Seminar 7: Regulation 1/2003 (21 November 2013)

This seminar and the next are paired up. This week we look at the design of Regulation 1/2003, the readings tease out different interpretations of the salience, risks and opportunities of the new design. Next week we turn to what the Courts have, to date, made of this regulation. Please read a couple of the papers from the list, hopefully, without collusion, all will have been read by the group as a whole.

Reading               

Articles 1-16 of Regulation 1/2003, [2003] OJ L1/1

Wilks, ‘Agency Escape: Decentralization or Dominance of the European Commission in the Modernization of Competition Policy?’ (2005) 18 Governance 431

Maher ‘Functional and normative delegation to non-majoritairan institutions: the case of the European Competition Network’ (2009) 7(4) Comparative European Politics 414

Cengiz ‘Multi-level Governance in Competition Policy: the European Competition Network’ (2010) 35 European Law review 660

Svetiev ‘Networked Competition Governance in the EU: Delegation, Decentralisation or Experimentalist Architecture?’ in Sabel and Zeitlin (eds) Experimentalist Governance in the EU (Oxford University Press, 2010) (you can download a copy from the library)

Wils ‘Ten Years of Regulation 1/2003 – A Retrospective’(2013) 4(4) Journal of European Competition Law and Practice 1

FURTHER READING

Commission Staff Working Paper accompanying the Report on the functioning of Regulation 1/2003 (SEC(2009) 574 final chapters 4 and 5 (This document is a more expanded version of the Communication from the Commission to the European Parliament and the Council, Report on the functioning of Regulation 1/2003 (COM(2009) 206 final, 29.4.2009)

Commission Notice on cooperation within the Network of Competition Authorities [2004] OJ C101/43

In addition, you can have a look at the website of the ECN and consult some of the work they do. As Svetiev notes the most significant work is that on leniency. http://ec.europa.eu/competition/ecn/

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12 comments on “Seminar 7: Regulation 1/2003 (21 November 2013)

  1. Theodosia Stavroulaki says:

    Although most of times when I read the research material I am trying to be critical in order to contribute to the academic discussion with my thoughts and arguments, this time after finishing my reading I realized that I have less things to add. Taking into account the arguments of the authors I consider that the ECN system works quiet well and that most of the issues that have been raised during the implementation of Regulation 1/2003 have been already accommodated. However I would like to underline some of the issues that according to my opinion could be considered potentially problematic:
    -As Imelda Maher analyses in her paper, because of the range of enforcement procedures and sanctions at the national level, there is a risk of information being gathered under civil procedures in one jurisdiction being used to bring criminal procedures in another, where the constraints and burden of proof on an investigative agency are necessarily higher given the risk to individual liberty. To address this risk, exchange of information is only allowed if the disclosure would not lead to a custodial sentence or higher liability than that found in the state providing the information. However, as the author mentions, such a rule cannot be easily applied because the huge diversity in procedures and remedies at national level makes it difficult to establish when information can be exchanged. I consider that the rule can also be circumvented by the fact that officials from the Commission and the ECN have built a strong professional network and some of them might informally exchange information that should not be exchanged according to applicable articles of Regulation 1/2003.
    -As also Imelda Maher states economic theories play a central role in the articulation and interpretation of competition law to the extent that it is not possible to define it without reference to economics, with some economists going so far as to claim that competition law owes its very existence to economics. However, the interaction between competition law and economics is an ongoing project especially with regard to the application of article 102 TFEU. As a result, there is a danger that some NCA will apply an effects based approach while others will follow the traditional per se approach of the Commission regarding the application of article 101, 102 TFEU. However, the non-uniform application of competition law will lead to inconsistency and possibly to legal uncertainty.
    – As Cengiz analyses in his paper although designed primarily as a policy enforcement network rather than a policy making network, the ECN also served as an active platform for policy discussions and mutual policy learning between competition officials. Such a development is quite interesting since it can be argued that it leads to an exchange of useful information and policy recommendations. However, I consider that due to the principal – agent problem and the fact that the Commission monitors the NCAs, the NCAs might have, under certain circumstances, less incentives to provide the Commission with accurate information about all problematic, controversial issues that may appear in their jurisdiction when they apply competition law and design their competition policy. As a result I argue that I am not convinced that all the information the Commission receives by the NCAs is accurate and as a result it contributes to the accommodation of the information asymmetry issue.

