A Framework for European Competition Law

Co-ordinated Diversity

Christopher Townley

• Publisher: Hart Publishing
• Year: 2018
• ISBN:
  9781509916467
• Edition: 1
• Topic: Law
• Subtopic: Antitrust
• Index: Law

This book asks whether the current push to increase uniformity in substantive and procedural competition policy and enforcement in Europe, as well as in related institutional structures, is desirable. It focuses on European Union (EU) competition policy and enforcement (related to Articles 101 and 102 TFEU and the merger rules), the equivalent rules in the Member States, and the relationships between these different legal orders. Uniformity has many benefits; yet, the advantages of diversity are also legion, enabling more policy experimentation and innovation; and improving the ability to accommodate national preferences. Contrary to the overwhelming view of academics, practitioners and regulators in this area, the book argues that uniformity is insufficient and examines ways of achieving a better mix of uniformity and diversity (the EU's motto is 'United in Diversity'). To achieve this better mix, the book offers a new framework for European competition law: Co-ordinated Diversity. Finally, this book discusses whether Co-ordinated Diversity fits with the current legal order in the EU, as well as the EU constitutional settlement more generally, and suggests some ways that it might be made compatible with this order with relative ease. The book's impact could be significant: changing the results in individual cases; the way cases are argued; and what information is relevant. More importantly, it builds the theoretical foundations for fundamentally altering the way in which the EU and the Member States' competition authorities interact, allowing space for disagreement and uncertainty. The aim is to improve the effiiciency and effectiveness of competition policy-making and enforcement in Europe. It should also increase the legitimacy in this field (rebalancing towards the Member States). Co-ordinated Diversity provides a new way of seeing the EU that better blends difference, when this is demanded, with uniformity and its benefits, as necessary. A timely and ambitious work, this book will be read with interest by all practitioners and academics interested in EU competition law, as well as the related fields of political science and economics.

PART C

Co-ordinated Diversity and its Limits in the EU

Part C Introduction

Part A showed that while uniformity brings valuable benefits in terms of competition policy and enforcement (eg, lower enforcement costs for firms, uniform consumer protection, greater ability to influence international firms and people, and the opportunity to develop more detailed competition rules), diversity can bring substantial benefits too (particularly more democratic legitimacy and increased potential to innovate, which can result in medium to long-term efficiency gains, given Hayek’s knowledge problem). We also saw that different Member States (and the EU) disagree about substantive aims and methods, procedural rules and institutional structures, and so diversity on these dimensions seems important. On the other hand, the risk of externalities leading to beggar-thy-neighbour policies between Member States seemed to be potentially something that we should avoid where possible.

Part B searched for mechanisms that might achieve an optimal balance of uniformity and diversity. It argued that this is a complex problem; the optimal balance also depends upon the specific case at hand. Co-ordinated diversity, as set out in Chapter 8, is my suggestion for a way of achieving more efficient and effective solutions than the European system today. In addition, it is also hoped that co-ordinated diversity would bring more democratic legitimacy.

The debate in competition policy and enforcement in the EU overwhelmingly highlights the benefits of uniformity (and seeks to achieve ever more uniformity in order to enhance these benefits). The role of Part C is to examine co-ordinated diversity’s fit with the EU, specifically its emphasis on the need for more diversity. First, Chapter 9 asks whether co-ordinated diversity is possible today in the current competition system. It finds that much of it could easily be achieved through minor changes (such as amending Commission notices), although some things, such as organising clusters of Member States and reducing the Commission’s central role (to the extent that it has one), are not possible in today’s legal framework. This is already an interesting result, given the emphasis on uniformity. It should not be surprising. As Helmut Kohl has said (generally rather than on competition policy and enforcement), one should not mistake ‘a unified Europe with a standardised Europe’.¹

Given the results in Chapter 9, Chapter 10 then discusses the EU’s constitutional settlement. This is important because if the current competition system does not fully tolerate co-ordinated diversity, then one needs to assess whether the current rules could be changed. One can only do this within the limits of the EU constitutional system. Understanding the EU constitutional system is not an easy task, and there is much confusion about how it constrains EU competition policy and enforcement. Furthermore, it is not a subject that is discussed very often, even since the changes wrought by the Lisbon Treaty. Focusing on the space for diversity in competition policy and enforcement in the EU, particularly executive and legislative competences, Chapter 10 shows that the EU constitutional system leaves a lot of space for diversity. This is particularly true for the competition system. There is certainly much more space than is generally understood today, as many (wrongly) believe that the EU competition rules, in their entirety, have become an area of exclusive EU competence.

Finally, Chapter 11 asks whether there is space for co-ordinated diversity within the EU constitutional order today. It starts by examining the tensions present when deciding who is the best-placed decision-maker(s) from the perspective of efficiency, effectiveness and legitimacy. This is not a binary choice – Member State interests can be integrated into EU decision-making and vice versa. Clusters of similar Member States might also resolve tensions. It is also worth remembering that the optimal balance changes over time and may depend on the context in a specific case. Once we trace these dilemmas, we examine the constitutional choices for dealing with these issues in the EU constitutional order. In fact, the EU Treaties and the EU Courts do not seem to impose a consistent, overarching constitutional framework. They seem to invite ideas for better organising the competition system. The picture that emerges here is that it is certainly possible that the EU Courts could embrace co-ordinated diversity and that this would be particularly likely if the Council expressly chose to implement a system based on co-ordinated diversity in the EU.

¹‘Helmut Kohl Calls on EU Leaders to Take “One Step Back” after Bexit Vote’ The Guardian (16 July 2016), https://www.theguardian.com/world/2016/jun/30/helmut-kohl-warns-eu-leaders-one-step-back-after-brexit-vote.

