European Competition Law Annual 2000: The Modernisation of EC Antitrust Policy 9781472559098, 9781841132426

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TABLE OF CASES

EC Cases Ahlstrom and Others v Commission, Joined Cases 89, 104, 114, 116, 117 and 125-129/85 [1992] ECR 1-1037. Ahmed Saeed, Case 66/86 [1989] ECR 803. Albany International v Stischting Bedrijfspensioenfonds Textielindusirie, Case C-67/96 [1999] ECR 1-5751. Alcatel/EspacelANT Nachrichtentechnik, Commission Decision, OJ L 31/19 1990. Anic Partecipazioni, Case C-49/92 [1999] ECR 1-4125 Asjes, Joined Cases 209 to 213/84 [1986] ECR 1425. Automec v Commission (Automec II), Case T-24/90 [1992] ECR 11-2223. Banks, Case 313/93 [1994] ECR 1-1279. Banks v British Coal, Case C-128/89 [1994] ECR 1-1209. BATv Reynolds, Joined Cases 142/84 and 156/84 [1987] ECR 4487. Belasco and Others v Commission, Case 246/86 [1989] ECR 2117. Belgische Radio en Televisie et Societe beige des auteurs, compositeurs et editeurs v SVSABAMet NVFonior (BRT-I), Case 127/73 [1974] ECR 51. Bier v Mines de Potasse d'Alsace, Case 21/76 [1976] ECR. BNICv Clair, Case 123/83 [1985] ECR 391. BoeinglMcDonnell Douglas, Commission Decision M877, OJ L 336/16 of 8.12.1997. Boussoisllnterpane, Commission Decision of 15.12.1986 in Case IV/31.302, OJ L 50/30 1987. Brasserie de Haecht v Wilkin (Brasserie de Haecht II), Case 48/72 [1973] ECR 77. British Leylandv Commission, Case 226/84 [1986] ECR 3263. BRT\ Sabam, Case 127/73 [1974] ECR 51. Carbon Gas Technologie, Commission Decision of 8.12.1983 in case IV/29.955, O J L 376/17 1983. Carlo Bagnasco and Others v Banca Popolare di Novara s.c.a., Cassa di Risparmio di Genova e Imperia SpA (Carige), Joined Cases C-215/96 and C-216/96 [1999] ECR 1-179. CILFIT, Case 283/81 [1982] ECR 3415. Coditel SA, Compagnie General pour la Diffusion de la Television and Others v Cine-Vog Films SA and Others, Case 262/81 [1982] ECR 3381. Commission v Anic Partecipazioni, Case C-49/92 P [1999] ECR 1-4125. Commission v France, Case C-159/94 [1997] ECR 1-5815. Commission v Germany, Case C-217/88 [1990] ECR 1-2879.

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Consten SARL & Grundig- Verkaufs-GmbH v Commission, Joined Cases 56/64 and 58/64 [1966] ECR 299. Corbeau, Case C-320/91 [1993] ECR 1-2533. Corte Ingles v Cristina Bldzquez, Case C-192/94 [1996] ECR 1-1281. De Bloos v Bouyer, Case 14/76 [1977] ECR 2359. De Geus v Bosch, Case 13/61 [1962] ECR 89. Delimitis v Henninger Brau, Case 234/89 [1991] ECR 1-935. Direction General de la Defensa de la Competencia v AEBP, case C-67/91 [ 1992] Ecr1-1475. DM Transport SA, Case C-256/97 [1999] ECR 1-3926. Drouot, Case C-357/96 [1998] ECR 1-3075. Eco Swiss China Time v Benetton International, Case C-126/97 [1999] ECR 1-3055. ElopaklMetal Box Odin, Commission Decision, OJ L 209/15 1990. Emmot v Minister for Social Welfare, Case C-208/9 [1991] ECR 1-4269. European Night Services and Others v Commission, Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94 [1998] ECR 11-3141. FacciniDori, Case C-91/92 [1994] ECR 1-3325. Factortime, Case C-213/89 [1992] ECR 1-2433. Francovich v Italian Republic, Joined Cases C-6/90 and C-9/90 [1991] ECR 1-5357. Ford Agricultural Tractors, Commission Decision, OJ L 68/19 1992. Ford-Volkswagen, Commission Decision 93/49/EEC of 23.12.1992, OJ L 20/14 1993. Fotofrost, Case 314/85 [1987] ECR 4199. Frubo v Commission, Case 71/74 [1975] ECR 563. Giry and Guerlain, Joined Cases 253/78 and 1 to 3/79 [1980] ECR 2327. Gottrup Klim Grovvareforeninger v Dansk Landbrugs Grovvareslskab AmbA, Case C-250/92 [1994] ECR 1-5641. Groupement des cartes bancaires, [1994] ECR 11-49. Hoffman La Roche, Case 85/76 [1979] ECR-461. Hugin, Case 22/78 [1979] ECR 1898. John Deere v Commission, Case C-7/95 P [1998] ECR 1-3111. Kali und Salz, [1975] ECR 499. Keck and Mithouard, case C-268/91 [1993] ECR 1-6097. Kledingverkoopbedrijf de Geus en Uitdenbogert v Robert Bosch GmbH and Maatschapppij tot voortzetting van den zaken der Firma Willem van Rijn, Case 13/61 [1962] ECR 89 (see also Opinion of Advocate General Lagrange [1962] ECR 309). KO v de Agostini and TV Shop, Joined Cases C-34/95 and C-36/95 [1997] ECR 1-3843. Konsortium ECR 900, Commission Decision, OJ L 228/31 1990. Kruidvat v Commission, Case T-87/89 [1996] ECR 11-1931, on appeal Case 70/97 P, (judgment of 17.10.1998). Langnese Iglo GmbHv Commission, Case T-7/93 [1995] ECR 11-1533.

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L. C. Nungesser KG and Kurt Eisele v Commission of the European Communities, Case 258/78 [1982] ECR 2015. Louis Erauw-Jacquery SPRL v La Hesbignonne SC, Case 27/87 [1988] ECR 1919. Marshall I, Case 152/84 [1986] ECR 723. Marshall II, Case C-271/91 [1993] ECR 1-4367. Marty v Lauder, Case 127/73 [1980] ECR 2481. Masterfoods, Case C-344/98,(judgment of 14.12.2000, not yet reported). Matra Hachette v Commission, Case T-17/93 [1994] ECR 11-595. Metro v Commission (Metro I), Case 26/76 [1977] ECR 1875. Metro v Commission (Metro II), Case 75/84[1986] ECR 3021. Metropole Television, Case T-528/93 [1996] ECR 11-649. Michelin v Commission, Case 322/81 [1983] ECR 3461. Miller v Commission, Case 19/77 [1977] ECR 131. Nederlandse Vereniging van Banken (1991GSA Agreement), Commission Decision of 8.9.1999 in Cases IV/34.010, IV/33.793, IV/34.234 and IV/34.888, OJ L 271/28 1999. Nordsee v Reedrei Mond, Case 102/81 [1982] ECR 1095. Opel Austria, Case T-l 15/94 [1997] ECR 11-39. Oscar Bronner, Case C-7/97 [1998] ECR 1-7791. Oude Luttikhuis and Others v Verening de Cooperatieve Melkindutries, Case C-399/93 [1995] ECR 1-4515. Papiers Feints de Belgique, Case 73/74 [1975] ECR 1491. Procureur du Roi v Dassonville, Case 8/76 [1974] ECR 837. Pronuptia de Paris GmbH v Pronuptia de Paris Irmgard Schillgalis, Case 161/84 [1986] ECR 353. Rechberger, Case C-140/97 [1999] ECR 1-3499. Remia BVand Others v Commission, Case 42/84 [1985] ECR 2566. Rewe-Zentral v Bundesmonopolverwaltung fur Branntwein (Cassis de Dijon), Case 120/78 [1979] ECR 649. Rurhgas and Thyssengas v Bundeskartellamt, Case C-365/96, cancelled from the Court register by order of 26.3.1998. REWEv Hauptzollamt Kiel, Case 158/80 [1981] ECR 1805. RWE and Stadt Nordhorn v Bundeskartellamt, Case C-34/97, cancelled from the Court register by order of 13.10.1998. Sacchi, Case 155/73 [1974] ECR 409. SA Lancome and Co sparfranee Nederland BV v Etos BV and Albert Heyn Supermarket BV, Case 99/79 [1980] ECR 2511. S.A. Portelange v SA Smith Corona Marchant International and Others, Case 10/69 [1969] ECR 309. Schoeller, Case T-9/93 [1995] ECR 11-1611. Simmenthal, Case 106/77 [1978] ECR 629. Sirena Sri v Eda Sri and Others, Case 40/70 [1971] ECR 69. Societe Technique Miniere v Maschinenbau Ulm, Case 56/65 [1966] ECR 337. Sole distribution agreements for whisky and gin, Commission Decision of 13.12.1985 in Case IV/30.570, OJ L 369/19.

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SPO and Others v Commission, Case T - 29/92 [1995] ECR 11-289 (upheld on appeal. Case C-137/95 P [1996] ECR 1-1613). Stork, Case 1/58 [1959] ECR 17. Suzen, Case C-13/95 [1997] ECR 1-1259. Stork Amstedam, Case T-241/97 [2000] ECR 11-30. Sydhanvnens sten og grus, Case C-209/98 (judgment of 23.5.2000, not yet reported). Syndacat national des fabricants raffineurs d'huile de graissage, Case 172/83 [1983] ECR 555. Tetra Pak v Commission, Case T-51/89 [1990] ECR 11-309. Tipp-Ex v Commission, Case 279/87 [1990] ECR 1-361. Trefilunion v Commission, Case T-148/89 [1995] ECR 11-1063. TWD, Case C-188/92 [1994] ECR 1-0833. Ufex and Others v Commission, Case C-l 19/97 P [1999] ECR 1-1341. Union Royale Beige des Societes de Football Association v. Bosman and Others, Case C-415/93 [1995] ECR 1^921. Van den Bergh Foods Limited, Commission Decision in Cases IV/34.073, IV/34.395 and IV/35.35.436, OJ L 246/1 1998. Van den Bergh Foods Limited, Case T-65/98. Van Gend&Loos, Case 26/62 [1963] ECR 5. Van Landewick (Fedetab), [1980] ECR 3125. Van Munsten, Case C-l65/91 [1994] ECR 1—4661. Van Schjindel, Joined Cases C-430/91 and C-431/91 [1995] ECR 1-4705. VBVB and VBBB, Joined Cases 43/82 and 63/82 [1984] ECR 19. VBVB v VBBB, Case T-17/93 [1994] ERC 11-595. Verband der Sachversicherer, Case 45/85 [1987] ECR 405. Vereniging van Samenwerkende Prijregelende Organisatie in de Bouwnijverheidv Commission, Case T-29/92 [1995] ECR 11-289. Vereniging van Cementhandelaren, Case 8/72 [1972] ECR 977. VGB and Others v Commission, Case T-77/94 [1995] ECR 11-759. Walt Wilhelm v Bundeskartellamt, Case 14/68 [1969] ECR 1. WEA-Filipacchi, Commission Decision 72/480/CEE, OJ L 303/52 1972. XlOpem Group, Commission Decision, OJ L 35/36 1987. Zuchner v Bayerische Vereinsbank, Case 172/80 [1981] ECR 2021.

US Cases Alaska v Safeway, Inc. and Carr-Gottstein Foods Co., Case No. 3AN-99-4371 (Sup. Ct. Alaska 1999). Brown v Allen, 344 U.S. 443 (1953). California Dental Associations v FTC, 526 U.S. 756, 119 S. Ct. 1604 (1999). Chevron U.S.A. Inc. v Natural Resources Defense Council, Inc., 461 U.S. 837 (1984).

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Commonwealth of Pennsylvania v Russell Stover Candies, Inc., 1993-1 Trade Cas. (CCH) (E.D. Pa. 1993). Continental T. V, Inc. v GTE Sylvania, Inc., 433 U.S. 36 (1977). Elliot v Commodities Futures Trading Comm'n, 202 F. Supp. 3d 926 (7th Cir. 2000). Food & Drug Administration v Brown & Williamson Tobacco Corp., 120 S. Ct. 1291 (2000). FTC vBP Amoco, pic, Case No. 000415SI (N.D. Cal. Feb. 4, 2000) FTCvButterworth Health Corp., 1997-2 Trade Cas. (CCH) (6th Cir. 1997). FTCv Cardinal Health, Inc., 12 F. Supp. 2nd 34 (D.D.C. 1998). FTC\ Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997). FTCv Tenet Health Care Corp., 117 F. Supp. 2d 937 (E.D. Mo. 1998). HardfordFire Ins. Co. v California, 509 U.S. 764 (1993). Jefferson Parish Hosp. Dist. No. 2 v Hyde, 104 S. Ct. 1551 (1984). Loeb v Eastman Kodak Co., 183 F 704 (3rd Cir. 1910). McLain v Real Estate Board, 444 U.S. 322. New York v Kraft General Foods, Inc. et al, 926 F. Supp. 321 (S.D.N.Y. 1995). New York v Primestar Partners, L.P., 1993-2 Trade Cas. (CCH) (S.D.N.Y. 1993). Spectrum Sports v McQuillan, 506 U.S. 447. Summit Health v Pinhas, 500 U.S. 322. Toys 'R' US v FTC, No. 98-4107 (7th Cir. 1999). United States v Allied Waste Indus., Inc., 1992-2 Trade Cas. (CCH) (D.D.C. 1999). United States v Cargill, Inc., 1997-2 Trade Cas. (CCH) (W.D.N.Y. 1997). United States v Long Island Jewish Med. Ctr, 983 F. Supp. 121 (E.D.N.Y. 1997). United States v Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (findings of fact); 87 F. Supp. 2d 30 (D.D.C. 2000) (conclusions of law). United States v Primestar Partners, L.P., 1994-1 Trade Cas. (CCH) (S.D.N.Y. 1994). United States v Topco Assocs., Inc., 405 U.S. 596, 629-12 (1972).

INTRODUCTION

On 2-3 June 2000 the European University Institute (EUI) hosted thefifthedition of the Annual EC Competition Law and Policy Workshop. This program, started in 1996 by law professors Giuliano Amato and Claus-Dieter Ehlermann at the Robert Schuman Centre of the EUI, brings together every year top-level policy-makers, academics and legal specialists to discuss critical issues of EC competition policy. The first edition of the Workshop (1996) focused on the problems of implementing competition policy in a federal context.' The second (1997) debated the objectives of competition law and policy.2 The third (1998) analysed how to ensure effective competition in the rapidly evolving market of communications.3 The fourth (1999) examined selected problems of State aid control.4 The fifth edition of the Workshop was devoted to the ongoing debate about the modernisation of EU antitrust law.5 This publication includes a transcript of the discussions and a collection of the writings presented by the participants at thefifthEU Competition Law and Policy Workshop. The event took place one year after the European Commission published the White Paper containing its suggestions for the reform of EC antitrust law enforcement,6 at a stage when consultations on the suggestions were already fairly advanced. The Workshop concentrated on those issues which the White Paper and the ensuing discussions had identified as particularly problematical and controversial. Proceedings were divided into three sessions. Panel One was devoted to the following three aspects of the reform: its compatibility with the EC Treaty; its effects on the efficiency of EC anti-cartel enforcement, and its consequences for undertakings interested in legal security. Panel Two focused on the risks that the reform entails for the coherent application of Article 81 EC Treaty. Panel Three 1

Ehlermann C.-D. and Laudati. L. L., eds. (1997): The Robert Schuman Centre Annual on European Competition Law 1996, The Hague, Kluwer Law International. 2 Ehlermann C.-D. and Laudati. L. L., eds. (1998): European Competition Law Annual 1997—Objectives of Competition Policy, Oxford, Hart Publishing. 3 Ehlermann C.-D. and Gosling L., eds. (2000): European Competition Law Annual 1998—Regulating Communications, Oxford, Hart Publishing. 4 Ehlermann C.-D. and Everson M., eds: European Competition Law Annual 1999: State Aid Control in the European Union—Selected Problems, Oxford, Hart Publishing (forthcoming during Winter 2000/2001). 5 The term 'antitrust' is used to cover in particular Article 81 EC Treaty. Issues concerning the implementation of Article 82 EC Treaty were not discussed during the Workshop. 6 European Commission: White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, OJ C 132 of 12.5.1999.

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concentrated on the specific problems that the reform will generate for national judges, who will become responsible for the interpretation and application of Article 81 (3) EC Treaty. The Workshop revealed broad consensus on the main thrust of the Commission's reform initiative. Yet it also showed that a series of issues have to be considered further and addressed in a formal proposal from the Commission to the Council. Among these issues are: the scope of supremacy of EC competition law with respect to national law; the legal effects of positive (or 'noninfringement') Commission decisions based on Article 81 (3); the legal effects of decisions taken by national competition authorities and by national courts in other Member States; the burden of proof with respect to Article 81 (3); the distribution of cases between the Commission and national competition authorities, as well as among the national authorities themselves. Background. The White Paper suggested a radical departure from the existing EC antitrust law enforcement system. Council Regulation 17/62 reserves to the Commission the power to exempt, according to Article 81 (3) EC Treaty, agreements that fall under Article 81(1) EC Treaty (and that are, therefore, prohibited), provided they have been properly notified. Because of the Commission's exemption monopoly, Article 81 (3) has no direct effect. The White Paper proposes to abolish the system of notifications and the Commission's exemption monopoly. It suggests instead that Article 81 (3) should become directly effective, so that it can be also be applied by national competition authorities (NCAs) and by national courts. The centralisation of the exemption power under Article 81 (3) in the hands of the Commission, and the corresponding notification requirement, have given rise to enormous problems in enforcement. In the early sixties, the Commission was swamped by notifications. In reaction, the Commission adopted so-called 'group exemptions' (i.e. regulations declaring Article 81 (1) inapplicable to whole categories of agreements), and developed the instrument of 'comfort letters', giving a sort of green light to individual agreements. Individual exemption decisions remained extremely rare; their average number did not exceed 5 during the last 5 years. Group exemptions were criticised as anti-economic and over-bureaucratic. Comfort letters were considered to be poor substitutes for formal decisions, because they do not have legal effects, and are, therefore, not able to eliminate the invalidity resulting from Article 81 (1) and (2). In addition, the Commission was not even able to eliminate totally the backlog of pending requests for exemptions. Thus, the Commission never succeeded to manage its exemption monopoly in a satisfactory way. Over the last decade, criticism of the existing antitrust enforcement system intensified. Comparisons were made with the successful application of the 1989 Merger Regulation. The debate on subsidiarity stimulated requests for the abolition of the Commission's exemption monopoly in favour of the NCAs. Until recently, the Commission responded to this largely justified criticism by trying to improve the application of Article 81 within the existing legal framework, e.g. by favouring the decentralised application of Article 81 (1) and (2) by

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NCAs and national courts, while maintaining the monopoly to adopt exemption decisions under Article 81 (3). In this perspective, the reform suggestions of the White Paper represented not only a legal, but also a 'cultural' revolution. Previous EC Competition Law and Policy Workshops held at the EUI might have contributed to the Commission's change of mind. During the 1996 and 1997 meetings, as one of the participants at the June 2000 Workshop put it, '. . . the faces of Commission officials flushed and blushed to hear severe criticism: the European system . . . did not work, could not work, had to change.' In spite of the traditional criticism of the existing situation, the immediate reactions of the legal and business community to the Commission's reform proposal were sometimes rather sceptical, particularly in Germany, though in the past German voices have been most critical about the centralising effects of Regulation 17/62. During the consultations following the publication of the White Paper, however, the initial scepticism has somewhat diminished. Discussions at the June 2000 Workshop revealed that, in the meantime, a broad consensus seems to have emerged around the Commission's proposals for the decentralisation of EC antitrust enforcement. However, there were also warning views. In addition to the well-known German critics, some participants expressed the fear that the Commission might go too far in its enthusiasm for decentralisation, and that it might jeopardise its essential role in determining and guiding competition law enforcement in the EU. Everybody agreed, nevertheless, on the need for careful preparation of the reform, and in particular on the need to give precise, clear and convincing answers to the issues identified in the debate. The reform was generally considered to be too important for the future of the EU's competition policy to be rushed through the EU's legislative process, thus leaving well-known questions unresolved, reserving them to later administrative decisions of competition authorities and judgements of the courts. The Workshop Proceedings. The annual EC Competition Law and Policy Workshops hosted by the EUI in Florence provide an ideal forum for the informal debate of critical issues in EU competition policy among policy-makers and actors involved in EU competition law implementation. Thefifthedition of the Workshop brought together a group of thirty-three top-level participants, including: high-ranking Commission officials directly involved in the preparation of the reform; judges from the EU and Member State courts, as well as from the US and EFTA; representatives of competition authorities in the Member States and one of the countries candidate to EU membership (Romania); academics; and outstanding practitioners in the field of antitrust. The event was co-chaired by Claus-Dieter Ehlermann and Karel van Miert, former Member of the European Commission responsible for Competition. The proceedings of the Workshop were opened by Professor Mario Monti, Karel van Miert's successor in the Prodi Commission. Professor Monti explained the reasons requiring a fundamental reform of EU antitrust enforcement. He underlined the need for the intensified application of EU competition law both by EU and by NCAs and national courts. This would be achieved by

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establishing a network of competition authorities, based on vertical and horizontal co-operation and mutual assistance, and by giving the national courts their natural role as protectors of private rights derived from the EC Treaty. Professor Monti recognised the risk of divergence that decentralisation will inevitably entail. He expressed, however, his determination to clarify existing rules, thus bringing about in the end more convergence than ever before. Of particular interest is Professor Monti's view that the modernisation of EU antitrust law enforcement through increased decentralisation is a paradigm for the reform of other activities of the European Commission. Panel 1 of the Workshop was devoted to discussing the following issues: (a) the compatibility of the reform envisaged by the Commission in the White Paper with the EC Treaty, (b) whether the reform will enhance the efficiency of EC antitrust policy, (c) whether it will bring about the desired simplification of EC antitrust procedures, but nevertheless ensure sufficient legal certainty for the undertakings concerned. The issue of the compatibility of the Commission's reform proposal with the EC Treaty is discussed in several of the papers prepared for the Workshop. One of the participants in particular elaborated the three main arguments which, in his view, plead against the reform's compatibility with the Treaty. Thefirstargument is that the legal exemption system envisaged by the Commission embodies de facto a 'control of abuse' approach in enforcement, rather than the prohibition approach established by the Treaty. Furthermore, the drafting of Article 81 EC Treaty, and in particular the introductory formula of paragraph 3 ('. . . the provisions of paragraph 1 may however be declared inapplicable ...'—emphasis added), as well as the wording of Article 83 EC Treaty, indicate that the founders of the Treaty intended to establish an administrative authorisation system. Finally, the jurisprudence of the EC Court of Justice (ECJ), and in particular its recognition of the Commission's discretion in applying Article 81 (3), is proof of the fact that Article 81 (3) is incapable of having direct effect. Assigning its implementation to national courts would, de facto, deprive paragraph 1 and 2 of Article 81 of their direct effect. According to this argumentation, the system of administrative authorisation has to be maintained. While the Commission's exemption monopoly may be shared with national competition authorities, Article 81 (3) can not be applied directly by national courts. Though some participants expressed doubts as to whether national judges were capable of applying directly Article 81 (3), or whether it was appropriate and wise, particularly at this stage, to entrust direct application of this provision to them, nobody shared the fundamental legal objections against the envisaged reform. Noteworthy is, in particular, the positive position of present and former members of the Courts in Luxembourg who participated in the Workshop. Defenders of the reform repeated and elaborated the already well-known arguments about: the respect and reinforcement of the prohibition principle established in Article 81(1) and (2); the deliberately ambiguous form of Article

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81 (3) as compared to the clear wording of Article 65 ECSC; the wide scope of Article 83; the similarities between Article 81 (including its paragraph 3) and other Treaty provisions for which the ECJ has recognised direct effect. After all, direct effect is the rule, and not the exception, in EC law. Of particular interest are the findings of two participants who investigated in depth the history of the negotiations leading to the wording of Article 85 EEC Treaty (now 81 EC Treaty). While one of them qualifies the discussions as not focussed and amicable explorations of concepts unfamiliar to negotiators, the other comes to the conclusion that the White Paper is right in its assertion that the divergence of views between the legal exemption versus the administrative authorisation approach was deliberately left open and reserved for future Council legislation. In practice, the absence of direct effect of Article 81 (3) under the actual Regulation 17/62 might not have had as drastic effects as a strictly legal analysis might suggest. One participant underlined that even under the existing authorisation system, national judges have found ways to take into account the outcome of an analysis of Article 81 (3), though this analysis is formally reserved to the Commission. Several participants noted that the switch from the Commission's exemption monopoly to direct effect of Article 81 (3) will have repercussions on the interpretation and application of this provision by the ECJ: the margin of discretion granted to the Commission by the ECJ will disappear. The categories of considerations used explicitly or implicitly in interpreting and applying Article 81 (3) may also change. The 'judicialisation' of Article 81 in its totality may even have repercussions on the Commission's administrative procedures under Regulation 17/62. The Workshop showed consensus that it is urgent to clarify the scope of Article 8(3). It is obvious that this scope depends on the interpretation of Article 81 (1): the broader the reach of Article 81 (1), the greater the need for recourse to Article 81 (3). On the contrary, if Article 81 (1) is interpreted more restrictively, the field of application of Article 81 (3) will shrink correspondingly. The discussion of this issue showed a wide spectrum of opinions. One participant argued in favour of a restrictive interpretation of the requirement of effect on trade between Member States. Others suggested to situate the totality of strictly competition-oriented arguments in Article 81 (1), leaving to Article 81 (3) only non-competition oriented considerations. In such a perspective, the Commission's reform proposal would be misplaced: the Commission should maintain its exemption monopoly under Article 81 (3). The majority of participants seemed, however, to follow the White Paper's 'middle of the road' approach: the notion of 'restriction of competition' has to be interpreted more realistically, in particular taking into account the position of the undertakings concerned on the relevant market, but without situating all the weighting and balancing of economic factors in Article 81 (1). The problem of the borderline between Article 81 (1) and (3) therefore remains, as much as the debate on the legality of taking into account non-competition oriented considerations in Article 81 (3). Recent EC Treaty reforms have increased the number and importance of such considerations, provided for in other parts of

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the Treaty. The need for Commission guidelines on the interpretation of Article 81 (3), recognised by the Director General of DG Competition, has grown correspondingly. Opponents of the Commission's reform suggestions have shown scepticism as to whether the reform will simplify and render more efficient the enforcement of EC antitrust law. German critics point to the fact that the notification and administrative authorisation system has proved to be effective in the context of German antitrust enforcement. One of its advantages is that it enabled the Bundeskartellamt to remain informed on market developments. In line with this experience, the Head of the Bundeskartellamt repeated his recent proposal to oblige undertakings to inform NCAs about their restrictive agreements and to make this information available on the Internet. He noted, however, that other positive aspects of the German experience, like the preventive and deterrent effect of the administrative authorisation system, are generally considered not to exist at EU level. He was joined by others in observing that 'exemptions allow negotiation, and fine tuning' (like fixing a time limit for the validity of an exemption) which will disappear under a legal exemption regime. The great majority of participants welcomed the initiative to abandon the notification and administrative authorisation system. They shared the view expressed in the White Paper and by Commission representatives at the Workshop that requests for exemptions detract the Commission's rare resources from more important work, i.e. dealing with complaints and detecting horizontal, hard core cartels. They also greeted the elimination of the official separation of Article 81(1) and (3). Not everybody was convinced that the elimination of the Commission's exemption monopoly would lead to the desired results, i.e. that NCAs and national courts will use more often Article 81. NCAs might continue to prefer to apply national competition law. National courts depend on private action, i.e. the initiative of undertakings to have recourse to juridical proceedings. Where are the incentives (in addition to the elimination of the exemption monopoly obstacle) to use Article 81 more frequently than in the past? In addition, adequate resources are lacking not only at Commission level. They are also needed at the level of NCAs and national courts. The new approach to Article 81(1), emphasising economic instead of purely legal factors, was generally welcome, though again, German voices warned against an excessive softening of the EC antitrust discipline. Participants noted that this approach would have consequences in terms of the predictability of outcome of the analysis under Article 81 (1). These consequences are not dependent on the choice of systems for the implementation of Article 81 (3). Under the new 'economic' approach, it will indeed be more difficult to foresee whether Article 81 (1) applies than under the traditional, more legalistic interpretation. Part of the old (Commission and ECJ) decisions will not provide guidance for the future. Consequently, the need for Commission guidelines on the interpretation of Article 81 (1) will increase. These guidelines have to be clear and should regularly be updated.

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Whether and to what extent the abolition of individual exemption decisions will add to existing and future uncertainties remained a matter of controversy. The White Paper expresses the view that the legal exemption system will eliminate the major cause of legal insecurity, because the direct effect of Article 81 (3) will dispense of the adoption of individual exemption decisions which, in any case, were rarely taken in the past. Participants from the USA went even further. They considered European preoccupations about the validity of contracts to be exaggerated. For them, legal certainty is not a serious problem. Doesn't business prefer a rule of reason approach to per se prohibitions? Participants reflecting the positions of European business took a different view. Considering the Commission's adamant opposition to any system of voluntary notification (underlined by Prof. Monti in his opening statement), requests for such a system were hardly voiced any more. But the need for individual positive decisions and instruments equivalent to comfort letters continued to be emphasised. Discussions at the Workshop showed that insistent request for Commission guidance in individual cases has had a certain effect on DG Competition. According to the Director General, his DG is disposed to adopt and publish, within reasonable deadlines, reasoned opinions on specific genuinely new issues on the basis of available information, provided the issues are not pending before a Court. On the contrary, the Commission remains hostile to enlarging the narrow limits for positive decisions, now called 'non-infringement' decisions. Such decisions, and their legal nature, remained very controversial. While many practitioners insisted that they were necessary or, at least, extremely useful, others expressed doubts about—or even opposition to—such decisions, which can be considered to be contrary to the logic of the new system. The debate about non-infringement decisions is influenced by two other issues. Thefirstconcerns the NCAs: should they be entitled to adopt such decisions? The Commission remains totally opposed to this perspective, as it apprehends that NCAs might retain divergent interpretations of Article 81 (3). Insofar, the Commission shares the fear that EC competition policy might be re-nationalised. Others, however, consider it to be normal that the process of decentralisation does not stop at non-infringement decisions. The second major problem raised by non-infringement decisions concerns their legal nature. For some, they can only be declaratory in nature, not having any binding effect, at least on national courts. Others considered that they should be binding even under the legal exemption regime. In support of this view, reference was made to general EC law principles, like the duty of cooperation and mutual respect (Article 10 EC Treaty), and the supremacy of EC law. Even representatives of the Commission seemed to be divided on this issue, which was said to be still open among Commission departments. Participants agreed, however, that the formal amendments to Regulation 17/62 should provide an answer to this question.

