Competition Between Rules and Rules of Competition: A Legal and Economic Analysis of the Proposed Modernization of the Enforcement of EC Competition Law

9 Colum. J. Eur. L. 1 (2002)

Damien Geradin. Professor of Law at the University of Liege and the College of Europe, Bruges.

Over the last couple of years, a very hot debate has raged in the European Union over the European Commission (hereafter, the “Commission”) proposals to modernize the implementation of EC competition law. In essence, these proposals seek to promote a more decentralized application of EC competition law. The Commission argues that decentralization will allow a better implementation of EC competition rules. Many, however, argue that the proposed reforms will lead to a less coherent and, in some cases, contradictory application of such rules.

With some limited exceptions, those who have so far intervened in this debate have generally tried to outline the expected practical advantages and disadvantages of the proposed reforms. By contrast, few observers have attempted to analyze the proposed reforms by relying on the analytical tools offered by economic analysis. The objective of this paper is to contribute to fill this gap in the literature. As will be seen below, economic analysis offers a certain number of criteria that may provide useful guidance to legislatures and policy-makers having to make a choice about the level at which rules should be formulated and enforced.

This paper is divided into five Parts. Part II reviews the arguments advanced in the economic literature in favor of decentralization and centralization respectively. Part IlI describes the main features of EC competition law. It then analyses the levels of power at which competition rules are formulated and enforced in the EC legal order. As will be seen, the current system of allocation of tasks between EC and national levels in the field of competition law provides for a concurrent application of EC competition rules and national competition laws to anti-competitive conduct that may have an effect on trade between Member States, as well as for a fairly centralized system of implementation of EC competition rules. This Part also analyses the downsides of the current centralized system of implementation of EC competition rules and reviews the main aspects of the Commission proposals to modernize the implementation of such rules. Through these proposals, the Commission seeks to promote a broader application of EC competition rules, which will become the only rules applicable to conduct that may have an effect on trade, and a more decentralized application of such rules through a growing intervention of the national competition authorities and the national courts. Part IV seeks to determine the extent to which the current and the new proposed systems of task allocation in the area of competition law fit with the economic criteria identified in Part II. Part V contains a brief conclusion. As will be seen, the new proposed system risks creating a series of problems, such as an asymmetric enforcement of EC competition rules as national enforcement bodies enjoy very different levels of resources for the purpose of carrying out their missions, as well as a “disintegrating effect”–as national enforcement bodies essentially focus on the local effects of transactions. The proposed reform might also increase transaction costs, since decentralization creates a risk of multiple enforcement. The Commission must adequately address these problems in order to ensure the success of the decentralization process.