Antitrust Procedure: Regulations 1/2003 and 773/2004 in Review

SYMPOSIUM

Edited by: David Pérez de Lamo and Lewis Reed

Table of Contents

1. Introduction

Edited by David Pérez de Lamo and Lewis Reed

2. Looking Backward and Looking Forward: Another Evaluation of the Antitrust Procedural Regulations

Wouter Wils

3. Some Reflections on the Review of Regulation 1/2003

Giovanni Pitruzzella

4. Food for Thought for a Revised Regulation 1/2003

Jérémie Jourdan

5. The “hole” in the (antitrust) “doughnut”: governing the Commission’s administrative discretion in antitrust procedures Or Brook and Katalin J. Cseres

6. Latitude for effective enforcement of Article 101(3) TFEU under the current regulations – a case for revising administrative practice instead of revising the law?

Nils Imgarten

7. The Complaint Crusher: How the revision of Regulation 1/2003 can advance rights of complainants

Malgorzata Kozak and Jacek Mainardi

8. Inapplicability Decisions under Regulation 1/2003: A ‘Dead Letter’ coming back to life?

Georgia Theodorakopoulou

9. The Reform of Regulation 1/2003

Cani Fernández

10. The Future Relationship Between EU Competition Law and National Laws

Miguel Mota Delgado

11. Regulation 1/2003 From Modernisation to Digitisation

Massimiliano Kadar and Sophia Stephanou

12. Modernising the ‘Modernisation Regulation’: towards a ‘Regulation 2’ or a ‘Regulation 1/2003+’?

Andreas Scordamaglia-Tousis

13. EU Competition Procedure: the Ongoing Dialogue Between Brussels and Luxembourg Mark English

Introduction

David Pérez de Lamo (1) and Lewis Reed (2)

Regulation 1/2003, and its implementing Regulation 773/2004, ‘modernised’ EU competition law enforcement. The modernisation revolutionised antitrust by bolstering the EU Commission’s enforcement toolkit and decentralising enforcement to national competition authorities (NCAs) and courts, which in turn allowed the EU Commission to set priorities and focus on the most significant cross-border cases (see O. Brook and K. J. Cseres, EULL 2023, “ The “hole” in the (antitrust) “doughnut”: governing the Commission’s administrative discretion in antitrust procedures”). Two decades later, changes in society and practice suggest that the antitrust procedural framework should be modernised once again, albeit in more concrete areas. The EU Commission’s press release regarding the scope of the new evaluation simply states that, after twenty years, ‘[t]he time is therefore ripe to evaluate the procedural framework that the Regulations have created’. Digitisation is also mentioned as a factor motivating the review, particularly to update the Commission’s powers of investigation to the transition from the ‘paper world’ to the ‘digital world’ (see M. Kadar and S. Stephanou, EULL 2023, “Regulation 1/2003 – From Modernisation to Digitisation”).

Taking a bird’s eye view of the enforcement landscape over the past twenty years, the contributors to the Symposium largely agreed that the original goals of the modernisation of antitrust procedure have certainly been met, notably as regards more intensified decentralised enforcement (see W. Wils, EULL 2023, “Looking Backward and Looking Forward: Another Evaluation of the Antitrust Procedural Regulations”). The creation of the leniency and settlement programmes for cartels has also adapted enforcement to complex factual circumstances and enhanced efficiency. And for undertakings, overall, while the ‘European Commission has the combined role of investigator, prosecutor and (first instance) judge... there has been a consistent and positive evolution in the procedural rights of investigated parties derived from general principles of EU law’ (see M. English, EULL 2023, ‘EU Competition Procedure: the Ongoing Dialogue Between Brussels and Luxembourg ’; see also J. Jourdan, EULL 2023, “Food for Thought for a Revised Regulation 1/2003”).

Yet, the optimistic expectations at the time of reform have been slightly tempered with the reality on the ground. Contrary to what was anticipated, prohibition decisions have slightly decreased over the years. The efficiency gains produced through abolishing notifications of restrictive agreements have therefore not translated directly to higher numerical enforcement output on the Commission’s part (see W. Wils, supra) – even if there may have certainly been a ‘qualitative turn’. The development of digital markets and the enforcement of anticompetitive practices in that space have also evidenced the need for competition authorities to intervene more quickly and to use more modern tools, thus catalysing a series of unprecedented legislative initiatives that materialised in an ex ante enforcement regime that raises a range of intricate legal questions (see G. Pitruzzella, EULL 2023, “Some Reflections on the Review of Regulation 1/2003”; see also J. Jourdan supra). Moreover, with the recognition of the criminal nature of competition law – first in ECtHR Menarini Diagnostics S.r.L. v Italy, no. 43509/08, but more recently confirmed unequivocally by the Court of Justice for the EU legal order in bpost SA, C-117/20, para 27 – it becomes all

1. David Pérez de Lamo is an Associate at an international law firm in Brussels. He holds an LL.M. in EU Law and Economic Analysis from the College of Europe (Bruges) and has published a series of contributions in EU competition and constitutional law.

2. Lewis Reed is an Academic Assistant in the European Legal Studies department of the College of Europe (Bruges). He holds an LL.M. in EU Law from the College of Europe (Bruges) and an LL.B. from Durham University, and has published contributions in EU competition law and constitutional law.

the more important that any enforcement or procedural reform provides adequate procedural guarantees to protect those targeted by the rules (see G. Pitruzzella supra; see also A. Scordamaglia-Tousis, EULL 2023, “Modernising the ‘Modernisation Regulation’: towards a ‘Regulation 2’ or a ‘Regulation 1/2003+’?”).

Lessons for Better Enforcement

While decentralisation has an efficiency-enhancing aspect, the flip side is the risk of inconsistent application of the rules. This is because competition law enforcement is in many ways still not fully harmonised. For instance, certain contributors observed that fine imposition rules and practices diverge by Member States, and thus propose that the reform of the antitrust procedural framework should harmonise these rules, particularly the methodology to calculate the fines and limitation periods (see C. Fernández, EULL 2023, “The Reform of Regulation 1/2003”; see also A. Scordamaglia-Tousis supra)

Conversely, the EU legislator could fill certain gaps at the EU enforcement level that have already been filled at a national level. One such example is the Commission’s power to take statements (Article 19 of Regulation 1/2003). The General Court and the Court of Justice have certainly consistently reinforced the obligations imposed on the Commission when taking statements, thus bolstering procedural rights of undertakings (see Intel, C-413/14 P; Les Mousquetaires, C-682/20 P; Qualcomm, T-235/18; and Google Android, T-604/18). Most recently, the Court of Justice held that the Commission is obliged to comply with procedural rights by recording interviews held not only after the formal opening of an investigation, but also in the period prior thereto when gathering indicia (Les Mousquetaires, C-682/20 P). However, the power to take statements is arguably deprived of its effectiveness to the extent that the Commission can neither oblige natural persons to give evidence nor impose fines if such evidence turns out to be incorrect or misleading (see A. Scordamaglia-Tousis supra). In contrast, the NCAs are equipped through the ECN+ Directive with their ability to summon undertaking representatives to interviews and their power to oblige this through deterrent fines for non-compliance (see J. Jourdan, G. Pitruzzella, M. Kadar and S. Stephanou supra). Accordingly, this is one gap that could be filled at EU level. It might seem lop-sided to strongly police the Commission’s discretion in this matter, while not giving it the teeth to properly utilise this power effectively (see A. Scordamaglia-Tousis supra). Another relevant legislative gap that could be filled, through a simple but effective change, concerns the burden of proof, as set out in Article 2 of Regulation 1/2003. Where that provision already mentions the burden on the undertaking claiming an Article 101(3) TFEU defence, it would be wise to add reference to Article 102 TFEU therein, ensuring an express reference to the necessary burden with regards to all Article 102 TFEU defences, as well as potential wording to account for ‘ancillary restrictions’ given that these arguments could be key to digital markets cases and beyond (see A. Scordamaglia-Tousis supra).

Absent harmonisation, the Commission’s use of soft-law instruments through guidelines and notices have proven instructive. These instruments distil the Commission decisional practice, creating legitimate expectations for companies and thus boosting legal certainty. However, some contributors criticised the Commission for not utilising these tools even further. The possibility for the Commission to provide informal guidance per Recital 38 of Regulation 1/2003 and to adopt decisions declaring the inapplicability of competition law tools per Article 10 of that Regulation are two powers that remain in desuetude. In particular, Article 10 decisions have largely remained a “dead letter” (see G. Theodorakopoulou, EULL 2023, “Inapplicability Decisions under Regulation 1/2003: A ‘Dead Letter’ coming back to life?”), whereas they could be deployed more effectively, for instance, where the non-application of competition rules can give way to public interest objectives, such as sustainability goals (see N. Imgarten, EULL 2023, “Latitude for effective enforcement of Article 101(3) TFEU under the current regulations – a case for revising administrative practice instead of revising the law?”; see also G. Theodorakopoulou supra). Similarly, the Commission issued informal guidance relatively late on per Recital 38, providing some assistance to companies seeking legal certainty when taking action in response to the global Covid-19 pandemic. But these tools have not been used more

widely since. Proposals to encourage the Commission to provide such guidance include elevating Recital 38 to a more prominent place in the articles of the revised Regulation 1/2003 (see N. Imgarten supra).

Another avenue to overcome the lack of harmonisation is to improve coordination within and amongst the members of the European Competition Network (‘ECN’). Certain contributors argued that the ECN could be better operationalised to allow more systematic communication and feedback collection between the members of the ECN (see M. Mota Delgado, EULL 2023, “The Future Relationship Between EU Competition Law and National Laws”). Indeed, the ECN provides an ideal conduit through which NCAs may enhance their cooperation and learn from best practices (see C. Fernández and A. Scordamaglia-Tousis supra). Other potential areas for improvement could be stronger cooperation in sharing best practices, as well as the ‘coordinated and coherent adoption of behavioural or structural measures for companies or greater flexibility in the imposition of interim measures’, in order to deal with specific issues arising in markets such as tech (see C. Fernández supra; on developments for adapting to the digital world, see below). Moreover, the complexity of cross-border cases is made worse by procedural disparities such as in the rules pertaining to legal privilege – in this regard, review and EU-level harmonisation in this matter would be welcomed (see C. Fernández supra).

Decentralisation, however, does not only generate benefits, but also poses ‘structural’ challenges of constitutional nature. Notably, decentralisation leads to a vertical tension in the enforcement of competition rules between the EU and national competition authorities. Under classic EU law doctrine, a Member State is ‘pre-empted’ from acting where there is a conflict between national and EU rules, on account of the primacy of the latter. National rules hindering the substantive or procedural effectiveness of applying Articles 101 or 102 TFEU are thus disapplied, so that EU competition law is given full effect (see, e.g., INNO v ATAB, Case 13/77 and Manfredi, C-295/04). However, Article 3 of Regulation 1/2003 distinguishes three situations determining the scope of application of EU rules in national law: (i) in cases of alleged anticompetitive conduct, NCAs must apply EU rules in parallel with national rules (coordinated and unilateral conduct); (ii) in cases concerning unilateral conduct, NCAs may apply stricter rules; (iii) in cases where the first two situations are not relevant, that is because the national rules predominantly pursue different objectives to the EU competition law provisions, NCAs may apply their own rules. Therefore, while Article 3 of Regulation 1/2003 is designed to foster some ‘convergence’, it also allows ‘divergence’ between Member States, thus creating a risk of fragmentation, which should at least be better harnessed through enhanced ‘experimentalist governance’ (see M. Mota Delgado supra).

Lessons for Better Enforcement in the ‘Digital World’

Technology has made vast leaps since the Commission’s enforcement powers came into being. One of the main factors driving the evaluation of the antitrust procedural framework is the need to update the Commission’s toolkit to a faster and paperless ‘digital world’ (see M. Kadar and S. Stephanou supra).

The digital world poses new hurdles as we contemplate the best ways of processing and storing information. Accordingly, contributors proposed that the Commission should obtain the power to take statements and conduct inspections remotely, for instance, retrieving such information from the ‘cloud’(see M. Kadar and S. Stephanou supra). Sealing off premises and searching through files might look more like logging into a database to ‘plug and play’. Where Article 18 requests for information entail an administrative burden both for undertakings gathering and the Commission collecting such information, the possibility to ‘seal’ off premises to prevent undertakings under investigation from hiding of or tampering with information becomes all important (see M. Kadar and S. Stephanou supra). The time may also be right to rethink the process of access to file, where creating ‘confidentiality rings’ might be a new (and less time-consuming) solution to allow companies to exercise their rights of defence while protecting confidential data obtained by or provided to the Commission (see M. Kadar, S. Stephanou, G. Pitruzzella and J. Jourdan supra).

Lessons to Better Protect Procedural Rights

The Commission may also seize the opportunity to enhance the protection of the procedural rights of defendants during investigations.

Certain authors pointed out that the revised Regulation 1/2003 should foresee an obligation on the Commission to communicate to the undertakings under investigation a copy of the indicia justifying the raid, which should also take the form of a decision that could be challenged before the final infringement decision (see J. Jourdan supra). Similarly, to further improve transparency and accountability, other contributors argued that the Commission’s and NCAs’ (increasing) ‘uncontrolled discretion’ in setting enforcement priorities should be more closely examined and likely limited through some degree of harmonisation, while still not fully relinquishing the benefits of flexible priority-setting powers (see O. Brook and K. J. Cseres supra).

Also important, and possibly overlooked, are the rights of complainants themselves, who seek a level of legal certainty especially where there is risk of a claim being struck out (see M. Kozak and J. Mainardi, EULL 2023, “The Complaint Crusher: How the revision of Regulation 1/2003 can advance rights of complainants”). Both the lack of soft law guidance detailing grounds for rejecting complaints and the wide discretion the Commission has in changing grounds for rejection during case re-evaluation limit the predictability of enforcement, undermining the rights to good administration and effective legal protection of complainants per Articles 41 and 47 CFREU (see M. Kozak and J. Mainardi supra).

The Commission’s desire to act in an expedient fashion might also undermine procedural safeguards (see M. English supra). The 2022 General Court judgment in Qualcomm (T-235/18) serves as an important reminder that the Commission must conduct a thorough investigation, while taking adequate notes of meetings. In relation to the Commission’s power to hold interviews, as confirmed in Intel (C-413/14 P), the burden rests on the undertaking to demonstrate the procedural error of the Commission. It seems like a high hurdle to jump, to prove that had the Commission complied with these obligations, an exculpatory document might have been produced, though Qualcomm at least demonstrates that this is not impossible (see M. English supra). Qualcomm also exposed a gap in the law with regard to third-party informants, where the Commission had relied on third-party allegations to begin their investigation, yet had failed to produce a record of those meetings and the identity of the informants – not only does this re-emphasise the importance of taking notes, but it also highlights the lack of guidance establishing a framework to handle third-party complaints (see M. English supra).

The questions raised undoubtedly require answers, in order to bring clarity to enforcement and safeguard procedural rights. One proposal is to increase internal control within the Commission, whether it be an increased role for the Hearing Officer with regard to third-party informants (see M. English, above) or the creation of an independent officer for the monitoring of potential grounds for rejection (see M. Kozak and J. Mainardi supra). Increased use of guidance, whether it be for the purposes of determining the procedure regarding third-party informants or listing the grounds for rejection of complaints (perhaps in the implementing Regulation) may also be welcomed (see M. English, M. Kozak and J. Mainardi supra).

The Road Ahead

Stock-taking exercises like this one require careful reflection of all relevant factors and proposed solutions. This is especially so where the reform pertains to such a vital part of EU law enforcement, such as the antitrust procedural framework. By gathering the opinions of practitioners, academics, the judiciary and the enforcers, we have sought to complement the ongoing debate and contribute to the reform. We thank the contributors for their diligent work and also for their openness and patience during the discourse which led to the publication of their excellent contributions. While the Commission staff working document with the results of the evaluation due in 2024 is only around

the corner, if these discussions have shown anything it is that the pace of law and policy is tempered by societal change which can be intense even over short periods. This Symposium is therefore not designed to draw a line under, but rather to highlight, the current state of play. That way, the reform will hopefully be shaped and informed by the lessons which we have learned.

Looking Backward and Looking Forward: Another Evaluation of the Antitrust Procedural Regulations

Wouter Wils (1)

On 30 June 2022, the European Commission launched an  evaluation of  Regulation 1/2003 and  Regulation 773/2004 (the ‘antitrust procedural regulations’), which will be carried out under the Commission’s  Better Regulation Guidelines (see Commission press release).

What is the new evaluation about and why is it happening now?

According to these  Better Regulation Guidelines, ‘evaluations gather evidence to assess how a specific intervention [i.e., Regulations 1/2003 and 773/2004] has performed (or is working), taking account of earlier expectations […] ensuing from the adopted legislation and whether there were unintended or unexpected effects that were not anticipated and taken into account in […] the adopted act. They also draw conclusions as to whether the EU intervention: – remains fit for purpose; – should be adjusted for greater effectiveness, relevance and coherence, and/or to eliminate unnecessary burdens or inconsistencies; or – should simply be repealed.’

The new evaluation of the antitrust procedural regulations is not the first one. In fact, there have been several previous evaluations. Article 44 of Regulation 1/2003 instructed the Commission (i) to report, five years after the date of application of this Regulation, to the European Parliament and the Council on the functioning of the Regulation and (ii) to assess, on the basis of this report, whether it was appropriate to propose to the Council a revision of this Regulation. The Commission produced the first evaluation report in 2009. This report highlighted, in a limited number of areas, aspects that merited further evaluation, but left open the question of whether any amendment to the existing rules or practice was required.

