Q&A: The ECN+ Directive and how it applies to competition law in Ireland
Q&A: The ECN+ Directive and how it applies to competition law in Ireland
What is the ECN+ Directive?
It is Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market. It was signed into law on 11 December 2018 and was published in the Official Journal of the EU on 14 January 2019.
By when must the ECN+ Directive be transposed into Irish law?
4 February 2021.
What is the objective of the ECN+ Directive?
It is designed to empower the national competition authorities (NCAs) of the Member States to be more effective enforcers and to bring about a common competition enforcement area in the EU.
Why was the ECN+ Directive needed?
Since 2004, the NCAs have been empowered by Council Regulation (EC) No 1/2003 (Regulation 1/2003) to apply the EU competition rules alongside the European Commission (Commission). NCAs are obliged to apply the EU competition rules to agreements or practices that can have an effect on trade between Member States. The Commission and the NCAs have enforced the EU competition rules in close cooperation in the European Competition Network (ECN) (created in 2004 for this purpose). Regulation 1/2003 did not address the means and instruments by which NCAs apply the EU competition rules (i.e. Articles 101 (the prohibition on anti-competitive agreements) and 102 (the prohibition of abuse of dominance) of the Treaty on the Functioning of the European Union (TFEU)). Many NCAs (including the Competition and Consumer Protection Commission (CCPC) in Ireland) do not have such means and instruments effectively to enforce Articles 101 and 102 TFEU. The ECN+ Directive is designed to address these shortcomings.
What are the main shortcomings identified by the ECN+ Directive?
The main shortcomings of NCAs identified by the ECN+ Directive are an absence of:
enforceable guarantees to apply the EU competition rules independently (also, a number of NCAs have insufficient human and financial resources while some NCAs lack forensic IT tools to find evidence of infringements).
tools they need to effectively detect and tackle EU competition rule infringements (e.g. some NCAs do not have key investigative powers such as to gather evidence stored on mobile phones, laptops, tablets etc.).
an ability to impose effective fines - in some Member States, national law does not allow NCAs to impose effective (or any) fines for breaches of Articles 101 and 102 TFEU.
leniency programmes across the EU which discourage companies from coming forward to provide evidence of anti-competitive practices.
tools and guarantees which undermine the system of parallel powers for the enforcement of Articles 101 and 102 TFEU based on close cooperation within the ECN.
The ECN+ Directive sets out rules to ensure that NCAs have the necessary guarantees of independence and resources as well as enforcement and fining powers effectively to apply Articles 101 and 102 TFEU. This is to ensure that competition in the internal market is not distorted and that consumers and undertakings are not put at a disadvantage by national laws and measures which prevent NCAs from being effective enforcers.
The ECN+ Directive covers the application of Articles 101 and 102 TFEU and the parallel application of national competition law to the same case (i.e. in Ireland, Sections 4 and 5 of the Competition Act 2002 (as amended) (Competition Act)).
What are the main provisions of the ECN+ Directive?
The ECN+ Directive will provide NCAs with a minimum common toolkit and effective enforcement powers to make sure that they will have the:
ability to act independently when enforcing EU competition rules and work in a fully impartial manner.
necessary resources to carry-out their work.
powers needed to gather relevant evidence (e.g. the right to search mobile phones, laptops and tablets etc.).
ability to find that an infringement of Article 101 or 102 TFEU has been committed.
ability on the part of "national administrative competition authorities (NACA)" (i.e. an administrative authority designated by a Member State to carry out some or all of the functions of a NCA) to either: (i) impose by decision in their own enforcement proceedings, or (ii) request in non-criminal judicial proceedings, the imposition of administrative fines on undertakings.
establishment of a leniency programme and which facilitates the application for leniency in multiple jurisdictions.
A number of these toolkit and enforcement powers already exist with NCAs (such as the CCPC) under Irish law.
The ECN + Directive also augments the way in which NCAs across the EU will cooperate with each other in relation to dawn raids, the cross-border enforcement of decisions imposing fines, the role of NACAs before national courts and limitations on access to files of NCAs.
What enforcement powers does the CCPC lack?
While the CCPC has some investigation and enforcement rights (e.g. to investigate suspected breaches of EU competition law, issue summonses to obtain information and carry-out dawn raids), the CCPC 's powers to enforce EU competition law are otherwise limited under Irish law.
In light of Regulation 1/2003, the Irish legislature confirmed the pre-existing position that significant enforcement powers continue to rest with the Irish Courts as NCAs (e.g. to make declarations that there has been a breach of the competition rules, to impose injunctive relief, to grant damages, to impose fines on undertakings and individuals and to imprison individuals).
The CCPC cannot:
make any legally enforceable findings that there has been a breach by an undertaking of Articles 101 or 102 TFEU. The CCPC has found a way to "form a view" that there has been a breach of Articles 101/102 TFEU (and has done so by way of its so-called "enforcement decisions" which are, in effect, merely opinions of the CCPC and very far short of a formal finding of a breach of the EU competition rules as the Irish Courts are entitled to make).
impose fines for a breach of the EU competition rules,
impose interim measures, or
grant immunity or leniency - there is currently a system for the CCPC to vet cartel immunity applications but the Director of Public Prosecutions (DPP) ultimately makes the decision whether to grant cartel immunity (i.e. from prosecution for criminal cartel offences under the Competition Act). There is no system of leniency under Irish law.
