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However, the overlapped jurisdiction between the two authorities must be limited to a minimum. Otherwise, it may lead to seriously unfortunate consequences that:
(1) “it confuses the law, and causes legal uncertainty and unnecessary expense;
(2) it creates a potential liability, ex post, to pay compensation, when that is not justified;
(3) it encourages the wider use of the national competition law rules on unilateral conduct (more or less equivalent to Article 82 EC Treaty), which is permitted in principle by Regulation 1/2003 , but which may lead to anticompetitive results.”
Therefore, a harmonized procedure to solve such jurisdictional conflicts must be developed, especially in the areas where common interests both for competition authorities and regulatory authorities are involved. In order to set up a harmonized procedure between competition authorities and regulatory authorities to ensure competition, promote the common market and protect consumers’ interest, the 2002 Framework provides a mechanism requiring the cooperation of competition authorities on the one hand and converging competition law methodologies into SSR on the other. As discussed before, the 2002 Framework makes great contributions but it also leaves three residual problems.
Subsequently the paper offers four proposals in light of the three residual problems discussed in the third part. The key point concerns the question how to avoid duplicated procedures through an effective cooperation between the Commission and the NRAs at the European level, and then between NRAs and NCAs at national level.
ii. Resolving Conflicts at the European Level
1. Extension of Article 7 Procedure to remedies
As discussed in the second and third parts, the participation of DG Competition, together with DG Information, in the process of examination of national regulatory measures can greatly ease the jurisdictional tensions between the Commission and NRAs. No veto power of the Commission on national regulatory remedies may however produce a risk that the Commission would apply EC competition law ex post into already regulated issues. The best solution to resolve this risk is of course to establish a genuine ERA. Nevertheless, the Commission admitted that the establishment of a genuine ERA in the electronic communications sectors is incompatible with the principle of subsidiarity and therefore is impossible to be achieved in a short term.
Therefore, the first proposal of this paper is to extend the Commission’s veto power to national regulatory remedies.
By such an extension the Commission should be granted the power to examine whether the national regulatory remedies would create a barrier to the single market and whether they are compatible with the Community law and in particular, the objectives referred to by Article 8 of Framework Directive. Similar to the veto power on market definition and designation of SMP, the Commission can not have the power to replace a national remedy by one of its own, but can only indicate the problems of the remedy proposed by the NRA in its justification for the veto decision. This veto decision must be accompanied by a detailed and objective analysis of why the Commission considers the draft remedies should not be adopted, if appropriate, together with specific proposals for adopting draft remedies.
This reform is expected to be submitted by the Commission to the Council of European Union in early 2007. In the summer of 2006 the Commission issued a Communication with two staff working documents whereby stating its proposals to reform the 2002 Framework for public input. In its proposals, the Commission expressed the need for greater consistency in the application of national remedies and proposed that
“in order to contribute to the development of the internal market, the Commission proposes to extend the veto powers under the market review procedure to include proposed remedies”.
Although the extension will indisputably contribute to EC regulatory consistency, the disadvantaged side of the extension is the increasing workload of the Commission and accordingly the decreasing efficiency of implementation at national level. Fortunately the Commission also proposed to simplify the notification procedure with regard to certain draft national measures in order to focus on cases where substantial problems may arise. Though the proposal of a simplified Article 7 Procedure is not to target the increasing workload of the Commission after the extension of veto power, it will certainly achieve desired effects also. Such a simplified procedure is proposed by the Commission to be applied to the following categories of cases:
(1) “notifications of markets which were found to be competitive in the previous review, unless substantial changes in competitive conditions have occurred since that review; and
(2) notifications where only minor changes to previously notified measures are proposed (such as the details of a remedy).”
In addition, according to the Commission’s proposal
“for cases falling under the simplified procedure, a standard notification form could be established to limit the information required to a minimum so as to reduce significantly the administrative burden for NRAs, operators and the Commission. In such cases, in exceptional circumstances where the Commission detected serious problems with the measures under consultation, it could still require the measure to be notified in full.”
