4 - Paul Edgar Micallef by GħSL - Publications

Paul Edgar Micallef Act XVI of 2019 â&#x20AC;&#x201C; a missed opportunity to improve market regulation in Malta?

Dr Micallef is a senior visiting lecturer at the University of Malta. This paper reflects only his opinion and is based on the situation as it was on 10 April 2020.

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1. Introduction

n 2017, I wrote an article entitled ‘An effective regulatory enforcement and sanctions post the Federation of Estate Agents case: the issues’, where I considered the issues arising following the judgement of the Constitutional Court in the names Federation of Estate Agents vs. Direttur Ġenerali (Kompetizzjoni), l-Onorevoli Prim Ministru u l-Avukat Ġenerali [‘the Federation of Estate Agents judgement’].1 In that article I suggested what steps could be taken to address the issues raised in the Federation of Estate Agents judgement.2 When I wrote that article, Government had not as yet published any legislative measures to address the issues raised.3 The first proposals by Government to address the issues raised were published in a public consultation issued on the 10 August 2018 (the ‘August 2018 Public Consultation’), which consultation included a draft law with the amendments that Government then was proposing to the Competition Act and the Consumer Affairs Act.4 Subsequently, Bill Number 80 entitled ‘The Competition Act and Consumer Affairs Act and other Laws (Amendment) Act, 2019 (‘Bill Number 80’) was published on the 26 March 2019 and became law on the 31 May 2019 following the enactment of Act XVI of 2019 entitled ‘The Competition Act and Consumer Affairs Act and other Laws (Amendment) Act’.5 According to the ‘Objects and Reasons’ of Bill Number 80, the purpose of the amendments was to address the concerns raised by the Constitutional Court on the imposition of administrative penalties by nonjudicial bodies in the Federation of Estate Agents judgement of the 3 1 Paul Edgar Micallef, ‘An Effective Regulatory Enforcement and Sanctions Regime Post the Federation of Estate Agents Case: The Issues’ (2018) <http://lawjournal.ghsl.org/viewer/211/download.pdf> 92-116. 2 ibid 112 - 116. 3 My earlier article was written in late 2017 and therefore based on circumstances as they were at that time. The article was subsequently published in Volume XXVIII of Id-Dritt in May 2018. 4 ‘An Act to amend the Competition Act, Cap. 379 and the Consumer Affairs Act Cap. 378 and other Laws, to extend the competence of the Civil Court (Commercial Section) and to make ancillary and consequential provisions thereto’ (Government of Malta, 2018) 5 Bill 80 of 2019 - An Act to amend the Competition Act, Cap. 379 and the Consumer Affairs Act, Cap. 378 and other Laws, to extend the competence of the Civil Court (Commercial Section) and to make ancillary and consequential provisions thereto, and Act XVI of 2019 - An Act to amend the Competition Act, Cap. 379 and the Consumer Affairs Act, Cap. 378 and other Laws, to extend the competence of the Civil Court (Commercial Section) and to make ancillary and consequential provisions thereto.

Competition and Consumer Law May 2016, and in the Thake Rosette Nomine et vs. Kummissjoni Elettorali judgement of the 8 October 2018.6 Act XVI of 2019 provides for various changes to the Competition Act (‘Chapter 379’) and to the Consumer Affairs Act (‘Chapter 378’) that impact significantly the market regulatory regime in Malta, factoring primarily changes in relation to the enforcement powers of the Director General (Competition) (‘DG Competition’) and of the Director General (Consumer Affairs) (‘DG Consumer Affairs’) operating within the regulatory set-up of the Malta Competition and Consumer Affairs Authority (‘MCCAA’).7 As a result of these amendments both Director Generals (‘DGs’) are required to apply to the Civil Court (Commercial Section) (‘Civil Court’) to impose punitive sanctions if there is an alleged non-compliance of the laws that they enforce, or if they wish to prohibit acts or omissions that are non-compliant with the laws they enforce.8 These amendments differ substantially from the previous regulatory regime whereby both DGs were empowered to impose administrative fines against non-compliant persons and to issue orders prohibiting malpractices or requiring compliance.9 In this article, with the benefit of the sight of the legislative amendments for a revised regulatory regime where enforcement and other regulatory measures, including the imposition of any sanctions, to curb anticompetitive practices require a priori a court ruling subsequent to a request by the DG concerned, I discuss whether the regulatory regime subsequent to Act XVI of 2019 provides for better market regulation. In this context, the August 2018 Public Consultation preceding the amendments in Act XVI of 2019 is of particular relevance in evaluating these amendments and other alternative solutions, since Government subsequent to the legislative proposals it made in the aforesaid public consultation, substantially revised those proposals when it published Bill Number 80 on the 26 March 2019. These new changes according to Government were necessary because of the Constitutional Court judgement in Thake Rosette nomine et vs. Kummissjoni Elettorali [the ‘Thake nomine judgement’] given some weeks after the closure of the 6 Bill No.80 of 2019 - Competition Act and Consumer Affairs Act and other Laws (Amendment) Bill, <https://parlament.mt/13th-leg/bills/bill-no-080/> 7 Act XVI of 2019 also amends other laws including the Code of Organisation and Civil Procedure (Cap. 12), the Voluntary Organisation Act (Cap. 492), the Malta Competition and Consumer Affairs Authority Act (Cap. 510), the Collective Proceedings Act (Cap. 520), and various other consequential amendments (see Part VII of Act XVI of 2019). 8 Hence, under Chapter 378 as amended by Act XVI of 2019, the DG Consumer Affairs must apply to the Civil Court if he wishes to prohibit an unfair commercial practice or the use of an unfair commercial term. See articles 12 to 12G of Chapter 378. 9 Unless stated otherwise, the reference to ‘persons’ includes both physical and legal persons.

