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Co-operation between the European Commission and national competition authorities
This Practice note considers co-operation between national competition authorities, the European Commission, and each other in relation to the application of Articles 101 and 102 of the Treaty on the Functioning of the European Union under Regulation 1/2003. It also briefly covers co-operation between the Commission and competition authorities in third countries, as well as issues that may arise in relation to co-operation between competition authorities in the future.
Changes in terminology: Following the entry into force of the Lisbon Treaty on 1 December 2009, Article 81 and Article 82 of the EC Treaty have been renamed Article 101 and Article 102 of the Treaty on the Functioning of the European Union (TFEU). In addition, the Court of First Instance (CFI) has been renamed the General Court. This new terminology has been reflected throughout this note. For further information on the Lisbon Treaty see Practice note The European Union after the Treaty of Lisbon (www.practicallaw.com/2-381-1190).
To meet the challenges posed by the enlargement of the European Union in 2004, the European Commission decided to reconsider the arrangements for applying Articles 101 and 102 of the TFEU in order to ensure the effective supervision of the EU competition rules and simplify administration to the greatest extent possible. The Commission's reconsideration led to the adoption of Regulation 1/2003 (the Modernisation Regulation) which came into force on 1 May 2004 (OJ 2004 L1/1).
The Modernisation Regulation abolished the scheme for notification of agreements or conduct to the European Commission for an individual exemption under Article 101(3) (in Article 101 cases) or for negative clearance. National competition authorities (NCAs), as well as national courts were given the power to apply Articles 101 and 102 in their entirety (previously only the Commission had the power to grant individual exemptions under Article 101(3)). For more details of the procedure applied in the application of Articles 101 and 102 pursuant to the changes introduced by the Modernisation Regulation see Practice note, Competition regime: EU Procedure, negotiation and enforcement (www.practicallaw.com/6-107-3709).
Under the Modernisation Regulation, NCAs are authorities that have been designated by member states as authorities responsible for the application of Articles 101 and 102 of the TFEU . In the UK, the Office of Fair Trading (OFT) is an NCA, along with the sector regulators that have concurrent powers to enforce Articles 101 and 102 of the TFEU and Chapters I and II of the Competition Act. A list of authorities that have been designated as NCAs can be found on DG Competition's website.
Although NCAs have the power under Article 5 of the Modernisation Regulation to apply Articles 101 and 102, the ECJ has clarified that, in relation to Article 102, they do not have the power to make a decision that there has been no infringement. Where the NCA finds that the conditions for the application of the prohibition are not met, NCAs' powers are limited to making a decision that it has no grounds for action. The ECJ's decision relates to the application of Article 102, although the reasoning seems to be equally applicable to Article 101 (see Legal update, ECJ rules that national competition authorities do not have power to decide that there has been no breach of Article 102 (www.practicallaw.com/4-505-9272))
The Modernisation Regulation imposes obligations on NCAs, the Commission, and national courts to ensure the consistent application of Articles 101 and 102 in all member states. This Practice note deals with co-operation between NCAs and the Commission. Co-operation between the Commission (and NCAs) and national courts is considered in the Practice note, Co-operation between the European Commission and national courts of member states (www.practicallaw.com/3-500-2281).
Framework for co-operation between the Commission and national competition authorities
The Modernisation Regulation imposes obligations on NCAs and the Commission to ensure that they co-operate closely with each other. These obligations are set out in Articles 11 to 13 of the Modernisation Regulation and deal with the notification of cases by the Commission and NCAs and case allocation between them, the exchange of information between the Commission and NCAs and between NCAs themselves, and the subsequent use of information exchanged (including special provisions relating to the use of information provided by leniency applicants). The full text of these articles is set out in the box, Modernisation Regulation: Articles 11-13.
There are also obligations on NCAs to assist the Commission in carrying out on-site inspections under Articles 20 and 21 of the Modernisation Regulation, and to carry out inspections on the Commission's behalf under Article 22(2). NCAs also have the power to conduct investigations on behalf of other NCAs under Article 22(1).
Co-operation between NCAs and the Commission takes place under the auspices of the European Competition Network (ECN). The ECN was created in 2004, at the same time as the Modernisation Regulation came into force. It consists of NCAs of the member states and the Commission and, as well as providing a mechanism for the NCAs and Commission to fulfil their obligations in relation to co-operation, the ECN creates a forum for the discussion of competition policy issues and particular cases between NCAs and the Commission. The role of the ECN is set out below (see The European Competition Network).
In addition to the ECN, the Advisory Committee on Restrictive Practices and Dominant Positions (the Advisory Committee), which was created by Regulation 17/62 (Regulation 17), the precursor to the Modernisation Regulation, also continues to have a role in relation to co-operation between competition authorities and the Commission. Under Regulation 17, the Advisory Committee consisted of representatives from each member state and the Commission, and had to be consulted by the Commission prior to its taking any decision based on the application of the Article 101 or 102. The Advisory Committee was retained under the Modernisation Regulation and its remit was extended so that it could act as a forum for the discussion of cases that are being handled by the NCAs in order to help safeguard the consistent application of the EU competition rules (Recital 20, Modernisation Regulation). The Practice note briefly considers the continued role of the Advisory Committee in relation to co-operation between NCAs and the Commission within the ECN (see further, The Advisory Committee).
In 2009, the Commission published a report on the functioning of the Modernisation Regulation during its first five years (see Legal update, Commission publishes report on functioning of Regulation 1/2003 (www.practicallaw.com/1-386-0138)), (the Report). The Report (COM(2009) 206 final) was accompanied by a Staff Working Paper (the Staff Paper).
Further, in November 2012, the Commission published two reports prepared by the ECN, one on investigative powers and the other on decision-making powers (see Legal update, ECN reports on investigative powers and decision-making powers (www.practicallaw.com/3-522-7186). These reports examined and compared the different systems and procedures for competition investigations and enforcement in the EU member states (as well as at EU level). The reports concluded that there has been a significant degree of voluntary convergence of member states' competition laws. However, the reports found that there were still some areas of divergence. The reports were intended to inform the debate as to the extent to which further harmonisation is desirable or required.
