Amsterdam Law School
LLM European Competition Law & Regulation
Master Thesis
———————————————————————————————————————————
Implications for the Competition Authorities of the institutional design laid down
in the Directive EU 2019/1 : Constant search for a balance between consistency in
enforcement and independence of the National bodies
———————————————————————————————————————————
Author
:Supervisor
:Stefano Piantedosi
Dr. Zlatina Georgieva
stefanopiantedosi10@gmail.com
Student N° 12878456
Table of Contents
I. The Process of Decentralization that led to the adoption of the ECN+ Directive 1a) The Regulatory Framework Prior to the Directive
1b) Recognition of Certain Shortcomings & the Report on Ten Years of Regulation 1/2003 1c) The Commission’s Public Consultation : Seeking for Improvements
1d) The Proposal for a Directive
1e) A Directive as the Most Suitable Legal Instrument 1f) Why The Need for a Double Legal Basis
II. The impact of Institutional Design choices on the Functioning of an Independent Administrative Authority
2a) Concept Analysis and Theoretical Models of Institutional Design
2b) Essential Characteristics for the Good Functioning of the Independent Authority. The LITER Formula
2c) Where does the EU's legitimacy to impose institutional design requirements heal from? Focus on the Principle of Effectiveness
2d) Some Practical Examples of Institutional Structures Present in Europe 2e) Considerations on Provisions Contained in the Directive
III. The need to ensure the outright independence of NCAs 3a) Analysis of the Notion of Independence
3b) Implications Deriving from a Correct Application of the Independence Principle 3c) Comparison of Independence Requirements with Other Regulatory Areas
3d) The Absolute Detachment of NCAs from Economic Interests ensured by the ECN+ 3e) Independence from the Political and Governmental Sphere
Introduction
In the current context of decentralization of the application of European antitrust law, the main question that this research wants to address concerns the institutional design provided for in the Directive EU 2019/1 (henceforth ‘Directive’ or ‘ECN+ Directive’). The critical issue arises whether this structure is actually appropriate to allow the competent authorities to carry out their duties effectively, in particular by analyzing it in connection with the component of their independence, that the Directive itself aims to expand and improve and which constitutes a fundamental
requirement to ensure coherency in the application of European competition rules.
Since the start of the decentralization process of competition law, the difficulty in organizing this complex multi-level governance has been to find a correct balance between two complementary and opposite elements, both of great importance : on the one hand there is the necessity to provide all the relevant authorities with the independence and operational autonomy they need in order to act objectively and free from external pressures capable to alter their activity; on the other hand, there occurs the issue of ensuring that uniform and effective enforcement is implemented within the European network. The main focus of the research has as its object this binomial composed on the one hand by the self-governance of the administrative competition agencies and on the other by the efficient and adequate enforcement of the competition rules within the internal market.
In order to answer the main question, this research begins by investigating in the first chapter what are the causes that led to the adoption of the ECN+ directive, thus clarifying what was the previous regulatory framework and what are the objectives pursued by the Directive; to conclude this section this work wants to make clear why the European legislator chose the directive as legal instrument and why he opted for a dual legal basis.
The second chapter of this work focuses on the theme of the institutional design of competition authorities. After having clarified the meaning of this concept and the possible implications deriving from it, we move on to list the main characteristics and qualities that an independent administrative authority must reflect in order to maximize its efficiency in carrying out its tasks. Subsequently, the aspect of the legitimacy of the EU to impose such institutional requirements is inspected.
The third chapter will deal more specifically with an element closely related to institutional design, namely that of the guarantees of independence provided by the directive in favour of competition authorities. We will then stress out the importance of the dual nature of independence, which
manifests itself both in relations with economic operators and with respect to governments and their political choices. In this perspective, the question to which this research aims to answer is whether
these guarantees are sufficient and appropriate to achieve the ultimate goal of making competition law enforcement more consistent and effective across the EU by way of a deeper decentralization.
Chapter 1 - The Process of Decentralization that led to the
adoption of the ECN+ Directive
In order to fully understand the proposal of the ECN + directive, it is first necessary to clarify its background. Since the origins of the European Communities, competition has constituted one of the few sectors of direct administration of the Community, that is, one of the few areas of action in which the institutions exercise, in addition to legislative competences, also the administrative activity necessary to implement it.
The latter is still carried out today by a specific directorate of the Commission (the Directorate-General for Competition or DG COMP) which has the task of exercising the administrative investigative, inspection, decision-making and sanctioning powers necessary to ensure application of the EU antitrust regulation.
Over time, on the one hand, the multiplication and complexity of the implementation tasks in this area, also due to the enlargement of the Union and, on the other hand, the opportunity to reduce the Commission's direct commitment, have led to a change in the regulatory design.
As a result of this change, competition remained under the direct responsibility of the Commission but, according to the provisions of the Financial Regulation of the Union (Article 58 paragraph a, titled ‘Methods of implementation of the budget’)1, it can be exercised through third party bodies, set up by national antitrust authorities. This is the start of the so-called process of decentralization, which took off concretely trough Regulation 1/2003.2
A. The Regulatory Framework Prior to the Directive
Regulation 1/2003 or the ‘Modernisation Regulation’, as popularly called, abolished the centralised individual exemption regime in the enforcement of art.101(3) TFEU (ex Article 81(3) EC) and decentralised the enforcement of arts 101 and 102 TFEU (ex Articles 81 and 82 EC) by giving the national courts and the national competition authorities (“NCAs”) alongside the European
Commission the power to apply these provisions in their entirety.3
1 REGULATION (EU, EURATOM) No 966/2012 of the European Parliament and of the Council of 25
October 2012 on the financial rules applicable to the general budget of the Union and repealing Council Regulation (EC, Euratom) No 1605/2002 - Historical source no longer in force. The document can be consulted at the following link :
https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32012R0966&from=EN
2 Ghezzi, F.. (2018). La proposta di direttiva europea in tema di rafforzamento dei poteri delle autorità
antitrust e i suoi effetti sulla quantificazione delle sanzioni in Italia.. 10.13140/RG.2.2.22363.05924.
