Select Committee on European Union Thirteenth Report


4th REPORT, SESSION 1999-2000: REFORMING EC COMPETITION PROCEDURES

Letter from The Rt Hon Stephen Byers, MP, Secretary of State for Trade and Industry

  I am pleased to submit the Government's considered response to the House of Lords Select Committee on the European Union report on "Reforming EC Competition Procedures" (HL Paper 33).

  The Government agrees with the main points raised in the Report, many of which are necessarily the subject of ongoing discussions among Member States and with the Commssion. In particular, on legal certainty for business the Government believes it is necessary to take into account not only the interests of enforcement authorities but the legitimate needs of business for adequate legal certainty. On this issue my officials are working closely with the CBI and other commercial interests to achieve a satisfactory solution.

8 May 2000

"REFORMING EC COMPETITION PROCEDURES"—PART 3: OPINION OF THE COMMITTEE

INTRODUCTION

  The Government welcomes the Report of the Select Committee on "Reforming EC Competition Procedures" as an important contribution to the debate on the modernisation of EC competition policy. In many ways it echoes the main issues of concern set out in the Government's response to the EC White Paper which the Secretary of State submitted in October 1999. Ensuring free and fair competition across Europe is vital both to European competitiveness and to the interests of European consumers. The Select Committee's report helpfully highlights a number of areas where further work is required to develop the outlines of the White Paper into a detailed blueprint for a new procedural regime for competition rules in Europe. The European Commission itself recognises much work needs to be done and this discussion will necessarily continue among the Member States, European institutions and private sector and consumer interests over the coming months.

95-97

  The Government endorses the general comments of the Committee in these opening paragraphs.

98-102  The resources question

  The Government very much agrees with the Committee that whilst in theory improvements could be made under the current system and, if Member States agreed, more resources made available to the Commission, this would be to ignore the fundamental shortcomings of the notification system: it is burdensome on industry and fails to capture more serious infringements of the law such as cartels. The government supports the Commission in attempting to refocus existing resources, particularly with respect to cartels.

103-104  What the Treaty permits

  The advice of both the Commission's own Legal Service and the Government's legal advisors is that the approach proposed by the Commission in its White Paper is indeed compatible with the wording of the EC Treaty. As the Report recognises, this issue cannot be resolved definitively by the European Court of Justice in advance of the adoption of the proposal—and it can only be finally resolved after adoption if a legal challenge is made. The Government agrees with the Committee on the importance of trying to obtain a unanimous understanding among Member States as to the compatibility of the White Paper proposals with the Treaty. This is necessary to ensure business confidence in the new approach once adopted.

105-112  The issue of legal certainty

  In its White Paper, the Commission recognised that legal certainty needs to be addressed. The Government notes the Committee's advice that the value of a notification system for enforcing competition policy is questionable, and that it is easy to exaggerate the extent of the proposed changes in terms of their impact on legal certainty. But as the Committee recognises this is an issue of importance for business and the Government plans to submit some suggestions for the way forward. Our aim will be to see that business' interest in obtaining adequate legal certainty is reflected in the final proposals. In particular it will press with the Commission the Committee's proposal that it should consider how to rework its proposals on positive decisions and opinions in order to afford greater legal certainty for business.

  There are several other points of detail. For example the Government notes the Committee's argument in paragraph 110 that while it is logical to apply ex ante control to non-full-function production joint ventures through compulsory notifications under the ECMR, due to the difficulty of enforcing remedies after implementation, there is no such justification for extending compulsory notification to other types of agreement. The Government is concerned, however, that just as there is a competition policy interest in ensuring ex ante control of those agreements which may be hard to reverse, such as non-full-function production joint ventures, so there is a commercial interest for businesses to be able to obtain adequate assurances on legal certainty for agreements which entail notable financial or other risk. This class of agreement may be wider than simply non-full-function production joint ventures.

113-118  Decentralisation

  The Government agrees with the Committee that decentralisation should help to bring about greater consistency in the application of competition law across Europe because Member States will be applying Community law. It recognises that many countries may need to adapt their national laws to authorise national competition authorities to apply Community law, including the UK, but does not expect this to be a major hurdle in the adoption of the White Paper reforms (indeed, some Member States have already begun to do so). To the extent possible, the Government supports the application of Community rather than national law when a case affects trade between Member States.

119  The problem of consistency

  The Government shares the Committee's concern at the need to ensure consistency in the application of Community law by Member States. The operational details of the White Paper proposals require considerable fleshing out in this respect and discussions on this issue, including criteria for case allocation, consultation on draft national decisions, information exchange between authorities and the use of the Advisory Committee, is under way among Member States and the Commission. The Commission has already done some useful work on the functioning of a Network of Competition Authorities.

