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Juncker’s Commission: Time To Review Competition Law Enforcement?

About The Author

Matt Bogdan (Former EU & International Law Editor)

Matt graduated with an LLB (2:1) from Durham University in July 2014. Most recently, he has been assisting with research on comparative company law at the Durham Law School. Matt is primarily interested in the TMT sector, but has also been involved in matters of public international law through Durham United Nations Society.

Competition law (commonly referred to as ‘antitrust law’ in the US) consists of legal rules intended to protect the process of market competition in order to maximise consumer welfare and achieve economic efficiency. At the heart of the European Union’s (EU’s) competition law system lie Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), which restrict an array of anti-competitive practices, including agreements disrupting the competitive process (such as cartels) and abuses of an undertaking’s dominant position in the market (such as price exploitation). The enforcement of both provisions is primarily effected by the EU’s foremost executive body, the European Commission, and in particular, its Directorate-General for Competition (COMP/DG Comp). As a public authority acting in the public interest, COMP investigates and responds to anti-competitive conduct through, among others, the administration of fines, which are intended to achieve effective deterrence of future infringements and to maintain competitiveness in the markets. Notably, private enforcement, public enforcement’s little nascent sibling, discussed in my earlier article ‘Private Enforcement of EU Competition Law: Worth the Risk?’, can also have a compelling deterrent effect despite being primarily occupied with alleviating losses and damage suffered by individuals. Nonetheless, in the EU, public enforcement has historically been the default method of ensuring competitiveness, which puts the Commission in a particularly powerful and commanding position. The debate over the appropriateness of the Commission’s enforcement powers and practices in fulfilment of its mandate is by no means novel, however with the new Commission members assuming office last month (November 2014), it appears that the time for revisiting this debate is most appropriate.

Meet the New Commission

The election of the European Commission is a particularly important event because it effectively sets the EU’s enforcement priorities and strategies for the next five years. In the UK, we have entertained a surprising amount of media coverage during the election process, mostly owing to David Cameron’s opposition to the appointment of Jean-Claude Juncker as the new President of the Commission. The two gentlemen’s relations following Juncker’s appointment were marked by rather frosty political exchanges and even some awkward high-fives (the latter being particularly noteworthy). As it usually is the case with newly elected public figures, since the November entry into office, we have been flooded with even more news on the Commission, albeit not exactly of the usual type. Mr Juncker has been recently accused of facilitating tax avoidance schemes in Luxembourg and challenged by a motion of censure in the European Parliament (sponsored by an unusual alliance of right-wing, anti-EU parties, including UKIP), which was subsequently voted down by the overwhelming majority of the remaining parties. Simultaneously, the Commission has also announced its substantial 300-billion-euro investment plan aimed at boosting economic growth by attracting private investment in EU infrastructure projects. All in all, the Commission has been busy and controversial, which in my opinion has taken away the spotlight from the arguably most interesting and important part of the Commission, the DG Comp.

Meet the New Directorate-General for Competition

Since November, the enforcement of competition law has certainly been a hot topic. The Council of the European Union has finally approved the Damages Directive, (discussed in my recent article on private enforcement of competition law) originally proposed by the Commission. COMP itself has already resumed the work left to it by its former President, Joaquin Almunia (including, among others, an investigation into Starbuck’s tax deal with the Dutch government) and opened an inquiry into allegations of anti-competitive practices by the Formula One’s governing body. But perhaps the most exciting event yet is the European Parliament’s recent successful vote on a resolution to break up Google, which could be attributed both to the EU’s concern over the relative economic weakness of the European digital sector and to the recently topical issue of privacy protection. Nonetheless, the resolution itself is non-binding and does not have any practical effects on Google, but rather serves as symbolic message incentivising enforcement to DG Comp, which has reopened its four-year-long investigation into Google this September.

All of the aforementioned on-going and forthcoming investigations will be shaped by Margrethe Vestager, the new President of DG Comp. It therefore follows that getting to know Vestager could provide some valuable insights into COMP’s current attitude towards its enforcement mandate. Unfortunately, finding information about the acclaimed Danish politician is not easy unless you can afford the latest €150 issue of the Global Competition Review (containing an interview with her) or you happen to be fluent in Danish and can understand the tweets on her rather active Twitter account. Nonetheless, Vestager appears to have a steely reputation owing to her determination in getting things done irrespectively of the obstacles she encounters. She is said to be less susceptible to political influences than her predecessor, which has already manifested itself in her response to the European Parliament’s aforementioned vote against Google that firmly determined competition enforcement as ‘independent from politics’. The seemingly determined and resilient character of the new COMP President may translate into a firmer stance from the Commission in pursuing their existing investigations (e.g. against Google) and in opening new ones (e.g. a potential action against Android, which will be addressed on KCTL in the forthcoming weeks). In an ideal world of competition law enforcement, this would be classified as an unequivocally positive sign of things to come, however in our Commission-centred enforcement structure based on an integrated agency model (i.e. where a single specialised institution, like the Commission, concurrently performs investigative, enforcement and adjudicative functions), concerns may be raised over the situation of businesses operating in the EU.

