Select Committee on European Union Fourth Report



The timeliness of the proposal - enlargement

142. There has in the past few years been a notable degree of harmonisation of competition laws in the Member States. The UK, following the Netherlands and Germany, has been one of the last to bring its substantive law and procedures closer into line with those of the Community. There remains, however, a great diversity in the experience of, and in the quality and resources available to, the various competition authorities. It is also significant that the Commission is seeking to decentralise at a time when the Community is enlarging. The question might be asked whether it is timely to introduce such a radical change.

143. The Commission's reforms are designed, in part, to address the problems of enlargement. But enlargement carries its own problems. Though they have been required to have national competition laws mirroring Articles 81 and 82 and have set up antitrust enforcement offices, whether on enlargement the applicant Member States could cope with the enforcement regime as proposed is debatable. Doubts have been expressed as to whether they would have the experience and resources to participate effectively from the outset in the direct enforcement of the Competition Rules as now being proposed by the Commission.

144. It is clear that much will be expected of the existing Member States, their competition authorities and their courts. If there is to be uniformity, no less must be expected from the newcomers. It may be that this is only a transitional issue but the potential difficulties should not be underestimated. If the Commission's proposals are to be taken forward, consideration needs to be given as to whether any special arrangements should apply. As a first step, candidate countries should be more closely involved in future discussions of the White Paper proposals. The Commission might also wish to pursue the option of encouraging Member States with established competition regimes and experience of enforcement through the domestic courts to mentor or partner individual applicant States.

Conclusions and points for discussion

145. The Commission's White Paper is a bold and imaginative initiative. It is an attempt to meet head-on the difficulties of an outdated procedural regime, competing claims on scarce resources, and enlargement. The Committee supports the need for more action to be taken, by both the Commission and national competition authorities, to combat secret cartels. There is a problem here which clearly needs to be addressed urgently. Releasing resources within the Commission by replacing the notification/authorisation system by a directly applicable Article 81(3) is at first sight attractive: but there are implications for legal certainty and for national courts. Harnessing the resources of the national competition authorities to apply the Competition Rules also has its attractions: but this might jeopardise the coherence of the Rules and lead to uneven enforcement.

146. Two concepts lie at the heart of the White Paper - close co-operation between Member State and Community authorities, and decentralised application and enforcement of Community law and policies. Neither is new or unfamiliar. The principle of genuine or sincere co-operation is enshrined in the Treaty and binds the Community institutions and Member States, including their courts. The principle of decentralised enforcement of Community law by national courts has been given added impetus by the application of directly effective Treaty law. As regards the enforcement of the Competition Rules Member States have to date generally shown little enthusiasm for decentralisation. That position would have to change. National governments, parliaments, courts and competition authorities would have to demonstrate and execute a commitment to enforcing Community competition law far in excess of anything to date. Community law would have to be given priority in practice, not just in principle. National law and procedures, some quite new in the case of the UK and a number of other Member States, would have to be changed. Adoption of the White Paper proposals would be a formidable political challenge and there are many hurdles to overcome if the Commission's proposals are to succeed.

147. While decentralisation is one of the two basic building blocks of the Commission's proposals, the White Paper itself provides no more than a skeletal framework for reform. It raises many questions, some quite fundamental others more technical but all having practical implications for the success or failure of the Commission's proposals. We have described a number of these above and have suggested possible ways forward. But there needs to be much more work done by the Commission in close communion with the Member States if some real flesh is to be put on the bones. As presently proposed, adoption of the White Paper would, at least without the detail, involve a great step into the unknown.

148. The timeliness of the proposal has been questioned, with the reality of enlargement growing ever closer. Enlargement both provides a stimulus to improve the present regime for application of the Competition Rules and, somewhat paradoxically, draws attention to some of the difficulties in what the Commission is proposing. But things cannot be permitted to get worse before there is change. The Commission should be looking now to see how much can be done in the short term, building on the precedents of Regulations 1215/99,1216/99 and 2790/99 (described at para 99 above).

149. The White Paper, while radical, stops short of proposing Treaty amendment. But the possibility of amending the Treaty in order to address some of the difficulties, particularly in relation to the application of Article 81(3), now being faced should not be discounted. While the requirement for the Community to have competition rules and strong enforcement is a fundamental precept the precise content and wording of those rules is not, in our view, sacrosanct. Perhaps the time is not far off when it will be necessary to think the unthinkable and to consider reformulating Article 81 so that it does not require the exercise of administrative discretion and is more amenable to application by national judges.

Recommendation

150. The Committee considers that the Commission's White Paper on modernisation of the rules implementing Articles 81 and 82 of the EC Treaty raises important questions to which the attention of the House should be drawn and makes this Report to the House for debate.


 
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