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# 52000PC0582

**Proposal for a Council Regulation on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 ("Regulation implementing Articles 81 and 82 of the Treaty") /\* COM/2000/0582 final - CNS 2000/0243 \*/** 
  
*Official Journal C 365 E , 19/12/2000 P. 0284 - 0296*

  

Proposal for a COUNCIL REGULATION on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 ("Regulation implementing Articles 81 and 82 of the Treaty")

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. General

A. Context

The Community competition rules were established in its founding Treaty of 1957. Article 81 sets out the rules applicable to restrictive agreements, decisions and concerted practices, while Article 82 concerns abuses of dominant positions.

In 1962, the Council adopted Regulation No 17, which sets out the rules of procedure for the application of Articles 81 and 82 of the Treaty which have been applied till today without any significant modifications. Regulation No 17 was based on direct applicability of the prohibition rule of Article 81(1) and prior notification of restrictive agreements and practices for exemption under Article 81(3). While the Commission, national courts and national competition authorities can all apply Article 81(1), the power to apply Article 81(3) was granted exclusively to the Commission. Regulation No 17 thus established a highly centralised authorisation system for all restrictive agreements requiring exemption. In contrast, Article 82 has always been enforced in parallel by the Commission, national courts and national authorities.

This system was well suited for a Community of six Member States in which there was little competition culture. It allowed the development of Community competition law and its consistent application throughout the Community. However, today the context has changed fundamentally. The European Union now has 15 Member States, whose markets have already been extensively integrated, 380 million inhabitants, and 11 official languages. National competition authorities have been set up in the Member States and national competition laws have been enacted, many reflecting the content of Articles 81 and 82.

In this new context, the current system presents two major deficiencies. First, it no longer ensures the effective protection of competition. The Commission's monopoly on the application of Article 81(3) is a significant obstacle to the effective application of the rules by national competition authorities and courts. And in a wide Community, the Commission alone cannot bear the responsibility for enforcing the competition rules throughout the Union. Furthermore, the notification regime no longer constitutes an effective tool for the protection of competition. It only rarely reveals cases that pose a real threat to competition. In fact, the notification system prevents the Commission's resources from being used for the detection and punishment of serious infringements.

The second deficiency of the current system is that it imposes an excessive burden on industry by increasing compliance costs and preventing companies from enforcing their agreements without notifying them to the Commission even if they fulfil the conditions of Article 81(3). This is particularly detrimental to SMEs for whom the cost of notification and in the absence of notification, the difficulty of enforcing their agreements can constitute a competitive disadvantage compared with larger firms.

The perspective of the enlargement of the Community makes it even more urgent to proceed with a reform of Regulation No 17. A Union with 25 or even more Member States is now in prospect. A notification system with prior authorisation by one administrative body would be completely unsustainable in an enlarged Community, since, potentially, thousands of agreements would require administrative clearance in order to be enforceable. Direct application of Article 81(3) would ensure that agreements fulfilling the conditions of that provision were legally enforceable without recourse to an administrative body being necessary.

B. The White Paper and the consultation process

In order to prepare Community competition law for the challenges of the coming years, the Commission initiated the reform process by adopting and publishing in 1999 a White Paper on modernisation of the rules implementing Articles 81 and 82 of the EC Treaty.

The White Paper examines various options for reform and proposes the adoption of a fundamentally different enforcement system called a directly applicable exception system. Such a system is based on the direct applicability of the exception rule of Article 81(3), implying that the Commission and national competition authorities and courts would apply Article 81(3) in all proceedings in which they are called upon to apply the prohibition rule of Article 81(1), which is already directly applicable.

The White Paper was adopted on 28 April 1999. Interested parties were invited to submit comments by 30 September 1999. The European Parliament organised a public hearing on 22 September 1999. It adopted a resolution on 18 January 2000. The Economic and Social Committee adopted an opinion on 8 December 1999. The Commission has received and carefully examined submissions from all Member States and more than 100 interested parties, including submissions from EFTA countries, the ESA, and competition authorities from Estonia, Hungary and the Czech Republic. A working group composed of Commission officials and experts from the national competition authorities has discussed the content of the White Paper in a number of meetings.

The European Parliament and the Economic and Social Committee support the Commission's proposal while insisting on the importance of ensuring consistent application of Community competition law in a system of parallel powers and of maintaining an adequate level of legal certainty.

The positions of industry associations and lawyers are varied. Many welcome the Commission's approach as a more efficient and less bureaucratic alternative to the present system of implementation, which is almost universally considered unsatisfactory. However, many also stress the need to ensure that the reform does not lead to inconsistent application and renationalisation of Community competition law and that the reform does not reduce legal certainty for companies.

The proposal for a new regulation is in its main parts based on the White Paper, taking due account, however, of the major preoccupations expressed in the consultation process. The question of extending the procedures of the Merger Regulation to partial-function production joint ventures, that was also raised in the White Paper (nos. 79-81), will be further examined in the context of forthcoming reflections on the revision of that regulation.

2. Proposal for a new Council regulation

A. Subject

The subject of the proposal is the reform of the implementing regulations for Articles 81 and 82 of the EC Treaty, i.e. Regulation No 17 and the corresponding transport regulations. It is proposed to create a new enforcement system referred to as a "directly applicable exception system". In such a system, both the prohibition rule set out in Article 81(1) and the exception rule contained in Article 81(3) can be directly applied by not only the Commission but also national courts and national competition authorities. Agreements are legal or void depending on whether they satisfy the conditions of Article 81(3). No authorisation decision is required for enforcing agreements complying with Article 81 as a whole. This is already the existing enforcement system for Article 82 of the EC Treaty.

B. Legal basis

The legal basis for the present proposal is Article 83 of the EC Treaty. Article 83 empowers the Council to lay down the appropriate regulations or directives to give effect to the principles set out in Articles 81 and 82. In a non-exhaustive list, Article 83(2) mentions elements that should in particular be covered by implementing rules created on this basis.

The legal basis in Article 83 covers the application of Articles 81 and 82 in general. In particular, it is not limited to the application of the rules by specific decision-makers. The Community legislature, within the limits of the general principles of the Treaty, is therefore empowered to lay down rules on the application of Articles 81 and 82 by bodies other than the Community institutions as well as rules on the interaction between the different decision-makers. Accordingly, the proposed Regulation provides for certain rules to be respected by national competition authorities and/or courts when applying Articles 81 and 82 as well as rules on cooperation between them and with the Commission.

Article 83(2)(b) expressly provides for the Community legislature to lay down detailed rules for the application of Article 81(3), taking into account the need to ensure effective supervision on the one hand, and to simplify administration to the greatest extent possible on the other. The legal basis in Article 83 thereby enjoins the Community legislature to fill a lacuna left by Article 81. Leaving aside Article 81(2), Article 81 is divided into a prohibition rule (Article 81(1)) and a rule according to which the prohibition may be declared inapplicable if stated conditions are satisfied (Article 81(3)). It does not, however, lay down by what procedure the prohibition may be declared inapplicable, and by whom. In particular, the words 'may be declared inapplicable', unlike the words 'the High Authority shall authorise' used by the ECSC Treaty (see Article 65 of the ECSC Treaty), do not define a specific procedure.

The existing Regulation No 17 granted exclusive power to the Commission to apply Article 81(3) in the framework of an administrative procedure aiming at an authorisation decision. Article 81(3) is however suitable for direct application. While leaving a certain margin of appreciation as to its interpretation, Article 81(3) does not imply discretionary powers that could only be exercised by an administrative body. A limited margin of appreciation does not make a Treaty provision unsuitable for direct application, as is clear from the case-law on for instance Article 81(1) and Article 82, which are already directly applied by national courts.

There is no indication in the Treaty to contradict this conclusion. In particular, the words 'to simplify administration to the greatest extent possible' in Article 83(2)(b), while imposing on the legislature the objective of a minimum of procedural bureaucracy, do not exclude the application of Article 81(3) by courts in addition to administrative bodies. Under the powers granted to it by Article 83, the Community legislature can choose an implementing system that is based on direct application of Article 81(3).

Article 83(2)(e) states that the Community legislature is also empowered to define the relationship between national laws and the Community rules on competition. Regulation No 17 refrained from regulating this relationship, which has led to long-standing debates and to legal uncertainty. The Court of Justice was able to clarify some of the issues involved by applying the principle of primacy of Community law over national law. Given the specificity of Article 81 in particular, the solutions found on that basis do not, however, cover the entirety of cases in which conflicts can arise. In addition, the change to a new implementing system risks to reopening the debate and creating new legal uncertainties as to this fundamental issue. The proposed Regulation therefore lays down a rule regulating the relationship between Community competition law and national law.

Finally, Article 83 is also the appropriate legal basis for regulating the application of Articles 81 and 82 to the transport sector. This was not yet clear when Regulation (EEC) No 1017/68 was adopted: it had two legal bases, the former Articles 75 and 87, now Articles 71 and 83. However, the Court of Justice has since held that the Community competition rules apply in full to the transport sector [1]. The Community legislature can therefore provide that the application of Articles 81 and 82 to agreements and decisions presently governed by Regulation (EEC) No 1017/68 is integrated into the proposed Regulation on the legal basis of Article 83. The same goes for the application of Articles 81 and 82 to the maritime transport sector presently governed by Regulation (EEC) No 4056/86. The latter regulation, although adopted subsequently to the abovementioned case-law of the Court of Justice, and in contrast to the Commission proposal (based on Article 87 (now 83) alone), was also based by Council on the former Article 84(2) (now 80(2)), owing to the inclusion of Article 9 of that Regulation concerning relations with third countries. The difference of opinion between the Council and the Commission does not need to be resolved in the present instance, as the proposed Regulation leaves Article 9 of Regulation (EEC) No 4056/86 untouched.

[1] See Joined Cases 209 to 213/84 Nouvelles Frontières [1986] ECR 1425 and Case 66/86 Ahmed Saeed [1989] ECR 803.

C. Characteristics of the proposed system

1. More efficient protection of competition

The proposal aims at increasing the protection of competition in the Community. This will be achieved by the proposal in three ways.

(a) More enforcers

The proposed system will result in increased enforcement of Community competition rules, as in addition to the Commission, national competition authorities and national courts will also be able to apply Articles 81 and 82 in their entirety.

National competition authorities, which have been set up in all Member States, are generally well equipped to deal with Community competition law cases. In general, they have the necessary resources and are close to the markets.

As regards the applicant countries, considerable progress has already been made in establishing national competition authorities. Even if initially they may not all possess sufficient resources to ensure the effective protection of competition, the proposed reform will allow the Commission to step up enforcement in those parts of the enlarged Community. The proposed discontinuation of the notification and exemption system ensures that all available resources can be used for the effective protection of competition.

It is a core element of the Commission's proposal that the Commission and the national competition authorities should form a network and work closely together in the application of Articles 81 and 82. The network will provide an infrastructure for mutual exchange of information, including confidential information, and assistance, thereby expanding considerably the scope for each member of the network to enforce Articles 81 and 82 effectively. The network will also ensure an efficient allocation of cases based on the principle that cases should be dealt with by the best placed authority.

National courts will also play an important and enhanced role in the enforcement of Community competition rules. Unlike national authorities or the Commission, which act in the public interest, the function of national courts is to protect the rights of individuals. They can grant damages and order the performance or non-performance of contracts. They are the necessary complement to action by public authorities.

The Commission's proposal aims at promoting private enforcement through national courts. Both Article 81(1) and Article 81(3) confer rights on individuals, which should be protected by national courts. The present division of powers under Article 81 is not in line with the important role that national courts play in the enforcement of Community law in general. In the present Regulation No 17 the authorisation system and the Commission's monopoly on the application of Article 81(3) make application of Article 81(1) by national courts very difficult. The fact that the elimination of this obstacle may lead to more application of Article 81 and thereby increase the case load on national courts is not a valid argument against the reform. Such considerations should not be allowed to hamper the implementation of a reform that aims at strengthening the enforcement of the rules and at enhancing the protection of individual rights.

(b) Refocusing the Commission's action

The second way in which the proposal will increase the protection of competition is by allowing the Commission to concentrate on the detection of the most serious infringements. Experience in the last decades has shown that notifications do not bring to the attention of the Commission serious violations of the competition rules. The handling of a large number of notifications prevents the Commission from focusing on the detection and the punishment of the most serious restrictions such as cartels, foreclosure of the market and abuses of dominant positions. In the proposed system, the abolition of the notification and authorisation system will allow the Commission to focus on complaints and own-initiative proceedings that lead to prohibition decisions, rather than establishing what is not prohibited. The Commission intends to issue a notice providing potential complainants with guidance on the treatment of complaints. The notice will inter alia set a deadline within which the Commission should inform the complainant whether it intends to deal with its complaint.

(c) Increased powers of investigation for the Commission

In order to guarantee the protection of competition, it is also necessary to ensure that the Commission's powers of investigation are sufficient and effective. Under the existing Regulation No 17, the Commission can conduct inspections on the premises of companies and make written requests for information. It can fine companies for infringements of substantive and procedural rules and impose periodic penalty payments.

Three main improvements of the current system are required to ensure a more effective application of Articles 81 and 82.

First, the rules governing the obtaining of judicial orders at national level in order to overcome any opposition on the part of an undertaking to an inspection should be codified. This will clarify the intervention of national judges in accordance with the limits established by the Court of Justice.

Secondly, it is necessary to adapt the powers vested in Commission officials during inspections: they must be empowered, subject to judicial authorisation, to search private homes if professional documents are likely to be kept there. The experience of the national competition authorities and the Commission shows that incriminating documents are ever more frequently kept and discovered in private homes. Commission inspectors should also be empowered to seal cupboards or offices in order to ensure that documents are not removed and destroyed. Finally, they should be entitled to ask oral questions relating to the subject matter of the inspection.

Thirdly, the fines for breaches of procedural rules and the periodic penalty payments, which were set in absolute terms in the sixties, must be increased. A system based on turnover percentage figures is considered the appropriate solution.

2. More level playing field

Competition laws have an immediate impact on the commercial activities of companies, as they have to adapt to the prevailing standard in any given area. For companies that engage in activities having cross-border effects it is therefore important that there be a level playing field throughout the European Union, allowing them to reap the full benefits of the single market.

