12 June 2020

Proposals for a new European competition enforcement tool

The European Commission (the 'Commission') has published a consultation on expanding its powers to allow it to investigate structural market problems. The consultation, published on 2 June 2020, forms the third pillar of the Commission’s ‘holistic and comprehensive approach’ to tackling emerging competition issues in a rapidly digitised and globalised market.  The other two pillars are the continued vigorous enforcement of the existing competition rules and a consultation on the possible regulation of digital platforms through the Digital Services Act package.

The European Commission’s existing competition enforcement powers

Currently, the Commission can enforce competition law where there are specifically identified issues and/or against specific market participants, following:

  • Complaints received from market participants about potential breaches;
  • Investigations into companies it suspects have breached competition law; and/or
  • Sector inquiries – investigations into sectors to understand how a particular market functions, although this tool does not allow the Commission to impose remedies to address sector wide concerns and it still needs to open individual investigations if it finds a potential breach during a sector inquiry.  For example, the recent Commission e-commerce sector inquiry resulted in a number of individual investigations. 

The consultation

The proposed new competition enforcement tool under consultation would allow the Commission to tackle structural market competition issues without having to rely on a finding that a company has breached Article 101 of the Treaty on the Functioning of the EU ('TFEU') (the prohibition on anti-competitive agreements) and/or Article 102 (abuse of a dominant position). This means, for example, the Commission could address competition issues in digital markets where larger players exert significant market power and weaken competition, but these issues do not fit the criteria of either Article 101 or Article 102 TFEU and nor would companies necessarily be fined for competition law breaches.

The consultation is seeking views on whether such a tool is necessary and if so, what features in a particular market provide evidence of or give rise to competition problems – for example, the ability (or lack thereof) of customers to switch; wide spread use of pricing algorithms so prices remain stable across a market; and dependency on access to data. It is also seeking views on what kind of powers the Commission should have, such as purely making recommendations to sectoral regulators or going as far as imposing remedies on companies.

The consultation closes on 8 September 2020, with a view to proposing new legislation reflecting the outcome of the consultation by the end of 2020.

Digital Services Act

The consultation makes clear that the new tool will be designed to sit alongside the open consultation on the Digital Services Act and market-specific regulatory powers.

The Digital Services Act proposals seek input on regulating the power of online platforms, i.e. digital services which connect consumers and businesses such as e-commerce marketplaces or app stores. The consultation is focused on how the Commission should regulate those large platforms that offer multiple services and exert power over the markets they operate in, making new market entry very difficult.

The Digital Services Act consultation closes on 30 June 2020.

What might this mean for companies?

Companies in the UK in many sectors may already be familiar with the UK market investigation regime. The UK’s Competition and Markets Authority (CMA) has well-established powers to investigate structural market problems and impose remedies and/or make recommendations to a sectoral regulator. 

For example, the CMA (and its predecessor the Competition Commission) has carried out a wide range of market investigations, including into groceries, retail banking (which led to the Open Banking regime), statutory audit services, private motor insurance, private healthcare, movies on pay TV, rolling stock leasing, and energy, and is currently conducting market a market investigation into funerals and a market study into online platforms and digital advertising.  

For companies operating in EU markets, the new proposals represent another significant source of potential investigation and regulation beyond simply complying with and not breaching competition law.  If you have any questions in relation to the issues raised in this article, please contact Chris Worrall or your usual Burges Salmon contact.

Written by Shachi Nathdwarawala and Paschalis Lois

Key contact

Chris Worrall

Chris Worrall Partner

  • Head of Competition
  • Mergers and Acquisitions
  • Financial Services

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