Bridging the Gap or Intersecting Realms? Examining the Relationship between EU Competition Law and R

SYMPOSIUM

Bridging the Gap or Intersecting Realms?

Examining the Relationship between EU Competition Law and Regulation

Edited by:

Lena Hornkohl and Lewis Reed

Table of Contents

1. Editorial

Lena Hornkohl and Lewis Reed

2. Competition law and regulation: what tool and when?

Bernd Meyring and Dzhuliia Lypalo

3. Time to rethink the interaction between ex-ante-sector regulation and ex-post-competition law

Dr. Christian Bergqvist

4. The case of EU telecoms – past and future

Martin Cave

5. The Transformation of the Electricity Market Design within the Economic and Legal Context of Competition Law Analysis

Melani Dumancic

6. REMIT II: new investigatory powers for the EU agency in Ljubljana to strengthen the fight against market abuse in the European energy markets

Giuliana D’Andrea

7. Revitalising the EU Postal Market: Lessons from Telecom’s Competitive Edge

Mateusz Chołodecki

8. Moving past “Crime and Punishment” in European financial regulation: lessons from competition law on commitment decisions

Enrico Sartori

9. The Principle of ne bis in idem in the Digital Economy EU Competition Law vs. the DMA?

Bernadette Zelger and Ina Kapusta

10. A Bias Towards Enforcement: How the DMA Changes the Landscape

Jasper van den Boom & Rupprecht Podszun

11. Competition law and space regulation: Orbital markets, Martian efforts, and a planetary champion?

Fabian Ziermann

Editorial

Lena Hornkohl and Lewis Reed

What is the relationship between competition law and regulation? Do the two live in separate worlds? How do they interact? Perhaps more importantly, how should they interact? Do they refer to one another or do they live separate lives? At the turn of the twenty-first century, the distinction might have seemed more obvious. Some industries and sectors were privatised and, in the following, ‘regulated’, whereas for other markets, society (and legislatures) deemed it acceptable to leave them open to ‘free competition’ (with all the potential invisible hands, creative gales of destruction, and so on, that accompanied). For the latter, when market failures occurred, enforcers would rely on the classic European competition law toolkit to solve problems (i.e., Articles 101 and 102 TFEU, and national laws transposing European rules). For the former, market failures were sought to be mitigated through the regulatory instrument itself.

The two could be seen as polar opposites. Yet, in regulating markets, actors avow that they are ‘opening’ and ‘liberalising’ those markets as exposure to competition takes hold. Where market failures occur, competition (through regulation) has been seen as something of a panacea to reintroduce contestability and a level playing field, to the benefit ultimately – it is hoped – of the European consumer. The paradigmatic examples are telecoms and energy, where EU regulatory action started in the 1980s and 1990s respectively.

Nonetheless, one could be tempted to think of the protection of the internal market and the goals of EU competition law as upholding a thoroughly deregulatory project. However, as aforementioned, it is precisely through regulation that competition law has been injected back into markets characterised by monopolies, concentration and high barriers to entry. Energy and telecoms are two such examples, reformed and renewed through various packages. That is a trend that continues today in markets that pose new challenges, as seen by the introduction and enforcement of the Digital Markets Act. Even in those sectors that were dealt with by the EU legislature in the 2000s, reform is still on the agenda, for instance the future so-called Digital Networks Act concerning telecoms. The reality, in 2024, is that competition law and regulation exist contemporaneously, sometimes in friction, but the presence of one does not preclude the application of the other. The Court of Justice confirmed this over a decade ago, holding that in regulated markets competition law remains applicable (C-280/08 P, Deutsche Telekom).

This Symposium has sought to capture and explain some of those classic debates, while keeping an eye on the future of competition and regulation.