In December 2013, the ECN adopted Recommendations on various aspects of the investigative and decision-making powers of national competition authorities (see Legal update, ECN Recommendations on investigative and decision-making powers published (www.practicallaw.com/2-551-4932)). These set out the common views of the ECN competition authorities on the minimum set of powers that the ECN competition authorities consider relevant to ensure the effective enforcement of the EU competition rules within the ECN. The Recommendations are intended to serve as guidance to all those involved in shaping the legal framework for enforcement of Articles 101 and 102 of the TFEU. They are without prejudice to the legal frameworks of those ECN jurisdictions which already provide for these general principles or which go beyond the scope of the Recommendations. For further information, see ECN Recommendations on investigative and decision-making powers.
The European Competition Network
One of the innovations introduced by the Modernisation Regulation was the creation of a network of NCAs and the Commission to enable them to comply with their obligations of close co-operation in the application of Articles 101 and 102. The network, the ECN, came into being at the same time as the Modernisation Regulation came into force.
The stated objective of the ECN is "to build an effective framework to enforce EU competition law against companies who engage in cross border business practices which restrict competition and are therefore, anti-consumer."
The ECN's web pages set out that co-operation between NCAs and the Commission entails:
Informing each other of new cases and envisaged infringement decisions.
Co-ordinating investigations where necessary.
Helping each other with investigations.
Exchanging evidence and other information.
Discussing various issues of common interest.
The policy work of the ECN is carried out at four levels:
Meetings of the Directors General of the ECN members. The Directors General of the ECN members meet yearly to discuss major policy issues. Since the ECN was established in 2004, discussions have taken place on topics such as the Commission's review of Article 102, the Model Leniency Programme (see The Model Leniency Programme), increases in the prices of food and energy, and the financial crisis.
Plenary meetings. ECN Plenary meetings are held where issues of common interest are discussed and NCAs exchange experience and know how. Participants in the plenary meetings are usually officials of the NCAs that are responsible for ECN matters, and officials of the ECN unit in DG Competition.
Horizontal working groups. There are horizontal working groups within the ECN (working under the "umbrella" of the Plenary) who deal with a number of questions of a legal, economic or procedural nature, and the interface between EU law and diverse national laws, for example, the Cartels and the Mergers working groups. A working group was also set up in relation to the Commission's review of the block exemption regulations and guidelines, although this group was suspended after the adoption of the new block exemption and guidelines in 2010.
Sectoral subgroups. Sectoral subgroups deal with particular sectors, such as banking, energy, telecommunications, media, sport, and different forms of transport. At the subgroup level, expert officials from the NCAs and DG Competition exchange views and best practice and promote a common competition culture in their sectors. For example, the banking subgroup was involved in discussion of the Commission's decision in the Mastercard (www.practicallaw.com/8-102-5840) case, and in relation to the Commission's work on multi-lateral interchange fees and the creation of the Single European Payment Area. In addition, the pharmaceutical subgroup was associated with the Commission's pharmaceutical sector inquiry (www.practicallaw.com/1-380-2011).
The foundations for the functioning of the ECN are contained in a Joint statement of the Council and Commission on the functioning of the European Commission Network (the Joint Statement) and the Commission Notice on the co-operation within the Network of Competition Authorities (OJ 2004 C101/43) (the Network Notice). The Joint Statement and the Network Notice deal with the practical aspects of the obligations of close co-operation set out in the Modernisation Regulation, and contain mechanisms intended to ensure the consistent application of EU competition law.
Close co-operation within the ECN in practice
There are several aspects of the duty of the NCAs and Commission to co-operate with each other. These include the way in which case work is divided between the NCAs and the Commission, the notification of cases to the ECN by NCAs, the suspension or termination of cases that are being dealt with by another authority, the exchange of information between ECN members and the subsequent use of the information and assistance provided by NCAs in relation to Commission on-site inspections, or inspections carried out on behalf of another NCA. Each of these issues is discussed below.
Notification of cases to the ECN
Article 11(3) of the Modernisation Regulation provides that NCAs have to notify the Commission in writing before, or without delay after, commencing the first formal investigative measure in an Article 101 or 102 case. The information supplied to the Commission may also be made available to other NCAs. The notification requirements allow the ECN to detect instances where cases are being dealt with by a number of authorities and, where necessary, allow cases to be reallocated at the start of an investigation.
The Network Notice states that the information should be provided by NCAs before, or just after, any step similar to the measures the Commission may take under Articles 18 to 21 of the Modernisation Regulation. The relevant measures are:
Information requests (Article 18).
Conducting interviews and taking statements for the purpose of collecting information relating to the subject matter of an investigation (Article 19).
Inspecting business or private premises (Articles 20 and 21).
Case notification takes place by way of a standard form which contains limited details of the case, including the NCA that is dealing with the case, the product, territories and parties concerned, the alleged infringement, the suspected duration of the infringement and the origin of the case. NCAs are also expected to update the information provided when a change occurs (paragraph 17, Network Notice).
Case allocation/Division of case work
The Network Notice sets out the following possibilities for dealing with an Article 101/102 case:
One NCA may deal with the case. The Joint Statement explains that as many cases as possible will be dealt with by a single NCA or the Commission. Where an agreement or practice substantially affects more than one member state, members of the ECN will seek to agree who is best placed to deal with the case successfully (paragraphs 16 and 17, Joint Statement).
Several NCAs could act in parallel on a case. In cases where competition is affected in more than one member state and no single member state would be able to deal with the case successfully alone, parallel action may be appropriate. An NCA may be designated as the "lead NCA" in the case, although each authority that is well placed to act may conduct its own investigation (paragraph 18, Joint Statement).
The Commission could deal with the case. The Commission will be well placed to deal with a case where competition in more than three member states is affected. The Commission may also be the most appropriate authority to deal with cases that are closely linked to other EU provisions which may be exclusively, or more effectively, applied by the Commission. Cases may also be dealt with by the Commission where European Union interest requires the adoption of a Commission decision to develop EU competition policy. This will be the position, in particular, where a case involves new competition issues (paragraph 18, Joint Statement and paragraphs 15 and 16, Network Notice).
In most cases, the NCA that receives a complaint or commences an investigation will remain in charge of the case. A case will only be reallocated to another NCA or the Commission at the start of a procedure where either the NCA does not consider that it is well placed to act or where another NCA (or the Commission) considers that it is well placed to act (paragraph 6, Network Notice).