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Panel 2 was devoted to the risks which result from the radical decentralisation of the enforcement of Article 81 for the coherence of EC antitrust law, and the mechanisms envisaged in the White Paper to minimise these risks. It is inevitable that an increase in the number of agents entrusted with the implementation of Article 81 (3) will lead to divergences in the interpretation and application of this provision. Opinions were divided as to the importance of these divergences. Participants from the US seemed least concerned, as they are used to a multitude of public and private actors in the field of antitrust enforcement. They, but also others, considered diversity of solutions to a given problem as an opportunity to arrive at the best result. For them, a 'bottom up' approach in which 'the law bubbles up' is a familiar phenomenon which is one of the great merits of a federal structure. After all, nobody guarantees that a central agency like the Commission has the monopoly of insight and wisdom in enforcing Article 81. Others considered that, in the light of decisions taken so far by national courts under the already directly applicable Articles 81(1) and 82, the risk of divergent decisions will be relatively small. This view is shared by those who do not expect a significant increase in the use of Article 81 by NCAs and national courts. However, there are also those who fear divergent decisions because of the overlapping responsibilities of NCAs, the limited territorial effect of NCA decisions, multiple jurisdictions and forum shopping by private parties. Because of the lack of practical experience with any decentralised application of Article 81 (3), it is difficult to appreciate the importance of these risks. The business community, trying to minimise costs and maximise the benefits of the national market, will probably evaluate them to be higher than political defenders of the subsidiary principle. We have already noted the Commission's hostility to decentralise in favour of NCAs the possibility to adopt non-infringement decisions under Article 81 (3), because it fears a re-nationalisation of the interpretation and application of this provision which would lead to too generous results. It is noteworthy that one of the papers prepared for the Workshop points to the risk that decentralisation might produce the opposite results, i.e. a too strict interpretation and application of Article 81 (3), as NCAs might not take into account the positive effect of certain agreements if these effects present themselves outside the territory for which the NCA is responsible. Consequently, this paper proposes to impose on NCAs a positive comity obligation. There is no doubt that the Commission is determined to maintain its central role as policy-making agency, defining and implementing the future course of EC antitrust policy. Nobody contested the need for such a role, which only the Commission can perform. Participants expressed, however, more or less doubts as to whether the mechanisms envisaged in the White Paper will be sufficient to preserve this indispensable function. The Commission suggests relying essentially on two broad principles in order to minimise the risks resulting from the radical decentralisation of the application of Article 81 (3). The first is co-operation within the network of enforce-

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ment agencies formed by the Commission and the NCAs. The second is the principle of supremacy of EC law over national law. Participants expressed broad support for the main lines of the Commission's approach. They expressed, however, also some concerns, and asked for clarifications or suggested additional mechanisms. The spectrum of opinions was large. It spread from rather general criticism (like 'weaker part of the White Paper', 'lack of detail', insufficient distinction between the problems related to NCAs as opposed to those concerning national courts) to very detailed proposals on how to avoid conflicts and to restore coherence in case of diverging decisions. As the problems of national courts were the subject of a special, third session, the following passages will concentrate on issues pertaining specifically to NCAs. The risk of divergent decisions would be reduced if cases were attributed, within the network of enforcement agencies, according to precise, clear and transparent criteria. As one participant observed, such rules should address not only situations in which several NCAs claim to be competent, but also the opposite problem, i.e. that none of the NCAs wants to deal with a complaint. Whether the criteria envisaged so far are satisfactory remained controversial. They are certainly the subject of ongoing in-depth discussions between the Commission and NCAs. Information about these discussions might have influenced the position of those participants who expressed dissatisfaction with the Commission's approach. While participants certainly agreed in general with the position taken by the Head of the Dutch competition authority, who pleaded in favour of preventive mechanisms for conflict avoidance (information and consultation, instead of approval), others emphasised the continuing need for the Commission to exercise its right under Article 9 of Regulation 17/62 to take over cases, thus assuming responsibility for their outcome. Reference was made in this respect to the functions exercised by the US Supreme Court in settling divergences of opinion among US Circuit Courts of Appeal. Some participants floated even the idea to envisage a right of appeal of the Commission against decisions taken by NCAs. The suggestion to allow such an appeal before the Court of first Instance (CFI) would of course affect the architecture of judicial review under the EC Treaty, and therefore would require an amendment of the Treaty. More generally, it should be noted that Commission interventions in cases pending before a NCA raise problems under the principle of subsidiary. In addition, 'hard' as opposed to 'soft' co-ordination could very well become a disincentive for NCAs to apply EC competition law, instead of using, by preference, national competition law, as they seemed to do until now. The White Paper concentrates on vertical co-operation between the Commission and NCAs. It hardly discusses horizontal co-operation among the NCAs themselves. However, such horizontal co-operation is indispensable for the efficient functioning of the network of administrative enforcement agencies within the EU. During the Workshop, the White Paper's weakness in this respect was observed, and reference was made in particular to: the transfer of

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cases between NCAs; the exchange of confidential information, complicated through confidentiality requirements (which might be particularly acute in the case of information provided in the framework of national leniency programs); the already mentioned positive comity principle; and even the possibility that NCAs might collect evidence in other Member States. The White Paper assumes, without further discussion, that the effect of NCA decisions will continue to be limited to the national territory. Several participants observed that such limitation is contrary to the principles of the internal market. One of them suggested to install a 'conditional' EU-wide effect, the condition being the absence of objections raised by the Commission or another NCA. However, specific requirements for the recognition of EC-wide effect were not discussed. In general, most participants seemed to accept that, at least for the time being, the approach of the Commission is appropriate. The White Paper contains no suggestions for minimum procedural standards that NCAs have to fulfil before decentralisation of the application of Article 81 (3) takes place. That all of them have to be entrusted with the possibility to apply Article 81 (in its entirety) is obvious. The new Regulation replacing Regulation 17/62 should make this absolutely clear. But should they go further and provide for the approximation of minimum requirements for NCAs, like the status of NCAs, their procedures, their instruments of action (such as the possibilities of settlement, the nature and size of sanctions)? A few participants considered that some approximation of national legislation regulating the status, the rights and obligations of NCAs was necessary or, at least, highly desirable. Most participants, however, seemed to agree with the Commission's position that, at this stage, it would not be wise to take such an initiative. It is not surprising that the White Paper does not refer to the substance of national competition law, as the reform deals exclusively with the enforcement of existing EC antitrust law. The substance of national competition law remained also outside the discussions of the Workshop. However, the observation was made that differences between Article 81 (3) and similar, but either narrower or broader national provisions could have an influence on the interpretation and application of Article 81 (3) by the NCAs. The co-existence of EC and national rules, and the consequent 'spillover' from national to EC law could, be one factor leading to conflicting interpretations. We have already mentioned that the risk of such conflicts motivates the White Paper's opposition to the decentralisation of non-infringement decisions to NCAs. The decentralisation of Article 81 (3) is already a challenge for the NCAs of the existing Member States. It is even more such a challenge for the NCAs of acceding new Member States. The so-called Europe Agreements have obliged Central and Eastern European candidates to EU membership to apply the criteria of Article 81 and 82, and to harmonise their national competition law with existing EC competition law. As a result, the existent notification and prior administrative authorisation system was taken over in the national laws of the candidate countries. The reform of EC law should logically lead to a corresponding change of national law in Central and Eastern Europe. Whether

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administrators (and judges) in these countries are sufficiently equipped and qualified to follow the change of systems in the EU remains to be seen. Transitional arrangements (not discussed in detail at the Workshop) might be the appropriate answer. Contrary to the situation under the Europe Agreements, no corresponding harmonisation obligation exists for Member States of the EU. Member States are, therefore, perfectly entitled to maintain their notification and prior administrative authorisation systems, often inspired by the existing EC regime. Participants who specifically addressed the issue recognised, however, that the reform of EC competition law would probably have repercussions on corresponding national law. It is indeed not logical to maintain notification and authorisation requirements taken over from EC competition law at national level, if such requirements are eliminated in EC competition law. It is, however, remarkable that the likely pressure to amend national law was not invoked by anybody as an argument against the reform of the EC antitrust enforcement system. The reader will remember that the principle of supremacy of EC law is for the Commission one of the two main defences against the risk of divergent decisions in a totally decentralised enforcement system. The discussion on the legal effects of non-infringement decisions with respect to NCAs and national courts is—at least in part—a debate about the scope of supremacy of EC antitrust law in the new context of a legal exception system. In addition, the extent to which Article 81 pre-empts the application of national antitrust law is of fundamental importance for the possible reach of such national law. The Workshop demonstrated wide differences of opinion on this question. While representatives of the Commission considered that the reform will enhance the area pre-empted by Article 81, others took the opposite view, i. e., that under the new system, the logic of existent ECJ jurisprudence would leave more scope for national antitrust law. A particularly important point was made by the Head of the Dutch competition authority: if the Commission representatives were right, and the simple fulfilment of the conditions of Article 81 (3) by a given agreement were to preclude the application of national law, the burden of proof with respect to Article 81 (3) might shift to NCAs; such a result would be unacceptable in view of the general consensus that the existing situation with regard to the burden of proof should not be affected by the reform. Participants agreed that, in view of the uncertainties surrounding the supremacy question, it was urgent to give it a clear response in the new Regulation. Another essential point emerging from the debate referred to the Delimitis principle of 'deference' of national courts vis-a-vis the Commission. In particular, some of the participants questioned whether the deference principle remained in place once the Commission's monopoly over the application of Article 81 (3) was abandoned. It was suggested that this issue, closely related to the need for ensuring a coherent application of EC antitrust law in a system of parallel competencies, needed to be clarified in the new Regulation.

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Panel 3 examined the particular problems arising from the envisaged reform for courts and judges. We have already discussed the first and most important issue for national courts, i.e. the question whether Article 81 (3) is capable of having direct effect. The reader will remember that the majority of participants considered that this question had to be answered in the affirmative. Judges are perfectly able to apply Article 81 (3), which is neither fundamentally different from other provisions of the EC Treaty that have direct effect, nor from national law requiring the appreciation of complex economic situations and the balancing of competing economic and non-economic interests and values. We have also mentioned the opinion of some participants that the Commission might overestimate the role that national courts will play under the new system of decentralised enforcement of Article 81. NCAs and national courts have different perspectives and functions. Taking into account European traditions and the lack of US-type incentives for private action under EC competition law, administrative antitrust law enforcement will remain considerably more important than court decisions obtained by private plaintiffs or defendants. The application of competition law is fact-intensive. Under the new, more economically oriented interpretation of Article 81 (1), even more factual evidence will need to be considered. Procedural rules for court proceedings differ widely within the EU. They converge, however, on one important point. In civil (as opposed to administrative) law proceedings, the facts have to be alleged and proved by the parties. They are not investigated ex officio by the judge. For powerful players with deep pockets this is much less of a problem than for their financially weaker adversaries, in particular if financial strength is combined with otherwise easier access to pertinent information, like for the members of a cartel. For opponents of the Commission's reform suggestions, these are important arguments against the decentralisation of the application of Article 81 (3) to national courts. Supporters of the reform recognised this difficulty, but stressed that judges may need help and assistance from the Commission or NCAs. In addition, the natural limits of judicial procedures, particularly for weaker parties, militate in favour of the continued involvement of the Commission (and NCAs). One of the major objections of those who are opposed to the reform is the possible effect on the distribution of the burden of proof. According to the settled case law of the ECJ, under the existing system the party invoking Article 81 (3) has to prove that the conditions of this provision are met. Opponents to the reform assert that under the new system the burden of proof would shift to the party who alleges that the agreement is prohibited, and, therefore, illegal and void. This party would not only have to prove that the conditions of Article 81 (1) are fulfilled, but also that those of Article 81 (3) are not met. A shift of the burden of proof for Article 81 (3) would have major consequences for the Commission, NCAs, and in particular for private actors invoking the illegality of an agreement, who are often the weaker, less well informed parties to a dispute. Participants agreed that a shift of the burden of proof was neither

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intended nor desirable. It was generally recognised that the formal proposal for the new Regulation should clarify this point. The White Paper suggests to consolidate the traditional—but until know rarely used—practice of the Commission assisting national courts, at their request, with relevant information. The White Paper envisages also that the Commission might act in certain court proceedings as amicus curiae. Participants echoed the well-known criticism that the process of 'information' of judges by the Commission might conflict with the requirements of a due process. A certain preference was therefore voiced for the status of amicus curiae, widely practised in the US and praised by the transatlantic participants. However, continental European legal systems do not provide for such a status. Participation as 'intervener' might be more appropriate. In addition, it was observed that the exercise of such procedural rights requires a good knowledge of national judicial proceedings. It was, therefore, suggested to assign this function to NCAs rather than to the Commission, which has to spare in any case its rare resources. That the amicus curiae suggestion is, once more, one of those that need to be elaborated further, is obvious. Reference was also made to a suggestion advanced in the literature, namely to establish within each Member State an EC law Advocate General to advise national courts on questions of EC law in general, and EC antitrust law in particular. Participants welcomed in general the suggestion to concentrate competition law issues in certain, specialised jurisdictions. Such specialised jurisdictions exist in several Member States (but not in the country with the oldest and richest antitrust tradition, where the law is exclusively enforced through courts, i.e. the US). However, attention was drawn to the fact that competition law issues arise, more or less incidentally, in a wide variety of civil proceedings for which concentration in specialised courts might not be desirable. Instead, the specialisation of individual judges, at the appeal court level in particular, might be preferable. Training of judges was of course welcomed. Even better would be the exchange of judges between Member States—but these proposals go far beyond the limited area of EC antitrust law. We have already mentioned the problems that the decentralised application of Article 81 (3) will raise for NCAs in accession countries. Such problems will, of course, also arise with respect to judges of these countries. Transitional arrangements might, again, be the appropriate solution to attenuate these problems. In relation to the problems of overlapping jurisdiction, participants expressed in general the view that the provisions of the Brussels Convention are sufficient to deal appropriately with the problems of forum shopping. But not everybody agreed. Forum shopping might not only be influenced by differences in substantive and procedural national laws, as well as in interpretation and application of Article 81, but also by purely administrative factors, like speed and language. Most courts are notoriously overburdened; the language issue is an even greater problem for the national judiciaries than for national administrations.

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It is obvious that the risk of diverging decisions does not only exist at administrative level. It is even greater for the much more numerous national courts. According to existing Treaty rules, preliminary rulings by the ECJ under Article 234 should avoid or, at least, reduce this risk. Transatlantic participants explained the much more efficient mechanisms provided by US law for coping with problems of 'judicial federalism'. Establishing similar mechanisms in the EU would require far-reaching modifications of national and EU constitutional law. We have already mentioned one suggestion, made with respect to the judicial control of NCA decisions by the CFI. Other suggestions were advanced with respect to preliminary rulings and national courts. One of them concerns the responsibility for giving preliminary rulings. In line with reform ideas advanced by the ECJ, the responsibility for giving preliminary rulings in antitrust matters might be attributed to (or shared with) the CFI. However, preliminary rulings have to be more or less abstract answers to strict legal questions. Such answers were generally considered not to be necessarily helpful in fact-intensive competition cases. This aspect might explain, at least in part, the rather bold suggestion to submit national court judgements to the control of the CFI (and the ECJ). Critical voices considered that the Commission has overlooked the repercussions of the envisaged reform on the judicial architecture of the EC Treaty. It is, however, more likely that the Commission did not want to add to the already numerous and delicate problems mentioned in the White Paper. This consideration explains probably also why the White Paper does not mention differences in Member States' procedural laws, and why it does not even hint to any initiative that would lead to the approximation of such laws. The Workshop seemed to agree on this cautious approach. Participants drew however attention to an issue which, in their view, has to be addressed, i.e. the growing importance of arbitration proceedings. EC competition law is considered to be arbitrable, but belongs to the group of rules that are in the nature of ordre public provisions. Arbitrators are obliged to take into account EC antitrust law issues, because otherwise the party losing the dispute might challenge the validity of the arbitral award in a national court. However, competition law questions coming up in arbitration proceedings cannot be submitted to the ECJ for preliminary rulings, as arbitration tribunals are not courts in the meaning of Article 234. Should arbitrators be given the right to address requests for preliminary rulings to the ECJ? Should they be given the right to request opinions from the Commission or from NCAs? These questions were raised, but not answered. It was, however, considered that the Commission should consider them carefully before it puts forward its formal proposal for the reform of the EC antitrust enforcement system. Before we leave the specific problems of courts and judges, a final point has to be mentioned and which was hotly debated. The White Paper considers that even after afinaljudgement given by a national Court, the Commission should be able to take up the case and decide differently (e.g., denying the applicability of Article 81 (3), provided that the resjudicata effects between the parties of the

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court judgement remain unaffected). A considerable number of participants expressed concern about and even opposition to such an initiative, which seemed to them to be incompatible with constitutional principles such as the separation of powers. The preceding remarks may have raised doubts about our initial observation that a broad consensus seems to have emerged around the Commission's reform suggestion. We would like, however, to confirm our initial statement. The great majority of participants expressed their overall support for the Commission's initiative. Their critical remarks concerned—some times very important— details, but rarely the main thrust of the reform. They warned against a premature and hasty conclusion of the ongoing debate, leading to an insufficiently prepared and thought out proposal that would leave open crucial questions. The reform was generally considered to be too important to be jeopardised by unsatisfactory preparatory work. The Workshop was thus a contribution on the long march to a new, modernised and more efficient system of enforcement of EC antitrust rules. Claus Dieter Ehlermann Isabela Atanasiu EUI Florence, Italy 30 August 2000

Opening Speech

THE MODERNISATION OF EC ANTITRUST POLICY Mario Monti Ladies and gentlemen, I am honoured to be here today to give the opening speech at this EC competition workshop on the modernisation of EC antitrust policy, which has brought together such an impressive number of distinguished scholars, practitioners and policy-makers. I am confident that the contributions to, and the discussions of, this workshop will deepen our understanding of the many complex issues raised by the White Paper on modernisation of the enforcement system set out in Regulation 17/62. This will lead us towards our final objective, namely, to replace the present system with a new system of enforcement that will ensure the effective and coherent enforcement of EC competition rules in the coming years. In my introduction this morning I will briefly explain the main aims of the reform proposed by the Commission in the White Paper, and I will give you my thoughts on some of the concerns that have been voiced in respect of the proposal to fundamentally change the present Regulation 17, which was adopted in 1962.

I. Regulation 17/62 and the present environment The enforcement system established by Regulation 17/62 has certainly served us well for many years. In particular, it has allowed the Commission to develop a coherent competition policy for the whole of the Community, contributing greatly to the creation of the internal market. Over the years we have come to think of Regulation 17/62 as a stable and almost sacred companion in an otherwise turbulent world. To change it was almost unthinkable. However, the fact that the Commission is now thinking the unthinkable is a clear indication of the crucial importance that the Commission attaches to this matter. We must adapt Regulation 17/62 to meet the challenges of today and tomorrow. As we all know, the world has changed dramatically since 1962. Particularly in recent years the changes have exceeded even the most far-reaching predictions. Globalisation is increasing and markets evolve at great speeds. The Internet is revolutionising the way that we do business. The introduction of the Euro is creating more transparency and is facilitating capital movements and cross-border transactions. Enlargement will not only considerably expand the Community, but it will also present great challenges in terms of adapting the economies of the applicant countries.

Opening Speech

All these changes and challenges create demands concerning the development of competition policy. Competition law and policy are of fundamental importance to the European Union, European consumers and European industry. The very foundation of the European Union is an open market economy. As is now generally accepted, a competitive economy not only creates benefits for consumers and our societies as a whole, it also ensures the optimal functioning of the Internal Market and the competitiveness of European industry in an increasingly world-wide arena.

II. The overall reform of EC competition policy Considering the importance of competition policy, it is essential that we continuously monitor its effectiveness. The Commission believes that by adapting our rules we can considerably enhance their effectiveness for the benefit of European consumers. That is why the Commission has launched a comprehensive reform of our overall competition policy, reaching from the substantive to the procedural rules applying in thefieldof antitrust, mergers and State aid. The modernisation of Regulation 17/62, although highly important in itself, should not be seen in isolation. It is rather a part of this much larger reform. These reforms pursue the same fundamental objectives, namely: the more efficient enforcement of EC competition rules, less bureaucracy for companies, and the creation of a more level playingfieldfor companies through the development of a common competition culture and more application of Community law.

III. The problems related to the current enforcement system Before dealing with some of the main elements of the White Paper, such as efficiency, coherent application and legal certainty, it is perhaps useful to briefly recall the existing enforcement system and its main perceived deficiencies. Under Regulation 17/62, the prohibition rules of Article 81 (1) and Article 82 have direct effect and can therefore be invoked before national courts. National competition authorities similarly have the power to apply these provisions. On the other hand, the Commission has the exclusive power to grant exemptions under Article 81 (3). An agreement can only benefit from the exemption rule if the Commission has been notified of it and it has received the benefit of an exemption decision. For a long time the Commission has actively sought to encourage the application of EC competition rules by national courts and competition authorities. However, in practice these efforts have been largely in vain. The Commission's

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monopoly under Article 81 (3) is a significant obstacle to the enforcement activities of national competition authorities and courts. This obstacle follows from the fact that companies alleged to be in breach of Article 81 (1) quite naturally claim that their agreements meet the conditions of Article 81 (3) and are therefore legal. As the national bodies have no power to apply Article 81 (3), the continuation of their enforcement action is made very difficult. In most cases, a national action must be suspended pending the Commission's decision. This leads to unnecessary delays and creates a clear disincentive to apply EC competition law. The present system has led to a situation where the Commission is virtually the sole enforcer of Community law in an enlarging Union, and where its resources in the area of antitrust are substantially tied up in the handling of notifications. Of course the latter fact would not be a problem if notifications revealed the cases that merit investigation. However, that is not the case. The clarity of the law has increased substantially since 1962, when Regulation 17 was adopted. Companies and their lawyers therefore generally know what is prohibited and what is likely to be exempted. Only the latter cases are 'notified'. Unfortunately, we have good reason to believe that some companies - too many in fact - also engage in practices that are prohibited by the competition rules. For obvious reasons the Commission is never notified of these practices; they are hidden ever more ingeniously from the eyes of the competition authorities. They are therefore resource-intensive to uncover and prosecute. Naturally, the Commission tries both to cope with the notifications and to investigate cartels and other prohibited practices. However, the use we make of our resources is inefficient in terms of protecting competition. The current system therefore no longer ensures effective enforcement of the competition rules. This is a fact that, in my view, clearly justifies fundamental reform.

IV. Efficient enforcement To promote effective protection of competition the new system must enable the Commission to concentrate its resources on the cases that present a real threat to competition to the detriment of consumers. The Commission must step up its prosecution of cartels; of other hard core restrictions such as resale price maintenance, market sharing, restrictions on parallel trade, and exclusive dealings leading to market foreclosure; of state measures that distort competition and of abuses of dominance such as tying, refusal to supply andfidelityrebates. However, in a territory the size of the Community, it is not possible for a single authority to alone enforce the rules effectively. It is also necessary to involve both the national competition authorities and the national courts in the enforcement of EC competition law. In order to do so it is necessary to abolish

Opening Speech

the notification system and the Commission's monopoly over Article 81 (3). This will allow each body forming part of the enforcement system to effectively apply the rules and to concentrate on what it does best. Each authority will have the power to act on the basis of the Community competition rules in respect of agreements or practices affecting trade between Member States. However, the aim is to establish a network of competition authorities with rules on the allocation of cases so as to avoid multiple control, duplication of work or inefficient actions. Generally speaking, parallel action by several competition authorities is not resource efficient since it implies parallel administrative procedures. Furthermore, it could impose significant additional burdens on companies. The basic principle should therefore be that of 'single action'. Effective enforcement by national competition authorities could often require co-operation with, and assistance from, other members of the network. We must therefore establish the necessary basis for horizontal co-operation between the national competition authorities, including the exchange of information and mutual assistance. However, it is also important to set out proper and effective rules for the protection of the rights of undertakings, including rules on confidentiality. Undertakings have a legitimate interest in the protection of the confidentiality of any information exchanged. Both the Commission and national competition authorities should therefore be required not to disclose information collected or received that contains business secrets or is otherwise of a confidential nature. Other safeguards might also be necessary to protect the legitimate interests of companies. Let me now turn to the national courts and their function in the envisaged new system. National courts rule on disputes between two or more parties. Unlike competition authorities, which act in the public interest, the central function of courts is to safeguard the rights of private individuals. Private enforcement by national courts is an essential complement to public enforcement. To realise this one needs to look no further than other areas of Community law. Enforcement of Community law by national courts is the rule and not the exception. National courts have played an essential role in shaping our Community into what it is today: a unique legal order that grants important rights to the citizens. This is important for all of us to bear in mind. Due to the Commission's monopoly on Article 81 (3) we have become accustomed to the courts playing a rather limited role in the antitrust field. Habit, however, should not stand in the way of progress. In the European Union of today I see no valid justification for excluding national courts from the full application of Article 81. This is even more so in the context of the more economic approach adopted by the Commission. Under an economic approach based on the effects of the practice on the market rather than its legal form, the current division of competence under Article 81 is wholly artificial. At present national courts are empowered to assess the negative effects of an agreement due to the direct effect

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of Article 81(1), whereas another body - namely the Commission - must assess the positive effects of the very same agreement. In practice these issues are closely related and one is not more complex than the other. Consequently, they should not be separated.

V. Coherent application The Commission is aware that empowering national competition authorities and national courts to apply Article 81 (3) involves a certain risk of inconsistent application. However, this risk can be addressed and diminished by appropriate measures. I must emphasise that associating national authorities and courts with the enforcement of Community rules is not a re-nationalisation of European Competition law. Far from it: over time, the Commission's proposal will lead to the creation of a common policy and a common approach based on Community law, reducing the scope for inconsistencies. Consistent application requires that the rules are sufficiently clear and that the approaches followed in their application are sufficiently similar. Clarification of the antitrust rules will be an important function of the Commission in the new system. In addition to facing up to this responsibility to develop clear rules and to make public its enforcement policy by means of guidelines and other appropriate instruments, the Commission is envisaging a number of other specific instruments that aim to preserve consistency throughout the system. With regard to the national competition authorities, the aim is to establish a network of competition authorities within which the members increasingly apply the same body of rules, instead of the current situation in which 16 authorities apply 16 (sometimes different) sets of rules. The aim is to widen the application of EC competition law. The application of a common set of rules will greatly promote consistency and the creation of a level playing field throughout the Community. The Commission will remain at the centre of the network and will play a leading role in defining policy and ensuring consistent application. Importantly, the Commission also proposes to retain the current Article 9 (3) Regulation 17/62, according to which the Commission can withdraw a case from a national authority. The network of competition authorities will be a forum for discussion about the common policy and for coordination about cases and issues of common interest. In particular, it is important to ensure that there is prior consultation on prohibition decisions, decisions accepting commitments and decisions withdrawing the benefit of a block exemption. These types of decision merit special attention because they can only be reversed with difficulty once they have been adopted and enforced. Consultation on these types of decisions is

Opening Speech

also important in order to maintain a coherent competition policy, since policy in the new system will, to a significant extent, be developed by means of prohibition decisions and decisions with commitments. Let me now say a few words about consistency as regards national courts. As already mentioned, our proposal essentially means that Article 81 will catch up with the rest of Community law, where national courts already play an essential role. In all these areas, the Court of Justice has been able to maintain coherence and consistency via the Article 234 preliminary reference procedure. The Court of Justice will play the same essential role in the application of Article 81 as a whole. However the Commission is proposing additional instruments. In the 1993 notice on co-operation with national courts, the Commission provides assistance to national courts upon request. This instrument will be maintained and made more efficient by the introduction of a deadline for reply. We expect that the incentive for national courts to obtain input and opinions from the Commission will grow in the future system as they will get the power to apply Article 81. The application of EC competition law is frequently a matter of law and fact. In such cases, the Commission might be able to draw on its own administrative practice to provide valuable assistance to national courts. The Commission is also envisaging a mechanism whereby it could intervene more actively in court proceedings, allowing it to defend the common competition policy before national courts. One such instrument, which is mentioned in the White Paper, could be the right to intervene as amicus curiae. The Commission would then, on its own initiative, submit written observations and/or oral observations to the court hearing the case. Finally, let me turn to the issue of forum shopping and multiple control. Multiple control and forum shopping before national courts should of course be avoided. However, in this respect we are fortunate to be able to rely on the rules of the Brussels Convention. The Brussels Convention establishes rules about how to determine the proper forum in commercial and civil cases. The purpose of the Convention is to prevent parallel proceedings before the courts of different Member States and to avoid conflicts between decisions that might result therefrom. The Convention confers jurisdiction on a limited number of courts that are territorially well placed to deal with the dispute. Once an action has been brought before one national court, all other courts must decline jurisdiction provided that the proceedings concern the same parties, the same cause of action and the same subject matter.

VI. Legal certainty In an open market economy, companies should be encouraged to enter into pro-competitive transactions. Competition law should not only discourage

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anti-competitive practices, it should also encourage those practices that promote competition and consumer welfare. An adequate level of legal certainty is therefore a legitimate and necessary objective. The Commission's White Paper proposal, while aiming to restore the primary task of effective enforcement, fully recognises the need to provide companies with an appropriate degree of legal certainty. That said, I must however emphasise that I see no justification for introducing a voluntary notification system, as is sometimes called for by industry. A voluntary notification system would in effect reinstate the present system and would undermine the principal objective of the reform, namely effective enforcement. It would prevent the Commission from focussing on the cases that present a real threat to competition and would also perpetuate the blocking effect of the current system on the application of EC rules by national courts. Companies must accept responsibility for assessing their own agreements. In fact, most companies already do that, since the Commission is not notified of most agreements. What companies can reasonably expect, however, is an adequate level of predictability and consistent application of the rules that allows them to properly assess how the rules will be applied. In the future, the Commission will put more emphasis on clarifying the rules by focussing on what is prohibited. In fact, the Commission has already started to overhaul the legal framework and to further clarify the rules, thereby facilitating self-assessment. The Commission will also apply a more economic approach that, for many companies, will reduce the risk of being caught by Article 81 (1). Block exemption regulations will be maintained. However, as is clear from the new block exemption regulation on vertical restraints, the Commission is abandoning the present form-based regulations in favour of regulations based on economic effect. This allows the Commission and the national authorities to concentrate on the important cases where the parties have market power, meanwhile creating legal certainty for the vast majority of companies. The Commission will also issue a number of guidelines and this general body of rules will be further clarified by the decisions in individual cases. The Commission will continue its current policy of imposing fines only in cases where it is clearly established that certain behaviour constitutes an infringement. Consequently, there is no risk for undertakings to be fined without having been able to know that they were infringing the law. One should also keep in mind that the direct applicability of Article 81 (3) will, in itself, promote legal certainty, since it massively legalises agreements which fulfil the conditions of Article 81 (3) without the need for a prior Commission decision. In addition, it provides companies with a new defence against claims based on Article 81 (1). At present, only an agreement of which the Commission has been notified, and which it has exempted by a formal decision, can benefit from Article 81 (3). On balance therefore, civil enforceability of agreements will be improved in comparison with the existing system. In addition, the Commission considers that it would be appropriate to introduce a new instrument that would allow it to provide guidance to undertakings

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in cases where there is real doubt as to the application of the competition rules. What we have in mind is a system of opinions whereby companies could put questions to the Commission in cases where the existing general rules, measures and case practice do not provide sufficient guidance. Companies would be required to submit a supporting and explanatory memorandum alongside questions they put to the Commission. On that basis the Commission would issue an opinion in appropriate cases. Such opinions would be reasoned and published, and they would therefore contribute to the overall clarity of the rules. Accordingly, they would not only provide guidance to the companies asking a question but to other undertakings as well. The value of this instrument should not be underestimated, particularly when compared with the current system of comfort letters that are neither reasoned nor published. In this respect, it is important to take account of one of the effects of our more economic approach under Article 81. When one takes a global view of the Commission's proposal and takes due account of the impact of our reform work in the substantivefield,I believe that there will actually be more coherence, predictability and legal certainty in the proposed new system than in the current system.

VII. Conclusion Ladies and gentlemen: let me now conclude. The Commission is aware that reforming the enforcement of European competition rules poses major challenges. I have already mentioned some of these. However, the risks of inaction and complacency are even greater. We must adapt the current system to the radical change in the legal, economic and political environment in which it has to be applied: market integration, the Euro, successive enlargements and globalisation. In so doing we must devise a new system that will live up to the expectations of Europe's citizens. Our primary objective must be to strengthen the enforcement of our rules. I wish you much success in the study of the complex issues that are facing each Panel. The discussions will no doubt improve our understanding and assist us in constructing a new antitrust enforcement system that will ensure the success of EC antitrust policy in the future.

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Panel Three: Courts and Judges • CLAUS-DIETER EHLERMANN—During this session we will address the problems linked to the judiciary—problems that we have already spoke about quite a bit during the previous sessions. I am mindful of the fact that we left the arbitration and civil procedure issues aside, though I suppose they will come forth during this debate. Our first speaker today is Professor Carl Baudenbacher, who is here today in his capacity of judge at the EFTA Court. • CARL BAUDENBACHER—As a judge and a law professor I deal with competition law issues only from time to time, among my many other assignments. Therefore, in the presence of so many distinguished competition specialists, I feel like a lover among long-married people: sometimes enthusiastic, but every now and then with a bad conscience. The competition rules of the EEA Agreement, in particular Articles 53 and 54, mirror Articles 81 and 82 of the EC Treaty. These provisions are enforced by two agencies: the Commission of the European Communities and the EFTA Surveillance Authority. As far as the division of enforcement competencies is concerned, there is a one-stop shop that, as Jacques Bourgeois mentioned, would also be a good idea for the future enforcement system in the EU. 'One-stop shop' means that either the EFTA Surveillance Authority or the Commission handles cases affecting trade between the EFTA States and the EU Member States, and the EFTA remembers gratefully that Claus-Dieter Ehlermann has been instrumental in setting up this system. EFTA national competition authorities do not yet have the right to apply Articles 53 and 54 EEA, but the national courts in the EFTA States do apply those provisions. I should mention here that there is a dualistic tradition in international law in the Nordic Countries. However, in this case, this tradition does not create any problems because the EEA agreement has been incorporated into the national law. By the way, the EFTA Court has ruled in a case involving an Icelandic woman, with the beautiful name of Erla Maria Sveinbjdrnsdottir that the EEA Agreement has itself created a new legal order, to be distinguished from the legal orders of the contracting parties. With respect to the impact of the reform proposed in the White Paper on the European Economic Area: the EFTA States basically support the Commission's proposal. It is also clear that, from the point of view of homogeneity in enforcement, the reform should be extended to cover the European Economic Area. The EFTA States are aware that this implies that they will have to enable their national competition authorities to apply the EEA competition rules. The EFTA States agree that in a decentralised competition law enforcement system, Commission block exemption regulations, notices and guidelines will continue to be of importance and, furthermore, they ask the Commission to consider the need for harmonising national procedural laws. ESA has even pointed out that clear rules on the allocation of cases are needed.

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With respect to the question whether national courts will be able to do the job, I will limit myself to four remarks. The first is that antitrust is not the only legal area posing complex problems. The second is that the arguments put forward against entrusting national courts with the application of provisions that presuppose a certain economic knowledge are not new; I remind you of the law on unfair competition, just as an example. The third is that, with all due respect, the competition law community (or certain parts of it) is in danger of doing too much navel gazing. This might have to do with the fact that there is a lot of money involved in this area of law enforcement, but also with the fact that Europe competition law is some sort of 'secret science' as it is not taught at most of our universities. My fourth remark is that, when reading all the objections that were made against the Commission's reform proposal, one might get the impression that the criticism is based on a tacit assumption that the protagonists that handled EC competition cases so far are almost impeccable. I would just like to remind you a famous statement by Justice Robert H. Jackson, namely that reversal by a higher court is not proof that justice is thereby served better, since there is no doubt that if a 'Super' Supreme Court also existed, a substantial portion of the Supreme Court decisions reversing State court decisions would also be reversed in turn. Then there is the famous sentence: 'We are not final because we are infallible, but we are infallible only because we are final'. I recall in this context that, for instance, the Bundesfinanzhof (the Supreme Court dealing with financial matters in Germany) refused, for a certain time, to request preliminary rulings from the ECJ because the judges had the feeling that the ECJ did not handle such cases in an appropriate way. So, everything is relative. One will of course agree that there are problems with the enforcement of EC competition rules in national courts, given their shortage of resources, the actual knowledge of competition matters, education and experience, but all these problems seem to be manageable. Nevertheless, we should not hold too many illusions: we will not be able to have it both ways, and a certain amount of forum shopping will be unavoidable, since national judges will compete with each other. As far as the role of the European Courts is concerned, I want to make just one comment. The White Paper essentially relies on the preliminary ruling procedure. Yet this cannot be compared to direct actions, since the facts of the case basically remain established by the national court. At this point, the focus has to be on the ongoing reform of the judicial architecture of the European Union. My feeling is that the White Paper, and the discussion around it, have not taken the importance of this reform into account to a sufficient extent. You could say that, in this respect, the White Paper is trying to shoot a moving target. Regarding the goal of reaching intensified control of trespassing agreements, the EFTA States suggest—and this is an interesting proposal—that the provisions in US antitrust law concerning information-gathering powers of the competition authorities should be further explored.