Contributing authors firstly set out the landscape of these debates, proffering some perspectives concerning the interaction between competition and regulation in the broader scale:

• “Competition law and regulation: what tool and when?” by Bernd Meyring and Dzhuliia Lypalo

• “ Time to rethink the interaction between ex-ante-sector regulation and ex-post-competition law ”, by Christian Bergqvist

The next group of pieces were sector-specific, focusing on some of the more ‘classic’ regulatory markets that come to mind during these discussions, like telecoms, electricity, and postal markets and the specific competition concerns faced by these markets:

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• “ The case of EU telecoms – past and future”, by Martin Cave

• “ The Transformation of the Electricity Market Design within the Economic and Legal Context of Competition Law Analysis”, by Melani Dumancic

• “REMIT II: new investigatory powers for the EU agency in Ljubljana to strengthen the fight against market abuse in the European energy markets”, by Giuliana D’Andrea

• “Revitalising the EU Postal Market: Lessons from Telecom’s Competitive Edge”, by Mateusz Chołodecki

Finally, the debates and discussions were framed through more ‘recent’ challenges, such as financial and digital markets, as well as space:

• “Moving past “Crime and Punishment” in European financial regulation: lessons from competition law on commitment decisions”, by Enrico Sartori

• “ The Principle of ne bis in idem in the Digital Economy EU Competition Law vs. the DMA?”, by Bernadette Zelger and Ina Kapusta

• “A Bias Towards Enforcement: How the DMA Changes the Landscape”, by Jasper van den Boom and Rupprecht Podszun

• “Competition law and space regulation: Orbital markets, Martian efforts, and a planetary champion?”, by Fabian Ziermann

The symposium has shown that, in conclusion, the relationship between competition law and regulation is complex and evolving. While they may have seemed like separate worlds in the past, the reality is that they coexist and interact in contemporary times. The future of competition and regulation continues to be a subject of exploration and debate, with ongoing reforms and discussions on how they should interact. The outcome of this symposium most certainly provided the editors, and hopefully the readers, with some food for thought. We extend our grateful thanks to the authors for their excellent pieces, as well as their availability and engagement with the editorial process.

In no way can the views set out in this symposium be attributed to the editors or their employers/clients.

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Bridging the Gap or Intersecting Realms? Examining the Relationship between EU Competition Law and Regulation

Competition law and regulation: what tool and when?

Bernd Meyring and Dzhuliia Lypalo

Is overregulation suffocating innovation and competitiveness in the EU? Or is regulation necessary to keep markets open and efficient to deliver for consumers? The debate is neither new nor specific to the EU. The polarisation may appeal to politicians who want to get votes by being seen to fight bureaucracy. It may also appeal to companies on either side of the debate. For some, regulation is a tool to get a slice of the cake that others have prepared through investment and risk-taking. Others will stress how they invest trusting that the fruit will be for them to collect, and regulation removes or “chills” that very incentive.

As is often the case, reality is far more nuanced. With the benefit of hindsight, advocates for regulation can point to some obvious success stories. Who would want to go back to the markets for telecom services or energy before they were broken open and regulated to inject competition where possible? Who would argue against driving down our energy bills or allowing for new services that quickly became crucial in today’s world? Few would suggest that state-run entities or unregulated monopolies would have been as effective in achieving the same outcome without regulation. Who really thinks it was right to bail out banks with taxpayers’ money in 2008, when the same institutions had reaped the rewards of high-risk ventures for years?

At the same time, there is no doubt that Europe is struggling with its competitiveness. This is emerging already now as a key attention point for the forthcoming Commission. There are more and more voices that see (over)regulation as toxic for innovation and productivity. The administrative burdens of compliance are heavy for start-ups without the resources to navigate the muddy waters of EU regulation. “They’ll all go to the US” is how some stakeholders have described the impact of the AI act on European start-ups in this area. As companies determine their strategies to comply with the DMA, it is becoming evident that some may have to modify or even terminate certain (even if marginal) services for European consumers.

