EC ANTITRUSTPROCEDURE

FIFTH EDITION

by

Christopher KERSEC.B., L.L.B., Ph.D.

Nicholas KHANL.L.B., Barrister

LONDONSWEET & MAXWELL

2005

Contents

Preface vTable of Cases xxiiiTable of Legislation lxxxvii

1. INTRODUCTORY

I. INTRODUCTIONAim and scope of this book 1-001Brief historical perspective 1-002Article 83—implementing powers 1-003

Transport 1-004Block exemptions 1-005Relationship with national competition laws 1-006

Regulation 1/2003—the backgroundThe 1999 White Paper—modernisation 1-007The Draft Regulation 1-009

Regulation 1/2003—key features 1-010

II. THE COMPETITION RULES AND THEIR ENFORCE-MENTApplying the competition rules—the Treaty context 1-011Article 81 1-012

Need for collusion 1-013Effect on competition 1-014Effect on inter-State trade 1-015

Article 81(2) 1-016Article 81(3)

Directly applicable legal exception 1-017End of exception decisions—transitional arrangements.... 1-018Block exemptions 1-019Practical implications of the new context for Article 81(3) 1-021

Article 82 1-022Dominance 1-023Relevant market 1-024Abuse 1-025

Applying the competition rules—Commission Notices 1-026European Economic Area 1-028

Restrictive agreements 1-029Dominant positions 1-030

vu

Contents

III. ENFORCEMENT BY THE COMMISSIONInstitutional framework 1-031The Commission 1-032

The staff—the Directorates-General 1-033DG Competition 1-034Impact of "modernisation" on DG Competition 1-035Legal Service 1-036

IV. OUTLINE OF THE COMMISSION'S PROCEDUREIntroduction 1-038Stage one—fact-finding 1-039Stage two—hearing and decision

Statement of objections 1-041Interim measures 1-042Parties' right to be heard 1-043Advisory Committee 1-044

Transparency 1-045

V. ROLE OF NATIONAL COMPETITION AUTHORITIESTreaty background 1-046The authorities in Member States 1-047Background—the 1997 Notice 1-048Joint responsibility 1-049Priority of EC rules 1-050Legal certainty 1-052The European Competition Network 1-053Wider international co-operation 1-054

VI. THE COMMUNITY COURTSThe Court of Justice 1-055Power to review Commission Decisions 1-056

References from national courts 1-057Court of First Instance 1-058

The Courts' personnel 1-059

VII. PROCEEDINGS IN NATIONAL COURTSDirect effect and the primacy of Treaty rules 1-061Articles 81 and 82 in national courts 1-063Jurisdiction 1-064National procedural rules 1-065National courts and Regulation 1/2O03 1-066The duty of national courts 1-067Co-operation between the Commission and national courts 1-068Impetus for private enforcement—the future 1—069

viii

Contents

2. STARTING THE MACHINERY

I. INTRODUCTIONHistorical background notification 2-001Self-assessment 2-002Information for the Commission 2-003

II. COMPLAINTS 2-004Handling cases in the Network 2-005"Well-placed"

Criteria for allocation/reallocation of cases 2-006Commission particularly well placed 2-007Allocation 2-008Parallel proceedings 2-009Reallocation 2-010Challenging allocation/reallocation 2-011

EEA—Complaints 2-012Effects of decentralisation—the Commission's stated priorities 2-013Choices and decisions for the Complainant 2-014Complaints to the Commission 2-015Legitimate interest 2-016Examples—complainants accepted 2-017Representative bodies 2-018Form C

Formal complaints 2-019Informal complaints 2-020Completing Form C 2-021Confidential information 2-022Form C—the detail 2-023

I—Information regarding the parties 2-024II—Details of alleged infringement 2-025III—Finding sought 2-026IV—Proceedings before NCAs or national courts 2-027

Signature of complaint 2-028Sending and receipt of complaint 2-029Commission's three stage procedure—first stage 2-030

Commission's duty of care and vigilance 2-031Languages 2-032Responding within a reasonable time 2-033

Commission's three stage procedure—second stage 2-034The Article 7 letter 2-035Responding to the Article 7 letter 2-036

Commission's three stage procedure—third stage 2-037Grounds for rejecting complaint

Commission's discretion— "Community interest" 2-038

ix

Contents

No exhaustive list of criteria 2-039Clarification of the law 2-040Cessation of offending conduct 2-041Time taken by Commission 2-042Complaint being dealt with by another authority 2-043Availability of remedy in national courts 2-044