In deciding whether an authority is well placed to act, NCAs will take into account factors including the market or markets in which the main anti-competitive effects of the agreement or practice are felt, and the NCA's ability to gather evidence, to bring the infringement to an end, and to effectively sanction the infringement. According to the Network Notice, an NCA or the Commission will be well placed to act where:
The agreement or practice has substantial direct actual or foreseeable effects on competition within its territory, is implemented within, or originates from, its territory (paragraph 8.1).
The NCA is able to bring the entire infringement to an end, and can sanction the infringement adequately (paragraph 8.2).
The NCA can gather the evidence required to prove the infringement (paragraph 8.3).
For an NCA to be well placed to act, there has to be a material link between the infringement and the NCA's member state. In most cases, the NCAs in countries where competition is substantially affected by an infringement will be well placed to act as long as they are capable of effectively bringing the infringement to an end. It may be, however, that the Commission will be better placed to act in such cases.
The Network Notice sets out various scenarios and considers which NCA will be well placed to act in each of them. These are set out in detail in the box, the Network Notice: NCAs that are well placed to act.
Where a case has been notified to the ECN by an NCA and members consider that it should be dealt with by another NCA or the Commission, it may be necessary to reallocate the case. ECN members will try to reallocate cases to a single, well placed NCA as often as possible. Reallocation should be quick and efficient and should not hold up ongoing investigations.
The Joint Statement states that the reallocation of a case should take place as quickly as possible. According to paragraph 18 of the Network Notice, any case allocation issues should be resolved within 2 months (although the Joint Statement sets out in paragraph 12, that the ECN uses an indicative time limit of up to 3 months to deal with case allocation issues). The case allocation made within this time period will usually continue to the end of the proceedings as long as the facts known about the case remain substantially the same. An NCA that has notified a case to the ECN will, normally, remain responsible for it if it is well placed to deal with the case, and no other NCA raises an objection during the indicative time period.
The question of which NCA should deal with a case may be important for businesses that want to complain about alleged breaches of Articles 101 or 102 when they make their decision as to the body to which to address their complaint (see also Practice note, Complaints under EU competition law (www.practicallaw.com/6-107-4638)). Conversely, where a business has potentially been involved in an infringement, it may be necessary to determine which authority or authorities will be well placed to deal with a case, in order to determine where leniency applications should be filed (see Practice note, EU Procedure, negotiation and enforcement (www.practicallaw.com/6-107-3709) for more details about the Commission's leniency policy).
The Joint Statement intends that NCAs should make case allocation as predictable as possible, and should provide guidance to businesses and other interested parties as to where to direct complaints (paragraph 13, Joint Statement).
Notification of decisions to the ECN
Under Article 11(4) of the Modernisation Regulation, once an investigation reaches a stage where an NCA envisages making an infringement decision, accepting commitments, or withdrawing the benefit of a block exemption, no later than 30 days before adopting the decision, the NCA has to provide the Commission with a summary of the case, a copy of the envisaged decision, or any other document that indicates the substance of the proposed course of action. The Commission can also request that the NCA makes other documents necessary for the assessment of the case available to the Commission. The information provided by the NCA can be made available to other NCAs in the ECN.
The Commission sets out in its Staff Paper that its practice has developed such that it has submitted observations to NCAs in many cases. Observations have, mostly, been provided orally and have been minor comments, or have been related to particular aspects of an envisaged decision in order to promote a uniform approach on certain aspects of the case, co-ordination with on-going Commission cases, or the case law of the European Courts. In its Annual Report on Competition Policy (www.practicallaw.com/7-422-2999) for 2008, the Commission stated that it advised on 61 envisaged decisions and informal requests and queries during that year. In 2009, the number of envisaged decisions increased to 69 (see Legal update, Commission publishes 2009 Annual Report on Competition Policy (www.practicallaw.com/4-502-4602)), and in 2010, the number of envisaged decisions rose again to 94.
NCAs take the Commission's observations into account as they consider appropriate, although the Commission does have the power to open proceedings itself and relieve the NCA of its competence if it considers that the NCA will adopt a decision that will create a serious risk to the coherent application of Articles 101 or 102 (see further, Power to relieve an NCA of their competence to deal with a case).
Case allocation (and reallocation) in practice.
In the Staff Paper, the Commission states that over 1000 Article 101 or 102 cases had been pursued by ECN members between 1 May 2004 and 31 March 2009, and over 300 envisaged decisions were notified to the Commission under Article 11(4) of the Modernisation Regulation. According to the Commission's figures set out in its Annual Report on Competition Policy for 2008, during that year, the Commission was informed of 150 new investigations that had been commenced by NCAs. In 2009, 129 new investigations were notified to the Commission by national competition authorities, and in 2010, the ECN was informed of 169 new investigations (11 Commission cases, and 158 NCA cases).
Despite the high number of cases investigated by NCAs, case allocation (or reallocation) issues have only arisen in a few cases. Cases have, generally, been dealt with by the authority that started the investigation. Allocation issues that have arisen have usually related to international cartel cases, or cases that have been commenced following the receipt of a complaint.
In cases where leniency applications have been received by more than one NCA, or by the Commission and individual NCAs, the Commission and NCAs have co-operated at an early stage. One such example was the Flat Glass (www.practicallaw.com/4-200-3943) case. The Commission started its investigation based on information that had been provided to the ECN by several NCAs that had received complaints from customers and third parties about a suspected cartel in the market.
Some complaints made to the Commission have been passed on to NCAs to deal with. In one case, the Commission and the German NCA had received similar complaints under Article 102 of the TFEU about the same practice employed by Deutsche Post relating to discounts for pre-sorted mail. The practice was based on a provision of German legislation which was the subject of a Commission procedure under Article 106 of the TFEU. The Commission, who was preparing the Article 106 decision, considered that the complaint should be investigated by the German NCA. The complainant, therefore, withdrew its complaint to the Commission and the German NCA proceeded to investigate the case.
Recent examples of the reallocation of cases from the Commission to NCAs include the joint commercialisation by Telefonica and Sogecable of a TV/telephone/broadband offer which was reallocated to the Spanish NCA, and investigations into the joint sale of football rights which were reallocated to the German and Danish NCAs.
According to the Commission, the reallocation of cases between NCAs has been very rare, and has mainly been because the companies being investigated were located in other member states. The Commission reports that the reallocation of two of these cases took place towards the UK NCA, the OFT, and that both of the cases were closed.