The discourse on state intervention has also been changing over time. The EU’s approach has its unique features, where competition rules in the Treaties underpin an internal market that was to be created. In line with that objective, the initial enforcement was formalistic and focused on removing barriers to trade in all forms. The approach was not adverse to state intervention as such but rather to barriers to trade between Member States and distortions of competition that it created or incentivised. The late 1990s and early 2000s saw more confidence in markets. The EU used a combination of competition enforcement and regulation to break energy markets open. Many thought that markets would deal with any inefficiencies, and targeted competition law enforcement would only cover have to deal with exceptions.

The tremendous value and innovation that unregulated tech platforms began to deliver during that time seemed to confirm the benefits of this laissez-faire attitude. Leading academics blew into the same horn. Intervention to shape market structures was portrayed as an error of the past. But the pendulum now seems to be swinging back. The EU now equipped itself to intervene early to preserve pluralistic market models and to avoid “tipping” where network effects may lead to natural monopolies. Whether the large platforms deliver for consumers has not been the main focus in this debate. Rather, ensuring plurality and keeping markets open has become an objective as such.

As explained by Hancher and Larouche. Nor is competition the only objective that regulation aims to achieve. It is perfectly conceivable for regulation to strike a balance between efficiency, economic consumer welfare, and other objectives that legislation may pursue.

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Regulation can create competition

Network industries with their natural monopolies show the most evident tension between competition and regulation. Telecoms, energy, postal services, and transport have been progressively liberalised and regulated at the EU level. These infrastructures were largely built by states or through state intervention. There was often no room for free market competition before liberalisation. Replacing a state monopoly by a private, profit-maximising company was not possible without regulation. Regulation has been instrumental in removing barriers to entry, ensuring access to the infrastructure, and facilitating competition where possible.

In the energy sector, competition law was initially used to reinforce liberalisation. Antitrust actions forced unbundling through (capacity) divestiture by companies like E.On and RWE. At the same time, it was an EU directive (2009/72) that mandated separation of energy supply from transmission networks (unbundling) for operators in all Member States. The combination effectively created competition in previously monopolised markets and attracted market entry to ensure that the new opportunities would be used quickly. Crucially, competition law remains applicable where markets are regulated. The Court of Justice confirmed this in Deutsche Telekom (C-280/08 P) in 2010. Accordingly, regulation and competition law complement each other. The Commission (or sectoral regulators) can combine both tools or use the one they consider to be more efficient, . Cases like Google Shopping, Google Android, Amazon and Apple (music streaming) straddle DMA and dominance aspects, and the EC is using both tools to shape markets and the key players’ conduct. US law famously restricts the scope of antitrust law in sectors subject to regulation. The Supreme Court excluded such an application of antitrust law in the regulated telecoms sector based on a cost-benefit assessment in Trinko in 2003.

Where markets are are open and well-functioning, the need for regulation may decline . The regulation of telecoms (Directive 2018/1972) is explicitly premised upon a progressive reduction of ex ante regulation as competition in the market develops. This assertion has been in place since the first Access Directive in 2002, but the regulation is still in place and there is nothing to indicate that it would disappear any time soon.

Regulation that supplements competition

The objectives of competition law enforcement are another contentious topic. There is a tendency to broaden its scope to topics like sustainability, data privacy and many others, as controversial as that may be. This can work to a certain degree where the efficiency and innovation that competition can promote serve other ancillary purposes. Innovation competition can accelerate the development of technologies that achieve environmental benefits. Quality competition may promote choice for consumers in relation to how their data is used. However, competition authorities lack tools to make an enforcement choice where various policy objectives and the objective to promote efficiency diverge. They will not clear a merger to monopoly between tobacco producers because their monopoly rents might help reducing tobacco consumption and thereby promote health objectives.

This shows how competition law alone will often not achieve outcomes that are desired to promote broader policy objectives. For instance, competition in the market is not always sufficient to ensure appropriate data and consumer protection. Regulation can legitimately define the level playing field on which effective competition can deliver the desired results.