No fettering of discretion 2-045Challenging a rejection decision 2-046Complaints combining Article 81 and 82 with Article 86 ... 2-047Rejection of complaint

Entitlement to a decision 2-049The rejection decision 2-050Re-opening a complaint 2-051

Dealing with Commission failure to act on a complaint 2-052

III. GUIDANCE LETTERSIntroduction 2-053Guidance letters 2-054

The three pre-conditions 2-055The cumulative conditions 2-056

I—Novelty 2-057II—Usefulness 2-058III—Resources 2-059IV—Relationship with other proceedings 2-060

Procedure 2-061Content of guidance letter 2-062Publicity 2-063

Legal effect of guidance letter 2-064

IV. DECLARATIONS OF INAPPLICABILITYIntroduction 2-065No Notice or specified procedure 2-066Effects of declaration of inapplicability 2-067Practice and procedure 2-068

V. PROFESSIONAL SECRECY—BUSINESS SECRETSStatutory rules 2-069Information protected 2-071Business secrets 2-072Claiming protection 2-073

VI. INITIATION OF PROCEEDINGSIntroduction 2-074Significance of initiation of proceedings 2-075Relationship with NCAs and national courts 2-076

Contents

Initiation—formal act 2-078Not a challengeable act 2-079Practice 2-080

3. INVESTIGATIVE POWERS

I. INTRODUCTION 3-001

II. FUNDAMENTAL RIGHTSIncreasing importance 3-002Status of ECHR in Community law 3-003Criminal or civil nature of proceedings 3-004

III. REQUESTS FOR INFORMATIONPowers under Article 18 3-005Necessary information 3-006Primary and secondary sources 3-007Who supplies information? 3-008Scope of "information" 3-009Two types of request 3-010Article 18(2)—requests for information

Form of request 3-011No compulsion to reply; replying and liability to fines .... 3-012

IV. DECISIONS REQUIRING INFORMATIONNature of decisions requiring information 3-014Self-incrimination

Background 3-016Hoechst and Orkem 3-017ECtHR developments 3-018Implications for requests by decision 3-019

Other grounds of refusalConfidentiality 3-021Legal professional privilege

(i) Background 3-022(ii) Communications protected 3-023(iii) Restriction to independent lawyers 3-025(iv) Current developments 3-026(v) Restriction to lawyers registered in the Community 3-027(vi) Verification 3-028(vii) Surrender or loss of protection 3-029

Extraterritoriality 3-030Location of information 3-031Foreign law defences 3-032

Contents

Fines 3-033

V. INSPECTIONS OF BUSINESS PREMISES

Introduction 3-034Obligations imposed by Article 20 3-035

Necessity of the inspection 3-036Persons susceptible to investigation 3-037Obligations on those inspected 3-038

Two types of investigation 3-039Inspections by simple authorisation

Preparation 3-040Authorisations 3-041

Inspections by decisionFormal requirements of decision 3-042Justification for decision 3-043Notification to undertaking 3-045Assistance by the NCA 3-046

Fundamental rights and inspections by decision"Private life" and business premises 3-047Compatibility of inspections with Article 8 ECHR—Roquette 3-049

The inspectors' powers 3-051To enter any premises, etc. of the undertaking 3-052To examine the books and other records related to the

business 3-053To take copies of books or records 3—056To seal premises, books and records 3-057To ask for explanations

(i) Background 3-058(ii) Remaining ambiguities as to scope of powers 3-059(iii) Representatives or members of staff 3-060

Judicial review of inspection decisionsFeasibility of review by the CFI 3-062Distinction between review of inspection decisions and

review of their execution 3-063Review by a national court 3-064

VI. INSPECTION OF OTHER PREMISESIntroduction 3-065Necessity for a judicial warrant 3-066Fundamental rights 3-067Inspectors' powers 3-068

VII. POWER TO TAKE STATEMENTSDevelopment of use of Statements 3-069Procedure 3-070

xn

Contents

4. RIGHTS OF THE DEFENCE

I. GENERAL PRINCIPLESIntroduction 4-001The right to be heard 4-004Who must be heard 4-005Third parties/complainants 4-006Parties having a sufficient interest 4-007Other third parties 4-009Participation of complainants and other third parties 4-010Decisions under Articles 9 and 10 4-012Witnesses 4-013Hearing Officer 4-014The Hearing Officer's responsibilities 4-015Regulation 1049/2001 4-017

II. THE COMMISSION'S CASEStatement of objections 4-018Language/translations 4-019Form of Statement of objections 4-020Documentary evidence 4—021Inferences 4-022Notice of fines 4-023Complex cases 4-024Effects of Statement of objections 4-025Service of Statement of objections 4-026Supplementary Statement of objections 4—027

