Relaxing whilst doing Competition Law is not an Oxymoron

The prohibition of double jeopardy. Case law in need of a revamp (by Rafael Allendesalazar)

with one comment

[This is a guest post by our friend Rafael Allendesalazar (MLAB) discussing the EU case law on the ne bis in idem principle in the wake of the Slovak Telecom Judgment and of Amazon’s appeal against the Commission’s decision to carve Italy out of its BuyBox investigation. A very interesting take on an important and timely topic]

The principle of ne bis in idem, also known as the prohibition of “double jeopardy”, “undoubtedly constitutes one of the cornerstones of any legal system based on the rule of law” and its “rationale lies in ensuring legal certainty and equality”, as reminded by the then AG Wahl in his Opinion in the Powszechny Zakład Ubezpieczeń na Życie Case C-617/17.  The ECJ has repeatedly acknowledged that it is a fundamental principle of EU law, that has been enshrined in Article 50 of the Charter and Article 4 of Protocol 7 to the ECHR as regards criminal proceedings and penalties, but that must also be observed in proceedings that may lead to the imposition of fines under competition law. It precludes an undertaking from being found liable of proceedings being brought against it afresh on the grounds of anticompetitive conduct for which it has been penalised or declared not liable by an earlier decision that can no longer be challenged. The principle is subject to a twofold condition: that there is a prior definitive decision (the ‘bis’ condition), and that the prior decision and the subsequent proceedings or decisions concern the same person and the same offence (the ‘idem’ condition).

As to the ‘idem’ condition, the same offence could be defined by reference to the facts, to their legal classification or to the legal interest protected. Regarding criminal proceedings, the ECJ has opted for the first criterion and has explicitly rejected the other two (Case C-436/04, Van Esbroeck). “Same offence” is defined as the “identity of the material facts, understood as the existence of a set of concrete circumstances which are inextricably linked together, and which resulted in the final acquittal or conviction of the person concerned” (Case C-537/16, Garlsson). It does not require the facts to be identical, as it suffices that the offences “have the same essential elements” (Judgment of the ECHR of 07.12.2006, Application 37301/03, Hauser-Sporn); for instance, exporting and importing the same illegal goods from different States are considered the same offence. Furthermore, even where the imposition of a criminal penalty depends on an additional subjective constituent element in relation to the administrative fine of a criminal nature, this does not call into question the identity of the material facts at issue (Case Garlsson).

When applying the ne bis in idem principle to competition law cases, the ECJ has interpreted it narrowly and has required, not only an identity of offender and of facts (which includes the same territory and the same period) but also an additional third identity: the legal interest protected in both cases must be the same. This divergence in the scope of the ne bis in idem principle in criminal law and in competition law cases was strongly criticized by AG Kokott in her Opinion in Toshiba: “to interpret and apply the ne bis in idem principle so differently depending on the area of law concerned is detrimental to the unity of the EU legal order. The crucial importance of the ne bis in idem principle as a founding principle of EU law which enjoys the status of a fundamental right means that its content must not be substantially different depending on which area of law is concerned. For the purposes of determining the scope of the guarantee provided by the ne bis in idem principle, as now codified in Article 50 of the Charter of Fundamental Rights, the same criteria should apply in all areas of EU law”. AG Kokott concluded that retaining the criterion of the unity of legal interest protected would not be compatible with the requirement of homogeneity as enshrined in the third subparagraph of Article 6(1) TEU and the first sentence of Article 52(3) of the Charter. More recently, in his above-mentioned Opinion in Case C-617/17, the then AG Wahl also rejected the application of the three-fold criterion in competition law cases and concluded that “on the basis of the two-fold criterion based on the identity of the facts and offender, the principle of ne bis in idem can ensure effective prosecution of anticompetitive conduct in the European Union. It also ensures more legal certainty for undertakings”. AG Wahl recalled that the origin of the ECJ’s case-law requiring the identity of legal interest can be traced back to the Walt Wilhem judgment of 1969, at times where the risk of cumulative application of national and EU competition law was limited and such legislations were often designed to safeguard different legal interest; furthermore, neither the Charter nor Protocol 7 to the ECHR were then in force. More than fifty years later, and following the adoption of Regulation 1/2003, the risk of cumulative application is now inherent to the decentralised system of competition law enforcement it has set up, despite Regulation 1/2003 containing some rules seeking to avoid parallel prosecution, particularly in Articles 11 and 13. That is why —Wahl concludes— the application of these rules and of the principle of ne bis in idem should not be made “subject to overly cumbersome criteria”.

