EU Competition Enforcement

Enforcement System

The European system of enforcement of competition law is provided by EU Regulations.  The  Commission’s Competition Directorate is central to enforcement.  It has significant powers and may impose very significant administrative fines. Enforcement will generally arise from an investigation, arising on foot of a complaint or by the authority acting its own initiative.

The 2003 Regulation represented a significant modernisation of the competition enforcement rules. The reforms provided a decentralised network of national competition authorities, which assisted the Commission in enforcing EU competition law. The European competition network includes the Commission and the national competition authorities.

The core prohibitions are directly applicable law in all member states. Under the reformed system of enforcement, the Commission’s role is more focused on the coordination and development of policy.  It is still central in enforcing the more serious breaches of competition law.

Cooperation Mechanism

There are cooperation mechanisms between national competition authorities and the Commission, which facilitate the exercise and coordination of their powers.  There is provision for sharing and exchange of information and for consultation.  There are provisions to avoid duplication, by which a national competition authority or the Commission may suspend proceedings where the matter is being dealt with by others.

Cases are generally dealt with by the originating authority. The Commission will generally deal with matters which affect more than three States or where the matter is of importance to EU competition policy development. Enforcement may be by a single competition authority, by several in parallel or by the Commission.

Cases should be dealt with by the authority that is better placed to do so. Reallocation is possible where there is a better-placed authority. Where a matter is being dealt with by one authority, other authorities may close their investigations.

The Commission retains powers to call in investigations where it believes that it is the appropriate body in accordance with the above criteria. Under the revised system, national competition authorities deal with the majority of complaints so that the Commission’s role is limited to the more important complaints.

There is provision for the exchange of information between national competition authorities.  NCA’s may make requests for assistance to other Authorities. Information sent to the Commission may be shared with other national competition authorities. Information, including confidential information, can be exchanged.

National competition authorities must keep the Commission informed of their activities. They must give notice of the commencement of investigations and give prior notice of proposed decisions.

When conducting investigations, national competition authorities use their own domestic law. Many member states have adopted national substantive and procedural rules equivalent to those under EU law.

EU Law Supremacy

European Union law is supreme under the EU doctrine of supremacy.  National courts are bound to give effect to it and to give precedence to it over conflicting national law.  The European Court of Justice has indicated that national authorities must, in imposing penalties under equivalent national rules, have regard to the fact that penalties may also be imposed by EU authorities.

If the decision of the national competition authority is incompatible with the Commission’s decision, the authority must take account of the Commission’s decision and must avoid any conflict.  National rules may be applied provided that they do not prejudice the uniform application of EU rules.

EU Enforcement Action

The commission may take action on its own initiative, on foot of a complaint or disclosure by persons involved in the alleged infringement. The Commission has power to carry out investigations of alleged competition law infringements. There were three phases in the Commission investigation, the investigatory phase, the decision-making phase and possible judicial review.

The Commission publishes a form for complaints.  Any person with a legitimate interest is entitled to make a complaint.  Complaints may be refused on the basis that there is no Community interest in the matter or where it considers that a national authority is more appropriate or is already dealing with the matter.

Entities and undertakings may approve the Commission requesting a finding that a particular agreement or practice does not breach competition law.  Most commonly, it will give informal guidance on the issue.  This informal guidance or clearance is not legally binding but may create legitimate expectations.

The Commission has published a leniency program, which allows for potential immunity or leniency.  The leniency programs is designed to encourage cartel members, who would otherwise have no incentive to leave the cartel. Prompted disclosure may be afforded a reduced level of fine. Where a member of an alleged price-fixing cartel “whistle-blows” or approaches the Commission, it may qualify for more lenient treatment.

Investigation

The Commission has wide-ranging investigatory powers.  It may gather information from the parties concerned and from third parties.  “Dawn raids” may be made simultaneously against members of an alleged cartel. The Commission may request states to carry out investigations and undertake investigatory powers on its behalf.

The Commission has the power to require information.  An informal request or simple request does not involve a penalty for noncompliance.  However, it is an offence to provide incorrect or misleading information.  This power may be appropriate for requests to third parties who have relevant information. In the case of a mandatory request, sanctions for failure to comply.  A penalty of up to 5% of daily turnover may be imposed for each day of failure.  It is also an offence to furnish false or misleading information.

The Commission may take statements and interview persons in the course of investigations.  Verbal statements may be taken in less serious cases. They may have the advantage of not being discoverable in antitrust litigation outside the European Union.

Powers

The Commission has the power to undertake inspections.  This may be done in cooperation with national competition authorities.  Officials of national competition authorities may assist the Commission. If a warrant is required, national authorities must assist.

The Commission has powers to enter premises and vehicles.  They may examine books and records.  They may take copies and extracts from the records.  They may seal records for later inspection.  They may require members of staff and other representatives of the undertaking concerned to furnish explanations of facts and documents.  Their answers may be recorded.

