Memorandum by the Office of Fair Trading
INTRODUCTION
1. This call for evidence relates to an
enquiry into the need for establishing a judicial panel under
Article 225a of the EC Treaty ("the Treaty") to hear
competition cases (the "EU Competition Court"). We welcome
the opportunity to contribute to this enquiry.
2. This submission focuses on questions
1, 2 and 6 of the Call for evidence. Questions 3, 4 and 5 raise
a number of technical questions regarding jurisdiction, the composition
of the Court and appeals. At this stage, we consider that it is
appropriate to focus on the point of principle of whether an EU
Competition Court should be established although in the course
of doing so we comment incidentally on some points raised in questions
3 and 5 (jurisdiction and appeals).
EXECUTIVE SUMMARY
3. The following are the main points raised
in this submission:
— We believe that expeditious judicial
review of Commission decisions in competition cases, especially
in merger cases, is important.
— The establishment of an EU Competition
Court might be thought to enable competition cases to be dealt
with more efficiently and speedily.
— However, it appears that the main
barriers to this desirable outcome are in the areas of organisation,
procedures and resources.
— Thus, it would appear likely that
the same desirable outcome could be achieved within the present
CFI through organisational, procedural and resourcing changes
which would avoid the dissipation of people, skills and functions
that a separate body would inevitably involve.
— Further the establishment of an EU
Competition Court could have significant consequences for the
development of EC competition law, the institutional balance within
the EU and the relationship between national competition law and
EU law.
1. NEED FOR
ACTION AT
UNION LEVEL
(QUESTION 1)
The need to consider the wider implications of
the proposal
4. The first question asks whether there
is a need for an EU Competition Court distinct from the Court
of First Instance ("CFI") and, if so, in what sorts
of cases a Competition Court would be useful. The need, as initially
put by the CBI in its Brief, relates to merger cases, specifically
in view of the claimed need for judicial review of such cases
to be completed within six months. However, the Brief then assumes
that appeals on all competition decisions of the Commission would
be made to such a Court and, indeed, that the Court's jurisdiction
would be further enlarged to cover "all competition matters
referred to it by private parties and/or Member States" and
suggests that this would assist the development of private enforcement
of competition law in Member States. The case for a broad jurisdiction
beyond merger cases, with their claimed time deadlines, is not
developed by the CBI.
5. In addressing the question of need, it
is important to recognise that the establishment of a specialist
judicial panel to hear competition cases on the basis proposed
would be a very significant institutional change with potentially
far-reaching implications for competition law, both EU and national,
and for Community law generally. These must be thoroughly debated
and fully understood before a proposal is developed and action
is taken. An EU Competition Court could have fundamental consequences
for the coherent development of competition law within the broader
EC law framework, the constitutional status of competition law
cases, the institutional balance between the Commission and the
Community Courts and the development of national competition law.
6. Bearing in mind the potential significance
of the reform that is being envisaged, the rest of this submission
attempts to identify some of the issues that would appear to merit
further consideration.
Balancing the Pros and Cons of an EU Competition
Court
7. As already noted, the CBI considers the
main benefit of the establishment of an EU Competition Court to
be more expeditious judicial review of merger cases. The CBI recognises
that the CFI expedited procedure has reduced the time previously
required for the judicial review of a Commission decision. However,
it is pointed out that such a review still takes longer than six
months. The CBI states that its members have indicated that six
months is the maximum period for which a "deal" can
be kept "alive" awaiting the outcome of judicial review
of a decision.
8. The OFT believes that expeditious judicial
review of competition decisions, and particularly of merger cases,
is important. The use of the expedited procedure has enabled some
cases to be heard close to the CBI's target (eg the EDP
case[74]—seven
months) although the procedure has also led to difficulties where
the essence of the procedure has not been respected (eg see the
IMPALA case[75]).
The comparison with cases before the Competition Appeal Tribunal
(the "CAT") in the UK may not be helpful given the structural
and institutional differences between the two systems. Furthermore,
in the UK, the three main cases that have gone to the CAT have
been reviews of Phase I decisions not to make a reference to the
Competition Commission; [76]the
two cases that have gone from the Competition Commission to the
CAT have been on limited points only. [77]
9. We would suggest that to the extent that
the current system still does not deliver the required outcomes,
the causes of the delays within the CFI need to be fully investigated
and understood and all options and possible solutions for addressing
them should be fully explored. The establishment of an EU Competition
Court might have advantages but is not the only solution. It cannot
be too readily assumed that, because there may be some perceived
problems associated with the length of certain judicial review
proceedings in some merger cases, then the only solution is that
a new Court is created or that a specialist Court will provide
solutions that cannot be provided by an appropriately equipped
and organised generalist Court.
