European Commissioner for Competition
Commission/IBA Joint Conference on EC Competition Policy
Ladies and gentlemen,
I am delighted to once again welcome you all to Brussels. I would like to thank the IBA for working so closely with the Commission to organise this conference.
An ongoing need for a competition partnership
I remember standing here before you two years ago, when I spoke about the importance of competition enforcement for Europe's competitiveness. As we looked together at getting the most out of the 2004 anti-trust reform package, I set down a challenge to everyone in the European competition community. I asked you all – in your respective roles - to have the courage to be active players in the partnership for growth and jobs, to help ensure that Europeans get the most out of our Single Market.
This month we celebrate the fiftieth anniversary of the Treaty of Rome. I'm perhaps in a minority here in this room, since I am old enough to remember that day! But all Europeans should be proud of what has been achieved since then. Our Single Market is unique both politically and economically, and our companies have been quick to seize the opportunities. Fair competition has generated investment, efficiency and innovation. Making sure this continues will ensure the right conditions for the social and environmental well-being of European citizens for the fifty years to come.
Oscar Wilde once described the difference between optimism and pessimism by reference to doughnuts. The optimist sees the doughnut, the pessimist sees the hole! If you look at our European competition culture then the doughnut is already a pretty good mouthful. But that hole bothers me – for in it lie the challenges and opportunities of the future.
Let’s take a closer look:
I'm realistic enough to see the hole in our doughnut. But I’m also the sort of optimist who believes that with hard work – with fair but firm enforcement - we can fill it.
So today I come here once again in a spirit of partnership. We all need to work to uphold the rights of European consumers to benefit from the lower prices and better products that a competitive environment promotes.
I'll use the rest of my time today to look at how we in the European Commission are doing more to deliver this, through our ongoing fight against cartels, and our work to promote more private enforcement of the competition rules.
Further strengthening the fight against cartels
I don't think that by now there can be any doubt as to my views on cartels. Private secret agreements between competitors protect their own individual positions, but at a huge cost. OECD studies have found that the artificial price increase can be as much as 50%. This hits direct customers – be they other companies or citizens - but also filters down through the entire European economy.
In the end, cartels make Europe less competitive and put the brakes on our future economic growth. Why invest, why innovate, when you can sit back and profit unfairly from an illegally engineered allocation of resources?
Back in 2005 I announced here that I would put greater priority on the fight against cartels. The dedicated Cartel Directorate is now up and running very well. In 2006 we imposed a record total of over €1.8 billion in cartel fines. Our recent action covered cartels in intermediate products like chemicals, that impose extra costs on downstream European companies, as well as in end products ranging from copper plumbing tubes to zips, that directly hit citizens' purses. Ten days ago the Commission imposed the largest ever fines, on manufacturers of lifts and escalators.
I want the future for cartelists to continue to look as bleak as possible. That is why I am further sharpening our tools in this area.
Standing here two years ago, I said I wanted to build on the increasing success of leniency programmes run by the Commission and a large number of Member States. Our new Leniency Notice enhances the transparency and the certainty of the thresholds and conditions for leniency. It gives companies a better picture of the Commission’s procedure, so they know what to expect and what is expected of them. As a result, applicants can expect to receive quicker responses to their applications. The changes take careful account of the views expressed by the legal and business community.
I also said I would look closely at the problem of multiple filings. The ECN Model Leniency Programme is now in place, and we need to see if this addresses the concerns that were raised. The Commission's own system is of course fully in line with the Model Programme, and I am happy to see increasing convergence among national systems as well.
Of course the most visible deterrent signal we are sending out is through our fines. I’ve heard some people – those perhaps who have something to fear - complaining that the level of fines resulting from our new guidelines is too high. I take this as proof that fines work best when they are predictable and set at a level which ensures effective deterrence, whilst not damaging the market structure itself. So under our new guidelines we will multiply the initial fines according to the length of time a company participated in a cartel. And we will double fines in the case of repeat offenders. Companies now have even more incentive to think twice before they embark on illegal behaviour. It's their choice, and they know that the consequences of misbehaving will hurt.
What's next? Well, the number of leniency applications continues to increase. So we are seriously considering developing an instrument to handle selected cartel investigations more speedily. In certain cases we should be able to reach an agreement with the parties on the scope and duration of the infringement, and their individual liability for it under public enforcement. The application of the fines guidelines would then apply net of any reduction for cooperation. Cooperation and voluntary assistance by the party would justify a rebate in the amount of the fine. This could come on top of the leniency rebate, although we need to think more about the exact modalities.
The debate on direct settlement is well worth having, and the business community has already shown its interest. I would encourage you to contribute your thoughts too. In this context one issue we need to look at very carefully is the link between this kind of direct settlement and civil litigation where plaintiffs seek damages.