The present proposal will create a more level playing field in two ways. First, Community competition law will be applied to more cases, thereby limiting the scope for inconsistencies caused by differences in national competition laws. Secondly, a number of measures will ensure that Articles 81 and 82 are applied in a consistent manner by the various decision-makers involved in their application.

(a) More application of Community competition law

In the present enforcement system, several national systems of competition law and Community competition law may apply concurrently to the same transaction to the extent that an agreement or practice is capable of affecting trade between Member States. The application of national law is constrained only by the principle of primacy of Community law.

Several national systems of competition law have been modelled on Articles 81 and 82. However, no formal harmonisation is in place, and differences remain both in law and practice. Such differences can lead to different treatment of agreements and practices that affect trade between Member States.

In order to promote a level playing field for companies that engage in agreements or practices that have a cross-border effect, it is necessary to regulate the relationship between national law and Community law, as provided in Article 83(2)(e) of the EC Treaty. Accordingly, Article 3 of the proposed Regulation provides that only Community competition law applies when an agreement, decision or concerted practice within the meaning of Article 81 or abusive conduct within the meaning of Article 82 is capable of affecting trade between Member States. This rule ensures in a simple and effective way that all transactions with a cross-border effect are subject to a single body of law.

The proposal not only creates a level playing field throughout the European Union, it also facilitates an efficient allocation of cases within the network of competition authorities, the aim being that cases should be dealt with by the best placed authority. In several Member States the competition authority, once seized of a case, is obliged to come to a formal decision. Such obligations may hinder reallocation of cases to a better placed authority. To overcome this problem in respect of the application of Articles 81 and 82 the Regulation empowers a competition authority to suspend a proceeding or reject a complaint on grounds that another competition authority is dealing with or has dealt with the case. However, the scope of this provision is limited to the application of Community competition law. Article 3 of the proposed Regulation ensures that an efficient allocation of cases is not hindered by simultaneous application of national law in respect of which a national competition authority may remain bound to come to a formal decision. Parallel application of national and Community competition law should be avoided because it leads to unnecessary parallel proceedings.

(b) Consistent application of Community competition law

The application of the same law and policy will in itself promote consistency throughout the single market. The application of Articles 81 and 82 by national competition authorities and courts will be subject to Community block exemption regulations, creating safe harbours for defined categories of agreements. Further guidance will be provided by guidelines adopted by the Commission.

Application by national competition authorities and courts will also be subject to the case-law of the Court of Justice of the European Communities and the Court of First Instance as well as the administrative practice of the Commission. In the latter respect, it is proposed in Article 16 of the proposed Regulation to impose on national competition authorities and courts an obligation to use every effort not to contradict a Commission decision.

More decision-makers also mean more case-law and administrative decisions, which will further clarify the scope of the Community competition rules.

Moreover, there will be a number of additional instruments aiming at ensuring that Articles 81 and 82 are applied in a consistent manner.

The application of the Community competition rules by national courts will be subject to the preliminary reference procedure of Article 234 of the EC Treaty. The Court of Justice of the European Communities will play the same important role in ensuring consistency as it has done and continues to do in other areas of Community law. As the proposal aims at increasing the level of private enforcement before national courts, an initial increase in Article 234 references can be expected. A significant increase, however, is unlikely, as it is expected that most litigation before national courts will concern areas where the law has been clearly established.

Article 15 of the proposed Regulation codifies the existing obligation of the Commission, based on Article 10 of the Treaty, to cooperate with national courts. This cooperation includes a right for national courts to ask the Commission for information in its possession or for its opinion on questions concerning the application of the Community competition rules. It is expected that the importance of this mechanism will increase once national courts are empowered to apply Article 81(3) as well.

Article 15 also proposes to vest in the Commission the power to submit written or oral submissions to national courts at its own initiative and in the Community public interest. This will allow the Commission to contribute to the consistent application of Community competition law by national courts. It is also proposed that the national competition authorities be empowered to make oral and written submissions to the courts of their Member State.

With regard to the national competition authorities, the creation of a network in which all members apply the same law and policy will greatly promote consistency and a level playing field throughout the single market. The formal basis for establishing the network is found in Article 11 of the proposed Regulation, according to which the national competition authorities and the Commission are to apply the Community competition rules in close cooperation. The details of this cooperation will be developed in a notice. The network will foster the development of a common competition culture throughout the Community.

In addition, certain formal mechanisms are established to ensure consistent application, including a consultation procedure for certain types of decisions adopted by national competition authorities (see Article 11(4) of the proposed Regulation). This provision requires national competition authorities to consult the Commission prior to the adoption of prohibition decisions, decisions accepting commitments and decisions withdrawing the benefit of a block exemption regulation. All such decisions have direct repercussions for the addressees. It is therefore important to ensure that these decisions are consistent with the general practice of the network. In case of substantial disagreement within the network, the Commission retains the power to withdraw a case from a national competition authority by itself initiating proceedings in the case.

It is not necessary for consistency purposes to provide for prior consultation in respect of other types of decisions adopted by national competition authorities, such as rejections of complaints and decisions to take no action. These decisions bind only the deciding authority, and do not preclude subsequent action by any other competition authority or before national courts.

As regards decisions adopted by the Commission, it is proposed to maintain the present obligation for the Commission to consult the Advisory Committee on Restrictive Practices and Dominant Positions.

3. An adequate level of legal certainty for companies and a reduction of bureaucracy

Under the existing Regulation No 17 an agreement or decision caught by Article 81(1) can become valid, i.e. enforceable before a civil court, only if it is notified to the Commission and is exempted by the Commission. In practice, most notified cases are closed by a non-binding administrative letter from the Commission services (a 'comfort letter').

The proposed Regulation removes the bureaucratic obstacles connected with the notification and authorisation procedure while maintaining an adequate degree of legal certainty.

In particular, the proposed Regulation provides that agreements and decisions which satisfy the conditions of Article 81(3) are valid and enforceable ab initio with no administrative decision being required to that effect. Undertakings can therefore rely on civil enforceability as an element of improved legal certainty independently of any action by an administration.

The proposed Regulation does not remove the necessity for undertakings to assess their business transactions to verify whether they are in compliance with the competition rules. Under the present Regulation No 17, this analysis is carried out by undertakings when preparing a notification. The proposal assimilates the application of the Community competition rules to other areas of law where undertakings are required to ascertain themselves that their behaviour is legal.

In the field of Community competition law, companies' task of assessing their behaviour is facilitated by block exemptions and Commission notices and guidelines clarifying the application of the rules. As a complementary element of the current reform, the Commission commits itself to an even greater effort in this area. Article 28 of the proposed Regulation confers on the Commission a general power to adopt block exemption regulations. This power will ensure that it is in a position to react with sufficient speed to new developments and changing market conditions.

In addition, under the new system, with the larger number of decision-makers applying Article 81(3), case-law and practice on its interpretation will rapidly develop where they do not yet exist, thereby inherently reinforcing the framework for assessment.

The Commission will further contribute to this development by continuing to set policy through its own decisions in individual cases. In addition to prohibition decisions, the proposed Regulation provides that in cases where it is in the Community public interest to do so the Commission, acting on its own initiative, can adopt decisions finding that no infringement has been committed. This will permit the Commission to set out its position in a landmark case so as to clarify the law for all companies that find themselves in similar situations.

Finally, the Commission will remain open to discuss specific cases with the undertakings where appropriate. In particular, it will provide guidance regarding agreements, decisions or concerted practices that raise an unresolved, genuinely new question of interpretation. To that effect, the Commission will publish a notice in which it will set out the conditions under which it may issue reasoned opinions. Any such system of opinions must not, however, lead to companies being entitled to obtain an opinion, as this would reintroduce a kind of notification system.

3. subsidiarity and proportionality

In the interest of the single market, the proposed Regulation ensures that Community competition law should be applied to agreements and practices capable of affecting trade between Member States, thereby creating a level playing field throughout the Community. At the same time, the proposal ensures that the application of that law takes place at the most efficient level. Under the proposal, the Commission shares the power to apply Article 81(3) with national competition authorities and national courts, thereby enabling these bodies to apply Articles 81 and 82 effectively.

The scope for effective intervention at national level is substantially increased by the cooperation mechanisms contained in Articles 12 and 21 of the proposed Regulation, which empower national competition authorities to exchange confidential information and to assist each other in respect of fact-finding. As a result of market integration evidence and information will increasingly be located in several Member States. Enhanced horizontal cooperation will make it easier for national competition authorities to obtain all the relevant facts.

The Commission's proposal is thus fully in line with the principle enshrined in Article 5 of the Treaty, according to which action should be taken at the most efficient level. While promoting the Community interest in a level playing field throughout the single market, the proposal ensures that national competition authorities and courts can apply Articles 81 and 82 fully and effectively to all cases in respect of which intervention at national level is more efficient.

The Commission, being the only authority that can act throughout the European Union, will necessarily continue to play a central role in the development of Community competition law and policy and in ensuring that it is applied consistently throughout the single market, thereby preventing any renationalisation of Community competition law. The development and application of the law and policy will, however, be a concern of all the competition authorities involved in the enforcement of Articles 81 and 82. Policy issues will be the subject of discussion within the network.

The proposal does not go beyond what is necessary to achieve the objectives of the Treaty. The Treaty aims, inter alia, to create an internal market and a system of undistorted competition. The very objective of the present proposal is to enhance the protection of competition and to create a level playing field throughout the Community.

The proposal to exclude the application of national competition law to agreements and practices that affect trade between Member States is necessary in order to ensure that such agreements and practices are subject to a single set of rules. This is essential in order to ensure that competition in the internal market is not distorted as a result of differences in the legal framework and to ensure that cases can be allocated efficiently within the network.

Effective case allocation also makes it necessary that the members of the network should inform each other of all new cases and exchange relevant case-related information. Moreover, provision must be made for prior consultation by the national competition authorities in respect of prohibition decisions, decisions accepting commitments and decisions withdrawing the benefit of a block exemption regulation. Inconsistencies in respect of these types of decisions would be detrimental to the single market and the objective of creating a level playing field throughout the Community. Such decisions also have important implications for the common competition policy of the network. The Commission will associate the other members of the network in the consultation process. The functioning of the network will be further elaborated upon in a notice on cooperation between competition authorities.

The present proposal is based on the premise that national competition authorities will apply Articles 81 and 82 in accordance with their respective national procedural rules. It is not necessary for the implementation of the reform to embark on a full-scale harmonisation of national procedural laws. On the other hand, it is necessary to regulate at Community level a limited number of issues that have a direct impact on the proper functioning of the proposed system.

First and foremost, it is necessary to oblige the Member States to empower their national competition authorities to apply Articles 81 and 82.

It is also necessary to stipulate the content of the decisions that national competition authorities may adopt in the application of Articles 81 and 82 (see Article 5 of the proposed Regulation), in order to ensure a full and effective implementation of the directly applicable exception system. No competition authority forming part of the network can be empowered to adopt constitutive exemption decisions when applying the Community competition rules.

Article 13 of the proposed Regulation empowers national competition authorities and the Commission to suspend or terminate proceedings on the ground that another member of the network is or has been dealing with the case; this is necessary to ensure an efficient allocation of cases and use of resources within the network. It is, however, neither necessary nor appropriate to oblige other competition authorities to suspend or terminate their proceedings. It is the task of the network to ensure in practice that resources are used efficiently.

The proposed Regulation provides a legal basis for the exchange of information and assistance between national competition authorities. Such horizontal cooperation is necessary in order to enable them to apply Articles 81 and 82 effectively.

The power of the Commission to make written and oral submissions in the Community public interest before national courts hearing a case on the application of Articles 81 and 82 (see Article 15) is necessary in order to allow the Commission to contribute to their consistent application. Divergent application of Community competition law by national courts would pose a threat to the proper functioning of the single market and the coherence of the system. In accordance with the principle of subsidiarity it is proposed that the power to make submissions before the courts be shared between the Commission and the national competition authorities. Furthermore, submissions will be made in accordance with the procedural rules in force in the Member State in question. Thus, the proposal does not purport to harmonise national procedural law, except that it grants the Commission and the national competition authorities the power to make submissions on their own initiative. In order to enable the Commission and the national competition authorities to exercise this proposed new power effectively, it is necessary to oblige national courts to furnish, upon request, relevant information pertaining to cases before them in which the Commission or a national competition authority is considering making a written or oral submission or has decided to do so.

4. The regulation, article by article

CHAPTER I - PRINCIPLES

Article 1 - Direct applicability

This Article sets out the general principle governing the new implementing rules outside the scope of block exemption regulations. In addition to the prohibition of Article 81(1) and the prohibition of Article 82, it provides that Article 81(3) will also be directly applicable.

Under this rule, agreements, decisions or practices that fall under Article 81(1) and do not satisfy the conditions of Article 81(3) are prohibited and void ab initio in accordance with Article 81(1) and 81(2). On the other hand, agreements, decisions and practices that fall under Article 81(1) but do satisfy the conditions of Article 81(3) are valid ab initio, no prior administrative decision to that effect being required.

When applying Article 81(1), all decision-makers, i.e. the Commission, national courts and national competition authorities, are also obliged to consider whether the conditions of Article 81(3) are met. In doing so, they must respect the interpretation of Article 81(3) given by the Community Courts. In addition, they should take due account of all other elements of interpretation including Commission guidelines, notices and decisions.

On finding that the conditions of Article 81(3) are met or not met, decision-makers are to draw the appropriate legal consequences in accordance with the proposed Regulation and, where applicable, the relevant national procedural rules.

Article 2 - Burden of proof

This Article clarifies which party bears the burden of proving the facts pertaining to the fulfilment of the conditions of Article 81. It is based on the division in the Treaty between the prohibition in Article 81(1) and the conditions under which it may be declared inapplicable set out in Article 81(3). It is also in line with the principle, widely observed in the laws of the Member States, that each party to litigation has to prove the facts on which it relies.

The rule proposed ensures a fair balance between the parties. In particular, the party invoking the benefit of Article 81(3) is generally best placed to supply the information required to demonstrate that the conditions of Article 81(3) are satisfied (e.g. regarding efficiencies). It is therefore appropriate that that party should bear the burden of proof as regards Article 81(3).

Article 3 - Relationship between Articles 81 and 82 and national competition laws

This Article stipulates that when an agreement or practice is capable of affecting trade between Member States only Community competition law applies. National competition authorities, being empowered to apply Articles 81 and 82 in their entirety, will thus apply Community law in all cases affecting trade between Member States.

