Select Committee on European Union Fourth Report


95. The Community has changed substantially since 1962, when Regulation 17/62, the first regulation implementing the Competition Rules, was adopted. Then there were only six Member States and very little experience of competition law. The ECSC had introduced a competition regime for the coal and steel industries, but otherwise competition law was, with the exception of Germany, virtually unknown in the (then six) Member States. The position in 2000 is vastly different. The size of the Community has increased to 15 Member States, with the possibility of that number rising to 25 or more in the not too distant future. All the Member States have competition laws, most based on the Community's rules in Articles 81 and 82. Member States have also modelled their procedures and enforcement, in particular the need for notification/authorisation of agreements, on the Community regime. Under the Europe Agreements and in taking on the acquis communautaire which is a precondition of membership, the applicant States have also adopted, or adapted their competition laws to, the Community model.

96. There have over the years been many criticisms of the Commission's performance in enforcing the Competition Rules. The Committee has taken a close interest in the subject and has prepared two earlier Reports. When we examined the Commission's procedures in 1982[23], the Committee considered that the delay in giving clearances and granting exemptions was not acceptable.[24] It was perceived as creating intolerable problems in financing and initiating new trading ventures. The workload exceeded the Competition Directorate's resources, and though the Committee did not undertake a detailed inquiry into the staffing level we concluded that there was a clear possibility that the DG was understaffed.[25] In our 1993 Report[26] we noted that improvements had been made and that the backlog of notifications was being reduced. But the Committee again expressed concern at the lack of resources in the Commission to deal with Article 81 and 82 cases.[27] In 2000, the overall position has improved in some respects but remains unsatisfactory. It is clear that there is pressure on the system and under the present arrangements parties to a notified agreement still have to wait for a substantial time, possibly years, for a Commission decision or, more usually, a comfort letter. There is general agreement that the system needs to be reformed though views differ as to how this might best be done.

97. The position has changed in one remarkable respect from when we last looked at the Commission's competition procedures. The Commission is now advocating amendment of Regulation 17. The Commission has produced a White Paper containing a very radical set of proposals. It is generally agreed that they need to be given serious consideration, though the White Paper itself is noticeably thin on detail. The proposals have two main features. First, the Commission has proposed the withdrawal of the authorisation procedure for granting exemptions under Article 81(3) and its replacement by a directly applicable legal exception (exception légale) regime. Commission decisions granting exemption would disappear along with form A/B and the notification system. Second, the enforcement of the Competition Rules would be decentralised. National competition authorities and national courts would take on a major role in the application of Articles 81 and 82. These two features have given rise to two main concerns; the loss of legal certainty that the current notification system gives, and the risk of inconsistency in the application of Article 81 and 82 when many more players become active in the arena.

The resources question

98. Not surprisingly it was suggested that the reforms being proposed, and in particular the move to decentralisation, might be budget driven. The Commission argues that in an enlarged Community it will no longer be possible to retain a centralised authorisation system in Brussels, involving the individual assessment of thousands of cases. Such a system, the White Paper says, would be cumbersome, inefficient and impose excessive burdens on economic operators. If the current system were to be improved that would only increase its usage and take up more resources. The White Paper proceeds on the assumption that Member States will not make more resources available to the Commission.

99. The Commission's view that the current regime cannot be improved and made to operate more efficiently needs to be qualified. First, it is clear that the Commission has already taken legislative action to simplify application of both substantive and procedural rules. Considerable progress has been made by the recent amendment to Regulation 17—the new Art. 4(2) introduced by Regulation 1216/99. A new block exemption on vertical restraints has been adopted.[28] Further progress should be made with the Commission's forthcoming proposals on horizontal agreements. Secondly, notification is not as great a problem now as it was in the past. The Commission has reduced the backlog substantially. The White Paper speaks of the Commission having stemmed the flood of notifications. Thirdly, there are clear lessons to be learnt, for example, from experience in applying the Merger Control Regulation (ECMR).[29] The ECMR has shown that the Commission can operate an efficient a priori system of control. The Commission has, in relation to large-scale mergers having a Community dimension, taken, and exercised most effectively, virtually exclusive supervision and control. Prior notification is obligatory and the Commission is required to work within a tightly drawn timetable.[30]