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From the viewpoint of EFTA States, the hot potato in the reform proposal is the following: at present, the ESA has certain co-operation rights with respect to cases over which the Commission has jurisdiction under the EEA Agreement, and fears that, with decentralisation, the national competition authorities of the Member States will not respect those co-operation rights. This problem could be solved by obliging the national competition authorities of the Member States to co-operate on the same terms as under the present arrangement with the Commission, but EFTA's preferred solution would be that the Commission take the relevant cases out of the jurisdiction of national competition authorities. • JOCHEN BURRICHTER—I will try to concentrate on three items. First, I would like to say a few words about the role of private enforcement under the new system. Second, I shall go into some of the details concerning the application of Article 81 (3) under the new system. Finally, I will come to the issue of forum shopping. It has been said that one should not rely too much on private enforcement in the new system, and I think that is true. In my understanding, the new system should not place private enforcement at the forefront, but private enforcement should nevertheless be enhanced and made easier. This is one of the pillars of the future system, though of course not the only one, as enforcement by the national competition authorities is still at the forefront. I think, however, that the Commission's reform ideas will in effect be able to enhance private enforcement, which is nowadays becoming more and more important. In relation to this, I share the doubts that Professor Immenga expressed on behalf of Professor Mestmacker, namely that at present it is quite difficult (at least for a third party) to enforce antitrust law against the members of a cartel. But I see in practice that there is a move in the business community towards changing this state of affairs. For example, in the past in Germany nobody would have thought of suing against cartels, but more recently, after the vitamin cartel case there are many more companies actually considering doing so (third parties, that is, customers). I also know that interested parties urge the Commission to declare its objections to granting an exemption more quickly, and to give them access to the file. This might be an idea for the Commission to consider; namely that in cartel cases the files of the Commission should be opened to third parties interested in suing the cartel members before national courts. I will move on to some of the aspects concerning the direct application of Article 81 (3) in national courts. I think there is no doubt that the courts are able to apply Article 81 (3), and we have already covered many of the issues involved here. I therefore only want to mention something related to the policy aspect: in fact, as I said yesterday, general EU policy aspects should have no place in the application of 81 (3), but the courts should of course also take into consideration the general provisions of the Treaty when interpreting the

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conditions for granting an exemption. I think that is something that a Court could do in civil law proceedings. We have already discussed about the discretion previously granted by European Courts to the Commission in the application of 81 (3). I want to take this discussion further by referring to one of the objections as to the applicability of 81 (3) by national courts, namely that adversarial procedures cannot produce fair results and 'find the truth'. This is a surprising argument, if taking into account that legislators in most Member States leave other important legal matters—for example, corporate law, or labor law which also implies public interest considerations—to be decided in adversarial procedures. So, I think that this argument is not justified. If we look at the cases decided by the courts, these are more and more disputes between the parties to an agreement about its validity and, certainly, also claims by third parties about alleged infringements of competition rules. In the latter kind of cases, it can be expected that the plaintiffs will submit facts to back their case, or that fact-finding should not be more difficult than in other legal areas, or more difficult than when the cases are dealt with by a competition authority. In adversarial procedures, judges have a variety of possibilities to explore the facts, and to point to legal aspects so that the parties have the opportunity to put forward the right arguments. The Commission can also strengthen private enforcement by assisting the third parties, for example, in finding the facts to back their claims against competition law infringements, including by opening thefilesof a fine case, for instance. I should mention that one of the possibilities for correcting wrong decisions of the courts could be that of allowing the competition authorities to issue administrative decisions. I mentioned yesterday that I would even advocate the issuing of Commission positive decision in cases where a national court wrongly came to the conclusion that Article 81 (3) was not applicable. This was to clarify yesterday's controversy with Mr Boge. I wanted to remark that this is actually not extraordinary under German law, because even the Federal Cartel Office in Germany comes to the conclusion that, for example, the rules prohibiting of cartels are not applicable. In such cases, even if the civil court's decision is definitive, the Federal Cartel Office has the possibility of issuing a decision prohibiting the cartel if it comes to a different conclusion to the court on the case. Another argument invoked against the applicability of Article 81 (3) in national courts is the fact that, under the current system, exemptions can only be granted for a limited period of time, and this is not compatible with the nature of civil court decisions. Here I think one has to consider that, under the new enforcement system, exemptions will not be granted in the operative part of the court decision, but rather the possibility of an exemption is an issue that the courts have to look at implicitly when granting an award for a claim or refusing to grant it. So, issuing a decision with effects limited to a certain period of time should not be a problem. However, in clear cases where the court comes to the conclusion that an exemption can only be granted for a certain period of time, and the claim goes beyond that period, the Court can refuse to grant, for

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example, the statement of validity beyond that period of time, a solution that makes it possible to limit the exemption in time. I would also make some short remarks about arbitration procedures, because that' is another aspect that arose in our discussion. I think it is important to understand that arbitration courts must observe competition rules, otherwise they risk that their decision be challenged by the loosing party during the enforcement proceedings. Then the risk arises that the arbitration decision cannot be enforced, and that the arbitrators have to return their fees. I would think that under the new system it would be sufficient for arbitration courts to be enabled to ask the Commission for the same information that Commission would have to provide to the ordinary courts in case of doubt, but I do not think it is necessary to grant the arbitration courts the possibility of requesting preliminary rulings to the European Court of Justice under Article 234 EC Treaty. There is no time left to cover the issue of forum shopping, but my feeling is that this fear is exaggerated and in most cases there is no danger of forum shopping—but I can elaborate on that later during the discussion.

• JOHN COOKE—I believe that what the Commission proposes to do in the White Paper is both legally feasible and practically possible. I do not share the doubts about the compatibility of the reform proposal with the EC Treaty that were mentioned yesterday. I also think it is possible to make the reform work, provided that the new Regulation—replacing Regulation 17/62—will very clearly define what the role of the Commission will be in the new enforcement system, both in relation to the national competition authorities and in relation to national courts. If you consider in particular that in the foreseeable future we are going to have a Union of possibly twenty or twenty-five Member States, with an equivalent number of national competition authorities, it is absolutely crucial that the relationship between the Commission and both the national courts and the national competition authorities is clearly and simply defined, so that everybody understands exactly who is doing what, who is entitled to do what, and when they are entitled to do it. The White Paper makes me suspect a tendency on the part of the Commission to have it both ways. If the Commission believes in decentralisation, then let's have decentralization, and not some obscure compromise in which there are exceptional provisions to override, to withdraw, to hold back, to second-guess what happens at national level. Nor do I share the doubts that have been expressed about the ability of national judges to apply Article 81 (3). It is the vanity of all experts to believe that their own area of specialisation is so arcane that it cannot be put into the hands of people outside that particular expertise. When you think about it, national judges are applying other legal provisions that are every bit as delicate, complex and framed within public policy. I cannot speak for all the judicial systems in the EU, but if you take the common law jurisdictions, a judge sitting in

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a commercial court is often asked to authorise the reduction of the capital of a public company, where very arcane and sophisticated accounting concepts come into play and both the interest of the public and public policy in the area have to be taken into account. For many years in Ireland and the UK, in the field of intellectual property, there used to be applications to extend the duration of patents where the judge was asked not only to understand a complex patented scientific formula, but also to look at the remuneration of the patentee over a certain period and decide whether he had been adequately remunerated. In addition, you had the administration arguing for public interest, and the current policy of the patent office in thatfield.So, there is nothing particularly special from an ordinary judge's point of view about competition law when compared with other legal areas. It seems to me that the real question is how do you ensure that the national judges are adequately informed about Community competition policy, and how do you ensure that the Commission is adequately and promptly informed of important decisions taken or pending to be taken in national courts, particularly in the area of application of Article 81 (3). The White Paper talks about the Commission intervening in national court proceedings as amicus curiae. I think this wrong: the role of the Commission at national level should be as close to nil as possible. When you think about it, if you are going to have multiple enforcers, then the Commission is already represented through the national competition authorities in the Member States. I therefore think the answer to these questions is relatively simple: the new Regulation should require each Member State to ensure that its rules of court procedure contain a provision whereby every party to litigation first raising a claim or a defense based on Articles 81, 82, or 81 (3) is obliged to serve notice of that claim, or defense—whatever it may be—on the national competition authority. The national competition authority should then have a limited period of time in which to decide, in consultation or after consultation with the European Commission, whether it wishes to intervene in that case. This is why I think that the concept of amicus curiae in this area is inappropriate, because if the issue that is raised is sufficiently important to warrant the intervention of the Commission through the national competition authority, then it seems clear that the Commission and the national competition authority will have taken a view on the point at issue. In those circumstances, I believe it is more appropriate and more helpful for the national judge if the Commission or the national competition authorities intervene in support of one side or another. The vague idea of amicus curiae is inappropriate: I think it is wrong for the Commission to intervene, and even on constitutional grounds it is a mistake for the Commission to risk compromising its privileged position under the Protocol on the Privileges and Immunities of the European Communities by becoming involved in litigation at the national level. All this is unnecessary if the network of national competition authorities acts on the Commission's behalf and in consultation with it. The national competition authorities would, in any event, frequently be involved in litigation in their own courts in relation

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to the application of national competition law, and thus they will know the judges and the rules of procedure, they will have their own legal teams already in place. It would therefore be a much more efficient employment of resources to use the national competition authorities for any such intervention on behalf of the Commission. And, in any event, if we already have a problem of resources in Brussels in the Competition Directorate, I cannot see how these resources are going to be spared for an effective and prompt intervention at national level by the Commission. I wanted to make onefinalpoint, which I mentioned in my paper, and here I think it is worth reading a passage from the White Paper, because I am hoping to learn from the participants at this conference what it means. It is paragraph 102 (2) of the White Paper, which reads: 'When a national authority has adopted a positive decision which is either no longer open to appeal or which has been confirmed on appeal, or a court has delivered a positive judgment (for example rejection of a complaint on the ground that a restrictive practice satisfies the tests of Article 81 (3) which is either no longer open to appeal or has been confirmed on appeal) the Commission can always intervene to prohibit the agreement, subject only to the principle of res judicata that applies to the dispute between the parties themselves, which has been decided once and for all by the national court.' That does not seem to me to make sense. In fact, I think it is dangerous nonsense. If the matter has been decided once and for all by a national judge, how can the Commission overturn that decision? More importantly, if the principle of res judicata applies, it seems that the very parties whom the Commission believes have infringed the Community law will get away with it, whereas third parties are apparently going to be bound by the subsequent Commission reversal of the original outcome. This also seems to be dangerous from the point of view of the rule of law: I do not think that national judges will take kindly to a situation in which they are left in the position that, however final their decision in a case, an administrative authority may reverse the effect of what they have decided. And all this is quite apart from the fact that, once national courts are applying Community law, Article 6 of the European Convention on Human Rights comes into play. • DAVID EDWARD—First of all, I am happy to say that there is no disagreement between the two European Courts. I entirely agree with John Cooke, and would repeat what Mr Kist said yesterday: do not jeopardise this enterprise by inadequate preparation and do not underestimate the seriousness of the problems that were pointed out yesterday and will be raised today. It is absolutely futile to proceed with the reform on the assumption that it is just the selfinterested lawyers who create problems. If you do not face up to these problems now, they will come back to haunt you later. Second, I endorse entirely what John Cooke said about using the potential of the national competition authorities. The great 'secret' of the Community legal system, is that the Treaty uses national bodies as enforcers of Community law,

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and there is absolutely no reason why national competition authorities should not be used as enforcers of Community competition law. This is absolutely in line with the Community principle of subsidiarity, which was in the Treaty from the very beginning: subsidiarity was not invented in Maastricht, it was invented back in 1957 with the use of the national courts as primary enforcers of Community law. Third, taking further a comment that John Cooke made before, it is perfectly true that the national courts will be dealing with disputes between party A and party B about their contract, but one of the most pernicious elements in competition law is the 'network' of identical contracts between party A and parties B, C, D, and E. From a legal point of view, each is a separate contract, and each is justiciable separately. From the economic point of view, competition is distorted by the network of agreements as a whole. So, do not say we do not need to bother about the Brussels Convention because the dispute is just between party A and party B. If the contract between parties A and B was subject to a court decision in one country, what is the effect of that court's decision in another country and with respect to a contract concluded on identical terms between party A and party C? And in particular, what happens when parallel proceedings between one party and several different parties are started in the courts of different Member States, but all concern the same terms of identical contracts in the 'network'? The same question arises in arbitration: arbitration proceedings may involve two parties, but the effect of the arbitral decision might have a knock-on effect on identical contracts with other parties. Fourth, I agree with John Cooke that Article 81 (3) is justiciable. Analogous balancing problems occur in other areas of Community law as well, and the need to balance different Treaty provisions is ever increasing. Under the Treaty of Rome, the main provisions to be considered were those on the free circulation of goods and competition, but social developments and successive Treaty amendments have brought about several new legal and policy considerations to be balanced against each other (fundamental rights, trade marks and designations of origin, environment, consumer protection, biodiversity, drugs and terrorism, and so on). In the old days, the judge was operating a sort of on-off switch: he looked for the norm to apply, and he applied it. Nowadays the judge is operating a synthesizer, that has a number of pulses coming through, so he must assess the strength of these different pulses or considerations, adjust them, and find a solution whereby several considerations come through together, and not simply one norm of positive law. This exercise is new for many judges, and some are afraid of it, particularly in the national courts. Some judges simply resist doing it, as you can see from the evidence of Mr Justice Ferry and Mr Justice Laddy before the House of Lords. They just do not like the idea that this is what they have to do. So, do not underestimate the potential for judicial resistance to what you are expecting them to do under the new enforcement system. Having said that, unlike political institutions, the courts are not in a position to choose what they want to do. In Europe at least, they cannot just say 'This

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case is unattractive, or uninteresting, and we are not going to deal with it'. The courts have to take the case and, what is more, they also have to decide it. The consequence of this is that if you devolve enforcement powers to national courts, you will get decisions, and many of them might be unattractive from your point of view. They will be decisions from overloaded national judges, and not necessarily those in London, Brussels, or Paris, but also those in Rochester, Yorkshire, Santiago de Compostela, and any town in Finland. These will be the judges who decide Community competition law issues and, please, distinguish between specialised courts dealing with the judicial review of administrative decisions, and ordinary courts that do not deal with competition law aspects only, but which mix competition law aspects with other civil law considerations in the same case. So, the real question is not whether the judges can do it, but what will be the quality of the decisions that you will get from them. As I see it, this quality will depend on the manpower of the national courts, the training of the judges, and the availability of 'back-up' (for example, libraries, access to information, and the help that the judge can get generally). In many countries, the judge depends extensively on the lawyers to present the court with the evidence. This means that the Bar must be brought into this training and information operation as well. But above all, as John Cooke said, there must be clarity as to what is expected of the national judges: clarity as to the burden of proof, clarity as to what has to be taken into account, and what does not. Do not underestimate the magnitude of the need for training and guidance. Equally importantly, do not underestimate the burden the reform will place on the European Court of Justice. At the moment, both the Court of First Instance and the European Court of Justice are overloaded. The European Court of Justice in particular is seriously overloaded with requests for preliminary rulings, so do not underestimate the difficulties with using the Community Courts as a modality to ensure coherence in the enforcement of Community competition law, unless substantial additional resources are provided to them. My next comment goes back to another point made by John Cooke: please respect the separation of powers. The Commission cannot have it both ways: if you want the judges to do it, the judges will do it, but the Commission cannot start interfering on an administrative basis with what the judges will do. With respect to procedural issues: do not be misled by parallels with the US system. The US is procedurally homogeneous, Europe is not. We must take account of the fact that procedures in the national courts differ considerably from one Member State to another, and—as someone said yesterday—it is often the procedure that decides the substance of the case. My final point is one that I made very briefly at the end of my paper: if the national courts' decisions are subject to appeal on the merits of the case, and therefore under the new system we will have full judicial review of national court decisions in individual competition law cases, then you must also consider whether it is tolerable to continue with Commission administrative decisions that are subject only to limited judicial review. Is it tolerable that a small

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contract—between small private parties, if you like-—be open to complete review on the merits of the case and, if necessary, also open to a reference to the European Court of Justice, while major contracts concerning important market players are subject to administrative decisions and judicial review on legality aspects only? People have now been making this point for years and years and years. Even at a very simple level, what will be the status of the hearing officer and his report under the new system? Will the report be made available to the parties? And so on. We should therefore consider the knock-on effect of judicialising part of the Community's competition law enforcement while continuing with a limited administrative procedure in the Commission's own backyard. • DAN GOYDER—May I begin by expressing all my support for what Judge Edward just said about not mixing up judicial and administrative functions. I also said something along those lines yesterday, and I think this is a very important aspect of the reform. You cannot have it both ways: you can have either an administrative or a judicial enforcement system, and you must be very careful that the administrative side does not—as it would-—take the precedence. I have great sympathy for the judges facing complex economic issues and I think that, as a starting point, we must not be greedy. Judges in every jurisdiction are very valuable assets: they have limited time and energy and, and they cannot spend all of both dealing with competition cases. Yet competition cases are very 'greedy'. I mentioned in my paper the Premier League case, which was, in my opinion, an appalling example of a waste of resources, and of course, the [previous U.K.] Restrictive Practices Act must take some of the blame for that. But let us just stop at this point: we need judges, the judges should be involved, and they can cope with the problems, but they need a great deal of help, and that help can be provided in a number of ways. I am going to mention two such ways in particular. The first was touched upon by Judge Cooke, and I think it is very important: the new Regulation should deal with the relationship between national competition authorities and national courts. I would like to see an enforcement system whereby not only the parties are obliged to file their arguments with the national competition authorities—as was suggested by Judge Cooke—but also the national courts have the right to ask for all relevant documents in the possession of the national competition authorities, and the latter would be obliged to help the courts, for example, with market definition—particularly when a lot of research has already been done on the markets at issue, and given that market definition is a very time-consuming occupation—and other matters relevant to the case. In some cases there might be no relevant records already available at the national competition authorities' offices, yet in others there will be quite a considerable amount of valuable information. It is therefore very important that the work carried out by the national competition authorities from a public interest perspective be brought into the cases before courts: this will not only

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save time, but very often will also ensure that important issues, which might otherwise be overlooked, are brought to light. The judges already face huge problems in establishing the facts in many of competition law cases. These problems will increase when the courts can apply Article 81 (3) because such cases involve a tremendous amount of factual evidence, especially when the parties are large and have many resources. Therefore, the greater the help that courts can get from the national competition authorities, who in turn will bring in—as was suggested—resources from Brussels, the better. The second kind of support consists of the fact that both judges and the parties should be confident that the hierarchy of appeal is logical and correct. As already mentioned, at present there is an obvious discrepancy between cases heard by the Commission and those dealt with by the national courts, a situation that is clearly unsatisfactory. I would therefore make a strong plea that Article 234 EC Treaty be amended. It seems to me—and this has also been publicly acknowledged by the President of the European Court of Justice—that a system in which it takes nearly two years to obtain an opinion, or simply an answer to a preliminary question, from the European Court of Justice, is not justice. Justice delayed is justice denied. Frankly, a system in which it takes more than a year to obtain such opinions or preliminary rulings is not something we can continue. Considering the rationale on which the Court of First Instance was established, I would like to join Jeremy Lever Q.C. and others in arguing that it is time to give this court Article 234 jurisdiction in competition law cases—and maybe in other fields of Community law as well, for example trade marks—and that in the future the Court of First Instance should sit not only in Luxembourg but on a regional basis throughout the Community in order to deal with appeals in such cases from national courts. These are reforms that seem to me to be essential, because without a proper judicial architecture you cannot ask national judges to do something that is so difficult. Incidentally, while the idea of having judges specialised in competition law is great, you should nevertheless be warned that national judges often have more than one specialisation. When I mentioned to a friend in London that a particular UK judge would make a wonderful competition law judge, he replied: 'Oh no, you will rarely see him in London. He is one of the only judges speaking Welsh, and is needed to deal with murder and other serious crime in North Wales!' To summarise, I think we have to start by assuming that judges can deal with competition law cases, but we must give them every structural support possible and intensive documentation if we are not to see their efforts wasted, and we must realize that judges have many other things to do too. • JOCHEM GRONING—Yesterday we heard much about certain 'German concerns' about the reform proposal. I would just like to let you know that the German judges—me included—do not play any active part in this discussion, which, as far as I can see, involves the Commission, the Bundeskartellamt, the German Monopolkommission and German academics.

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What could I contribute, as a national judge, to this Workshop? First, there is not much left for me to say anew. Second, my position as a national judge is similar to wandering in a valley and trying to find out what it looks like from above the hill. Third, I belong to a Member State whose antitrust authorities hold the reputation of being tough and effective, and their administrative actions are under full judicial review by administrative courts. As I heard during yesterday's discussion, this is not the case everywhere in the Community. So, I might easily underestimate the problems that the Commission's reform proposal might raise. With respect to changing the interpretation of Article 81: normally we change the interpretation of rules because we find out that our former interpretation was wrong. The case is different with the reform of EC competition law enforcement: the interpretation of Article 81 is not going to be changed because it has been wrong, but because it is no longer practical. This approach might be rare, but not without precedent: I remember we were astonished a couple of years ago by the decision of the European Court of Justice in the famous Keck and Mithouard case,1 where the Court cancelled an interpretation of Article 28 that had been upheld for more than twenty years (since the Dassonville and Cassis de Dijon cases).2 Still, I have my personal doubts about whether it is possible to change the interpretation of Article 81 so fundamentally. I tend to believe that the essence of the exemptions under paragraph 3 implies that they are given for a limited period of time, and as such they are not exactly suited for civil law proceedings. I understand, however, that the Commission opted for Article 81 (3) to be applied in national courts because it fears that this provision might not always be applied correctly by the national competition authorities. The Commission should, however, lay out clear rules destined to avoid parallel competencies; this also relates to the issue of forum shopping, which does not necessarily have to be picked up again. What will be the scenario when civil law judges come to apply Article 81 (3)? For me personally this is a fascinating task—I have been dealing with antitrust cases for a couple of years now, and with merger cases in particular, whose structure does not seem to be so different from that of cases involving paragraph 3, but to trying to convince all my colleagues throughout the Community that this is a very interesting task is similar to trying to convince them that the taste of lemon is sweet. It seems to me that the task of applying paragraph 3 does not pose so much legal difficulties as factual ones. Such difficulties arise from the big mass of facts that need to be brought together, and from the economic analysis required in order to put all the mosaic of facts together and get a complete image of the economic and competitive conditions in the case. As such cases are normally rather complex, it will take a certain time—a couple of years, maybe longer—for national judges to get used to them. I think that com1

Case C-268/91 Keck and Mithouard [1993] ECR 1-6097. Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837, and Case 120/78 ReweZentral v Bundesmonopolverwaltung fiir Brannwein (Cassis de Dijon) [1979] ECR 649. 2

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petition as an institution will survive this. What concerns me more, however, is that the application of paragraph 3 relies upon what the litigants bring before the court. As was said before, powerful undertakings might not be willing to disclose the whole economic and competitive background of the case, while their small opponents might not be able to do so. So, this is the point at which judgments could go wrong. Now, the Commission wants to help us as amicus curiae. If that is realistic, it would be great. But I think it will take a lot of the Commission's resources to be on the run in every single national and regional market in fifteen to twenty Member States, so this kind of help seems only theoretically possible. As to other kinds of support from the Commission, such as support in the interpretation of Article 81: as an independent judge, I do not like much the idea of being told by the Commission how to interpret the law correctly. I prefer to do it on my own. Of course, I find what Judge Wood suggested in her paper very interesting, namely that the Commission should just point out the competition policy questions and the application of competition law. We should indeed be provided with information on developments in Community competition policy, but the Commission should not intervene by the judge himself. Afinalpoint: the danger of abusing the possibility of requesting preliminary rulings from the European Court of Justice will be high. In my eyes, factual problems are the object of many such requests, rather than legal interpretation ones. The judges, and especially German judges, love to ask the European Court of Justice, for example, what percentage of the customers must be misled or wronged by misleading advertisement. They have brought three such cases before the Court, and I hope they understand by now that the Court does not want to answer such questions. • SANTIAGO MARTINEZ LAGE—The White Paper aims to reduce the Commission's burden in the enforcement of Article 81 in two ways: first, by entrusting national competition authorities with applying Article 81 as a whole and, second, by opening the application of Article 81 to private enforcement before national courts. Claus Ehlermann observed—and I agree with him— that in reality the main element of novelty in the White Paper is the less prominent role attributed in the new enforcement system to competition authorities, at both the EU and national levels. In my opinion, judicial enforcement raises quite different problems from those of administrative enforcement, and, while the application of Article 81 by national competition authorities is the real decentralisation, judicial enforcement has nothing to do with it. Even more important, in my opinion, is the fact that the judiciary cannot replace the enforcement functions of administrative authorities. Judicial enforcement is not an alternative to administrative enforcement, and I will seek to argue this point of view. There are three main differences between administrative and judicial enforcement. The first is that each of the two types of enforcement implies adopting

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quite a different perspective. When competition authorities deal with a case, they are mainly concerned with the competition policy aspects, such as the structure of the market and the conditions for competition. Therefore the interests of third parties (clients, competitors or suppliers) are always taken into consideration. By contrast, at least in my experience, when competition issues arise in court proceedings only purely private interests are considered. The second difference is closely related to the first. When administrative authorities intervene, either following notification or in infringement procedures, the parties to the agreement stand close together to defend it against third parties— usually competitors, suppliers, or clients—whereas when Article 81 cases are dealt with in court, it is usually the parties to the agreement that confront each other. The third difference is that administrative authorities and judges have different possibilities for intervention. Administrative authorities may, and usually do, suggest modifications of an agreement so as to make it compatible with the competition rules, or they might require certain commitments from the parties to the agreement, whereas judges can only accept or reject claims. Therefore, whether or not judicial enforcement of Community competition rules is desirable, it is not an alternative to administrative enforcement. Some critics of the White Paper have argued that we are actually trying to get closer to the US antitrust enforcement model without having the legal instruments that the US system employs, such as class actions, treble damages, criminal sanctions, and, last but probably not least, contingency fees for lawyers, which are so uncommon in the European jurisdictions. Since I am Spanish, allow me to tell you about the Spanish jurisprudence related to national competition rules that probably worries the European Commission. In 1985 the Spanish Supreme Court ruled that civil courts cannot apply national competition law in the case of an abuse of dominant position unless our competition authority verified whether the abuse of dominant position existed. This judgment was followed in 1993 by another quite famous decision of the Supreme Court, according to which the same condition applies to Community competition rules (namely to Article 82 cases). In relation to the latter, in December 1993 the Supreme Court ruled that, whenever the principal claim was based on a Community competition rule (and the Community competition rules were not only incidentally raised in the case), the civil court should stay the proceedings until a decision was taken by either the European Commission or the Spanish competition authority. This was confirmed last November by another Supreme Court judgment, according to which, in both matters of national law and Community competition law, agreements need to be verified by the competition authority before civil courts can decide upon the civil law sanctions applying to the contract (nullity, etc). I know that the Spanish jurisprudence I referred to should be considered as contradicting the European Court of Justice's decision in the BRT v Sabam case,3 according to which Articles 81 (1) and Article 82 have direct effect. Case 127/73 BRTv Sabam [1974] ECR 51.

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However, I wanted to underline that the same condition was first applied to national competition rules, which is very important in my opinion: it shows that both national and Community competition rules were treated in the same way. At any rate, the Spanish experience demonstrates the difficulties that ordinary courts have in dealing with the complex economic analysis involved in the application of Articles 81 (1) and 82, let alone 81 (3). So, I will conclude by sharing Judge Edward's words: do not underestimate the problems of enforcement in national courts, or in the Spanish courts at least.

• ANNE SPIRITUS-DASSESSE—I would like to comment on three particular issues: the specialisation of courts, the way in which decisions are taken by the Commission as compared to the way in which they are taken by national courts, and preliminary rulings. On specialisation: if we were to opt for specialised courts, then 'specialisation' should be understood in a broader sense, namely as 'courts with a specialisation in business cases'. The parties come before the court only if they have a personal interest. This means that competition law issues arise in court in two types of cases. One is where the parties ask the court to validate their agreement; this is where the issue of applying Article 81 (1), and eventually 81 (3), arises directly. The other type of case is where the parties come before the court for other business matters (patents, trade marks, distribution agreements, parallel imports) and the question of the validity of the agreement arises in the context of this litigation. In practice, this second type of case is the most frequent. It is in this perspective that we should look at the application of Article 81 (3) by national courts. It would be very difficult to reserve the application of this provision to specialised courts because national judges have the competence to decide upon an agreement infringing Article 81 (1), and the question of whether the agreement qualifies for an exemption under 81 (3) or not would implicitly arise in some of the cases before them. There is a beautiful example in this sense in the Belgian jurisdiction: when the state is the defendant of a case, it cannot be considered as a business entity according to Belgian law. This means that the Belgian Commercial Courts have no jurisdiction over commercial cases in which the state is the defendant. For example, the famous cases concerning the legality under the provisions of the EC Treaty of the double control of the sanitary control of the quality of meat—i.e. control in the Member State of origin and in the Member State of destination—where the Belgian state was the defendant had to go to before an ordinary court, whereas cases where the state is the plaintiff and a firm is the defendant go before the Commercial Court. Therefore, I think—and here I am in agreement with Laurence Idot—that it is very difficult to limit the interpretation and application of EC competition rules to specialised competition courts. This would imply that, in practice, civil courts would very often have to refer the EC competition law questions arising in the cases before them to specialised courts. Yet in cases concerning patents,

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trademarks, or sale agreements—to give just a few examples—time is very often of the essence. The parties need a quick decision. The courts have to deliver it, and cannot just deny their jurisdiction over the case. As we say, in such cases we have to decide fast, and cannot ask a specialised competition court: 'please, tell us if 81 (1) or 81 (3) apply, and only then we decide about the patent, trade mark, or any other issue that is the main subject of the litigation'. This is also the reason why I disagree with what Barry Hawk said yesterday, in the sense that the application of Articles 81 and 82 EC Treaty is about competition only. For a judge, competition rules are just a part of the Treaty. In order to achieve the purposes of EC competition rules, sometimes judges also need to apply the old Article 5 of the Treaty, or combine Article 81 with the provisions on states aids, and so on. This brings me to the issue of forum shopping. I believe that forum shopping cannot be avoided. As we all know, in competition cases the substance may be decided on the basis of the EC rules, but the effects of prohibiting decisions are determined under the national law, and with respect to the latter there are big differences among the Member States. For example, an English judge can award substantial damages, whereas a Belgian judge can award only very small ones. So, even if rules on jurisdiction would send the parties before a Belgian court to settle the substance of the case, the parties can always decide afterwards to sue for damages in another Member State, where the law is more generous on this aspect. The decisions of the European Court of Justice always refer to national law in so far as the effects of decisions and the procedural aspects of their implementation are concerned. I think we should not exaggerate the dangers of forum shopping because there are positive as well as negative aspects to it. Besides, the parties must consider a variety of aspects before deciding which forum is finally more advantageous, so that in the end it is not at all so clear whether they will derive such a big advantage from choosing among jurisdictions. As to the different ways of reaching a decision within the administration and within the judiciary: Judge Edward has pointed this out—and I think he is right.—the courts base their decisions only on the evidence put before them by the lawyers. In Belgium, at least, the courts can also ask third parties to provide evidence if there are reasons to believe such evidence exists, or can ask the third parties to stand before the court as witnesses, or call expert witnesses. It is in the nature of court proceedings that the parties are in contradiction, so that they are bound to bring forward plenty of evidence to support their claims. Moreover, the parties will always bring new evidence to contradict that previously presented, so that the court finally needs to undertake a lengthy and complex analysis of the facts presented. My last considerations are about requests for preliminary rulings. At present, such rulings can be requested to the ECJ. It would be the most clamorous mistake to deprive the national courts of first instance, as well as the national courts of appeal, from the possibility to request such preliminary rulings, as some would want to do. If you look at the jurisprudence of the European Court

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of Justice, the most complex and interesting legal questions were raised before the national courts of first instance. In addition, as I mentioned before, national courts are often confronted with crisis situations and they cannot delay reaching a decision. This also means that, as national courts cannot always wait for their national supreme court to make a request for a preliminary ruling to the European Court of Justice, the decisions taken in such circumstance might sometimes be wrong. In such cases a definitive damage is done, even if afterwards the European Court of Justice comes to a different conclusion on the case. Bankruptcy cases are the best illustration in this sense: such cases are timesensitive, and although an erroneous bankruptcy decision can be overturned on appeal, the reversal on appeal of the erroneous bankruptcy decision cannot restore the position of the company that was declared bankrupt. The benefits of the possibilities of appeal are purely academic, because an erroneous bankruptcy decision causes an irreparable damage: a firm never survives after having been declared bankrupt. • CLAUS-DIETER EHLERMANN—I will pass the floor now to Judge Sarah Vance. We are very privileged and grateful to her and Judge Diane Wood for being here to share with us their US experiences and impressions about this European debate. If somebody can bring forth a considered judgment about our European idiosyncrasies when it comes to antitrust enforcement, it should be the American judges. • SARAH S. VANCE—I will confine my remarks to my views on the ability of the national judges to apply Article 81 (3), and to what I think is necessary for them to do this effectively. Some of my remarks will be based on what I would want to know if I were a national judge in Europe called upon to apply Article 81 (3). You must know, however, that my perspective is colored by the US traditions of a strong and independent federal judiciary. In the United States, federal judges serve life tenures. They also are generalists, meaning that they hear any kind of case, from competition cases to intellectual property cases, criminal cases or interstate traffic accidents, as long as people from different States and enough money are involved. So, it should not surprise anyone that I think that national judges are quite capable of deciding on competition issues and of applying Article 81 (3). It has been pointed out by a number of speakers here that national judges already apply EC law in other areas, that they apply Article 82, and are experienced in balancing divergent interests, so they should be reasonably capable of performing the economic analysis involved in the application of Article 81 (3). Having said this, I think that several factors are necessary in order to assist the national courts in applying EC competition rules effectively. First of all, education and training on the fundamentals of EC competition law should be made available to national judges, particularly if there are some judiciaries that are less sophisticated than others on competition issues. In the US, the Federal

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Judicial Centre provides federal judges with educational seminars by prominent academics, and there are numerous Bar associations offering training programmes and materials for continuing this legal education. I think that, if the Commission invested some resources in the training and education of national judges, it would be time and money well spent. Judges also need immediate access to Commission decisions and decisions by the courts of other Member States based on Article 81 (3). In the US, we have instantaneous Internet access to the decisions of State courts, federal courts, and the US Supreme Court, and this is very beneficial in keeping us up to date on the law. In addition, if national courts are expected to make use of economic analysis, they must have access to the expertise of economists. There are a number of ways to accomplish this, from appointing experts to sit with judges, to enforcement agencies offering their input. In the US we usually rely on the parties to hire their own experts, but we are authorised—under the Federal Rules of Evidence—to appoint our own experts if we feel that the testimony of the experts brought by the parties is partisan and not helpful. The cost of the independent expert can be assessed to the parties. The expert will make his opinion known to the parties in advance of the trial, and he will be subject to crossexamination by the parties. Judge Kimba Wood, for example, who used to be an antitrust lawyer, has appointed an economic expert in New York v Kraft General Foods,4 and relied very heavily on his testimony. Moreover, for national courts to apply Article 81 (3) in a coherent fashion, they have to be able to answer a series of questions in a reasonably predictable way. First of all, the judge has to know if the case belongs in his/her court, or whether it should be somewhere else. If the rules on allocation of cases are not clear, then they ought to be clarified. In the US, we have provisions according to which the judges can transfer a case to a more appropriate forum, or can consolidate related cases in the same forum. These types of instruments facilitate co-operation among judges, and make the delivery of justice more efficient. Second, judges must also be able to determine the law that applies. In this regard, the issue of the primacy of EC law must be clearly established, and judges must know if they are bound by Commission decisions. In the US, if the government obtains a civil or a criminal judgment against a defendant to the effect that he/she has violated the anti-trust laws, this judgment is primafaciae evidence of a violation in any other court proceedings between that defendant and third parties. Third, the court has to know who has to prove what in order to prevail under Article 81 (3). Here, either the Commission or the Luxembourg Courts should clarify the approach under Article 81 (3): how much of the competition analysis is done under paragraph 1, and how much is done under paragraph 3? Who has the burden of proof? What is the test for market definition and market power? What factors are relevant to assess pro-competitive and anticompetitive effects? Are only competition issues relevant under Article 81 (3)? 4

New York v Kraft General Foods, Inc., et al., 926 F. Supp. 321 (S.D.N. Y 1995).

