Select Committee on European Union Fourth Report

The applicant states

69. The White Paper stated that enlargement of the Community would make it necessary to strengthen competition policy. A number of the applicant States have a background of a planned economy and state monopolies and have administrative structures unfamiliar with the concepts of markets and free enterprise. There would be an increase in the number of agreements and practices potentially subject to Community law. In a Union with more than 20 States the rules for implementing Articles 81 and 82 must be modernised if competition policy is to continue to operate efficiently.[15] In its Response to the Commission, the Government said: "the prospect of enlargement underlines the need for a thorough review of the approach to competition law enforcement across the Community" (p 130). The position of the applicant States was not, however, addressed in detail by the White Paper, though it stated that in the context of its pre-accession strategy, the Commission would devote particular attention to the development of competition in the candidate countries and would provide their competition authorities with increased assistance.[16]

70. Professor Whish commented that the countries involved had very different backgrounds, economically, politically, institutionally, and it had to be asked whether their competition authorities would be in a state of preparedness to be making the sort of decisions they would be making (Q 12). The CBI said that the applicant States had little experience of applying competition law, many having been used to a command economy. Such inexperience would lead to varying levels of enforcement and inconsistent application of the Competition Rules, particularly in the early stages of accession (p 12, Q 67).

71. Mme. Montalcino (DGCCRF) noted that even within the present Community some authorities had more experience in applying competition laws than others did. The applicant States were doing a lot of work to put in place competition laws and also to have competition authorities to enforce those laws. The applicant States had to implement that acquis communautaire and they should be trusted to do so. M. Chambu added that relieving the Commission from the burden of dealing with notifications would enable them to target resources on those States. The limited effects of a decision of national authority applying Article 81(3) as exception légale also served to reduce risks of perverse decisions. Furthermore a complainant could always take a case to the Commission (Q 220). Mrs Bloom (OFT) also noted that the authorities would not be taking exemption decisions or so-called positive decisions (which would be for the Commission alone) but only prohibition decisions affecting their countries. Demands on them might not be as great as first seemed (QQ 356, 360).

72. Mr Nagy (Hungarian Competition Office) accepted that the authorities in Hungary had no direct experience in applying EC law. But they had harmonised their domestic law to the Community rules and had over ten years experience in applying that law (Q 242). Professor Fornalczyk described the growing appreciation of Polish industry of competition law and, with accession only a few years away, the Community rules. Firms were rapidly adapting their commercial behaviour to the ways of a modern market economy (Q 244). Both Mr Nagy and Professor Fornalczyk accepted that additional resources would have to be made available to their authorities if the White Paper proposal were to be implemented (QQ 257-8). Mrs Bloom (OFT) assumed that as the introduction of the reform package and accession both grew nearer the need for discussion with the applicant States would become greater (Q 357).

The problem of consistency

73. The White Paper acknowledged that decentralisation must not compromise the uniform interpretation of Community law or result in a number of national authorities being able to adopt contradictory decisions on one and the same case.[17] Professor Whish considered that the Commission's proposals offered scope for forum shopping before national courts notwithstanding the rules in the Brussels Convention. There was even greater scope for forum shopping in relation to national competition authorities because there were no rules at all allocating jurisdiction among them (Q 16). Dr Wolf (BKA) also considered that there was a risk of forum shopping. He drew on the experience under the Merger Control Regulation (Q 188). The White Paper contained the idea that the national competition authority in whose jurisdiction rests the centre of gravity of the agreement (the Schwerpunkttheorie) should have jurisdiction. Professor Whish thought that that idea had many problems (QQ 16, 22). But Mrs Bloom (OFT) doubted whether there were many possibilities for forum shopping between national competition authorities. It was not the case that parties would go shopping for exemption decisions as they would not be available under an exception légale system. So far as complaints were concerned, if more than one Member State was affected then the complainant could be expected to go to the Commission. Otherwise it would be unlikely for a competition authority in one Member State to take on a case solely having effects in another (Q 333).