100. There is a strong argument for an increase in the Competition Directorate's resources. There is no doubt that if the Member States were prepared to make more resources available, certain procedural changes were to be made and practices were to be modernised the present defects of the authorisation/notification system could be remedied. The Commission and the Member States do not appear to contemplate any increase but prefer to talk about resources being "refocused". But the Commission would need considerable resources for their role as they envisage it after decentralisation. The involvement of national competition authorities would also be substantial and far greater than any of them has had to date. The resources implications have not been sufficiently examined in the White Paper. In particular, the question of the need for an increase has not been satisfactorily addressed. If enforcement of the Competition Rules is to be improved more resources would almost certainly have to be made available by the Member States irrespective of whether or not there is decentralisation. Indeed we do not see how decentralisation would reduce the amount of money which may need to be spent on enforcement of the Competition Rules.

101. However, with or without an increase in resources, revitalising the notification regime may not be the way forward for the Community. We are impressed by the evidence of the Commission, the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF) and the OFT that such regimes take up scarce resources and may prejudice the enforcement of competition laws. The current EC system of notification of agreements was described as "a poor tool in competition law enforcement". It is bureaucratic and burdensome to both industry and the Commission. Notification may be a costly and time-consuming way of securing legal certainty. It is also doubtful whether the present notification system does in practice deliver the degree of certainty claimed by some. The Commission is burdened with work that from a competition policy standpoint is largely unproductive. Scarce resources are expended on the analysis of agreements, very few of which raise serious competition issues. The current system is a major restraint on the Commission investigating in a pro-active way serious breaches of competition law and monitoring key sectors such as the recently liberalised industries.

102. We believe that it is important that the Commission and national competition authorities should be able to devote more time to investigating serious cartels. The OFT's evidence on the nature and number of international cartels convinces us that there is a real problem. We fully accept the need to improve enforcement of antitrust laws and to put consumer interests foremost. Redirecting resources not just in the Commission but across the Community is desirable. The merit of what is being proposed in relation to Article 81(3) is that, at the price of some legal certainty, the Commission and national competition authorities would be able to allot more resources to strategic work to uncover cartels.

what the Treaty permits

103. One Member State, Germany, has raised the question whether the reforms, in particular the shift from an authorisation to a directly applicable exception regime, is compatible with the Treaty. Unlike the ECSC Treaty, which expressly provides for an authorisation regime, the EC Treaty leaves it to the Council (acting under Article 83, formerly 87) to determine the means of application of Article 81(3). The Council decided in 1962, when agreeing Regulation 17, to adopt the authorisation approach. The question has been raised as to whether the Council, having so decided, can change its mind and take the other (directly applicable exception—exception légale) route. Under the White Paper's proposals, Article 81(3) would become directly applicable in relation to many agreements. The Commission could not, as a general rule, grant individual exemptions, though it would be able to exempt "categories of agreements", by using block exemption regulations. Certain joint ventures would, exceptionally, remain subject to an authorisation procedure, the Commission applying Article 81(3) using the mechanisms of the Community's Merger Control Regulation (ECMR) procedures. This raises the further question as to whether the two systems, authorisation/exemption and directly applicable exception, can at the same time operate side by side under the Treaty.

104. The extent of any change is dependent on the purpose and construction of Article 81 and the surrounding Articles. Article 81(3) states that the provisions of Article 81(1) (ie the prohibition) "may, however, be declared inapplicable". The background to and reason for this choice of words, which the Commission claims are not decisive, is explained in the White Paper.[31] There remains an argument as to what the draftsmen intended and the effect of subsequent case law of the Court of Justice on Article 81(3). It would be desirable if this could be speedily resolved to the satisfaction of all sides. Unfortunately there is no means by which the matter can be determined definitively by the Court of Justice in advance of its adoption. We urge the Government to use its best endeavours to secure unanimous agreement on the adequacy of the legal base under the Treaty for any formal proposal brought forward by the Commission in implementation of the White Paper. This would not rule out the possibility of legal challenge at some future date. But it would be unsatisfactory if the matter was left unresolved in the Council of Ministers in view of the importance of the proposal for the functioning of the Single Market and the need for all concerned, not least industry, to have confidence in any new regime.

