Cseres, Katalin J.

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Mutual (Dis)trustKati Cseres 2022-02-16T15:05:26Last week, the General Court of the European Union, in its judgment T-791/19 Sped-Pro, recognized for the first time the impact that systematic rule of law deficiencieshave on national competition authorities. The judgement is seminal in that it openlyquestions the ability of national authorities impacted by rule of law backsliding toeffectively enforce EU law. The judgement also goes to the heart of explaining thepivotal constitutional role of competition law within the EU legal order.The Sped-Pro caseThe case concerns a complaint filed with the Commission in 2016 by the Polishcompany Sped-Pro against PKP Cargo, a company controlled by the Polish state.Sped-Pro submitted that PKP Cargo abused its dominant position on the Polishmarket for rail freight transport services on account of its alleged refusal to concludea multi-annual cooperation agreement on market conditions.In 2019, the Commission rejected Sped-Pro’s complaint on the grounds that thePolish competition authority was best placed to examine it. Subsequently, theapplicant brought an action before the General Court seeking annulment of thecontested decision raising three arguments, alleging (1) a failure to have its casehandled within a reasonable time and a failure to state reasons in the contesteddecision, (2) manifest errors in assessing the EU interest in pursuing the examinationof the complaint and (3) breach of the principle of the rule of law in Poland. While theCourt rejected the first two arguments of the applicant, it fully endorsed the argumentthat the systemic or generalised deficiencies of the rule of law in Poland and thelack of independence of the Polish competition authority and the national courts withjurisdiction in the field, must be considered by the Commission before rejecting acomplaint for lack of an EU interest.Case allocation mechanismsIn this case, the Court not only addressed rule of law issues as an element ofeffective competition law enforcement, but has also redrawn the otherwise clearjurisdictional mechanisms of case allocation, which govern the enforcement ofcompetition law between the Commission and the Member States.The allocation of cases between national competition authorities (NCA) and theCommission occurs within a framework of clear jurisdictional boundaries by seekingto find the best placed authority for enforcing Articles 101 and 102 TFEU, determinedby various objective factors such as size and cross-border nature of the relevantbehaviour.- 1 -Ever since the Automec II judgment, the Courts acknowledged that the Commissionhas broad discretion to reject complaints. The principles governing the Commission’smargin of discretion when it decides to pursue a case or disregard it, have beenbroadly construed and entitle the Commission to classify complaints according todifferent degrees of priority based on the Union interest.Rule of law concernsThe present judgement demands the Commission to take account of the additionalcondition of rule of law concerns when deciding on rejecting complaints andcase allocation. By referring to case-law developed in the area of the EuropeanArrest Warrant (EAW), the Court created a novel condition that “requires theCommission, before rejecting a complaint for lack of an EU interest, to ensure thatthe national authorities are in a position adequately to safeguard [emphasis added]the complainant’s rights”. The Commission must therefore investigate whetherits decision to reject complaints puts complainants at risk of being subjected toinvestigations by national authorities compromised by rule of law backsliding.Furthermore, the Court seems to argue that uniform application of EU law must beprotected against certain captured authorities, winding up the presumption of mutualtrust that also governs competition law enforcement.In doing so, the General Court draws on its own rulings pertaining to the applicationof the EAW. To recall, the mutual recognition and execution of EAWs was alwaysbased on “the high degree of trust and solidarity between the Member States” thatnational authorities would dutifully execute EU law. The nature of EU law basedprimarily on norms formulated at the EU level but executed by the Member Statesmeant that membership in the Union premised that “each Member State shares withall the other Member states, and recognizes that they share with it, a set of commonvalues on which the EU is founded, as stated in Article 2 TEU.” More simply put,the act of accession to the EU constitutes an act of recognition and acceptanceof the values of the EU, and in equal measure a promise that these values will berespected whenever EU law is enforced.The CJEU has since elaborated on the exceptional circumstances under whichmutual trust can be suspended. Crucially, in its LM decision, which the Court nowcited in Sped-Pro, the lack of judicial independence of authorities issuing EAWswas the object of concern. In such a situation, the Court ruled that systemic orgeneralized deficiencies in judicial independence should be assessed as part ofthe right to a fair trial, with the Charter forming the applicable standard of review.Where such deficiencies could be proven to a sufficient degree, cooperation withEAW requests could be suspended. It is this test of exceptional circumstances forcompliance with the fundamental values of Article 2 TEU that the Court has nowexported to the enforcement mechanisms of competition law.