From Freiburg to Chicago and Beyond the First 50 Years of European Competition Law

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1 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R. 81 From Freiburg to Chicago and Beyond the First 50 Years of European Competition Law Andreas Weitbrecht* Anti-competitive practices; Competition law; EC law; European Commission; Legal history; Mergers On January 1, 1958, Arts 85 and 86 entered into force as part of the Rome Treaty outlawing agreements and concerted practices that restrict competition in the Common Market as well as the abuse of dominant positions. Over the past 50 years these provisions have undergone an enormous evolution. This article takes an historical perspective and looks back on the first 50 years of developments under EC competition law, 1 including not only Arts 85 and 86 but also merger control. 2 When faced with a period as long as half a century, it is useful to divide that long time-frame into several periods in order to give a first orientation along the timeline: Even though there will of course always be considerable debate as to what these periods should be and what characterises them, it appears that three distinct periods can be identified: 1958 to 1969 establishing the foundations. During the initial period, the Council, in 1962 and * The author is the Managing Partner in the Brussels office of Latham & Watkins LLP and teaches competition law at Trier University. The author thanks Verena Faltz and Styliani Sarma for invaluable contributions in the preparation of this article and his partner John Kallaugher for invaluable advice. All views are personal. 1 For a description of the development of EC competition law until 1997 see the seminal study by D. Gerber, Law and Competition in 20th Century Europe Protecting Prometheus (1998, paperback edn., 2001). 2 State aid rules (Arts 87, 88 EC), which did not begin to take on practical significance until the 1980s will not be covered in this article. after considerable debate, enacted the implementing Regulation 17/62 and the Commission, with support from the Court of Justice, began to establish the foundations of EC competition law. The Commission placed huge emphasis on the integration function of Art.85, focusing in this period on vertical restraints to 1989 testing the powers. It is difficult to exactly draw the line between the first and second period, as there is no watershed event as the enactment of the Merger Control Regulation in 1989 that marked the end of this period. However, in 1969 the transitional period for the European Economic Community ended and this date seems a convenient dividing point. It appears that after the end of that period a certain lull set in and the Commission began a series of experiments, testing its powers under Arts 85 and 86. The Continental Can case of 1971, 3 seeking to conduct merger control under Art.86, is evidence of such experimentation as well as a line of cases where the Commission began to explore a more conventional application of Art to 2004 the coming of age. The period covering almost 15 years between the coming into force of the Merger Control Regulation in August 1990 and May 1, 2004 when Regulation 1/2003 came into force, accompanied by a revised Merger Control Regulation 139/2004 (as well as an expansion of the European Union from 15 to 25 Member States) marks a period of profound change which has left untouched only the wording of Arts 85 and 86, 4 but completely revamped the entire fabric of substantive and procedural EC competition law. EC competition law today is not only, in the area of behavioural control, the law of the land in 27 Member States, but the European Union is in its entirety today established as one of two leading antitrust jurisdictions in the world. In making this transition, EC competition law has been heavily influenced by the development in the United States, in particular the Chicago School, while retaining its own characteristics and identity. 3 Commission Decision of December 9, 1971 Europemballage [1972] OJ L7/25; Europemballage and Continental Can v European Commission (6/72) [1973] E.C.R Renumbered without change in the wording, as Arts 81 and 82 by the Amsterdam Treaty.

