Article

Through the Lens of Goods and Services: An Analysis of the CJEU

Matthew Foster

2nd year LLB student at King’s College London


a.   Introduction

The Court of Justice of the European Union[1] (CJEU) is one of the most active judicial bodies in the world, delivering over 26,000 judgements since its creation.[2] Its impact upon Europe has been deep and pervasive and it has influence over many different policy sectors.[3] As AG Maduro correctly identifies, the Court has engaged in systematic “majoritarian activisim”[4] in pursuance of judicial harmonisation. Moreover, the Court frequently takes a teleological approach to jurisprudence in order to achieve this objective, sometimes basing its decisions upon “the spirit” of the Treaties opposed to their literal wording.[5] The scope, motivations and approach of the Court have a compounded effect, making it incredibly potent. It is capable of creating highly creative (and sometimes unpredictable) case law which can affect a wide range of people in a broad variety of sectors. Such power has the potential to be both highly beneficial and highly damaging.

 

In light of this some scholars have questioned its legitimacy.[6] There is an inherent friction between Member States and the Court; as Craig and de Burcá highlight “each has locked itself into a system of review whose dynamics it cannot easily control”[7]. This is because the Court’s power of review stems from all 28 Member States who all have divergent opinions. Holding the Court to account is therefore very difficult. This poses a problem when one considers the uneasy relationship direct effect and primacy have with Member State sovereignty. However the biggest danger to the Court, and the important role it plays, is itself. As established, the stakes are very high and poor judicial decisions can have colossal ramifications.

 

In this article I will analyse the approach of the Court through the lens of the fundamental freedoms. I will highlight the different approaches taken in regards to free movement of goods and free movement of services and argue why the Court should follow its approach in the latter.

 

b.   Free Movement of Goods

The bulk of the case law concerning free movement of goods can be found in relation to measures having equivalent effect to quantitative restrictions.[8] In this area the Court has repeatedly tied itself in knots and generally struggled to take a decisive approach.

 

In the seminal case of Dassonville[9] the scope of Article 34 TFEU was cast very wide, indeed its “potential breadth […]is striking”.[10] The Court held that “any measure capable of hindering, directly or indirectly, actually or potentially, intra-Community trade”[11] would fall within the scope of Article 34, and thus be prohibited. Case law has developed these principles, meaning that at its widest scope anything that could potentially interfere[12] with intra-Community trade, even indirectly,[13] could fall within the scope of Article 34. Evidently this was a step too far. When taken to extremes Dassonville could be used to challenge a plethora of national rules.[14] As the notorious Sunday trading cases[15] illustrate something had to be done.

 

Consequently, in the infamous decision in Keck, the Court found it “necessary to re-examine and clarify its case law on this matter”.[16] Some tactfully state that this is merely a refinement of the Dassonville test,[17] however as Weatherill bluntly puts it, the Court simply “changed its mind”.[18] The decision in Keck effectively created an exception for certain selling arrangements that applied equally to all measures in fact and in law.  This was not completely unprecedented (drawing from academic commentary[19] and case law[20] for its inspiration) and neither was its aim undesirable.[21] In fact, the Commission was initially very positive, stating that “the Court has completed its case law”[22]as a result of the judgement.

 

Regardless, the decision has been very divisive. Barnard states the ruling received “brickbats and bouquets in almost equal measure”.[23] However it is important to note that the majority of said ‘bouquets’ were from Member States thankful for a curtailment of the previous law. The majority of academic opinion is critical of the case; several key problems arise from it. Firstly it purported to clarify the case law; however it said nothing about which previous cases it overruled. Secondly the distinction between product requirements and certain selling arrangements is extremely fine, a problem exacerbated by the concept of dynamic/static rules.[24] Finally, and most damaging, the concept was completely novel and signified a departure from the well-established test of distinctly applicable and indistinctly applicable measures.[25] This caused the Court a considerable headache.[26]

 

Thankfully the Court heeded this criticism[27] and altered[28] its decision in Keck, at least to an extent. In Commission v Italy (Trailers)[29] the Court reaffirmed another test, the market access test. It is debatable whether this is an overarching theme or merely another category of breach; however the overall result is relatively clear. If a measure fails the Keck test it will be considered automatically in breach of the market access test. If a measure passes the Keck test it will still have to pass the market access test independently. Therefore, irrespective of how a measure fares under the Keck test, it will always be considered in light of Commission v Italy (Trailers).[30] Put simply the Keck test is not as relevant as it once was, it is subsumed by Commission v. Italy. There are now three types of measures which will fall foul of Article 34, distinctly applicable measures, indistinctly applicable measures and measures which prevent access to the market.


