Employment Considerations and
THE CURRENT PROVISION FOR EMPLOYEE INVOLVEMENT
215. Recital 31 of the ECMR stipulates that the Regulation
"in no way detracts from the collective rights of workers
as recognised in the undertakings concerned". Recital 19
goes further, stating that "the members of management and
supervisory organs and recognised workers' representatives in
the undertakings concerned, together with third parties showing
a legitimate interest, must [
] be given the opportunity
to be heard". In the Green Paper, the Commission confirmed
that it is "open to hearing the views of employees"
in merger investigations (paragraph 244). We explored various
ways in which this might be facilitated.
SHOULD THE ECMR OBLIGE THE PARTIES TO CONSIDER THE
IMPACT OF A MERGER ON EMPLOYMENT?
216. The trade unions drew attention to Article 127(2)
of the Treaty of Amsterdam, which states that the "objective
of a high level of employment shall be taken into account in the
formulation and implementation of Community policies and activities."
Despite this provision, the unions considered that the ECMR ignored
the employment consequences of a merger.
217. To tackle this issue of employment considerations,
ETUC proposed that Form CO should include a question asking the
parties what the employment consequences were of a proposed merger.
Where the parties judged that the effects of the merger on employment
would be negative, the form would contain further questions asking
them what action they had considered taking, whether they had
any plans to address the job losses and whether they had "discussed
the situation with the respective, competent worker representation".
ETUC said that such an addition to Form CO would be "a considerable
step" and would help employees since it would provide one
practical way in which employees might express their views, indirectly,
to the Commission (Q 345).
THE ROLE OF WORKER REPRESENTATIVES
218. The TUC suggested that companies planning a
merger should inform and consult representatives of the workforce
"at the earliest possible stage of the process" and
before the case reached the competition authorities (Q 126). ETUC
complained that on the occasions when they were consulted, the
time available for them to respond was too short and did not allow
them to carry out a proper evaluation of the case. Both the TUC
and ETUC recognised that the parties might have concerns about
the confidentiality of the case. But senior officials of trade
unions were capable of maintaining confidentiality. Nor did ETUC
accept that consulting workers could conflict with the Stock Exchange
rules. (QQ 126, 345, 353).
219. ETUC suggested that the responsibility to contact
the worker representatives should rest with the Merger Task Force
(MTF). Although the Commission already notified ETUC if a merger
investigation went into Phase II, the unions wanted this to happen
in the first stage of the process or even earlier (p 55).
They argued that such a move would not result in delay, since
in most cases company management contacted the Commission well
in advance, on an unofficial basis, and had talks with MTF officials
before a notification was formally sent to the Commission (Q 345).
However, if the workers were notified of a casewhether
the Commission itself communicated a notification to the worker
representatives, or whether it were conveyed by companies, asking
for the advice of worker representativesthe ETUC said that
this contact "would help a great deal" (Q 345).
220. In opposition to such moves, the CBI said that,
given the very tight deadlines for decision-making and the fact
that employee representatives were already entitled to make their
views known on a proposed transaction (either orally or in writing),
it would "strongly oppose any expansion of their role in
the decision-making process." Any such development could
cause uncertainty and delay (pp 10-11). The Competition Law Association
(CLA) also made the point that trade unions, and other bodies,
already had the right to make representations to the Commission
(Q 113). The GMB, however, dismissed the current system as "inadequate"
221. The Government had "no objection to the
Commission taking more active steps to seek the views of employees'
representatives on merger cases." But "any input should
be on competition issues alone and not the broader social implications
of any concentration" (p 150). This went directly against
the wish of the GMB, who wanted the Commission to "stop seeking
to limit the scope of consultations to market impact and broaden
discussions to include assessment of the wider employment and
social impact" (p 59).
SHOULD THE CRITERIA FOR THE APPRAISAL OF MERGERS
BE EXTENDED TO TAKE ACCOUNT OF EMPLOYMENT CONSIDERATIONS?
222. The trade unions argued that "the criteria
for assessing mergers should go beyond the impact on competition
and include wider economic assessment, which would include the
impact on employment" (TUC p 1). Consequently, the Committee
considered whether the criteria in the substantive test of the
ECMR should be amended to require the Commission to take employment
considerations into account when judging a proposed merger.