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aforesaid public consultation.10 The amendments introduced by Government as reflected in Bill Number 80 in the main remained unaltered when the Bill was approved by Parliament and subsequently published as Act XVI of 2019 on the 31 May 2019.11 Government through the amendments in Act XVI of 2019, decided to address the concerns raised in the Federation of Estate Agents judgement by amending Chapter 379 and requiring that the DG Competition in relation to the laws he enforces, must apply to the Civil Court for a ruling to determine if there has been an infringement of competition law, and if the Court agrees that there has been a breach, for the Court to decide on the sanction to be imposed. In this context Government decided to introduce similar measures in relation to the DG Consumer Affairs and the laws enforced by that DG, but not in relation to other non-judicial bodies which at law have similar enforcement powers to those previously available to the DG Competition to impose administrative fines.12 In the amendments it introduced, Government went beyond the issues raised in the Federation of Estate Agents judgement by also requiring that both the DG Competition and the DG Consumer Affairs apply to the Civil Court if the DG in question considers that there is an act or omission which is in breach of the law enforced by that DG, and which act or omission should, in the opinion of the DG, be curbed. Hence for example, whereas previously the DG Consumer Affairs could issue a compliance order requiring the modification or deletion of a contractual term considered by him to be unfair in terms of the Chapter 378, subsequent to the amendments under Act XVI of 2019, the DG Consumer Affairs must apply to the Civil Court for the issue of a compliance order to ensure conformity with the law.13 Similarly, if the DG Competition considers that there is an infringement of Articles 5 or 9 of Chapter 379, and consequently, that it is necessary to stop any resultant anti-competitive practices, the DG is now required to apply to the Civil Court for a ruling determining the appropriate regulatory measures and, where applicable, any consequential sanctions where applicable.14 10 See Parliamentary debates during the second reading of Bill Number 80 held on the 8 April 2019. 11 See Permanent Committee for the Consideration of Bills discussion during the sitting of the 6 May 2019 <https://parlament.mt/en/13th-leg/adjunct-committee-for-the-consideration-of-bills/?type=committeedocuments>. 12 Such non-judicial bodies include the Regulator for Energy and Water Services and the Malta Communications Authority and the Electoral Commission amongst others. 13 The same procedure now applies where the DG Consumer Affairs wishes to curb acts or omissions relating to other aspects of consumer law which he enforces such as unfair commercial practices. 14 Articles 5 and 9 are the core substantive provisions of Chapter 379 and relate re-

Competition and Consumer Law

This situation is in contrast to the previous regime whereby both DGs were empowered to issue orders requiring compliance with the laws they enforced and, where necessary, to impose administrative fines. The former regime had its imperfections, and needed substantial amending. This consideration is demonstrated by the fact that in the case of competition law for a period of eight years, few enforcement orders were issued curbing anti-competitive practices and then only a few thousand euros were actually collected in administrative fines imposed for infringements of competition law requirements.15 This was hardly the hallmark of a pro-active competition watchdog curbing anti-competitive practices effectively and in good time. Matters were not that much better in case of the enforcement of consumer protection laws by the DG Consumer Affairs with few sanctions being imposed in the same span of time.16 It is of concern to note that notwithstanding the wide remit of both DGs, which covers most commercial activities, the regulatory measures taken by either DG over the years is low.17 This situation however does not justify the amendments introduced under Act XVI of 2019 which render the taking of any regulatory measures by either DG to curb malpractices entirely dependant on a court decision. Such amendments may actually exacerbate matters in so far as timely and effective enforcement is concerned given that now either DG must apply and wait for a court ruling in order to stop or punish malpractices. If anything, the enactment of Act XVI of 2019 should have been preceded by an in-depth analysis to see why the regulatory activities of both DGs following the establishment of the MCCAA in 2011 was relatively muted. A glance at the low number of regulatory decisions issued by both DGs, the number of contestations before the now defunct Consumer and Competition spectively to prohibited agreements and practices, and to abuse of a dominant position in the market. 15 See the response to PQ number 27947 given on 17 October 2016 whereby the Minister responsible for competition when asked about the number of administrative fines imposed and paid since 2011, stated that during this period two fines were imposed and paid, one of €1000 and another of €2000. In response to PQ number 10169 given on 3 June 2019, the Minister replied that subsequent to the Federation of Estate Agents judgement no more fines were imposed. See also: Ivan Camilleri, ‘Competition watchdog left powerless to implement decisions’ Times of Malta (30 August 2016) <https://www.timesofmalta.com/articles/view/20160830/ local/competition-watchdog-left-powerless-to-implement-decisions.623542>. 16 See the response to PQ 10170 where the Minister responsible for competition listed the number of administrative fines imposed up to 3 June 2019. 17 See response to PQ 10172 whereby the Minister responsible for competition and consumer protection gave a year-by-year break-down of the regulatory decisions issued by each DG.

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Appeals Tribunal (‘CCAT’) and, most revealing of all, the low number of fines collected by either DG, indicate that the former procedure was in need of an overhaul and necessitated the introduction of measures to provide for a more robust regulatory regime.18 The amendments introduced by Act XVI of 2019 may however have the reverse result of undermining timely and effective market regulation once all cases where regulatory measures need to be taken, must first be referred to the Civil Court for a decision by that Court authorising or otherwise the taking of the required regulatory measures, and where applicable determining what sanctions are to be imposed if there is a breach of the law. All this may lead to more lengthy proceedings than was the case under the former regime in addressing abusive market practices to the detriment of timely market regulation, once now the DG concerned, after making his investigations and reaching his conclusions that the law may have been flouted, must then initiate court proceedings and obtain a court ruling that there is a breach of the law and the imposition of any sanctions and, or orders to put a stop to the malpractice. Under the former regime it was up to the DG concerned to decide whether to act and what measures to impose. Whilst such regulatory decisions by either DG could be contested before the former CCAT, the DG concerned had the possibility of taking regulatory measures of his own initiative and issue an order to stop a malpractice in its tracks.19 This subsequent to the enactment of Act XVI of 2019 is no longer the case. Whilst the concerns raised in the Federation of Estate Agents judgement were certainly no simple matter to solve, the question arises whether the legislative measures introduced under Act XVI of 2019 address those concerns, and equally important whether they provide for an efficient and effective regime able to curb market abuse in good time. It is in the light of these considerations that the impact of the amendments introduced by Act XVI of 2019 on market regulation in Malta is evaluted in this article.