The market access test, however, is not perfect; there is some uncertainty as to its scope, with criticism present well before Commission v Italy (Trailers).[31] In Leclerc-Siplec[32]AG Jacobs stated that such a test could risk encompassing too much national regulation (as with Dassonville) and that therefore a minimum threshold criterion should be established. This may be a feature of the test, as the Court did use the phrase “considerable influence”[33] in the ruling; however this has not yet been resolved. Barnard states[34] that this concept of a threshold is at odds with the de minimus rule found in cases such as Bluhme.[35] This ignores the huge variation in barriers to the market that can arise; therefore such a threshold remains useful.

 

Although the exact scope of Article 34 TFEU is now almost fully defined, it is clear that the method the Court used to get to this position is flawed. The scope of the test fluctuated wildly throughout the years and no one test was applied consistently. This has resulted in a very messy series of decisions. The law concerning free movement of goods is unnecessarily convoluted.

 

c.   Free Movement of Services

The Courts approach in regards to free movement of services is much preferred over the approach outlined above. In contrast to the relatively straightforward cases in regards to goods[36] the Court faced the problem of defining exactly what a service was, particularly considering the vague wording in Article 57 TFEU.[37]


Despite this the Court took a purposive and consistent approach to the matter. For the purposes of Article 56 TFEU,[38] a service is a self-employed activity provided for remuneration on a temporary basis with a cross-border element. Even though the Court has cast the scope fairly wide, especially in regards to the definition of remuneration[39] and the cross border element[40] there has not been the problems encountered with free movement of goods. This is because the Court has considered its approach and has thus been consistent when applying it. By avoiding the excessively broad statements that are present in cases like Dassonville the Court removes the need for correction further down the line.


Furthermore in regards to which measures are caught by Article 56, the Court has again been consistent. It has not sought to apply different tests or experiment with new concepts; rather it has taken a structured approach. The measures falling within the scope of this provision mirror that of the free movement of goods, but without the entire Keck fiasco. Distinctly applicable measures[41], indistinctly applicable measures[42] and measures which prevent access to the market[43] are all caught by the provision.

 

Free movement of services is arguably much more complex than free movement of goods, due to the human element it inherently incorporates. This freedom affects not only the provision of services, but those who deliver them. Consequently the stakes are much higher; any alteration to this framework will have an impact upon the flow of citizens between Member States. However due to the Court’s consistent and restrained approach it has managed to pursue the overall aim of a free market[44] without any of the complications encountered above.

 

d.   Conclusions

It is evident that the Court is an extremely powerful and influential institution of the EU; it has the power to shape events across many countries. Considering this, and the inherent friction such an institution has with Member States, it is of utmost importance that the Court’s decisions are of the highest standard. It has been evidenced that the Court can err, especially when determining the scope of Treaty provisions and choosing which principle to apply. However it has also been shown that the Court can operate in a consistent and purposive manner, ensuring that the aims of the EU are carried out through case law. This is the approach that should be, and largely has been taken by the Court. However as the Court’s jurisdiction strays into more and more litigious areas, such as human rights and citizenship, it is crucial to remember the lessons learnt when developing the freedoms to ensure such mistakes are not made again.

 


[1] Hereafter referred to as the Court.

[2] ‘The Court in Figures’ (1 July 2013) <http://curia.europa.eu/jcms/jcms/P_80908/> accessed 20 January 2014

[3] Paul Craig and Gráinne de Búrca, The Evolution of EU Law  (2nd Edition, 2011, OUP) [119]

[4] Communication from the Commission concerning the consequences of the judgment

given by the Court of Justice on 20 February 1979 in Case 120/78 (‘Cassis de Dijon’)

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:1980:256:0002:0003:EN:PDF

[5] C-26/62  Van Gend en Loos (1963)  ECR I [12]

[6] Giandomenico Majone, ‘Two logics of delegation, agency and fiduciary relations in EU governance’ [2001] EUP 2(1) 103

