Germany: The Commission’s Informal Guidance Notice: A Way To Alleviate The Risks Of Antitrust Self Evaluation Under The New EC Competition Procedure Rules?

Regulation (EC) 1/20031 ("Regulation 1/2003") which will enter into force on 1 May 2004 brings about a fundamental reform to the procedural rules of European Competition Law. The changes place the burden of assessing whether an agreement is compatible with competition law entirely on undertakings and associations of undertakings and, at the same time, entitles national competition authorities and courts to comprehensively apply the competition rules of Articles 81 and 82 EC Treaty ("EC"). In order to provide the companies with support in the application of and operating on the new system, on 1 October 2003 the Commission has published its "Modernisation Package" relating to Regulation 1/2003. The package includes, inter alia, a Draft Notice on Informal Guidance2 which envisages an informal consultation of the Commission in cases of novel or unresolved questions. The Notice is designed to overcome cases of legal uncertainty resulting from the new system of self-evaluation.

The following article shall provide companies with an overview of the implications of the new system of self-evaluation with a particular view to the Draft Notice on Informal Guidance.

Practical Implications of the New System of Legal Exemption

Regulation 1/2003 only marginally affects the application of European competition law to agreement on the merits. The main effects of Regulation 1/2003 for the daily business of companies are of a practical and procedural nature: The increased risk of companies to act in violation of competition law because they incorrectly assessed their agreements under Article 81 EC, in particular Article 81 para. 3 EC. This aspect involves a two-fold element:

  • First, the new responsibility of self-evaluation of the law (below 1.) and
  • Secondly, the new responsibility of self-evaluation of the facts (below 2.).

With regard to the problem of self-evaluation of the law, except for the Draft Notice on Informal Guidance, the Commission has issued draft guidelines on the application of Article 81 para. 3 EC3 which explain in more detail the concept and the requirements of Article 81 para. 3 EC.

The New Responsibility of Self-Evaluation of the Law - Draft Notice On Informal Guidance

Regulation 1/2003 causes an actual change only in cases, where an agreement restrictive of competition is potentially not exempted from the prohibition of Article 81 para. 1 EC by virtue of a block exemption regulation and therefore does not benefit from this safe harbour. Where companies until now were able to obtain legal security, whether their agreement was in compliance with competition law by way of notifying the agreement to the Commission, from 1 May 2004 on, they have themselves to bear the entire risk of assessment.

The Counsel and the Commission believe that the companies are themselves generally well placed to assess the legality of their actions and to decide whether to go ahead with an agreement or conduct. Among the reasons for this assumption are the block exemption regulations, notices and guidelines published by the Commission which further assist the self-assessment of the companies. However, the Counsel and Commission also acknowledge that despite these elements, there might be situations of genuine uncertainty because they present novel or unresolved questions. In these situations Recital 38 Regulation 1/2003 grants companies the right to seek informal guidance from the Commission and receive an informal guidance letter. The Draft Notice on Informal Guidance ("Draft Notice") further substantiates this right.

Pre-Requisites for the Issuance of a Guidance Letter

According to the Draft Notice, the Commission will issue a guidance letter if the following cumulative conditions are met:4

  • The assessment of an agreement, decision or practice poses a "novel" or "unresolved" question, that is a question of application for which there is no clarification in the existing EC legal framework or publicly available general guidance nor precedent in case law, decision-making practice or previous guidance letter.
  • A first preliminary assessment by the Commission must lead to the conclusion that the clarification of the novel question through a guidance letter is "useful" in view of the economic importance of the agreement from the consumer point of view and with regard to the involved companies and their size.
  • The companies have comprehensively presented the information necessary to issue the guidance letter.
  • The question must relate to an agreement or practice, which is either applied or envisaged, provided that for an envisaged agreement or practice this has reached a sufficient degree of substantiation.

In contrast, a guidance letter will not be issued if the questions raised are identical or similar to questions pending in a case before the Commission, the Court of First Instance or the Court of Justice.5

Processing of a Request and Content of Guidance Letters

The Commission will in principle assess the question on the basis of the information in the request or upon later provision of information by the parties or own data. It may discuss the request with the Member States’ competition authorities respecting confidentiality. The information supplied with the request will remain with the Commission, even if the companies withdraw the request.6

If the requirements for a issuance of a guidance letter are fulfilled and the Commission has examined the question, the guidance letter will set out a summary description of the facts on which it is based and the principal legal reasoning of the Commission. It will be published on the Commission website.7

Effects of a Guidance Letter

A guidance letter does not prejudge an assessment of Community courts and does not preclude the Commission from or bind it in subsequent assessments. The Commission may for instance newly assess the agreement under a complaint received from a third party. Unless the complaint presents new aspects or developments, the Commission will, however, take into account the guidance letter. As a matter of fact the guidance letter does not bind the Member States’ authorities or courts.

Conclusion

An informal guidance letter might be helpful to get a "first feeling" of how the Commission assesses a certain case. 

However, it also includes some drawbacks and pitfalls:

  • It includes strict conditions under which it is issued.
  • In the absence of a binding nature on the Commission it provides legal certainty only to a limited extent and no legal certainty for future developments.
  • In the process of the analysis of the agreement or practice the Commission might inform national authorities about the agreement or practice and the guidance letter will be published.
  • From its nature the guidance letter cannot take into account future developments.

In conclusion, the guidance letter may be a useful instrument in certain situations, in particular in cases involving new and complex legal issues. The instrument has, however, certain deficiencies as described above, so that it does not suit all situations.

The New Responsibility of Self-Evaluation of the Facts – Effects on the Conclusion and Practising of Agreements

As seen above, the Draft Notice alleviates the risk of self-evaluation of the companies only to some extent. Besides, in any case it cannot do away with the risk of the factual self-evaluation: In order to carry out the legal self-evaluation of agreements which contain clauses restrictive of competition, the companies, beforehand, have to undertake a comprehensive factual analysis of their market position and the market position of their contractual partners on the relevant market. Only then can the parties estimate whether their agreement might be critical from a competitive point of view, whether any restraints of competition are appreciable under Article 81 para. 1 EC, whether the agreement meets the market share thresholds of a block exemption regulation and the like.

Till now, the parties had to disclose their market data under a form AB notification at least to the Commission which could conduct further investigation in case of doubts before issuing a decision. However, from 1 May 2004 on, the companies themselves have to analyse their agreement on the basis of their market data and, even more problematic, the market information provided by their contractual partners. As there is no duty to notify the agreement, it can be assumed that the contractual parties will be less willing to provide the necessary information and to analyse these. This problem can be conceived particularly in situations of vertical agreements, since one party usually does not have knowledge of and free access to the market data of the other party.

Particularly in cases of important agreements with parties which have a significant market position, it could therefore be advisable to let the other party contractually ensure its market position. It seems recommendable to include provisions

  • securing the market position present at the conclusion of the agreement and
  • during the exercise of the agreement as well as
  • to regulate the consequences of a relevant change of the market position during the course of the agreement.

Market Position at the Time of the Agreement Coming Into Effect

In order to secure the market position of the other party as provided by it, one party could for example include

  • an independent warranty that the contractual partner has a certain market position (for instance a position, which meets the requirements for an exemption under a block exemption regulation or under guidelines) or
  • the obligation to communicate the market data, which are relevant to the agreement and a guarantee that the market analysis has been carried out in a sufficiently comprehensive way and correct as to one’s best knowledge.

Market Position during the Course of the Agreement

It will also be more important in future to investigate the market development during the course of a restrictive agreement. In order to have oneself secured vis-à-vis the contractual partner, one might include into the agreement the duty of the other party to constantly analyse the market and to immediately notify the other party in case that a relevant change of the market is perceived. A breach of such duty could be sanctioned under an ordinary liability clause or by contractual penalties.

Consequences of Market Changes

In order to react to relevant changes of one’s market situation one could insert the following provisions:

  • Express clauses to adapt the agreement (such as the replacement of an exclusive licence by a non-exclusive license in case of a specific development of the market);
  • A right of termination, possibly combined with a duty to newly negotiate either the entire agreement or the clause restrictive of competition;
  • A provision that the agreement is automatically terminated, if because of a change of the market situation the agreement does not meet the requirements for an exemption anymore.

If and which measures are useful to minimize the risk, is, as a matter-of-course, contingent on the individual circumstances. In any case, in future, the parties to an agreement should take into account the importance of their market position and the development of their market position for their agreement to be compatible with competition law. They should, depending on the case, also secure themselves by liability clauses or other means.

Endnotes

1 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, OJ 2003 L 1/1; see already Schmidt, Antitrust Quarterly, Issue 2, p. 25.

2 Draft Commission Notice on informal guidance relating to novel questions concerning Article 81 and 82 of the EC Treaty that rise in individual cases (guidance letters), available at: http://www.europa.eu.int/comm/competition/antitrust/legislation/.

3 Communication from the Commission, Draft Notice, Guidelines on the application of Article 81(3 of the Treaty; available at: http://www.europa.eu.int/comm/competition/antitrust/legislation/. See also the Article of Jens-Peter Schmidt in this Antitrust Quarterly.

4 Draft Notice on Informal Guidance, Sections 9, 11.

5 Draft Commission Notice on Informal Guidance, Section 10.

6 Draft Commission Notice on Informal Guidance, Sections 16 to 19.

7 Draft Commission Notice on Informal Guidance, Sections 20 to 22. 

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions