EC Competition Law

The Modernization Regulation

Jane Lambert

19 Dec 2005

On 1 May 2004, the day that the EU admitted 10 new member states, EC antitrust enforcement ceased to be a monopoly of the Commission and European Court. The competition authorities of the member states assumed responsibility for enforcing arts 81 and 82 of the Treaty of Rome as well as and in conjunction with their own national antitrust laws under the supervision of their national courts. Those national authorities were required to co-operate with the Commission and each other as a network of competition authorities ("European Competition Network") or ECN which in turn collaborate with competition authorities outside Europe as an International Competition Network ("ICN").

The Old System

Between 6 Feb 1962 and 30 April 2004, antitrust enforcement was governed by Council Regulation 17/62 which was implemented by Commission Regulations 27. Art 9 (1) of Reg. 17 conferred sole power on the Commission to declare art. 81 (1) of the Treaty of Rome inapplicable pursuant to art 81 (3). Art 4 (1) of that regulation required  agreements, decisions and concerted practices of the kind described in art 81 (1) to be notified to the Commission. Unless and until it was notified, no decision could be taken under art 81 (3) in respect of such an agreement, decision or practice. The combination of those provisions produced a compelling incentive to notify because nobody could challenge the validity of an agreement that was before the Commission. Notification also afforded provisional immunity from fines and other penalties while the investigation continued. Consequently, unless there was a block exemption or an agreement was otherwise excluded from art 81 (1), notification of high value commercial contracts became almost routine.

The Need for Reform

When the EEC consisted of just 6 members, this machinery worked very well. The accession of new members  volume of increased as by the early 1980s the volume of work had grown to such an extent that it had become the exception rather than the rule for the Commission actually to grant an exception. The expansion of the EU to 25 members on 1 May 2004 necessitated a new approach to regulation.

Modernization Regulation

The chosen solution is the Modernization Regulation (Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty). This legislation shares responsibility for antitrust enforcement with the competition authorities of the member states and requires them to work together. The ECN mentioned above came into being pursuant to a Joint Statement of the Council and Commission on the Functioning of the Network of Competition Authorities on 10 Dec 2002.

The Key Prohibitions

Art 1 (1) of the Modernization Regulation provides:

"Agreements, decisions and concerted practices caught by Article 81(1) of the Treaty which do not satisfy the conditions of Article 81(3) of the Treaty shall be prohibited, no prior decision to that effect being required."

Conversely, art 1 (2) provides:

"Agreements, decisions and concerted practices caught by Article 81(1) of the Treaty which satisfy the conditions of Article 81(3) of the Treaty shall not be prohibited, no prior decision to that effect being required."

There is also a prohibition without any prior decision to that effect of any abuse of a dominant position referred to in art 82 EEC in art 1 (3) of the regulation. The burden of proof of an infringement of art 81 (1) or 82 rests with the party alleging the infringement by virtue of art 2. On the other hand, the burden of proving entitlement to an exemption under art 81 (3) lies with the party claiming it.

Responsibility for Enforcement

The Commission retains all the powers to enforce arts 81 and 82 that it enjoyed under regulation 17 under arts 4 and 7 to 10 inclusive of the regulation, but it now shares those powers with the competition authorities of the member states. Those authorities have power under art 5 to require infringements to be brought to an end, order interim measures, accept commitments and impose fines, periodic penalty payments or any other penalty provided for in their national law. They also have power to decide that there are no grounds for action on their part. Further, if a national authority finds that a block exemption  has effects that are incompatible with art 81 (1) in its territory which has all the characteristics of a distinct geographical market it may withdraw the benefit of that exemption in that territory.

Co-operation

Art 11 (1) of the regulation requires the Commission and national authorities to apply the competition rules in close co-operation. That includes the exchange of information under art 12 (1) and participation in the Advisory Committee mentioned above. National courts are also obliged to co-operate with the Commission and each other by art  15 of the regulation.

Advisory Committee on Restrictive Practices and Dominant Positions
An important change from the past is that the Commission is required by art 14 to consult an "Advisory Committee on Restrictive Practices and Dominant Positions" consisting of representatives of national competition authorities before exercising its powers.

 

Important