223. Apart from the trade unions, witnesses were
firmly opposed to widening the scope of the Commission's analysis
to take into account wider non-competition criteria such as employment
or economic effect on the region in question. Professor John Kay,
who was against the Commission performing cost benefit assessments
of the consequences of mergers, said that to bring in these considerations
"would be pushing the Commission even further down the road
of trying to predict what was going to happen in the industry
in future." He considered such analyses to be impracticable
and unreliable (Q 196).
224. Witnesses from industry agreed that the MTF
should be authorised only to make competition judgements. Accordingly,
they were against proposals to introduce non-competition matters
into the ECMR (Q 307). They argued that the ECMR should remain
a competition regulation, in which employment and the regional
effect a transaction were not relevant. Non-competition criteria,
such as employment, could still be taken into account by national
authorities insofar as they were compatible with Community law.
The CBI argued strongly that expanding the criteria on which the
Commission judged a merger would "undermine the competition
focus of the MTF's analysis" (pp 10-11). The CLA insisted
that competition policy "ought to deal with competition issues,
the structure of the market, the effects on the intensity of competition."
The CLA argued that social issues were difficult to deal with
in the context of a review of an individual merger:
"The issues of concentration, of putting together
two companies, are not necessarily the same issues as those that
might be troubling the workforce or the region. It is better that
those are dealt with in parallel procedures, many of which of
course exist" (Q 111).
The JWP also stressed the presence and role of other
areas of legislation covering these issues (QQ 111-12).
225. John Vickers considered it important to be clear
what merger policy could and could not reasonably be expected
"What it is designed for and best at is safeguarding
the competitive market process and I would add that there are
many wider social issues, for example, employment issues, where
I think the preservation and promotion of competitive markets
are the best thing that competition policy can do for employment
prospects. So I do not see a collision between competition objectives
and other objectives. It is more a question of complementarity.
I think there would be all sorts of dangers of mission creep and
the like if the authorities were deflected from the competition
assessments, which are paramount for all of us and in all the
main jurisdictions" (Q 228).
Professor Kay agreed:
"In general, we have to rely on what I personally
believe which is that the best way of securing employment, good
jobs for people in the long run, is a competitive market economy
and that, if we have one, some people will gain, some people will
lose but on balance that is what secures good, well-paid jobs
in the long term" (Q 196).
226. In 1989, after careful consideration of the
impact of mergers on employment, the Committee reached the conclusion
that "it would not be appropriate to include such wider criteria
in a competition Regulation based on the competition provisions
of the Treaty" (1989 Report, p 22). The Committee reasoned
that there were other provisions in the Treaty with social objectives
and other measures of Community social policy. The Committee remains
of the same opinion. The interests of employees should be addressed
by specific legislation providing for the information and consultation
of employees and for their protection in the event of a merger
leading to restructuring. Many Member States already provide for
this in their national law. Further, the EU has adopted a number
of measures to provide for such issues at the European level.
Foremost among these is the Directive to harmonise the information
and consultation rights of workers.
Similar requirements are included in the Directive on the establishment
of a European Works Council
and in the Directive supplementing the Statute on the European
Company with regard to the involvement of employees.
The GMB recognised that these recent Directives should help to
safeguard workers' rights (p 5). There may also be such a provision
in any legislation that might be adopted on take-overs. The Committee
would consider supporting moves to strengthen these Directives.
The substantive test in the ECMR and the way in which it is applied,
however, should remain focused exclusively on competition.
227. The parties to a merger will inevitably consider
the impact of mergers on their workers. Adding to the already
long and complicated Form CO would bring little, if any benefit,
if competition is to remain the key consideration in evaluating
mergers. Employees should be able to express their views on a
merger that would affect them. The responsibility for notifying
them of the proposal should rest with employers, who should be
encouraged to do so at the earliest opportunity. The Commission
has a duty to listen to representations from employees and their
trade unions representatives, but it should not be obliged to
inform and consult representatives of the workforce prior to notification.
The Commission's responsibility is set out in recital 19 to which
it should continue to pay high regard.
Due Process and "Checks
The Commission's position in the Green Paper
228. In the Green Paper, the Commission claimed that
its dual function as investigator and decision-maker was inherent
in the structure of an administrative procedure. It also held
that it was subject to "effective judicial review" by
an independent and impartial judge. Commissioner Monti further
pointed out that the decision-making set up in the Merger Task
Force (MTF)where the administration took decisions that
had executive effect and that could be appealed to a courtwas
exactly the same as in the majority of the Union's National Competition
Authorities (NCAs) (Q 403).
