Opinion of the Economic and Social Committee on the "XXIXth Report on Competition Policy (1999)"
Date: 2001-01-24
Institutions: European Economic and Social Committee
Subjects: EU programme, competition policy, consumer motivation, control of State aid, merger control

25.4.2001

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Official Journal of the European Communities

C 123/11

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).

The emphasis on modernisation stems from the
1.1.1.
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 stimu-
late and promote Community action in the competition field
is significant, as the result will be to improve the efficiency and
timing of that action.

Another key theme of

1.2.
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

the XXIXth report

(1) The subject of the Modernisation of the legislative and interpret-

ative 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.

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 Com-
mission’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.

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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.
in future, the Commission should think
For this reason,
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 (1).

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.
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.

Increasingly,

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 (2), 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 (3), this is all the more important.

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 trans-
forming existing competition scenarios.

is the development of

1.3.
Another key theme in the report, in the area of merger
international cooperation.
control,
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

(1) 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.

(2) 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.

(3) 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,
is however
Brussels 28/6/2000 - COM(2000) 399 final.
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.

It

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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 (1).

introduction to the XXVIIIth report, on which the Committee
issued a very positive opinion (3).

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 (2).

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 (4).

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 (5). The Committee

Bilateral cooperation is no longer enough to limit
1.3.2.
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

(1) 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.
(2) 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.

(3) 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.

(4) Chapter III of the XXIXth report on competition policy is devoted

to state aid.

(5) Legislative measures in the area of aid are described in para-
graph 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 compati-
bility of which with EU rules is normally not problematic’.

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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.

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 (2).

Commission competition activities

1.5.
in 1999 also
extended to other areas, generally following in the footsteps of
previous reports, with significant results (1).

2.

‘Modernising’ the legal framework

The Committee opinion on the XXVIIIth competition
2.1.
policy report (3) stated that there were two keys to understand-
ing the report: modernisation and cooperation. These were
‘the keys to the Commission’s future scenario for competition
policy’.

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.

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.

1.6.1.
For instance, in the Committee’s opinion, the XXIXth
report rightly links the possibility of giving the citizen/con-
sumer 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

(1) 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’.

In 1999, the legislative process setting out arrange-
2.1.2.
ments 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 (4).

(2) Legislative measures in the area of aid are described in para-
graph 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 compati-
bility of which with EU rules is normally not problematic’.

(3) OJ C 51, 23.2.2000, p. 1 (Rapporteur: Mr Bagliano).
(4) OJ C 116, 28.4.1999, p. 22 (Rapporteur: Mr Regaldo).

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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 decentralis-
ation 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.

coordination of the powers of such authorities within individ-
ual 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.
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 reac-
tions 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 consider-
ations, 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

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 Com-
munity 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.

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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.

3. Decentralising Commission management of Com-

munity 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).

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’.

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
Article 81(1) ban will not apply if the interpreting party
considers
the economic conditions mentioned in
Article 81(3) are met.

the Commission. After the reform,

that

The role of modernisation in the current phase of
2.4.1.
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’ (1), 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.

3.1.2.
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 there-
fore 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.

(1) See Competition rules relating to horizontal cooperation agree-
ments — 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 Regu-
lation (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’.

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.

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3.2.
The central role of cooperation in the new Community
competition policy framework is borne out by other consider-
ations 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.

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.

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.
the process of
liberalisation, which is central to current Community compe-
tition 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.

In addition,

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

The above points demonstrate the Committee’s

4.1.
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.

None of this will, in the view of the Committee, be
4.2.2.
the reform, however. The
an automatic consequence of
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.

Handing over the new responsibilities set out in the
4.3.
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.

This should significantly improve the efficiency and
4.3.1.
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.

This analysis must cover all the legislative systems
4.3.2.
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.

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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 (1).

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

The new exemption regulation (CE) No 2790/1999
4.4.1.
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.

The efficiency and effectiveness of the system will
4.4.2.
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 par-
is
ticular, widely known. The importance of
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.’

this aspect

The Committee believes that the repeated use of
4.4.3.
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

Transparency will be an essential

factor in the
4.4.4.
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’ (2).

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 compe-
tition 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.

(1) 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 neverthe-
less 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.

(2) 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.’

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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 agree-
ments 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
it
regarding both substance and procedures. Furthermore,
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 require-
ments.

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 citizen-
s/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 (1)’ is crucial. In the body of
the report, it is noted that: ‘… Many citizens do not realise that
for
competition policy is a powerful and effective tool
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...’ (2)

the Commission’s

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
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 (3), is therefore to be
welcomed.

focus on the

(1) 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 compe-
tition 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.’

(2) 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.’
(3) See brochure entitled:

‘European competition policy and the

citizen’, published by the European Commission in June 2000.

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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.

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 compe-
tition problems they generated.

For the reasons mentioned above,

5.3.
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.

The large number of transactions completed by
6.2.2.
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, respond-
ed 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. 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.

6.2.3.
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.
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

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.

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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(1) 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 justi-
fications, 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

(1) 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’.

Brussels, 24 January 2001.

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 under-
takings 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.
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.

It

The Committee is aware of the difficulty of this task,
6.2.9.
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.

The President

of the Economic and Social Committee

Göke FRERICHS