I. INTRODUCTION
Competition law differs from other branches of law for various reasons. It is not about the fairness or morality to be instilled in the actions which mark societal behaviour. Instead the rules of competition reflect economic principles, designed to render the operation of the markets in a manner beneficial to the common good. These rules are of immense importance as they not only vouchsafe against the monopolistic and exploitative tendencies of the bigger market players, they are also instrumental in providing the smaller and newer entrants in the markets to work towards achieving self-sustaining levels.
Their importance is noted well in by the US Supreme Court when it observed, “the antitrust laws … are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free enterprise system as the Bill of Rights is to the protection of our fundamental freedoms”. [
To speak of the European Economic Communities (
- Article 81, prohibiting anti-competitive agreements,
- Article 82, prohibiting abuse of dominant positions, and
- The EC Merger Regulation (ECMR), prohibiting anti-competitive merges, acquisitions and joint ventures.
II. REGULATORY STRUCTURE UNDER THE EC COMPETITION
The competition law framework, as originally envisaged under the EC Treaty concentrated upon the EU Commission as the sole benefactor and regulator of market actions pertaining to competition in the
Since the aim is to comparatively examine the EC Competition law structure, it is this new framework which forms the subject-matter of study of this project. With this background, let us proceed towards the attainment of our objectives.
(a) The legal regime for competition in the EC
As with other Community policy areas, EC Competition law is established and developed via a variety of legal sources. At the top of the legal hierarchy is the EC Treaty. By itself the Treaty does not provide sufficient detail to permit the existence of a fully and completely functioning legal order, and a considerable quantity of secondary legislation has been made. Article 249 of the Treaty lists the types of secondary legislation that may be adopted by the EC, which are, regulations, decisions, and directives. Thus EC competition law may be enforced by way of decisions made by the EC Commission and Article 249 provides that a ‘decision shall be binding in its entirely upon those to whom it is addressed’.
The legislations may further be interpreted by the European Court of Justice (ECJ) or the national courts. Thus these decisions serve as the third source of EC competition law. Further, the notices and guidance issued by the EC Commission are also binding instruments of state policy and thus serve as another important source of the competition law.
As noted above, Article 81 and 82 comprise the bulk of the substantive competition rules of the EC. However what is important as regards their implementation is the objective set forth in Article 2 of the EC Treaty, which includes ‘a high degree of competitiveness and converging economic performances.’ Further, Article 3(g) provides that the activities to be undertaken for the purpose of achieving the objectives of Article 2 include, the development of ‘a system ensuring that competition in the internal market is not distorted. In these one may find the broad objectives upon which the functioning of the EC competition law regime is based.
(b) The EC Regulatory Authorities
While Articles 81 and 82 form the bulk of the substantive rules, Articles 83 and 85 provide the mechanism for the implementation of these substantive rules. Article 83 makes a provision for the enactment of ‘any appropriate regulation or directives to give effect to the principles set out in Articles’ 81 and 82. Thereunder various regulations have been made, the major ones being Regulation 1 of 2003, block exemption regulations, etc.
In this framework, Article 85 confers upon the EC Commission the primary role in the enforcement of the EC Competition law by requiring it that it ‘shall ensure the application of the principles laid down in Article 81 and 82’. In this regard, the Commission is required to investigate infringements of law and in cases of breach, it is duty bound to ‘propose appropriate measures to bring it to an end’. Thus our study proceeds with the examination of the EC Commission.
(i) EC Commission
Given the importance of the institution and its pivotal role in rendering the EC competition law effective, the Commission has been described as the ‘guardian of the Treaty’, or the ‘watchdog of the Community’. Established under the Treaty itself, the rules relating to the Commission are set out in Articles 211-19 of the Treaty with Article 211 providing that the Commission should ensure compliance with the EC law, and exercise specific powers given to it by the Council of Ministers.
The Commission consists of 27 Commissioners, nominated by the Member States. Administratively the Commission is divided into Directorates General, with one Directorate General having responsibility for competition policy, which includes the contentious areas of state aids, and merger policy as well as ‘antitrust’.
The role of the Commission, as at present, is to supervise the operation of competition policy and to play the lead role in the formulation of that policy as change is needed. The Commission has the power to investigate infringements of the law, and to take appropriate action, on its own initiative, or in response to complaints. However, each Member state is also required to apply the law in specific areas with the use of the appropriate national procedures applied by the relevant national competition authority. The Commission is also required to submit an annual report to the European Parliament detailing its activities in competition law over the last year.