2 82 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R. This article will describe each of these periods in their peculiar characteristics; it will conclude with a brief look at the challenges of the present and future. 1. Establishing the foundations 1958 to Freiburg and the Sherman Act the sources for Articles 85 and 86 of the Rome Treaty The origins of the decision to include detailed competition rules in the Rome Treaty remain shrouded in history as the materials documenting the negotiations of the Rome Treaty have not been published. 5 However, competition rules had been included in the Rome Treaty s predecessor, the Treaty of Paris establishing the European Coal and Steel Community. 6 The inclusion of such rules had been motivated more than anything else by a desire to prevent a resurrection of the power of the German coal and steel industry whose commercial behaviour, including the ability to merge companies, was to be subjected to a strict regime of administrative control; as regards the three basic instruments of intervention, the ECSC Treaty appears to have been influenced by US law. 7 In addition, by the time the Rome Treaty was being drawn up in 1955 and 1956, Germany was about to conclude the legislative process for its national competition law which ended up coming into force on the same day as the Rome Treaty. The fact that the Rome Treaty unlike the European Coal and Steel Treaty did not include rules on merger control is probably due to the German influence since Germany had concluded that for its own national competition law it did not have to have a substantive merger control provision. 8 5 The best source is still the accounting by H.-J. Küsters, Die Gründung der Europäischen Wirtschaftsgemeinschaft (1982). 6 Treaty establishing the European Coal and Steal Community (ECSC) Arts 65 and 66, which was concluded in 1951 for a duration of 50 years. 7 The provisions of Art.65 (more or less corresponding to Art.85) and Art.66 (containing rules on merger control and creating power for the High Authority to intervene against abuses of dominant positions) were apparently the result of American influences (ss.1 and 2 of the Sherman Act, and Clayton Act s.7) translated into French administrative terms. See the account of Gerber, Law and Competition in 20th Century Europe Protecting Prometheus (1998, paperback edn., 2001), pp.335 to Substantive merger control was established in Germany only in 1973 by the Second Amendment to the Competition Law. In fact, in Germany a parallel process had taken place between 1949 and 1956, ultimately leading to the enactment of the German competition law in 1957 which entered into force on January 1, 1958, the same day as the Rome Treaty. The German debate was very much influenced by the Freiburg School, a group of economic and political thinkers such as Franz Böhm and Walter Eucken, 9 which also included Germany s first economics minister, Ludwig Erhard and the first President of the European Commission, Walter Hallstein. According to these ordoliberals, the establishment of a competition law was an important part of the economic constitution, which also includes the freedom to conclude contracts and the guarantee of property rights and which insures the economic freedom of action of every actor. As the only Member State that had a national competition law remotely resembling that of the EEC, German thinking was to become very influential in EEC competition law and policy for many years to come Creating an enforcement tool Regulation 17/62 Article 87 of the Rome Treaty had left the rules about the implementation of Arts 85 and 86 to a Council Regulation to be adopted later and it took until 1962 until such a Regulation, the famous Regulation 17/62, was enacted. Regulation 17/62 established the monopoly of the Commission to grant exemptions under Art.85(3) and thus established a leading role, if not a de facto monopoly of the Commission in the overall application of Arts 85 and 86. It also provided for the enforcement mechanism that is still part of EC competition law today the role of the Commission as investigator, prosecutor and decision-maker, controlled only by the EU judiciary Competition law as a motor of integration The Commission s principal concern in this period was not so much the concern that competition laws usually seeks to address that agreements and other practices do not distort competition but a concern with the integration of the Common Market. At that time, it was still common for companies to appoint exclusive importers for individual Member States, and the agreements had the effect of erecting, by private 9 Both taught at Freiburg University.