3 Cengiz, Firat. "Multi-level governance in competition policy: The European Competition Network."
The transition from a highly centralized application of EU antitrust law, based on the decisions of the European Commission, to one that is mainly based on the Network of national authorities has been significant. The available empirical data are very eloquent in this regard: as a result of the establishment of the Network and the new geography of the enforcement produced by it, from 2004 until today 85% of the decisions pursuant to Articles 101 and 102 of the Treaty are due to the work of the national authorities and the number of decisions taken overall under European antitrust law has increased exponentially.4
The first concern resulting from this process was that the new system could jeopardise the
consistency in the enforcement of competition rules, by producing less uniformity in decisions, both for procedural issues and for the different structures, resources, and powers with which the NCAs are endowed. Indeed, ‘companies engaged in anti-competitive practices can face different outcomes depending on the country in which they are active. For example, businesses can in certain
jurisdictions manage to avoid fines by way of corporate restructuring, while in others this is not possible. A striking example of this is the “sausage gap”which appeared in Germany due to unclear rules on parental liability for anti-competitive conduct’.5
Therefore, ‘in order to regulate relations between the soon to become 28 competition authorities of Europe and to protect consistency in enforcement, a network was formed between the NCAs and the Commission which was named “European Competition Network”’ (ECN)’.6
This new apparatus has led to a marked Europeanization of the competition rules but, on the other hand, ‘much of the effectiveness of the decentralised enforcement now depends on the success of the coordination mechanisms between centrifugal pulls from the Member States towards their national legal systems and centripetal pushes from the Commission to safeguard uniform and consistent application’.7
B. Recognition of Certain Gaps & the Report on Ten Years of Regulation 1/2003
The shortcoming of Regulation 1/2003 was felt in the fact that it contained certain rules on the powers exercisable by the authorities but did not regulate national procedural rules nor institutional designs; ‘the procedures and sanctions for the application of the EU competition rules in the
4 Ibid 2
5 Robert Klotz, ECN+ Ante Portas, 2 Eur. Competition & Reg. L. Rev. 71 (2018)
6 Cengiz, Firat. "Multi-level governance in competition policy: The European Competition Network."
European Law Review 35.5 (2010): 661
7 Cseres, Kati, The Implementation of the ECN+ Directive in Hungary and Lessons Beyond (November
19, 2019). Amsterdam Law School Research Paper No. 2019-40; Amsterdam Centre for European Law and Governance Research Paper No. 2019-03. Available at SSRN: https://ssrn.com/abstract=3489903 or http://dx.doi.org/10.2139/ssrn.3489903
Member States were thus not harmonised by Regulation 1/2003 and they are only subject to general principles of EU law, in particular, the principles of effectiveness and equivalence, as well as the observance of the fundamental rights’.8
As regards the institutional setup of the NCAs, according to article 35 of the Regulation in question, each Member State had the only obligation to designate a competent authority (of a judicial or administrative nature) to verify compliance with the competition rules provided for by the
regulation itself. ‘Given this diverse procedural and institutional landscape, it has been questioned whether the decentralized enforcement system where NCAs operate under different national procedural rules and impose a variety of sanctions and remedies, could jeopardize effective EU law enforcement’.9 As Advocate General Kokott in T-Mobile Netherlands & Other argued in paragraph 85 of her Opinion:
‘in those circumstances, it is of fundamental importance that the uniform application of competition rules in the EU be maintained. Not only the fundamental objective of equal conditions of competition for undertakings on the single market but also the concern for uniform protection of consumer interests in the entire Community would be undermined if in the enforcement of the competition rules of Articles 81 EC and 82 EC significant disparities occurred between the authorities and courts of the Member States. For that reason, the objective of a uniform application of Articles 81 EC and 82 EC is a central theme which runs throughout Regulation No 1/2003’
Thus, at first in the “Regulation’s 5 Years Functioning Report” the Commission expressed that the differences in the institutional structure of the NCAs didn’t raise any particular issues for the application of articles 101 and 102 TFEU. Later on, after years from the entry into force of
Regulation 1/2003, following the doubts and criticisms regarding the consistency of the system of implementation of European competition laws, the Commission realised that the national
competition authorities still encountered non-negligible difficulties in the performance of their functions.
Therefore, in 2014 the Commission adopted a report on ten years of Regulation 1/2003. In this report, the Commission stated that, “to enhance EU competition enforcement for the future, the
8 Ibid 7
9 Cseres, K. J. (2017). Rule of Law Values in the Decentralized Public Enforcement of EU Competition
Law. In A. Jakab, & D. Kochenov (Eds.), The Enforcement of EU Law and Values: Ensuring Member States' compliance (pp. 182-199). OUP.
institutional position of NCAs needs to be reinforced while at the same time ensuring further convergence of national procedures and sanctions applying to infringements of EU antitrust rules”.10
As to the institutional position of the NCAs, the report declares that EU law leaves Member States a large degree of flexibility for the design of their competition regimes. Nevertheless, it continues by revealing that despite the lack of specific EU law requirements, the position of the NCAs had evolved in the direction of more autonomy and effectiveness; indeed many national laws contain specific safeguards to ensure the independence and impartiality of NCAs.
In this view, the Commission emphasizes the importance of ensuring that NCAs can execute their tasks in an impartial and independent manner. For this purpose, minimum guarantees are deemed to be necessary to ensure the independence of NCAs and their management or board members and to have NCAs endowed with sufficient human and financial resources. In order to achieve this result, the Commission points out that important aspects are the grant of a separate budget with budgetary autonomy for NCAs, clear and transparent appointment procedures for the NCA's management or board members on the basis of merit, guarantees ensuring that dismissals can only take place on objective grounds unrelated to the decision-making of the NCA and rules on conflicts of interest and incompatibilities for the NCA's management or board.
Subsequently, the Ten Years Report continues noting the problem of the different application of European law due to the different procedures and instruments available to the authorities of the various Member States, stating that important differences still subsist throughout the EU. In fact, while most NCAs now have the same main working tools as the Commission, some still lack fundamental powers, e.g. to inspect non-business premises.
Therefore, the Commission highlights the necessity to ensure that all NCAs have a complete set of powers at their disposal, which are comprehensive in scope and are effective. Important elements are, in this regard, the core investigative powers, the right of NCAs to set enforcement priorities, key decision-making powers and the necessary enforcement and fining powers to compel
compliance with investigative and decision-making powers.11
10 Communication from the Commission to the European Parliament and the Council : Ten Years of
Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives, COM (2014) 453
In sum, the Commission indicated through the Communication that ‘limitations in NCAs’ tools mean that undertakings engaging in anticompetitive practices may face very different outcomes in proceedings, depending on the Member State in which they are active. For instance, Articles 101 and 102 TFEU may be enforced ineffectively or not at all because evidence of anti-competitive practices cannot be obtained or because undertakings can escape liability for fines’.12
C. The Commission’s Public Consultation : Seeking for Improvements
In order to seek solutions to the critical issues highlighted in the ‘ten-year report on Regulation 1/2003’, in 2015 the European Commission decided to start public consultations on how to
empower NCAs to be more effective enforcers, starting from the assumption that NCAs play a key role enforcing the EU antitrust rules alongside the Commission, but there is potential for them to do much more. As already mentioned, the main problem lies in the fact that EU law (Regulation 1/2003) gave NCAs the competence to apply the EU competition rules, but it did not tackle the means and instruments by which NCAs apply those rules. As a result, NCAs encounter difficulties in carrying out their work and in tapping into their full potential.13 ‘The four key areas of action were identified, namely to guarantee that the NCAs have : (1) adequate resources and are
sufficiently independent in their enforcement of EU competition rules (2) an effective enforcement toolbox (3) are able to impose effective fines (4) have effective leniency programmes in place to facilitate applying for leniency in multiple jurisdictions.