In the present system the same agreement or conduct may be subject to Community competition law and several national competition laws. In accordance with the principle of primacy of Community competition law, established by the Court of Justice in the Walt Wilhelm case [2], national law can be applied only in so far as it does not prejudice the uniform application of the Community competition rules throughout the single market. The primacy principle resolves clear conflicts in favour of Community law. It does not, however, effectively prevent inconsistencies and differences in the treatment of agreements and practices between Member States, even if such agreements and practices affect trade between Member States.

[2] See Case 14/68 Walt Wilhelm [1969] ECR 1.

At the present stage of development of the Community it is essential to ensure that there is a level playing field throughout the European Union, allowing companies to reap the full benefits of the single market. As is evident from the very content of Article 81(3), many agreements have desirable effects on economic welfare. It is inconsistent with the notion of a single market that agreements and practices capable of affecting cross-border trade should be subject to different standards and that an agreement which would be considered innocuous or beneficial under Community law can be prohibited under national competition law. To address this problem effectively it is necessary to adopt the solution alluded to by the Court of Justice in Walt Wilhelm, namely to regulate the relationship between national law and Community competition law as provided for in Article 83(2)(e) of the EC Treaty.

Article 3 ensures that agreements and practices capable of affecting cross-border trade are scrutinised under a single set of rules, thereby promoting a level playing field throughout the Community, and removing the costs attached to the parallel application of Community law and national laws for both competition authorities and business. The provision does not limit the scope for action of national competition authorities, which will be able to apply Community law. Experience gained at national level will contribute to the development of Community competition policy within the network.

The Article also ensures that all cases concerning agreements and practices affecting trade between Member States become subject to the mechanisms of cooperation inside the network of competition authorities. It is a fundamental aim of the proposed Regulation that the Commission and the national competition authorities should form a network of competition authorities that cooperate closely in the application of Articles 81 and 82. The network will incorporate mechanisms that seek to ensure that the consistency of Community competition law is preserved.

The proposal eliminates the risk that the proper functioning of the network might be affected by the concurrent application of Community competition law and national competition law. The objective is to ensure an efficient allocation of cases, generally to a single authority, which is considered the best placed to act. This objective would be hampered if national authorities were bound to continue dealing with the case under their own competition law. In several Member States the competition authority that has received a complaint based on national law is obliged to adopt a formal reasoned decision. These parallel proceedings should be avoided.

CHAPTER II - POWERS

Article 4 - Powers of the Commission

Paragraph 1 establishes the Commission's power to take the measures provided for in the Regulation.

Such measures may in the first place be individual decisions. The Commission thus keeps an autonomous power of enforcement, which it will use not only to act against infringements but also to set policy and to ensure consistent application of Community competition law.

The measures provided for also include block exemptions. Article 28 confers on the Commission a general power to adopt block exemption regulations.

The block exemption is one of the main tools, which the Commission uses to ensure the consistent application of competition law throughout the single market. Together with the practice developed by the Commission in its decisions, block exemptions form the backbone of a common set of competition enforcement rules that is complemented by the guidelines that the Commission issues. In the new system, where undertakings must, as a general rule, assess for themselves whether their behaviour complies with the law, the legislative framework that block exemptions offer will be of crucial importance in providing legal certainty for undertakings.

Block exemption regulations, while containing abstract rules, do not create new law for undertakings, but codify and clarify the interpretation of Article 81(3). When drafting them, the Commission is able to base itself on the experience it has gained in individual cases. Under Article 16 of the proposed Regulation, it will also have information about the application of Articles 81 and 82 by national courts in all Member States. It is therefore best placed to know in which areas it is necessary to enact or amend block exemption regulations in order to keep up with new developments and rapidly changing market conditions. In doing so, the Commission will cooperate closely with the competition authorities of the Member States.

As block exemption regulations cannot authorise behaviour that is ultimately prohibited by Article 81, the benefit of a block exemption can be withdrawn where it is found that in an individual case an agreement, decision or concerted practice has effects that are incompatible with Article 81(3). Under the proposed Regulation, in the spirit of decentralised but consistent application, the national competition authorities have the power to withdraw the benefit of a block exemption if the relevant geographic market is no wider than the territory of their Member State (see Article 29(2)). Decisions to that effect are, however, subject to consultation in accordance with Article 11(4).

Paragraph 2 gives the Commission power to introduce a registration requirement for types of agreements, decisions or practices that fall under Article 81(1) and are not covered by block exemptions. In accordance with the conditions set out in this paragraph, the Commission can lay down the details of such an obligation in a Commission regulation, including possible penalties for failure to comply with the registration obligation.

Article 5 - Powers of the competition authorities of the Member States

This Article serves to establish and define the powers of the competition authorities of the Member States to apply Articles 81 and 82. If additional measures to achieve this objective are necessary under national law, Article 36 obliges Member States to take such measures by a date to be determined.

The competition authorities of the Member States are to apply Article 81 as a whole: each time they apply Article 81(1) they are also empowered to decide whether the conditions of Article 81(3) are satisfied. They may also apply Article 82.

If they find that there is infringement of Article 81 as a whole, or of Article 82, the competition authorities of the Member States are to take effective action against the conduct in question, acting in accordance with the proposed Regulation and applicable national procedural rules. Paragraph 3 lists the contents of the decisions they may take in that respect. While the proposed regulation does not foresee harmonisation of national sanctions, general principles of Community law require that such sanctions ensure effective enforcement.

If the competition authority of a Member State finds that behaviour, acting on a complaint or on its own initiative does not infringe Article 81 as a whole or Article 82, it can close the proceedings or reject the complaint by decision, finding that there are no grounds for action.

Such decisions bind only the authority adopting the decision.

The effect of other types of decisions adopted by the national competition authorities within their own Member State is not regulated in the proposed Regulation. This is a matter of national law. Decisions adopted by national competition authorities do not have legal effects outside the territory of their Member State, nor do they bind the Commission.

Article 6 - Powers of the national courts

This Article gives national courts jurisdiction to apply Article 81(3). When applying Article 81(1), a court will be empowered to apply Article 81(3). It is already established case-law that courts have jurisdiction to apply Article 81(1) and (2) and Article 82.

If a national court finds that the conditions of Article 81(3) are satisfied it must - in the absence of other objections - hold that the agreement is valid with effect ab initio. It must then enforce the agreement and reject any claims for damages based on an alleged violation of Article 81.

Conversely, if the conditions of Article 81(3) are not satisfied, national courts must rule that an agreement or decision or part of it is void under Article 81(2), and may order damages or take any other decision that follows from the violation of Article 81(1).

CHAPTER III - COMMISSION DECISIONS

Article 7 - Finding and termination of infringement

This Article is equivalent to Article 3 of the present Regulation No 17, with two exceptions.

First, it makes it clear that the Commission is empowered to adopt a decision finding an infringement not only when it orders the termination of an infringement or imposes a fine, but also where the infringement has already come to an end and no fine is imposed.

In conformity with the case-law of the Court of Justice, however [3], the power of the Commission to adopt an infringement decision in such circumstances is limited to cases where it has a legitimate interest in doing so. This may be the case where there is a danger that the addressee might re-offend, or where the case raises new issues clarification of which is in the public interest.

[3] See Case 7/82 GVL [1983] ECR 483.

Secondly, the Commission is empowered to impose all remedies necessary to bring the infringement to an end, including structural remedies. Structural remedies can be necessary in order to bring an infringement effectively to an end. This may in particular be the case with regard to cooperation agreements and abuses of a dominant position, where divestiture of certain assets may be necessary.

Article 8 - Interim measures

According to this Article, the Commission is empowered to adopt interim measures in cases where there is a risk of serious and irreparable harm to competition and there is prima facie evidence of an infringement. It is further stipulated that interim measures may be adopted for no more than one year, with a possibility of renewal.

The Commission acts in the public interest and not in the interest of individual operators. It is therefore appropriate to ensure that the Commission has an obligation to adopt interim measures only in cases where there is a risk of serious and irreparable harm to competition. Companies can always have recourse to national courts, the very function of which is to protect the rights of individuals.

Article 9 - Commitments

Paragraph 1 introduces a new provision empowering the Commission to adopt decisions accepting commitments offered by undertakings in the course of proceedings in which the Commission intends to adopt a decision ordering termination of an alleged infringement. Such decisions constitute an appropriate remedy when the commitments offered meet the competition concerns identified by the Commission. Decisions accepting commitments establish the material facts of the case and the prima facie evidence of the suspected infringement, and incorporate the accepted commitments.

The addressee of the Commission decision is bound by the decision containing the commitments, which can be invoked by third parties before national courts.

The time-limit ensures that undertakings are not bound by the commitments for an indefinite period, and that the Commission is in a position, if need be, to reassess the agreement or practice and the effectiveness of the commitments after a certain period of time.

Paragraph 2 provides that the decision makes no finding as to the existence of an infringement prior to the commitments or as to the absence of an infringement following the commitments. Following the acceptance of the commitments by decision, the Commission closes the file.

Paragraph 3 stipulates that the Commission is entitled to reopen the procedure only if the facts on the basis of which the Commission accepted the commitments have materially changed, if the undertaking offering the commitments has supplied incorrect, incomplete or misleading information, or if the undertaking violates the commitments.

Article 10 - Finding of inapplicability

In the proposed directly applicable exception system the main functions of the Commission will be to take action against infringements and to develop competition policy and promote consistent application of the rules by means of general measures such as block exemption regulations and guidelines.

However, Article 10 of the proposed Regulation also empowers the Commission to adopt decisions finding that Article 81 is inapplicable, either because the conditions of Article 81(1) are not fulfilled or because the conditions of Article 81(3) are satisfied, and decisions finding that Article 82 does not apply.

Such decisions can be adopted only at the Commission's own initiative and in the Community public interest. These conditions ensure that decisions making a finding of inapplicability cannot be obtained on demand by companies. Such a possibility would seriously undermine the principal aim of the reform, which is to focus the activities of all competition authorities on what is prohibited.

In the decentralised system the Commission, as the guardian of the Treaty and the centrally placed authority, has a special role to play in setting competition policy and in ensuring that Articles 81 and 82 are applied consistently throughout the single market. To that end it is necessary to empower the Commission to adopt positive decisions if the Community public interest so requires. This power allows the Commission to adopt a decision making a finding of inapplicability, in particular in respect of new types of agreements or practices or issues that have not been settled in the existing case-law and administrative practice.

Such decisions will be of a declaratory nature. The proposed instrument thus differs significantly from the exemption decisions currently adopted under Article 81(3), which create rights with effect erga omnes for the duration of the decision regardless of any material change in the facts. Non-infringement decisions will have the effects of Community acts. Article 16 of the proposed Regulation creates a general obligation for national competition authorities and national courts to make every effort to avoid decisions conflicting with decisions adopted by the Commission. A finding of inapplicability by the Commission pursuant to Article 10 can therefore make an important contribution to the uniform application of Community competition law.

CHAPTER IV - COOPERATION WITH NATIONAL AUTHORITIES AND COURTS

Article 11 - Cooperation between the Commission and the competition authorities of the Member States

This Article establishes the principle of close cooperation aimed at enabling the Commission and the Member States' competition authorities to function as a network when applying Articles 81 and 82 under the proposed Regulation. It sets out the basic information and consultation mechanisms; detailed rules will be laid down in an implementing Commission regulation in accordance with Article 34 and in a notice on cooperation between competition authorities.

Paragraph 1 establishes the principle of close cooperation, covering cooperation between the Commission and the Member States' competition authorities on the one hand and between the latter on the other hand.

Paragraph 2 takes over the rule of Article 10(1) of the existing Regulation No 17, adapted to the new implementing system.

Paragraph 3 requires national competition authorities to inform the Commission at an early stage of cases treated under Articles 81 and 82. In practice this will be done by electronic means, and the information will be made accessible to all Member States' authorities via the network. The objective is in particular to facilitate case allocation, to initiate cooperation on cases at an early stage, and to ensure effective handling of multiple complaints.

Paragraph 4 establishes a consultation obligation regarding all decisions by Member States' authorities aimed at terminating or penalising an infringement of Article 81 or 82. Its objective is to allow for coordination of prohibition decisions and equivalent decisions in order to ensure consistent application.

Paragraph 5 makes it clear that the principle of close cooperation also includes voluntary consultation on cases other than those covered by paragraph 4.

Paragraph 6 takes over the rule of Article 9(3) of the existing Regulation No 17, the provision empowering the Commission to withdraw a case from a national competition authority and deal with the case itself, adapted to the new implementing system. This provision is of crucial importance in the new system; it serves to ensure effective case allocation and consistent application of Community competition law.

Article 12 - Exchange of information

Paragraph 1 creates a legal basis for the exchange of any information between the Commission and the Member States' competition authorities and its use as evidence in proceedings applying Community competition law. It covers the transfer of information from the Commission to a Member State's authority and vice versa, and the transfer from one Member State authority to another. This provision also allows the transfer of entire case files, including confidential documents, the objective being to render possible the transfer of a case from one authority to another in the interest of effective case allocation.

Paragraph 2 introduces limits on the use of information transmitted under paragraph 1, thereby ensuring that the undertakings concerned benefit from appropriate procedural safeguards. The first sentence limits the use of the information transferred to the application of the Community competition rules. No use for other purposes is possible. The second sentence further limits the use of the information transferred with regard to penalties. The objective of this rule is to ensure an appropriate balance between the rights of defence the undertakings concerned could invoke in the Member State from which the information originates, and the penalties they may face in the prosecuting Member State. It is proposed to exclude the use of evidence exchanged for imposing penalties other than pecuniary penalties.

Article 13 - Suspension or termination of proceedings

This Article serves the purpose of effective case allocation within the network of competition authorities. It gives all Member States' competition authorities and the Commission the right to suspend a proceeding or reject a complaint if the same case is or has been dealt with by another competition authority. It thereby removes risks of duplication of work and incentives for multiple complaints.

Paragraph 1 creates a legal basis for the staying or closing of proceedings if a complaint is already under examination by another competition authority. It supersedes national law that might oblige some Member States' competition authorities to rule on the substance of each complaint they receive. The provision is without prejudice to other grounds for rejecting a complaint and without prejudice to the power of the Commission to withdraw a case from national competition authorities under Article 11(6).