  2. Céline Estas says:

    The articles try to determine the result of the Regulation 1/2003: is it a big success or a big failure? The conclusion reached is mitigated and is neither totally the first nor the second.
    In my opinion, it is worth examining two elements: first, the influence of the reform on the workload; second, the answers to inconsistencies that can occur.

    First, I was really surprised to discover in Wils’ article that the suppression of the notification system has not led to a substantial increase of the Commission’s decisions (p. 299). Indeed, such increase was predicted in the White Paper and seemed reasonable to me.
    I understood that the suppression of the notification system would help the Commission to focus on highly anticompetitive behaviours. It is obvious to me that undertakings which perform such highly anticompetitive conducts would not notify them to the Commission. Therefore, I expected that the reform would allow the Commission to take more prohibition or commitment decisions.
    However, as Wils pointed out, I realized that a lot of work of the Commission was done through comfort letters and that the question of the resources devoted to this action should not be forgotten. Moreover, this paper highlighted also the growing importance played by national competition actors now allowed to apply directly articles 101 and 102 TFEU (”The national competition authorities have (..) become the primary public enforcers of articles 101 and 102 TFEU” (Wils, p. 296)). In conclusion, the consequence of the reform appears to result in a reorganisation of the workload rather than in an increase of the cases handled by the Commission.

    Second, the articles emphasize that one fear with this new system was the inconsistencies created by divergences between national laws and their application (Wilks, p. 441; Cengiz p.2).
    The first answer to this issue was given in the Regulation itself. Indeed, the Regulation establishes rules insuring consistency by avoiding the application of national in several cases or in giving the exclusive control to the Commission for specific cases.
    The second answer, in my opinion, concerns an important consequence of the new network: the voluntary “harmonisation” of national procedural rules (Cengiz p.7; Wils p. 297). Indeed, this voluntary harmonisation demonstrates the influence of the reform and of the Commission’s perspective on national regulations.
    Both measures lead to avoid divergences between national implementation of competition rules and therefore to avoid the risk of forum shopping.

  3. Mariajo says:

    As to the articles, I found it interesting to compare Svetiev’s chapter and Cengiz’ article. Svetiev seems to be fully supportive of the Modernization Regulation and the establishment of the ECN. He celebrates it as a successful form of experimental governance in the face of high uncertainty facing both, regulators as well as businesses. If I understand his argument correctly, he sees the Modernization Regulation as implementing a minimum level of harmonized competition enforcement, above which national NCAs have room to maneuver and experiment with what could constitute the best approach to competition enforcement. These different insights would provide a rich learning mechanism. This argument reminds me very much of the argument for regulatory competition in federal systems (starting with the discussions in company law – “Delaware”). And I buy the argument. I find it especially interesting that Svetiev includes a perspective on regulation of competition that is not too often considered: After all regulation of competition should correspond to the realities of the market. If businesses are having a very hard time of coping with uncertainty, because traditional business models work less and less in an environment where ‘the’ standard has become high-speed innovation, regulation of competition must somehow adapt to this market reality. Maybe Svetiev is right, that the only and proper way to do so, is by experimentalist network governance.

    Cengiz on the other hand points out two of the ‘standard’ weaknesses of network governance present in the ECN: jeopardy of due process and lack of accountability. According to Svetiev, the accountability problem is solved by internal peer-to-peer review between the COM and the NCAs, requiring pervasive justifications for actions. To Cengiz this is not enough, she appears to demand some external accountability mechanisms. Cengiz also points out that the involvement of ‘invisible Commission hands’ in national competition enforcement proceedings may violate due process of the parties being prosecuted. There is something to this argument. What Svetiev could answer, is that this is not a problem, since national courts can always review the decisions of NCAs and divert from any opinion in these decisions (he actually argues this point in relation to the Commission appearing before national courts). So what is to prevail? Flexibility in a world of uncertainty, or due process and accountability in a world where fundamental rights protection and transparency the new political religion? This reminds me of a Tuscan (?) saying I just heard in my Italian class: “avere la botte piena e la moglie ubriaca” (to have a full bottle and one’s wife drunk) – we just want it all, but it seems impossible to achieve it in practice.