229. The Commission declared that there was a high
degree of transparency in its procedures that came from the publication
of the reasoned decision, the Statement of Objections, the right
to an oral hearing and the full reasoning of final decisions.
In addition, transparency was further strengthened through Guidance
Notices and the publicity given to the Commission's treatment
of individual cases.
230. The Commission claimed that the merger control
system respected due process and that the Commission's other departments
and the Member States provided the current system with internal
and external checks and balances. The Green Paper proposed that,
as the review was limited to the ECMR itself, suggestions should
be limited to those that aimed at reform within the present institutional
and Treaty framework.
Criticisms of the Commission
231. Witnesses were very critical of the Green Paper's
narrow frame of reference and were keen that no artificial limits
should be imposed on their comments. We received much evidence
on how the Commission conducted its reviews of merger cases; witnesses
raised important questions over the level of accountability for
the Commission's decisions. Although the Commission's final decision
on a notified merger is subject to appeal to the European Courts,
it was widely considered that this appeal procedure took so long
that the transaction would no longer be viable for the parties
since the economic situation would have changed. The Commission's
decision therefore for all intents and purposes was final (QQ
232. The Confederation of British Industry (CBI),
amongst many others, remained completely unconvinced by the Commission's
arguments in the Green Paper, and was clear that a lack of due
process in the system was "the ECMR's greatest defect"
(p 3). Whereas the Commission said that it had to account for
itself to the Member States (through the Advisory Committee) and
in front of its own Legal Service, both of these checks were criticised
by our witnesses. The Government said that the role of the Advisory
Committee needed to be reconsidered. They explained that the involvement
of the Advisory Committee was "of little benefit to the parties"
who only saw a summary opinion published in the Official Journal
a number of months after the Commission had reached its decision
(p 149). The Government further reported that, in the past, Member
States had had inadequate time to consider any commitments before
the meeting of the Advisory Committee, which had made it "impossible
for the Advisory Committee to give a properly considered view"
(p 159). In addition, lawyers from Squire, Sanders & Dempsey
said that the timeframe meant that the Legal Service could not
be "effectively consulted on the legality of certain actions
throughout the case" (pp 181-82). Furthermore, the American
Chamber of Commerce (ACC) said that the Commission's Legal Service
did not act as an adequate safeguard in the system because the
parties involved in a notification did not have access to the
Legal Service and so could not know what the legal service was
telling the Merger Task Force (Q 381).
233. In addition to the changes to the commitments
procedure outlined above, we examined a number of recommendations
for how to incorporate further checks and balances into the administrative
arrangements for the handling of ECMR cases prior to the Commission
reaching a final decision. We also addressed the question of judicial
review of Commission decisions. The proposed reforms are presented
Changing to a judicial-based system
234. The most drastic and contentious reform, which
would fundamentally alter the current working of the Commission
and the Merger Regulation, was the possibility of the EU moving
to a system of merger control that would more closely resemble
the regime in the United States. Under such an arrangement, the
Commission would act as a prosecuting agency (as does the Department
of Justice and sometimes the Federal Trade Commission in the United
States). If the Commission considered that a merger raised serious
competition concerns, it would have to take the case to a court,
where the decision and power to prohibit the merger would lie
with the judge.
235. This proposal would be a very radical change
for the ECMR because it would change the role of the Commission
and the Community Courts. As such, it would require amending the
Treaties. Nonetheless, this suggestion was supported by Dr Bishop,
the Union of Industrial and Employers' Confederation of Europe
(UNICE), the Competition Law Association (CLA) and the CBI (QQ
43-45, 55-57, 324).
236. For the CBI, looking at comparisons around the
world, the US model was "the fairest system" as it removed
the issue of a particular agency having a concern about a merger
and its decision not being subject to sufficient checks and balances.
However, whilst both the CBI and the CLA would support the ECMR
moving to a US system "in an ideal world", they noted
that full-scale institutional reform was not on the agenda as
part of this review exercise and "would take years and years
of, no doubt, anxious debate" (QQ 43, 45; p 52). Likewise,
UNICE realised that such a change would certainly not happen within
the next few years and concluded that it went "too far at
present" (Q 331). Dr Bishop was alone in supporting an immediate
move to a US-style regime. He could see "absolutely no reason"
why such a change was impossible in Europe (Q 55).
