European Commission adopts report on the functioning of the Modernisation Regulation

06 May 2009

Katharine Annesley

On 30 April 2009, the European Commission published a report on the functioning of Regulation 1/2003 (the Modernisation Regulation). The Commission reports that the Modernisation Regulation has been largely successful and has allowed the Commission to focus its resources on the most serious competition infringements, such as cartels. The Commission has, however, identified some areas which it considers deserve further attention.

Background

The Modernisation Regulation entered into force five years ago, on 1 May 2004. It brought about a modernisation of EC competition law procedures, most notably giving national competition authorities (NCAs) and national courts powers to apply the provisions of Articles 81 and 82 EC in full and abolishing the system of notifications and exemptions under Article 81(3). It also gave the Commission greater powers of investigation. Under Article 44 of the Modernisation Regulation, the Commission is required to report to the European Parliament and the Council on the functioning of the legislation by 1 May 2009.

The Commission’s observations

The Commission notes that the change to a system of direct application and self-assessment under the Modernisation Regulation has in practice been “remarkably smooth” and has freed up resources, enabling the Commission to focus on enforcement of Articles 81 and 82 EC, which the Commission illustrates by way of reference to the sector inquiries it has carried out in the last few years and the increased number of enforcement decisions. It also refers to the success of the new powers under Article 9 (commitment decisions) and Article 23(1)(e) (fine for breaking seals affixed during inspections). The Modernisation Regulation has contributed to a voluntary convergence of national laws; EC competition rules are stated to have become the “law of the land” to a large extent for the whole of the EU.

The Commission notes that several matters may require further evaluation, although it does not specify what form this will take. These issues include:

  • the absence of penalties for misleading or false replies to interview questions;

  • the Article 24 periodic penalty procedure, which can be “relatively lengthy and cumbersome” (as in the Microsoft case);

  • national provisions which go further than Article 82 in relation to unilateral conduct, such as the regulation of the abuse of economic dependence, “superior bargaining power” or “significant influence”;

  • the divergence of national enforcement systems, including fines, criminal sanctions, succession, standard of proof and the ability of NCAs to set formal enforcement priorities; and

  • the legal framework for disclosure of information in the Commission’s file in the context of private litigation or to public authorities in third country jurisdictions.

Comment

The Modernisation Regulation appears to have achieved one of its primary objectives, namely reducing the administrative burden on the Commission and freeing up its resources to enable it to pursue the most serious infringements of EC competition law. It remains to be seen what further action will follow from the Commission’s assessment of the functioning of the Modernisation Regulation, particularly whether, and to what extent, the Commission will attempt to level out further some of the remaining inconsistencies between the different Member States.

Source: Commission report, 30 April 2009