The Dark Matter in EU Competition Law: Non-Infringement Decisions in the New EU Member States Before and After Tele2 Polska 1

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1 The Dark Matter in EU Competition Law: Non-Infringement Decisions in the New EU Member States Before and After Tele2 Polska 1 by Alexandr Svetlicinii Maciej Bernatt Marco Botta Forthcoming in the European Law Review Abstract Under Article 11 Regulation 1/2003 every National Competition Authority (NCA) of the EU Member States must notify the EU Commission about the opening of formal investigations for a potential infringement of Articles TFEU and the envisaged decisions in that regard. The enforcement statistics for the first decade of Regulation 1/2003 indicates that the number of notified envisaged decisions is only about 50 per cent of the number of investigations opened under EU competition law. The authors explore the resulting dark matter in EU competition law by looking specifically at the non-infringement and closure decisions adopted by NCAs under national competition rules. The paper assesses the compatibility of such decisions with the powers of NCAs under Article 5 Regulation 1/2003, as interpreted in the CJEU s Tele2 Polska case law. The paper shows how the CJEU s interpretation of Article 5 Regulation 1/2003 has contributed to the development of the dark matter in the decentralized system of EU competition law enforcement, which affects the ability of the EU Commission to monitor the enforcement activities of the NCAs. Keywords: EU competition law, national competition authority, Regulation 1/2003, noninfringement decisions, Bulgaria, Croatia, Czech Republic, Poland, Romania, Slovakia. 1 Paper presented at the 11th ASCOLA conference in Leiden (the Netherlands) on 30 June 2 July 2016 and at the 12th SIDE conference in Turin (Italy) on December The authors would like to thank the anonymous reviewer for the useful comments received. Assistant Professor, University of Macau, Faculty of Law. AlexandrS@umac.mo. The author acknowledges the support from the Multi-Year Research Grant MYRG FLL EU competition rules as legal transplants in the domestic legal orders: policy tools for market regulation and protection of competition of the University of Macau. Assistant Professor, University of Warsaw, Faculty of Management, Department of European Economic Law (Jean Monnet Chair); Scientific Secretary, Centre for Antitrust and Regulatory Studies of University of Warsaw. MBernatt@wz.uw.edu.pl. The author would like to thank Ondrej Blazo and Agata Zawłocka-Turno for their comments. Research, Max Planck Institute for Innovation and Competition, Munich (Germany). Marco.Botta@ip.mpg.de. 1 Electronic copy available at:

2 i. Introduction, the Dark Matter in EU Competition Law In 1933, Fritz Zwicky hypothesized for the first time the existence of dark matter in the universe. 2 Since dark matter does not emit visible radiation, the astrophysicist would not be able to directly observe it; Zwicky theorized the existence of the dark matter by noticing a large discrepancy between the expected mass of the universe, determined by its gravitational effects, and its actual visible mass. Article 11 Regulation 1/2003 is the cornerstone of the decentralized system of EU competition law enforcement. Under Article 11(3) Regulation 1/2003, every National Competition Authority (NCA) of the EU Member State has to notify the EU Commission of the opening of formal investigation for a potential infringement of Articles TFEU. 3 In addition, the NCAs are required to communicate to the EU Commission any envisaged infringement or commitment decision based on Articles TFEU. 4 The notification requirement allows the EU Commission to monitor the work of the NCAs; every draft decision based on Articles TFEU is subject to a peer-review process within the European Competition Network (ECN) before being adopted by the respective NCA. However, Article 11 has limits within its scope of application. Firstly, NCAs are not required to give notification of the investigations and infringement decisions based on national competition law. Secondly, Article 11 does not require NCAs to report information for any other type of administrative act except for the infringement and commitment decisions. If one expects there to be a comprehensive monitoring of the NCAs activities in enforcing the EU competition rules, the mass of the open investigations notified to the EU Commission should be equal to the mass of draft decisions communicated at a later date by the NCAs. However, under the mandatory notification obligations of the Regulation 1/2003 this is not the case. In the first decade of the enforcement of Regulation 1/2003, NCAs notified the ECN of the opening of 1759 formal investigations dealing with the breaches of Articles TFEU, while only 907 draft infringement decisions were later 2 Stöckli and Müller, Fritz Zwicky An Extraordinary Astrophysicist (Cambridge: Cambridge Scientific Publishers, 2011). 3 Council Regulation (EC) No 1/2003 of December 16, 2002 on the implementation of the rules on competition laid down in Arts. 101 and 102 TFEU. Art. 11(3). 4 Regulation 1/2003 on the implementation of the rules on competition laid down in Arts. 101 and 102 TFEU. Art. 11(4). 2 Electronic copy available at:

3 communicated to the ECN. 5 From these numbers we can infer the existence of a dark matter in the decentralized system of EU competition law enforcement: in 852 instances the NCAs communicated to the EU Commission the opening of an investigation, but failed to later give any notification of a final administrative act. This dark matter substantially reduces the ability of the EU Commission and other ECN members to monitor the work of the NCAs in the decentralized system of competition law enforcement, thus decreasing the consistency in the enforcement of EU competition rules throughout the Union. We hypothesize that three types of decisions adopted by NCAs could fall within the scope of this dark matter and therefore explain its existence. Firstly, NCAs often open investigations relying on both Articles TFEU and the corresponding national provisions as a legal basis. However, some NCAs might later adopt their final decision only under national competition law. Since, they either consider that the conduct does not trigger intracommunity trade which makes the EU competition rules inapplicable, 6 or they believe that the NCA is not authorized to adopt certain types of decisions under Regulation 1/2003. Therefore, while the opening of the investigations is communicated to the ECN, the final decision escapes from the duty of notification under Article 11 Regulation 1/2003 (i.e. nonnotified infringement decisions ). Secondly, due to reasons of legal certainty NCAs are required under the national competition law to adopt an administrative act that closes the investigation in the absence of any evidence concerning an infringement (i.e. closure decisions). 7 Closure decisions are not subject to the duty of notification under Article 11, even if the NCA previously notified the opening of investigation to the ECN. Finally, instead of closure decisions a NCA might adopt a non-infringement decision, stating that a particular market conduct subject to investigation does not breach competition rules. As further discussed in section ii, since the ruling of the Court of Justice of the European Union (CJEU) in Tele2 Polska the NCAs cannot adopt non-infringement 5 [Accessed January 11, 2017]. 6 See Botta, Svetlicinii and Bernatt, The Assessment of the Effect on Trade by the National Competition Authorities of the New Member States: Another Legal Partition of the Internal Market? (2015) 52 Common Market Law Review, See Art.105 of the Code of Administrative Procedure of Poland that provides administrative authorities with a legal basis for the discontinuation of the administrative proceedings. 3

4 decisions under Articles TFEU. 8 According to the CJEU, in fact, Article 5 Reg.1/2003 does not mention non-infringement decisions among the types of acts that NCAs can adopt to enforce Articles TFEU. Following a literal interpretation of Article 5, the Court concluded in Tele 2 Polska that NCAs cannot adopt non-infringement decisions; power reserved to the EU Commission under Article 10 Regulation 1/2003. Nevertheless, Tele2 Polska does not prohibit NCAs from adopting a non-infringement decision under national rather than EU competition rules. 9 In addition, even though an investigation is formally concluded through a closure decision, the NCA might introduce the administrative act of a substantive assessment of the investigated market conduct, by adopting a de facto noninfringement decision. The paper aims at exploring the types of NCAs decisions that fall within the scope of dark matter, by focusing particularly on the non-infringement and closure decisions adopted by NCAs under national competition rules. Although the difference between closure and noninfringement decisions is not always straightforward, in Tele2 Polska the CJEU differentiated these two types of decisions; the paper follows the same approach. In particular, the paper assesses the compatibility of such decisions with the powers of NCAs under Article 5 Regulation 1/2003, as interpreted in the CJEU case law. The paper is structured as country case studies, including a representative group of countries that joined the EU in 2004 (Poland, Czech Republic and Slovakia), 2007 (Bulgaria and Romania) and 2013 enlargements (Croatia). For each case study, the paper first analyzes whether the NCA has the power under national competition law to adopt noninfringement/closure decisions, and whether any amendment to this regard was introduced in the national competition law after Tele2 Polska. Furthermore, the paper analyzes whether the NCAs have used the power to adopt non-infringement decisions when allowed to under the national competition law, and whether closure decisions have been drafted as de facto non-infringement decisions. 8 Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp. z o.o., devenue Netia SA (C-375/09) [2011] ECLI.EU.C Rizzuto, Article 5 of Regulation 1/2003: The Limits to National Procedural Autonomy (2011) 32 European Competition Law Review,

5 As shown by the EU Commission official statistics, the dark matter does not only affect the new EU Member States. There is a discrepancy between the number of notified open investigations and draft notified decisions for all NCAs. 10 However, due to the fact that the new EU Member States are scarcely covered in the literature, a number of EU Member States in Central and Eastern Europe has been selected as case studies. At the same time, further comparative research on the decisions adopted by the NCAs of the old EU Member States remains a research desiderata. The paper contributes to the existing literature on the patterns of enforcement of EU competition law in the new EU Member States. 11 Furthermore, the paper contributes to the broader discussion on the effects of the decentralized system of competition law enforcement. In particular, the paper calls for a harmonization of national procedural rules to ensure a consistent enforcement of competition rules throughout the Union, as well as a reform of the current notification system under Article 11 Regulation 1/2003 in order to decrease the size of the dark matter. ii What the NCAs Can and Cannot Do under Article 5 Regulation 1/2003 Article 5 represents one of the few provisions in Regulation 1/2003 that harmonizes the procedural rules followed by NCAs. Article 5 stipulates that NCAs can adopt infringement decisions, issue interim measures, accept commitments and impose fines. Furthermore, under Article 5(2) Regulation 1/2003 the NCAs may adopt procedural acts to close the investigations when there are no grounds for action (i.e. closure decisions). As noted by Brammer, the last sentence of Article 5 was specifically inserted in order to allow those 10 [Accessed January 11, 2017]. 11 See, for instance: Botta, and Svetlicinii, The Right of Fair Trial in Competition Law Proceedings: Quo Vadis the Courts of the New EU Member States? in Skoczny and Nihoul (Eds.), Procedural Fairness in Competition Proceedings (Cheltenham: Edward Elgar, 2015), pp ; Svetlicinii and Botta, Article 102 TFEU as a Tool of Market Regulation: Excessive Enforcement Against Excessive Prices in the New EU Member States and Candidate Countries (2012) 8 European Competition Journal, ; Bernatt, Convergence of Procedural Standards in the European Competition Proceedings (2012) 8 The Competition Law Review, ; Hölscher and Stephan, Competition and Antitrust Policy in the Enlarged European Union: a Level Playing Field? (2009) 47 Journal of Common Market Studies,