[7] Craig and Gráinne de Búrca, The Evolution of EU Law  (2nd Edition, 2011, OUP)  [127]

[8] Consolidated Version of the Treaty on the Functioning of the European Union (2012) OJ C 326, Article 34

[9] C-8/74 Procurer de Roi v Dassonville [1974] ECR 837

[10] Catherine Barnard, The Substantive Law of the EU (3rd Edition, 2010, OUP) [73]

[11] C-8/74 Procurer de Roi v Dassonville [1974] ECR 837 [5]

[12] C-184/96 Comission v France (Foie Gras) [1998] ECR I-6197

[13] C-120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649

[14] Craig and Gráinne de Búrca, The Evolution of EU Law  (2nd Edition, 2011, OUP)  [74]

[15] Torfaen Borough Council v B & Q plc [1989] ECR 3851

[16] C-267 & 268/91 Keck and Mithouard [1993] ECR I-6097 [14]

[17] Craig and Gráinne de Búrca, The Evolution of EU Law  (2nd Edition, 2011, OUP)  [74]

[18] Stephen Weatherill, Cases and Materials on EU Law (10th Edition, 2012, OUP) [328]

[19]Eric White, ‘In Search Of The Limits To Article 30 Of The EEC Treaty’ (1989) 26 CMLR 2 235

[20] C-292/92, Hünermund [1993] ECR I-6787

[21] Craig and Gráinne de Búrca, The Evolution of EU Law  (2nd Edition, 2011, OUP)  [665]

[22] [1993] OJ C353/6 [22]

[23] Catherine Barnard, The Substantive Law of the EU (3rd Edition, 2010, OUP) [126]

[24] Eric White, ‘In Search Of The Limits To Article 30 Of The EEC Treaty’ (1989) 26 CMLR 2 235

[25] Craig and Gráinne de Búrca, The Evolution of EU Law  (2nd Edition, 2011, OUP)  [661]

[26] C-405/98, Konsumentenombudsmannen v Gourmet International Products AB [2001] ECR I-1795

[27] Craig and Gráinne de Búrca, The Evolution of EU Law  (2nd Edition, 2011, OUP)  [667]

[28] ibid 141

[29] C -110/05 Commission vItaly (Trailers) [2009] ECR I-519

[30] ibid

[31] ibid

[32]  C-412/93 Leclerc-Siplec [1995] ECR I-179 [41] [49]

[33] C -110/05 Commission vItaly (Trailers) [2009] ECR I-519 [2]

[34] Catherine Barnard, The Substantive Law of the EU (3rd Edition, 2010, OUP) [106]

[35] C-67/97 Bluhme [1998] ECR I-8033

[36] C-97/98 Jägerskiöld [1999] ECR I-7319

[37] Consolidated Version of the Treaty on the Functioning of the European Union (2012) OJ C 326, Article 57

[38] Consolidated Version of the Treaty on the Functioning of the European Union (2012) OJ C 326, Article 56

[39] C-51/96 & C191/97 Deliège [2000] ECR I-2549

[40] C-157/99 Peerbooms [2001] ECR I-5473, C-384/93 Alpine Investments [1995] I-1141

[41] C-288/89 Gouda [1991] ECR I-4007

[42] C-18/87 Commission v Germany [1988] ECR I-5427

[43] C-384/93 Alpine Investments [1995] I-1141

[44] Consolidated Version of the Treaty on European Union (2012) OJ C 326, Article 3(3)

Article

Keck vs. Trailers: have certain selling arrangements been towed away?

Amanda Spalding

PhD Candidate at King’s College London

 

In the 1990s the European Court of Justice (ECJ) established a distinction between the product requirements and certain selling arrangements in the case of Keck and Mithouard.[1] A few years ago in Trailers[2] the ECJ declined to extend Keck to user arrangements and declared that a measure will be classified as a measure having equivalent effect to a quantitative restriction if it hinders access to the market. Though Keck has not been specifically overruled does this market access test mean that Keck has been abandoned? This post will examine whether the market access test has indeed overtaken the Keck certain selling arrangements exception or whether the tests actually deal with separate situations. There is an argument that the phrasing used in Trailers actually excluded product requirements and certain selling arrangements from the market access test.[3] It is also possible that the market access test only applies when the measure is discriminatory whereas certain selling arrangements only apply to indiscriminate measures.[4]  These arguments will be explained and critiqued here.