The issue of legal certainty

105. Some parts of industry have expressed considerable unhappiness with the White Paper's proposals on the grounds that removal of the notification/authorisation procedure for Article 81(3) would result in a loss of legal certainty. In the present context certainty is something which only a Commission exemption decision gives. In practice most notified agreements do not benefit from a formal exemption decision, of which there are only a handful each year. The parties concerned generally accept comfort letters. Industry in the UK nevertheless perceives a continuing need for notification, particularly in relation to arrangements where substantial investment is being made. The CBI has revised its views on comfort letters and has adopted a more positive stance on their value.

106. The proposal would place a greater responsibility on the shoulders of industry and their advisers. Already the vast majority, some 90% or more, of agreements is not notified. The companies concerned and their advisers take a view on the application of Article 81 and whether they should be notified, considering the cost and delay and taking the risk that parts of agreements might be unenforceable. And in the case of those agreements that are notified many are implemented before they receive a positive decision from the Commission. Self-assessment is the norm at the present time. It is easy to exaggerate the extent of the change.

107. The value of a notification system for anti-competitive agreements and practices as an instrument for enforcing competition policy is debatable. It is clear that it is not a prerequisite of an effective antitrust law, as the US experience shows. On the other hand, notifications are a potential source of information about markets and commercial behaviour. Such information may be useful to young competition authorities and even older ones may perceive some benefit in having it in order to exercise a priori control. But for a mature system such as the Community's it is, for the reasons given in paragraphs 101-2 above, highly doubtful whether it is of sufficient value to be retained. Notifications are not the only source of relevant information and, as witnesses indicated, may disclose very few real antitrust issues. Processing forms A/B is not the best use of staff in the Commission's Competition Directorate.

108. The fundamental change proposed in relation to Article 81(3) has implications for the second limb of the Commission's reforms, the scheme of decentralisation. First, the effect of making Article 81(3) directly applicable would mean that national courts would have the power to apply Article 81 in full. A defendant would not be able to put a complainant into baulk by filing a notification with the Commission. But, as we shall explain below, extending the national court's jurisdiction in this way and thus giving national judges the job of applying Article 81(3) is controversial. Second, maintenance of the notification system is closely linked to the question of the future role of the Commission and in an enlarged Community and the position of national competition laws and procedures. The German Government and Federal Cartel Office wish to retain the authorisation system and have proposed decentralising notifications and the granting of individual exemption decisions. This would not necessarily reduce the numbers of notification. It would redistribute them between the Commission and national competition authorities. Sharing the burden in this way may increase the work for all concerned. Industry may not like the "directly applicable exception" approach because of the belief that it will diminish legal certainty. On the other hand it does not want the authorisation process to be decentralised, with the possibility of multiple notifications. Any system of decentralisation which involved notification of agreements would not be satisfactory. There is a greater public interest in ending notifications and enabling resources to be concentrated on investigating secret cartels.

109. However, the Commission accepts that there is a continuing need for notification for certain agreements. Under its proposal partial-function production joint ventures would still be notifiable, though the procedural rules of the Merger Control Regulation (ECMR) would apply.[32] The reason given in the White Paper for retaining this requirement is the substantial investment involved in such ventures and the difficulty of subsequent unravelling. In the course of evidence it became clear that there was support for such joint ventures being brought within the scope of the ECMR though there is a problem of the meaning of the term "partial-function production joint ventures". It must be clarified and defined to establish what types of agreement are encompassed within this term.

110. It was suggested that there could well be other types of agreement which did not constitute such joint ventures but which would nonetheless require or would benefit from having prior clearance because they involved substantial investment. We were told that consideration was being given to whether the category should be widened to include all large investments having a cross-border dimension. Care needs to be taken before any widening of the category of cases which might be brought within the scope and procedure of the ECMR. But we see no justification for extending the category of agreements requiring compulsory notification. There is an important element of consistency in the Commission's current proposal. The scope of application of the ECMR has always extended to certain joint ventures and it makes sense, from a competition policy standpoint, that agreements having major structural implications for the market are subject to a priori control because of the inherent difficulties of taking effective remedial action after the event. The Commission should examine whether the procedures (ie "positive" decisions and business review letters) which would remain available to the Commission and firms could be adapted to deal with that small category of cases where commercial interests see a need for a greater measure of legal security.