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My reading of Article 81 (3) is that it is a competition provision and not an allpurpose catch-all that will consider any policy matter that may strike the judge's fancy. Of course, if there are other statutes, other laws that are relevant—as Judge Wood pointed out yesterday—that should be taken into account, but Article 81 (3) sounds to me like an anti-trust provision, and it should be applied as such. Fourth, the court has to know what remedy to award to the prevailing party. In the US, federal courts impose the same set of remedies for antitrust violations. I suggest that harmonisation of remedies in the national courts would lend coherence to EC competition enforcement and minimise forum shopping. My experience in the US is that, in competition cases, a judge will rarely have a precedent that is on all fours with the case in question ready to pull out of a hat. Competition cases are, indeed, fact-intensive. Yet if judges know the general approach to use and they look at the right factors, this means that a certain level of consistency has already been ensured, even if reasonable minds may differ on the result. Finally, involving national courts in the application of Article 81 (3) will undoubtedly produce some inconsistent and some wrong decisions. I do not think this should be unnecessarily troubling as long as there is an effective mechanism for the Community interest to be asserted and established. In this regard, in my experience as a US trial judge, it is an enormous self-discipline to know that I can be reversed on appeal. Yet in Europe there is no possibility of appeal from a national court to Community courts. If there is concern about parochialism in national courts, an option would be to enable the Commission to appeal national court decisions to the Community Courts. If that is not possible, I think that the preliminary ruling mechanism needs to be strengthened, so that it can be faster and more responsive to the national courts. Here I agree that lower national courts should be able to ask for preliminary rulings, because it is there that the questions arise in the first place.

• DIANE P. WOOD—Before all, I should say that I was impressed when listening this morning to the other judges around the table by our common understanding about what it means to be a judge and what it means to entrust certain enforcement tasks to the judiciary. I will quickly review the arguments in my paper, and, if time permits, I will also make a couple of other observations. The first aspect I discussed in my paper refers to ascertaining what the law is. Here, as a number of the participants around this table already pointed out, there are a number of sources to be considered: there are, of course, the Commission's decisions, and there are the decisions of the two European Courts. I think that the weight given to the Commission's official pronouncements will increase if the Commission continues to exert jurisdiction over the more important competition cases, or those cases that seem to need its attention. I mentioned in my paper the Chevron doctrine in the US, according to which, in essence, the judges should give the benefit of the doubt to the antitrust

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agency instead of approaching a question from a fresh perspective, as long as the agency has stayed within the outer boundaries of its discretion. It seems to me that this doctrine is similar to your suggestion that the Commission should continue to have a leadership role in the enforcement of EC competition law. It is not that there are no outer limits to such a role and, as we all know, the Commission has sometimes stepped beyond those limits, but this usually does not happen. And if there are reasons why the Commission has interpreted the Treaty competition provisions in a certain way, those reasons should normally be respected by the courts. A short remark about balancing tests: if you want to see a line of decisions vigorously criticising balancing tests, I recommend those of my colleague at the United States Court of Appeals for the Seventh Circuit Frank Easterbrook, who might be known to some of you from his antitrust writings. I actually share many of Frank's views about this, because there are two kinds of balancing tests. One kind are those saying: 'Here are x factors, think about them all and come up with a result.' With such tests it is hard to predict the outcome of a case, because the factors can be balanced in several different ways. Such balancing tests are difficult for judges to apply, and they do not bring about much predictability in enforcement for the parties and the public as a whole. The other kind are the so-called 'weighted balancing tests', where the judge is not just given five random factors, but is also told that, when these factors are in conflict, number one is more important than number two, and number two is more important than number three, for example. I strongly recommend adoption of the second kind of balancing test with respect to rule of reason cases. While the rule of reason might itself be the ultimate balancing test in antitrust, in the US (or at least at the United States Court of Appeals for the Seventh Circuit) we made it clear that market power is a prerequisite for worrying about any rule of reason case, since those are in fact the cases where you are looking for market effects. I think this has brought a great deal more definition into what we are doing. Let me move now to the issue of co-ordination among national courts. There are so many possible ways to help the national courts communicate among each other and with the various European institutions about the content of the law they are about to apply, that I do not think we need to review them all, so let me just make on or two remarks on this aspect. In the US, the federal antitrust authorities have the right to intervene during the court proceedings, with party status, whenever the cases pending before the court are considered to raise public interest issues. As I mentioned in my paper, federal statutes require that the Attorney General be notified whenever a matter pending before the court could involve the interests of the United States. In reality, this procedure is not much used in antitrust cases, yet another procedure is much more used, and this is the following. At the time when I was working at the Antitrust Division of the Department of Justice, one of my responsibilities—aside from the international work—was to handle the appellate work of the Division. This included a variety of issues,

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from criminal appeals on sentencing guidelines to the modified final judgment in the AT&T case, to give just some examples. As Appellate Deputy I had to hear parties trying to persuade the Antitrust Division to file an amicus brief in an antitrust case pending before a federal court which appeared to raise matters involving our antitrust enforcement policy in general. Such parties came to us quite often, and sometimes I would be persuaded that the case was important. Then I would go to the Solicitor General and try to obtain his permission to file an amicus brief, and sometimes I got it. This was a way to allow people to come in and talk to us, the federal authority. Sometimes we would inform the federal court that we did not want to have the status of a party in the case—you might not always want to jump into the deep end of the pool—but simply wanted to inform the court of the government's interest in the case. We could do that, or we could do something more involving a greater time and energy commitment on behalf of the federal antitrust authorities. On the subject of coherence, a couple of issues were raised during our discussion here. One of them refers to the effects of the decisions taken by the national courts in other Member States and in Brussels. On this issue, I think that courts decide cases between two parties, and if a case involving competition issues was decided between parties A and B, it seems to me that this should be the end of the matter between A and B, even if A and B move from one jurisdiction to another, unless there is some profound legitimacy problem with the original decision. Assuming there is nothing fundamentally wrong with the original decision, that should be the end of it. The decision might be right or it may be wrong but, at least in the US system, the principles of finality are very important, and sometimes they override the objectives of getting it right. The last point I wanted to make is about arbitration. Here I think we have to keep in mind two important points. One is that arbitration works fine if you are talking about consensual arrangements, or arrangements that people make in the open: vertical agreements, joint ventures, and agreements in general. I do not think, though, that arbitration makes any sense at all if you are dealing with a cartel case, where people are sneaking around in back rooms doing something that is plainly illegal. What are they going to do, arbitrate the case? Or is a third party going to say,' Hey, we would like an arbitration?' I do not think so. We might want to think about which antitrust cases lend themselves to arbitration. Second, and perhaps much more importantly, is that even if you figured out how to get arbitration into the court system—for instance, an arbitral award might be put before a national court for recognition and enforcement—the scope of review of arbitral awards is still very narrow. In fact if the courts just sat down and re-did the case, this would destroy the arbitration system. Moreover, only the most fundamental arbitration errors—under the New York Convention or other national arbitration laws—can be reviewed in court, and this poses a real problem for competition law enforcement, to the extent that we have a public interest to ensure that this body of law is properly administered.

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• CLAUS-DIETER EHLERMANN—One of the greatest obstacles to any sort of co-operation among the courts of different Member States will be the language barrier. For the same reason, the network of competition authorities is already difficult to achieve. Yet in this respect the judges are clearly even more disfavored, and this goes way beyond competition law enforcement. It is a more general problem. • JAMES VENIT—I will try to be provocative, because I think we have the right mix of participants here to raise these questions. When we discussed the need to reform the EC antitrust enforcement system at the Workshop of four years ago, one of the differences between the EC and the US antitrust enforcement systems that emerged from the discussion and struck me most was that the US system relies to a greater extent on private enforcement and third party actions. So, it occurred to some of us that part of the reform of the Community competition law enforcement system and, in a way, also a form of decentralisation, would be the strengthening of private enforcement. When one looked at the problem, there were certain incentives to private enforcement in the US that did' not exist in Europe. Most notably, these are treble damages, positive discovery rules, maybe class action suits, maybe contingency fees also. I mean, one thing you have in Europe in most jurisdictions is cost, which is another feature of the US system. And then, as one thought further about that, one realised that those measures were needed to provide an incentive for third party enforcement action. How would you go about adopting that? One possibility would be to harmonise national rules through some sort of Community instrument. The one question that I have is: how would national judges react to that? The second possibility would be to create a system of federal courts. There are some attractions to that, particularly to the extent that the European Court of Justice and the Court of First Instance are severely overloaded. Creating an additional judicial body to absorb some of that workload might be attractive. So, I guess the question is whether strengthening private enforcement would be a desirable thing? If it were, should it be accomplished at the national level, or at federal level? And if it is not, why not? • JAMES RILL—I would like to comment of the issue of specialised courts. Here I draw on my experience shortly after having left Law School, in the early 1960s, when a report by the Administrative Conference proposed the establishment of a specialised Trade Court in the US. Both the Congress and the Bar rejected this proposal, retaining that, first, 'trade is too broad to be specialised', and second, it was feared that specialised Trade Court judges appointed for life could stultify, rather than provide for theflexibilityneeded in antitrust deliberations. This kind of skepticism with respect to specialised courts persists to our day. It would be interesting to learn the views of Judge Vance or Judge Wood on the efficiency of the federal circuit, which seems to be quite specialised in

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handling patent and some other intellectual property disputes, and which one finds cannot be 'vacuum-packed' so as to not have spill-over effects into antitrust. I think that judges dealing with antitrust matters should have experience with a broader range of judicial matters, especially in the field of commercial and contract law. Antitrust cannot be 'vacuum-packed'; this area of law enforcement is influenced by the reality of the time, and I think that trying to 'vacuum-pack' judges into trade law with no experience in other commercial activities is a mistake. At least that is what the US experience suggests. At the same time, I think the suggestion that the Commission should be able to intervene in national court proceedings as amicus curiae is good. As indicated by Judge Wood, in the US the experience with filing amicus briefs has proved very helpful. I should mention that the amicus brief instrument can be very important: the US government expressed through it its position on predatory pricing in the Cargill case, and on summary judgment in the Matsushita case, for example. I think these briefs were quite influential on the Supreme Court, as was the government's position both in the Court of Appeals and in the Supreme Court on the Insurance Antitrust Litigation case, both as to the insurance exemption and as to extra-territorial jurisdiction. I think amicus briefs are not so labor intensive as to drain resources from the Commission, and the influence that the Commission might have within the deliberation in national courts seems to me to be potentially salutary. • GIULIANO MARENCO—I would like to deal telegraphically with several points. The first relates to the broad interpretation given to Article 81 (1), an aspect that has been commented on by several participants. I would like to say that, in my view, in this regard the present system is perverse in several ways. Above all, the civil servant who must look at thousands of pages of contracts in order to decide whether an agreement can be exempted or not will be frustrated if at the end of this examination he does not find a restrictive clause so that he could oblige the undertakings to modify it. Yet even more perverse is the effect on the undertakings, which prefer to ask for a negative clearance, rather than an exemption. They would claim their agreement restricts competition, so that it be considered as falling under the scope of Article 81(1) and benefit from an exemption under Article 81 (3). Finally, I cannot help thinking that even the European Court of Justice, in realizing the awkwardness of the enforcement system under Regulation 17/62, has in a way broadened the scope of Article 81 (1), in the sense of including some of Article 81 (3) into Article 81 (1) in order to make things work better in real life. My second point relates to the temporary nature of exemptions under Article 81 (3). If I understood well, Judge Groning said that the content of Article 81 (3) intrinsically points to the temporary nature of the exemptions. I do not see that in Article 81 (3), but I see it in the new enforcement system proposed by the White Paper. Under the new system there will be no indefinite exemptions at all, because all exemption decisions will apply to the past or the

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present. So, there will be nothing more temporary than the application of Article 81 (3). As to the four conditions under which Article 81 (3) applies, I understand— but I would like the American participants around the table to confirm this or not—this provision as intending to codify the American rule of reason. I see nothing beyond competition criteria in Article 81 (3), and if some Commission decisions (like Ford- Volkswagen5) included remarks going beyond competition, one should forgive the Commission for these remarks which were probably out of place. I think one should confess one's own weaknesses. What is important is that the European Court of Justice has established that an agreement needs to comply with the four conditions in Article 81 (3), and only those four conditions, in order to be given an exemption, and that is what counts, nothing else has importance. Judge Cooke has drawn our attention to paragraph 102 in the White paper, saying that the Commission reserves the possibility to prohibit an agreement despite the fact that the agreement has already been cleared by a national court. I think it is difficult to discuss this in the abstract, let me give an example: a firm sues another before a national judge for the non-execution of a contract. The defendant claims that the agreement is void and inapplicable because it is contrary to Article 81. The judge arrives at the conclusion that the agreement is all right, and pronounces against the party that has not executed it. Does this prevent the Commission, at a subsequent time, from issuing an order against the parties because the agreement is contrary to Article 81? As much as I understand and share the concerns voiced around this table in the sense that the Commission should not attempt to bind the national judges because there is a principle of separation of powers, at the same time I think that, if we give concurrent jurisdiction to administrative authorities and courts, then the administrative authority should also be free to decide. This is not against the court's pronouncement, because if you look at the operative part of what the judge has said and the operative part of the Commission's decision, there is no conflict between them. Another point: it has been said that the allocation of cases between the Commission and the national competition authorities should follow very clear criteria. Here I would have one question: are clear criteria for the allocation of cases a necessity for the undertakings, or for the national competition authorities? In my understanding, only the national competition authorities have an interest in clear allocation criteria, since I do not think that the undertakings have to know in advance which administration will treat their problem under the Community competition rules. A final point: I notice with sadness (or I have the impression) that the European Court of Justice would like to get rid of competition cases, and to leave only the Court of First Instance to deal with them in so far as preliminary 5

Ford-Volkswagen, Commission Decision 93/49/EEC of 23.12.1992, OJ L 20/14 1993.

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rulings are concerned. If I am wrong, I would be happy. Though I would like to remind you that in the US, where antitrust rules are not of a constitutional nature but were adopted at the legislative level, the Supreme Court deals with antitrust cases every year, and it does not miss an occasion to say that the Sherman Act is the economic constitutional chart of the US, thus giving antitrust law a prominent position within the legal system. •

CLAUS-DIETER EHLERMANN—What is within Article 81 (3)? One of the

greatest contributions that the Commission could make to the debate on this aspect is to spell out its position on the interpretation of 81 (3). I think this should be done by the Commission, not by DG COMP, and not by the European Court of Justice—which in the end will decide—because what you just said about the Ford- Volkswagen decision is of the utmost importance. • FREDERIC JENNY—I heard Judge Vance saying before 'To me, it looks like Article 81 (3) is part of normal competition law, it is about efficiency.' I asked some of the practitioners around this table how many Commission decisions they thought might have been different if Article 81 (3) were strictly about efficiency analysis. Some answered 'Not many, really.' Others said 'Well, maybe the Commission would have opened some more cases, but it did not do so because of those 'other policy goals' hidden in Article 81 (3).' To me it seems that Article 81 (3) could, at least in part, be read as pointing towards the straight efficiency analysis one would expect in competition law enforcement. If this is right, then Article 81 (3) is not too far from Article 10 of the French competition law. In fact, Articles 7 and 10 of the French competition law are basically the equivalent of Article 81 (1) and (3) under the EC Treaty, and these provisions are enforced by the Conseil de la Concurrence as well as by courts. And in France no one has ever argued that judges, who know 'nothing' about economics, have considerably erred in applying Articles 7 and 10.1 was very interested by what Judge Spiritus-Dassesse said about specialised courts, because, by contrast, I believe that court specialisation, or the concentration of cases in the hands of a reduced number of judges, is a useful thing. Judge Spiritus-Dassesse said that specialisation is hard to work with at the first instance level, because competition law issues arise in all kinds of different contexts. I recognise that. I just wanted to mention that the Court of Appeal of Paris, which handles appeals against the decisions of the Conseil de la Concurrence but also regular appeals against decisions by lower courts in the Paris area, decided to concentrate the competition cases in the hands of about ten of its judges—although there is no legal provision requiring for such specialisation—and in practice this has proved to be a helpful step. The judges acquired a better understanding of the economic issues, and the relationship between the Conseil de la Concurrence and the Court of Appeal has improved. So, I would strongly recommend the establishment of specialised courts, at least at the appellate level. Or, if this cannot be done, I would recommend finding a

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way to concentrate competition cases in the hands of few judges in the civil courts, so that a competition culture and economic understanding of competition issues can develop. In so far as the courts offirstinstance are concerned, the French law provides for the possibility of referring cases involving competition law issues to the Conseil de la Concurrence for an opinion. This referral system has two advantages. One of these derives from the fact that civil judges might not always know what factual evidence is really relevant for the economic analysis required in competition cases. In such instances, the judge can request an expert opinion from the Conseil de la Concurrence, which has investigative power and understands the issue. The judge can then decide how to use this expert opinion, in other words, he can decide whether to follow or not the opinion given by the competition agency. The second advantage is, of course, one for the parties. Namely, the parties can petition the court to send their case to the Conseil de la Concurrence for an opinion, asking the Conseil to use its investigative means to establish the facts in full, or to find evidence on a particular aspect of the case. This referral system, however, is not without flaws, since it is up to the courts to decide whether to request the opinion of the Conseil or not. An alternative would be to oblige the courts receiving a petition in this sense from a party to send the case to the Conseil for an opinion, although in the end the courts would still have the possibility to decide whether to take into account the expert agency's opinion or not. In any case, so far quite a number of references of the kind were made to the Conseil, and I think the system has proved rather efficient in so far as both the relationship between the judges and the national competition authority and the role played by the latter in enforcement are concerned. And I think that this experience is not too far from the Spanish one, which is different procedurally, but quite interesting as well. I believe that this is something to consider in terms of modalities to facilitate the work of the judges in the new enforcement system. • ULRICH IMMENGA—I would like first to follow up on the issue of court specialisation, which, as far as I can derive from this debate, is quite controversial. We also have some experience with specialised courts in Germany, and I think this experience has been positive. Just to clarify one point: in Germany there are about twelve or fifteen courts specialised in competition cases at the first instance level. Therefore, if competition issues arise in a case before a first instance civil court, the case will be referred to a specialised court and will be dealt with there. More precisely, the court does not simply refer to the specialised court the competition question while preserving the case, and this reference system has no dilatory effect with respect to the delivery of the decision. As a second point, I just wanted to emphasise an issue that was pointed out by the judges around this table: in Germany, and as far as I understand, in other jurisdictions as well, procedural rules applying to court proceedings oblige the

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judges to decide on the basis of the facts and arguments brought up by the parties, and that means by their lawyers. Third, I think it is necessary to introduce some of Professor Mestmacker's considerations proposals concerning the burden of proof and the legal consequences of the application of Article 81 as a whole in private courts. I quote: 'The Commission expects Article 81 to be applied as a whole in three kinds of proceedings: contractual liability proceedings (disputes between parties to an agreement), non-contractual liability proceedings (disputes between a third party and one or more parties to an agreement), and applications for injunctions (White Paper para. 99).' And then: 'In dealing with private enforcement, the narrow limits of Community law must be observed. The only Community law sanction is Article 81 (2), providing for invalidation of restrictive agreements, All other sanctions and remedies are a matter of civil law of the Member States. There are nevertheless important indirect effects of Article 81 (2) onto tort and unfair competition law. For private enforcement to be effective there is obviously a trade-off between legal certainty of the parties to an agreement and effective protection of legitimate third party interests. The Commission appears to be more concerned with creating legal certainty for parties to an agreement than with the protection of potential victims. The implications of the initial tolerance for all restrictive agreements and the absence of a presumption that Article 81 (3) does not apply are among the most important reasons why private enforcement is bound to be ineffective.'

I find the last point very important, since such 'initial tolerance' would have implications in so far as the primacy of Community law over national law is concerned. The 'globally satisfactory legal certainty' proposed by the White Paper applies to the parties to the agreement only, yet it has important indirect effects for the stability of the agreement and its defense against third parties. The Commission's reform proposal implies that the issue of the validity of an agreement will become relevant in all tort and unfair competition cases, since, according to the Commission, there will be no presumption under Community law in the sense that restrictive agreements are null and void. This also implies that, in all such instances, the general rules of evidence apply. In this respect, the position of German courts is representative: where the validity of an agreement is challenged, the plaintiff bears the burden of proving the facts establishing the invalidity of the agreement. The German courts refuse to modify this rule of evidence even if an EC Regulation or the case law of the European Court of Justice requires it. Yet in competition cases it is difficult for the plaintiff to obtain and prove the facts relevant to the application of Article 81 (3). In cartel cases, for instance, the plaintiff would have to prove facts that by their very nature are known to the cartel members only. To sum up, the Commission's confidence in the enforcement of Community competition rules in national court proceedings stands in striking contrast with its neglect of the conditions determining the effectiveness of this remedy. It is

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also at odds with the key role played by individual rights in the enforcement of directly applicable Treaty provisions, and it is hardly compatible with the Commission's own position with respect to the direct applicability of Article 81 as a whole. • JOCHEM GRONING—I would like to reply to Giuliano Marenco: I am well aware that it is not written down in Article 81 (3) that exemptions are limited in time. For me there is a simple reason for assuming that: temporary limits are in the very nature of exemptions. If a contract infringes Article 81 (1) and it is given an exemption under Article 81 (3), this exemption cannot be but temporary, because one does not know how competition or the conditions of the market will develop over time. I think that the Commission knows this, and this is why it is trying to change the paradigm completely. I admire this, it is mentally so radical, and usually we are not so radical in our daily legal practice. I just entertain some doubts as to whether it is to the benefit of competition or to the benefit of the parties to obtain judgments that are good only for the past and the present. The litigants prefer to have judgments covering the future, and this is what they had so far with the system of Commission exemptions. I think that the concept of exemptions is workable, and could in the future be applied by the national competition authorities. Nevertheless, as I already mentioned several times, I do not think the concept of exemptions really fits with the procedural principles of civil litigation. • DAN GOYDER—In the UK an important step has already been taken towards the integration of public and private enforcement in such a way as to help judges. For the first time, under Section 58 of the [1998] Competition Act, the findings of fact by the Office of Fair Trading are binding on courts, and that includes third party actions for damages. That, of course, is subject to one qualification, namely that the findings of fact of the OFT are not overturned on appeal by the Competition Commission. This is an important first step, which of course does not provide all the necessary answers, but at least it does give the judges some important help. • ELEANOR FOX—I wanted to say something about the issue of 'private rights versus the public interest'. Diane Wood and James Rill also referred to this before. I wanted to add something about laying the foundation right: when law provisions have direct effect, this creates rights for the individuals in terms of enforcement, which is often confounded with the idea that the individual obtains a right on its own. The new enforcement system will place more emphasis on complaints, and we all know that complaints are very often made by competitors who do not like competition. And so, it is very important to recognise that private rights might sometimes conflict with the public interest in competition cases, that competitors might sometimes be complaining about

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competition itself, and that if effect is given to the individual rights without thinking further about whether those rights do or do not correspond with the interests of consumers, distorted case law might develop. In the Community jurisprudence, a violation of Article 28 EC Treaty (the old Article 30) whereby private individuals are deprived of their right to sell their goods across the border corresponds with the public interest, in this instance the free movement of goods. Yet when an individual sues because a competitor has an exclusive contract, this might conflict with the public interest. I think it is very important to recognise that in competition cases it is often very difficult to distinguish between private and public interests, and therefore the courts should not just assume that because a private party sues, public interest is at stake. • JOHN COOKE—Giuliano Marenco gave us before a concrete example in the application of the hypothesis at paragraph. 102 of the White Paper, and then addressed a question to me. I should try to answer his question, because if the position of the Commission is as outlined by Giuliano Marenco, then we may have a potentially serious constitutional problem. Take the following example: company A and company B concluded afive-yearcontract. At the end of the first year, company B refuses to perform. Company A sues for a court declaration that company B is obliged to perform, as well as for damages for the nonperformance. Company B defends itself arguing that the contract is in violation of Article 81, and therefore is void. Company A replies: 'If that is the case, which I deny, then the contract is 'saved' by Article 81 (3).' In the scheme of the White Paper, in such a case either the national competition authority (in my scenario) or the Commission (in the White Paper's scenario) would be notified of the existence of that litigation and given the opportunity to either submit observations or intervene. Whether the Commission declines that invitation, or whether it intervenes and its arguments are rejected by the court, it seems to me that the Commission should at any rate be bound by the court's decision. If the contract is upheld by the court and damages are awarded on the grounds that 81 (3) applies, then it seems to me that if the Commission could nevertheless later issue a 'cease and desist' order with respect to the performance of the contract the rights of both parties will have been damaged in a way that is inimical to the rule of law. Namely, the plaintiff is deprived of the performance of the contract, to which he was entitled for the balance of the five years, and the defendant has paid damages that he never would have had to pay. That, in my view, is the scenario envisaged in the White Paper, and this scenario raises important constitutional problems. • DAVID EDWARD—In relation to a question addressed to me earlier on by Emil Paulis: it is very important to distinguish, for judicial purposes, between Commission acts that have legal effect, and Commission soft law pronouncements that, as far as courts are concerned, may influence the approach in the application of the law, but cannot be binding. Moreover, according to the

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Treaty, even Commission decisions are binding only on those to whom they are addressed. Therefore, an individual Commission decision, however significant it may be, does not bind a court in another issue. In addition, we should make a distinction between concurrent jurisdiction, which is what Giuliano Marenco was talking about, and the notion of administrative reversal of a judicial decision, which is what John Cooke was talking about. Please, bear in mind that, according to Article 81 (2)—a provision that we have mentioned here very little—an agreement or a practice that infringes Article 81 (1) is void—in French nulet non avenu—as if it never existed. Now, if a court decides that an agreement is valid, and the Commission takes later an administrative decision in the sense that the agreement it is not compatible with Article 81 (1), what is then the significance of Article 81 (2)? Has the agreement become nul et non avenu, or what has happened to it? The Commission must be clear on this. All I ask of you is to bear the distinction in mind and be clear about what your answer is. Second, on the issue of forum shopping: I entirely agree with Judge SpiritusDassesse, we will never be able to avoid forum shopping. Yet forum shopping is only one aspect of the conflict of laws, and there are other aspects to be considered too. One is competence or jurisdiction of the Court, and that is what affects forum shopping and, broadly speaking, is already dealt with by the Brussels Convention. But a second case of conflict of law is when two courts are competent, but one has to give priority to another. The Brussels Convention deals with that simply where you have the same issues between the same parties, and the Court has said in the recent Drouot case6 that 'same parties' means same parties, and not parties with a like interest. My illustration here is that of a standard contract entered into by a manufacturer with a number of suppliers. It is clear that the contract between A and B is not the same as the contract between A and C: it may have the same subject, but it is not between the same parties. You have to consider whether you need new rules, not on jurisdiction, but on Us alibi pendens—or on suspending or yielding the case to another court already seized with the same question, and then distinguish between conflicts of competence, and conflicts with respect to the effects of court decisions. For instance, what are the effects of one court's judgment with respect to the judgment of another court? This issue is completely different from the one of conflicts of jurisdiction. It goes back to the question of what is the effect of a Commission decision, which according to the Treaty is only binding between the parties. Is the decision of the Spanish Court on a dispute between the manufacturer and the distributor in Spain binding on a dispute in France between the manufacturer and the distributor in France? And to what extent is the decision of any of these Courts binding on the Commission? These are legal questions to consider. Last point: Giuliano Marenco said he has the impression that the European Court of Justice would like to transfer jurisdiction and competition cases to the 6

Case C-351/96 Drouot [1998] ECR 1-3075.

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Court of First Instance. The European Court of Justice has no position on that, and certainly my personal position is that it is up to the political institutions of the Community to decide who shall do what. But please make the rules of allocation of competence clear, and do not create conflicts of competence. We already have difficulties of the kind in state aid cases. When challenged by a company, a Commission decision on state aid goes to the Court of First Instance, whereas when challenged by a Member State the same Commission decision comes to the European Court of Justice. Please do not add to the length of time taken to deal with cases a conflict of jurisdiction between the European Court of Justice and the Court of First Instance or some other specialised court. Finally, Dan Goyder said that two years is too long to wait for an ECJ decision. Let me give you a precise example in this sense. Last week, as Rapporteur, I agreed in the Fifth Chamber on two judgments, and in the plenary three more. I have four other drafts with the lecteurs d'arrets. I have already signed off ten judgments this year. Of the five judgments agreed last week, three will be pronounced on the 4th of July, and two on the 14th of September, and that is because we do not have enough translators. That is, four months of delay simply because there are not enough translators. Now, you can transfer everything you like to the Court of First Instance, but unless you have the resources to make the system work, you will not get the results in the time you want. • JOCHEN BURRICHTER—I wanted to get back to the risk of forum shopping. I think that the danger of forum shopping is exaggerated. Let us take the case of a dispute about the validity of an agreement. Normally commercial agreements provide for a clear forum clause, so that there is no choice for the parties to go to different courts. In other cases the agreements contain an arbitration clause, so that again, there is no problem of forum shopping. And even if there is no express clause about the competent forum, the rules normally say—though I admit I have not done a thorough comparative study—that the competent forum is either at the place of performance of the contract or at the seat of the defendant. In this latter case, admittedly, there may be a slight possibility of forum shopping. In cases where third parties claim damages, for example, the general rules of tort indicate that the competent forum is at the place where the harm has been done or where the defendant has acted, so we have only two possibilities. Overall, I think that there are very limited, well defined cases, where forum shopping is possible, so that the risk should not be exaggerated. I would next return to the issue of court specialisation, and add a few remarks to what Professor Immenga has already said. Until January 1999, Germany had a system of distribution of court competencies whereby, if in the course of the court procedures, a competition law issue was detected, the court had to stay the proceedings and refer the competition law question to a specialised court. This reference system had exactly the dilatory effects that

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some of you described. However, it has been abolished, and now Germany has a system whereby the specialised courts are seized with jurisdiction even if the competition issue arises on the background of another kind of litigation. Of course, objections based on competition law provisions might still arise in the course of proceedings before a civil court. In such cases there might in fact be a delay of the process. I must admit that lawyers might sometimes make use of the possibility of delaying the trial, or might submit competition-related arguments just to bypass the court dealing with the case. Yet these are exceptional cases, and this is not an argument against the establishment of specialised courts. Third, I would like to return to the issue of whether national procedural rules should or should not be harmonised. Yet we all know that the harmonisation of procedural rules will take years, maybe decades. I think, however, that if the 'disharmony' of procedural rules were to disadvantage the business community in one European jurisdiction as compared to another, then the business community itself will probably ask for the improvement of the rules. This means that a sort of competition between procedural systems might even help at an initial stage. • JACQUES BOURGEOIS—First of all, I would like to make a comment about the famous paragraph 102 in the White Paper, clarified by Giuliano Marenco and challenged by John Cooke. I was wondering what the purpose of this particular remedy was: is it to redress erroneous decisions by the national courts and avoid that they become legal precedents, or is it really to prevent the parties to an illegal agreement from 'getting away with it'? If the purpose is simply to redress erroneous court decisions, then I think that the decision should remain standing with respect to the parties, and for the rest, a remedy of the recours dans I'interet de la loi type could be used. Second, I would like to refer to the proposals made by Jochen Burrichter and somehow endorsed by Dan Goyder with respect to the Commission assisting parties in private litigation, and in particular assisting them with fact-finding. I have some difficulties with endorsing this proposal. The fact-finding activities of the Commission are performed for a public interest purpose: the Commission investigates the facts in order to issue decisions that are binding on the parties, including sanctions or penalties. Why should the result of such factfinding be put at the disposal of private parties in a private litigation? I would not like to add a detailed comment on what Santiago Martinez Lage said about the lack of incentives for private enforcement in the European jurisdictions when compared to the US system. Considering what Eleanor Fox also said about private rights, I think this is really a subject for the next Workshop. The only point I wanted to make in relation to this issue actually refers to the Chevron doctrine developed in the US and recommended to us by Judge Diane Wood. This doctrine implies that courts should have deference for the interpretation given to the rules by agencies specialised in a particular sector. (I am sim-

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plifying it, I know.) On the occasion of an article written on this issue by John Jackson et al. I contested that this would be appropriate in the EU. European courts are there precisely to review the interpretation given to the rules by the specialised agencies. In other words, European courts are, so to speak, guarantees against experts' arrogance (if I may use that word). I am not speaking about the experts of DG COMP, but about those experts who know everything about a given sector and actually contributed to the coming into being of the rules, and who would claim that they have written the rules, so they know best. This is why I think we should certainly not advocate the Chevron doctrine for Europe. • SIMON BISHOP—Dan Goyder referred in his paper to the Premiere League case and expert economist witnesses baffling the judges. As one of those expert witnesses, I would like to offer an economist's view on making economic presentations before the court. I think that, if we are genuinely moving towards a more economic effect-based approach in enforcement, then the economic experts' submissions will get more and more sophisticated over time. We already saw this happen at the level of Commission decisions. Ten years ago economic arguments were relatively simplistic. Today, econometric evidence is presented at all hearings. Unfortunately, economics involves complex issues: game theory, all these arcane economics terms, and, horror of horrors, numbers, statistics, and econometrics. I know how much lawyers 'love' numbers and statistics, but these are the tools of economic analysis. If you want an economic effects-based approach you have to face up to these kinds of arguments. Certainly, the economists must present this evidence to the court in a clear and concise way. Yet, in some cases, when you have to go so far down into the basics of economics—the only analogy I can find now is with giving expert testimony in German to a non-German speaking judge and having to explain the difference between der, die and das—your evidence will end up by having no weight. So, it seems to me you have really only two choices. One is 'do-nothing', implying that we will have an economic effects-based approach in name only, because decisions would not really be based at all on economic analysis—a better name for this approach in enforcement would be the 'lottery approach'. The other option is, obviously, 'do something about it'. And in this context it is interesting to hear about the US experience with the training of judges on economic issues and the possibility that US judges have to appoint their your own economist experts. Just to be clear: this is not an attack on courts. Some of these issues also apply to the competition authorities themselves, and I think it is laudable that the UK Office of Fair Trading and the Dutch competition authority have actually instituted courses of economic training for their staff—not just for the economists, but for the lawyers as well. The Commission will also set up a training course towards the end of this year.

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Let me end by trying to take a leaf out of Mario Siragusa's book and be controversial by referring to the words of a US judge, which go something like this: 'The lawyer who does not know economics is apt to become an enemy of the people.' • CARL BAUDENBACHER—First, I would like to go back to the arbitration issue. I agree with Judge Wood that no one involved in a hard core cartel would conclude an arbitration clause. Yet, being from Switzerland, which is an important arbitration place by tradition, I can tell you that many important agreements have been concluded at a Swiss venue in order to benefit from the application of the Swiss law and thereby avoid EC competition law, whose standards these agreements clearly violated. However, in 1992 the Swiss Supreme Court ruled that an arbitration tribunal is basically obliged to take into account the competition provisions of the EC Treaty if, according to rules on conflict of laws, EC law applies, and I think that is remarkable. Obviously, Swiss arbitration courts are not able to refer a case to the Luxembourg courts, even if the Luxembourg courts were disposed to accept them. That leads me to the situation of EC-based arbitration tribunals. Here we have the case law of the European Court of Justice in Nordsee,1 which was addressed by David Edward in his paper. He seems to say that it is for the legislator to look for a different situation if the legislator thinks that it would be appropriate. On the same line of argument, Mr Burrichter has said that, in his view, it would be sufficient that the Commission be asked to clarify the situation of arbitration within the new enforcement system. The case law of the European Court of Justice is only case law, so it could be changed. It is not for a judge of the EFTA Court to give advice here, yet from a functional point of view, it fair to say that there is very little difference between a state court and an arbitration tribunal, at least in certain respects. My second point refers to the language problem. Claus Ehlermann has rightly said that co-operation between national judges will be very difficult because of language barriers. I would add it is not only co-operation that will be blocked, but also the courts of different Member States will rarely read each other's judgments. The EFTA Court has its own experience that is relevant on this point: we are the first court in Europe that adopted a lingua franca, namely, in direct actions we only use English, while in preliminary ruling proceedings we use English and the language of the referring court. This system saves a lot of our resources, and it is a modern solution. There is, however, a dark side to it, since we observed that our judgments are read in the English speaking countries mainly. British judges, for instance, tend to take our judgments as persuasive authority, or even as acte clair, whereas judges from other Member States, even if they read English, would just not be willing to take our jurisprudence into account. This is why I consider it would be worthwhile to make an investment in Case 102/81 Nordsee v Reederei Mond [1982] ECR 1095.

