Discuss the current EU competition law reform proposals and evaluate the case for anti-trust de centralisation.

Introduction
EU competition law, born out of post-war desire to integrate the economies and peoples of Europe as part of the project of unification initiated in the 1950s, has developed, in the early stages of the twenty first century, into a cornerstone of the Single Market project that binds the European Union today. Together with the free movement provisions of the Treaty the competition rules stand as guarantors of the economic integrity and cohesion of the EU marketplace.
Reform of the legislative framework is permanently on the agenda of EU policy makers keen to ensure that Europe remains in the vanguard of global antitrust enforcement. Similarly, the politically sensitive issue of decentralisation is never far from any policy debate in Brussels. It is submitted that the nexus of these two great forces proves a fertile field for analysis and commentary.

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Competition is a fundamental market mechanism and, according to conventional economic theory, a simple and efficient means of providing consumers with lower prices and superior levels of choice and quality in products and services. Effective competition demands that the market is made up of independent suppliers, each subject to a range of rigorous competitive pressures exerted by the operations of the others. Two grand rules stand at the heart of the EU competition regime:
Agreements which distort, restrict or hinder competition are prohibited (Article 81 EC), e.g. horizontal price-fixing agreements and cartels between competitors;
Firms in a dominant position may not abuse that position (Article 82 EC), e.g. monopolist predatory pricing aimed at eliminating competitors from a market.

The Commission, guardian policeman and watchdog of the Treaty, is empowered to apply the competition rules. It enjoys a wide number of investigative powers and may impose swingeing fines on those undertakings found in transgression of the system.

Recent Steps
On May 1 2004 ten new states acceded to the European Union. That date also had particular significance for EU competition policy, witnessing as it did the entry into force of four new regulations:

Competition enforcement regulation (Reg (EC) No 1/2003): terminates notifications; sanctions national competition authorities and domestic courts to apply Article 81 in extenso; increases the Commission’s inspection powers sharpens fining powers and modernises the 17/62 regime.
Merger control regulation (Reg (EC) No 139/2004): enables the Commission to intervene in all anticompetitive mergers; underlines the ‘one-stop shop’ principle; introduces more flexibility into the review timetable.
Block exemption regulation on technology transfers between firms (Reg (EC) 772/2004): Establishing protection for agreements licensing new technological developments between competing companies with a market share below 20 per cent (or 30 per cent for agreements between non-competing firms); no presumption of illegality re agreements between companies with higher shares of the market.
Regulation on air transport between EU and non-EU airports (Reg (EC) 411/20004): grants the Commission clear and effective powers to review the effect of collusion between non-EU and EU airlines on European customers.

Reforming the State Aid Regime

The European Council has established a clear goal in his field: a more competitive Europe requires ‘less and better aid’. The Commission has launched a consultation process on an Action Plan aimed at delivering this through a root and branch reform of the current state aid regime. ‘Less aid’ is desirable given that it is unacceptable that, while most businesses strive hard to survive and succeed, others gain an artificial advantage, sometimes through heavy public support. In the long term this aid disrupts competition by preventing market forces from rewarding the most competitive firms, and overall competitiveness suffers. Any contemplated reform will also have to deliver ‘better aid’ in light of the fact that prudently and effectively targeted support can fill holes left by genuine, non-organic market failures. Hence empowering and encouraging more undertakings to become active competitors and thus enriching the economy.
In tandem with the decentralisation debate, the Action Plan will launch an EU-wide debate as to how future aid can be concentrated on undertakings where it will add greatest value. As a matter of commonsense it is submitted that any new rules adopted must guarantee that the Commission can continue to block those national subsidies that safeguard inefficiencies or hold back necessary structural change. Moreover it is argued that such new rules should make it easier for Member States to use scarce public funds for measures that will boost entrepreneurship and innovation, improve the availability of risk capital, and promote vital research and development.

