New competition rules clear the way

Michael Grenfell, partner, Norton Rose

Simon Holmes, partner, SJ Berwin & Co

In an attempt to clear a severe backlog of competition work building up outside the European Commission's (EC) doors, a white paper was recently released proposing changes to how the EC handles restrictive trade cases under Article 81 of the EC Treaty.

Among the proposals is the intention to end, or at least curtail, the process of companies notifying the EC of being exempt from agreements which restrict competition.

In future the EC envisages shifting some of the burden onto national authorities, which in the UK would be the Office of Fair Trading (OFT).

But will the proposals help ease the log jam, or lead to more confusion?

Norton Rose competition partner Michael Grenfell is sceptical about how the proposals will work with the UK's 1998 Competition Act, due to be implemented in March 2000.

He says: "Under the Competition Act, the OFT was hoping it could concentrate only on serious complaints. It had hoped routine cases would go to the EC and would automatically be exempt under the UK regime."

But he says: "There is now a risk that the OFT will be deluged by routine cases. The OFT could go the way of the EC and abandon the notification system and allow more national courts to grant exemption.

"This is not in the Act but my recommendation would be to amend it."

He also claims that the EC's White Paper would leave businesses in a state of uncertainty, without the comfort of an EU exemption to avoid fines.

At the moment businesses are protected from fines if they gain exemption, but Grenfell says: "Under the White Paper they do not get that protection, and businesses would have to ask their lawyers to look hard at the agreement they are about to sign, instead of having the certainty of an exemption."

However, Simon Holmes, partner in EU law at SJ Berwin & Co, believes the lack of exemption protection will not pose any more problems than the present situation.

"We are involved in some cases that have gone on for years and years, which is a happy situation for clients that have been accused, but on the other hand it is a source of extreme frustration that the Commission does not have the resources to deal with things in a timely manner."

Holmes adds that in some cases his clients have decided to drop the complaint after being reminded by EU officials of how long it is likely to take, meaning any result would be only of academic historical interest.

"As to the supposed uncertainties faced by companies that cannot get the assurance of an exemption, in reality that happens already.

"In nine out of ten cases we have to go with our own view on what the consequences would be of the Commission looking at the agreement."

"The proposals should be viewed with misgivings by the companies that are the subject of complaints. At present companies can take a relaxed view on the rules, knowing that the Commission is unlikely to get around to looking at the case until it is too late."

Moving away from a form-filling mentality would be welcomed by John Boyce, Brussels-based competition partner at Slaughter and May.

"The proposals will enable lawyers to look with their clients at agreements and decide if they are anti-competitive and conflict with Article 81."

Boyce believes that most of the time companies know whether or not they will get exemptions.

"It should be unusual that there should be a gulf in opinion between the Commission and the company. And you can always go for an informal chat with the Commission and get some sort of reassurance.

"What will happen under the new system is that clients will place greater value on advice upfront which tells them that where you are going is acceptable but needs to be toned down here or there."

Boyce adds: "Some clients will want the added comfort of a stamp of approval from the authorities, but it seems that option will no longer be available."