111. Though there would, with the exception of partial-function production joint ventures, in future be no individual exemption decisions, the White Paper proposes that the Commission should retain the ability to grant individual decisions in addition to prohibition (and fining) decisions. The Commission would have powers to make "positive" decisions. They would be declaratory as to the application of Article 81(3), rather than constitutive in effect. But the Paper is unclear as to the scope and likely use of such decisions. The precise nature and effects of the new type of "positive" decision should be clarified, as well as the circumstances in which the Commission might take such decisions. What seems clear is that they would not be exemption decisions. But the new type of "positive" decisions might be directly related to specific cases and their particular facts and thus potentially appropriate for those agreements where some form of prior clearance seems desirable. Further consideration should be given to granting a right to seek a positive decision in cases where the project could not reasonably be expected to go ahead without such prior assurance albeit that it is recognised that certain countries with established anti-trust laws do not have such a regime. If such a right was granted it would be reasonable that the applicant should pay a fee commensurate with the Commission's costs of examining the application.

112. Informal contact with the Commission would continue to be encouraged and the White Paper envisages that the Commission would be able to issue business review letters. There would, however, no longer be a place for comfort letters as presently known. Consideration should be given to seeing whether business review letters could be made more helpful to the firms concerned.


113. Decentralisation lies at the heart of the White Paper. The idea is, however, not new. The Treaty and existing subordinate legislation regard enforcement of the Competition Rules as a shared responsibility of the Commission and the Member States. The scheme of Regulation 17/62, in the form it has had since 1962, maintains the ability of national competition authorities to apply the Community rules until such time as the Commission has formally initiated proceedings. Proposals have emerged in the past from the Commission aimed at refining the balance between the Commission and national authorities with the aim of ensuring that each case is dealt with by the body best placed to handle it. Mechanisms for co-operation exist. In 1997 the Commission issued a Notice on co-operation between national authorities and the Commission.[33] The 1997 Notice makes clear that the Commission favours national competition authorities dealing with "local" cases by applying Community law or, if they do not have the powers to do that, by applying national competition laws to obtain a similar result. The Commission has also been concerned to facilitate the direct application of the Competition Rules in national courts. In 1993 the Commission issued a Notice on co-operation between national courts and the Commission in applying Articles 85 and 86.[34] The Notice provides a number of positive ways in which the Commission can assist a national court faced with an issue concerning the application of Article 81 or 82.

114. Despite these attempts to encourage greater involvement by Member States in the enforcement of the Competition Rules the Commission has not been successful to date. This is not unexpected as the Commission, which the Treaty envisages carrying out a primary role in the enforcement of the Competition Rules, would seem to be the most effective body to deal with cases having an effect on trade between Member States. Its jurisdiction is not limited by national boundaries and its decisions are enforceable in all Member States. It is independent and the Competition Directorate has shown itself to be resistant to national political influence. The Commission has built up considerable experience in the application of the Competition Rules and is widely regarded as a major force on the international stage. It participates in a number of international forums and has developed co-operation arrangements with a number of non-Member States antitrust authorities, in particular in the US.

115. It is therefore somewhat surprising that the White Paper is proposing to take decentralisation a substantial step further. As already mentioned, only about half the Member States have taken the necessary legal powers to apply the Rules. Member States have generally shown a reluctance to apply Community law, though not to adopt national competition laws similar to Articles 81 and 82. Under the White Paper national competition authorities would be required to apply Community competition law, not just their "look-alike" national competition laws. The White Paper makes clear that it is not the Commission's intention that there should be any renationalisation of competition policy.[35] At least 7 Member States, including the UK, would have to change their laws.[36] Adoption of reforms set out in the White Paper would be politically challenging for the Member States, requiring many to change their laws and all Member States to give far greater prominence and priority to the application of the Competition Rules.

116. The Commission envisages, and it is necessary for the fulfilment of the objectives of the White Paper, that all Member States will take the powers and will make an effort to enforce Community law. The Committee notes that the OFT would want to apply Community law in future and that it is hoped that other competition authorities, given the choice, would also elect to apply Community law. The position then would be that national authorities would, where trade between Member States may be affected, apply one set of rules which would have primacy. That could have advantages in developing consistency and giving industry some degree of legal certainty by removing the scope for overlap and multiplicity of enforcement action. There is a strong case for a greater degree of uniformity across the Union, particularly given enlargement. Some centralisation of competition policy, through the universal application of Community law, is becoming increasingly necessary.

