Competition Law (Relationship between European and National Law)

From Max-EuP 2012

by Reinhard Ellger

1. Problem

It is the function of the competition rules of the TFEU—completed by Council Regulation 139/ 2004 relating to merger control—to safeguard competition in the European internal market against restraints caused by measures of undertakings. Consequently, the applicability of European competition law depends on the specific relationship between the measure pursued by the involved undertakings and the internal market. With regard to Arts 101, 102 TFEU, this particular connecting factor is established by the interstate effects clause (requiring for the applicability of the EU competition rules that a measure ‘may affect trade between the Member States’) and with respect to merger control by Art 1(1) EU Merger Control Regulation by making its applicability dependent on a concentration having a ‘Community dimension’. EU competition law, however, is not the only legal system within the European Union which provides rules against restrictive measures; it stands alongside the acts against restraints of competition of the currently 27 EU Member States. These laws determine their own scope of application independently from the competition rules in the TFEU.

From the outset, EU institutions gave the interstate effects clause an extremely broad interpretation so that the threshold for the applicability of the competition rules of the EC Treaty and now the TFEU was and remains low. This is the reason why the fields of application of EU competition rules on the one hand and the ambit of the laws against restraints of competition of the Member States on the other hand frequently overlap. In many cases, the EU competition rules under the interstate effects clause and the statutes against the restraint of competition of the Member States under their own criteria apply to the same set of facts. So the question arises which of the applicable legal systems takes precedence over the other in a situation of conflict. Such a situation emerges when the competition rules of Union law and the law against restraints on competition of a Member State are simultaneously applicable in the same case and provide different solutions. A conflict arises if an agreement is prohibited under Art 101(1) TFEU because of its restrictive object or effect but is exempt from this prohibition as it complies with the requirements of Art 101(3) TFEU, yet at the same time the agreement is prohibited under the competition law of a Member State without exemption. Then it has to be decided which body of law takes precedence over the other.

For a long time, Union law did not provide express rules for disputes arising from the concurring application of EC competition rules and national competition law of the Member States. Although the original EEC Treaty of 1957 had already authorized the Community by Art 87(2)(e) ‘to determine the relationship between national laws and the provisions contained in this Section or adopted pursuant to this Article’ (now Art 103(2)(e) TFEU), the competent Community institutions did not make use of this power until the adoption of Council Regulation 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Arts 81 and 82 of the treaty. Since the coming into force of the regulation on 1 May 2004, Art 3 of Reg 1/2003 determines the relationship between the Community’s and the Member States’ competition laws. The conflict of laws rule as set forth in Art 3 Reg 1/2003 relies on the principle of precedence of European Union law over the national laws of the Member States. Even if Art 3 of Reg 1/2003 does not formally exclude the laws of the Member States as far as the latter are simultaneously applicable with the EU competition rules for the same case, it leads, however, to a far-reaching and thorough displacement of national competition law in all cases in which a measure of an undertaking affects trade between Member States so that the requirements of the interstate effects clause are met.

2. Survey of the development of conflict of laws and the actual legal situation

a) Previous legal situation

The state of law before the coming into force of Reg 1/2003 on 1 May 2004 was characterized by a nearly complete absence of express rules on the relationship between the competition rules of the EC Treaty and the laws against restraints of competition of the Member States as a matter of Union law. The broad interpretation of the interstate effects clause and the numerous possibilities of collisions caused by the parallel applicability of EC competition rules and national laws of the Member States led to a discussion among legal writers about the appropriate approach for the demarcation of the respective fields of application of both legal systems.

Several ways of solving this problem were proposed. The so-called one-barrier-theory argued that in case of conflict, the EU competition rules should take precedence over national competition laws, even if those laws provided for stricter requirements for restrictive measures than EU law. The two-barriers-theory was based on the assumption that the competition law of the Union and that of the Member States were characterized by different fields of protection. The EU competition rules serve the protection of the competition in the internal market; national competition law has the task of protecting trade within each Member State against restraints of competition. The conception that both legal systems coexist in an uncoordinated manner by determining their respective fields of application independently from each other makes them appear as two separate barriers to anti-competitive restraints of undertakings. This theory leads to the result that an anti-competitive measure which falls within the scope of application of both the EU competition rules as well as the law against restraints of competition of a Member State is only lawful if it complies with the requirements of both legal systems applicable. The double-barriers-theory, thus, enforces the principle of stricter law. Under this principle, the law against restraints of competition of a Member State may take precedence over the EU competition rules if the national law provides for tighter rules on restrictive measures. It was the intention of the double-barrier-theory to ensure an independent and meaningful scope of application of national competition law vis-à-vis the EU competition rules.

