, in all national legal systems, of the Commission’s coordination and monitoring powers with relation to any incorrect or inconsistent decisions or rulings. Care must be taken, further- more, to prevent jurisdiction overlaps on individual cases (involving either one or more authorities, or authorities and courts). 2. 3. 5. 11. Companies must be able to appeal effectively to the most appropriate authorities against conflicting or inconsistent decisions or errors of judgement. 2. 3. 5. 12. Very careful attention must be paid to the risk that competition law will be ‘renationalised’, as well as to defending the precedence of Community law. Appropriate safeguards are required. Decisions on whether to apply national or Community law cannot fall solely to the discretion of the courts and authorities responsible. There should be a provision to state that national law must not be applied to cases where Community law applies. A decision establishing an infringement on the basis of national law must not take precedence over a decision or judgement that recognised the presence of any of the con- ditions laid down in Article 81(3). 2. 3. 5. 13. For the system to become genuinely integrated, the harmonisation process must be stepped up, and all Member States must start applying Community principles to the interpretation of national law as well as Community law. 2. 3. 6. L e g a l c e r t a i n t y — t h e n e e d t o s a f e - i n t h e a n d a g r e e m e n t s c o n f i d e n c e g u a r d c o m p a n i e s ’ l e g i t i m a c y o f p r a c t i c e s t h e i r 2. 3. 6. 1. A further issue raised by the proposed reform is that of safeguarding companies’ confidence in the validity of their agreements. The Committee is aware that this requirement does not always sit comfortably with the reform’s drive for greater efficiency. 2. 3. 6. 2. The White Paper highlights the accountability of companies regarding the assessment of their agreements. In principle, such assessments will no longer be delegated to a body that takes a definitive decision on the matter. The White Paper therefore considers that, in principle, the de facto conditions which gave rise in 1962 to the exemption (by means of authorisation) system for applying Article 81(3) (previously 85(3) of the Treaty) no longer exist. The exemption system was designed in part to satisfy the confidence require- ment [the ‘definite’ validity, erga omnes, of authorisation decisions under Article 81(3)]. In view of the considerable economic and social importance of competition legislation, the Committee, while aware of the difficulties, hopes that judgements made by national courts (possibly promoting any necessary constitutional changes) will (1) This issue has already been addressed with reference to the European trademark and the study on the Community patent. Although they are essentially unrelated, it is possible that the further research done in these areas could be applied to compe- tition. 23. 2. 2000 EN Official Journal of the European Communities C 51/65 2. 3. 6. 3. However, the White Paper recognises that in some cases, protection similar to that provided by Regulation 17, but even more effective, is not only justified but essential. 2. 3. 6. 6. The exceptions to the general rule cannot be limited to specific cases mentioned explicitly by the new legislation. As mentioned above (see 1. 3. 2), this has been recognised for production joint ventures. Under the Commission proposal, these undertakings, though they are ‘agreements’, will in future come under the Merger Regulation, which provides for legally binding prior authorisation, similar to exemption. Production joint ventures sometimes involve very high levels of investment and by their nature have irreversible effects that are similar to those of mergers. In such cases, the directly applicable exception does not satisfy the need for legal certainty, as the uncertainty will clearly remain until the relevant courts or authorities have made their decision. The White Paper makes explicit reference to a new type of ‘decision’ to apply to cases of particular importance or which raise new issues. However, this is not enough. There is a need to clarify when they must be adopted, who can request them and under what conditions, what the procedures will be and what will be the legal effect of such decisions. The question of when to apply the new type of 2. 3. 6. 7. decision must not be left to the discretion of the Commission, but must be governed by precise rules which can be invoked — in exceptional circumstances — by all interested parties. Though they differ from the Regulation 17 exemption decisions, these decisions should be taken before the event, have ‘erga omnes’ effect, and be subject to brief procedures, similar to those set out in the Merger Regulation. The absence of this exception could have a paralysing effect on business initiative and prevent initiatives that would otherwise strengthen rather than weaken competition. 2. 3. 6. 8. decisions could satisfy other reform-related requirements. As well as meeting the above demands, these However, with the ‘exception’ of production joint ventures (which would fall under the Merger Regulation), the need for legal certainty is met both by the brevity of Merger Regulation procedures and by the ‘erga omnes’ effect (as for the Article 81(3) exemptions) of the final decisions. 2. 3. 6. 