117. It is clear, however, that not all national competition authorities are equipped to take on the extra work. Even among those that have the necessary legal powers and are adequately resourced few have any substantial experience in applying Community law, though some may have national laws modelled on them. The clear expectation is that in future, in cases having an effect on inter-State trade, national competition authorities will apply Community law and that Member States will respect the primacy of Community law even where that has the effect of displacing national competition laws. Not only would implementation of the White Paper require the resources of national competition authorities to be redirected, but national competition laws and procedures would also be likely to have to undergo reappraisal and readjustment. The Commission's proposals do not, for example, fit well with the Competition Act 1998 and it would almost certainly be necessary to amend the Act.

118. Nonetheless the greater involvement of national authorities in practice is politically in tune with the notion of bringing the Community closer to the citizen. It would, for example, be easier, particularly for small firms and individuals, to bring forward complaints because they could deal with a local office in their own mother tongue. Further, the Commission has reported that the large majority of Member States have indicated preliminary support for its proposals. In the case of the United Kingdom that support is somewhat cautious. As we shall explain there are a lot of questions that need to be answered. They fall under two main headings.

the problem of consistency

119. Witnesses expressed concern that with many more bodies enforcing the Competition Rules decentralisation would lead to a loss of consistency in their enforcement and application. There would also be increased opportunities for legal action. Witnesses pointed to the risks of forum shopping by undertakings concerned, not only as between national courts but also as between national competition authorities. A substantial degree of uniformity is essential if the benefits to industry and consumers are to be realised. The problem is how to maintain consistency in practice. The White Paper is remarkably thin on detail. It will be important to get the detail right if abuse and unfairness are to be excluded. Though there is a measure of overlap, it is convenient to separate the position of national competition authorities from that of national courts.


120. Are jurisdictional rules needed to allocate cases to the Commission, the OFT or another (non-UK) national competition authority? Or can it be left to informal co-operation, with the possibility of the Commission taking over a case? Some witnesses suggested that it would be necessary to have detailed rules determining the most appropriate national authority to deal with a particular case.

121. In our 1993 Report we noted that it would be extremely difficult to devise criteria - such as those in the Merger Control Regulation (ECMR) - for determining which competition authority should have jurisdiction in any particular circumstances. Before such criteria could be devised the Commission and Member States should proceed on a case by case basis. That seems very much to be the approach preferred by competition authorities at the moment. We agree. The application of detailed jurisdictional rules could easily become a separate cause of dispute diverting attention from the investigation of suspected infringements and causing delay. Adding such rules at this stage of the reform could be undesirable because they might place an extra burden on the enforcement agencies and on complainants.

122. The Commission says that complainants should be free to choose their forum. There is a risk that this might encourage forum shopping and we are concerned that the Commission may not have taken sufficient regard of this. It would, we accept, be odd for a complainant in one Member State to go to the authorities of another when the object of the complaint was situated in the first. Most complainants are likely to turn to their local competition authority or the Commission, unless there are substantial advantages in going elsewhere. But the risk of forum shopping is a serious issue which needs to be addressed. A minimum harmonised set of rules as to the procedure for handling complaints (dealing with matters such as time limits) might go a long way to make sure not only that national authorities were properly equipped to deal with complaints and might tend also to lessen forum shopping. Such rules should be consistent with the general principles of Community law, in particular the rights of defence.

123. It hardly needs saying that all Member States should have the necessary powers and resources to investigate and prosecute infringements affecting their consumers. But there is an argument that their responsibilities should, as a matter of Community law and policy, not stop there. Though the White Paper anticipates national competition authorities dealing primarily with "local" cases and the Commission taking on the major cases, it is for consideration whether the application and enforcement of the Community Rules by national authorities should be limited by national boundaries. While national competition laws and procedures are territorially limited, Community law straddles the boundaries of the Member States. Elsewhere, particularly in the joint actions and other measures taken by Member States under the Third Pillar to tackle serious crime, we are seeing the dismantling of national boundaries and greater co-operation between investigation and enforcement agencies. There is an argument that this should also be the case for the Competition Rules.