Parallel proceedings (where a case is considered by more than one NCA) have also been rare. In one case, the German and Belgian NCAs both received leniency applications relating to a Europe-wide price-fixing cartel for a certain chemical product. Both authorities investigated; both imposed fines. The Belgian authority, who imposed the later fine, considered the issue of double jeopardy and decided that it was entitled to impose a fine, because the fine imposed by the German NCA had only taken into account the effect of the cartel in the Germany.
The Network Notice explains that case allocation (and reallocation) within the ECN does not create individual rights for the companies involved or affected by an infringement of Article 101 or 102 to have their case allocated to a certain authority. If a case is reallocated, it is because the application of the allocation criteria led to the conclusion that the relevant NCA is well placed to deal with the case (see box, The Network Notice: NCAs that are well placed to act). Where a case is reallocated, the undertakings concerned are informed as soon as possible.
Suspension or closure of cases that are being dealt with by another NCA
If the same agreement or practice is brought to the attention of several competition authorities, Article 13 of the Modernisation Regulation allows an NCA to suspend its proceedings, or close the case on the grounds that another NCA is dealing with the case, or has dealt with it. In order for an NCA to be able to suspend a case or reject a complaint under Article 13, the agreement or practice that is being considered by the other authority has to involve the same infringement in the same geographic and product markets. It does not matter whether the investigation by the other NCA is the result of a complaint raised by a different complainant, or has been started on the NCA's own initiative.
Although an NCA has the ability to close proceedings where another NCA is dealing with the case, it does not have to do so. The Modernisation Regulation allows the NCA to consider whether closing the case would be appropriate. Where, for example, the NCA investigating the case rejects a complaint for a procedural reason, without making a finding as to whether or not there has been a breach of Article 101 or 102, another NCA may wish to continue investigating in order to reach a final substantive decision as to infringement. NCAs also have the choice between suspending and closing a case. An NCA may, for instance, choose to suspend a case until the outcome of the other NCA's investigation is clear.
The Network Notice states that the possibility of terminating or suspending proceedings may apply to part of a complaint only. For example, an NCA might want to terminate or suspend an investigation where a complaint raises issues that overlap with an investigation being carried out by another NCA.
Power of the Commission to relieve an NCA of its competence to deal with a case
Under Article 11(6) of the Modernisation Regulation, if the Commission formally initiates proceedings in a case with a view to adopting a decision under Article 101 or 102 of the TFEU, NCAs will be relieved of their competence to act in the case (i.e. they cannot open an investigation or continue with an on-going investigation). The Joint Statement says that, where the case is already being investigated by one or more NCA, this will be an unusual occurrence and the Commission will only open proceedings in relation to such a case where:
NCAs envisage making conflicting decisions.
An NCA envisages making a decision that is obviously in conflict with consolidated case law (judgments of the European courts, Commission regulations, and previous decisions should serve as a yardstick to determine whether a decision is in conflict). Where the facts of the case are in issue, only a significant divergence will trigger intervention by the Commission.
Where the NCA dealing with the case is unduly drawing out proceedings.
Where there is a need for the Commission to adopt a decision to develop EU competition policy. This will be the case, in particular, where a similar competition issue arises in several member states.
The NCA does not object.
If the Commission is minded to initiate proceedings under Article 11(6), the Joint Statement sets out that it should do so as soon as possible. If an NCA is already acting on a case, the Commission will explain the reasons for the application of Article 11(6) in writing to the NCA and other members of the ECN.
A decision by the Commission to initiate proceedings under Article 11(6) will be announced to the ECN in time to give members an opportunity to ask for a meeting of the Advisory Committee before the Commission's proceedings are commenced. The Network Notice also sets out that, unless the EU interest is at stake, the Commission will not usually adopt a decision conflicting with a decision of an NCA where proper information has been provided, and the Commission has not initiated proceedings under Article 11(6). To date, the Commission has never initiated proceedings under Article 11(6) in order to relieve another NCA of its competence to deal with a case.
Exchange and use of information within the ECN
In order for the ECN to function effectively, NCAs and the Commission have to be able to exchange information between themselves and to use that information in their investigations. Article 12 of the Modernisation Regulation sets out that NCAs have the power to provide one another with, and use in evidence, any matter of fact or law, including confidential information. Exchanges of information may, therefore, take place both between the NCAs and the Commission and between the NCAs themselves.
Information can be exchanged for use as intelligence (i.e. to inform authorities about the potential existence of a breach of Article 101 or 102) regardless of whether the underlying proceedings are criminal or administrative in nature or whether sanctions are imposed on individuals, as long as the exchange of information occurs for the purpose of applying Article 101 or 102.
There are, however, restrictions on the use of information exchanged as evidence (i.e. using the information to prove an infringement). These are set out in Article 12(2) and (3) of the Modernisation Regulation:
Article 12(2) states that information that is exchanged between NCAs shall only be used in evidence (i.e. to prove an infringement) for the purpose of applying Articles 101 and 102, and in respect of the subject matter for which it was collected by the transmitting authority. However, the information may be used in evidence in national law where national competition law is applied in parallel with EU competition law and does not lead to a different outcome.
Article 12(3) sets out limitations on the use of exchanged information to impose sanctions on individuals. Information exchanged can only be used to impose sanctions on individuals where the law of the transmitting authority foresees sanctions of a similar kind (e.g. financial or custodial) in relation to an infringement of Article 101 or 102 (it does not matter whether the national systems differ in qualifying the sanctions as criminal or administrative).
Where the laws of the transmitting and receiving authorities do not foresee the same type of sanction, it is necessary to compare the rights of defence of individuals in the territory of each relevant NCA. Where the rights of defence grant the same level of protection for individuals in each member state, the information may be used in evidence, although it may not be used to impose a custodial sanction.
The Staff Paper explains that information exchanges have taken place between the Commission and NCAs and between NCAs in the following circumstances:
At the early stages of an investigation, where the exchange of information can allow authorities that have received different pieces of information to obtain a more complete picture of a suspected infringement. These exchanges, which have occurred in the context of inspections, strengthen the ability of the ECN members to detect infringements.
Where inspections are carried out under Article 22 of the Modernisation Regulation, the information collected on behalf of the authority that requested it is transferred on the basis of Article 12.
Where a case is allocated between authorities, or reallocated to another authority, the information is passed on under Article 12.
Cases where information exchanged has actually been used in evidence are more limited. The Staff Paper states that, where information has been exchanged following investigative measures carried out under Article 22, there have been difficulties due to different national legislation in relation to confidentiality.