18 See response to PQ 101173 whereby the Minister for justice listed on a year-by-year basis, the appeals filed before the CCAT commencing from 2011 when the MCCAA came into being. 19 See Part XI ‘Compliance orders’ of Chapter 378 notably articles 94 to 96 thereof and Article 12A of Chapter 379 of the Laws of Malta, as worded prior to the enactment of Act XVI of 2019.

Competition and Consumer Law

2. The events leading to Act XVI of 2019 The need to amend the enforcement powers of the DG Competition arose following a constitutional application before the First Hall of the Civil Court (constitutional jurisdiction) by the Federation of Estate Agents (‘the Federation’) contesting the commencement of investigations by the DG Competition under the Competition Act.20 In its application the Federation argued that investigations by the DG in relation to a possible breach of Article 5(1) of the Competition Act (‘Chapter 379’) and of Article 101(1) of the Treaty on the Functioning of the European Union (‘TFEU’) constituted a breach of the fundamental rights of the Federation under Article 39(1) of the Constitution of Malta (‘the Constitution’) and, under Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Liberties (‘the European Convention’). The Federation said that if the DG Competition decided that the Federation had acted in breach of the aforesaid provisions, then the DG was empowered under Chapter 379 to impose an administrative fine of up to ten per cent of the turnover of the undertakings making up the Federation in the preceding business year. The Federation argued that the power of the DG to impose what it described as ‘severe fines’, rendered the nature of such administrative fines as criminal and therefore such infringements as tantamount to criminal offences. The Federation said that under the Constitution and under the European Convention a person, including a legal person such as the Federation, who is being investigated of having committed a criminal offence can only be tried before an independent and impartial court, and that consequently the provisions under Chapter 379 empowering the DG Competition to impose such fines were in breach of both the Constitution and of the European Convention.21 It is pertinent here to note that when these constitutional proceedings were filed, the DG Competition had not arrived at any conclusions, and more specifically had not imposed any fines, but was still in the process of investigating if there was a breach of competition law.22 20 The constitutional application was filed on the 11 November 2013 against the DG Competition, the Prime Minister and the Attorney General. 21 See judgement dated 21 April 2015 given by the First Hall in the names Federation of Estate Agents vs. Direttur Ġenerali (Kompetizzjoni) et at page 3 et seq. 22 Regrettably, many commentators including some MPs during the debate in Parliament on Bill number 80 were under the mistaken impression that the DG Competition had actually issued a decision imposing a 1.2 million euro fine on the Federation, when this was not the case. See the parliamentary debate during the second reading of Bill Number 80 held on the 8 April 2019 where at least one MP said that such a fine had been imposed.

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The First Hall concurred with these arguments by the Federation, deciding that though the alleged infringement in relation to which the Federation was being investigated was classified as being of an administrative nature, the nature and severity of the penalty that could be imposed rendered the infringement as being criminal in nature. The First Hall referred to Article 39(1) of the Constitution which provides that a person accused of a criminal offence must be given a fair hearing within a reasonable time before an independent and impartial court, noting that the DG Competition was not a court for the purposes of Article 39(1). The First Hall decided that the then applicable enforcement provisions of Chapter 379 which empowered the DG Competition to impose administrative fines were in breach of Article 39(1) of the Constitution and of Article 6(1) of the European Convention.23 The judgement of the First Hall was subsequently appealed by the DG Competition and the Attorney General before the Constitutional Court. This Court confirmed the judgement of the First Hall other than with regard to the alleged breach of Article 6 of the European Convention, whereby the Court, contrary to what the First Hall had decided, held that there was no breach of the European Convention.24 The Federation of Estate Agents judgement of the 3 May 2016 meant that Government had to consider what legislative measures to take to address the issues raised in that judgement. The gravity of the impact of this judgement on the enforcement powers of the DG Competition came to the fore a few months after the aforesaid judgement when the DG Competition in October 2016 issued a decision relating to the energy sector by deciding that Falzon Group Holdings Limited (â&#x20AC;&#x2DC;Falzon Groupâ&#x20AC;&#x2122;) had made pressure on M&N Camilleri Petrol Station to enter into a resale price maintenance agreement in breach of Article 5(1)(a) of Chapter 379, given that the said agreement had as its object the prevention, restriction of distortion of competition by indirectly fixing the selling price of diesel. The DG however decided not to impose any administrative fines in the light of the Federation of Estate Agents judgement, thereby leading to a situation where an undertaking was found to have acted in breach of competition law, but was not punished.25 23 ibid footnote 21 above, the Federation of Estate Agents judgement of the 21 April 2015 given by the First Hall at pages 27 et seq. The First Hall in particular referred to Articles 12A, 13, 13A and 21 of the Competition Act. 24 See the Federation of Estate Agents judgement of the Constitutional Court given on the 3 May 2016 at pages 42 et seq. 25 See Decision of the Office for Competition dated 4 October 2016 Case Comp-MCCAA 3/2015 at page 73 et seq. <https://mccaa.org.mt/media/1169/decision_4_10_16_non_ confidential_version-2.pdf>. See also the reply by the then Minister responsible for competi-

