COMPETITION • EUROPEAN LAW • PROCEDURE
Regulation No 1/2003, which gives national authorities an increased involvement in the application of the EU competition rules, does not define the concept of authorities of the Member States. Article 5 of the regulation only sets out the powers conferred on them. This lack of legal definition can be explained by the diversity of situations within the European Union. In some Member States, one body investigates cases and takes all types of decisions. In other Member States, the functions are divided between two bodies, one which is in charge of the investigation of the case and another, often a college, which is responsible for deciding the case. Finally, in certain Member States, prohibition decisions and/or decisions imposing a fine can only be taken by a court with another competition authority acting as prosecutor and bringing cases before that court.
In order to address this shortcoming, the Court of Justice ruled that the concept of “authorities of Member States” refers to the administrative authorities in most Member States entrusted with the task of applying domestic legislation on competition, subject to the review of legality carried out by the competent courts, i.e. the courts to which that task has been especially entrusted, not including the criminal courts whose task is to punish breaches of the law.
More recently, the so-called “ECN+” Directive, No 2019/1 provided a legal definition of National Competition Authority (NCA), presented as “an authority designated by a Member State pursuant to Article 35 of Regulation (EC) No 1/2003 as being responsible for the application of Articles 101 and 102 TFEU” and stated that “Member States may designate one or more administrative competition authorities (national administrative competition authorities), as well as judicial authorities (national judicial competition authorities)”.
The NCAs, together with the European Commission, form part of the network of authorities (the European Competition Network – ECN), set up under Regulation No 1/2003. The functioning of this network, which is responsible for the application of EU competition law, must entail close cooperation between the competition authorities of the Member States and the Commission (Article 11 of Regulation No 1/2003). Such cooperation can take various forms; when the Commission or the national authorities of a Member State initiate competition proceedings pursuant to Articles 101 or 102, they must share the information on the case with each other. The Commission must send a copy of the most important documents to the national authorities. The authorities can consult the Commission in order to obtain its interpretation of the case. When the Commission initiates proceedings with a view to adopting a decision finding the existence of an infringement, or ordering that an infringement be brought to an end, ordering interim measures or for the acceptance of commitments, national competition authorities are relieved of their jurisdiction. At the same time, if a national authority has already initiated proceedings, the Commission must consult that authority before starting proceedings. The Commission Notice on cooperation within the network of competition authorities sets out the rules for the allocation of cases and the mechanisms of cooperation and assistance.
The NCAs must, by virtue of the principle of primacy of EU law, apply the EU competition rules, which are of direct effect. Article 3 of Regulation No 1/2003 of 16 December 2002 enshrines the obligation for the competition authorities and courts of the Member States to apply EU law where they apply national competition law to agreements and practices which may affect trade between Member States. The need to ensure that conditions of competition are homogeneous within the internal market makes it impossible for a practice to be prohibited under national law if it is not prohibited under EU law. The national authorities are bound to comply with this rule of convergence: they cannot take decisions on agreements, decisions or practices under Article 101 or Article 102 which would run counter to the decision adopted by the Commission (Article 16 of Regulation No 1/2003). Acting on their own initiative or on a complaint, they may (i) order that an infringement be brought to an end; (ii) order interim measures; (iii) accept commitments; (iv) impose fines, periodic penalty payments or any other penalty provided for in their national law. The application of EU law must be carried out in close cooperation with the European Commission. Article 11 of the regulation defines how this cooperation should be pursued.
In the context of Regulation No 1/2003, two situations must be distinguished. If the Commission is the first authority to initiate proceedings with a view to taking a decision under the regulation, the national authorities are relieved of their competence to deal with the case. If one or several national authorities have informed the Commission that they are acting on a case, the Commission may only initiate proceedings after consulting with that national competition authority within the two months initial allocation period. After the allocation phase, the Commission will, in principle, apply Article 11(6) only if one of the following situations arises: (i) network members envisage conflicting decisions in the same case; (ii) network members envisage a decision which is obviously in conflict with consolidated case law; (iii) proceedings in the case are unduly long; (iv) there is a need to adopt a Commission decision to develop EU competition policy; or (v) the national competition authority or authorities concerned do not object.