The change in the role of the Commission came with the EU Council of Ministers adopting Regulation 1/2003 in November 2002 (which came into force from May, 2004), replacing Regulation 17/62 which set out the hitherto existing procedural rules for enforcement of Articles 81 and 82. This Regulation introduced fundamental changes to the process by which EC competition law was enforced and also the roles of the various authorities.
Under the new regime, the Commission is not required to be notified in advance about their proposed actions whereas earlier the companies were required to notify agreements to the Commission in advance for clearance confirming that the arrangements do not infringe Article 81(1) or an exemption confirming that the arrangements infringe but are exempted under Article 81(3). Under the new regime, companies will now have to form their own view on whether the agreement is compliant and would survive an attack by a regulator or other third party during the life of the arrangements or even after they are concluded. Thus the market players have been vested with the power to declare that the conditions of Article 81(3) are satisfied so as to protect arrangements from attack; an instance of self-regulation.
Nonetheless, in order to assist the players in arriving at decisions regarding compatibility of their actions with the competition law, the Regulation does not formally prevent parties applying to court for a declaration as to the status of an agreement. Further, in respect of novel or unresolved questions on the application of Articles 81 and 82, the Commission retains the power to provide informal guidance.
It may also be noted that now the power of regulation is decentralized with the National Competition Authorities (NCAs) and the national courts of the Member states also allowed enforcing Articles 81 and 82. This may, depending on the geographical spread of the arrangements, give aggrieved parties a range of potential venues. Nonetheless the parental role of the Commission is retained with the Regulation requiring each NCA to send the Commission drafts of its intended decisions at least 30 days before the NCA intends to adopt the decision. This would allow the Commission to detect any inconsistency in the application of Articles 81 and 82 and, if necessary, take over the investigation.
It is now widely believed that under the aim of modernization the purpose is instead to allow the Commission to focus its attention on the enforcement of competition law; moving from being a regulator to a policeman, a belief which has been reinforced with present Competition Commissioner Mrs. Neelie Kroes’ handling of the Microsoft case. Under the new regime, the Commission deals only with complaints that have a sufficient ‘Community interest’. This is brought out by the draft Commission notice on the handling of complaints which may be only in cases wherein;
- One or more agreements or practices have effects on competition where there are cross-border markets covering more than three member states or several national markets; or
- Where a Community decision is required to develop Community competition policy or provide effective enforcement.
This emphasizes the Commission’s new role as dealing only with matters that are strategic or of EU-wide significance.
(ii) The Advisory Committee
Article 14 of Regulation 1/2003 makes provision for an Advisory Committee on Restrictive Practices and Dominant Positions, which must be consulted before the Commission takes various decisions, in particular those which have an adverse affect on those to whom they are addressed. It is the forum where experts from the various competition authorities discuss individual cases and general issues of Community competition law. It is consulted at the request of the Commission or a
(iii) National Competition Authorities & European Competition Network
With the modernization in 2004, an important role was assigned to the National Competitions Authorities (NCAs) in the effectuation of the EC competition law regime. While earlier they had been responsible for giving effect to the national competition laws and the orders of the Commission in so far as they pertained to their states, now they also vested with the powers to apply Article 81 and 82 of the EC Treaty, a power which was hitherto vested solely with the EC Commission.
Towards this end, Article 5 of Regulation 1/2003 sets out the basic role of the national competition authorities. It states,
“The competition authorities of the Member States shall have the power to apply Articles 81 and 82 of the Treaty in individual cases. For this purpose, acting on their own initiative or on the complaint, they may take the following decisions:
- requiring that an infringement be brought to an end,
- ordering interim measures,
- accepting commitments,
- imposing fines, periodic penalty payments or any other penalty provided for in their national law.
They may also decide that there is no ground for action. However their importance in the EC competition law framework is derived from Article 11(1) of Regulation 1/2003 which provides that ‘the Commission and the competition authorities of the Member States shall apply the Community competition rules in close cooperation’. Thus from being independent observers and actors, the NCAs have been formally instituted as the lower tier of the EC competition regime, supplementing the functions of the Commission.