- 2 -Putting (mutual) trust into the enforcement ofcompetition lawAs we argued elsewhere, the protection of the competitive process in EU law mustbe seen as an implementation of Article 2 TEU, as competition law and democracyare intimately connected. However, unlike Article 2 values, which are seriouslyundermined by the EU’s limited competences to legislate and enforce these values,competition law is an exclusive competence of the EU with powerful tools and trackrecord of enforcement. This means on the one hand, that competition law is a robustconstituent of the EU legal order that has been transferred to all Member Statesvoluntarily and forms a shared value for all Member States. A fact recognized asmuch by the Court crowning competition law as one of the “fundamental provisions”of Union law together with the area of freedom, security and justice (AFSJ) andfree movement law. On the other hand, competition law is equally threatened andundermined by systematic attacks of certain Member States on the rule of law anddemocracy.Currently, enforcement of competition law is shared between the Commissionand the NCAs and is based on a system of parallel competences. This creates achallenge as the enforcement of Articles 101 and 102 TFEU (partly) relies on theeffective enforcement by national administrative authorities embedded in diversepolitical, institutional and procedural settings. Creating decentralised enforcementwas an important component to provide more democratic political support tocompetition policy, however, with concerns that bringing decision-making closerto citizens carried the inherent risk that Member States would implement their ownnational interests within the EU enforcement framework. These concerns seem fullyjustified in Poland today as the Sped-Pro judgment demonstrates.The judgement raises the question if the concerns of the Court should not compelthe Commission to consider these issues in other jurisdictions facing similar ruleof law concerns and to revisit its “hands-off” approach (Si.mobil, AgriaPolska),which enables the Commission to re-allocate cases to Member States‘ competitionauthorities.The Hungarian caseAnother jurisdiction that suffers heavily from rule of law backsliding is Hungary.Politicising the competitive process to support national economic interests has beena widespread practice of the Hungarian government since winning the elections in2010. The drastic re-transformation of the constitutional system has fabricated aframework for economic regulation where accumulation of political power steadilyleads to accumulation of economic power in the hands of a few. This new economicgovernance systematically undermined key legal rules and independent institutionsof the functioning Hungarian market economy. Numerous cases show how legaland regulatory measures were enacted by the Hungarian government to exempteconomic activities in strategically important sectors of the economy from thepressures of competition. For example, in the area of cartels, the government- 3 -has enacted legislations to relax the control of cartel agreements and bid riggingand thus fails to prosecute corruption and selectively enables harmful cartels. Anillustration was the legislative restructuring and renationalization of the Hungarianwaste management market that excluded the applicability of the competition rulesconcerning illegal conduct in public procurement procedures. Likewise, the 2012Watermelon cartel was initiated by the Ministry for Rural Development as an allegedrestrictive agreement. But as a consequence of an amendment by the HungarianParliament to the Act on Inter-branch Organisations, it was exempted from theapplication of the Hungarian competition law.An even more palpable concern for democracy is a 2013 amendment to theHungarian merger review, which enables the Hungarian Government, on publicinterest grounds, to declare a concentration of undertakings of strategic importanceat the national level. For such concentrations, no authorization of the Hungariancompetition authority (GVH) is required and the decision can be taken in agovernment regulation without being subject to judicial review. Since 2013, 29merger cases in strategically important sectors were approved by the governmentwithout any competition review by the GVH. Meanwhile, other jurisdictions haveseen far lower rates of approval by ministerial mandate. The risk of such exceptionsis especially tangible concerning a merger case in 2018 that relates to mediapluralism and a recent case concerning telecommunications market enabling theacquisition of the majority of shares in a state-owned company.Suspension of NCA cooperationThe rate and scope of constitutional re-engineering of Hungary´s competition lawenforcement pose questions beyond the Hungarian context. As public enforcers ofthe competition rules, the Commission and the NCAs have a fundamental role inensuring effective enforcement of competition law across Europe. Hence, MemberStates must use their sovereign powers to maximize the effectiveness of enforcingthe Treaty’s competition rules.Accordingly, competition authorities’ power to challenge conduct deemed hostileto competition, particularly when that conduct is by politically powerful actors, is anessential measure to safeguard competitive markets. Even if competition authorities’formal independence is guaranteed, Member States should be barred from adoptinglegislative or other measures that de facto eliminate the independence of its NCAas the above Hungarian cases show. The Courts have on various occasionsemphasized the obligations Member States have on the basis of the principle ofeffectiveness, which requires “sufficiently robust national enforcement structuresso that Member States can discharge their overarching obligation to secure themeaningful application of EU law within the domestic system.”Effectiveness relates to the deterrent effect that national sanctioning systems haveon the conduct of market operators. No deterrent effect will be realized in situationswhere competition rules are either sparsely enforced or not enforced at all. In thislight, the general deficiencies to effectively enforce competition law, as shown inthe selected Hungarian cases, form a clear risk to the fundamental rights of market- 4 -players who are prevented from exercising their right to economic activity and equalaccess on the Hungarian market. Such a systemic failure of an NCA poses therisk to the overall system of competition law enforcement and should, therefore,be sufficient to suspend cooperation among NCAs. Practically, such a suspensionmeans that other NCAs would no longer recognize the respective national systemas effective enforcer with the consequence that cases would be re-allocated fromsuch an NCA to other NCAs to ensure that the Treaty rules are enforced. Moreover,if there is a serious risk of incoherence, the Commission can intervene by relievingthe NCA of its competence to act.- 5 -

Mutual (Dis)trust

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