The European Union is an economic behemoth. The optimum method of enforcement of EU Competition Law is a widely debated and elusive concept, often at the fore of academic debates. EU Competition Law is governed by articles 101 and 102 of the TFEU and has always been a key issue of the Union. The primary objective of EU Competition Law is to enhance efficiency, by maximising consumer welfare. Protection of consumer welfare is key due to the sheer enormity of the potential economic power of cartels. Competition is recognised as a key driver of growth and innovation. Competition ensures that businesses continually improve their goods and services whilst striving to reduce their costs. Wesseling broke the development of the EU competition law into 3 phases, the first being when the Commission enforced rule with specific and constant reference to “ensuring the free flow of goods”. In the second phase of enforcement, exemptions from the law were brought about in order to establish Community industrial policy. Most recently, in the third phase described, we saw that anti-trust policy was being used to promote other objectives of the Union, where these priorities were selected on a case by case basis. The enforcement of EU competition law is widely debated through various academic works, with the issues of the fines system, leniency, criminalization and public or private enforcement being some of the more pertinent issues.
The debate between public and private enforcement of EU Law has been a well-thought out topic of EU competition law. Most competition law enforcement systems are based on two enforcement pillars: public enforcement and private enforcement. Public enforcement is when the antitrust rules are enforced by state authorities here public enforcers are given special policies to follow to investigate an infringement. These decisions are subject to judicial review. This style of enforcement can be simplistically broken down into two stages, detection and intervention. Private Enforcement is when individual private legal persons initiate an action before the court. An obvious issue with private enforcement however is that the private parties in question have no special powers of detection. The key objective of public enforcement is usually agreed to be deterrence, due to the fact that prevention would prove to be overly expensive to become more effective than deterrence. Deterrence is achieved through the use of fines. The sole primary objective of private enforcement is far harder to pin down, with deterrence also regularly cited, but the interests of the private parties can vary drastically.
The debate of whether private or public enforcement is the optimal choice is a dense and very complex one, but to begin we must look at how a private enforcement would work with regards to primacy in the system. It would be absurd to suggest that there is a parallel system due to the fact that there is a very minimal amount of private proceedings taking place. For years, the national competition authorities have shaped their own vision of policy to best suit their opinion of what is best for the public interest, but greater interference from the courts would certainly change this. Were the courts to be given greater freedom, it could be said that, this would enable them to develop their own theories of competition. Traditionally within the European Union member States, the National Competition Authority has had the primary role in “directing competition policy”, with the courts doing no more than ensuring that the NCAs do not go beyond the principals and policies set out for them in the legislation. This limitation of the courts’ discretion could very easily change, especially given the growth of specialist courts, the increased judicial training in the area of EU competition law and the use of more rigorous enforcement of competition law.
So, how involved should the competition authorities be in the enforcement of competition law in private cases? Should there be a right to intervene? It could be argued that in certain cases, where judges may lack expertise, the national regulator “may be able to offer considerable assistance to judges”, but this intervention with the independence of the judiciary shows a clear danger. The ultimate decision must be one for the court. It could be said that this system would be very similar to medical negligence claims, where the medical experts provide significant and hugely important expert analysis, but the final decision rests with the judiciary. To provide an optimal method of enforcement, the NCAs must be given the necessary powers and trust in order to be allowed to provide an optimal method of enforcement.
What must be debated now however, is what the optimal method of enforcement should be? In the United States, private enforcement is “the driving force of competition law, while public enforcement plays only a rather residual role.” While this model works in the United States, is it one that we should follow in the European Union? I would argue not. Currently the EU has an almost exactly opposite situation in play, where public enforcement is far more prevalent. Why is this? As per Roberto Cisotta in a piece from July 2014, “…what lies at the root of this situation is… the fact that the European competition law framework largely… has to be supervised and governed by a strong public authority.”. As such, we can see that these movements towards private enforcement would break the mould of common EU enforcement procedure.
With regards to the optimal enforcement procedure, we must look at where the EU should go next in terms of an enforcement procedure. It must be said that the optimal method of enforcement would be one of need to be a mix of both enforcements. To create this optimal method of enforcement, then we must look at the positives and the negatives of both procedures, and then try to promote as much of the positives and eliminate negatives in the most efficient way possible. It has been said that, a private enforcement system provides greater incentives to pick up a case, provides better information and makes resources more available for enforcement, however these come with increased costs and potential for strategic abuse. It cannot be disputed that there is a possibility that private individuals may hold their own personal motives or agendas against the parties to whom they claim infringement.
As such, to create the optimal mix of both, we must look at the ‘cost-benefit spread’ and the maximise the positive effects of public enforcement. It would have to be said that the optimal method of enforcement would be a, primarily, public one which would continue to allow private enforcement to maximise the consumer protection. As such, it must be said that private enforcement could be utilized to maximise the quality of enforcement. The issue with attempting to mix the enforcement procedures on certain issues can be seen clearly with regards to capacity and quality of the work provided by the institutions. It could be said that “public enforcement activities are often constrained to a budget of the competition authority”, and while it could be said that private enforcement could be utilized here, that under a more significant work load, the capacity restrictions could soon come into play once again, as well as the fact that follow-on cases could further delay and add to the back-log.