74. Mr Nagy (Hungarian Competition Office) thought that there should be a regime for allocating competence not only as between the Commission and a national competition authority but also as between one national competition authority and another (Q 253). Mr Lever and Mr Peretz put forward a proposal under which there would be requirements to notify and consult the Commission and other authorities against a fixed timetable (pp 159-6). But Mr Whitehorn (OFT) doubted whether there was a need for formal rules of allocation. It should be possible to decide which authority dealt with a particular matter on a case-by-case basis. He thought that it would be relatively easy to have a general understanding of how such a scheme would operate. The Commission would handle cases involving more than one Member State. As was the situation under the Commission's 1997 Notice on co-operation, where the effect of an agreement was mainly in one Member State that Member State would deal with it. Any dispute between national authorities would be resolved by the Commission dealing with the case. Cases involving Article 86 (formerly 90) would also be dealt with by the Commission. Similarly the Commission would be expected to deal with cases involving a novel point of law or which might lead to a significant development of Community competition policy (Q 335).

75. Mr Paulis, for the Commission, said: "We think that our criterion should be "the authority which is best placed". Which authority is best placed? The authority which has access to the evidence and the authority which can adopt the decision with the most efficient remedy". But Mr Paulis did not believe that with parallel competencies the Commission would be able to direct a complainant to any particular authority. The choice would be the complainant's (Q 285). The Government did not see that there could be a clear dividing line between what went to the Commission and what remained with the Member States. There would have to be a proper network (with an exchange of information) between the Commission and the national competition authorities on how cases were handled. It would be unsatisfactory if the Commission intervened and took over cases too frequently (QQ 327, 331).

76. The CCBE believed there was a danger that decentralisation would lead to EC competition rules being applied differently across Member States (p 152). The CBI did not believe that national competition authorities were in a position to ensure the consistent application of the Competition Rules throughout the Community without giving undue emphasis to potentially differing national interests. This could jeopardise the completion of the Single Market. The CBI spoke of decentralisation leading inevitably to conflicts of jurisdiction, forum shopping and inconsistent application and enforcement of the law. Commercial agreements would face double or even multiple jeopardy, through proceedings before one or more of fifteen national competition authorities, complaints before national courts, and before the Commission (pp 12-13). There was a need, Mrs Holmes (the Joint Working Party) said, to ensure there was proper co-ordination and consultation among the Member States to avoid conflicting decision making (Q 96).

77. Mr Paulis, for the Commission, said that removing the monopoly over Article 81(3) would create the risk of inconsistent decisions. That was unavoidable. But he saw it being controlled in various ways. The Court of Justice would develop the case law and jurisprudence on Article 81(3). The Commission could also provide guidelines on the four conditions specified in the Article (QQ 287, 289). Ms Anderson (DTI) said that Ministers would attach importance to there being an effective system of co-operation. Mrs Bloom (OFT) described the extent of co-operation that currently existed, including discussions on a wide range of issues and the exchange of staff. She agreed that there would have to be stronger mechanisms for co-operation, building on what happened at present and providing a formal means of ensuring co-operation (Q 355).


78. The Commission's proposed solution to the problem of consistency was an informal/flexible arrangement in which it would have a central position. A national competition authority examining an agreement or practice, upon a notification or complaint, would have to notify the Commission that it was conducting an examination. The Commission could give informal assistance. The role of the Advisory Committee[18] might be also be strengthened. Mr Paulis, for the Commission, said that the Commission was intending to build up a "network of competition authorities". He was working on the setting up of "a real intranet". Competition authorities would be linked to each other in such a way that they instantly have information about all cases being started, either by the authority acting ex officio or on the basis of a complaint (Q 276).

79. The Law Society of Scotland said that if decentralisation was going to work the Commission would, particularly in the early years, have to give guidance to national authorities. It would have to respond to requests from both national authorities and courts much more speedily (p 157 ). Mme. Montalcino (DGCCRF) said that one of the main tasks of the Commission would be to ensure that there was consistency in the application of Community law. It would have powers to issue guidelines, to intervene in cases and to make a priori decisions in particular cases. Mme. Montalcino said that the Commission would have to have a central role at the head of a network of competition authorities applying Community law (Q 221).

