INTRODUCTION

In this chapter we review the two principal provisions that implement the competition policy whose aims and enforcement structure were discussed in Chapter 21. Article 101 TFEU applies to agreements between undertakings and declares these agreements void when they are found to restrict competition; Article 102 TFEU applies to dominant undertakings and forbids them from abusing their position. Since the end of the 1990s, the Commission has been engaged in a series of reform initiatives to the application of competition law, in response to criticisms that its approach was insufficiently grounded in economics and was overly aggressive. Explaining and evaluating this process of reform is the central theme of this chapter, which is organised in the following way.

Section 2 covers three legal issues that are common to both Articles: the meaning of an undertaking, the concept of an effect on trade between Member States, and judge-made rules that exclude the application of competition law.

Section 3 is a review of the key issues that have arisen in the application of Article 101. It is divided into three parts. First, we explore how this provision applies to activities that undermine the key aims of EU competition law (the protection of the consumer and the integration of markets). In particular we study how this provision tackles cartels, whose agreements cause them to act as a monopoly and reduce consumer welfare. A former Competition Commissioner characterised them as ‘cancers on the open market economy’. Catching and punishing cartels is at the heart of the functions of all competition authorities. This subsection of the chapter should be read together with section 3 of Chapter 21 which explains the powers the Commission has to find cartels and to penalise them. The task in this chapter is to examine how widely the meaning of the concepts of agreement and concerted practice have been used to catch collusion. Secondly, we consider how the Commission and European Courts determine whether agreements that are not obviously anti-competitive (for example, joint ventures and distribution agreements) are evaluated under Article 101(1) and consider different views on what the legal or economic standard for assessment is. Thirdly, we study how Article 101(3) is applied to exempt anti-competitive agreements and explore the debate between a narrow and a wide interpretation of this exemption.

INTRODUCTION

This chapter considers the different forms of law and regulatory acts in EU law, the legislative and regulatory procedures deployed to enact them and the debate about the democratic legitimacy of the Union. It is organised as follows.

Section 2 looks at the allocation of law-making power within the Treaties. The Treaties provide a series of legal bases which both grant the European Union authority to legislate in a particular field and determine the procedures and instruments which can be used. In cases of contestation reference will be had to the predominant aim and content of the measure to determine the base. If the measure is inextricably and equally associated with more than one base the Court of Justice will then apply a formal hierarchy between legal bases.

Section 3 discusses the types of legal instrument in EU law. There are four types of binding legislative instrument in EU law: Regulations, Directives, Decisions and international agreements. Problems have emerged because these legislative instruments have been used interchangeably. In addition, recent years has seen the growth of soft law: non-binding instruments which are used for a variety of purposes. These include setting out how EU institutions will apply EU law, and interpretations of EU law. This has led to hybrid situations where parties’ understanding of their rights and obligations is governed by a mix of hard and soft law.

Section 4 considers the central legislative procedures. The ordinary legislative procedure grants the Parliament the power of veto and the Council, acting by qualified majority voting (QMV), the power of assent over any Commission proposal. Under the assent procedure Parliament has the power of assent, a requirement for it actively to approve a proposal before it becomes law. Under the consultation procedure, Parliament is merely consulted on a Commission proposal with the Council taking the final decision. Increasingly, the formal features of the legislative procedures have been blurred by the development of trilogies: informal meetings between representatives from the three institutions, usually first taking place before the Council first considers the proposal, in which agreement is sought on the proposal.

INTRODUCTION

This chapter considers the infringement and sanctions proceedings that the European Commission may bring before the Court of Justice against Member States for failure to comply with EU law. It is organised as follows.

Section 2 considers the main features of the infringement proceedings set out in Articles 258–260 TFEU. The central provision is Article 258 TFEU which allows the Commission to take the Member State to the Court of Justice and to obtain a ruling that it has failed to comply with EU law. The roles of the proceedings are threefold: to secure compliance with EU law; to serve as an instrument which contributes to the effective functioning of EU policies; and to be a public law arena, in which the different interests of the EU institutions, Member States, complainants and EU citizens can be mediated. All three roles are important and there is a danger in over-emphasising any one.

Section 3 considers the scope of Member State responsibilities under Article 258 TFEU. Actions can be brought only against the Member State, but they can be brought for the failure of any state agency, including courts and local and regional government, even if it is constitutionally independent of the central government which is, in practice, the body against whom the action is taken. The Member State is also responsible not just for legal instruments that conflict with EU law but also administrative practices that conflict with EU law. These usually have to be general and consistent in nature to attract liability. The Member State is finally under a duty to secure and police the effective functioning of EU law, and will be held liable for a failure to do so.

INTRODUCTION

This chapter looks at the institutional settlement governing the European Union.