  4. Sara Perez says:

    Regulation 1/2003, considered to be a form of decentralized competition policy, allows the European Commission and the national competition authorities to apply competition rules and pursue infringements under Articles 101 and 102 TFEU. From the Commission’s perspective, Regulation 1/2003 helps to apply competition laws more effectively by expanding who can apply the laws among the growing number of EU member states and simultaneously freeing up resources at the Commission. For this week, I looked at the articles by Wilks (2005) and Wils (2013).
    Wilks argues that while Regulation 1/2003 appears to decentralize competition policy, the reform actually increases the Commission’s power and establishes a dominant European law. Taking a socio-institutional approach, Wilks further suggests that the political goals behind the reform was to pursue a neoliberal and pro-competition European economy at the expense of national competition laws. Published in 2005, two years after Regulation 1/2003 went into effect, Wilks’ article shows the skepticism of how the Commission’s “decentralization” will provide certainty, cohesion, and efficiency in competition policy. It was interesting to read Wils’ article on the success of Regulation 1/2003, published in 2013, after hearing Wilks’ criticism of the reform and associated risks within competition law. National competition authorities have become the primary enforcers of Articles 101 and 102 TFEU, cases brought against undertakings for antitrust behavior has increased, and the ECN has promoted cooperation and coordination among member states. It appears that one of the only issues with Regulation 1/2003 is that the reform did not free up Commission resources as intended.
    While reading Wilks’ article I agreed with his sentiment that a potential problem with the Commission delegating competition laws to numerous member states, who may have different national competition law policies, poses a risk of uncertainty and lack of cohesion in applying the various laws consistently. It appears that undertakings would take advantage of “forum-shopping.” However, Wils shows that this was a non-issue. In fact, member states voluntarily converged on procedures and sanctioning powers of their respective national competition authorities, ensuring more cohesion in applying EU competition law. Even if Wilks was correct and the Commission decentralized in order to secure a dominant EU competition law, it appears that the system is more or less a success.

  5. Samantha Palladino says:

    The first article that I read was Wils’ “Ten Years of Regulation 1/2003 – A Retrospective” and my initial reaction was, this seems to easy. According to Wils, the radical changes introduced by Regulation 1/2003 were a smashing success. The only seeming drawback is that the predicted increase in the White Paper on Modernisation in the number of individual prohibition decisions has not come to fruition as to the number of decisions adopted by the European Commission. But, Wils does not dwell on this as indicative of failure because overall, with the massive in crease in decisions by national authorities, there has been an increase in enforcement of Articles 101 and 102 TFEU since Regulation 1/2003 was put in place. My reaction was that this seems too easy because generally, changes, especially radical changes, encounter issues in implementation and resistance from some players. I thought that perhaps the ease of this transition was due to the giving of power back to the Member States, as opposed to integration or things that generally incur Member State resistance. But, then I read Wilk’s article, “Agency Escape: Decentralization or Dominance of the European Commission in the Modernization of Competition Policy?” and I was quite convinced by his “second reading” of what the Commission did through Regulation 1/2003: apparent decentralization but actually “Europeanizing” national competition regimes and giving itself increase power. So then I am back to the question of why there was not more opposition to the Regulation 1/2003. But, seeing as Wilks wrote in 2005 before the effects of the Regulation had much time to play out, I am inclined to agree with Wils, absent more thorough knowledge at this point, that the Regulation has been successful because it has increased enforcement of Articles 101 and 102, which is sought to do. I will be interested to do next week’s reading and see how the courts have handled the Regulation. So far this term we have encountered cases which demonstrate a somewhat confused application of regulations, notices, etc. Perhaps that is why I was expecting more confusion in the articles. But perhaps if I wait a week I will find that everything did not turn out entirely smoothly with the introduction of such a “radical” new system.