237. In sharp contrast, the European consumer group,
BEUC, was hostile to the suggestion that Europe should move to
a court-based system, saying that it did not favour "any
attempt to mimic other systems for the sake of making companies
The majority of witnesses gave little consideration to such a
far-reaching suggestion. Instead, they concentrated on more achievable
aims and favoured incorporating further checks and balances into
the current system. The ACC appreciated that moving to a US system
of merger control would involve "a very dramatic overhaul"
of the ECMR and was not a realistic aim. It concluded:
"Instead of going after what is not really achievable,
there are things that should be done, relatively short term if
possible, in order to make the process better within the constraints
that we have." (Q 386)
238. Mr Burnside, of Linklaters, agreed: "The
system that we have is not sufficiently broken that it needs to
be abandoned, but not sufficiently working that it does not need
fixing" (Q 386).
239. This is an important debate that raises questions
of justiciability, institutional balance and resources. Whether
a court is better suited to analysing and taking decisions on
the economic issues arising in merger cases is arguable. Further
reflection is needed before any such fundamental change is proposed.
If the EU were to give consideration to such a move, it would
require a more comprehensive exploration of the issues involved
than was instigated by the Green Paper. Such an exercise would
have to include a more extensive consultation and a review of
the experiences of other jurisdictions.
240. The top priority is to ensure as soon as
possible objectivity and fairness in the ECMR process. Rather
than changing the institutional arrangements, these could be improved
more quickly by enhancing the procedural safeguards in the current
system. The concerns about due process are best addressed in this
Reform of the system of judicial review
241. A number of witnesses pressed for reform of
the judicial review process in merger cases. They called for improvements
both in terms of the grounds on which appeals could be made and
in terms of the time taken for appeals to be heard. They wanted
the Court of First Instance (CFI) to hear cases faster and to
have the fullest jurisdiction to deal with all matters of fact
242. The Committee heard that the US had a much speedier
court system than that in the EU. Dr Bishop reported that, in
the US, an application could be made and the case could be in
court "in a week or two, if not a few days" (Q 44).
In contrast, appeals to the Community Courts could take years
to be decided, by which time the judgment would be "useless
to the company" as the deal would effectively be dead (Q
55; pp 3-4). The inadequacy of the speed of judicial redress was
demonstrated by the recent appeal by Airtours, which took
two and a half years to settle after the end of Phase II (Q 452).
Accordingly, a number of witnesses put forward the argument that
a much speedier court system was needed in the EU. UNICE, the
Government and BEUC called for quicker access to the CFI (Q 324;
243. A second complaint against the CFI was that
it normally only looked at the due process and legality of a case
rather than its substance. Dr Bishop said that the CFI was "far
from the ideal court" to hear merger cases. He pressed for
institutional reform that would allow more effective appeals and
called for "a more professional court" that might take
the form of a special mergers chamber. That is, it would still
be a court, but it would have a specialist unit, experienced in
merger cases (QQ 57, 66). BEUC also supported consideration being
given to establishing "specialist tribunals" that could
hear appeals on fact and law.
244. However, in the Airtours/First Choice
appeal, the CFI had proved itself capable of investigating the
substance of a case. It had examined the evidence; it had been
willing to study the facts involved in the case and analyse the
Commission's conclusions. The Chairman of Mytravel Group (formerly
Airtours) was pleased that the Court had performed a very thorough
job (Q 469).
THE "FAST-TRACK" PROCEDURE
245. A key development in this area was the introduction,
in December 2000, of amended rules of procedure for the CFI which
aimed at expediting its proceedings.
This initiative, which was supported by the Commission, introduced
a "fast-track" procedure for certain types of case,
which could include merger cases. (Q 403). The Commission has
said that it would welcome "any further reform undertaken
by the European Courts to expedite appeals" (paragraph 250).
246. It was pointed out, however, that this system
was not a panacea: for every case that was expedited, another
was held up. This meant that the procedure was only used for simple
cases with a very limited number of issues, generally where the
arguments were mainly limited to points of law. Consequently,
the procedure could not be used in many cases (Q 456).
UNICE thought it should be improved and used for more cases, by
broadening the grounds on which a case can qualify (QQ 324-26).
