#91 - Enforcement And Extraterritoriality - Competition Law

Competition Law Reading Session 4:

(Enforcement and Extraterritoriality)

See notes from lectures 6 & 7

Ezrachi Case book:

Chapters 7 & 8- Enforcement

• Articles 81 and 82EC have direct horizontal effect and can be applied in NCs and national competition authorities.

• Regulation 1/2003 (on enforcement) says that agreements/CP/decisions of trade associations that come within the meaning of article 81 and infringe 81(1), shall be prohibited by NCs & comp. authorities of MSs, unless they satisfy 81(3), in which case they shall not be prohibited. Also abuses of dom position prohibited by art. 81 will also be prohibited by NCs etc. (article 1, reg 1/2003)

• It’s possible to sue for damages in competition law cases (Courage v Crehan), and might also be used for injunctive relief. In the absence of C rules, it’s for each MS to decide how compensation is worked out- see C-295/04 Manfredi (e.g. should it include punitive damages) but under C law it must include interest (some say this brings Europe closer to having the treble damages system that the US has, because there is no award for interest there).

• Euro defence: where a party gets out of having to pay money under a contract because he claims that it’s in breach of art. 81/82. Treated sceptically by the courts which feared it being used as a way to escape a bad bargain.

• Burden is on party alleging infringement, but defencdant has burden when claiming exemption under 81(3). (art.2, reg 1/2003).

• NB C law is silent on the ‘passing on’ defence (where D says that P hasn’t actually suffered damage because he just passed on the extra cost to him to his own customers in turn). Hasn’t banned it unlike US.

• When NCs consider a matter falling within scope of 81/82 and the commission has already taken a decision on the matter then NCs cant take a decision contradicting the one of the decision. Article 10 EC creates a duty of loyal cooperation between MSs and Commission. This is further detailed in 1/2003.Art. 3 reg 1/2003 details relationship between national and EC competition law, art. 15 explains cooperation between NCs and Commission, while art. 16 ensures a uniform application of C competition law.

• The regulation has not increased the amount of private enforcement of competition law. See notes from lectures on private enforcement.

• The reg does increase Commission’s powers of investigation. Art. 20 details these, and arts 23 and 24 detail fines for failure to allow the inspection. Under art 21 the commission, with sanction from the NC, can enter and search private property. Art. 18 allows the commission to request documents and impose penalities where incorrect/misleading info is given. See lecture notes for stuff on legal privilege (NB legal privilege doesn’t apply to communications from in-house counsel).

• Commission can interview people who consent to it. There is no general right to silence, except where to answer would require the interviewee to admit the presence of an agreement that it is the commission’s job to prove.

• Art 8 of reg 1/2003 codifies the commission’s power to order interim measures in cases of urgency due to risk of serious and irreparable damage. Under art. 7 1/2003 the Commission can impose behavioural or structural remedies which are proportionate to the infringement and necessary to bring it to an end. Structural remedies can be used where there is no equally effective behavioural remedy or where an equally effective behavioural remedy would be more burdensome on the undertaking. NB a structural remedy will only be proportionate where there is a substantial and long-lasting risk of repeat infringement owing to the structure of the undertaking (recital 12 of 1/2003). Commission also has power to order termination of an anticompetitive agreement (Automec Srl T-24/90)

• Art. 9 of reg 1/2003 says that where the commission intends to adopt a decision that an infringement should be brought to an end and undertakings concerned offer certain commitments addressing the concerns, the commission can choose to accept those commitments as legally binding on the undertakings.

• Under recital 38 of 1/2003 undertakings can take informal guidance from the commission when there’s a case of uncertain effect.

• Reg 1/2003 sets out the fines for infringements (max fine is 10% of turnover, though largest ever was 4.5%- Intel). Also see lecture notes on leniency.