The aim of Directive No 2019-1, called ECN+, (European Competition Network+) adopted on 11 December 2018 is to give NCAs the necessary guarantees of independence, resources, and enforcement and fining powers to be able to effectively enforce Article 101 and 102 TFEU so that competition in the internal market is not distorted and undertakings are not put at a disadvantage by national laws and measures which prevent national competition authorities from being effective enforcers of the competition rules. The directive harmonizes the laws of the Member States when the NCAs apply Articles 101 and 102 TFEU in parallel with the provisions of their national competition law.
The directive establishes a procedural basis common to all NCAs. It extends to them the procedural rules applicable to the Commission under Regulation No 1-2003 and its implementing texts, and the interpretations of the Court of Justice’s case law, in particular as regards the definition of an “undertaking”. The directive thus safeguards the application of the general principles of Union law and the Charter of Fundamental Rights of the European Union by NCAs which will be required to respect the undertakings’ rights of defense, including the right to be heard, the right to an effective remedy, and to have proceedings conducted within a reasonable timeframe, and to refrain from taking any decision before issuing a Statement of Objections (Article3). The Member States must guarantee the independence of the NCAs and their funding (Articles 4 and 5). It sets out the minimum powers that the NCAs must have to carry out their investigations (Articles 6 to 9), find and terminate the infringement (Article 10), take interim measures (Article 11) and accept commitments (Article 12) and lays down the rules for imposing fines and periodic penalty payments (Articles 13 to 16), those intended to boost the effectiveness and attractiveness of leniency programs (Articles 17 to 23), as well as those relating to fostering mutual assistance between NCAs (Articles 24 to 28).
Among the new features that will most significantly affect the laws of Member States is Article 10, which authorizes NCAs to take both structural and behavioral remedies to put an end to the infringement. Among these structural measures, recital 37 of the directive refers to the obligation to dispose of a shareholding in a competing undertaking or to divest a business unit. The EU legislator has seen fit to establish a safeguard by requiring NCAs, when a choice is possible between two equally effective remedies, to opt for the remedy that is least burdensome for the undertaking. Will this open the door to endless debate on whether the two types of measures are equivalent and/or which is the most effective? Likewise, Article 11 provides that NCAs will be able to issue interim measures on their own initiative, without any referral by a party, in order to deal with rapid market developments, particularly in the digital field, and to prevent the market structure from evolving to such an extent that it would be very difficult to re-establish it by a decision taken by an NCA. While the directive limits this prerogative to cases of “urgency due to the risk of serious and irreparable harm to competition”, a sword of Damocles will now hang over undertakings, even when no competitor or trading partner believes that it has suffered harm due to their activities. In terms of evidence, it should also be noted that, contrary to the current French approach, the NCAs are now entitled to use “covert recordings” provided those recordings are not the sole source of evidence (recital 73 and Article 32). With regard to fines, Article 15 significantly increases the penalties for anticompetitive practices, as it now requires Member States to set a maximum fine of not less than 10% of total turnover, applicable to undertakings and associations of undertakings alike. However, in many Member States, the fine ceiling is much lower and in others, such as France, certain entities such as trade unions or professional associations are not subject to it.
More reassuringly for undertakings, Article 4(5) gives NCAs the power to set their priorities, and thus to reject complaints where they do not constitute a priority. This will allow minor restrictions to avoid the brunt of competition law and administrative sanctions. Furthermore, Article 23 on the interplay between applications for immunity from fines and penalties imposed on natural persons requires Member States to ensure that current and former directors, managers and other personnel of undertakings applying for immunity from fines are fully protected from penalties imposed in non-criminal administrative and judicial proceedings or criminal proceedings relating to their participation in the cartel, for violations of national law provisions that pursue predominantly the same objectives as those pursued by Article 101 TFEU.