However, the European Court of Justice (ECJ) did not endorse the double-barriers-theory but instead determined the relationship between the Union and Member State competition laws in close accordance with the criteria which it had developed in general for the relationship between the European Union law and the law of the Member States (see ECJ Case 6/64 – Costa v ENEL [1964] ECR 585, 593 f). In a landmark decision (ECJ Case 14/68 – Walt Wilhelm v Bundeskartellamt [1969] ECR 1 ff), the Court held that in principle the competition rules of the treaty as well as the statute against restraints of competition of a Member State can be applicable to a restrictive measure because both legal systems deal with such measures in a different manner even though the relevant economic and legal facts which are the basis for the antitrust assessment under both legal systems might be identical.

However, the ECJ set limits on the parallel applicability of the EU competition rules and national competition provisions in order to secure the effet utile and the uniform and equal application of Union law in all Member States. The parallel applicability of national competition law of the Member States is only permissible to the extent that the uniform application and the practical efficiency of the EU competition rules are not prejudiced. A conflict between both legal systems has to be resolved following the principle of primacy of Union law (ECJ Case 14/68 – Walt Wilhelm v Bundeskartellamt [1969] ECR 1 para 6). Hence, the prohibition of a measure under the EU competition rules takes precedence over a permission of the same measure through a Member State’s law.

More problematic, however, has proven the exact interpretation of the principle of primacy of Union law in cases where the exemption of an agreement under Art 101(3) TFEU collides with stricter provisions of national competition law. Before the coming into force of Reg 1/2003, Art 101(3) TFEU was not perceived as a legal exception to the prohibition of restrictive agreements but as an indirectly applicable rule, the legal effect of which (exemption from the prohibition of restrictive agreements) only occurred if an agreement was notified to the European Commission and was declared exempted through a Commission decision after an assessment of the requirements set forth in Art 101(3) TFEU. In order to simplify the administrative procedure and to facilitate the handling of a very large volume of notified agreements, the administrative practice of the Commission shifted since the 1970s from declaring exemptions by formal decision to issuing informal letters through the Directorate-General Competition of the Commission (comfort letters). In such a comfort letter, the Commission declared that, after summary examination of the facts of the case as presented by the undertaking, it did not see any reason to intervene. The undertakings were able to implement the agreements on this basis without infringing EU competition law. Moreover, the Commission was empowered to declare upon application by an undertaking that a notified agreement did not infringe the prohibition of Art 101(1) TFEU (negative clearance).

With respect to the relationship between the EU competition rules and the national competition laws of the Member States, a differentiated treatment of the various legal acts provided for by Union law for exempting agreements from the prohibition of Art 101(1) TFEU was developed under the Walt-Wilhelm-reasoning of the ECJ: if the exemption was declared by decision of the Commission or through a block exemption regulation, the exemption prevailed against a stricter national competition law of a Member State. If the Commission, however, chose to simply issue a comfort letter or a negative clearance, Union law did not take precedence over stricter national law. To this extent, an agreement could be subjected to a stricter national competition law even if the EU competition rules applied (ECJ Joined Cases 253/78, 1 to 3/79 – Giry v Guerlain [1980] ECR 2327, 2374 f).

b) Provisions presently in force

In sharp contrast to the previous state of law, Reg 1/2003 has to a considerable extent shifted the implementation of the EU competition rules to competition authorities and courts of the Member States (Arts 5, 6 Reg 1/2003). This objective was first set out in the Commission’s 1999 ‘White Paper on modernization of the rules implementing Articles 85 and 86 of the EC Treaty’ (101, 102 TFEU) as a decentralization of the enforcement of the competition rules; by pursuing this target, the Commission intended to relieve itself of administrative burdens stemming from its then exclusive power to declare exemptions under Art 101(3) TFEU, in order to be able to efficiently concentrate its scarce resources on the struggle against serious and dangerous hard-core restraints of competition. To ensure a uniform application of Union law, an effective enforcement of the EU competition rules and a smooth cooperation of the competition authorities and the courts of the Member States, the courts and authorities of the Member States should apply Arts 101, 102 TFEU whenever they apply national law to agreements and practices which may affect trade between Member States.