6 NCAs which cannot close a file informally, but have to terminate every procedure by formal decision. 12 The CJEU had the opportunity for the first time to examine Article 5 in Tele2 Polska, following a request for a preliminary ruling by the Polish Supreme Court. 13 Under Article 11 of the 2000 Polish Competition Act (provision now abolished) 14 the Prezes Urzędu Ochrony Konkurencji i Konsumentów (UOKiK, Polish NCA) could adopt a non-infringement decision where it did not establish a breach of competition rules. 15 In Tele 2 Polska, the Polish NCA adopted a non-infringement decision in relation to the corresponding national provision of Article 102 TFEU, while it discontinued the proceedings (i.e. adopted a closure decision) in relation to Article 102 TFEU. According to the UOKiK, in fact, NCAs did not have the power to adopt non-infringement decisions since Article 5 Regulation 1/2003 did not expressly mention non-infringement decisions among the powers of NCAs. 16 Via its reference for preliminary ruling the Polish Supreme Court asked the CJEU whether Article 5 Regulation 1/2003 precluded NCAs from adopting non-infringement decisions. 17 During the proceedings, two opposite views emerged: on the one hand, the EU Commission, the EFTA Surveillance Authority, the Polish Government and the UOKiK argued that Article 5 included an exhaustive list of the types of decisions that could be adopted by NCAs. 18 If each NCA was free to adopt different types of decision, there would be a risk of inconsistent enforcement of EU competition rules within the different EU Member States. In view of the principle of ne bis in idem, if one NCA adopted a non-infringement decision, it could prevent the NCA from another EU Member State or the EU Commission to sanction the same conduct under Articles TFEU. 19 On the contrary, the Czech Government argued that NCAs should have the power to adopt non-infringement decisions, since the EU Commission 12 Brammer, Case C-375/09, Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp. z o.o., (now: Netia SA), Judgement of the Court of Justice (Gran Chamber) of 3 May 2011 (2012) 49 Common Market Law Review, Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp. z o.o., devenue Netia SA (C-375/09) [2011] ECLI.EU.C See more below Part III, Poland. 15 Case C-375/09, para Case C-375/09, para Case C-375/09, para Opinion of AG Mazak delivered on December 7, 2010 in the Case C-375/09, Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp. z o.o., devenue Netia SA [2010] ECLI.EU.C. 743, para AG s Opinion in Tele2 Polska, para.30. 6

7 had such power under Article 10 Regulation 1/2003. In a community of peers like the ECN, the NCAs and the EU Commission should have the same enforcement powers. 20 In addition, non-infringement decisions provided legal certainty to undertakings, which could rely on the administrative decision as a safe harbor to show the legality of its market conduct, by thus preventing further investigations by the NCA 21. In its final ruling, the CJEU followed the view expressed by the EU Commission and UOKiK: Article 5 included an exhaustive list of types of decisions that could be adopted by NCAs under Articles TFEU, and this list did not include non-infringement decisions. 22 According to the Court, such a literal interpretation of Article 5 was confirmed by the fact that the EU Commission had the power to adopt non-infringement decisions under Article 10 Regulation 1/2003, while the Regulation did not expressly grant such power to the NCAs. 23 According to the Court, the difference between the two provisions was justified by the priority role played by the EU Commission within the decentralized system of competition law enforcement: by adopting a non-infringement decision, the EU Commission could prevent NCAs from investigating a certain conduct, and therefore guiding the enforcement activities of the NCAs. 24 The CJEU s ruling in Tele2 Polska generated a lively academic debate. On the one hand, Petit criticized the ruling, arguing that a literal interpretation of Article 5 did not prevent NCAs from adopting non-infringement decisions. 25 In fact, the provision included a list of acts that may be adopted by the NCAs to enforce Articles TFEU (i.e. non-exhaustive list of acts). Secondly, the power of the EU Commission to adopt non-infringement decisions under Article 10 did not implicitly exclude such power for NCAs under Article 5. In addition, the CJEU interpretation in Tele 2 Polska breached the overall objectives of Regulation 1/2003, 20 AG s Opinion in Tele2 Polska, para AG s Opinion in Tele2 Polsk, para Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp. z o.o., devenue Netia SA (C-375/09), para Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp. z o.o., devenue Netia SA (C-375/09), para Prezes Urzędu Ochrony Konkurencji i Konsumentów v Tele2 Polska sp. z o.o., devenue Netia SA (C-375/09), para Petit, Lousberg, Arrêt Tele 2 Polska: une Interprétation Contestable de la Compétence des Autorités Nationales de Concurrence, (2011) 182, Journal de Droit Européen: [Accessed January 11, 2017]. 7