Paragraph 2 contains an equivalent rule regarding complaints against an agreement or practice that has previously been dealt with by another competition authority.

Article 14 - Advisory Committee

Article 14 maintains the Advisory Committee on Restrictive Practices and Dominant Positions as set up by the existing Regulation No 17. It has worked well in the past and is perfectly in line with the principle of close cooperation between the Commission and Member States' competition authorities. The adaptations proposed, namely written procedure and the possibility of discussing cases dealt with by Member States authorities, serve to adapt it to the new enforcement system.

Paragraph 1 sets out the types of decisions on which the Commission has an obligation to consult the Advisory Committee.

Paragraph 2 sets out the composition of the Committee. It is aligned on Article 10(4) of the existing Regulation No 17.

Paragraph 3 defines the working methods of the Committee. It takes over the elements set out in Article 10(5) of the existing Regulation No 17. In the interest of efficient proceedings it introduces the possibility for the Member States to agree that the meeting may be convened at shorter notice.

Paragraph 4 creates a legal basis for written procedure. The purpose of this provision is to allow for more flexible and efficient working methods.

Paragraph 5 allows the opinion of the Advisory Committee to be published, along the lines of the Merger Regulation.

Paragraph 6 creates a legal basis for discussing a case dealt with by a Member State's competition authority. Its purpose is to allow the Committee to serve as a forum for discussion of all cases that may be of common interest, in particular cases raising issues of consistent application of Articles 81 and 82. If requested by a Member State, the Commission will normally put a national case on the agenda.

Article 15 - Cooperation with national courts

This Article aims at reinforcing cooperation between the Commission and national courts in order to promote consistent application of Articles 81 and 82.

Paragraph 1 establishes a right for national courts to obtain from the Commission information in its possession for the purpose of applying Article 81 and 82. They can also ask for an opinion from the Commission on questions relating to the application of the Community competition rules. The Commission will set out detailed rules on its practice in this field in a notice, replacing the existing notice on cooperation between national courts and the Commission. These rules will include a deadline within which the Commission must reply.

Paragraph 2 aims at facilitating the monitoring of the application of Articles 81 and 82 by national courts. It sets up an obligation for national courts to transmit a copy of judgments applying Articles 81 or 82 to the Commission. The extent of this information obligation is such that the amount of bureaucracy involved for the courts and for the Commission is kept to a minimum. On the courts' side, in particular, very little additional work is required, and what there is is purely clerical. As far as possible, paper transmission should be replaced by electronic transmission.

Paragraph 3 introduces a right for the Commission and the national competition authorities to make submissions to national courts in written or oral form. In the case of the national competition authorities the power is limited to the courts of their own Member State. The Commission may act under this provision only in the Community public interest (as amicus curiae), i.e. not in the interest of one of the parties. This provision aims in particular at permitting the Commission and the national competition authorities to draw the courts' attention to issues of considerable importance for the consistent application of Community competition law. The national courts are not bound to follow an opinion expressed by the Commission or a national competition authority. Paragraph 3 is without prejudice to Article 234 of the EC Treaty.

The second subparagraph of paragraph 3 requires national courts to supply information to the Commission or the national competition authorities, as the case may be, in individual cases, but only upon specific request, in order to ensure that they have all relevant information about proceedings before a national court to which they intend to make written or oral submissions. It is essential for the Commission and the national competition authorities to be fully informed about the substance of the case, first in order to arrive at a well-founded decision about whether they want to make a submission in accordance with paragraph 3, and second in order to be able to make qualitatively satisfactory submissions.

Article 16 - Uniform application of Community competition law

In the proposed new system Commission decisions will continue to play an important role in defining competition policy and - given their Community-wide effect - in maintaining consistency throughout the single market. Such decisions are Community acts within the meaning of Article 249 of the EC Treaty and are subject to a separate system of judicial control. National courts have no jurisdiction to review the validity of Community acts. This is the prerogative of the Community courts, which in the exercise of their jurisdiction ensure the uniform application of Community law in the interest of the Community legal order and legal certainty.

Maintaining consistent application is essential in an enforcement system in which parallel powers to apply Articles 81 and 82 are exercised by the Commission, national competition authorities and national courts. If significant differences in the application of these provisions were to develop the consistency of Community competition law and the proper functioning of the single market would be put at risk. It is therefore necessary to adopt measures addressing the danger of inconsistent application effectively.

Article 16 of the proposed Regulation imposes on national courts and national competition authorities an obligation to make every effort to avoid taking decisions that conflict with decisions adopted by the Commission. This rule is without prejudice to the case-law of the Court of Justice.

The objective of this Article is to create a system that limits the scope for conflicting decisions. It is essential to prevent national courts and national competition authorities from adopting decisions that contradict Commission decisions, as it would be detrimental to the proper functioning of the Community legal order if contradicting decisions based on the same body of law were to persist.

The potential for conflict depends on the operative part of the Commission decision and the facts on which it is based. When the Commission has found that there has been an infringement, national courts and national competition authorities must use every effort to avoid conflicts to the extent that the material facts are the same. This also applies to findings of inapplicability under Article 10 of the proposed Regulation.

National courts can avoid taking contradictory decisions, in particular, by making a preliminary reference to the Court of Justice under Article 234 of the EC Treaty or - in cases where a Commission decision is pending before the Community courts - by suspending their own proceedings. The outcome in both situations is that the issue is clarified by the Community courts with effect for the whole of the Community. National competition authorities can avoid taking conflicting decisions by consulting the Commission and - in cases where a Commission decision is pending before the Community courts - by suspending their own proceedings.

CHAPTER V - POWERS OF INVESTIGATION

Article 17 - Inquiries into sectors of the economy

This Article takes over Article 12 of the existing Regulation No 17. The detection of infringements is achieved partly by monitoring markets. The instrument of sector enquiries, whereby the Commission can conduct general enquiries in a given sector if the evolution of the market suggests that competition is restricted, should therefore be maintained.

Article 18 - Requests for information

This Article is based on Article 11 of the existing Regulation No 17.

The existing text does not require substantial modification. The proposed Article introduces only one minor amendment:

Paragraph 3 allows duly authorised lawyers to answer requests for information on behalf of their clients. However, companies remain responsible for the correctness of the information provided.

Article 19 - Power to take statements

This Article creates a legal basis for the Commission to interview natural or legal persons, whether or not they are themselves the subject of the proceedings, and to record their statements. The provision fills a gap in the Commission's powers by allowing for oral submissions to be recorded and used as evidence in proceedings.

Article 20 - The Commission's powers of inspection

This Article defines the Commission's powers of inspection. It is largely identical to Article 14 of the existing Regulation No 17, but in order to increase the effectiveness of inspections it proposes certain amendments.

Under the existing Regulation No 17, Commission officials are empowered to examine the books and other business records, take copies of or extracts from the books and business records, ask for oral explanations on the spot, and enter any premises, land and means of transport of undertakings. The proposal contains the following changes:

Paragraph 2 of the proposed Article introduces three new elements to complement the Commission's powers in order to safeguard the effectiveness of inspections:

First, paragraph 2(b) provides for the extension of the powers of search to private homes if there is reason to suspect that professional documents are kept there. This extension is based on experience gained in recent cases where it appeared that company employees kept relevant documents in their private homes. Evidence was found suggesting that incriminatory documents were deliberately stored in private homes. Under the existing rules, this enables companies effectively to undermine inspections by the Commission. In order to ensure that the effectiveness of inspections against secret infringements is maintained, it is therefore necessary to extend the powers of the Commission inspectors to search private homes of companies' personnel where professional documents are likely to be kept. Paragraph 7 of Article 20 ensures that the exercise of this power is subject to authorisation by a national court.

Secondly, paragraph 2(e) empowers Commission inspectors to seal cupboards and offices in order to make sure that no documents disappear during the inspection. This power serves to ensure the efficiency of inspections, in particular in cases where an inspection is carried out over more than one day and where the officials have to leave the premises of the company without having finished the inspection. Breaking of the seals is punishable by fines under Article 22 paragraph 1(d).

Thirdly, paragraph 2(f) stipulates, without prejudice to the case-law of the Court of Justice, that all questions related to the subject matter of the inspection can be asked by the Commission inspectors in the course of the inspection. This is necessary to increase the effectiveness of the investigations, as the wording of the present Article 14 of Regulation No 17 allows inspectors to ask only for oral explanations relating to documents.

Paragraph 8 codifies the Hoechst case-law [4], in order to ensure uniform conditions for companies subject to Commission inspections throughout the single market.

[4] See Joined Cases 46/87 a.o. Hoechst [1989] ECR 2859.

When the Commission decides to carry out inspections under the present Article 14(3), the national authorities assisting it must, in most Member States, obtain an order from a court in order to overcome any opposition on the part of the undertakings. The Court of Justice held in Hoechst that the national court cannot substitute its assessment for that of the Commission and cannot question the validity of the Commission decision. The review by the national court is limited to checking the authenticity of the Commission decision and balancing the measures of constraint envisaged (i.e. the possibility for the Commission to proceed without the consent of the undertaking) against the subject matter of the inspection. To allow the court to fulfil this task, the Commission decision ordering the inspection must give an adequate statement of the reasons on which it is based.

The powers of courts in respect of the application of domestic competition laws differ from those they can exercise in respect of the application of Community competition law. This may introduce confusion in the proceedings, since some courts have a tendency to apply domestic standards to inspections based on Community law. In order to ensure that inspections by the Commission are governed by the same rules throughout the single market, it is considered indispensable to clearly state in the new Regulation the standards set out in the Hoechst judgment.

Article 21 - Investigations by competition authorities of Member States

This Article is based on Article 13 of the existing Regulation No 17, adapted to the new implementing system. While continuing to allow Member States to conduct investigations on their territory on behalf of the Commission, it also enables them to carry out fact-finding measures on behalf of a competition authority of another Member State. This provision is necessary in order to allow effective cooperation between the competition authorities of the Member States. Such cooperation enables national competition authorities to deal with cases where some evidence is to be found in other Member States. Without such mechanisms a real decentralisation of the application of Community competition rules would be seriously hampered.

CHAPTER VI - PENALTIES

Article 22 - Fines

There are two types of fine in Article 15 of the existing Regulation No 17: fines for breaches of procedural rules (requests for information, refusal to submit to an inspection, etc.) and fines for substantive breaches of Articles 81 and 82.

Paragraph 1 modifies the fines for breaches of procedural rules, which in the existing Regulation No 17 can be between EUR 100 and 5 000. These amounts no longer have any deterrent effect. It is proposed that these procedural fines be aligned on the ECSC Treaty, which provides for fines of up to 1% of the total annual turnover for these kinds of infringements (Article 47). The proposed Regulation also introduces penalties for refusing to answer oral questions during inspections or for breaking seals.

Paragraph 2 concerns fines for breaches of the substantive rules. It is not proposed that the level of this second category of fines should be changed (up to 10% of the total annual turnover). It is simply necessary to add to the list of infringements the violation of a decision granting interim measures and failure to comply with commitments made binding by decision.

Paragraph 4 introduces a new rule concerning infringements committed by associations of undertakings. The Treaty allows the imposition of fines on associations for breach of Community competition law. The Court of Justice has found that the fine can be calculated on the basis of the turnover of the members of the association. However, in practice, it is often impossible to recover the fine imposed: associations seldom have sufficient resources of their own to cover the payment and there is currently no legal means to recover the fine from members of the association. A new rule is therefore proposed permitting the Commission, in case of default on the part of an association, to recover the fine from its members at the time of the infringement.

Article 23 - Periodic penalty payments

Rules on periodic penalty payments also have to be amended with regard to the amount stipulated in the Regulation (the existing Regulation No 17 provides for payments of from EUR 50 to 1 000 per day). It is proposed that a ceiling should be set on the basis of the total turnover: 5% of the average daily turnover for each day's delay. This is the amount provided for in the ECSC Treaty (Article 47).

Furthermore, the creation of new categories of decisions, i.e. decisions accepting commitments and decisions adopting interim measures, requires that it be possible to impose periodic penalty payments on undertakings if they fail to comply with such decision.

CHAPTER VII - LIMITATION PERIODS

Article 24 - Limitation periods for the imposition of penalties

This Article takes over the rules on prescription from Regulation (EEC) No 2988/74 and integrates them into the proposed Regulation. As a result, Regulation (EEC) No 2988/74 will no longer apply to fines or periodic penalty payments covered by the proposed Regulation.

The provisions on prescription have been adapted to the new enforcement system. The only significant aspect relates to decentralised application under the proposed Regulation: Under Regulation (EEC) No 2988/74 prescription is interrupted by steps taken by the Member States only if they act at the Commission's request. The latter condition is here removed, so that prescription is also interrupted by measures taken by national competition authorities applying Articles 81 or 82, irrespective of any request from the Commission.

Article 25 - Limitation period for the enforcement of penalties

Like Article 24, this Article takes over the rules on prescription from Regulation (EEC) No 2988/74 and integrates them into the proposed Regulation. The same adaptation has been made as for Article 24.

CHAPTER VIII - HEARINGS AND PROFESSIONAL SECRECY

Article 26 - Hearing of the parties, complainants and others

On the basis of Article 19 of the existing Regulation No 17, the Commission has developed a practice of fair hearing and access to file which is partially set out in the 1997 notice on access to file. It is proposed that this Article should confirm the right of access to file, while leaving the detailed rules for a Commission notice.

Article 27 - Professional secrecy

Paragraph 1 takes over the provision in Article 20(1) of the existing Regulation No 17. It confines the use of information gathered under Articles 17 to 21 to the purpose for which it was collected. Article 27(1) is subject to the application of the more specific rules of the Regulation, namely Article 12 and Article 15.

Paragraph 2 makes the obligation of professional secrecy laid down in Article 20(2) of the existing Regulation No 17 applicable to all confidential information exchanged by the national competition authorities under the proposed Regulation. This provision complements the safeguards set out in Article 12(2).

CHAPTER IX - BLOCK EXEMPTIONS

Article 28 - Adoption of block exemption regulations

At present, the Commission has been empowered by the Council to adopt block exemption regulations in the field of vertical agreements, intellectual property rights, specialisation and research and development agreements, insurance and certain fields of transport.

