FOREWORD: EUROPEAN COURT OF JUSTICE - PROCEDURE - EFFECTS ON THE MARKET - ANTICOMPETITIVE CONDUCT - FUNDAMENTAL RIGHTS - INVESTIGATIVE MEASURES

Recent trends at the Court of Justice of the European Union

This editorial is the written version of a speech given at the ’Concurrences’ Annual Dinner at New York on 6 September 2018. It identifies and discusses three recent trends of antitrust litigation at the European Court of Justice. These three trends are, respectively, of a structural, substantive and procedural nature. Thus the author discusses the progressive decrease in the quantity of cases brought before the EU courts in direct actions, the renewed interest by EU judges to analyze the concrete effects on the market of a conduct alleged to be anticompetitive, and the trend to give substance to the fundamental rights invoked by undertakings affected by the investigative measures of the Commission. While the author considers two of these trends to be clearly positive, judgment is reserved on the structural changes concerning antitrust litigation at the Court of Justice.

In this editorial, three recent trends of antitrust litigation at the Court of Justice of the European Union shall be identified and discussed.

The first is a structural/systemic one. To put this into proper context, please allow me to jump back in time: one hundred years, to be precise. Indeed, the year 2018 is the centennial of Woodrow Wilson’s “Fourteen Points” speech. Nine months after the United States had entered World War I, President Wilson appeared before Congress to outline his plan for a postwar peace. In just over 1,200 words, his speech contributed to changing the world. In particular, he suggested ending secret treaties, ensuring freedom of the seas, promoting reciprocal and free trade and creating “a general association of nations” in order to guarantee the “political independence and territorial integrity of great and small states alike.” President Wilson, however, did not succeed in winning general support for that project at the time. It would take another world war and another US president before his ideas would eventually prevail both domestically and abroad.

President Wilson’s ideas found particularly fertile ground in Europe after the end of World War II. The founding fathers of the then European Economic Community (now, the European Union) decided to establish a community of states with the primary objective of creating lasting peace. This was done, at least as the first step of the process was concerned, by progressively integrating the economies of the various European states. Put simply, the key idea was to turn former enemies into business partners. To do so, an internal market had to be created in order to ensure the free circulation of goods, services, capitals and workers within Europe. In that context, a body of pan-European antitrust rules also had to be enacted. What was the point of removing state-made obstacles to trade if companies could basically re-create them by dividing the market?

Antitrust was, accordingly, a key policy for the first 4–5 decades in the life of the European Union. The Court of Justice of the European Union had, in those years, to deal with numerous high-profile cases which helped shape the key concepts of EU antitrust rules. Judgments such as Consten and Grundig (56/64 and 58/64), Société Technique Minière (56/65), Wilhelm v. Bundeskartellamt (14/68), Dyestuffs (48/69), Continental Can (6/72), United Brands (27/76), Hoffmann-La Roche (85/76), Hoechst (46/87 and 227/88), Delimitis (C‑234/89), Woodpulp II (C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85), and Tetra Pak II (C‑333/94 P) were eagerly awaited by the institutions, economic operators and not least the academic community.

However, the interest generated by these antitrust cases decided by the Court has progressively, but clearly, diminished over the last three decades and I believe there are at least three reasons for that development.

With the reform introduced by Regulation (EC) No. 1/2003, a significant part of the enforcement of EU competition rules has been decentralized towards the national competition authorities and courts of the Member States.

The process towards a declining interest probably started in 1988, when the Court of First Instance (now, the General Court) was set up, in order to assist the Court of Justice, which was faced with an ever-growing number of cases. The new court was intended to deal in particular with antitrust cases: they were numerous and often raised a variety of factual, legal and economic issues which—it was thought—deserved dedicated and highly specialized staff. The Court of Justice (i.e., the body at the apex of the judicial structure) thus would be enabled to concentrate more on its constitutional role.

The second reason seems to be the completion of the European Single Market on 1 January 1993. As from that date, goods, services, capital and workers were free to move across the EU. It was the achievement of the long-term plan conceived by the founding fathers. After that moment, the focus of the integration process gradually shifted. The EU was given new areas of competence such as foreign and security policy, environment, energy, justice—thereby evolving from being a primarily economic organization to something close to a federation of states. This inevitably affected the number and types of cases which were brought before the Court, which then had to venture into new (and often sensitive) fields of law. Antitrust as a consequence progressively lost its central importance.