8 which aimed at establishing a decentralized system of EU competition law enforcement where the NCAs would mutually trust each other and recognize their acts. 26 Finally, the CJEU interpretation could negatively affect the enforcement of Art TFEU. In particular, by prohibiting non-infringement decisions the CJEU could de-incentivize the NCAs from investigating complex cases. 27 According to the author, since the NCAs could not close the investigations through a reasoned decision stating that the investigated conduct did not breach EU competition rules, the NCAs would not waste time and resources investigating complex cases, where the illegality of the conduct was doubtful. The NCA would be more inclined to investigate easy cases which were likely to be concluded via infringement decisions. Amorese, on the contrary, argued that through the literal interpretation of Article 5, the CJEU has rightly safeguarded the EU Commission s priority role within the decentralized system of enforcement introduced by Regulation 1/ Furthermore, the CJEU prevented possible forum shopping strategies by private firms: if NCAs could adopt noninfringement decisions, companies would run to the NCAs which had a more lenient enforcement approach in order to obtain a non-infringement decision. The firm would then rely on the non-infringement decision as a shield to prevent future possible investigations by other NCAs/EU Commission or damages claims. 29 The argument concerning the possible forum shopping caused by non-infringement decisions relies on the application of the principle of ne bis in idem, also known as prohibition of double jeopardy. 30 This general principle is applicable when the two sanctions refer to the same facts, the same offender and safeguard the same legal interest. In view of the principle of ne bis in idem, the decision adopted by a NCA under Articles TFEU would bind the other NCAs and the EU Commission. This line of reasoning raises 26 Ibid. 27 Petit, The Perverse Effects of the Court s Ruling in Tele2 Polska (June 17, 2011), [Accessed January 11, 2017]. 28 Amorese, Case C-375/09 Prezes Urzedu Ochrony Konkurencji i Konsumentow V Tele 2 Polska SP. Z.O.O., Now Netia SA, (2012) 18 Columbia Journal of European Law, Amorese, Case C-375/09 Prezes Urzedu Ochrony Konkurencji i Konsumentow V Tele 2 Polska SP. Z.O.O., Now Netia SA, See Louis and Accardo, Ne Bis in Idem, Part Bis (2011) 34 World Competition Law and Economics Review,

9 three questions: firstly, in light of General Court (GC) ruling in Orange, 31 the principle of ne bis in idem would not be applicable to non-infringement decisions. In the judgment, the GC ruled that the principle of ne bis in idem did not prevent a NCA from adopting a decision following a commitment or closure decision issued by another authority in the same case. 32 Orange judgment could be applied a fortiori to non-infringement decisions due to the similarity with closure decisions. Secondly, this line of reasoning is questionable in view of the narrow 33 interpretation of the principle of ne bis in idem followed by the CJEU in Toshiba. 34 In the judgment, the CJEU ruled that the parallel enforcement of Article 101 TFEU by the EU Commission and the equivalent provision by Czech NCA vis a vis the same anticompetitive conduct and the same offenders was possible, since it did not trigger the application of the ne bis in idem principle. 35 In other words, the Court recognized that national and EU competition rules do not safeguard the same legal interest, although their wording is often identical, and thus they can be applied in parallel. In view of the narrow interpretation followed by the CJEU in Toshiba in relation to the ne bis in idem principle it is unlikely that a non-infringement decision would prevent other NCAs from sanctioning the same conduct. Finally, in any case the EU Commission could prevent a NCA from adopting a non-infringement decision by exercising its priority right under Article 11(6) Regulation 1/2003. To sum up, the argument that the prohibition of non-infringement decisions was necessary to avoid forum shopping by private firms seems exaggerated since the EU Commission and other NCAs would not be bound by a non-infringement decision adopted by a NCA. The literal interpretation of Article 5 followed by the Court in Tele2 Polska has favored the emergence of a double procedural standard. In Tele2 Polska, the UOKiK adopted two decisions to close the case: a closure decision under Article 102 TFEU and a non- 31 Orange v. Commission (Case T-402/13) [2014] ECLI:EU:T:2014: Ibid, para From this point of view, see Botta, Case C-17/10, Toshiba and Others v. Úřad pro ochranu hospodářské soutěže: Testing the Decentralization of Competition Law Enforcement (2013) 38 European Law Review, Toshiba and others v. Úřad pro ochranu hospodářské soutěže (C-17/10) [2012] ECLI.EU.C. 72, para In Toshiba, the CJEU recognized that the Czech NCA could sanction the companies involved in the gas insulated switchgear cartel although the same companies had already been sanctioned for the same conduct by the EU Commission. According to the Court, the Czech NCA sanctioned the effect of the cartel in Czech Republic before its accession to the EU. Therefore, there was no overlap between the decision of the EU Commission and the Czech NCA and thus the decision did not breach the principle of ne bis in idem. Ibid, paras

10 infringement decision under the national equivalent of Article 102 TFEU. 36 In its ruling, however, the CJEU did not analyze the implications of this procedural aspect. In particular, the CJEU did not reply to the second question asked by the Polish Supreme Court, which specifically addressed this issue. 37 By upholding the arguments of the Polish NCA, on the contrary, the CJEU indirectly recognized the legality of this approach. As we will see in the following pages, after Tele2 Polska a number of NCAs have followed the approach of the UOKiK. Since the ruling of the CJEU only deals with the procedural rules of enforcement of Articles TFEU, the NCAs have continued to apply divergent procedural rules when enforcing national competition law. iii Country Case Studies Bulgaria The current Bulgarian Competition Act, 38 which came into force on 2 December 2008, clearly distinguishes the competences of the Bulgarian NCA (CPC) 39 in relation to finding no infringement of competition rules. In relation to the domestic competition rules the CPC is authorized to issue a non-infringement decision, i.e. to conclude that the undertaking(s) concerned have not infringed the Competition Act. 40 In relation to the EU competition rules the CPC, in line with Article 5 Regulation 1/2003, concludes that there are no grounds for intervention under Articles 101 and 102 TFEU. 41 The Competition Act does not permit the CPC to conclude the investigation due to the absence of sufficient evidence. 42 This effectively means that the investigation of the merits of the case must be concluded with an infringement or a non-infringement decision. 36 AG s Opinion in Tele2 Polska, para The second question was whether the second paragraph of Article 5 of the Regulation is directly applicable and whether, on that basis, a national competition authority which forms the view that the conditions for prohibiting a practice under Article 102 TFEU are not satisfied may bring to an end the procedure initiated against an undertaking by taking a decision which states that there are no grounds for action on its part, even though national law provides in such circumstances only for the possibility of taking a negative decision on the merits (emphasis added). Case C-375/09, para Law on Protection of Competition, published in the Official Gazette No. 102 of November 28, Комисия за защита на конкуренцията, [Accessed January 11, 2017]. 40 Bulgarian Competition Act, Art. 60(1)(5). 41 Bulgarian Competition Act, Art. 8(3). This provision has been inherited from the 1998 Law on Protection of Competition, published in the Official Gazette No. 52 of May 8, 1998, Art. 55(1)(3). 42 Bulgarian Competition Act, Art