Dr Bishop complained that the expedited procedure was "still
not adequate" (Q 66).
247. The ACC considered that the procedure was starting
to work but wanted "a truly accelerated procedure before
the CFI." The system had to be very quick and faster than
the 8 months it took, which was still too long (QQ 383, 385).
The ACC explained that companies could not afford to wait "longer
than a couple of months for a decision" (Q 384). However,
Mr Nicholson, of Slaughter & May, who represented Airtours,
explained that many cases did not lend themselves to fast-track
treatment as they were too complex and involved too much evidence
for a court to consider in that amount of time. He concluded that
the time taken for court cases was not the problem that needed
to be resolved. Although the US judicial system was quicker at
dealing with merger cases, the initial decision of the Department
of Justice or Federal Trade Commission could take much longer
than the maximum five-month period that the ECMR provides for
the MTF to review a proposed merger and come to a decision (Q
456). The CBI was also quick to point out that the ECMR compared
"favourably as against other similar systems in terms of
speedy decision-making and transparency" (p 3).
248. The concerns expressed by witnesses over the
adequacy of judicial review extend beyond the reform of the Commission's
competition policy and impact directly on the jurisdiction and
procedure of the Court of First Instance. As the Government point
out, "changes to the Court's procedures are not a matter
over which the Commission has control; any amendments, including
the question of resources, would be something Member States would
have to pursue in other fora" (p 150). The Committee agrees
with the Commission (paragraph 250) and the ACC (Q 385) that it
is too early to judge the expedited procedure. Before coming to
a conclusion on the working of this new procedure, it would be
better to wait and see how the cases currently before the CFI
work out. Notwithstanding this, it is clear to the Committee that
unless the Courts are given extra resources, including extra judges,
there may not be much more they can do to make the judicial review
249. Only a very small fraction of merger cases
are referred to judicial review in the Community Courts and some
of these cases are likely to be too complex to be resolved in
a time frame that would enable the original merger to proceed.
The priority for ensuring an effective system of due process within
the ECMR should not therefore be limited to trying to obtain speedier
judicial review or a greater role for the Courts. Efforts should
focus instead on improving the internal checks and balances in
the ECMR regime.
Separation of the teams that examine mergers in
Phase I and Phase II
250. The third reform suggested for improving the
system of due process in the ECMR regime was to separate the team
of officials working on Phase I of the investigation of a notified
merger from the team conducting the investigation in Phase II.
This approach would more closely reflect the separation of the
two steps in the process between different administrative bodies
adopted in many Member States such as the UK, France and Spain.
Mr Burnside, of Linklaters, considered the separation between
the Office of Fair Trading (OFT) and the Competition Commission
in the United Kingdom to be "a fundamental advantage of the
UK system" and urged this model to be replicated for the
ECMR (QQ 387-38). Unsurprisingly, the Government (p 149), the
OFT (Q 238) and the Competition Commission (Q 281) all supported
such a change.
251. Even if the current process within the MTF,
where one case team conducted the appraisal in Phases I and II,
was fair, it was not always seen to be so. Whilst acknowledging
that the majority of accusations levelled at the Commission lacked
substance, the CLA was keen for justice to be seen to be done
(p 53). This could not be the case so long as the Commission maintained
its dual role of prosecutor and judge. Professor John Kay was
not sure that it was a problem for the Commission to combine these
functions, but if it was perceived to be a problem then that was,
in itself, a problem. Dividing the fact-finding and prosecutorial
functions of the case team from the Commission's final decision-making
function "would clearly give people more confidence in the
process" and was a strong case for separating the teams in
Phases I and II (QQ 194-95).
252. Mr Nicholson, of Slaughter & May, also considered
it important for people to feel that they had had a fair hearing
and that there was "some balance in the decision" taken.
This could be achieved by splitting the two teams. It was against
human nature for a team investigating in both Phases to say that
its decision in Phase I to refer the case to Phase II (thereby
saying that the merger raised serious doubts) was unnecessary
or wrong and so clear the case. Some division between the case
handlers in Phases I and II was therefore desirable (QQ 467-69).
Indeed, Gavin Anderson considered such a division to be essential.