III. ACCESS TO THE COMMISSION'S FILEIntroduction 4-028Legal basis—rights of defence—equality of arms 4-030The principle restated 4—031Not for the Commission to decide which documents are of

use to the defence 4-032When should access be given —no retrospective regularisation 4-033Seif help by the undertakings concerned 4—034Lack of resources no excuse 4-035Confidentiality not as such a bar to disclosure 4-036Failure to give access does not automatically mean annulment 4-038Inculpatory documents 4-039Exculpatory documents 4—040The Commission's draft 2004 Notice 4-042Accessible and non-accessible documents 4-043

Internal documents 4-044

xiii

Contents

Business secrets 4-045Other confidential information 4—046

The "file" 4-047Classification of documents 4-048Giving access 4-049Policing the System—the role of the Hearing Officer 4—050Challenging a decision on access to the file 4—051

IV. THE REPLY 4-053The reply to the Statement of objections 4-054Time-limits and copies 4-055The oral hearing—Organisation 4-057Representation at oral hearing 4-058Procedure at the oral hearing 4-059

The introduction 4—060The party's oral presentation 4-061Questions from the competent authorities of the Member

States 4-063Questions form the Commission 4-064Concluding remarks 4-065

Minutes of hearing 4-066The Hearing Officer's first report 4-067After the hearing 4-068The Hearing Officer's final report 4-069

5. INVOLVEMENT OF NATIONAL AUTHORITIESAND COURTS

Introduction 5-001

I. THE NATIONAL COMPETITION AUTHORITIESDefinition of competition authorities 5-002Designation 5-003Powers of NCAs 5-004Close co-operation 5-005Exchange and sharing of information within the Network.. 5-007

Restrictions on use 5-008Professional secrecy 5—009Confidential information—the SEP proviso 5-010

Article 12—information for use in evidence 5-011Article 12(1) 5-012Article 12(2) 5-015Article 12(3) 5-017

xiv

Contents

Leniency applications 5-018Obligations of the Commission as regards the competent

authoritiesTo supply information 5-019To notify procedural Steps 5-021

(i) Requests for information under Article 18 5-022(ii) Interviews under Article 19 5-023(iii) Investigations under Article 20 5-024(iv) Hearings 5-026(v) Initiation of proceedings 5-027(vi) Other procedural Steps 5-028

Assistance, etc. from and between national competitionauthorities

Information(i) First formal investigative measure and other measures 5-029(ii) Obligation to supply information on request 5-030(iii) Draft decisions 5-031

Investigations(i) Assisting the Commission inspectors 5-032(ii) Carrying out the investigation for the Commission 5-033(iii) Overcoming resistance or obstruction 5-034(iv) UK implementation 5-036(v) Carrying out an investigation for another NCA.. 5-037

Hearings 5-038

II. THE ADVISORY COMMITTEE ON RESTRIKTIVEPRACTICES AND MONOPOLIESConstitution and functions 5-039

Consultation before decision-taking 5-040Ensuring consistency across the Network 5-041General competition issues 5-042

ProcedureMeetings 5-043Shortened notice of meetings 5-044Practice 5-045Written procedure 5-046

The Committee's opinion 5-047Secrecy of the opinion 5-048Publishing the opinion 5-049

Irregularities in Committee's procedure 5-050Identifying irregularities 5-051

EEA 5-052

III. CO-OPERATION WITH NATIONAL COURTSIntroduction 5-054

xv

Contents

Possibility of concurrent proceedings/conflicts 5-055Avoiding conflicts—primacy of Community law 5-056Bürden and Standard of proof 5-057Staying national proceedings 5-058Assistance from the Commission 5-059Requests for information from Commission 5-060Seeking the Commission's opinion 5-062Involvement of NCAs and Commission in national court

proceedings 5-064Publicity of Commission opinions and observations 5-066Co-operation—obligations of national courts 5-067Co-operation—respecting Commission decisions 5-068

6. COMMISSION DECISIONS

I. GENERAL REQUIREMENTS RELATING TO DECISIONSIntroduction 6-001Delegation of powers over decision taking 6-002Delegation of powers to sign decisions 6-005Authentication 6-006Reasoning 6-007Statement of the right to appeal the Commission's decision 6-010Error, formal and clerical 6-011Addressees of decision 6-012Notification of decisions 6-013Amendment and withdrawal of decisions 6-014

