Loosening the strait-jacket

Stephen Sidkin takes a look at the CBI proposals for reforming EC competition law

Last month saw the publication of another set of proposals by the Confederation of British Industry for the reform of the scope and administration of Article 85 EC Treaty.

The CBI's latest proposals, 'Loosening the strait-jacket', are based on the idea that effective competition needs definitive EC competition law.

The CBI is correct in its claim that businesses need clear rules setting out which types of agreement do not restrict competition and so are not caught by Article 85 (1).

It then suggests that such rules should not leave Directorate General IV (DGIV) of the European Commission to assume that agreements which do not comply with the rules must be dealt with under Article 85(1).

This is incorrect. It demonstrates a misunderstanding as to the jurisprudence which underlies the treaty. It is a principle of many European legal systems that persons can only do that which is permitted in law.

Accordingly the CBI seeks to cut across this principle without appreciating the fundamental concept which it is calling into question.

The CBI suggests that agreements containing serious restrictions should be regarded as anti-competitive per se. On the other hand all other agreements containing restrictions should be evaluated by reference to the appreciability test in order to assess if the restrictions significantly harm competition.

But what is the consequence of getting things wrong? There is more than just a passing suspicion that were the CBI's proposal to be implemented, DGIV would police this area with rigour.

It might then seek to make an example of a company whose self-evaluation was wrong simply pour encourager les autres. As a result fear could dictate that, except in black and white cases, self-evaluation was avoided for the security of individual notification.

The proposals also deal with the CBI's suggestions for obtaining more exemptions under Article 85(3) through the use of a great number of block exemptions as well as block exemptions which are reformed to meet the group's criticisms.

In this respect the CBI has a valid point. Many of the 'blacklist' provisions are concerned with form and not economic effect; the opposition procedure in a number of block exemption regulations is ineffective; and often the definitions used are inadequate.

This is a useful wish list. But the shenanigans concerning the draft Technology Transfer Regulation cast doubt on the realism of the CBI's proposal. The draft has been beset by various criticisms.

Originally intended to come into force on 1 January 1995, it was postponed until 1 July. Now another draft is in limited circulation.

The organisation also has a valid concern as to the status of comfort letters. With reference to this it proposes the introduction of a regime similar to that under the Merger Regulation in order that there is a strict and speedy timetable by the end of which the parties will know their position.

The CBI suggests that if such a timetable could be adhered to then businesses might be prepared to accept the burden of providing a large amount of information for the initial notification. It also questions the benefit of the encouragement which has been given to a greater decentralised application of Article 85 from DGIV to the national courts.

In the past the various modifications to the workings of DGIV have come about as a result of the fact that it is overworked and under-resourced.

Although it may be fanciful to believe that it could happen, if businesses across Europe were to take the plunge and provide a large amount of information in compliance with their legal obligations, they could probably bring DGIV to its knees. What then the likelihood of reform?

Stephen Sidkin is a competition law partner in the City law firm Fox Williams.

diary