Supplementary letter from Mr Rufus Ogilvie
Smals, Chairman, CBI Competition Panel
On behalf of the CBI, I should like to repeat
my thanks to the Committee for conducting this enquiry into the
proposal for an EU Competition Court and for inviting the CBI
to give evidence at the hearing on 22 November.
22 NOVEMBER 2006
In reviewing our evidence given at the hearing
however, we believe it could further assist the Committee if we
were able to amplify some of the responses given to the questions
that were put to us.
If this were acceptable to the Committee, we
would like to make the following supplementary points:
THE NEED
FOR ACTION
AT THE
EU LEVEL
— As we stated in our brief and
at the hearing, the primary problem for business is the delay
in the present system of review by the CFI. This delay probably
has the biggest impact in the case of mergers.
— Even in non-merger cases, the
length of proceedings generally means that there is no effective
and timely external control of the Commission's administrative
actions, and this seriously undermines the rule of law.
— In our view this has two important
effects:
— it discourages challenges to Commission
decisions, thus insulating Commission actions from effective constraints.
The European Commission itself, in its Green Paper on the review
of the EC Merger Regulation, acknowledges this problem when it
states (at paragraph 250): "The length of EC court proceedings
is deemed to discourage litigation and therefore to eliminate
the constraints imposed upon administrative action by the threat
of judicial control"... .; and
— it modifies the incentives of the
parties during the administrative review process as they will
seek to salvage the deal (by offering remedies) whatever the merits
in that particular case.
THE JURISDICTION
OF THE
PROPOSED COMPETITION
COURT
We believe that a number of points concerning
the scope and effect of the proposed role for the new Competition
Court should be emphasised:
— We propose that the jurisdiction
of such a new court should extend to all of the administrative
actions of the Commission in relation to competition matters,
with the possible exception of State Aid cases. In addition to
mergers, abuse of dominance cases are particularly important given
that the actions of a dominant company may have a damaging effect
over an entire industry or there may be need for certainty as
to whether a given practice of a dominant company is or is not
abusive.
— Both DG Competition and the
OFT are pressing for more private enforcement actions in the case
of cartels. This would enable affected third parties to recover
compensation following a final decision. However, currently cartel
cases can take three years or more on appeal with the result that
receipt of compensation becomes quite remote. The proposed Competition
Court would result in a significant acceleration of Competition
cases and thus making the economics of recovery more attractive.
— Disputes on procedural points,
that arise during the Commission's initial investigation, are
currently dealt with by the Hearing Officer. However, specific
rules enabling these disputes to be referred to the Competition
Court would enable more effective judicial review of due process
issues.
— We have observed that opinions
are divided on whether State Aid cases should be included in the
jurisdiction of the Competition Court. Logically they should,
as the issues they raise also require economic analysis. Also
the number of cases is increasing and the trend is towards more
enforcement action. However they involve a ruling on the role
of Member States which are likely to demand that the cases should
be subject to a full review by the CFI and hence be outside the
jurisdiction of the Competition Court. In setting up a Competition
Court, one approach could be to give the court jurisdiction over
State Aid cases after an initial period of five years upon a decision
of the Council of Ministers by QMV.
I hope the Committee will find these brief supplementary
submissions useful to its Enquiry and if we can assist the Committee
any further we should be most happy to do so.
28 December 2006
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