Speech made by Commissioner Mario Monti
the UNICE Conference on Competition Policy Reform
Brussels, 11 May 2000
Only the spoken words are authentic
Ladies and gentlemen,
I am very pleased to be here today to give an opening speech at this UNICE conference on competition policy reform. I very much welcome the UNICE initiative. It is important that there is a constructive dialogue between the Commission and industry on issues of common interest to ensure that we mutually understand each other's views and positions.
This conference will allow some of the main interested parties, namely industry, the national competition authorities and the Commission to discuss a number of issues that are of common interest and concerns. I am confident that the discussions will be fruitful.
The reform of Regulation 17, which was launched by the Commission's White Paper on modernisation, is a topic that has attracted considerable industry interest. It is not difficult to see why.
First, the Commission's White Paper proposes a fundamental change to the present Regulation 17, which has been in force since 1962, that is for almost 40 years. During that period we have come to think of Regulation 17 as a stable and almost sacred companion in an otherwise turbulent world. However, the fact that the Commission is now thinking and indeed proposing the unthinkable is a clear indication of the crucial importance that the Commission as a whole attaches to this matter.
Secondly, the Community antitrust rules apply to the conduct of economic operators. Companies take centre stage both as complainants and as those complained of. Operators therefore understandably ask themselves: How will the proposed changes affect me? Similarly, an organisation like UNICE must ask the question: How will the reform in global terms affect our members; will the application of the rules be more or less predictable; will certain members become subject to closer scrutiny; will there be more or less bureaucracy and so on.
In my intervention this morning I will share with you my thoughts on some of the main issues for discussion, namely efficiency, coherence and legal certainty.
However, before doing so it is important for me to stress that the proposed modernisation of Regulation 17 cannot be seen in isolation. It forms part of a fundamental and comprehensive reform of Community competition policy, affecting all its constituent parts, both substantive and procedural. There is a close interrelationship between the different elements which all aim to strengthen EC competition law. When assessing the White Paper proposal account must therefore be taken of the work that we are undertaking in the substantive field. Here I am thinking in particular of the new rules on vertical restraints and the draft texts in the field of horizontals, which mark a new departure based on a more economic approach.
I. The principal reform objective
I sometimes get the impression that the public perception of the White Paper is that it is about resources and nothing more. Let me be clear. Nothing could be more wrong. The objective of the proposed reform is not to create less work for the Commission. The objective is to strengthen enforcement of EC competition law throughout the European Union.
It is clear from the very content of the Treaty that effective competition constitutes a public good that must be protected. Competition law and policy is of fundamental importance to the European Union, European consumers and European industry. The very foundation of the European Union is an open market economy. As is now generally accepted, a competitive economy not only creates benefits for consumers and our societies as a whole but also ensures the optimal functioning of the Internal Market and the competitiveness of European industry on an increasingly world-wide arena.
The primary reform objective must therefore be effective enforcement. The yardstick against which the reform of Regulation 17 will and must rightfully be judged is that of effective protection of competition. To be successful the reform must ensure a clear and unequivocal gain in enforcement terms.
Of course, this does not mean that the reform cannot and should not also pursue other objectives as well. Considerations such as consistent application and legal certainty for companies are very important. But it does mean that the pursuit of such additional objectives must not be allowed to undermine the principal objective of effective protection of competition. As a public body we must never lose sight of this when constructing the new enforcement system and all its constituent parts. If we did, we would certainly deceive and disappoint not only ourselves but also and more importantly the European citizens, whom we serve.
II. The problems related to the current system
Before dealing with some of the main elements of the proposed reform, it is perhaps useful to briefly recall the existing enforcement system and its main deficiencies.
Under Regulation 17 the prohibition rules of
have direct effect and can therefore be invoked before national courts. Similarly, national competition authorities have the power to apply these provisions. On the other hand, the Commission has the exclusive power to grant exemptions under Article 81(3). An agreement can only benefit from the exception rule, if it has been notified to the Commission. No other sanction is attached to non-notification. There is as such no obligation to notify. In this way the notification system under Regulation 17 differs fundamentally from that established by the Merger Regulation. The Commission's proposal in the White Paper concerns only Regulation 17. The system of mandatory notification and ex ante control under the Merger Regulation is not affected. With regard to mergers this is the most effective enforcement system, since once implemented a merger it is difficult and costly to unravel. Ex post control would therefore either not take place or waste society's resources. These considerations do not apply to Articles
since there is generally not the same degree of integration of activities. The situation may be different for production joint ventures, which is the reason why the White Paper suggests that it may be appropriate to subject production joint ventures to the procedure of the Merger Regulation.