Competition and Consumer Law

At this juncture, Government should have taken remedial measures in very short order given that effectively the Federation of Estate Agents judgement as interpreted by the DG Competition, meant that unless the law was amended, the DG Competition did not have the necessary enforcement tools to curb any alleged infringements of competition law. Whilst it is not contested that the enactment of the necessary amendments required some time and careful thought given the nature of the constitutional issues involved, the possibility of at least adopting some provisional solution at law to ensure that the DG Competition could still ensure effective compliance with competition law does not appear to have been actively pursued at the time. One option then would have been for Government to amend Chapter 379 whereby the DG Competition could apply for the issue of a court order determining if there has been a breach of the applicable law and if in the affirmative, the sanction to be imposed. Such measures could have been introduced strictly as a short-term solution to ensure that the DG Competition was not at any stage bereft of the necessary tools at law to ensure compliance with competition law. In the interval Government could have initiated a wide-ranging exercise to consider what changes could be implemented to address matters in a comprehensive manner. Regrettably, none of this happened and instead for a period of three years the DG Competition effectively had no powers under competition law to stop and punish anti-competitive practices. Initially, it appears that the first response of Government to address the issues raised by the Federation of Estate Agents judgement was to amend the Constitution.26 Though no public consultation was made on the amendments which Government then was considering in this context, it appears that the amendments under consideration in order to address the issues raised by the Federation of Estate Agents judgement necessitated amendments to Article 39(1) of the Constitution, which amendments in turn required a twothirds majority vote of the members of Parliament and therefore the support tion to a PQ number 28519, where the Minister explained that because of the Federation of Estate Agents judgement decisions by the DG Competition imposing fines could not be imposed. ‘House of Representatives – Parliamentary Questions Website’ Parlament ta’ Malta (7 November 2016) <http://pq.gov.mt/PQWeb.nsf/7561f7daddf0609ac1257d1800311f18/c1257d2e0046dfa1c125806b00327f5b!OpenDocument> 26 Member of Parliament (‘MP’) Clyde Puli who in 2017 was the Opposition spokesman, in an article he wrote in The Times of Malta stated that Government had contacted the Opposition proposing amendments to article 39(1) of the Constitution. See: Clyde Puli, ‘Safeguarding consumers’ rights’ Times of Malta, (18 January 2017) <https://www.timesofmalta.com/articles/ view/20170118/opinion/Safeguarding-consumers-rights.636839>.

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of the Opposition in Parliament given that Government did not then enjoy a two-thirds majority.27 It appears however that this particular route was not pursued by Government, since the Opposition was not prepared to support amendments to the Constitution in order to address the issues raised by the Federation of Estate Agents judgement. The spokesman for the Opposition in explaining the stance of his party in opposing the amendments to the Constitution argued that if a law is declared to be unconstitutional then it is that law which should be amended and not the Constitution. The same spokesman also voiced his concern about what he described as being ‘the repercussions’ of such an amendment in that it would extend to all criminal offences.28 Effectively, this stance by the Opposition brought to a close any proposals to address the issues raised by the Federation of Estate Agents judgement by amending the Constitution. The next development occurred on the 10 August 2018 when Government finally issued a public consultation containing its proposals to amend the Competition Act, the Consumer Affairs Act and other laws to address the concerns raised by the Federation of Estate Agents judgement.29 The salient measures proposed in this consultation included the substitution of the CCAT with the Civil Court (Commercial Section) as the competent forum to determine appeals from regulatory decisions taken by either DG; the right of a further appeal from decisions of the Court of First Instance to the Court of Appeal on both points of law and of fact; the automatic suspension of a decision taken by either DG imposing a fine once an application contesting that fine has been filed before the Court; the application of a settlement procedure to all competition law infringements including abuse of dominance cases and other types of restrictive practices; and the requirement in relation to competition law that inspections of business premises require a priori a warrant issued by the Court of Magistrates.30 Significantly, Government also proposed that amendments be made to Chapter 378 since Government considered that the Federation of Estate Agents judgement was also relevant to the regulatory proceedings that could be instituted by the DG 27 See Article 66(2) of the Constitution which lists Article 39 as one of the articles of the Constitution which requires the vote of at least two-thirds of all the members of Parliament. 28 Clyde Puli, ‘Safeguarding consumers’ rights’ Times of Malta, (18 January 2017) <https://www.timesofmalta.com/articles/view/20170118/opinion/Safeguarding-consumers-rights.636839>. 29 ‘An Act to amend the Competition Act, Cap. 379 and the Consumer Affairs Act Cap. 378 and other Laws, to extend the competence of the Civil Court (Commercial Section) and to make ancillary and consequential provisions thereto’ (Government of Malta, 2018) 30 ibid. 1 - 3 which provide a résumé of the salient measures proposed.

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Consumer Affairs.31 Notwithstanding the impact of the proposed measures on the effective regulation of the market, the public response to the August 2018 Public Consultation was poor with only five respondents, two of which were foreign respondents.32 Of note in the Government response to the submissions made by the public to the August 2018 Public Consultation was the statement by Government that in the light of other recent judgements by the Constitutional Court a few weeks after the issue of the said consultation, a number of provisions contemplated in the proposed amendments would have to be redrafted.33 No details then, however, were given as to which proposed provisions as stated in the August 2018 Public Consultation would need to be redrafted and the precise reasons for doing so. On the 26 March 2019, Bill Number 80 entitled ‘An Act to amend the Competition Act, Cap. 379 and the Consumer Affairs Act and other Laws, to extend the competence of the Civil Court (Commercial Section) and to make ancillary and consequential provisions thereto’ was published in the Government Gazette. The Bill as indicated in the Government Response to the August 2018 Public Consultation provided for some significant changes to the measures originally proposed in the draft law published as part of public consultation made the previous August. As a result of these changes to original proposals by Government, in the case of infringements of either competition law or of consumer law, the DG concerned was now required to institute court proceedings against the person suspected of non-compliance, applying to the Civil Court for a decision that an infringement has been committed and if in the affirmative, determining the sanction to be imposed. The requirement onerous on either DG to apply to the Civil Court was not limited to those instances where the DG deemed it necessary that some form of punitive sanction be imposed, but also extended to those instances where either DG considered it necessary that an order requiring compliance with the law be issued against a non-compliant person. This was in contrast to the previous regulatory regime where either DG was empowered to issue such orders. These changes in Bill Number 80 were with some minor amendments approved by Parliament and subsequently published as Act XVI of 2019 in the Government Gazette on the 31 May 2019. 31 ibid. 3. 32 See Annex A to the ‘Government response to the Consultation on (An Act to amend the Competition Act, Cap. 379 and the Consumer Affairs Act Cap. 378 and other Laws, to extend the competence of the Civil Court (Commercial Section) and to make ancillary and consequential provisions thereto)’ 33 ibid. 12.

