Competition enforcement in the European Union: a three-way partnership: with Europe's modernized competition regime highlighting the importance of both public and private enforcement, companies are self-assessing.

• Author: Holmes, Marjorie

THE FORMER European Commissioner for Competition Policy, Mario Monti, described the arrival of the European Union's new competition regime as a "a revolution in the way competition rules are enforced in the European Union." He was referring to Regulation 1/2003, which came into force on 1 May 2004, bringing with it fundamental changes in the way Europe's competition rules are applied. (1)

These changes are primarily twofold:

* E.U. member states' national competition authorities, as well as the European Commission, now have the power to apply Europe's competition rules as embodied in Articles 81 and 82 of the European Community Treaty. Article 81(1) prohibits "all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the common market." Article 81(2) states that such agreements will be null and void, whilst Article 81(3) sets out the conditions to be fulfilled if an agreement is to be exempted from the prohibitions contained in Article 81(1). Under Article 82 "any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between member states."

Previously this power lay solely with the European Commission. This means that a company could now find itself being investigated by competition authorities in more than one member state. Where three or more competition authorities are investigating a company's activities, it is intended that the commission will take over an investigation. By devolving the powers of public enforcement of Articles 81 and 82 to national competition authorities, it is hoped that the application of competition rules across Europe will be more efficient and effective.

* The ability to submit agreements to the European Commission for approval, which is known as notification for exemption and which had been the mainstay of competition enforcement in Europe for more than 40 forty years, has been abolished. Until now companies could apply to the commission requesting confirmation that a restrictive agreement was exempted from the Article 81(1) competition rules. This has been replaced with a system which encourages companies and their legal advisers to assess agreements themselves to ascertain whether they are compatible with European competition rules.

The aim of these changes is to make public enforcement of competition rules in Europe more effective by freeing up the European competition authorities' resources to concentrate on investigating and prosecuting hardcore cartels in Europe. But the changes do not stop at enhancing public enforcement of competition rules. There is a hope in the European Commission that this new environment will encourage private enforcement of competition, with more competition damage claims coming before the national courts.

With these changes, one thing is certain--effective enforcement of competition rules in Europe is a priority for European enforcers. By putting an emphasis on both public and private enforcement, the European Commission and national competition authorities are issuing a clear message: Cartelists beware! In such a climate, it is important that companies assess their agreement effectively to ensure compliance with Europe's competition rules.

PUBLIC ENFORCEMENT

All member states of the E.U. have competition rules that mirror the principles as laid down in Articles 81 and 82. This standardisation forms the basis of the E.U.'s modernised competition regime. Competition rules across the E.U. have been revitalised within the last five to ten years, and national competition authorities have become more proactive. In the United Kingdom, the Enterprise Act 2002 reinforced the powers of the three main competition authorities--the Office of Fair Trading, the Competition Commission, and the Competition Appeals Tribunal--whilst the Danish Competition Authority has committed itself to reducing the number of industries in Denmark with competition problems by 2010. In Austria, the Federal Competition Authority was created in 2002, and at the beginning of 2003 the new Portuguese Competition Authority came into existence.

To consider how public enforcement of competition rules in Europe is likely to develop it is important to understand the fundamental elements of the national competition regimes and be aware of any differences that exist.

1. Fines

   Whilst the majority of the member states will fine companies a maximum of 10 percent of their turnover for breaches of competition rules, there are some exceptions. The Greek competition authority can impose a maximum fine of 15 percent of receipts received in the current or previous financial year, whilst the German Bundes-kartellamt...