 

Pre-Keck

Before jumping straight into the Keck case it is necessary to give a bit of background as to why it was decided. As is well known, in the case of Dassonville[5] the ECJ defined a measure having equivalent effect to a quantitative restriction (MEQR) as ‘all trading rules enacted by member states which are capable of hindering directly or indirectly, actually or potentially intra-community trade.’ This is a very wide definition and a trend started with opponents of regulation attacking national rules in view of EU law compliance.  Thus Member State competence to impose any regulation was severely limited. A good example of this is the Sunday Trading case law which challenged the limits on Sunday trading hours imposed in the UK.[6] Eventually the ECJ declared that these rules could be justified by socio-cultural reasons but by that point the UK Parliament was already under huge pressure to change the law.

 

The Keck Case

The Keck case concerned traders selling goods at a loss which contravened French law. The traders argued that this prohibition restricted a method of sale promotion and so was a MEQR. The ECJ noted ‘the increasing tendency of traders to challenge national rules’ and drew a distinction between product requirements and certain selling arrangements (CSAs). Product requirements would always fall within the scope of EU law and have to be justified but CSAs.  So long as the CSAs applied equally to all traders in the national territory and had the same effect on all traders in law and in fact, fell outside the scope of the Treaty. This French prohibition was a CSA and so was not prohibited under EU law. The Keck case was applied again in Leclerc-Siplec[7] where the TV advertising of fuel distributors was prohibited and was found to be a CSA. After that Keck was not successfully used again in front of the ECJ[8] but more recently a body of case-law concerning ‘user arrangements’ came before the ECJ – where these certain selling arrangements?

 

User Arrangements

In the Trailers case an Italian rule prohibited motorcycles, mopeds, bicycles etc. from pulling trailers thus there was effectively a ban on a certain type of trailer. The ECJ found that the rule did not discriminate with regard to origin but in fact only imports were affected as no trailers were manufactured in Italy. The ECJ identified three situations where a rule could be regarded a MEQR.

  1. Where the object/effect of the measure is to treat products from other member states less favourably than domestic products.
  2. When a measure requires goods lawfully made in another member state to meet another condition even if it applies to all products indiscriminately.
  3. Any other measure which hinders the access of products originating in other member states to the market.

The third situation applied here as the prohibition on the use of the product would have a big impact on consumer behaviour which will affect demand for the product. However this could be justified under the mandatory requirement of road safety.

A second user arrangement case emerged soon after. In Mickelsson and Roos[9] two people were caught riding jet skis on a body of water where the use of watercraft is prohibited by Swedish law. The ECJ did not even refer to Keck but went straight to the definition of a MEQR provided in the Trailers case. It found such a limitation would hinder access to the market as it would deter consumers from buying the product but it could be justified on the grounds of the protection of health and life of plants and animals and environmental protection.

 

Market Access vs. Keck

Though Keck has not been specifically overruled, has it been abandoned in favour of a market access test? Perhaps not as there is an argument that the phrasing used in Trailers exempts CSAs from the market access test.[10] The ECJ reiterates that discriminatory measures and product requirements are always prohibited by Article 34 and that CSAs are only prohibited in so far as they are discriminatory. Then the ECJ states ‘Any other measure which hinders the access of products originating in other Member States to the market of a Member State is also covered by that concept [MEQR]’ The phrase ‘any other measure’ is confusing, since it is not clear whether it refers to the a measure which is not a discriminatory measure, a product requirement or a CSA? Or does it refer to any non-discriminatory measure – including CSAs?

If it is the former situation, then the market access test may be said to apply to residual rules.  Residual rules are those rules which cannot be classed as a product requirement nor can they be considered product requirements but which affect the sale of a product.  Some examples are a requirement to report data, restrictions on the transport of the product and indeed prohibitions on the use of the product. However this reading of the judgement is not without its problems. The most prominent being that, given the nature of residual rules, it does not make much sense in the internal market. Why would the court exclude CSAs from the market access test when they are likely to have bigger impact on the sale of the product than a residual rule? CSAs govern where, when, how and to whom the product may be sold – factors far more likely to affect trade than a requirement to provide data. There is also a potential for overlap between CSAs and residual rules, for example a requirement not to sell cigarettes to under-18s would be both a CSA (to whom) and a residual rule (prohibition on use).