The Slovak Telekom judgment and its consequences

Notwithstanding these opinions, the ECJ has reiterated that the ne bis in idem principle requires the identity of legal interest and has defined rigorous formal identity requirements to apply Article 11(6) of Regulation 1/2003. In its recent judgment of 25.02.2021 in the Slovak Telekom Case C-857/19, the ECJ has reaffirmed its strict interpretation.

In December 2007, the Slovak competition authority (SCA) adopted a decision declaring that Slovak Telekom (ST) had abused its dominant position infringing Article 102 TFEU. The SCA followed the cooperation mechanism set out in Article 11 of Regulation 1/2003, as it had duly notified the Commission when it opened proceedings, pursuant paragraph 3, and submitted its draft decision, pursuant paragraph 4. In April 2009, the Commission also initiated proceedings against ST. The next day, the Board of the Slovak Antimonopoly Office amended the 2007 SCA’s decision and concluded that ST had committed an abuse between May 2001 and April 2009. In October 2014, the Commission adopted its decision stating that ST had infringed Article 102 TFEU during the period August 2005-December 2010. Both decisions considered that ST abused its dominant position by adopting a margin squeeze strategy, but whereas the SCA declared that the abuse referred to the wholesale and retail markets for telephone services and low-speed internet access services, the Commission considered it referred to wholesale access to the unbundled local loop and to other broadband access services and their corresponding retail services. As the SCA and the Commission had found ST liable for an abuse consisting of a margin squeeze for the period August 2005-December 2007 (i.e. the period covered by the initial decision of the SCA; the overlap with the amended decision would have lasted until April 2009), and as the Slovak Supreme Court considered that both decisions had examined the same products, it referred to the ECJ for preliminary ruling asking for clarification on the interpretation of Article 11(6) of Regulation 1/2003 and on the application of Article 50 of the Charter and the ne bis in idem principle.

The ECJ interprets Article 11(6) as relieving the Member States of their competence to apply Articles 101 and 102 TFEU only when the Commission initiates proceedings related to the same alleged infringement, committed by the same undertaking on the same product market and the same geographical market during the same period. If a NCA is already acting on a case, the Commission can initiate proceedings only after consulting with that NCA. If any of the five identities mentioned by the ECJ fails, the NCA and the Commission can continue with their proceedings and adopt separate decisions and fines.

In the case at stake, the identity of undertaking, geographical market and timeframe was undisputed; and the infringements were also the same: margin squeeze practices contrary to Article 102 TFEU. The question was whether the practices affected the same product market. In this respect, the ECJ merely relies on the definition of the affected product markets contained in both decisions to conclude that the infringement had been committed on separate products.

It is questionable whether such a formalistic criterion would suffice, under the Court’s case-law in criminal cases, to conclude that the offences were different. Such case-law does not require the facts to be identical and considers that two offences are the same when they “have the same essential elements” and correspond to “a set of concrete circumstances which are inextricably linked together”. The ECJ, unfortunately, did not analyse, for instance, whether the margin squeeze practices in the broadband and in the low-speed internet access had the same essential elements or were inextricably linked, nor how close or separate were the two product markets, or whether the companies participating in both markets and the exclusionary effects of the practice were the same. An analysis of whether the infringements were, not only formally, but materially essentially the same, or not, would have been particularly opportune, as the Slovak Supreme Court, which referred the case, believed that both decisions applied to the same products.

Having ruled that Article 11(6) of Regulation was not applicable as the proceedings conducted by the Commission and by the SCA referred to abuses committed on separate product markets, the response to the referring court’s question on the application of the ne bis in idem principleis straightforward. The ECJ expounds that this principle applies to infringements of competition law subject to the twofold ‘bis’ and ‘idem’ conditions and that the ‘idem’ condition is, in turn, subject to the threefold sub-condition that the facts, the offender and the legal interest must be the same. The ECJ concludes that in the case at stake, the ‘idem’ condition was not met as the margin squeeze did not relate to the same product markets.

Obiter dictum, the ECJ considers the hypothesis that, notwithstanding its responses to the preliminary ruling, the referring Slovak court, which is competent to interpret the scope of the SCA decision, finally concluded that the two decisions referred to practices committed by ST on the same product markets, and thus that the ‘idem’ condition was met. The ECJ affirms that the principle ne bis in idem would still not apply as the ‘bis’ condition would not be satisfied since the SCA was relieved, pursuant to Article 11(6) of Regulation 1/2003, of its competence to apply Article 102 TFEU.

