Opinion of the Economic and Social Committee on the "XXIXth Report on Competition Policy (1999)"

(2001/C 123/02)

On 5 May 2000, the Commission decided to consult the Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the XXIXth Report on Competition Policy (1999).

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 8 December 2000. The rapporteur was Mr Pezzini.

At its 378th plenary session (meeting of 24 January 2001), the Economic and Social Committee adopted the following opinion unanimously.

1. Introduction: themes covered by the XXIXth report

1.1. In the first part of his foreword to the XXIXth Report on Competition Policy (1999), Professor Mario Monti, Commissioner responsible for competition policy, stresses "the need to modernise Community competition law". This is a recurring theme in the foreword and is also given a great deal of attention in the report(1).

1.1.1. The emphasis on modernisation stems from the continuation in 1999 of the process of modernising the legal framework for Community competition policy. The conditions for completion of this process are now in place, and there is no turning back.

1.1.2. Another extremely important theme in the XXIXth report is the central position of the citizen in Community competition policy. In the foreword and the main report, much attention is given to a new programme of measures aimed at putting citizens, as consumers, first, not just as beneficiaries but also as promoters of the policy(2). In the Committee's view, the Commission's emphasis on giving consumers and their associations(3) the opportunity to stimulate and promote Community action in the competition field is significant, as the result will be to improve the efficiency and timing of that action.

1.2. Another key theme of the XXIXth report is the Commission's merger control work in 1999. This chapter is fully illustrated with explanations and a detailed set of case studies(4). In the Committee's opinion, 1999 was a highly successful year for the Commission in this area, confirming its growing importance. Some of the issues addressed were even more complex than in previous years and led to conclusions which, though valid in economic terms, pose a series of questions which will have to be resolved rapidly, possibly in court.

1.2.1. One subject of particular importance relating to merger control, and to which the report devotes a good deal of time, is the sectors that stem from the convergence of technologies from diverse sectors and feature a high level of innovation. If new markets, arising from new technologies and the convergence of the technologies of various sectors, are to grow, the business initiative and competition they represent must not meet any obstacles that cannot be objectively justified. The Committee very much welcomes the Commission's attempt to reconcile the opportunity for companies to launch initiatives that may lead to the creation of new markets of this kind, with the need to ensure that such initiatives do not create positions that could prevent other companies from entering the same markets. There is a danger, however, probably confirmed by the report's discussion of the Telia/Telenor merger, that attempts to strike a balance between the various demands can lead to measures that can dissuade companies from making transactions that are clearly important for the development of Community policies. The Telia/Telenor merger which, as mentioned in the report, was abandoned after the Commission decision made approval conditional upon extensive changes to the original plan, would have merged the activities of the national companies of two Member States, and as such would have had a major impact on the process of Community integration and on the development of new markets, paving the way for other transactions that only a few years ago would have been inconceivable. The Committee therefore hopes that the Commission will bear this precedent in mind in future and assess whether in some cases a more flexible approach would be preferable, even if this means that it is not possible to eliminate every imaginable risk to competition.

1.2.2. Another interesting theme addressed in the report is that of the growing use of merger control to counter collectively dominant positions. The Committee agrees that in the context of merger control, the concept of collectively dominant positions can be genuinely useful in addressing increased risk to competition. Nevertheless, in the absence of precise definitions, there is a danger of over-stretching the concept of collectively dominant positions, making it difficult to distinguish such cases from other mergers that do not threaten competition but may actually encourage it and are an essential requirement of the modern economy. For this reason, in future, the Commission should think carefully before taking the path opened up by the Kali und Salz and Gencor/Lonrho judgments of the Court of Justice and the Court of First Instance, and move quickly to adopt the long-awaited guidelines on the definition of oligopolistic dominance, in order to nip these dangers in the bud and reduce the risks inherent in the excessive use of subjective discretion(5).

1.2.3. The increasingly important role of merger control is largely the result of the exponential growth in the number and size of transnational mergers. This growth is in turn sparked by the process of globalisation and the development of the new economy. With the current torrent of changes, companies are tending to view their size and capacity, which only a few years was deemed optimal, as inadequate. For this reason, there is a growing wave of mergers, often involving previous market leaders and triggering a spiral that is radically transforming existing competition scenarios.

1.2.4. The high level of Community activity is also the result of the mass of experience garnered by the Commission over ten years of merger control activity. The solutions illustrated in the XXIXth report, adopted for highly complex operations, including many of major industrial and economic importance, are particularly noteworthy. Increasingly, the Commission is aiming to marry the tough approach demanded by the increase in situations of individual or oligopolistic market power with the desire not to obstruct the free flow of entrepreneurial activity released by the new challenges and new goals. The report therefore reveals a Commission that has become one of the main protagonists in the merger processes under way at world level, and that is playing an ever more vital and demanding role.