11 The Bulgarian experience demonstrates that the closure of the investigation without the finding of an infringement leads to the conclusion that the undertaking(s) concerned have not committed an infringement. This understanding has been reflected in the judgment of the Supreme Administrative Court (SAC) 43 in the BTC cable ducts case issued just several months before the CJEU s judgment in Tele2 Polska. 44 The case concerns the judicial review of the CPC s decision concluding that the Bulgarian Telecommunications Company has not committed an abuse of dominance, and, therefore, did not violate Article 102 TFEU. 45 The SAC held in its judgment that the CPC s power to issue a non-infringement decision is in line with Article 5 Regulation 1/2003 because a decision to take no action under Articles 81 and 82 EC amounts to finding no infringement of the law. 46 The enforcement practice in the aftermath of the Tele2 Polska indicates that the wording of Article 5 Regulation 1/2003 in relation to the closure of the investigations in the absence of evidence of an infringement is still understood as essentially amounting to the finding of a non-infringement. On 28 April 2011, just a few days before the adoption of the Tele2 Polska judgment, the CPC issued a non-infringement decision under Article 102 TFEU and its national equivalent Bulgargaz EAD. 47 In the month following the adoption of the landmark judgment by the CJEU, the CPC issued a technical correction decision which amended the wording of the non-infringement decision which now states that there are no grounds for taking action under Article 102 TFEU. 48 When the complainants challenged the CPC s findings by alleging inter alia that the CPC acted contrary to its powers under Article 5 Regulation 1/2003, the SAC held that by issuing the technical correction decision the CPC brought its actions in line with Regulation 1/ The five-member panel of the SAC that heard the case on appeal agreed with the first instance court on the point that the technical correction decision brought the CPC s findings is in line with the Regulation 1/ At the same time, the SAC held that the failure to notify the EU Commission about the investigation under 43 Върховен административен съд, [Accessed January 11, 2017]. 44 SAC Judgment No of February 15, 2011 in case No / CPC Decision No of October 1, 2009 in case No. 662/ See Dinev, The Bulgarian Supreme Administrative Court upholds the Competition Authority's decision finding no infringement of Art. 102 TFEU in a case involving concurrent application of competition rules and communications regulation (BTC Cable Ducts), e-competitions Bulletin, February 15, 2011, Art. N CPC Decision No. 546 of Aril 28, 2011 in case No. 840/ CPC Decision No. 726 of June 7, 2011 in case No. 840/ SAC Judgment No of November 21, 2011 in case No. 7785/ SAC Judgment No of April 27, 2012 in case No. 1895/

12 Article 102 TFEU amounted to the infringement of the CPC s obligations under Regulation 1/2003. The CPC has learned its lesson from the Bulgargaz case and its subsequent non-infringement decisions refer to the EU competition rules using the no grounds for actions wording. In 2014 the CPC concluded an investigation into the practices of the pharmaceutical companies Abbott Products EOOD and Sting AD connected to the distribution of the drug Humira. 51 Under the Bulgarian national health insurance system 75 per cent of the price of Humira was reimbursed to the insured patients. Abbott initiated a co-payment scheme under which it sold the product at 100 per cent of its price to the wholesalers. The wholesalers sold the medicinal product at 75 per cent of its price to the pharmacies and the latter respectively at 75 per cent of product s price to the patients. In order to receive the 25 per cent discount from Abbott, the wholesalers had to report the sales volumes of the specific pharmacies, where Humira had been sold at a reimbursed price. The complainant, in that case Sopharma Trading AD, argued that by receiving the exact data on reimbursement sales, Abbott could easily estimate the volume of its product on the free market, which would enable it to prevent the parallel exports of these medicinal products from Bulgaria. The CPC considered the reporting obligations under the co-payment scheme as necessary for avoiding abuse by pharmacies and wholesalers, which would prevent the patients from the receiving the benefit of a 25 per cent discount. 52 As a result, the CPC concluded that the above-mentioned reporting requirements did not amount to a breach of Competition Act. While the complainant alleged violations of Articles 101 and 102 TFEU the CPC carried out an assessment of their effect on trade and concluded that since the relevant market was limited to Bulgaria and concerned only the sales of medicinal products under the Bulgarian national health insurance system and does not concern cross-border trade, there was no effect on trade, and EU competition rules were inapplicable. In the resolution part of its decision the CPC concluded that there are no grounds for intervention under Articles 101/102 TFEU. The CPC s decision in that case raises a number of questions including the NCA s approach towards the restrictions on the parallel trade of pharmaceuticals and applicability of EU 51 CPC Decision No of December 17, See Mateina, The Bulgarian Competition Authority rules on parallel trade of pharmaceuticals products and its limitations (Sopharma), e-competitions Bulletin, December 17, 2014, Art. N

