Potential problems with respect to the requirements of due process

In the decentralized model of enforcement of the substantive antitrust provisions of the TFEU provided for by Regulation 1/2003, the procedures, especially those governing companies’ rights, have not been fully harmonized. Instead, Regulation 1/2003, as well as the Cooperation Notice, provide only 69 _{This is without prejudice to any power of the authority to open an investigation on the}

basis of information received from other sources. See: Network Notice, para. 39.

70 _{Network Notice, para. 40.} 71 _{Network Notice, para. 41.}

72 _{By this is meant informal exchange of information in the sense of the exchange taking}

place outside of the framework of specific instruments of cooperation. See: International Competition Network, Co-operation between…, p. 7.

that general procedural safeguards for the parties to the proceedings be integrated into the mechanisms for cooperation between the members of the ECN. In this respect, as has already been underscored, Article 12 of Regulation 1/2003, regulating the terms and the conditions of exchange of evidence between the members of the ECN, is the central provision bringing about the efficient free flow of information within the Network. Consequently, it provides a basic procedural framework for use of the information exchanged by the Network members/parties to the exchange, and the basic procedural warranties afforded to the undertakings and individuals who are the subject of such exchanges.

Moreover, it needs to be stressed that the issue of the adequate minimum level of protection of the parties’ fundamental rights with respect to the exchange of information within the ECN has recently lost much of its pertinence. This is due to the fact that a vast common set of sources of procedural safeguards applies throughout the entire EU, ensuring a minimum standard of protection of these rights73_.

Nevertheless, the ECN, in the way it was conceived and currently functions, presupposes a – somewhat comfortable – assumption of ‘sufficient equivalence’ of the rights of defense enjoyed by undertakings in the various legal systems of its members74_{. Additionally, according to the principle of} ‘mutual recognition of national procedural rules’75_{, contained in paragraph 8} of the Joint Statement of the Council and the Commission on the Functioning of the Network of Competition Authorities76_{, Member States accept that their} 73 _{As it was already underlined, following the entry into force of the Treaty of Lisbon the}

Charter of Fundamental Rights of the European Union,) the European Convention on Human Rights and Fundamental Freedoms ECHR became legally binding on the EU institutions as well as national authorities applying EU law. Insofar as the Charter contains rights which correspond to rights guaranteed by the ECHR, the meaning and scope of those rights is the same as those laid down by the Convention, unless EU law provides more extensive protection. Moreover, the ECHR applies in the legal systems of all national competition authorities and, based on the provisions of Article 6 (2) of the Treaty on the European Union shall be joined by the EU. Finally, the general principles derived from Article 6 of the Treaty on the European Union could be used for the protection of fundamental rights It is also stated that the case law of the Court of Justice of the European Union with respect to undertakings’ fundamental procedural rights standards should be applicable in the proceedings before NCAs applying Articles 101 and 102 of the Treaty (see: considerations in the preliminary part to the Second section of the article here-above).

74 _{Recital 16 of Regulation 1/2003. See: A. Andreangeli, EU Competition Enforcement…,}

p. 189.

75 _{See: A. Andreangeli, EU Competition Enforcement…, p. 201.}

76 _{Joint Statement of the Council and the Commission on the Functioning of the Network}

of Competition Authorities 15435/02 ADD 1, available at http://ec.europa.eu/competition/ecn/ joint_statement_en.pdf.

enforcement systems differ but nonetheless mutually recognize the standards of each other’s system as a basis for cooperation. These rules underlie the principle that each NCA has full responsibility for ensuring due process in the cases it deals with77_.

The debate concerning the equivalence of the standards of protection of the rights of defense within the EU becomes even more heated as the cooperation amongst the members of the European Competition Network grows and tightens in practice. The debate thus concerns possible divergences in the levels of protection of the individuals’ and undertakings’ rights provided for by different legal regimes of the NCAs transmitting and receiving information within the ECN78_.