Another argument which suggests that Keck has not been abandoned is the idea that the market access test only applies when a measure is discriminatory.[11] In order for a CSA not to be caught by Article 34 TFEU it must fall equally on all traders in the national territory and affect the same in law and in fact – in other words it must not be discriminatory. If a measure is not discriminatory because it affects all traders equally then it surely follows that there is no market access problem. Any trader trying to break into the market faces the same obstacles as any other. This is a more convincing reading. Although this argument does not seem to stand up against the ECJ case law, a prohibition on trailers for mopeds, for example, would affect any company attempting to start such a business in Italy as well as those from other Member States. In other words it fell equally on all traders but there were simply no traders from Italy. Thus the discrimination distinction seems also to be problematic.

 

Conclusion

Has Keck been abandoned then? Maybe seems to be the only possible answer. This whole area of EU law has been encased in uncertainty for a long time. The refusal of the ECJ to clear up the situation seems bizarre given the obvious potential consequences for both member states and traders. The two explanations outlined above are not without their problems but their adoption by the ECJ would not be all that surprising. It would not be the first time the Court has engaged in strange and contradictory logic.[12] Until the Court chooses to clarify the situation however, traders and Member States will have to deal with the legal uncertainty.

 


[1] Case 267 and 268/91 [1993] ECR I-6097

[2] Case C-110/05 Commission v Italy  [2009] ECR I-519

[3] E. Spaventa, ‘Leaving Keck behind? The free movement of goods after the rulings in Commission v. Italy and Mickelsson and Roos’’, (2009) 34 ELRev. 914

[4] G. Davies, ‘Understanding market access: Exploring the economic rationality of different conceptions of free movement law’, (2010) 11 GLJ 671

[5] Case 8/74 [1974] ECR 837

[6] Case 145/88 Torfaen Borough Council v B&Q plc ECR 3851, Case 169/91 Stoke-on-Trent City Council v B&Q plc ECR 6635

[7] Case 412/93 ECR I-179

[8] Although there is an argument that there are ‘hidden uses’ of Keck in ECJ cases Case 384/93 Alpine Investment ECR I-1141; Case 51/96 Christelle Deliege ECR I-2549; Case 544/03 Mobistar ECR I-7723 but this is outside the scope of this paper.

[9] Case 142/05 [2009] ECR I-4273

[10] For the full argument and rebuttal see E. Spaventa, ‘Leaving Keck behind? The free movement of goods after the rulings in Commission v. Italy and Mickelsson and Roos’’, (2009) 34 ELRev. 914

[11] For the full argument see G. Davies, ‘Understanding market access: Exploring the economic rationality of different conceptions of free movement law’, (2010) 11 GLJ 671

[12] Case 137/09 Josemans [2010] ECR I – 13019

Article

A Prosecutorial Model could lead to a more Efficient Enforcement of Article 101 TFEU in Cartel Cases

Andrea Usai

PhD Candidate in EU Law, University of Bologna-Université de Strasbourg; LLM in EU Competition Law, King’s College London

 

Introduction

This article seeks to contribute to the ongoing debate on whether a separation of powers between the prosecutorial and the adjudicative functions, which are now both held by the European Commission (“EC”), could entail a more efficient enforcement of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) in cartel cases. In the first part it will be explained how the procedure works and then why the current concerns regarding fairness could jeopardize efficiency. Indeed, although the scope of this paper is not of going deeply into the alleged lack of fairness in the Enforcement System, it is important to understand that the debate on fairness could affect efficiency.

However, should it be discovered that there could be fairness concerns, would it be acceptable to have a fair system which is not efficient? In other words, are we sure that a prosecutorial model can foster efficiency? Is there any risk that a reform will make the system worse off? The literature is mostly concerned about fairness. In this paper it is argued that a prosecutorial model can be more efficient than an administrative one. Indeed, efficiency means fewer costs and more benefits. Deterrence can be fostered together with the credibility of the whole system. The possibility of having wrong decisions can be drastically reduced and the risks of bias in the decision-making process completely avoided.