In 2014, the Commission published a  second evaluation report, ‘Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives’. This report concluded that it was necessary, in particular, to guarantee further the independence, resources and powers of national competition authorities (NCAs), and to ensure that well-designed leniency programmes are in place in all Member States. The second evaluation report ultimately led to the ECN + Directive 2019/1.

Between 2014 and 2016, the Commission also conducted, with the help of an external contractor, an  ex-post evaluation of two key procedural aspects of Regulation 1/2003:  access to the file and  complaints. The external contractor’s  final report concluded that ‘there is room for improving the cost-efficiency of the EU access to file system’ and ‘scope for improving the complaints system at EU level’.

As to the scope and particular focus of the new evaluation, the Commission’s press release states that it addresses ‘topics of particular importance […], such as the Commission’s investigative powers, the procedural rights of parties to investigations and third parties, the Commission’s enforcement powers and the cooperation of the Commission with national competition authorities (NCAs) and courts’. The evaluation thus covers the whole of Regulations 1/2003 and 773/2004.

1. Wouter Wils is a Legal Advisor in the European Commission Legal Service, a Visiting Professor at King’s College London, and a former Hearing Officer for competition proceedings at the European Commission. All views expressed in this Op-Ed are strictly personal and should not be construed as reflecting the views of the European Commission.

As to the  need for the new evaluation, the Commission’s press release states, again rather generally, that ‘it has been almost 20 years since the adoption of the procedural framework. While the Commission’s enforcement action has adapted to evolving markets, new technologies and changing ways of doing business, the procedural framework has remained largely the same’.

It is true that Regulation 1/2003 has escaped formal amendment in the past twenty years, except for the broadening of its scope of application in the transport sector. As already mentioned, the separate instrument of the  ECN+ Directive 2019/1 did however introduce very substantial additions to the rules concerning the NCAs and the cooperation between the Commission and the NCAs in the  European Competition Network (ECN), as created by Regulation 1/2003.

Regulation 773/2004 has been subject to several formal amendments, in particular by  Regulation 622/2008 for the introduction of the Commission’s settlement procedure in cartel cases, and by  Regulation 2015/1348 on the conduct of proceedings under Articles 101-102 TFEU, in connection with the Damages Directive 2014/104. This Directive also introduced very substantial additions to the rules concerning the enforcement of the EU antitrust rules through actions for damages in the national courts and the cooperation between the competition authorities (Commission and NCAs) and the national courts.

Concerning the procedural rights of parties to investigations and third parties in the Commission’s own proceedings, significant changes to the applicable rules and practice were introduced in 2011 through Decision 2011/695 on the function and terms of reference of the  Hearing Officer and through the Commission’s  Best Practices on the conduct of proceedings under Articles 101-102 TFEU.

Finally,  Regulation 2022/1925 (Digital Markets Act) has created a new (substantive and) procedural framework, allowing the Commission to deal differently with certain issues in digital markets for which the application of the competition rules under Regulation 1/2003 was considered to be insufficiently effective.

As to the expected outcome of the new evaluation, and whether or not it may lead to any legislative proposals, the Commission’s press release merely states that the Commission ‘will summarise the results of the evaluation exercise in a Staff Working Document that is planned to be published in the second quarter of 2024’. Again, everything remains open.

What were the expectations at the time of the preparation of Regulation 1/2003?

As already mentioned above, according to the Better Regulation Guidelines, in assessing how Regulations 1/2003 and 773/2004 have been working, account should be taken of the earlier expectations, at the time of the preparation and adoption of those regulations.

It is thus worthwhile to look back at what expectations were expressed in the White Paper on Modernisation, which set out the ideas for the replacement of the original Regulation 17 by Regulation 1/2003, in the explanatory memorandum of the Commission’s legislative proposal, and in (the recitals of) Regulation 1/2003 itself.

I have done so in detail in a recent paper,  ‘Regulation 1/2003: An Assessment After Twenty years’, only some elements of which can be summarised here.

Regulation 1/2003 brought about a radical change in the way in which the EU antitrust prohibitions contained in Articles 101 and 102 TFEU are enforced (see this detailed analysis). The previous enforcement regime, under Regulation 17, which dated from 1962, was characterised by a centralised notification and authorisation system for Article 101(3) TFEU. Regulation 1/2003 abolished this system and replaced it by a system of decentralised  ex post  enforcement, in which the European Commission and the NCAs, forming together the European Competition Network, pursue infringements of Articles 101 and 102 TFEU.

The White Paper on Modernisation, the explanatory memorandum of the Commission’s legislative proposal, and the recitals of Regulation 1/2003 highlighted two objectives: (i) intensified enforcement by the European Commission, and (ii) decentralisation of enforcement to national authorities and national courts, while maintaining EU-wide consistency in the interpretation of Articles 101 and 102 TFEU.

1. Intensified enforcement

The first objective was to allow the European Commission to become more active and concentrate efforts in the pursuit of serious infringements of Articles 101 and 102 TFEU.

At the time of the White Paper on Modernisation, the European Commission dealt every year with 150 to 200 notification cases through comfort letters. It thus spent substantial resources on cases of little or no value for the effective enforcement of Articles 101 and 102 TFEU. The abolition of the notification system would allow the Commission to redirect these resources to curbing the more serious infringements of Articles 101 and 102 TFEU. The White Paper on Modernisation predicted that thus ‘the number of individual prohibition decisions can be expected to increase substantially’.

This intensified enforcement by the European Commission was further helped by strengthening the Commission’s powers of investigation, and by encouraging the victims of antitrust infringement to approach the Commission as complainants, in particular by introducing a time limit of four months by the end of which the Commission would inform the complainant of the action it proposed to take on the complaint.

2. Decentralisation of enforcement

The second objective was to decentralise the application of Articles 101 and 102 TFEU more to the Member States’ competition authorities and to the national courts, making both the national competition authorities and the national courts play an enhanced role in the application of the EU antitrust rules.

To this effect, Regulation 1/2003 not only abolished the European Commission’s monopoly for applying Article 101(3) TFEU. It also obliged all Member States to designate national competition authorities empowered to apply Articles 101 and 102 TFEU, and obliged both national competition authorities and national courts to apply also Articles 101 and 102 TFEU whenever they apply national competition law to agreements or practices within the scope of Articles 101 and 102 TFEU.

At the same time, this decentralisation was not to lead to inconsistent application of EU antitrust law. To this effect, the European Commission was to continue adopting block exemptions, and draw up more notices and guidelines to provide guidance on the application of Articles 101 and 102 TFEU. The  European Competition Network was created, bringing together the European Commission and the national competition authorities to make them apply Articles 101 and 102 TFEU in close cooperation. Arrangements were also established for cooperation between the national courts and the European Commission.

Has Regulation 1/2003 met the expectations?

Twenty years after the adoption of Regulation 1/2003, there can be no doubt that, as far as the national competition authorities and the functioning of the European Competition Network are concerned, the new enforcement system has been a major success, beyond expectations.

According the ECN statistics, from the start of the application of Regulation 1/2003 on 1 May 2004 until 31 December 2021, the national competition authorities have informed the European Commission and their fellow national competition authorities of 2515 investigations under Articles 101 and 102 TFEU, and of envisaged final decisions ordering termination of infringements, imposing fines or accepting commitments in 1336 cases.  During the same period, the European Commission informed the Network of 429 investigations of its own, and 137 draft final decisions.

The national competition authorities have thus in quantitative terms become the primary public enforcers of Articles 101 and 102 TFEU, adopting 90% of all decisions. Given that, under Regulation 17, the number of cases in which the national competition authorities applied Articles 101 and 102 TFEU was negligible, this means that the overall number of decisions ordering termination of infringements of Articles 101 or 102 TFEU, imposing fines or accepting commitments has increased very substantially.

The functioning of the  European Competition Network has also been a clear success. Work sharing between the different competition authorities has generally been unproblematic, and the cooperation and coordination mechanisms provided for in Regulation 1/2003 have generally worked well. As already mentioned, the ECN + Directive 2019/1 further strengthened the NCAs and the ECN.

The impact of Regulation 1/2003 on the activity of the European Commission has in many respects been as expected. The European Commission has in particular made good use of the increased investigatory and sanctioning powers which it obtained through Regulation 1/2003, such as the increased possibility to ask oral questions during inspections, the possibility to put seals, the possibility to inspect private homes, the increased penalties for obstruction of investigations, and the higher level of periodic penalty payments for non-compliance with decisions.

As to the number of decisions adopted by the European Commission, the prediction in the White Paper on Modernisation that, following the abolition of the notification system, “the number of individual prohibition decisions can be expected to increase substantially”, has however turned out to be too optimistic.

In fact, the detailed analysis of the figures in my paper ‘Regulation 1/2003: An Assessment After Twenty years’ (comparing the first full 17 years of application of Regulation 1/2003 with the last full 17 years of application of Regulation 17, as well as the recent five-year period 2017-2021 with the five-year period 1997-2001 twenty years earlier) shows that, instead of a substantial increase, there has been a slight decrease in prohibition decisions.

The resources saved through the abolition of the notification system, as well as through the generalisation of  leniency in cartel cases and the introduction of the cartel settlement procedure, have thus not allowed the Commission to increase its output in numerical terms.

I do not have the answer to this puzzle, which undoubtedly merits further research. In my paper  ‘Regulation 1/2003: An Assessment After Twenty years’, I have provided some initial, in part speculative, thoughts about possible explanations, including the impact of the  so-called ‘more economic approach’, an  intensification of judicial review by the EU Courts, and loss of expertise due to increased staff turnover.

It is to be hoped that the new evaluation will shed more light on the reasons why the expectation of increased output by the Commission has not been met, and what can be done about it.

Some Reflections on the Review of Regulation 1/2003

Giovanni Pitruzzella (1)

Regulation 1/2003 brought about landmark changes in the EU antitrust enforcement landscape and provided a great contribution to the effectiveness of the enforcement of EU competition law. The decentralisation of the application of EU antitrust law by National Competition Authorities (“NCAs”) and national courts, the replacement of the old “notification system” with a system based on self-assessment and the reinforcement of the Commission’s investigative and decision powers all represented revolutionary changes in the enforcement of EU competition law. It is common ground that Regulation 1/2003 has been highly successful and has worked remarkably well in practice.

However, in the 20 years since its adoption the world has changed dramatically. Our society and economies have been rapidly undergoing the “Digital Transformation”. These changes had (and are having) a radical impact on markets and business models. New markets, new ways of doing business and new ways of communication have been continuously emerging. This digital revolution has a substantial impact on the enforcement of EU competition law bringing new challenges for enforcers. Cases in the digital economy are different: markets move fast, new technologies develop constantly, data is the new key input, files are by now mainly electronic, and competitive parameters have changed. As the Commission itself has pointed out, while its enforcement action has necessarily adapted to this new landscape, the procedural framework has remained the same. In this context, the compelling need to adapt EU antitrust enforcement to this new reality raises the question of the suitability of the EU antitrust procedural framework.

Against this background, the initiative on the part of the Commission to launch an evaluation of the EU antitrust enforcement framework with a view to revising Regulation 1/2003, and its implementing act, Regulation 773/2004, is surely to be welcomed.

Broadly speaking, the new economic reality arising from the digital revolution has brought two set of challenges relating to competition enforcement. First, in a fast-moving global economic environment, the speed of the enforcement has become paramount. In digital markets, the competition enforcer is required to act faster, in order to avoid worthless intervention if the market context has already considerably changed, or if the competitive dynamics have already been compromised and irreparable harm to competition has already been caused. Second, investigations have become even more complex and challenging given the increased quantity of documents and evidence that, following the digitalisation of the economy, competition enforcers are required to analyse.

The present contribution aims at highlighting a few ideas – without any claim to completeness – regarding possible issues that may be the object of discussion in the debate started by the Commission for the evaluation and revision of Regulation 1/2003.

Precautionary tools, alongside repressive tools

The conceptual idea that underpins Regulation 1/2003 is that antitrust enforcement is aimed at sanctioning, ex post, anticompetitive behaviours. The EU legislator has therefore conceived Regulation 1/2003 essentially as a repressive

1. Giovanni Pitruzzella is an Advocate General at the Court of Justice of the European Union. The views and opinion expressed in this article are only those personal of the author and do not represent in any way the views or opinions of the Court of justice of the European Union.

tool. This approach is in line with the recognition that antitrust law falls within the criminal sphere  (ECtHR, Menarini Diagnostics S.r.L. v Italy, application no. 43509/08 and Court of Justice, Schindler Holding, C-501/11 P, para 33). While repression of anticompetitive behaviour certainly remains necessary and crucial for a proper enforcement of EU antitrust, the new economic reality arising from the Digital Transformation raises the question as to whether new complementary tools of non-repressive nature aimed at the precautionary management of risks in uncertain situations should be added to the Commission’s arsenal. Such precautionary instruments would not aim at sanctioning undertakings for past anticompetitive behaviours. They would rather enable the Commission to carry out more detailed risk assessment analyses before extensive deployment of newly developed business practices. In this respect, some interesting discussions as well as pilot projects have been developed regarding risk management tools. As an example, one can mention the regulatory ‘sandbox’ tool which, if applied to competition law, could allow to discuss and test ex ante new practices or business models in order to avoid ex post enforcement or competitive harm that may not be subsequently remedied. The rise of new more flexible and programmatic legal tools could potentially allow the Commission to play a more proactive role in risk management than its traditional reactive approach in competition law enforcement based on the repressive concept. The amendment of Regulation 1/2003 in order to introduce such precautionary mechanisms raises undoubtedly serious policy as well as legal questions for which it will be necessary to find an answer. One of these questions concerns the issue whether such changes can be introduced through a modification of secondary legislation. In this respect, Article 103 TFEU seems, however, to constitute a broad and flexible legal basis that may allow, to a certain extent, adjustments to the current rules in order to address the new developments in the markets arising from the Digital Transformation.

The Commissions’ investigative powers in the new digital environment

In the new digital environment, speed of the investigation is essential. However, in order to guarantee fast antitrust enforcement, it is necessary that the enforcer has effective investigative tools that can have an impact. Accordingly, competition enforcers, including the Commission, have already started extensively using and applying digital solutions and methodologies to investigate undertakings operating both in digital markets and in other markets. Applying Article 20(2) of Regulation 1/2003, the Commission regularly uses forensic IT tools that allow it to copy, search and recover data whilst respecting the integrity of the undertakings’ systems and data’. In this context, two new factors have emerged that are disrupting traditional investigation methodologies. First, the volume of electronically stored information produced or collected by undertakings is growing exponentially. Second, business data is frequently no longer stored at companies’ premises, as it used to be in the past. Such data is increasingly stored in the cloud or on servers that may be located outside Europe. Furthermore, cloud computing has evolved from simply providing storage capability to offering a comprehensive set of additional cloud services and functionalities, such as servers solution, software and analytics. The revision of Regulation 1/2003 will need to take account of this new reality, that could not be envisaged when this legal instrument was conceived 20 years ago, as well as of its impact on the investigations of infringements carried out by the Commission. In this respect, the practice has already highlighted certain gaps that should be addressed. Thus, for instance, there is no specific legal basis in Regulation 1/2003 that allows the Commission to conduct inspections remotely from the beginning. Also, under Regulation 1/2003, the Commission lacks the power to impose so called “freezing orders” on undertakings, outside the scope of a formal inspection. Thus, the fundamental importance of electronic evidence in today’s antitrust enforcement may justify the introduction – mirroring the provision of Article 26(1) of the Digital Markets Act – of the power upon the Commission to impose on undertakings, an obligation to retain all documents deemed to be related to the subject matter of an investigation.

Power to take statements

Some issues, not necessarily related to the new digital reality, which should be addressed in the revision of Regulation 1/2003 concern the Commission’s power to take statements under Article 19 of this regulation. Under the current provision, submitting to an interview is merely voluntary. This provision should, however, be brought in line with the powers attributed, under Article 9 of the ECN+ Directive, to NCAs who can now compel natural or legal persons to appear for an interview. In fact, the same rationale that underpins this power attributed to NCAs equally applies to the Commission. Furthermore, the absence of sanctions and penalties for providing false or misleading information should also be addressed in order to increase the incentive to provide correct and complete statements. As regards the Commission’s power to take statements, it may also be advisable to explicitly codify the case law of the Court of Justice. In particular, in Intel (C-413/14 P, para 91), the Court expressed the principle according to which the Commission is required to record, in a form of its choosing, any interview which it conducts, under Article 19 of Regulation 1/2003, for the purpose of collecting information relating to the subject matter of an investigation.

Procedural rights and guarantees of the different actors involved in an antitrust investigation

Several provisions of Regulation 1/2003 deal with procedural rights of the parties to the investigation and of third parties in antitrust proceedings before the Commission. 20 years of antitrust enforcement and of case law of EU Courts have highlighted certain issues that the revision of Regulation 1/2003 may need to address. For example, the Commission could be explicitly empowered to allow for document disclosure under “confidentiality rings” beyond the simple current possibility to use this mechanism on a voluntary basis. Furthermore, Regulation 1/2003 does not contain any provision dealing with legal professional privilege. A revision of Regulation 1/2003 could be the occasion to codify the principles expressed in the case law of the Court of Justice in this regard (see Akzo Nobel, C-550/07 and AM&S, 155/79).

Food for Thought for a Revised Regulation 1/2003

Jérémie Jourdan (1)

Regulation 1/2003 turned 20 years old last December. By many standards, it has delivered on its promise to revolutionise the enforcement of EU competition law.

