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SPEECH/06/566












Neelie Kroes

European Commissioner for Competition Policy




EC antitrust rules: an overview of recent developments






















Hellenic Competition Commission
Athens, 5th October 2006

Ladies and gentlemen,

I’d like to thank the Hellenic Competition Commission for inviting me here today. I am pleased to see that so many of you are here – I think it is a sign that competition is a topic that is – quite rightly - dear to us all.

Introduction

I’d like to use our time today to look at recent developments in antitrust policy. Together with my colleagues in DG Competition, I’ve been quite busy on this recently, both in ensuring that the antitrust rules are effectively enforced and respected, and in improving the tools we have at our disposal to do this.

The European Commission is no longer alone in applying Articles 81 and 82 of the Treaty. These antitrust rules are now also enforced by the whole network of competition authorities, the ECN. We have now had more than two years of application of the new system. And the system is working very well in practice.

Modern competition rules, effectively enforced, are central to the Lisbon strategy with its objectives of growth and job-creation within the EU. We still have a long way ahead of us in realizing these goals. But every single member of the ECN has a role to play to ensure that competition enforcement contributes to the full!
And here in Greece, I would like to be particularly clear. I have absolutely no doubt that the effective, diligent enforcement of the EC competition rules by the Hellenic Competition Commission and your national courts will continue to be a top priority. Indeed, since the work of the cartelists and others who breach anti-trust rules never ceases, so all of us in the ECN have no choice but to stand strong and together in investigating, stopping and sanctioning such illegal behaviour.

Recent developments

It was with this overall objective in mind that I launched sector inquiries into key sectors of the EU economy, energy and financial services. These are sectors which impact on every corner of the EU, every business and every citizen.

When I started work as European Commissioner I got the feeling – reinforced by many learned people I talked to - that these areas which have already seen some liberalisation were still not working properly. I set out to find out why, and what could be done to make sure things are better in the future. The inquiries are on-going. We will publish the final reports at the end of the year for financial services and in early 2007 for energy. In the meantime we are also pursuing direct follow up action where necessary. And as you may be aware, individual investigations have already begun in the energy sector.

The preliminary results of the inquiries have proved that indeed, all is far from well.

Look at energy, where we found that:

(1) markets are highly concentrated, with few players;

(2) control over infrastructure by vertically integrated companies makes it difficult for new players to offer their services to consumers;

(3) market-integration is not working - and the low level of cross-border sales is not enough to put pressure on existing national operators; and finally

(4) there is a significant lack of transparency.

As concerns financial services, our preliminary findings into the payment cards market showed that in some countries high card fees result directly from lack of competition in the market and that card fee levels can vary up to 400% across the EU! Unsurprisingly, given this variation, some companies are making pretty high profits. But perhaps I didn't need to tell you that here! And there also seem to be restrictions on companies entering markets.

All of this suggests that many firms and consumers are probably paying far too much for their cards.

As in energy, I can assure you that we will not hesitate to take enforcement action if we consider that to be necessary for punishing anti-competitive behaviour.

Cartels

Of course the European Commission’s enforcement activities go well beyond the sector inquiries. The fight against cartels is a key priority. Cartels are the most damaging restrictions of competition and we will pursue such practices relentlessly and with zero tolerance.

Last year I established a dedicated cartel-busting directorate within DG Competition. This structural change, and the success of our leniency programme, are starting to bear fruit. We are detecting more cartels, and numerous investigations are ongoing. Already this year we have imposed fines amounting to € 1.3 billion, and I’ve just introduced new guidelines which will make sure that fines are an effective deterrent to illegal behaviour in the years to come.

New Guidelines on fines

Fines do of course sanction the companies concerned. But I’m convinced of their deterrent effect – making companies think twice before entering or continuing any anti-competitive behaviour. Our previous guidelines on fines dated from 1998, and perhaps did not send out a strong enough signal.

So we have just revised the guidelines, to introduce several new and important innovations:

1. First, from now on, the basic amount of the fine will be calculated as a percentage of the turnover of each cartelist in the relevant product market during the last business year the company participated in the infringement. The percentage may well reach 30% of the relevant sales for cartels.

2. Second, the Commission will look at how many years a company participated in an infringement, and will multiply the initial amount of the fine by the number of years. So, contrary to the previous system, each additional year of participation in an infringement will be fully reflected in the level of the fine.

3. Finally, repeat offenders – of which there are far too many – can be penalised by a 100% increase in the fine for each previous offence. Companies that have already breached the competition rules need to be very, very careful not to do so again. Or the fine will hurt even more.

What do I hope these innovations will deliver? Well, I expect they’ll give real food for thought to any company considering “blowing the whistle”. What greater incentive do you need to step forward and denounce cartels or anti-competitive practices?