This Article empowers the Commission to adopt block exemption regulations, and sets out the conditions with which it must comply. The adoption of block exemption regulations requires that the Advisory Committee on Restrictive Practices and Dominant Positions be consulted twice.

Article 29 - Withdrawal in particular cases

Paragraph 1 provides, in line with the existing legal framework, that the Commission is empowered to withdraw the benefit of a block exemption, for the future, if it finds upon an individual assessment that a specific agreement does not fulfil the conditions of Article 81(3).

Paragraph 2 proposes to give the national competition authorities the power to withdraw the benefit of block exemptions for their own territory on condition that the territory constitutes a distinct relevant geographic market. At present the national competition authorities have such a power only in respect of vertical agreements [5]. To ensure consistency in the application of block exemption regulations, which are Community acts, it is necessary to provide for prior consultation of the Commission in respect of national decisions withdrawing the benefit of a block exemption (see Article 11(4) of the proposed Regulation).

[5] See Article 1(4) of Council Regulation (EC) No 1215/1999 amending Regulation No 19/65/EEC on the application of Article 81(3) of the Treaty to certain categories of agreements and concerted practices.

Article 30 - Regulations ending the application of a block exemption

This Article provides that the Commission may include in block exemption regulations a clause entitling it to exclude, by way of regulation, from their scope certain agreements or practices that are applied within a particular relevant market. Often anti-competitive effects are caused by the existence of a number of parallel agreements or networks of agreements [6]. In such cases it is inefficient to proceed by way of individual withdrawal in respect of each agreement or network. The proper response is to end the application of the block exemption to the particular market.

[6] See in this respect Article 1(2) of Regulation (EC) No 1215/1999.

CHAPTER X - GENERAL PROVISIONS

Article 31 - Publication of decisions

This Article is equivalent to Article 21 of the existing Regulation No 17.

Article 32 - Review by the Court of Justice

This Article is identical to Article 17 of the existing Regulation No 17.

Article 33 - Exclusions

This Article sets out areas to which the Regulation does not apply. These are certain areas of the sea and air transport sectors that are not covered by the present rules implementing Articles 81 and 82 (see Regulations (EEC) Nos 4056/86 and 3975/87).

Article 34 - Implementing provisions

This Article establishes the right of the Commission to adopt implementing rules for the Regulation and lists certain particular areas that may be covered by such rules.

CHAPTER XI - TRANSITIONAL AND FINAL PROVISIONS

Article 35 - Transitional provisions

Paragraph 1 makes it clear that notifications and equivalent applications submitted under the existing Regulation No 17, Regulations (EEC) Nos 1017/68, 4056/86 and 3975/87 serve no further purpose upon the date of application of the proposed Regulation.

Subparagraph 2 of paragraph 1 draws the conclusion of the introduction of the new system by providing that existing exemption decisions cease to be valid on the date of application of the Regulation.

Paragraph 2 ensures that procedural steps taken under the existing Regulation No 17, Regulations (EEC) Nos 1017/68, 4056/86 and 3975/87 remain valid under the proposed new Regulation. Proceedings started under Articles 3 and 15 of the existing Regulation No 17, for example, will continue under the proposed Regulation, and be governed by the new rules from the date of their application.

Article 36 - Designation of competition authorities of Member States

This Article requires the Member States to empower their national competition authorities to apply Articles 81 and 82 in their entirety in so far as national measures in addition to Article 6 may be needed. Full empowerment of the Member States' competition authorities is an indispensable precondition for efficient application of Articles 81 and 82 in the new decentralised enforcement system. It is also the precondition for the proper functioning of the network of competition authorities. Without it, case allocation could not take place as envisaged, and the Commission might be forced to take up a disproportionate share of cases concerning the markets of a Member State whose authority is unable to apply Articles 81 and 82.

Article 37 - Amendment of Regulation (EEC) No 1017/68

This Article repeals specific procedural rules contained in Regulation (EEC) No 1017/68, leaving in force the substantive rules the Regulation lays down. The amendments are required in order to create an implementing system which includes the transport sector.

Article 38 - Amendment of Regulation (EEC) No 2988/74

This Article makes Regulation (EEC) No 2988/74 inapplicable to the fines and periodic penalty payments provided for in the proposed Regulation.

Article 39 - Amendment of Regulation (EEC) No 4056/86

This Article repeals procedural rules contained in Regulation (EEC) No 4056/86, leaving in force the substantive rules the Regulation lays down. The amendments are required in order to create an implementing system which includes the transport sector.

Article 40 - Amendment of Regulation (EEC) No 3975/87

This Article repeals specific procedural rules contained in Regulation (EEC) No 3975/87, leaving in force the substantive rules the Regulation lays down. The amendments are required in order to create an implementing system which includes the transport sector.

Article 41 - Repeals

This Article lists the Regulations to be replaced by the present Regulation.

Article 42 - Entry into force

This Article regulates the entry into force of the Regulation.

2000/0243 (CNS)

Proposal for a COUNCIL REGULATION on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty and amending Regulations (EEC) No 1017/68, (EEC) No 2988/74, (EEC) No 4056/86 and (EEC) No 3975/87 ("Regulation implementing Articles 81 and 82 of the Treaty")

(Text with EEA relevance)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 83 thereof,

Having regard to the proposal from the Commission [7],

[7] OJ C

Having regard to the opinion of the European Parliament [8],

[8] OJ C

Having regard to the opinion of the Economic and Social Committee [9],

[9] OJ C

Whereas:

(1) If a system is to be established which ensures that competition in the common market is not distorted, Articles 81 and 82 must be applied effectively and uniformly in the Community. Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty [10], has allowed a Community competition policy to develop that has helped to disseminate a competition culture within the Community. In the light of experience, however, that Regulation should now be replaced by legislation designed to meet the challenges of an integrated market and a future enlargement of the Community.

[10] OJ 13, 21.2.1962, p. 204/62; Regulation as last amended by Regulation (EC) No 1216/1999 (OJ L 148, 15.6.1999, p. 5).

(2) In particular, there is a need to rethink the arrangements for applying the exception from the prohibition on agreements, which restrict competition, laid down in Article 81(3). Under Article 83(2)(b), account must be taken in this regard of the need to ensure effective supervision, on the one hand, and to simplify administration to the greatest possible extent, on the other.

(3) The centralised scheme set up by Regulation No 17 no longer secures a balance between those two objectives. It hampers application of the Community competition rules by the courts and competition authorities of the Member States, and the system of notification it involves prevents the Commission from concentrating its resources on curbing the most serious infringements. It also imposes considerable costs on undertakings.

(4) The present system should therefore be replaced by a directly applicable exception system in which the competition authorities and courts of the Member States have the power to apply not only Articles 81(1) and 82, which have direct applicability by virtue of the case-law of the Court of Justice of the European Communities, but also Article 81(3).

(5) It should be specified here that, in line with the case-law developed in the framework of Regulation No 17, the burden of proving that the conditions of Article 81(3) are fulfilled rests on the party seeking to rely on that provision. That party is usually best placed to prove that the conditions of that paragraph are fulfilled.

(6) In order to ensure that the Community competition rules are applied effectively, the competition authorities of the Member States must be associated more closely with their application. To this end, they must be empowered to apply Community law.

(7) National courts have an essential part to play in applying the Community competition rules. When deciding disputes between private individuals, they protect the subjective rights under Community law, for example by awarding damages to the victims of infringements. The role of the national courts here complements that of the competition authorities of the Member States. They must therefore be allowed to apply Articles 81 and 82 of the Treaty in full.

(8) In order to ensure that the same competition rules apply to businesses throughout the Community, provision must be made pursuant to Article 83(2)(e) to regulate the relationship between Articles 81 and 82 and national competition law by excluding the application of national law to agreements, decisions and practices within the scope of Articles 81 and 82.

(9) Although, in the new system, application of the rules will be decentralised, the uniformity of Community law requires that the rules be laid down centrally. To this end, the Commission must be given a general power to adopt block exemption regulations in order to enable it to adapt and clarify the legislative framework. This power must be exercised in close cooperation with the competition authorities of the Member States. It must be without prejudice to the existing rules in Council Regulations (EEC) No 1017/68 [11], (EEC) No 4056/86 [12] and (EEC) No 3975/87 [13].

[11] OJ L 175, 23.7.1968, p. 1; Regulation as last amended by the Act of Accession of Austria, Finland and Sweden.

[12] OJ L 378, 31.12.1986, p. 4; Regulation as amended by the Act of Accession of Austria, Finland and Sweden.

[13] OJ L 374, 31.12.1987, p. 1; Regulation as last amended by Regulation (EC) No 2410/92 (OJ L 240, 24.8.1992, p. 18).

(10) As the system of notification will now come to an end, it may be expedient, in order to improve transparency, to require registration of certain types of agreement. The Commission should accordingly be empowered to require registration of certain types of agreement. If any such requirement is introduced, it must not confer any entitlement to a decision on the compatibility with the Treaty of the agreement registered, and must not be prejudicial to effective action against infringements.

(11) For it to ensure that the provisions of the Treaty are applied, the Commission must be able to address decisions to undertakings or associations of undertakings for the purpose of bringing to an end infringements of Articles 81 and 82. Provided there is a legitimate interest in doing so, the Commission must also be able to adopt decisions which find that an infringement has been committed in the past even if it does not impose a fine. This Regulation should also make explicit provision for the Commission's power to adopt decisions ordering interim measures, which has been acknowledged by the Court of Justice.

(12) Where, in the course of proceedings which might lead to an agreement being prohibited, undertakings offer the Commission commitments such as to meet its objections, the Commission should be able to adopt decisions which make those commitments binding on the undertakings concerned, without settling the question of the applicability of Article 81 or Article 82, so that the commitments can be relied upon by third parties before national courts and failure to comply with them can be punished by the imposition of fines and periodic penalty payments.

(13) In exceptional cases where the public interest of the Community so requires, it may also be expedient for the Commission to adopt a decision of a declaratory nature finding that the prohibition in Article 81 or Article 82 does not apply, with a view to clarifying the law and ensuring its consistent application throughout the Community.

(14) If the Commission and the competition authorities of the Member States are to form together a network of public authorities applying the Community competition rules in close cooperation, arrangements for information and consultation must be set up and the exchange of information must be allowed between the members of the network even where the information is confidential, subject to appropriate guarantees for undertakings.

(15) If the competition rules are to be applied consistently and, at the same time, the network is to be managed in the best possible way, it is essential to retain the rule that the competition authorities of the Member States are automatically relieved of their competence if the Commission initiates its own proceedings.

(16) To ensure that cases are dealt with by the most appropriate authorities within the network, a general provision should be laid down allowing a competition authority to suspend or close a case on the ground that another authority is dealing with it or has already dealt with it, the objective being that each case should be handled by a single authority. This provision must not prevent the Commission from rejecting a complaint for lack of Community interest, as the case-law of the Court of Justice has acknowledged it may do, even if no other competition authority has indicated its intention of dealing with the case.

(17) The Advisory Committee on Restrictive Practices and Dominant Positions set up by Regulation No 17 has functioned in a very satisfactory manner. It will fit perfectly into the new system of decentralised application. It is necessary, therefore, to build upon the rules laid down by Regulation No 17, while improving the effectiveness of the organisational arrangements. To this end, it would be expedient to allow opinions to be delivered by written procedure. The Advisory Committee should also be able to act as a forum for discussing cases handled by the competition authorities of the Member States, so as to help safeguard the consistent application of the Community competition rules.

(18) Consistency in the application of the competition rules also requires that arrangements be established for cooperation between the courts of the Member States and the Commission. In particular, it will be useful to allow national courts to ask the Commission for information or for its opinion on points concerning the application of Community competition law. The Commission and the competition authorities of the Member States must also be able to submit written or oral observations to courts called upon to apply Article 81 or Article 82. Steps must therefore be taken to ensure that the Commission and the competition authorities of the Member States are kept sufficiently well informed of proceedings before national courts.

(19) In order to ensure compliance with the principles of legal certainty and the uniform application of the Community competition rules in a system of parallel powers, conflicting decisions must be avoided. When the Commission has adopted a decision, therefore, the competition authorities and courts of the Member States must use every effort to avoid contradicting it. In this context, it should be recalled that the courts may refer questions to the Court of Justice for a preliminary ruling.

(20) The Commission must be empowered throughout the Community to require such information to be supplied and to undertake such inspections as are necessary to detect any agreement, decision or concerted practice prohibited by Article 81 or any abuse of a dominant position prohibited by Article 82. The competition authorities of the Member States must cooperate actively in the exercise of these powers.

(21) The detection of infringements of the competition rules is growing ever more difficult, and, in order to protect competition effectively, the Commission's powers of investigation need to be supplemented. The Commission must in particular be empowered to interview any persons who may be in possession of useful information and to record the statements made. In the course of an inspection, authorised Commission officials must be empowered to affix seals and to ask for any information relevant to the subject matter and purpose of the inspection.

(22) It is expedient to clarify, in keeping with the case-law of the Court of Justice, the limits to the power of review that the national courts may exercise when asked, under national law, to order measures allowing assistance from law enforcement authorities in order to overcome opposition on the part of an undertaking to an inspection ordered by decision.

(23) Experience has shown that business records are often kept in the homes of directors or other people working for an undertaking. In order to safeguard the effectiveness of inspections, therefore, authorised Commission officials should be empowered to enter any premises where business records may be kept, including private homes. However, the exercise of this latter power must be subject to the authorisation of the judicial authority.

(24) In order to help the competition authorities of the Member States to apply Articles 81 and 82 effectively, it is expedient to enable them to assist one another by carrying out fact-finding measures.

(25) Compliance with Articles 81 and 82 and the fulfilment of the obligations imposed on undertakings and associations of undertakings under this Regulation must be enforceable by means of fines and periodic penalty payments. To that end, appropriate levels of fine should also be laid down for infringements of the procedural rules.

(26) The rules on periods of limitation for the imposition of fines and periodic penalty payments were laid down in Council Regulation (EEC) No 2988/74 [14], which also concerns penalties in the field of transport. In a system of parallel powers, the acts, which may interrupt a limitation period, should include procedural steps taken independently by the competition authority of a Member State. To clarify the legal framework, Regulation (EEC) No 2988/74 should therefore be amended to prevent it applying to matters covered by this Regulation, and this Regulation should include provisions on periods of limitation.

[14] OJ L 319, 29.11.1974, p. 1.