1.2.5. The growing importance of Community merger control has probably been made possible by the new powers given to the Commission under the recent reform(6), the first manifestations of which are fully documented in the report. With further legislative developments just around the corner, aiming in part to continue along the path marked out by the previous reform(7), this is all the more important.

1.3. Another key theme in the report, in the area of merger control, is the development of international cooperation. In 1999, cooperation with American antitrust authorities increased significantly, with joint work on a number of especially difficult cases. The year also saw fruitful cooperation with the antitrust authorities of other countries. Furthermore, the Commission has been assisting the CEEC countries and transferring experience in the area of competition law(8).

1.3.1. Cooperation with the authorities in the CEECs is especially important in view of the risks to competition associated with the privatisation process under way in those countries. Unless effective measures are taken, this process could generate private dominant positions likely to lead to serious distortions in the future Community competitive fabric. The Committee therefore hopes that cooperation will trigger effective measures, before irreversible damage is done. 1999 proved, however, that over and above the specific issues associated with relations with the CEEC countries, international cooperation is now indispensable given the geographical extent of the changes brought about by mergers. The effects of mergers are difficult to contain within a given area and therefore mergers increasingly fall within the jurisdiction of a growing number of antitrust authorities, with all the burdens and risks that entails(9).

1.3.2. Bilateral cooperation is no longer enough to limit these burdens and risks, although it will be needed ever more frequently in future. Therefore, despite the difficulties encountered so far, forms of multinational cooperation must definitely be explored as well, as was pointed out in the introduction to the XXVIIIth report, on which the Committee issued a very positive opinion(10).

1.4. The major commitment of the Commission to making Community action in the competition field more effective and incisive is also evident in the area of state aid. As in previous years, the primary objective here has been to reduce total state aid volumes, which are still too high. There are also other objectives. For instance, the Commission has attempted to reconcile the need to be tough on distorting effects with the desire not to damage initiatives that could encourage competition and need support(11).

1.4.1. With these objectives in mind, new rules, governing both substance and procedures, have been adopted with a view to making aid more transparent and to cutting unnecessary red tape, especially for SMEs, in order to free up more resources for addressing more harmful forms of aid(12). The Committee welcomes the efforts made in this direction, but believes that other avenues must be actively explored in order to counter hidden and non-declared aid. For instance, the cooperation of Member State authorities and all other interested parties must be secured to set up a control system covering the entire Community, similar to the action to be taken on restrictive agreements.

1.5. Commission competition activities in 1999 also extended to other areas, generally following in the footsteps of previous reports, with significant results(13).

1.6. All the measures, activities and themes mentioned above deserve due recognition. Nevertheless, this opinion must pay special attention to the programme for modernising the legal framework, owing to the general importance of the problems it will solve and its significance with regard to the other matters mentioned above. The successful modernisation of the legal framework is a vital precondition for solving any problem relating to Community competition law.

1.6.1. For instance, in the Committee's opinion, the XXIXth report rightly links the possibility of giving the citizen/consumer a central role with the decentralisation itself, which will be one of the modernisation reform's key achievements.

1.6.2. There is also a close connection between the reform and the other matters mentioned above, which illustrates the interdependence of the various aspects. For instance, to extend merger control activities, far more resources are needed than are presently available. The Committee would stress that this in turn requires the Commission to free itself of any unnecessary burdens hampering its work, which is another aim of the modernisation process. The link between modernisation and state aid activities is similar. The revision of the legal framework for state aid is part and parcel of the modernisation process and must be considered in the context of this policy as well(14).

2. "Modernising" the legal framework

2.1. The Committee opinion on the XXVIIIth competition policy report(15) stated that there were two keys to understanding the report: modernisation and cooperation. These were "the keys to the Commission's future scenario for competition policy".

2.1.1. The keys to understanding this year's report are the same. Many projects begun or first formulated in 1998 were completed or acquired their definitive form the following year. In 1999, new projects were set up, in the same vein as the earlier ones but going much further, illustrating the now irrevocable desire for a complete overhaul.

2.1.2. In 1999, the legislative process setting out arrangements for vertical agreements, heralded by the 1997 Green Paper and given its broad outline the following year, was completed. The Committee gave it an overall positive response, while highlighting a few concerns(16).

2.1.3. In 1999 a further, still more wide-ranging reform was set in place, modernising the system applying Articles 81 and 82. The central element of the reform was the decentralisation of the system to Member State legal and administrative bodies with powers and responsibilities that in essence were previously exercised almost exclusively by the Commission. As a result, this is probably the reform that does most to highlight the scale and scope of the change. It must therefore be given special attention in this opinion, despite the fact that the Committee has already given its opinion on the general approach and will be reporting on the consequences.

