european commission – directorate general for competition dr. k. mehta, director, cartels

European Commission – Directorate General for Competition

Dr. K. Mehta, Director, Cartels

A PRIMER ON ANTI-TRUST POLICY

IN THE EUROPEAN UNION

UCL – Louvain-la-Neuve17th February 2007

The views and opinions expressed herein are purely personal and do not reflect the position of the European Commission.

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DEFINING ANTI-TRUST

° Historically referred to laws and enforcement against flagrant anti-competitive activities of Trusts.

° Policy of maintaining competition to benefit of economic health.

° Anti-trust is a portmanteau term for the composite of laws, case law, policy and administrative procedures to maintain competition:

Not just trusts but all private, public undertakings involved in economic activity.




PLAN OF THE PRESENTATION

LEGAL BASIS OF EU POLICY

° Treaty Provisions

° Case Law Principles

° Secondary Legislation

° Merger Control

Substantive Tests

Enforcers

Enforcement by the Commission and Judicial Review

Specifically: anti-cartel enforcement

Policy evaluation




TREATY PROVISIONS

Article 81 (ex article 85): prohibits agreements between undertakings that affect intra-EU trade and restrict, prevent or distort competition within the Common Market.

Article 82 (ex article 86): prohibits unilateral conduct of a dominant (or jointly dominant) undertaking(s) that affects intra-EU trade and amounts to an abuse, exploitative or exclusionary, of the dominant position in the Common Market or a substantial part of it.

Article 86 (ex article 90): outlines the competition rules applying to statutory monopolies or undertakings enjoying special or exclusive rights granted by Member States.

Articles 87-88: provide the rules for state aid which reflect the objective of competition free from distortions

Article 308 (ex article 235): provides a legal base for a European control of concentrations by permitting the Council to adopt any objective of Community action for which the Treaty has not provided the necessary powers.




PRINCIPLES FROM CASE LAW

The principle of direct effect of Treaty provisions and its twin principle of supremacy of EC law plays an important role in giving individuals and national courts a role in the enforcement of Community competition law. One of the main elements to justify the principle of supremacy over the national legal order has been to ensure the effective enforcement of community law.

This means:

- That articles 81 and 82 are directly applicable by national courts before whom undertakings may attack a restrictive agreement or abusive conduct.

- Community competition rules apply side by side with national competition rules and in case of conflict have primacy over national rules.

- While parallel actions under Community law by the Commission and under national law by a national competition authority are possible, the parallel application of the national action cannot prejudice the effectiveness of

Community application.




SECONDARY LEGISLATION

Previously provided by regulation 17/62, and current regulation 1/2003, both are based on article 83 of the Treaty. The Commission is empowered under regulation 1/2003 to enforce articles 81 and 82

- by having the power to investigate;- obtain market sensitive information from undertakings;- launch “dawn” raids”;- issue a statement of objections;- issue cease and desist orders;- prohibit restrictive agreements;- impose fines and periodic payments;- have exclusive power to issue EU-wide positive decisions on restrictive agreements.




In enforcing articles 81 and 82, the Commission:

- assisted by the Advisory Committee of Member States at important stages of the administrative procedure;

- relies on national authorities in organising inspections of undertakings

- makes available access to its file to defenders and involved third parties in its case- makes arrangements for a hearing of parties to statement of objections- must respect a limitation period – 5 years for substantive infringements and 3 years for proceduralinfringements.- must respect “legitimate expectations”- must motivate its decisions.




EUROPEAN COMMUNITY MERGER REGULATIONS (ECMR)

The Treaty does not foresee a specific article relating to the control of mergers and acquisitions. Secondary legislation based on article 83 and 308 entered into force in 1989 and was updated in 2004 by regulation 139/2004.

Merger control in the EU is characterised by exclusive Commission competence for mergers of Community dimension.

The ECMR foresee a system of two-way referrals.

If the effects of a merger of Community dimension are limited to one Member State, it may be referred to that Member State.

Referral from the Commission to MS – after initial examination by the Commission.

Referral from MS to Commission – pre-notification stage.