And of course, to be really effective, the Commission cannot rely exclusively on the leniency programme for the detection of cartels. It is vital that we retain and strengthen our ability to uncover cartels through our own initiative investigations.
Creating the conditions for more effective private actions in antitrust enforcement
The battle against illegal anti-competitive behaviour is of course one the Commission cannot fight alone. We have great allies in the national competition authorities and, increasingly, national courts. But there is still one group of stakeholders – perhaps the most important of all – who I'd like to be more active in the pro-competition partnership. I mean customers and consumers, the small businesses and individual citizens who foot much of the bill of illegal behaviour upstream.
That is why I launched a Green Paper in 2005, and why the ensuing lively debate and its follow-up are among the most interesting and exciting of all the policy projects we are currently engaged in.
The European Court of Justice has been clear: the right to damages is necessary to guarantee the useful effect of the EC competition rules. But even in Member States with advanced national antitrust rules, there is little evidence that consumers and business customers are fully exercising their right to damages for harm. That means that many injuries are left uncompensated, with society and the economy left to absorb that loss. This situation is clearly unjust, incompatible with our Community of law, and at odds with our shared competitiveness objectives.
An increased level of private actions will also have the effect of increasing deterrence, complementing public enforcement. The debate on the Green Paper has shown the importance stakeholders attach to this parallel approach: it's not "either/or" but "both". There is also general agreement that national procedural rules should be designed so that the victims' right to damages can be exercised effectively.
Of course it's always easier to agree on the definition of a problem than on the appropriate methods to remedy it and at what level – EU or national - any measures should be taken.
This is exactly the debate in which I am currently engaged with the European Parliament, which will present its opinion on the Green Paper next month. And it is a debate which needs to continue, to be widened to include the full range of stakeholders, practitioners, Member States, consumer groups alike. To further focus thoughts, we will issue a White Paper around the turn of the year.
I want to make clear that there is no need, and the Commission does not intend, to impose a unified European model of antitrust damages that would regulate all the issues identified in the Green Paper. Some obstacles may be more efficiently tackled at European level, others at national level. Some obstacles may justify legislative solutions and others more informal instruments. The issues are diverse and the solutions will have to take account of this diversity.
And most importantly, the solutions have to be firmly bedded in our European cultures and traditions. Developing private enforcement must not mean creating a system in which unmeritorious litigation can flourish. This is a delicate balancing act, and we will move forward slowly and carefully, gauging our progress with every step. But it has to be clear that staying where we are today is not a solution. Inertia will not help those injured by anticompetitive behaviour, nor strengthen the European economy.
I am of course aware that the Green Paper has prompted a quite emotional response in some quarters. Scare-mongering is sometimes a more interesting hobby than listening to the reality of what is being said. So let’s debunk some of the myths which are polluting the debate:
Firstly, private enforcement is nothing to do with encouraging a litigation culture. We should learn from our neighbours' experience – and then design European solutions. This initiative is not about importing a system from non European jurisdictions.
Certain features of the US private competition litigation system are simply not compatible with our European traditions. The two examples I cite most frequently are treble damages for all infringements and the opt-out class action, in which one single individual can bring an action on behalf of an unidentified class of persons. I would not support the introduction of either of these features in Europe.
But we do need to debate possible European solutions to the issues the US arrangements tried to address. Double damages for hard core cartels are worth considering, but only if it is proven that single damages are not enough to get the victims to court. Representative actions are already possible under some national systems – the first one is now being brought in the UK. This kind of representative action – empowering groups that truly represent the interests of consumers – is closer to the heart of European traditions.
Secondly, more private actions will not create additional costs for business. Already today there are huge costs resulting from infringements to the competition rules. These costs are unseen as they are currently absorbed by the economy as a whole. So what we are talking about here is getting things out into the open, and ensuring that tomorrow these costs are borne by the infringers, not by the victims.
Finally, the initiative is not about unnecessarily harmonising national procedural rules applicable to tort actions. The Commission wants to guarantee the effectiveness of the rights conferred by the Treaty. The lack of effectiveness often lies in the procedural rules of the Member States. But that does not mean we should tear them up completely. Instead, if, and only to the extent that, the procedural rules of the Member States do not guarantee effectively the substantive rights conferred by the Treaty, the Commission may seek some approximation of these rules. I am extremely conscious that any steps we may propose will have to meet the strict tests of subsidiarity, proportionality and necessity.
These are the first of the principles which will guide the White Paper. Alongside these I would mention:
Ladies and gentlemen,
Today and tomorrow you will have many opportunities to discuss the interaction between public enforcement and actions for damages. I am looking forward to hearing the outcome of your debates on these issues.
More generally, please do continue to contribute actively and constructively to helping shape the overall framework of competition law enforcement. I meant what I said here two years ago: it is only through partnership that we can really make sure European competition policy plays its full part in ensuring the competitiveness of the Union for the next half a century. Let's keep the good work up!