Review of Leniency Notice

This leads me onto the subject of leniency. It is no secret that the Commission’s 2002 leniency programme has proved a very successful tool for detecting and destabilising cartels. I am delighted that this year Greece has joined the ranks of Member States that operate leniency programmes.

But despite the success of these programmes, we cannot rest on our laurels. So, together with our colleagues in the ECN, the Commission has developed a Model Leniency Programme that was endorsed by the heads of all ECN members last Friday. This programme sets out in some detail the rules and procedures that an applicant can expect to find in any European programme. It also contains a model for a so-called summary application system that will considerably alleviate the burden associated with multiple leniency filings.

The Model Leniency Programme gives ECN members a unique opportunity to ensure that all our programmes remain efficient and attractive. The Model Programme will however only achieve its goal if the ECN members are prepared to align their respective programmes accordingly. We in the Commission have demonstrated a clear commitment to this project by announcing our plans to revise our own Leniency Notice. We want to further clarify what information and assistance is needed in order to qualify for immunity, especially where the Commission had no previous knowledge of the cartel. We also intend to make some improvements in our procedure, including introducing a marker system and clarifying how we deal with oral applications. I expect the new rules to be in place before Christmas.

I can only encourage the Hellenic Authority to follow suit and apply the Model Leniency Programme – and I know I can count on you to help make this vital project really work.

Article 82

Ladies and gentlemen,

As you can see, we are working hard at improving the regulatory framework, to make it both more efficient, and more effective. The work we are doing on the review of the application of Article 82 of the Treaty is yet another example of this.

Last year we published a Discussion Paper on the application of Article 82 to abuses that exclude other competitors from the market - “exclusionary” abuses in short-hand. We set out a possible framework for how Article 82 should be applied to ensure that we pursue the cases that are most harmful to competition and consumers in Europe. I’m pleased that the Discussion Paper was met with great interest from the business community - not only in Europe, but throughout the world!

It’s great that the debate has prompted so many contributions from so many people. Now we are reflecting carefully on these comments and the issues at stake, to determine the best way to move forward with this project. I expect to announce next steps early next year.

Green Paper on Antitrust Damages

In the spring I will also draw some conclusions from the healthy debate we have launched on damages actions for breaches of Articles 81 and 82 of the Treaty. I personally attach high importance to this topic because its basic objective is exactly what good competition policy is about: ensuring that consumers are compensated for any wrong-doings, and at the same time providing a further incentive to market players to respect the rules.

I know that I do not have to tell a Greek audience about the importance of kratos dikaiou, the rule of law. But I am amazed that nearly fifty years after the competition rules were enshrined in the EC Treaty, individuals and companies who are harmed by breaches of those rules are not yet adequately compensated. Where is the rule of law there?

In our Green Paper published last year, we highlighted already some obstacles that exist for obtaining damages and suggested some solutions. We are now assessing the responses to the public consultation, and look forward to hearing the views of the European Parliament shortly.

Already I have proof that some follow-up is appropriate. But given the unique elements of the European legal systems, it is clear that we cannot simply borrow solutions from other countries, such as the US. We need a European solution to a European problem, because here Europe really can add value.

European Competition Network

Another area where we see value added through everyday European cooperation is the work of the ECN. As I have already mentioned, May 2004 saw a landmark change in the way the European antitrust rules are enforced.

Most significantly, national competition authorities can now apply EC competition law. To ensure the consistency of this enforcement, national authorities and the Commission co-operate closely though the European Competition Network. I’m delighted that the EC competition rules now have the resources of all the EU’s competition authorities and courts behind them.

The ECN has vastly increased not only the enforcement of the EC competition rules, but also the degree of cooperation between authorities. Sharing information on new cases and proposed prohibition decisions has become daily practice. By early August 2006, some 600 new investigations had been notified within the Network. By the same date, the national competition authorities had informed the Commission of around 150 envisaged decisions. Impressive figures aside, there is a great sense of commitment and professionalism in the ECN. We are all working to contribute whatever we can to the common goal of ever more effective competition enforcement. The Model Leniency Programme is just an example of what we can achieve together.

Conclusion

Ladies and gentlemen,

The Commission has been busy on many fronts to ensure that the competition rules are enforced in a vigorous and efficient manner. We have a lot of work ahead of us, but I am committed to keep up the good work we have started, to the benefit of growth and jobs in the EU. But the Lisbon goals can only be achieved if we cooperate and work together. We are all part of a common endeavour to enforce the competition rules throughout the length and breadth of the enlarging European Union. The Commission, national competition authorities and national courts, working together. And we are only just getting started.

Ladies and gentlemen, I have no doubt that Greece and the Hellenic Competition Commission will play their part. Thank you for your attention.


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