Thirdly, with the reform introduced by Regulation (EC) No. 1/2003, a significant part of the enforcement of EU competition rules has been decentralized towards the national competition authorities (“NCAs”) and courts of the Member States. In particular, having acquired more powers and more resources, the NCAs have, over time, become more proactive (and bold!). For its part, the Commission seems more concerned with developing competition law by focusing on a few bigger cases raising novel issues (the recent Google decisions are a good example). More routine cases are often dealt with by way of settlement or commitment decisions.

This means that the EU courts, both the General Court and the Court of Justice, receive by way of direct actions significantly fewer cases than before. For example, according to a recent study, the number of judicial proceedings for cartel-related cases dropped by a margin of 20 to 55% due to the introduction of the settlement procedure alone (M. Hellwig, K. Hüschelrath, and U. Laitenberger, Settlements and Appeals in the European Commission’s Cartel Cases: An Empirical Assessment, ZEW, Discussion Paper No. 16-010, January 2016).

As a direct consequence of the decentralization of the application of the antitrust rules to NCAs and courts, more cases than in the past come before the Court indirectly, via the preliminary ruling procedure.

While the three factors just mentioned might point to a relatively diminishing importance of antitrust cases before the EU courts, there are then again also developments pointing in a different direction. As a direct consequence of the decentralization of the application of the antitrust rules to NCAs and courts, more cases than in the past come before the Court indirectly, via the preliminary ruling procedure. Indeed, national courts hearing appeals against decisions rendered by the NCAs may have doubts concerning the scope of Articles 101 and 102 TFEU in specific circumstances and thus are more likely to turn to the Court for assistance. Cases such as AKKA/LAA (C‑177/16, on excessive prices), APVE (C‑671/15, on the application of competition rules to the agricultural sector) and Coty Germany (C‑230/16, on internet sales bans) illustrate this well. These cases, which attracted considerable attention, allowed the Court to provide important clarifications as regards the reach of EU competition rules.

Turning now to the second trend which I have identified as being substantive in nature.

Until fairly recently, faced with questions regarding the alleged anticompetitive nature of a given conduct, the EU courts have frequently relied on presumptions developed on the basis of the legal and economic analyses carried out in past case law, especially in some landmark cases of the 1970s and 1980s. For that reason, the EU courts have been criticized for their reluctance to carry out any in-depth assessment of the cases brought before them, even when the most recent economic theories appeared to cast doubts on certain presumptions. More recently, however, there seems to be a renewed interest—especially by the Court of Justice—to analyze the concrete effects on the market of a conduct alleged to be anticompetitive, or at least to verify the presumed harmfulness of a conduct by examining it in the light of all the relevant circumstances. In particular, in Cartes Bancaires (C‑67/13 P), the Court of Justice faulted the General Court for adopting too broad a concept of “restrictions by object” for the purposes of Article 101 TFEU. It held that the first instance court could not validly conclude that the pricing measures adopted by the economic interest grouping set up by the main French banks had as “their object” the restriction of competition. Similarly, in Intel (C‑413/14 P), the Court of Justice dismissed the per se approach that had been adopted by the General Court: the latter should have verified whether the loyalty rebates granted by Intel to four computer manufacturers were capable of restricting competition. In AKKA/LAA, the Court indicated that for high prices charged by a dominant company to be considered “unfair” for the purposes of Article 102 TFEU those prices must be “significantly and persistently” higher than the competitive prices, and that the analysis by the authorities must be based on “objective, appropriate and verifiable criteria” and carried out “on a consistent basis.” In Coty Germany, the Court held that a supplier of luxury goods can, in principle, prohibit the authorized distributors of a selective distribution network from selling those goods on a third-party internet platform (such as Amazon). The Court found that, when imposed uniformly and not applied in a discriminatory fashion, such a measure is appropriate to preserve the luxury image of the products at issue and does not go beyond what is necessary to achieve that aim.

More recently, however, there seems to be a renewed interest—especially by the Court of Justice—to analyze the concrete effects on the market of a conduct alleged to be anticompetitive, or at least to verify the presumed harmfulness of a conduct by examining it in the light of all the relevant circumstances.