Commentary on Reform

At the end of March, European Heads of State and Government met in Brussels to agree how to achieve the goal of increased competitiveness by renewing the economic and social reform process started at the Lisbon summit in 2000.
The Commission position is that the best path forward is by means of a partnership that garners support for change by gathering together stakeholders at all levels EU institutions, Member States, undertakings and citizens. It is thought that a partnership of common interest is the safest way to guarantee that the Union’s economic development is both sustained and sustainable.
Ideally every individual in the European anti-trust community would have a part to play in the partnership. Each actor within his or her own sphere of responsibility owes a duty to have the courage to use the competition policy tools at their disposal effectively.
The radical 2004 reforms of anti-trust enforcement were, it is submitted, well-justified and appropriate in terms of the broad canvas of socio-economic and political factors to which they will be subject. The new legal regime is characterised by sharper and proactive enforcement, increased cooperation between the EU and Member States and better goal and priority setting.

The policy of Decentralisation and the new network of Competition Authorities

The first success of the new reform agenda has been the creation of a cooperative network between national competition authorities across the Union who, in partnership with domestic courts, now share the Commission’s power to apply EU competition rules. Enforcement is therefore no longer subject to or dependent on the exclusive action of the European Commission alone. No fewer than 11 cartel decisions were adopted under Article 81 between 1 May 2004 and February 2005. Five decisions were taken by national authorities, and six were adopted by the Commission. Nine Article 82 decisions were taken over the same period: eight by national authorities and only one by the Commission.

The modernisation policy has not only had an impact on national competition authorities. National judges have also been empowered to increase their jurisdiction over competition matters. Of course, where judges so desire, the Commission is available to tender opinions on specific cases and it is submitted they should be encouraged to exploit this facility to preserve the harmony and integrity of the application of the law. Networking activities such as those organised by the Association of European Competition Law Judges and inter alia, the Presidents of European Supreme Courts are also to be robustly applauded. An increasing number of judges are taking up the training which is on offer to support modernisation. In 2005 alone, over 700 members of the national judiciaries will benefit from intensive competition law training co-financed by the Commission.

Arguably, the most significant success of the decentralisation policy has been the way it has offered a new gateway for an unprecedented level of cooperation support and exchange between national competition authorities and the Commission. Authorities now meet regularly both in formal working groups and more informal meetings. Issues of anti-trust law and economics are discussed alongside problems in individual sectors. Fluent cooperation within the network is also deriving benefits in terms of ascertaining which authorities are best placed to initiate and take forward particular cases.

Decentralisation: Pooling resources for more effective and efficient enforcement

To date networking has generated significant benefits in terms of more effective enforcement mechanisms and a considerably more efficient use of the collective resources of the EU-based competition authorities. It is important that pragmatism and a sense of common strategy remains the basis of this cooperation strategy. Those operating anti-competitive activities are skilful at collaborating across frontiers to achieve their own goals. It is necessary for the regulatory authorities to be as motivated, focused and industrious in their own coordination efforts. The risk of deleterious turf wars breaking out is obvious and a matter of concern. Procedures must be established that ensure that each enforcement task is carried out by the authority that is best-placed to perform the function.
In theory, pooling and exchanging information should promote effective enforcement action. In recent times, several Member States’ competition authorities have received complaints from customers suggesting that a cartel was operating in the flat glass sector. Various authorities coalesced to piece individual pieces of the jigsaw puzzle of the case together. On ascertaining the full picture through this cooperation, it was concluded that the scope of the case merited Commission action. Accordingly, the Commission promptly carried out inspections and the case is progressing.

Better and faster identification of the appropriate authority to lead an investigation is only one aspect of the picture. If performed well, proactive work sharing also yields valuable new opportunities in terms of quality, efficiency and effectiveness. IN an ideal world, Commission action will seamlessly complement that of Member State competition authorities and vice versa. One good example lies in the management of simultaneous complaints against Deutsche Post recently received by both the German Bundeskartellamt and the Commission.
Deutsche Post’s actions were predicated on a provision of German postal legislation which is already the subject of Commission proceedings under Art. 86 EC. In the circumstances it was agreed that the most sensible and productive way forward was for the Commission to continue its Article 86 procedure and for the Bundeskartellamt to adopt the antitrust complaint. The combined efforts of the two investigatory bodies enabled both the Commission and the Bundeskartellamt to conclude the work and take their respective decisions within a considerably shorter timeframe than would otherwise have been the case.

