Competition - Anti-trust modernisation package25/08/04 / cata_european-union-news

On 1 May 2004, a new system of application of Articles 81 and 82 of the EC Treaty dealing with cartel agreements and abuse of dominant position entered into force. This is the result of a long process of a reform that started five years ago. The new system is established by Council Regulation no. 1/2003 and notices and guidelines issued by the European Commission.

The objective of the reform is to ensure efficient protection of competition in an enlarged European Union while reducing bureaucracy for companies that operate in Europe. Under the previous system (established by Regulation no. 17/62), an exemption from the general prohibition of a cartel agreement must have been granted either in the form of a so-called block exemption, or through an individual decision by the European Commission. Such system created an increasing burden and distracted the Commission from the detection and repression of the most serious violations. Under the new system, the centralised notification system is abolished. Article 81(3) EC, the provision under which an agreement that has anticompetitive effects can nonetheless be found legal, can be directly relied upon by undertakings before a national court or national competition authority; no Commission statement is needed to do so.

Consequently, the companies are themselves responsible for checking whether the conditions of Article 81(3) EC have been fulfilled. To this end, the Commission has issued guidelines on the application of Article 81(3) of the EC Treaty which complement the already available guidelines on horizontal cooperation agreements and on vertical restraints. The Commission will remain open to discuss specific cases with companies where appropriate. It is in particular prepared to do so where novel questions of EU competition law make it difficult for companies to assess their agreement or conduct. For this type of situations, the Commission shall issue so called guidance letters (see the Commission Notice on informal guidance).

The new Council Regulation creates also the conditions for a greater involvement of national courts as it makes Article 81 EC as a whole (i.e. including para 3) directly applicable. This means that a company or a final consumer suffering from an infringement of competition law can take legal action against the companies – authors of the alleged infringement before a national court and obtain damages, without having to wait for a decision of the Commission or of a national competition authority.

The new regulation empowers also national competition authorities to apply Articles 81 EC and 82 EC in full and makes it compulsory to apply Community law whenever it is applicable (i.e. whenever the agreement or practice in question may affect trade between Member States – see also the Commission guidelines on the effect on trade). In the new system, not only the Commission but also the national competition authorities will be responsible for enforcing competition rules.

The entry into force of the system will bring about several challenges, the most important of which is to ensure a correct allocation of cases and a consistent application of rules by all players. To this end, Regulation no. 1/2003 creates a number of specific instruments such as the power for the Commission and national competition authorities to intervene as amicus curiae (submitting an opinion) before national courts. When national courts rule on an agreement or a practice which are already the subject of a Commission decision, they cannot take decision running against such a Commission decision. They are also obliged to avoid giving decisions with would conflict with a decision contemplated by the Commission in ongoing proceedings. A similar obligation applies to national competition authorities.

Given that both national courts and competition authorities may apply these two Articles of the EC Treaty, a situation may arise where both Community and national competition laws apply. In such a case, the application of national competition law may not lead to the prohibition of a behaviour which is not prohibited under Community law.

The new regulation strengthened the powers of investigation of the Commission. For instance, the Commission is now entitled to enter homes of directors, managers etc. should there be a reasonable suspicion that important evidence is being kept there. Further details concerning procedure before the Commission are set in new procedural Regulation no. 773/2004.

With regards to enforcement, a network of competition authorities called the European competition network was set up in 2002 which consists of national competition authorities in charge of the application of Articles 81 EC and 82 EC and the European Commission. There should be a close cooperation within the network; the authorities have the power to exchange confidential information, to use such information as evidence in their respective proceedings and are subject to various information obligations regarding their respective cases. In the Commission Notice on cooperation with the Network of Competition Authorities, a particular attention has been given to the issue of leniency applications in cartel investigations in order to preserve national leniency programmes where they exist.

This legislation came into force on 1 May 2004.

On 2 June 2004, an extensive amendment to Czech Competition Act came into force that, among others, paves a way for application of EC antitrust rules by Czech Competition Office and aligns Czech law to the new EC legal exemption principle.