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3. The issues consequential to the changes introduced by Act XVI of 2019 The legislative amendments introduced under Act XVI of 2019 give rise to various issues.34 These include the omission by the legislator to provide for a solution which also addresses the possible infringement of Article 39(1) of the Constitution by public authorities other than the DG Competition and the DC Consumer Affairs, where such other authorities exercise their power at law to impose punitive sanctions; the failure to address the three year hiatus between the 3 May 2016 when the Federation of Estate Agents judgement was given and the enactment of Act XVI of 2019 during which period the DG Competition was bereft of the power to impose or to apply for the imposition of punitive sanctions; and the consequences following the migration of the regulatory powers including enforcement powers from the DG Competition and the DG Consumer Affairs to the Civil Court. These issues are considered below separately.

4. Measures to address the concerns vis-à-vis other public authorities? One glaring omission subsequent to the enactment of Act XVI of 2019 is that this law does not provide a comprehensive solution with regard to the declared purpose of Bill Number 80 to address the concerns raised by the Constitutional Court on the imposition of administrative penalties by non-judicial bodies. The ‘Object and Reasons’ to Bill Number 80, referred to two judgements of the Constitutional Court namely the Federation of Estate Agents judgement, and Thake nomine judgement. However Act XVI of 2019 fails to provide any legislative amendments in order to address the concerns expressed by the Constitutional Court in the Thake nomine judgement in relation to the alleged non-conformity of the applicable norms under the Financing of Political Parties Act (Chapter 544) enforced by the Electoral Commission which on the basis of that judgement, were declared by the Constitutional Court to be in breach of Article 39(1) of the 34 The list of issues discussed in this paper is not exhaustive and factors only the main issues which I believe must be addressed.

Competition and Consumer Law

Constitution.35 Moreover, the concerns about the imposition of administrative fines by non-judicial bodies go beyond the Federation of Estate Agents and the Thake nomine judgments, since such concerns also relate to a myriad of other public authorities apart from the DG Competition or the Electoral Commission. This is evident from the reply given by the Minister for Justice to a parliamentary question (‘PQ’) whereby the Minister provided a list of constitutional court judgments involving the contestation of the power of different public authorities to impose administrative fines.36 Furthermore, the non-conformity of the powers to impose punitive sanctions of public authorities other than the DG Competition was highlighted by the First Hall in its judgement in the Federation of Estate Agents case where that Court had referred to other public authorities such as the Malta Communications Authority and the Malta Resources Authority which authorities, as was the case with the DG Competition, have the power by law to impose punitive sanctions.37 Notwithstanding the evident need to address matters comprehensively, the legislator in enacting Act XVI of 2019 choose to introduce legislative solutions only in so far as these impact the role and enforcement powers of the DG Competition and DG Consumer Affairs within the MCCAA, ignoring that there are various other public authorities in Malta which by law have the power to impose punitive sanctions on noncompliant persons. This omission by the legislator was highlighted both by the Consumer Association following the publication of Bill Number 80 and during the debate in Parliament whilst Bill Number 80 was being given a second reading.38 The piecemeal approach taken by the legislator in addressing the concerns raised by the Constitutional Court only in relation to the enforcement powers of the DG Competition and DG Consumer Affairs raises the spectre of more constitutional cases by impacted persons objecting to the imposition of punitive measures by other public authorities. 35 See Constitutional Court judgement in the names Thake Rosette nomine vs. Kummissjoni Elettorali decided 8 October 2018 at page 111 et seq. Reference was made in particular to articles 22 and 44 of Chapter 544. 36 See reply to PQ number 8456 given by the Minister responsible for justice, <http://pq.gov.mt/PQWeb.nsf/7561f7daddf0609ac1257d1800311f18/c1257d2e0046dfa1c1258391003cc8e8!OpenDocument>. 37 ibid footnote 21, the Federation of Estate Agents judgement of the First Hall of the 21 April 2015, 35. 38 See: ‘Amendments to the Competition Law –CA’s comments’ Consumers Association Malta (6 April 2019) <http://camalta.org.mt/amendments-competition-law-cas-comments/> and remarks by MP Chris Said during the second reading of Bill Number 80 on the 8 April 2019.

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Irrespective of whether one agrees or not with the measures introduced under Act XVI of 2019 whereby the DG Competition and the DG Consumer Affairs are required to apply to court for the issue of any regulatory measures including punitive sanctions, the legislator will probably at some stage be confronted with the situation whereby a decision has to be taken on whether to continue addressing the issue of non-conformity with Article 39(1) of the Constitution on a piecemeal approach by amending separately the various applicable laws empowering the different public authority to impose punitive sanctions, or else consider the enactment of legislative measures which address the concerns raised by the Constitutional Court holistically, which would then entail amending the Constitution. The logical and practical approach is to adopt a comprehensive solution providing for norms which strike a balance between on the one hand the effective and efficient exercise of regulatory powers and on the other hand the rights of a person to a fair hearing. During the debate in Parliament on Bill Number 80, it was suggested that one measure that could be considered was to amend the applicable provisions of the Constitution to reflect the wording of article 6 of the European Convention. In this regard, it was pointed out that the Constitutional Court in the Federation of Estate Agents judgement whilst deciding that there was a breach of article 39(1) of the Constitution, conversely also held that there was no breach of article 6 of the European Convention.39 This suggestion could serve as the basis of a solution which would have the merit of addressing the concerns raised in a comprehensive manner.