It brought to an end an antiquated notification system, which had lost its  raison d’être by virtue of decades of administrative enforcement by the EU Commission and case law of the EU Courts in Luxembourg, which made it possible for companies to self-assess the legality of their own conduct, and for the Commission to focus its own resources on more egregious practices. The past two decades have seen the Commission investigate and punish dozens of cartels with fines totaling a jaw-dropping 28 billion euros (2) in great part thanks to its revamping of the leniency notice and fining guidelines in 2006. Enforcement of Article 102 TFEU has been more modest (quantitatively), but the Commission emerged as the leading enforcer amongst its peers regarding unilateral conduct cases. It also displayed an immaculate record of victories in courts until the  Servier case in 2018 (T-691/14) (and a few other defeats since then, full or partial, in Intel (T-286/09 RENV), Google Android (T-604/18) and Qualcomm (T235/18); a sign of the vigour of judicial review).

Regulation 1/2003 also empowered national competition authorities, who in turn acquired the competence to apply Articles 101 and 102 TFEU, and made good use of it. As recently noted by Wouter Wils in a talk with Benoit Cœuré, President of the French Competition Authority, decisions applying Articles 101 and 102 TFEU have multiplied by 10 since 2004 (see “@Echelle avec Wouter Wils”, 13 February 2023;  see also W. Wils, EULL 2023, “Looking Backward and Looking Forward: Another Evaluation of the Antitrust Procedural Regulations“). Much of today’s enforcement of EU rules comes from national competition authorities and national courts.

The basic architecture of Regulation 1/2003 has been a success, and need not be altered: no one wants notifications back, and it is hard to dispute that decentralised enforcement is superior to a Brussels monopoly.

The officials working on the review of Regulation 1/2003 will sleep better knowing that no one is expecting a revolution. However, they do have the challenge of marking an occasion that only comes along once every 20 years. What they will come up with should withstand the experience of time, and equip the EU with a system that should last for another 20 years. Below are a few ideas on targeted issues (a comprehensive review would not fit in the format of this publication).

Digital Powers

As noted by Commissioner Vestager when she announced the potential reform, ‘in light of the challenges brought about by the digitization of our economy, there may well be certain areas where improvements are possible or needed’. Remember that the enforcement toolbox introduced by Regulation 1/2003 and Regulation  773/2004 predates the launch of the first iPhone by 3 years. Consider what has changed since then in business practices, not least because of the time accelerator of the COVID-19 pandemic, which caused a boom in remote working and digitisation. Some of the Commission’s tools are, at the very least, dusty, if not obsolete.

1. Jérémie Jourdan is a partner at an international law firm in Brussels, where he focuses on antitrust litigation and merger control. He regularly publishes on competition issues (see here), incl. a contribution in the recent Regulation 1/2003 and EU Antitrust Enforcement, a systematised article-by-article expert commentary on Regulation 1/2003

2. European Commission, Cartels cases, available here and Statistics on Cartel cases, available here.

Think of requests for information. In their most recent – and intrusive – form, they come as a list of keywords and custodians, and lead to the delivery of hundreds of thousands, sometimes millions, of documents. They challenge, at its core, the case law of the Court that only documents potentially relevant for proving the infringement can be requested, and pose insoluble problems of privacy and proportionality, as shown by the on-going  Facebook  (T451/20 and  T-452/20) cases before the General Court. As a bare minimum, the revised Regulation 1/2003 and its implementing regulation, must regulate the use of this nuclear weapon by the Commission, finding the right balance between enforcement efficiency and fundamental rights.

What about dawn raids? In the past, the Commission would turn up on a Tuesday morning and spend a few days at the company’s premises, going through cupboards and sealing offices to review and copy documents, as well as interviewing employees. These days, it is more like plug and play. Inspectors hook up their laptops to the servers and search for documents using keywords. It is obvious that this could all be done remotely from Tour Madou, so one might wonder why the Commission should keep on invading company premises and disrupting business for days (other than for the charms of a case team field trip). There remains, of course, the need to ask for explanations to employees on-site, but with remote working becoming more prevalent, it is less likely that the inspectors will actually find present those who need to be interviewed, unless the Commission could indeed request their presence on a given day.  There is, also, the need to surprise companies to collect documents before they can be destroyed.  But, even there, we see new instruments popping up in other contexts, such as the Digital Services Act (Regulation 2022/2065, ‘DSA’), which empowers the Commission to order companies to retain documents (Article 72 DSA). No doubt something the officials reviewing Regulation 1/2003 are dreaming of at night.

A word on the power to take statements (albeit unrelated to digital). That dusty, almost unused, provision of Regulation 1/2003 (Article 19) was reborn when the CJEU decided (in  Intel) that virtually any conversation with the Commission was “an interview”. Obliged to fix decades of the – let’s be frank here – bad administrative practice of not taking good minutes, the EC case teams are now diligently scripting every (even benign) conversation. The recent CJEU judgment in Intermarché Casino Achats C-693/20 P confirms that this obligation applies also before the formal opening of proceedings if the interview purports to gather information for an investigation. Perhaps the revised Regulation 1/2003 should enshrine these principles in the law to avoid any future debate (see also G. Pitruzzella, EULL 2023, “Some Reflections on the Review of Regulation 1/2003”). Since the adoption of the ECN+ Directive, whether or not the Commission should have the power of summoning company representatives for an interview (which the ECN+ Directive provides for) is also in the air.

Procedural Rights 2.0

The review of Regulation 1/2003 should not just be about fixing the Commission’s powers for the digital age. It should also be about the procedural rights of companies under investigation. Looking back over the past 20 years, one can discern reasons for the status quo but also for the room for improvement.

Companies have generally been able to exercise their right to be heard in a satisfactory manner, if one sets aside the insoluble question of implied bias, linked to the fact that the EC combines functions of prosecutor and judge (I have given up on seeing this resolved in my lifetime). The sequence: statement of objections – response to the SO – oral hearing – decision, has generally worked well. Annulments of decisions for breaches of the right to be heard in Luxembourg are rare (NKT C-607/18 P, Sony C-697/19 P, Qualcomm and Google Android remain exceptions).

Looking at recent developments in other areas, namely the Digital Markets Act (Regulation  2022/1925, “DMA”), DSA and Foreign Subsidies Regulation (Regulation 2022/2560, “FSR”), one may feel a certain nervousness: in relation to all three new tools, the Commission nixed the oral hearing; the DSA and DMA draft implementing regulations (“IRs”) prescribe a page limit of 50 pages for written observations (but none for the Commission’s preliminary findings…). These are not great ideas, and hopefully ones that the Commission is not considering for the revised

Regulation 1/2003. Remember that the Servier/Perindopril decision was almost a thousand pages. As to oral hearings, in  Google Android the General Court just reaffirmed their importance. The Commission should resist the temptation to trim down these rights (or seriously consider lowering the level of fines to that of parking tickets). The status quo is the best option here.

What about access to file? In the recent DMA draft IR, the Commission proposed that only incriminating documents be accessible, together with a list of other documents in the file that could then be accessed upon a reasoned request to the Commission. In the FSR and DSA draft IRs, the Commission has proposed a different format: access to incriminating documents for the company under investigation and access to the full file for the companies’ advisers under a confidentiality ring (with big fines in case of breach…).

It is unclear whether the Commission will contemplate these “innovations” on access to file for the revised Regulation 1/2003, but this definitely appears to be the direction of travel. There are a number of advantages to this solution, which should help eliminate unnecessary disputes between the company investigated and the Commission on redactions in third party documents. It will also lower the administrative burden on the Commission. However, there is clear drawback: companies get access to less information. This new regime could also create new disputes when advisers want to share documents accessible in the confidentiality ring with their client. The Commission may wish to consider enlarging confidentiality rings to include specific company representatives, such as the legal department or certain technical experts (upon request).

Last but not least, inspections. There are a few areas of possible improvement here in respect of companies’ rights. First, the revised Regulation 1/2003 should provide that the Commission communicates to the undertakings targeted a copy of the indicia justifying the Commission’s raid, together with the notification of the Commission’s decision. This would avoid challenges merely aimed at discovering what the Commission has in its file (in case the raid looks like a fishing expedition). It would also force the EC to make sure it has compelling indicia to justify the raid, thereby avoiding legal defeats such as in  Nexans  (T-135/09),  Prysmian  (T-140/09) and  Intermarché Casino Achats.

Second, as regards remedies, the revised Regulation 1/2003 could facilitate the exercise of the right to appeal the conduct of the Commission during the raid, recently recognised by the Court in  Intermarché Casino Achats. Until now, apart from the LPP Akzo exception, the conduct of the Commission during the inspection was only reviewable when challenging the final infringement decision (Nexans, para. 129). This lack of an immediate remedy created an obvious tension with the European Court of Human Rights (“ECtHR”) case law in Canal Plus (29408/08), Primagaz (29613/08) and Delta Perkarny (97/11) (which led several Member States to amend their national laws and introduce immediate rights of appeal). In Intermarché Casino Achats, the Court seemingly resolved that tension by expanding the LPP Akzo remedy to any act affecting the interest of the company involved (paras. 52 and 55). The exercise of this new right could, however, be really messy in practice, as companies may need to file multiple appeals for different actions of the Commission in the same inspection (not to mention appealing against implicit refusals of the Commission to give back documents). A better solution could lie with a simple amendment to Regulation 1/2003, providing that the Commission adopts a decision formally  closing the inspection. That decision would list the actions taken by the Commission, catalogue the documents copied by the Commission, include the transcripts of any interview, report any LPP issues etc., and could be appealed before the General Court. This would provide a much clearer framework for the Commission and the companies involved.

(1)

1. Priority setting: the wild-west of EU competition law procedure

Setting enforcement priorities by the European Commission and national competition authorities (‘NCAs’) is a crucial component of effective and independent enforcement. As competition authorities are constrained by scarce financial and human resources, it is neither possible, nor desirable, that they enforce every conceivable infringement. The power to choose which cases to pursue and which to disregard frees up resources and affords competition authorities the autonomy and capacity to effectively focus on matters of genuine economic and doctrinal importance.

Priority setting provides an illuminating example of how procedural choices inform substance. This process involves setting substantive criteria of what is and what is not a priority. The open-ended wording of Articles 101 and 102 TFEU entails that competition authorities must undertake technical assessment and policy choices. Hence, priority setting plays an important role in norm concretisation.

Alongside the power to set priorities, however, lies the power to discriminate. The choice not to enforce a competition law infringement can easily lead to arbitrariness, inconsistency, unpredictability and even to the promotion of private interests. This is especially the case with independent regulatory authorities, like competition authorities, who are independent non-majoritarian institutions whose operation is not always fully accountable and transparent. Legal and non-legal controls often remain limited, for example, concerning case selection that is informed by a desire to increase the reputation of the authorities’ heads, supporting the values of the officials, cherry-picking, regulatory capture, revolving doors, under-enforcement, and populist initiatives. Setting enforcement priorities can, therefore, be problematic from the perspective of the rule of law. Situated at the centre of tensions between legal norms and administrative discretion, prioritisation is like a “hole in a doughnut” as famously conceptualised by R. Dworkin and raises numerous questions on how law can delineate, structure, and control the exercise of discretionary powers.

These challenges are certainly not unique for EU competition law enforcement, but are present with regard to competition authorities worldwide, as well as independent regulators. Yet, EU competition law enforcement is somewhat exceptional given its decentralised nature coupled with the principle of procedural autonomy, which imposes only few EU-wide constraints on the exercise of prioritisation discretion of national competition authorities. Unlike the American antitrust system, the selection of cases for (public) enforcement, is not supplemented with effective standalone private damages claims. While firms and individuals gradually bring actions for damages in front of national courts, approximately 98% of private action are follow-on actions based on a prior decision of the Commission or an NCA

The modernisation of EU competition law in 2004, has brought to the forefront the challenges of priority setting. Under the old enforcement regime of Regulation 17/62, setting enforcement priorities had limited relevance because all potentially anti-competitive agreements had to be notified to the Commission prior to their implementation. The Commission had to address all notified agreements, either by issuing a formal decision or by means of comfort letters.

The “hole” in the (antitrust) “doughnut”: governing the Commission’s administrative discretion in antitrust procedures

Or Brook

and Katalin J. Cseres (2)

1. Or Brook is an Associate Professor of Competition Law and Policy, Centre for Business Law and Practice (CBLP), University of Leeds, o.brook@leeds.ac.uk.

2. Katalin J. Cseres is an Associate Professor of Law, Amsterdam Centre for European Law & Governance (ACELG), University of Amsterdam, k.j.cseres@uva.nl.

While it enjoyed discretion to choose between those two legal instruments and could reject complaints, the burden of responding to all notifications had consumed much of the Commission’s resources, leaving only limited room for a proactive enforcement strategy.

Regulation 1/2003 enabled the Commission and NCAs to set enforcement priorities. Freeing the Commission from the burden of notification and decentralising the enforcement sought, according to the Modernisation White Paper (para 13) to enable the Commission to ‘refocus its activities on the most serious infringements of Community law in cases with a Community interest’, and reduce the number of complaints addressed to the Commission in cases where NCAs could effectively deal with them. Sharing the enforcement with national enforcers was, moreover, envisioned to tackle the slow progress of decentralised enforcement by NCAs as well as complainants’ reluctance to resort to national courts.

While Regulation 1/2003 regulated many aspects of the enforcement procedure, it provided little guidance on the exercise of priority setting by the Commission and no guidance for NCAs. The scope, substance, and procedure for setting enforcement priorities have not been harmonised by the EU legislator. At the EU level, the Commission generally has the discretion to devise its own priority setting rules and practices, while the EU Courts have, so far, only addressed questions relating to its discretion when rejecting complaints (most recently and with implications for the rule of law in Sped Pro). At the national level, pursuant to the principle of procedural autonomy, the enforcement of EU competition rules by NCAs – including the rules and practices governing enforcement priorities – are governed by their national laws. Not all of them have full powers to set priorities. In 2017, stakeholders, including businesses warned that the lack of prioritisation powers prevented NCAs from focusing their efforts on infringements causing the most harm to competition.

This legislative gap was only partially addressed by the adoption of the ECN+ Directive in 2019. Admittedly, the Directive requires the Member States to empower their respective competition authorities to set enforcement priorities for carrying out the tasks for the application of Articles 101 and 102 TFEU. It also authorises NCAs to reject (formal) complaints that they would otherwise be obliged to consider under national law but do not consider to be an enforcement priority. Yet, these obligations are drafted in a general manner and do not impose clear requirements on the Member States with respect to their NCAs’ prioritisation policies and practices. In practice, they may prove to have only limited effect on national procedures.

2. A new typology of priority setting

Our study, Policy Report: Priority setting in EU and national competition law enforcement (the ‘Study’), explores how the Commission, Member States, and NCAs have filled this legislative gap. Based on a systematic and comprehensive mapping of the procedural and substantive rules and practices that define the way competition authorities of 27 EU Member States, the United Kingdom, and the EU Commission set their priorities, it points to the considerable divergence of priority setting rules and practices. We collected the data by combining desk research of the publicly available legislation and policy documents in each jurisdiction with written questionnaires and interviews with officials of the competition authorities. This allowed us to investigate not only the black-letter rules, but also their application in practice.

On this basis, our study offers a novel typology to structure the discussion of priority setting. It identifies seven aspects of priority setting, pointing to the verity of rules under each aspect and their effects on compliance with good governance principles of effectiveness, efficiency, independence, transparency, and accountability. Those aspects include: (i) setting an enforcement agenda; (ii) legal (de jure) competence to prioritise; (iii) (de facto) ability to prioritise; (iv) procedural rules framing the prioritisation decisions; (v) substantive criteria that determine which cases are a priority and which are not; (vi) alternative enforcement mechanisms: instrument and outcome discretion; and (vii) impact assessment to evaluate the effects of the priorities chosen.

Based on this typology and the empirical mapping of the seven aspects of priority setting, we identified four representative models that describe the characteristics of priority setting rules and practices by the competition authorities in the EU: (i) competition authorities having a wide margin of discretion to set priorities, but such discretion is structured, limited, and controlled; (ii) competition authorities having a wide margin of discretion to set priorities, which is left uncontrolled; (iii) competition authorities having a medium degree of discretion to set priorities; and (iv) competition authorities having a limited margin of discretion to set priorities. This exercise demonstrates how the institutional and procedural choices governing setting of the priorities affect the operation of the authority. While there is no single, “best” model, we show that each of the models entails a different trade-off between effectiveness, efficiency, independence, transparency, and accountability.

3. Convergence towards the Commission’s model of wide, uncontrolled discretion

The Commission is an example of an authority falling within the second model. Namely, the rules and practices governing the setting of the enforcement priorities by the Commission result in a system by which the Commission enjoys a high degree of enforcement discretion that is subject to few constraints. This model has some clear strengths: high priority setting powers have the potential of increasing the efficiency in handling low-priority cases, thereby allowing the Commission to focus its efforts on matters of legal or doctrinal importance. This model may also increase the effectiveness of the authority by reducing the influence of political and market actors in determining matters of priority setting. This model, however, carries some weaknesses: the lack of controls imposed on priority setting decreases the transparency of the prioritisation decisions and the Commission’s accountability towards political and market actors and society at large. Moreover, there is a risk that prioritisation choices may be taken in a sub-optimal or discriminatory manner without being exposed to external pressures of legitimisation, review, and reform.

While an explicit discussion about the preferred model for priority setting is missing from the EU legislative debate (at least, the publicly available debate), the Commission appears to be pushing towards ‘Europeanisation’ of priority setting rules, converging around its own model. The Commission’s policy papers, ECN initiatives, and the provisions of the ECN+ Directive emphasise the benefits of granting wide priority setting powers to NCAs, especially in terms of increased effectiveness and efficiency.