Section 2 looks at the institutional framework governing the European Union. This framework is subject to two different visions. One is that of institutional balance. EU institutions are only to have the powers provided for them by the EU Treaties. This is both to limit institutional power and to protect the prerogatives of other EU institutions. The other is that EU institutions are to promote the policies of the Union, its interests and those of its citizens. National governments can grant EU institutions any powers for this purpose, even outside the framework of the EU Treaties. If the initial vision was traditionally predominant, the latter has emerged strongly with the onset of the financial crisis. The powers of the EU institutions can no longer be understood simply through the lens of the EU Treaties. If this gives them greater capacities, it also raises concerns about their judicial and democratic control.

Section 3 considers the European Commission. An independent administration, the Commission has four central powers: legislative and quasi-legislative, agenda-setting, executive and supervisory. These extensive powers have increasingly proved too much for it, and so a wide array of its powers have been transferred to specialised European Regulatory Agencies, of which there are now thirty-six. However, even these powers are insufficient to secure the full administration and implementation of EU law and policy, which is predominantly done by national administrations with the Commission supervising them. The consequence is a pan-Union executive order made up of the Commission, European Regulatory Agencies and national administrations which carries out a large number of quasi-legislative, regulatory and executive tasks, and which is relatively unaccountable to broader democratic constituencies, either at a national or pan-Union level.

INTRODUCTION

This Section of the book contains a survey of the main competition law provisions. Competition law forbids price fixing cartels among competitors and other agreements that restrict competition (Article 101 TFEU) and prohibits monopolies from abusing their position (Article 102 TFEU). Firms that infringe these rules may be fined by the Commission, and victims of such acts may seek damages. Law enforcement is discussed in Chapter 21 and the two Treaty provisions are discussed in Chapter 22. Competition law also monitors Member States’ regulation of markets and can be applied to prohibit anti-competitive legislation, as well as promote competition in markets where national law has prevented competition. In this context, there are overlaps between the enforcement of competition law and the rules regulating the internal market discussed in Chapters 15 to 20. In Chapter 23 we look specifically at the state aid rules in the Treaty (Articles 107 to 109 TFEU) which limit the Member States’ discretion to grant subsidies and other advantages to national firms. In light of the ongoing economic crisis the regulation of state aid is particularly poignant. There are two online chapters on competition law: Chapter 25 considers the role of EU law in markets subjected to heavy state regulation and traces the deregulatory impact of EU law intervention. Finally, Chapter 26 considers the EU’s merger policy.

When the EEC Treaty was negotiated, there was considerable pressure by Americans, but also by segments of Europe’s academic community, that competition law should be included in the Treaty. However, at that time, the ‘culture of competition’ had yet to emerge in most Member States, who traditionally favoured cartel arrangements, state intervention and the promotion of national champions. Indeed, some Member States only introduced national competition laws as late as the 1990s, and even today in some countries enforcement is emerging or unstable. Thus, when provisions were first introduced to curb restrictive practices in the coal and steel sector (by Articles 65 and 66 of the ECSC Treaty), these were an innovation for the Member States.

INTRODUCTION

Article 56(1) TFEU provides:

The concept of “services” is a relatively recent one, both in economic and in legal terms. While from today’s perspective the provision of services has always been an important field of the economy, it was only in the 1940s and 1950s that scholars started to conceptualize services as a distinct economic sector. In comparison to trade in goods, the legal framework for transnational trade in services began to evolve with a significant time lag. Negotiations for a global agreement on trade in services were initiated only in the 1980s, during the Uruguay Round of multilateral trade negotiations, and the General Agreement on Trade in Services (GATS) which emerged from them, came into force in 1995. The number of the Court’s cases in the field of services grew significantly during the same period.

Over the past decade, legislation and adjudication on the free movement of services has been one of the most dynamic, but also one of the most controversial, of the Treaty freedoms. The dynamic character of the field is owed to the fact that the integration of a European market in services essentially dates back only to the 1980s and 1990s. This means that a considerable number of regulatory questions are not yet fully settled, and that the legal framework has not yet been fully stabilized. Consequently, controversies persist, as unsolved regulatory questions are liable to attract different, sometimes conflicting, answers. A central field of controversy has been the area of public services. The main question in this regard has been the following: what does EU law require in a situation where a private provider wishes to offer the same service as is offered by a public provider? The question has important implications, because the issue of public services has been the center of a political conflict since the 1980s: some policymakers believed that private enterprises could provide public services more efficiently than public operators, whereas others believed that public operators were more efficient and could serve the public interest better.

INTRODUCTION

This chapter considers the ideas and rights associated with European Union citizenship. This is granted by the Treaty to all those who are citizens of one of the Member States of the European Union. The chapter is organised as follows.

Sections 2 and 3 discuss ideas of citizenship.