| Author (Person) | Davies, Eric | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Publisher | ProQuest Information and Learning | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 23.2.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 23/02/2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
To coincide with the Union's enlargement on 1 May, new competition rules will come into force, effecting merger control and antitrust procedures. The new law on mergers will, said the Commission's Competition Commissioner, Mario Monti, 'equip the European Union with a modern, more flexible and efficient legislation to cater for the interests of 450 million consumers'. According to the Commission, it has 'shifted from a more legalistic approach to one based on sound economic principles in line with current economic thinking.' At the same time, the Union's antitrust system will become less centralised. Agreements which meet the relevant criteria will not have to be notified, and national competition authorities and courts will be able to fully apply competition rules. The new competition policy will also be accompanied by internal reforms within the Commission's Directorate-General for Competition. Background In its section on Competition policy, the Penguin Companion to European Union, states: 'Competition policy (which also covers state aids and merger controls) is one of the areas in which the Commission is most powerful, and the decisions that the Commission is required to take are sometimes very sensitive politically. In recent years four very active Commissioners, Peter Sutherland, Sir Leon Brittan, Karel Van Miert and Mario Monti, have been instrumental in making competition policy much more effective. It was obvious that if the Single Market programme was to bring benefits to consumers, the removal of trade barriers would have to be accompanied by a vigorous competition policy.' In addition to the needs of the Single Market, the Union's enlargement to 25 members - which will bring an estimated increase of some 40% in the Commission's competition workload - has provided a further incentive to reform competition policy. The new approach rests on two main pieces of legislation, accompanied by a restructuring of the Commission's Competition DG. The new Merger Regulation (Council Regulation 139/2004) was formally adopted on 20 January 2004 and will enter into force on 1 May. It replaces Regulation 4064/89, which has been in force since December 1990 and which created the 'one-stop shop' approach, under which the European Commission must clear mergers between companies with a combined global turnover of €5 billion or more, and which individually have a turnover within the European Economic Area of more than €250 million. Under the new Regulation - described by the Financial Times as 'one of the most extensive shake-ups of anti-trust policy for decades' (see: The new Regulation modifies the review timetable, allowing more time in order 'to avoid even the perception that a merger may have to be blocked because there was no time left to discuss remedies to the competition problems.' The 'substantive test' has been amended to ensure that all mergers which 'significantly impede effective competition' are stopped. In addition to the various aspects of dominance, the substantive test under the new Regulation will also include 'anticompetitive effects in oligopolistic markets where the merged company would not be strictly dominant in the usual sense of the word (i.e. much bigger than the rest).' The European Parliament's Rapporteur on the proposed Regulation, Benedetto Della Vedova, expressed concerns that the Regulation gives 'the impression that mergers and acquisitions are a bad thing, and inevitably harm the markets' and that the new system 'will give officials the power to raid companies in much the same way as they investigate cartels' (see European Voice: The other key legislative development is the adoption of Regulation 1/2003, which concerns the implementation of the rules on competition laid down in Articles 81 and 82 (previously Articles 85 and 86) of the Treaty and which is sometimes referred to as the 'modernisation package'. Articles 81 and 82 are concerned, respectively, with the general rules applicable to restrictive practices and abuses of a dominant position. In 1962, the Council adopted Regulation 17 which implemented the two Articles. Although there have been changes since then, Commissioner Mario Monti, speaking in Tokyo on 20 November 2003, reminded his audience that the Union's antitrust legislation has 'remained largely unchanged since 1962', when Regulation 17 was introduced (see: Mario Monti: The New Shape of European Competition Policy). Regulation 17 is one of a number of Regulations which the new legislation - which entered into force on 24 January 2003 - will either amend or replace when it takes effect on 1 May. The new system seeks to move away from the highly centralised authorisation system which has for so long applied to restrictive agreements. Under previous legislation, companies were responsible for notifying the European Commission of relevant agreements and for seeking approval for them. In a significant change, the new Regulation will assume that any agreements which meet the appropriate criteria are legal, and companies will not have to seek prior approval. The Regulation will also introduce 'direct application' of EU competition law, thus allowing Member States' competition authorities and courts to apply the rules. In another speech, this time made in New York in October 2003 (see: Mario Monti: EU competition policy after May 2004), the Competition Commissioner noted that 'the abolition of the notification system ... will oblige the Commission to adopt a more proactive stance in antitrust enforcement. Indeed, the Commission will have to rely more on complaints and own initiative investigations.' He went on to elaborate on the creation of the European Competition Network (ECN), intended to ensure greater cooperation and coordination between the European Commission and national competition authorities. In a change of emphasis, the intention is that a case should be dealt with by the most appropriate body in the Network. Whilst that will usually be the competition authority of the Member State most affected by a case, the Commission envisages the authorities of two or three Member States cooperating on cases which impact significantly on more than one country. However, cases concerning a larger number of Member States are likely to be dealt with by the Commission itself. The Commission is also likely to be involved in cases of particular interest, such as those which might set a precedent for policy on the Single Market. The significance of an individual case will now be looked at from more of an economic than a political angle, reflecting what the Commission terms 'current economic thinking.' Whilst a company's market power will be a key consideration in the assessment of the competitive impact of a proposed agreement, the Commission has made it clear that the new Regulation will not apply to the 'the vast majority of small- and medium-sized enterprises, [which] are able to act within what we call 'safe harbours'. They do not need to worry about the compatibility of their agreements with EU competition law.' Vertical distribution agreements between companies with a market share of less than 30% will, in most cases, not fall within the scope of the Regulation. A similar line will be taken with horizontal cooperation agreements, with the focus being 'on cases where companies have market power and can therefore harm competition.' In addition to the two new Regulations, the reform of the Union's competition policy includes a reorganisation of the Competition DG, intended to improve sector-specific knowledge. A new post of Chief Competition Economist has been created, to which Professor Lars-Hendrik Röller was nominated in July 2003. His role will be to offer an independent economic assessment and to provide guidance in relation to antitrust, merger and state aid cases. The DG will also benefit from a newly-created system of peer review panels, aimed at reinforcing internal scrutiny. Perhaps most significantly, the Commission's Merger Task Force (MTF) has effectively been disbanded, with its merger control responsibilities divided between four sector-specific directorates covering: information, communication and multimedia; services; industry and energy; consumer goods (see Freshfields Bruckhaus Deringer: The reorganisation of DG Competition). Further information within European Sources Online European Sources Online: In Focus:
European Sources Online: Topic Guide:
European Sources Online: Financial Times:
European Sources Online: European Voice:
Further information can be seen in these external links: EU Institutions European Commission DG Press and Communication
DG Competition
Delegation of the European Commission in Japan
European Parliament
Law firms Clifford Chance Freshfields Bruckhaus Deringer
Eric Davies Background and reporting on the week's main stories in the European Union and the wider Europe. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subject Categories | Internal Markets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