Modern Decentralisation: A further and better alignment of policy and practice
Examining the broader picture, it can be argued that modernisation has produced increasing comity and coherence in the general policies and practices of EU competition authorities. In the UK, competition laws were aligned with EU competition law on the enactment of the Competition Act 1998 and similar experiences have been shared across the Union. In addition, Member States are now leaving behind their pre-2004 notification systems and leniency programmes are now in place in 17 Member States. Moreover, a new exchange of views is now taking place on draft decisions to bring about convergence in the application of Articles 81 and 82.
An effective enforcement policy will guarantee that the rich fruits and spoils of the Single Market are not carved then swallowed up in private by a handful of huge undertakings. Decentralisation can help to ensure that each and every undertaking competes on its own merits. This is a pre-requisite for competition and for keeping business on target for continuous efficiency improvements and the closer to the local ground enforcement is initiated the easier it will be to achieve. Moreover, it is only by creating and maintaining a fair competitive environment at home that EU businesses will learn to compete effectively abroad and a decentralised strategy can only serve to incentives this.

Some observations on the reformed Regime

There can be little doubt that it was right to shift the focus of competition law enforcement in the EU from an overburdened system of close central control to one of cooperation, and of course, these are very early days. Over the next several years it should be possible to observe the full range of benefits inherent in the new system crystallise and mature, hopefully in a virtuous and expanding circle of more and better enforcement.
Ex-Competition Commissioner Mario Monti has contended that there is no need for further root and branch reform of the EU anti-trust regime of 2005. However, it is essential that the enforcers stay engaged in the process of review and refinement. The new system will be judged principally on the consistency of its implementation and it will be necessary to build on experience gained actively to promote healthy competitive practices in the Single Market.
One attractive by-product of the reforms is that the Commission has been released from the laborious and both time and resource-consuming duty of dealing with antitrust notifications. This should give the Commission more freedom to set new proactive priorities. It is submitted that this could contribute to the creation of a business environment that not only facilitates cross-border competition but which actually induces and nurtures the flux of competition, new entry and innovative action.
The Commission has expressed an intention to use the powers under Regulation 1/2003, to initiate and conduct investigations in sectors in which competition does not seem to be functioning at an ideal level. Sectors such as energy and financial services, both markets absolutely central to the overall competitiveness of the EU, are likely to be among the first on the list for review. Regulatory barriers in these areas, at both national and Community level, unnecessarily, and usually unintentionally, restrict competition.

The Acid Test

It is desirable if not essential that new legislation is more conducive to competition. The Commission’s proposals to embark on a renewed and reinvigorated Lisbon programme include a stern commitment systematically to examine the impact of all existing and proposed new EU legislation on competitiveness. Seemingly the aim of the exercise is to measure the competitive impact of the measures and to ensure so far as is possible that they do not harm or undermine the growth of the European economy or the interests of consumers. It is recommended that competitiveness testing should be built squarely into European impact assessment and Member States should be encouraged to consider competition issues when developing their own national rules.

The challenge for the future is to ensure that the new anti-trust regime is employed to its fullest extent. The competition provisions are a very powerful tool in the fight to stimulate innovation and competitiveness. Decentralisation will, by means of cooperation and work-sharing in the network of competition authorities, offer the best chance success in this endeavour through advances in the struggle against cartels, and through closer focussing of the Commission’s enforcement activity on the most harmful anti-competitive practices.

Active and fluent bilateral cooperation between national and central competition authorities will prove to be of unquestionable value. Such would make for vastly more effective joint, coordinated responses to anti-competitive practices, amongst other things and perhaps most importantly by avoiding conflicting decisions in cross-border cases. However, with the growing number of competition authorities world-wide, bilateral cooperation will not suffice. A global marketplace demands a multilateral response. It is a trite observation that European competition law does not operate in the vacuum of a black hole but in a complex world packed full of interacting elements.

The importance of the OECD and the International Competition Network in promoting the progressive convergence of competition policy around the world cannot be overstated. Globalisation is now a simple reality of commercial life. Free, open and competitive markets abroad offer enormous opportunities for all efficient operators.