The Commission declared, for example, in the preparatory impact assessment for the ECN+ Directive that NCAs should have “the power to set their priorities in full” (emphasis added). Such initiatives do not discuss the benefits of structuring and controlling such discretion as manifested in the three other models, the risks associated with wide uncontrolled discretion, and how the Commission’s preferred model could operate within the wider constitutional and administrative law setting of the Member States.

The evolution of Regulation 1/2003 is, in our opinion, a valuable opportunity to spark a discussion about priority setting. We call for placing greater attention on the impact of the four models of priority setting rules and practices on the effectiveness of EU competition law enforcement. Such a debate should take into account of good governance principles when considering the adoption of EU-wide guidance to structure, control, and limit the exercise of the competition authorities’ priority setting powers. In many cases, more transparency and accountability in the setting of enforcement priorities are likely to result in more effective rules. Our study offers a theory and practice based ‘checklist’ by which each authority can increase its compliance with the good governance principles while staying within the boundaries of its legal mandate.

for effective enforcement

Introduction

The evaluation process of Regulations 1/2003 and 773/2004 has focused on effectiveness of enforcement of competition laws under the current regime. A focus in that discussion is usually put on the effectiveness of enforcement against anticompetitive practices under Articles 101(1) and 102 TFEU. This article aims at complementing that discussion with a critical view on the effective application of Article 101(3) TFEU,  i.e., the exemption of certain practices from EU competition law. It is argued that already under the current antitrust procedural framework, there exists unused potential to foster legal certainty and predictability for undertakings. Wider use of existing procedural tools of formal declarations of inapplicability (Article 10 of Regulation 1/2003) as well as informal guidance (recital 38 to Regulation 1/2003) would be possible and beneficial.

Underenforcement of Article 101(3) TFEU

The main objective and driving force of change from Regulation 17/62 towards Regulation 1/2003 was probably the shift from prior authorisation to self-assessment of potentially anti-competitive practices. Consequently, the Commission went from a precautionary practice of  ex-ante authorisation to  ex-post enforcement of Article 101 TFEU. With the ensuing decline in decisional practice, risks of illegality and prosecution regarding certain agreements that were neither clearly compatible nor clearly incompatible with competition law became much more difficult to measure and to evaluate for undertakings.

These risks were balanced by several parallel developments and mitigating factors, including block exemption regulations, detailed Commission guidelines, and more developed case-law. Besides, Regulation 1/2003 included two mechanisms, namely: (i) declarations of inapplicability under its Article 10; and (ii) informal guidance pursuant to recital 38, to address the need to adapt to novel situations. These measures aim to decrease legal uncertainty by fostering predictability.

As Richard Whish rightly summarised it, these mechanisms were perceived as “a risk of reintroduction of notification by the back door”. While this argument is persuasive to some extent, it does neglect the possibility for a more differentiated and nuanced approach. Nobody today seriously argues in favour of a return back to the old notification system under Regulation 17/62. If the Commission, however, applied the available means of formal declaration of inapplicability and informal guidance just in exceptional cases of new and unresolved policy or enforcement matters, that would not lead to a high workload on the side of the enforcers. By no means would it be comparable to the situation under Regulation 17/62. On the other hand, it could be of enormous help to undertakings and advisors in the affected sectors. That is even more true taking into consideration that such formal or informal guidance can, in summary, be published and therefore be of informative value in situations beyond those of the affected

Latitude

of Article 101(3) TFEU under the current regulations – a case for revising administrative practice instead of revising the law?

Nils Imgarten (1)

1. Nils Imgarten (LL.M., College of Europe) is an academic assistant and doctoral candidate in procedural competition law at the University of Goettingen, Germany.

parties. Despite not being a guidance letter in the sense of an  ex-ante, precautionary advice, the  explanatory letter published by the Commission after the adoption of the AdBlue cartel decision gives a glimpse on different use cases and a potential openness on the part of the Commission to use such informational flexible tools.

It is nonetheless – or even more – remarkable that the European Commission had not issued a single guidance letter regarding the applicability of Article 101(3) TFEU until the emergence of the novel Coronavirus that then led to two cases of application. Although the revised Commission notice on informal guidance of October 2022 was influenced – and some might argue catalysed – by the COVID-19 pandemic, it clearly is not limited to cases of health emergency. In contrast, it replaced the Antitrust COVID-19 Temporary Framework with a system of general application. The same holds true for Article 10 of Regulation 1/2003 that is not limited to a specific subject area, but still has never been applied to a single case by the Commission.

With increased frequency of political crises and challenges, the need for legal certainty as well as clear and predictable, but also adaptive, legal frameworks further increases.

Potential future cases of application

One potential area of concern relates to sustainability agreements. The Commission’s preliminary guidelines on horizontal cooperation agreements include a section on this issue, which provides examples of agreements that may or may not be acceptable. Although these examples are useful, they cannot replace proper guidance on an actual individual sustainability agreement. The abstract findings of the guidelines should therefore be complemented by an enhanced application of concrete guidance in individual cases, which is possible under the existing Regulation. Nonetheless, it is important to recognise that the Commission can only provide guidance if companies are willing to have their agreements subjected to public review. Therefore,  Commissioner Vestager invited interested stakeholders to submit certain practices or agreements, especially regarding sustainable change, to review by the Commission. Such practice could not only be beneficial for the concrete undertakings but also for the development of legal certainty and predictability generally. Whilst the discussion so far has focused predominantly on sustainability objectives, the scope of application of both Article 10 and recital 38 of Regulation 1/2003 is not limited to a particular subject matter and could well be used in novel cases or scenarios that result from security, digitisation, or other not yet foreseeable areas of concern. Whether an extension is likely or not is difficult to say. For now, the fact that there are no cases of application of precautionary (ex-ante) guidance – be it formal or informal – even in the field of green transition projects (the often-mentioned showcase) warrants a certain scepticism regarding such forecasts.

Looking forward, when discussing reform proposals, as well as the potentials and limits of both measures, informal guidance and declarations of inapplicability are different. Naturally, an application of Article 10 of Regulation 1/2003 goes further than a guidance or ‘comfort’ letter. The informal guidance is merely informative and could only rarely trigger the principle of legitimate expectations in limited circumstances, in line with the Court’s case law (under the old regime) (see Van den Bergh Foods, T-65/98, paras 192-196).

Declarations of inapplicability under Article 10 of Regulation 1/2003, by contrast, are legally binding for national competition authorities (NCAs) and national courts according to Article 16 of the Regulation. The conditions to issue such a decision are also stricter insofar as they require an EU public interest. However, in practice, it is not that difficult to satisfy this requirement because the existence of an EU public interest is likely interpreted broadly and affording ample discretion to the Commission, so as to cover a wide range of circumstances, such as in cases of climate policy, security policy or even economic policy. There must furthermore be a conflict between the pursued public interest and competition law, which requires the adoption of a decision stating the inapplicability of Article 101(1) TFEU. This does however not alter the substantive legal test under Article 101(3) TFEU. It merely opens up a facilitated way of application of the individual exemption to a concrete case. Obviously, concrete policy considerations must be substantiated and depend on the individual case as presented to or found by the Commission.

When applying a strict standard to the necessity of such declarations of inapplicability, they will naturally remain exceptional. Nonetheless, it is argued that the reasons for non-application of the norm are rather the unwillingness of the Commission to make use of its discretionary power in this direction, instead of the excessively demanding legal prerequisites of Article 10.

Accordingly, Article 10 decisions could be seen as the more effective tool to strengthen the application of Article 101(3) TFEU as compared to informal guidance, which allows for more flexibility on the side of the Commission. Both measures can and should have their cases of application, depending on circumstances and needs of the individual case.

Necessity of ‘new laws’?

As it has been outlined in brief, a more effective application and use of procedural tools, such as informal guidance, is already possible under the current Regulation. Regulatory revision would therefore not be necessary. Nonetheless, the current reform process can be the starting point for reflection not only on the current procedural competition law regime itself but also on the legal and administrative practice.

The observation that administrative practice under the Regulation plays a significant role in the review process is supported by the evaluation results. Criticism by practitioners focuses rather on administrative practice and not on the applicable law. For example, the long duration of cases, lack of transparency, and perceived gaps of due process were amongst the criticisms submitted by lawyers and lawyer associations in the evaluation of Regulation 1/2003 (see  summary results of public consultation). None of these issues demand the revision of Regulations 1/2003 or 773/2004.

Just as in the U.S., it can well be argued that no new laws are needed for modern and effective antitrust enforcement, but rather a modernised approach and mindset in applying the ‘old’ laws may suffice (see Executive Order on Promoting Competition in the American Economy, and the approach favoured thereunder to apply the old statutes which remain ‘good law’). At least for the matter of effective enforcement of Article 101(3) TFEU through formal and informal guidance, this assumption holds true.

Nevertheless, an assumed increasing relevance and need for (formal and informal) guidance could still be better reflected in the text of the revised Regulation. One potential change could be to transfer the spirit of informal guidance from recital 38 to a more prominent place. Though, elevating it to an independent Article of the revised Regulation might somewhat contradict the informal nature of guidance as reflected in the Commission notice. The complementary scheme of informal guidance and formal declarations of inapplicability could well be preserved but could be complemented by further explanations on the scope and relevance of such guidance measures, and of (non-competition related) public interest considerations generally, in the recitals of the revised Regulation.

Conclusion

There is a relatively broad consensus that enforcement under Regulation 1/2003 was effective and the decentralising approach was thus successful. In this regard, one may look to figures 4 and 5 in the evaluations summary report However, such figures often neglect certain aspects that are less discernible, such as possible gaps in the application of tools of administrative guidance and declarations of inapplicability. The effective application of Article 101(3) TFEU can be improved and is within reach.

Increased use of informal guidance and, if necessary, declarations of inapplicability, would promote predictability of enforcement and facilitate the inclusion and the pursuit of non-competition public interests within competition policy. The reform process can therefore raise awareness for the demonstrated underdeveloped competition policy tools that hold much potential

The Complaint Crusher: How the revision of Regulation 1/2003 can advance rights of complainants

Malgorzata Kozak (1) and Jacek Mainardi (2)

As Regulation 1/2003 and the decentralisation of competition law enforcement are entering their twenties, the time has come to reflect upon it. Although Regulation 1/2003 is a remarkable piece of legislation in many respects, we would like to focus on one possible area of improvement: the rights of complainants. In this contribution, we aim to demonstrate that the current regime does not protect complainants’ rights effectively and thus present some normative proposals to remedy this. The lack of adequate protection is particularly worrying because the involvement of third-party complainants can play an essential role for ensuring the enforcement of competition law. Unsurprisingly, the most important decisions taken in recent years – take  Google Shopping  for example – were driven by complaints filed by several market participants.

Our contribution is organised as follows: first, we will discuss the lack of specified and explicit grounds for rejection of complaints by the European Commission; second, the lack of the efficiency of the judicial review and the institution of a pre-rejection letter, which in our view has a chilling effect on complainants; third, we will present the consequences of the current system of complaint handling and conclude with normative proposals.

Unclear Grounds for Rejection

The efficiency of proceedings is the rationale for allowing competition authorities to prioritise cases. The European Commission is not an exception in this respect as it is entitled to give different degrees of priority to complaints, while defining and implementing Union competition policy (C-344/98 Masterfoods, C-119/97 P, Ufex).

Currently, the Commission’s main grounds for rejecting complaints are: (i) the lack of legal interest in bringing a complaint; (ii) the failure to demonstrate an infringement of EU law (or lack of evidence in the proceedings); or (iii) the lack of Union interest (see M. Kellerbauer and A. Lamadrid,  Rejection of Complaints in L. Ortiz Blanco (ed),  EU Competition Procedure).

At a glance, one sees that those grounds cannot be found in Regulation 1/2003. This Regulation neither provides specified grounds for rejection of a complaint, nor gives a clear standard of the Commission’s due diligence in handling complaints. They are not provided in delegated acts either. Their description in the  Notice on handling of complaints is vague and provides little guidance at all. The specification of those grounds is left to the Commission’s decisional practice.

Such an approach comes from the settled case-law, claiming that the grounds for rejection, as first presented in the  Automec (T-24/90) judgment, should not be set in stone. During the last 30 years they proved to be flexible enough to give the Commission a margin of appreciation. A great example of a ground for rejection that allows the Commission to retain flexibility is the lack of Union interest. This ground has several dimensions, including the ge-

Authors would like to thank Ton van der Brink, Marta Sendrowicz, Lewis Reed and David Perez de Lamo for their helpful comments

1. Dr. Malgorzata Kozak is an Assistant Professor of European Law at Utrecht University School of Law and Centre for Shared Regulation and Enforcement in Europe – RENFORCE, NL and attorney-at-law (radca prawna) admitted to the Bar in Gdańsk, PL. E-mail: m.w.kozak@uu.nl.

2. Jacek Mainardi is a Law and Economics PhD Student at the University of Warsaw and an associate in the Warsaw office of an international law firm. Email: j.mainardi@uw.edu.pl.

ographical scope of the alleged infringement, the size of the affected market (e.g., Case  COMP/39464 Supporters Juventus Turin, paras 42-44, 47), or low probability of establishing an infringement (e.g., Case AT.40037 Carpenter/ Subaru), and is broad enough to guarantee the required flexibility. Therefore, providing a complete list of existing grounds for rejection would not significantly limit the discretionary powers of the Commission. At the same time, if accompanied by a more detailed explanation on the Commission’s side about their interpretation (see infra), it would significantly enhance the efficiency of the judicial review of the rejection decisions and create more legal certainty for complainants.

Therefore, we propose that while preparing the revision of Regulation 1/2003, the Commission should evaluate decades of its decisional practice to create a list of grounds for rejection. In our view those grounds should be listed in the revised implementing regulation.

Lack of Predictability

In judgments based on the previous Regulation 17/62, the CJEU has consistently claimed that the Commission should respond to a complaint in such a way that shows that the arguments submitted by the complainant were analysed diligently (see  298/83,  CICCE, para 18; C-199/97 P  Ufex, para 86) assessing the priority of handling a particular complaint, the Commission should assess the seriousness of the alleged interferences with competition and the persistence of their consequences (see C-199/97 P Ufex).

The main rationale for that is the central position of the Commission as an enforcer of EU competition law (see AG Ruiz-Jarabo Colomber’s Opinion in Ufex, paras 63-65). The decentralisation has of course impacted such reasoning because national competition authorities (‘NCAs’) now also apply Articles 101 and 102 TFEU. Therefore, the idea that a NCA can be better placed to deal with a case became reality. Unsurprisingly, it became a common ground for rejection. An example of post-decentralisation changes is the (in)famous but notorious case C-373/13 P Agria Polska, in which instead of indicating that the case was  prima facie beyond the Commission’s interest, it indicated that the NCA was better placed, even though it could not open the case because the limitation period had elapsed (paras 18, 76-82).

The Commission’s practice of handling of complaints is well illustrated by one of the few cases in which the Court annulled the Commission’s rejection decision. The Commission rejected the complaint of the CEAHR , a European non-profit organisation consisting of several national associations of watch repairers (Case COMP/E-1/30937, Independent Watch Repairers). The CEAHR had alleged that watch producers were abusing their dominant position or engaged in anticompetitive agreements by refusing to sell spare parts for watches and that their selective distribution systems should not be exempted. The Commission rejected the complaint based on insufficient Community interest. It noted that national authorities or courts were better placed to review such complaints. Then the CEAHR argued that the Commission was better-suited to deal with the case because the alleged infringement had occurred in five Member States (T-427/08, para 176). The GC ruled that an action on the Union level would be more efficient than any actions that could be taken by NCAs and, as a result, upheld CEAHR’s action for annulment.

Despite those clear criteria being developed, the Commission has referred to them in its decisional practice only a few times (see case AT.39804 Volkswagen Audi 1, and case AT.40160 Money transmittance market). It is quite striking – given that competition law is well-known for many soft-law instruments providing the Commission’s interpretation of specific concepts – that a detailed interpretation of grounds for rejection has never been provided and the Notice is quite vague. Providing such an interpretation in the accompanying notice could improve the impartiality of the proceedings and predictability of the analysis, thereby serving the legitimate interests of complainants.

There is yet another systemic challenge: the wide discretion given to the Commission allows it to change the ground for the rejection decision during the re-evaluation of the case and, as a result, avoid pursuing the case. Following

the CEAHR judgment, the Commission adopted a new decision in which it rejected the complaint because of the low likelihood of finding an infringement (AT.39097,  Watch Repair). This decision followed a detailed examination of facts and was argued at length. The CEAHR once again challenged  the Commission’s decision (T-712/14, CEAHR). This time the Court dismissed the action because the CEAHR was unable to prove in any of its pleas that the Commission had made a manifest error of assessment.

Therefore, we propose that once the grounds for rejection are formally listed, the Commission publishes (either as a delegated act (preferably), or by using guidelines) how they understand specific grounds of rejection and legal tests for particular grounds. By issuing such a soft-law instrument, the Commission would create rules of practice from which it could not depart (except for exceptional circumstances), and this would speed up the efficiency of the judicial review. It would also allow complainants and courts to have a clear benchmark for assessing whether the Commission diligently assessed arguments submitted by the complainant (cf.  C-397/03 P Archer Daniel Midlands, para 91).

Pre-rejection Letters Replacing Rejection Decisions

Regulation 773/2003, which is a delegated act adopted by the Commission, includes more specific provisions regarding the position of complainants. Pursuant to Article 7(1) of Regulation 773/2004, where the Commission intends to reject a complaint, it shall inform the complainant about its intention to reject the complaint in a ‘pre-rejection letter’ and set a time limit for the complainant to respond in writing.