The Commission's experience of the use of information to impose sanctions on individuals is also very limited. No NCA has reported a case where it has had to analyse the provisions of Article 12(3), or cases where an NCA has decided not to request information or has not been able to use exchanged information in a case involving custodial sanctions.
Information covered by the concept of "professional secrecy" (business secrets and other confidential information) is protected by Article 28 of the Modernisation Regulation. This prevents the Commission, the NCAs, and people working for them, from disclosing information covered by obligations of professional secrecy. However, the legitimate interests of undertakings in the protection of their business secrets cannot prejudice the disclosure as between NCAs of information necessary to prove an infringement of Article 101 or 102. Article 28 states that, without prejudice to Article 12 (the exchange of information between the Commission and NCAs) and Article 15 (information relating to the enforcement of competition law in national courts), information collected by the Commission and NCAs under their investigative powers may only be used for the purpose for which it was acquired.
Confidentiality of correspondence between the Commission and NCAs
In terms of the disclosure to parties under investigation of evidence that has been exchanged between members of the ECN, Article 27(2) of the Modernisation Regulation provides that the right of access to file shall not extend to correspondence between the Commission and NCAs, or between NCAs. This includes access to documents that have been drawn up pursuant to Article 11 of the Modernisation Regulation (see Case allocation/Division of case work), and Article 14 (information drawn up for consultation/discussion by the Advisory Committee (see The Advisory Committee (www.practicallaw.com/5-422-5178)).
The Commission considers it important that information exchanged within the ECN should be treated as internal, and, as such, should be exempt from disclosure requirements. It believes that the ECN members should be able to have a free and constructive exchange of views and that granting access to documents created solely for that purpose would have a negative impact on the way the ECN functions. The Staff Paper explains that observations submitted in an Article 11(4) procedure are treated as internal documents.
Co-operation in investigations
The Modernisation Regulation gives NCAs the power to carry out inspections on behalf of NCAs of other member states (Article 22, Modernisation Regulation). They can also carry out other fact finding measures on behalf of other NCAs in order to establish whether there has been an infringement of Article 101 or 102. Any inspections or fact finding measures taken by an NCA on behalf of another are carried out under the national law of the NCA where the inspection takes place.
In the UK for example, the OFT carries out such measures under sections 65(D) to 65(H) of the Competition Act 1998. These sections set out the criteria that must be met for the OFT to carry out an investigation on behalf of another NCA, and its powers when it carries out such an investigation. Once it has commenced an investigation on behalf of another NCA, the OFT has powers to require the production of specified information (section 65E, Competition Act), enter business premises with or without a warrant (sections 65F and G, Competition Act), and enter domestic premises with a warrant (section 65H, Competition Act). The OFT's powers when investigating on behalf of another NCA mirror the powers its officers have when investigating on their own account.
The Commission may also request NCAs to assist it in carrying out an inspection under Article 20, or 21, or may ask an NCA to carry out an inspection on its behalf under Article 22(2).
As when conducting inspections/investigations for NCAs, where NCAs carry out inspections on behalf of the Commission (as opposed to assisting the Commission), the inspection will be carried out according to the national procedures of the NCA that is carrying out the investigation. National rules on issues such as legal professional privilege will apply.
The Staff Paper explains that assistance provided by member states to one another under Article 22(1) has been used successfully. In most cases, requests for assistance were taken up by the relevant authority and results fed into cartel investigations. Assistance has mainly been given in relation to inspections, witness interviews and information requests.
The Staff Paper does, however, point out that there have been some practical and legal difficulties in the application of Article 22(1). The practical issues that have arisen have mainly related to the limited resources of some authorities and language issues. Legal issues have arisen because of divergencies in national procedures in relation to legislation concerning the requirements for conducting an inspection, or proceeding with a request for information, and in relation to powers to conduct forensic IT searches.
The Model Leniency Programme
Since the entry into force of the Modernisation Regulation, all member states have been able to apply Articles 101 and 102 as well as the Commission. Therefore, where an undertaking wishes to apply for leniency, it may need to file multiple applications in order to protect its position in member states that can impose sanctions for cartel activity. In the Network Notice, undertakings are warned that a leniency application to a given authority is not an application to any other authority, and that undertakings should make applications to all competition authorities that can apply Article 101 in the territories affected by the infringement (paragraph 38, Network Notice).
The Network Notice sets out that, in view of the timing imperative in most existing leniency programmes (the first applicant receives the greatest benefit), applicants will have to consider whether it would be appropriate to file leniency applications with the relevant authorities simultaneously or to take action, where possible, to protect its position with those authorities. The Commission recognises the special concerns of leniency applicants regarding the use of the information they provide, and the Network Notice puts in place safeguards in relation to the transmission of information provided under a leniency programme to other ECN members. These provisions are set out in the box, Information provided under a leniency programme.
In 2006, the ECN members endorsed a Model Leniency Programme in order to remove discrepancies between leniency policies and to facilitate multiple filings. The Model Programme is not binding on ECN members but they committed to use their best efforts to align their national programmes to the Model. All but one of the 27 EU member states (Malta) now have leniency programmes, and there is a high level of convergence with most aspects of the Model Programme. In November 2012, the ECN published a revised version of the Model Programme to provide further clarifications and to reflect enforcement experience (see Legal update, Revised ECN Model Leniency Programme published (www.practicallaw.com/8-522-5868)).
The framework set out by the Model provides that:
Full immunity for the first undertaking to come forward, if it meets the specified conditions, where it provides the evidence either to enable targeted inspections to be carried out or to enable an infringement to be established.
A reduction of fines will be available for undertakings which do not meet the conditions for full immunity but provide significant added value. Such reductions should not exceed 50%.
The conditions for immunity/leniency are: ending involvement, genuine and full co-operation and not destroying evidence or disclosing the fact or content of the application.
Full immunity should not be granted, or can be withdrawn, where the undertaking acted as a coercer.
The information to be provided should be specified. The procedures applied should allow for the provision of initial submission on an anonymous basis and, at the discretion of the competition authority, whether or not to grant markers. Oral evidence may also be accepted, where certain safeguards are in place.
Prior to its 2012 revision, the Model Programme only provided for summary applications where the company had applied to the Commission for immunity, being the first to provide information to enable the carry out targeted investigations. Under the 2012 revision, the use of summary applications is extended to cover all types of leniency application (regardless of whether the Commission already has information to enable it to conduct an inspection or where the conditions for immunity are not satisfied). The ECN has also published a new template (available on the Commission's website) in English that applicants may use when preparing a summary application.