5. The three-year hiatus of a DG Competition lacking enforcement powers One worrisome consequence as a result of the overdue enactment of Act XVI of 2019 on the 31 May 2019 is that for a period of three years, the DG Competition was powerless to impose any meaningful dissuasive sanctions.40 This point was made in the course of the debate on Bill Number 80 where Government was strongly criticised for waiting three years to enact 39 See remarks by MP Chris Said during the second reading of Bill Number 80 on the 8 April 2019. 40 At no stage did the Constitutional Court question the enforcement powers of the DG Consumer Affairs. Therefore, in practice there was nothing to stop the DG Consumer Affairs from exercising its powers to impose punitive fines post the Federation of Estate Agents judgement.

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amendments to the law to address the concerns raised in the Federation of Estate Agents judgement.41 Some months earlier the Consumer Association in its response to the August 2018 Public Consultation had been even more specific on this point, noting that in practice the DG Competition during the interim period had no effective tools to curb acts or omissions in breach of competition law.42 The negative impact of the delay in enacting the necessary laws was amply demonstrated a few months after the Federation of Estate Agents judgement, in a decision taken by the DG Competition involving an alleged breach by Falzon Group a leading operator in the energy sector, where the DG concluded that this operator had acted in breach of competition law, but because of the issues raised in Federation of Estate Agents judgement, decided not impose administrative fines.43 Moreover, Falzon Group subsequently instituted a constitutional lawsuit contesting this ruling by the DG Competition on the grounds that the DG in concluding his investigations and issuing a decision contravened the fundamental rights of the Group as protected by the Constitution and the European Convention. Significantly, the First Hall in a preliminary judgement did not uphold a plea by the DG Competition that the investigations undertaken by the DG did not constitute proceedings of a criminal nature given that the DG had declared that he was not imposing any fine on Falzon Group. In this preliminary judgement the Court referred extensively to the Federation of Estate Agents judgement, holding that the investigations initiated by the DG could still be equated with criminal proceedings.44 The Falzon Group ruling by the DG Competition heralded a period of close to three years characterised by lack of active regulatory enforcement coupled with the non-imposition of dissuasive sanctions in so far as noncompliance with competition law is concerned. During this three-year hiatus, the outcry against this state of affairs was subdued, other than for the concerns 41 ibid footnote 39, remarks by Said during the second reading of Bill Number 80. 42 See paragraph 1.1. of the response of the Consumer Association to the August 2018 Public Consultation, see ‘Amendments to Competition Law – CA Malta’s comments’ Consumers Association Malta (6 April 2019) <http://camalta.org.mt/amendments-competition-law-ca-maltas-comments/>. 43 ibid footnote 25, the decision of the Office for Competition in the Falzon Group case, at page 74. 44 See preliminary judgement of the 8th November 2018 by the First Hall in the names Falzon Group Holdings Limited et vs. Direttur Ġenerali (Kompetizzjoni) et. At the time of writing, this constitutional case was still pending.

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raised by the Consumer Association, The Times of Malta and a couple of MPs.45 In particular, the private sector was conspicuously silent throughout this period, this notwithstanding that abusive anti-competitive practices if unchecked could cause considerable harm to business, consumers and the market in general. The lack of any such significant outcry that such a state of affairs was allowed to subsist for such a long period is of concern when one considers the importance of the role of the MCCAA, through the DG Competition and DG Consumer Affairs, as the principal guardian of effective market regulation.

6. The migration of regulatory powers from the DGs to the Civil Court The focus of the amendments under Act XVI of 2019 is tied to the migration of the regulatory powers to impose sanctions and to issue orders to ensure compliance with competition law and consumer law from the DG Competition and the DG Consumer Affairs on the one hand onto the Civil Court on the other. This migration gives rise to various concerns related to the timely imposition of corrective measures to curb malpractices and to ensure compliance with the law. The paramount consideration which stands out in this regard is that whereas previously either DG could of his initiative issue an order to ensure compliance with the law or impose a fine, now in either case the DG in question must apply to the Civil Court, convince that Court that there are valid grounds for the issue of the fine or order being requested, and then wait for a court decision. All this means that when compared to the 45 See for example reports carried in the issues of The Times of Malta on the 12 October 2016 and 22 February 2018 both by journalist Keith Micallef entitled respectively ‘Competition Office reform delay creates fines loophole’ and ‘Competition Authority two years in limbo’. Keith Micallef, ‘A watchdog with no teeth - Belated action will enable Competition Office to impose fines’ Times of Malta 12 October 2016 ‘<https://www.timesofmalta.com/articles/view/20161012/ local/a-watchdog-with-no-teeth-belated-action-will-enable-competition-office.627731>; and Keith Micallef, ‘Competition authority still in limbo 2 years after judgment rendered it toothless’ Times of Malta (23 January 2018) <https://www.timesofmalta.com/articles/view/20180223/ local/competition-authority-still-in-limbo-2-years-after-judgment.671390>. The Consumer Association in its response to the August 2018 Public Consultation raised similar concerns. See: ‘Amendments to Competition Law – CA Malta’s comments’ Consumers Association Malta (6 April 2019) <http://camalta.org.mt/amendments-competition-law-ca-maltas-comments/>. In a PQ MP Chris Said asked about the measures being taken by Government in the aftermath of the Federation of Estate Agents judgement, see: ‘House of Representatives – Parliamentary Questions Website’ Parlament ta’ Malta (3 October 2018) <http://pq.gov.mt/PQWeb.nsf/7561f7daddf0609ac1257d1800311f18/c1257d2e0046dfa1c125833c004a7e1a!OpenDocument>.

