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Enforcement Notes

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This is an extract of our Enforcement document, which we sell as part of our Competition Law Notes collection written by the top tier of Oxford students.

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Enforcement of EU Competition law
Public enforcement
ENFORCEMENT BY EUROPEAN COMMISSION (EC)
Public enforcement of Article 101 TFEU and Article 102 TFEU carried out by EC using powers provided by Regulation 1/2003.
1 - Prioritisation of enforcement
EC is not required to conduct an investigation in every case - it is entitled to accord different weights to complaint before it according to Union interest.
However, EC discretion not unlimited. EC must:

1. Assess in each case how serious the alleged interferences with competition are; and

EC must consider attentively all matters of law and fact which complainants bring to
EC's attention (Ufex [2009]).
 Must take into account duration and extent of infringements complained of and their effect on competition within the EU.
 EC cannot rely on fact that practices have ceased if effects are ongoing.
- If effects continue then EC remains competent to eliminate or neutralise them.
o CEAHR [2011]: When considering the Union interest in prioritising a case, EC must in particular weigh:
a) Significance of alleged infringement as regards functioning of internal market against b) Probability of its being able to establish the existence of the infringement; and c) Extent of investigative measures necessary to fulfil its tasking of ensuring the observance of Articles 101 and 102 TFEU.

2. Provide precise and detailed reasons for its decision.
o Reasons provided by EC must be sufficiently detailed and price to define EC's priorities (Ufex [2009]).
 Must set out facts justifying decision and legal considerations on basis of which it was adopted.
EC can decline to investigate complaint for lack of Union interest where National Competition
Authorities well-placed to deal with it.

Court considers whether this in itself justifies EC's finding of lack of sufficient Union interest -
where multiple Member States are involved, may be that EU-level action more effective than various national-level actions (CEAHR [2011]).

EC Notice on handling of complaints by EC (2004) contains most of the information above, but also notes that EC is not obliged to set aside a complaint where there is no clear Union interest - may still go ahead with investigation.

1.1 - Complaints procedure
Potential infringements of Competition law may be brought to the attention of EC by a complainant -
under Regulation 1/2003, EC focuses on serious infringements of Articles 101 and 102 TFEU and hence relies on information supplied by Us and consumers.
Article 7(2), Regulation 1/2003 permits natural or legal persons that can show a legitimate interest to lodge a complaint to ask EC to find an infringement of Article 101 and/or 102 TFEU and require the infringement be brought to an end under Article 7(1). EC Notice on handling of complaints by EC (2004):

[36]: Us can claim a legitimate interest where they are operating in the relevant market or where the conduct is liable to directly and adversely affect their interests.
[37]: Consumer associations can lodge complaints with EC, so can individual customers where their economic interests are directly and adversely affected, insofar as they are buyers of the relevant goods and services.
[38]: General interest considerations put forward by the complainant are insufficient to amount to a legitimate interest - does not show that complainant liable to be directly and adversely affected by infringement.

EC must decide on complaints within a 'reasonable time' ([60]), with what is reasonable depending on the circumstances of each case, including:

i. ii.

iii. iv.

v. Context;
Various procedural steps;
Conduct of parties in course of procedure;
Complexity of case; and
Importance for parties involved.

2 - Enforcement powers of EC and penalties for non-compliance
Regulation 1/2003 gives EC a number of powers in enforcing EU Competition law.

i. ii.

Request for information (Article 18);
Inspection powers (Articles 20 & 21).
o Inspections of undertakings (Article 20);
o Power to take statements (Article 19);
o Inspection of other premises (Article 21).

2.1 - Request for information (Article 18, Regulation 1/2003)
Article 18, Regulation 1/2003 allows EC, in order to carry out the duties assigned to it by Regulation 1/2003, to require undertakings to provide all necessary information by simple request or decision.
'Necessary information' refers to the objectives for the achievement of which the powers of investigation have been conferred on EC (SEP [1991]).

By simple request:
o Article 18(2): When sending a simple request for information, EC shall -
 State legal basis and purpose;
 Specify information required;
 Fix time-limit for provision;
 Indicate penalties provided for in Article 24;
 Indicate right to have decision reviewed by ECJ.
By decision:
o Article 18(3): When requiring undertakings to supply information by decision, EC shall State legal basis and purpose;
- 'Purpose' must involved identifying the alleged infringement of competition rules (Heidelberg Cement [2014]).
 However not required to make precise legal analysis nor communicate to U all information at its disposal.
 Formulation of reasons in general terms insufficient for determination of suspicion of infringement justifying decision. 



Specify information required;
Fix time-limit for provision;
Indicate penalties provided for in Article 23;
Indicate or impose penalties provided for in Article 24;
Indicate right to have decision reviewed by ECJ.