9

Legal Limits to Co-ordinated Diversity under Today’s EU Rules

I.Introduction

This chapter asks whether co-ordinated diversity is compatible with the current legal framework in EU competition law. In other words, could co-ordinated diversity be implemented today and, if not, what changes would be needed so that this could happen? Once we have identified areas where change is needed, Chapters 10 and 11 assess co-ordinated diversity in a deeper EU constitutional context, asking whether it is appropriate to make these changes and, if it is, exploring any potential limits that there might be.

There are two stories about the modernisation of EU competition law and policy.¹ Some say that it is a way for the Commission to consolidate its control on competition regulation throughout the EU, centralising through hierarchy.² If this is true, then the resulting focus on uniformity leaves little room for co-ordinated diversity. Others argue that modernisation has liberated the NCAs from overbearing constraints and, while there are significant reporting obligations on them, these reporting obligations allow the Commission and the NCAs to share their knowledge and learn from a wider set of competition policies in this dynamic field.³ Svetiev argues that Regulation 1/2003 (a key modernisation instrument in EU competition policy) provides sufficient:

[D]evolution of responsibilities and latitude to national authorities and courts to pursue diverse national solutions to competition problems in ways that recognise a variety of interests and objectives potentially implicated in such interventions.⁴

If this is true, then it is a story that embraces diversity, at least to some extent, and such a telling may be more compatible with, and leave more space for, co-ordinated diversity.

In fact, we will see that the battle for the soul of modernisation continues to this day.⁵ Section II starts by assessing how much space NCAs have for diversity in relation to substantive competition law and policy, both national and EU. By this I mean what gaps the EU Courts’ judgments have left to national diversity. We also see that, insofar as these gaps exist, the Commission claims the right to fill them, treating its own decisions as if they carried legal precedent. This does not seem right in EU law. Thus, I argue that, in fact, the EU Courts have left considerable room for the NCAs to exploit. To be clear, I am not arguing that the Member States can ignore EU Court judgments. Also, if the Commission has made a decision in a matter, the Member States should still follow this decision in the same matter, for example, when it comes to damages actions. This is not a challenge to the supremacy of EU law. Section II then moves on to the room left to the Member States for diversity in their procedural rules and institutional structures. There used to be considerable room for diversity here too. We will see though that there is increasing pressure for uniformity, and the EU Court tests may even be changing to more deeply embed a more uniform standard.

Having argued that there is room for diversity in relation to the interpretation of substance, procedural rules and institutional structures, section III turns to the compatibility of co-ordinated diversity with the current legal framework in EU competition law. You will remember that there were three levels to consider. It starts with a focus on individual NCAs, asking whether the optimal balance under co-ordinated diversity is best sought in the application of national or EU competition law; it suggests that EU competition law is better for several reasons. It also asks whether there are any limits to the diversity that NCAs can pursue in EU competition law, ie, what limits might there be in terms of general principles of law. As we saw in Chapter 8, competition law and policy are closely intertwined. Even if NCAs had a lot of freedom with competition policy, this could be seriously undermined when it came to competition enforcement if many NCAs had the right to apply their own interpretation of the competition rules in the same case (the most restrictive competition policy would ‘win’). Therefore, I also discuss case allocation, including what scope there is for NCAs to consider the effects in other Member States in their competition decisions (NCAs need to be able to consider the effects in other Member States) and whether other NCAs can undermine each other with conflicting competition decisions. Section III then goes on to discuss whether co-ordinated diversity’s rules relating to mini-networks and the network as a whole are compatible with current EU law. It finds that minor changes are needed to the current legal framework, but that, in general, these can easily be made.

II.Diversity and its Limits under the Current EU Rules

This section starts by looking at what diversity the current EU and national competition laws tolerate. It is split into two parts: first, it looks at the room for substantive difference; then, it examines the space for differences in procedure and institutional design.

A.Substantive Diversity

In relation to the diversity of the substantive interpretation of competition law in the EU, we need to consider two things: first, the application and interpretation of EU competition law, by all relevant actors, both EU and national; and, second, whether EU competition law might affect the application and interpretation of national competition laws.

i.EU Competition Law⁶

Regulation 1/2003 empowers the Commission to take decisions terminating infringements of Articles 101 and 102 TFEU (prohibition decisions), as well as to take decisions of inapplicability in relation to both Treaty articles.⁷ It can also make block exemptions⁸ and produce competition notices explaining its interpretation of these provisions. While the CJEU has held that they cannot take inapplicability decisions,⁹ the NCAs of Member States can also take prohibition decisions in relation to Articles 101 and 102.¹⁰

Therefore, many decision-makers means that the inconsistent application of these provisions is possible and even likely. Legal provisions cannot be applied perfectly uniformly. Our focus is to ask whether substantive diversity is currently acceptable in EU law (or even desirable).¹¹

The first point is that the EU Courts ensure that in the interpretation and application of the EU Treaties the law is observed (Article 19(1) TEU); they have the final say on the legal interpretation of Articles 101 and 102.¹² After many years of EU Court judgments, and its own decisions, the Commission believes that Articles 101 and 102 are reasonably clear. In 1999, it said:

Undertakings also at present enjoy a satisfactory level of legal certainty thanks to the set of clear rules that have been developed and refined through more than 30 years of Commission decision-making practice and Court of Justice case-law and by the many different kinds of general instruments that have been adopted (block exemption regulations, notices and guidelines).¹³

Nevertheless, much of Articles 101 and 102 remain open to interpret...