Hardly picked up by the specialised press, the Proposal for a Regulation setting out the conditions and procedure by which the European Commission may request undertakings and associations of undertakings to provide information in relation to the internal market and related areas (“the Proposal”) was adopted by the Commission on 2 May 2017.
The new powers are admittedly designed on the basis of the Commission power in competition law enforcement, i.e. Regulation No 1/2003, Regulation No 139/2004 and Regulation No 2015/1589. In the Explanatory Memorandum, the Commission is at pains to stress that:
- The Proposal does not aim to create new enforcement powers, in particular the power to pursue infringements of EU law against individual market participants: rather, it aims to provide the Commission with a tool to monitor and enforce internal market rules by enabling it to obtain comprehensive and reliable information from selected market players.
- The Commission will only use the new investigative powers with regard to the internal market and to more specific sectors such as agriculture and fisheries (save for some exceptions), transport, environment and energy, and only as a last resort if other means to obtain essential information fail.
- The information requests would be narrowly targeted, both as regard the length of the request and the number of respondents, and requests will only be addressed to undertaking and associations of undertakings that are able to provide sufficiently relevant information. Micro-undertakings are therefore exempted from the scope of the Proposal (Article 6(1)), and, for SMEs, proportionality should be duly taken into account (Article 5(3)). Compliance with the above conditions is subject to judicial review before the CJEU.
How SMIT Will Work
Article 4 of the Proposal entrusts the Commission with the power to request information directly from undertakings and associations of undertakings for the purpose of addressing a serious problem with the application of Union law. The procedure and main conditions for requesting information are as follows:
- According to Article 5, the Commission must adopt a prior decision stating its intention to use the power in question, explaining the suspected serious problem, the information sought, why such information is needed, why other means to obtain such information failed and the criteria for selecting the addressees of the requests (which cannot be micro-undertakings). The Commission is only empowered to request information that the addressee of the request is able to provide. The concerned Member State or States will be the addressees of the prior decision and the Commission is obliged to notify it to the Member State or States concerned without delay.
- According to Article 6, the Commission may require undertakings or associations of undertakings to provide information by simple request or by decision and it must inform the Member State where the recipient of the request is situated. Where the Commission has launched a formal infringement procedure pursuant to Article 258 TFEU, the Commission is obliged to provide the Member State concerned by the procedure with a copy of all requests for information issued in the context of that procedure, irrespective of where the registered seat of the undertaking or association of undertakings is situated.
- Article 7 deals with the protection of confidential information. The Commission is obliged to forward the answers received to the Member State concerned by the request where they are relevant for a formal infringement procedure pursuant to Article 258 TFEU against the Member State concerned; however, where an answer includes information that is confidential vis-à-vis that Member State, the Commission shall only forward the non-confidential version of the submission. Article 8 restricts the use of the information collected to the purpose established in Article 4. It is therefore excluded that the information provided can be used for the purposes of the application of EU competition rules.
- Fines and periodic penalty payments may be imposed (but there is no requirement to do so automatically) if a respondent supplies inaccurate or misleading information or if, in response to a request made by formal Commission decision, it provides incomplete information or no information at all. These rules follow the model of Regulation (EU) 2015/1589 applicable in the State aid area.
While the purpose of the SMIT is to help the Commission ensure the application of Internal Market legislation and principles, Whereas (14) of the Proposal adds that SMIT “is also useful, for any subsequent enforcement action by the Member States concerned that would require the use of the relevant information collected using this power and disclosed by the Commission to the Member States concerned.” It is unclear what enforcement action would be covered by this provision. Does it refer to an action brought by a Member State against undertakings that do not comply with certain rules of the Internal Market? And, if this is the case, would this not go beyond the stated aim of merely making sure that the Commission gains access to information about the functioning of the Internal Market?
One other provision that may generate some anxiety among undertakings concerns the extent of the obligation to provide the requested information. While the Proposal makes a commendable effort to stress the importance of necessity and proportionality when requesting information, the requirement that undertakings are obliged to provide “only information that is at their disposal” may prove thorny in its practical application: if the requested information needs, for example, to be aggregated according to specific criteria, or spans across a long lapse of time or goes significantly back in time, is the mere fact that the “raw data” are at the undertaking’s disposal sufficient to trigger an obligation to respond in full, though the process of aggregating and searching information may prove rather burdensome?
In addition, experience with requests for information for the enforcement of EU competition rules can help predict possible questions and issues arising out of the application of SMIT.
For example, in the case of a request for information by DG COMP, where the Commission considers that a confidentiality claim is ill-founded, it can decide that the relevant information is to be disclosed. There is, as compared to competition law, no redress procedure contemplated in this case, and certain safeguards regarding the use of information, provided for under Article 8, are only available with regard to confidential information.
One other question is whether the principles relating to self-incrimination would apply also in this context, given that—as opposed to competition law—the requests for information would not be made in the context of an investigation against the undertakings themselves. On the other hand, if the information gathered can subsequently be used by the Member State against such undertakings, the latter may want to ensure they are not obliged to answer questions that would force them to admit that they are acting in breach of the principles governing the Internal Market.
The last question concerns the extent to which the principles elaborated by the CJEU with regard to the need to state reasons would also apply in this context. In setting out, at Article 5, some rather stringent limits to the Commission’s fact-finding ability under SMIT, the Proposal already seems to take into account the lesson learnt from the Cement judgement. While the context of the Proposal is slightly different, in that the main concern would not be the safeguard of the right of defence, but rather the need to avoid excessive administrative burden, it is still to be expected that requests for massive volumes of data, for reformatting information already provided, or for information that is in the public domain are unlikely to withstand the Court’s scrutiny.
The Proposal is currently undergoing its first reading in the European Parliament under the ordinary legislative procedure and significant amendments may still be made.
Once adopted, the impact of the Regulation on businesses will be difficult to predict as it will very much depend on the extent to, and manner in which, the Commission intends to use the new investigative tool. It may, for example, have a positive impact with regard to public procurement procedures, where Member States’ restrictive practices or legislation often limit, unduly, companies’ abilities to participate. Nevertheless, it is important that businesses are, in the first place, aware of the fact that SMIT is not meant to operate as an investigative tool against undertakings (subject to the caveat above) and that, in the second place, the cooperation required from undertaking under SMIT may still impose some burden on their resources.
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