II. FUNDAMENTAL RIGHTS IN RELATION TO THEADOPTION OF DECISIONS IMPOSING FINESNon-retroactivity of penalties 6-015Hearing by "an independent and impartial tribunal" 6-016Immediate enforceability and Article 6 ECHR 6-017

III. FINAL DECISIONSDeclarations in respect of past breaches 6-019Cease and desist Orders 6-020Potential or threatened breaches 6-021Behavioural or structural remedies 6-022Relationship with the Statement of objections 6-026Structure of the decision 6-028

IV. INTERIM MEASURESGenerally 6-030Requirements of Article 8

xvi

Contents

Can a complainant apply for interim measures? 6-032Prima facie case 6-033Urgency of serious and irreparable damage to competition 6-034

(i) Public and private interests 6-035(ii) Irreparable härm 6-036(iii) Relevance of national court remedies 6-038

Protection of the interests of the undertaking concerned 6-039Temporary nature of the measures 6-040Procedural safeguards 6-041The decision 6-042

V. PROCEDURAL DECISIONS 6-044

VI. WITHDRAWAL OF BLOCK EXEMPTIONSArticle 29 6-045Procedure 6-046

VII. PUBLICITYPublication of decisions

Obligation and discretionary publication 6-047Official Journal and electronic publication 6-048Protection of business secrets 6-049

Generally 6-050

VIII. ACCEPTANCE OF COMMITMENTS AND INFORMALSETTLEMENTSBackground 6-052Commitments 6-053Informal settlements 6-055Lobbying 6-056

7. FINES AND PENALTIES

PRELIMINARY POINTS/GENERAL ISSUESSource of fining powers 7-001Concept of "undertaking" 7-002Identification of addressees of decisions imposing fines 7-003Groups of undertakings—parental responsibility 7-004Restructuring of undertakings—continuity of liability 7-005Takeovers and mergers—continuity of existence and of

liability 7-006Undertakings assisting in an infringement 7-007Criminal nature of fines 7-008Joint and several liability 7-009

xvii

Contents

II. PROCEDURAL INFRINGEMENTSChange of turnover based fines 7-010Independence of infringements under Article 23(1) 7-011Article 23(l)(a) and (b)—supplying incorrect information... 7-012Article 23(l)(c)—obstructing the Commission's investigation 7-013Article 23(l)(d)—incorrect answers to questions 7-015Article 23(l)(e)—seals broken 7-016Relationship between procedural and Substantive infringements 7-017

III. SUBSTANTIVE INFRINGEMENTSArticle 23(2)—infringements concerned 7-018The statutory limits—the 1 per cent, 5 per cent and 10 per

cent turnover rules 7-019Infringement already terminated 7-020Intentionally or negligently 7-021Negligence and novelty 7-022Fixing the fine—the Guidelines

Introduction 7-023Methodology of the Guidelines 7-024Binding but flexible rules 7-025General trend—higher fines 7-026

Gravity of the infringementRelevant factors 7-027Nature of the infringement 7-028Impact on the market 7-029

Deterrence 7-030Differential treatment/grouping of participants 7-032Duration 7-033Aggravating and mitigating circumstances

General 7-034Methodology of calculation 7-035Leniency Notice—a subsequent step in the calculation .... 7-036Application of the 10 per cent limit 7-037

Aggravating factorsForms of aggravating circumstances 7-038Repeated infringement 7-039Refusal to co-operate with the Commission/obstructing

the investigation 7-040Role of leader in, or instigator of the infringement 7-041Retaliatory measures and other practices 7-042Need to exceed the amount of gains improperly made .... 7-043Other aggravating factors 7-044

Mitigating factorsForms of attenuating circumstances 7-045An exclusively passive or "follow my leader" role 7-046

xviii

Contents

Non-implementation of the offending agreement 7-04 8Prompt termination of the infringement 7-049Knowledge and awareness of the parties—reasonable

doubt as to infringement 7-050Co-operation outside the scope of the Leniency Notice ... 7-052Other attenuating circumstances

(i) "Innocent" parties/victims 7-053(ii) Reliance on legal advice/compliance programmes 7-054(iii) Effect of notification 7-055(iv) Legislative requirements or official involvement.. 7-056(v) Delays by Commission 7-057

The Leniency NoticePreliminary 7-058Conditions for the grant of immunity

(i) Basic conditions 7-060(ii) Conditions for immunity to become definitive .... 7-061

Procedure for applications for immunity 7-063Conditions for the grant of a reduction in fine

(i) "Significant value" 7-065(ii) Scale of reductions 7-066

Procedure for applications for a reduction in fine 7-067Leniency and exchange of information within the Network