  6. Itsiq Benizri says:

    Whereas the Commission had enormous powers, the Regulation created a kind of decentralisation. The change was so large that some even spoke about a Cultural revolution. Obviously, it was not possible to decentralize without maintaining the consistence of the system as a whole. The European competition network was created with the aim of preserving this consistence.

    What interests me in particular is that the Commission presented this network like a model of multilevel governance (MLG). It should be said indeed that the Regulation falls under this spirit of MLG. Some criticize the term: why create this obscure concept, whereas the concept of governance itself is already not clearly defined? Finally, the governance indicates all that is not the government. But what does it indicate more precisely? Is it relevant to create a vague concept which extends an already obscure concept? In any case, the idea of the MLG consists in making the decisions in a more collegial way. It is a question of dialoguing more between levels of different powers, to include the whole of the actors concerned in decision makings. The goal, it is the effectiveness. One also wants to improve the information flow. It appears that this contributed much to the success of the network. This will to make circulate information is at the base of the MLG. I remember to have attended a conference of Hendrik Theunissen last year. He works at the Committee of the Regions. He had then defended the white paper of the Committee of the Regions on MLG. In an article which he had written, he had had this sentence: “knowledge is power. shared knowledge is even more powerful”. And indeed, the example of the network confirmed this approach.

    The question will thus be to know how to reconcile effectiveness and democratic procedure. On the one hand, this kind of procedure is more democratic because it brings back the decisions closer to the citizens, as Tocqueville wanted and explained in his book on American democracy. But, on the other hand, the procedures appear obscure, so that it should be modified to be more transparent.

  7. Marita Szreder says:

    At first, seeing names like Dicey or Hayek in an article about competition law/policy seemed very strange and foreign to me. This made me realise that deep in my mind I treat competition law/policy very differently from other pieces of regulatory law, when in fact there might be no reason for this kind of special treatment. At the same time, my understanding is that Diceyan definition of the rule of law was clearly designed with a national dimension in mind. So, I wonder whether we should apply the same standards to a multilevel governance project of the type of the ECN.

    It appears that despite some early scepticism the ECN turned out to be a quite well functioning network and the main criticisms that can be made of it are more of a normative nature. These include concerns about accountability, transparency or the wider questions of the rule of law. In a way the problems presented in this week’s reading material remind me somehow of the debate we had last week on the accuracy versus legitimacy. Which one is more important, functionality or legitimacy? Or is one affecting the other? As pointed out by Maher “meeting the procedural criteria of the rule of law that, in essence, go to fairness, can have an impact on the effectiveness of the law”. So, with the answer to the latter question clearly being positive, we need to consider both dimensions, even if in the competition sphere it is the functionality dimension that often receives more attention.

    Yeung (as cited in Maher’s article) expressed a view that “the highly functional nature of competition law” may undermine values such as human rights or natural justice. While I agree that this is a valid concern, I cannot stop thinking that in the specific context of the ECN and the particular nature of the work it does, too much focus on normative correctness might be unduly harmful to the effectiveness of the network. It’s always a question of balance, but perhaps here, unlike in actual court proceedings, the balance should be leaning more towards the functionality dimension?

  8. Jonas von Kalben says:

    According to Wils, “Ten Years of Regulation 1/2003 – A Retrospective”, “there can be no doubt that Regulation 1/2003 has led to a spectacular increase in the enforcement of Article 101 and 102 TFEU, and that Regulation 1/2003 has thus been a great success” (p. 301). Nevertheless, I would doubt his analysis by questioning his approach of measuring the enforcement of Art. 101, 102 TFEU: Wils bases his conclusion on the increase in the amount of decisions taken by the Commission and the NCA’s, but does not take into account the quality of these decisions. I agree that “numbers matter” but I still think that before declaring the indubitable success of the Regulation 1/2003, one has to analyze the content and quality of the decisions, as the increase in numbers could be accompanied by a decrease in the quality of the analysis of the facts, the theory of harm etc.