D. The Proposal for a Directive
The consultation was followed by several meetings organized by the Commission to consult other authorities, Ministries and to seek stakeholders’ advice again. It turned out that the decentralized system of enforcement of European antitrust law initiated by Regulation 1/2003 was unable to express its maximum potential and some changes were deemed necessary.
Therefore on 22 March 2017 the European Commission presented the proposal for the ECN+ Directive, the aim of which was to empower the competition authorities of the Member States to be more effective enforcers and to assure the proper functioning of the internal market, which is part of the Commission Work Programme 2017 and is based on enforcement experience in the ECN since 2004.
12 J. Malinauskaite, Harmonisation of EU Competition Law Enforcement (2020) - Springer International
Publishing. Page 117
13 European Commission, ‘Empowering the national competition authorities to be more effective
The primary ambition of this Directive, according to the Commission, is to ensure that the national authorities, when they are required to apply European law, do so with the appropriate minimum tools and guarantees necessary to carry out their activity in the most appropriate way.
This setup allows a fairly homogeneous application of EU law that is capable of achieving the objectives of the proposed Directive, while respecting the peculiarities of national legal traditions. In this way, Member States remain free to impose higher and stricter standards according to their needs. For example, the Member States will be free to design, organise and fund their national competition authorities as they see fit, provided their effectiveness is ensured.14
The objectives pursued by the proposed directive are then explained in the first part of the Explanatory Memorandum delivered by the Commission in 2017, which states as follows :
“Regulation (EC) No 1/2003 did not address the means and instruments by which NCAs apply the EU competition rules and many do not have all the means and instruments they need to effectively enforce Articles 101 and 102 TFEU”. The Memorandum continues by calling for the need for a directive that entitles NCAs to be more effective enforcers of the EU competition rules to ensure that NCAs have the necessary guarantees of independence and resources and enforcement and fining powers. The Commission in this document clearly explains that the removal of obstacles in national laws that prevent NCAs from working efficiently, will positively affect the competition into the internal market and this will also prevent consumers and businesses from suffering a
disadvantage resulting from these measures. “Moreover, enabling NCAs to effectively provide each other with mutual assistance will ensure a wider level playing field and safeguard close cooperation within the ECN”.15
E. A Directive as the Most Suitable Legal Instrument
The conclusion of the present chapter will focus on why the choice of using a Directive as legal instrument to regulate this matter and why is it founded on a dual legal basis. In fact, this analysis will help us understand how vast the scope of the ECN + Directive is. We will now see that the only basis for the implementation of the competition rules has not been considered sufficient, while the legal basis for the harmonization of the rules governing the internal market has been used (in this case as in others) for the purpose of maximizing the efficiency of national enforcers.
As we have seen so far, the directive aims to improve the efficiency of national competition authorities without however wanting to eliminate the traditional legal differences and institutional specificities that exist in MSs’ domestic systems.
14 J. Malinauskaite, Harmonisation of EU Competition Law Enforcement (2020) - Springer International
Publishing. Page 119
According to Article 288 (3) TFEU, Directives are binding as to the result to be achieved, but shall leave the national authorities the choice of form and methods. This instrument sets a regulatory framework and common objectives that each member state will have to achieve within more or less wide margins of autonomy.
Consequently the directive was chosen as the best tool to ensure that the NCAs had the necessary guarantees to carry out their activities effectively, without however changing the peculiarities of the national legal systems. Compared to a regulation, in fact, it leaves the states the choice of the most appropriate and convenient means of implementation. Furthermore, the directive is to be considered as a flexible tool that allows to give guarantees of independence, resources and sanctioning powers to NCAs, without depriving them of the possibility to go further by imposing higher standards if they deem it opportune. In spite of its flexibility, a directive allows for uniform and detailed requirements to be put in place. Such detailed rules have the positive effect of maintaining
incentives for companies to take advantage of leniency programs, in which the core problem results from the differences between the various internal systems that generate legal uncertainty about how the application of the companies will be treated.16
Therefore, the choice of the directive was deemed the most respectful of the objectives pursued, as it allows for the provision of minimum standards to be adopted in individual Member States, without having to impose a common detailed discipline; as already mentioned, the resulting advantage is that governments can provide national competition authorities with additional powers in line with their peculiarities.
F. Why The Need for a Double Legal Basis
Let us now analyze the legal basis on which the adoption of the Directive was proposed; the first particular feature to be noted is the double basis on which it is based.
First, it has to be clear that, ‘in accordance with the principle of conferral, every binding act the Union adopts must have a legal foundation either in the Treaties or in a valid pre-existing normative act; such foundation is known as the ‘legal basis’ of the act. This provision indicates who may adopt the act, what the act may contain, and what procedure must be followed to adopt it’.17
Once this concept has been clarified, it must be understood that the general rule is to choose one and only one legal basis to legitimize an act. Nonetheless, ‘with the growth of policy areas,
16 Ailsa Sinclair, Proposal for a Directive to Empower National Competition Authorities to be More
Effective Enforcers (ECN+), Journal of European Competition Law & Practice, Volume 8, Issue 10, December 2017, Pages 629-630
17 Catherine Barnard & Steve Peers, European Union Law (2017, 2nd Edition) - Oxford University Press,
however, the coherence and overlap between separate legal bases grew as well. Double legal bases were necessary to implement measures that have multiple aims, one of which not being
incidental’.18
The Court of Justice of the European Union (“ECJ” or “CJEU”) also treated this issue in the important ruling 'Titanium Dioxide’ in 1991. On that occasion the Court explained that when, according to its aim and content, it is not possible to identify a 'center of gravity' of a directive, then it is legitimate to base it on a double legal basis.
The current proposal is based on both Articles 103 (“implementing competition measures” basis) and 114 TFEU (“harmonisation of the internal market” basis), because it pursues a two-fold policy. As concerns article 103 TFEU, its function is to ensure the full effectiveness of the competition rules, by assuring that NCAs have the means to be more effective enforcers of articles 101 and 102 TFEU. In particular article 103(2) (a) aims at ‘ensuring compliance with the prohibitions laid down in article 101 (1) and 102 by making provision for fines and periodic penalty payments’.
However, as stated in Titanium Dioxide, the choice of the legal basis must be based on objective factors which are amenable to judicial review, the most important being the aim and content of the act. Following this jurisprudence, it seems clear that the aim and content of the proposed Directive go beyond the basis of the sole article 103 TFEU. Indeed, as appears from its wording, the ECN+ is concerned indissociably with both the effective implementation of the competition measures and the elimination of disparities in conditions of competition (article 114).