In this context, the question arises whether indeed uniform due process can be maintained based on domestic rules, where different standards of protection exist with respect to the procedural rights of the parties to the proceedings79_. These doubts relate to three basic aspects of the transfer of information: (i) the terms and conditions of the exchange itself,80 _{(ii) the collection of the} information to be transmitted, and finally (iii) use of the information received. In this respect, the procedural safeguards concern both the parties’ ‘active’ participation in the proceedings (such as access to files or right to be heard), as well as their ‘passive’ procedural rights (such as right not to incriminate oneself, right to protection of confidential information and especially business secrets and legal professional privilege,as well as right to privacy). As far as the discrepancies between national regimes with respect to the collection and subsequent use of evidence are concerned, the most important examples of such differences typically relate to the standard of the undertakings’ and

77 _{Network Notice, para. 4.}

78 _{See for example: K. Kowalik-Bańczyk, The issues of the protection…; W.P.J. Wils, Efficiency}

and Justice…; C. Smits, D. Waelbroeck, ‘Le droit de concurrence et les droits fondamentaux’, [in:] M. Candela Soriano (ed.), Les droits de l’homme dans les politiques de l’Union europeenne, Bruxelles 2006, p. 138; C. Gauer, Due process in the Face of Divergent National Procedures and Sanctions, paper presented at the IBA conference, March 9–11 2005 Antitrust reform in Europe: A year in practice papers, available at http://www.ibanet.org; W.P.J. Wils, The EU Network of Competition Authorities the European Convention of Human Rights and the Charter of Fundamental Rights of the EU, EUI 2002.

79 _{However, it needs to be underlined that situations triggering such doubts with respect to}

fundamental rights as a rule occur only in rare cases where divergences in national procedures translate into two standards of protection out of which the lower one, i.e. that of the authority transmitting information, would necessarily have to be equal to (or higher than) the applicable ECN minimum standard, and the other one, i.e. that of the authority receiving information – would have to be higher than the ECN minimum standard and the standard of the transmitting authority. Similarly, a different scope of investigatory powers could raise due process related doubts (see: examples below).

individuals’ rights during inspections/searches, or dawn-raids. Upon paragraph 27 of the Network Notice the question whether information was gathered in a legal manner by the transmitting authority is governed on the basis of the law applicable to this authority Accordingly, upon the ‘country of origin’ principle, it is for the transmitting authority carrying out specific fact-finding measure to decide, upon its national rules, which information may be collected and thus subsequently transmitted81_{. In this context, it is possible that evidence} collected during an inspection performed in a jurisdiction providing for a lower standard of protection of the rights of defense and/or right to privacy, may be transmitted to an NCA which, under its own domestic rules, could not have gained access to such information82_{. Most prominently, a broad reading} of Article 12 of Regulation 1/2003 could result in allowing for the transfer of information which under the national rules of the receiving authority would be covered by legal professional privilege83_.

Another sensitive area of collection of the information by transmitting authority and subsequent use of the information by the receiving authority concerns the exchange of confidential information. Article 28(2) of Regulation 1/2003 provides for a minimum standard of protection of confidential information within the EU, stating that the Commission and the competition authorities of the Member States shall not disclose information acquired or exchanged by them which is covered by the obligation of professional secrecy. Similarly, upon the provisions of Article 71 of the Polish Competition Act, the Office employees are obliged to protect the business secrets84 _{as well as any} other secrets being liable to protection under the relevant separate provisions,

81 _{See: S. Brammer, Co-operation between National Competition Agencies…, pp. 283–286.} 82 _{For instance, while the investigatory powers concerning private premises are covered by}

the vast majority of national jurisdictions, some NCAs do not have the possibility to inspect non-business premises outside of assistance to the Commission in the context of Article 21 of Regulation 1/2003 (such as, for instance, competition agencies in Bulgaria, Denmark, Italy or Portugal). Similarly, under national jurisdictions there are different approaches towards lawyers’ presence during the inspection, and discrepancies with respect to the power to ask questions and take statements during the inspections.