124. In a decentralised system, the Commission would inevitably have a pivotal role in ensuring consistency. There is no doubt that it would need to work closely with the Member States and to build a system based on the strengths of the individual national competition authorities. The practices that the UK authorities are developing in the context of the Competition Act should be helpful here. It would also need to manage its working relationships with all the Member States. Member States would also have to work closely with each other. As we would understand it, the Commission's role would be that of a facilitator, not a referee. The Commission spoke of developing a "true intranet". Networking would be the order of the day. We are encouraged by the experience to date described by and involving the OFT. The Commission would need to work closely with the Member States and, equally importantly, the Member States with each other.

125. But it is doubtful whether an effective decentralised system could rest wholly on informal arrangements, not least because those concerned, whether they are a complainant or the subject of inquiry, need to know their rights and duties. Article 10 of the Treaty imposes co-operation obligations on both Member States and the Commission. Their practical application should not be left to be defined by the Court of Justice on a case by case basis. It would be important to give those Treaty obligations more precise statutory expression and to spell out in advance the detail of co-operation.

126. Regulations might, for example, set out the detailed rules for mutual assistance and co-operation to be given by one national authority to another. They might specify rights and duties in respect of the receipt, sharing and use of information. Confidentiality must, however, be safeguarded. National competition authorities might be expressly required to provide assistance with investigations in gathering evidence, in particular to enable relevant information to be obtained locally. The regulations might also encompass recognition and enforcement of decisions, including collection of fines and penalties.

127. It would, in our view, be particularly important that any such rights and duties of co-operation should operate directly between national authorities. It should not be necessary to have to proceed via the Commission, though the latter would be kept informed when co-operation is being sought and given. It is reasonable to expect that there would be national variations in efficiency and zeal. The whole process might be regularly reviewed by the Commission to ensure that it is working to best effect. Consideration might also be given to the setting up of a system of peer review, as has been established in relation to mutual assistance between Member States in criminal matters.

128. As the White Paper indicates, the Advisory Committee would play an important role.[37] It would review in draft the decisions of both the Commission and the national competition authorities in application of the Competition Rules. Though the White Paper[38] contemplates the Committee discussing only "important cases" thought should be given as whether, at least in the early days, it should see all substantive decisions of the national competition authorities in the same way as it sees all such decisions of the Commission. The Committee would have a key role to play in supervising and ensuring consistency in decision making. It already has, and would continue to have, responsibilities in relation to block exemption regulations. The Advisory Committee is the obvious and most appropriate forum for the further development of competition policy and the setting of enforcement priorities by the Commission and the Member States. If the Commission's proposals were to be adopted, consideration would have to be given to ensuring that sufficient resources, including translation and interpretation services, are allocated by the Commission to the work of the Committee. If each national authority took only one decision in application of Article 81 or 82 per year the Committee's workload would double! It is also important that its deliberations should become more transparent, especially under a regime where Article 81(3) would be directly applicable.

129. Finally, all decisions of national competition authorities applying Articles 81 and 82 should be published. Such transparency would be a powerful force in keeping up standards and might act, as a long stop, to identify any inconsistency in approach. There is a case for publication being in the Official Journal so that the information can be widely available in all languages.


130. The implications of the Commission's proposals for national courts, in particular the direct applicability of Article 81(3), also raise a number of questions. Witnesses expressed concern that the "litigation floodgates" would be opened. There was a risk of forum shopping. Most fundamentally, a number of witnesses had serious reservations as to the justiciability of certain criteria in Article 81(3). In short, the criteria of Article 81(3) were matters of economic judgement and balancing advantage and disadvantage. Application of Article 81(3) was a matter for administrative bodies and not a suitable job for judges.

131. How different national judges will adapt to the direct applicability of Article 81(3) is uncertain. That they should be able to do so is, however, a key feature of the Commission's reform package enabling the Commission to escape the burden of notifications. Even with judicial training, application of the Competition Rules in toto (the large part, Articles 81 (1) and (2) and 82, is already directly applicable) will not be easy. The concerns expressed by legal practitioners and, not least, those by the judges themselves have to be taken seriously. The success or failure of the "automatic" decentralisation effected by the replacement of the current notification/authorisation regime by making Article 81(3) a directly applicable exception is heavily dependent on the capacity of the national judicial systems to apply the criteria in Article 81(3) in a systematic and coherent manner.