80. The Joint Working Party doubted whether what the White Paper was proposing would be enough. Mr Freeman said: "I think the Commission should be looking to propose some kind of new institution, a council or a committee for the national authorities which would have some kind of formal status and whose deliberations could be available to humble practitioners like myself" (Q 114). Mr Green spoke of the need for "some umbrella organisation or guidelines or code of conduct which will lubricate that process of co-operation because otherwise one can imagine there will be turf wars" (Q 115). It was possible for national authorities to reach different conclusions on a matter having regard to the situation in the geographical market to which they were closest. If more than one authority was seised of a matter there should be a duty to notify the Commission and a dispute resolution procedure available if necessary to determine which authority should handle the case. Such issues could not be left to informal co-operation. There needed to be rules (QQ 115-7). The Competition Law Association said that the Commission's liaison with national competition authorities should be "very considerably developed and institutionalised". Dialogue between them should be regular and formal (QQ 110, 117).

81. The Government accepted that the Commission could be responsible for general policy, including issuing notices and guidelines. Those measures together with greater use of the Advisory Committee and of block exemptions would encourage consistency. Duplication of work had to be avoided and the division of responsibilities within the "network" of the Commission and national competition authorities had to be clear. The Commission might generally handle cases covering wide geographical areas. Beyond that it might not be desirable to set out "bright line divisions of responsibility". As regards consistency of decision-taking, the aim should be to establish mechanisms that ensured consistency in advance of decisions being taken (p 135).

82. Mr Freeman (Joint Working Party) believed that there was a case for improving and providing consistency in appeals against decisions of national competition authorities. In the UK the Competition Appeal Tribunal, which will hear appeals from the OFT under the Competition Act, might have a greater role (Q 121). The Government also thought that that was a question that ought to be given further consideration (Q 354).

83. As regards recognition by one national authority of the decision of another, it was noted that Article 10 of the EC Treaty already imposed an obligation of sincere co-operation on Member States. Mr Green (BEG) said that administrative authorities were thus "duty-bound to co-operate both one with the other and with the European Commission" (Q 115). Professor Whish could see that there was an argument that the second Member State might be under a duty as a matter of Community law to respect the prior decision of the first Member State (Q 23). Mr Roth (Competition Law Association) did not believe that, in contrast to the position of judgments of national courts under the Brussels Convention, decisions of national competition authorities would be binding in other Member States, but he accepted that they would be persuasive (QQ 117, 120).

84. The Commission would also be able to take a case out of the hands of a national competition authority.[19] Both Professor Fornalczyk (University of £ódŸ) and Mr Nagy (Hungarian Competition Office) disliked the idea that the Commission could remove a case from a national authority (QQ 251-2). But Mr Paulis (Commission) pointed out that that power was not new (Q 276). It was possible under the present regime (Article 9(3) of Regulation 17) for the Commission to take over a case though the power had only been exercised once in forty years. Mr Whitehorn (OFT) said that if one accepted that the Commission had a leading role in developing competition policy at Community level then, although there would inevitably be political sensitivities, it was difficult to see on what grounds one could object to taking over a particular case (QQ 352-3). Dr Wolf (BKA) accepted that the ability of the Commission to interfere in proceedings of a national competition authority was necessary to guarantee consistency for the whole regime (Q186). Ms Anderson (DTI) thought that if a properly workable system for dealing with cases were designed it would only very infrequently be necessary for the Commission to take a case away from a Member State (Q 354).