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translation computers. We should not try to get rid of the whole translation system before we have explored all the possibilities of modern technology in this field. I can tell you that I was astonished when I paid a visit to a small administrative court in Switzerland, and saw these Dragon translation computers there. I do not know whofinancedthem, but they were there. The judges told me that their use was far from being perfect but the system could be improved. • CLAUS-DIETER EHLERMANN—The issue of arbitration should be thought about as a separate issue, perhaps even considered from a Community legislative point of view, although I do not know whether Article 83 allows to deal with it. Another issue is whether something can be done specifically for the competition field, or whether it is politically wise to do that. However, in the commercial world arbitration is probably as important, if not more important than state jurisdictions. It also happens that arbitrators are well paid and therefore deliver quality judgments, and this could have a positive impact in terms of the interpretation of Articles 81 and 82 • DIANE WOOD—Actually, Claus Ehlermann touched on the point that I wanted to make: we seem to have been discussing two rather different kinds of problems. One set of problems, is directly related to the sphere of competition law, such as: what is Article 81 (1), what is in Article 81 (3), can national courts apply it, etc. Then a number of other issues came up, such as arbitration, forum shopping, the issue of mechanisms to ensure consistency in the interpretation of EU law, which go well beyond the sphere of competition law. For instance, the consistency question raises in my mind the thought that perhaps the system of references for preliminary rulings under Article 234 worked well when there were only six Member States and there was a broader scope for the interpretation of EC law. I do not know whether this would still be the case ten years from now, when the EU will have up to twenty-six Member States and a much more comprehensive law system. Personally, I will watch with interest to see if the time ever arrives when the tensions created by different interpretations of Community law by national courts will lead to the replacement of the preliminary ruling system by a system in which the European Court of Justice will have some form of direct review responsibility over the decisions of national courts. This problem is by no means unique to competition law. As to arbitration, the risk of forum shopping, and so on, one must decide which of these issues needs to be dealt with during this round of reform and which should simply be left for a later stage. One way to put the brakes on the reform is to attempt to solve all the problems of the world in one moment. It seems to me that a number of concerns invoked here are not really about competition law enforcement; they are general problems of the judiciary or of the Community institutions. Finally, a quick reply to Jacques Bourgeois: I can assure you that Chevron deference is not about rubber-stamping, but about deciding where the

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boundaries are. There are agencies and agencies, and you will see that certain agencies—which I will not name—do not get much deference, while others command a lot of respect from the courts, because they understand where the legislative boundaries are, they understand what they are supposed to be doing, and that they are acting in a legal enforcement area where reasonable people can come to different conclusions. • CLAUS-DIETER EHLERMANN—Before I give the floor to Mr Alberto Pera, I would like to mention that he is the Secretary General of the Italian Antitrust Authority, which has proved to be so successful, and a considerable part of the merit for this should go to its Secretary General. • ALBERTO PERA—I wanted to raise a few considerations about the issue of coherence, which was the subject of yesterday afternoon's debate. It seems to me that some of the remarks made today by Judge Edward and Judge Cooke put into question the notion of amicus briefs, which is one of the mechanisms proposed by the White Paper for ensuring consistency in the application of EC competition rules by the national courts of the different Member States. I also think that there are some problems with the practicability of the amicus briefs when dealing with hundreds of national courts, and not with Supreme Courts or appeal courts only. Commission guidelines were the second mechanism proposed by the White Paper for ensuring consistency in enforcement, and here as well some objections were raised from the judiciary. Somebody said that the judges agree on the utility of guidelines, provided the judiciary's autonomy of decision is respected. The third mechanism for ensuring coherence proposed by the White Paper was that of concurrent competencies and the possibility for the Commission to over-rule decisions by the national courts. Basically, three instruments for ensuring coherence in enforcement have been put into question. So, the issue is how then to ensure coherence once the application of EC competition law will be decentralised? It therefore seems to me that ensuring coherence under the new enforcement system would anyway be a problem, even if leaving aside the debate on the split between paragraphs 1 and 3 of Article 81. However, I think that the wording of Article 81 (3) is an important cause of concern from this perspective. First, the application of this provision by the judiciary has not yet been tested. Second, the scope of Article 81 (3) should be defined more precisely. Judges might give different interpretations to this provision: some may consider it as pointing only to pure competition considerations, other may consider it requires taking into account, say, employment or industrial policy considerations. Facing this doubt, some judges might decide to refer to the European Court of Justice for a preliminary ruling. Others instead might not find this necessary. This could be a problem, since in the Community we do not have the same safety mechanisms for ensuring coherence of private enforcement at the 'federal' level as in

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the US. As far as I know, in the US there are State jurisdictions with State Supreme Courts, and then there is also the federal jurisdiction, starting from first instance level, going through the appeal level, and ending with the Supreme Court. There may be differences of opinion between, say, one Circuit Court of Appeal and another, but there is always the Supreme Court to settle the differences. I therefore think that we should either put all the burden of private enforcement on the Community courts, or open the possibility that the decisions of national courts be appealed to the European Court of Justice, at least in certain cases. In conclusion, I would suggest that 'the train of the reform' should be slowed down—as someone suggested yesterday—in order to allow time to think about these problems.

• ANNE SPIRITUS-DASSESSE—I just wanted to add a last comment on the issue of specialised courts. I think that one of the best instruments in the power of the judge in competition law cases is the direct effect of Article 81. The European Court of Justice has taken the potential of this instrument very far in deciding that national judges can even interpret themselves the provisions of Community Directives to establish whether they can be considered to have direct effect. At any rate, in so far as Article 81 (1) is concerned, there is no problem, it has been decided once and for always by the Court that this provision has direct effect. I think that the existence of specialised courts—to which cases involving competition issues should be referred—would reduce the tendency of civil courts to address on their own, the question of whether the agreement which is the subject to the dispute before them is compatible with Article 81 (1). When a judge has a crisis situation before him and has to deal quickly with the case, he would perhaps decide to go on with the case if there is not enough certainty that the agreement is invalid under Article 81 (1). I think, that if we want to take forward the European integration and promote competition on the single market, we should rather emphasise the role of the judge and give him the power to address the legal question on his own In most cases before courts the competition issues arise in defense, and in such cases eight times out of ten it is the judge to raise the Article 81 (1) question on his own. My second point goes back to something that I tried to explain yesterday in relation to Article 81 (2). As Judge Edward said, under the existent notification and prior authorisation system judges can find themselves in a situation whereby they must cancel contracts infringing Article 81 (1) with respect to the past. In other words, judges cannot do anything other than to acknowledge that the contract is invalid under Article 81 (2) for the past. As to the future, the judges can wait for a Commission decision based on Article 81 (3). In an enforcement system such as proposed by the White Paper there will be no more uncertainty in this respect: the issue of the validity of the contract under Article 81 (1) can be put on the table at any time, and it can also be solved at the end by reference to Article 81 (3). I would therefore agree with Judge Groning that

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the new system is more in line with Article 81 (1). First, it takes into account that the economic context can change. Second, it is possible that during a litigation between parties A and B a contract may seem valid, though in another litigation, involving party C, other effects of the same contract may come forth, and the court could come to the conclusion that the same contract cannot be declared valid. My last point relates to the issue of whether an administrative authority should review a judgment or not. Here I totally agree with my colleagues from the judiciary around this table, and I would just add some arguments to support our standpoint. First of all, we must take into account the jurisprudence of the Court of Strasbourg—the Treaty of Amsterdam foresees this very clearly. The jurisprudence of the Court of Strasbourg points towards the following two aspects. First, when the Commission, as an administrative body, imposes heavy fines in competition cases, these could be seen as similar to criminal sanctions, and criminal sanctions can be applied only by the judiciary, not by the administration. Second, criminal sanctions must be open for a second degree of jurisdiction, and I think that the jurisprudence of the European courts in Luxembourg confirms this. This point is actually taken over in a number of EC Directives. For example, all EC Directives on financial services provide that the decisions taken by the national supervisory authorities must be subject to appeal to the national courts. I think these are very important reasons why judgments cannot be reviewed by administrative authorities only. • MARIO SIRAGUSA—I was somewhat surprised by Giuliano Marenco's comment in the sense that companies are not interested in clear rules on the allocation of competencies. Let us take the example Judge Edward mentioned before: a company with a selective distribution system relying on similar or identical agreements with various distributors throughout the Member States. Let us assume that in one Member State the distribution agreement is challenged by the national competition authority, which opens an investigation, while in another Member States a competitor of the local distributor is challenging the agreement in front of a court. What would be the effect of the decision of the national competition authority finding that the agreement is infringing EC competition rules? Does this decision have effect in that country only, or also in the rest of the Community? What is the result of this decision in the other Member State, where the competitor challenged the distributor in court? Finally, when would the Commission exercise its power to intervene and take up the case in Brussels—a power that the Commission, rightfully so, intends to retain? I really think we should leave aside this 'we-all-love-each-other' co-operation spirit of the White Paper. Can you imagine the consequences of such a situation as I just described? Powerful companies would run to Brussels and lobby the Commissioners to get the case. Less strong companies, however, will not be in a position to do that. I think this is unacceptable. We must have clear rules as

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to who is competent to do what, which are the cases when the Commission can intervene, what is the effect of a decision by a national competition authority in other Member States. Otherwise, I am afraid that only the most powerful will gain from the new enforcement system, while normal citizens will be the potential victims. This is not only a matter of common culture, which in the competition field is, fortunately, growing fairly rapidly in Europe. It is a matter of power as well, and having a common culture does not solve the issue of power. My second comment refers to the US Chevron doctrine, which is about courts deferring on certain issues to opinion of specialised agencies. I think there is a fairly large number of Member States where the decisions of administrative bodies are reviewed by an administrative judge, and that is exactly what happens. European administrative judges, at least on the continent, have a tradition of applying only a legality review, while being fairly reluctant to review cases on their merits—that is, unlessfindinga manifest mistake of appreciation, a failure of the investigation, or a contradiction in the reasoning, but otherwise, they are very prudent in substituting themselves to the administrative authorities. So, let us not imagine that on the continent we will have real review of administrative decisions on the merits of the case. • JOHN COOKE—I was asked why I distinguished between the notions of 'am/cus curiae' and 'intervener': perhaps here my position is slightly influenced by my common law background. I thought of the Commission's—or the national competition authorities'—right to intervene during court proceeding more as an obligation, and not so much as a possibility. I quite appreciate the utility of the amicus briefs in US antitrust litigation, but we must remember that the Commission has two 'hats': the legislative, or policy-making hat, and the enforcement hat. If the Commission's only interest in a particular private litigation is to inform the court of the policy context it wants to be taken into consideration, then an amicus brief is fine. Yet if, a la Giuliano Marenco, the interest of the Commission is an enforcement interest, that is, the Commission regards a specific agreement as being of some significance and wants to take a stand on the litigation the subject of which this agreement is, so that it comes into the case with a view on the facts, and possibly with an expert testimony to offer as to market share, reaction of other competitors in the marketplace etc., then I think it is important from the point of view of the national court that the Commission has the status of a party in the proceedings, so that the other parties in the litigation are entitled to put its intervention up to scrutiny, both on facts and on expertise. • DAVID EDWARD—This is the distinction between intervention and direct action before the European Court of Justice: the intervener intervenes to support one of the parties, while the Commission submits observations, but not as a party.

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• EMIL PAULIS—Above all, I personally noticed a few general issues coming up in this debate. Thefirstone is that there may be some general problems in our judicial system, and in our administrative decision-making system perhaps, which are highlighted in this debate on the reform of EC competition law enforcement, but which are not specific to it. I do not think that we should make it a condition that all these problems be resolved before we can go ahead with this reform, because they may not only hold up this reform, but other reforms as well. I will also take with me after this meeting that there is a strong demand for clarity, and a strong demand on the Commission not to leave open in the new Regulation issues that would then have to be settled by the judges in Luxembourg. There is an equally strong demand for coherence. This means, on the one hand, uniform application of the law and legal certainty for all operators; and on the other hand, independence for all the decision-makers in the enforcement system, and particularly for national courts. There is of course a tension here: the more independence you leave with respect to competencies, the more this independence may conflict with the aim of coherent application of the law and legal certainty. These are conflicting claims, and we will probably have to find a middle way. I would also like to add, in relation to the previous point, that there is—as Judge Edward rightly said—a distinction to be made between the Commission's decisions and its 'soft law'—guidelines, etc.—even if the Commission's decisions are of a declaratory nature. The Commission's decisions have binding effect on their addressees, but this effect has, of course, to be implemented. The Commission has no power to enforce its decisions, so that their effects must be taken into account by the national courts. The latter must, of course, respect the Commission's decisions, otherwise they would put into question a Community act that can only be reviewed by the European Court of Justice. The European Court of Justice itself developed a jurisprudence concerning the effects of Commission decisions, based precisely on considerations of uniform application of the Community law and legal certainty. I also think that the argument of separation of powers may be fallacious. Jacques Bourgeois basically said that because administrative decisions can be reviewed by the judges they can never really have any effect on the judges. This is not the point here, because it is not up to the national courts to review the Commission's decisions, but the European Court of Justice. The issue of separation of powers arises in each legal system, but it does not play in the same way between different systems, as is the case here. However, we would probably have to continue the debate on this. A few remarks on the interpretation of Article 81 (3): after what has been said here, my personal opinion—though not everybody from the Commission might agree with me—is that the scope of Article 81 (3) must be first clarified by the Commission. The Commission should come up with a set of guidelines addressing specifically the interpretation and application of Article 81 (3), and then the European Court of Justice could of course decide whether we were right or not in our interpretation. I think though that this would be a start at least, rather than to wait for the ECJ to elaborate on everything anew.

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A short remark on the issue of 'other objectives' in Article 81 (3): these 'other objectives' are laid down elsewhere in the Treaty and do not refer specifically to Article 81 (3). General objectives, such as the protection of environment, can also for instance arise under Article 82. Take an agreement serving to promote environmental protection which involves a whole industry, and which could lead to a kind of collective dominance. Does Article 82 apply or not? So, this issue is not specific to Article 81 (3) only, but one that we have to solve in a general sense. On the issue of the burden of proof: I would like to correct a misunderstanding arising in Professor Mestmacker's paper. He apparently starts from the assumption that, by introducing a legal exemption system, we would introduce a kind of general presumption of legality under 81 (3), or we would remove what would be a general presumption of illegality under 81 (1). Neither of these is true. There is no presumption of illegality under Article 81 (1), one has to prove in casu whether this provision applies. Article 81 (3) is a rule of exemption, but by turning this rule of exemption into a directly applicable legal exemption one does not introduce a general presumption of compatibility. The legal exemption applies only if it is proven that the conditions of 81 (3) are fulfilled. I would also like to comment on the issue of the burden of proof as put by Judge Edward in his paper and during our discussion. He said that in the future enforcement system the burden of proof will depend on what approach we take in the interpretation of 81, in other words, if we would go for a unitary approach or a bifurcated approach of Article 81 (1) and Article 81 (3). I think we cannot re-write the Treaty. There are two rules: there is the rule of prohibition and there is the rule of the exemption. However, the legal exemption system will bring about an element of novelty in this respect in the sense that it will create a link between Article 81 (1) and (3) in a direct effect context. This means that if the two rules stay separate—and they have to stay separate—their balancing will require tofirstidentify the negative effects of an agreement and then identify its positive effects. These two separate rules need to be balanced, and therefore we should, in my view, regulate the issue of burden of proof. In my view, we should specify that for Article 81 (1) the burden of proof is, of course, on the party invoking this provision, and for Article 81 (3) the burden of proof is on the party who invokes the exemption. A very personal remark on Article 234: there are a number of problems with the system of references for preliminary rulings, in particular the European Court of Justice's workload. Again, this is a general problem, it is not specific to the area of competition law only. There are, however, two things I think should be said about this problem. First of all, the problem of delays should not be exaggerated, because there is no vacuum. A national judge can adopt a preliminary measure pending the reply of the European Court of Justice. Second, and this is again a very personal view, if the European Court of Justice decided that arbitrators must observe EC competition rules, then it would seem logical to me that arbitrators should also be given the possibility to make

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references for preliminary rulings when they have legal interpretation queries. However, this would again increase the number of references to the European Court of Justice under Article 234. • CLAUS-DIETER EHLERMANN—Just two short remarks. The first is that there are limits to legal interpretation and to the questions that arbitrators can bring before the Courts in Luxembourg. In my view, sometimes such questions are beyond what interpretation allows, even if the Courts are very generous with wording. Then again, I am referring to experience at the Appellate Body of the WTO, which is slightly different from the case of the Courts in Luxembourg. Second, I think that everybody around this table assumes that the Delimitis principle of 'deference' of national courts vis-a-vis the Commission is, and will remain in place.8 Yet, if the Commission's monopoly over the application of Article 81 (3) is abandoned, I wonder whether that deference principle, particularly from the point of view of separation of powers, remains in place. • ALEXANDER SCHAUB—Just one additional remark, to avoid a misunderstanding: Mario Siragusa got very agitated about the issue of the allocation of cases, and insisted that this was a matter of power, not of competition culture. The Commission does not consider this neither a matter of power nor one of culture, but, in the first place, one of clear rules, as we already clarified in the non-paper on the network of competition authorities. We need clear rules on the allocation of cases, though, of course, we need rules with certain flexibility. Such flexibility exists even at the present: take for instance the area of merger control, where the Commission can refer cases to national competition authorities or it can refuse to do so. I wanted to emphasise this once more: this is not a matter of power. We are exposed to the worst pressures, and I could tell you long stories about that, but we have long lists of examples making it obvious that we are not giving in to the pressure, and that we have always made our own judgment as to whether we should decide a case in Brussels or refer it to a national competition authority. There is this one little pending case, concerning an electricity merger in Germany, about which you may have heard, and there were important and powerful people who would have preferred that this case be decided in Germany rather than in Brussels. And not for reasons of power and not for reasons of culture, but for reasons of judgment on the basis of existing rules, the Commission kept this case peacefully, as in many other cases of this sort. We kept it with us, and we intend to continue on the same line once the new enforcement rules will be in place.

8

Case 234//98 Delimitis v Henninger Brdu [1991] ECR 1-935.

I Simon Bishop Modernisation of the Rules Implementing Articles 81 and 82

I. Introduction In April 1999 the EC Commission unveiled its proposals for reform of the rules implementing Article 81 in a White Paper.l The White Paper includes some radical proposals to decentralise the implementation of Community competition rules to Member States and to give a greater focus to economic analysis. One of the key issues raised by these proposals is the issue of legal certainty. In particular, the intention for the analysis under Article 81 to be based more on an assessment of economic effects suggests a case-by-case analysis in which the role of formalistic rules of thumb is necessarily limited. Under the proposals there will therefore be a trade-off between economic analysis and legal certainty. This paper assesses the arguments put forward in the White Paper in the sense that 'legal certainty' will be largely unaffected by the proposed changes. In particular it assesses two issues: a) whether the application of EU competition law is sufficiently transparent and known so that the business community will be able to limit any legal uncertainty to an acceptable level, and b) whether under the proposed system, individual positive decisions and comfort letters are no longer needed. The remainder of this paper is organised as follows. Section II provides an overview of the White Paper and the general issues raised by it. Section III discusses whether business will be able to assess the likely competition law consequences of contracts into which they will enter. In particular, this section assesses whether the case law provides an adequate guide. Section IV discusses whether under the proposed system individual positive decisions and comfort letters are no longer required.

II. Too much paper and not enough competition analysis In the White Paper the Commission states that a change in its procedural framework is required to ensure a balance between effectiveness of policy and simplification of control. Procedural change is required due to the ever-increasing 1 European Commission: White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, OJ C 132 of 12.5.1999.

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burden on the European Commission to deal with notifications under Article 81. This burden created by the current enforcement of Article 81 has two sources. First, the Commission, in applying Article 81 (1), has adopted a very broad interpretation of what constitutes a restriction of competition. Article 81 (1) states that all agreements that restrict competition are unlawful unless they meet certain conditions that allow for an exemption under Article 81 (3). This implies that nearly all contracts between firms are caught by Article 81 (1). In consequence, the Commission has come dangerously close to concluding that all contracts are therefore in breach of 81 (I).2 Second, agreements that breach 81 (1) are void and unenforceable before they are notified to the Commission, and only the Commission has the power to grant an exemption to such agreements under Article 81 (3). The need for notification of all restrictive agreements to the Commission has led to a mountain of paperwork and bureaucracy devoted to trivial agreements, and at the same time has prevented the Commission from devoting its time to the important issues. In addition, attempts to relieve the scarce resources within the Commission have had a stifling effect on business. Although the Commission has developed tools such as block exemptions in order to ease the burden, the formalistic nature of these tools has tended to divorce Commission policy from a more rigorous analysis.3 Given this situation, change is clearly required. With refreshing candour, the White Paper summarises the situation as follows: 'It is essential to adapt the system so as to relieve companies from unnecessary bureaucracy, to allow the Commission to become more active in pursuit of serious competition infringements, and to increase and stimulate enforcement at national level.'4

1. The options for reform—and the Commission's preference There are two broad categories of options outlined in the White Paper. One is to stay with the existing authorisation system, in which the Article 81 prohibition can be lifted only by an act of the EC enforcement agency. The other is a move to a directly applicable exemption system, whereby the Article 81 prohibition does not apply to agreements that do not meet certain criteria. Such a system avoids the need for prior notification. 2

The European Courts have on several occasions indicated that this is too restrictive an interpretation, but these indications do not seem to have changed the Commission's practice. 3 However, the Commission has successfully reduced notifications in a manner that has better economic rationale through its de minimis notice (European Commission: Notice on agreements of minor importance which do not fall under Article 85(1) of the Treaty establishing the European Community, OJ C 372 of 9.12.1997). 4 White Paper, paragraph 10.

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The White Paper considers reforms of the existing authorisation system. But none of these really deals with the problems associated with that system. It is therefore unsurprising that the White Paper comes out clearly in favour of a radical shift to a directly applicable exemption system.5 The key feature of this proposal is that agreements will no longer need to be validated in advance by the Commission in order to be lawful. This places a responsibility on businesses to take a view on whether their agreements meet the criteria for exemption. At the same time, it places a responsibility on the Commission and the member state competition authorities to give guidance oh when agreements will be considered lawful.

III. Shifting the burden to business? The introduction of a directly applicable exemption system raises the issue of legal certainty. Under any system of law, it is desirable that firms should be able to enter into contracts reasonably secure in the knowledge that these contracts will be enforceable. But under Article 81, the danger that contracts may be rendered void by a legal challenge on the grounds that they contain restrictions that should have been notified to the Commission has been one of the main factors behind the excessive burden on the system.6 The proposed move to a directly applicable exemption system removes the element of legal uncertainty created by the problems of non-enforceability of contracts that, whilst they are benign, contain some element of restrictiveness. However, such a system still contains an element of commercial uncertainty where an existing agreement is found to be anti-competitive—i.e. the agreement (a) falls within the scope of Article 81 (1) and (b) does not warrant an exemption under Article 81 (3). What is more, this element of uncertainty is to be increased by the Commission's proposals to withdraw the old block exemptions which provide safe harbour to any agreement that meets a certain standardised form, and to make the new set of block exemptions conditional on some kind of market power test, embodied in a market share threshold. Yet in economic terms, such a change is entirely justified. Although Article 81 applies to all agreements that entail 'the prevention, restriction or distortion of competition', this immediately raises the question of when competition is prevented, restricted or distorted. The current interpretation holds that many agreements may be 5

Of the authorisation system options, the third, involving an ability to do ex post analysis, seems to have the greatest appeal. 6 In a few high profile cases, firms have been challenged in the courts on the enforceability of contracts that had not been notified. Thus, for example, the singer/songwriter George Michael tried unsuccessfully to escape from his recording contract with CBS/Sony on the grounds that it should have been notified but was not.

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covered by Article 81 (1), regardless of the market position of the parties involved or of the economic impact of the agreement. In other words, the legal interpretation of what constitutes a restriction is extremely wide. Such a wide interpretation captures many agreements that have adverse effects for competition. From a policy perspective, whether an agreement can be retained to prevent, distort or restrict competition depends on its impact on market outcomes and its precise form. Standard economic theory states that, unlessfirmspossess and exercise market power, they are unable to affect adversely competition. In other words, in the absence of market power, agreements between firms do not restrict or distort competition. To illustrate this point, consider a shoe manufacturer who wishes to restrict the supply of its products only to those retailers who agree not to stock the products of other manufacturers. Is such an exclusivity agreement anti-competitive? The answer is that it depends on the facts of the particular case. For example, if the shoe manufacturer has a relatively small market share of retails sales of shoes—say 10 per cent—then it is unlikely that the exclusivity agreement would adversely affect competition, since competing shoe manufacturers can easily gain access to other retail outlets not subject to such restrictions. On the other hand, if the shoe manufacturer were able to sign up 90 per cent of shoe retail outlets the impact on competition might be different. It is therefore clear that the same type of agreement can have widely different impact on competition. A restriction agreed between two firms with no market power has different economic effects from an identical set of terms concluded by parties with appreciable market power. Modern competition law enforcement must take business reality into account. The White Paper's proposal to conduct a more economic approach to the application of Article 81 (1) is to be welcomed. Hence, the move towards an economic effect-based approach in enforcement will involve the evaluation of complex economic issues where it is hard to draw generalisations between cases, despite superficial similarities. This raises the question of how undertakings are to know whether their agreements fall foul of the law. It might be argued that the ex post prohibition of agreements found to be anti-competitive raises no particular concerns for the enforcement of Community competition rules. But such arguments rest on the assumption that those businesses that fall outside the proposed block exemptions are able to determine with precision whether their agreements either fall outside Article 81 (1)—a relatively straightforward issue to assess—or qualify for an exemption under Article 81 (3)—a much more complex task. Most agreements—with the notable exception of explicit cartel agreements—cannot be said a priori to be anti-competitive. Indeed, in many cases, a given agreement may have both proand anti-competitive effects that require a careful assessment of the relative balance between them. Given that that the new enforcement system is bound to create some additional uncertainty, the crucial question is how does the Commission propose to

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limit the damage. The White Paper claims that there are four areas in which predictability (if not certainty) will be created:7 —The existence of 40 years experience of implementation and case law; —The use of wide ranging block exemptions based on market share thresholds; —The adoption of Commission guidelines and individual decisions to clarify the scope of its application of Articles 81 (1) and 81 (3); and —The implementation of preventive and corrective mechanisms to ensure consistent and uniform application of Community law by national authorities and courts. 1. The existence of 40 years experience of implementation and case law The White Paper suggests that business will be able to infer the treatment of specific agreements by reference to the lessons that can be learnt from the 40 years of case law and decision-making practice, which is said to have 'largely clarified' the law. This is a bold statement to make, for two reasons. First, the fact that the Commission is proposing a radical change in implementation, the removal of block exemptions from undertakings with market shares above certain thresholds (likely to be set at a level below that traditionally signifying dominance), and a more economic approach to the application of Article 81, indicates that the new regime will differ significantly from the old one. Any decision-based 'precedent' that can be gleaned from the old system is therefore likely to provide an unreliable guide to future policy and enforcement. Second, and more importantly, the adoption of a more economic approach reduces the usefulness of 'precedent' when assessing the likely competitive effects within a particular industry. As discussed above, a particular type of agreement can have widely different effects on competition depending on the particular characteristics of the industry—including inter alia the market position of the undertakings concerned, the nature of the products or services and the nature of competition. This assessment is necessarily complex and must properly be conducted on a case-by-case basis. Precedent provides only minimal guidance. 2. The use of wide-ranging block exemptions based on market share thresholds The White Paper promises new block exemptions that will cover a much wider range of agreements—'the vast majority'. The effect of these new block These are to be found at para. 78 of the White Paper.

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exemptions will be to give those undertakings that are able to benefit from them greater freedom in running their respective business. This is an admirable intention that should be welcomed and supported. However, while this commitment provides legal certainty for many undertakings, for those to whom the proposed block exemptions do not apply, this is not the case. This wider range of block exemptions is to be conditional on the firms involved falling below a market share threshold. The Commission's current thinking on vertical restraints, for example, involves a near per se approval for all vertical restraints, provided the relevant market share lies below a 30 per cent 'market power' threshold. Such an approach is justified on the basis of economic theory. However, there remain some important issues to be resolved. First, for those firms that do not fall below the market share threshold, legal uncertainty will remain. It is likely that many undertakings with market shares above the relevant market share threshold will not wish to enter into contracts before undertaking a detailed legal and economic assessment. Even those that do enter into agreements, legal uncertainty may persist for some time. Second, there is the issue of market definition. Although the framework for defining relevant markets is now widely accepted, it would be wrong to see market definition as simply a mechanistic task. Moreover, market definition under Article 81 and Article 82 raises a number of difficulties that are not encountered in merger inquiries.8 This means that market definition and any subsequent market share analysis can sensibly play only a screening role. The market share threshold approach is appropriate, therefore, only if the competitive effects of agreements entered into by undertakings with market shares above the threshold, including those with dominant market shares, are genuinely assessed without prejudgment.

3. The adoption of Commission guidelines and individual decisions to clarify the scope of application of Articles 81 (1) and 81 (3) The Commission also promises enforcement guidelines and more published decisions aimed at explaining its enforcement policy in those difficult areas where firms exceed the market share safe harbours. This is in principle good news, signifying the Commission's determination to enter into an open debate on the economic objectives of competition law with industry and its external legal advisers. Such a debate should help clarify where the often hazy line between pro- and anti-competitive effects is to be drawn. However, the stated need for such enforcement guidelines and published decisions is at odds with the claim that existing case law provides sufficient guidance to future implementation. The application of Community competi8 See Baker S. and S. Bishop: Market Definition in Non-merger Inquiries, Research Paper for the Office of Fair Trading (forthcoming).

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tion law is therefore likely to continue to evolve and may entail some seemingly radical departures from previous case law. Indeed, it is the proposed change in the analytic approach that warrants the need for such publications. As the White Paper notes, the forthcoming notices and guidelines that explain the Commission's policy and provide guidance for the application of Community competition rules by national authorities are particularly well suited to the interpretation of rules of an economic nature.9

4. Ensuring the consistent application of Community competition rules As noted above, one of the stated reasons for the proposed reforms is the need to deal with the ever-increasing burden on the European Commission to deal with notifications under Article 81. As the White Paper notes: 'In an enlarged Community with more than twenty Member States, centralised detection of, and action against, infringements of the competition rules will be increasingly inefficient and inappropriate. Application of the rules will have to be decentralised more to the Member States' competition authorities and to the national courts.'10 The decentralisation of European competition law enforcement to national competition authorities and to national courts appears to offer a ready solution to this problem. Yet we should not pretend that such a proposal raises no concerns. The devolution of greater powers to implement Community competition policy brings with it the possibility of inconsistency in the application of those rules. That fear is recognised by the Commission, and the White Paper promises to implement a series of measures to ensure consistent and uniform applications of the EC Competition rules throughout the Community. It is not clear how such safeguards would work in practice. Even at the level of specialised antitrust authorities, differences in approach and interpretation of competition law exist throughout the Community. This can be seen even in dealings with the Commission, where the composition of the case team can have an important bearing on the approach taken in the case. These differences in approach are likely to be even more evident once the enforcement of EC competition law is devolved to the Member States. These differences arise both from different rationales for the establishment of national competition laws, and, to even a greater extent, from different legal traditions. While there is convergence between Member States in the area of competition law, these differences in approach still persist, and that needs to be recognised. Moreover, national courts are not well equipped to deal with competition issues. The application of EU competition involves addressing complex 9 10

White Paper, paragraph 86. White Paper, paragraph 42.

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economic issues, and the Commission's own reforms will require national courts to keep up with higher enforcement standards. While the same fundamental economic issues have always been present in the application of Community competition rules, the Commission's own approach in enforcement is becoming increasingly more economics-based. This trend will raise difficulties in the consistent implementation of Community competition law by the national bodies. National courts are often reluctant or unable to consider some of the core economic issues that are routinely raised in competition matters. My own experiences before national courts illustrates some of these difficulties. In one case, the national court was required to consider some detailed econometric analysis on an issue contested by experts on both sides. It was clear that the judge had neither the necessary training nor the support to evaluate properly the competing claims. In another case, the relevant national court was asked to assess whether an agreement infringed Article 81. Although largely sympathetic to the economic analysis that was presented to him, the judge remarked that this type of case was better dealt with by the specialised competition authority, which, in his words, was more able to assess the economic arguments. This is not to denigrate the ability of the judges, but merely to point out that the evaluation of economic issues, particularly those of an empirical nature, is particularly complex. Indeed, similar views were expressed by Mr Justice Ferris, a UK High Court judge, to the House of Lords' EC Select Committee on the reform of EC competition law procedures. When asked about the ability of judges to apply the kind of complex economic criteria required by Article 81 (3) of the EC Treaty, and which are, of course, replicated in the UK Competition Act, Mr Justice Ferris stated that 'the sort of feeling that judges can decide economic issues to my mind is wholly misplaced . . . They cannot make value judgements except in a very limited field, certainly not in relation to general economic questions.' In principle, these are not insurmountable problems. Indeed, it should be recognised that the courts pay an important role in the implementation of US antitrust rules, as the recent Microsoft case illustrated. However, the role played by US courts is rather different to that envisaged by the White Paper for the national courts of Member States. One possibility would be for judges to be given training in the application of competition law on both legal and economic aspects.11 Yet even such training introduces its own delays and level of bureaucracy. A further area of concern is whether the implementation of Community competition rules by national competition authorities and national courts creates greater scope for protectionism. The White Paper raises this possibility with reference to those Member States that have chosen to remain outside the 1 ' Training for judges was recently suggested by the Confederation of British Industry in relation to the introduction of the UK Competition Act 1998. This new competition law is closer to the EC competition law model.

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Euro. Yet such protectionism is as likely, if not more likely to arise within the Euro-zone countries, particularly those where the culture of national champions has been traditionally prevalent.

5. Summary The proposals contained in the White Paper are to a large degree predicted on the belief that undertakings are more than able to understand and foresee how Community competition rules will be implemented. But the foregoing considerations indicate that those businesses falling outside any new block exemption rules will face considerable legal uncertainty as to the applicability of their agreements.12 Such uncertainty will increase the burden on business. While business will be able to conduct their own legal and economic analysis prior to entering into agreements, and thereby reduce legal uncertainty somewhat, only in rare instances will such analysis provide unambiguous answers as to the outcome of any potential Commission investigation.