Competition and Consumer Law

previous regime, more time will be taken to stop or punish malpractices in the market since now, not only must the DG in question decide that there are valid grounds to proceed, but in order to do so that DG needs a Court decision. One can argue that both Chapter 378 and Chapter 379 contemplate measures which at least on paper can be taken in the short term to deal with malpractices whose impact on the market is immediate. Specifically, under both laws, it is possible for the respective DGs to apply for the issue of an interim order by the Court to address cases of urgency. However, even in this context, the law provides for time constraints that may impact the taking of corrective measures in good time. Hence, whereas under the previous regime the DG Consumer Affairs could in advance of a final decision, order interim measures to remedy a situation which could give rise to immediate and serious harm to the collective interests of consumers. In doing so the DG was required to give ‘a reasonable opportunity’ to the person against whom the interim measures were being contemplated. This person could contest the interim measures taken by the DG before the CCAT. However, any such appeal did not suspend any interim measures taken.46 Conversely, under the new regime the DG Consumer Affairs must apply to the Civil Court for the issue of interim measures. The person against whom the interim measures are being requested, in turn has eight days to reply. The Court is then required to decide the application ‘with urgency’. Any interim measure issued by the Court is enforceable upon its delivery and no appeal is possible.47 This means that under the new regime at least eight days, probably more, will pass before any interim measure can be ordered by the Court, this irrespective of the immediacy of the impact that an alleged malpractice may have on the market. This is in contrast to the former regime where the DG Consumer Affairs had more latitude in the taking of interim measures as he was not bound by a fixed period during which the person investigated could respond given that the DG was required to give the person concerned ‘reasonable opportunity’ to respond. In theory, such reasonable opportunity if justified by the urgency of the specific circumstances could be less than the eight days period now applicable. Under Chapter 379, the situation is in most respects similar since in urgent cases involving serious and irreparable harm to competition the DG Competition must apply to the Civil Court for the issue of an interim order. The person against whom the interim measure 46 cle 14B. 47

Consumer Affairs Act (Chapter 378 of the Laws of Malta prior to Act XVI of 2019), Artiibid. as amended, Article 12E.

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is requested has eight days in which to reply and the Court is then required to decide the application with urgency.48 Under the previous regime in cases of urgency, which involved a risk of serious and irreparable damage to competition, the DG Competition was of his own initiative empowered to order interim measures on the basis of a prima facie finding of infringement of Articles 5 or 9 of Chapter 379.49 It is suggested that a more flexible regime should be considered giving the Civil Court more leeway to issue interim measures in short order. This is the case, for example, with the issue of a prohibitory injunction where the Court can in urgent cases reduce the period of reply conceded by law to a person against whom a prohibitory injunction is being requested.50 An issue of some concern is that the amendments introduced under Act XVI of 2019 in migrating the authority to impose fines from the DGs to the Civil Court, do not distinguish between the quantum of the fine that may be imposed, and that therefore the sanction irrespective of whether a thousand euro may be imposed or conversely a million euro, must in all instances be referred to the Civil Court for its decision. This consideration fails to factor the fact that one of the cardinal elements underlying the Federation of Estate Agents judgement was precisely the severity of the fine that could be imposed by the DG Competition. It appears that the legislator in enacting the amendments to both Chapter 379 and Chapter 378, considered that the respective DGs should in absolute terms be bereft of any authority to impose any fine irrespective of the amount involved. One questions whether this was too drastic a measure and if instead some latitude should have been given to enable either DG to impose fines not exceeding a pre-established maximum in relation to relatively minor instances of non-compliance. As things stand, either DG requesting the imposition of a sanction must in all instances apply to the Civil Court, hardly the ideal way of dealing effectively with relatively minor infringements. Act XVI of 2019 provides for the abolition of the former CCAT and instead empowers the Civil Court as the competent adjudicative forum with the role not of an appellate forum as was the case with the CCAT, but as already discussed, with the new role of effectively deciding if there has been a breach of the law, and if there has been of the sanctions to be 48 49 50 875.

Competition Act (Chapter 379 of the Laws of Malta), Article 15. ibid. Article 15 prior to the amendments under Act XVI of 2019. Code of Organisation and Civil Procedure (Chapter 12 of the Laws of Malta), Article

Competition and Consumer Law

imposed, thereby assuming functions that were previously onerous on both DGs.51 Irrespective of whether one agrees with the migration of the regulatory powers from both DGs to the Civil Court, one questions whether the abolition of the CCAT was necessary. From a reading of the Federation of Estate Agents judgement one of the issues relating to the non-conformity of the previous regime with the Constitution was that the CCAT was not a court for the purposes of Article 39(1) of the Constitution more so as it was composed of a judge and two lay members who were not members of the judiciary.52 Rather than doing away with the CCAT, one measure which could have been considered was to modify the composition of the CCAT by empowering the presiding judge to decide issues relating to punitive measures on his own, whilst however retaining the lay members in so far as decisions relating to non-punitive issues are concerned. One point, which was not sufficiently discussed during the amendments to Chapter 379 and to Chapter 378, was the importance of having in place expert adjudicative fora. Rather than abolishing the CCAT, measures should have been considered as to how its role could be enhanced given the complexity of issues relating to competition and consumer affairs whereby it is imperative that the competent adjudicative forum have access to expert persons hailing from different professions who can provide an informed opinion.