A detailed discussion of the Model Leniency programme and its requirements is set out in Practice note, Cartels: EU law and practice (www.practicallaw.com/6-107-4520).
The Advisory Committee
Under Regulation 17, which was replaced by the Modernisation Regulation, experts from the competition authorities of member states formed the Advisory Committee. The Commission would consult the Committee before making various decisions relating to the application of Articles 101 and 102. The Modernisation Regulation built on the rules laid down by Regulation 17 to improve the effectiveness of the arrangements for the Advisory Committee, and to enable it to act as a forum for discussing cases that are being handled by NCAs to assist in the consistent application of Articles 101 and 102 across member states.
The Advisory Committee is consulted prior to the Commission taking any of the following decisions:
An infringement decision (Article 7, Modernisation Regulation).
A decision ordering interim measures (although where interim measures are at issue, the procedure for consultation is based on a short explanatory note and the operative part of the decision, rather than the full proposed decision) (Article 8, Modernisation Regulation).
A decision accepting commitments (Article 9, Modernisation Regulation).
A decision finding that Article 101 or 102 is inapplicable to an agreement or practice (Article 10, Modernisation Regulation).
A decision imposing a fine for supplying incorrect or misleading information or infringing the competition rules (Article 23, Modernisation Regulation).
A decision fixing the definitive amount of a periodic penalty payment (Article 24, Modernisation Regulation).
A decision withdrawing the benefit of a block exemption (Article 29, Modernisation Regulation).
The Network Notice states that the Commission will also consult the Advisory Committee on the notices and guidelines it adopts which explain and announce Commission policy.
The Commission is required to take the "utmost account" of the opinion of the Advisory Committee and inform it of the manner in which its opinion has been taken into account before the Commission's decision is adopted (Article 14(5), Modernisation Regulation).
In relation to decisions of the NCAs applying Articles 101 and 102, the Advisory Committee acts as a forum for discussion. Discussions of particular cases can be requested by the Commission or by any member state, although the Advisory Committee will not produce a formal opinion on decisions of NCAs as it would in relation to a Commission decision.
The Network Notice also sets out that the Advisory Committee may play a role in important cases where case allocation (and reallocation) is an issue, in particular, where the Commission intends to initiate proceedings under Article 11(6) of the Modernisation Regulation. Although, it is not envisaged that the Committee would give a formal opinion on such a case, it could issue an informal statement on the matter. Details of the procedures for consultation with the Advisory Committee and the publication of its opinions are set out in paragraphs 65 to 67 of the Network Notice.
Co-operation with competition authorities in third countries
Co-operation between the Commission and third country competition enforcement authorities is based on by bi- or multi-lateral agreements or is arranged through regular contacts between the Commission and the third country authority. Some bilateral agreements relate solely to competition. The European Union has dedicated competition co-operation agreements with the US, Canada, Japan and South Korea under which competition authorities exchange information and co-ordinate their enforcement activities. Authorities on each side may ask the other to take enforcement action and must take account of the other's significant interests when enforcing competition rules. The Commission has also announced that a Memorandum of Understanding has been signed which sets out a framework for dialogue between the Commission and the Brazilian competition authorities on competition matters. Terms of reference for a dialogue of competition matters between the EU and China were agreed in 2003, and a Memorandum of Understanding in relation to competition policy, legislation and enforcement between the EU and Russia was signed in March 2011.
Co-operation with competition authorities of countries who are members of the Organisation for Economic Co-operation and Development (OECD) is based on a 1995 recommendation of the OECD which includes recommendations on the notification of investigations that may affect another country's interests, the co-ordination of action where two or more countries are investigating the same anti-competitive practice, the exchange of information, consultation, and settlements between countries.
The Commission also co-operates with a number of other specified countries in relation to the application of competition law. The names of each of the countries and details of the extent of co-operation between them and the Commission are set out on the DG Competition website. In addition, the Commission also discusses competition issues in international fora such as the International Competition Network, the World Trade Organisation, and the United Nations Conference on Trade and Development.
Exchange of information between the Commission and authorities in third member states is not governed by the Modernisation Regulation. Information is exchanged on the basis of the relevant agreements with the third countries. However, the co-operation agreements expressly exclude the exchange of confidential information so, in practice, information obtained through formal investigative measures cannot be shared with the other authorities without the specific consent of the companies involved.
The Staff Paper notes that, in international circles, the limitation on the exchange of information is seen as a major handicap to efficient co-operation between authorities in the fight against international cartels, and could lead to some cartels being able to escape detection completely. Increased exchange of information between third countries could, however, lead to a conflict with the Modernisation Regulation, where the third country foresees the imposition of custodial sanctions. This is due to the fact that, under the Modernisation Regulation, the use of information collected by one authority cannot be used to impose custodial sanctions by the receiving authority if the transmitting authority does not allow custodial sanctions to be imposed for an infringement of Articles 101 or 102. It would, therefore, be awkward for the European Union to go further in terms of information exchange with third country enforcers than it currently does in relation to the exchange of information between member states.
The Staff Paper states that it may be appropriate for the Commission to reflect on the Modernisation Regulation limitation on the use of information received to impose custodial sanctions, and to consider whether there are other available options which will also fully preserve the parties' rights of defence. It considers that the issue of disclosure to third country authorities requires further consideration in the light of deepening and enhanced co-operation.
ECN Recommendations on investigative and decision-making powers
Published in December 2013, the ECN's Recommendations set out common views and general principles on the powers and procedures needed to ensure the effective enforcement of the EU competition rules. The Recommendations cover inspections and requests for information, collecting digital evidence, the provision of inspection assistance to other competition authorities, priority setting, interim measures, commitment procedures, and the imposition of structural remedies (see Legal update, ECN Recommendations on investigative and decision-making powers published (www.practicallaw.com/2-551-4932)):
ECN Recommendation on investigative powers, enforcement measures and sanctions in the context of inspections and requests for information. This Recommendation sets out recommendations on the minimum set of powers required by ECN competition authorities in relation to inspections of business premises, inspections of non-business premises and requests for information.