3 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R. 83 agreement, barriers to trade between Member States that the Rome Treaty was trying to abolish. The leading case in which the Commission s policy, valid until today, with respect to vertical distribution agreements was established is the Grundig/Consten 10 case, where the Court of Justice endorsed the Commission s prohibition of an exclusive distributor relationship between Grundig and Consten which had provided for absolute territorial protection in the case of Consten, additionally secured by an exclusive licensing of a Grundig trade mark for the territory of France The Court s role as a supporter During this period, the Commission was fully supported by the Court of Justice, which in cases such as Grundig/Consten, Bosch, 11 and Maschinenbau Ulm 12 established many principles of Art.85 that appear trivial today but that were fundamental at the time for the anchoring of competition law in the EEC: these include that Art.85 is not a mere principle but directly applicable law; the distinction between restriction by object and by effect; the applicability of Art.85 to vertical agreements; the applicability of Art.85 to intra-brand competition; and the application of Art.85 in the area of intellectual property rights The first hardcore cartel case The Commission also began to assert its powers to investigate and fine companies for what today are known as hardcore cartels, concluding its first infringement proceeding in 1969, 13 subsequently upheld by the Court of Justice Commission Decision of September 23, 1964 Grundig [1964] OJ L2545; Consten and Grundig v European Commission (56/64 & 58/64) [1966] E.C.R Kledingverkoopbedrijf de Geus en Uitdenbogerd v Robert Bosch GmbH (preliminary ruling) (13/61) [1962] E.C.R Société Tecnique Minière v Maschinenbau Ulm GmbH (preliminary ruling) (56/65) [1966] E.C.R Commission Decision of July 16, 1969 Quinine [1969] OJ L192/5. 14 ACF Chemiefarma NV v European Commission (41/69) [1970] E.C.R Testing the powers 1970 to 1989 The next period, which this article considers to begin in 1970 with the end of the transitional period, 15 was marked by a relatively slow development, which to some extent parallels the difficult phases that the European Economic Community as a whole was undergoing throughout the 1970s and the first half of the 1980s Article 85 As regards Art.85, the Commission, very much influenced by the Freiburg School which saw in Art.85 an instrument to protect the economic freedom of all those that act in the business world rather than to protect competitive markets as it is understood today did not yet fully appreciate the fundamental difference between hardcore cartels and forms of cooperation that do not have as an object but merely as an effect the restriction of competition. In addition, cartels were secret and difficult to uncover. As a result, hardcore cartels were prosecuted 16 but not with a high priority, the fines were relatively low by today s standard and no particular social stigma appeared to attach itself to those who were found to have participated in such practices. As regards vertical restraints, the Commission issued revised block exemptions for exclusive distribution 17 and exclusive purchasing 18 and began to formulate rules concerning selective distribution In the alternative, one might regard January 1, 1973 as the dividing point, when the United Kingdom, Ireland and Denmark joined the EEC, as the dividing line between the first and the second period. Since this event had no immediate significance for competition law, it is not chosen here. 16 See, for instance, Commission Decision of January 2, 1973 European Sugar Industry [1973] OJ L140/17; Suiker Unie v European Commission (40/73 48/73, 50/73, 54/73 56/73, 111/73 and 114/73) [1975] E.C.R. 1663; Commission Decision of April 23, 1986 Polypropelene [1986] OJ L230/1; Rhône-Poulence SA v European Commission (T-1/89) [1991] E.C.R. II-867, and the parallel cases; European Commission v Anic Partecipazioni SpA (C-49/92 P) [1999] E.C.R. I-4125, and the parallel cases. 17 Commission Regulation 1983/83 on the application of Art.85(3) of the Treaty to categories of exclusive distribution [1983] OJ L173/1. 18 Commission Regulation 1984/83 on the application of Art.85(3) of the Treaty to categories of exclusive purchasing [1983] OJ L173/5. 19 Commission Decision of December 15, 1975 Saba [1976] OJ L28/19.

4 84 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R Abuse of dominant position Much of the Commission s focus during that period was on Art.86 as it began to explore the possibilities and limits of its powers under this Article. In Continental Can, 20 Commercial Solvents, 21 United Brands, 22 Hoffmann-La Roche, 23 Michelin I 24 and Tetra Pak, 25 the Commission was largely supported by the Court of Justice: even where the Court of Justice annulled certain aspects of the Commission s rulings, it supported the Commission s general concept such as the application of Art.86 to mergers. national competition authorities. In order to overcome resistance in the Council, Commissioner Sutherland threatened to conduct merger control with the blunt instrument of Art.85, taking encouragement from the Court of Justice s dicta in the Philip Morris case. 27 The substantive test under Regulation 4064/89, which was passed in 1989, the creation or strengthening of a dominant position, was taken from the German competition law. 28 This adoption of the German rule was to turn out to be the last triumph in what had been 30 years of Germanic influence on the development of European competition law The rumblings of change The Single Market movement triggered by President Jacques Delors in his inaugural speech in 1985 also gave European competition policy as opposed to national competition policy a shot in the arm. In a single market the uneasy co-existence of national and European competition law, applicable as dual barriers to the same conduct, was becoming increasingly questionable. The Commission s enforcement practice grew bolder and more innovative and at the very end of the period, in fact in 1990, even the glimmerings of a rule of reason approach to Art.85 began to surface. 