These kinds of issues of quality are far from disheartening. Instead it could be said that they merely provide us with examples of the sorts of issues that one must simply face when creating optimal enforcement. In a piece by Kai Hüschelrath, it was said that; “a combination of public and private enforcement is likely to increase the benefits of competition law enforcement” when compared to a purely public or private system. He then sets out an example of the sort of system which could be utilized to optimize the enforcement procedure. Hüschelrath splits the enforcement procedure into three distinct and separate forms of offences. He begins with Horizontal agreements, saying that the focus of enforcement needs to be public due to “the costs caused by enforcement actions”. He does also stress that there needs to be “complementary private actions”. It could be said that this fluid mix of the two behaving in a symbiotic relationship would provide the optimal method of enforcement in order to protect what is at the heart of EU competition law, the welfare of consumers.
The second form of offences that Hüschelrath comments on is that of vertical agreements, where he once again stresses the cost of litigation for both public and private. For this reason, and the fact that a private party are likely to have insider information on the agreements, Hüschelrath recommends the use of the private enforcement system in order to complement the public system of enforcement. The public enforcer often has to rely on complaints from the market participants, but the leniency procedure could play a strong part in ensuring that private parties who will have advantageous information will come forward in order to avoid large sanctions. It could be argued that, once again this focus on public enforcement would ensure that the welfare of consumers is at the heart of EU competition Law
The final enforcement procedure that is mentioned in this piece is that of the abuse of dominant position in a market. Here, it is said that the “enforcement of abuse rules demands a higher involvement of public enforcement because it is difficult for private parties to assess… the market”. As such, it must be stressed that the optimal method of enforcement currently, is a focus of public enforcement, with assistance provided by way of the complementary use of private actions where the private party has additional information or has suffered damage and monetary loss due to the abuse of competition law.
As was said above, the leniency programme has led to reduced cost and investigation time in the EU competition law procedure. The concept of leniency in EU competition law is a simple one. “Companies that have participated in illegal cartels have a limited opportunity to avoid or reduce a fine. The Commission operates a leniency policy whereby companies that provide information about a cartel in which they participated might receive full or partial immunity from fines.”. This principal has been highly effective and its immediate effect was notable, once it was given time to settle, as per UCC’s Declan Walsh in 2008, “it is only in the past year that we have begun to see the fruits of more vigorous public enforcement”. Walsh also spoke about the effect that this increased vigor in the level of fines would have saying that it was, “arguably going to have a serious dissuasive effect on those undertakings that would consider engaging in anti-competitive practices”. It has been argued that there was a fear that undertakings may have been advised not to hand over evidence as it may lead to damages actions, but the Commission took a different view, stating that there was no evidence that this would be the case.
With regards to remedies for practicing in anti-competitive practices the most common is damages. The Commission has spoken at length regarding the fact that the issue of paramount importance to them is the need to protect consumers. As such, when we look at remedies, we must look at the method of remedies that will have the optimal effect on the consumer. The issue with private actions is that, it is unlikely that consumers will benefit in any way from a move to private actions. The reasons behind this are numerous, but perhaps the most obvious would be the that it is highly unlikely that it is unlikely that there would be sufficient private actions to lead to deterrence. It must be stressed that the optimal method of enforcement of fines would have to be an increase in the public fine and additional focus on public enforcement. As per Kai Hüschelrath, “it may be more cost-effective to increase the ‘public fine, rather than to incentivise private follow-on actions.” A strong public enforcement procedure would reduce the need for private enforcement, while still allowing opportunities for a more efficient and stream-lined private enforcement procedure. It cannot be argued but that the current fine system is below the optimal level.
Another method of enforcement that has been regularly and widely debated is that of the Criminalisation of a breach of EU competition law. The question that must be asked is whether or not criminalisation would form part of the optimal method of EU competition law enforcement. It has been argued that for fines to be enough of a deterrence to prevent breaches, then the fines would have to be so great as to put the companies at the risk of bankruptcy. It could easily be argued here that this idea is fanciful to say the least. To suppose that a company would cease to engage in anti-competitive practices unless it had seen another company before it thrown into bankruptcy is hugely unlikely. At the very most, it would take no more than several of these large fines to lead to companies rethinking their practices. As such, it could still be argued that fines should be at the heart of EU competition law enforcement procedure.
While it could be argued that imprisonment would serve a more active deterrence and would increase the effectiveness of the leniency programme, it must be stressed that at the heart of EU competition law is the idea of consumer welfare, and that should be achieved through correct use of the procedures currently in place. That is not to say that there is no place for the criminalisation of breaches in the enforcement procedure, quite to the contrary, but the effective use of a public enforcement procedure complemented by private enforcement should be given time to be fine-tuned, before making the sudden and immediate jump to criminalisation. An efficient symbiotic relationship between both public and private procedures, where public is at the forefront, and private assistance is used in cases where insider knowledge is present would, it could be argued, lead to the optimal method of enforcement so desperately sought after in EU Competition Law.