ECN Recommendation on the power to collect digital evidence, including by forensic means. This Recommendation states that all ECN competition authorities should have effective and efficient powers to gather digital evidence, including evidence obtained forensically, through inspections of business and/or non-business premises, requests for information and other investigative tools. Competition authorities should have the power to gather all information in digital form related to the business(es) under investigation, irrespective of the medium on which it is stored and the technological evolution of the storage media. The competition authorities should also have powers to gather digital information by taking digital copies, including forensic images, of the data held and/or through the seizure of storage media.
ECN Recommendation on assistance in inspections conducted under Articles 22(1) of Regulation(EC) No 1/2003. Article 22(1) of Regulation 1/2003, enables a NCA to carry out inspections (as well as other fact-finding measures that its national law provides for) on its territory on behalf and for the account of another NCA, for the purpose of investigating suspected infringements of Article 101 and/or Article 102 of the TFEU. Article 22(1) is an important cornerstone of the ECN as it provides NCAs with the possibility of extending their investigatory toolkits beyond their respective territories.
The ECN considers that a higher degree of convergence would facilitate co-operation during inspections and enhance their effectiveness. Therefore, the ECN now recommends that an assisting NCA, when conducting an inspection on behalf and for the account of a requesting NCA further to Article 22(1) of Regulation 1/2003, should allow the attendance and assistance of officials of, and other persons authorised by, the requesting NCA. Also, acting within the framework of the inspection carried out by the assisting NCA, the officials of, and persons authorised by, the requesting NCA should, to the greatest extent possible, enjoy investigative powers equivalent to those of the officials of, and persons authorised by, the assisting NCA under its national law.
ECN Recommendation on the power to set priorities. There is currently degree of divergence among member states regarding the ability of competition authorities to set priorities in the exercise of their functions. The ECN considers that convergence on the ability of the competition authorities to set priorities would help enhance effectiveness and efficiency in the enforcement of competition rules by ECN members by allowing them to focus their action on the most serious infringements or sectors and areas most in need of action.
Therefore, the ECN recommends that competition authorities should have the ability to set priorities in the exercise of their tasks. Also, competition authorities should have the ability to open and close ex officio cases insofar as cases are deemed to be a priority and should, to the greatest extent possible, have the ability to decide not to initiate cases and reject complaints if they do not consider them to be a priority.
ECN Recommendation on interim measures. The ECN recommends that all ECN jurisdictions should provide explicitly in their legal framework for effective means to order interim measures to protect competition and that competition authorities should be able, as a minimum to adopt interim measures where there is urgency due to the risk of serious and irreparable harm to competition and there are reasonable grounds to suspect that an infringement has occurred.
ECN Recommendation on commitment procedures. Article 5 of Regulation 1/2003 expressly enables national competition authorities to adopt decisions accepting commitments when applying Articles 101 and 102 of the TFEU. The possibility to adopt commitment decisions is expressly provided for by specific legal provisions in almost all EU member states.
Given the need to make commitments binding and enforceable and to ensure a minimum level of procedural guarantees for stakeholders, to ensure appropriate convergence, the ECN recommends that all ECN jurisdictions should provide explicitly in their legal framework for effective means to adopt formal decisions by which commitments offered by undertakings to meet competition concerns are made binding on, and enforceable against, them. Such a decision should not conclude whether there was or still is an infringement but should find that there are no longer grounds for action.
ECN Recommendation on the power to impose structural remedies. Currently there is divergence within the ECN as regards the power of competition authorities to impose structural remedies when applying the EU competition rules. Some competition authorities do not have the power to impose structural remedies at all. In addition, even where the power exists there is divergence as to the conditions which may trigger the imposition of structural remedies.
Further convergence on the power to impose structural remedies within the ECN would contribute to reinforcing the range of appropriate enforcement tools which the competition authorities should have at their disposal to effectively and adequately enforce the competition rules and to ensure competitive conditions for businesses and markets. It would also strengthen legal certainty for undertakings by limiting the risk of different treatment in cases of parallel investigations in different jurisdictions. Therefore, the ECN recommends that:
Competition authorities should have the power to impose structural remedies where it is necessary to bring a competition infringement efficiently and effectively to an end and thereby to restore competition in the market. The power to impose structural remedies should be subject to the principles of proportionality and effectiveness (necessary to remedy the infringement and not going beyond what is necessary to re-establish competition).
Competition authorities should have the powers to ensure the quick, simple and observable enforcement and implementation of the structural remedies. Competition authorities should be able to monitor and enforce structural remedies through effective mechanisms or procedures, including the possibility to revert to external experts such as trustees.
In cases of non-compliance with structural remedies, competition authorities should have at their disposal effective sanctions, notably fines, in addition to efficient means to compel compliance with the remedies, for example through the imposition of effective periodic penalty payments set at an appropriate level.
Modernisation Regulation: Articles 11-13
Article 11 - Co-operation between the Commission and the competition authorities of the member states
The Commission and the competition authorities of member states shall apply EU competition rules in close co-operation.
The Commission shall transmit to the competition authorities of the member states copies of the most important documents it has collected with a view to applying Articles 7 [findings of infringement], 8 [interim measures], 9 [commitments], 10 [finding of inapplicability] and Article 29(1) [withdrawing a block exemption]. At the request of the competition authority of a member state, the Commission shall provide it with a copy of other existing documents necessary for the assessment of the case.
The competition authorities of the member states shall, when acting under Article 101 or Article 102 of the TFEU, inform the Commission in writing before, or without delay after, commencing the first formal investigative measure. This information may also be made available to the competition authorities of the other member states.
No later than 30 days before the adoption of a decision requiring that an infringement be brought to an end, accepting commitments or withdrawing the benefit of a block exemption Regulation, the competition authorities of the member states shall inform the Commission. To that effect, they shall provide the Commission with a summary of the case, the envisaged decision or, in the absence thereof, any other document indicating the proposed course of action. This information may also be made available to the competition authorities of the other member states. At the request of the Commission, the acting competition authority shall make available to the Commission other documents it holds which are necessary for the assessment of the case. The information supplied to the Commission may be made available to the competition authorities of the other member states. National competition authorities may also exchange between themselves information necessary for the assessment of a case that they are dealing with under Article 101 or 102 of the Treaty.
The competition authorities of the member states may consult the Commission on any case involving the application of EU law.