To better explain the aspect of the correlation with article 114, we highlight three fundamental objectives that the directive aims to achieve in order to improve the internal market.19
The first of these is tackling national rules which prevent NCAs from being effective enforcers; this aspect is linked to the effectiveness considerations that we will discuss in Chapter 2 in relation to the appropriate institutional design that NCAs should take on.
The main risks in this regard are that national rules may prevent the imposition of fines that have a truly deterrent effect for companies that fail to comply with the competition rules. We can also find this problem with regard to differences in leniency programs, evidence gathering or guarantees of independence. In each of these areas the problem is that an irregular implementation of Articles 101 and 102 TFEU in the Union will have the effect of distorting the internal market and undermining
18 T. Hoekstra, ‘Double Legal Basis, Identical Procedures Versus Compatible Procedures’ - EU Law
Foundations, ‘The Institutional Functioning of the EU’, 2010-2011 Volume 1; Maastricht Centre for EU Law
its functioning. For this reason, ECN + aims to neutralise the distortions existing between the various national systems, in order to improve and standardise the protection of companies and consumers in Europe.
The second reason for the Directive to be based on Article 114 refers to the necessity of ensuring that the same guarantees and instrumentsare in place for national competition law when it is applied in parallel with the EU competition rules (this aspect will be dealt with in the third chapter of this thesis with regard to the independence characteristics of the competition authorities) : since most NCAs apply national competition law provisions in parallel to articles 101 and 102 TFEU, the proposed Directive would inevitably have an impact on these national provisions. Hence it follows that, as Dr. Sinclair asserts in her above-mentioned work, if the same guarantees and instruments were not in place for national law when it is applied in parallel with Articles 101 and 102 TFEU this would cause legal uncertainty and risk undermining the level-playing field.
The last reason for the double legal basis has to be found in the need to put in place effective rules on mutual assistance, in the absence of which the whole system of competition enforcement in the EU risks to be undermined. In this view, a major issue put forward by Dr. Sinclair is that ‘the majority of NCAs cannot notify key enforcement measures or request the enforcement of their fines cross-border if the infringer has no legal presence in their territory. Such companies currently have a safe haven from paying the fine. This is a growing issue of concern as in the digital era, many companies sell over the Internet to potentially numerous countries but may only have a legal presence in e.g. one Member State’. This is why the ECN+ wants to provide ‘for a system for the cross-border notification of preliminary objections to alleged infringements of Articles 101 and 102 TFEU and decisions applying these Articles, as well as the cross-border enforcement of fines imposed by NCAs’.
After having discussed the key points of the previous legal context, as well as some of the main features and objectives of ECN+, the present research continues by focusing on the concept of institutional design and the implications it can have on the functioning of an independent agency. It then goes on to expose the theoretical framework defined by the so-called LITER principles, which is useful for understanding what are the qualities that an authority must reflect in its institutional architecture in order to be considered efficient and adequately managed. Finally, after analysing the legitimacy of the EU to impose institutional design requirements on Member States, some
Chapter 2 - The impact of Institutional Design choices on the
Functioning of an Independent Administrative Authority
As described so far, the competition policy is a system of actors and rules which as a whole is aimed at protecting and improving the competitive dynamics of markets and their efficiency in general. Moreover, in Europe this policy has been more important than elsewhere, being always influenced by the primary objective of creating a single internal market for all Member States. However, despite its importance, the European competition policy has been characterized by an uneven institutional design and a discontinuous evolution; this is basically due to the succession of different political patterns, existing constraints of various kinds and also to fortuitous events,20 which have followed one another since the beginning of the decentralization process.
The result of this process, as explained in the previous chapter, was to assign powers and
responsibilities relating to the definition and implementation of the competition rules to multiple actors located in different governance levels. In this system, none of the actors can work
independently from the others. This vertical dimension is crucial to fully understand the institutional design of the European competition policy. In addition, the vertical dimension integrates
horizontally with at least two important "parallel domains" of the competition policy: alongside the independent administrative bodies (NCAs and EU Commission), there are in fact the national courts that perform the role of private enforcers of antitrust law.21
A. Concept Analysis and Theoretical Models of Institutional Design
Competition policy therefore presents itself as a dense network of vertical and horizontal
relationships that define the institutional environment in which competition takes place, giving rise to numerous competence overlaps and strong links of interdependence. Organizing the distribution and use of these competences in a timely and efficient manner is precisely what the institutional design of the various authorities must aim to do.
However, to better understand the evolution of the structural setup of competition authorities, it is good to first clarify what are the characteristics of a proper institutional design that must be respected by an agency’s structure in order to work at its best. An interesting starting point to approach this topic, is by pointing out how much it has been underestimated in recent years. Indeed,
20 A. Manganelli, A. Nicita, M.A. Rossi, ‘The institutional design of European Competition Policy -
European University Institute, Florence (Robert Schuman Centre for Advanced Studies)
to date, there has been no serious question about how much and how the choices regarding the institutional design of an agency can influence its functioning.22
According to scholars, there are two main theoretical models to which the many types of
institutional structures present today can be linked : those that align with contingency theory and those that can be traced back to the theory of structural change.23 According to the first, there is no one best way of organizing an agency, and an organizational style that is effective in some
situations may not be successful in others, so the optimal structure is contingent upon various internal and external constraints. In the theory of structural change, on the other hand, the assumption is that organizational forms are the mere result of political considerations.
B. Essential Characteristics for the Good Functioning of the Independent Authority. The LITER Formula
Whatever the setup model chosen, the important thing is that each agency reflects certain
characteristics in order to maximize its efficiency. These features have been shrewdly categorized as LITER principles by the seminal work of Prof. Annetje Ottow and help us to understand in a simple, logic and clear way the essential requirements of a good institutional organization.24
Because of their simplicity of expression and at the same time their clarifying role, this research wants to support the idea that respect for these principles should be taken into account by each NCA in the current implementation phase of Directive 2019/1. Indeed, it is believed that this may have the positive effect of standardising the principles of good administration across the Member States. The purpose for which they were conceived and studied by Prof. Ottow was to create a transversal uniformity between the various regulatory sectors. In addition to this aim, it is argued here that the same principles can also achieve a homogeneity of the institutional design requirements imposed by the various Member States specifically on the competition authorities.
The first letter of the acronym refers to the concept of Legality. Although design is an
organizational issue, it must still follow some basic rules applicable to the decision-making process, by virtue of the principle of legality. For example, if a competition authority imposes a penalty, it will also have to respect certain legal safeguards such as compliance with the fair process.
22 It should be noted that the literature on this issue has developed mainly in the context of
organizational and political sciences, rather than in the legal sphere.
23 F Gilardi, ‘Policy Credibility and Delegation to Independent Regulatory Agencies: A Comparative
Empirical Analysis’ (2002) 9 Journal of European Public Policy 873; K Yesilkagit and J Christensen, ‘Institutional Design and Formal Autonomy: Political versus Historical and Cultural Explanations’ (2010) 20 Journal of Public Administration Research and Theory 53.