As held in the PGNiG case (T-399/19, para 59), the pre-rejection letter needs to explicitly address the points raised by the complainant, and an ‘implicit’ justification is not allowed. But even if the letter is vague, the complainant can only challenge the rejection in court if they can show that they could have changed the Commission’s views if they had received a more detailed letter.

After receiving the pre-rejection letter, the complainant should provide its opinion on the Commission’s views, including new evidence on the alleged violation. If no opinion is provided, the complaint shall be deemed to have been withdrawn. According to Ben van Rompuy’s estimates, almost 50% of complainants do not provide such an opinion and, therefore, they give away their right to judicial review. (B. van Rompuy, “ The European Commission’s Handling of Non-priority Antitrust Complaints: An Empirical Assessment ”,World Competition, 45(2))

Given the (almost) unlimited scope of the Commission’s discretion and the futility of challenging a rejection decision in European courts the low number of such opinions is not surprising at all. From the complainant’s perspective a pre-rejection letter means that the Commission has no willingness to act on the complaint and attempts to change it are very unlikely to succeed. It also generates additional work (and costs) on the side of the complainant, which, lacking the tools, is generally not well situated to investigate further. Therefore, the complainant is likely to be discouraged from responding to the pre-rejection letter. For the abovementioned reasons, we propose to narrow this practice to manifestly unfounded complaints.

Undermining EU Law Principles

The current way in which the Commission handles the complaints has negative consequences both for the protection of fundamental rights in the Union, as well as for the public policy interests pursued by the Commission.

Filing a complaint to the European Commission is a legal remedy for a victim of the competition law violation and, as such, should be judged from the perspective of effective legal protection of complainants’ rights. Different rules protect complainants’ rights at different stages of the proceedings. When the European Commission looks into a case, complainants have the right to good administration, defined by Article 41 of the Charter of Fundamental Rights. When complainants want to challenge the Commission’s decision in court, they have the right to effective legal protection, as prescribed by Article 47 of the Charter.

Even though Articles 41 and 47 of the Charter are two distinct provisions, it is important to see how they both ensure the effectiveness of the legal protection of complainants. According to settled case-law, the relationship between the administrative and judicial components must be considered (C-175/11, H.I.D. and B.A., para 102).

The ECtHR in respect to a requirement of an effective remedy held that, even if one cannot be sure to win their case, they should at least have a chance to get an adequate redress (ECtHR,  30210/96, Kudła v Poland, para 394). As we have shown above, those chances are very weak for the complainants. This is certainly an issue of the current legal framework.

From the policy perspective,  Or Brook has argued extensively that by using vagueness of grounds for rejection that are procedural in nature, the Commission opts not to decide on cases that are important from a public policy point of view (see also O. Brook and K. Cseres, EULL 2023, “The ‘Hole’ in the (Antitrust) ‘Doughnut’: Governing the Commission’s Administrative Discretion in Antitrust Procedures”). While we agree that a certain margin of discretion is desired because it improves the administrability of competition enforcement, its practice needs to be perceived critically and potentially reformed. The lack of clear grounds for rejections, and therefore clear precedents, undermines not only legal certainty but also  consistency of application of EU law because a ‘chilling effect’ on complaints to the Commission.

Normative Proposals

Given the above, we propose that the revised Regulation 1/2003 and implementing regulation incorporate the following changes.

First, the normative obligation of the Commission to assess the seriousness of the alleged interferences with competition and persistence of their consequences in each case should be reinforced (e.g., in recitals to the amended Regulation). The implementing regulation, or the Notice on handling of complaints, should be amended to include a clear list of the grounds for rejections (that is derived from the existing case law of the CJEU). The Notice should also include clear criteria on how the Commission is going to apply those criteria. Such an approach would enhance transparency.

Second, pre-rejection letters should be limited to manifestly unfounded complaints because they inflate the legal costs of complainants and can have a chilling effect.

Third, an independent officer should be established (whose position would be similar to the one of the hearing officer) monitoring the grounds for rejecting complaints so that internal control within the Commission is increased.

Inapplicability Decisions under Regulation 1/2003: A ‘Dead Letter’ coming back to life?

Georgia Theodorakopoulou (1)

The European Commission is celebrating almost two decades of the current procedural antitrust regulations, Regulation 1/2003 and Regulation 773/2004. To ‘mark’ this occasion, last year it launched a public consultation seeking feedback on the performance of these tools. It is generally admitted that Regulation 1/2003, which repealed Regulation 17 and brought about a decentralised, parallel application of Articles 101 and 102 TFEU by National Competition Authorities and Courts, has worked well and attained its objectives. The Commission has managed to save on resources and focus on the most important cases. The notification system under the previous system has been abandoned for good and a potential revival would distort the Commission’s policy for a self-assessment framework for undertakings. However, in its shift in enforcement policy twenty years ago, the Commission introduced a tool that appears to be a ‘nuclear option’ that has never been used to date: the decision of inapplicability under Article 10 of Regulation 1/2003. The fact that an Article 10 decision has never been adopted raises questions about the practicability of the tool and whether upon the occasion of the 20-year anniversary of Regulation 1/2003, its application should be further clarified or wholly reviewed in view of the Union’s latest policies.

Decision of Inapplicability: An acceptable policy ending up a dead letter?

Article 10 of Regulation 1/2003 provides for decisions issued upon the Commission’s initiative declaring the inapplicability of Article 101 TFEU (and similarly of Article 102 TFEU) either because the conditions of Article 101(1) TFEU are not fulfilled or those of Article 101(3) TFEU are cumulatively met.

Article 10, serving  as an  ex ante means in the hands of the Commission to ensure consistency constitutes, together with the informal guidance that the Commission may provide upon request of the interested parties, a useful toolbox entailing varying degrees of legal comfort. (2)The inapplicability decision under Article 10 does not intend to replace the possibility of exemption decisions under the old system of Regulation 17, but rather is intended to be used in two scenarios: (i) where the Commission has serious doubts concerning the consistent application of EU competition law by national authorities and courts; and (ii) where there is need to ensure legal clarity in a matter of EU public interest, especially when it comes to novel types of agreements (and similarly practices) that have not been dealt with before in the case-law and administrative practice. As reflected in Article 10, a decision of inapplicability is to be adopted in exceptional cases where the ‘Community public interest’ so requires, meaning the goal of undistorted competition within the internal market and, accordingly, the development of EU competition policy to safeguard that public goal. (3)Nowadays, the notion of EU public interest should be interpreted in the light of a reduced emphasis on protecting competition as such and the emergence of parallel public interests and non-market public values that are clearly distinct, a trend which has existed now for some time. (4) A preliminary consideration of this was seen in the  Wouters doctrine, where the Court accepted that non-competition concerns could fit into the assessment of Article 101(1) TFEU.

1. Georgia Theodorakopoulou is Academic Assistant at the College of Europe (Bruges).

2. Gianni de Stefano, ‘COVID-19 and EU Competition Law: Bring the Informal Guidance On’, JECLAP, 2020, Vol. 11, Issue 3-4, p. 121.

3. Konstantin Jörgens and Luis Ortiz Blanco, ‘13 Voluntary Adjustments, Commitments, Finding of Inapplicability, Informal Guidance’ in Luis Ortiz Blanco (ed), EU 4. Competition Procedure (4th Edition), Oxford University Press (2021), pp. 705-756, at p.744.

4. Niamh Dunne, ‘Public Interest and EU Competition Law’, The Antitrust Bulletin, 2020, Vol. 65 (2), p. 256

It is explicitly acknowledged in Regulation 1/2003 that in cases of genuine uncertainty, interested parties may have recourse to legal comfort provided by the Commission. In the same vein, a decision of inapplicability would ensure legal certainty and in turn boost innovation and investment because undertakings would be allowed to enact practices or agreements benefiting the economy that they might otherwise not due to the risk of enforcement.

The two scenarios in which Article 10 is to be applied have so far been tackled through soft law. First, with regard to the possibility of inconsistent application of EU competition rules, the 2009 Commission Working Paper points out that the ECN consultation mechanism has made ‘extensive efforts’ in promoting the coherent application of EU competition rules through the establishment of horizontal working groups and sector-specific subgroups where case-handlers of different authorities regularly meet, proactively exchange views and share experiences. For  some commentators, the EU-wide binding legal effect of the decision under Article 10 in observance of Article 16 of Regulation 1/2003 has encouraged the coordinated efforts of authorities to prevent the potential application of this tool. (5) These efforts seem to have been fruitful as there has been no need for an  ex officio initiation of an Article 10 procedure by the Commission. This approach however overlooks the Commission’s indications in its  Manual of Procedures of 2019. According to those indications, a decision of inapplicability, being declaratory in nature, may no longer be invoked or block national proceedings within the meaning of Article 16 of the Regulation, where circumstances known to the Commission at the moment of the adoption of the decision and explained in detail therein have later changed. In other words, where the terms of an agreement materially change, the decision loses its binding effect and national authorities cannot be barred from pursuing these cases.

As regards the second case where Article 10 may be applied, where there is need for legal clarity in certain types of agreements, again the Commission seems in principle to resolve any arising issues through either the adoption of a commitment decision under Article 9 or its Guidelines accompanying its Block Exemption Regulations on vertical restraints, and R&D and specialisation agreements. However, it is in this case, where the Commission toolbox, including Article 10 decisions, could be used in the service of EU public interest.

A new era for the Commission’s legal comfort toolbox. Where could Article 10 stand?

The COVID-19 outbreak, identified as a public health emergency, seems to have triggered anew the Commission’s toolbox after the introduction of Regulation 1/2003 and the abolition of the notification system through the Commission’s use of comfort letters. In its  EU Temporary Framework of 2020 the Commission had shyly referred to possible forms of cooperation between undertakings in order to ensure the supply and adequate distribution of essential scarce products and services. It had further stressed that the cooperation was objectively necessary to attain the procompetitive objective, was temporary in nature and did not go beyond what was strictly necessary. The Framework, which was finally withdrawn last October, provided for the exceptional issuance of written comfort by the Commission in relation to specific and well-defined projects.

And while the exceptional nature of these letters, related as they were to public health emergency reasons, was underlined in the first comfort letters adopted by the Commission in compliance with the Temporary Framework, the letters that have followed, be them named comfort letters or not, mark a new era in the Commission’s practice that extends beyond temporary in duration or urgent projects.

In her  Statement in the context of a prohibition decision finding a cartel between car manufacturers in the  Car Emissions case, Vice-President Vestager underpinned that in the context of this case, the Commission provided guidance to the companies on aspects of their technical cooperation presenting novelties by means of a  letter addressed to them. This letter was followed by the feedback given by the Commission to GAIA-X in October 2021

5. Tobias P. Maass and Annemarie ter Heegde, ‘Article 10: Finding of Inapplicability –Commentary’, in Luca Prete, Kris Dekeyser, et al. (eds), Regulation 1/2003 and EU Antitrust Enforcement: A Systematic Guide, Kluwer Law International (2022), pp. 299 – 308.

upon the latter’s request. In that case, the Commission acknowledged that ‘GAIA-X’s aim to promote and facilitate an open software data infrastructure and federated cloud services in the European Union is a significant development of European interest’. The revised Informal Guidance Notice for novel or unresolved questions in antitrust cases, whose adoption coincided with the withdrawal of the Temporary Framework, advocates for the Commission’s intention for now reaping the benefits of the previously scarcely utilised tool of comfort letters. Of course, this soft-law mechanism is launched upon request and assists the interested parties in self-assessing the compatibility of their agreements or practices with EU competition rules.

Interestingly enough, the uncertainty provoked in relation to the application of antitrust rules to cooperation agreements after the start of the war in Ukraine was again a sign of the Commission’s reticence to embark on a more systematic use of its comfort toolbox. Unlike the Covid-19 crisis, in the present case, the prompt issuance of a  joint statement by the ECN providing for general guidance to market players and inviting the latter to address to the Commission or the NCAs for informal guidance in the framework of their self-assessment, was not followed by a Temporary Framework for assessing antitrust issues related to business cooperation in response to situations of urgency stemming from the war in Ukraine and that would also provide for informal guidance by the Commission.

The question that inevitably arises is whether the other part of the Commission’s toolbox, the inapplicability decisions of Article 10, is now more likely to be used or will remain a dead letter. Decisions under Article 10 of Regulation 1/2003 can be the keystones though which the Commission will attain the objectives of its twin transition to a digital and sustainable economy, especially in view of the common public goal that this tool is designed to serve.

First, the 2019  Report on Competition Policy for the Digital Era had already identified a concrete novel type of agreements, those of data sharing or pooling arrangements where more legal clarity on the guiding principles for its assessment should be provided by the Commission in the form – inter alia –  of Article 10 decisions.

Second, the public policy dimension enshrined in the Commission’s intervention on the basis of Article 10 is now more relevant than ever when it comes to accomplishing large Union goals, such as large-scale infrastructure projects or green-lighting initiatives, such as the GAIA-X consortium. (6) In the same vein, in its  Competition Policy Brief of September 2021, the Commission had declared that where public interest so requires, it will apply Article 10 to sustainability initiatives. In its Draft Guidelines on horizontal co-operation agreements, the Commission introduces a type of sustainability agreements relating to known forms of cooperation agreements such as R&D or specialisation. Pursuant to the Guidelines, these novel sustainability agreements enjoy a safe harbour regime and fall outside the scope of Article 101(1) TFEU when certain conditions are met. In the same vein, at the national level, the Dutch Competition Authority has tackled the agreement between TotalEnergies and Shell to collaborate in the storage of CO2 in empty natural-gas fields in the North Sea by means of issuing a ‘no action letter’. It will thus be interesting to see whether the Commission will take the initiative to enforce its green policy also by means of the declaratory decision of Article 10, in the case of sustainability agreements pertaining to ‘collective benefits’ that occur irrespective of consumers’ individual appreciation, for example drivers purchasing less polluting fuel are also citizens who would benefit from cleaner air, if less polluting fuel is used. At the current state of affairs for sustainability agreements, it seems that it is yet premature to enforce an Article 10 decision. It is admitted in the Draft Guidelines that more experience needs to be accumulated ‘in concrete cases, which could allow the development of methodologies of assessment’. Additionally, among the conditions that need to be satisfied so that collective benefits are taken into account are the existence of evidence that benefits have already occurred or are likely to occur, as well as the concrete identification of beneficiaries. These conditions may be difficult to be fulfilled especially when it comes to an ambitious project having a genuine sustainability objective, the efficiencies of which may not be established in the short or

6. Selçukhan Ünekbaş, ‘The Resurrection of the Comfort Letter: Back to the Future?’, Working Paper Series No. 22/22.

medium term. The use of an Article 10 decision could do more harm than good to the envisaged legal certainty and could easily be overturned by more recent and concrete evidence.

Breathing life back to Article 10?

In view of the challenges of a twin transition, the barely or never exploited tools of the Commission are now becoming very topical. Although its use remains to be materialised in a future first case, Article 10 and the legal certainty it can provide to undertakings due to its binding effects is now more relevant than ever. As the application of Article 10 of Regulation 1/2003 pertains to public policy objectives that the Commission already highlights in its agenda, concrete cases where an Article 10 decision can be adopted may already be envisaged. The review of the antitrust procedural regulations can be an excellent opportunity for the Commission to confirm that the policies of digitalisation and sustainability are subsumed under EU public interest. In the current context where less emphasis is given to protecting competition as such and public societal values are being put at the forefront, an Article 10 decision can find its true meaning. However, it remains to be seen whether in the future when more substantiated evidence for certain types of aspiring agreements or practices is provided, the Commission will break the ice and stress the importance of its set objectives by using an unprecedented tool that has long been at its disposal. Such inauguration and use of Article 10 instead of recourse to solicited comfort letters will contribute to the enforcement of the Union’s latest policies.

The Reform of Regulation 1/2003

Cani Fernández (1)

Regulation 1/2003 marked a major change in the application of competition rules in the European Union. It moved decisively towards a self-assessment system that would allow competition authorities to focus on the most serious infringements of competition law (cartels) and towards the decentralisation of the application of Articles 81 and 82 of the Treaty on the European Community, now Articles 101 and 102 of the Treaty on the Functioning of the European Union (‘TFEU’). As of 1 May 2004, the national competition authorities (‘NCAs’) were established as EU authorities with the power to apply in its whole, at last, Articles 101 and 102 TFEU.

This new scenario required the establishment of a solid framework for cooperation and coordination between the NCAs among themselves, and between them and the European Commission. It also required a major harmonised effort to ensure the consistent application of these rules in the common market (ECN+ Directive), for which the European Competition Network (‘ECN’) has been instrumental.

Today we can affirm that this cooperation and coordination channelled through the ECN has been a resounding success and, with the exception maybe of some procedural aspects, Regulation 1/2003 is an instrument that, 20 years later, serves perfectly well to achieve its initial purpose.

1. New and conventional issues

However, the digitalisation of the economy and a new scenario characterised by digital markets is a challenge for both the European Commission and the Member States. At this point in time, launching a debate on a possible revision of Regulation 1/2003 is, therefore, highly relevant. As we navigate an increasingly complex digital environment and the Digital Markets Act (‘DMA’) aims to respond to these new problems and challenges, traditional competition law remains and coexists with the DMA. Therefore, it will be essential to coordinate actions, exchange knowledge and share tools. To this end, Regulation 1/2003 needs to be aligned.

The revision of Regulation 1/2003 is a good opportunity to resolve some issues that could be improved, particularly also in the new digital context. Investigation proceedings should be seen in the light of digital innovations and even take this opportunity to modernise some aspects (e.g., full online access to the file, remote online inspections on digital files, etc.).