13 competition rules in cases concerning parallel imports. It was already shown in the previous studies that the CPC had often applied a narrow approach towards effect on trade assessment, which effectively excluded the applicability of the EU competition rules in the majority of the CPC s infringement decisions. 53 Nevertheless, in Humira case the CPC issued a non-infringement decision on the merits under the Competition Act and concluded that there were no grounds for intervention under EU competition rules. Croatia The current Croatian Competition Act 54 was amended in 2013 prior to Croatia s joining of the EU 55 in order to harmonize the domestic legislation with the Regulation 1/ It contains both substantive competition and procedural rules governing the investigatory and decisionmaking powers of the Croatian NCA (AZTN). 57 Being an administrative agency authorized to impose administrative sanctions, the AZTN also applies the Administrative Procedure Act 58 and the Misdemeanor Act. 59 Under the Competition Act the AZTN initiates the infringement proceedings ex officio following the preliminary assessment of the competitive situation on the relevant market. If this preliminary investigation reveals the absence of reasons for initiating the infringement proceedings, the AZTN should inform the complainant accordingly within 10 months from the date of the complaint. 60 In relation to the EU competition rules the 2013 amendments introduced the obligation of the AZTN to inform the complainant within 6 months of the complaint about the absence of the effect on trade and, therefore, about the absence of 53 See Botta, Svetlicinii and Bernatt, The Assessment of the Effect on Trade by the National Competition Authorities of the New Member States: Another Legal Partition of the Internal Market? Zakon za zaštitu tržišnog natjecanja, adopted on June 24, 2009, published in Narodne novine 79/2009, in force on October 1, Zakon o izmjenama i dopunama Zakona za zaštitu tržišnog natjecanja, adopted on June 25, 2013, published in Narodne novine 80/2013. The EU and Croatia signed Croatia s EU Accession Treaty on December 9, Croatia became the EU s 28th Member State on July 1, See [Accessed January 11, 2017]. 56 See Kapural, New Kid on the Block Croatia s Path to Convergence with EU Competition Rules (2014) 5 Journal of European Competition Law & Practice, Agencija za zaštitu tržišnog natjecanja, [Accessed May 27, 2016]. 58 Zakon o općem upravnom postupku, published in Narodne novine 47/ Prekršajni zakon, published in Narodne novine 107/2007, 39/2013, 157/2013, 110/ Competition Act, Art. 38(5). 13

14 reasons for initiating the infringement proceedings under Articles TFEU. 61 Thus, after conducting the preliminary assessment, the AZTN issues decisions concluding that there are no grounds for commencing the infringement proceedings. 62 Normally, these decisions contain certain assessments of the merits of the complaint and explain the reasons for its rejection: the absence of AZTN s competence, the competence of a regulatory authority, the absence of the indicia of anti-competitive behavior and others. If the preliminary assessment of the competitive situation on the relevant market creates the reasonable suspicion of the existence of the anti-competitive behavior, the AZTN initiates an infringement procedure. Under the Competition Act, the AZTN has the authority to conclude that there has been no infringement of the competition rules, i.e. to issue a noninfringement decision. 63 The 2013 amendments of the Competition Act have added the syntagma or the provisions of Articles 101 or 102 TFEU to the respective provision of the Competition Act, which makes it possible for the AZTN to adopt a non-infringement decision in relation to the EU competition rules. 64 The AZTN can also decide to terminate the infringement proceedings, without a decision on the merits, since the provisions of the Administrative Procedure Act stipulate that, when an administrative authority arrives to the conclusion that there are no legal grounds for continuing the procedure, it adopts the decision concerning the closure of the case. 65 The AZTN s decisions terminating the infringement proceedings or establishing the absence of an infringement can be contested by the complainant. 66 The enforcement practice of the AZTN demonstrates that the Croatian competition officials are well aware of the inconsistency between the above cited Article 58 of the Competition Act and Article 5 of the Regulation 1/2003. This inconsistency has been addressed by the AZTN in the case concerning predatory pricing on the market for parcel services against the national postal operator Hrvatska pošta d.d. 67 Based on the effect on trade assessment, the AZTN concluded that the alleged predatory pricing practices could inhibit new entry to 61 Competition Act, Art. 38(6). 62 Competition Act, Art. 58(2)(5). 63 Competition Act, Art. 58(1)(13). 64 Amendments Act 2013, Art Administrative Procedure Act, Art. 46(5). 66 Competition Act, Art. 67(5). 67 AZTN Decision No / of November 26, 2015 in case UP/I /13-01/