132. A separate, consistency, question arises from the nature of the tests in Article 81(3) which, as mentioned, involve assessing countervailing benefits in which consumers share. Tribunals with different attitudes and different economic philosophies are inevitably going to come to different decisions. It cannot be discounted that on the same set of facts a tribunal in one Member State will come to one decision and a tribunal in another might come to an opposite decision. Both decisions may be within the scope of the law. They may differ because different views of economic factors have been taken. In a domestic situation inconsistency of approach can be removed through operation of the appeal system. A common appeal system does not, of course, exist in the Union.

133. To a large extent the White Paper points to the two Community institutions, the Court of Justice and the Commission, for the answer to both the above issues. The shift from an authorisation scheme to one based on the notion of exception légale would gradually change the way Article 81(3) is viewed and applied. It is reasonable, we believe, to suppose that the law on Article 81(3) will develop. The ECJ can be expected to play its part in this process. One would expect that, at least in the early years, there would be an increase in the number of references (made under Article 234) from national courts to the ECJ. The Court will not neglect its definitive interpretative role in this important area of Community law and will no doubt seek to ensure the uniform application in practice of the Competition Rules. The Commission has also said that it will make new block exemptions and that it will issue notices and guidelines to assist in the detailed application of the elements of Article 81(3). These measures should assist in maintaining a degree of consistency in the application of the Competition Rules, albeit that they would not necessarily remove the possibility of different assessments of economic evidence and argument.

134. The Commission would also have an enhanced role to play before national courts. Mention has already been made of the Commission's 1993 Notice on co-operation between national courts and the Commission in applying the Competition Rules. It is remarkable, however, what little use has been made of this facility. Under the White Paper the Commission would be able to appear before national courts in order to assist the judge in particular in the application of Article 81(3).

135. As we have said in previous reports we see no objection to the Commission appearing as "friend of the court" in a UK or other national court.[39] Beyond that, the issue as we see it is essentially one of resources. Although the Commission could, with leave of the court, have a right of audience before a national court it is impractical to imagine that the Commission will actually wish to exercise that right in every case in which a Community competition issue arises. We doubt whether it would be feasible or practical for the Commission to be notified of every case in which a competition issue might arise. In principle it should be for national courts to apply Community law and to decide when the Commission should intervene. No doubt one or more of the parties would alert it to the possibility. But the matter would need to be kept under review. If it appeared that there were, notwithstanding Commission regulations, notices and guidelines and the developing jurisprudence of the ECJ, large divergences of approach by national courts in the application of Article 81 then something more formal might have to be considered. There might be a need to introduce uniform (and possibly complex) rules stipulating at what stage in the litigation and how the Commission would have to be notified.

136. Any involvement by the Commission in litigation before national courts would inevitably take up resources. But, as the Commission accepted, it might not be necessary in all cases for its representative to attend and to participate in the oral proceedings. A written opinion or other information might be sent to the court. This raises the question of what the status and effect of such a written communication from the Commission opinion would be. We see this as probably a greater problem for common law jurisdictions than others because of the rules of evidence. Harmonisation across the Member States should not be necessary. UK courts should not be denied the benefit of receiving the Commission's views orally or in writing and they should where necessary be given the power to permit such intervention. How best this could be achieved is a matter to which the Government should give detailed consideration in consultation with the judiciary.

137. Forum shopping is a separate problem. As regards the jurisdiction of national courts to hear cases involving the application of the Competition Rules, the Brussels Convention will apply. But it cannot be denied that without more narrowly defined rules as to which courts have the right to hear a case and harmonised rules with regard to such matters as procedure, discovery of documents, evidence, and rights of appeal, forum shopping is potentially a significant problem. It is, however, probably unrealistic to imagine setting up a separate system of jurisdiction and recognition rules just for cases involving Articles 81 and 82. Nevertheless we are concerned that the White Paper does not pay sufficient attention to this problem.