120-129  National competition authorities

  The Government agrees with the competition authorities cited by the Report that the allocation of cases among NCAs and between them and the Commission should be left to informal co-operation rather than detailed rules.

  The Committee then refers to two areas where there is clearly a need for further development of the Commission's proposals—procedures for the handling of complaints by NCAs and co-operation among NCAs and with the Commission. The Government shares the Committee's concern that forum shopping by complainants be minimised and recognises the potential usefulness of some sort of minimal common procedural rules for the handling of complaints by NCAs in this respect. Against that it will be necessary to avoid creating wasteful and burdensome constraints on the freedom of national authorities. The balancing of interests here requires further examination by the Member States and Commission.

  Similarly the Government is concerned to achieve greater clarity on how NCAs and the Commission will co-operate with each other, and would expect guidance of some form in this respect to be drawn up. It retains an open mind, however, on the nature and form of this guidance, although it will clearly need to be both transparent and flexible. These issues are the subject of current discussions among Member States and the Commission.

  The Government agrees with the Committee on the importance of the role of the Advisory Committee in ensuring consistency in national decisions. It believes that all national decisions in Article 81 and 82 cases should be both reasoned and published. Such publication would be vital to ensuring the development of a coherent jurisprudence across the Community.

130-138  National courts

  There is wide agreement that further work is required on defining the role of national courts under the new regime. The Government agrees with the Committee that the effectiveness of the new regime will be "heavily dependent on the capacity of the national judicial systems to apply the criteria in Article 81(3) in a systematic and coherent manner" and welcomes the Commission's promise of detailed guidance for national courts in applying the test. The Government believes that although National Courts should be capable of determining these matters there needs to be further discussion to ensure that courts across the community have the right expertise to determine these economic questions. It will also consider whether some form of guidance, training or other assistance for the judiciary relating to the new responsibility would be appropriate.

  The Committee points to the roles of the European Court of Justice and Commission in ensuring consistency in the decisions of national courts, but is concerned about the practicalities of how the Commission will be able to monitor and intervene when necessary in a large number of cases. The Government agrees that it is likely to be impracticable for the Commission to be notified of every Article 81 and 82 case brought before a national court, let alone intervene. The Government believes that it is important for there to be some mechanism for national courts to be made aware of the views of the Commission and the Commission and Member States are currently exploring options for this. Possibilities include Commission interventing in national court proceeding as amicus curiae or being notified of all national court judgments relating to Article 81 and 82. Such proposals also have to be balanced against the need to safeguard the independence of national courts and the interests of the parties in individual cases. Further work and consideration between the Commission and Council on this subject will clearly need to continue.

139-141  Role of the Commission

  The Report argues that with a decentralised system there is a case for closer involvement of Member States in setting EU competition policy. The Government believes that the existing institutional arrangements which involve considerable informal discussion between the Commission and Member States are adequate, although it recognises, however, that such a fundamental change in the competition rules will require changes in the operation of these arrangements.

  The Advisory Committee on Restrictive Practices and Monopolies must be consulted prior to certain Commission decisions under Article 81 and 82 being taken, and it is proposed that it should also review draft decisions of Member States authorities, or at least the "important cases" among them. The Committee should not only be used to ensure the coherence of Member State decisions but should also continue to be the forum in which Member States make known their views on draft Commission decisions. In discussions among the Member States and Commission, the Commission has also shown a willingness to consider joint working groups for the development of policy instruments such as block exemption regulations and guidance notices in recognition that they will form an important part of the common policy to be applied by all members of the network. It has also proposed joint studies of particular sectors or competiton issues.

  Member State government do of course play a full role in any changes to underlying EU competition law through the normal institutional processes for legislative proposals.

142-144  The Timeliness of the proposal

  The Government appreciates that it will be a challenge to ensure consistency in the application of Community law in new Member States. It welcomes the Committee's suggestion that candidate countries should in some way be more closely associated with discussions on the White Paper and be given assistance in developing their capacity to implement EU competition law. The Government considers that this is best achieved in a co-ordinated fashion through the Commission.

145-149  Conclusions and points for discussion

  In its conclusion the Committee asked whether the time has not come to reconsider the wording of Article 81, in particular Article 81(3), itself. The Government considers that while the current wording may raise some, probably transitional, difficulties of application, these difficulties are caused primarily by the interface of economic and legal concepts. Decision-making on competition cases will always require that both aspects be taken into account, and it is doubtful whether alternative wording could be devised which would avoid such a need.

  In general however, the Government concurs with the concluding remarks of the Report, and in particular the need for considerable work to flesh out the White Paper into a fully complete proposal. While improvements in existing procedures would be welcome, the Commission should focus on resolving the detailed issues of implementation arising from its White Paper proposals. The Committee has set out some useful points on how they should be developed.


 
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