Article 18(5): EC must forward copy of simple request or decision to National Competition Authority…
a) In whose territory seat of relevant U is situated; and b) Whose territory is affected.
Article 18(6): At EC's request, governments and National Competition Authorities shall provide EC
with all necessary information to carry out duties under Regulation 1/2003.

2.1.1 - Penalties for non-compliance
Articles 23 and 24, Regulation 1/2003 provide for the imposition of fines and periodic penalty payments respectively for a failure to comply with a number of EC's powers of investigation.

Article 23: EC may by decision impose on U fine of up to 1% total turnover in preceding business year where, intentionally or negligently -
a) U supplies incorrect, misleading or incomplete information or does not supply information within required time limit in response to Article 18(3) decision requesting information.
b) U supplies incorrect or misleading information in response to Article 18(2) simple request for information.
 NOTE: Two differences between (a) and (b) - liable for fine under Article 18(3) and Article 23 where:

i. U does not supply the information; or ii.
U supplies incomplete information.
 This reflects the voluntary nature of responding to simple request for information under Article 18(2).
Article 24: EC may impose penalty payments of up to 5% average daily turnover in preceding business year per day in order to compel U to supply complete and correct information which EC has requested by decision pursuant to Article 18(3).
o NOTE: So, where U (a) fails to provide information, (b) supplies incomplete information, or (c) provides misleading information, EC may impose periodic penalty payment to compel them to do so.

NOTE: EC has across the board no power to fine individuals - they can only fine the relevant U
under investigation. There is also no power of Criminal law in EU law.

2.1.1.1 - Limitation periods on penalties
NOTE: This applies to all penalties under consideration in this area of EU Competition law.
Article 25, Regulation 1/2003: EC's power to impose penalties subject to following limitation periods -
a) 3 years in relation to infringements relating to:

I. Requests for information (Article 18);

II. Conduct of inspections (Articles 19, 20 & 21).
b) 5 years in the case of all other infringements.
Time starts running on the day the infringement is committed; in case of continuing or repeat infringements, time begins to run when the infringement ceases.
Any action taken by EC or National Competition Authority for purpose of investigation or proceedings in respect of an infringement shall interrupt the limitation period - starts time running afresh. 

Marine Hoses [2009]: Where there is a break in cartel activity which later recommences,
can view it as a single infringement - would be artificial to split up such continuous conduct.
o What is involved is a single infringement which manifests itself in a series of anticompetitive activities throughout cartel's operation.

However, limitation shall expire on latest day on which period equal to 2x limitation period has elapsed without a fine or period penalty payment being imposed.

2.2 - Inspection powers (Articles 19, 20 & 21, Regulation 1/2003)
Per Article 20(1), Regulation 1/2003, EC may carry out all necessary inspections of U in order to carry out its duties under the Regulation. Article 20(3) deals with voluntary inspections of U's premises; Article 20(4) deals with mandatory inspections, "dawn raids".
Under Article 19, EC has power to take statements in order to carry out the duties assigned to it under the Regulation.

2.2.1 - Power to take voluntary statements (Article 19, Regulation 1/2003)
Article 19(1): In order to carry out its duties under the Regulation, EC may interview any natural/legal person who consents to be interviewed for the purpose of collecting information relating to the subject matter of the investigation.
NOTE: These statements are voluntary - there is no compulsion for individuals to provide them.
Hence, there is also no penalty for non-compliance under either Article 23 or 24.

2.2.2 - Power to inspect U's premises (Article 20, Regulation 1/2003)

Article 20(1): EC carry out all necessary inspections of U in order to carry out its duties under this Regulation.
Article 20(2): Officials and other accompanying persons authorised by EC to conduct an inspection are empowered -
a) To enter premises, land and means of transport of U;
b) Examine books and other records relating to business;
c) Take or obtain copies of or extracts from such books or records;
d) Seal any business premises and books or records insofar as necessary for the inspection;
e) Ask representatives or staff of U for explanations on facts or documents relating to subject matter of investigation and record the answers.
o NOTE: This does not allow EC to go on a 'fishing expedition' - only relates to factual questions; does not require individuals questioned to express guilt.

It is not necessary in relation to inspections under either Article 20(3) or Article 20(4) to get national judicial authorisation.

2.2.2.1 - Voluntary inspections
Article 20(3) deals with voluntary inspections of U's premises.
EC must produce written authorisation specifying:

i. ii.

Subject matter and purpose of inspection;
Penalties provided in Article 23 in case the books/records are incomplete or answers to questions under Article 20(2)(e) are incorrect or misleading.

