White Paper on modernisation of the rules implementing Articles 81 and 82 (formerly Articles 85 and 86) of the EC Treaty

1) OBJECTIVE

The White Paper proposes to replace the existing system of notification and centralised authorisation provided for in Regulation No 17 in respect of cartels and abuses of dominant positions with an exception system. This would also be based on a decentralised application of the competition rules and intensified ex post supervision with a view to:

• simplifying administrative formalities for firms;
• enabling the Commission to take more effective action against serious infringements of the competition rules;
• enhancing the role of national authorities and courts in implementing competition law while guaranteeing that it is applied in a uniform manner.

2) ACT

White Paper on modernisation of the rules implementing Articles 81 and 82 of the EC Treaty (formerly Articles 85 and 86 of the EC Treaty) [Official Journal C 132 of 12.5.1999].

3) SUMMARY

Context

Regulation No 17 of 1962 laid down a system of supervision requiring restrictive practices affecting trade between Member States to be notified to the Commission in order for them to qualify for an exemption. The Commission thus has the exclusive power to authorise restrictive practices meeting the conditions of Article 81 (3) (formerly Article 85(3)) of the EC Treaty.

This system of centralised authorisation was necessary and proved very effective in establishing a "competition culture" in Europe at a time when the interpretation of Article 81 (restrictive practices) and Article 82 (abuse of a dominant position) was still uncertain and when the Commission was making an effort to integrate national markets which were still very heterogeneous. At national level, this system has enabled a body of rules to be created which is now accepted by all Member States and firms as being fundamental to the proper functioning of the internal market.

However, the Commission's exemption monopoly has led companies to notify large numbers of restrictive practices to Brussels not only in order to obtain legal certainty but also in order to block private action before national courts and national competition authorities; this has undermined efforts to promote a rigorous and decentralised application of the competition rules.

It is thus essential to adapt the system to the economic and social changes which have occurred since 1962 so as to relieve companies of unnecessary bureaucracy, to allow the Commission to become more active in the pursuit of serious competition infringements and to increase enforcement of the competition rules by the national authorities and courts. In this respect, the White Paper proposes the setting-up of an exception system accompanied by a modernisation of the competition rules.

Exception system

The White Paper maps out the transition from a centralised authorisation system based on prior notification to an exception system whereby any administrative or judicial authority called on to apply the provisions prohibiting agreements which restrict competition (Article 81(1) of the EC Treaty) could simultaneously apply the provisions laying down the conditions for exemptions contained in Article 81(3) of the EC Treaty. Article 81 would, in its entirety, then become a directly applicable provision which individuals could invoke in court or before any authority empowered to deal with such matters.

This would mean that cartels prohibited under Article 81(1) could be made legal if they complied with the conditions of Article 81(3). Similarly, cartels that restricted competition would be unlawful once the conditions of Article 81(3) were no longer fulfilled. This new framework would mean that restrictive practices would no longer have to be notified in order to be validated.

The reforms currently under way in the area of vertical restraints and horizontal cooperation agreements will also help to simplify the scope of Article 81(1) and (3).

The new approach will establish a system of general exemption for all agreements and all clauses in a given category, subject to a list of prohibited restrictions ("blacklisted clauses") and specific conditions of application, on the one hand, and a restriction of the benefit of general exemption through a market-share threshold criterion, on the other. This exemption arrangement offers the advantage of providing legal certainty for a wider category of agreements and restoring greater freedom of contract to undertakings, while at the same time continuing to safeguard competition effectively.

The exception system proposed by the White Paper would also be accompanied by a modernisation of the competition rules at three levels:

• The ending of the notification and authorisation system

The requirement that undertakings wishing to invoke Article 81(3) must notify their restrictive practices to the Commission presents a number of drawbacks: on the one hand, it acts as a curb on their commercial strategy and represents a considerable cost while, on the other, it makes it increasingly difficult at EU level to detect the most serious infringements of the competition rules.

The exception system proposed by the White Paper would significantly simplify this procedure.

• Decentralised application of the competition rules

The reform introduces a new division of responsibilities:

(a) The Commission will be able to continue adopting individual decisions prohibiting serious cartels affecting trade between the Member States and having the effect of restricting competition.

(b) National authorities and courts will be able to take direct action to ensure compliance with the competition rules at national level within a European framework of uniform application of the competition rules.

In more concrete terms, the competition authorities of each Member State will be required to work closely with the Commission and the competition authorities of the other Member States so as to guarantee the maintenance of a system which ensures that competition is not distorted and promote uniform application of the competition rules through the creation of a genuine network. If such a network is to work properly, the Commission will have to give up its exemption monopoly, the national authorities will have to be empowered to withdraw the benefit of a Community block exemption regulation and an authority considering a case will have to be in a position to pass a file on it to another authority, including any confidential information.

By contrast, national courts will be called on to apply Article 81 of the EC Treaty in three types of proceedings: contractual liability proceedings (disputes between parties to an agreement); non-contractual liability proceedings (disputes between a third party and one or more parties to the agreement); and applications for injunctions. The White Paper provides for the possibility of the Commission appearing as a party before a national court, subject to the agreement of the judge.

It is crucial that decentralisation should not give rise to inconsistency in the application of competition law or to legal uncertainty for firms. To that end, the Commission stresses the principle of the primacy of Community law and the existing information and cooperation mechanisms (Articles 169 and 177 of the EC Treaty) and expresses its readiness to draw up notices to explain its policy and provide guidance for the application of the Community competition rules. The White Paper also requires national authorities to inform the Commission in good time of any cases in which they apply Community law, an obligation which might also extend to national judges.

• Intensified ex post control

For the Commission to take effective action against restrictions of competition, its powers of enquiry should be strengthened by making it easier for it to secure authorisation from a judge in order to overcome any opposition on the part of the undertaking. To achieve this, the White Paper proposes that judicial review be centralised by entrusting it to one of the Community courts and that authorised Commission officials be given the right to ask any questions and to draw up official minutes in the course of the investigation.

If the Commission wishes to emphasise the need to combat the most serious restrictions, complaints and penalties will assume greater importance. Consequently, a series of measures is envisaged to facilitate the lodging of complaints, including the introduction of a four-month time limit by the end of which the Commission must inform complainants of its intentions concerning their application and an updating of the amounts of fines and periodic penalty payments.

Conclusions

The Commission is convinced that only a radical reform of the current system will ensure that the competition rules are applied effectively. This is why the White Paper proposes far-reaching amendments not only to Regulation No 17, as outlined above, but also to the transport regulations and the rules applicable to vertical and horizontal restraints.

Last updated: 14.01.2003