26 Most importantly, the lack of a merger control instrument at Community level was beginning to be felt as a real problem. Then Competition Commissioner Peter Sutherland had concluded that the Commission would never be able to become the foremost institution for the enforcement of competition laws in Europe if the most important practical instrument, the control of mergers, remained exclusively in the hands of 20 [1973] E.C.R Commission Decision of December 14, 1972 ZOJA/ CSC- ICI [1972] OJ L299/51; Commercial Solvents v European Commission (6/73 & 7/73) [1974] E.C.R Commission Decision of December 17, 1975 Chiquita [1976] OJ L95/1; United Brands v European Commission (27/76) [1978] E.C.R Commission Decision of June 9, 1976 Vitamines [1976] OJ L223/27; Hoffmann-La Roche & Co AG v European Commission (85/76) [1979] E.C.R Commission Decision of October 7, 1981 Michelin I [1981] OJ L353/53; Michelin v European Commission (322/81) [1983] E.C.R Commission Decision of July 26, 1988 Tetra Pak I [1988] OJ L272/27; Tetra Pak Rausing SA v European Commission (T-51/89) [1990] E.C.R. II Commission Decision of July 27, 1990 Konsortium ECR 900 [1990] OJ L228/31; Commission Decision of July 13, 1990 Elopak/Metal Box-Odin [1990] OJ L209/ The coming of age 1990 to 2004 While it is commonly said that the modernisation of EC competition law began in the middle of the 1990s, the watershed event that marked the beginning of a new era was Merger Control Regulation 4064/89 29 which came into force in The ability of the Commission to pass judgment on the biggest mergers occurring in Europe, in fact in the world, catapulted the Commission into a position of power and importance that no competition agency in Europe had ever enjoyed. In getting ready to apply the new Merger Control Regulation, the Commission for the first time relied on experts from the United States. 30 Merger control, even though it was applying a test inherited from Germany, over time provided a natural breeding ground for the fertilisation of economic analysis and the adoption into EC law of the consumer welfare model of the Chicago School The adoption of the consumer welfare model Until well into the 1990s the Commission had remained under the influence of the ordoliberal Freiburg School BAT and R. J. Reynolds v European Commission (142/84 & 156/84) [1987] E.C.R An additional element, contained in the German law, the balancing test between positive and negative effects of the merger was not adopted by EC law. 29 [1989] OJ L395/1. 30 In 1991, the first co-operation treaty between the United States and the EU was concluded; Agreement between the Government of the United States and the Commission of the European Communities regarding the application of their competition laws of 1991 [1995] OJ L95/47. Advisory work on policy and process issues can, of course, take place independent of any treaty, but the timing is no coincidence. 31 See fn.30 above and accompanying text.

5 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R. 85 Subsequent to the enactment of the Merger Regulation, a process of Americanisation began and the Commission gradually adopted its own version of the consumer welfare approach developed by the Chicago School, whereby the sole purpose of competition law is to ensure that consumer (or total) welfare is not jeopardised by the actions of undertakings (and governments). 32 This fundamental change as regards the purpose which the competition rules of the Treaty and the Merger Control Regulation are supposed to foster occurred without any intervention by the legislator and it was never subjected by the Commission to public debate Merger control a story of mixed successes In order to implement Merger Control Regulation 4064/89, Directorate General IV or as it is known today, Directorate General for Competition established a Merger Task Force, which soon began to develop an esprit de corps of its own, with bright young men and women scrutinising the biggest mergers the world had to offer. Overall, the Commission saw many cross-border mergers as beneficial for the completion of the Common Market, with integration sounding a completely different theme compared to the days of Grundig/Consten. Even though the first prohibition occurred as early as 1991, 33 initially, the Commission moved very slowly in making its new powers felt. Over time, the Commission grew bolder and more interventionist, which led to five prohibitions being adopted in 2001, 34 three of which were appealed to the Court of First Instance, which had been established at about the same time that the Merger Control Regulation was adopted. Two of these appeals contributed to the annus horribilis for the Competition Commissioner in 2002, when three prohibition decisions were annulled by the Court of First Instance, with two annulments occurring 32 See, e.g. R. Bork, The Antitrust Paradox (1978), and R. Posner, Antitrust Law, 2nd edn. (2001). 