Residential premises, including those of directors of the undertaking concerned, may be searched.  Reasons to justify the same must be given to the appropriate judicial authority in order to obtain a warrant. A warrant is not generally required for searching business premises.

The European Courts have recognised professional privilege, in the context of competition investigations.  It is broadly similar to that which exists under the common law.  It covers documents passing between a lawyer and client for the purpose of defence.  It also covers communications between a lawyer and client.  It does not appear to cover communications with in-house lawyers, although this view is controversial.

The privilege against self-incrimination arises in the context of questions in the course of investigations, which carry sanctions if not answered.  The privilege has been limited to direct admissions of infringement.  Controversy arises as to whether this is overly narrow. It is not clear whether the privilege against self-incrimination is enjoyed by corporate entities at all.

Decision

Interim measures may be taken, where necessary, at an earlier stage of the investigation.  Where there is a risk of serious and irreparable damage to competition, then provided that there is a prima facie case, the Commission may take interim measures.  It must comply with basic procedural requirements under the Regulation.  The counterparty must be notified and given the opportunity to be heard.

On the conclusion of the investigation, the Commission will make a decision as to whether to take further action.  If it considers there has been a breach, it may commence proceedings for an infringement. Infringement proceedings are commenced by way of a statement of objection,  which is given to the undertaking.  It must set out the relevant facts and the application of legal principles to them.  The period of infringement must be set out if a fine is proposed.

The statement of objections sets out the parameters of the complaint.  The party against whom the complaint is made and interested third parties may request a hearing.  Representations may be made verbally or in writing. The hearing is conducted by an officer who must ensure fair procedures.

Following the hearing, the hearing officer consults with the Advisory Committee on Restrictive Practices and Dominant Positions. The Commission may then make a formal decision. The decision may require termination of the breach of competition law.

Undertakings

Remedies may be imposed in order to terminate the infringement.  So-called structural or behavioural remedies may be applied.  Structural remedies are applied if there is no equally effective behavioural remedy or where an equally effective behavioural remedy would be more burdensome.

The 2003 Reforms allow for the acceptance of commitments or undertakings given by entities who have been found to be in breach of completion law.  They may be given without a finding of infringement. Undertakings may be innovative and may propose solutions.

The role of commitment/undertakings has increased significantly. The Commission has the power to impose administrative sanctions/fines for a failure to comply with a commitment.   The Commission has accepted commitments related to a range of very serious infringements, including those involving certain alleged infringements by Google and Microsoft.

Fines

The Commission has the power to impose a fine of up to 10% of annual turnover in the preceding year.  Periodic payment fines may be imposed for ongoing infringements. The  Commission has wide discretion in relation to the imposition of penalties.  It will take into account the seriousness of the behaviour, its duration, the size of the market and its  effect.

The Commission has published a notice regarding the criteria for the imposition of a fine.  The fine is set primarily with reference to the level of gravity.  Serious infringements may be subject to fines of €20 million or greater.  Very serious infringements could be greatly in excess of this. Price-fixing arrangements and those which seek to divide the internal market are likely to be treated as very serious infringements.

Aggravating factors may increase the level of fine.  The refusal of cooperation may be an aggravating factor.  The duration of the infringement is a significant factor and may lead to a significant uplift in fines. There may be an uplift, generally at a 10% rate for each year the infringement continues. Correspondingly, mitigating factors may reduce the fine that would otherwise apply.

Fines will be based on percentages of turnover in the sector per year of participation.  An additional tariff may be imposed in respect of serious and grave infringements.  Repeat offenders may be subject to increased fines. The level of fines imposed by the EU Commission is high, being of the order of three billion Euro annually.

Whistle-blowers may be avail of leniency programs. The first entity, which brings sufficient information to the Commission to allow it to take proceedings for an infringement, will generally receive complete immunity.  Others who cooperate may receive the benefit of reduced fines.  Fines may be reduced if there is an admission of liability.

Challenge Commission Decisions

Decisions of the Commission may be reviewed by the General Court.  There is a further appeal on the point of law to the EU Court of Justice. General Court was established as the Court of First Instance in 1989.  The General Court reviews the competition decisions of the Commission.

The review is in the nature of a judicial review rather than a re-hearing on the merits.  The Court will consider whether the relevant procedures have been followed and whether there has been a manifest error or abuse of powers. It has been argued that this may not be sufficient to satisfy the European Convention on Human Rights.

The Treaty provides a  procedure for a review of the legality of acts of the institutions.  It may be available where the act is of direct and individual concern to the party who seeks its annulment.  An act covers decisions and informal decisions.

The grounds are lack of legal competence and authority, infringement of essential procedural requirements, infringement of the Treaty or rule of law, failure to give a hearing, inadequate reasoning, decision-based on inadequate evidence or based erroneous application of the law. An application for an annulment may be combined with an application for review of a Commission fine.