SUBSTANTIVE TESTS

SUBSTANTIVE TESTS:

1. RESTRICTIVE AGREEMENTS:

“appreciable restriction by object or effect of competition affecting intra-EU trade, and which does not satisfy the cumulative conditions of article 81.3”

2. ABUSE OF A DOMINANT POSITION:

“unilateral conduct by a dominant undertaking that results in exploitative or exclusionary abuse (harmful to consumers)”

3. ANTI-COMPETITIVE MERGERS:

“a concentration which would significantly impede effective competition, in particular as a result of the creation or strengthening of a dominant position, shall be declared incompatible”




ENFORCERS

° THE COMMISSION

° NATIONAL COMPETITION AUTHORITIES

° NATIONAL COURTS




ENFORCEMENT THROUGH COMMISSION DECISIONS

The Commission enforces through the following decisions addressed to undertakings, not to individual persons:- Prohibition decisions addressed to cartel members imposing fines

or prohibiting agreements (eg joint ventures)- Periodic penalty decisions on undertakings that fail to provide information, refuse documents, obstruct enquiries- Cease and desist orders against unilateral conduct with or without

fines- Decisions ordering mandatory access, supply, licensing

decisions requiring structural or behavioural remedies with or without fines- Non-infringement decisions making binding commitments offered

by undertaking(s)

Final decisions are adopted by the College of Commissioners by majority.Intermediate decisions are delegated to the Commissioner for Competition.




CONTROL OF CONCENTRATIONS

The Commission enforces control of concentrations under the rules of merger control by:

- Requiring ex-ante notification if need be through periodic penalties or fines for failure to notify

- Authorisation decisions for non-opposed mergers- Authorisation decisions for cases of concentrations where transaction

is modified to meet competition concerns- Decision prohibiting a concentration or requiring an implemented

concentration to be reversed.




JUDICIAL REVIEW

Commission decisions are subject to review by the European Court of Justice (ECJ). In practice competition cases are reviewed by the Court of First Instance (CFI) (which is attached to the ECJ), subject to appeal on a point of law to the ECJ. The Commission’s application and enforcement of the competition rules can be subject to judicial review in several ways:

- in regard to fines and periodic penalty payments the court has “unlimited” jurisdiction under article 224 (ex 172) of the Treaty. The Court substitutes its own assessment for that of the Commission.- The Court can annul a Commission decision under article 230 (ex 173) on the grounds of (a) infringement of an essential procedural requirement, (b) lack of competence, (c) infringement of any rule of law in applying the Treaty (d) misuse of power.- The Court can rule under article 231 (ex 175) on the legality of the Commission’s failure to act.




ANTI-CARTEL ENFORCEMENT

Assessment: ° Clear violation of Article 81 ° Secret agreement/concerted practice between competitors to distort, restrict or eliminate competition.

Detection: ° Problematic

Economic Approach I – develop collusion markers

Economic Approach II – offer incentives to defect and report

Investigative Approach II – follow-up of complaints, informants, whistleblowers.

Sanctions:

Collective infringement, but individual fines according to contribution to the gravity and severity.

No economic impact quantification.




cartel decisions

1

7

5

7

5

9

10

3

2

5

2

1

5

6

2

1

3

4 4

1

4

1 1

2

0

2

4

6

8

10

12

2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1996 1995 1994 1992 1990 1989 1988 1986 1984 1983 1982 1977 1973 1969

year

nu

mb

er




amount and decisions

1846,3855

683,029

390,2091 404,781

944,871

1837,823

119,832

1329,23105

75

75

9 10

3

44

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2006 2005 2004 2003 2002 2001 2000 1969

year

amount in millions

0

5

10

15

20

25

30

35

40

45

50

number of decisions



POLICY EVALUATION

POSSIBLE CRITERIA:

° DESIRABILITY AND FEASIBILITY OF POLICY OBJECTIVES

° IMPLEMENTATION

° ENFORCEMENT RECORD COMPARED TO BENCHMARKS

° TYPE I AND TYPE II ERRORS

° POLICY ACHIEVEMENTS AND ECONOMIC IMPACT




AT&T HISTORY

european commission – directorate general for competition dr. k. mehta, director, cartels

Documents

national law

national competition

community competition

national rules

national competition

ex article

national courts

national action