Under the existing Regulation 17 system, the Commission has for a long time sought actively to encourage the application of the EC competition rules by national courts. National courts are ideally suited to dealing with certain types of disputes, for example over contract terms. Moreover, national courts possess powers beyond those of either the Commission or national competition authorities. Only national courts can draw the consequences in civil law of compliance or non-compliance with Articles
This means that they alone can order the civil enforceability of agreements or alternatively find an agreement to be null and void. Again, only national courts can award damages to victims of anti-competitive practices. Competition authorities' powers are limited to ordering the termination of infringements and to imposing fines on companies which have breached the competition rules. As is clear from its notice from 1997 on cooperation with national competition authorities the Commission has also sought to promote the application of Community law by national competition authorities, realising that alone it could not bear the responsibility for enforcing the rules throughout the Union.
However, in practice these efforts have been largely in vain. The Commission's monopoly under Article 81(3) has been and remains a significant obstacle to the enforcement activities of national competition authorities and courts in the course of such national proceedings. There is always the risk that the company under investigation for breach of the competition rules claims that its agreement meets the conditions of Article 81(3) and is therefore legal. The company may make a formal notification to the Commission for exemption under Article 81(3). As the national bodies have no power to apply Article 81(3), the continuation of their enforcement action is made very difficult. In most cases, the national action must be suspended pending the Commission's decision. This leads to unnecessary delays and creates a clear disincentive to apply EC competition law. Instead national competition authorities and national courts apply national competition law. When applying national law national courts and competition authorities are only constrained by the principle of primacy of Community law. According to this principle Community law takes precedence in case of a conflict between national law and a prior Commission decision or a Community block exemption regulation. Since, at present, Article 81(3) is not directly applicable and therefore cannot be invoked by individuals, the primacy effect is limited to the few cases where the Commission has adopted a prohibition or exemption decision.
In practice, this system has led to a situation where the Commission is virtually the sole enforcer of Community law in an enlarging Union and where its resources in the area of antitrust are to a large extent tied up in the handling of notifications.
The latter would of course not be a problem if notifications revealed the cases that merit investigation because they would present a real threat to competition. However, that is not the case. The clarity of the law has increased substantially since 1962 when Regulation 17 was adopted. The rules have been clarified by legislative instruments like block exemptions, Commission notices and guidelines as well as a growing stock of case law and practice. Companies and their lawyers therefore generally know what is prohibited on the one hand and what is likely to be exempted on the other hand. Only the latter cases are notified. Unfortunately, we have good reasons to believe that some companies - too many in fact - also engage in practices that are prohibited by the competition rules. For obvious reasons these practices are never notified, they are even hidden ever more ingeniously from the eyes of the competition authorities. They are therefore resource-intensive to uncover and prosecute.
Naturally, the Commission currently tries both to cope with the notifications and to investigate cartels and other prohibited practices. However, the use we make of our resources is inefficient in terms of protecting competition. The current system therefore no longer ensures effective enforcement of the competition rules, which in my view in itself clearly justifies fundamental reform. We have to break away from the past in order to create a system that meets the principle objective of the Treaty in the field of antitrust, namely effective protection of competition. The Commission should no longer do the job of stating the law upon request. This is the task of the national courts.
III. Efficient enforcement
To promote effective protection of competition the new system must enable the Commission to concentrate its resources on the cases that present a real threat to competition to the detriment of consumers. The Commission must step up its prosecution of cartels; of other hard core restrictions such as resale price maintenance, market sharing, restrictions on parallel trade, and exclusive dealings leading to market foreclosure; of state measures that distort competition such as state monopolies; of mergers leading to single or collective dominance; and of abuses of dominance such as tying, refusal to supply and fidelity rebates.
However, in the Community of today and tomorrow it is not possible for a single authority alone to enforce the rules effectively. It is necessary to involve both the national competition authorities and the national courts in the enforcement of EC competition law. In order to do so, it is necessary to abolish the Commission's monopoly over Article 81(3) and the notification system. This will allow each body forming part of the enforcement system to effectively apply the rules and to concentrate on what it does best. I expect that a relatively clear division of labour between the Commission, national competition authorities and national courts will develop. In particular, I expect that the complex cases that require in depth market analysis will be dealt with by the competition authorities. In such cases, complainants have a clear incentive to file a complaint with a competition authority, as it will then be for the authority to substantiate the alleged infringement.
One of the main pillars of the Commission's proposal is to establish a network of competition authorities. Within this network the authorities will cooperate closely in the application of the Community competition rules. The Commission will remain at the centre of the network, maintaining a role of leadership and guarantor of the Community interest.
In the proposed system of parallel competence each authority will have the power to act on the basis of the Community competition rules in respect of agreements or practices affecting trade between Member States. However, there will be rules on the allocation of cases within the network so as to avoid multiple control, duplication of work or inefficient actions. The guiding principle for the cooperation should be that the Commission and the national authorities each concentrate on the cases they can deal with most efficiently.
The Commission - being the central enforcement body - should focus on the development of an open Community market, on control of state aids, on control of Community dimension mergers, on liberalisation of state monopolies and on control of market behaviour and abuse of dominant positions that involve important Community interests. I am talking about cases where agreements or practices cover several Member States or international co-operations going beyond the borders of the Community.
National authorities - given that they operate in a particular Member State - will naturally focus on cases where the centre of gravity is in their Member State. In certain circumstances parallel action concerning the same practice within the same relevant market by a limited number of national authorities may be efficient. However, generally speaking parallel action is not resource efficient, since it implies parallel administrative procedures. Furthermore, it may impose significant additional burdens on companies. The basic principle should therefore be that of single action.
Effective enforcement by national competition authorities may often require co-operation with and assistance from other members of the network. This is a natural consequence of market integration and the fact that more and more cases involve operators established in more than one Member State. We must therefore establish the necessary basis for horizontal co-operation between the national competition authorities, including the exchange of information and mutual assistance.
It is important, however, also to set out proper and effective rules for the protection of the rights of undertakings, including rules on confidentiality. Undertakings have a legitimate interest in the protection of the confidentiality of any information exchanged. Both the Commission and national competition authorities should therefore be required not to disclose the information collected or received which contains business secrets or is otherwise of a confidential nature. Other safeguards may also be necessary to protect the legitimate interests of companies.
Let me now turn to the national courts and their function in the envisaged new system. National courts rule on disputes between two or more parties. Unlike competition authorities, who act in the public interest, the central function of courts is to safeguard the rights of private individuals. Private enforcement by national courts is an essential complement to public enforcement.
To realise this one needs to look no further than other areas of Community law. Enforcement of Community law by national courts is the rule and not the exception. National courts have played an essential role in shaping our Community into what it is today: a unique legal order that grants important rights to the citizens. Without judgements like the Cassis de Dijon judgement in the field of free movement of goods the Community would certainly not be the same. The field of free movement is a striking example of the importance of private enforcement for the protection of the rights of individuals.
This is important for all of us to bear in mind. Due to the Commission's monopoly on Article 81(3) we have become accustomed to the courts playing a rather limited role in the antitrust field. Habit, however, should not stand in the way of progress. In the European Union of today I see no valid justification for excluding national courts from the full application of Article 81.
This is even more so in the context of the more economic approach adopted by the Commission. Under an economic approach based on the effects of the practice on the market rather than its legal form, the current division of competence under Article 81 is wholly artificial. At present national courts are empowered to assess the negative effects of an agreement due to the direct effect of Article 81(1), whereas another body, namely the Commission, must assess the positive effects of the very same agreement. In practice, these issues are closely related and one is not more complex than the other. Consequently, they should not be separated.
National courts must be allowed to apply Article 81 as a whole and thus to play the same essential role in the enforcement of Article 81 as they do in all other areas of Community law.
IV. Coherent application
The Commission is aware that empowering national competition authorities and national courts to apply Article 81(3) implies a certain risk of inconsistent application. However, this risk can be addressed and diminished by appropriate measures.
