Reflections on the Enforcement of European Union Competition Law

18 September 2013

Dr Vincent J G Power

Purpose of this Presentation

TO PRESENT

SOME REFLECTIONS ON,

AND

SOME RADICAL IDEAS FOR THE REFORM OF,

EUROPEAN UNION COMPETITION LAW

Menu for this Presentation

A Primer on EU Competition Law

The Remarkable Nature of EU Competition Law

Merits of the Existing Institutional Structure

Scale of the Penalties

Lack of a Deterrent Effect of the Existing Penalties?

Politicised State Aid Regime

What did we Learn from the Financial Crisis?

The Use of Communications to Make Law?

What about the Proposed Damages Package?

The Limited Scope of EU Competition Law?

Conclusions

Competition Law

Set of legal rules designed to ensure rivalry, fairness and freedom in the market so that there can be rivalry in the market leading to increased efficiency and enhanced consumer welfare

Primer on EU Competition Law

Issue Rule

Anti-competitive Arrangements TFEU, Article 101

Abuse of Dominance TFEU, Article 102

State Authorities TFEU, Article 106

State Aid TFEU, Articles 107-109

Merger Control Regulation 139/2004

Primer on Competition Law: Excitement

Bill Gates, one of the brightest people on the planet, sent the following email, which emerged in the Microsoft antitrust litigation:

"How much do we need to pay you to screw Netscape?“

He also asked in another e-mail about a competitor:

“Do we have a clear plan on what we want Apple to do to undermine Sun?”

This arose in a UK OFT case:

The makers of Monopoly sent the following email after fixing prices for games and toys with various retailers:

'Ian … This is a great initiative that you and Neil have instigated!!!!!!!!! However, a word to the wise, never ever put anything in writing, its highly illegal and it could bite you right in the arse!!!! suggest you phone Lesley and tell her to trash? Talk to Dave. Mike'

Remarkable Nature of EU Competition Law

Acceptance of Competition as a Concept and a Philosophy in Europe

A long road from “protectionism” to “competition”

Imposition of Tough Penalties is now Common Place

Interference with Sovereignty of Member States

Reform and evolution of the Regime

Remarkable Nature of EU Competition Law

Relationship between EU and Member State Institutions

Role of National Competition Authorities and the European Competition Network

Ability of the European Commission to receive Complaints and conduct Own-Initiative Investigations

Evolution of Doctrine and Philosophy

Court willing to Strike Down the Commission’s Decisions

Well-functioning System

Recognition of Imperfections

Merits of the Existing Institutional Structure

Imagine a land far, far away

» Judgments are handed down by politicians

» Defendants never see the decision-makers

» Decisions are made quickly

» Decisions are made upon reliance of the views of officials

» Politicians within the system and outside the system believe they can influence the decision

» These decisions can involve enormous fines

Is reform needed?

Is an independent agency, tribunal or court required?

Scale of the Penalties

The Fines imposed by the EU are enormous

» “Commission avarice has been increasing steadily over the years” – Edward and Lane, Edward and Lane on European Union Law (2013), page 779

2003 € 416,000,000

2004 € 388,000,000

2005 € 422,000,000

2009 €1,540,651,400

2010 € 2,868,459,674

2011 € 614,053,000

2012 € 1,875,694,000

2013 (to 10.7.2013) € 141,791,000

Scale of the Penalties

Scale of the Penalties

But are they having a deterrent effect?

Are they becoming unreal?

Are some penalties really penalties at all?

Lack of a Deterrent Effect of Penalties?

What about smaller penalties but imposed on directors and managers?

National experience

Deterrent Effect

Competence to have Criminal Penalties?

Politicised State Aid Regime

Concept of State Aid

Examples of State Aid

Political Nature of State Aid

Extraordinary nature of State Aid Control

Examples of State Aid Issues in the Banking Crisis

Notification of State Aid

What happens when State Aid is Found to Exist?

Is that a Penalty at all? Is it just an even bet?

Should the regime be depoliticised?

Should recipients/beneficiaries be entitled to notify potential State aid?

Lessons from the Financial Crisis?

Does the End justify the Means?

State Aid decision making in “peace time”?

State Aid decision making in “war”?

Was the State Aid regime the right regime at all?

1992 / Single Market / Ban on Acquisitions on EU Banks

Curious result

Use of “Communications” to Make Law?

Lessons from the Financial Crisis

1. Communication from the Commission — The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis, 13 October 2008 (see IP/08/1495)

2. Communication from the Commission — The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition, 5 December 2008 (see IP/08/1901)

3. Communication from the Commission on the Treatment of Impaired Assets in the Community Banking Sector, 25 February 2009 (see IP/09/322)

4. Communication from the Commission - Temporary framework for State aid measures to support access to finance in the current financial and economic crisis, adopted on 17 December 2008 (see IP/08/1993), as amended on 25 February 2009.

5. Communication from the Commission - The return to viability and the assessment of restructuring measures in the financial sector in the current crisis under the State aid rules, 23 July 2009 (see IP/09/1180)

6. Communication from the Commission – on the application, from 1 January 2011, of State aid rules to support measures in favour of banks in the context of the financial crisis (see IP/10/1636)

7. Communication from the Commission - on the application, from 1 January 2012, of State aid rules to support measures in favour of banks in the context of the financial crisis (see IP/11/1488)

8. Communication from the Commission – on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (see IP/13/672)

Proposed Damages Package

What about the Proposed Damages Package?

History

Main Elements of the Package

Reflections on the Package

An alternative – and better? – Proposal

Damages as Part of the Decision?

Limited Scope of EU Competition Law

The Limited Scope of EU Competition Law?

Treaty rules written almost 60 years ago are still in place

Meaning of “competition”

Change in the policy and approach

Need to change the Treaty rules?

But how?

But why?

What have we just discussed?

A Primer on EU Competition Law

The Remarkable Nature of EU Competition Law

Merits of the Existing Institutional Structure

Scale of the Penalties

Lack of a Deterrent Effect of the Existing Penalties?

Politicised State Aid Regime

What did we Learn from the Financial Crisis?

The Use of Communications to Make Law?

What about the Proposed Damages Package?

The Limited Scope of EU Competition Law?

Conclusions

Proposals for Debate

Independent Non-Politicised Decision Making Structure for Competition, Merger Control and State Aid Cases

Penalties should be more Meaningful and more Targeted including on individuals

Beneficiaries should be able to Notify Possible State Aid

Damages as Part of the Original Decision

Laws have to be Clearer and not just contained in Administrative Paper

Reflections on the Enforcement of European Union Competition Law

18 September 2013

Dr Vincent J G Power