24 A. Ottow, ‘Market and Competition Authorities : Good Agency Principles’, Published to Oxford
Scholarship Online : April 2015, P. 98 - Print ISBN-13: 9780198733041 - DOI:10.1093/acprof:oso/9780198733041.001.0001
The second letter of the formula refers to Independence. The meaning of this element and its absolute importance in defining the institutional design of an NCA will be analyzed more thoroughly and comprehensively throughout the next chapter. Suffice it to understand for the moment the absolute need to ensure that the authorities take decisions as objectively as possible and without being subject to external influences; this affects, for example, the way in which the board is appointed and the high technical expertise of the staff of the authority.
If independence is one side of the coin, the other side is represented by the Transparency (the T in the LITER scheme). Transparency consists of the requirements for accountability. Specifically, it is the obligation of the authority to draw up annual action plans, submit reports to political
institutions, as well as to organize meetings with parliamentary committees and advisory bodies. In addition, the authority will be required according to the transparency principle to publicly provide reasons and timely data relating to each of its decisions. The principle at issue must also guide the entire appointment procedure of the board of directors and must illuminate any relationship and communication between the agency and the stakeholders.
All the aspects just mentioned allow the authority to appear reliable and solid, increasing its independence and therefore its legitimacy.
The penultimate requirement identified by Prof. Ottow is that of Effectiveness. This element is linked in an essential way to the organizational setup of the authority. A well-chosen governance model allows competition and market authorities to achieve better results and to attain the goals set by the government, while respecting the boundaries of their legal framework.25
The last component of the LITER principles coincides with the Responsibility of the agency, which encompasses many facets. It means the general duty of the agency to demonstrate good practice through its daily work, its values and its perspectives and ideas. By establishing well-defined ethical codes, fair decision-making processes, clear internal compliance procedures, they show authority and responsibility for their behaviour and actions’.26
C. Where Does the EU's Legitimacy to Impose Institutional Design Requirements Hail From? Focus on the Principle of Effectiveness
The research continues by exploring the legitimacy of the European Union to impose requirements on the institutional setup of national authorities. These requirements are neither foreseen directly by
25 OECD report (n7) 19 26 Ibid 21, P. 101
the Treaties, nor is there an explicit legal basis in the Treaties for their adoption (except in the fields of the ESCB and data protection27).
As we know, the Union can only act within the limits of the powers conferred on it by the principle of Conferral (art. 5 TEU) and if it entrusts the enforcement of EU law to state authorities, then it should leave them the freedom to set up their own procedural rules (and remedies therein) which govern the application of EU law, in accordance with the principle of procedural autonomy28 of the Member State. So where does the European legitimacy to impose these requirements come from? The answer to this question must be sought in the principle of effectiveness, which intensity changes from sector to sector and also varies in time. Hence, it must be first acknowledged that effectiveness is a matter of degree, not a yes/no test.
It is important to understand that the reforms that have been launched in several regulatory sectors since 2009 to redefine the institutional requirements of independent agencies, for example in the telecommunications or nuclear energy sector, were not motivated by the fact that European law was deprived of its effet utile but rather by the finding that their efficiency could be improved.29
Therefore, the EU legislator exercises discretion in establishing the requirements related to the institutional set-up, with a view to ensuring greater efficiency. This raises a significant question in relation to the practice of judicial review : to what extent can the argument of the legislator's discretionary choice be stretched, and from what point on must the Court intervene to set limits to this phenomenon?
Upper limits would seem necessary to curb the legislative discretion to appoint Board Members of independent agencies. These limitations have been meticulously imposed in the banking sector, defining rigorous guarantees to protect the governors of national central banks. This is also
demonstrated by the right of appeal against undue dismissal of a national central bank governor to the ECJ and, by the Court's rulings it is clear that banks are considered an integral part of the EU administration.30 Beyond the banking sector, however, the design requirements that ensure the independence of the administrative authorities are not specified and therefore give rise to
interpretation issues. Making reference to ESCB guarantees to regulate other sectors is a solution that has been rejected by the CJEU; for example, in the ISTAT case, the Court was asked, inter alia,
27 ESCB: Arts. 130 and 131 TFEU and Art. 7 of TFEU Protocol 4 ; Data Protection: Art. 16(2) TFEU and
Art. 8(3) of the EU Charter on Fundamental Rights
28 ECJ, Case 51-54/71, International Fruit Company, §3 and 4 29 Ibid 25, P. 7
30 Judgment in Joined Cases C-202/18 :Ilmars Rimsevics v Latvia and C-238/18 European Central Bank v
whether the guarantees of independence provided for central bank governors could by analogy be extended to electronic communications National Regulatory Authorities (hereinafter NRAs). The negative response of the ECJ to this request was justified by the 'fundamentally different functions' performed by central bank governors compared to the NRAs of the other regulatory sectors.31 The fact that the Court made clear on that occasion that in other areas of law the institutional design requirements cannot be extended as for the ESCB, does not help us understand how far these requirements can go in the antitrust area.
Furthermore, the variation in the degree of intensity of the institutional design requirements (and therefore the extent of the discretion of the European legislator) does not even seem to depend on whether they are prescribed at the primary or secondary level of the European legal order.32 To give an example, in the data protection sector, the institutional design requirements that
guarantee the independence of the authority are found in the EU Charter of Fundamental Rights and in the TFEU, respectively in articles 8 (3) and 16 (2). However, these requirements do not seem significantly different from those imposed in other sectors only through secondary legislation. Therefore, in the competition sector, where there is no specific legal framework that identifies the organizational characteristics of the independent authorities, nor was this framework created by Directive 2019/1, questions have been raised whether these characteristics could be derived from jurisprudence.
Nonetheless, the EU legislator’s right to impose such obligations is believed to be a non-judicable issue in most areas of law. Indeed, the Court would intervene to limit that right only in extreme situations where the legislator has committed serious errors of assessment and imposed
requirements which are manifestly unreasonable in the view of ensuring the effet utile of the European competition rules. Moreover, the very nature of the European legislative process makes such a hypothesis very unlikely to occur.33
Therefore, as mentioned at the outset of this paragraph, the European discretion to impose these requirements revolves around the principle of effectiveness. The jurisprudence of the Court has adopted a teleological approach centred around this principle which is logically extendable to any area of European law where the independence of the administrative authorities must be ensured.