83 _{Such would be the case, for instance, if information not covered by the LPP under the}

transmitting system, limiting the scope of the privilege to external legal counsel (as foreseen by the Akzo case-law, see: judgment of the Court of 14 September 2010 in case C-550/07 P Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v European Commission) was collected and transferred to a jurisdiction where such information would normally be protected by LPP specifically covering, for example, in-house legal counsel (see: A. Andreangeli, EU Competition Enforcement…, pp. 202–206 ).

84 _{According to the provisions of Article 4 (17) of the Competition Act, ‘business secret’}

shall be understood as the ‘entrepreneur’s technical, technological, organisational or other information having commercial value, which is not disclosed to the public, to which the entrepreneur has taken the necessary steps to maintain confidentiality’.

of which they have become aware in the course of the proceedings. However, upon the ‘country of destination’ principle it is for the country receiving an information containing request of confidential treatment to decide whether the information will be treated as confidential85_{. Along the lines of the} principle, it is argued that any assessment of the confidentiality claim made by the transmitting authority is not binding upon the receiving authority, except if it has been taken by the Commission86_{. It could also be argued that the} information transmitted by the authority, upon national rules applying higher standard of protection of confidential information, to the authority applying lower standard of protection would not receive equivalent treatment87_{. In} this respect, it is worth reminding, that the provisions of Article 73(5) of the Polish Competition Act, providing that information received by the Polish NCA may be used in the course of the proceedings under the terms upon which such information is provided by the transmitting authority, seem to reverse the country of destination principle, by making transmitting authority’s decision on the validity of confidentiality claim binding upon the Polish NCA. Mutual recognition of the confidentiality classification based on Article 28 of Regulation 1/2003 should become the ECN good practice.

Similarly, concerns are raised that, confidential information being exchanged will become accessible from the receiving jurisdiction, due to lack of harmonization of the procedures of access to files in competition cases88_. The issue of such kind was recently dealt with by the Court of Justice of European Union in the Pfleiderer case where access to the leniency files was sought in the private enforcement proceedings before the national court89_. The CJEU confirmed that it is for the national courts and tribunals, on the basis of their national law, to determine the conditions under which such access must be permitted or refused by weighing the interests protected by European Union law.

85 _{S. Brammer, Co-operation between National Competition Agencies…, pp. 277–282.} 86 _{S. Brammer, Co-operation between National Competition Agencies…, p. 278; C. Gauer,}

Due process…, p. 18.

87 _{However, it needs to be underlined that situations triggering such doubts as to the}

protection of procedural rights as a rule occur only in rare cases where divergences in national procedures translate into two standards of protection out of which the lower one, i.e. that of the authority receiving information, would necessarily have to be equal to (or higher than) the applicable ECN minimum standard, and the other one, i.e. that of the authority transmitting information – would have to be higher than the ECN minimum standard and the standard of the receiving authority.

88 _{OECD, Competition Committee, Background Note by H. Jennings, Improving}

International Co-operation in Cartel Investigations(DAF/COMP/GF(2012)6), para. 95.

89 _{Judgment of the European Court of Justice of 14 June 2011 C-360/09 Pfleiderer AG}

Moreover, it could be argued that the terms and conditions of the exchanges of information within the ECN could jeopardize due process. Regulation 1/2003 contains no obligation to inform the targeted undertakings about the transfer of the information. As long as the information is not being placed into evidence by the receiving authority (i n which case the parties to the proceedings would normally have the right of access to files, and thus access to the information exchanged, while not necessarily being aware from where the evidence originated), the undertakings may remain unaware of the exchange taking place and of the information exchanged. In addition, there is no transparency with respect to how in practice the exchange is performed. Moreover, although Article 28 of Regulation 1/2003 extends the uniform EU concept of professional secrecy to all NCAs, it could nonetheless be argued that the ‘country of destination’ principle, coupled with the lack of transparency accompanying the exchange of information, brings about legal uncertainty and may in practice render any procedure dealing with a request for confidential treatment unduly lengthy and complicated90_.