Furthermore, the establishment of equal conditions for competition within the internal market requires a clear determination of the relationship between EU competition rules and the national laws against restraints of competition on the legislative basis of Art 103(2)(e) TFEU (Reg 1/2003, recital 8). At first, the Commission in its draft of Reg 1/2003 had proposed to make the relationship between the EU competition rules and the laws against restraints of competition of the Member States subject to the principle of exclusivity: whenever the EU competition rules were applicable under the interstate effects clause, the national competition laws should be inapplicable. In the legislative process, the Commission was not successful at having this proposal included in the regulation. Rather, Art 3 of Reg 1/2003 assumes—in principle—the parallel applicability of EU and national competition law. Nonetheless, the convergence rules contained in Art 3 Reg 1/2003 ensure that the EU competition rules to a very large extent take precedence over the laws against restraints of competition of the Member States.

Article 3(1) of Reg 1/2003 obliges the competition authorities and the courts of the Member States which apply their national competition law to agreements, decisions by associations of undertakings or concerted practices to apply Art 101 TFEU to such measures if these are capable of affecting trade between Member States. The same holds true in case the competition authorities and the courts of the Member States apply the national rules against an abuse of a dominant position: they have to apply Art 102 TFEU to the same set of facts if the requirements of the interstate effects clause are met. The principle of primacy as established in Art 3(2)(1) of Reg 1/2003 practically leads to the elimination of the competition laws of the Member States within the scope of applicability of Art 101 TFEU. According to this provision, the application of national competition law may not result in a prohibition of agreements (and other measures under Art 101(1) TFEU) which fulfil the conditions of the interstate effects clause but which either do not restrain competition pursuant to Art 101(1) TFEU or which are exempted under Art 101(3) TFEU or by a block exemption regulation. Also in the reverse case (prohibition under Art 101 TFEU, no prohibition under the national competition law), the primacy rule makes sure that Union law prevails over the law of the Member State.

In contrast to the primacy rule for Art 101 TFEU as established by Art 3(2)1 of Reg 1/2003, the reach of the primacy rule with regard to Art 102 TFEU is more limited. As a general rule, in respect of the abuse of a market-dominant position, Art 3(1) of Reg 1/2003 determines that competition authorities of the Member States have to apply Art 102 TFEU along with their own competition laws if the requirements of the interstate effects clause are met. Pursuant to Art 3(2)2 of Reg 1/2003 the Member States, however, are not precluded from adopting and applying in their own territory stricter national laws to prohibit or sanction unilateral conduct by undertakings. The so-called ‘German clause’ enables the Member States to adopt and apply provisions of national competition law for the prevention of abusive, unilateral behaviour which establish stricter standards for such conduct than Art 102 TFEU. In such a case, the stricter competition law of a Member State takes precedence over Art 102 TFEU.

As an example for such a stricter provision of a national competition law, § 20(4) of the German Act against restraints on competition (ARC) may be mentioned, which makes it a violation of the Act if undertakings use their superior market power to hamper their small and medium competitors in an unfair manner, eg by selling goods or commercial services below cost price. The EU competition rules, in particular Art 102 TFEU, do not provide for an equivalent rule. In a case in which § 20(4) ARC and Art 102 TFEU would apply simultaneously, but only § 20(4) ARC would lead to a prohibition of the behaviour at issue, the German ARC would prevail under Art 3(2)2 of Reg 1/2003.

The primacy rules of Art 3(1), (2) of Reg 1/ 2003 do not apply to merger control provisions of the Member States. By the same token, Art 3 of Reg 1/2003 does not prevent the application of provisions of national law which predominantly pursue objectives other than those pursued by Arts 101, 102 TFEU, eg provisions against unfair competition or for consumer protection.

3. Relationship between the EU Merger Control Regulation and merger control provisions of the Member States

The relationship between the EU Merger Control Regulation 139/2004 and national merger control provisions of the Member States is not subject to the principle of the parallel applicability of Union law and the law of the Member States as laid down by Art 3 of Reg 1/2003 for Arts 101, 102 TFEU. In this respect, European merger control instead follows the principle of exclusivity: according to Art 21(3) EU Merger Control Regulation, the Member States are precluded from applying their national legislation on competition to concentrations which have a Community dimension. Pursuant to Art 1(1) Merger Control Regulation, the regulation covers all concentrations with a Community dimension, which again depends on certain turnover thresholds of the concerned undertakings as laid down in Art 1(2), (3) EU Merger Control Regulation. Within the ambit of the EU Merger Control Regulation, the application of national provisions on merger control is excluded.