Therefore it analyses, in the light of what the game-theory calls the cut-off strategy, whether the current structure of the system can be considered as efficient enough. After taking into account the risks of too long proceedings and bias in the decision-making process that seem to be typical of the administrative model, it will be shown how the judicial review can be fostered if the EC acts as a prosecutor before a specialized Competition chamber within the General Court (“GC”).

1. How the procedure works

According to the procedure laid down in Reg. 1/2003, the EC’s procedure usually starts with the Statement of Objections (“SO”), which contains all the elements of facts and law against the alleged anticompetitive agreement. Indeed, the SO is drafted by the members of Directorate General Competition (“DGCOMP”) and it is reviewed by the Legal Service, by an economist, the Director and the Director General and the Cabinet of the Commissioner for Competition. Afterwards, the undertakings, which are addressees of the SO, can make written replies and have a right to ask for an oral hearing.[i] Usually, the officials who drafted the SO take part in the hearing together with some of the other officials already involved.[ii] After the hearing takes place, the same officials who wrote the SO will write the decision.[iii] At this stage of the proceedings, as regards cartel cases, there is normally no peer review examining the case. The decision is commented on by the Advisory Committee, which brings together competition experts from the Member States. In the end, the Competition Commissioner proposes it to the other Commissioners. In fact, formally speaking, the final decision is taken by the Commissioners and takes the form of a Commission’s decision. To put it differently, it seems clear that the same officials both write the SO and draft the final decision.

As it has already been stressed, the scope of this paper is not to go deeply into the concerns regarding fairness, which have been raised by scholars and practitioners. There is still a big debate between those who argue that the system is fair and those who firmly believe that it is not fair at all. Indeed, it is claimed that although fairness is very important, the enforcement of competition law, especially in cartel cases, should focus primarily on efficiency[iv] in order to protect consumers and to guarantee the proper functioning of the Internal Market.

2. Efficiency

It can be certainly argued that an eventual structural reform, in order to be deemed to foster efficiency, should first of all not entail any loss of effectiveness when enforcing Art. 101 TFEU. Even more, an eventual reform should entail further benefits and diminish the current costs that can be eliminated. In other words, the big radical structural reform that this paper suggests should guarantee effectiveness and foster efficiency. Indeed, if it could be proved that an adversarial model could be more efficient in cartel enforcement proceedings, the debate regarding fairness could be read from a different point of view. As long as the separation of the three functions[v] now held by the EC can provide for an efficient system saving time and money and providing for better outcomes, there would be no reason to speak about fairness and due process in Competition Law proceedings.

To begin with, it should be pointed out what efficiency means. Efficiency is usually maximised when it is possible to have fewer costs. What does ‘fewer costs’ mean? It means to save time and money and to provide for tools that reduce the risks of bias, the risks of inaccurate decisions and the risk of having too many cartels which are not detected or not punished properly. Moreover, ‘fewer costs’ also means diminishing the risk of having a non-credible system. Then, efficiency must necessarily mean more benefits. To be more explicit, it means faster proceedings, less costly procedures, more objectively taken decisions, more accurate decisions and maximisation of the number of cartels which are detected and punished. Efficiency means also fostering deterrence and the credibility of the system. Moreover, the understandable concerns about efficiency should also take into account the most efficient way to get a more efficient system. In other words, the structural reform that could be done in the fastest and easiest way should be preferred. In the EU, this would be reformation without going through the Treaty amendment procedures. In this case, it is argued that it would be possible to use Art. 103 (1) TFEU.[vi]

Furthermore, one way to foster efficiency is to act strategically.[vii] Sometimes it could be in a player’s interest to reduce his own freedom of future action and to create a non-return situation, an emergency situation. For instance, this strategy was taken by Cortés who burned his own ships after his arrival in Mexico. He deliberately eliminated the option of going back to Spain. Without ships to sail back home, Cortés made it clear to his crew that they could either fight and destroy their enemies or perish. No matter that his soldiers were enormously outnumbered. This strategy, which at the beginning scared his army and risked mutiny, was the best solution. In fact, Cortés put himself and his crew in an urgent and one-way situation. They could not fail. Failure would have certainly meant death. Indeed, they did not fail. They fought and they won. This is to demonstrate that, in order to work out what is best, it is often a good strategy to cut off all the different options that you have but one.