2.2. The Committee opinion was favourable towards the modernisation plan as a whole. It did, nevertheless, stress that this positive assessment could not be viewed in isolation from a number of concerns and warnings, which were outlined in the same document. The opinion mentioned that preliminary, preparatory and accompanying measures for drafting and implementing the new legislation appeared to be a necessary condition if the reform was to meet the expectations it had raised. This aspect of the opinion is still vitally important. It is therefore appropriate to refer to the reasons that led the Committee to draw those conclusions.

2.2.1. The modernisation plans have sparked varying reactions from the parties concerned. There is general agreement as to the urgent need for a change, and acceptance in principle of the objectives set out in the White Paper. Nevertheless, it is also accepted that radical reform of this nature is very costly and difficult. Furthermore, it is agreed that many important aspects require further attention and that the success or failure of the reform cannot be left to depend on the efforts of the Commission alone.

2.2.2. These views are prompted by a variety of considerations, which are no less valid now. A reform with these objectives requires adjustments to be made to legal, judicial and administrative structures at both Community and national levels. Moreover, the possibility that the reform may require changes to be made to constitutional provisions in certain Member States, alongside changes to the Community Treaties, cannot be ruled out. In many countries, training and selection systems for judges will also have to be reviewed. Some Member States will have to draw up rules authorising the relevant authorities to apply Community competition law. In addition, attention must be given to the matter of the link between the legal and administrative authorities of the various countries and the coordination of their powers, and probably to the coordination of the powers of such authorities within individual countries. One fundamental problem will be that of securing the unity of the decentralised system and of making sure that handing power over to the national courts and authorities does not mean jeopardising the unity of the system or the primacy of Community law. For this reason, care must be taken to ensure that the interpretative principle used by authorities or courts in one Member State does not differ from that used by a court or authority in another. Furthermore, it is vital that courts and authorities of different Member States do not arrive at differing conclusions with regard to one and the same agreement.

2.2.3. New instruments are needed to maximise awareness of all the case law and administrative practice used to apply the same provisions throughout the Community. This is essential for any matter subject to assessment under Community competition law.

2.2.4. Given the importance of the matters touched upon here and others described in the Committee opinion, studies and further research will probably be required, involving universities and the relevant professional bodies, as well as State legislatures. The success of the reform requires all those concerned - Community bodies, national States and all other interested parties - to cooperate and contribute in their own spheres. In view of the complexity and difficulty of these matters, no-one can expect radical changes of the kind set out in the modernisation plan to be made overnight.

2.3. The Committee's position in its opinion on the White Paper took into account all the arguments that made the reform appear necessary and urgent as well as those requiring measures to be taken to address the problems highlighted. Following a thorough debate, the Committee aimed to stress the need both for the reform and for proper solutions to be found for the problems it would imply. This remains the Committee's position.

2.3.1. Nevertheless, in view of the wide range of difficulties to be overcome and the length of time needed (in some cases), the reform could not be made conditional upon the adoption of all the "necessary" provisions or "appropriate" action at Community level and by the individual Member States. In the Committee's opinion, the Community bodies must thus act quickly to adopt all the legal and administrative provisions within their responsibility, before the decentralisation comes about.

2.3.2. Furthermore, decentralisation should be part of a concerted effort at Community level to implement the new global framework required by the reform as soon as possible. This concerted effort must begin at once. The Commission must, therefore, take the initiative and begin as soon as possible stimulating active cooperation between the Member States and all possible interested parties, in order to implement all possible measures and initiatives to ensure the orderly and coherent development of the new overall frame of reference. The Commission and the Member States must also make the necessary arrangements to prepare the courts and regulatory authorities.

2.4. Following this necessary parenthesis, it must also be stressed that the Commissioner's foreword to the XXIXth report emphasises the need for modernisation "both in the area of antitrust, where the actions of companies may distort competition, and in the area of State aid, where the actions of Member States may produce similar effects".

2.4.1. The role of modernisation in the current phase of Community competition policy is also demonstrated by the fact that this year the Commission's reforms have continued apace. On 24 May 2000, the Commission adopted guidelines for applying Article 81 of the Treaty to vertical restraints, completing the reform in this area. The broad debate on modernisation generated by the White Paper has continued, and major developments in this area are on the horizon. There is word of a Commission initiative to launch the reform in the Community bodies, and this will be the subject of a specific Committee opinion. Meanwhile, a draft reform document on "horizontal cooperation agreements"(17), which was issued on 27 April 2000, should dovetail with the other reforms and, if carried through properly, should have the desired innovative impact on the legislative framework concerned.

3. Decentralising Commission management of Community competition policy

3.1. One important aspect of the new frame of reference for future Community competition policy, uncovered by the current reform programme, is the concerted manner in which the new Community competition system must be implemented. The White Paper reform will give national courts and competition authorities the power to apply one of the most important competition provisions, namely Article 81(3).