(27) The undertakings concerned must be accorded the right to be heard by the Commission, third parties whose interests may be affected by a decision must be given the opportunity of submitting their observations beforehand, and the decisions taken must be widely publicised. While ensuring the rights of defence of the undertakings concerned, in particular, the right of access to the file, it is essential that business secrets be protected. The confidentiality of information exchanged in the network must likewise be safeguarded.

(28) Since all decisions taken by the Commission under this Regulation are subject to review by the Court of Justice in accordance with the Treaty, the Court of Justice should, in accordance with Article 229 thereof be given unlimited jurisdiction in respect of decisions by which the Commission imposes fines or periodic penalty payments.

(29) The principles laid down in Articles 81 and 82 of the Treaty, as they have been applied by Regulation No 17, have given a central role to the Community bodies.

This central role should be retained, whilst associating the Member States more closely with the application of the Community competition rules. In accordance with the principles of subsidiarity and proportionality as set out in Article 5 of the Treaty, this Regulation confines itself to the minimum required in order to achieve its objective, which is to allow the Community competition rules to be applied effectively, and does not go beyond what is necessary for that purpose.

(30) As the case-law has made it clear that the competition rules apply to transport, that sector should be made subject to the procedural provisions of this Regulation. Regulations (EEC) No 1017/68, (EEC) No 4056/86 and (EEC) No 3975/87 should therefore be amended in order to delete the specific procedural provisions they contain.

(31) In order to take account of the new arrangements established by this Regulation, the following Regulations should be repealed: Council Regulation No 141 of 26 November 1962 exempting transport from the application of Regulation No 17 [15], Council Regulation No 19/65/EEC of 2 March 1965 on application of Article 85(3) of the Treaty to certain categories of agreements and concerted practices [16], Council Regulation (EEC) No 2821/71 of 20 December 1971 on application of Article 85(3) of the Treaty to categories of agreements, decisions and concerted practices [17], Council Regulation (EEC) No 3976/87 of 14 December 1987 on the application of Article 85(3) of the Treaty to certain categories of agreements and concerted practices in the air transport sector [18], Council Regulation (EEC) No 1534/91 of 31 May 1991 on the application of Article 85(3) of the Treaty to certain categories of agreements, decisions and concerted practices in the insurance sector [19], and Council Regulation (EEC) No 479/92 of 25 February 1992 on the application of Article 85(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) [20],

[15] OJ 124, 28.11.1962, p. 2751/62; Regulation as last amended by Regulation No 1002/67/EEC (OJ 306, 16.12.1967, p. 1).

[16] OJ 36, 6.3.1965, p. 533/65; Regulation as last amended by Regulation (EC) No 1215/1999 (OJ L 148, 15.6.1999, p. 1).

[17] OJ L 285, 29.12.1971, p. 46; Regulation as last amended by the Act of Accession of Austria, Finland and Sweden.

[18] OJ L 374, 31.12.1987, p. 9; Regulation as last amended by the Act of Accession of Austria, Finland and Sweden.

[19] OJ L 143, 7.6.1991, p. 1.

[20] OJ L 55, 29.2.1992, p. 3; Regulation as amended by the Act of Accession of Austria, Finland and Sweden.

HAS ADOPTED THIS REGULATION:

CHAPTER I

PRINCIPLES

Article 1

Direct applicability

Agreements, decisions and concerted practices caught by Article 81(1) of the Treaty which do not satisfy the conditions of Article 81(3), and the abuse of a dominant position referred to in Article 82, shall be prohibited, no prior decision to that effect being required.

Article 2

Burden of proof

In any national or Community proceedings for the application of Article 81 and Article 82 of the Treaty, the burden of proving an infringement of Article 81(1) or of Article 82 shall rest on the party alleging the infringement. A party claiming the benefit of Article 81(3) shall bear the burden of proving that the conditions of that paragraph are fulfilled.

Article 3

Relationship between Articles 81 and 82 and national competition laws

Where an agreement, a decision by an association of undertakings or a concerted practice within the meaning of Article 81 of the Treaty or the abuse of a dominant position within the meaning of Article 82 may affect trade between Member States, Community competition law shall apply to the exclusion of national competition laws.

CHAPTER II

POWERS

Article 4

Powers of the Commission

1. For the purpose of applying Articles 81 and 82 of the Treaty, the Commission shall have the powers provided for by this Regulation.

2. The Commission may, by regulation, determine types of agreements, decisions of associations of undertakings and concerted practices caught by Article 81(1) of the Treaty which must be registered by undertakings. In that event, it shall also determine the procedures for such registration and the penalties applicable in the event of failure to comply with the obligation. Registration of an agreement, a decision of an association or a concerted practice shall confer no entitlement on the registering undertakings or associations of undertakings and shall not form an obstacle to the application of this Regulation.

Article 5

Powers of the competition authorities of the Member States

The competition authorities of the Member States shall have the power in individual cases to apply the prohibition in Article 81(1) of the Treaty where the conditions of Article 81(3) are not fulfilled, and the prohibition in Article 82. For this purpose, acting on their own initiative or on a complaint, they may take any decision requiring that an infringement be brought to an end, adopting interim measures, accepting commitments or imposing fines, periodic penalty payments or any other penalty provided for in their national law. Where on the basis of the information in their possession the conditions for prohibition are not met they may likewise decide that there are no grounds for action on their part.

Article 6

Powers of the national courts

National courts before which the prohibition in Article 81(1) of the Treaty is invoked shall also have jurisdiction to apply Article 81(3).

CHAPTER III

COMMISSION DECISIONS

Article 7

Finding and termination of infringement

1. Where the Commission, acting on a complaint or on its own initiative, finds that there is an infringement of Article 81 or of Article 82 of the Treaty, it may by decision require the undertakings and associations of undertakings concerned to bring such infringement to an end. For this purpose, it may impose on them any obligations necessary, including remedies of a structural nature. If it has a legitimate interest in doing so, it may also find that an infringement has been committed in the past.

2. Those entitled to lodge a complaint for the purposes of paragraph 1 are Member States and natural or legal persons who can show a legitimate interest.

Article 8

Interim measures

1. In cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, acting on its own initiative may, on the basis of a prima facie finding of infringement, by decision order interim measures.

2. A decision under paragraph 1 shall apply for a maximum of one year but shall be renewable.

Article 9

Commitments

1. Where the Commission intends to adopt a decision requiring that an infringement be brought to an end and the undertakings concerned offer commitments such as to meet the Commission's objections, the Commission may by decision make those commitments binding on the undertakings. Such a decision shall be adopted for a specified period.

2. Irrespective of whether or not there has been or still is an infringement of Article 81 or Article 82 of the Treaty, such a decision shall terminate the proceedings.

3. The Commission may reopen the proceedings:

(a) where there has been a material change in any of the facts on which the decision was based;

(b) where the undertakings concerned act contrary to their commitments; or

(c) where the decision was based on incomplete, incorrect or misleading information.

Article 10

Finding of inapplicability

For reasons of the Community public interest, the Commission, acting on its own initiative, may by decision find that, on the basis of the information in its possession, Article 81 of the Treaty is not applicable to an agreement, a decision of an association of undertakings or a concerted practice, either because the conditions of Article 81(1) are not fulfilled, or because the conditions of Article 81(3) are satisfied.

The Commission may likewise make such a finding with reference to Article 82 of the Treaty.

CHAPTER IV

COOPERATION WITH NATIONAL AUTHORITIES AND COURTS

Article 11

Cooperation between the Commission and the competition authorities of the Member States

1. The Commission and the competition authorities of the Member States shall apply the Community competition rules in close cooperation.

2. The Commission shall forthwith transmit to the competition authorities of the Member States copies of the most important documents it has collected with a view to applying Articles 7 to 10.

3. Where a matter involving the application of Article 81 or Article 82 of the Treaty is referred to the competition authorities of the Member States or where they act on their own initiative to apply those Articles, they shall inform the Commission accordingly at the outset of their own proceedings.

4. Where competition authorities of Member States intend to adopt a decision under Article 81 or Article 82 of the Treaty requiring that an infringement be brought to an end, accepting commitments or withdrawing the benefit of a block exemption regulation, they shall first consult the Commission. For that purpose, they shall no later than one month before adopting the decision provide the Commission with a summary of the case and with copies of the most important documents drawn up in the course of their own proceedings. At the Commission's request, they shall provide it with a copy of any other document relating to the case.

5. The competition authorities of the Member States may consult the Commission on any other case involving the application of Community law.

6. The initiation by the Commission of proceedings for the adoption of a decision under this Regulation shall relieve the competition authorities of the Member States of their competence to apply Articles 81 and 82 of the Treaty.

Article 12

Exchange of information

1. Notwithstanding any national provision to the contrary, the Commission and the competition authorities of the Member States may provide one another with and use in evidence any matter of fact or of law, including confidential information.

2. Information provided under paragraph 1 may be used only for the purpose of applying Community competition law. Only financial penalties may be imposed on the basis of information provided.

Article 13

Suspension or termination of proceedings

1. Where competition authorities of two or more Member States have received a complaint or are acting on their own initiative under Article 81 or Article 82 of the Treaty against the same agreement, decision of an association or practice, the fact that one authority is dealing with the case shall be sufficient grounds for the others to suspend the proceedings before them or to reject the complaint. The Commission may likewise reject a complaint on the ground that the competition authority of a Member State is dealing with the case.

2. Where the competition authority of a Member State or the Commission has received a complaint against an agreement, decision of an association or practice which has already been dealt with by another competition authority, it may reject it.

Article 14

Advisory Committee

1. An Advisory Committee on Restrictive Practices and Dominant Positions shall be consulted prior to the taking of any decision under Articles 7, 9, 10, 22 and 23(2).

2. The Advisory Committee shall be composed of representatives of the competition authorities of the Member States. Each Member State shall appoint a representative who, if prevented from attending, may be replaced by another representative.

3. The consultation may take place at a meeting convened by the Commission, which shall supply the chairman, not earlier than fourteen days after dispatch of the notice convening it. The Member States may accept a period of notice of less than fourteen days. The Commission shall attach to the notice convening the meeting a summary of the case, together with an indication of the most important documents, and a preliminary draft decision. The Advisory Committee shall deliver an opinion on the Commission's preliminary draft decision. It may deliver an opinion even if some members are absent and are not represented.

4. Consultation may also take place by written procedure. In that case, the Commission shall determine a date by which the Member States are to put forward their observations. However, if any Member State so requests, the Commission shall convene a meeting.

5. The opinion of the Advisory Committee shall be delivered in writing and appended to the draft decision. The Advisory Committee may recommend publication of the opinion. The Commission may carry out such publication. The decision to publish shall take account of the legitimate interest of undertakings in the protection of their business secrets.

6. Acting on its own initiative or at the request of a Member State, the Commission may include a case being dealt with by the competition authority of a Member State on the agenda of the Advisory Committee for discussion before the final decision is adopted.

Article 15

Cooperation with national courts

1. In proceedings for the application of Article 81 or Article 82 of the Treaty, courts of the Member States may ask the Commission for information in its possession or for its opinion on questions concerning the application of the Community competition rules.

2. Courts of the Member States shall send the Commission copies of any judgments applying Article 81 or Article 82 of the Treaty within one month of the date on which the judgment is delivered.

3. For reasons of the Community public interest, the Commission may, on its own initiative, submit written or oral observations to courts of the Member States on the subject of proceedings in which questions concerning the application of Article 81 or Article 82 of the Treaty arise. It may have itself represented by competition authorities of Member States. Acting on their own initiative, competition authorities of Member States may likewise submit written or oral observations to the national courts of their Member State.

To this end, the Commission and the competition authorities of the Member States may request the national courts to transmit to them any documents necessary.

Article 16

Uniform application of Community competition law

In accordance with Article 10 of the Treaty and the principle of the uniform application of Community law, national courts and the competition authorities of the Member States shall use every effort to avoid any decision that conflicts with decisions adopted by the Commission.

CHAPTER V

POWERS OF INVESTIGATION

Article 17

Inquiries into sectors of the economy

1. If, in any sector of the economy, the trend of trade between Member States, the rigidity of prices or other circumstances suggest that competition is being restricted or distorted within the common market, the Commission may conduct a general inquiry into that sector and, in the course of that inquiry, may request undertakings in the sector concerned to supply the information necessary for giving effect to Articles 81 and 82 of the Treaty and may carry out any inspections necessary for that purpose.

. The Commission may in particular request any undertaking or association of undertakings in the sector concerned to communicate to it all agreements, decisions and concerted practices.

2. Articles 18 to 23 shall apply by analogy.

Article 18

Requests for information

1. In order to carry out the duties assigned to it by this Regulation, the Commission may request all necessary information from the governments and competition authorities of the Member States and from undertakings and associations of undertakings.

2. In its request for information the Commission shall state the legal bases of the request, the time-limit within which the information is to be provided, the purpose of the request, and the penalties provided for in Articles 22 and 23 for supplying incorrect, incomplete or misleading information.

3. The owners of the undertakings or their representatives and, in the case of legal persons, companies or firms, or associations having no legal personality, the persons authorised to represent them by law or by their constitution shall supply the information requested. Lawyers duly authorised to act may supply the information on behalf of their clients. The latter shall remain fully responsible if the information supplied is incomplete, incorrect or misleading.

4. Where an undertaking or association of undertakings does not supply the information requested within the time-limit fixed or supplies incomplete information, the Commission shall by decision require the information to be supplied. The decision shall specify what information is required and fix an appropriate time-limit within which it is to be supplied. It shall indicate the penalties provided for in Article 22(1)(a), and indicate or impose the penalties provided for in Article 23(1)(d). It shall also indicate the right to have the decision reviewed by the Court of Justice of the European Communities.

Article 19

Power to take statements

In order to carry out the duties assigned to it by this Regulation, the Commission may interview any natural or legal person that may be in possession of useful information, in order to ask questions relating to the subject-matter of an investigation and recording the answers.

Article 20

The Commission's powers of inspection

1. In order to carry out the duties assigned to it by this Regulation, the Commission may conduct all necessary inspections of undertakings and associations of undertakings.

