Competition Law

Competition law

Nothing to disturb the tranquillity: The Lisbon Treaty and Competition law Damian Collins assesses the impact of the Lisbon Treaty on competition law The practice of EC competition law in Brussels (and in the member States) revolves around four core elements of the competition policy of the EU: antitrust enforcement, merger control, State aid and market liberalisation. In each of these areas, the Community has significant (but not always exclusive) competence and the European Commission has a prominent (and often decisive) role. In practical terms, the entry into force of the Lisbon Treaty will have very little impact on the practice of competition law. As far as antitrust enforcement is concerned, the focus of the EC system is primarily on the investigation and prosecution of price fixing cartels (prohibited by Article 81 of the EC Treaty) and the abuse of monopoly or market power (prohibited by Article 82 of the EC Treaty). There is no change in the substantive prohibitions of anticompetitive conduct, which have remained untouched since they were introduced in the Treaty of Rome in 1957. There was a major reform of the rules on antitrust procedure earlier this decade, resulting in the adoption of Council Regulation (EC) No 1/2003 which enhanced the role of the national competition agencies and national courts in the enforcement of the EC competition rules and encouraged cooperation between the national bodies and the Commission. The 2003 Regulation confirmed the Commission’s extensive powers in antitrust enforcement and the remainder of the decade has provided plenty of examples of its commitment to vigorous enforcement action. The Commission has emphasised that the current financial and economic crisis will make it more, rather than less, determined to pursue cartels and the abuse of market power. Merger control is a relatively late addition to the Commission’s competition tool box. It is not provided for in the EC Treaty (and does not make an appearance in the Lisbon Treaty). The Commission acquired its extensive powers to investigate and block big corporate mergers and acquisitions through a Council Regulation in 1989 which was updated and amended in 2004. The Commission’s merger control procedure is generally hailed as a success, so much so that the business sector successfully lobbied in 2004 for the inclusion of a procedure which

6

Damian Collins

would allow requests by companies for the transfer of their merger control cases to the Commission where they would otherwise have been reviewed by a number of Member States. These first two elements of competition policy relate to the market activities of firms and businesses. The focus of the remaining sets of rules (State aid and market liberalisation) is on the member States and on preventing State intervention in markets that might lead to distortions of competition and of the Internal Market. The State aid rules are set out in considerable detail in the EC Treaty and establish a system giving the Commission extensive powers to ensure that government interventions such as grants, subsidies, guarantees or tax reliefs do not distort competition and intra-Community trade. Article 87(1) prohibits State aid in broad terms; article 87(2) and (3) set out a broad variety of grounds related to social, regional and industrial policies on which state aid measures can be cleared and taken outside of the scope of the article 87(1) prohibition. Only the Commission can grant these clearances and in order to obtain a clearance, a member state must notify the proposed measure in advance to the Commission. This requirement essentially means that aid should only be implemented after the Commission has issued a positive finding. Frequently, the Commission will impose or extract conditions as the price for clearance (as it did when it cleared the Irish Government’s guarantee of the Irish banking system in October last year). The Commission’s

role under the State aid rules extends to approving bail-outs for national champions in sensitive industrial sectors (car makers, steel foundries and airlines are a few examples). The scope for conflict with the member States is obvious. It is often forgotten that services such as transport, energy, postal services and telecommunications have not always been as open to competition as they are today. The role of the Commission in opening up these markets to competition has been vital and to achieve its objective, the Commission has tended to rely on a combination of the powers granted to it in the Treaties. Article 86 which is also part of EC competition law gives the Commission the power to supervise national organisations with exclusive or monopoly rights. Since the late 1980s, initially as part of Peter Sutherland’s drive to open up the markets for air transport and communications, article 86 has been a key component in the Commission’s armoury by which it achieved market liberalisation. The application of the rules on State aid and market liberalisation tends to pit the Commission against member states and often results in disputes culminating in solutions influenced both by legal and political factors. However, despite heavy criticism, the Treaty rules on State aid and market liberalisation on which the Commission has relied for some of its most controversial interventions have emerged unscathed from the European Constitution/Lisbon Treaty process. In summary, the rules on which competition lawyers advise and on which the Commission relies to bring the cases challenging restrictions of competition are not really changed by the Lisbon Treaty. One thing will change, however, and this may be a minor annoyance for lawyers, particularly those of us who have been practising in this area for some time. Due to the changes elsewhere in the Treaties the numbering of the Treaty’s competition law Articles on which we advise will change: Article 81 will become Article 101 and Article 82 will become Article 102. The State aid rules will be found in Articles 107-109. I think we’ll cope. Damian Collins is a partner and CoHead of Competition, Regulated Markets & EU Law Group at McCann FitzGerald Public Affairs Ireland