    My second point refers to the assessment of the abolition of the notification system (pp. 294, 295). Wils mentions that some German professors “of an older generation” opposed the abolition of the notification and authorization system (p. 295) but does not explain their objections. I think it would be interesting to consider, when thinking about the success of Regulation 1/2003, that there are some good reasons for arguing that the abolition of the notification system infringes the treaty (e.g. wording of Art. 101 (3) TFEU (“may, however, be declared inapplicable“), Art. 103 (2) lit. b TFEU, deprivation of the direct applicability of Art. 101 (1) TFEU etc.), but also objections referring to legal policy (e.g. that without the notification system the commission does not obtain important information on conduct that might distort competition).

    Finally, I agree with Maria that the “experimentalist” perspective on Regulation 1/2003 introduced by Svetiev provides for an interesting rhetorical instrument to describe some of the positive aspects of decentralization and limited harmonization (e.g. regarding remedies). The fact that regulators and competition authorities have to deal with innovation and dynamic forms of competition seems to justify a certain degree of flexibility. However, even though “learning” of the competition authorities and regulators appears to be an important element of the regulatory architecture of Regulation 1/2003 as Svetiev argues (p. 83), I have the impression that this aspect should not be overrated with a view to the remaining importance of the national and union courts and the high level of juridification and formalization of competition law. At the same time it appears to me a bit inconsistent to introduce stricter economic analysis and higher level of proof regarding the effects of certain conduct into substantive law as part of the “more economic approach”, but at the same time choosing a rather flexible regulatory set up e.g. concerning the corresponding remedies or the use of commitment decisions.

  9. Delphine Defossez says:

    One may wonder whether it was a smart choice to include Treaty provisions on competition. Above all when one knows the reasoning behind that choice. It is only during the 80’s that the Union started to look more carefully at competition and use efficient policy guidelines. But all was in the hands of the Commission which used it as a powerful tool to help achieving its goal. Therefore, one should not be surprised that Commission is the main actor in competition cases and that the CJEU is mostly following the Commission. The Commission had a monopoly in granting exemption when the old model was still in place, now there are blocks exemptions. But still those block exemptions are based on the old findings of the Commission and they have been established in order to reduce the workload of the Commission. Instead of going on case-by-case basis, now the burden of proof has switch from the Commission to the undertakings.
    Before the White Paper, the Commission had monopoly over the application of article 101(3) and about the exemptions. Therefore, it was a centralized system with decentralized aspects. The new regime was implemented by the Regulation 1/2003. The Regulation made it clear that any agreements falling under article 101(1) and that is not justified under art 101(3) is prohibited.
    With the Regulation 1/2003, the Union rendered EU competition as part of national competition law. In the sense that national authorities can directly apply Regulation 1/2003. The Regulation gives a wide-ranging power of investigation to national authorities as well as far-reaching provisions for the fines. Furthermore, the co-operation between national competition authorities and the Commission has been tightened. Additionally, it has allowed the establishment of a European Competition Network which help National competition authorities in their cooperation.
    The adoption of Regulation 1/2003 changed a bit the picture but still left most of the powers to the Commission.

  10. Haukur says:

    This week’s reading focuses on the decentralisation, or as some argue, the consolidation of the Commissions enforcement powers with regards to Articles 101 and 102 TFEU. I’m not sure that the plot behind Regulation 1/2003 was a high-level conspiracy orchestrated by M. Monti and P. Lowe to increase the power of DG Comp. I do however think that the plot was to ease the workload in routine cases that can be easily solved at a national level, and to enable the Commission to concentrate its resources on high profile cases that require the work of top experts and the lobbying resistant organism of the EU to successfully prosecute.

    Some of the papers discuss the ECN and whether it has been a success or not, and whether it has any role in the power games of EU competition policy. I don’t know about that, but I do know that I did actually attended few of its sessions when I was working in Brussels. It’s perhaps an indication of its importance that I was sent to attend few of its meetings when I was the most junior employee at my office. These sessions were certainly not a priority.