31 C-240/15, §43
32 Topic introduced by AG Campos Sánchez-Bordona, Opinion in case C-240/15, §§48-50 33 M Sousa Ferro, Institutional Design of National Competition Authorities: EU Requirements
First, this principle was already provided for in article 35 (relating to the institutional architecture of the NCAs), which provides that the authorities must apply the competition rules in “in such a way that the provisions of this regulation are effectively complied with”. As reiterated by the ECJ, the “authorities so designated must, in accordance with the regulation, ensure that those Treaty articles are applied effectively in the general interest”.34
Furthermore, in the case law of the ECJ developed in other areas of regulation, we can find further clarifications on the consequences of the principle of effectiveness on the institutional design of the administrative agencies, applicable by analogy to the competitive context. Consolidated case-law regarding the institutional structure of the NRAs in the telecommunications sector says that :
“§24 Member States have the obligation, when they transpose a directive, to ensure that it is fully effective, whilst retaining a broad discretion as to the choice of methods. §25 It must also be observed that the freedom to choose the ways and means of ensuring that a directive is implemented does not affect the obligation imposed on all Member States to which the directive is addressed to adopt all the measures necessary to ensure that the directive concerned is fully effective in accordance with the objective which it pursues. §26 (…) autonomy may be exercised only in accordance with the objectives
and obligations laid down in that Directive”.35
Here we want to express the thought that the same rationale of the Court mentioned above can be applied analogically in the competitive field, in order to identify the institutional setup requirements that NCAs must have. This principle implies that structures must be put in place to ensure that the exercise of the rights conferred by Articles 101 and 102 TFEU and the fundamental rights related to their enforcement are not impossible or excessively difficult in practice.
D. Some Practical Examples of Institutional Structures Present in Europe
The research will now focus on the characteristics of the institutional set-up of the NCAs in the context of the European Competition Network.
In the first chapter, the development and functioning of the Network was inspected; we know that it reflects a hierarchical structure, with the Commission playing the role of supervisor of the works and giving substantial guidelines to the national authorities to standardise and homogenise their work and thereby increase the efficiency and productivity of the entire implementation mechanism of the European antitrust rules. The focal point of this section is precisely to study this cooperation
34 C-439/08, §56
scheme, critically evaluating its weak and strong points in order to find out what is the right balance between the harmonization led by the EU Commission and the independence of national enforcers within the institutional structure defined by the ECN+.
Nowadays the Commission and the NCAs assume different institutional structures. Let's see three main examples of how such models can be shaped.36 We first describe that of the Commission, which in a harmonization perspective should theoretically inspire the evolution of the other models, being the Commission at the top of the ECN pyramid. This body is made up of a college of 27 commissioners, appointed every 5 years. The Commission's system provides that all powers are in the hands of a single authority, which will therefore be able to conduct investigations, make decisions and exercise redress powers. Another type of institutional architecture is represented by models such as the Spanish one, in which there is an administrative separation between the investigation phase and prosecution on the one hand and the decision-making phase on the other. A third model of competition authority consists of an administrative body with investigative and prosecution powers, flanked by a Court that decides on the imposition of the fine (e.g. the Austrian competition authority). Hence, in this panorama in which very different characteristics are present between one model and another, this work wants to express an opinion on what are the institutional design obligations, especially arising from the principle of effectiveness, that the ECN + Directive should have standardised or however regulated in a different way than it did.
E. Considerations on Provisions Contained in the Directive
The first aspect we consider is that of the number of NCAs. According to Article 2 (1), Member States continue to have the freedom to concentrate the various tasks and powers in the hands of a single administrative competition authority. This solution respects both the autonomy of the States and the principle of effectiveness, since it does not seem to affect the agency's operations in any way.
A second element that we want to evaluate refers to Article 4 of the proposed directive. We will analyze in more detail the independence and accountability requirements proposed by this article in the next chapter. In this section of the research, the reader's attention should be just directed to article 4 (2) (c); it requires staff and decision makers within the agency to “refrain from any action which is incompatible with the performance of their duties and exercise of their powers”.
36 Francisco Enrique Gonzalez-Diaz and Alvaro Fomperosa Rivero, 'European Competition Law
Here we want to make one criticism against the lack of clarity of the obligation imposed by the article, which causes it to be interpreted differently in the various Member States. It would have been preferable for the Directive to define more precisely and concretely an incompatibility regime for NCA Board Members, in the footsteps of how the European legislator has done in the field of Data Protection.37
Another gap which could be identified in the Directive concerns the requirements applicable to the bodies charged with carrying out the judicial review in order to ensure the effectiveness of
European law. Since a court has the power to confirm or overturn a decision of an NCA, it is necessary that the same guarantees of adequacy of the financial and human resources provided for the NCA are also provided for the courts enabled to intervene on their decisions, so that it is
ensured the effective and correct application of the antitrust communication rules. If these courts are not provided with sufficient financial, technical and technological resources and the technical expertise adequate to understand and evaluate the merit of the case, its ruling would not be able to safeguard the effet utile of Articles 101 and 102 TFEU.
Moreover, it is believed that the Directive could have been more specific with regard to the
requirements of adequate expertise of the NCA staff. It could concretely define a procedure which ensured transparency in the appointment of the Board Members. This could be achieved, for example, by punctually listing all the technical skills and personal qualifications necessary to fill certain roles, thus avoiding possible misunderstandings related to the generality of the text of article 4 of the Directive.
Finally, another shortcoming found in the institutional set-up of the NCAs as defined by the ECN+, regards the lack of a requirement linked to the minimum duration of the mandate of the Board Members. A risk linked to this aspect is that some governments may try to impose short-term mandates so that they can "meddle" more often in the management and therefore in the activity of the independent administrative authority of their country.
This chapter concludes by reiterating once again the importance of an adequate institutional set-up for the proper functioning of a national competition authority (as well as any other sectoral NRA).
37 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the
protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) - Arts. 52(3) and 54(1)(f) of the Data Protection Regulation
In the next chapter, the relationship between institutional design and authority independence will be analyzed in detail. The way in which the independence requirement is implemented in the
governance structure of an agency will have a significant influence on its decisions; a sufficient degree of independence is a key factor for effective and satisfactory enforcement of the competition policy.
Chapter 3 - The need to ensure the outright independence of
NCAs
In this final chapter, the research focuses on the examination of the characteristics of independence that the ECN+ aims to ensure to national competition authorities.
The need for this requirement for the correct application of Articles 101 and 102 TFEU is not a new concept, but it is widely accepted internationally by now. One example is the 2013 OECD
(Organisation for Economic Co-operation and Development) work on indicators that measure the strength and scope of antitrust regimes, which states that independence of competition authorities is one of the indicators as there is broad consensus among OECD countries that it constitutes good practice for competition regimes.38 A subsequent OECD survey also showed that most of the responses indicated 'greater independence' as a key factor for a better realisation of the competition law objectives.39
Notwithstanding the acknowledged importance of the principle at issue, the absence of enforceable safeguards at European level aimed at ensuring independence in the application of antitrust rules, could generate on the NCA the risk of being subject to external pressure from other public or private bodies, even if they are formally independent according to national law. This is why during the drafting of Directive 2019/1, the European legislator recognised the need to harmonize the independence requirements of the NCAs to ensure that they were completely free from any political and market influence.