15 the Croatian market and decided to conduct its investigation under Article 102 TFEU and its national equivalent. As a result, the AZTN has adopted the decision stating that Hrvatska pošta did not infringe the national equivalent of Article 102 TFEU and that there were no grounds for action under Article 102 TFEU. In its decision the AZTN acknowledged that although Article 58 of the Competition Act empowers the AZTN to adopt non-infringement decisions in relation to both national and EU competition rules, the application of this provision in relation to the EU competition rules would be contrary to Article 5 Regulation 1/2003 as interpreted by the CJEU in Tele2 Polska case. When justifying its decision of not making use of its powers under Competition Act in relation to the non-infringement of EU competition rules, the AZTN referred to the CJEU s guidance in Amministrazione delle Finanze v Simmenthal SpA where the Court held that every national court must, in a case within its jurisdiction, apply Community law in its entirety and protect rights which the latter confers on individuals and must accordingly set aside any provision of national law which may conflict with it, whether prior or subsequent to the Community rule. 68 In its subsequent press release the AZTN explained that it terminated the proceeding against HP or closed the proceeding without taking a negative decision on the merits i.e. by deciding that there are no grounds for action on its part, in the sense of the principle of supremacy of the EU law that allows EU law to take precedence over the provisions of the national law and the established case law of the European Court of Justice. 69 The AZTN s decision contains a detailed analysis of the case and its conclusion on the absence of infringement of the national equivalent of Article 102 TFEU is made in accordance with the EU acquis and the case practice of the European Commission upheld by the rulings of the European Court of Justice. 70 The AZTN s practice also contains examples of the avoidance to adopt the non-infringement decisions using a different procedural avenue the Administrative Procedure Act. In 2014, the AZTN investigated two cases concerning the abuse of dominant position in the form of 68 Amministrazione delle Finanze dello Stato v Simmenthal SpA (Case 106/77) [1978] E.C.R. 629, para Croatian Competition Authority, The Croatian Competition Authority concludes that a dominant company did not engage in predatory conduct and therefore did not abuse of its dominance in the postal services market (Hrvatska pošta), e-competitions Bulletin, December 9, 2015, Art. N Croatian Competition Authority, The Croatian Competition Authority concludes that a dominant company did not engage in predatory conduct and therefore did not abuse of its dominance in the postal services market (Hrvatska pošta), e-competitions Bulletin, December 9, 2015, Art. N

16 the refusal to deal against the Croatian telecom incumbent Hrvatski Telekom d.d. 71 The effect on trade assessment carried out by the AZTN led to the decision that the infringement proceedings should be commenced under Article 102 TFEU and its national equivalent. After a thorough analysis of the merits of the case, the AZTN arrived to the conclusion regarding the absence of the alleged infringement. Being aware of the limitation of its powers to adopt non-infringement decisions under Regulation 1/2003, the AZTN decided to close these cases pursuant to the provisions of the Administrative Procedure Act. This way of closing the investigations is also characteristic of the AZTN s practice when investigating practices that have taken place prior to Croatia s accession to the EU and were assessed exclusively under the national competition law. 72 At the same time, the AZTN s enforcement practice contains non-infringement decisions issued under national competition rules after Croatia s accession to the EU. For example, in 2015 the AZTN was investigating the case of the alleged resale price maintenance (RPM) practices in the distribution agreements of the exclusive importer of Piaggio motorcycles and scooters Piaggio Hrvatska d.o.o. 73 Even though the case concerned distribution of the products imported from another Member State, the AZTN s decision did not contain an effect on trade assessment, did not indicate the market share of the undertaking concerned and was based solely on national competition law. In line with Article 58 of the Competition Act, the AZTN concluded its investigation with the decision stating that Piaggio Hrvatska d.o.o. did not infringe the national equivalent of Article 101 TFEU. 74 From the overview of the procedural framework and the AZTN s practice in enforcing domestic and EU competition rules in Croatia, the following observations can be made. While the AZTN s application of its procedural powers is generally in line with Regulation 1/2003 as interpreted in Tele2 Polska, the wording of the Competition Act still allows the AZTN to issue non-infringement decisions in relation to the EU competition rules. 71 AZTN Decision No / of December 17, 2014 in case UP/I / /007; AZTN Decision No / of May 8, 2014 in case UP/I / / See e.g. AZTN Decision No / of June 12, 2014 in case UP/I /13-01/020; AZTN Decision No / of June 12, 2014 in case UP/I /13-01/ AZTN Decision No / of 17 Dec in case UP/I / / See Croatian Competition Authority, The Croatian Competition Authority closes its procedure concerning an alleged resale price maintenance in the market of the distributors of motorcycles and scooters (Piaggio Hrvatska), e-competitions Bulletin, February 15, 2016-II, Art. N

17 Considering the fact that Croatia has only recently joined the EU, there is little evidence on AZTN s application of the effect on trade assessment. At the same time, the issuance of noninfringement decisions under national law may lead to situations where the absence of infringement will be stipulated in cases affecting trade between Member States but not notified to the EU Commission due to the incorrect effect on trade assessment by the NCA. Czech Republic Under the Czech Competition Act the Czech NCA (UOHS) is entitled to adopt infringement decisions concerning violations of Czech competition law as well as infringement decisions concerning violations of Articles TFEU. 75 The Czech Competition Act stipulates that the UOHS is entitled to adopt infringement or commitment decisions when it finds agreements restricting competition (Article 7) or abuses of dominant position (Article 11). Article 20a repeats the wording of Article 5 Regulation 1/2003 and states that if the behavior of undertakings may affect trade between Member States the UOHS is entitled to require that an infringement is brought to an end, order interim measures, accept commitments and impose fines. In such a case, the decisions issued by UOHS address a parallel violation of Czech law and violation of the EU competition rules (Article 21a(1)). Under the Czech Competition Act the UOHS does not have the power to adopt noninfringement decisions. However, Article 25a of the Competition Act states that unless otherwise specified, the 2004 Administrative Procedure Code governs the proceedings before the UOHS. In practice, this provision serves as a platform enabling the UOHS to adopt de facto non-infringement decisions under Article 67 of the Administrative Procedure Code 76 when alleged anti-competitive practices do not affect trade between Member States. This is true for the decisions issued both before (see the decision of 11 April ) and after Tele2 Polska (see the decision of 30 September ). In these two decisions, the UOHS held that the alleged anticompetitive practices were not proven and provided a detailed explanation 75 Act No. 143/2001 Coll. of April 4, 2001 on the Protection of Competition and on Amendment to Certain Acts. 76 Article 67 of the Code of Administrative Procedures of June 24, 2004 (Act no. 500/2004 Coll.) stipulates that an administrative body may decide that a certain person does not have certain rights or duties. 77 The UOHS Decision No. S075/2008/KD-5244/2009/820, [Accessed January 11, 2017]. 78 The UOHS Decision No. S67/ /2011/850, [Accessed January 11, 2017]. 17