EC must also give notice in good time before the inspection to the National Competition Authority.
NOTE: These rarely occur in practice - EC usually just sends over a list of questions to be answered. 2.2.2.2 - Mandatory inspections ("Dawn raids")
Article 20(4) deals with mandatory inspections of U's premises.
EC must produce an EC decision specifying:

i. Subject matter and purpose of the inspection;
o Nexans [2014]: While EC obliged to indicate as precisely as possible the evidence sought and the matter to which investigate relates, it is not necessary to:
a) Define relevant market precisely;
b) Set out exact legal nature of presumed infringements; or c) Indicate period during which those infringements were committed.
 Inspections occur at the beginning of an investigation - aimed at enabling EC
to gather evidence relating to suspected infringement.
Appoint date on which inspection is to begin;
Penalties provided for under Articles 23 and 24;
Right to have the decision reviewed by ECJ.

ii. iii.

iv. Article 20(6): Where U opposes an inspection ordered pursuant to Article 20, the relevant Member
State shall give EC assistance, requesting police assistance if necessary.
If assistance under Article 20(6) is required, authorisation must be obtained from a judicial authority according to national rules (Article 20(7)).
NOTE:

i. "Dawn raids" usually conducted when EC suspects serious infringements (cartels, largely).
Leniency applications by one cartel members usually trigger dawn raids on other alleged members of the cartel.
Document provided by EC upon arrival at business premises for an inspection valuable for the firm under inspection - it limits the scope of inspection.
o U's lawyers can thus prevent EC taking away documents not included within the scope of their authorisation (i.e. not within purpose and subject matter of documents searched for) - prevents 'fishing expedition'.
Law firms will often do two things for U:

I. Assist U with the dawn raid and restricting EC's inspection;

II. Assist U with an internal investigation to root out who was controlling the cartel activity - often cartel activity does not come directly from the top.

ii. iii.

2.2.2.3 - Penalties for non-compliance

Voluntary inspections under Article 20(3):
o Article 23: EC may impose fine of up to 1% total turnover in preceding year where,
intentionally or negligently -

i. U produces incomplete books or records during inspection.

ii. U's representative or staff, in response to a question asked in accordance with Article 20(2)(e):

I. Gives an incorrect or misleading answer;

II. Fails to rectify within time limit given by EC an incorrect,
incomplete or misleading answer given by staff.

iii. Seals affixed in accordance with Article 20(2)(d) have been broken.
Mandatory inspections under Article 20(4):
o Article 23: EC may impose fine of up to 1% total turnover in preceding year where,
intentionally or negligently - i.

o

U produces incomplete books or records during inspection.
- Professional Videotape: Staff member shredded documents - U's responsibility to employ, instruct and control its employees to ensure none of them obstruct or hamper EC's work during inspection.
 Does not matter that it is a junior employee acting contrary to company policy of cooperation.
 Staff's behaviour constituted aggravating circumstances -
30% increase in fine.

ii. U refuses to submit to inspections ordered by decision under Article 20(4).
- Bitumen [2007]: EC refused entry to premises and refused permission to talk to an employee in management position/serve the decision. EC officials had to invoke assistance of national authorities,
who were also denied entry.
 These actions constituted aggravating circumstances - 10%
increase in fine imposed.

iii. U's representative or staff, in response to a question asked in accordance with Article 20(2)(e):

I. Gives an incorrect or misleading answer;

II. Fails to rectify within time limit given by EC an incorrect,
incomplete or misleading answer given by staff.

III. Fails or refuses to provide a complete answer on facts relating to subject matter and purpose of inspection ordered by decision under Article 20(4).
 Professional Videotape: Representative, without justification being given and despite assistance of lawyer, refused to answer all questions; did not substantiate objections against questions.

iv. Seals affixed in accordance with Article 20(2)(d) have been broken.
- EON Energie: EC not required to establish that sealed door actually opened or that documents inside were removed; only need to establish that seals were broke, whether intentionally or negligently.
Article 24: EC may impose penalty payment of up to 5% of average daily turnover in preceding business year, in order to compel U to submit to an inspection ordered by decision under Article 20(4).

NOTE:

i. ii.

iii. Article 24 only applies to non-compliance with mandatory inspections pursuant to Article 20(4) decision.
Two differences between Article 20(3) voluntary inspection and Article 20(4) mandatory inspection in the coverage of Article 23:

1. U liable where they refuse to submit to mandatory inspections ordered by decision under Article 20(4);

2. U liable where they fail or refuse to provide a complete answer relating to subject matter and purpose of a mandatory inspection ordered by a decision under Article 20(4).
Difficult to see how these penalties would be effective - even aggravated damages are only a 30% increase which would often equate to 1.3% of annual turnover.
o This is hardly crippling given the potential gains to be made from cartel activity -
harsher penalties must be enforced for deliberate or reckless destruction of incriminating documents if this penalty regime is to carry any great force.

2.2.2.4 - No right to presence of a lawyer

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