It would allow "a more balanced assessment of the parties'
views and recommendations from within the merger review process"
253. If the procedures were to be split, so that
different teams would deal with the two stages of the procedure,
the issue would then be how strict this separation would need
to be and whether it could be meaningfully achieved within DG
Competition. Witnesses put forward a variety of suggestions. At
the most radical end of the scale, Mr Crossland, the Chairman
of Mytravel Group (formerly Airtours), who criticised the current
set up as being "totally unacceptable", wanted to see
the team responsible for Phase II to be outside the Commission.
It should be composed "not of civil servants but of academics
who [would] look at the case cleanly without any bias." This
way the case would be reviewed not only by a government body but
by an independent body as well (Q 467). The CLA suggested that
the members of Phase II teams should be drawn from a different
body that would report to the Commissioner for Competition but
would be outside DG Competition (p 52). The Government agreed
that "ideally the new team would report up a separate chain
of command with only the Director General having responsibility
for both teams" (p 149). The least radical suggestion for
a separation was proposed by lawyers from Squire, Sanders &
Dempsey, who said the composition of the case team (whether all
or some of its members) could be altered once a case moves from
a Phase I to a Phase II review (p 182). The CBI proposed an entirely
different team, but still drawn from within the MTF (p 4). The
Joint Working Party of the Bars and Law Societies of the UK (JWP)
questioned whether it would be possible, within the Commission,
to establish a team of case-handlers to conduct Phase II investigations
who would be separate from the staff of the MTF (p 12; Q 121).
Dr Derek Morris, the Chairman of the Competition Commission, thought
that the strictness of the division between the two teams could
evolve over time (Q 281).
254. Mr Nicholson, of Slaughter & May, did not
believe that there was "any prospect of the Commission allowing
decision-taking on major competition cases to escape to a body
outside the institution of the Commission". It was therefore
important to look for a system of checks and balances within the
Commission. The best way to achieve a fair system within the Commission
was to move to a quasi-judicial process within DG Competition.
The same team that had identified an issue in Phase I would take
the case into Phase II, but they would act as a prosecution team.
They would collect the evidence together and write the statement
of objections. But there would be an entirely different team,
from a different division within the competition directorate,
with specific responsibility to sit as the decision-taking body
and write the decision. Mr Nicholson thought the internal dynamics
of the Phase I team having to prove its case and having a separate
team to review the evidence would bring about significant improvements
in decision-taking, reasoning, evidencing and substantiating.
255. The Commission should divide responsibility
for the consideration of cases in Phase I and Phase II. Separate
teams of officials for dealing with Phase I and Phase II would
be both desirable and achievable within the Commission. This would
be the most straightforward way of introducing a 'second pair
of eyes' into the ECMR regime and should ensure that any case
which reaches Phase II is subjected to a measure of independent
thinking. It would be a simple but significant change that would
directly compensate for the fact that, except on appeal, the Commission
does not have to submit its conclusions to an independent authority.
256. We recognise that having a second group of
people examining a case could be said to impose further demands
on DG Competition's limited resources, since the new case team
would have to devote significant effort to familiarising itself
with the detail of the case. However, such considerations need
to be weighed against the urgent need for more effective internal
checks in the ECMR system.
Strengthening the role of the Hearing Officer
257. In 1982, in response to criticisms of the quality
of decision-making by the Commission and its disregard for the
rights of defence, the Commission created the post of Hearing
Officer. His initial responsibility concerned the organisation,
chairing and conduct of the oral hearing. Over the years, his
powers and responsibilities have increased to include supervision
of the disclosure of documents and access to the file. The post
was recently strengthened by the Commission Decision of May 2001.
His role is to ensure that the procedural rights of companies
undergoing competition investigations are upheld. Nevertheless,
many witnesses wanted the Hearing Officer's role to be further
strengthened. The CBI said that, though welcome, the measures
introduced last year did not go far enough; much more needed to
be done to ensure an adequate process of review by the Hearing
Officer (p 4).
SHOULD THE HEARING OFFICER HAVE A MANDATE TO REPORT
ON SUBSTANTIVE ISSUES?
258. All the witnesses from industry called for the
Hearing Officer's mandate to be widened to include greater scrutiny
of substantive issues (pp 134, 192). The CBI wanted the Hearing
Officer's role to be expanded so that, instead of concentrating
on matters of procedure, he or she would check that the actions
taken by the Commission were justified by the evidence (Q 51).