10. Some of the perceived shortcomings of
the current position identified in the CBI Brief, including the
CFI procedures not being tailored to the speedy review of mergers
and translation problems, do not necessarily require, and are
not necessarily solved by, the establishment of a new Court. On
the other hand, the implications relating to the EU institutional
structure are potentially far-reaching. Their advantages and disadvantages
should be carefully assessed. The benefits associated with the
establishment of an EU Competition Court should be balanced against
the risk of altering, perhaps unintentionally but fundamentally,
the current EU institutional arrangements. [78]
Potential Advantages of an EU Competition Court
11. The creation of an EU Competition Court
would mean that a new set of procedural rules would have to be
drafted, thus perhaps making it easier to address some procedural
problems afresh. The establishment of a new Court would, assuming
that the additional resources were made available, increase the
overall resources of the Community first instance judiciary and,
possibly, the resources devoted to competition law cases. However,
it is not clear why the same results could not be achieved through
providing the CFI itself with more resources and through targeted
organisational changes and reform of rules of procedure to the
extent necessary to make them better suited to competition cases.
In the OFT's view, the CFI has proved to be effective in its judicial
review role and well-equipped to address complex legal and economic
issues arising in competition matters. To the extent that there
are problems in the current system, there would appear to be a
prima facie case for identifying and addressing them, so enabling
the CFI to perform its role even more effectively rather than
by diverting resources to the creation and operation of a new
EU Competition Court. [79]Organisational
changes might include, for instance, the creation of a chamber
which dealt with all merger cases under the expedited procedure,
which could itself be enhanced and managed more directly by the
court.
Potential Disadvantages of an EU Competition Court
12. Furthermore, it is necessary to consider
the implications of establishing a separate EU Competition Court.
They can be summarised as follows:
— The risk that competition law could
develop in a world of its own detached from the general substantive
and procedural framework of EU law.
— The risk of a perceived lower importance
of competition cases in contrast with their constitutional, policy
and economic importance.
— The introduction of a third level
of jurisdiction, albeit with a very limited right of appeal to
the Court of Justice (the "ECJ").
— The risk of a shift of focus of the
decision- and policy-making functions from the Commission to the
EU Competition Court, which may be at variance with the institutional
balance envisaged by the Treaty. We will now address these four
points in turn.
13. First, it is important to note that
competition law does not exist and develop in a world of its own.
It is part of the wider framework of Community law, both substantively
and procedurally. Substantively, and by way of example, much competition
law was developed by the ECJ in parallel with the case law on
free movement, with the objective of creating a single market.
Some recently decided cases have both a freedom of movement and
a competition law dimension (for example, the Meca-Medina
case[80]).
Procedurally, and again by way of example, the rights of defence
often feature prominently in competition law cases. They are part
of the fundamental principles of Community law. To create a separate
Court dealing only with competition cases could risk insulating
competition law from the broader development of Community law.
14. Moreover, Community competition law
now also has a direct impact on national competition law, with
the majority of Member States adopting national systems based
on Articles 81 and 82.
15. Secondly, to establish a lower Court
with jurisdiction over competition cases would appear at odds
with the constitutional status of EC competition law. The Community
Courts have repeatedly said that the competition rules of the
Treaty are fundamental provisions essential for the accomplishment
of the tasks entrusted to the Community and, in particular, for
the functioning of the internal market. In addition to their constitutional
status under the Treaty, competition cases often have significant
economic and policy implications. In some Member States, there
is provision for competition cases to be heard by a higher court
than ordinary cases. If competition cases were heard by a lower
Court in the EU, this would appear to be at odds with their constitutional,
policy, and economic importance.
16. Furthermore, the limited right of appeal
to the ECJ would mean that it would be more difficult for the
highest Court in the EU to hear a major competition case than
a potentially much less significant case concerning another Community
policy. Limited rights of appeal to the highest Court both deprive
the ECJ of one of its most important functions and, when combined
with a potential third tier EU Competition Court and the possibility
of referrals from Member State courts to the CFI, creates a more
complex judicial review structure than is warranted or necessary
for merger cases or for competition cases generally.
17. It is appropriate here to make a comparison
with "staff cases". The latter, while of importance
to the individual concerned and with budgetary implications for
the Community institutions, are often of no wider constitutional
significance and hardly ever have an appreciable impact on the
economy of the EU as a whole. Competition cases are also different
from actions relating to the validity or infringement of a Community
patent, the use of the invention, and consequential actions for
damages, which would fall within the jurisdiction of the proposed
EU Patent Court. Patent litigation, more akin to private enforcement
of competition law than to judicial review of Commission competition
decisions, raises a number of technical and complex issues but
often without wider constitutional implications.
18. Thirdly, the creation of an EU Competition
Court would mean the introduction of a third tier of jurisdiction
for competition cases, albeit in a rather limited set of circumstances
(Art 225(2) EC). The sums of money often at stake and the wider
legal and policy implications of competition cases might result
in the opportunity of a second appeal being taken more frequently
than the narrow wording of Art 225(2) might suggest. This risk
must be balanced against the perceived benefit of more expeditious
first instance judicial review.