3.1.1. Under the new system, exemption from the Article 81(1) ban on restrictive agreements will no longer depend on an administrative action (exemption) until now the exclusive responsibility of the Commission. After the reform, the Article 81(1) ban will not apply if the interpreting party considers that the economic conditions mentioned in Article 81(3) are met.

3.1.2. This ban is a key pillar of Community competition law. In future, it can be applied not only by the Commission but also by the administrative and legal authorities of any Member State, before which, as an exception to the rule, the companies concerned will have to challenge any application of the Article 81(1) ban.

3.1.3. The most significant effect of the reform will therefore be that the ban on restrictive agreements will no longer be imposed from the centre, but by various bodies that are not used to cooperating together and have differing traditions, values and mindsets. As a result, one of the most difficult but unavoidable aspects of the legislation implementing the White Paper's plans will be that of establishing the rules to govern the necessary cooperation between the bodies among which responsibility, hitherto the Commission's alone, will be divided.

3.1.4. Given the scale of the overall process of modernising the legal framework in question, the term "cooperation" is also a key to the XXIXth report. One of the main reasons for reform is that the European Union can no longer afford the luxury of a competition policy managed from the top down, where all players other than the Commission have a role that involves only limited responsibility. In any case, this form of management is no longer necessary, or even possible, given the major changes in the Community context; and the reforms are in essence a reflection of this.

3.2. The central role of cooperation in the new Community competition policy framework is borne out by other considerations relating to the modernisation project outlined in the XXIXth report.

3.2.1. With regard to the need for a concerted effort to create the right conditions for the reform, the cooperation of all the Member State bodies and institutions, encouraged and guided by the Commission, is a necessary precondition for the reform's implementation.

3.2.2. Cooperation must be the rule for all areas of competition law, not just those that are up for modernisation. For instance, the active role that the report states should be given to consumers and their associations is a right to be accorded them as citizens, but it also involves a duty on their part to cooperate, so as to ensure that their interests are protected as effectively as possible. The policy on State aid described in the report is unthinkable without practical, active cooperation between the Commission, the Member States and any other interested parties. In addition, the process of liberalisation, which is central to current Community competition policy, and is also referred to, demands full-scale cooperation between the Commission on the one hand and the Member States, national competition and regulatory authorities on the other, otherwise the good work done so far could be undone.

3.2.3. In the light of the above, future annual reports must not simply make general statements on the need for cooperation, but must describe the measures taken in all respects in order to make the necessary cooperation effective.

4. The importance of the aims of the modernisation plan

4.1. The above points demonstrate the Committee's unswerving support for the Commission's goals.

4.2. The modernisation should, first and foremost, lead to a much more thorough application than in the past of Community competition rules, expanding and sharpening up the Commission's own opportunities to act. Free of a workload that was no longer justified, the Commission will be able to devote many more resources and much more attention to tasks that cannot be delegated and on which the success of its competition policy largely depends. For instance, as the report points out, more resources should be given over to action against cartels and abuses and to merger control.

4.2.1. Furthermore, the Commission, free from other tasks, will have time and resources to conduct a continuous as opposed to periodic assessment of the performance of the new legislation. This will enable it to ascertain quickly any needs that have not yet been met by the existing legislation. As a result, it will be able to assess the case for new action or adjustments to existing legislation, as a matter of urgency if need be. Relieved of some of its previous commitments, the Commission should also be able to fulfil its role in supporting and guiding the other parties working with it to achieve competition policy objectives.

4.2.2. None of this will, in the view of the Committee, be an automatic consequence of the reform, however. The Commission's internal structures and the procedures and instruments it uses to exercise its guiding and coordinating powers will still require fine-tuning. It may, for instance, be necessary to conduct a thorough reorganisation of structures, methods and processes that could have a major impact on the reform's effectiveness.

4.2.3. The Committee would therefore ask the Commission to provide information on the measures it intends to take, and on the results already achieved in this respect.

4.3. Handing over the new responsibilities set out in the White Paper to the national courts and authorities will make for a far more widespread application of competition law than in the past, reaching situations that would otherwise have escaped Commission control. Once national courts can apply the whole of Treaty Article 81, there should be an increase in the number of requests for civil remedy, compensation and the declaration of contracts as being null and void, which only courts are able to rule on.

4.3.1. This should significantly improve the efficiency and effectiveness of the system, but it is also one of the more sensitive aspects of the reform. The Committee would also therefore stress the vital need for the Commission to promote a process of careful analysis and preparation, in which all must participate.

4.3.2. This analysis must cover all the legislative systems concerned and assess for each the minimum conditions under which the reform can be implemented and the measures needed to meet those conditions effectively. Work must also begin immediately on devising measures to make the new system transparent and manageable, and to ensure it functions without any serious discrepancies.