Such regulation may well be inspired by learnings from competition enforcement investigations. For instance, many DMA obligations are based on various EU and national cases. Contrary to the sectoral regulation, the DMA does not include any premise of reducing the ex-ante rules once the markets are “contestable and fair”. Another example is the regulation on interchange fees in the financial services industry (Regulation 2015/751). Following the EC investigation into payment

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service providers, the EU introduced caps for interchange fees. The 2015 regulation expands the outcome initially reached through antitrust enforcement. It defines uniform requirements for transactions and caps the interchange fee for all providers. It aims to impose a balance between fair compensation for payment service providers and reasonable costs for merchants and consumers, an area where unregulated competition was seen to have failed. In fact, antitrust intervention has various pitfalls including lengthy and potentially fragmented enforcement. For instance, MasterCard investigation lasted more than 10 years, while it took the co-legislators less than 2 years to adopt the regulation following the initial EC proposal.

The recently proposed Standard Essential Patents (“SEPs”) Regulation is another example. Its main objective is to address inefficient licensing of SEPs, in particular by providing sufficient transparency with regard to FRAND terms and their determination through a mandatory out-of-court procedure. Until now, at the EU level, these licensing conditions were only subject to rules developed through the case law on Art. 102 TFEU, including Huawei v ZTE (C-170/13). While the Court provided guidance on legality of a dominant firm seeking an IP injunction and whether seeking such an injunction could amount to an abuse under Art. 102 TFEU, the meaning of FRAND under EU law was – and still is – widely debated. The draft Regulation provides the first EU framework for SEPs registration and licensing. When adopted, it will also establish a procedural framework for FRAND determination through expert out-of-court procedure. The FRAND determination would have to be initiated by the SEP holder or implementer before initiating respective court proceedings in the EU (or it could be initiated by one of the parties voluntarily to resolve disputes related to FRAND terms and conditions). This would restrict the right of the SEP holder to seek an injunction before a national court for up to 9 months. At the same time, the regulation would merely facilitate negotiations and not bind the parties after the initial 9 months. Either party could also still seek a limited financial injunction during this period.

Externalities

Generally, competition fosters innovation and economic efficiency. But it does not consider externalities. Regulation may be necessary to address these negative externalities. “Race to the bottom” competition may occur where companies resort to risk-taking and cost-cutting measures that compromise quality, safety, or ethical standards in the pursuit of maintaining a competitive edge. Getting the balance right is difficult: any such regulation will prevent short-term efficiencies. It will also prevent competition through conduct that may initially benefit consumers. The legislator replaces the “invisible hand of the market” and decides which investment and conduct is to be promoted.

The Global financial crisis is a good example. It illustrates how free competition created incentives for banks to take risk in order to outperform their competitors. They had no reason to consider the potential wider implications for the economy. This ultimately threatened the stability of the entire economic system. The experience led to strengthening regulation on risks that banks are allowed to take. At the same time, regulation created a safety net for the economy to allow the preservation of critical services without having to use public funds.

The Single Supervisory Mechanism ensures oversight of all active credit institutions. It provides an orderly resolution framework for failing banks and minimises costs for the economy. This regulation applies equally to the institutions with market power and smaller players in the market, as long as they play a role for the stability of financial markets.

Conclusion

There is no “either or” relationship between competition law and regulation. These tools complement each other in numerous ways, and striking the right balance is a difficult task. As often, success or failure only become evident in

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hindsight. There are numerous examples of success, but the concern of overregulation is growing. Compliance with regulation comes at a price. The last twenty years of enforcement have put the focus on an effects-based approach. We know that some effects are easier to identify and measure than others. This may have led to a bias towards short-term price effects to the detriment of other effects that, while more difficult to establish, have a more significant impact, at least longer-term. As we have seen, there is no doubt that regulation must come in where competition can otherwise not function or deliver the desired results. But just as in competition enforcement, regulation must also factor in and weigh the effects to determine the best way – and if even necessary – to intervene. It should only be used where the (economic or other policy) benefits outweigh the unavoidable harm. Impact assessments are rightly part of the legislative process, but they are not held to the same standards as enforcement. There have been too many examples where hindsight shows how the impact assessment was predictably off the mark. Only where both enforcement and regulation are based on a robust analysis of effects will they complement each other efficiently and deliver the desired result.