The purpose of this new system is the expected faster resolution of competition cases than it has been in the past where the Commission was the sole arbiter in such matters. In its zeal to maintain constant communication between the two tiers of regulators, Article 11 of the Regulation 1 of 2003 imposes upon the Commission the requirement to send the NCAs copies of important documents in its possession, and the NCAs in turn are required to tell the Commission whenever they commence formal investigative measures. Similarly, the NCAs intending to take infringement actions or accepting commitments etc., are required to inform the Commission and provide a summary of the case and a copy of the proposed decision. Thus it is seen that significant powers have been conferred upon the NCAs but nonetheless they are required to act in close coordination with the EC Commission. [To this effect, the Commission has also produced a Notice on cooperation with the Network of Competition Authorities (2004) OJ C101/43]
In order to maintain close coordination amongst the various authorities responsible for implementation of the EC competition law and to avoid inconsistencies in their actions, the Regulation 1 of 2003 also created a framework, known as the European Competition Network (ECN). This ECN consists of the European Commission and the competition authorities of the 25 Member States. It was established during the modernization reform of the EC antitrust rules as a forum for discussion and cooperation of Member States competition authorities in cases where Articles 81 and 82 of the EC Treaty are applied. The ECN ensures an efficient division of work and an effective and consistent application of EC competition rules.
This creates an effective mechanism to counter companies which engage in cross-border practices restricting competition. As European competition rules are applied by all members of the ECN, the ECN provides means to ensure their effective and consistent application. Through the ECN, the competition authorities inform each other of proposed decisions and take on board comments from the other competition authorities. In this way, the ECN allows the competition authorities to pool their experience and identify best practices.
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The above examination of the regulatory model for the implementation of competition law in the EC may serve some purpose in the re-evaluation of the competition model proposed for
(a) Regulatory Structure under the Competition Act, 2002
Enacted on the lines of the recommendations of the Raghavan Committee, the Competition Act of 2002 marks a significant shift in the economic policy of
Chapter
Section 19 of the Act required the conducting of ‘inquiry into certain agreements and dominant position of enterprise’. This may be proceeded to upon the basis of a complaint alleging contravention of the provisions of the Act or by the Commission on its own motion. Similarly Section 20 requires ‘inquiry into combination by the Commission’. Section 22 provides for the Benches of the Commission and Section 23 provides for the ‘distribution of business of Commission amongst Benches’. Thereupon there are other provisions providing the procedure for investigation and its necessary fallouts.
This provisioning for the exercisal of the quasi-judicial functions of the Commission may as well be comparable with the various Tribunal operating in
It is noteworthy that the arrival of the Competition Act of 2002 of
(b) Lessons from the EC model for
The EC Competition law model is a unique one as it envisages two tiers of regulatory structure (pursuant to the 2004 reform) and the situation is almost unparallel across the world. Even the
Given the existing situation, the Competition Commission of India (CCI) is at best comparable as a NCA of the EC framework, being required to administer the Competition Act of 2002 alone. However in my opinion it would be worthwhile to develop the CCI on the lines of the EC Commission as the first tier of regulator. This presupposes institution of the second tier of regulator, which may in case of
What I propose is that in its quest for competition to spurt from the grass root levels and thereupon to gush up to the top, the aspect of regulation should be decentralized to these local commissions with the CCI to monitor their functioning and involved in the designing of the policy framework, being equipped with all the relevant information and filled with the experience of these commissions.
Thus I propose a second tier of competition commissions, initially divided on geographic lines (like one for north, south, east, and west regions each) and later on one for each state, which are primarily entrusted with the responsibility and functions of investigation, monitoring compliance etc., on the lines of the NCAs in the case of EC. They would act in close coordination with each other and with the CCI at the top to assist them and regulating their activities.
This would serve three fold purposes. Firstly, the CCI would be rendered divested from the investigative functioning and thus it can devote its resources towards designing of policy framework for competition in
To this effect, I am aware that this may be termed as premature for
(IV) CONCLUSION
The position of
In tandem with India's transition from a highly controlled to liberalized economy, the Competition Act 2002 has replaced the earlier focus on concentration of economic power with a focus on effects on competition, thereby bringing Indian competition law substantially in line with international practice. However the country is yet to witness an efficient competition regulator.
It is imminent that by the time a proper competition framework becomes operationalized in
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