The same limitations on the CCPC's ability to the enforce the EU competition rules also apply to the enforcement of Irish competition rules (i.e. Sections 4 and 5 of the Competition Act and which are the domestic equivalents to Articles 101 and 102 TFEU respectively).
What other powers will result from the implementation of the ECN+ Directive?
In addition to being able to make decisions that there has been a breach of the EU competition rules and impose administrative fines, the CCPC may also be granted the power to:
impose behavioural or structural remedies to bring the competition infringement to an end.
impose interim measures on undertakings where there is urgency due to the risk of serious and irreparable harm to competition, on the basis of a prima facie finding of a breach of the EU competition rules.
make commitments offered by undertakings binding in competition enforcement proceedings (rather than, as now, the CCPC having to go to the Irish Courts to obtain a Court order for such commitments).
Will the ECN+ Directive increase the powers of the CCPC (and other NCAs in Ireland)?
Probably. The ECN+ Directive will augment the powers of at least some of the designated NCAs (i.e. the Irish Courts, the CCPC, the DPP and the Commission for Communications Regulation (ComReg)) to apply the EU competition rules in Ireland.
The CCPC believes that the introduction of an administrative enforcement regime, where the CCPC would have the power to impose fines for breaches of the EU competition rules, would fill a significant gap in the existing competition law enforcement regime in Ireland and is needed for the effective enforcement of the EU competition rules in Ireland. To have such a power to fine, the CCPC first needs to be empowered to make a finding that there has been a breach of the EU competition rules. In addition, the introduction of a leniency system in Ireland will likely present complex challenges for the NCAs involved.
The current Irish Government stated in its 2020 "Programme for Government" that it intends to: "Increase transparency, tackle anti-competitive behaviour, and foster competition by: Giving the Competition and Consumer Protection Commission (CCPC) effective enforcement powers to punish and deter anti-competitive conduct". Based on the Irish Constitution, there has been a limitation on the ability of NCAs (such as the CCPC) to impose fines because they are regarded as penal and therefore only able to be imposed by the Irish Courts (it is notable that a number of other agencies in Ireland do impose "administrative" fines on undertakings for certain non-competition law breaches).
The implementation in Ireland of the ECN+ Directive may well result in the CCPC being able to impose administrative fines for breaches of EU competition law. However, the Irish legislature may yet refuse this by, for example, only allowing the CCPC to make a decision that there has been a breach of the EU competition rules but leave the potential imposition of any subsequent administrative fines to made by the Irish Courts.
The ability to grant leniency is a requirement under the ECN+ Directive. The Irish legislature will have to introduce a leniency system and which facilitates applications for leniency in multiple jurisdictions – this will be a complex change to the current Irish competition system and will likely result in a system that again involves some combination of the CCPC, the DPP and the Irish Courts (depending, in particular, on whether the applications for leniency are related to civil or criminal matters).
Other NCAs (such as ComReg) may also be granted additional powers as a result of the transposition of the ECN+ Directive in Ireland (ComReg has co-competition powers with the CCPC in relation to electronic communications).
How will the ECN+ Directive be transposed in Ireland?
The Department of Business, Enterprise and Innovation (which is leading the process in Ireland) has said it is intended to be transposed by primary legislation. So far, there has been very little consultation and debate on the transposition of the ECN+ Directive in Ireland with little more than 3 months to go before the deadline.
What is the CCPC's view of the ECN+ Directive ?
The CCPC is supportive of an increase in its enforcement powers as a result of the ECN+ Directive. It has recently said, for example, that the burden of proof in terms of criminal competition investigations in Ireland is set high in terms of the volume of evidence it must obtain and the number of investigative steps it must take. The CCPC then sends the file to the DPP to decide the next steps in the investigation and it is essentially out of the CCPC's hands. As a result, the process is long drawn-out before it reaches an outcome. The ECN+ Directive is a different model that should give the CCPC more control to do things at a quicker pace. The CCPC sees a very different competition enforcement regime as a result of the implementation of the ECN+ Directive in Ireland.
Are there any hurdles as to the implementation of the ECN+ Directive in Ireland?
There will numerous hurdles including.
The impact on CCPC resources and the increased responsibility on the CCPC with these new powers will be a challenge.
The CCPC will need to reach sustainable and robust decisions that there has been a breach of the EU competition rules and (if granted) will be faced with the challenge of imposing proportionate and justifiable fines on undertakings.
The exact application of the cartel immunity and new leniency rules will be complex to apply in practice.
Clear procedural safeguards for third parties will be needed to ensure appropriate application by the CCPC of new powers.
Apart from the parallel application of Irish competition law to the same cases as the application of Articles 101 and 102 TFEU, there seems little point in not also applying the principles of the ECN+ Directive to standalone Irish competition law cases - this would mean added work and responsibility for the CCPC.
It is not yet certain which powers the CCPC will ultimately be granted so the Irish Courts may yet find themselves being granted additional powers as a result of the ECN+ Directive – if so, this will add to the complexity of the current Irish competition system.
The absence of consultation with so little time before transposition of the ECN+ Directive by 4 February 2021.