Game Theory can be very helpful in our analysis. In order to foster efficiency in antitrust proceedings regarding cartels cases enforcement, there are good arguments in favour of a separation of the investigative, prosecutorial and adjudicative functions, at the present held by the EC. It seems to be arguable that if the EC cuts off its adjudicative option, leaving it to the Courts, the whole system can be made better off. This is the background of our legal and economic analysis. However, as it does not seem to be the case of giving things for granted, this paper will look at the length of the proceedings and at how the judicial review works from an efficiency point of view.

2.1. Length of the proceedings[viii]

The first cluster of criticisms deals with the length of the proceedings. In fact, as it has already been pointed out, one of the alleged advantages of the current system is that an administrative model can lead to efficiency because it provides for faster proceedings. Moreover, according to the statistics and to the problems that are usually dealt with in the national legal systems, one of the main issues regarding the administration of justice is the delays that cases encounter when they get stuck in the Courts. As it seems to be clear from the statistics regarding the Courts, the delays of the cases are mainly at the level of the GC. In fact, the average[ix] of the length of the proceedings was 40 months at the level of the GC and 35 months at the level of the European Court of Justice (“ECJ”) between 2000 and 2005. Then, between 2006 and 2010 the average goes up significantly to 54 months at the level of the GC and down to 25.5 at the level of the ECJ.

These data show two main issues: the first one is, as it has already been pointed out, that the delays concentrate at the GC level. Therefore, an eventual reform should take into consideration a solution which would be able to reduce these delays. Secondly, they show that a huge percentage of cases go on appeal before the Courts. The ease with which appeals can be brought and the fact that neither the GC nor the ECJ can substitute the EC’s decision with their own decision, as it is possible in the UK, can jeopardise efficiency.

This paper argues that also the length of the proceedings before the Commission is relevant. The average of the length of the proceedings is between one and two years from the issuing of the SO and the adoption of the final decision. In this case too, a prosecutorial model could make the system better off as there would be no issuing of the SO, no oral hearing before the Hearing Officer, no internal debate with checks and balances and no draft and final decision. There would be no supplementary SOs and remittals from the Court to the Commission. In a prosecutorial model there would be the EC acting as a prosecutor concerned about preparing its strong case to be brought before the Court. Indeed, it would be possible to save time and it would be likely that the number of cases going on appeal will be reduced, either because the cases that the EC will bring will be much stronger or because there will be more settlements as it happens now in the US.

2.2. Judicial review

One of the key issues of the current system is what happens if the reviewing court finds fault with the decision. At the present, the EU system provides for Courts that can only annul the decision but they cannot themselves take a new one substituting their decision for the EC’s. Indeed, the EU model works very differently if compared to the UK model, where the Competition Appeal Tribunal can substitute its decision for the Office of Fair Trading one. In fact, this paper argues that the GC does not exercise extensive review and that therefore it does not have full jurisdiction. The EU courts are allowed only to review the manifest errors.[x] Indeed, the GC exercises self-restraint when it comes to “complex and factual economic assessments”. Moreover, It does not use properly its unlimited jurisdiction on fines[xi]. This paper argues that the GC and the ECJ do have unlimited jurisdiction as regards fines and penalties but they lack it when it comes to facts. This problem is brilliantly emphasised in a recent case[xii] where even though the Commission had found a single and continuous agreement in the Belgian removals sector, the GC found that the applicant had participated in only part of the practices. Therefore, the GC, not being able to substitute its decision for the EC’s, had to annul the decision entirely. The likely result will be that the EC will have to readopt a new SO and a new decision and a second round of judicial review.

Another key issue is whether the Courts defer to the EC’s decisions. It is important to go deeply into this point, because it seems to be that not only do the Courts have no full judicial review which contributes to render the system inefficient, but they defer to the EC’s decisions. This paper suggests that the alleged deference of the Courts should be resolved by reforming the structure of the enforcement system. It seems to be arguable that a prosecutorial model would be much more efficient from the Courts’ perspective, as they would be given the possibility of taking the final decision. To put it differently, this paper suggests that even though it might be argued that the Courts could do their job better, the answer to this criticism stays in the reform itself. A better job could be done only if a chamber with full review is established within the GC and the EC acts as a prosecutor before it.