Before going into the substance of the Directive, it is useful to shed some light on the meaning of the term independence and its purpose in the specific context of the enforcement of Articles 101 and 102 TFEU.
A. Analysis of the Notion of Independence
Firstly, it must be clear that the concept in question absolutely does not coincide with the absence of control nor with the freedom to act at one's convenience. On the contrary, the competition
authorities have been assigned powers and resources to perform tasks in the general interest, so it is right that there are adequate controls to verify their correct management.
For this reason, the other side of independence is deemed to be accountability, the understanding of which concept is necessary to fully grasp the meaning of the principle of independence.
38 E. Alemani and others, ‘New Indicators of Competition Law and Policy in 2013 for OECD and
non-OECD Countries’ (2013) OECD Economics Department Working Papers, No. 1104, OECD Publishing
39 OECD, Global Forum on Competition, ‘The Objectives of Competition Law and Policy: Note by the
This inseparable binomial has been clearly recognised by the European legislator, who put it in writing in Article 4 (1) of the proposed Directive, stating that the NCAs must be “subject to accountability requirements and without prejudice to close cooperation between competition authorities in the European Competition Network”.
Another hint that helps us reconstruct the sense of the principle of independence in the field of competition law comes from a Report of the International Competition Network. According to that, it means that the actions of the competition authorities “should be based on the facts and the law and not on political considerations”.40
A final consideration aimed at completing the notion of independence concerns the tasks that the authority must carry out.41 The crucial point is to understand what types of controls and interference are appropriate to allow NCAs to perform their tasks. As has been clarified by the CJEU in the VEBIC case, the task of the NCAs is the effective and uniform application of articles 101 and 102 TFEU in the general interest.42 The words of the Court are reflected in Article 4 (1) of the proposed Directive (“in the interests of the effective and uniform enforcement of those provisions”) and recital 13 (“in the common interest of the effective enforcement of European competition rules”). Once we have clarified the intrinsic meaning of the principle of independence in the organizational context of an NCA, let's move on to examine the possible implications of a failure or incorrect application of the principle itself and therefore what are the problematic issues to be addressed and resolved in this area.
B. Implications Deriving from a Correct Application of the Independence Principle
The most significant consequence linked to the authority's ability to act impartially and free from external influences is the growth of its legitimacy and credibility in the eyes of the stakeholders. Therefore independence also means stability of the agency, and this stability can influence, sometimes even significantly, the market trend. How can this occur? This is due to the fact that if the authority receives instructions from external bodies, this will have a direct impact on the legal certainty and predictability of the implementation of the competition rules. Consequently, the
40 International Competition Network, Competition Policy Implementation Working Group, Seminar on
Competition Agency Effectiveness, Summary Report (Brussels, January 2009), accessible at http://www.internationalcompetitionnetwork.org/uploads/library/doc376.pdf, at 25.
41 Wils, Wouter P. J., Competition Authorities: Towards More Independence and Prioritisation? – The
European Commission's 'ECN' Proposal for a Directive to Empower the Competition Authorities of the Member States to Be More Effective Enforcers (June 26, 2017). Proceedings of the New Frontiers of Antitrust 8th International Concurrences Review Conference (Paris, 26 June 2017) ; King's College London Law School Research Paper No. 2017-39. Available at SSRN: https://ssrn.com/abstract=3000260
willingness of the companies to invest on the market will be compromised by the uncertain outcomes that their investment will face.43
In order to act independently and at the same time to effectively apply the antitrust rules, a not negligible element for the NCA is to be provided with appropriate technical expertise and sufficient resources to carry out inspections, formulate an assessment and possibly defend the latter before the Courts. These characteristics and resources are also necessary in order to ensure the antitrust
agency's self-government with respect to market powers, which are always assisted by teams of expert economists and lawyers.
However, in the modern European context, it became clear that some competition authorities had lower human and financial resources than those of other Member States. Some, for example, are unable to simultaneously inspect all the locations of a cartel, thus decreasing the probability of finding all the evidence necessary for an effective and proportionate sanction of the cartel. Other NCAs sometimes lack the appropriate legal tools to prosecute and sanction the infringement of the competition rules.44
Another important aspect linked to the autonomy of the agencies has attracted the attention of the Community institutions in recent years: it is about the frequent lack of ability of the NCAs to decide which cases to inspect and in which order, commonly defined as a “priority-setting” requirement.45 This, like the other shortcomings highlighted, have the effect of jeopardizing the whole enforcement system of Articles 101 and 102 TFEU, which is based, as we know, on close and timely cooperation within the ECN. A reform to improve that cooperation mechanism was therefore necessary; this reform was reflected in the drafting of the Directive analysed in this research.
The aspects highlighted above concern substantial differences between competition authorities from different Member States. In the view of answering the main question of this research, that is
whether the organizational design of the competition authorities can be considered adequate to ensure the independence of the NCAs, and therefore their effectiveness in applying the competition rules, we are going to compare the competitive environment with other regulatory sectors.
C. Comparison of Independence Requirements with Other Regulatory Areas
43 Ailsa Sinclair, Proposal for a Directive to Empower National Competition Authorities to be More
Effective Enforcers (ECN+), Journal of European Competition Law & Practice, Volume 8, Issue 10, December 2017, 627
44 Ibid 39, p.
45 See The ECN Recommendation on the Power to set Priorities (available at
http://ec.europa.eu/competition/ecn/recommendation_priority_09122013_en.pdf) advocates for authorities to have greater flexibility to choose which cases to investigate.
There are in fact several provisions aimed at ensuring the independence of the authorities in the various regulatory sectors, and which basically reflect the result that the European legislator wants to pursue in articles 4(1) and (2)(a) to (d) and Article 5 of the proposed Directive.
We therefore examine the independence requirements, related to the institutional design of the authorities, as they are foreseen in other areas regulated at European level. We want to define through the following comparative study an overview that can help us understand what are the aspects that have required greater intervention by the legislator in the past, so as to derive useful ideas for improving the obligations imposed on national competition authorities. The sectors considered are the following : telecommunications, energy, railway, data protection and nuclear safety and radiological protection.46 These sectors were chosen because of the presence of specific institutional design requirements, which can be found in primary or secondary European law. First it should be noted that there is a clear absence of harmonization in the approach aimed at guaranteeing the independence of the agencies in the various sectors taken as a sample. Indeed, today EU law influences almost all branches of national law and fields of administrative activity in the way they are organised; however in some sectors it imposes significant institutional design requirements on the authorities and in others there is practically no obligation in this regard.