7. Conclusion There are two specific aspects to consider when evaluating Act XVI of 2019. The first aspect relates to the impact on market regulation in so far as the roles of both DGs are concerned. Act XVI of 2019 provides for measures, which in relation to effective competition law and consumer law enforcement are debateable. The Constitutional Court in the Federation of Estate Agents judgement questioned the powers of the DG Competition to impose punitive fines on non-compliant undertakings. In that judgement, however, the Court did not question the faculty of the DG Competition to issue orders requiring compliance with competition law as distinct from the power to impose fines if there is non-compliance. Yet, notwithstanding one of the new salient measures under Act XVI of 2019 requires that the DG Competition must in the case of the issue of such compliance orders apply 51 See the August 2018 Public Consultation at pages 1 and 2. 52 See the Federation of Estate Agents judgement of the Constitutional Court given on the 3 May 2016 at page 44 et seq.

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to the Civil Court and await the judgement of that Court before proceeding any further. The fundamental rights protected under Article 39(1) of the Constitution relate to the right of a person charged with a criminal offence to be afforded a fair trial within a reasonable time before an independent and impartial court established by law. Nowhere in this provision is there any reference to a fair trial before a court if the person in question is required to comply with an order requiring him to desist from an anti-competitive practice. If anything, the right to a fair trial before a court would arise if that person does not comply with such an order and as a result is then liable to punitive sanctions. The legislator should reconsider the changes introduced under Act XVI of 2019 by affording both DGs the power to issue such orders, without the need to seek a court judgement. As things stand with the changes under Act XVI of 2019, remedial measures to address malpractices whose negative impact is immediate, may not always be taken in good time this to the detriment of consumers and of competition. The other aspect relates to the wider picture concerning the impact on the enforcement by non-judicial bodies in general. The measures under Act XVI of 2019 impact only the powers of the DG Competition and DG Consumer Affairs, ignoring that according to the â&#x20AC;&#x2DC;Objects and Reasonsâ&#x20AC;&#x2122; of the Bill Number 80 the concerns raised by the Constitutional Court were not only with regard to the imposition of administrative penalties by the DG Competition, but also to non-judicial bodies in general.53 This failure by the legislator will possibly lead to other constitutional lawsuits contesting the enforcement and punitive powers of other non-judicial bodies. If this situation is to be avoided, then a comprehensive solution is required factoring amendments to the article 39(1) of the Constitution. Otherwise, Government may be faced with a situation whereby it will have to amend a multitude of sector specific laws on an ad hoc basis in response to constitutional lawsuits contesting the enforcement powers of diverse public authorities. To answer the question posed in the title to this paper, the amendments introduced in Act XVI of 2019 are regrettably a missed opportunity and do not serve to provide for a more effective, efficient and perhaps most important of all timely market regulation. The inclusion of a requirement that the DGs must invariably now seek a court order not only to impose sanctions but to issue orders to prohibit practices that are of detriment to fair competition and, or to consumers, is a step in the wrong direction. The measures 53 As observed earlier the Objects and Reasons of Bill Number 80 even refers to Thake nomine judgement which relates to the enforcement powers of the Electoral Commission.

Competition and Consumer Law

introduced appear to ignore the factual realities of the regulatory regime as it was between 2011 and 2019, where in practice few successful regulatory interventions took place and even fewer sanctions were imposed. The focus of any change to the law should have addressed the causes underlying the inefficiencies characterising regulatory intervention rather than adding a tier of regulatory clearance for either DG in order to curb malpractices. There is some irony in the fact that the process that initially lead to the amendments in question was heralded by a lawsuit based on the very remote possibility that DG Competition could impose 1.2 million euro fine, this when in the preceding five years the amounts in total actually recovered by the same DG amounted to a mere three thousand euro. Much emphasis has been made on the importance of safeguarding fundamental human rights as protected by Article 39(1) of the Constitution and rightly so. Conversely, not much has been said about the need to ensure that there is in place an effective regulatory regime which can curb malpractices in good time. In most EU Member States, the national competition regulators have the power to impose fines and to issue orders to prohibit malpractices in good time. The exercise of these powers is subject to judicial oversight, whereby the person under investigation has the right at law to contest any measures before the competent adjudicative fora. The same should apply in the case of Malta if there is to be in place a regulatory regime which is empowered to take effective and timely measures to ensure compliance. In a previous article, I wrote on this subject prior to the enactment of Act XVI of 2019, I had suggested that amendments to the Constitution should be a matter of last resort but should not be excluded outright.54 Now, with the benefit of hindsight looking also at the wider picture and the possible impact on the enforcement powers of other non-judicial bodies, I believe that amending Article 39(1) of the Constitution is unavoidable if there is to be a comprehensive solution to the concerns raised by the Constitutional Court in the Federation of Estate Agents judgement. The practicable solution is to amend article 39(1) of the Constitution to reflect the provisions under article 6 of the European Convention, this in the light of the consideration that the Constitutional Court had in the Federation of Estate Agents judgement decided that there was no breach of the European Convention.55 54 Paul Edgar Micallef, â&#x20AC;&#x2DC;An Effective Regulatory Enforcement and Sanctions Regime Post the Federation of Estate Agents Case: The Issuesâ&#x20AC;&#x2122; (2018) <http://lawjournal.ghsl.org/viewer/211/download.pdf> 112-116. 55 This measure was suggested by MP Chris Said during the second reading on Bill Number 80 during the sitting of the 8 April 2019.

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The fundamental requisite that must be safeguarded is that a person under investigation once confronted with a regulatory ruling has the possibility to contest such a ruling before an independent adjudicative forum before it is enforceable. The inclusion of such a measure would be in line with the underlying spirit of the law intended to balance on the one hand the need to curb malpractices in good time in the interest of the general public wellbeing and on the other hand the protection of fundamental human rights.