Bernd Meyring is a partner and Global Head of Antitrust and Foreign Investment at Linklaters LLP. He is a professor of EU competition law and regulation at the College of Europe in Bruges.

Dzhuliia Lypalo is an associate at Linklaters LLP. She holds an LL.M. in EU law from the College of Europe.

SUGGESTED CITATION: Meyring, B. and Lypalo, D; “Competition law and regulation: what tool and when?”, EU Law Live, 22/04/2024, https://eulawlive.com/competition-corner/competition-law-and-regulation-what-tool-and-when-by-berndmeyring-and-dzhuliia-lypalo/

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Time to rethink the interaction between ex-ante-sector regulation and ex-post-competition law

Christian Bergqvist

It follows directly from the EU’s legal structures that in the case of conflicts between competition law and any secondary regulation, priority must be given to the former by virtue of its higher place in the legal hierarchy. Regardless, in DB Station (C-721/20), at para. 81, the European Court of Justice suggested halting competition law enforcement if sectoral regulation derived from an EU Directive was available, indicating a different position. In the underlying case, a potential victim of excessive pricing for railroad services in Germany had complained. Initially, the complaint was made to the sector regulator designated under the EU Directive, but following discontent with the lack of progress due to appeals, etc., an Article 102 case had been tabled before a local court. Confronted with this, the court referred questions to the European Court of Justice, yielding a ruling that does not comport with the notion of competition law as superior and always applicable regardless of sectoral regulation. However, it does comport with what tacitly have been practiced for years by DG COMP.

Why does it make sense to halt competition law enforcement?

In DB Station, the European Court of Justice outlined a position that sits uneasily with DG COMP’s official position. For the last 30 years, this has been that ex-post-competition law enforcement is not waived or halted for ex-ante sector regulation unless the latter essentially coerced the infringement. This position was expressed in the Guidelines on the application of ECC competition rules in the telecommunication sector recital 17 (1991) and the Access Notice, recital 12-23 (1998). However, in practice, DG COMP has tacitly applied a different position, prioritising ex-ante sector-specific regulation over ex-post competition law if both were available. A principle that holds merits as a rigid application of competition law might conflict with EU objectives. Below, these concerns are developed, followed by an exploration of the scope of the DG COMP priority rule.

Applying competition law might undermine long-term objectives

Since the 80s, the EU has promoted a Single Market agenda, eventually reaching traditional utility sectors such as telecom, post, energy, and railroad, where ex-ante sector regulation often would mandate network access. In this, a delicate balance had to be secured in the adopted sector regulation, as mandatory shared access to the incumbent’s network might foster competition at the downstream retail level but chill future investments at the upstream access level. Not only with the incumbents, unwilling to invest if also beneficial to the competitors, but also newcomers, who can free-ride on the existing network instead of making their own investments – a risk discussed by, e.g., the Advocate General in Bronner (C-7/97) para 57 and the 102-Enforcement Paper, recital 75 when it came to Article 102. Ex-ante sector regulations should be better positioned to balance short-term access competition v. long-term infrastructure competition, making it prudent to give priority to this.

Applying competition law can promote collusion

Another danger associated with a generous access regime under Article 102 is the persistent risk of promoting collusion when relying on the same underlying infrastructure. Promoting shared use could uniformise costs and quality, reducing

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the scope for competing on these, and eventually uniforming retail prices across providers. This risk is highlighted in the Horizontal Merger Guidelines recital 48 and the UK Network Sharing Agreement (COMP/C-1/38.370), recitals 104 and 121. Naturally, the risk is affected by many other factors and can even be reduced by well-crafted remedies but should, on the other hand, neither be ignored nor downplayed.