Regarding more conventional issues, possible improvements might pertain to the calculation of fines, the system of case allocation, harmonisation of attorney-client communication (legal professional privilege) or the imposition of interim measures (see sections ii-v below). Other legislative pieces should probably be reviewed in the same process (i.e., Regulation 773/2004, the Notice on access to the file, etc.).

1. Cani Fernández Vicién is the President of the Spanish National Markets and Competition Commission (CNMC). Ms. Fernández worked as a lawyer in private practice specialised in EU and Competition Law for more than 30 years. Between 1993 to 1997 she was référendaire at the Court of Justice of the European Union. She has also been associate professor at different academic institutions.

2. Fine calculation, declaration of infringements, sanctions on natural persons

As far as fines are concerned, since 2003, their calculation, methodology and imposition has been one of the issues that has attracted the most attention from the courts when deciding on appeals in the field of competition law. The lack of a harmonised system for calculating fines in the EU Member States leads to a certain disparity in their amounts and implementation systems. As the principle of procedural autonomy applies here, the clarifications made by the EU courts over the years in matters related to fines are not directly applicable either. However, setting harmonised criteria (both in terms of calculation methodology and the limitation periods for the imposition of fines) would undoubtedly strengthen the effective and uniform application of Articles 101 and 102 TFEU in all EU countries. Therefore, we believe that, with the revision of Regulation 1/2003, it would be appropriate to reopen this discussion to analyse whether the consolidation of a single system for calculating fines is possible.

Likewise, the revision of Regulation 1/2003 could also be an opportunity to harmonise the possibility to declare infringements where the limitation period to impose a fine has expired. Following Article 7 of Regulation 1/2003, the European Commission maintains this faculty, while NCAs, like the CNMC, do not.

In addition, it could be interesting to start a discussion on the ability to impose sanctions on natural persons. At present, the main jurisdictions provide for some kind of punitive consequence for natural persons who infringe competition law. In the Spanish system, for example, a natural person who participates in an infringement of competition law on behalf of their company may be fined up to 60,000 euros. This ceiling is likely to be increased to 400,000 euros in the event of a successful regulatory procedure (currently underway in the Spanish Parliament). This type of sanction is a very strong deterrent and is already bearing fruit, especially in the area of compliance. Perhaps, the limited amounts of fines for individuals have not yet allowed them to have their full deterrent effect. However, since their effective and routine implementation as of 2016 in the CNMC’s resolutions, a change in the perception of managers and other corporate decision-makers has been perceived.

3. Investigations: legal professional privilege, coordination of cross-border action, storage of electronic records, case allocation

In terms of investigations by competition authorities, some aspects would facilitate the work of the competition authorities if they were harmonised at the European level, especially in cross-border cases, facilitating cooperation and coordination between authorities, as sought by the ECN+ Directive.

One first aspect is, for example, the confidentiality of attorney-client communication: the disparity in the protection offered to such communication in different countries causes dysfunctions in inspections, particularly in multinational and cross-border cases. A review at the Community level could be appropriate in order to harmonise its treatment at the European level.

Likewise, it would be advisable to launch a debate on inspections and their harmonisation within the European Union in order to facilitate cross-border action, particularly in this new digital context.

Similarly, rules on the storage of electronic records by companies in order to safeguard the integrity of the information stored would require a common European approach.

Finally, it might be appropriate to review the current rules on the allocation of cases once they are detected in order to establish precise time limits for responding and to avoid the expiry of the statute of limitations at national level.

4. Sharing best practices

On another front, the review of Regulation 1/2003 could help to share and, where appropriate, propose best practices of NCAs. For example, in the case of the CNMC, we would recommend establishing a specific unit to monitor the enforcement of decisions for those authorities that do not have one. In the case of Spain, this unit has proved to be essential not only for precise monitoring of compliance with the commitments or obligations imposed but also for monitoring incidents or events that may affect their enforcement, ensuring the payment of fines, their outcome in the context of judicial review,  etc. Above all, this unit allows the CNMC to react swiftly in the event of non-compliance in order to guarantee the effectiveness of decisions. Coordinated action across the EU by units of this type would undoubtedly contribute to the overall effectiveness and deterrence of the system in the context of the internal market.

5. Interim measures

Finally, and with regard to more substantive issues, the review of Regulation 1/2003 could be a good opportunity to undertake the review of specific measures provided for in EU law to address the new paradigms of the markets following the digital irruption. This could include, for example, the coordinated and coherent adoption of behavioural or structural measures for companies or greater flexibility in the imposition of interim measures.

6. Final remarks

These are just a few notes that may be useful in the context of the review process initiated by the European Commission. The process is welcomed because improvements are always necessary, but so is a certain amount of caution to safeguard a system that, in our opinion, has so far allowed progress to be made towards a coordinated and cohesive policy in the protection of competition within the EU’s internal market.

The Future Relationship Between EU Competition Law and National Laws

Miguel Mota Delgado (1)

On 5 April 2023, the Italian Competition Authority announced that it started a probe targeting Meta for abuse of economic dependence against SIAE, the Italian copyright collective agency (A559). According to the national authority, while negotiating the renovation of the contract for licensing the use of music rights on Meta’s platforms, Meta allegedly interrupted negotiations in a way that is contrary to the Italian law’s prohibition of abuse of economic dependence. Meta could argue that as a dominant undertaking operating in the internal market under EU law, its ‘special responsibility’ is already regulated by that legal order, which has primacy over national legal orders. It could argue that instead of being regulated by other 27 legal orders, Article 102 TFEU (and, potentially, other instruments of EU law, such as the Digital Markets Act; see Regulation 2022/1925) should be the only benchmark for assessing the whether Meta’s unilateral business conduct is anti-competitive. Yet, Meta’s plea would be dismissed. The reason is Article 3 of Regulation 1/2003, one of the EU competition law system’s most cryptic provisions.

Article 3 regulates the relationship between EU competition law and national laws. As the  SIAE case illustrates, understanding and thinking about Article 3 is increasingly relevant. Pressure to regulate the digital economy has led Member States to enforce old rules, such as those on abuse of economic dependence, more vigorously (see also, e.g., the  Apple decision of French Competition Authority  20-D-04). The same reason has also led Member States to adopt new rules that overlap in scope and purpose with Articles 101 and 102 TFEU (see, e.g., Section 19a of the German Competition Act). Another example of this trend is the application of traditional national competition rules in ways (arguably) liable to depart from the uniform application of EU competition rules (see, e.g., the Facebook decision of the German Competition Authority  B6-22/16). Against this background, this contribution to the present symposium offers some thoughts on the “future relationship” between EU competition law and national laws.

Before Article 3 of Regulation 1/2003

Article 3 is a rare provision in the EU legal system. The relationship between EU and national rules is usually regulated by unwritten principles of EU law, like the principle of primacy of EU law. In most cases, the Court of Justice develops doctrines of pre-emption to determine when national rules must be disapplied under the title of primacy. This was the case for Articles 101 and 102 TFEU.

In its case law, the Court of Justice settled that the relationship between EU competition rules and national competition rules would follow a model of rule pre-emption. This meant that the national rule would be rendered inapplicable whenever it led to an outcome different than that which would occur under Articles 101 or 102 TFEU (Walt Wilhelm,  Case 14/68). With respect to  other national rules (e.g., rules prohibiting the sale of a product below the price fixed by the manufacturers or importers, or rules on limitation periods), the Court of Justice settled that the relationship between EU competition rules and those national rules would follow a model of obstacle-pre-emption

1. Miguel Mota Delgado is a Ph.D. Researcher and Coordinator of the European Union Law Working Group at the European University Institute (Florence, Italy). Miguel holds an LL.M. in Comparative, European and International Laws from the European University Institute and an LL.M. in European Law from the College of Europe (Bruges, Belgium).

Thus, the national rule would be rendered inapplicable only if it impaired the substantive or procedural effectiveness of Articles 101 or 102 TFEU (see, e.g., INNO v ATAB, Case 13/77 and Manfredi, C-295/04). This form of judicial regulation governed the relationship between the EU competition rules, national competition rules, and other national rules until the entry into force of Regulation 1/2003.

Article 3 of Regulation 1/2003

With the advent of the modernisation of the EU competition system, the Commission proposed a new model of regulation for the relationship between EU and national competition rules. In the  proposal for Regulation 1/2003, the Commission advanced a clear-cut solution in Article 3: within the field of application of Articles 101 and 102 TFEU, national authorities would apply these provisions to the exclusion of national competition rules.

This proposal embodied the Court of Justice’s doctrine of  field-pre-emption, a solution at the time foreign to the EU competition system. Accordingly, the disapplication of national competition rules would not be dependent on any conflict, of rule or of obstacle, between the national competition rules and Articles 101 and 102 TFEU. Disapplication would only depend on the national competition rules applying to the same situations as Articles 101 and 102 TFEU. In other words, the EU legislature would be exercising a “jurisdictional veto” with respect to the regulation of anti-competitive conduct of firms affecting trade between Member States: only EU competition law would apply.

Some Member States, however, wanted to preserve the autonomy of certain types of national rules such as those prohibiting abuse of economic dependence. Thus, negotiations in the Council resulted in a compromise: the convoluted text of Article 3 of Regulation 1/2003.

Article 3 can be divided into two parts: one about convergence and one about divergence.

On the convergence part, Article 3 tells us that when a national authority decides to apply national competition rules to a situation covered by the scope of application of Articles 101 or 102 TFEU, it must also apply these Treaty rules. It also tells us that the application of national competition rules cannot lead to a result different from Article 101(1) TFEU, read in conjunction with Article 101(3) TFEU and the applicable exemption regulations.

On the divergence part, Article 3 contains exceptions covering three categories of national rules: stricter rules on unilateral conduct, merger rules, and rules that pursue an objective predominantly different from Articles 101 and 102 TFEU. These exceptions rest on vague terms, use varying language, and their relationship with the principle of primacy is highly debated in the literature.

What, for instance, is meant by the wording ‘stricter’, or to ‘predominantly pursue an objective different from that pursued by Articles [101 and 102 TFEU]’? Or why do both the title of Article 3 and the first part of Article 3(2) use the narrower concept of ‘national competition law(s)’, while the second part of Article 3(2) uses the broader concept of ‘national laws’? Finally, do the exceptions mean that all three categories of national rules prevail over Articles 101 and 102 TFEU? Nicolas Petit and I have addressed these questions in another context. In the present one, suffice it to say that the interpretation of Article 3 is clouded by legal uncertainty, for the most part yet to be dissipated by EU courts.

After Article 3 of Regulation 1/2003

Beyond questions concerning the drafting of Article 3, any reflection on the reform of Regulation 1/2003 should consider, more broadly, the future relationship between EU competition law and national laws. The remaining part of this post will focus, particularly, on the future relationship between EU competition rules and national rules on the unilateral conduct of undertakings. Going forward, the EU legislature will be faced with three main ways of engaging with this relationship: (i) uniformity; (ii) fragmentation without experimentalism; and (iii) fragmentation with experimentalism.

i. Uniformity

One possibility is for the EU legislature to choose the way of uniformity, as originally proposed by the Commission in its proposal for Regulation 1/2003. This solution would favour the consolidation of the internal market as undertakings would not be required to adapt their strategy and conduct based on the rules in force in different Member States. Article 102 TFEU would serve as the sole parameter of liability for anticompetitive unilateral conduct of undertakings affecting trade between Member States. For example, in German Competition Authority’s in  Facebook decision, the national authority would only be allowed to bring this case under Article 102 TFEU. If the Court of Justice disagreed with the national authority’s potentially stricter reading of that treaty provision, the decision would have to be set aside.

This solution would be in line with the Lisbon Treaty’s default model of  field pre-emption for the establishment of the competition rules necessary for the functioning of the internal market. The Lisbon Treaty introduced Article 3(1)(b) TFEU, which defines ‘the establishing of the competition rules necessary for the functioning of the internal market’ as an area of exclusive competence of the EU. Furthermore, according to Article 2(1) TFEU, Member States can only adopt binding acts if so empowered by the EU within the scope of exclusive competences of the EU. In the absence of an EU act empowering Member States to adopt competition rules, such as Article 3, primacy will displace most rules within the field of application of Article 102 TFEU.

ii. Fragmentation without experimentalism

Another possibility is for the EU legislature to maintain the current system of limited fragmentation. Following this route, the EU legislature should consider the evolution of the scope of the exceptions in Article 3 since the early 2000s. For instance, the exception concerning stricter national rules on unilateral conduct has been construed beyond the limited scope originally envisioned for this rule. This exception was originally introduced having in mind limited types of national rules, such as those prohibiting abuse of economic dependence. Yet, since then, the same exception has been construed broadly, allowing national authorities to potentially sanction any type of anti-competitive unilateral conduct arguably permitted under Article 102 TFEU. As demonstrated in the Facebook decision of the German Competition Authority, the predictability of this form of national regulation can be very limited. This increases the potential fragmentation of the internal market.

At the same time, in the current system, the negative aspects of the fragmentation of the internal market are not compensated by the potential benefits of experimentalist governance. Under a model of experimentalist governance, national competition authorities (NCAs) are granted discretion to propose regulatory solutions. Information about the implementation of these national solutions is then pooled and used to review solutions taken at the EU level. Yet, the architecture of Regulation 1/2003 lacks the mechanisms for systematic feedback collection, benchmarking, and other processes that are required for experimentalism.

This is not to say that some elements of experimentalist governance cannot be traced in the current EU competition system. Think, for instance, of the online travel agents’ cases that the Commission allowed to be distinctively regulated by the Italian, French and Swedish NCAs on one side, and the German Competition Authority on the other. Such examples are, however, not systematic consequences of an experimentalist governance architecture in the EU competition system. Rather, as Giorgio Monti and Bernardo Rangoni  explained, these examples appear to be the more or less accidental consequences of functional and political factors. For this reason, the present system can be described as one of “fragmentation without experimentalism”.

iii. Fragmentation with experimentalism

Finally, the EU legislature can choose to complement the current system of limited fragmentation with the structure required for reaping the full benefits of experimentalist governance. The European Competition Network

(“ECN”) may provide an institutional forum for developing some practices of experimentalist governance, and in some ways already does, albeit episodically. If Article 3 will continue to allow NCAs to sanction anti-competitive unilateral conduct in a way that is arguably stricter than Article 102 TFEU, why not learn from these experiences? Why not introduce mechanisms for systematic (emphasis on “systematic”) feedback collection, benchmarking, and other processes required for allowing the central (EU) level to learn from the local (Member States) level? This reform could contribute, namely, to testing new theories of competitive harm at the national level, before making them “the law of the land” at the EU level.

Final remarks

The guiding ethos of the EU legal system pulls towards uniformity. Yet, some degree of fragmentation can be required to harness the benefits of experimental federalism. Regulation 1/2003 was adopted at a moment when experimentalist governance in the EU was under-theorised and under-practised. This explains why the present system bears the disadvantages of limited fragmentation without enjoying the benefits of experimentalism. Today, however, a reflection on the reform of the EU competition system must face this contradiction.

Regulation 1/2003 From Modernisation to Digitisation

Massimiliano Kadar (1) and Sophia Stephanou (2)

Regulation 1/2003 sets out the procedural framework for the application of Articles 101 and 102 TFEU. Together with its implementing regulation, Regulation 773/2004, it has, for the last 20 years, had a profound impact on how EU competition rules are applied. First, Regulation 1/2003 designated national competition authorities (‘NCAs’) as “co-enforcers” of the Treaty rules on competition, which allowed for an increase in the application of these rules. Second, Regulation 1/2003 abolished the system of prior notifications of restrictive agreements and established a system of self-assessment, which allowed the Commission to allocate resources to investigations that had a greater impact on competition in Europe.

The 20th year of applying Regulation 1/2003 is a milestone that invites reflection on the effectiveness of the legal instrument. For example, these last decades have seen a digital transformation in the way businesses work. Is Regulation 1/2003 still “fit for purpose” given the digitised world that we live in? Against this background, the Commission launched the evaluation of Regulation 1/2003 and Regulation 773/2004. The Regulations are being evaluated in full. However, certain procedural aspects on which digitisation may have had a more profound impact are the centre of focus.

While the evaluation of Regulation 1/2003 is ongoing, and information is being collected, we can offer some personal reflections on how the Commission’s investigation powers and procedures might be adjusted to both increase its efficiency and effectiveness, while reducing the burden on businesses in this digitised world.

Investigative powers for a “paper world”

When one looks at the powers that Regulation 1/2003 has given to the Commission, one notices that these are not, in fact, radically different compared to those the Commission had under Regulation 17. The two “new” powers that the Commission obtained are (a) the power to take statements – a power with limitations, since the Commission, contrary to  the proposal in the Modernisation White Paper, cannot summon any person for an interview; and (b) the power to inspect “other” premises, including private homes. Regulation 1/2003 also strengthened the Commission’s inspection powers by allowing the Commission to seal premises and ask questions during inspections. RFI powers were boosted as well, allowing the Commission to request information by decision at the outset, without waiting for an undertaking to have failed to respond to an informal request. Finally, fines for breaches of procedural rules were also increased. Fundamentally, however, perhaps with the exception of the power to inspect other premises (a power that has not been frequently used so far), the Commission’s most-used powers have been

1. Massimiliano Kadar is Deputy Head of Unit in Unit A1 (Antitrust policy and case support) at the Directorate General for Competition of the European Commission.

2. Sophia Stephanou is a Policy Officer in Unit A1 (Antitrust policy and case support) at the Directorate General for Competition of the European Commission.