However, also within this trend one can find indications of a different and, perhaps, more conservative or rigid approach. In particular, in Hoffmann-La Roche (C‑179/16), the Court held that an arrangement between two undertakings marketing two competing medicinal products, which consists in the dissemination, in a context of scientific uncertainty, of misleading information relating to adverse reactions resulting from the off-label use of one of those products with a view to reducing the competitive pressure it exerts on the other product, constitutes a restriction of competition “by object”.

Unlike the first and second trends, the third trend, I would like to emphasize, is a procedural one.

For quite some time the EU system (with the Commission as investigating authority and the courts tasked with verifying the legality of the former’s decisions) has been criticized not only for resorting to a much too frequent reliance on presumptions, but also for being too lenient in tolerating the far-reaching investigative powers of the Commission. However, a number of recent cases have given the EU courts the opportunity to provide important clarifications as regards the scope of the Commission’s powers of investigation under Regulation No. 1/2003. In those cases, the EU courts, and in particular the Court of Justice, have given substance to the fundamental rights invoked by the undertakings affected by the investigative measures, censuring the unlawful use of the Commission’s powers. In Nexans (C‑37/13 P), Prysmian (T‑475/14) and (very recently) České dráhy (T‑325/16), the EU courts have partly annulled decisions ordering companies to submit to an in loco inspection on the ground that the statement of reasons provided in the decisions in question was too broad, covering also products, services or forms of conduct for which the Commission had no element to justify an inspection. In Deutsche Bahn (C‑583/13 P), the Court censured what was, in part, a “fishing expedition”: immediately before a (regularly authorized) inspection at the premises of Deutsche Bahn, the Commission staff was informed about another, unrelated, possible infringement by the same company. During the raid, the Commission officials did find documents concerning the new alleged infringement and informed their colleagues in Brussels, which prompted the Commission to adopt second and third inspection decisions, which then also covered the new suspected infringement. The Court observed that the information given to the Commission’s officials on the second alleged infringement could not be viewed as part of the general background information on the first alleged infringement. The Court concluded that the Commission’s conduct had infringed the right of defense of the undertaking concerned and annulled the second and third inspection decisions. Some months later, in four almost identical judgments, the Court annulled requests for information sent by the Commission to companies active in the cement industry (C‑247/14 P; C‑248/14 P; C‑267/14 P; and C‑268/14 P). The Court found the statement of reasons provided in the decisions at issue to be excessively brief, vague, generic and, in some respects, also ambiguous. In particular, the decisions did not set out, with the minimum degree of clarity required, the subject matter of the investigation, the alleged infringements, and the suspicions that the Commission intended to investigate. Such a statement of reasons could not justify requests for information which, furthermore, were sent more than two years after the first inspections and after the Commission had already sent a number of requests for information. Here it is interesting to note that the questionnaire sent by the Commission comprised nearly 100 pages and multiple sets of questions and sub-questions. The questions posed were extraordinarily numerous and covered very diverse types of information, some of which concerned a ten-year period. Furthermore, the information had to be provided in a very specific and rigid format.

For quite some time the EU system (with the Commission as investigating authority and the courts tasked with verifying the legality of the former’s decisions) has been criticized not only for resorting to a much too frequent reliance on presumptions, but also for being too lenient in tolerating the far-reaching investigative powers of the Commission.

Just as for the other two trends, also when it comes to this one, there are cases pointing in a different direction. In Intel the Court did criticize the Commission for failing to comply with its duty to record statements made during interviews of natural or legal persons, but did not view that as a breach of an essential procedural requirement capable of justifying the annulment of the challenged decision. The facts were as follows: during the investigations, the Commission held a meeting with a senior executive of a computer manufacturer without, however, recording the meeting. When Intel asked about that meeting, the Commission first denied that such a meeting had taken place. Only at a later stage did the Commission admit to the existence of the meeting and sent Intel a non-confidential version of an internal note on that meeting. The confidential version of that note was communicated to Intel only during the first instance proceedings. On appeal, the Court of Justice rejected the Commission’s argument that a distinction could be made, under Regulation No. 1/2003, between formal and informal interviews. The interview in question thus should have been properly recorded. In addition, the Court rejected the argument that, by making available to Intel during the administrative procedure the non-confidential version of the internal note, the Commission had remedied the omission. That said, the Court pointed out that Intel had not managed to prove that the breach committed by the Commission could influence, to Intel’s detriment, the course of the proceedings and, ultimately, the content of the Commission’s decision. The Court thus rejected Intel’s request to annul the challenged decision.