UNICE also wanted the Hearing Officer to be specifically empowered
to assess the substantive aspects of a case and the way in which
the Commission had reached its substantive decisions (QQ 324,
334; p 110). The Government also saw "some merit" in
enhancing the role of the Hearing Officers. Expanding their remit
in this way would assure the parties that "the Commissioner
would receive the benefit of a second opinion on the substance
of the Merger Task Force's arguments" (p 149).
259. The Government recognised, however, that this
proposal was "not without its difficulties." It would
be important to ensure that the Hearing Officer's role did not
expand so as effectively to require him or her to conduct a parallel
enquiry to that of the MTF and thus make them a separate target
of parties' lobbying efforts (p 149). The OFT shared the Government's
concern that strengthening the role of the hearing officer risked
creating parallel inquiries, which would be unproductive. The
more the Hearing Officer inquired into the substance of the merger
as opposed to the issue of due process, the more the issue of
parallel inquiries would become an issue and a potential risk,
especially if there were major discrepancies (Q 239). This concern
was effectively confirmed by UNICE who wanted the Hearing Officer's
report on substantive issues to go to the Commission as a collegiate
body so that the Commissioners would all know about any divergences
of view between him and the Commissioner for Competition (Q 324).
260. Mr Nikpay, of Clifford Chance, wondered whether
it might be better "for the Hearing Officer to focus and
deal with administrative issues, access to files, procedural fairness
and so on and so forth, and for another body, another office,
to be created which would deal with the issues on substance"
(Q 123). This would not address the problem of parallel inquiries,
however. The Government suggested that this concern might be reduced
by asking the Hearing Officer only to state a view at one or two
particular points in the proceedings (perhaps in the report on
the oral hearing and in the final opinion to the Commissioner).
The Hearing Officer's input could also be limited to the question
of whether the Commission's conclusion appeared to meet the burden
of proof in the light of the evidence available (p 149).
261. Mr Gilchrist explained that, under the new mandate
of May 2001, the Hearing Officer was already authorised to intervene
not only in matters of pure procedure but was also invited to
intervene in evaluating matters of substance. Article 3(3) states:
"the Hearing Officer may present observations on any matter
arising out of any Commission competition proceeding to the competent
member of the Commission" (p 4). Similar facilities are given
in the other articles of the mandate and invite the Hearing Officer
to comment on remedies (Articles 13(2) and 14).
262. We would discourage any further extension
to the mandate of the Hearing Officer that would lead to a parallel
inquiry that might challenge that of the MTF. There are, however,
clear advantages in the Hearing Officer taking a prominent role
in the negotiation of remedies (see above paragraphs 209-211).
The Hearing Officer already has, as Mr Gilchrist noted, extensive
THE CONTENT OF THE HEARING OFFICER'S REPORT
263. The decision, introduced by the May 2001 reforms,
to publish the Hearing Officer's report was widely welcomed. However,
the CBI was hugely disappointed by the content of these reports
as they sometimes gave no indication as to how the Hearing Officer
arrived at his or her conclusions. The CBI wanted the reports,
"even in straightforward or non-controversial cases,"
to contain some measure of reasoning and analysis by the Hearing
Officer (p 4). UNICE and ACC supported this call for the Hearing
Officer to produce fully reasoned opinions (pp 110, 192).
264. We welcome the Commission's decision to publish
the reports of the Hearing Officers.
We see this as a most significant improvement in the review process;
it reinforced the Hearing Officer's authority and was a step towards
openness and ensuring a fair hearing for the parties. The objectivity
of the Commission's proceedings and the transparency of its ultimate
decision could be further enhanced if the Hearing Officer's report
was full reasoned and contained a full explanation of his or her
conclusions. Hearing Officers should be required to do this.
265. Since last year's reforms, the Hearing Officers
no longer belong to DG Competition but instead report directly
to the Commissioner for Competition. Detractors from industry
argued that this change did not provide an adequate safeguard
against bias and that the independence of the Hearing Officers
remained compromised. Derek Morris thought that, given the current
arrangements, this complaint was understandable (Q 285). Witnesses
suggested various, some quite radical, ways in which the Hearing
Officer could be seen to be more independent vis-à-vis
the Commission and the Commissioner for Competition in particular.