4. Exceptions should also be made for other cases, however, where, to a certain degree at least, there are grounds similar to those justifying the exception granted to ‘production joint ventures’. This may apply to certain forms of ‘strategic agreement’, which are increasingly common in industries that are innovating or being liberalised, or which in any case are undergoing major restructuring. These operations are not ‘mergers’ in as far as they do not result, at least formally, in the disappearance of the individual identities of the companies taking part. However, they do involve the entire structure of the companies con- cerned, sometimes with irreversible effects, and are the necess- ary precondition for major investments. 2. 3. 6. 5. A further example is that of companies that prepare standard contracts for use in an unspecified number of agreements, to be drawn up at different times and in different places, and involving significant investment and irreversible effects. Together with regulations and notices, these decisions could provide the Commission with the primary instrument — or one of the primary instruments — with which to conduct its guiding role. (See 2. 1. 5) They may also help to ensure uniform and consistent appli- cation of the law by the national courts: enabling the courts to refer to the Commission’s decisions in legal proceedings will provide them with some guidance in interpreting the complexities of Article 81(3). In this respect, the Committee would state that the importance of the reform and the influence it will have on all Community competition law justify the reform itself and demand the immediate implementation of several new preparatory and accompanying measures, while work continues on the reform project. 2. 3. 6. 9. In any event, it must be made clear and a guarantee given that the abolition of the prior notification system shall not in any way prevent — but rather should encourage — prior dialogue between the companies, the Commission and the national authorities, should the companies so wish. Obviously, this dialogue will not replace the ‘decision’ or offer legal certainty, but it could provide an indispensable, indication for preliminary, important cases, and as such could become a routine means of operating in mutual trust and openness. and non-binding informal C 51/66 EN Official Journal of the European Communities 23. 2. 2000 2. 3. 7. M e a s u r e s t o b e a d o p t e d ‘ b e f o r e ’ t h e Article 81(3) to the national authorities (1). i m p l e m e n t a t i o n o f t h e r e f o r m It may be useful — and in the Committee’s view it is necessary — to adopt legislative, administrative and organisational measures to adjust the current system pending the implemen- tation of the reform. Such measures would prepare the ground for the reform and could make an (in some cases major) impact on current problems. 2. 3. 7. 1. One interim measure could be to adopt a notice, definitively establishing the principle whereby the criteria for interpreting the first sub-paragraph of Article 81(1) must take account of the economic effects rather than the mere letter of agreements (as is already generally the case in the new system for vertical agreements, soon to be adopted). This would possibly reduce the risk of Article 81(1) being applied increasingly on the basis of formal criteria alone (application of the prohibition if an agreement restricts the market behaviour of companies, regardless of the effects). A measure of this kind (new criterion for interpreting Article 81(1)) could put companies at ease regarding the validity of their agreements and thus substantially reduce the need for them to ‘notify’ the authorities of them. 2. 3. 7. 2. The efforts already made by the Commission and mentioned in the White Paper to shorten the length and the procedures must continue, as lighten the burden of considerable improvements have already been achieved. 2. 3. 7. 3. The Committee does not feel however that these measures should involve giving the power of exemption under Brussels, 8 December 1999. This would put an end to the current Commission monopoly over Article 81 (3) exemptions as laid down by Regulation 17, but it would be more of a hindrance than a help. It would do nothing to reduce the overall number of notifications and it would raise difficult interpretation problems owing to the unclear division of responsibilities. The multiplication of powers would not result in the simplification aimed at by the reform, but would create new procedural problems which could constitute a further obstacle to the efficiency of the whole system and to company business. 3. Conclusion 3. 1. In the Committee’s view, the reform proposed in the White Paper is both justified and valid. There are, however, difficulties and dangers which must be addressed by means of a specific programme of preliminary and accompanying measures. The Committee has used the present opinion to propose a number of practical, necessary and preliminary measures and to make a series of more general suggestions, which are nonetheless equally important for the implementation of the reform. The aim of these measures is to create the necessary 3. 2. preconditions for reform (2. 3. 1. ), namely: — conditions for effective decentralisation (2. 3. 2 and 2. 3. 3), — preservation of the unity and coherence of the system and the precedence of Community law (2. 3. 5), — maximum legal certainty (2. 3. 6). The Committee reserves the right to make further 3. 3. comments and contributions to the debate. (1) This possibility is mentioned in the White Paper (points 58 to 62) as an alternative — later rejected — to the proposed solution, i. e. the switch to the ‘directly applicable exception’ system. The President of the Economic and Social Committee Beatrice RANGONI MACHIAVELLI