19. Finally, and perhaps most important,
an EU Competition Court could risk altering the institutional
balance between the powers and functions of the Commission and
the judicial review function of the Community Courts. Under the
framework of the EC Treaty, the Commission is the guardian of
the Treaty and the institution entrusted with the enforcement
of Articles 81 and 82. It has a coordination function within
the European Competition Network and formulates new policy in
the area of competition in consultation with Member States and
other stakeholders (businesses, consumers, and other interested
parties). The Community Courts have the role of reviewing the
legality of the Commission decisions.
20. It is possible that, by establishing
an EU Competition Court, this delicate balance might be altered
in two ways. First, an EU Competition Court with the only task
of deciding competition cases may be more inclined to exercise
an over-intrusive review of the factual and evidential substance
of decisions. This will depend on a number of almost imponderable
factors but past experience shows that it is not unlikely to happen.
Such a development may over the passage of time turn the Court
into what is effectively the primary decision-making body and
with the Commission becoming, in effect, a prosecuting authority
in competition matters, contrary to the separation of functions
(administrative and judicial) clearly envisaged in the Treaty.
Secondly, the Court, whose exclusive focus will be on competition
law, might inadvertently take on a stronger, or different, policy-making
function than would be appropriate for a court of review and thus
discourage or prevent the application and the enforcement of competition
law from evolving and developing in the hands of the institution
charged and equipped with this responsibility. This also would
run counter to the separation of functions between the Commission
and the Community Courts. (It might also be exacerbated if, as
suggested in Question 5, appeals from the EU Competition Court
would be not to a generalist CFI, but to a specialist chamber
of the CFI.)
2. REFORM OF
THE CFI (QUESTION
2)
21. The establishment of an EU Competition
Court could have benefits in terms of increased resources and,
possibly, different and more flexible procedures better suited
to competition cases. But the key question is whether the establishment
of a new Court is necessary to obtain those objectives.
It appears that the perceived concerns relating to the length
of judicial review proceedings, especially in merger cases, could
be addressed by organisational changes, by improving the expedited
procedure before the CFI and by providing the CFI with more resources.
This would have clear benefits: a) it would maintain the link
between competition law and wider EU law; b) it would be consistent
with the importance of competition cases; c) it would avoid the
introduction of a third tier of jurisdiction; d) it would not
alter the existing institutional structure and thus the balance
between the function of the Commission and the review role of
the Community Courts.
3. FUTURE ROLE
OF THE
CFI (QUESTION 6)
22. The proposal that the CFI, in addition
to being the first court of appeal against judgments of the EU
Competition Court, might also be given jurisdiction on competition
law references under Art 234 EC is not developed in the CBI Brief
and raises some serious issues, whether the CFI remains a generalist
court and even more so if it operates through a specialist chamber
in competition matters.
23. First, references from national courts
to a lower Court would not appear to be consistent with the constitutional
and legal significance of competition cases. Secondly, the very
objective of the preliminary reference procedure is to ensure
the uniform application of Community law. It is not clear, for
instance, why competition cases should go to a lower Court, but
cases on discrimination or equal pay, should go to the highest
Court; or why cases raising similar issues of principle but in
different policy areas (eg competition and consumer law) should
go to different Courts; or what would happen to cases which raised
both competition law and other EU law issues.
24. It would appear natural within the Community
structure for references that one Court should have jurisdiction
on all references from national courts, particularly because competition
law is part of the wider EU law framework. A case like Courage
Ltd v Crehan, [81]for
instance, which is mentioned in the Call for evidence, is more
about the principle of effectiveness of Community law than about
competition law itself. It would be artificial if such cases were
referred to the CFI instead of the ECJ. Finally, the proposal
would introduce a second tier of jurisdiction under Article 234
EC as judgments by the CFI would be appealable to the ECJ, albeit
in the limited circumstances envisaged by Article 225(3) EC.
3 November 2006
74 Case T-87/05 EDP v Commission [2005] OJ C281/22. Back
75
Case T-464/04 IMPALA v Commission [2006] 5 CMLR 19. Back
76
IBA Health Ltd v OFT [2003] CAT 27 (clearance decision);
UniChem Ltd v OFT [2005] CAT 8 (clearance decision); Celesio
AG v OFT [2006] CAT 9 (decision to refer unless suitable undertaking
in lieu were provided). Back
77
Somerfield PLC v Competition Commission [2006] CAT 4 (concerning
remedies); Stericycle v Competition Commission [2006] CAT
21 (concerning an interim order). Back
78
See paras 12-20 below. Back
79
See paragraph 21 below. Back
80
Case C-519/04 P Meca-Medina v Commission [2006] 5 CMLR
18. Back
81
Case C-453/99 Courage Ltd v Crehan [2001] ECR I-6297. Back
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