85. The White Paper has suggested that consistency might be maintained by inter alia national courts avoiding conflicting decisions, if necessary by staying the proceedings and seeking guidance on questions of law from the Court of Justice under the preliminary reference procedure provided by Article 234 (former 177) of the EC Treaty.[20] The Government anticipated inevitable teething problems in national courts applying Article 81(3) and expected a substantial number of references being made to the Court as there had been little jurisprudence because the Article had to date only been applied by the Commission (Q 344). Witnesses expressed concern that one consequence of the Commission's proposals might be that there would be an increase in Article 234 references and that the Court of Justice could be overburdened by preliminary references from national courts (p 152). The CBI said that the Court's involvement would undoubtedly help to ensure consistency but at the risk of "even more massively overloading that court which already has its own backlog and workload problems" (Q 57). Professor Whish said that he would find it more rational that competition matters might in future go to the Court of First Instance (Q 21). Practitioners argued that consideration might be given to the Court of First Instance hearing such cases, though that would require Treaty amendment (QQ 119-22).

86. Mr Roth (Competition Law Association) doubted whether preliminary references to the Court of Justice would be very helpful in practice. They would be confined to questions of interpretation (Q 122). Mr Justice Ferris was of the same view. He said: "the difficulty of the national court ... is going to be in making the judgement about these rather nebulous economic criteria: does this agreement contribute to improving the production or distribution of goods or to promoting technical or economic progress? You cannot make a reference on that question. You can only make a reference on some much more limited question of European law" (Q 144).

87. The White Paper accepted that the Article 234 reference procedure was slow and therefore also suggested that consistency might be improved by increasing information and co-operation procedures. It proposed that national courts should be obliged to notify the Commission of cases before them which raised competition issues. The Commission should be able, subject to the leave of the court, to intervene in proceedings before national courts.[21] The CCBE questioned whether all Member States' legal systems would readily accept the amicus curiae system and to what extent the opinions given by the Commission before national courts would be binding (p 152). The Faculty of Advocates described the intervention of the Commission in national proceedings as "a more problematic provision". It would involve substantive Community legislation in the area of judicial autonomy. The procedural autonomy of national courts could be compromised. There would be questions as to what appeal rights there might be against a decision to allow or to refuse an application for intervention by the Commission. The Faculty also expressed concern that the proposal raised "delicate questions as to the role of national courts and seems to envisage a more pro-active or inquisitorial role for domestic courts and judges than has hitherto been the norm within the Anglo-Celtic legal systems of England, Scotland and Ireland" (p 155).

88. Mr Justice Ferris thought that some sort of participation by the Commission would be necessary to foster consistency (Q142). Mr Justice Laddie agreed but questioned whether it was in practice feasible for the Commission to participate in courts throughout the Community: "you are going to have personnel from the Commission flying to London, to Paris, to Ferrara, to Athens. This may be a wonderful way of entertaining everybody but whether it is efficient is another matter" (Q 143). Mr Paulis, for the Commission, spoke of the Commission providing "ad hoc co-operation". It was not, however, the Commission's intention to run around Europe and to be present in every trial. It would be selective. Where not in attendance, the Commission would be able to assist the Court by giving a written opinion. Mr Paulis also envisaged co-operation between national courts being developed in the context of a European Judicial Area (espace judiciare) as part of judicial co-operation on civil matters in implementation of Part IV of EC Treaty (Q 277).

89. The CBI did not believe that it was practicable for the Commission to monitor and be involved in national proceedings before national courts. It would have to be familiar with the local procedure and language. Mrs Martin Alegi said that when appearing before UK courts the Commission would be appearing "at least as some sort of expert witness and its views on the law and on policy would be open to examination or cross-examination by the parties". (Q 54). Mr Whitehorn (OFT) accepted that there would be resource implications for the Commission, though it would be possible in some cases for the Commission to provide a written communication rather than actually appear in court (Q 343).

90. Professor Whish thought that the intervention of a national competition authority might also be helpful, particularly if it had already done a considerable amount of economic analysis of the relevant industry (Q 15). Mr Roth (Competition Law Association) pointed out that under the Competition Act there was provision whereby rules of court could be made for the OFT to intervene in private civil litigation in the UK as a sort of friend of the court (Q 105). The CBI thought that allowing a national competition authority to intervene might overcome some of the problems of knowledge of procedures and language. But the benefit of the national authority's economic expertise and knowledge of the local market would be extremely small. The national authority would not have access to the other policy Directorates within the Commission and the involvement of national authorities would not secure the benefits of the Commission's involvement, namely retaining the uniformity of Community law (Q 55).