IV. A need for individual positive decisions and comfort letters The proposed changes will require the Commission to provide on-going guidance not only to national competition authorities but also to undertakings. In this sense, there is a need for published Commission decisions, both of prohibition and positive ones. It can also be argued that one of deficiencies of the current system is that it leads to too few published decisions. This not only hinders transparency, but also the development of a consistent policy approach. Moreover, this can be contrasted with Commission's approach to the control of mergers, where a decision is published following each notification, whether or not a detailed investigation is required.13 The adoption of market share thresholds will allow the Commission to focus on fewer cases, allowing a more detailed analysis of the issues arising in those particular cases. This, combined with the requirement to publish a decision, will help to shape the Commission's policy in a consistent and coherent manner. The White Paper states that positive decisions need only be taken in exceptional cases, where it may be necessary to provide guidance on the Commission's approach to certain restrictions. Yet, as mentioned above, one type of agreement properly exempted in one case need not necessarily qualify 12

As noted above, a distinction can be drawn between cartel agreements where the illegality of the agreement is clear and other types of agreements where this is usually not the case. 13 Unless the notification is withdrawn.

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for being exempted in other circumstances. It is, therefore, important that decisions be adopted whenever the Commission opens an investigation. Under the EC Merger Regulation, the publication of the Commission's decisions has probably done more to generate transparency and consistency than any other development in EC competition law. The same should be true in the application of Article 81, once a series of reasoned Commission decisions dealing with proand anti-competitive agreements between firms possessing some market power builds up. In particular, positive decisions will be needed for those undertakings whose market share lies above the block exemption thresholds to be introduced by the Commission. In those cases where the agreement does not give rise to anticompetitive effects, and therefore meets the criteria of 81 (1), a positive decision, or at a minimum a comfort letter, should be issued. In the absence of such a decision, the undertaking will continue to face legal uncertainty as to whether its methods of commercial activity are acceptable or liable for challenge in the future. Under these circumstances, pro-competitive investments may be severely affected. Positive decisions, as well as negative ones, will therefore provide important signals as to the likely application of Article 81 (3), especially to undertakings with market shares above levels traditionally associated with dominance.

V. Conclusions The basic thrust of the White Paper is a welcome one. The application of Article 81 needs to be transformed from a drawn out paper shuffling exercise into one that reflects the reality of real-world markets. The proposals contained in the White Paper represent part of a general and welcome shift towards greater emphasis on economics in the application of competition law in Europe. However, a number of issues remain unresolved by the proposals. As an economist, I would point to the following: 1. The reliability of market share threshold tests. Market share thresholds play a crucial role in limiting uncertainty to those cases where a firm has market power, but no one who has experience with the application of competition law will imagine that market share tests provide unambiguous guidelines. Moreover, it is important that market shares are not seen as a tolerance threshold in which agreements entered into by undertakings falling outside the proposed block exemptions, particularly those with a dominant market share, are perceived as being per se anti-competitive. 2. Article 81 's 'schizophrenic' nature. Many of the problems encountered in Article 81 cases arise from the Commission's dual role as a competition agency and as guardian of the Single Market. Refusal to acknowledge that

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these objectives may conflict can reduce the transparency of the decisionmaking process.14 3. The sheer 'newness' of the challenge the Commission is facing. As discussed above, existing case law provides little useful guidance and the approach set out in the White Paper requires the Commission to invent a whole new approach to the economic analysis of restrictive agreements. Of course, there are models (e.g. the US model) from which to learn, but the learning curve the Commission is facing is a steep one. The Commission must have the confidence to break with tradition if it is to take the right path in policy development. The Commission's quest for modernisation in this area is to be both welcomed and supported. While the proposed new system will generate uncertainties of its own, the benefits of a less formalistic assessment and a streamlined procedure are clear. Indeed, in many cases, those who now shout loudest about the unpredictability and the 'chaos' created by the proposed reforms will be those who have in the past complained most bitterly about the 'straight-jacket effect' of the existing system.

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For example, where pro-competitive effects of exclusive sale territories can only properly be achieved by market segmentation.

II Dr. UlfBoge The Discussion on the Modernisation of EC Antitrust Policy: An Update on the Bundeskartellamt's Point of View

I. Preliminary remarks Since the publication of the White Paper over a year ago, the Commission's reform proposals have been intensively discussed and commented upon. Various working groups and meetings of Directors-General have, in the meantime, contributed towards clarifying the position of the Member States. Progress has also been made on the content of the reform itself. The Fifth EU Competition Law and Policy Workshop is a good opportunity to take stock of the situation and to gain insight into the latest developments in the discussion. In response to numerous comments, some of them critical, the Commission has specified its proposals in a series of non-papers. On this basis it has been possible to discuss the main problem areas in more detail, particularly those concerning the compatibility of the reform with the EC Treaty, the different types of decisions and their effects under the new system, the achievement of coherence by setting up a network of competition authorities, the role of the courts and,finally,the issue of legal certainty for undertakings. This discussion, which is still in full swing, is important and necessary. The Commission, which in the initial stages focused mainly on just defending its approach against Member States' objections, has recently been more prepared to enter into a real debate. There is, of course, no doubt that the changes to European competition law enforcement procedures proposed in the White Paper will have a direct and appreciable effect on national competition legislation and on its application. The expected pressure towards harmoriisation under the new enforcement system would make it impossible for Germany to maintain its system of preventive control. In addition, the Bundeskartellamt would be placed under a new framework of conditions relating to the decentralised application of Article 81 of the EC Treaty. Yet the possible need to adapt is no reason for the Bundeskartellamt to refrain from participating in the discussion. The ultimate aim of the reform can only be to more effectively enforce the principle of competition. The Commission too has declared that it does not desire any reduction in the level of protection for competition. And that is precisely the reason why we will have to look into all the questions involving the competitive effects of the new procedural rules. It is therefore a good thing that the Commission is not putting anyone under pressure, and that it set the year 2003 as the target date for starting to implement the reform.

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Whether the proposals contained in the White Paper can be realised merely by introducing a new regulation, therefore without amending the EC Treaty, is a matter that has not been fully clarified. Yet we do not wish to go into that debate at this stage. The topics of interest here are, above all: —The fundamental decision concerning the abolition of the notification and prior administrative approval system in conjunction with the re-evaluation of horizontal co-operation; and —The issue of decentralisation and how it can be implemented as consistently as possible. Let us look first at the points that are more likely to cause problems.

II. The abolition of the notification and prior administrative approval system It is well known that, from the start, there were major objections in Germany to the proposal that the notification and prior administrative approval system be completely abolished. In Germany's experience, the obligation to notify enables important information to be obtained, opens up room for manoeuvre and has a preventive, deterrent effect on undertakings. Discussions with the other Member States and the Commission, however, have shown that, of those positive aspects of a notification system that Germany considers important, namely transparency and the preventive function, at least the latter is not convincing at the European level. One reason for this might be that notifications do not have any preventive effect in the Commission's enforcement practice. However, the transparency function of the notification system would also to a large extent disappear in the new system, despite its high practical relevance. By contrast to the area of vertical agreements, in the case of horizontal agreements it cannot be automatically assumed that there will be an influx of complaints in cases of restraints of competition, as there is no conflict of interests among those involved in the agreements.

1. The introduction of an information system on horizontal agreements Considering the above, we introduced into the discussion a proposal in the sense that the necessary degree of transparency be achieved by obliging enterprises to briefly inform the national competition authorities of their co-operation arrangements. This information would simultaneously be made available to the public, for example on the Internet. Vertical agreements would be

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exempted from this information obligation, as would horizontal agreements covered by block exemptions. The legal effectiveness of agreements would remain unaffected as long as the criteria for exemption under EC Article 81(3) were fulfilled, as no decision would have to be taken. Competition authorities and affected third parties would, however, be able to act and obtain more detailed information if they saw reason to do so. In this way, a kind of early warning system would be created in the so-called 'grey area'. With it would come a degree of de facto legal certainty, as cartel authorities and third parties would be informed at an early stage. However, no legitimate expectations would be involved in this procedure. The obligation to provide brief information of this kind would be an appropriate, suitable and necessary corrective measure in order to create transparency if the preventive exemption system was to be called into question. Unless such an amendment to the reform proposal is made, it is hardly conceivable that the reform would be widely accepted in Germany.

2. Leniency programs for hard-core cartels Hard-core cartels would, of course, be just as unlikely to notify in a directly applicable exemption system as they were under the current enforcement system. In Germany, we have been thinking hard for some time now about how cartels could be more robustly combated. The most important step we have undertaken was to recently announce a leniency program. This is influenced by the corresponding Commission notice, but it is also based on the American model of automatic leniency for the first undertaking to report a cartel. 3. The reassessment of horizontal co-operation agreements Along with the abolition of the requirement to obtain an exemption, the more economic effect-based approach in enforcement envisaged by the Commission also causes headaches in the Bundeskartellamt. The term itself does, of course, have positive connotations. But the term alone will not automatically achieve the common goal of more efficient competition law enforcement in the Member States. If 'more economic' ultimately meant that all horizontal agreements involving market shares of 15% or less would not fall under Article 81 (1), this might be 'more economic' for the competition authorities and the courts. However, suppose there is no longer any competition in the German furniture industry, for example, becausefivelarge manufacturers have joint buying arrangements that are all below this threshold. In this case, we would have not a 'more', but a 'less' economic approach. It is therefore clear at this juncture that reform of the

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procedural law cannot be viewed in isolation from current considerations about substantive law. As far as reforming the block exemption regulations for vertical agreements is concerned, there have been discussions about the fact that such agreements should be re-evaluated in the future, and why this is so. However, a similar discussion about horizontal agreements still has to take place. The recent draft block exemption regulations on specialisation and on research and development, as well as the directives for applying Article 81 of the EC Treaty to certain main types of horizontal co-operation agreements, take a new approach, namely that horizontal agreements have anti-competitive effects only when associated with market power. This means that the previously applicable requirements for an appreciable effect with respect to Article 81(1) will be considerably raised. We have the impression that a new competition policy model is being developed, along the lines of the rule of reason approach taken in US antitrust. In particular, the new distinction between agreements which merely have the effect of restraining competition and those in which such a restraint is the object of the agreement is reminiscent of the American distinction between agreements 'may well be reasonable' and those are 'per se unreasonable'. In justifying its new approach, the Commission refers to numerous judgements of the European Court of Justice. Yet if one examines this jurisprudence, one discovers that it mainly relates to vertical restraints. Therefore the Bundeskartellamt has considerable doubts as to whether the Court's jurisprudence does in fact permit such conclusions to be drawn. Another question is whether one can actually say that horizontal agreements are not necessarily damaging. From our perspective, there are major differences between horizontal and vertical agreements. Restraint of competition by vertical agreements is usually limited to the fact that there is a natural conflict of interests between the supplier and the purchaser, whereas competitors at the same stage of production or distribution generally have the same aims. The anti-competitive potential of horizontal agreements is thus much higher. Of course, this does not mean that horizontal agreements cannot also promote competition. That is, after all, the reason why there are exemptions from the ban in German competition law as well. Yet we should carefully consider whether we really want to send a definite signal that horizontal agreements other than price-fixing, production and market allocation agreements, are generally acceptable (or are acceptable if they fall below an appreciable market share threshold). Finally, like the draft block exemption regulations, the current version of the directives leaves much room for interpretation and manoeuvre, even in the area of hard-core restraints such as price-fixing and market sharing. This gives the Commission considerable discretionary powers and therefore room for manoeuvre in decision-making, which is a matter that really has to be discussed.

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These questions concerning the level of protection in substantive law terms are closely related to the modernisation of procedural law and require further clarification.

III. Decentralised enforcement First of all, it should be emphasised once more that the Bundeskartellamt fully supports the broad objectives of the White Paper. The Bundeskartellamt also believes that a refom of the existent enforcement system is urgently needed. This also applies to efforts towards greater decentralisation. For years the Bundeskartellamt has been advocating an extension of the competence to apply Article 81(3) towards the competition authorities of Member States, thereby doing justice to the increased significance of the principle of subsidiarity. The President of the Commission, Mr Prodi, has on several occasions emphasised his commitment to bringing Europe closer to its citizens by applying this principle more intensively. The Directorate-General for Competition is following this course by abandoning its exemption monopoly. However, decentralising enforcement brings with it problems such as how best to distribute the cases and how to ensure uniformity in the way the law is applied. These problems were already manifest during the notification and prior administrative approval system, yet they would become more acute during the transition towards a directly applicable exemption system. Regardless of how decentralisation is organised, a reasonable solution needs to be found to these questions. 1. The allocation of cases The Commission suggests that the allocation of competencies should be based on a number of criteria, including the nature of the case, the size of the relevant geographic market, the extent to which intervention would be effective in ending a contravention of the law, appropriate punishment and the location of the evidence. This list of criteria certainly appears to be practicable, and the results would probably be similar to those achieved by basing the allocation system on an assessment of the economic and competitive focus, as the Bundeskartellamt suggested in an earner Working Paper on decentralisation. However, all in all, we should not overestimate the potential for conflict of competencies. 2. Coherence and legal certainty By far the most difficult question is how to ensure the uniform application of EC competition law. This requires, above all, a consistent system of

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types of decisions and appropriate mechanisms of co-operation and coordination. Questions arise in relation, for example, to the so-called Commission positive decisions and opinions. Neither of these types of decisions is strictly in line with the directly applicable exemption system, and they should therefore be abandoned in favour of consistency in the new approach. If the aim is that under the new system undertakings assume greater responsibility, a certain level of legal uncertainty in the 'grey area' is simply the other side of the same coin. Of course, that will not prevent competition authorities from continuing in the future to informally discuss critical agreements with the undertakings. This is what it will boil down to in practice anyway. And this also makes sense if we do not want to have courts that are unable to operate because of their burdensome caseloads. The President of the European Court of First Instance has already expressed concerns of this kind. The degree of legal certainty that could previously be achieved through Commission binding exemption decisions cannot be achieved through declaratory decisions and informal discussions. Nevertheless, if one decides in favour of a directly applicable exemption system, this is partly because in the past Commission formal exemption decisions were issued only on rare occasions, and frequently such decisions have not been requested in European competition law enforcement. If under the new enforcement system the Commission will issue positive decisions and opinions, what form should these take? Certain criteria have been developed about when the Commission should issue opinions, yet there is still not enough clarity about their practical value and field of application. It is suggested that the Commission should be able to issue positive decisions in cases raising particularly important issues from the perspective of the Community interest, whereas national competition authorities should issue exemption decisions only when a formal decision is required in order to settle a case under national law. This would mean that the Bundeskartellamt would probably not be able to use this type of decision without a change in its procedural law. Yet it is precisely because the Bundeskartellamt regards them as being alien to the concept of a directly applicable exemption rule that it sympathises with the idea of comprehensively restricting the scope of application of such decisions. However, this should not lead to small and medium-sized enterprises being placed in worse positions than large companies. It is only natural that the latter will more easily be able to point out the existence of a significant Community interest. Conversely, small and medium-sized enterprises might have a greater need for clarification, because they are less likely to have the resources necessary to carry out a competition law analysis of their own. This is why it should be made possible for the national competition authorities to act to a greater extent on their own initiative, even if some of them do not yet have many years of experience in applying European law. The consultation and co-ordination mechanisms that are envisaged for both the Commission and the national

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competition authorities before making prohibition and approval decisions or withdrawing the benefit of block exemption regulations to certain agreements appear to be quite suitable means of achieving the required measure of uniformity. At the same time, the obligations to provide information should be kept as simple as possible, and decisions should be dealt with in more detail by the Advisory Committee only in really important cases.

3. National courts No detailed investigation has yet been carried out as to how the national courts will apply EC competition law in practical terms and what will be the effect of decentralisation from this perspective. Coherent application of EC competition rules would certainly be more easily ensured if the competence to deal with competition cases is concentrated in a few specialised courts. This is the case in Germany, and France is also planning to introduce a similar procedure. But not all Member States will follow this course. The Commission made a range of proposals on how to alleviate the inherent conflict between decentralisation and coherence in enforcement, such as comprehensive obligations to provide information, an amicus curiae function for the Commission, or even its right to appeal against decisions by national courts. It has also laid down instructions on how to interpret the EC competition rules, through positive decisions, opinions or guidelines. However, these 'safety mechanisms' are not totally unproblematic, among other things because of the fact that the desired reduction in the Commission's workload might again be unintentionally lost. At the same time, Germany believes that the courts' independence must not be infringed upon and the principle of the separation of powers must be observed. The topic of coherence should not be concluded without stating that, in our view, the highest national courts and the European Court of Justice are ultimately the guarantee that the law will be uniformly applied.

IV. Summary To sum up, the objectives of the reform, namely to apply the law more efficiently and less bureaucratically, to ensure legal certainty for undertakings, and to achieve decentralisation and coherence, objectives that we all aspire to, cannot all be achieved to their full extent at the same time. These objectives can, however, be optimised by placing the right emphasis on each. By proposing an information system, the Bundeskartellamt is attempting to find an effective compromise among these objectives. Above all, this will prevent the one outcome nobody involved in the debate wants: a watering down or undermining of the principle of competition.

Ill Ian S. Forrester, Q. C.! The Modernisation of EC Antitrust Policy: Compatibility, Efficiency, Legal Security

A Constitution cannot make itself; somebody made it, not at once but at several times. It is alterable; and by that draweth nearer Perfection; and without suiting itself to differing Times and Circumstances, it could not live. Its Life is prolonged by changing seasonably the several Parts of it at several times.2

I. Introduction The European Commission has proposed big changes to European competition law, the biggest changes since 1962, in terms both of substance and procedure. Change has been called for since at least twenty years, and resisted for about eighteen years. It is interesting that Director General Ehlermann presided over an administration which, broadly speaking, set its face against such fundamental reforms (though there were occasional flutters of boldness in theoretical individual decisions). Yet, translated to Florence, he has encouraged the discussion of outrageous heresies. Whether Dr. Ehlermann is to be regarded as a Luther (an insider who became a successful outsider), or as a Becket or Savonarola or Tyndall3 (three clerics who died violently but whose efforts are better judged by posterity), it is sure that these meetings of a small number of enforcers, professors, academics and practitioners have contributed to the process of reform. Indeed, at the preceding meetings of this group in Florence in 1996 and 1997 (and 1998, to some extent), the faces of Commission officials flushed and blushed to hear severe criticisms: the European system of interpreting and applying the Treaty's basic rule on anti-competitive conduct did not work, could not work, had to change. These remarks were not new, but the circumstances were different: the new Director General confronted by his persecutors, confronted by the statistics of a case-load which was impossibly 1 The author gratefully acknowledges the very generous assistance and advice offered by his colleague Ann Stanley, as well as a number of other helpful persons who have answered technical, policy and legal questions. 2 This quotation from the seventeenth political figure, Lord Halifax, appears in Senator Jordan's Preface to the annotated version of the Constitution of the United States of America, published by the Congress in 1972. 3 William Tyndall believed in lay access to the Bible. He emigrated from England to Vilvoorde, near Brussels, for peace to continue his translation efforts, but was captured there by secret agents of Henry VIII of England.

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heavy if old doctrines were maintained, allowed some staff to voice heresy, to think seriously about radical change, and finally to propose it. The last century's approach to enforcement of competition by the European Commission was too much dominated by textual analysis of written clauses rather than by economic analysis of business reality. The system as established following the adoption of Regulation 17/624 did not function properly, and sometimes did not function at all. The problem had several elements: • Article 81 (I) 5 was given a broad scope and caught all sorts of agreements, including those which were basically pro-competitive but which contained restrictive clauses. There was little analysis of the merits or seriousness of the restriction, merely a noting of its presence, which entailed the consequent triggering of Article 81 (1). • This meant that thousands of basically desirable agreements were caught by the prohibition of Article 81 (1), void under Article 81 (2), andfinableunder Regulation 17/62. Only an exemption could cure these hazards; and only the Commission could issue an exemption. • Decisions by the Commission were rare because every decision was a major piece of rule-making, not a mere response to an individual problem. Perfection and comprehensiveness were the goals, not adequacy. • There was not enough application of the law in a transparent and procedurally predictable manner. Because too many agreements were prohibited, most agreements could not receive an exemption. • A theoretically necessary but practically unavailable exemption was therefore not a source of legal certainty, but of legal uncertainty. • To avoid this uncertainty, block exemption regulations came to be regarded as black letter, obligatory standards, and failure to respect them was dangerous and close to illegal. Various commentators suggested how the Commission could react to the unsatisfactory procedural situation. I argued that there were three ways.6 It could share more responsibility with the Member States, whose enforcement resources are notionally limitless; or relax its interpretation of Article 81 (1) to release basically benign agreements from the difficulties of needing an exemption which was practically unobtainable; or render the taking of decisions very much simpler and quicker, so that an individual decision became no more than an answer to a specific problem rather than a long, public, detailed ex cathedra pronouncement of general importance. I argued that richness of output rather 4 Council Regulation 17/62: First Regulation Implementing Articles 85 and 86 of the Treaty, 1956-1962 OJ Spec. Ed. 5 This paper will use the new numbering given to the articles of the EC Treaty based on Article 12 of the Treaty of Amsterdam (e.g. Article 81, 82, etc.), except in passages quoted verbatim and in contexts where use of the old numbering is more appropriate from a historical perspective. 6 Forrester I. (1994): 'Competition Structures for the 21st Century', Fordham Corporate Law Institute, Matthew Bender & Company, Inc.

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than perfection should be the goal. To general surprise, the reforms have been more radical than expected, with both procedural and substantive aspects. We were asked to consider whether the proposed reforms of the competition rules are workable, whether they are constitutional in the sense that they match the Treaty of Rome, and whether the world of law and business will be better off once they are implemented. I will consider these questions from the historical, textual and practical viewpoints, as to which I have three themes: legal certainty; the desirability of retaining a notification system; and the discrepancy between the new law being adopted in Brussels and the old law being received into the competition laws of the Member States and, a fortiori, the candidate States to the East. As to that discrepancy, I fear that the law which is likely to be applied nationally may well be old-fashioned: the process of decentralisation is very laudable in principle, in that it promises more enforcement, more law and a better permeation of competition law doctrines into the daily lives of regulators and business people; yet there is a risk that the law applied locally may be the old unreformed doctrines which the European Commission wishes to abandon, doctrines preoccupied by textual analysis and black-letter rules, rather than the reality of how a given marketplace works.

II. Can the reforms be squared with the words of the Treaty? 1. Historical The most enjoyable portion of this paper has been the conducting of some legal archaeology. I felt it would be pleasing to know whether and how the founding fathers had discussed what we are today discussing. If the drafters had crafted Article 85 (1), (2) and (3) of the Treaty of Rome with the firm confidence that effective enforcement could be achieved only by a rigid and wide-reaching prohibition which could be cured only by a Commission decision, then the Commission's Directorate General for Competition ought to be very cautious before scrapping the regime so presciently crafted by giants with legendary names like Spaak and Snoy et d'Oppuers. It is of course true that the European Court of Justice has not so far found it appropriate to go back to the Minutes of early intergovernmental meetings to interpret the Treaty. It has not referred in its judgments to the Minutes of meetings at the Messina Conference, or of drafting sessions at Val Duchesse, the castle on the eastern edge of Brussels where the negotiations took place. These documents might be said to be equivalent to the Federalist Papers, a famous dialogue between famous founding fathers about the future governance of the United States (centralised or decentralised power?), and sometimes cited as relevant to the framers' original intent. These and other early authorities are sometimes invoked in US constitutional

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debates, although sparingly. Chief Justice Marshall said that the framers of the Constitution expected that it should endure for ages to come and consequently be adapted to various crises in human affairs. It has never been suggested in Europe that EC constitutional doctrines must be interpreted according to the original intent of the founding fathers, nor in light of the Minutes of the drafting of the Treaty of Rome. Although there were many similarities between French agricultural rules and the EEC agricultural regime, the Court has never looked at the former for help in understanding the latter. However, the Court does make a comparative law review of national laws and jurisprudence in appropriate cases.7 So a 'bad' historical precedent would not be an incurable impediment to reform. However, a positive or favourable historical indicator could be helpful reassurance that the new regime is not contradicted by the earliest records relating to competition law. A request was therefore made to the keepers of the Council's Archives, and in March 2000 Ann Stanley and I spent some happy hours browsing.8 The documents available are the French language Minutes kept by the forerunners of the Council Secretariat, along with a few texts from the States involved.9 Those documents can be corroborated by an article written by Arved Deringer in 196310 and by early books on competition law.11 I have also spoken to some of the now-retired officials who worked in the Competition Directorate General in the early 1960s. 1.1. The big issues to be settled During the six months from September 1956 to February 1957, the negotiators had the task of reaching consensus on the competition law portion of the Treaty. There were broadly three models. The German approach contemplated preventive control: an anti-competitive arrangement should be void unless approved. The French approach left more authority to the enterprise, so that the arrangement could be implemented without prior approval, but could be rendered retroactively void by the authorities. The Dutch (there was also a Belgian-Dutch variant) provided for compulsory notification and provisional validity; if the competition authority showed that it was abusive, the invalidity 7 See the as-yet-unpublished papers presented at the colloquium on The Role of Comparative Law in the Emergence of European Law organised by the Swiss Institute of Comparative Law, Lausanne, April 2000. 8 The patience, good humour and creativity of the staff in charge of the Archives of the Council, notably Mr. Sanchez Martin, are warmly to be commended. 9 Giuliano Marenco of the Commission Legal Service has indulged in some parallel archaeology, and has set forth the references to all the documents to which he refers in a table. For posterity's benefit, a similar table is annexed to this article. 10 Deringer A. (1963): 'Les regies de la concurrence au sein de la CEE', 54 Revue du marche commun, 256-66. 11 Such as that by the late Graupner R. (1965J: The Rules of Competition in the European Economic Community, Martinus Nijhoff, one of the first serious studies in English of the subject.

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would take effect only prospectively. There was concern about price discrimination and refusals to supply based on grounds of nationality and even race or religion. There were thus a lot of what would now seem extraneous issues, and there were also real divergences both as to what were the enforcement targets and how enforcement should be structured. The secretariat of the Intergovernmental Conference for the Common Market and Euratom prepared a chart, dated September 24, 1956, which showed the main lines of divergence. It is attached as an annex to this article. In early September 1956,12 the German delegation considered that the provisions on this topic should use as their starting point the prohibition of agreements/cartels. However, exceptions should be allowed for certain kinds of agreements/cartels, it being clearly understood that these exceptions would be subject to checks against abuse.13 Conversely, the French delegation wanted a system similar to its own legal exception system,14 and was supported by Belgium, '[which] considered that it might be desirable, for psychological reasons, to replace the absolute prohibition of agreements/cartels by the notion of checks against abuse.'15 The French proposal was the closest to what finally emerged: 1. All situations or practices involving arrangements or monopolies with the object, or which may have the effect, of hindering the exercise of competition, are incompatible with the Common Market, in particular: —fixing or determining resale or sale prices; —restricting or controlling production, technical development and investments; —partitioning markets, products, customers and sources of supply; —permitting the absorption or domination of the market for a product by an undertaking or group of undertakings.

12

The following quotation, and all subsequent quotations of texts from this early period of Community history, are unofficial translations prepared for the purposes of this article. The original French texts are given in footnotes. 13 '. . . la delegation allemande a insiste pour que les dispositions en cette matiere partent du principe de I'interdiction des ententes. Des exceptions devraient toutefois etre admises pour certaines formes d'ententes, etant bien entendu que ces exceptions seraient soumises au controle d'abus.' Excerpt from the Minutes of Meetings of the Common Market Group (extrait du Proces-Verbal des reunions du Groupe du marche commun), Sept. 3-5,1956, Council Archives, CM3/NEGO/236, doc. MAE 252/56 at II(B); see also Sections 1 and 6, German Law Against Restraints of Competition of July 27,1957, published in R. Graupner (1965), supra note 11, Appendix B. 14 Deringer A. (1963), supra note 10; see also Articles 59bis and 59ter of the French Price Ordinance No. 45-1483 of June 30,1945, as supplemented and amended, published in R. Graupner (1965), Appendix C, supra note 11. 15 '[qui] s'est demande s'il ne serait pas opportun de substituer, pour des raisons psychologiques, le principe du controle des abus a celui de I 'interdiction absolue des ententes.' Extract from the Minutes, supra note 13; this was September 1956.

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2. Situations or practices whose authors are able to prove that they effectively contribute to the improvement of production or putting into circulation, or to the development of technical and economic progress, may be exempted from the above provisions. [The authors] must also show that the consumer receives a legitimate share of the profit resulting from these measures. 3. (Provisions concerning State and public service monopolies to be inserted).16

1.2. Discriminations based on nationality, race or religion There is no sign, however, that the delegations attributed overwhelming importance to what we are discussing forty-four years later in Florence. They were looking at older doctrines. Should price discrimination based on nationality be prohibited? Should discrimination be addressed in the competition articles or in a separate Treaty provision? At the end of October 1956, there was apparently unanimity among the Delegations 'to limit the ban on discrimination to those practices which are effected within the Common Market and where the operators who are treated differently are in competition with each other. .. Moreover, the making of price differentials in comparable transactions in order to obtain a dominant position should not be dealt with by the ban on discrimination but within the framework of rules on unfair competition.'11 The reasoning seemed to be that, although the Single Market's replacement of the six national markets would seem to necessitate a general prohibition of discrimination on the basis

16 I. Sont incompatibles avec le marche commun toutes les situations oupratiques d'ententes ou de monopole ayantpour objet oupouvant avoir pour effet d'entraver I'exercice de la concurrence, en particulier:

—enfixant ou en determinant lesprix de revient ou de vente; —en restreignant ou en controlant la production, le developpement technique et les investissements; •—en repartissant les marches, produits, clients et sources d'approvisionnement; —enpermettant I 'absorption ou la domination du marche d'un produit par une entreprise ou un groupe d'entreprises. 2. Peuvent etre relev&es des dispositions precedentes, les situations ou pratiques dont les auteurs sont en mesure dejustifier qu'elles contribuent effectivement a I 'amelioration de la production ou des debouches, ou au developpement duprogres technique et economique. Us devront egalement justifier que le consommateur obtient une part legitime dans le profit qui decoule de ces mesures. 3. (Dispositions a inserer concernant les monopoles d'etat et services publics). Id. Annex (Doc. Mar. Com. 17). 17 'pour limiter I'interdiction de discrimination aux discriminations qui sont commises a Vinterieur du marche commun et ou les partenaires a des transactions qui sont traitees de facon differentielle, sont en concurrence entre eux. .. En outre, il semble que les majorations ou minorations deprix operees, lors de transactions comparables, en vue d'obtenir une position dominante sur le marche ne devraient pas etre traitees dans le cadre de I 'interdiction de discrimination, mais devraient faire Vobjet de dispositions eventuelles relatives a la concurrence deloyale.' Note of Oct. 26, 1956 du President du Groupe du Marche Commun, Council Archives, CM3/NEGO/217, Doc. MAE 468 f/56.

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of nationality, 'the opening up of the common market is not a reason to forbid discriminations committed for non-commercial motives, especially since discriminations based on non-commercial motives such as religious or political beliefs are rarely encountered in commercial life.'18 The Chairman of the Groupe du marche commun therefore proposed as a basis of discussion the following text: Within the Common Market, it shall be prohibited to apply dissimilar terms in similar situations to buyers or sellers in competition with each other (according to their nationality), in particular to ask from them or offer to them different prices.19 Indeed, the working group discussed a number of versions of Treaty articles that would have formally condemned discrimination in economic matters based upon nationality. In mid-November 1956, the full text of Article 4Oa20 as proposed by the Chairman of the working group read: Discriminatory practices carried out by commercial partners in competition with one another for reasons of nationality are prohibited within the Common Market.* (However, undertakings are not prohibited from establishing their offers on the basis of the conditions offered by other undertakings with regard to delivery). * The German and Italian delegations have proposed that this article be deleted. However, in a conciliatory spirit, the Italian delegation would be prepared to agree to the article being worded as follows: 'If it is established that competition in the Common Market is distorted by discriminatory practices whose effect is to place buyers or sellers in the other Member States at a disadvantage owing to their nationality, the Council may, on a proposal from the Commission, unanimously adopt regulations with a view to prohibiting such discrimination.'21 18

'. . . I'ouverture du marche commun nest pas ... un motif de reprimer d'autres discriminations commises pour des motifs non commerciaux, d'autant plus que les discriminations fondees sur Vorigine ou sur les convictions politiques ou religieuses, par exemple, ne jouent guere de role dans la vie commerciale.' Id. 19 '// est interdit, a Vinterieur du marche commun, d'appliquer des conditions inegales a des transactions comparables, avec des acheteurs ou vendeurs en concurrence entre eux (suivant lew nationalite) et notamment de leur demander ou de leur offrir des prix differents.' Id. 20 Article 40 dealt with the principle of discrimination on grounds of nationality. Article 40a contained t h e prohibition of discrimination. Article 41 dealt with antidumping. Article 42 was the ancestor of Article 85 (1). T h e numbering of the Articles and paragraphs, however, changed week by week. 21 Sont interdites a Vinterieur du Marche commun les pratiques discriminatoires exercees, en raison de la nationalite, a Vegard de partenaires commerciaux en concurrence entre eux. * (Toutefois il nest pas interdit aux entreprises d'etablir leurs offres d'apres les conditions offertespar d'autres entreprises, a I'endroit de la livraison). * Les delegations allemande et italienne ont propose de supprimer cet article. Toutefois, dans un esprit de conciliation, la delegation italienne serait disposee a accepter que cet article soil redige comme suit: 'S'il est constate que la concurrence dans le Marche commun est faussee par la pratique de discriminations ayant pour effet de desavantager des acheteurs ou des vendeurs des

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Two weeks later, the delegations had agreed to eliminate the Article concerning discrimination on the basis of nationality.22 It is evident that the wisdom of dealing with anticipated nationalist commercial behaviour in the private sector was vigorously discussed and then discarded. With respect to discriminatory rules adopted for the public sector, it was decided that the promulgation of these should be prohibited, rather than prohibiting that they be obeyed. 1.3. A discursive early review of competition problems The French and the German delegates had a difference in approach as to whether unilateral price discrimination by a non-dominant company should be legal.23 The drafters also pondered whether abusive monopolies should be addressed together with cartels or in a separate provision. The French view was dirigiste, suspicious of price discrimination, perhaps rather tolerant of horizontal arrangements under supervision. The conflicting approaches to enforcement emerge clearly:24 • M. Muller-Armack (D) noted that: 'the question of discrimination or price differentials should not necessarily be considered from the point of view of practices which harm competition. Dumping, dual pricing etc. are often perfectly compatible with a free market. When it does not give rise to abuse and is not based on discrimination for reasons of nationality, discrimination in itself is in no way harmful to the competition regime but, on the contrary, is one of its normal features.'25 autres Etats membres en raison de leur nationalite, le Conseil, sur proposition de la Commission, peut prendre a I'unanimite tout reglement en vue de I 'interdiction de ces discriminations. ' Proposal submitted by t h e President with a view to drawing up provisions relating to o b s t r u c t i o n s to c o m p e t i t i o n , N o v e m b e r 14, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . M A E 541 f/56. 22 T h e working group considered that: 'the field of application of the provisions concerning discrimination for reasons of nationality goes beyond the scope of the competition rules, and that these provisions, which contain one of the fundamental principles of the Common Market, should be placed at the beginning of the Treaty, for example as Article 2bis' ('le champ d'application des dispositions concernant la discrimination en raison de la nationalite depasse le domaine des regies de concurrence et que ces dispositions, contenant un des principes fondamentaux du marche commun, auraient leur place au debut du Traite, par exemple, comme article 2bis.'). Projet de proces-verbal des reunions d u G r o u p e tenues les 2 7 - 2 9 Nov. 1956, C o u n c i l Archives, C M 3 / N E G O / 1 4 6 , D o c . M A E 785 f/56 (Dec. 10, 1956). 23 M e m o interne of Sept. 7, 1956, Fascicule 5, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . M A E / S e c . 29/56. 24 Id. 25 'La question de la discrimination ou de la differentiation de prix ne doit pas etre envisagee necessairement sous Vangle des pratiques nuisibles a la concurrence. Dumping, double-prix, etc sont souvent parfaitement compatibles avec un libre marche. Les discriminations en elles-memes, lorsqu'elles ne donnent pas lieu a des abus et ne remontent pas a des discriminations de nationalite, ne prejugent en rien le regime de la concurrence mais, au contraire, representent un aspect normal de celui-ci.