Moreover, it might be argued, as many practitioners do, that the risk of having a prosecutorial model is that judges are not well trained in Competition Law (such as in Ireland), instead of a strong tradition of judges deciding antitrust cases, as in the US. In other words, the risk would be that judges are not as prepared as the EC’s officials are. However, this would not be the case. First of all, because there are already EU judges who are experts in Competition Law. Secondly, it would always be possible to use Article 255 TFEU in order to make sure that there will be judges well trained in Competition Law.

The idea of establishing a specialised chamber of Competition Law cases within the GC and using Art. 255 TFEU can function well in the current system too. Indeed, Art. 255 TFEU is already being used. However, it is argued that an administrative system with a specialised chamber and with Art. 255 TFEU fully applied would not be optimal, from an efficiency perspective, for the abovementioned reasons. A prosecutorial model could entail more efficiency. It could reduce the length of the proceedings, both at the Courts’ and at the EC’s level, apply the “cut-off” strategy, and reduce the risks of bias in the decision making process. Moreover, once a prosecutorial model is established, a specialised chamber within the GC would avoid the risk of having bad outcomes.

Conclusions

It seems to be clear that, for the abovementioned reasons, a prosecutorial model would entail a much more efficient enforcement in cartel cases. Firstly, because of the fact that the length of the proceedings could be drastically reduced at the Courts’ level and at the Commission’s level. Secondly, the system could be made better off with providing for a specialised chamber within the GC and giving this chamber the possibility of having unlimited jurisdiction on facts too. In this way, the new Competition Chamber would be able of taking the final decision. Moreover, it should be pointed out that a prosecutorial model should not diminish the deterrent effect of the fines and of the new settlements procedures.[xiii]


[i] The Hearing allows the addressees of the SO to present their defense arguments not just on procedure but also on substance. However, the final report of the Hearing Officer is on procedure only.

[ii] See J. Temple Lang, “Three possibilities for reform of the procedure of the European Commission in Competition cases under Reg. 1/2003, in Carl Baudenbacher (Ed.) “Current Developments in European and International Competition Law” (ICLF 2010) presented at the 17th St. Gallen International Competition forum Helbing Lichtenhahn, Basel 2011, Vol. 12

[iii] Ibid.

[iv] In this case, as it is possible to understand from the debate about fairness and due process, those who argue that the system is not fair, argue in favour of a prosecutorial model in order to comply with the European Convention of Human Rights criteria. This paper points out that, regardless of fairness and due process, a prosecutorial model can be much more efficient from different perspectives.

[v] As it has already been pointed out, the scope of this article is not to go deep into the issue of fairness, it could be argued that the fact in itself that the debate continues is jeopardising efficiency as it increases the already high likelihood of going on appeal and it contributes to diminish deterrence and the credibility of the system. See Alec Burnside, “Mario Monti should not be judge and jury”, Financial Times, 21 October 2002, p 17; and “Enforcement of Competition Law in Europe is unjust and must change”, The Economist, 18 February 2010.

[vi] Article 103 (1) reads as follows: “The appropriate regulations or directives to give effect to the principles set out in Articles 101and 102 shall be laid down by the Council, on a proposal from the Commission and after consulting the European Parliament”.

[vii] See A. Dixit and B. Nalebuff. “Thinking strategically. The Competitive Edge in Business, Politics and Everyday Life”. (New York: W.W. Norton & Company, 1991)

[viii] According to the recent developments of the European Courts’ case law, it could be argued that the length of the proceedings both before the Courts and the Commission is problematic also as regards fairness.

[ix] See D. Gerard, “Judicial Review of Cartel Decisions”, in Mario Siragusa and Cesare Rizza, eds., EU Competition Law, Vol III. Cartel Law: Restrictive Agreements and Parctices between competitors, Claeyes and Casteels, 2007, Chapter 5

[xi] Ibid.

[xii] Case T 210/2008, Coppens v Commission, par 36

[xiii] For a detailed analysis of the issues, see W. Wils, “The Use of Settlements in Public Antitrust Enforcement: Objectives and Principles” (2008) 31 (3) World Competition; See also W. Wils, “Optimal Antitrust Fines: Theory and Practice” (2006) 29(2) World Competition; See also  W. Wils, “Leniency in Antitrust Enforcement: Theory and Practice” (2007) 30 (1) World Competition