Taking a Closer Look at Commission’s Powers

The scope of the Commission’s mandate is impressive. It can launch inquiries into actors suspected of harming competition (investigative function), prosecute the offenders (enforcement function) and finally, reach decisions and impose penalties on the guilty (adjudicative function). To use a crude metaphor, the Commission acts as the detective, the police and the judge when determining whether there has been a violation of competition law. If that is not enough, as an executive body, the Commission also proposes legislation, which makes it a key policy-maker in the EU. As Milana Karayandi points out in her article, such concentration of powers raises numerous concerns. On a theoretical level, the current state of affairs stands in contradiction of the traditional concepts of the separation and balance of powers. On a political level, this results in a negative and distrustful perception of the EU institutions as detached and authoritative. Finally, on a practical level, the Commission’s strength can prove detrimental to businesses with regard to matters of access to justice and fair trail. Nonetheless, with the Commission’s mandate being a matter of policy choice, one cannot ignore the arguments in favour of the present situation. Concentrating powers in the hands of the Commission allows its members to experience all aspects of enforcing competition law, which should yield higher levels of expertise found in that institution. This can translate not only to more coherent enforcement decisions, but also to better policy-making and an improved standard of best practice guidelines published regularly by the Commission. The expertise also leads to an increase in administrative efficiency, which is particularly important for the currently understaffed Commission. On balance, it can be argued that the current system is suitable, providing that the exercise of Commission’s powers remains appropriately regulated and restricted.

Guarding the Guardians of Competition Law

In enforcing competition law, DG Comp is accompanied by a number of actors who are intended to protect the accused from procedural abuses. While a complete set of procedures used in COMP’s enforcement actions can be found in their extensive Antitrust Manual of Procedures, for purposes of this article, the process begins when the Commission opens proceedings and starts its investigation of the allegedly infringing conduct; this is followed by the issuing of a Statement of Objections, which notifies the parties involved of the objections raised against them; a process of document discovery and disclosure comes next, and leads to oral hearings; finally, a decision is made and, potentially, a remedy is prescribed. The Commission has a wide range of remedies available depending on the type of infringing conduct, ranging from administrative fines, to injunctions and even nullifications of contractual agreements.

The first significant safeguards for businesses are the Hearing Officers, who are responsible for monitoring oral proceedings. As Michael Albers points out in his extensive analysis of the role of Hearing Officers in Commission proceedings, Hearing Officers facilitate the enforcement process by mediating between the Commission and the alleged offenders as well as planning, organising and conducting oral hearings. Most crucially, they also have the capacity to postpone deadlines for submission of responses to Statements of Objections, which oftentimes run very tight in conjunction with the deadlines for oral hearings. 

Nonetheless, Hearing Officers not only have no formal powers allowing them to intervene into the enforcement process itself, but also usually begin acting only after a Statement of Objections has been published by the Commission. This potentially exposes the parties involved to a particularly thorough and intrusive investigative process (conducted before the Statement of Objections is drafted), where the Commission may, for example, attempt to submit excessive discovery requests. This pre-statement safeguarding gap can theoretically be filled by the European Ombudsman, who is tasked with improving accountability of EU institutions through acting as a guarantor of the right to good administration to all EU persons. Under Article 228(1) TFEU, the Ombudsman is empowered to address complaints of maladministration and to seek early relief from procedural irregularities, which, at least theoretically, should be helpful in the absence of Hearing Officers during the pre-statement stages (in his article, Andreas Scordamaglia-Tousis provides an excellent overview of the Ombudsman’s mandate). Nevertheless, akin to the Hearing Officers’ decisions, the Ombudsman’s decisions are not legally binding and thus cannot guarantee instant relief. In practice, only 35 competition law cases have so far been brought before the Ombudsman, which most likely is a consequence of the Ombudsman’s inability to offer immediate support to businesses complaining of the Commission’s conduct. During the Commission’s proceedings against Intel, the Ombudsman received complaints about the DG Comp’s failure to take minutes from a meeting that directly concerned the subject matter of its investigation. While the Ombudsman’s decision (which found maladministration on the investigator’s part) led to a reform of the Commission’s 2010 draft Best Practices, it failed to remedy the harm done to Intel. Thus, unless the Ombudsman is granted some extensive, immediately binding remedial powers, its relevance for protecting businesses from procedural abuses will remain limited.

Finally and perhaps most fundamentally, it can also be argued that ensuring procedural fairness during oral hearings by Hearing Officers is somewhat futile given that the ultimate decision-makers of the Commission, the College of Commissioners (i.e. the 28 core members of the Commission responsible to specific EU policy areas, excluding the civil servants below them), and the Commissioner for Competition in particular, are not actually legally required to attend them.

The second significant safeguarding solution is a judicial review of the Commission’s decisions by the EU courts, namely the General Court (EGC) and the Court of Justice (ECJ). The TFEU provides for a judicial review of the legality of Commission’s decisions (Article 263) and of the level of administrative fines imposed (Article 261). Notably, the former review does not allow the courts to scrutinise the measures used by the Commission in the enforcement process. Furthermore, in practice, the EU courts usually grant the Commission a wide margin of discretion in its decision-making, a trend corresponding to the increasing quantity of economic analysis found in competition enforcement decisions, which induces greater judicial deference. 

Finally, as Anne MacGregor points out in her article on due process in EU competition cases, an appeal against a DG Comp’s decision does not have an automatic suspensory effect on that decision (as it is the case in, for example, Germany). Thus, immediately following the decision, the Commission may issue a press release announcing the guilt of a party whose appeal against that decision is still pending. Suspension of the decision may naturally be requested, however it is difficult to obtain and operates only after the damage is already done (i.e. the presumption of guilt is already established by the press release). 

Concluding Remarks

The entry into office of the new European Commission this November may have just marked a new era of competition law enforcement in the EU. If Vestager applies her steely character to her pursuits of anti-competitive actors, it may just be the right time for European businesses to thoroughly review their activities. But equally so, the Commission’s powers and activities should also be revisited and adjusted accordingly so that the balance between the enforcer and the contravening entity is properly safeguarded.

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Tagged: Commercial Law, Competition, European Union

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