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M. Donnedieu de Vabres (F) 'on the contrary, insisted on the need to draw up precise legal rules with regard to price discrimination and differentials.' He further noted that: 'not all arrangements and concentrations should be condemned, since they may be compatible with economic progress.'26 M. Muller-Armack (D) stated that: 'a clear distinction should be drawn between monopolies and oligopolies on the one hand, and cartels on the other. Monopolies and oligipolies are not necessarily . . . incompatible with a competition regime. What must be abolished ... [are] the abuses to which certain monopolistic situations might lead.'27 He suggested: 'for cartels,. . . the principle of an absolute prohibition, while foreseeing the need to authorise the existence of certain cartels which could exceptionally be compatable with a competition regime.' M. Donnedieu de Vabres (F) responded that: 'the meaning of the French word "arrangement" does not correspond to the term "kartell" used by the Germans. It has a wider meaning, which is why it requires a more supple regulatory regime than that proposed by Mr. Muller-Armack. Moreover, authorised exceptions must have a special character, and be allowed on a case by case basis and not generally, as the French Delegation [sic] seems to accept.'28 M. Van Tichelen (B) 'declared that for psychological reasons it was dangerous to provide for condemnation of arrangements in principle, but that it would be advisable to let certain arrangements continue to exist for some time.'29 M. Linthorst-Homan (NL) responded that: 'psychological arguments must not win out against the objective needs of the Common Market, and that— for commercial and financial circles—it would be better to know the contents and scope of the Treaty from the outset instead of being obliged to dither in a situation of uncertainty.'30 26

'au contraire, insiste sur la necessite d'elaborer une reglementation juridique precise en matiere de discriminations et de differenciation deprix... .ilnefaudraitpas condamner toutes les ententes et toutes les concentrations, car ellespourraient etre compatibles avec le progres economique.' 27 'ilfaut bien distinguer entre monopoles et oligopoles d'un cote et cartels de Vautre. Les monopoles et les oligopoles ne sont pas necessairement . . . incompatibles avec un regime de concurrence. Ce qu'il faut supprimer. . . [sont] les abus auxquels certaines situations monopolistiquespourraient aboutir ... [q]uant aux cartels,.. . leprincipe de I'interdiction absolue, tout enprevoyant la necessite d'autoriser Vexistence de certains cartels, qui, exceptionnellement, pourraient etre compatibles avec un regime de concurrence.' 28 'le terme 'entente' au sens francais du mot, ne correspond pas a celui de 'kartell' employe par les allemands. Ilestplus large que le second et voila pourquoi ilexige une regiementation plus souple que celle prevue par M. Muller-Armack. En outre, les exceptions autorisees devraient avoir un caractereparticulier, etre admises Caspar cas et nonpas d'une facon generate comme semble I'admettre la delegation francaise' [sic]. 29 'declare qu'il est dangereux, pour des raisons psychologiques, de prevoir une condamnation duprincipe des ententes, mais qu'ilserait opportun de laisser subsister certaines ententes pendant quelque temps.' 30 'les raisons d'ordre psychologique ne doivent pas I'emporter sur les necessites objectives du marche commun et qu'il vaut mieux—pour les milieux commerciaux et

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• M. Muller-Armack (D) suggested as a solution to 'the problem of sanctions against the formation of arrangements',31 the adoption of 'the principle of the declaration of nullity "ipso jure".' • M. Van Tichelen (B) favoured notification: 'imposing an obligation to notify on undertakings.'32 Thus at the beginning of the drafting process, the founding fathers were by no means agreed either on what constituted problems or on what the remedies might be. The notions of refusal to supply and price discrimination which French law did not discard until 1996, forty years later, were much debated. The notion of nullity now provided in Article 81 (2) is mentioned first by the German delegate. It appears one month later in a Note by the Chairman of the Groupe du Marche Commun:33 'The abusive exploitation of a dominant position in the market must be governed by the same principles whether that position results from the scale of production of an undertaking or from an arrangement between several undertakings. However, there are differences between the situation of agreements and that of monopolies, which must be taken into account when drawing up the legal requirements concerning them. Thus, for example, one of the characteristics of agreements is that they are likely to hinder or prevent competition, and legal requirements should be introduced bearing in mind this effect and the extent to which it is produced or sought. With regard to monopolies, on the other hand, the more complete the monopoly, the less probable is it that any competition likely to be compromised or eliminated will exist. As a result, what should be prohibited in the case of monopolies is not hindrance of competition but only abuse of the dominant position in the market. . . . Finally, sanctioning the annulment of legal operations which lead to the acquisition of a dominant position in the market should probably apply only to agreements.'34 financiers—de connaitre des le debut le contenu et la portee du Traite plutot que d'etre obliges de se balancer dans une situation d!incertitude.' 31 ' le probleme des sanctions contre la formation des ententes . . . le principe de la declaration de nullite "ipso jure."' 32 ''I'imposition aux entreprises I 'obligation de I'enregistrement.' 33 D o c . M A E 468 f/56, supra note 17. 34 Lexploitation abusive a"une position dominante sur le marche doit etre regie par les mimes principes, que cette position resulte de I'ampleur de la production d'une entreprise ou d'une entente entre plusieurs entreprises. Toutefois, il existe entre les ententes et les monopoles des differences de situation dont ilfaut tenir compte en redigeant les prescriptions qui les concernent. C'est ainsi, par exemple, qu'une des caracteristiques des ententes est qu'elles sont susceptibles d'entraver ou d'empecher la concurrence, et c'est en consideration de cet effet et dans la mesure oil cet effet seproduit ou est recherche qu'ily a lieu de les introduire. En revanche, en ce qui concerne les monopoles, la concurrence susceptible d'etre compromise ou eliminee existe d'autant moins que le monopole en question est plus parfait. En consequence, dans le cas des monopoles, ce nest pas lefait d'entraver la concurrence, mais bien seulement I'abus de la position dominante sur le marche qui pourrafaire I'objet d'une interdiction. . . . Enfin, il parait opportun de reserver aux seules ententes la sanction de la nullite des operations juridiques qui conduisent a I'acquisition d'une position dominante sur le marche.

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At the beginning of November 1956 the Expert Group issued a proposal which also contained a provision embodying the notion of nullity:35 Agreements or decisions prohibited by virtue of paragraph 1 above [referring to the prohibition paragraph] are null and void in law and may not be relied on before any Member State jurisdiction.36 Agreements declared under the terms of paragraph 2 above [referring to the exemption paragraph] but prohibited by the Commission37 are equally null and void in law.

The delegations' positions on the proposed text can be culled from the following exchange:38 • Muller-Armack (D) 'expressed his full preference for a ban in principle on agreements, which was also accepted by the German legislation. B u t . . . this principle did not seem to be really envisaged in the proposal. . . , since even if point 1 [of the first article] provided for this ban, point 2 introduced too many exceptions. For this reason it would be preferable not to retain the 'principle of a ban' at international level, when this principle was not accepted in German national legislation; it would be more advisable simply to include in the Treaty a general declaration stating the incompatibility of arrangements with the Common Market, and to leave it up to the Member States themselves to make sure that this principle is put into practice during the first phase, through close collaboration and reciprocal consultation.'39 • M. Van Tichelen (B) 'declared he was very worried about the effect which the German proposal seemed likely to have on the objectives assigned to the Treaty and asked whether Mr. Muller-Armack would be prepared to adopt a

35 Projet de Redaction, Nov. 12, 1956, Council Archives, CM3/NEGO/217, Doc. MAE 527 f/56. A long document with some useful illustrations of alternative approaches to the drafting of the Articles. 36 'Les accords ou decisions interdits en vertu du paragraphe 1 ci-dessus sont mils de plein droit et nepeuvent etre invoques devant aucune juridiction des Etats membres.... La meme nullite frappe les accords declares aux termes du paragraphe 2 ci-dessus mais interdits par la Commission. 37 Reservation expressed by the Belgian expert; he would prefer the prohibition t o be laid down by a court. 38 Memo interne du groupe du marche commun of Nov. 13-15, 1956, Fascicule 10, Council Archives, CM3/NEGO/236, Doc. MAE/Sec. 70. 39 'exprime toute sa preference pour le critere de I'interdiction de principe des ententes, qui est egalement accepte par la legislation allemande. Mais,... ce principe ne semble pas etre reellement envisage dans le projet. . . , car si le (1 [du premier article] prevoit cette interdiction, le (2 introduit trop d'exceptions. Pour cette raison il serait preferable . . . de ne pas se tenir au 'principe de I'interdiction,' sur le plan international, alors que ce mime principe nest pas accepte par la legislation nationale allemande; il vaudrait mieux se limiter a inscrire dans le Traite une declaration generate qui enonce Vincompatibilite des ententes avec le Marche commun, en laissant aux Etats membres eux-memes le soin de veiller a la realisation de ce principe au cours de la premiere etape, moyennement une collaboration etroite et une consultation reciproque.'

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less extreme position if all the other delegations were ready to accept the principle of the ban adopted in the German legislation.'40 M. Muller-Armack (D) 'replied that his position on this problem was inspired by concern that should the proposed Treaty contain a ban in principle on arrangements, it would encounter strong opposition from certain circles with vested interests.'41 M. Hyzen (NL) 'drew the Group's attention to the hybrid nature of the proposal drawn up by the experts, which seemed to be a mixture of two different systems, one involving a ban and the other simply control of abuses. He ended by saying that every possible effort must be made to reach one single solution.'42 M. Donnedieu de Vabres (F) stated that 'a statement that arrangements and monopolies were incompatible and must be banned should not be abandoned. The fact that national laws on this subject were not harmonised was not an insurmountable obstacle. National laws should transpose the Treaty provision on agreements and monopolies, so that after a certain time international legislation could be drawn up.'43 M. Catalano (I) 'supported the German argument in favour of purely and simply deleting [the first article] which, unlike Mr. Muller-Armack, he thought was wholly superfluous, if not dangerous, since all transactions would be caught by the ban on discrimination which it laid down.'44

In parallel to these discussions in November 1956 about what we would call enforcement choices, the drafters' debate on prohibiting price discrimination on the basis of nationality was proceedings tied to their discussion on whether the rules enunciated in the Treaty should be directly applicable to the Member States. The President noted that most of the Member States at least agreed that

40 'se declare tres preoccupe par les consequences que la proposition allemande semble entrainer a I'egarddes objectifs assignes au Traite et demande a M. Muller-Armack s'il est pret a revenir sur des positions moins reculees au cas ou toutes les autres delegations seraient pretes a accepter leprincipe de I 'interdiction adopte par la legislation allemande.' 41 'reponden disant que sa position a I'egard de ceprobleme est suggereepar le soucique le projet du Traite, au cas oil il enonce le principe de I 'interdiction des ententes, nefasse I'objet d'une forte opposition venant de certains milieux interesses.' 42 'appelle Vattention du Groupe sur le caractere hybride du Projet etablipar les experts qui semble melanger deux systemes diffirents: celui de I'interdiction et celui du simple controle d'abus. II conclut en disant qu'il fautfaire tout effort possible pour aboutir a une solution unique.' 43 'il nefaudrait pas renoncer a I'enonciation de I 'incompatibility des ententes et des monopoles et a celui de leur interdiction. Lefait que les legislations nationales ne soientpas harmonisees a ce sujet nest pas un obstacle insurmontable. Les legislations nationales devraient incorporer les dispositions du Traite en matiere d'ententes et monopoles, defacon qu'apres un certain temps une legislation internationalpourra etre etablie.' 44 'se rallie a la these allemande de la suppression pure et simple [du premier article] qu'il considere, a I'oppose de M. Muller-Armack, absolument superflue si non dangereux, car Vinterdiction des discriminations qu'il enonce nepeut que frapper toute transaction.'

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the Treaty should only contain fundamental legal principles.45 He concluded that because the delegations could not reach an agreement on the text proposed by the Expert Group, they would refer the matter to a 'groupe restreint' which would consider: 1. a draft compromise setting out the principle of a prohibition of agreements and monopolies, to be drawn up jointly by the German, French and Italian delegations; 2. a draft compromise which would be presented by the President of the Common Market Group; and 3. a proposal setting out the principle of control of abuses regarding agreements and monopolies, to be presented by the Dutch delegation.46 In late November, the working group considered a set of draft competition articles, in which appear both nullity and the prohibition of discrimination on the basis of nationality:47 • first Article: • Discriminatory practices on grounds of nationality by commercial partners in competition with one another are prohibited within the Common Market. • The Council, acting on a proposal from the Commission, may adopt by qualified majority any legislation with a view to prohibiting such discriminatory practices. • second Article: • (reminder: question of anti-dumping legislation) • third Article: (1) All agreements between undertakings, all decisions by associations of undertakings and all concerted practices which are likely to affect trade between Member States and whose aim or effect is to prevent, restrict or distort competition within the Common Market are prohibited, in particular those which consist of: [list of 5 practices, much as they appear in what became Article 85 (1)] 45

M e m o interne of Sept. 7, 1956, Fascicule 5, supra note 23. 1. un projet de compromis formulant le principe de Vinterdiction des ententes et monopoles, a elaborer conjointement par les delegations allemande, frangaise et italienne; 2. un projet de compromis qui sera presente par le President du Groupe du Marche commun; et 3. une proposition formulant le principe du contrdle d'abus en matiere d'ententes et monopoles a presenter par la delegation neerlandaise. Projet de Proces-Verbal of Nov. 13-15, 1956, Council Archives, C M 3 / N E G O / 1 4 5 , D o c . M A E / 5 3 9 f/56; see also Projet de R e d a c t i o n p a r la delegation neerlandaise, of Nov. 15, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/547 f/56, a n d Tableau synoptique des projets d'articles of Sept. 24, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/325 f/56 (annexed to this paper). 47 Projet de redaction sur les regies de concurrence, Nov. 20, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/602 f/56. 46

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(2) These prohibitions will not apply to agreements between undertakings, decisions by associations of undertakings and concerted practices with regard to which those concerned can supply proof that they contribute towards improving the production or distribution of products or promoting technical or economic progress, and that users receive a fair share of the resulting profits, and that they do not • impose on those concerned restrictions which are not indispensable for the achievement of these objectives, • give these undertakings the possibility, for a substantial part of the products in question, to fix prices, limit production or market openings or eliminate competition from other undertakings. (3) agreements or decisions which are prohibited by virtue of the previous paragraph are null and void in law and may not be relied on before any Member State jurisdiction.48 It is curious that the third paragraph, establishing nullity, refers back to the second paragraph, which was the precursor of the exemption. Did the drafters consider that nullity should be inflicted upon agreements prohibited by virtue of the second paragraph (as not eligible for an exemption)? If so, we could conclude that the drafters did not, at least at this point, interpret Article 85 as necessarily establishing a prior authorisation system. Only those agreements 48

Article 1 Sont interdites a I'interieurdu marche commun les pratiques discriminatoires exercees, en raison de la nationality, a I'egarddepartenaires commerciaux en concurrence entre eux. Le Conseil, sur proposition de la Commission, peut prendre a la majorite qualifiee tout reglement en vue de I'interdiction de ces discriminations. Article 2 (pour memoire: question de la legislation anti-dumping) Article 3 (1) Sont incompatibles avec le marche commun et interdits tous accords entre entreprises, toutes decisions d'associations d'entreprises, et toutes pratiques concertees qui sont susceptibles d'affecter le commerce entre les Etats membres et qui ont pour objet ou pour effet d'empecher, de restreindre ou defausser lejeu de concurrence a I'interieur du marche commun et notamment ceux qui consistent a: [suit une liste de pratiques interdites plus ou moins telles que celles de iArticle 85] (2) Seront releves des interdictions precedentes les accords entre entreprises, les decisions d'associations d'entreprises et les pratiques concertees au sujet desquels la preuve peut etre fournie par les interesses qu'ils contribuent a ameliorer la production ou la distribution des produits ou a promouvoir le progres technique ou economique, tout en reservant aux utilisateurs une part equitable du profit qui en resulte et sans • imposer aux entreprises interessees des restrictions qui ne sont pas indispensables a la realisation de ces objectifs, • donner a ces entreprises la possibility, pour une partie substantielle des produits en cause, de fixer lesprix, de limiter la production ou les debouches ou d'eliminer la concurrence d'autres entreprises. (3) les accords ou decisions interdits en vertu duparagrapheprecedent sont nuls deplein droit et nepeuvent etre invoques devant aucune juridiction des Etats membres.

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falling within the prohibition of the first paragraph and not benefiting from the exceptions laid out in the second paragraph would be automatically null and void. One week later, the nullity provision had been changed, and referred back to the paragraph concerning the prohibition, not the exemption!49 Unfortunately, the archival documents do not provide any explanation for the change. Another week brought a further change: the nullity provision, still located in the third paragraph, refers to agreements prohibited by 'the present article.'50 This version is very close to what ultimately became Article 85 of the Treaty, save that paragraphs (2) and (3) are reversed. The drafting group was charged with determining whether the removal of the words 'sont nuls de plein droif would weaken the scope of the paragraph. Thus, the drafters considered that it might be enough that an agreement could not be invoked before a national court. But in a draft dated February 14, 1957, the nullity paragraph was eliminated and the notion incorporated into the first paragraph containing the prohibition: Sont incompatibles avec le marche commun, interdits et nuls de plein droit, tous accords.. . 51 It was not until the late date of February 23, 1957 that the order of the paragraphs appears as it does in the final form of the Treaty.52 At this time, there was also discussion of whether the nullity should be prospective only, and whether the intervention of a national authority would be necessary to establish nullity. It is clear that the nullity provision bounced around frequently before definitively arriving in Article 85 (2), its final rest place. The provision was in paragraphs (3), (2), and (1) at different times. The uncertainty related not merely to its numbering, but, more importantly, to its functioning. Upon which triggering event was the agreement to be void, and from when did the nullity run? Having looked at the texts, it seems impossible to say that they clearly favour one answer more than another. I think it is fair to say that the two paragraphs could be regarded as complementary, each being a part of a single analysis but they cannot—in my view— be regarded as favouring either the control of abuse theory or the prohibition of restrictions theory. Nor do the words or travaux preparatoires indicate the relative weights to be accorded to Article 85 (1) and (3). Were the energy, authority, skills and resources of the enforcing agency to be deployed principally in applying paragraph (1) or paragraph (3)? The Minutes do not much help us as to the nature of the exemption process. Is the agreement which is 49 Projet de Redaction, Nov. 28, 1956, Council Archives, C M 3 / N E G O / 2 1 7 , Doc. M A E 657 f/56. 50 Redaction approuvee, Dec. 6, 1956, Council Archives, C M 3 / N E G O / 2 3 6 , D o c . MAE/788 f/56. 51 Projet de redaction of Feb. 14, 1957, Council Archives, C M 3 / N E G O / 2 3 6 . 52 We found n o explanation of why Articles 40(1), (2) and (3) became Articles 85 (1), (3) and (2).

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caught by Article 85 (1) unlawful because it restricts competition but curable by Article 85 (3) because it serves broad competition goals despite its restrictive features? In this case, the entirety of the analysis would be a competition law analysis. Or might the role of Article 85 (3) be to extend to the agreement the benefit of general economic and social goals? In either case, there is a two-step process. Now, the Commission got itself into early difficulties by finding too easily restrictive features that necessitated the use of the exemption mechanism. Instead of blessing the agreement under Article 85 (1) as benign in its entirety, the Commission used the costly remedy of Article 85 (3) (costly because the apparatus of formally deciding to grant an exemption was far too burdensome). Thus to the extent that Article 85 was based on a prohibition theory, then it was used too promiscuously.53 As a result, Article 85 (3) was used for the wrong purpose, to confirm the overall legitimacy of the deal, as opposed to . being reserved for the special occasions where the deal called out for creative thinking, tolerance or the grant of a short-term exceptional approval. A simpler way of saying this is to observe that if negative clearances had been issued more frequently, the Commission could have kept up with the demand for exemptions by sharing the task of blessing agreements with national courts. By contrast, under the regime adopted, national courts had no function, at least in theory, once they had concluded Article 85 (1) applied. The words as the drafters left them are clearly based on a prohibition. The reforms would mean that an agreement containing a restrictive feature would no longer be void until exempted; it would be void if its restrictive features did not satisfy the criteria prescribed in paragraph (3), rather than solely because it had restrictive features. That change is, at least in theory, a profound one. (I argue below that, in practice, the change is not an important one.) However, I do not find in the travaux preparatoires evidence that the drafters would have opposed such an outcome. The travaux preparatoires indicate, I submit, that the drafters could legitimately expect three features in European competition law enforcement measures. First, the prohibition and punishment of the unacceptable. Second, the intelligent and pragmatic examination of doubtful matters with a view to determining in a timely manner whether they are acceptable. Third, abstention from interference in benign matters. Granting direct effect to paragraph (3) is not inconsistent with that division; nor does it seem inconsistent with what the drafters intended. The debate in 1956 and 1957 was not as focused and as scientific as the one we are conducting forty-five years later. The delegates were exploring in a basically amicable and collegiate manner concepts that were unfamiliar to most of them.

53

Read a competition decision like AlcatellEspacelANTNachrichtentechnik, 1990 OJ L 32/19, which lumbers through a series of reasons why jurisdictionally the deal falls within the Commission's clutches (changes in the parties' level of autonomy in various respects), and then records the many virtues of the deal.

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1.4. British doubts about what it all meant While thefinishedversions of Articles 85, 86 and 87 of the Treaty of Rome may have pleased the drafters, they left many questions unanswered. On April 10, 1958, the British Embassy in Paris addressed to the French Government an aide-memoire recording that there was: uncertainty in commercial and legal circles in the United Kingdom about the effect of Articles 85,86 and 88 ... on current and future commercial contracts between parties in the United Kingdom on the one hand and parties in the countries of the European Economic Community on the other.54 The UK presented a number of pertinent questions, such as: In order that this uncertainty may be resolved, Her Majesty's Embassy would be grateful if the Ministry of Foreign Affairs would provide answers to the following questions: 1. Article 88 of the Treaty of Rome provides that until the entry into force of the provisions adopted in application of Article 87, the authorities of Member States shall, in accordance with their respective municipal law and with the provisions of Articles 85 and 86, rule upon the admissibility of any understanding and upon any improper advantage taken of a dominant position in the Common Market. To what extent, and in what ways, does the ratification of the Treaty of Rome affect or modify existing municipal law in thisfieldin France? Is a party to a pre-existing contract entitled to repudiate it if it falls within the prohibited class of contracts indicated in Article 85(1) and (2) and is not saved by Article 85 (3)? Would the ordinary commercial courts apply Article 85 if the dispute were brought before them by another party to the contract? (b) What would be the position in the event of any conflict between the substantive rules of existing municipal law in France and Articles 85 and 86 of the Treaty of Rome? 3. Is it possible to say what further legislative steps, if any, in connection with private restrictive practices, are required or contemplated by the Government of France as a consequence of the ratification of the Treaty of Rome? 4. In the event that the answers to these questions indicate that there is doubt whether or how far Articles 85 and 86 are of direct, immediate and independent application in France during the interim period, what steps if any are contemplated by the Government of France to resolve this doubt?55 On June 12, 1958, the French Permanent Representation proposed that the aide-memoire should be examined by a working group of the six Member States 54 Aide-Memoire of April 10, 1958 from U K Embassy in Paris to French Government, Council Archives, CM2/1958/748. Identical memoranda were submitted by embassies in four other capitals. The sixth memorandum perhaps got lost. 55 Aide-Memoire of April 10,1958, of U K Embassy in Paris to French Government, Council Archives, CM2/1958/748.

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in order to achieve a common line (or, if this were not possible, parallel lines).56 The Commission's reaction was unease. In a memorandum dated June 19,1958, the Competition Directorate General expressed its fears: The Commission fully understands the French desire to avoid any increase in existing levels of uncertainty about the interpretation of these articles, which could arise if six countries were to give different replies to the questions from the British government.57 The Commission (disingenuously or optimistically) expressed its desire to put an end as quickly as possible to this uncertainty, and asked for time to find 'a practical solution.' It asked the Member States to give it some more time; and at the fourteenth meeting of Coreper in Strasbourg on June 20 and 21, 1958, there was a discussion of the subject.58 The Commission offered to propose an answer even before the summer holidays. The Italian delegation favoured a precise and comprehensive answer, but the French feared the need to offer a very complete and thorough reply, and proposed to send not a provisional answer which would in its turn call for an exhaustive follow up, and therefore favoured a simple answer. Belgium was troubled by the fact that there was no competition law in Belgium (has much changed?), and felt the need to offer reassurance to the British. The Netherlands favoured six different replies. Predictably, the outcome was the constitution of a working group which—rapidly—produced a common reply stating that: The co-existence, foreseen by Article 88 of the Treaty, of national laws with the provisions of Articles 85 and 86 of the Treaty—a co-existence which national courts will eventually have to recognise—poses a problem of interpretation which can only be resolved definitively by the case-law of the Court of Justice in the context of the competence which is granted to it by the Treaty. Further, according to Article 89 of the Treaty, the Commission of the Community is charged—when it takes up its duties—with ensuring that the principles laid down in Articles 85 and 86 are applied, which could lead the Commission to adopt a position on this subject. The attention of the Commission has therefore been drawn to the questions raised. The Commission has informed the Government of . . . that it intends, in the shortest possible time, to decide on its position on the most urgent practical questions regarding the application of these Articles. These questions include the problem of what procedure should be followed in order to put an end as soon as possible to the present uncertainties emphasised in the memorandum from the United Kingdom.59 56

N o t e of June 12, 1958 from French Permanent Representation, Council Archives, CM2/1958/748. 57 Commission Memorandum of June 19, 1958, COM/58/132, Council Archives, CM2/1958/748 ('La Commission comprendpleinement le desir frangais d'eviter I'incertitude actuelle sur I'interpretation de ces articles, qui pourrait se produire au cas ou les six pays donneraient des reponses differentes aux questions du Gouvernement britannique.'). 58 Extrait d u Proces-Verbal de la 14eme Reunion du Coreper, June 20-21, 1958, Council Archives, CM2/1958/748, Doc. 636 f/58. 59 La coexistence, prevuepar Varticle 88 du Traite, des legislations nationales et des dispositions des articles 85 et 86 du Traite—coexistence dont lesjuridictions nationales auront

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This was agreed on July 11, 1958. So far as the Archives could reveal, the Commission never did produce its definitive reassurance about the effects of the Treaty of Rome on industrial property rights and exclusive territorial licensing. 1.5. Conclusion on the archival evidence The drafters were not contemplating the competition rules in the way that we have come to examine them. The text of Articles 85 and 86 was drafted in six months, the actual order of the paragraphs of Article 85 was still unsettled only days before the signing of the Treaty, and the preamble was forgotten until just ten days before signing.60 The year after signature, neither the Member States nor the Commission were able to respond to the UK's questions about how the competition rules would affect executed agreements. The drafters probably did not fully realise the implications that these provisions would have in the ensuing years. These conclusions lead to the following remarks. First, there was no single will or goal on the part of the drafters about the nature of the challenge to be confronted. Moreover, their concerns, to the extent they are discernible, are—not surprisingly—different to those of today's enforcers. They were Babes in the Wood by today's standards. They were evidently worried about price discrimination, especially based on nationality. They were worried about what we would now call intra-Community dumping and anti-dumping measures. A reading of the Minutes does not suggest that they were unanimous in seeing competition as an instrument for deregulation, for adapting business structures and for stimulating economic efficiency and consumer welfare. Second, they certainly looked at every possible variant, procedurally speaking. Should restrictive agreements be prohibited? Unenforceable? Void? eventuellement a connaitre—pose un probleme d'interpretation qui ne pourra etre definitivement tranche que par la jurisprudence de la Cour de Justice dans le cadre de la competence qui lui est attribute par le Traite. Par ailleurs, selon I'article 89 du Traite, c'est a la Commission de la Communaute qu'incombe la tache de veiller—des son entree en fonctions—a Vapplication des principesfixes par les articles 85 el 86, ce quipourrait amener la Commission a prendre position a ce sujet. C'est pour cette raison que Vattention de la Commission a ete appelee sur les questions posees. La Commission a fait part au Gouvernement de . . . de son intention de fixer, dans leplus court delai, sa position vis-a-vis des questions pratiques les plus urgents concernant Vapplication des articles mentionnes. Parmi ces questions figure le probleme de la procedure a suivre afin de mettre fin, le plus tot possible, aux incertitudes actuelles soulignees dans Vaide-memoire du Royaume- Uni. Draft reply by the 6 Governments to the Memorandum from the United Kingdom, Council Archives, CM2/1958/748, Doc. 678 f/58. 60

Commission europeene, DG X et Conseil Universitaire Europeen pour l'Action Jean Monnet (1999): 40 ans des Traites de Rome ou la capacite des Traites d'assurer les avancees de la construction europeenne, Actes du Colloque universitaire de Rome organise a la memoire d'Emile Noel, Rome, March 26-27,1997 (Bruxelles, Bruylant), at p. 63.

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Incapable of being relied on before national courts? Invalid after being declared unenforceable by national courts? Ex tune, ex nuncl There were no obvious winners or losers. What they produced was an amalgam of several countries' preferences. Third, the new regime was based upon a text drafted by a committee, a diplomatic compromise. The drafters' governments were themselves unsure of the implications of that text only one year after its drafting had been completed. My impression is of well-intentioned confusion about a range of problems, rather than a focussed, purposeful debate on accurately identified issues. Fourth, Community law has moved on. Now it has the benefit of primacy over inconsistent national law, and of direct effect. The direct effect of Articles 85 and 86 was only established in my professional lifetime in BRTv SABAM.61 These judge-made creations are so important that it is not surprising the earliest texts were obscure without them, and that in judgments such as Portelange62 and Bosch63 the Court found these issues difficult. As a result of all the foregoing, I submit that the answer to the question regarding the compatibility of the White Paper proposals lies primarily in the text of the Treaty itself, as explained by the European Courts and learned commentaries.

III. Textual considerations Can we fairly read Article 85 as allowing what the Commission favours? 1. The ECSC Treaty as a recent example The ECSC Treaty, signed in Paris on April 18, 1951, explicitly provides for prior authorisation. Article 65(1) contains a simple prohibition: All agreements between undertakings, decisions by associations of undertakings and concerted practices tending directly or indirectly to prevent, restrict or distort normal competition within the common market shall be prohibited, and in particular those tending: 61

Case 127/73 Belgische Radio en Televisie et societe beige des auteurs, compositeurs et editeurs v SV SABAM et NVFonior (BRT-I) [1974] ECR 51; commented on by the a u t h o r in ' C o m p l e m e n t o r O v e r l a p ? Jurisdiction of National a n d C o m m u n i t y Bodies in Competition M a t t e r s After S A B A M ' , 1974 C o m m o n Market Law Review, 171. 62 Case 10/69 S.A. Portelange v SA Smith Corona Marchant International and others [1969] E C R 309. 63 Case 13/61 Kledingverkoopbedrijf de Geus en Uitdenbogerd v Robert Bosch GmbH and Maatschappij tot voortzetting van de zaken der Firma Willem van Rijn [1962] E C R 89.

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(a) tofixor determine prices; (b) to restrict or control production, technical development or investment; (c) to share markets, products, customers or sources of supply. Article 65(2) gives the High Authority/Commission the power to authorise certain categories of agreement: However, the High Authority shall authorise specialisation agreements or joint-buying or joint-selling agreements in respect of particular products, if itfindsthat: (a) such specialisation or such joint-buying or -selling will make for a substantial improvement in the production or distribution of those products; (b) the agreement in question is essential in order to achieve these results and is not more restrictive than is necessary for that purpose; and (c) the agreement is not liable to give the undertakings concerned the power to determine the prices, or to control or restrict the production or marketing, of a substantial part of the products in question within the common market, or to shield them against effective competition from other undertakings within the common market. Authorisations may be granted subject to specified conditions and for limited periods. In such cases, the High Authority shall renew an authorisation once or several times if itfindsthat the requirements of subparagraphs (a) to (c) are still met at the time of renewal. The High Authority shall revoke or amend an authorisation if it finds that as a result of a change in circumstances the agreement no longer meets these requirements, or that the actual results of the agreement or of the application thereof are contrary to the requirements for its authorisation. Thus the drafters of the EEC Treaty had before them the example of Article 65 of the ECSC Treaty. They were confronted with a broad range of possible control mechanisms. Arguably, the most compelling Community precedent would be Article 65, a prohibition of illegal conduct curable under limited conditions by the Commission and by no one else. They elected not to follow it. This seems to confirm the constitutional propriety of ascribing to other bodies the grant of exemptions under the Treaty of Rome.

2. Article 85 (3) does not prescribe who shall decide upon exemptions Paragraph (3) states that the provisions of paragraph (1) may, however, be declared inapplicable.. . . There is no specification of which body may do the declaring: the Commission? The national courts? National regulators or competition authorities? It is clear from the Minutes already quoted that the delegates considered many hypotheses and came to a conclusion that did not decide for the future. When a Treaty, which in other respects is very precise about which institution shall do what, fails to specify who shall act, it means that the identity of the actor is left open. There are therefore good textual grounds for concluding that

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the Treaty of Rome contemplated exemptions being granted other than by the Commission. Nothing in Articles 87 to 89 of the EEC Treaty contradicts this conclusion. 3. Subsidiarity It is also relevant that the Treaty has taken formal note of the doctrine of subsidiarity. Article 3b, as amended by the Treaty on European Union, now reads: The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.

I do not find attractive the notion of subsidiarity as a constitutional principle, but it has been adopted, and it is difficult even for an anti-subsidiarity-ist like myself to deny that it supports the proposition that national decision-making is not a priori inferior to Community decision-making. The local court or competition agency is likely to know the facts more thoroughly than a European agency. So decentralisation is consistent with the Treaty.