The three trends I have identified (one structural/systemic, one substantive and one of a procedural nature) are, as indicated before, only trends. In other words, the picture emerging from a complete analysis of the recent case law of the EU courts is not always and entirely homogeneous and unambiguous. One can easily find decisions which seem to go against the flow or that are blurring the picture. I would dare say that looking at the whole picture, it is more modern art rather than figurative art. Just like a cubist painting, the case law of the EU courts needs to be de-codified in order to be understood, explained and, where appropriate, criticized. As a member of the Court of Justice I am ill-suited to judge the quality of that case law. Naturally, as transpires from this contribution, I too find certain decisions more convincing, sound or clear than others.

Overall, however, I am of the view that two of the mentioned trends are clearly positive. First, the EU courts appear more ready to concretely verify the alleged anti-competitiveness of certain forms of conduct which, in the past, were considered harmful almost by definition. The Court of Justice, in particular, is not insensitive to more recent legal and economic theories: presumptions are an inevitable tool for judges, but their soundness and, in any event, their applicability to a specific set of circumstances need to be verified. Second, a number of cases show the EU courts’ willingness to censure the Commission for an improper, excessive or abusive use of its powers of investigation, thereby strengthening the right to effective judicial protection of the companies subject to an investigation. This is a crucial development, especially in the light of the level of fines imposed in the most recent Commission decisions. True, the Court has adopted a rather lenient approach in Intel, but perhaps that may be explained by its desire to rule on the substantive issues concerning the rebates.

Antitrust policy may have lost, to some extent, the preeminence it once enjoyed when the European project was more focused on economic integration. However, as a key instrument to ensure the genuine freedom of markets, its present and future importance should not be overlooked.

That said, whether the progressive decrease in the quantity of cases brought directly before the EU courts is to be regarded as a positive trend is an open question. From the perspective of the enforcer, I understand the rationale of the new Commission policy: it frees resources that may then be employed in the most complex cases. However, when I look at it from the perspective of the companies that decide to settle, I am more doubtful. May that be explained by the fact that companies see no added value in going before the EU courts? If that is so, I would hope that the increased stringency of the EU courts with regard to the Commission (which I just outlined) may in the future change that attitude. In that context, I would point out that the recent reform of the General Court has doubled the number of judges. Presumably, more resources are now available to carry out an in-depth and comprehensive review of the challenged decisions. It is also true that, in these last years, a larger number of cases land before the Court through the preliminary ruling procedure. Yet, antitrust is a particularly technical field of law and the specificities of each case are often of crucial importance to rule on the lawfulness or unlawfulness of a given form of conduct. As I see it, requiring the Court to provide an answer to an abstract question of law in this field may, at times, be neither straightforward for the Court of Justice nor satisfactory for the referring national court.

To conclude, I think that it can be safely said that the “association of nations” established in Europe after World War II has successfully achieved the objective of creating lasting peace on the continent, protecting the territorial integrity of large and small European states. It also greatly contributed to increasing the welfare of those countries.

Today, the European Union must face new challenges, which often also have a global dimension: terrorism, climate change, illegal immigration, the financial crisis, etc. The Court of Justice of the European Union, also in those fields, has to fulfill its mission to ensure the rule of law. In that regard, antitrust policy may have lost, to some extent, the preeminence it once enjoyed when the European project was more focused on economic integration. However, as a key instrument to ensure the genuine freedom of markets, its present and future importance should not be overlooked. Paraphrasing Austro-American economist Ludwig von Mises: we should not forget that basic freedoms such as “freedom of speech, of thought, of the press, freedom of religion, freedom from imprisonment without trial” can never be preserved in the absence of economic freedoms. In a system where there is no free market, “all those other freedoms become illusory, even if they are made into laws and written up in constitutions.”

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  • European Court of Justice (Luxembourg)

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Nils Wahl, Recent trends at the Court of Justice of the European Union, November 2018, Concurrences Review N° 4-2018, Art. N° 88071, www.concurrences.com

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