This response raises at least two questions: (i) What would be the practical effect if Article 11(6) relieved a NCA of its competence to apply Articles 101 or 102 TFEU in cases where it has already adopted a decision and duly informed the Commission pursuant to Article 11(3) and (4), as was the case with the SCA’s decision of 2007? (ii) Can a NCA be properly relieved of its competence if there is no evidence that the Commission consulted the NCA before initiating proceedings, as required by Article 11(6) in fine? The judgment is completely silent about this.

Article 11(6) is a very powerful tool in the hands of the Commission; the conditions as to when and how it can be used should be clear, but the Slovak Telekom judgment casts doubts. By relying solely on the product markets defined by the Commission and the NCA in each specific case, a criterion that is both formalistic and mutable, the Court has effectively narrowed the scope of Article 11(6) of Regulation 1/2003 and of the ne bis in idem principle, thus increasing the risk of cumulative proceedings against the same undertaking for practices that are in essence the same. To elude their application, it would suffice for the competition authorities to finetune nonidentical definitions of the relevant markets affected by the infringement. Amazon’s recent appeal against the Commission’s decision to carve Italy out of its “Buy Box” investigation illustrates a situation where the Commission and the NCA have apparently relied on Article 11(6) of Regulation 1/2003 to maintain two separate but simultaneous proceedings against the same practices, simply by splitting the geographical markets. Even though the idea of clearly separate geographical markets seems more intuitive than the separate product market criterion applied by the ECJ in the Slovak Telekom judgment, in fact, it is not. First, Amazon being an epitome of transnational commerce, what would be the relevant geographic market affected —and thus which would be the competent authority to investigate— for purchases made by Italian consumers on of Chinese products sold by a French retailer? When initiating these proceedings, the Commission has defined the geographical market covered by its investigation as “the European Economic Area with the exception of Italy”. Such a delimitation does not seem to correspond to a relevant geographic market as defined under competition law —“the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those areas” (Commission Notice on the definition of relevant market)—, but merely to the use of the geographical markets to allocate the competence between the Commission and the Italian Competition Authority. Second, assuming the market definition contained in the Commission’s initiation of proceedings, and applying the ECJ’s criterion in Slovak Telekom, both the Commission and the Italian Competition Authority will be competent to apply Article 102 TFEU in two separate decisions: one limited to practices in Italy and the other to same practices in all EEA countries, except Italy. But doesn’t the application by the Italian Competition Authority of Article 102 TFEU necessarily imply that Amazon’s practices in the Italian market have a significant effect on trade between Member States (and vice versa)?

It seems unfortunate to leave the crucial issue of the competence to apply Articles 101 or 102 TFUE, and the practical scope of the prohibition of double jeopardy, to such a malleable and unpredictable criterion, thus reducing legal certainty for undertakings. Moreover, it is paradoxical that, whereas in merger review, EU Law provides for a one-stop-shop, in cases applying Articles 101 or 102 TFEU, that can lead to the imposition of sanctions which have a criminal nature, it has made it almost impossible to claim the principle of ne bis in idem, while also been incapable of ensuring the objective “that each case should be handled by a single authority”, explicitly formulated in recital 18 of Regulation 1/2003. To comply with this objective, the mechanisms of cooperation and case allocation under the current decentralised system of Regulation 1/2003, and the case-law, need a serious revamp that reinforces legal certainty, by setting clear rules to identify the “natural authority pre-established by law” to decide each case, rather than striving to preserve the Commission’s “superior” competence to apply Articles 101 and 102 TFEU, while simultaneously incentivising their application by NCA.

Written by Alfonso Lamadrid

11 March 2021 at 10:43 am

Posted in Uncategorized

One Response

Subscribe to comments with RSS.

  1. This article reminds me of the situation where the Commission and OFT maintained parallel investigations for a while on the Apple Ebooks case (with the OFT being first off the blocks), supposedly on the basis that they were looking at different contracts (which naturally reflected the same underlying commercial policy with respect to ebook agency agreements). Eventually the OFT gave way and left it to the Commission to continue (alongside the DOJ, but that’s another story). While the new Amazon case suggests the Commission has learned from that experience, in seeking to carve out an entire Member State from its review, I can’t see how that can work for the reasons set out above. Both cases are a reminder that allocation of cases under Regulation 1/2003 is not always as straightforward as might appear.

    Becket McGrath

    11 March 2021 at 1:19 pm

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: