The Council of the EU adopted the Directive of the European Parliament and of the Council to empower the competition authorities of the Member States to be more effective enforcers and to ensure the proper functioning of the internal market (also known as "the ECN+ Directive") on 4 December 2018. This brings enforcement of competition rules in the EU (including Ireland) in line with the digital age tackles illegal competition practices in the EU. The ECN+ Directive will likely enter into force early in 2019 with Member States then having two years to implement the ECN+ Directive.

Background

The Commission originally presented the ECN+ Directive on 23 March 2017 to enable Member States' competition authorities to be more effective enforcers of EU competition law rules. The Council has now adopted the ECN+ Directive.

EU competition law is found essentially in Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU):

  • Article 101 TFEU prohibits agreements between companies which restrict competition (e.g. by forming a cartel to fix prices or share markets).
  • Article 102 TFEU prohibits companies that hold a dominant position on a market from abusing that position (e.g. by discrimination or giving loyalty rebates to customers).

EU competition law rules

EU competition law rules are enforced by the national competition authorities (NCAs) of the Member States (e.g. the Irish Courts and the Competition and Consumer Protection Commission (CCPC)) in parallel with the European Commission (Commission). The NCAs and the Commission form a network called the European Competition Network (ECN).

As EU competition law rules are applied by all members of the ECN, the ECN provides a means to ensure their effective and consistent application. Through the ECN, the NCAs and Commission inform each other of proposed decisions and take on board comments from the other NCAs. In this way, the ECN allows the Commission and the NCAs to pool their experience and identify best practices.

Currently, differences in the application of these rules mean that businesses engaged in anti-competitive practices can face different outcomes of proceedings depending on the Member State in which they are active. For example, companies can in certain cases avoid fines by restructuring their businesses. Under the new ECN+ rules, NCAs are supposed to be able to better detect prohibited agreements, decisions or concerted practices and prevent an abuse of a dominant position.

The ECN+ Directive

The ECN+ Directive provides NCAs with a minimum common toolkit and enforcement powers ensuring that they will:

  1. Act independently when enforcing EU competition law rules and work in a fully impartial manner, without taking instructions from public or private entities.
  2. Have the necessary financial and human resources to carry-out their work.
  3. Have the powers needed to gather relevant evidence, such as the right to search mobile phones, laptops and tablets (e.g. on "dawn raids").
  4. Have adequate tools to impose proportionate and deterrent sanctions for breaches of EU competition law rules (there are rules on parental liability and succession so that firms cannot escape fines through corporate restructuring).
  5. Have coordinated leniency programmes which encourage companies to come forward with evidence of illegal cartels.

Following the entry into force of the ECN+ Directive, Member States will have two years to incorporate the new provisions into their domestic law.

In Ireland, EU competition law is applied and enforced by certain NCAs (i.e. Irish Courts, the CCPC, the Commission for Communications Regulation (ComReg) and the Director for Public Prosecutions (DPP)). However, the structure of competition law in Ireland means that the CCPC, ComReg and the DPP can only investigate possible breaches of EU competition law. Only the Irish Courts can decide if there has been a breach of EU competition law and is the only NCA in Ireland that can impose fines and custodial sentences (as well as awarding damages). Depending on how the Irish Government implements the ECN+ Directive, this structure may be significantly adapted.

What will this mean?

While many of the ECN+ powers are already a feature of the competition law system in Ireland, the CCPC (and the Irish Courts) will obtain greater powers to enforce EU competition law as a result of the ECN+ Directive. In particular Under Article 13(1) of the ECN+ Directive: "Member States shall ensure that national administrative competition authorities may either impose by decision in their own enforcement proceedings, or request in non-criminal judicial proceedings, the imposition of effective, proportionate and dissuasive fines on undertakings and associations of undertakings where, intentionally or negligently, they infringe Article 101 or 102 TFEU".

This is the crux of ECN+ for competition law in Ireland. Infringing companies present in Member States where NCAs lack effective fining powers are sheltered from sanctions and have little incentive to act in compliance with EU competition law rules. The issue is that the CCPC has no ability to either make a finding that there has been a breach of the EU competition law rules. Furthermore, the Irish Courts cannot impose civil fines for such a breach

If the CCPC were to be able to impose such civil fines, it would need to be able to make a decision that there has been a breach of Article 101 or 102 TFEU (though not, it appears, a breach of Irish competition law). It is currently believed that the CCPC will be given enhanced powers in this regard. How the CCPC will apply such sanctions in practice remains to be seen.

Alternatively, the Irish Government may seek to empower only the Irish Courts to impose civil fines for a breach of EU competition law (something they cannot do at the moment). Whether the CCPC and Irish Courts will also be given the power to impose civil fines for a breach of the domestic Irish competition law equivalents of Articles 101 and 102 also remains to be seen.

Impact on the Cartel Immunity Programme

Implementation of the ECN+ Directive will have an impact on the Cartel Immunity Programme run by the CCPC and the Director of Public Prosecutions (DPP). Only the DPP can grant immunity to companies (and individuals) from prosecution in relation to cartel activity (i.e. anti-competitive behaviour between competitors) in breach of EU (and Irish) competition law rules. There are a number of different approaches to immunity/leniency across the EU. This causes difficulties for applicant companies.

The ECN+ Directive seeks to increase legal certainty for companies looking to apply for leniency and thus to maintain their incentives to cooperate with the Commission and the various NCAs across the EU. This will be done by reducing the current differences between the leniency programmes applicable in the Member States. The ECN+ Directive transposes the main principles of the ECN Model Leniency Programme into law to seek to ensure that all NCAs can grant immunity and reduction from fines (something not possible currently under the Cartel Immunity Programme where the first successful applicant obtains full immunity while others receive nothing (e.g. no reduction in fines)).

Precisely how this will translate in Ireland (both in relation to the distinction between immunity and leniency, who grants leniency and whether it will also apply to breaches of Irish competition law) remains to be seen but the impact of this provision of the ECN+ Directive is likely to be significant for the CCPC in particular.