21 st Annual EU Competition Law and Policy Workshop Stronger NCAs Procedures, Powers, Prospects ORGANIZED BY PHILIP LOWE, MEL MARQUIS and GIORGIO MONTI Conclusions 1. The Workshop welcomed a presentation by Anna Vernet from the European Commission of the ECN plus project aimed at empowering national competition authorities to become more effective enforcers and noted the four issues which the Commission had identified as key to strengthening their enforcement role: Their degree of independence from political and other outside influences and the adequacy of the staff and financial resources at their disposal; The toolbox of enforcement powers at their disposal; Their ability to impose fines and other penalties; The leniency programmes at their disposal. 2. The results of the Commission s consultation of stakeholders on ECN plus showed that there was considerable support for new initiatives at the EU and national level to improve the effectiveness and efficiency of NCAs. However, it was emphasised that any increase of their enforcement powers required a commensurate strengthening of undertakings rights of defence. 3. The efficiency and effectiveness of a competition authority should be assessed in particular with respect to the accuracy of its decisions, the degree of quality control it has carried out, including evaluation of past decisions, its ability to use any discretion it had to establish clear enforcement priorities, the efficiency and speed of its investigations, and the extent to which the rights of defending and intervening parties were adequately protected. Building up the knowledge and skills of a competition authority was essential to its effectiveness, but necessarily
required diverting some resources away from current tasks to invest in future capacities. 4. Many competition authorities also had parallel responsibility for enforcement of consumer protection law and other sectoral regulation. They had to make clear choices about the use of their scarce resources in relation to those different responsibilities. It was also stressed that the number of enforcement decisions taken against companies was not the best or only measure of effectiveness of a competition authority. However, a record of little or no enforcement was likely to undermine the credibility and reputation of an authority, as well as its independence, even if the quality of its research and advocacy was of a high level. 5. The Workshop stressed that the Commission and the NCAs were integral parts of the ECN. The Commission s structures and procedures should also be consistent with the principles and standards set for all ECN members. The EU enforcement system, based around the Commission and the Courts in Luxembourg, frequently provided the necessary benchmarks for Member States that were establishing or reforming their competition regimes. 6. In addition, the Workshop drew attention to the fact that the Commission s ECN plus initiative concentrated on enhancing the powers of the NCAs in relation to enforcement of EU law. A broader question to be addressed was the effectiveness and efficiency of national competition regimes in applying both EU and national law. In this context, the scope for greater harmonisation of national procedures remained to some extent limited because they were embedded in wider systems of civil law. The EU Damages Directive had shown that it was in principle possible to carve out a competition-specific regime, but there limits to this. 7. The role of the Courts in exercising effective judicial control on a competition authority was considered as an essential element in guaranteeing the independence, accountability and efficiency of a competition regime. Through their judgments on referral or appeal, the Courts in Luxembourg could contribute to increasing convergence of enforcement activities among national competition authorities and between them and the Commission. The Commission could assist both
the European and national Courts in their efforts to achieve more convergence through more active intervention in preliminary ruling procedures and through its submission of amicus briefs at national level. 8. There was a broad consensus among the Workshop participants that some basic principles - or minimum standards - for the independence, the resources and the extent of the enforcement powers of NCAs could be included, for example, in an EU Directive. Without the legal obligation to respect minimum standards of independence and enforcement, there was a constant danger of rollback, in particular in countries where the competition regimes are new and where there has been a tradition of political intervention in the work of public agencies. 9. The majority view within the Workshop was that a European Directive strengthening the powers and independence of the NCAs would nevertheless leave sufficient flexibility to reflect the variety of very different political, cultural and institutional traditions in the Member States. However the diversity of regimes among the Member States was not an obstacle to efficiency and effectiveness. A degree of competition between the different systems encouraged innovation and best practice. As in other areas of public policy, there should be continuous improvement in the structures and processes of competition authorities. 10. For this reason, any new EU legislation aimed at enhancing the powers of the NCAs should be accompanied by a revision of existing Guidance papers and other soft law instruments on procedural and substantive issues which could provide a degree of predictability and legal certainty for firms, while at the same time allowing for adaptation of the guidance given in the light of the development of both case law and markets. Several participants attached importance to guidance in raising the presently low awareness of competition law among many sectors of business. 11. There were different views as to the balance to be struck by the Commission and by NCAs between providing guidance on the one hand through taking decisions which could be tested by the Courts, and therefore through a solid basis of case law, and on the other through guidelines in which an authority indicated the policy it intended to pursue. There was also some support for the Commission to provide, under specific conditions, guidance through fully reasoned clearance