4. Do Article 81(1) and Article 81 (3) constitute a single text? A more difficult textual question is whether one can fairly read Articles 81 (1) and 81 (3) together. This is a genuine and challenging legal problem with substantive and procedural consequences. Where only the Commission was in charge of the analysis, it did not make a great difference. If the agreement was basically desirable in its totality, but contained restrictive clauses, the exemption decision would recite a litany of restrictions, and then a counterpoint of beneficial effects. The Commission was regularly encouraged to be bolder in applying Article 85 (1) in such a way as to find that clauses which notionally limited the economic freedom of the parties were nonetheless not anti-competitive in that their dispositions were a natural concomitant of a basically pro-competitive agreement. The ease with which clauses could be found restrictive meant that enterprises were reluctant to pursue formal exemption since obtaining one always involved the risk of being asked to make heavy concessions as the price of approval. This phenomenon muddled the debate about the respective roles of Article 85 (1) and (3). Was the function of Article 85 (3) to cure, by reference to indus-

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trial policy, the competitive restrictions identified in Article 85 (1)? Or was it to be used only in the gravest cases, on pure competition grounds, where the criteria established by Article 81 (3) for the grant of an exemption had been stringently verified? If we looked at the decisions, however, the debate became irrelevant. The Commission's practice was not completely consistent, but generally if it granted an exemption it noted 'restrictive clauses' plus 'economic benefits', and then granted an exemption. Sometimes, there would be a bolder decision in which the restrictive features were minimised.64 Commission decisions, however, usually proceeded to a classical textual analysis of restrictive clauses, followed by a curative recital of their wholesome economic effects. Functionally, therefore, paragraphs (1) and (3) have been read together in the Commission's practice. This had big implications for the enforcement of the law. The Commission was unable to deliver the exemption decisions for which its theoretical jurisdictional reach created a need.65 Indeed, I submit that the core difficulty is not a textual problem at all but a problem of practicalities, of how the European Commission chose to structure its enforcement efforts. In the early 1960s, when Regulation 17/62 was being drafted, the staff of DG IV had no special reason to be optimistic about the receptivity of businesses, their lawyers or even national judges to novel doctrines, promulgated by a young bureaucracy, still less the use of competition law as a tool for cross-frontier market integration. Naturally, the officials were reluctant to see their creature stifled at birth. So they decided that the basic prohibition should be interpreted as having a broad reach. It would be by the tolerant use of Article 81 (3) rather than by the mild use of Article 81 (1) that sensitive choices were to be made. Producing a volume of decisions commensurate with the jurisdictional reach implicit in a broad interpretation of Article 81 (1) proved to be beyond the capacities of the Commission. The procedures adopted were too cumbersome, too thorough, too perfectionist, too slow. Some early decisions were taken very briskly66 but others took years, even decades.67 The enforcement system effectively broke down; certainly specialist practitioners in Brussels had an 64 {Consortium ECR 900, OJ L 228/31 1990, for example, or ElopaklMetal Box Odin, OJ L 209/15 1990, in which the Commission recited a lot of good reasons why the deal made sense as pro-competitive; dozens of decisions used this kind o f reasoning in the past, but always as justification for granting a n exemption under Article 81 (3), as opposed to negative clearance under Article 81 (1). 65 This approach to paragraph (1) may yet cripple the decentralisation effort, since if the authorities to whom power of enforcement is newly-given follow the example of the European Commission from 1970 to 1999, they will create for themselves the same kind of difficulty as the Commission is trying to escape. Too many deals caught by the prohibition, too many candidates for exemptive treatment, too much procedural manipulation by using unanswered notifications as proof of legality. 66 Decision 72/480/CEE WEA-Filipacchi OJ L 303/52 1972, raced from opening t o adoption in barely seven months. 67 Decision 93/46/EEC Ford Agricultural, O J L 2 0 / 1 1993, is one, maybe unfair, example.

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advantage over non-specialists elsewhere. It was easier to prevent a decision being taken than to achieve the taking of a decision. Doubts and theoretical disputes could delay controversial decisions for years or forever. Victory in defending a client accused of an infringement would lie in the absence of defeat; that is to say in the non-taking of a negative decision rather than the taking of a favourable decision. Thus the proposed reforms are largely a reaction to the Commission's inability to enforce the system rationally. When the key documents were adopted over thirty years ago, expectations about how they would be enforced were different.

5. Are the Bosch and Portelange judgments relevant? This is an appropriate moment to note the early judgments of the Court of Justice, where the Court had to consider the effect on 'old agreements', antedating the Treaty of Rome or Regulation 17/62, of the new competition rules. Did a restrictive agreement become void from the moment of its signature, from the moment of the Treaty's entry into force, from 1962, or from the moment of the notification? Or did it remain valid unless condemned? And if condemned, from what moment should the nullity run? The Bosch68 and Portelange69 cases offered an opportunity for the Court to consider how the competition rules ought rationally to be enforced. In Bosch, speaking of 'old agreements', those signed before the entry into force of Regulation 17/62, the Court said: . . . the authors of the Regulation seem to have envisaged also that at the date of its entry into force there would be subsisting agreements to which Article 85 (1) applied but in respect of which decisions under Article 85 (3) had not yet been taken, without such agreements thereby being automatically void. The opposite interpretation would lead to the inadmissible result that some agreements would already have been automatically void for several years without having been so declared by any authority, and even though they might ultimately be validated subsequently with retroactive effect. In general it would be contrary to the general principle of legal certainty—a rule of law to be upheld in the application of the Treaty—to render agreements automatically void before it is even possible to tell which are the agreements to which Article 85 as a whole applies.70

This seems consistent with the view that Article 85 is not a prohibition to which a potential cure is attached, but a conditional prohibition that applies if the cure is unavailable. Thus these paragraphs contradict the 'German view' that the reforms are improperly abandoning a regime of prohibition of infringements and adopting a regime of controlling abuses. They also contradict 68 69 70

Case 13/61 Bosch [1962] E C R 89. Case 10/69 Portelange v Smith Corona [1969] E C R 309. See Bosch at § 52.

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Commission practice, which was indeed to regard the denial of an exemption as having retroactive effect. The Court thought it would be wrong to prohibit and render void an agreement that might subsequently be validated retroactively. However, the Court then discussed Article 85 (2) which . . . seems to regard Articles 85 (1) and (3) as forming an indivisible whole. The Court was writing in an age when it was expected that the notification system would work rationally, with filing, examination and favourable or unfavourable response following each other in a rational manner and with reasonable speed. In Portelange,11 the Court maybe noted the possibility of a problem of delay. It stated: 15. In view of the absence of any effective legal means enabling the persons concerned to accelerate the adoption of a decision under Article 85 (3)—the consequences of which are all the more serious the longer such a decision is delayed—it would be contrary to the general principle of legal certainty to conclude that, because agreements notified are notfinallyvalid so long as the Commission has made no decision on them under Article 85 (3) of the Treaty, they are not completely efficacious. 16. Although the fact that such agreements are fully valid may possibly give rise to practical disadvantages, the difficulties which might arise from uncertainty in legal relationships based on the agreements notified would be still more harmful. 20. It must therefore be concluded that the agreements mentioned in Article 85 (1) of the Treaty, duly notified in accordance with Regulation No 17, are of full effect so long as the Commission has made no decision under Article 85 (3) and the provisions of the said regulation.

I do not see in this judgment a definitive statement about whether Article 85 (1) and (3) shall be applied in a sequential or in a unitary fashion. Both the Portelange and the Bosch judgments were considering practical procedural problems. They do not prove or disprove the Commission's case: they were rational responses to the procedural situation as the Court could imagine it. They were adopted when all parties could reasonably expect that a notification would be examined promptly and decided with only moderate delay. It would therefore be unreasonable for the denial of an exemption to have retroactive consequences that went back a very long way. As we have learned, however, very few notifications lead to a formal decision and none are decided quickly. One may imagine that, confronted with such a procedural situation, the Court would wish to follow whatever approach was not inconsistent with the words of the Treaty and was most likely to deliver a procedurally rational framework within which business people could organise their affairs with a reasonable level of stability. The Bosch and Portelange judgments are best read as the Court's reasonable expression of opinion as to how the notification system should work. I do not see them as making fundamental pronouncements relevant for all time in different procedural contexts. In any event, we should not feel

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constrained by very early judgments when.the Court was feeling its way (remember that the Court made early mistakes. Sirena v Eda12 is probably the clearest).

6. Self-help and the rule of reason Although the notion that ancillary restraints could be pro-competitive was helpful, and although the European Court was notably encouraging when it had a chance to bless a more robust approach to Article 85 (1), the Commission was reluctant to contemplate a reading of Article 85 (1) which allowed businesses on their own to conclude that a deal with restrictive clauses and procompetitive effects was textually tolerable. My usual analogy for students is to say that DGIV was a catholic jurisdiction in which the affirmative approval of the priest was necessary: the layman was forbidden to discern the right path by consulting his conscience alone. He was eligible to receive blessing only after having made a full confession. To quote the White Paper,73 The Commission has already adopted this approach to a limited extent and has carried out an assessment of the pro- and anti-competitive aspects of some restrictive practices under Article 85 (1). This approach has been endorsed by the Court of Justice.47 However, the structure of Article 85 is such as to prevent greater use being made of this approach: if more systematic use were made under Article 85 (1) of an analysis of the pro-and anti-competitive aspects of a restrictive agreement, Article 85 (3) would be cast aside, whereas any such change could be made only through revision of the Treaty. It would at the very least be paradoxical to cast aside Article 85 (3) when that provision in fact contains all the elements of a 'rule of reason'. (Footnote47 referring to the Maize Seed1* and Pronuptiali cases omitted.) The Commission warned against . . . diverting Article 85 (3) from its purpose, which is to provide a legal framework for the economic assessment of restrictive practices and not to allow application of the competition rules to be set aside because of political considerations.76

72

C a s e 40/70 Sirena Sri v Eda Sri and Others [1971] E C R 69. E u r o p e a n C o m m i s s i o n : White Paper on the modernisation of the rules implementing Articles 85 and 86 of the EC Treaty, C O M (1999) 101 Final (Apr. 1999), § 57; 1999 O J C 132/1 [hereinafter White Paper]. 74 Case 258/78 L. C Nungesser KG and Kurt Eisele v Commission of the European Communities [1982] E C R 2015. 75 Case 161/84 Pronuplia de Paris Gmbh v Pronuptia de Paris Irmgard Schillgalis [1986] E C R 353 76 Mat§57. 73

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The Commission had already started changing its mind (but was unwilling to voice doubts in public) when the intriguing judgment in Night Services11 emerged. There, the Court of First Instance offered its version of the point at which Article 85 (3) should become relevant: . . . The Commission submits that, whilst the analysis of an agreement must take account of its economic context, it does not follow that the rule of reason—a concept which the Court of Justice has hitherto declined to embrace—should be resorted to . . . Consequently, it is necessary to balance the competitive benefits and harms of an agreement in relation to the granting of exemptions under Article 85 (3) of the Treaty but not in respect of the appraisal of restrictions on competition—which were, contrary to the United Kingdom's contention, fully explained in the decision—in accordance with Article 85 (I).78 Before any examination of the parties' arguments as to whether the Commission's analysis as regards restrictions of competition was correct, it must be borne in mind that in assessing an agreement under Article 85 (1) of the Treaty, account should be taken of the actual conditions in which it functions, in particular the economic context in which the undertakings operate, the products or services covered by the agreement and the actual structure of the market concerned (judgments in Delimitis, cited above, Gottrup-Klim, cited above, paragraph 31, Case C-399/93 Oude Luttikhuis and Others v Verenigde Cooperatieve Melkindustries [1995] ECR 1-4515, paragraph 10, and Case T-77/94 VGB and Others v Commission [1997] ECR 11-759, paragraph 140), unless it is an agreement containing obvious restrictions of competition such as price-fixing, market-sharing or the control of outlets (Case T-l 48/89 Trefilunion v Commission [1995] ECR 11-1063, paragraph 109). In the latter case, such restrictions may be weighed against their claimed pro-competitive effects only in the context of Article 85 (3) of the Treaty, with a view to granting an exemption from the prohibition in Article 85 (I).19 (emphasis added) The route chosen by the Commission in the White Paper is faithful to its traditional doctrines: The whole of Article 85 would then become a directly applicable provision which individuals could invoke in court or before any authority empowered to deal with such matters. This interpretation would have the effect of making restrictive practices which are prohibited by Article 85 (1), but which meet the tests of Article 85 (3) lawful as from the time they were concluded, without the need for any prior decision. Similarly, restrictive practices that restricted competition would be unlawful once the conditions of Article 85 (3) are no longer fulfilled. This new framework would mean that restrictive practices would no longer have to be notified in order to be validated. The arrangements for implementing Article 85 as a.whole would then be identical to those for Article 85 (1) and Article 86.80

77 Joined Cases T-374/94, T-375/94, T - 3 8 4 / 9 4 a n d T-388/94 European Services and others v Commission [1998] E C R 11-3141. 78 Id. at §134. 79 Id. at §136 80 White Paper, supra note 73 at § 69.

Night

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It is difficult to predict whether the analysis of a directly-effective Article 85(1) and (3) would follow the liberal approach espoused in Gottrup Klim81 and European Night Services,62 or the old approach in the joint venture cases like Alcatel, quoted above,83 or X/Open.84 As noted elsewhere, I suggest that in jurisdictions where competition doctrines are new, or where the European Commission's policy serves as the role model for the local enforcement agency, there is a risk that it will be by the application of the exempted part of the equation that most sensitive decisions are made. In conclusion, I do not think, however, that there is a strong textual case against reading Article 81(1) and Article 81 (3) together as a unity.

IV. Practical considerations 1. Legal certainty Legal certainty or legal security (the terms seem synonymous) is very frequently invoked as a prime concern for those responsible for enforcing the competition rules. Advocates General, article writers, and the Commission itself have each stated on various occasions how important it was to ensure legal certainty. The absence of such certainty would typically be due to the unavailability of a formal Commission exemption decision, or due to the inherent uncertainty of a competitive situation in which a formal clearance or condemnation had not yet emerged. I have never been wholly convinced that an absence of legal certainty was such a terrible thing; or indeed that the achievement of legal certainty about the application of the competition rules was in truth feasible. Competition law exists to encourage competition, not to prescribe or regulate rigidly or definitively. It is a plastic legal discipline. Its goal is to ensure the opportunity for economic operators to pursue prosperity in the marketplace and to engage in economic strife with each other. It is not realistic to imagine that a business manager can expect a high degree of legal certainty as to his 81 Case C-250/92 Gettrup Klim Grovvareforeninger v Dansk Landbrugs Grovvareselskab AmbA [1994] E C R 1-5641. 82 Joined cases T-374/94, T-375/94, T-384/94 and T-388/94, [1998] E C R 11-3141. 83 See supra note 53. 84 For a very conservative approach to Article 85 (1) see XlOpen Group, O J L 35/36 1987, where the Commission found that the information exchange and related non-disclosure agreements did not infringe Article 85 (1). On the other hand, the combination of the restrictions on membership and the fact that, even though the resulting standards were to be open and public, members would have access to them sooner than non-members, were caught by Article 85 (1) but exempted. One may wonder, as ever, whether this methodological contortion was really useful in order t o reach the conclusion that the whole arrangement was valid under the competition rules (the agreement was operated for almost a year before being notified).

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competitive situation. There are certain matters in running a business where legal certainty is expected and indeed demanded. The formal requirements for the execution of a binding contract of employment must be known, and if they are not known or are constantly changing, business people can properly feel let down by legislators and judges. The terms of the law governing the lease of office premises or the effectiveness of a bank loan must be clear, and their application ought to be predictable. In private life, the rules governing the formal validity of a will and the constraints upon a testator's freedom to dispose of his assets as he chooses, are precisely defined by the law, and prudent people organise their affairs accordingly. By contrast, any business is today exposed to swings in the respective values of foreign currencies, changes in how business is conducted due to the Internet and e-commerce, continually growing social costs, the emergence of new products, and the gradual de-regulation of many markets which, in former years, were heavily regulated. The uncertainties posed for a business by these external political, fiscal, monetary, economic and social factors, to say nothing of changes in customer taste and the perpetually unforeseeable course of events, are far more significant and arguably far more threatening than the doubts attributable to the unpredictability of the outcome of any competition law dispute. As long ago as the 1970s, prudently run companies were looking at the possibility of filing a notification with the European Commission, and concluding that this was one invitation they would not take up. Such companies would say to themselves that while it would be agreeable to have the formal confirmation of the European Commission that the arrangement to which they were party was valid and enforceable, there were countervailing drawbacks. The filing of a notification could draw attention to a transaction that might otherwise go unnoticed. More particularly, obtaining the Commission's approval could involve months and years of negotiation and concession. In most cases, the Commission's approval was not manifested by any formal decision. The heart of the doctrine concerning whether a notification was desirable was therefore based on a fiction, namely that most notifications led to a formal disposition by the Commission's services. It can thus be observed that many companies have decided over the years that they will not exercise their option to file a notification requesting an exemption. They accept some diminution in the legal certainty governing their affairs, but do not regard this as troublesome.

2. Fictitious advantages of the reforms At least one rationale for the change seems disingenuous. For example, it is contended that ... undertakings' legal certainty will remain at a globally satisfactory level, and in certain respects will even be strengthened. Thus, instead of depending on the Commission adopting an exemption decision, undertakings will be able to obtain

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immediate execution of their contracts before national courts, with effect from the date of their conclusion, provided that the conditions of Article 85 (3) are satisfied. There is no presumption that restrictive practices are void under Article 85: the prohibition contained in this provision is applicable only when the conditions of prohibition are met.85

I call this fiction because companies did not find themselves having to wait for an exemption before being able to enforce a contract. In terms of legal certainty as that is conceived by the Commission, companies will not be better off. They will execute agreements containing clauses with restrictive features. If commercially convenient, they will endeavour to avoid complying with the contract on the grounds of competition law. There will be complaints or requests for the Commission's intervention to cure an uncertainty. The Commission's comments, whether framed as a formal decision (rare in the past and rare in the future) or in a simple administrative letter, will be given very great weight. While comfort letters did not formally solve the theoretical problem that only an exemption could cure a situation where there was a restrictive clause in a benign relationship, in actual practice I have never once encountered a judge who took the formal position that the agreement was necessarily damned since the Commission had not issued its formal blessing.

3. The supposed dangers of change Supporters of the German view contend that by eliminating the automatic prohibition of paragraph (1), there is a danger of a loosening of the protections against anti-competitive agreements. On this basis, since the prohibition only bites once the grant of an exemption is refused, doubtful agreements and even plainly unacceptable agreements, will effectively remain provisionally valid until they are denied an exemption; by contrast, at the moment doubtful agreements fall under the prohibition of Article 85 (2) regardless of whether they might be said to be eligible for an exemption. Thus the victim of an illegal agreement might be forced to respect it, being unable to invoke its nullity in the absence of an affirmative decision in its favour, whereas today he could invoke nullity without needing to discuss whether an exemption might be available. This is a substantial shift in the legal architecture of the competition rules. However, in my submission it will not make fundamental changes in practical outcome. At the moment, if Article 81 (1) is invoked before a national court, and if the court finds the presence of clauses deemed restrictive by the European Commission, in theory the court should either refrain from acting until the Commission has decided whether an exemption will be available, or should apply Article 81 (2). In actual practice, however, most judges are inclined to decide a case by enforcing or not enforcing the terms of an agree85

White Paper, supra note 73 at § 78.

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ment rather than by doing an incomplete job. Thus in actual practice the courts are today not greatly hindered by the Commission's monopoly over the granting of exemptions; and I presume that judges who feel comfortable with competition law matters will welcome the new power to grant exemptions. Conversely, unlawful agreements upon which one party seeks to rely are unlikely to be enforced, regardless of the fact that in strict theory they would be enforceable for so long as an exemption has not been refused. In the same way as agreements in the past were prosecuted and threatened with fines, not because of their not having been notified but because of their contents and effects, so agreements in the future will be threatened with nullity and fines not because they have not been granted an exemption, but because of their contents and effects. Functionally, Article 81 (1) and (3) are today read together. Functionally, they will be read together under the new regime. Neither outcome appears more or less likely to lead to genuine injustice.

4. Enforcement before thirty entities Europe is not a judicially uniform continent. In certain countries, judges are well paid and honoured, the court system receives high amounts of public funding, the orderly handling of litigation is a high priority of the central government, and litigants and lawyers involved in the process are correspondingly fortunate. In other countries, judges are poorly paid, back-logs of judicial business extend to years, procedures are formalistic, slow and unpredictable. Litigation in any country is to be approached only reluctantly, but in the latter countries it is quite unlikely to yield timely satisfaction (I refrain from using the word 'justice'). Three contiguous extremes may be noted. Litigation before the High Court in England is luxury justice, costly and risky, but efficient and relatively rapid. In the Netherlands, kortgedinge procedures are in effect interim interlocutory hearings that can be heard within a few weeks of the initiation of litigation. Very often the first hearing, although notionally merely preliminary, constitutes the entirety of the proceedings. Those who want a quick answer can obtain one in a brisk and common sense atmosphere. In Belgium, the situation is very different. The judicial backlog is immense and it is not uncommon for ten years to elapse between the initiation of the litigation and its disposition upon appeal. I lack personal experience, but it is commonly stated that litigation in Scandinavian countries is relatively rapid and efficient, whereas litigation before the Italian civil courts can be painfully slow. There are explanations for why the courts are so organised in each of the countries, and there is no early prospect of approximation of the different systems. It must also be acknowledged that there are huge differences in the experience, skill and resources of national competition agencies. Austria and Belgium are two countries where competition law enforcement is in serious difficulties. Although the need for an independent Kartellamt in Austria has been

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recognised for years, and although a number of studies have been commissioned, and although there is cross-party agreement that the application of competition law needs to be improved, there appears little likelihood of change in the near future. The Ministry of Economics has the job of acting as competition authority, but it seems widely accepted that this is not successful. No competition agency has the right to apply Articles 81 and 82 of the EC Treaty. The Belgian Conseil de la Concurrence issued its second report with respect to the period 1994 to 1995. It has never issued a further report. In its second report, it stressed, as it had done in itsfirstreport, that due to staff and equipment shortages, it was able only partly to fulfil its duties under the Law of August 5, 1991, on the protection of economic competition. The reports acknowledge that the Conseil de la Concurrence has, on a number of occasions, been unable to deploy officials to examine a merger within the statutory deadline. The Conseil de la Concurrence lacks books on competition law, legal periodicals, economic periodicals, filing cabinets, computers, and even enough officials who have fluency in Dutch and French. As protest about these inadequacies, the seven members of the Conseil de la Concurrence resigned. I may also observe that the decisions taken do not always carry complete conviction. In one case of which I have heard, the Conseil approved a joint venture between fruit and vegetable traders on the grounds that the parent companies and the joint venture would be active in different markets, the one being active in the long-term market for the sale of fruit and vegetables, the parent companies being active in daily operations. It was alleged that there were considerable spill-over effects between the two markets, but the joint venture was cleared nonetheless. Other countries have very effective competition agencies. The Italian Autorita Garante della Concorrenza e del Mercato has had a tremendous impact in a short time led by eminent figures, and is well-funded and enjoying strong popular support. Likewise in France, the Conseil de la Concurrence and the DGCCRF at the Ministry of Economic Affairs are widely regarded as knowledgeable, vigorous and effective. The German and Dutch agencies are similarly well-regarded, and in due course the UK, which has lacked an effective system of dealing with small cartels, will probably be endowed with a good regime. A report on each Member State's competition agency is beyond the scope of this paper. The point remains that there are substantial divergences. It is sometimes argued that national judges cannot be trusted to do a good job of working with the unfamihar economic doctrines involved in applying the competition rules. If judges are trusted to handle subjects like medical negligence, taxation, white-collar crime, and the calculation of damages in a vast range of circumstances, it seems unreasonable and elitist to deem them incapable of applying the competition rules. That said, the judges of certain countries are more familiar with competition law arguments than others, and this will hinder the invocation of EC competition law claims or defences before certain courts. Thus, Belgian, English and Dutch judges, to name only three, are unlikely to be nervous of confronting European competition law questions, whereas Portuguese and Greek judges might be.

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Decentralising the government of a country can mean transferring authority from the central government to regional or local administrations. The roles and powers of the administrations to receive the new authority will be well known. If, tomorrow, the job of selecting the schoolbooks for primary pupils were to be effected by East Lothian District Council as opposed to a Scottish or UK Ministry, there is no doubt that the Council will know its task and be equipped to discharge it. By contrast, decentralising from the Directorate General for Competition to fifteen national authorities and more than fifteen judicial systems (regional judicial systems such as Scotland) represents quite a leap in the dark. Some agencies and courts are efficient, other are not. If the decentralisation were to work badly, substantial prejudice could occur for businesses located in Member States where enforcement is inefficient. The natural response will be forum shopping, which could take the form of pre-emptive action by initiating litigation in a slow jurisdiction, or by seeking to engage the attention of an efficient agency in a matter that is not primarily within its jurisdiction. There will be many matters where more than one court jurisdiction or enforcement agency could be involved. Indeed, such is the trend to globalisation that it would not be surprising for three or four countries to have an interest in a particular controversy. The existing mechanisms for cross-border enforcement cooperation appear to be non-existent or rudimentary in many cases. While the goal of sharing enforcement responsibility with the Member States is plainly desirable, the European Commission will have an immense responsibility to coordinate, educate and mediate. It should also be ready to decide, in cases where this is appropriate, and I submit that the White Paper seems to contemplate something close to abstention in a wide range of situations. To the contrary, I would submit that since the Commission is the premier competition law agency in Europe, with excellent prestige, resources and experience, those resources ought to be available for deciding competition cases. To exaggerate the proposition, it would be disappointing if the Commission were to become merely a spectator of imperfect national enforcement of the competition rules that have been largely shaped by Commission enforcement action. Pursuing this theme, the Commission must have an enforcement role more extensive than major cartels, legislation, major mergers, and coordination. Today, businesses with a competition problem can obtain guidance in Brussels: one-stop-shopping. The Commission's proposals go too far, I submit, in assuming that the move from centralised to decentralised enforcement will necessarily be a good thing. In many cases, especially at the beginning, substantial confusion seems likely. More precisely, there is a risk of wrong decisions, unjust decisions, or no decisions, and a step backwards from the level of enforcement, albeit imperfect, that we have today. Welcoming the proposal to share responsibility with national entities having resources beyond those of the Commission is not inconsistent with expressing alarm about the short- and medium-term problems which will probably arise if the Commission does not heavily and actively involve itself in the process of absorption into the Member States. The

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Commission is traditionally very cautious about taking a position in cases pending before a national court. Because so much weight is attached to its opinion, what it says may effectively decide the competition point in dispute rather than merely giving guidance. The Commission therefore expresses itself very cautiously and the formulation of its replies to a request for assistance from a national court will normally take months. Possibly because of the Commission's reluctance to take a false step in influencing the outcome of private litigation, its formal assistance has been requested on only a few occasions. Helping the process of decentralisation will involve giving help to national courts more quickly and less cautiously than has been the case in the past.

5. Notifications The Commission dislikes notifications because they clog its in-box. This seems surprising, at least by reference to the volume of notifications recorded in the Annual Reports on Competition Policy. In 1998, there were 216 notifications; in 1999, there were 162 notifications. These numbers do not seem to be an excessive burden for a skilled administration with long experience and immense inhouse knowledge. Moreover, a fair number of those must relate to transactions that are now eligible for a block exemption pursuant to the new doctrines on vertical restraints. In addition, a number are presumably principally national rather than European in scope. I therefore question whether the disadvantages to the Commission of notification are so serious as to outweigh the advantages of giving it thoroughly-documented, carefully-drafted descriptions of why particular transactions are to be regarded, in their entirety, as pro-competitive. When the private sector volunteers sensitive and potentially embarrassing information to a public authority, the public authority is better informed about market developments and techniques, learns who the big players are, understands where the controversies may lie, is better equipped to do its job, and is invited to guide major enterprises on how to respect the competition rules. These are important benefits. The notification system is capable of being abused. First, there is the notion of the so-called dilatory notification. The Commission's Notice on Cooperation with National Authorities86 defines dilatory notification as o n e where a firm, threatened with a decision banning a restrictive practice which a national authority is posed to take under Article 85 (1) or under national law, notifies the disputed agreement to the Commission a n d asks for it to be exempted under Article 85 (3). 8 7

86

E u r o p e a n Commission: Notice on Cooperation between National Courts and the Commission in applying Articles 85 and 86 of the EEC Treaty, O J C 39/6 1993. 87 W.at§55.

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Another category of potential abuse is what I call notification to achieve the higher moral ground, as follows. A firm enters an agreement. The agreement could be said to be caught by Article 81(1) and there are doubts about whether the other contracting party might wish, in the future, for commercial reasons, to try to wriggle out of the contract, invoking the competition rules. Filing a notification offers the notifying party the opportunity to claim the higher moral ground; the Commission has been informed about the deal and has not challenged it. As a result, the transaction is presumptively valid under the competition rules. The vice in this situation is not the requesting of the Commission's approval for a transaction, but the possibility that silence on the part of the Commission may be misrepresented as proving the agreement's acceptability. The problem is curable by deadlines. If the Commission were obliged to respond to every notification within, let us say, forty-five days, the problem would be eliminated. There is a market for authoritative guidance on competition law matters. In the context of the Merger Regulation,88 the Commission is arguably the world leader in delivering such guidance. In the context of Article 81 (1), it could do better if it were less perfectionist and worked to brisk deadlines. While I accept that the Commission is not slamming the door in the face of those who wish to seek its guidance, I am not convinced that abandoning the notification entirely would be an appropriate response to the problem of supposed administrative overload through having had to examine less than two hundred filings.89

6. Application in countries candidate for accession and other third countries Obligations to adopt and apply competition rules are imposed by the Europe Association Agreements of 1993 and 1994 upon Poland, Hungary, the Czech Republic, the Slovak Republic, Romania, Bulgaria, Slovenia; by Europe Association Agreements of 1998 upon Lithuania, Estonia and Latvia; by Partnership and Cooperation Agreements of 1995 upon Russia, Belarus, Ukraine, Moldova; and by Mediterranean Agreements of 1995, 1996, 1997 and 1998 upon Tunisia, Morocco, Jordan, the Palestinian Authority and Israel. Like obligations are imposed upon Turkey, and upon Norway, Liechtenstein and Switzerland. The commonest method of implementation of these Treaty obligations has been for the third country to reproduce more or less faithfully the language of Articles 81 and 82 of the EC Treaty. My anecdotal experience suggests that enforcement agencies in Eastern Europe are most comfortable 88

Council Regulation 4064/89 on the control of concentrations between undertakings, OJ L 257/14 1990. 89 If resources are n o t available, why n o t levy a charge of, say, €10,000 p e r notification?

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when applying a black-letter rule as set forth in a block exemption regulation, which they are likely to examine as if it was prescriptive and obligatory. Yet, the presence or absence of key clauses should not deliver certainty. Competition rules should move away from clause-driven unenforceability, for example whether know-how, which is the subject of an exclusive licence, should be recorded in writing in order for the licence to be exempted. These difficulties are well known to competition law specialists; and the Commission's theorists are correcting them. However, I question how the new enforcement jurisdictions will deal with their new responsibilities. Advising lawyers in these countries, practising before these administrations, certainly suggests that the competition law that is being exported from Europe to the East is the old law and not the new law. Again, the problem is capable of being solved, but it calls for the energetic involvement of the European Commission. We are talking about competition, not aesthetics. Our criticisms of the new regime should be rooted in practicalities. Will the new system work better than the old one? A system which may contain paradoxes and inconsistencies but which functions well is to be preferred over a perfectly conceived system that does not function. I therefore commend the boldness of the Commission. It observed that the system is not functioning. It has adopted a path that will yield many more decisions applying the competition rules, some of which will be good and some of which will be bad. In thisricherjurisprudence, there will be imperfections and injustices, but by the end of this decade, we should see the wholesome effects of the entering into daily business life of competition rules at national and international level. The difficulties of getting to that happy condition have been underestimated in the White Paper.

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ANNEX 1: COUNCIL ARCHIVES—SUMMARY OF TOPICS DISCRIMINATION* Projet allemand

Projet fran; ais

Art. 42 Est incompatible avec le marche commun et interdit le fait pour une entreprise de desavantager, dans des transactions comparables 1 , des acheteurs ou vendeurs en concurrence entre eux, en raison de leur nationality.

Art. X(Doc. Mar. Com. 37) Sont interdites a l'interieur du marche commun les majorations ou minorations de prix et les modifications des conditions de vente operees pour des transactions comparables 1 , a l'egard d'acheteurs ou de vendeurs en concurrence entre eux.

* These charts are based on a document found at the Council Archives entitled: Tableau synoptique des projets d'articles soumis par les experts des delegations concernant les regies de concurrence applicables aux entreprises, MAE 325 f/56, CM3/NEGO/236 (only the formatting has been changed). 1 Cette expression doit etre interpretee comme visant une inegalite dans les conditions faites a l'acheteur, qui depasse l'inegalite que justifie la difference de nature des transactions comparees.

Projet belgo/neerlandais

Sont incompatibles avec le Marche Commun et a interdire, dans la mesure oil le commerce entre Etats membres s'en trouve affecte, a) l'exploitation abusive, par les entreprises publiques ou privees d'une position dominante sur le marche; b) les accords entre entreprises dont Papplication constitue une entrave injustifiee a l'exercice de la concurrence. Ces pratiques abusives peuvent resulter notamment: —de lafixationde prix ou conditions de transaction; —de discriminations a l'egard des

Projet neerlandais

Sont interdites a l'interieur du marche commun les majorations ou minorations de prix et les modifications des conditions de vente operees pour des transactions comparables,' a l'egard d'acheteurs ou de vendeurs en concurrence entre eux, lorsque ces pratiques sont operees: a) en application de reglementations

Projet francais

Sont incompatibles avec le marche commun toutes les situations ou pratiques d'ententes ou de monopole ayant pour objet ou pouvant avoir pour effet d'entraver l'exercice de la concurrence, en particulier: —en fixant les prix; —en restreignant ou en controlant la production, la vente, le developpement technique et les investissements; —en repartissant les marches, produits, clients et sources d'approvisionnement; —en permettant l'absorption ou la domination du marche d'un produit par une entreprise ou un groupe

Projet allemand

Sont incompatibles avec le marche commun et interdits, dans la mesure oil le commerce entre Etats membres s'en trouve affecte, tous accords entre entreprises ayant pour objet ou pour consequence d'entraver la concurrence, notamment —en fixant les prix; —en restreignant ou en controlant la production, la vente, le developpement technique et les investissements; —en repartissant les marches, produits, clients et sources d'approvisionnement.

ENTENTES*

I

publiques;2 b) pour obtenir une position dominante sur le marche; c) pour des motifs autres que commerciaux. acheteurs ou des vendeurs en concurrence entre eux dans la conclusion des contrats; —