2. The officials authorised by the Commission to conduct an inspection are empowered:

(a) to enter any premises, land and means of transport of the undertakings and associations of undertakings concerned;

(b) to enter any other premises, including the homes of directors, managers and other members of staff of the undertakings and associations of undertakings concerned, in so far as it may be suspected that business records are being kept there;

(c) to examine the books and other business records, irrespective of the medium on which they are stored;

(d) to take copies of or extracts from the documents examined;

(e) to seal any premises or business records during the inspection;

(f) to ask any representative or member of staff of the undertaking or association of undertakings for information relating to the subject-matter and purpose of the inspection and to record the answers.

3. The officials authorised by the Commission to conduct an inspection shall exercise their powers upon production of a written authorisation specifying the subject matter and purpose of the inspection and the penalties provided for in Article 22 in cases where production of the required books or other business records is incomplete or where the answers to questions asked under paragraph 2 of this Article are incorrect, incomplete or misleading. In good time before the inspection, the Commission shall give notice of the inspection to the competition authority of the Member State in whose territory it is to be conducted.

4. Undertakings and associations of undertakings are required to submit to inspections ordered by decision of the Commission. The decision shall specify the subject matter and purpose of the inspection, appoint the date on which it is to begin and indicate the penalties provided for in Articles 22 and 23 and the right to have the decision reviewed by the Court of Justice. The Commission shall take such decisions after consulting the competition authority of the Member State in whose territory the inspection is to be conducted.

5. Officials of the competition authority of the Member State in whose territory the inspection is to be conducted shall, at the request of that authority or of the Commission, actively assist the officials of the Commission. To this end, they shall enjoy the powers specified in paragraph 2.

6. Where the officials authorised by the Commission find that an undertaking opposes an inspection ordered pursuant to this Article, the Member State concerned shall afford them the necessary assistance, requesting where appropriate the assistance of the police, so as to enable them to conduct their inspection.

If national law requires authorisation from the judicial authority before the assistance of the police can be called upon, such authorisation may be applied for as a precautionary measure.

7. Where the officials authorised by the Commission wish to exercise the power provided for by paragraph 2(b), authorisation from the judicial authority must be obtained beforehand.

8. The lawfulness of the Commission decision shall be subject to review only by the Court of Justice. The power of review of the national court shall extend only to establishing that the Commission decision is authentic and that the enforcement measures envisaged are neither arbitrary nor excessive having regard to the subject matter of the inspection. The national court may not review the necessity for the inspection or require information other than that out in the Commission decision.

Article 21

Investigations by competition authorities of Member States

1. The competition authority of a Member State may in its own territory carry out any fact-finding measure under its national law on behalf and for the account of the competition authority of another Member State in order to establish whether there has been an infringement of Article 81 or Article 82 of the Treaty. It shall transmit the information collected to the requesting authority in accordance with Article 12 of this Regulation.

2. At the request of the Commission, the competition authorities of the Member States shall undertake the inspections which the Commission considers to be necessary under Article 20(1) or which it has ordered by decision pursuant to Article 20(4). The officials of the competition authorities of the Member States who are responsible for conducting these inspections shall exercise their powers upon production of a written authorisation issued by the competition authority of the Member State in whose territory the inspection is to be conducted. Such authorisation shall specify the subject matter and purpose of the inspection.

If so requested by the Commission or by the competition authority of the Member State in whose territory the inspection is to be conducted, the officials of the Commission may assist the officials of the authority concerned.

CHAPTER VI

PENALTIES

Article 22

Fines

1. The Commission may by decision impose on undertakings and associations of undertakings fines not exceeding 1% of the total turnover in the preceding business year where, intentionally or negligently:

(a) they supply incorrect, incomplete or misleading information in response to a request made pursuant to Article 17 or Article 18(1) or (4), or do not supply information within the time-limit fixed by a decision adopted pursuant to Article 18(4);

(b) they produce the required books or other business records in incomplete form during inspections under Article 20 or Article 21(2), or refuse to submit to inspections ordered by a decision adopted pursuant to Article 20(4);

(c) they refuse to answer a question asked in accordance with Article 20(2)(f) or give an incorrect, incomplete or misleading answer;

(d) seals affixed by authorised officials of the Commission in accordance with Article 20(2)(e) have been broken.

2. The Commission may by decision impose on undertakings and associations of undertakings fines not exceeding 10% of the total turnover in the preceding business year of each of the undertakings participating in the infringement where, either intentionally or negligently:

(a) they infringe Article 81 or Article 82 of the Treaty; or

(b) they contravene a decision ordering interim measures under Article 8 of this Regulation; or

(c) they fail to comply with a commitment made binding by a decision pursuant to Article 9 of this Regulation.

3. In fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement.

4. Where a fine is imposed on an association of undertakings under this Regulation and the association is not solvent, the Commission may require payment of the fine by any of the undertakings which were members of the association at the time the infringement was committed. The amount required to be paid by each individual member cannot exceed 10% of its total turnover in the preceding business year.

5. Decisions taken pursuant to paragraphs 1 and 2 shall not be of a criminal law nature.

Article 23

Periodic penalty payments

1. The Commission may, by decision, impose on undertakings or associations of undertakings periodic penalty payments not exceeding 5% of the average daily turnover in the preceding business year per day and calculated from the date appointed by the decision, in order to compel them:

(a) to put an end to an infringement of Article 81 or Article 82 of the Treaty, in accordance with a decision taken pursuant to Article 7 of this Regulation;

(b) to comply with a decision ordering interim measures taken pursuant to Article 8;

(c) to comply with a commitment made binding by a decision pursuant to Article 9;

(d) to supply complete and correct information which it has requested by decision taken pursuant to Article 18(4);

(e) to submit to an inspection which it has ordered by decision taken pursuant to Article 20.

2. Where the undertakings or associations of undertakings have satisfied the obligation which the periodic penalty payment was intended to enforce, the Commission may fix the definitive amount of the periodic penalty payment at a figure lower than that which would arise under the original decision. Article 22(4) shall apply by analogy.

CHAPTER VII

LIMITATION PERIODS

Article 24

Limitation periods for the imposition of penalties

1. The powers conferred on the Commission by Articles 22 and 23 shall be subject to the following limitation periods:

(a) three years in the case of infringements of provisions concerning requests for information or the conduct of inspections;

(b) five years in the case of all other infringements.

2. Time shall begin to run on the day on which the infringement is committed. However, in the case of continuing or repeated infringements, time shall begin to run on the day on which the infringement ceases.

3. Any action taken by the Commission or by the competition authority of a Member State for the purpose of the investigation or proceedings in respect of an infringement shall interrupt the limitation period for the imposition of fines or periodic penalty payments. The limitation period shall be interrupted with effect from the date on which the action is notified to at least one undertaking or association of undertakings which has participated in the infringement. Actions which interrupt the running of the period shall include in particular the following:

(a) written requests for information by the Commission or by the competition authority of a Member State;

(b) written authorisations to conduct inspections issued to its officials by the Commission or by the competition authority of a Member State;

(c) the initiation of proceedings by the Commission or by the competition authority of a Member State;

(d) notification of the statement of objections of the Commission or of the competition authority of a Member State.

4. The interruption of the limitation period shall apply for all the undertakings or associations of undertakings which have participated in the infringement.

5. Each interruption shall start time running afresh. However, the limitation period shall expire at the latest on the day on which a period equal to twice the limitation period has elapsed without the Commission having imposed a fine or a periodic penalty payment. That period shall be extended by the time during which limitation is suspended pursuant to paragraph 6.

6. The limitation period for the imposition of fines or periodic penalty payments shall be suspended for as long as the decision of the Commission is the subject of proceedings pending before the Court of Justice.

Article 25

Limitation period for the enforcement of penalties

1. The power of the Commission to enforce decisions taken pursuant to Articles 22 and 23 shall be subject to a limitation period of five years.

2. Time shall begin to run on the day on which the decision becomes final.

3. The limitation period for the enforcement of penalties shall be interrupted:

(a) by notification of a decision varying the original amount of the fine or periodic penalty payment or refusing an application for variation;

(b) by any action of the Commission or of a Member State, acting at the request of the Commission, designed to enforce payment of the fine or periodic penalty payment.

4. Each interruption shall start time running afresh.

5. The limitation period for the enforcement of penalties shall be suspended for so long as:

(a) time to pay is allowed;

(b) enforcement of payment is suspended pursuant to a decision of the Court of Justice.

CHAPTER VIII

HEARINGS AND PROFESSIONAL SECRECY

Article 26

Hearing of the parties, complainants and others

1. Before taking decisions as provided for in Articles 7, 8, 22 and 23(2), the Commission shall give the undertakings or associations of undertakings which are the subject of the proceedings the opportunity of being heard on the matters to which the Commission has taken objection. The Commission shall base its decisions only on objections on which the parties concerned have been able to comment. Complainants shall be associated closely with the proceedings.

2. The rights of defence of the parties concerned shall be fully respected in the proceedings. They shall be entitled to have access to the file, subject to the legitimate interest of undertakings in the protection of their business secrets. That legitimate interest may not constitute an obstacle to the disclosure and use by the Commission of information necessary to prove an infringement.

The right of access to the file shall not extend to confidential information and internal documents of the Commission or the competition authorities of the Member States. In particular, any correspondence between the Commission and the Competition Authority of the Member States, or between the latter, inter alia, documents drawn up pursuant to Articles 8 and 11 are excluded.

3. If the Commission or the competition authorities of the Member States consider it necessary, they may also hear other natural or legal persons. Applications to be heard on the part of such persons shall, where they show a sufficient interest, be granted.

Article 27

Professional secrecy

1. Without prejudice to Articles 12 and 15, information collected pursuant to Articles 17 to 21 shall be used only for the purpose for which it was acquired.

2. Without prejudice to Articles 11, 12, 14, 15 and 26, the Commission and the competition authorities of the Member States, their officials and other servants shall not disclose information acquired or exchanged by them pursuant to this Regulation and of the kind covered by the obligation of professional secrecy.

CHAPTER IX

BLOCK EXEMPTIONS

Article 28

Adoption of block exemption regulations

1. In accordance with Article 81(3) of the Treaty, the Commission may, by regulation, declare that Article 81(1) is not applicable to categories of agreements, decisions by associations of undertakings or concerted practices, subject to the conditions in paragraphs 2 to 5 of this Article.

2. Exemption regulations must define the categories of agreements, decisions or concerted practices to which they apply and specify in particular the restrictions, which are not exempted, and any conditions that must be fulfilled.

3. Exemption regulations must be limited in time.

4. Before adopting an exemption regulation, the Commission must publish a draft thereof and invite all interested parties concerned to submit their comments within the time-limit it lays down, which may not be less than one month.

5. Before publishing a draft exemption regulation and before adopting such a regulation, the Commission shall consult the Advisory Committee on Restrictive Practices and Dominant Positions.

Article 29

Withdrawal in individual cases

1. Where, in any particular case, the Commission, acting on its own initiative or on a complaint, finds that agreements, decisions or concerted practices to which a block exemption regulation applies nevertheless have certain effects which are incompatible with Article 81(3) of the Treaty, it may withdraw the benefit of the regulation.

2. Where in any particular case agreements, decisions or concerted practices to which a block exemption regulation applies have effects which are incompatible with Article 81(3) of the Treaty in the territory of a Member State, or in a part thereof, which has all the characteristics of a distinct geographic market, the competition authority of that Member State may withdraw the benefit of the regulation in question in respect of that territory.

Article 30

Regulations ending the application of a block exemption

A block exemption regulation adopted pursuant to Article 28 may specify the circumstances which may lead to the exclusion from its scope of certain types of agreement, decision or concerted practice that are applied on a particular market. Where those circumstances obtain, the Commission may establish this by way of regulation, and fix a period on the expiry of which the block exemption regulation will no longer be applicable to the relevant agreements, decisions or concerted practices on that market. That period must not be less than six months. Article 28(4) and (5) shall apply by analogy.

CHAPTER X

GENERAL PROVISIONS

Article 31

Publication of decisions

1. The Commission shall publish the decisions, which it takes pursuant to Articles 7 to 10, 22 and 23.

2. The publication shall state the names of the parties and the main content of the decision, including any penalties imposed. It shall have regard to the legitimate interest of undertakings in the protection of their business secrets.

Article 32

Review by the Court of Justice

The Court of Justice shall have unlimited jurisdiction to review decisions whereby the Commission has fixed a fine or periodic penalty payment. It may cancel, reduce or increase the fine or periodic penalty payment imposed.

Article 33

Exclusions

This Regulation shall not apply to agreements, decisions and concerted practices or to the abuse of a dominant position within the meaning of Article 82 of the Treaty in the following areas:

(a) international sea transport of the tramp service type;

(b) sea transport between ports in the same Member State;

(c) air transport between the Community and third countries.

Article 34

Implementing provisions

The Commission shall be authorised to take such measures as may be appropriate in order to apply this Regulation. The measures may concern inter alia:

(a) the introduction of a registration requirement for certain types of agreement;

(b) the form, content and other details of complaints lodged pursuant to Article 7 and the procedure for rejecting complaints;

(c) the practical arrangements for the exchange of information and consultations provided for in Article 11;

(d) the practical arrangements for the hearings provided for in Article 26.

CHAPTER XI

TRANSITIONAL AND FINAL PROVISIONS

Article 35

Transitional provisions

1. Applications made to the Commission under Article 2 of Regulation No 17, notifications made under Articles 4 and 5 of that Regulation and the corresponding applications and notifications made under Regulations (EEC) No 1017/68, (EEC) No 4056/86 and (EEC) No 3975/87 shall lapse as from the date of application of this Regulation.

The validity of decisions applying Article 81(3) of the Treaty adopted by the Commission under those Regulations shall come to an end no later than the date of application of this Regulation.

2. Procedural steps taken under Regulation No 17 and Regulations (EEC) No 1017/68, (EEC) No 4056/86 and (EEC) No 3975/87 shall continue to have effect for the purposes of applying this Regulation.

Article 36

Designation of competition authorities of Member States

The Member States shall designate the competition authorities responsible for the application of Articles 81 and 82 of the Treaty, and shall take the measures necessary to empower those authorities to apply those Articles before \*\*\*.

Article 37

Amendment of Regulation (EEC) No 1017/68

Regulation (EEC) No 1017/68 is amended as follows:

(1) Article 2 is deleted.

(2) In Article 3(1), the words "The prohibition laid down in Article 2" are replaced by the words "The prohibition in Article 81(1) of the Treaty".

(3) Articles 5 to 29 are deleted.