Applying competition law can dilute core concepts

An imprudent application of competition law to network-tied sectors can also dilute core concepts such as abusive behaviour and anti-competitive agreements. To successfully apply Article 102 TFEU to the telecommunication sector, DG COMP was, e.g., in Wanadoo Interactive (COMP/38.233), recitals 70-106, forced to cross novel ground and include a portion of the fixed cost in the predatory pricing test. Usually, this would be assessed against the recovery of Average Variable Cost (AVC), but an expanded test was applied to account for the substantial fixed cost associated with building and maintaining a network.

Also Article 101 has been bent to secure what DG COMP viewed as an acceptable solution. In Verbändevereinbarung (See XXVIII Report on Competition Policy (1998), pp. 160-163), DG COMP accepted not to act against a hardcore horizontal price agreement. The agreement pertained to prices and terms for using the German electricity transmission network, a matter left explicitly out of adopted sector regulation and referred to direct negotiations or national legislation. Deciding that a horizontal industry agreement was better than individual discussions with the many German transmission operators, DG COMP decided to turn a blind eye to the matter. Regardless, it remains how DG COMP had to bend Article 101 (and 102) to reach an acceptable solution, making it apparent how core concept could be diluted unless priority is given to ex-ante sector regulation specifically bespoken to the specific situation.

Applying competition law can create conflicts

Applying competition law to matters covered by sectoral regulation might also disturb a delicate balancing of interests, if the sector regulation either represents a compromise or has not been implemented correctly. The need for a horizontal sector agreement in Verbändevereinbarung only emerged because of a lack of provision in the adopted EU Electricity Directive (96/92), but this had been a concession to Germany rejecting mandatory rules. The EU legislator, therefore, had to accept an incomplete Directive and, later, DG COMP had to respect this by ignoring a blatant infringement of Article 101 TFEU.

Other examples of this interaction, where competition laws are drafted to close regulatory lacunas, can be seen in Deutsche Telekom (COMP/37.451) and Swedish Interconnectors (COMP/39.351). In the former, the designated German regulator had approved the prices leading to an abusive margin squeeze. In the latter, it was the Swedish system operator that acted abusively by periodically closing an electricity cable, inflating the prices. Across both cases, the sector regulator designated in accordance with adopted EU Directives had failed. Rather than directing its frustration at the member states (or the designated national regulator), DG COMP used competition law to remedy the problem directly, but in this, DG COMP circumvented formal procedures and ignored the fault of the Member States.

Applying competition law opens for forum shopping

Another risk of imprudent application of competition law relates to the risk of forum shopping. In cases such as Telefónica (COMP/38.784), recitals 302-304 Telekomunikacja Polska (COMP/39.525), recitals 704 and 803-807, and Slovak Telekom, (COMP/39.523), recitals 363 and 428-442, the obligation to grant access (to telecom networks) rested on adopted sector regulation but had, to various degrees, been thwarted in practice. However, as ex-ante sector regulation mandated access, DG COMP did not have to establish how this could qualify as an abusive refusal to supply, lowering the threshold for intervention. A consistent application of the principle of separate systems should have led some of these

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cases to be pursued under other principles and doctrines (or dropped). Deutsche Telekom, Telefónica, and Slovak Telekom appear more akin to excessive or predatory pricing if not refusal to supply. Telekomunikacja Polska and Slovak Telekom as refusal to supply cases, and Verbändevereinbarung as a price and market sharing cartel. Sector regulation not only creates but also forms an antitrust infringement, allowing plaintiffs to present their claims in the manner most beneficial for this and not as dictated by fact and the law.

