20 Aug, 2018

It’s a Deal: a new Directive for Stronger Competition Authorities in the EU

On 30 May 2018, the European Commission (“Commission”) announced that the European Parliament and the Council have reached an agreement concerning a proposed new Directive, in order to further build on the Regulation 1/2003 and enable the competition authorities (“NCAs”) of EU Member States to enforce EU antitrust rules more effectively.

The new Directive, proposed as the “Directive of the European Parliament and of the Council to Empower the Competition Authorities of the Member States to be more Effective Enforcers and to ensure the Proper Functioning of the Internal Market” (“Proposed Directive”), came out as a consensus  following numerous consultations amongst relevant stakeholders from academia, business, industry associations, legal profession and public authorities, and awaits the confirmation by both the EU Parliament and the Commission, expected to take place this year.

Empowering NCAs

The Proposed Directive suggested a detailed set of measures and instruments in the NCAs’ enforcement, thereby boosting their powers for a better safeguard of competition in the internal market.  The results deriving from the implementation of the Regulation 1/2003 have demonstrated that the alignment of national systems is a prerequisite for a more efficient enforcement by the NCAs.  It was recognized that, inter alia, the NCAs must be independent and free of any influences in their conduct and must be equipped with appropriate human, financial and technical resources.  The latter is especially important for the mutual cooperation amongst the NCAs and their abilities to help one another in multi-jurisdictional cases.  In order to promote a more smooth alignment, special attention was given to suspension of limitation periods in one Member State for the duration of the same subject proceedings entered into in another Member State or by the Commission.

The Proposed Directive set the core minimum effective powers to investigate and make decisions, including effective sanctions for non-compliance.  It also reiterated a more coherent approach in terms of leniency programs.

Furthermore, the practice has confirmed that, due to different legislative approaches applied in the Member States, infringers were able to avoid liability for antitrust infringements.  For instance, if in a given national system no liability was introduced for legal successors of an infringer, a merger or a corporate restructuring could provide for a free pass to the infringing company.  Therefore, the Proposed Directive stipulates the necessity of Member States to hold all legal entities belonging to one undertaking jointly and severally liable for an infringement.  In addition, they should set the maximum amount of fine to no less than 10% of the worldwide turnover relative to the gravity and duration of such infringement.

Balancing between empowerment and fundamental rights

The respect of undertakings’ fundamental rights is one of the most important massages that the Proposed Directive conveys.  A clear demand from EU lawyers, business associations and enterprises that the new powers vested into the NCAs should be counter-balanced with increased procedural guarantees were reflected in the proposed text.  Similar concerns have been raised recently in the Serbian professional community, as we previously wrote in our publications.  These safeguarding measures, as noted in the Proposed Directive, should at least meet the standards of the Charter of Fundamental Rights of the European Union and the general principles of Union law.  The safeguarding measures encompass the right of defence and the right to an effective remedy before a tribunal. Moreover, as very well noted by Business Europe, an organization representing companies across the EU, even if the Proposed Directive is very detailed on increasing enforcement powers, it is vague on appropriate safeguards, which are not defined any further.  Therefore, Business Europe has invited the NCAs to sign up to the principles of the 2011 Commission Notice on best practices for the conduct of proceedings concerning Articles 101 and 102 of the Treaty of Functioning of the European Union, with the aim for the NCAs not only to respect minimum rights of defence but aspire at setting the highest standards for due process.

Winds of Change: a new Competition Act for Serbia?

The wind is blowing in different directions in Serbia and the EU – while the EU is trying to expand the powers of the NCAs in its Member States and moving towards more effective safeguarding measures, the current Competition Act of Serbia (“Competition Act”) lacks any provision in that respect.  Although the Proposed Directive mentions that NCAs shall be subject to appropriate safeguards, including respect of undertakings̕ rights of defense and the right to an effective remedy before a tribunal, in accordance with general principles of Union law and the Charter of Fundamental Rights of the European Union, the case of Serbia diverges from such an example.

This issue is the main concern in the ongoing debates and discussions in relation to the drafting of the new Competition Act (the “Draft Act”).  Given that Serbia is currently in the process of improving of its competition protection legal framework, it could be reasonably expected that some of the changes provided for in the Proposed Directive might be echoed in the final version of Draft Act.

The difficulties that undertakings are facing in Serbia with respect to the implementation of the Competition Act are numerous and are likely to amount to violations of the rights guaranteed by the Serbian Constitution and applicable international standards.

In difference to the Serbian Competition Act, in a number of European and non-European countries the investigative and judicial powers in the field of competition enforcement are clearly separated and are conferred upon different authorities.  Thus, inter alia, in Austria (which Serbian general administrative proceedings were modelled upon), the investigative power is entrusted to administrative authorities, while decision-making, imposing of fines and their enforcement, comes under the exclusive jurisdiction of the courts.  Such statutory provisions guarantee impartial public enforcement and provide for efficient safeguarding of the parties’ rights.

Furthermore, in relation to the rules of evidence in Serbia, while an oral hearing may be held if found beneficial for examining the matter in question, it is not mandatory even in the most serious cartel cases.  Such stipulations clearly deviate from the requirement, as recently reaffirmed by the EU Court of Justice[1], that the defendants, to whom a statement of objection is addressed to, must be given the opportunity to develop their arguments at an oral hearing.

Moreover, lack of criteria and proper justification before conducting dawn raids by the Serbian NCA proved to be a problematic experience for undertakings in Serbia, and such matters should be addressed by the new Draft Act.  Additionally, the inexistence of safeguards against conducting of parallel or successive criminal proceedings following opening of competition investigations and the severity of punishment for competition infringements further illustrate the various failures of the Competition Act. In that regard, as it was recently raised in a number of Constitutional challenges to the Competition Act, the Serbian NCA with the powers conferred to it, walks a thin line relating to its (mis)use of authority.

It is the hope of many, that the Proposed Directive will positively influence the upcoming work on the Draft Act by creating a more favorable and legally sound environment not only for the development of competition law in Serbia but also for enhancing the respect of rights of undertakings competing in the Serbian market.

This article was previously published by Thomson Reuters/Practical Law and available on our website with the permission of the publisher.

[1] Four judgements issued on September 12, 2017 by the European Court of Justice in: case C 85/15P Feralpi Holding v Commission, § 43-46; Joined cases C 86/15P and 87/15P Ferriera Valsabbia SpA and others v Commission, § 46-49; case C 88/15P Ferriera Nord SpA v Commission, § 51-55 and case C 89/15P Riva Fire SpA v Commission, § 44-49.