The initiation by the Commission of proceedings for the adoption of a decision under Chapter III [infringement decisions, interim measures decisions, commitments and findings of inapplicability] shall relieve the competition authorities of the member states of their competence to apply Articles 101 and 102 of the Treaty. If a competition authority of a member state is already acting on a case, the Commission shall only initiate proceedings after consulting with that national competition authority.
Article 12 - Exchange of information
For the purposes of applying Articles 101 and 102 of the TFEU, the Commission and the competition authorities of the member states shall have the power to provide one another with and use in evidence any matter of fact or law, including confidential information.
Information exchanged shall only be used in evidence for the purpose of applying Article 101 or Article 102 of the TFEU and in respect of subject matter for which it was collected by the transmitting authority. However, where national competition law is applied in the same case and in parallel to EU competition law and does not lead to a different outcome, information exchanged under this Article may also be used for the application of national competition law.
Information exchanged pursuant to paragraph 1 can only be used in evidence to impose sanctions on natural persons where:
The law of the transmitting authority foresees sanctions of a similar kind in relation to an infringement of Article 101 or 102 of the TFEU or, in the absence thereof;
The information has been collected in a way which respects the same level of protection of the rights of defence of natural persons as provided for under the national rules of the receiving authority. However, in this case, the information exchanged cannot be used by the receiving authority to impose custodial sanctions.
Article 13 - Suspension or termination of proceedings
Where competition authorities of two or more member states have received a complaint or are acting on their own initiative under Article 101 or Article 102 of the TFEU against the same agreement, decision of an association, or practice, the fact that one authority is dealing with the case shall be sufficient grounds for the others to suspend the proceedings before them or to reject the complaint. The Commission may likewise reject a complaint on the ground that a competition authority of a member state is dealing with the case.
Where a competition authority of a member state or the Commission has received a complaint against an agreement, decision of an association or practice which has already been dealt with by another competition authority, it may reject it.
The Network Notice: NCAs that are well placed to act
Scenario 1: Undertakings situated in member state A are involved in a price-fixing cartel in relation to products that are mainly sold in member state A.
In this situation it is obvious that the NCA of member state A would be well placed to deal with the case.
Scenario 2: Two undertakings set up a joint venture in member state B. The joint venture provides services in member states A and B and gives rise to a competition problem. A "cease and desist" order is considered sufficient to deal with the case effectively because it can bring the entire infringement to an end. Evidence of the infringement is mainly located at the offices of the joint venture in member state A.
In this case both NCAs would be well placed to deal with the case. However, single action by the NCA in member state A would be more efficient (because it could bring the entire infringement to an end) than action by member state B, or parallel action by NCAs in state A and B.
The Network Notice sets out that parallel action by two or three NCAs may be appropriate where an agreement or practice has substantial effects on competition mainly in their respective territories, and the action of one NCA alone would not be able to bring the entire infringement to an end, and/or to impose adequate sanctions.
Scenario 3: Two undertakings agree to share markets. The activity of the company situated in member state A is limited to member state A, and the activity of the company located in member state B is limited to member state B.
The NCAs of state A and B are well placed to deal with the case in parallel; each one can deal with the case in its own territory.
Where more than one NCA deals with a case in parallel, they will try to co-ordinate their action as far as possible. The Network Notice sets out that the NCAs may find it useful to designate one NCA as the "lead" NCA and to delegate tasks to that authority, such as the co-ordination of investigative measures, while each NCA is responsible for conducting proceedings in its own member state.
Where one, or several, agreement(s) or practices (including networks of similar agreements or practices) have effects on competition in more than three member states, the Commission will be particularly well placed to act.
Scenario 4: Two undertakings enter into market-sharing or price-fixing arrangements for the whole of the EU.
The Commission will be well placed to deal with this case.
Scenario 5: An undertaking is dominant in four national markets. It abuses its dominant position by imposing fidelity rebates on its distributors in all of the markets.
The Commission will be well placed to deal with the case. It could also choose to deal with one national market to create a "leading" case, and the other national markets could be dealt with by the relevant NCAs. This may be more appropriate if each market needs to be separately assessed.
Information provided under a leniency programme
The limitations on the exchange of information provided under a leniency programme are set out in the Network Notice as follows:
Where a case has been initiated as a result of an application for leniency, as in any other case involving the application of Article 101 or 102, the NCA must inform the Commission and may make information available to other members of the ECN under Article 11(3) of the Modernisation Regulation. In leniency cases, however, other members of the network will not use the information as a basis for starting their own investigation (whether under the EU competition rules, national competition or other laws). This is, however, without prejudice to any power of a competition authority to open an investigation on the basis of information received from other sources, or to request information under Article 12 of the Modernisation Regulation from any member of the ECN (including the authority to whom the leniency application was submitted) (paragraph 39).
Information voluntarily submitted by a leniency applicant will only be transmitted to another ECN member under Article 12 of the Modernisation Regulation with the consent of the applicant. This also applies to information obtained during or following an inspection, or by means of or following fact finding measures which could not have been carried out except as a result of the leniency application. Members of the ECN will encourage leniency applicants to give their consent, especially in relation to disclosure to authorities that could grant leniency to the applicant. Once consent to disclosure to an authority has been given by an undertaking, it cannot be withdrawn (paragraph 40).
Consent of the leniency applicant to the transmission of the information to another authority under Article 12 is not required where:
The receiving authority has also received a leniency application relating to the same infringement from the same applicant as the transmitting authority, provided that, at the time the information is transmitted, it is not open to the applicant to withdraw the information which it has submitted to the receiving authority (paragraph 41(1)).
Where the receiving authority has provided a written commitment (that will be copied to the applicant) that neither the information transmitted, nor any other information that it may obtain following the transmission will be used by it, or any other authority to which the information is subsequently transmitted to impose sanctions on the leniency applicant, on any other natural or legal person covered by favourable treatment offered due to the leniency application, on any employee, or former employee of any person who has been offered leniency (paragraph 41(2)).
Where information has been collected by an ECN member under Article 22(1) of the Modernisation Regulation on behalf of the authority to whom the leniency application was made (paragraph 41(3)).
Information that has been submitted to the Commission by an NCA and relates to cases initiated as a result of a leniency application will only be made available to those NCAs that have committed to respecting the principles set out in the Commission Notice. The same principle applies where a case has been initiated by the Commission as a result of a leniency application made to the Commission. NCAs in all member states have signed a statement committing themselves to these principles. Details of the signatory authorities are available on the ECN's pages of the DG Competition website (paragraph 42).