91. BEG said that the Brussels Convention, in determining jurisdiction and providing for recognition of judgments, went some way in resolving conflicts between national courts (Q 115). Mr Roth (Competition Law Association) noted that the Convention would only make decisions binding between the parties to the proceedings. It would not be binding in a subsequent case brought by a third party (Q 117). Mr Green thought that extending the Brussels Convention to cover such cases was not politically feasible (Q 121). He said that the risk of inconsistency between national courts in applying Article 81(3) was greater than in the case of Article 81(1) because of the heavily factual and subjective assessment required by the former (Q 104).

92. While the Commission could take a case out of the hands of a national competition authority (see paragraph 84 above), it would not be able to do so in the case of litigation in a national court. That, Mr Whitehorn (OFT) said, would be a "gross intrusion into the sovereignty of the national courts" (Q 337). But the White Paper contemplated intervention by the Commission to prohibit an agreement, subject only to the principle of res judicata that applied to the dispute between the parties themselves.[22] Mrs Holmes (Joint Working Party) was concerned about the involvement of the Commission in cases being handled by the national authorities. Were the Commission to take a decision (as was contemplated in para 102(2) of the White Paper) contrary to that of a national competition authority or a national court the parties and third parties would be left in a difficult position (Q 112). Mr Justice Laddie said that paragraph 102 (2) provided that as between the parties to the national litigation they would be bound by the decision of the national judge. That produced the bizarre prospect of a contract which was found to be offensive by the Commission but permissible by the national court being valid as between the parties to the litigation but void for everybody else or vice versa. Both of those situations seemed to be not terribly attractive (Q 152).

Future Role of Commission

93. The White Paper contemplated the Commission maintaining a central role in relation to Community competition policy The Commission would not disappear from the scene. There would remain a substantial amount of work for the Commission. Professor Fornalczyk considered that the Commission should have a central policymaking role, but that it should only be exercised in close consultation with the Member States. The Commission should also be able to act as arbiter in resolving conflicts of interest and disputes over jurisdiction between the Member States in the application of the competition rules (QQ 247-51). The Law Society of Scotland queried whether with decentralisation the Commission would have the necessary hands on experience to determine and formulate competition policy (p 157). But, as Mrs Bloom indicated, the Commission, its resources refocused, would be active in prosecuting cartels. It might also conduct sectoral investigations, looking at whole sectors of industry. The Commission would have responsibility for issuing guidelines and for taking positive decisions. It would also have responsibility of ensuring that consistency was delivered across the national authorities (Q 345).

94. The Joint Working Party did not see the White Paper proposals having the effect of reducing the Commission's work, though it would recast it (Q 111). The Competition Law Association considered it very important that the Commission should maintain its policy-making role. The Association believed the Commission was right to think in terms of greater use of guidelines, notices and block exemptions. The Association was concerned lest in adopting a greater "trust-busting" role the Commission might neglect policymaking (Q 110). The Joint Working Party shared that concern (Q 112). Mr Green (BEG) saw the Commission adopting "much more of a sweeper role". If there were conflicts between national authorities the Commission would come in as referee to sort it out and possibly take back the case (Q 111).

15   White Paper, para 7. Back

16   White Paper, para 106. Back

17   White Paper, para 47. Back

18   The Advisory Committee on Restrictive Practices and Monopolies established under Article 10(3) of Regulation 17. It is made up of expert representatives of the Member States and considers draft Commission decisions and regulations. Back

19   White Paper, para 102(2). Back

20   White Paper, para 102(1). Back

21   White Paper, para 107. Back

22   White Paper, para 102(2). Back

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries

© Parliamentary copyright 2000