4.3.3. Given the importance of this matter, the Committee believes that the Commission should provide information on its findings so far and the steps taken in this direction. By way of example, before drawing up official lists of rules and collections of common case law after the launch of the reform, the Commission should provide - either in the next report or in other documents - information on the state of the application of competition law, on the measures taken in the area by individual Member States, and on the problems they have encountered(18).

4.4. The other modernising reforms too should definitely lead, on the whole, to a more effective Community competition system.

4.4.1. The new exemption regulation (CE) No 2790/1999 for vertical agreements will exempt a much greater number of agreements than previous exemption regulations. The regulation will therefore nip in the bud potential disputes over the legality of agreements that are not genuinely harmful, and which would generate unnecessary work. This process should also be assisted by the new economic approach to interpreting the ban on restrictive agreements, which is at the root of the reform regarding vertical restraints but which will also be adopted for horizontal agreements and will be a necessary consequence of the reform.

4.4.2. The efficiency and effectiveness of the system will also be boosted by the meeting of a further objective common to the various reforms, namely that of making the competition rules more simple, transparent, comprehensible and, in particular, widely known. The importance of this aspect is recognised in the foreword to the report, which states that it is "of the utmost importance that the competition rules be clear, transparent, and efficiently enforced. But competition rules must also keep up with the pace of economic and technological development in the 21st Century."

4.4.3. The Committee believes that the repeated use of guidelines in the reform process is consistent with the aim of greater transparency. Guidelines differ from exemption regulations because they give no assurance that, under given conditions, certain agreements may not be banned. They cannot therefore be viewed as an alternative to regulations, which should be used as often as is possible and appropriate under the White Paper's provisions. Guidelines can however be useful in clarifying the Commission's reasoning and could therefore prove indispensable in helping companies shoulder the new responsibility for assessing their own agreements. Given the importance of this instrument, the Committee thinks that the Commission should regularly update the guidelines so that companies always have an up-to-date framework on which to base their assessments.

4.4.4. Transparency will be an essential factor in the efficiency of the system as a whole, and it is the aim of the modernisation process in the State aid sector as well. The foreword to the XXIXth report, for instance, states that: "Increased transparency is also necessary to raise awareness in Member States of the necessity for strict state aid control" and that: "Increased information to the public will, moreover, encourage peer pressure on Member States to reduce state aid volumes"(19).

4.4.5. As transparency is so important for the system as a whole, the Committee hopes to see it become a general principle for other aspects not mentioned in the report. Cooperation between the various bodies and authorities should be as transparent as possible for the companies concerned in order to provide them with the most effective possible protection. For the same reason, transparency must be an ever present factor in all competition law-related procedures.

4.5. As a result of the current reform process, the competition rules will be applied as they were originally intended and more fairly. This will benefit all companies, but probably small and medium-sized enterprises most of all.

4.5.1. Thanks to the new rules on agreements and aid, SMEs will no longer be subject to unjustified restrictions or potentially costly assessments. The new economic approach will mean that the prime concern in the competition analysis will be the restrictive effects of the actions considered. These effects will depend to a large extent on the market power of the company concerned, power that SMEs are unlikely to possess. Agreements with restrictive clauses drawn up by SMEs will no longer, therefore, be measured with the same yardstick as the restrictive agreements of companies with a significant share of the market. Under the White Paper reform, the rule for SMEs will be that all restrictive clauses except those explicitly banned will be allowed, while for companies with a strong market share, it may become more difficult to use clauses that are restrictive to their own advantage.

4.5.2. The new interpretative stance will not prejudice the interests of large companies, however, as long as the agreements they draw up do not have a direct and immediate effect on the market; this is confirmed by the draft guidelines on cooperation agreements. Basic research, even that conducted by major competing companies, will be free of restrictions regarding both substance and procedures. Furthermore, it should be possible to draw up many production-related restructuring and streamlining agreements, with less likelihood than in the past that they will fall within the scope of competition rules. Large companies will generally have a greater capacity to make their own independent assessments with regard to competition, and to avail themselves of the new instruments already on hand to make the system transparent and sufficiently flexible and responsive to business requirements.

5. The new competition policy gives centre stage to the interests of citizens/consumers

5.1. As mentioned earlier, the XXIXth report also looks into another key aspect, namely the prime position that competition policy should give to citizens/consumers.

5.1.1. This aspect is introduced in the foreword, which begins: "Competition policy is relevant not only for those in business and their advisers, but also for the citizens of Europe, who need to have an overall view of how competition policy is implemented and its relevance to improving their daily lives. One of the essential roles of competition is to promote innovation and ensure that goods and services are produced as efficiently as possible and that these efficiencies are benefiting consumers ...".