In this context, I must emphasise that associating national authorities and courts to the enforcement of Community rules is not a re-nationalisation of European Competition law. Far from it, the participation of national bodies in the enforcement of EC law is essential in order to strengthen Community competition law in the Member States. In the Commission's opinion there should be more application of Community law, not less. Over time the Commission's proposal will lead to the creation of a common policy and a common approach based on Community law, reducing the scope for inconsistencies.
Such a development is in my view a natural consequence of market integration, which leads to more and more cases with an effect on trade between Member States. Increased application of Community law should therefore follow automatically from the proposed system. However, we are in fact examining the extent to which the primacy of Community law should be spelled out in the Commission's proposal for a new regulation. The legal basis for this is found in
of the Treaty, which empowers the Council to determine the relationship between national law and Community competition law.
Consistent application requires that the rules are sufficiently clear and that the approach followed in their application is sufficiently similar. What we have to ensure is therefore that cases are assessed on the basis of the same rules and in the same way by the bodies involved in their application. The outcome in the individual case, on the other hand, depends on the facts including, in particular, the conditions of competition prevailing within the relevant market. The fact that an agreement may be assessed differently in different markets therefore does not as such give rise to consistency concerns.
Clarification of the antitrust rules will be an important function of the Commission in the new system. In addition to facing up to this responsibility to develop clear rules and to make public its enforcement policy by means of guidelines and other appropriate instruments, the Commission is envisaging a number of other specific instruments that aim to preserve consistency throughout the system.
With regard to the national competition authorities the aim, as I have said, is to establish a network of competition authorities within which the members apply more and more the same body of rules, instead of now 16 authorities applying 16 sometimes different sets of rules. The Commission will remain at the centre of the network and play a leading role in defining policy and ensuring consistent application. Importantly, the Commission also proposes to retain the current Article 9(3) according to which the Commission can withdraw a case from a national authority.
The network of competition authorities will be a forum for discussion of the common policy and for coordination on cases and issues of common interest. In particular, it is important to ensure that there is prior consultation on prohibition decisions and other types of decisions that lead undertakings to change their practices, such as the proposed decisions with commitments and decisions withdrawing the benefit of a block exemption regulation. These types of decisions merit special attention because once adopted and enforced they can only be reversed with difficulty. This is even more so when they have served as a basis for claims for damages. Consultation concerning prohibition decisions and decisions with commitments is also important in order to maintain a coherent competition policy, since in the new system policy will to a significant extent be developed by means of prohibition decisions and decisions with commitments.
Let me now say a few words about consistency as regards national courts. As already mentioned our proposal essentially means that Article 81 will catch up with the rest of Community law, where national courts already play an essential role. In all these areas the Court of Justice has been able to maintain coherence and consistency via the Article 234 preliminary reference procedure. The Court of Justice will play the same essential role in the application of Article 81 as a whole.
However, the Commission is proposing additional instruments. In the 1993 notice on cooperation with national courts, the Commission upon request provides assistance to national courts. This instrument will be maintained and made more efficient by the introduction of a deadline for reply. We expect that the incentive for national courts to obtain input and opinions from the Commission will grow in the future system as they will get the power to effectively apply Article 81. The application of EC competition law is frequently a matter of law and fact. In such cases, the Commission may be able to provide valuable assistance to national courts, drawing on its own administrative practice.
The Commission is also envisaging a mechanism whereby it could intervene more actively in court proceedings, allowing it to defend the common competition policy before national courts. One such instrument, which is mentioned in the White Paper, could be the right to intervene as amicus curiae. The Commission would then at its own initiative submit written observations as well as possibly oral observations to the court hearing the case. An alternative could be to grant the Commission the right to appeal against national court decisions in the Community interest. However, so far, these initiatives have met rather strong opposition from Member States, arguing that these proposals interfere with the independence of the national courts.
Finally, let me turn to the issue of forum shopping and multiple control. Multiple control and forum shopping before national courts should of course be avoided. In this respect, however, we can fortunately rely on the rules of the Brussels Convention.
The Brussels Convention establishes rules on determining the proper forum in commercial and civil cases. The purpose of the Convention is to prevent parallel proceedings before the courts of different Member States and to avoid conflicts between decisions that might result therefrom.