33 Commission Decision of October 2, 1991 Aerospatiale- Alenia/de Havilland [1991] OJ L334/ Commission Decision of January 31, 2001 SCA /Metsä Tissue [2002] OJ L57/1; Commission Decision of July 3, 2001 General Electric/Honeywell [2004] OJ L48/1; Commission Decision of October 10, 2001 Schneider/Legrand [2004] OJ L101/1; Commission Decision of October 17, 2001 CVC/Lenzing [2004] OJ L82/20; Commission Decision of October 30, 2001 Tetra Laval/Sidel [2004] OJ L43/13. For an overview of developments in EU merger control in 2001, see A. Weitbrecht, EU Merger Control in 2001 The Year of Controversy [2002] E.C.L.R within a time-frame of three days. 35 On the day of the last of these defeats, at the press conference commenting on the CFI s judgment in Tetra Laval, Commissioner Monti announced sweeping reforms of the Commission s merger control process, including the appointment of a Chief Economist, scrutiny panels designed to play the role of devil s advocate in reviewing drafts of important Commission decisions and increased transparency in the process through regular state of play meetings between the parties. It is fair to say that these reforms, which are still part of the Commission s practice today, have had a fundamental and overall positive effect on the Commission s merger control enforcement. 36 The annulment of the Airtours 37 decision also triggered a debate about the Commission s ability to intervene in oligopolistic markets on the basis of coordinated effects and the subsequent discussion led to the adoption of a new test on the occasion of the regularly scheduled review of the Merger Control Regulation: the creation or strengthening of a dominant position is now relegated to the role of being the prime example for the overall test, which asks whether the merger significantly impedes effective competition in the common market 38. The new test has injected additional lifeblood into the use of economic analysis, including econometrics. 39 The fact that US antitrust law, in particular the consumer welfare approach, had such a fundamental influence on the Commission s practice did not prevent the Commission from reaching an outcome opposite to the one reached in the United States in two important mergers involving US companies even though the markets in question were considered global, which 35 Airtours Plc v European Commission (T-342/99) [2002] E.C.R. II-2585; Schneider Electric SA v European Commission (T-301/01) [2002] E.C.R. II-4071; Tetra Laval v European Commission (T-5/02) [2002] E.C.R. II The Merger Task Force has subsequently been abolished in favour of merger control units in the various directorates organised along industry lines. 37 Airtours [2002] E.C.R. II-2585, annulling Commission Decision of September 22, 1999 Airtours/First Choice [2000] OJ L93/1. 38 Commission Regulation 139/2004 on the control of concentrations between undertakings [2004] OJ L24/1. 39 This approach is also evidenced by the Commission s Horizontal Merger Guidelines published in 2004 Commission Guidelines on the assessement of horizontal mergers under the Council Regulation on the control of concentrations between undertakings [2004] OJ C31/5.

6 86 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R. would militate in favour of identical results in all jurisdictions concerned The modernisation of Article 81 prosecution of hardcore cartels and more generous block exemptions Following the enactment of the Merger Control Regulation it took a few years until the Commission turned its full attention back on Art.81. Subsequent practice has been much influenced by the conclusion that apart from hardcore cartels, where companies aim to raises prices, restrict outputs and otherwise to allocate markets amongst themselves, other restrictions, both horizontal and vertical, are likely to be detrimental to competition only where at least one of the parties enjoys a certain degree of market power. Cartel enforcement From the mid-1990s, the Commission has made hardcore cartels a priority in its enforcement activities. Again following the example of the United States, the Commission in 1996 adopted its first leniency programme, 41 whereby companies that self-report their participation in a cartel may be immune from being fined by the Commission and companies that subsequently confess their involvement and provide additional evidence to the Commission will receive a reduction in the otherwise applicable fine. This instrument, which has subsequently been revised a couple of times, 42 places a premium on being the first company to report, or at least the second or third, creating a race to the courthouse, i.e. to the Commission. With this instrument, introduced by a simple Commission Notice, the character of cartel enforcement has been completely changed in that over the past 10 years many companies have chosen not to defend against allegations of participation in a cartel, making enforcement much more effective for the Commission while at the same time raising questions about the rights of defence. 