(i) Introduction 7-068(ii) Implications for the Operation of Article 11 7-069(iii) Implications for the Operation of Article 12 7-070(iv) Tactical aspects 7-071

Specific economic context 7-072Real ability to pay in a specific social context 7-073Double jeopardy—proceedings within the Union 7-074Double jeopardy—third country regulatory action 7-076

IV. PERIODIC PENALTY PAYMENTSArticle 24(l)(a)-(c)—compliance with Substantive decisions 7-077Article 24(1 )(e)—compelling Submission to an inspection ... 7-079Relationship between final and periodic penalties 7-080

V. LIMITATION PERIODSTwo types of limitation period 7-081Limitation periods in proceedings 7-082Interruptions to the running of time 7-083Suspension of the running of time 7-085Limitation period for the enforcement of sanctions 7-086

VI. PAYMENT AND ENFORCEMENT OF FINING DECISIONSInterest on unpaid fines 7-088

xix

Contents

Tax implications 7-090Enforcement 7-091

8. JUDICIAL REVIEW BY THE EUROPEAN COURT OFJUSTICE

I. INTRODUCTIONFunction of the Court 8-001Forms of direct action 8-003

II. PRACTICE BEFORE THE COURTCommencing proceedings 8-004

Limitation 8-005Notification 8-006Representation 8-007Written proceedings 8-008

InterventionsPersons with an interest 8-010Procedure 8-012

HearingsThe report for the Hearing 8-013Joinder of cases 8-014Conduct of hearings 8-015

AppealsLimited scope of appeals 8-016Points of law in competition cases 8-017

CostsDiscretion as to liability 8-018Principles applied on taxation 8-019

III. ARTICLE 229—THE COURTS "UNLIMITED" JURISDICTIONNature of Article 229 8-020Approach of the Court to the exercise of its unlimited

jurisdiction 8-022Influence of the Commission's Guidelines 8-023Reluctance to increase fines 8-025

IV. ARTICLE 230—ACTION FOR ANNULMENTIntroduction 8-028Locus standi 8-029Acts which may be challenged

Formal and informal acts 8-031Preliminary Steps not reviewable acts 8-034

xx

Contents

Catalogue of reviewable acts 8-035Grounds of annulment

Failure to substantiate infringements(i) Difficulty of classification 8-037(ii) Bürden of proof 8-038(iii) No formal rules of evidence 8-039

Lack of competence 8-041Infringement of an essential procedural requirement

(i) Breach must have been potentially decisive 8-043(ii) Consultation and hearings 8-044(iii) Not all procedural requirements are statutory .... 8-045(iv) Lack of reasoning 8-046(v) Fines 8-049

Infringement of the Treaty or of any rule of law relating toits application 8-050

Misuse of powers 8-051Remedies 8-052

V. ARTICLE 232—ACTION FOR FAILURE TO ACTGenerally 8-055Infringement of the Treaty 8-056Addressed to the applicant 8-057"Acts" 8-058Request to act 8-059Definition of position 8-060Remedy 8-061

VI. INTERIM RELIEFIntroduction 8-062Basic requirements and criteria 8-063Article 242—Suspension of acts

Decisions ordering undertakings to alter their conduct.... 8-066Decisions ordering the payment of fines 8-067Suspending investigative measures 8-069

Article 243 8-070Third parties and interim relief 8-071

APPENDICESA Council Regulation (EC) No. 1/2003 of 16 December 2002

on the implementation of the rules on competition laid downin Article 81 and 82 of the Treaty 509

B Joint Statement of the Council and the Commission made atthe time when Reg.1/2003 was adopted 541

xxi

Contents

C Commission Regulation (EC) No.773/2004 of 7 April 2004relating to the conduct of proceedings by the Commissionpursuant to Articles 81 and 82 of the EC Treaty 547

D Commission Notice on co-operation within the Network ofCompetition Authorities 561

E Commission Notice on the co-operation between the Com-mission and the Courts of the EU Member States in theapplication of Articles 81 and 82 EC 577

F Commission Notice on the handling of complaints by theCommission under Articles 81 and 82 of the EC Treaty 593

G Commission Notice on informal guidance relating to novelquestions concerning Articles 81 and 82 of the EC Treaty thatarise in individual cases (guidance letters) 613

H Commission decision of 23 May 2001 on the terms ofreference of hearing officers in certain competitionproceedings 619

I Guidelines on the method of setting fines imposed pursuant toArticle 15(2) Regulation No. 17 627

J European Union Preparatory Acts: Commission notice onimmunity from fines and reduction of fines in cartel cases... 633

xxn