266. First, the CBI and the CLA said that, to ensure
independence, the post of Hearing Officer should not to be open
to serving Commission officials (pp 4, 52). Secondly, UNICE put
forward the proposal that the Hearing Officers could be attached
to the President of the Commission to whom they would directly
report (p 110). The CLA agreed that, as with the Legal Service,
the Hearing Officer should not fall under the auspices of any
particular Commissioner but should be answerable only to the President
(p 52). Thirdly, the ACC thought the Hearing Officer should be
"entirely independent from the Commission and fulfil a role
analogous to that of the Advocate-General at the ECJ" (p
134). Fourthly, UNICE suggested that the Hearing Officer should
be nominated by the CFI so that he was subject to the rules for
judges (Q 324). Lawyers from Squire, Sanders & Dempsey said
that this suggestion was not without merit, but cautioned that
"such a blurring of the distinction between regulator and
appellate reviewer should be carefully considered before adoption"
267. The Committee welcomes the fact that the
Hearing Officer is no longer part of DG Competition. The Hearing
Officer should be independent and must be seen to be independent.
We are certainly not persuaded that the Hearing Officer should
be made a judicial officer or should be attached to the President
of the Commission.
THE NEED FOR MORE RESOURCES FOR THE HEARING OFFICER
268. Many witnesses called for the Hearing Officers
to be given extra staff and greatly enhanced resources. The CLA
said the current situation of resources for the Hearing Officers
was "untenable" and severely undermined the credibility
of the Office (p 52). The CBI agreed that the office of the Hearing
Officer must be given proper resources to enable them to scrutinise
the work of MTF case teams properly. One or two individualsno
matter how competent or experiencedcould not be expected
to do this on their own. (pp 2, 4; Q 51). If the Hearing Officers
were to conduct fuller reviews of merger cases, this would have
clear resource implications. An increase in their role would have
to be matched by adequate financial and human resources to enable
them to be able to carry out the additional work effectively (pp
36, 134, 187). Additional Hearing Officers might even be required
269. It is clear that, if the role of the Hearing
Officer were to increase, this would have resource implications.
It is important that the Hearing Officer should have adequate
staff and resources to be able to exercise real supervision over
the ECMR process.
270. Possibly the least radical proposal to the working
of the ECMR involved developing the economic capability of the
MTF. There was criticism of the lack of capability and capacity
within the MTF for performing high-quality economics. Many witnesses
claimed that the MTF did not have enough qualified economists.
Dr Bishop and Mr Nicholson felt that an increase in their number
would help the Commission's current "dependence on self-interested
complainants" on whom they were "abjectly dependent"
(QQ 61, 466). Dr Bishop thought that this development would add
an internal check to the Commission's decisions and was "more
important than anything in the Green Paper" (QQ 56, 60).
271. Witnesses suggested that a particular weakness
in the structure of the MTF was the absence of a Chief Economist.
If created, this post would mean that one person could oversee
and standardise the economic work of the MTF, raising the standard
of the economics and providing a degree of predictability. The
Government saw merit in appointing a Chief Economist in DG Competition
(pp 148-49). It could help to increase peer review of the
economic analysis underpinning ECMR cases and ensure consistency.
UNICE urged the MTF to appoint more economists and a chief economist
(Q 337). Gavin Anderson called on the Commission to adopt
the US Department of Justice's approach of having a separate department
of economists to provide an independent recommendation which,
together with the recommendation of the case-team, would provide
the advice for the Decision maker (p 183).
272. The Commission responded that it had already
increased the number of staff with economic expertise and was
making "increasing use of external economic advice."
However, Commissioner Monti said he wanted to do more in this
area and promised he would come forward with proposals for this.
273. The Commission should certainly strengthen
its overall capacity for economic analysis in merger cases. Given
that how the Commission defines markets in merger cases is crucial
in determining the fate of many mergers, we see merit in the Commission
developing a dedicated economics branch within the MTF. In particular,
DG Competition should appoint a Chief Economist, which could lend
more weight to their decisions. We look forward to seeing what
Commissioner Monti's proposal are in this area.
Additional posts and resources are required for
274. A number of the recommendations that we have
made for procedural changes (strengthening the role of the hearing
officer, separation of the teams that examine mergers in Phases
I and II, the appointment of more economists and a Chief Economist)
involve resource implications for the MTF and staff underneath
the Competition Commissioner. The Committee believes that the
ECMR and its effective, equitable and transparent implementation
is far too important to be jeopardised by resource constraints.
We therefore recommend that the new posts required to carry out
these changes be provided to the Competition Commissioner.