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The ECN’s Recommendations on Commitment Proceedings: A Missed Opportunity

January 24, 2014

On December 10, 2013, the European Competition Network (ECN) issued a set of recommendations on the investigative and decision-making powers that competition authorities in its network should have in their competition-enforcement toolbox.

Regarding antitrust commitment proceedings, which have been increasingly used both at the European Commission (EC) level and in a number of EU Member States, the ECN’s recommendations are aimed at setting minimum common denominators across the EU. Nonetheless, the recommendations are not binding and are without prejudice to the legal frameworks of those ECN jurisdictions with procedures in place that either incorporate or go beyond the scope of the recommended principles.

The ECN’s Recommendations on Commitment Proceedings

The ECN makes the following key recommendations in relation to commitment proceedings:

  • The legal frameworks of all ECN jurisdictions should include provisions explicitly stating that commitment decisions may be adopted.  The ECN makes reference to “formal decisions,” which indicates its strong preference for formal commitment proceedings as opposed to informal settlements.  Similar to the rules set in place under Regulation 1/2003, this recommendation aims to ensure that commitments offered by an investigated company are enforceable.
  • Commitment decisions should not conclude definitively that infringements took place.  Rather, a commitment decision should conclude that there are no longer grounds for action, given that the investigated company has offered appropriate commitments which are binding on it.  Again, the recommended approach largely borrows from the system put in place under Regulation 1/2003.  The ECN makes no recommendations regarding conduct that should be excluded from commitment proceedings (e.g. cartels).  It merely mentions in the preamble to its recommendations that some jurisdictions explicitly exclude the most serious infringements from commitment decisions, while others infer such a conclusion from the wording of Regulation 1/2003.
  • The choice between adopting a commitment or a prohibition decision should remain at the competition authority’s discretion.  While an investigated company may propose commitments to the competition authority, the ECN hints that the investigated company should have no right to the adoption of a commitment decision.  This recommendation is consistent with the EC’s current stance on commitment proceedings, which advocates the broadest possible discretion in deciding whether to pursue a case under infringement proceedings or through binding commitments.
  • Commitment proceedings should be designed so as to result in: (i) the swift restoration of effective competition on the relevant market; as well as (ii) procedural economies.  While the ECN appears to favour speed and flexibility when conducting commitment proceedings, it nevertheless notes that an investigated company should be allowed sufficient time to interact with the competition authority.  Such a recommendation arguably attempts to: (i) ensure the tailoring of an effective set of commitments; and (ii) safeguard the interest of the investigated company in ascertaining the allegations against it. Interestingly, the ECN takes a much less robust stance in so far as the interests of third parties are concerned: it notes that competition authorities may (rather than should) seek the views of market participants on whether the commitments offered address the competition concerns or not.
  • In reviewing the commitment proposal submitted by an investigated company, the competition authority should be confined to verifying that the commitments address its competition concerns.  Therefore it, , should not be obliged to run a comparison between the commitments offered and the measures that potentially could be imposed through a prohibition decision; or ensure that the commitments offered do not go beyond what is necessary to resolve its competition concerns.  In essence, the ECN, in line with the Court of Justice’s ruling in Alrosa, seems to take the view that the proportionality threshold in commitment proceedings should be lower than that in infringement proceedings.
  • The competition authority should have effective powers to monitor the implementation of decisions ordering commitments.  While the ECN does not make specific recommendations as to monitoring compliance, it does note that effective mechanisms include: (i) ex officio monitoring by the competition authority; (ii) monitoring emanating from complaints or information provided by market participants; (iii) the submission of periodic reports by the investigated companies; (iv) monitoring based on cooperation with sectoral regulators and/or other public bodies; (v) monitoring trustees; and (vi) express review clauses in commitment decisions.
  • The competition authority should have at its disposal effective means to enforce compliance with the commitment decision.  Such means could include fines for non-compliance, as well as periodic penalty payments to compel swift compliance.
  • The competition authority should have the power to re-open proceedings if: (i) there has been a material change in any of the facts on which the commitment decision was based; (ii) the company bound by the commitment decision acts contrary to it; or (iii) the commitment decision was based on incomplete, incorrect or misleading information.  In this regard, the ECN merely reiterates the conditions laid out in Article 9(2) of Regulation 1/2003.

A Missed Opportunity

In examining the increase in commitment decisions at both the EC and national competition authorities (NCAs) level, we noted here that the lack of guidance may result in the proliferation of differing approaches in the use of commitments and, eventually, the emergence of an inconsistent and fragmented application of antitrust law in the EU.  In that sense, the formulation by the ECN of a set of recommendations regarding commitment proceedings is certainly a welcome development.

However, upon closer examination, the ECN’s recommendations are to some extent disappointing: the ECN appears to merely recommend that the NCAs copy-and-paste the key aspects of the EC’s practice in commitment proceedings.  One would have expected the non-binding nature of the ECN’s recommendations to have “inspired” the ECN to make more innovative suggestions, sourced from the best practices of some of the NCAs, which already operate elaborate commitment proceedings.  Not only has the ECN failed in any attempt to do so, but it appears to have endorsed the current practices of the EC at a time when those practices are increasingly being questioned by stakeholders.