The European Commission as an accountability watchdog in the enforcement of competition law

In this blogpost we focus on the role of the European Commission in the enforcement of competition law and assess it from the perspective of accountability. We will focus on the relationship between the Commission and private undertakings in two aspects of the competition policy of the European Union: prohibition of anti-competitive agreements (Art. 101 TFEU) and the abuse of dominant position (Art. 102 TFEU). We leave the aspects concerning state aid aside. We will assess the following four dimensions of the accountability relationship: transparency, exposure, judgement and liability.

Transparency

Transparency in the framework of analysis of accountability mechanisms relates to the extent to which the legal framework obliges the parties to disclosure information or, conversely, allows secrecy. The transparency dimension of the relationship between private undertakings (actor) and the European Commission (watchdog) is governed by Council Regulation 1/2003 of 16 December 2003 of the implementation of the rules on competition laid down in articles 101 and 102 TFEU. Art. 30 states that the Commission shall publish the decisions which it takes concerning the finding and termination of the infringement (Art. 7), the finding of inapplicability of art. 101 and 102 TFEU (Art. 10), fines (Art. 23) and periodic penalty payments (Art. 24). This publication shall state the names of the parties and the main content of the decision, including the penalties imposed. Art. 30, paragraph 2 also states that the Commission shall have regard to the legitimate interest of undertakings in the protection of their business secrets.

The Commission also adopted an internal notice on the rules for access to the Commission files in cases concerning infractions of Art. 101 and 102 EC TFEU. This internal regulation establishes who is entitled to access the files of the Commission in competition law cases and to which documents the right of access applies. Access to the file is intended to enable the effective exercise of the rights of defence against objections brought forward by the Commission. Persons, undertakings or associations of undertakings to which the Commission addresses its objections, can be granted access upon request. The file of the commission contains all documents that have been obtained, produced and/or assembled by the Commission DG for Competition during the investigation.

According to Art. 10 of the Commission’s notice, access will be granted to all documents of the file with the exception of internal documents, business secretsof other undertakings or other confidential information. The Commission publishes a notice when it is opening investigations which allow citizens to follow up on what’s going on. This starting document contains very little information but contains some basic clues to follow up on the Commission’s behaviour as a watchdog. If an individual files a complaint it will not receive a notice when the Commission didn’t follow up. We can conclude on a lower level of transparency.

Exposure

Exposure in the framework of analysis of accountability mechanisms concerns the question whether the actor has the obligation to stand in front of the watchdog and answer questions. Concerning competition law, Council Regulation 1/2003 provides in its Art. 18 that the Commission, in order to carry out the duties assigned to by the Regulation, may, by simple request or by decision, require associations and undertakings to provide all necessary information.

The Commission has to state the legal basis and the purpose of the request, specify what information is required and fix the time-limit within which it is to be provided. It shall also indicate the penalties that could be applicable. If the Commission makes the request by decision, it shall also indicate the right to have the decision reviewed by the Court of Justice. The Commission also has to forward a copy of the request or decision to the competition authority of the Member State in whose territory the seat of the undertaking is situated and the competition authority of the Member State whose territory is affected. The undertakings concerned by the request of information of the Commission are obliged to provide the information required.

To put pressure on the companies and influence their willingness of the companies to answer to the Commission, Regulation 1/2003 provides sanctions that can be applied by the Commission. Art. 23 provides a legal basis for the Commission to impose fines of a maximum of 1 % of the undertakings’ total turnover in the preceding business year, if the undertaking, intentionally or negligently, supplies incorrect, incomplete or misleading information or if they do not supply the required information within the required time-limit. Furthermore, Art. 24 of the Regulation states that the Commission may, by decision, impose periodic penalty payments not exceeding 5% of the average daily turnover in the preceding business year per day in order to compel the undertakings to supply the complete and correct information required.

Exposure is indeed sufficient in the accountability mechanism. The private undertakings are obliged to answer to the Commission and provide all the necessary information. Furthermore the Commission can impose sanctions in case of non compliance. These sanctions are enshrined in the legal framework. The private undertakings have the possibility to have the request for information of the Commision reviewed before the ECJ.As a result of transparency and exposure, following Article 7 to Article 10 of the Regulation 1/2003, the Commission has the capacity to adopt decisions on the Companies.

Judgement

Regulation Article 7 gives the Commission the possibility to make a statement of objections by the finding and termination of infringement. Hereby, the Commission can act on a complaint or on its own initiative. It gives the Committee the capacity to impose on the Company a behavioral or structural remedy which are proportionate to the infringement committed.However, the behavioral remedy is preferentially applicable. The structural remedy can only be imposed where there are the criteria fulfilled given in Article 7 (1) concerning the behavioral remedy not to be as effective or being more burdensome.

Furthermore, Article 8 gives the Committee the capacity for interim measures in a case of urgency due to the risk of serious and irreparable damage to competition.

Moreover, following Article 9, the Commission may alternatively take a commitment decision. This procedure is a fast way of restoring effective competition to the market. The willingness of the Commission to pass judgements is shown in Article 7, where it is expressed that the Commission can either act on a complaint or on its own initiative. Here as well, the willingness is shown through the leniency procedures as well as the whistleblower tool.

We observe that the Commission disposes of a large margin of discretion in deciding whether to sanction or not.

Liability

When it comes to liability, the Commission is competent, according to Article23 (1) and (2) of Regulation 1/2003, to impose fines to the companies if they intentionally or negligently supply incorrect, incomplete or misleading information in response to a request on information made by the Commission to the company or the companyfail to respond within a 3set time-limit or if they intentionally or negligently infringe Article 101 or 102 of TFEU or fail to comply with decisions made by the Commission.If the companies do not pay the fine imposed on them, the fine can be enforced by the national authorities according to the civil procedure in force in the concerned State according to Article 299 of TFEU, which means that the companies are obliged to pay the fines.

According to the guidelines on the method of setting the fines issued by the Commission, the power to impose fines on companies is not only a task that includes the duty to investigate and sanction individual infringement, but it also encompasses the duty to pursue a general policy designed to apply the principles laid down by the Treaty. Therefore the Commission must ensure that its action has the necessary deterrent effect, which means that it may be necessary for the Commission to impose fines on the companies, when they discover infringements of Article 101 or 102 TFEU, not only as a sanction but also to deter other companies from engaging in or continuing behaviour that is contrary to Articles 101 and 102 of TFEU. Although the guidelines shows the willingness of the Commission to impose fines when necessary, the Commission has a very broad margin of appreciation regarding how to use the sanctions and their practice shows that they are willing to reduce the fines either fully or partly when companies corporate through leniency programmes or settlements.

Conclusion

Our conclusion is that the legal framework of competition procedures is very elaborated as to the watchdog role of the Commission, as corresponds to the ‘guardian of the Treaties’ role attached to it. This ensures that the sanctions will be applied. We also mention the intervention of the national judiciary for the enforcement of the sanction. This tight legal framework, especially concerning sanctions and liability has a deterrent effect on the behaviour of the subject.

Background research was made by

Stine Hansen, Nina Schröder, María Taboada, Liuting Wei and Marie Van
Haegenborgh, students of Deusto Law School

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