Chapter 10- Extraterritoriality

• In order to protect their own market, some competition agencies extend their jurisdiction to acts committed outside their state’s borders, but still having an effect on their state’s market (e.g. USA). This ‘effects doctrine’ contradicts the territoriality principle (that a country will make laws that affect conduct within its territory or to regulate conduct which, although initiated in another jurisdiction, is completed in its territory). The ECJ has refrained from adopting the effects doctrine, but merely extends the territoriality principle to cover cases where the infringement (e.g. a cartel) is ‘implemented’ in the EU. This ‘implementation doctrine’ is also used to determine whether a merger can be subjected to the European Merger Regulation. ECJ has also added the ‘single economic entity’ doctrine i.e. extends jurisdictions to undertakings outside the EU but which have a base/group member/subsidiary/office etc in the EU, on the grounds that it is part of the ‘single economic entity’.

• Implementation and effects doctrines will usually cover the same types of infringement. An exception might be a boycott cartel i.e. an agreement not to supply goods to a jurisdiction, which isn’t ‘implemented’ in the territory being boycotted, but clearly has an ‘effect’ on it.

Regulation 1/2003, OJ 2003 L 1/1:

Decentralisation

• Article 1: Introduced ex post regime for self-assessment for art. 81(3) rather than needing to apply to the commission first its assessment of the article ex ante.

• Art 2: NB burden of proving infringement lies with party alleging it, while burden of claiming an exemption under art.81(3) lies with party claiming it.

Investigation Powers

• Art. 7: Commission can impose (in addition to fines) any behavioural or structural remedy that is proportionate and necessary to end the infringement. However structural remedies can only be used where no equally effective behavioural remedy exists or would be more burdensome for the undertaking subject to it.

• Art 8: In cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, on the basis of a prima facie finding of infringement, can order interim measures.

• Art. 9: Commission can accept a binding commitment from the undertaking to end an infringement as part of a settlement to an ongoing investigation. The investigation can be reopened by the commission where there’s been a material change in facts; the undertaking has breached its commitments; or the decision was based on incomplete, misleading or incorrect info given by the undertaking.

• Art 17: Commission can open an investigation into a particular sector or type of agreement across various sectors, and can require undertakings concerned to give it copies of all such agreements.

• Art 18: Commission can require info by a decision or simple request with a deadline, with penalties (1% global turnover is max- art.23) for late, incorrect, misleading or incomplete info. Under art 19 it can also take statements from people who consent.

• Art. 20: Commission has power to enter an undertaking’s premises, examine books and records, take copies, and make inquiries. National officials, such as police, have to assist where the undertaking opposes the investigation, and NCs shall grant orders to grant the investigation, provided they aren’t arbitrary, excessive or disproportionate. Fine for failure to allow entry.

• Art 21: Company officials’ houses can be searched with NC permission.

• Art. 31: Max penalty for an infringement of art 81/82 is 10% turnover.

Harmonisation of Competition Law and MS-Commission Cooperation

• Article 3: NCs/NAs dealing with a matter that comes within art 81/82 have to apply those articles (not a different national law) and can’t prohibit something that falls outside scope of art 81(1) or which fulfil 81(3) (or a regulation relating to 81(3)). However they aren’t prohibited from prohibiting or sanctioning more strictly unilateral conduct by undertakings.

• Art 6: NCs (and competition authorities under art 5) have the power to apply arts 81/82, including requiring an infringement to be ended, ordering interim measures, accepting commitments, and imposing fines (including fines permitted under MS law).

• Art 16: NCs can’t reach decisions that conflict with commission decisions on a particular matter. They have to avoid decisions that would conflict with a decision ‘contemplated’ by the commission in proceedings that the commission has initiated. NCs cant take decisions on agreements, practices or decisions which contradict the decision taken by the commission.

• Art 11: Commission and NCs/NAs etc shall act in close cooperation. NCs etc shall inform the Commission before it initiates its first investigative measure and the initiation by the commission of proceedings (which can occur at any point, even after the NC/NA has begun its investigation) relieves NCs etc of competence to investigate.

Regulation 773/2004 relating to the conduct of proceedings by the Commission pursuant to article 81 & 82EC OJ 2004 L123/18:

• There’s a procedure for complaining to the commission of a breach of art 81/82

• Commission issues a statement of objections...