The views expressed in this article are the authors’ own views. The authors would like to thank Inge Bernaerts, Elisavet Arsenidou and Mireia Prat Garcia for their insightful comments on a previous version of this article. Any error or inconsistency remains the sole responsibility of the authors.

in place for 60(!) years. The fact that these rules have been operational for so long is a testament to their clarity and flexibility. However, digitisation has radically changed the way companies do business and it is inevitable that one should ask whether the Commission’s powers require some fine-tuning.

Investigative powers for a digital world

Currently, the Commission can (on its own initiative) collect information for its investigations in three main ways: (3)(i) it can request information under Article 18 of Regulation 1/2003; (ii) it can conduct inspections both at business and non-business premises under Articles 20 and 21 of Regulation 1/2003; and (iii) it can conduct interviews, although only when legal or natural persons consent, under Article 19 of Regulation 1/2003.

Article 18 is a very useful tool for the Commission, as this is the most commonly used investigative power. Article 18 allows the Commission to request information by simple request or decision, in which case the addressee is subject to the risk of penalties if it does not answer the Commission’s questions. Furthermore, replying to information requests in an incorrect or misleading way can entail penalties. From a practical perspective, Article 18 appears less burdensome for the Commission and for the addressees when compared to inspections. It is also less invasive for businesses than having to deal with the presence of inspectors in their premises (or indeed in non-business premises). However, the increased amount of data that businesses produce at the moment means that Article 18 requests can lead to a large volume of information being responsive to the Commission’s request, which can raise challenges both for businesses (given the amount of searches/reviews they need to conduct) and for the Commission (that has to manage files with a very large number of documents).

Inspections also serve a very important purpose under the present regime because they preserve the element of surprise and avoid the risk that companies conceal or destroy evidence. In the past, when records were mainly physical, it was particularly important for inspectors to be at the premises to ensure that this risk of document destruction would not materialise (and, in fact, the new power to “seal” that the Commission obtained under Regulation 1/2003 supported this purpose). One wonders, however, in the present circumstances, where the relevant information is likely to be digital, whether the Commission’s powers could not be usefully supplemented to ensure that data is preserved.

(4) Furthermore, when the data the Commission would need to inspect is located in the cloud, it may be possible for an inspection to be carried out entirely remotely. The combination of these two powers, i.e., preservation orders and entirely remote inspections, would likely allow for increased investigative efficiency and effectiveness, while at the same time addressing the risk of evidence being destroyed. Such powers could also in some cases replace the need for extensive document requests under Article 18, since they would allow the Commission to inspect the relevant records and collect evidence, rather than obtaining much larger amounts of documents via an RFI response that would be registered on the Commission’s file. Of course, remote inspections would not in all circumstances replace physical inspections, but the latter could potentially be reduced in time and focused on collecting evidence that is not cloudbased (e.g., hard copies or collection of hard drives that are not connected to the cloud).

Finally, a word on Article 19, the basis of the Commission’s ‘power to take statements’. As mentioned above, this is a power with limitations, which has been at the centre of a series of judgments of the EU Courts (see Intel,  C-413/14 P; Les Mousquetaires, C-682/20 P; Qualcomm, T-235/18; and Google Android, T-604/18). The message from the EU Courts on transparency and the Commission’s duty to record interviews when it is collecting information relating to the subject-matter of the investigation is crystal clear. And yet, the recording of interviews in the manner required by Article 3 of Regulation 773/2004 may not be entirely appropriate to achieve the aims highlighted by the EU Courts. What if, for instance, an interviewee refuses to agree to the minutes prepared by the Commission or seeks

3. Of course, the Commission also receives information in other ways, e.g. through complaints or leniency applications.

4. Measures to retain documents are already available to competition enforcers in other jurisdictions, such as the US. In addition, an obligation on gatekeepers to retain certain documents is foreseen in Article 26(1) of the Digital Markets Act (Regulation 2022/1925).

to distort the subject of the interview by substantially amending the minutes? Furthermore, the voluntary nature of interviews under Article 19 also appears limiting when compared with similar powers granted to NCAs under the  ECN+ Directive, given that those NCAs are able to summon representatives of undertakings for interviews, with the possibility to impose fines on their employers to ensure the effectiveness of these summons. If and when Regulation 1/2003 is revised, it would be reasonable to take these considerations into account, so as to ensure a more effective use of interviews as part of the Commission’s investigative toolkit.

Modernising the Commission’s procedures?

The impact of digitisation is of course not limited to the Commission’s investigation powers but also extends to other aspects of its procedures. Access to file is one such area: the rules for access to file under Regulation 1/2003 were created for paper world investigations and are not well-suited to situations that require large volumes of documents to be made accessible to the parties. (5) With the proliferation of data, investigation files are ever-increasing in size and the creation of a non-confidential version of the entire file has become complex and time-consuming. A possible update to Regulation 1/2003 could introduce the ability for the Commission to impose some form of disclosure arrangement (referred to sometimes as a “confidentiality ring”) in order to grant the addressees of statements of objections access to file without having to create non-confidential versions of all documents on the file, while at the same time respecting the rights of defence and confidentiality by granting access to the confidential file to external advisors. (6) Any such system would need to be supported by appropriate procedural sanctions in case of “leaks” to avoid any chilling effects on information providers.

Another consequence of digitisation, and the increased importance of digital markets more generally, is the need for a speedy and effective intervention by the Commission. While the Digital Markets Act will have an important role to play in regulating digital markets in the years to come, competition law enforcement will remain paramount to promote competitive markets. Some elements in the Commission’s toolbox could be fine-tuned to help improve the speed and effectiveness of antitrust intervention. For example, the Commission’s power to adopt interim measures, under Article 8 of Regulation 1/2003, could potentially be adapted, particularly in terms of procedures, to enable a swifter adoption of such measures when necessary. The Commission’s power to make commitments binding, under Article 9 of Regulation 1/2003, could also be updated, e.g., by including deadlines for the parties under investigation to offer commitments, thereby incentivising a speedy resolution of the competition concerns. Finally, the Commission’s powers to impose structural remedies could be clarified or expanded.

5. Regimes that regularly require extensive disclosure, for example in the United States, do not deal with confidentiality of information by creating non-confidential versions of documents, but by means of protective orders.

6. A system with such features will be implemented in the context of the Digital Markets Act (see Commission Regulation (EU) 2023/814 of 14.4.2023 on detailed arrangements for the conduct of certain proceedings by the Commission pursuant to Regulation (EU) 2022/1925 of the European Parliament and of the Council). Of course learnings from the use of alternative access to file methods will also inform any possible update of Regulations 1/2003 and 773/2004.

On June 30 2022, the Commission launched a public consultation to receive feedback on the performance of the regulations that lay out the rules on the implementation of EU competition rules (Regulations 1/2003 and 773/2004). To contribute to the ongoing debate, the present op-ed: (i) critically appraises the adequacy of the current procedural framework against the need to remain, in the Commission’s words, “fit for purpose” in view of the changes that occurred in market dynamics since the adoption of Regulation 1/2003, the so-called ‘Modernisation Regulation’ (Section I below); and (ii) identifies some key procedural provisions that could be improved to accommodate the future challenges posed to an efficient enforcement of EU competition law (Section II below).

I. Critical appraisal of Regulation 1/2003

Regulation 1/2003 introduced sweeping changes in the way EU competition law is enforced by replacing the ‘centralised authorisation system’, that had been in force for over 40 years, by a ‘directly applicable exception system’. The main breakthrough of the Modernisation Regulation was that companies seeking the application of Article 101(3) TFEU were no longer required to notify their agreements to the Commission and that agreements fulfilling the conditions of this provision were enforceable without prior approval, solely on the basis of self-assessment. This was prompted by the realisation that the Commission’s monopoly over the application of Article 101(3) TFEU was no longer tenable, particularly in the context of the 2004 enlargement of the EU. The ever-increasing number of agreements requiring administrative clearance were going to further limit the Commission’s capacity to effectively enforce the competition rules.

Almost 20 years after its entry into force, it can hardly be disputed that Regulation 1/2003 was successful in achieving both efficient and uniform application of EU competition rules.

With regard to efficiency gains, the end of the notification system under the previously applicable Regulation 17 naturally freed up valuable Commission resources, allowing the latter to focus its efforts on the pursuit of the most harmful competition law violations. While these efficiency gains did not translate into a clear increase in the number of Commission infringement decisions,  the proliferation of National Competition Authorities (NCAs) investigations pursuant to Articles 101 and 102 TFEU exemplifies, in quantitative terms, the overall success of Regulation 1/2003 (for an excellent analysis,  see W. Wils, World Competition 2023, “Regulation 1/2003: An assessment after twenty years”).

As regards the uniform application of EU competition law, the decentralisation of enforcement inevitably entailed a risk of inconsistent application of the substantive rules, and in particular of Article 101(3) TFEU. To limit this risk and also to ensure a coherent application of EU competition law, the Commission chose to provide general guidance on the application of these rules in the form of block exception regulations and soft-law instruments (guidelines and

Modernising the ‘Modernisation Regulation’: towards a ‘Regulation 2’ or a ‘Regulation 1/2003+’?

Andreas Scordamaglia-Tousis (1)

1. Andreas Scordamaglia-Tousis is a Référendaire (Legal Secretary) at the chambers of Advocate General Athanasios Rantos at the Court of Justice of the European Union. He is the author of ‘EU cartel enforcement: reconciling effective public enforcement with fundamental rights’, Kluwer Law International, 2013. Views expressed in this op-ed are strictly personal.

notices) as well as to enhance its cooperation with national courts and the NCAs within the European Competition Network (‘ECN’). These two tools have generally worked well in ensuring that NCAs/national courts and companies alike apply the competition rules coherently. Thus, if the centralised system of Regulation 17/62 allowed EU competition policy to develop by disseminating a competition culture across the EU, the decentralised system of Regulation 1/2003 further nurtured the competition culture by directly involving undertakings in the implementation of the competition rules through ‘self-assessment’.

On this subject, it is however worth noting that the risk of inconsistent application of the substantive provisions to specific cases is still present. This is particularly the case for successful Article 101(3) TFEU defences, which are logically (yet regrettably) less frequent, and for which targeted guidance from the Commission remains rare (see, however, the section on “sustainability agreements” of the draft revised Horizontal Guidelines, which clarifies when sustainability benefits can be taken into account as qualitative or quantitative efficiency gains in the assessment under Article 101(3) TFEU). A qualitative appraisal of the consistency of application of the EU competition rules at national level is well beyond the scope of the present contribution, and the ‘metrics’ for such an appraisal can hardly be accurate or objective. What is however undisputed is that the Commission is very well placed for ensuring such consistency given that, when acting under Articles 101 and 102 TFEU, NCAs have a duty to inform the Commission not only of the commencement of an investigation (Article 11(3)) but also of the draft decision or “in the absence thereof, any other document indicating the proposed course of action” no later than 30 days before the adoption of the final decision (Article 11(4)). In this regard, Regulation 1/2003 offers at least three tools that allow the Commission to intervene in national disputes where it fears that there is a risk of inconsistent application:

(i) it can issue a decision of inapplicability pursuant to Article 10 of the Regulation, where ‘the public interest so requires, for instance’, by finding, inter alia, that Article 101 TFEU is not applicable because the Article 101(3) TFEU conditions are fulfilled; (ii) it can offer ‘informal guidance’, pursuant to recital 38, in cases that ‘give rise to genuine uncertainty because they present novel or unresolved questions for the application of these rules’, as occurred recently in the context of the COVID-19 outbreak; and (iii) it can intervene in national judicial litigation through Article 15(1) referrals or Article 15(3) amicus curiae interventions. To my knowledge, these tools have not been used often. The current review could therefore offer an opportunity to ‘revamp’ their application by making them more widely known, particularly to in-house counsel and national courts. The increased role of informal guidance and the possibility of utilising the Article 10 inapplicability decision mechanism have both been discussed by previous authors (see further: “Latitude for effective enforcement of Article 101(3) TFEU under the current regulations – a case for revising administrative practice instead of revising the law?” by Nils Imgarten and  “Inapplicability Decisions under Regulation 1/2003: A ‘Dead Letter’ coming back to life?” by Georgia Theodorakopoulou). Finally, it is important to highlight the importance of the preliminary reference procedure (Article 267 TFEU) in clarifying issues of interpretation of EU competition law. The latest judicial activity has shown an increased propensity for national courts to refer targeted questions of interpretation of EU competition law before the Court of Justice.

It follows that, in an EU composed of 27 Member States with diverse (sometimes diverging) interests, the current institutional architecture for the enforcement of competition law is the most sensible one from a perspective of allocation of resources, as well as for achieving both efficiency and uniformity of application of EU competition law.

Against this backdrop, will the future challenges posed notably by the ongoing ‘digital transformation’ of the global economy affect the existing institutional model of enforcement? In other words, will these challenges lead, figuratively, to a ‘Regulation 2’?

In my view, this question should be answered in the negative.

Contrary to the considerations underpinning the adoption of Regulation 1/2003 that called for a radical rethinking of the institutional architecture of enforcement, the challenges pertaining to digital transformation, in my view,

raise different concerns. The direct applicability of Articles 101 and 102 TFEU by NCAs and national courts, on the one hand, and the reliance on ‘self-assessment’, on the other, are principles that today constitute the cornerstone of competition enforcement, and I can hardly see how the digitisation of the economy will affect this ‘acquis’. In other words, while undoubtedly potentially far-reaching in nature and scope, the current reform discussions relate primarily to targeted amendments (‘fine-tuning’), without affecting the core of the existing institutional architecture, as to enable competition enforcers to keep up with the fast-evolving technological developments (see further G. Pitruzzella, EULL 2023, “Some Reflections on the Review of Regulation 1/2003”, and J. Jourdan, EULL 2023, “Food for Thought for a Revised Regulation 1/2003”). In sum, in my view we are heading towards a ‘Regulation 1/2003+’ instead of a “Regulation 2”.

II. Areas of potential improvements

A preliminary remark is called for. From a methodological point of view, I consider that any proposition regarding the ongoing review process should be based on a thorough assessment (‘taking stock’) of the application of current procedural rules, both in qualitative and quantitative terms. With regard to the former, the Commission has access to all the statistical data it needs to draw normative propositions improving the overall efficiency of current enforcement. As for the qualitative appreciation of the current rules, the  contributions the Commission received in the context of the consultation process from stakeholders are, in my view, key. For instance, feedback received from the undertakings present in digital markets is unquestionably valuable, given that the current enforcement regime relies on ‘self-assessment’. Moreover, NCAs are today, in purely quantitative terms, the primary enforcers of the EU competition rules. In this capacity, NCAs are therefore well placed to formulate proposals on possible improvements particularly given that they will often have first-hand experience dealing with investigations in digital markets. Finally, comprehensive consultation warrants the active involvement of national courts. Indeed, courts are often confronted with appreciations pertaining to the uniform application of competition law, not only of substantive but also of procedural provisions that fall outside the scope of their procedural autonomy, all the more following the proliferation of follow-on actions for damages across the EU.

Dwelling on the substantive provisions, and without claiming to be exhaustive, I have identified some provisions that could in my view be further improved to offer better clarity and accommodate the future needs for swifter and more effective enforcement.

A. Rules on the burden of proof

Article 2 of Regulation 1/2003, last sentence, provides that ‘the undertaking […] claiming the benefit of Article 101(3) TFEU shall bear the burden of proving that the conditions of that paragraph are fulfilled’. This last sentence is silent with regard to Article 102 TFEU. For reasons of legal certainty, we could therefore consider tweaking the wording of Article 2 as follows, to reflect the content of recital 5 (3rd sentence): ‘the undertaking invoking the benefit of a defence against a finding of an infringement pursuant to Article 101 TFEU or 102 TFEU shall demonstrate to the required legal standard that the conditions for applying such defence are satisfied’. Article 2 would then expressly refer to the rules on the burden of proof regarding all types of defence invoked in the context of the application of Article 102 TFEU (such as objective necessity, the protection of legitimate commercial interests and efficiencies). Further, the same provision could be expanded to include a reference to ‘ancillary restrictions’, for instance, along the lines of ‘the undertaking […] invoking that a restriction of competition falls outside the scope of application of Article 101(1) TFEU shall demonstrate to the required legal standard that the restriction is directly related to and objectively necessary to the implementation of a main operation which is not itself anticompetitive in nature and proportionate to the objectives thereof’. Such arguments could potentially become more common in multi-sided digital markets, especially if the legal basis to raise them is clarified as proposed above.

B. Commission powers of investigation

One of the primary elements of reform brought about by Regulation 1/2003 was the empowerment of the Commission with increased investigatory powers, by supplementing the existing Commission’s arsenal (Article 18 requests for information and Article 20 inspections on business premises) with additional investigative tools, including the possibility to conduct interviews (Article 19) and inspections on ‘non-business premises’ (Article 21). The rationale behind this reform was to deal with the fact that the detection of competition law infringements was becoming more difficult (recital 25).

Almost 20 years later, in the current ‘digital era’, the detection and punishment of such infringements becomes even more challenging, among others, for three reasons: first, evidence will often be available solely in ‘digital form’ (for instance, stored electronically in databases or cloud-based services outside the EEA) and no longer be physically located on the premises of the investigated companies; second, the exponential growth of volume of ‘big data’ and the richness of publicly available sources (in the context of Article 102 TFEU); and third,  particularly in the context of cartels, the fact that collusive practices between competitors can take place through much more sophisticated methods than before, often automated (for instance, by means of algorithmic collusion or Artificial Intelligence (AI)).

These challenges will likely transform the way competition investigations will be carried out in the future. To keep up with this reality, the current rules will need to be flexible enough to accommodate new methods of investigation (for instance, remote online investigations) and processing of such information involving the use of new technologies (such as electronic forensics software, AI tools, and data analytics).