138. Under the Brussels Convention, a decision of a national court in one Member State applying Article 81 and 82 will be recognised and enforced throughout the Union. It was suggested that parties might choose their court and manufacture a cause of action in order to obtain a favourable declaratory judgment. This possibility cannot be excluded, but it may not be as damaging as first appears. The judgment of the national court, though widely enforceable, would only be binding on the parties to the action and would not operate erga omnes. A court in different proceedings in another Member State (or even in the same Member State) might look critically at a declaration obtained in such circumstances. Further, the Commission would, under the present proposals have its own reserve powers. It could investigate ex officio and take a decision to which national courts would have to pay regard. We consider these powers further at paragraph 141 below.


139. Even though the Commission wishes to decentralise the enforcement of the Competition Rules, the Commission would remain a major player in the day to day enforcement of the Competition Rules. It would continue to investigate cases and prosecute infringements. No one questions that it should retain these functions. The Commission would also retain a central role as policy-maker for the Community. It will need to retain hands on experience. Member States would be expected to apply the Competition Rules, sometimes in preference to their own domestic laws. As a consequence they should have a greater sense of ownership of the Rules and could legitimately expect to have greater involvement in policymaking. As mentioned in paragraph 128 above, the Advisory Committee would have enhanced responsibilities in this regard. But the Committee might not be the only forum for policy setting. Further thought is needed as to how Member States might become more involved. In a decentralised system there would be a case for a much closer and stronger role for the Member States. While the Commission would continue to take a strategic role in the setting of policy it might work more closely with national authorities.

140. The Commission would also have a major role to play in delivery of a successful decentralised system and would have a special role in maintaining consistency on a day to day basis. Reference has already been made to the possibility of the Commission intervening in proceedings before national courts. What is controversial is whether the Commission should have the powers (a) to take cases away from national competition authorities, and (b) where a decision of a national competition authority or court is open or subject to appeal to adopt a contrary decision.

141. The power to take over cases from national authorities seems entirely justifiable. It is not new. Such a power has existed since 1962 (in Article 9(3) of Regulation 17) though it has rarely, if ever, been used because of the relative inactivity of Member States in enforcing the Competition Rules. Under the proposed regime, there might well be cases where it is more appropriate for the Commission to act, for example where the agreement or practice in question affects a number of Member States and it would most efficient for it to be dealt with centrally. But we believe that the removal of a case by the Commission from a national authority should only be in exceptional circumstances. If decentralisation is to work there must be mutual confidence and trust between the Commission and the national authorities. The second is more controversial. In theory the situation should rarely arise. But we accept that it may be necessary for the Commission to have such powers, if only for their deterrent effect. Because of the practical limitations and political implications involved we envisage the Commission's use of the power to adopt a contrary decision as being the exception rather than the rule. It might be appropriate, for example, to deal with the case where parties have manufactured a positive declaration from a national court, as in the situation described in paragraph 138 above.

23   Competition Practice, 8th Report 1981-82. Back

24   See para 35 of 8th Report 1981-82. Back

25   Para 38 of 8th Report 1981-82. Back

26   Enforcement of Community Competition Rules, 1st Report 1993-94. Back

27   Para 126 of 1st Report 1993-94. Back

28   Reg. 2790/99 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices. [1999] O.J. L336/21. Back

29   Reg. 4064/89 of 21 December 1989 on the control of concentrations between undertakings, as amended. Back

30   The success of the Community regime has spawned numerous "look-alike" merger control laws in the Member States, with the consequence that industry has asked for more cases to be transferred to the Commission, in order to avoid the problems of multiple notifications. See our Report, Review of the EC Merger Regulation, 4th Report 1996-97. Back

31   White Paper, paras 11-13. Back

32   White Paper, para 79. Back

33   [1997] OJ C313/1. Back

34   [1993] OJ C39/6. Back

35   White Paper, para 62. Back

36   The UK has so far only taken limited powers: see The E.C. Competition Law (Arts 88 and 89) Enforcement Regulations 1996. S.I. 1996 No 2199. These powers have only been used once, in relation to the proposed collaboration of British Airways and American Airlines. Back

37   Described at footnote 14 above. Back

38   White Paper, para 106. Back

39   12th Report 1987-88, para 80, and 1st Report 1993-94, para 132. Back

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