The pros of having a strong and independent competition authority

The interaction of firms on the market is strongly regulated and competition authorities should make sure that firms do business on an equal playing field. In a competitive environment, the pressure on efficiency and effectiveness is ever greater. In order to withstand this trend, firms must keep coming up with quality and innovative goods at better prices. This is beneficial not only for consumers. Greater purchasing power of consumers and growth in firms’ production ultimately contribute to the growth of the entire economy. If the rules in place are followed, firms will remain driven to offer a wide range of quality and innovative products at low prices.

Compliance with competition regulations in conducting business is overseen by national competition authorities and the European Commission. The scope of regulation is fairly wide and also covers, for example, personal data protection, digitization of industrial branches and investment protection. By applying competition standards, sanctions can be imposed on a whole series of firms’ business strategies and activities. The purpose is to prevent those engaged in fraud from profiting from their actions.

The new ECN+ directive will empower competition authorities

Competition authorities in EU member states cooperate in enforcing competition law as part of the European Competition Network (ECN). In December 2018, the EU’s ECN+ directive was approved, strengthening the position of competition authorities so that they may enforce competition rules more effectively and efficiently. Thanks to harmonizing provisions across the EU, sanctions for anticompetitive activities may be more severe in the near future.

The ECN+ directive stipulates the minimum set of instruments to make sure that national authorities are more capable of action in enforcing anti-monopoly rules. The competition regulator should be a powerful guardian of the principles of regulating competition and, through their decisions, contribute to ensuring that the best withstand competition. To achieve this, it should have the necessary funds and human resources at its disposal, and the power necessary to gather all relevant evidence. In addition, a coordinated leniency programme should be in place, encouraging firms to submit evidence of unlawful cartel agreements and help cleanse the market of unfair practices. Within the single market, the enforcement of competition-related legal regulations should not have varying results in different EU member states.

A public debate on transposition is taking place in the Czech Republic

At present, a public debate is taking place as to how the directive should be transposed to the national legislation. In the Czech Republic, all stakeholders may comment on transposing the ECN+ directive until 1 April 2019. It is a great opportunity for firms to consider how to participate in the initiative and affect the future form of the instruments for enforcing competition regulations.

The debate will primarily centre on implementing the necessary guarantees to assure the independence of national competition authorities. The competition rules stipulate objective criteria that are equally imposed on all market players. Therefore, authorities should act in an independent and fully impartial manner, without taking instructions from public or private entities. This should be reflected in the institutional structure of competition authorities. However, adherence to the principles and the belief that the enforced rules are correct and objective is of key importance. In this regard, the European Commission may serve as a good example. Considerable political pressure notwithstanding, it has recently banned the merger of Siemens and Alstom. In doing so, it showed its resistance to political pressures from member states and politicians calling for the competition analysis to reflect new perspectives, such as the aspects of industrial policy.

In this context, it is worth considering what the role of the competition regulator is. Its task is not to replace the market. Competition authorities should, first and foremost, cultivate the business environment and regulate firms’ business strategies that are detrimental to the competition. Anti-competitive actions are ultimately detrimental to all of us. The authorities’ greater capability to act, their strict independence and greater powers whose purpose is to meet the objectives of regulating competition need to be supported.

The article is part of dReport – March 2019, Legal news.

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