18 in this respect. In the 2009 decision concerning potentially anti-competitive RPM agreements, the UOHS found that the agreements did not provide for any sanctions for their violation, and were in fact voluntary and could not adversely affect competition on the market. 79 In the 2011 decision the UOHS explained why the exchange of information between the members of building society cannot have anti-competitive effects. 80 These decisions amount effectively to the finding that the Czech competition law was not violated. Tele2 Polska influenced the procedural approach to the enforcement of Articles TFEU by the UOHS. When deciding at the beginning of 2011 about the existence of a cartel between Henkel, Procter & Gamble and L'Oréal (price fixing in cosmetic products), the UOHS issued a decision under Article 67 of the Administrative Procedure Code stating that in the light of the collected evidence the existence of a cartel under Czech Competition Act and Article 101 TFEU was not proven. 81 Since the proceedings were opened by the UOHS ex officio, such a decision amounted in fact to a non-infringement decision not only under Czech competition law, but also under EU law. In a 2014 case where the UOHS did not find the contacts and exchange of information between electro-technical firms to be anticompetitive the decision looked different. 82 The UOHS issued a non-infringement decision under Article 67 of the Administrative Procedure Code but found no grounds for action when it comes to EU competition law. Such an approach was based on the interpretation of Article 5 Regulation 1/2003 in the light of Tele2 Polska. Still, this decision repeats a Bulgarian scenario in Bulgargaz the introduced change is purely procedural. By contrast, when it comes to merits, this decision effectively finds no violation of both Czech and EU competition law. It provides a justification as to why the assessed information sharing 79 See paras of the 2009 Decision. 80 See paras of the 2011 Decision. 81 Decision of the UOHS of February 22, 2011 in case of Henkel AG & Co. KGaA, Procter & Gamble Rakona, s.r.o., L OREAL Česká republika s.r.o., html [Accessed January 11, 2017]. 82 Decision of the UOHS of March 5, 2014 in case of Eaton Elektrotechnika s.r.o., OEZ s.r.o. and Schneider Electric CZ, s.r.o, [Accessed January 11, 2017]. 18

19 practice (which was believed to affect the trade between Member States 83 ) cannot amount to violation of competition rules. 84 Poland The Polish NCA (the UOKiK) 85 has the right to issue infringement and commitment decisions under both national and EU law. Article 10 and Article 12 of Polish Competition Act 86 give respective legal basis for that. By contrast, the UOKiK is not entitled under the Competition Act of 2007 to adopt non-infringement decisions there is no counterpart of Article 11 of the Competition Act of In the literature, it is believed that such a change approximates Polish procedural framework to the acquis communautaire. 87 The UOKiK decision in Etiuda case of 15 October 2009 provides an example of a noninfringement decision under Article 11 of the Competition Act of 2000, where a potential violation of the EU law was assessed as well. 88 It represents the same approach the UOKiK took in Tele2 Polska decision 89 and in two other cases involving the practices affecting the trade between Member States. 90 The case concerned the refusal by the Polish Airports State Enterprise to give access to the Warsaw Chopin Airport s terminal, reserved for low-cost airlines (Etiuda Terminal), to a company operating trans-border charter flights. The UOKiK found that Polish Airports did not abuse its dominant position. The UOKiK believed that Etiuda Terminal was not an essential facility to which Polish Airports were obliged to provide access. It also determined that the Polish Airports approach was non-discriminatory - access to Etiuda Terminal was based on a neutral, flight-category basis. Therefore, the UOKiK found 83 Decision of the UOHS of March 5, 2014 in case of Eaton Elektrotechnika s.r.o., OEZ s.r.o. and Schneider Electric CZ, s.r.o, para See Decision of the UOHS of March 5, 2014 in case of Eaton Elektrotechnika s.r.o., OEZ s.r.o. and Schneider Electric CZ, s.r.o, para The Polish Competition Authority (Urząd Ochrony Konkurencji i Konsumentów) was established in 1990 as a part of market economy reforms. It employs more than 400 officers both in its head office in Warsaw and in its local offices in 9 major Polish cities. For further information, see [Accessed May 27, 2016]. The UOKiK s Decisions are available at [Accessed January 11, 2017]. 86 Polish Competition Law is regulated by the Act of Feburary 16, 2007 on Competition and Consumer Protection, Journal of Laws of 2007, No. 50, item Jurkowska-Gomułka, "komentarz do art. 75 in Skoczny (Ed.), Ustawa o ochronie konkurencji i konsumentów. Komentarz (Warszawa, 2013), p The Decision of October 15, 2009, RWA-32/ The Decision of September28, 2006, DOK-112/ The Decisions of August 26, 2010, DOK-8/2010 and of July 7, 2008, DOK-5/