decisions, and for national competition authorities to adopt similar decisions in very specific circumstances. 12. Clearly any guidance which was not subsequently backed up by case law was of little value. At the same time, reliance on old case law which reflected neither technological and market developments nor the best available techniques of economic analysis provided bad guidance and undermined the reputation and legitimacy of a competition regime. Whether or not there were agreements or practices which should be regarded as per se illegal, there had to be some underlying basis of empirical evidence and analysis of anticompetitive effects to give credibility and legitimacy to case law. Only competition authorities, with the knowledge and experience of markets and of economic analysis which they accumulate over time, were in a position to provide Courts with an up-to-date view on markets and how to assess them effectively. Without the guidance that authorities can provide through enforcement decisions and guidance documents there will be no effective definition of enforcement policy; there will rather be outdated case law and greater legal uncertainty for business as to those structures or conduct that are likely to be illegal and those that are not. 13. There was general agreement within the Workshop that there was now greater predictability in merger control policies, although at least at European level there was a continuing reluctance to challenge merger decisions before the Courts, and case law remained limited. However, the available guidance on enforcement under Articles 101 and 102 TFEU, such as enforcement in the field of vertical restraints, now appeared out of date in relation to the rapid development of the digital economy and new disruptive business models. The analysis of what now constituted market power, and what practices could be regarded as anticompetitive had become more complex. Recent cases in relation to online platforms revealed clear divergences between authorities on what enforcement action should be taken in relation to the same facts. 14. There was now a clear role for the ECN to pool knowledge and experience in these new areas and to reflect this in papers or opinions. Without providing guidance as such, these documents would at least constitute agreed statements about the latest state of knowledge on trends in these new sectors. In addition, there was agreement that it was neither sensible nor possible for all cases with cross-border effects
to be handled by the Commission. Yet there was certainly room for improvement in cooperation between national competition authorities that are dealing broadly with the same infringement. Upstream, knowledge and experience of the markets concerned needs to be shared, even if there is divergence on remedies. Procedural obstacles to rights of defence (including access to file) for parties in different countries need to be removed. 15. The Workshop gave general support to the idea of improvements to the leniency regime in the direction of a European one-stop shop. This could begin with harmonisation of summary applications, an EU-wide marker system and protection of immunity applicants in other jurisdictions. Participants also favoured rules providing for the exclusion of individual sanctions for employees of infringing undertakings insofar as the risk of such sanctions may discourage leniency applications. With regard to fines, the Workshop agreed on the need for convergence in fining methodologies but less importance was attached to the issue of harmonising the level of fines. At the same time, some participants felt it was now time to give credit for companies compliance efforts. 16. The extent of independence from political influence (governments or parliaments) and from commercial interests is crucial for authorities in administrative rather than adversarial systems. There are particular trade-offs to be considered: in some circumstances independence can lead to isolation and lack of influence on political authorities, and to a degree of lack of accountability. Factors relevant to independence include: the selection and appointment of senior officers, the duration of their mandates and whether they can be renewed; and the staff and financial resources at their disposal. Budgetary allocations from government were the common source of funds for NCAs. However, some authorities derived some funds directly from their enforcement activities through fines, merger fees or sectoral taxes. This gave them some independence from government but where such approaches are relied on exclusively the level of receipts may be volatile. Drawing on multiple funding sources was arguably the best guarantee of budgetary independence. 17. Several Workshop participants also stressed the need to protect the personal independence of the key decision-makers in an authority. One way was to appoint a supervisory board which was not directly
responsible for any specific enforcement decision but could be the first point of contact for outside interventions. Others underlined that action by a competition authority that is too independent and prescriptive could be interpreted as a measure equivalent to secondary legislation, which should be decided more legitimately by parliamentary bodies. It was also underlined that problems of independence of competition authorities could arguably be dealt with better by constitutional courts rather than being settled in the framework of competition law. 18. Governments frequently set up independent bodies to demonstrate their strong political commitment to a policy objective like promoting competition but were unpleasantly surprised that these bodies subsequently took decisions outside their political control. However as confidence was progressively built up between the independent authorities and a government, the initial tensions could possibly be removed. In addition it was pointed out that some governments were under pressure to legislate to achieve specific market outcomes (for example, a share out of television rights between two or three broadcasters), whereas competition authorities aimed at maintaining or improving competition between market operators. Philip Lowe, Chair. PL/030616.