The New Competition Tool – implications for the application of Irish Competition Law
The New Competition Tool initiative (if ultimately adopted) is one of a number of measures aimed at making competition policy and competition rules in the EU fit for the modern economy.
What is the New Competition Tool designed to address?
The New Competition Tool is based on giving the European Commission (Commission) powers of intervention in markets. It is designed to address perceived gaps in the current EU competition rules identified on the basis of the Commission’s experience with enforcing the EU competition rules in digital (and other) markets.
The initiative is also part of what is described by the Commission as "the worldwide reflection process about the need for changes to the current competition rules to allow for enforcement action preserving the competitiveness of markets well as on the worldwide reflection process about the need for changes to the current competition law framework to allow for enforcement action preserving the competitiveness of markets in times of increased digitisation and market concentrations".1
How does the New Competition Tool relate to the Commission's other EU competition powers?
This initiative complements the existing EU competition rules by adding a new market investigation tool to address perceived structural competition problems across markets. This includes structural competition problems that the EU competition current rules cannot tackle (e.g., monopolisation strategies by non-dominant companies with market power) or cannot address in the most effective manner (e.g., parallel leveraging strategies by dominant companies into multiple adjacent markets).
The New Competition Tool is one of a number of pillars for the Commission to make competition more effective across the EU as well as a "fairer digital ecosystem" to underscore the EU Single Market. The other two pillars are: (i) enforcement of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and, (ii) possible ex ante regulation for digital gatekeeper platforms (i.e. the "Digital Services Act").
Essentially, the New Competition Tool will give the Commission significant additional powers to investigate certain markets (likely digital and "Big Tech" markets but possibly a wider range of markets) and allow it to impose potentially very far-reaching structural or behavioural remedies.
Why does the Commission consider that it needs the New Competition Tool?
In its Impact Statement 2, the Commission considers that while EU competition law can address: (i) anti-competitive agreements between companies under Article 101 TFEU and (ii) the abuse by a company of its dominant position under Article 102 TFEU, the enforcement experience of the Commission
(and national competition authorities (such as the Competition and Consumer Protection Commission (CCPC) in Ireland)) have identified structural competition problems that these rules cannot:
(a) tackle (e.g. "monopolisation strategies by non-dominant companies with market power") or
(b) address in the most effective manner (e.g. "parallel leveraging strategies by dominant companies into multiple adjacent markets").
What will the New Competition Tool comprise?
The Commission is considering four options (described as (i) a dominance-based competition tool with a horizontal scope, (ii) a dominance-based competition tool with a limited scope, (iii) a market structure-based competition tool with a horizontal scope, and (iv) a market structure-based competition tool with a limited scope. Options 3 and 4 are wider than the dominance-based Options 1 and 2. The remedies that can be imposed under all of these options would be broadly similar in scope, as none of them would entail the finding of an infringement of EU competition law or the imposition of fines (which can be imposed after there has been a finding of a breach of Article s 101 or 102 TFEU). All options would allow the Commission to impose certain obligations on companies by which they would have to abide.
Are there challenges with the adoption of the New Competition Tool?
Yes. There will likely be material substantive and procedural issues that the New Competition Tool will face before it can be adopted (the consultation period has now expired) given its wide-ranging effect, impact on rights of undertakings and its originality.
What is Irish competition law?
Irish competition law is based on the EU competition rules. It is contained in the Competition Act 2002 (as amended) (Competition Act) and the Competition and Consumer Protection Act 2014 (CCP Act). Sections 4 and 5 of the Competition Act are the domestic Irish competition law equivalents of Articles 101 and 102 TFEU respectively.
Does Irish competition law contain anything comparable to the New Competition Tool?
By reference to the New Competition Tool, only the Irish Courts can currently intervene in any comparable fashion. Under Section 14(7) of the Competition Act (and after a finding of a breach of Section 5 of the Competition Act or Article 102 TFEU, the Irish Courts can require the relevant undertaking to discontinue the abuse of dominance or require such undertaking to adopt measures to: (i) cease to be in a dominant position, or (ii) secure an adjustment of that dominant position (such as the sale of assets of that undertaking).
So far, no such orders have been made by the Irish Courts.
What role will the CCPC and the Irish Courts have in relation not the New Competition Tool?
This is unclear. The New Competition Tool appears at this stage to be one for Commission intervention rather than application at a member State level (e.g. by the CCPC). In some cases relevant markets are defined as national under EU competition law.
The Commission explained in its Impact Statement that it doesn't consider intervention at national level would effectively address the cross-border dimension of competition related issues. This would likely lead to diverging rules, thus creating legal uncertainty for companies operating in the internal market, whether at national or on a pan-European basis.
However, Option 1 (i.e. the dominance-based competition tool with a horizontal scope) which would address competition concerns arising from unilateral conduct by dominant companies without any prior finding of an infringement pursuant to Article 102 TFEU would be to allow the Commission, "in close cooperation with the national competition authorities" (e.g. the CCPC), to identify competition problems and intervene before a dominant company successfully forecloses competitors or raises their costs. Under the CCP Act, the CCPC has wide-ranging powers of investigation in relation to possible Article 102 TFEU conduct but can also look at the way markets are operating (for example, under Section 10(3)(m) of the CCP Act, the CCPC can co-operate with other authorities "whether in the State or elsewhere" charged with responsibility for the enforcement of laws relating to competition).
The New Competition Tool is still being considered by the Commission and, if ultimately adopted, its scope is yet to be decided. The role of national competition authorities (such as the CCPC and Irish Courts) may be dependent on the specific option chosen but it seems probable that there will be some role to play for national competition authorities to play given the inextricable link between EU and national competition law.
For more information on this topic please contact Alan McCarthy, Partner or any member of the EU, Competition & Procurement team.
Date published: 9 November 2020