According to Art 21(4) EU Merger Control Regulation, the Member States are, however, in a case of a concentration of undertakings to be assessed under the EU Merger Control Regulation, allowed to take appropriate measures provided for by their national law to protect legitimate interests other than those addressed by the EC Merger Control Regulation, as far as those interests are compatible with Union law. As an example for such legitimate interests, Art 21(4) EU Merger Control Regulation refers to the plurality of the media. In a case of a concentration of broadcasting companies with Community dimension, which is subject to scrutiny under the EU Merger Control Regulation, this provision enables, for instance, the competent German authorities to apply §§ 25 ff of the German States Treaty relating to Broadcasting (the Rundfunkstaatsvertrag concluded between the individual German Länder) in order to prevent a potential prejudice to the free marketplace of ideas which might occur as the result of a merger by media-related undertakings.

Moreover, subject to certain conditions, Art 9 and Art 22 EU Merger Control Regulation allow mutual referrals of merger cases to the Commission and the competition authorities of the Member States under the rationale that the principle of exclusivity as established by Art 21(3) Merger Control Regulation does not always fully reflect the competition policy interests of the Union and the Member States in all merger cases. Thus, a Member State without a merger control mechanism at the level of national law might be interested in having a concentration case without Community dimension (Art 1 EU Merger Control Regulation) but nonetheless affecting trade between Member States assessed by the Commission under the EU Merger Control Regulation. According to Art 22 Merger Control Regulation, a Member State may apply for such an assessment to the Commission (‘Dutch clause’). Conversely, the Commission is empowered to refer a case under Art 9 EU Merger Control Regulation to the competition authorities of a Member State if a concentration threatens to affect competition in a market within that Member State which presents all the characteristics of a distinct market. If such a referral occurs, the competition authorities of the concerned Member State apply their own national competition law. If the Commission, however, decides to deal with the case itself, the concentration is assessed on the basis of the EU Merger Control Regulation.

Literature

Robert Walz, Der Vorrang des europäischen vor dem nationalen Kartellrecht (1994); Christian Jung, Subsidiarität im Recht der Wettbewerbsbeschränkungen (1995); Reinhard Ellger, ‘Das Verhältnis der Wettbewerbsregeln des EG-V zu den Gesetzen gegen Wettbewerbsbeschränkungen in den Mitgliedstaaten der Europäischen Gemeinschaft—vom Vorrangprinzip zur Exklusivitätsregel’ in Jürgen Basedow and others (eds), Aufbruch nach Europa—75 Jahre Max-Planck-Institut für Privatrecht (2001) 265; Andreas Klees, Europäisches Kartellverfahrensrecht mit Fusionskontrollverfahren (2004) § 4; Laurence Idot, Droit Communautaire de la Concurrence (2004) part 2 § 1; Ernst-Joachim Mestmäcker and Heike Schweitzer, Europäisches Wettbewerbsrecht (2nd edn, 2004) § 5; Andreas Zuber, ‘Art 3 VerfO’ in Ulrich Loewenheim, Karl M Meessen and Alexander Riesenkampff, Kartellrecht, vol 1: Europäisches Recht. Kommentar (2005); Thorsten Mäger, ‘§ 16: Kartellrecht’ in Reiner Schulze and Manfred Zuleeg (eds), Europarecht (2006) part AVI.; Volker Emmerich, Kartellrecht (10th edn, 2006) § 3 VII; Jonathan Faull and Ali Nikpay, The EC Law of Competition (2nd edn, 2007) ch 2 B paras 2.28 ff; Eckard Rehbinder, ‘Art 3 VO 1/2003’ in Ulrich Immenga and Ernst-Joachim Mestmäcker (eds), Wettbewerbsrecht EG/Teil 2. Kommentar zum Europäischen Kartellrecht (4th edn, 2007); Peter Roth and Vivien Rose (eds), Bellamy & Child: European Community Law of Competition, vol I (6th edn, 2008) ch 14 no 4.

Retrieved from Competition Law (Relationship between European and National Law) – Max-EuP 2012 on 01 December 2022.

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