In all 5 sampled regulation sectors, it is required by EU law that National Regulatory Authorities (“NRAs”) : are functionally independent and legally distinct from any other entity, public or
private47; do not take instructions from other bodies on how to perform their functions (unless there are general policy guidelines that allow it according to the constitutional rules of the nation)48; have adequate financial and human resources49. In 4 regulatory areas, independent regulatory authorities
46 The comparison reported here was carried out by Prof. Sousa Ferro in his paper quoted in note 33
above. Available at SSRN: https://ssrn.com/abstract=3077495 or http://dx.doi.org/10.2139/ssrn.3077495, p. 3-5
47 Telecommunications: Directive 2002/21/EC, Art. 3(2). Energy: Directive 2009/72, Art. 35(4). Railway:
Directive 2012/34, Art. 55(1). Data Protection: Regulation (EU) 2016/679, Art. 52(1). Nuclear: Directive 2011/70/Euratom, Art. 6(2); Directive 2009/71/Euratom, Art. 5(2) (as revised in 2014); Directive
2013/59/Euratom, Art. 76(1)(a).
48 Telecommunications: Directive 2002/21/EC, Art. 3(3a) (after 2009). Energy: Directive 2009/72, Art.
35(4). Railway: Directive 2012/34, Art. 55(3). Data Protection: contrast the succinct independence requirement in Directive 95/46/EC, Art. 28(1), to the new requirements in Regulation (EU) 2016/679, Art. 52(2) and (5). Nuclear: Directive 2009/71/Euratom, Art. 5(2) (as revised in 2014)
49 Telecommunications: Directive 2002/21/EC, Art. 3(3) and (3a) (after 2009). Energy: Directive 2009/72,
Art. 35(5). Railway: Directive 2012/34, Art. 55(3). Data Protection: Regulation (EU) 2016/679, Art. 52(4). Nuclear: Directive 2011/70/Euratom, Art. 6(3); Directive 2009/71/Euratom, Art. 5(2)(c) and (d) (as revised in 2014); Directive 2013/59/Euratom, Art. 76(1)(b).
must have separate annual budget, which has to be made public50. In 4 out of 5, EU law requires the
Board of the authorities to be appointed with guarantees that they may only be dismissed if they no longer fulfil the previously defined conditions required for the performance of their duties; also in the energy and data protection sectors, there are well-defined rules on the length and renewability of mandates, and for railway and data protection sectors, the manner and criteria for appointment of decision-makers is also punctually regulated.
Nonetheless, only in 2 out of 5 areas it is provided by the law EU that the decisions of the NRAs are not
subject to suspensions or revisions by any authority, other than independent appeal bodies51.
With regard to the behavioural obligations incumbent on the independent administrative authorities, they must, according to EU law: act impartially in all the sampled sectors52; act transparently in 3 out of 5 sectors53; protect confidential informations in 3 sectors54.
On the accountability and judicial review of the NRAs, we do not find many precise institutional design requirements. In fact, only the competent telecommunications authorities are explicitly required to have their decisions subject to independent judicial review55; moreover, only in the energy sector among those sampled, the NRAs are obliged to send an annual report on the performance of their tasks56.
In light of the discrepancies in treatment highlighted, on the occasion of the consultation preceding the adoption of the proposed Directive,57 the fact that European law imposes institutional design
50 Data Protection: Regulation (EU) 2016/679, Art. 52(6). Nuclear: Directive 2009/71/Euratom, Art.
5(2)(c) (as revised in 2014). Telecommunications: Directive 2002/21/EC, Art. 3(3a) (after 2009). Energy: Directive 2009/72, Art. 35(5).
51 Telecommunications: Directive 2002/21/EC, Art. 3(3a) (after 2009). Energy: Directive 2009/72, Art.
35(5)
52 Telecommunications: Directive 2002/21/EC, Art. 3(3). Energy: Directive 2009/72, Art. 35(4). Railway:
Directive 2012/34, Art. 55(3). Data Protection: Regulation (EU) 2016/679, Art. 52(3). Nuclear: Directive 2009/71/Euratom, Art. 5(2)(e)
53Telecommunications: Directive 2002/21/EC, Art. 3(3) and (4). Energy: Directive 2009/72, Art.
35(4). Nuclear: Directive 2009/71/Euratom, Art. 5(2)(b) and (f) (as revised in 2014); Directive 2013/59/Euratom, Art. 77
54 Telecommunications: Directive 2002/21/EC, Arts. 3(5) and 5(3). Energy: Directive 2009/72, e.g. Arts.
8(5) and 10(8). Data Protection: Regulation (EU) 2016/679, Art. 54(2)
55 Telecommunications: Directive 2002/21/EC, Art. 4 56 Energy: Directive 2009/72, Art. 37(1)(e)
57 European Parliament resolution of 14 February 2017 on the Annual Report on EU Competition Policy
requirements to safeguard the independence of several national sector regulators, but not that of the NCAs, has been perceived as an “anomaly that should disappear”.58
So let's see how this issue was addressed in the Directive to ensure harmonization of the
independence requirements. Independence which, as we know, has a double face. One is autonomy from economic operators and business interests and the other concerns autonomy from governments and political interests in general.
D. The Absolute Detachment of NCAs from Economic Interests ensured by the ECN+ The decisions of the NCAs have strong repercussions on the macroeconomic equilibrium of the market, understood as the companies under investigation, the other competing companies and finally the customers.
Their decisions must therefore be based on their own and impartial judgment, with a view to ensuring an effective and uniform application of the competition policy, without favouring some economic actors over others. As stated by the ECJ, “a system of undistorted competition, as laid down in the Treaty, can be guaranteed only if equality of opportunity is secured between the
various economic operators.”59 Therefore, the Court considered it legitimate to entrust regulatory
tasks in the telecom sector “to a body independent of public or private undertakings offering
competing goods and/or services in the telecommunications sector.”60 Following the same rationale,
it is mandatory that NCAs are independent of any economic operator, given that their decision-making powers have a strong impact on all economic sectors.61
Art. 4(1) and (2) (b) and (c) of the Directive require Member States to guarantee the independence and impartiality of the NCA and that they will be subject to proportionate accountability
requirements. The staff of the agency and its decision-making body must “neither seek nor take any
instructions from any (…) public or private entity” and “refrain from any action which is incompatible
with the performance of their duties and exercise of their powers.” Recital 19 of the Directive adds
that they “should not be able to deal with proceedings for the application of Article 101 and 102 TFEU in which they have been involved (…)” and “should not have any interest in any businesses
58 Consultation response by the American Chamber of Commerce to the European Union (AmCham
EU), at 3; see also consultation response by the French Competition Authority, at 15 and 20, and consultation response by the Lithuanian Competition Authority, at 13, 15 and 16, all accessible at http://ec.europa.eu/competition/consultations/2015_effective_enforcers/index_en.html
59 Case : French Republic v. Commission, C-202/88, EU:C:1991:120, para. 51 60 Ibid 40