Conclusively, the extension of veto power, together with the simplification of the Article 7 Procedure, will promote a consistent European regulatory policy on the one hand and ensure that SSR will only be imposed where necessary on the other. The participation of DG Competition, and especially the extension of the Commission veto power, will not only put the Commission in a position to examine the national regulatory measures under EC competition law, but also render SSR as a lex specialis to economy-wide competition law. This move is likewise significant to relax the institutional tensions between EC competition authorities and NRAs. Because on the one hand NRAs should comply with competition law methodologies to deliberate competition problems in the electronic communications sector and on the other hand DG Competition is granted the power to examine the draft measures of NRAs, the Commission, as EC competition authority, should be bound by the regulatory measures of NRAs. After examination, a positive decision of the Commission concerning the draft measures of NRAs should be a confirming decision that the national regulatory measures are compatible with EC competition law. To put it straightforward, the Commission should regard SSR as a lex specialis to EC competition law and therefore be “estopped” to ground on EC competition law for intervention in the future.
2. Extension of the Commission’s review power to the enforcement stage
According to the 2002 Framework the Commission is only competent to review the initiation of the regulatory measures by the NRAs, it however has no competence at a further step to monitor NRAs enforcing the approved regulatory policies. The uncontrolled enforcement may lead to a fresh risk. Because of insufficient or unpredictable information, the Commission, at the moment of examination of the draft measure, may not foresee the “adverse effects” of the measure concerned in the process of enforcement. Supposing the adverse effects might take place, without review power in the process of enforcing SSR may the Commission, when necessary, possibly invoke EC competition law to attack a market failure stemming from an inappropriate enforcement. Hence an institutional conflict is still possible even after the extension of Commission’s veto power.
In order to manage the jurisdictional conflicts when enforcing SSR, two groups of cases with different causations will be examined. The clear case can be solved under the current regulatory framework whereas the bottleneck case requires further harmonisation.
(1) The clear case
The clear case refers to a situation where a regulatory remedy may not exist, or may exist but the NRA fails to enforce it. In this case, as indicated by the Commission the possibility to act on the basis of competition rules could prove extremely useful. The Commission may start the procedure (by, for instance, launching a sector inquiry) in order to bring the failing NRAs’ attention on a particular problem. Subsequently the Commission will defer the case to the relevant regulator. Eventually, the problem is handled by the NRA through the application of sector specific remedies. The competition rules are thus only enforced as an “ignition” device. This approach has already been followed by the Commission in the pricing of leased lines inquiry and the mobile termination charges inquiry.
Based on the practice of the Commission, the second proposal of this paper is to set up a two-step cooperation mechanism with regard to the clear case.
At the first step, the Commission should be endowed with the power to inform NRAs of the latter’s failure of observation of a market failure and urge NRAs to respond within a certain time limit. In order to keep a consistent and independent regulatory framework, a revised Article 7 Procedure should provide the Commission with such an enquiry power. In line with the principle of subsidiarity, the Commission enjoys no executive or punitive power over the unobserved market failure.
At the second step, if NRAs does not respond actively and adequately so that the market failure concerned is still untouched within the certain time period, then it might be justifiable for the Commission on its own motion to take a step further, i.e. applying EC competition law into the market failure concerned.
(2) The bottleneck case
By contrast, the bottleneck case refers to a situation where while NRAs have already taken regulatory measures to a certain market failure, an anticompetitive activity that distorts trade between Member States still takes place from the perspective of EC competition law. If this case is indeed caused by inefficient NRAs in a sense that NRAs have imposed regulatory obligations while nevertheless are inefficient to solve the market failure concerned, this case is more or less similar to the clear case aforementioned. There is little doubt that the Commission can follow the two-step regime to solve the problem concerned. However, on a second thought this may be a different case that NRAs are deliberate to adopt a regulatory obligation in the transition period in order to boost competition in the long run, while such a temporary measure may be incompatible with EC competition law in the view of the Commission. Be it the case, the Commission’s intervention would frustrate the plans of the NRAs.
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