Today’s Guest post is from Markus Röhrig who is a partner at the European law firm Hengeler Mueller. He is admitted to the German and the New York bars. Mr. Röhrig specialises in German and European competition law.  He frequently advises clients with respect to European and German cartel investigations, behavioral issues (abuse of dominance) and merger control cases.

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When Regulation No. 1/2003 celebrated its tenth anniversary earlier this year, Vice President Almunia announced that the European Commission (EC) would launch an initiative to review how the enforcement system has performed and to explore further improvements. In July 2014, European Commission published a report which sets out a thorough analysis of the enforcement activities of the EC and the National Competition Agencies (NCAs) in the past ten years and a number of proposals to enhance antitrust enforcement in the EU in the years to come. The EC is currently engaged in discussions with stakeholders.

The EC’s objective is to create a genuinely common area for antitrust enforcement in Europe. In its report, the EC submits several proposals to achieve that goal. These include, first, enhancing procedural convergence. According the EC, some NCAs lack fundamental enforcement powers such as, e.g., the power to inspect the premises of private individuals or the ability to effectively collect electronic evidence. Second, the report finds that there is scope to harmonize and enhance the effectiveness of sanctions for antitrust infringements. Amongst other things, the report specifically mentions that all NCAs should be able to apply the concept of parental liability and economic succession, as established by the European courts, and that a uniform rule on the legal maximum of administrative fines for antitrust infringements would be desirable. The report also stresses that the achievements made in terms of leniency policy need to be secured. The third area which the report addresses is highly controversial in the EU, namely the role which sanctions on private individuals –especially criminal sanctions– should play in antitrust enforcement. The report points out, rightly I believe, that such sanctions can work as a disincentive for companies to seek leniency.  

There is much to say in favor of enhancing convergence in antitrust enforcement in the EU. Regulation No. 1/2003 establishes a system in which the EC and NCAs share enforcement responsibilities and cases are allocated so as to ensure that they are pursued by the agency which is best placed to do so. From a company’s perspective, it is difficult to see why it should face different sanctions or be subject to different investigative powers depending on whether its case is allocated to one agency or another, especially where both agencies enforce the same substantive antitrust rules. Companies which consider applying for leniency face particular challenges. Today, a leniency application which a company submits to the EC is not effective in any Member State, and a leniency application which a company submits to an NCA is neither effective in any other Member State not at the EU level. This may require companies to submit leniency with multiple agencies, only to secure its rank, even if only one of them will eventually pursue the case. Otherwise, another company may submit a leniency application to an agency which the first company failed cover and convince that agency to pursue the investigation, in which case the first company’s leniency efforts would be frustrated. The European Competition Network (ECN) has achieved much in terms of addressing that risk through its model leniency program and the introduction of summary leniency applications. However, a true one-stop-shop system, where a leniency application submitted to one agency within the ECN secures the applicant’s rank before all other agencies could help to further enhance the effectiveness of leniency programs within the ECN.

While convergence –for good reasons– is a key issue in EC’s review of Regulation No. 1/2003, convergence in my opinion means more than simply demanding that Member States align their respective national regimes with the procedural rules and the sanctions established in Regulation No. 1/2003.

The ECN provides a unique forum which enables the EC and NCAs to share the experience with their respective enforcement regimes. This may reveal shortcomings in some Member States, but the exchange should is not necessarily a one-way-road. The EC may well learn from the enforcement regimes which apply in other Member States and, where appropriate, should consider adopting Regulation No. 1/2003 accordingly. In other words, there is no presumption that the rules established in Regulation No. 1/2003 are superior to what the Member States do.

I believe that, when taking stock of Regulation No. 1/2003 after ten years, it would be appropriate for the EC to consider whether Regulation No. 1/2003 still strikes the right balance between efficient antitrust enforcement and effectively protecting companies’ rights of defense. When Regulation No. 1/2003 came into force, the highest cartel fine ever imposed on a company was 462 million € (F. Hoffmann-La Roche in Vitamins, 2001); the aggregate fine imposed by the EC between 2000 and 2004 was approx. 3.2 billion €. Today, the F. Hoffmann-La Roche fine still ranks in the top five, but is dwarfed by fines such as the 715 million € imposed on Saint Gobain in Car Glass, and the 705 million € fine and 688 million € fines imposed on Philips and LG Electronics, respectively, in TV and Computer Monitor Tubes. The aggregate fine in the five year period following 2000-2004 have also skyrocketed, reaching approx. 8.0 billion € in the 2005-2009 period and approx. 8.6 billion € in the 2010-2014 period (and that period is not over yet). This, and the Charter of Fundamental Rights of the European Union, which came into force in 2009, should provide sufficient grounds to review the EC’s enforcement powers under Regulation No. 1/2003.

I have argued in an article on the General Court’s judgment in Deutsche Bahn v Commission that there is clearly scope, and a need, to improve the companies’ rights of defense with respect to dawn raids, and it may also be the right time to strengthen the companies’ protection against self-incrimination. Only recently, the European Court of Human Rights found that the Czech Republic’s procedural rules governing dawn raids violated companies’ fundamental rights (Delta Pekárny A.S. v République Tchèque). The EC will want to consider what the implications are for its own powers to conduct dawn raids pursuant to Regulation No. 1/2003. Another issue to consider is whether the legislator should provide more specific guidance on the way the EC calculates fines, rather than leaving the field to the EC and its fining guidelines. For example, Article 23 of Regulation 1/2003 could be re-written by introducing tiers to the maximum level of fines, depending on the type and gravity of the infringement of Articles 101 and 102 TFEU, as criminal statutes commonly do. There is much in this field which the EC could learn from NCA through consultation in the ECN.