(4) In Article 30, paragraphs 2 and 3 are deleted.

Article 38

Amendment of Regulation (EEC) No 2988/74

In Regulation (EEC) No 2988/74, the following Article 7a is inserted:

"Article 7a

Exclusion

This Regulation shall not apply to measures taken under Council Regulation (EC) No ...\*

\_\_\_\_\_\_\_\_\_\_\_\_

\* OJ L ..."

Article 39

Amendment of Regulation (EEC) No 4056/86

Regulation (EEC) No 4056/86 is amended as follows:

(1) Article 7 is amended as follows:

(a) Paragraph 1 is replaced by the following:

"1. Breach of an obligation

Where the persons concerned are in breach of an obligation which, pursuant to Article 5, attaches to the exemption provided for in Article 3, the Commission may, in order to put an end to such breach and under the conditions laid down in Council Regulation (EC) No ... :\*

- address recommendations to the persons concerned;

- in the event of failure by such persons to observe those recommendations and depending on the gravity of the breach concerned, adopt a decision that either prohibits them from carrying out or requires them to perform certain specific acts, or withdraws the benefit of the block exemption which they enjoyed.

\_\_\_\_\_\_\_\_\_\_\_\_

\* OJ L ..."

(b) Paragraph 2 is amended as follows:

(i) In point (a), the words "under the conditions laid down in Section II" are replaced by the words "under the conditions laid down in Regulation (EC) No .../...";

(ii) The second sentence of the second subparagraph of point (c)(i) is replaced by the following:

"At the same time it shall decide, in accordance with Article 9 of Regulation (EC) No .../..., whether it accepts commitments offered by the undertakings concerned with a view, inter alia, to obtaining access to the market for non-conference lines."

(2) In Article 8, paragraph 1 is deleted.

(3) Article 9 is amended as follows:

(a) In paragraph 1, the words "Advisory Committee referred to in Article 15" are replaced by the words "Advisory Committee referred to in Article 14 of Regulation (EC) No .../...";

(b) In paragraph 2, the words "Advisory Committee as referred to in Article 15" are replaced by the words "the Advisory Committee referred to in Article 14 of Regulation (EC) No .../...".

(4) Articles 10 to 25 are deleted.

(5) In Article 26, the words "the form, content and other details of complaints pursuant to Article 10, applications pursuant to Article 12 and the hearings provided for in Article 23(1) and (2)" are deleted.

Article 40

Amendment of Regulation (EEC) No 3975/87

Articles 3 to 19 of Regulation (EEC) No 3975/87 are deleted.

Article 41

Repeals

Regulations No 17, No 141, No 19/65/EEC, (EEC) No 2821/71, (EEC) No 3976/87, (EEC) No 1534/91 and (EEC) No 479/92 are hereby repealed.

References to the repealed Regulations shall be construed as references to this Regulation.

Article 42

Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Communities.

It shall apply from xxx.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President

IMPACT ASSESSMENT FORM THE IMPACT OF THE PROPOSAL ON BUSINESS WITH SPECIAL REFERENCE TO SMALL AND MEDIUM-SIZED ENTERPRISES( SMEs)

Title of proposal

"Proposal for a Council Regulation implementing Articles 81 and 82 of the EC Treaty"

Document reference number

2000/018

The proposal

1. Taking account of the principle of subsidiarity, why is Community legislation necessary in this area and what are its main aims-

Community legislation is required to give effect to Articles 81 and 82 of the Treaty. The implementation of these rules is presently based on Regulation No 17 of 1962 (together with the procedural rules contained in Regulations (EEC) No 1017/68, (EEC) No 4056/86 and (EEC) No 3975/87 regarding transport; certain specific issues are also regulated in other regulations). The proposed Regulation brings about a major reform of the implementing system. It aims at more effective application of the Community competition rules through a stronger involvement of Member States competition authorities and courts in the application of Articles 81 and 82. This is achieved in particular by rendering Article 81(3) directly applicable. To ensure consistent application of the Community competition rules, the proposed Regulation provides for rules on the relationship between Articles 81 and 82 and national competition law and for mechanisms for cooperation and consultation between the Commission and national competition authorities and national courts.

The impact on business

2. Who will be affected by the proposal-

- which sectors of business

The proposed Regulation concerns the implementation of Articles 81 and 82 to all sectors of the economy subject to very limited exceptions. The proposed Regulation maintains certain exceptions of limited scope in the transport sector. Implementation in the agricultural sector remains governed by Regulation No 26 of 1962.

- which sizes of business (what is the concentration of small and medium-sized firms)

The proposed Regulation applies to all businesses independent of their size as well as associations of undertakings, if they engage in behaviour that fulfils the conditions of Articles 81 or 82. The practical impact of the proposed Regulation on small and medium-sized companies however tends to be different from that on larger businesses. This question is further developed under point 5 below.

- are there particular geographical areas of the Community where these businesses are found

No. All undertakings doing business in the Community are concerned in the same way, independent of the geographical area in which they operate.

3. What will business have to do to comply with the proposal-

The proposal does not affect the basic obligation for companies to comply with Articles 81 and 82 of the Treaty. But it does bring about a major change in the way Article 81 is implemented in individual cases, i.e. cases that are not covered by block exemption regulations. The companies most concerned by the reform will therefore in general be companies that have some degree of market power. These companies are generally the larger companies, and only rarely SMEs. Depending on their current practices, these companies may have to review the processes by which they ensure compliance of their transactions with Article 81 in individual cases and, where necessary, adapt them.

Under the present Regulation No 17, agreements falling under Article 81(1) that are not covered by a block exemption, and for which the parties wish to avail themselves of Article 81(3), must be notified to the Commission in order to obtain an individual exemption. Without such notification and exemption, the agreement is legally void.

In the present system, companies (assisted by their legal advisors) evaluate the business transactions they envisage in the light of Article 81 (on the basis of the existing case-law and practice and of Commission guidelines and notices), and decide whether or not to notify. They must weigh the risks entailed by the legal invalidity of their agreements in the absence of an exemption decision against the cost, duration and likely outcome of the notification procedure.

Under the proposed Regulation Article 81(3) becomes directly applicable. Agreements that satisfy the conditions of Article 81(3) become valid ab initio and can be enforced without the need to obtain an exemption decision. Only agreements which do not satisfy the conditions of Article 81(3) will be invalid ab initio and unenforceable. Companies will be able to invoke Article 81(3) as a defence in all proceedings. Alongside the Commission, national competition authorities and national courts will be able to apply Article 81 in its entirety.

The proposed Regulation thus eliminates the burden of notifications and prior administrative authorisation and thereby considerably reduces bureaucracy for all companies. This is particularly valuable for SMEs. The reform strongly improves the civil enforceability of all agreements that fulfil the conditions of Article 81(3). Invalidity of agreements based on the argument that an agreement has not been notified, and is therefore void, will disappear.

The proposed Regulation, however, also implies that companies must assume a higher degree of responsibility for their behaviour as regards compliance with Article 81, as they can no longer apply to the Commission for formal exemption. The body of existing secondary legislation and case-law which has been developed over the last 40 years has put companies in a position to assess the legality of their transactions. Under the present Regulation companies are already generally confident of their assessment. This is demonstrated by the fact that the implementation of an agreement is only very rarely postponed until the Commission's view has been obtained. This shows that companies are able to carry out their analysis in such a way that it can serve as a basis for an informed decision on whether to go ahead with the transaction and if so, in which form.

Under both the present and the proposed new system, the assessment made by the company will require more care the closer the agreement or practice comes to the scope of the prohibition. Where they envisage transactions bordering on the prohibition, businesses must be particularly careful in choosing to what extent they are prepared to take the risk of seeing their transactions invalidated with effect ab initio, and the risk of claims for damages. It is in the nature of the prohibition rule that companies in these cases have to consider alternative solutions that present a different balance of restrictive and beneficial effects if they want to exclude all risk.

Under the new system, Article 81 will become directly applicable in its entirety by the Commission, national competition authorities and national courts (parallel powers). Business will not however be exposed to a significant risk of divergent decisions. Several aspects are important in this context:

- The proposed Regulation provides that all decision-makers apply a single set of rules, i.e. Articles 81 and 82, to all transactions that may have an impact on trade between Member States.

- The proposal is complemented by a reinforced effort on the part of the Commission in the design of the legislative framework of block exemption regulations, guidelines and Commission notices that shape the application of Article 81 to a large extent and provide guidance to companies in the vast majority of cases (in particular cases involving small and medium-sized companies, cf. point 5 below). To simplify the adoption of block exemption regulations, a general power in this field is to be vested in the Commission .

- The proposed Regulation will bring about a change in approach in the enforcement of the rules. Without the present treatment of notifications, the Commission will have more time to clarify what is prohibited under Article 81. In addition to the reform of the enforcement rules, reform work is being undertaken on the substantive rules, aiming at a more economic and reasonable approach.

- The proposed Regulation is designed to maintain a high degree of consistency in the application of Articles 81 and 82 in general. It sets up a range of mechanisms for consultation and cooperation between the various decision-makers that will ensure a high degree of consistency from the outset, and contribute to laying the foundations for a common interpretation practice that will be self-sustaining in the longer term. The Commission maintains the right to withdraw a case from a national competition authority if it considers that the case would be better dealt with by itself or that the direction taken in the case deviates from its own policy. National courts may there exists the possibility (and at last instance must) make a reference to the ECJ under Article 234. Furthermore, the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters largely prevents forum shopping and multiple litigation in civil courts.

- In the rare cases presenting a genuine predictability problem because they raise new or unresolved questions the Commission will consider issuing reasoned opinions in order to provide guidance to companies. Details of this mechanism will be set out in a Commission notice.

4. What economic effects is the proposal likely to have on employment, on investment and the creation of new businesses and on the competitiveness of businesses-

The proposed Regulation is designed to reinforce the impact of the Community competition rules by ensuring more efficient enforcement. The abolition of the notification and authorisation system enables the Commission to step up enforcement action against serious infringements. The removal of the Commission monopoly on the application of Article 81(3) will release the enforcement potential of national courts and national competition authorities. Both elements taken together will serve to raise the deterrent effect of the Community competition rules, thereby ensuring more widespread compliance with the rules and furthering effective competition in the markets.

It is no longer disputed that effective competition is of fundamental importance to the European economy. Effective competition is the best guarantor of efficient allocation of resources, laying the foundations of economic growth. Competitive pressure forces companies to adapt by implementing innovations and striving to increase productivity. Companies exposed to vigorous competition become more competitive, and will generally be better equipped to compete internationally. Effective competition ensures a high degree of productive and therefore sustainable and secure employment. Competitive markets are open to new entrants; they invite investment and job creation. This effect has been clearly demonstrated in recently liberalised markets.

In addition, the proposal will serve to create a more level playing field for companies in the internal market by ensuring more widespread application of the Community competition rules rather than national competition law and by providing a comprehensive set of mechanisms to ensure consistent application. A more level playing field in terms of competition law encourages further market integration, thereby enhancing competition through market entry.

5. Does the proposal contain measures to take account of the specific situation of small and medium-sized firms (reduced or different requirements etc.)-

The proposal does not make any specific provision for small and medium-sized undertakings. However, the practical impact of the reform on small and medium-sized companies will be positive, for several reasons.

First, a large number of small and medium-sized companies are not directly concerned by the application of the Community competition rules, because they are involved in agreements, decisions or practices that do not have an appreciable impact on trade between Member States. In addition, the Commission is pursuing a more economic and reasonable interpretation of Article 81(1). Under this approach, companies that do not have a certain degree of market power are less likely to be involved in transactions caught by the prohibition.

Secondly, small and medium-sized businesses with little market power are generally more likely to be victims of infringements of the Community competition rules than actively to engage in infringements themselves. The proposed Regulation is designed to generate more efficient enforcement of the competition rules by the Commission and the national competition authorities. It will in particular enable the Commission to be more active in combating serious infringements at its own initiative or following complaints. This effect therefore particularly benefits small and medium-sized businesses.

Thirdly, the impact of removing the notification and authorisation system is different with regard to small and medium-sized companies. Their activities very often fall within the scope of block exemption regulations. This means that under the present Regulation No 17 they are already generally much less concerned to notify agreements with a view to individual exemption decisions.

Alongside the reform of the rules implementing Articles 81 and 82 through the proposed Regulation, the Commission, pursuing the more economic and reasonable approach mentioned earlier, has initiated a reform of the substantive rules in block exemption regulations, Commission notices and guidelines. In particular, a new type of block exemption regulation simplifies compliance for companies with little or no market power by introducing market share thresholds (with the exception of certain hard-core restrictions). Under this type of regulation, the vast majority of small and medium-sized businesses are able to act within 'safe harbours'.

Finally, where agreements involving small and medium-sized businesses do fall outside block exemptions, they will benefit fully from the direct effect of Article 81(3) provided for in the proposed Regulation. Under the present system, they are particularly likely to fight shy of the cost of the notification procedure (in a broad sense, i.e. including the resources required to prepare the information to be presented etc.), and thus to run the risk of legal invalidity of their agreements. This problem is removed by the reform. Most agreements of small and medium-sized undertakings will be rendered valid ab initio without the need for notification.

Consultation

6. List the organisations which have been consulted about the proposal and outline their main views.

The proposal is the result of an extensive consultation process and a wide public and academic debate. This debate was initiated by the Commission through its White Paper on modernisation of the rules implementing Articles 81 and 82 of the EC Treaty of 28 April 1999.

Following the White Paper the Commission received and carefully examined submissions from more than 100 interested parties, including numerous companies, industry organisations and lawyers advising companies in competition law proceedings. In addition, the Commission has had and continues to have numerous contacts with industry, lawyers and their organisations, bilaterally and in a very large number of conferences and similar events.

The European Parliament organised a public hearing on 22 September 1999. It adopted a resolution, supporting the reform, on 18 January 2000. The Economic and Social Committee adopted a generally favourable opinion on 8 December 1999.

The majority of comments received following the White Paper take a favourable view on the Commission's approach. The position of industry associations and lawyers are varied. Many welcome the Commission's approach as a more efficient and less bureaucratic alternative to the present enforcement system, which is almost universally considered unsatisfactory. However, many also stress the need to ensure that the reform does not lead to inconsistent application and renationalisation of Community competition law and that the reform does not reduce legal certainty for companies.

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