40 Commission Decision of July 30 Boeing/McDonnell Douglas [1997] OJ L336/47; Commission Decision of July 3, 2001 General Electric/Honeywell [2004] OJ L48/1, affirmed in Honeywell International, Inc v European Commission (T- 209/01) [2005] E.C.R. II Commission Notice on the non-imposition or reduction of fines in cartel cases [1996] OJ C207/4. 42 Commission Notice on immunity from fines and reduction of fines in cartel cases [2002] OJ C45/3; Commission Notice on immunity from fines and reduction of fines in cartel cases [2006] OJ C298/17. Secondly, the Commission has used Fining Guidelines, first issued in in order to increase fines to levels that were previously unknown. Whereas until 1998 the Commission had followed a practice of fining companies between 5 and 8 per cent of the turnover affected by the infringement in the last year of the infringement, the 1998 Fining Guidelines led to fines that in many instances were 10 or 20 times what fines would have been under the previous system. New block exemptions and guidelines On the non-cartel side, the existing block exemptions, which were based on the use of certain forms of restrictions of competition, had begun to act as a straitjacket for the development of contractual practice. The Commission began and completed a complete overhaul of existing block exemptions, based on the recognition that apart from a few core restrictions, restrictions of competition usually, in the absence of market power, will not distort competition and will in many instances have beneficial effects Article 82 Microsoft Applying the new economic learning to Art.82 has proven to be more difficult for the Commission. Until the Commission s Decision of 2004 against Microsoft, ordering Microsoft to unbundle the Windows Media Player from the rest of the Windows software and ordering it to make available to competitors interface information for workgroup servers, 45 the Commission 43 Commission Guidelines on the method of setting fines imposed pursuant to Art.15(2) of Regulation 17 and Art.65(5) of the ECSC Treaty [1998] OJ C9/3; Commission Guidelines on the method of setting fines [2006] OJ C210/2. 44 Commission Regulation 2658/2000 on the application of Art.81(3) of the Treaty to categoriesof specialisation agreements [2000] OJ L304/3; Commission Regulation 2659/2000 on the application of Art.81(3) of the Treaty to categories of research and development agreements [2000] OJ L304/7; Commission Notice Guidelines on the applicability of Art.81 to horizontal co-operation agreements [2001] OJ C3/2; Commission Regulation 2790/1999 on the application of Art.81(3) of the Treaty to categories of vertical agreements and concerted practices [1999] OJ L336/21; Commission Notice Guidelines on vertical restraints [2000] OJ C291/1; Commission Regulation 772/2004 on the application of Art.81(3) to categories of technology transfer agreements [2004] OJ L123/11; Commission Notice Guidelines on the application of Art.81 of the EC Treaty to technology transfer agreements [2004] OJ C101/2. 45 Microsoft v Commission (T-201/04) not yet reported, affirming Commission Decision of March 24, 2004, Case COMP/C-3/

7 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R. 87 in this period did not take many noteworthy decisions under Art Opening up of public monopolies The Commission also put itself at the forefront of a drive to break up and open to competition the all-important network industries in energy, transport, postal services and telecommunications that were and to some extent continue to be dominated by state-owned or formerly state-owned companies holding a dominant position as providers of infrastructure. This effort has been particularly successful in the telecommunications area where the Commission has been aided by the technical innovation occurring in this sector; in other, more mature industries, progress has been much harder to come by Procedural modernisation through Regulation 1/2003 On the procedural side, 47 the Commission issued in 1999 its famous White Paper on Procedural Reform 48 which resulted in Regulation 1/2003, turning the 40- year-old enforcement regime of Regulation 17 upside down. The modernisation rests on three pillars. Direct applicability of Article 81(3) EC Whereas previously para.3 of Art.81 had been interpreted as a norm that permits the Commission or the Council to decree, by individual decision or measure of general application (block exemption), when the conditions of this norm are met, Art.81(3) is now directly applicable and is to be applied by every authority, court and by companies evaluating the legality of their conduct. Supremacy of substantive EU competition law over national competition law Article 3 of Regulation 1/2003 has created for the first time a level playing field as regards the substantive 46 But see Commission Decision of July 24, 1991 Tetra Pak II [1992] OJ L72/1; Commission Decision of June 20, 2001 Michelin II [2002] OJ L143/1; Commission Decision of July 14, 1999 British Airways [2000] OJ L30/1; Magill (C-241/91 & C-242/91 P) [1995] E.C.R. I Sometimes only the procedural reform had been referred to when using the term modernisation. 