    As I recall it the meetings were mostly a discussion about issues and cases that the NCA’s were dealing with at the time. The French authority, for example, told us once about interesting case they were dealing with on Google and it’s ranking of search results. My impression was that the larger nations came better prepared to these meetings and did most of the talking. Some of the smaller nations did not always show up. I also attended several Advisory Committee meetings where the Commission told the NCA’s and us about their draft SO’s. My impression is that those meetings were mostly for the show. There was not anyone trying to challenge the findings of the Commission.

    Once, however, there was an Advisory Committee meeting about the level of fines to be imposed in a cartel case. We received the proposal on a piece of paper that we had to return when we left the meeting for secrecy reasons. The cartel concerned most of the major European airlines and their collusion with regards to fuel surcharges. The Commission proposed substantial fines. Then one of the major NCA’s used the opportunity to oppose the fining decision on obviously political grounds. They could not even make any concessions regarding the issue without consulting someone who was not in the room. I got the impression that this was someone far upstream in the political hierarchy. I don’t know what happened to this case, but we did not see this proposed fine in the case registrar of the Commission during the time I was following this.

    I thus think it is not easy to conclude once and for all about how this ECN organ actually works. It exists in a politically charged spectrum. And as we know about politics; it is the art of the impossible.

  11. Sylvi says:

    I found a common concern in this week’s readings was the lack of consistency in national competition authorities’ application of the law. As Wilks put it, decentralization meant the creation of “27 parallel competences across Europe, and not only would these individual jurisdictions vary “in the enthusiasm, speed, competence, and effectiveness” of their approaches, but they might also vary “in their interpretation of the European law,” and “will certainly vary in their competence and ability to cope with the pressure of work.” However, both Cegniz and Wils point out that the application of the Modernisation Regulation lead to the “voluntary convergence of Member States’ laws as to the procedures and sanctioning powers of national competition authorities,” inevitably harmonizing the national procedural regimes. I found this interesting and slightly counter-intuitive, because I wouldn’t have expected decentralization to “intensify the symbiotic relationship between the national and EU legal regimes in the field of procedural cooperation” – rather, I think I would have expected it to lead to greater discord, especially given Cegniz’s own due process concerns. This is partially similar to Wilks’ position that rather than decentralizing competition policy, modernization rather serves to reinforce the dominance of European law and the Commission. If the regulation is indeed an exercise in decentralization, it is interesting that it has led to greater harmonization of national law – although if the effect is greater efficiency and cooperation, Wilks’ concerns regarding the “Europeanization” of competition law are technically irrelevant.

  12. Mariajo says:

    Ok, I’m sorry, posting two posts for a session is a little geeky, but I HAVE TO SHARE this late night competition insight with you: When reading through Reg 1/2003, I was a little bit bothered by Article 16, because I wondered how the prohibition imposed on national courts to rule against a Commission decision was in conformity with the principle of judicial independence. So I googled around for a bit and I came across case C-199/11. The case was a preliminary reference from a Belgian Court. The facts are roughly the following: The Commission initiated proceedings under Art.101 TFEU against four big elevator manufacturers (inter alia Thyssen Krupp) for bid rigging. Due to their collusive behavior, the prices for elevators were kept artificially high. The COM adopted a decision and imposed a fine 990 Million Euros. The defendants appealed the decision to the GC, the GC upheld the COM decision. The defendants appealed then to the CJEU.

    So far, so good. But now comes the fun part!! So, some EU institutions had apparently bought cartelized elevators and therefore the Commission decided to bring civil proceedings for damages before the Belgian courts against the cartel members. The Belgian court (Rechbank van Koophandel te Brussel) then referred a preliminary reference to the CJEU, asking whether that was not going a little to far… in the sense that the principle nemo judex in sua causa was violated, since the COM had adopted the decision and was now a party to the proceedings – and the Belgian court was inhibited by Article 16 of the Regulation to review the COM decision. The CJEU ultimately held that the COM could indeed bring actions for damages in front of a national court on the basis of its own Art. 101 decision without infringing any due process principles. I still find the case curious and wonder what you think about it.

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