White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty

White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty

The European Commission adopted a major White Paper on reforming the competition policy of the European Union in April 1999. Below is reproduced the executive summary from the White Paper:

Executive summary

1. In the field of competition law applicable to undertakings, the EC Treaty sets out general rules applicable to restrictive practices (Article 85) and abuses of dominant position (Article 86). The Treaty empowers the Council to give effect to these provisions (Article 87).
2. In 1962, the Council adopted Regulation 17, the first Regulation implementing Articles 85 and 86. This Regulation laid down the system of supervision and enforcement procedures, which the Commission has applied for over 35 years without any significant change.
3. Regulation 17 created a system based on direct applicability of the prohibition rule of Article 85(1) and prior notification of restrictive practices for exemption under Article 85(3). While the Commission, national courts and national authorities can all apply Article 85(1), the power to grant exemptions under Article 85(3) was granted exclusively to the Commission. Regulation 17 thus established a centralised authorisation system for all restrictive practices requiring exemption.
4. This centralised authorisation system was necessary and proved very effective for the establishment of a 'culture of competition' in Europe. It should not be forgotten that in the early years competition policy was not widely known in many parts of the Community. At the time when the interpretation of Article 85(3) was still uncertain and when the Community's primary objective was the integration of national markets, centralised enforcement of the EC competition rules by the Commission was the only appropriate system. It enabled the Commission to establish the uniform application of Article 85 throughout the EC and to promote market integration by preventing companies from recreating barriers which Member States themselves had gradually eliminated. It created a body of rules which is now accepted by all Member States and by industry as fundamental for the proper functioning of the internal market. The importance of competition policy today is borne out by the fact that each Member State now has a national competition authority to enforce both national and (where empowered to do so) Community competition law.
5. However, this system, which has worked so well, is no longer appropriate for the Community of today with fifteen Member States, eleven languages and over 350 million inhabitants. The reasons for this are to be found in the Regulation 17 system itself and in external factors relating to the development of the Community.
6. As to the reasons inherent in the Regulation 17 system, the centralised authorisation system based on prior notification and the Commission's exemption monopoly has led companies to notify large numbers of restrictive practices to Brussels. Since national competition authorities and courts have no power to apply Article 85(3), companies have used this centralised authorisation system not only to get legal security but also to block private action before national courts and national competition authorities. This has undermined efforts to promote decentralised application of EC competition rules. As a result, the rigorous enforcement of competition law has suffered and efforts to decentralise the implementation of Community law have been thwarted. In an ever more integrated Community market, this lack of rigorous enforcement and the failure to apply one common set of rules harms the interests of European industry.
7. The development of the Community since 1962 has been extraordinary. The Community of six Member States has become a Union of fifteen and is likely to become even larger as applicant countries join. The internal market with all its imperfections is a reality and Economic and Monetary Union is under way.
8. The role of the Commission in this new environment has changed. At the beginning the focus of its activity was on establishing rules on restrictive practices interfering directly with the goal of market integration. As law and policy have been clarified, the burden of enforcement can now be shared more equitably with national courts and authorities, which have the advantage of proximity to citizens and the problems they face. The Commission has now come to concentrate more on ensuring effective competition by detecting and stopping cross-border cartels and maintaining competitive market structures. It has also risen to the challenges of merger control, liberalisation of hitherto monopolised markets and international co-operation.
9. The Commission can cope with all these developments only by focusing its attention on the most important cases and on those fields of activity where it can operate more efficiently than national bodies. To this end it has already adopted various measures such as the de minimis Notice for agreements of minor importance and block exemption regulations.
10. However, these measures are not sufficient to meet the new challenges outlined above. It is no longer possible to maintain a centralised enforcement system requiring a decision by the Commission for restrictive practices which fulfill the conditions of Article 85(3). To make such an authorisation system work in the Community of today and tomorrow would require enormous resources and impose heavy costs on companies. It is essential to adapt the system so as to relieve companies from unnecessary bureaucracy, to allow the Commission to become more active in the pursuit of serious competition infringements and to increase and stimulate enforcement at national level. Our Community requires a more efficient and simpler system of control.
11. In the White Paper, the Commission discusses several options for reform. It proposes a system which meets the objectives of rigorous enforcement of competition law, effective decentralisation, simplification of procedures and uniform application of law and policy development throughout the EU.
12. The proposed reform involves the abolition of the notification and exemption system and its replacement by a Council Regulation which would render the exemption rule of Article 85(3) directly applicable without prior decision by the Commission. Article 85 as a whole would be applied by the Commission, national competition authorities and national courts, as is already the case for Articles 85(1) and 86.
13. This reform would allow the Commission to refocus its activities on the most serious infringements of Community law in cases with a Community interest. It would pave the way for decentralised application of the EC competition rules by national authorities and courts and eliminate unnecessary bureaucracy and compliance costs for industry. It would also stimulate the application of the EC competition rules by national authorities.
14. In the new system, the Commission would keep a leading role in determining EC competition policy. It would continue to adopt Regulations and Notices setting out the principal rules of interpretation of Articles 85 and 86. The Commission would also continue to adopt prohibition decisions and positive decisions to set out guidance for the implementation of these provisions. It is also envisaged that production joint ventures involving sizeable investments would not be included in the new system, but submitted instead to the procedural rules of the Community merger regulation.
15. In this system of concurrent jurisdiction of the Commission, national authorities and national courts, it would be necessary to maintain certain measures enabling the Commission to ensure coherent application of the rules throughout the Community. In particular, it is proposed that the Commission maintain the power to remove a case from the jurisdiction of national competition authorities and to deal with a case itself if there is a risk of divergent policy. There should also be a clear obligation for national courts to avoid conflicts with Commission decisions. Additional measures are explained in the White Paper.
16. The Commission invites the Member States, all other institutions and interested parties to submit comments on the White Paper by 30 September 1999 to the address on the last page.

The full text of the White Paper (COM (1999)101 (Final)(28.4.99)) can be found on the homepage of DG IV of the European Commission at: http://europa.eu.int/comm/dg04/entente/en/wb_modernisation.pdf

Further information sources on the competition policy of the European Commission can be found at Section 6.2 in the 'Recent References' section in European Access. In

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