Many recommendations have been put forward to overcome the potential problems concerning the protection of procedural rights resulting from the discrepancies between the national jurisdictions of the competition authorities, i.e. parties to the exchange of information.

In this respect, following the OECD’s Best practices for the formal exchange of information between competition authorities in hard core cartel investigations, acceptance of whichever level of protection of the undertakings’ rights is higher could be promoted91_.

It is also argued that the decision concerning the transmission of information should be challengeable in order to guarantee due process within the ECN and to ensure a level playing field by balancing the effective enforcement of the antitrust rules and the protection of the rights of defense of investigated entities92_.

Greater transparency of the internal rules governing exchanges of information, in accordance with the principle of participation, is yet another postulate aiming at ensuring that the modus operandi of the exchange elaborated within the ECN fully takes account of undertakings’ procedural rights93_.

However, such solutions seem either intermediate or impossible to adopt under the current wording of Regulation 1/2003, and some could considerably impair the effectiveness of investigations. Therefore, from a long

90 _{See: S. Brammer, Co-operation between National Competition Agencies…, pp. 279–282.} 91 _{OECD, Best practices…, See: chapter 1 here-above.}

92 _{A. Andreangeli, EU Competition Enforcement…, p. 223.} 93 _{M. De Visser, Network-Based Governance…, pp. 270–275.}

term perspective, it seems that introducing general procedural changes to Regulation 1/2003 in order to achieve further standardization of the rights of defense would be the best remedy for addressing some of the potential problems with respect to due process that the current state of affairs may bring about94_{. In the meantime, it should be noted that such harmonization is being} sought and implemented by the members of the ECN using the ‘bottom up’ model, whereby the NCAs themselves initiate proposals aimed at achieving some level of procedural convergence, despite the lack of binding EU rules imposing the same.

IV. Conclusions

Comparison of the regulation of information exchanges in antitrust and in merger cases leads to the conclusion that antitrust provisions are fairly well developed, serving as a basis for day-to-day administrative cooperation, whereas the merger provisions are still in their infancy period. Such a situation should not be surprising inasmuch as the merger provisions still remain the domain of national legislation, while antitrust provisions are beginning to form a common European competition legal order. As a consequence of this situation, distinct problems arise with respect to antitrust and merger cases. In merger cases the likelihood of infringement of entrepreneurs’ rights is relatively small. As described earlier, in merger cases it is the entrepreneur who decides what confidential information will be disclosed and to whom. Non-confidential information is publicly available, so the transmission of such information will not, in principle, violate a company’s rights. Antitrust cases, on the other hand, involve much more complex and far-reaching issues. Especially troublesome is the fact that, under a broad reading of Article 12 of Regulation 1/2003, national rules which are more protective of the rights of defense than the ECN standards could be vitiated in the course of information exchanges within the Network. As far as international soft-law instruments are concerned, they rather provide a guide for informal exchange of non- confidential information.

Cooperation between competition authorities in merger cases is growing with the increasing number of multi-jurisdictional mergers. A very worrying fact is that Polish legislation does not recognize the tendency of growing cooperation in merger cases and there are only rudimentary legal grounds for 94 _{Similarly, stakeholders in the context of the public consultation for the Commission’s}

Report on the functioning of Regulation 1/2003 have also strongly urged the further harmonization of procedures within the ECN. See: Commission Staff Working Paper, para. 206.

such cooperation. The analysis undertaken leads to the conclusion that, under Polish law, the exchange of information in merger cases is limited to publicly available information. Confidential information may only be transmitted by the merging parties themselves directly to foreign NCAs. Therefore legislative changes in the Competition Act are needed in order to create a legal basis for the UOKiK President to transfer confidential information to other competition authorities with the consent of the entrepreneur concerned. Such consent must be given in a transparent manner, i.e. the entrepreneur should voluntarily and unambiguously (any ‘implicit’ means of expressing consent should be ruled out in advance) give its consent to the transfer of such information. Furthermore, the scope of the information provided under a waiver should be closely associated with the nature of the merger case. Finally, such waiver should specify the purpose for which the information is transferred and list