Opinion

On 1 May 2004, 10 new member states joined the EU. As such, the date will be remembered as a further red letter day in the EU’s evolution, following the creation of the EU itself in 1995 and the full launch of the euro in 2002.

The new member states are joining a developed legal system with established rules – the ‘acquis communautaire’ – that they will have to accept and follow. But in one field, both existing and new member states alike will be faced with a new legal landscape. That field is European Community (EC) competition law.

1 May 2004 sees: (i) the entry into force of the EC’s ‘modernisation regulation’ for competition law, Regulation 1/2003, amending the basic rules and procedures for enforcement of Articles 81 and 82 of the EC Treaty; and (ii) the replacement of the existing EC rules for control of mergers with a new merger regulation, Regulation 139/2004, which makes important changes to the EC merger regime, in particular an amendment to the substantive test to be applied, aligning it much more closely to the UK and US tests.

Both changes were preceded by exhaustive debate and consultation and were accompanied by a mass of guidance notes from the European Commission and national competent authorities.
The modernisation regulation is the biggest single change to EC competition law procedures since 1962. It transfers primary competition law enforcement from the Commission to national authorities and national courts; it abolishes the system of notification of agreements to the Commission for clearance or exemption; it enables national competition authorities and national courts to apply Article 81 in its entirety; and the system of individual exemption by the Commission is abolished.

What will this mean in practice? First, undertakings will no longer be able to seek a ruling or formal guidance from the Commission that agreements do not infringe Article 81. They will have to make up their own minds. Second, claimants bringing private law actions will become the rules’ new ‘enforcers’. They will be able to use the powers of the courts and get a ruling without waiting for a response from the Commission. Third, the new system will make ‘Euro’ defences more difficult to run as a delaying tactic. The success of such defences often depended on the fact that the national court could not deal with the whole case itself, but had to wait for the Commission to state its view. Fourth, national courts will have to ‘get their hands dirty’ with complex economic and policy assessments, often requiring expert economic evidence. A claim that an agreement is pro or anti-competitive always needs to be seen in a proper economic context. Fifth, the obligation to apply both EC and UK competition law where there is an effect on inter-state trade will have some interesting consequences. Article 3(2) of the modernisation regulation provides that national competition law cannot be used to strike down agreements if they do not also infringe Article 81. The scope of this provision is unclear. For example, in Days Medical Aids, Judge Langley held that a finding that Article 81(1) was not breached by an agreement that affected
inter-state trade prevented the application of the common law doctrine of restraint of trade.

Last but not least, although these changes are intended to devolve power to the national courts and authorities, it is not obvious that this will be the effect. The Commission retains wide powers to intervene and take over cases of broad EC interest; it also has extensive powers of investigation to provide information and guidance to the national authorities and courts. And in relation to remedies, national authorities and courts will in general be limited in their jurisdictions to their own national territories, so it will often be the case that only the Commission will have the power to deal effectively with a major international corporation or international cartel. The same is true of the courts: although national courts can apply the competition rules in full, it will still be the European Court of Justice in Luxembourg that will have the final word as to whether they have got it right.

The writers were assisted with this article by Matrix barrister Jessica Seymour