Documents considered by the Committee on 25 April 2017 Contents

9More effective enforcement by national competition authorities

Committee’s assessment

Legally important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

Proposal for a Directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market

Legal base

Articles 103 and 114 TFEU; ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

(38624), 7621/17 + ADDs 1–4, COM(17) 142/2

Summary and Committee’s conclusions

9.1The Commission proposes to strengthen the powers available to national competition authorities (NCAs) to implement EU competition rules. Although NCAs have, since 2004, been empowered to apply EU competition rules alongside the Commission, in practice some NCAs do not have the necessary powers and resources necessary to fulfil this obligation. The Commission believes that the resulting uneven enforcement of EU competition rules distorts competition in the internal market and undermines the now well-established system of decentralised enforcement.

9.2The Government informs us that the Commission hopes to secure the adoption of the Directive before European Parliament elections in spring 2019. The UK would have left the EU prior to the eventual deadline for transposition, and therefore the Government does not expect to implement the Directive.

9.3We are nonetheless grateful for a helpful Explanatory Memorandum from the Minister for Small Business, Consumers and Corporate Responsibility. This notes that the Government and the Competition and Markets Authority (CMA) had participated in the Commission’s consultation in early 2016 on the proposals, and highlights issues relating to leniency and mutual assistance.

9.4We are pleased at the Government’s confirmation that “the UK has a robust and flexible legislative competition framework under the Competition Act 1988, which works well and is well enforced,” and that “the UK is expected to be largely compliant with the proposed Directive”. We are interested to learn that “the CMA and the concurrent competition regulators in the UK that are designated as national competition authorities already have almost all of the powers set out in the directive”.

9.5Although the Government does not expect to have to implement the proposed Directive before Brexit, its provisions do highlight the issue of future cooperation between the UK’s competition authorities and EU national competition authorities. The form and nature of such cooperation is, as the Government states, a matter for future consideration. However, given that UK consumers and businesses have a clear interest in continued wide choice, affordable prices, continued innovation and a level playing field, we would like to be kept informed of the Government’s negotiating position on this Directive in the coming months, and therefore retain it under scrutiny. We would appreciate responses to the following questions:

9.6We note that the Government does not intend to produce an impact assessment because it does not expect to have to implement the proposal. However, we ask the Minister whether it would not still be beneficial to establish the costs and benefits for the UK of not participating in this proposal, for the purposes of identifying useful areas for future co-operation with the EU.

Full details of the documents:

Proposal for a Directive to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market: (38624), 7621/17 + ADDs 1–4, COM(17)142/2.

Background

9.7Articles 101 and 102 of the Treaty on the Functioning of the European Union set out EU rules on concerted practices that restrict competition and on abuse of dominance. Since 2004, national competition authorities of Member States have been empowered, through Regulation (EC) No. 1/2003, to apply EU competition rules alongside the Commission. Under the Regulation, NCAs must apply EU competition rules to agreements or practices that are capable of having an effect on trade between Member States.

9.8A European Competition Network was established in 2004 as a means of promoting greater cooperation between national competition authorities and with NCAs and the Commission.

9.9The Commission states that:

“Enforcement of the EU competition rules is now taking place on a scale which the Commission could never have achieved on its own. Since 2004, the Commission and the NCAs took over 1000 enforcement decisions, with the NCAs being responsible for 85%.”

9.10However, the Commission has determined that there is potential for more effective enforcement of EU competition rules by NCAs. In particular, it believes that Regulation (EC) No. 1/2003 did not address the means and instruments by which NCAs apply EU competition rules, and that many NCAs do not possess all the powers necessary for this purpose. Despite over a decade of soft action through the European Competition Network to promote voluntary national action, a number of NCAs still lack the guarantees and instruments necessary to be effective enforcers.

9.11The Commission has also concluded that national rules which prevent NCAs from being effective enforcers also impede the effective functioning of the internal market. The proposed Directive is therefore intended to pursue two linked goals, hence the dual legal base.

The proposed Directive

9.12Following a public consultation between November 2015 and February 2016, in which the Government and the UK Competition and Markets Authority participated, the Commission has now proposed a Directive to enhance the effectiveness of NCAs.

9.13This addresses the following areas:

9.14The Directive proposes that Member States ensure compatibility with the following provisions:

Independence and resources

Powers

Fines

Leniency

Mutual assistance

Limitation Periods

Other provisions

The Government’s Explanatory Memorandum

9.15The Minister for Small Business, Consumers and Corporate Responsibility (Margot James) informs us that the Government does not expect to implement the Directive on the basis that the UK would have left the EU by the likely transposition deadline. As such, the Government does not intend to carry out an impact assessment.

9.16However, the EM does make the following useful points:

Policy implications

9.17The UK’s Competition and Markets Authority (CMA) is expected to be largely compliant with the proposed Directive. The Government states:

“The CMA and the concurrent competition regulators in the UK that are designated as national competition authorities already have almost all of the powers set out in the directive and are sufficiently independent and well-resourced to meet the terms of the directive.”

9.18The CMA would support amendments to UK law such as the provisions relating to the joint liability for fines of members of associations of undertakings (eg trade associations), and for the penalty to take account of the turnover of the association’s members as well as that of the association itself.

9.19The CMA would also support a mechanism for cross-border notification of preliminary objections and decisions and for cross-border enforcement of decisions imposing fines. The Government informs us that it will “consider whether similar provisions to those in the directive on mutual assistance should be negotiated as part of future cooperation arrangements on competition with the EU and other countries”.

9.20The Government highlights concerns raised by the CMA on the Directive’s provisions on leniency. These relate to the interplay between leniency programmes and sanctions on natural persons. The Government believes that providing employees and directors with immunity from individual sanctions could undermine the deterrent effect of the enforcement regime and the basis of the leniency regimes. The Government tells us that “[it] will explore this possibility further with the CMA and consider such concerns in its negotiations of the directive”.

9.21With the exception of the provisions on leniency, many of the recommendations and considerations set out by the CMA in its response13 to the Commission consultation have been addressed in the proposed Directive.

9.22In addition, the Government states that if it were implemented into UK law, the Directive as drafted would limit the CMA’s discretion to grant immunity in cases where it is already conducting an investigation into a cartel (known as ‘Type B’ immunity). To qualify for this, an applicant must provide evidence which adds “significant value” to the CMAG’s investigation. The conditions for granting immunity as set out in the Directive would limit the CMA’s discretionary immunity to cases where it did not have sufficient information to conduct an inspection or to make a finding of infringement.

Previous Committee Reports

None.





27 April 2017