5.1.2. The role that competition policy must give citizens/consumers is then reiterated in more detail in various other passages in the foreword and the report. For instance, when describing the purposes of the modernisation reform, the foreword states that the objective of "bringing the decision-making process closer to citizens(20)" is crucial. In the body of the report, it is noted that: "... Many citizens do not realise that competition policy is a powerful and effective tool for protecting their interests as consumers, users of services, workers and taxpayers. If they were conscious of these things, it is likely that they would provide the Commission with strong political support in this area (...) First, for every single decision taken as part of competition policy the question should be asked what specific advantage there may be for the citizen, and especially the consumer (...) the Commission intends to treat consumers not merely as people who benefit as a result of competition policy but also as promoters of competition policy..."(21)

5.2. The reason for quoting this passage at such length is to highlight the Committee's support for the Commission's reasoning and stance. More specifically, the Committee fully endorses the Commission's focus on the importance of bringing citizens/consumers closer to decision-making processes in the competition field. Any initiative designed to make citizens/consumers more familiar with competition policy, such as that already under way(22), is therefore to be welcomed.

5.2.1. In the Committee's view, any measures designed to promote and bolster the role of the citizen in promoting competition can also be highly significant. Measures of this kind can greatly increase the effectiveness of control measures, by uncovering abuses and serious illegal activities that would otherwise have gone unnoticed. This can be a vital contribution to the performance of the system.

5.3. For the reasons mentioned above, the Committee wholeheartedly agrees with the Commission on the central place that competition policy must give to citizens/consumers, providing of course that this does not upset the balance between the interests at stake, which was intended by the Treaty (e.g. Article 81(3)), and which the Commission has always sought to preserve. In actual fact, the report gives no suggestion of any intention to alter the current balance, but rightly focuses on the above-mentioned participatory aspects rather than on the interpretation of the rules, which have been consolidated over many years of application and case law.

6. Community merger control practice with regard to the undertakings to which transaction compatibility decisions may be subject

6.1. A few comments should be made in view of the growing importance of Community merger control, which celebrated its 10th birthday this year.

6.2. One aspect which emerges very clearly from the report, and which in the Committee's view deserves due recognition, is the fact that the Commission has stood its ground in many cases where major interests were at stake. This firm approach is borne out by the growing number of transactions abandoned to avoid prohibition.

6.2.1. The report also shows the flexibility of the solutions found when it has been necessary to reconcile the industrial aspects of a merger carrying risks to competition on the one hand, with the removal of those risks on the other. This has generally been possible by using the opportunity to subject Community compatibility decisions adopted at the end of either Phase I or II to undertakings proposed by the interested parties and deemed sufficient by the Commission to overcome the problems that emerged during the procedure. The capacity to reconcile these conflicting demands paved the way in 1999 for important economic and industrial operations, which would otherwise have been prohibited owing to the competition problems they generated.

6.2.2. The large number of transactions completed by introducing obligations or changes as early as the first phase is also significant. This demonstrates that the reform of the regulation, which enabled these measures to be taken, responded to a genuinely felt need. It also bears witness to the wealth of experience picked up by the task force, enabling it to take decisions - sometimes with very little notice - on measures which can sometimes be highly complex, as the report shows.

6.2.3. The Committee feels however that the increasing recourse to these undertakings makes it imperative to find satisfactory solutions to certain problems that arise when a compatibility decision is made subject to highly complex undertakings that often involve withdrawing capital from certain activities that may be very important, or other measures. The greater the number of provisions involving such measures, the greater the problems.

6.2.4. One such problem relates to the deadlines within which companies must make proposals for the content of possible commitments to be included in final decisions. These deadlines are often the subject of heated discussions during control procedures, between the Commission (which has an interest in bringing forward the deadline in order to have time to assess the adequacy and feasibility of the commitments proposed) and the companies (which conversely wish to postpone the deadline in order to protect their transactions for as long as possible). The bitterness of these divisions is often revealed in statements by companies whose planned transactions were prohibited by the Commission, complaining afterwards that the Commission threw out proposals that they presented a little before the end of the procedure and that could have salvaged the transaction.

6.2.5. The subject of time limits is so important that the Commission's implementing regulation for the merger control regulation devotes an entire article(23) to it. This article gives details of the time limits for presenting proposals in Phases I and II. The two time limits are peremptory and it is explicitly stated that the deadline for Phase II can be altered only under "exceptional circumstances". The need to keep strictly to these time limits is reiterated in the report, which devotes a "box" to legal deadlines for submitting undertakings in Phase II of the procedure.

6.2.6. The Committee fully accepts the Commission's justifications, given that before accepting the undertakings, it has to carry out all the necessary checks and consult with the Member States. However the reasons why companies delay presenting their undertakings for as long as possible should not be discounted. For this reason, the Committee believes that the current reform should introduce changes to give companies the right and opportunity to ask the Commission to examine and discuss aspects of their transactions that may require more in-depth attention, before the deadline for formal notification. This would allow time for discussing the undertakings to be adopted in order to salvage the transaction, and would guarantee adequate protection in advance, thus meeting an equally important need.