In the interest of legal certainty and for the benefit of the parties the Convention therefore confers jurisdiction on courts that are territorially well placed to deal with the dispute. Once an action has been brought before one national court, all other courts seized must decline jurisdiction, provided that the proceedings concern the same parties, the same cause of action and the same subject-matter.
V. Legal certainty
In an open market economy companies should be encouraged to enter into pro-competitive transactions. Competition law should not only discourage anti-competitive practices, it should also encourage those that promote competition and consumer welfare. An adequate level of legal certainty is therefore a legitimate and necessary objective. The Commission's White Paper proposal, while aiming at restoring the primary task of effective enforcement, fully recognises the need to provide companies with an appropriate degree of legal certainty.
That being said, however, I must emphasise that I see no justification for introducing a voluntary notification system, as is sometimes called for by industry. A voluntary notification system would in effect reinstate the present system and would undermine the principal objective of the reform, namely effective enforcement. It would prevent the Commission from focussing on the cases that present a real threat to competition and would also perpetuate the unacceptable effect of the current system on the application of EC rules by national courts: As under the current system, a party to a litigation would have an incentive to notify an agreement to the Commission which in turn would impede effective application of Article 81 by the courts.
I am not prepared to jeopardise the interest of consumers and companies that are the victims of restrictive practices in order to satisfy claimed legal certainty needs. Companies must accept responsibility for assessing their own agreements. In fact, most companies already do that, since most agreements are not notified. In addition, the fact that notifications currently tend not to reveal problematic cases demonstrates that the existing legal framework, case law and practice allow companies - with the help of their legal advisors - in the vast majority of cases to reliably assess the compatibility of their agreements with Article 81.
What companies can reasonably expect is an adequate level of predictability that allows them to properly assess how the rules will be applied. In the future the Commission will put more emphasis on clarifying the rules. In fact, the Commission has already started to overhaul the legal framework and to further clarify the rules, thereby facilitating self-assessment.
Block exemption regulations will be maintained. However, as is clear from the new block exemption regulation on vertical restraints the Commission is abandoning the present form based regulations in favour of regulations based on economic effect. This allows the Commission and the national authorities to concentrate on the important cases, where the parties have significant market power, while creating legal certainty for the vast majority of companies, which have no market power.
The Commission will also issue guidelines. In addition to the guidelines on vertical and horizontal restraints, it should be envisaged to draft guidelines on the interpretation and methodology for the application of Article 81(3). This general body of rules will be further clarified by means of decisions in individual cases.
The Commission will continue its current policy of only imposing fines in cases where it is clearly established that a certain behaviour constitutes an infringement. Consequently, there is no risk for undertakings to be fined without being able to know that they were infringing the law.
One should also keep in mind that the direct applicability of Article 81(3) in itself will promote legal certainty, since it provides companies with a defence against claims based on Article 81(1). At present, only agreements that have been notified can benefit from Article 81(3).
In addition, the Commission considers that it would be appropriate to introduce a new instrument that would allow it to provide guidance to undertakings in cases where there is real doubt as to the application of the competition rules. What we have in mind is a system of opinions whereby companies can put questions to the Commission in cases where the existing general rules and measures and case practice do not provide sufficient guidance.
Companies would be required to submit a supporting and explanatory memorandum along side the questions. On that basis the Commission would then in appropriate cases issue an opinion. Such opinions would be reasoned and published and would therefore contribute to the overall clarity of the rules. Accordingly, they would not only provide guidance to the companies asking the question but to other undertakings as well.
The value of this instrument should not be underestimated. Particularly, when compared with the current comfort letters, which are neither reasoned nor published. In this context, one must also take account of one of the effects of our more economic approach under Article 81.
Therefore, when one takes a global view of the Commission's proposal and take due account of the impact of our reform work in the substantive field, I believe that there will actually be more predictability and legal certainty in the proposed new system than in the current system.
Ladies and gentlemen,
These were my brief thoughts on some of the important issues that you will now be discussing in the four groups. I wish you success in your efforts to further explore these topics.
I am confident that the discussions will be constructive and bring us forward towards our final objective, namely to replace Regulation 17 by a new enforcement system that will ensure effective, coherent and predictable enforcement of the EC competition rules in the coming years.