The Commission will therefore need to adapt its investigative tools and practices accordingly through soft-law instruments without necessarily having to modify the basic provisions of Regulation 1/2003. Nevertheless, the following two proposals could also be helpful in strengthening the Commission’s investigative apparatus.

With regard to the Commission’s power to take statements, Article 19 of the Regulation seems to contain two inherent weaknesses: first, the Commission has no power to compel persons to give evidence, as such interviews are conducted on a voluntary basis; second, the Commission cannot impose fines to natural persons if the oral statements contain information that is incorrect or misleading. These limitations considerably reduce the utility of such interviews, and, in specific circumstances, could even incentivise people to provide incorrect and misleading information. The EU Treaties grant no competence to the Commission to impose fines on natural persons. In the absence such competences, one could nevertheless envisage expanding the scope of Article 23(1) as to include the possibility to impose fines on undertakings for the supply of incorrect or misleading information in the context of interviews conducted pursuant to Article 19, whenever the natural person voluntarily supplying this information is an employee of that undertaking.

With regard to the Commission’s powers to conduct inspections on non-business premises pursuant to Article 21, including the homes of directors or other undertaking employees, it would appear that in reality the Commission has seldom used this power. The rationale for this power is that business records are sometimes kept in the home of employees working for an undertaking (recital 26). Given the need to protect the right to privacy (Article 7 Charter of Fundamental Rights), non-business inspections are subject to more stringent conditions compared to those carried out on business premises pursuant to Article 20. Indeed, inspections in non-business premises require prior judicial authorisations and the demonstration of a ‘reasonable suspicion’ that evidence is kept in private dwellings. Moreover, Article 21(3) sets out a series of additional criteria that the national judge should take into account when authorising such an inspection, such as ‘the seriousness of the infringement’, ‘the importance of the evidence sought’ and the ‘reasonable likelihood’ that business documents are kept on those premises. However, the COVID-19 outbreak has evidently, and arguably permanently, blurred the boundaries between the private and work spheres. In practice, this means that incriminating documents and data, now usually kept in electronic for-

mat, will more often be found in private computers or mobile phones than at the workplace. Inevitably, recourse to non-business inspections will be more frequent in the future. While the current framework enables the Commission to conduct such targeted non-business inspections, it might be worth revisiting or nuancing some of the abovementioned strict conditions for the application of Article 21 in order to ensure that the investigative powers of the Commission will remain effective. For instance, one may be prone to question whether the limitation of exercising these powers only when ‘serious violations’ are at stake is still justified. Finally, like in the case of Article 19 statements, one could consider expanding the powers of the Commission to enable the imposition of fines on an undertaking, when, in the course of a non-business inspection, an employee unjustifiably obstructs access to or fails to cooperate with the inspecting authorities.

Article 23 of the Regulation empowers the Commission to punish infringements of Articles 101 and 102 TFEU as well as procedural breaches by means of fines. More specifically, it lays down an upper limit of the fine to be determined by reference to the total turnover in the preceding business year, 1% when the infringement concerns the conduct of a company during the administrative procedure (Article 23(1)) and 10% when it consists in an anticompetitive behaviour (Article 23(2)). In fixing the amount of the fine, regard shall be had both to the ‘gravity’ and the ‘duration’ of the infringement. Other than that, Article 23 remains silent as to other criteria that are relevant for the calculation of the fine, as is the Implementing Regulation. The Commission has opted to adopt soft-law instruments for the implementation of Article 23(2)(a), currently the 2006 Fining Guidelines, which have a self-limiting effect given that the Commission cannot depart from the methodology without giving appropriate reasons (see Chalkor,  C-386/10 P, para 60). While discussions pertaining to the improvement of the calculation of fines fall outside the scope of the present contribution, insofar as they do not directly concern the reform of Regulation 1/2003 or its Implementing Regulation, the latter could provide more details on the basic methodology for the calculation of fines. Besides, given the de facto convergence of this methodology at national level, such codification could be a means to make such basic methodology binding on NCAs when applying EU competition rules.

Furthermore, one may be tempted to question whether the traditional approach of (negatively) defining competition law fines as ‘not being of a criminal law nature’ (Article 23(5)) still makes sense, in light of the current level of fines. Indeed, while not all competition infringements qualify as criminal (per Article 7, the Commission may bring an infringement to an end by imposing low or even no fines), one can hardly contest today that the level of fines generally imposed, due to their size, are  de facto criminal in nature within the meaning of Article 6 ECHR and the well-known Engel criteria on the qualification of a “criminal charge”  (see Engel a.o. v. The Netherlands, judgment of the ECtHR of 8 June 1976, para 82). Besides, the legal qualification of competition law is no longer contentious for the EU Courts that have on numerous occasions acknowledged that administrative penalties can be of a criminal nature (see  recently,  bpost SA,  C-117/20, para 27). Thus, while including a formal characterisation of competition fines as ‘criminal’ would be wrong, by the same token I see no use in maintaining Article 23(5) in a future revision of Regulation 1/2003.

III. Concluding remarks

The system of EU enforcement, as initially conceived in 1962, had to undergo substantive changes and be ‘modernised’ in order to adapt to the enforcement requirements of its time. Approaching the twentieth anniversary of the Modernisation Regulation, new challenges for competition enforcement appear on the horizon, particularly in the form of the digital transformation of the global economy. Conscious of the important ramifications that the growth of the digital economy has on the emergence of new business models and of the impact this could have on competition law enforcement, the Commission launched a debate on how the current enforcement rules could be better adapted to address these challenges. This is laudable, as it comes at a relatively early stage and follows a ‘pre-emptive’ rather

C. Fines

than ‘reactive’ logic. As discussed above, I consider that the Modernisation Regulation has proven to be successful and its institutional design allowed considerable flexibility for the Commission to set its enforcement priorities and adapt to new market realities though the adoption of soft-law mechanisms and guidance. The ramifications of digital transformation will therefore most likely be addressed without having to ‘transform’ the existing institutional design in the context of a revamped ‘Regulation 2’. All the more, this does not mean that the current review process should not lead to better use of its potential (for instance, through findings of inapplicability, increased informal guidance, and active presence in national judicial litigation) and to some targeted modifications, particularly in the area of the powers of investigation. Indeed, there is no reason why we should wait for another 20 years before ‘upgrading’ the current regulation into a new ‘Regulation 1/2003+’. Finally, the Commission should view this consultation process as an opportunity to assess valuable feedback from stakeholders active in digital markets, which could be a source of inspiration on how to put to good use the extremely powerful tools the modern technology offers. For instance, an AI tool operated in a controlled environment could prove to be a valuable tool to assist companies in carrying out ‘self-assessment’ and to ensure compliance with the EU competition rules. Similarly, data analysis tools could be used to easily identify conflicting applications of substantive competition rules at national level, based primarily on the information exchanged between the Commission and NCAs or national courts.

EU Competition Procedure: the Ongoing Dialogue

Between Brussels and Luxembourg

Mark English (1)

1. Introduction

Under Regulation 1/2003, and Regulation 17/62 before it, the European Commission has the combined role of investigator, prosecutor and (first instance) judge. Although this has remained a constant, over the decades, there has been a consistent and positive evolution in the procedural rights of investigated parties derived from general principles of EU law. There now exists a “suite” of procedural safeguards in EU competition law procedure, both established in the EU case law and “codified” in the Commission’s body of procedural rules.

This evolution has gone hand-in-hand with the persistent increase in fines, as well as the exposure to damages actions and reputational harm for firms found by the Commission to have infringed EU competition law, and the general recognition in both the EU Courts and in the European Court of Human Rights that competition law in the EU is a matter of a criminal nature (as most recently confirmed in bpost SA, C-117/20, para 27).

More recently, however, one can observe the Commission highlighting the need to balance due process with the “expediency” of proceedings. This tension has clearly manifested itself in the procedural framework set up by the EU legislature to enforce the Digital Markets Act (“DMA”) which, albeit largely inspired by Regulation 1/2003, combines, on the one hand, greater administrative discretion and potentially more serious penalties and, on the other hand, relaxed procedural safeguards: no role for the hearing officer, no right to full access to file, and no oral hearings, to name a few.

This Op-Ed is born out of the concern that a similar emphasis on “expediency” may also influence the ongoing review of Regulation 1/2003 and lead to a dilution of certain procedural guarantees that have built up over the years.

As explained below using a few salient examples, recent developments in Luxembourg, in particular the June 2022 General Court Qualcomm judgment (in which the author – writing here in their personal capacity – was a legal representative of Qualcomm), remind us that due process imposes limits on the Commission’s procedural discretion, and that the EU Courts are ready to intervene to ensure that those principles and limits are respected (see also here). The judgment has arguably also exposed an important lacuna in EU competition law procedure.

2. Some lessons from Luxembourg

In large part, the various procedural shortcomings found in the Qualcomm judgment are already covered by settled case law. This is perhaps one reason that the Commission declined to lodge an appeal before the Court of Justice.

As concerns the collection of documents, the Commission is entitled to issue requests for information (“RFIs”) both by simple request and by decision. The Commission may impose fines for incorrect, misleading and – in the case of RFIs by decision – incomplete responses. The Commission has a wide discretion to decide what requests to make, who to, and how to frame its questions.

1. Mark English is a partner in the Brussels office of an international law firm, where Mark advises in particular on EU and UK competition law. Mark was a legal representative for Qualcomm in Case T-235/18 Qualcomm v Commission. This Op-Ed is written in Mark’s personal capacity and the views set out herein are not attributable to those of his firm or clients.

Nevertheless, pursuant to the duty of sound administration, the Commission is under a duty to compile a complete and accurate investigation file. In other words, the Commission cannot sit on its hands and decline to collect prima facie relevant evidence. While this issue has received significant attention in recent cases such as Apple, Frucona Košice, Real Madrid and others (see e.g. here), the principle can be traced back to the seminal Consten & Grundig ruling, in which the Court of Justice held – in the context of the assessment of an efficiency defence under what is now Article 101(3) – that “as a matter of good administration, [the Commission must] play its part, using the means available to it, in ascertaining the relevant facts and circumstances” (p. 347).

In the Qualcomm case, the General Court was faced with a Commission decision that both placed heavy reliance on documents collected from a third party, Apple, and, according to the Commission, the case file “was not particularly voluminous and consisted mainly of agreements between Qualcomm and third parties” (recital 36). The Commission decision contended that “the Commission was not required to obtain from Apple all internal documents comparing different baseband chipset suppliers leading to the selection of Qualcomm as Apple’s chipset supplier between 2011 and 2015. The Commission has already obtained from Apple a significant amount of internal documents, which, together with the Apple’s responses to the requests for information, the Commission considers sufficient for the purposes of its investigation” (recital 44).

Qualcomm argued that the Commission had failed to conduct a thorough, objective and diligent investigation and thus had fallen short of its investigative duties. What was exceptional in this case, however, was that after the adoption of the Commission decision, Qualcomm engaged in “self-help” and obtained through the US courts documents from Apple that the Commission had failed to obtain during the administrative proceedings. Qualcomm produced these documents to the General Court, which then placed the documents on its file, assessed them, and concluded that the documents did indeed cast (further) doubt on the correctness of the Commission’s conclusions (e.g., recitals 476 and 497-499).

The Commission’s failure to take and provide to the investigated firm adequate notes of meetings was also an issue in the Qualcomm case. The Grand Chamber of the Court of Justice held in its Intel ruling that the Commission is under a duty to take notes of “interviews” carried out in the context of the investigation (in accordance with Article 19 of Regulation 1/2003). However, the Court put the burden on the investigated undertaking to show that had the Commission taken a proper note, the investigated undertaking would have been able to use that note to assist its defence. In other words, despite the procedural error being that of the Commission, it remains for the investigated undertaking to show that if the Commission had complied with its obligations, the Commission might have created an exculpatory document. The Grand Chamber concluded that Intel had failed to meet that burden. The General Court reached the same conclusion in Google (Android)

The Commission failed to provide Qualcomm with any meeting notes during the administrative procedure (see recital 168) and when some notes did appear after the adoption of the decision were insufficient to satisfy the Commission’s obligations. More significantly perhaps, the Qualcomm ruling serves as proof that the requirement to show that material that does not exist could have been exculpatory if it did exist is not an impossible burden to satisfy in practice.

Another reason that the General Court annulled the Qualcomm decision is that the findings of the decision differed significantly from the allegations of the statement of objections, yet the Commission did not issue a supplementary statement of objections prior to adoption of the decision. In particular, the SO covered both the supply of two types of baseband chipset (UMTS and LTE), yet the decision covered only one type of chipset (LTE). Also, the assumed contestable share was very different in the decision from that presented in the SO. These changes had an important bearing on, in the words of the Grand Chamber in the Intel ruling, the “analysis of the intrinsic capacity of [the conduct at issue] to foreclose competitors which are at least as efficient as the dominant undertaking.”

In most respects, the procedural lessons to be learned from the Qualcomm ruling are rather elementary and uncontroversial. There is, however, one element of the ruling which exposes an important lacuna in EU competition law procedure, i.e., the involvement and handling of so-called “third-party informant” who is neither an official complainant nor a leniency applicant.

3. The treatment of “third-party informants”: a lacuna in the system

The role of third-party “informants” is likely to gain relevance in the future, particularly given the Commission’s openness to “review the formal complaint system” under Regulation 1/2003 (see here) and the effective repeal of such system in the context of the DMA. The Qualcomm judgment arguably exposes a lacuna in the current treatment of third-party informants.

The Qualcomm decision states that the underlying investigation was an ex officio one (recital 8), i.e., that the Commission started on its own initiative. Yet, the judgment notes that during the procedure before the General Court, it became apparent that in fact the investigation had been triggered by an unnamed “third-party informant who had requested anonymity” who approached the Commission (recital 269) and “made allegations against [Qualcomm] which, in essence, concurred with the Commission’s theory found at the end of the administrative procedure which led to the adoption of the contested decision” (recital 281). It is unclear from the judgment whether the third-party was a natural or legal person, but it appears that they could potentially have participated in the Commission proceedings as a formal complainant, although they preferred not to (recital 285).

The General Court found that by failing to “make a record, even a succinct one […] of the material which the third-party informant might have provided in relation to its allegations or even the answers to questions which the Commission might have asked it in that regard” the Commission failed in its obligations (recitals 282-283) and thus Qualcomm’s defence rights had not been respected.

In a sense, this can be seen as an unremarkable manifestation of the Commission’s duty to take notes of meetings with third parties. However, that is not all. This meeting with the unnamed third party was the catalyst for the Commission’s investigation, yet the Commission afforded that third-party anonymity and even presented the case as one that the Commission commenced on its own initiative.

In the wake of the Qualcomm judgment, the Commission reportedly committed to continue to protect the identity of anonymous informants “ by any means necessary ”. What “means” exactly does the Commission have in mind? Unlike formal complainants and leniency applicants, we are not aware of any provisions in any regulations or guidance that establish a framework for the handling of such third parties in Commission competition cases. What processes should be carried out to verify whether a request for anonymity is valid? Is it more appropriate to treat the third party as a complainant? Even if there is a legitimate claim for anonymity, does a balancing of that interest against the rights of defence of the accused nevertheless militate in favour of disclosure? What information should be disclosed and at what point in the procedure? Who carries out that assessment? Who, if anyone, oversees that assessment? Who both within and outside the Commission is entitled to know of the identity or the existence of the “third-party informant”? In what conditions should information be disclosed externally, e.g., subject to a “confidentiality ring” type arrangement? Is the decision to grant anonymity one that can be appealed to the EU Courts?

This is an issue that merits a proper procedural framework with appropriate checks and balances, and fair and proportionate safeguards both for the third-party “informant” and for the party, or parties, to whom the allegations relate. The Commission notice on access to file touches upon related issues, including the balancing of confidentiality considerations with rights of defence. Also, and although not a competition law instrument and directed to Member States, the EU legislator has considered some similar issues in the so-called Whistleblower Directive

4. Time for a New and Expanded Mandate for the Hearing Officer?

The Hearing Officer – as the Commission official(s) tasked with ensuring the effective exercise of procedural rights in Commission competition procedures who must carry out their duties in “full independence” – could be wellplaced to oversee the assessment of “third-party informants”. This contrasts with the situation in the Qualcomm case in which it appears from recital 2 of the final report that the Hearing Officer was not even aware of the existence of the “third-party informant” and signed off on the decision on that basis.

More generally, the review of Regulation 1/2003 may be an opportune moment to consider a new – and expanded – mandate for the Hearing Officer(s). The role of the Hearing Officer was created by the Commission in 1982, and the Hearing Officer Mandate was amended in 1994, 2001 and – most recently – in 2011. In particular, it might be appropriate to reconsider the role that the Hearing Office plays in investigations prior to the issuance of the SO.

Today, the Hearing Officer plays a limited role in the investigative phase, and is empowered to deal only with specific issues. The reasoning for this has been that it is only once the SO is issued and the inter partes phase begins that parties benefit from their full procedural rights. However, it seems that some of the procedural failings in the Qualcomm case could have been avoided, or at least mitigated, if the Hearing Officer was more involved earlier in the procedure. The Court of Justice’s recent judgment in Casino also underscores the need to comply with certain procedural safeguards (including in relation to third-party interviews) at all moments, including before the opening of a formal investigation.

According to the Commission, the post of the Hearing Officer was introduced to “enhance impartiality and objectivity in competition proceedings before the Commission.” By the same token, expanding the role of the Hearing Officer will only result in greater impartiality and objectivity at all phases of an investigation, just as reducing it or getting rid of it (as has happened in the case of the DMA) risks leading to precisely the opposite situation.

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