6.2.7. The widely-debated subject of conditions and undertakings evolved significantly in 1999 when the Commission drew up a draft notice. This sheds useful light on the conditions under which such measures may be necessary, their timing and their possible content in various scenarios. The Committee therefore hopes that the notice will be adopted as quickly as possible and that the Commission will continue in its efforts to make its own procedures more transparent and to further the dialogue with the companies that are rightly treating these matters with increasing interest.

6.2.8. There are still major unanswered questions, however, which are unlikely to be resolved by the notice or by possible future amendments to the legislative framework. These include the matter (raised in the Committee opinion on last year's XXVIIIth report) of whether these measures can really solve the problems raised in the decisions. It is an important question, as the Committee is unaware of the findings of any studies on the performance of the measures, to assess with hindsight the value of the solutions and the true impact of Commission decisions in an increasingly important sphere.

6.2.9. The Committee is aware of the difficulty of this task, but it is nonetheless convinced that given the increasing importance of remedies in relation to merger control, this shortcoming will soon be addressed. The fact remains that, even on merger control, the 1999 annual report provides much encouragement and evidence of major achievements.

Brussels, 24 January 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) The subject of the Modernisation of the legislative and interpretative rules is addressed in Chapter I A of the report.

(2) The Commission explains what it means by the term "promoters of competition policy" in Box 1 entitled EU citizens and competition policy, which concludes the report's introduction.

(3) Box 3 in Chapter 1B of the report addresses Relations with consumer organisations.

(4) See Chapter II of the report.

(5) The report raises other merger control issues that deserve attention. Box 7 describes the new theme of the Assessment of potential dominance, which may also further extend the Commission's scope for action in the area of merger policy. This issue arose from two 1999 decisions that stated that the market power of the companies in question was significantly greater than that suggested by their market share, owing to specific advantages they had over their competitors. The idea of using merger control to address situations of potential market power in the absence of major changes in market concentration progressed further in 2000, when the Air Liquide/BOC decision of 18 January allowed the Commission to include mergers that reduced or eliminated potential competition although the market situation previous to the merger had not changed.

(6) See Council Regulation (EC) No 1310/97 of 30 June 1997 amending Regulation (EEC) No 4064/89 on the control of concentrations between undertakings. This amendment enables the Commission to make all its decisions on compatibility subject to obligations and conditions. The Commission's opportunities for action have also been increased by including within the scope of the regulation all full-function joint ventures, which, in addition to the other effects of mergers on market structure, involve the coordination of activities by parent companies, which can fall within the scope of Treaty Article 81.

(7) On the subject of further possible amendments to Regulation (EEC) No 4064/89, see the Report from the Commission to the Council on the application of the Merger Regulation thresholds, Brussels 28/6/2000 - COM(2000) 399 final. It is however likely that the proposed amendments provide for other changes including a further extension of the Commission's powers under the 1997 reform regarding joint ventures with coordination effects. This extension is one of the reforms mentioned in the modernisation white paper, which suggested that merger control should cover production joint ventures not covered by the previous reform.

(8) The subject of international cooperation is dealt with in Chapter IV of the report, under the title International Activities. Part A of the chapter describes cooperation on competition policy with the associated countries of central and eastern Europe (CEEC). Part B describes Bilateral Cooperation with the United States in the area of anti-trust. In 1999, a cooperation agreement on competition was signed by the European Communities and Canada. During the same year, there were further contacts and discussions on establishing effective cooperation on competition with other countries. Work began with Japan, for instance, on examining the possibility of drawing up cooperation agreements similar to those made with the United States and Canada. The USA and Japan already have a similar agreement together. Discussions have continued with Japan, meanwhile, with a view to securing further deregulation, with reference in part to the competition sector.

(9) Currently more than 60 countries have adopted merger control systems that can be implemented with reference to transactions that are also being assessed by the authorities of another country, with a resulting increase in the burden on companies and a risk of contradictory judgments that is increasingly difficult to control.

(10) The subject of international cooperation in the competition field was covered in Commissioner Van Miert's introduction to the XXVIIIth competition policy report, which contained a full description of the current initiatives needed in order to achieve, however gradually, broader and more institutionalised forms of cooperation. Furthermore, Commissioner Monti has often spoken about this, in relation to competition policy in general and merger control in particular. One major step forward in this area has been taken in 2000, as high-ranking representatives of the American anti-trust authorities, who previously only favoured bilateral cooperation, have recognised the need to experiment, with due caution, with other forms of cooperation.

(11) Chapter III of the XXIXth report on competition policy is devoted to state aid.