48 White Paper on modernisation of the rules implementing Arts 85 and 86 of the EC Treaty [1999] OJ C132/1. standard by which companies competitive conduct is being judged, regardless of the Member State in which the conduct takes place or has effects. The only requirement is that EU competition law be applicable, i.e. that the agreement or practice be capable of having an effect on trade between Member States. Joint enforcement of Articles 81 and 82 through a network of European competition authorities Whereas under Regulation 17 national competition authorities tended to apply their own national competition law rather than EU law and EU law was almost exclusively enforced by the Commission, Arts 81 and 82 are now enforced by both the Commission and national competition authorities; while this reform has been sold by the Commission as one of decentralisation, its practical effect seems to be the opposite in that national competition authorities act under the guidance and supervision of the Commission. 4. Present and future challenges The European Commission today has clearly established itself as the leading competition authority in the world, second to none since in the United States enforcement of the antitrust laws is divided between two separate agencies. In particular, the Commission has led a successful fight against Microsoft and has overall taken the intellectual leadership in many respects. It is of course impossible to view the development of the last three years with the same kind of historical perspective that can be brought to bear on a more distant period; it is even more difficult to predict the future evolution of EC competition law. That being said, a number of challenges can be identified: Control. Despite certain setbacks in the Court of First Instance (Sony/BMG 49 in 2006), the Commission s merger control enforcement may be the most stable area of its enforcement activities. The principal danger that can be seen is the risk of procedures becoming overly burdensome, the amount of evidence, including economic evidence, becoming unmanageable and Commission Decisions unreasonably long (300 to 400 pages). 49 Independent Music Publishers and Labels Association (IMPALA) v European Commission (T-464/04) [2006] E.C.R. II-2289.

8 88 WEITBRECHT: THE FIRST 50 YEARS OF EUROPEAN COMPETITION LAW: [2008] E.C.L.R. Criminalisation of hardcore cartels? The Commission has rejected ideas to increase the deterrence against participating in hardcore cartels through the introduction and imposition of criminal sanctions. This rejection appears motivated by the fact that criminal sanctions can only be imposed by national authorities and in particular courts. Instead, the Commission has opted for further increasing the level of fines, which are not paid by the individuals responsible for the infringements but by companies and therefore ultimately shareholders and consumers. Should Member States increasingly opt for criminalisation, the Commission may lose its position as the leading enforcement agency in the cartel area. Judicial review. The courts have followed the Commission not only in the Microsoft judgment but in the cartel enforcement area, where the Commission s retroactive application of Fining Guidelines leading to increased fines has been endorsed by the Court of Justice and where the Commission s fining decisions are routinely affirmed even if modified in certain details, by the CFI and ECJ. The pendulum will surely swing back in the other direction at some point, with Commission Decisions being put under closer scrutiny, but it is impossible to predict the time and circumstances of this occurrence. Private enforcement. The Commission has been slow in developing tools that would aid private enforcement of competition laws. In the absence of discovery tools, private enforcement will only exist in the form of follow-on damage actions; even for those there is relatively little incentive in the absence of class actions and punitive damages. The introduction of such measures, not necessarily limited to the competition area but covering many areas of consumer protection, will be the most immediate challenge for the Commission. Article 82. While at the end of 2005 the Commission has published a Discussion Paper on exclusionary abuses under Art.82, it appears that the extension of its more economic approach to Art.82 has proven to be more difficult than anticipated. A balance needs to be struck between economic sophistication and predictability of results in practice. Modified role for competition under the Treaty of Lisbon? Operating a system ensuring that competition in the internal market is not distorted has been one of the fundamental activities of the European Union (Art.3(g) Rome Treaty). Under the Lisbon Treaty, signed on December 13, 2007, Art.2(3) dealing with the internal market does no longer refer to such a system. Undistorted competition is now only mentioned in a tersely-worded Protocol on the Internal Market and Competition. While the current Competition Commissioner has sought to downplay the significance of this change as one of mere semantics, this revision may well turn out to be the starting point for a different role of competition in the European Union over the next 50 years.