Europe has good reason to support and encourage market-oriented reforms across the world, and the swift introduction of nascent competition regimes to buttress and flank these reforms. However, the proliferation of new competition regimes has led to a status quo of divergent standards. Individual compliance with these can elevate transaction costs, produce red tape, and foster legal uncertainty and insecurity for firms with footholds in many different parts of the world. That said, it is submitted that at present a global competition authority is neither a very realistic nor particularly desirable prospect.

For this cogent reason, decentralised international cooperation, both bilateral and multilateral, is of vital important for modern competition authorities. As more independent and specific approaches converge towards equivalence, it will prove easier for globally-active companies to comply with the regimes imposed on them. The OECD and the International Competition Network have already made considerable advances in deriving common standards to address specific issues in key areas. It is submitted that the results obtained to date are convincing not least because they represent a broad consensus gained after lengthy and high-level multilateral discussions. The EU regime would benefit greatly from a globally shared commitment to ban entrenched cartels and the first steps have been taken in this regard.

As regards bilateral relationships, the European Union’s cooperation with the United States has developed promisingly over the last five years. The Commission has embarked on an exploration, with their American counterparts, of the scope for a second generation agreement that would facilitate a deeper and broader level of cooperation in the fertile field of cartel busting.

In Summation

It is undeniable that healthy competition law is a core driver for efficiency and growth in the EU economy. If the competition authorities of Europe are serious about fundamental economic objectives and certain social and environmental goals, they have no choice but to seize the nettle of decentralisation, work through the inevitable wrinkles in the new extended system, and refine over time to derive an system fit for application in the vast and complex industrial environment of the twenty first century.

In the words of new Competition Commissioner Neelie Kroes:

we need to make European competition policy the ally of prosperity. A positive force for sustainable productivity and growth. A tool which can provide new and imaginative ways to eliminate the obstacles that still stand in the way of dynamic competition in the internal market.

It is submitted that the debate over decentralisation is lopsided to the point of practical affirmative certainty. The developments described above constitute a positive, ambitious, yet balanced and entirely attainable response to the challenge that continent-wide competition regulation presents. It is hard to find a convincing critique of decentralisation and it is not surprising that the vaunted policy has few prominent detractors. In terms of finite resource allocation and exploitation alone the policy carries before it clear and unarguable advantages. The 2004 reforms, in particular with regards to Regulation (EC) No 1/2003 on enforcement, but also by virtue of Regulation (EC) No 139/2004 on merger control will serve only to accelerate and lubricate this process. There is much to commend the decentralisation of competition surveillance and enforcement as the next great step in this field. Furthermore, it is possible that success in this context might well inspire a renaissance in the popularity of the doctrine of subsidiarity in general and decentralisation may well become the buzzword and code for efficiency in the EU. It is an inescapable fact that, already in domestic political parlance and ‘received socio-political wisdom’ across the EU, the concept has acquired that status in broad commentaries on the Union and its multi-headed bureaucracies. That, perhaps, is the most telling observation of all.

Bibliography

Competition Law, R. Whish, Butterwoths Law, (2001)
Wealth of Nations, Adam Smith, (1776)
Business Law in the European Union, C.Bovis, Sweet & Maxwell
Common Market Law of Competition, Bellamy & Child, 3rd ed, (1996)
European Competition Law Review
EC & UK Competition Law and Compliance, P.Taylor, Sweet & Maxwell (1999)
The Economics of EC Competition Law, S.Bishop and M.Walker, Sweet & Maxwell (1999)
CCH EC Competition Law Reporter
Introduction to European Union Law, W. Cairns 2nd ed (2002), Cavendish
Law of the European Community, C. Vincenzi and J. Fairhurst 3rd ed. (2001) Pitman
Competition Policy Newsletter
Bulletin of the European Union
http:www.europa.eu.int (multiple sources)
http://curia.eu.int/en/index.htm
A reformed competition policy: achievements and challenges for the future
Mario Monti, Center for European Reform, Brussels, 28 October 2004
http://europa.eu.int/rapid/pressReleasesAction.do?reference=SPEECH/04/477&format=HTML&aged=0&language=EN&guiLanguage=en
Bilateral Cooperation http://europa.eu.int/comm/competition/international/bilateral/bilateral.html
The Campaign to Reform the EU
reformeurope.org

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