(12) Legislative measures in the area of aid are described in paragraph A1 of Chapter III of the XXIXth report, entitled Modernising State aid control, which reads: "For around two years now, the Commission, with the support of the Council, has been taking various steps to modernise the conditions in which State aid is monitored. An overall system, which is coherent and effective, provides the Commission with a body of legislation and rules that allows it to focus on cases with a real impact on the common market and eases the administrative burden on firms while ensuring legal certainty and improving transparency. Thus the procedural regulation (...) Council Regulation (EC) No 659/1999 of 22 March 1999(...) entered into force on 16 April [1999]. (...) Another aspect of the modernisation of State aid control was introduced by Regulation (EC) No 994/98 of 7 May 1998, which enables the Commission to adopt block exemption regulations for State aid. (...) On 28 July 1999, the Commission adopted three draft block exemption regulations concerning respectively State aid to small and medium-sized enterprises, training aid and the de minimis rule. (...) The Commission's main objective is to free resources from assessing numerous standard cases the compatibility of which with EU rules is normally not problematic".

(13) Administrative activity regarding the application of Articles 81 and 82 of the Treaty, an area that saw significant results in 1999, is described in Chapter I of the XXIXth report, in Part B under the title "Consolidating the single market" and in Part C under the title "Sector-based policies".

(14) Legislative measures in the area of aid are described in paragraph A1 of Chapter III of the XXIXth report, entitled Modernising State aid control, which reads: "For around two years now, the Commission, with the support of the Council, has been taking various steps to modernise the conditions in which State aid is monitored. An overall system, which is coherent and effective, provides the Commission with a body of legislation and rules that allows it to focus on cases with a real impact on the common market and eases the administrative burden on firms while ensuring legal certainty and improving transparency. Thus the procedural regulation (...) Council Regulation (EC) No 659/1999 of 22 March 1999(...) entered into force on 16 April [1999]. (...) Another aspect of the modernisation of State aid control was introduced by Regulation (EC) No 994/98 of 7 May 1998, which enables the Commission to adopt block exemption regulations for State aid. (...) On 28 July 1999, the Commission adopted three draft block exemption regulations concerning respectively State aid to small and medium-sized enterprises, training aid and the de minimis rule. (...) The Commission's main objective is to free resources from assessing numerous standard cases the compatibility of which with EU rules is normally not problematic".

(15) OJ C 51, 23.2.2000, p. 1 (Rapporteur: Mr Bagliano).

(16) OJ C 116, 28.4.1999, p. 22 (Rapporteur: Mr Regaldo).

(17) See Competition rules relating to horizontal cooperation agreements - Communication pursuant to Article 5 of Council Regulation (EEC) No 2821/71 of 20 December 1971 on the application of Article 81(3) of the Treaty to categories of agreements, decisions and concerted practices modified by Regulation (EEC) No 2743/72. This document, which was published in OJ C 118 of 27.4.2000, includes two draft regulations on exemption under Article 81(3) of research, development and specialisation agreements, and "draft guidelines on the applicability of Article 81 to horizontal cooperation".

(18) The XXIXth report also gives an insight into activities carried out at national level to apply Community competition policy principles. Box 2, for instance, deals with Cooperation with national authorities and national courts. The Committee nevertheless believes that the decentralised and transparent system aimed for requires information to be provided more systematically and meticulously; this will to some degree arise from the new forms of cooperation.

(19) The foreword also mentions the possibility of setting up a state aid "register" and "scoreboard", stating that "The register would contain factual information on all State aid decisions, whilst the scoreboard would provide guidance to the Member States on how to evaluate more accurately the cost/benefit consequences of their State aid policies. The annual survey on State aid in the EU will also continue to be improved and will provide a more detailed assessment of State aid expenditure."

(20) The foreword states: 'In a Community of 15 Member States with strongly integrated economies, the application of the full range of competition rules should no longer be confined to one body, not only for the reasons associated with efficiency (...), but also to ensure that the citizens of Europe view competition policy in a positive manner and recognise it as playing an important role in their daily lives. The protection of the interests of consumers, and therefore of European citizens, is at the heart of Community competition policy. However, this is not always the public perception. By permitting consumers to address national competition authorities and courts (...) we will go a long way towards improving the perception which European citizens have of competition policy and of its benefits for them.'

(21) The body of the report continues: "consumers and consumers' associations could be of great assistance in identifying and evaluating possible anticompetitive practices. (...) The Volkswagen case is still too isolated. The Commission intends to step up relations with consumers' organisations and more generally with the citizens of the Union. Lastly, the Commission is considering the advisability of organising meetings of various kinds with the citizens of the Union."

(22) See brochure entitled: "European competition policy and the citizen", published by the European Commission in June 2000.

(23) Article 18 of Commission Regulation (EC) No 447/98 of 1 March 1998 "on the notifications, time limits and hearings provided for in Council Regulation (EEC) No. 4064/89 on the control of concentrations between undertakings".