Applying competition law and ne bis in idem

Traditionally has, the matter of double punishment, or ne bis in idem, been of limited concern under the EU competition law enforcement, but as outlined by Zelger and Kapusta, has the Court of Justice (finally) cleared its position by recent rulings as Bpost (C-117/20), at para 10-12, 30, 47-48 and 51, Nordzuker (C-151/20), at para 44-48 and Volkswagen (C27/22), at para 57. On the one hand, these rulings confirm the doctrine but then, on the other, confine it to situations of almost overlapping facts. Against these cases, it must be assumed that if a specific set of actions ex-post are deemed infringing ex-ante sector regulation by a designated (national) sector regulator, this will only prevent DG COMP from pursuing the matter under competition law in a very narrow set of circumstances. However, fines must reflect that the behavior has already been reviewed, often mandating a reduction, and more generally, DG COMP must be mindful of the issue, exercising some restraint in its pursuit of cases to avoid conflicts. Regardless, a more prudent solution would probably be to refrain from reviewing the matters ex-post under competition law.

A practical priority rule formulated by DG COMP

The main takeaway from the principles outlined above is that, in practice, DG COMP waives competition law enforcement if effective sector regulations are available. The latter would emerge from comparing, e.g., Deutsche Telekom, with UK Network Sharing Agreement, as the sector regulation in the former obviously had not worked as intended. This begs the question of what to consider effective sector regulation, and seeking outside Articles 101 and 102 clues on this can be found. Under the Merger Regulation (Regulation 139/2004), DG COMP has, e.g., been called several times to evaluate sector regulation and determine if this would alleviate concerns. In Gencor, DG COMP had rejected a set of submitted merger remedies and was subsequently called to defend this before the General Court (T-102/96) para 217-220. The Court confirmed DG COMP’s decision, as remedies could only be accepted if DG COMP could clearly evaluate if they addressed the identified impediments. Translated to the issue of effective sector regulation, DG COMP must be able to review the matter ex-ante in a convincing manner.

Consideration on the notion of being ‘effective’ is also available from Tetra Laval/Sidel, where the General Court (T5/02), para 217-219, as an obiter dictum, noted how the prospect of an Article 102 case might reduce the risk of abusive behavior post-merger by acting as a deterrent on the merged entity. On appeal, the Court of Justice (C-12/03 P), at paras. 75 and 78, rebutted the relevance of this. Further consideration on the matter was offered in Orange/Jazztel (COMP/M.7421), recital 156 when DG COMP noted how changes in the regulatory environment were relevant if they could be reasonably predicted. This suggests that ex-ante sector regulation can only be considered effective if it significantly reduces the prospect of subsequent needs for ex-post-competition law intervention. Moreover, DG COMP must be able to evaluate this, making it insufficient that national intervention is possible unless also plausible. Embedded in this, the sector regulator must also be effective.

Does DG COMP’s priority rule also apply to itself?

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Lacunes remains in DG COMP’s priority rules, including if it applies to DG COMP. Across the cases cited above, the ‘failure’ to remedy matters effectively under sector regulation rested with the national sector enforcers and, in reality, this was also the matter at hand in DB Station. However, with the adoption of the Digital Market Act (Regulation 2022/1925), DG COMP will get a more active role in ex-ante sector regulation enforcement, as DG COMP will be co-responsible for enforcement. It will probably be DG COMP’s position that it remains at liberty to apply competition law, but this rests uneasily with DG COMP’s priority rule and the principles emerging from DB Station. A more logical reading of the priority rule, and potentially, DB Station, would be that DG COMP initially must stall the application of, e.g., Article 102 until it has been cleared if the matter falls under the DMA and any of the adopted decisions.

Conclusions and Points of Consideration

With the Court of Justice’s ruling in DB Station, legal cover has been provided to what DG COMP (tacitly) has practiced for years in terms of waiving competition law enforcement if sector regulation is available. However, lacunae remain in our knowledge of the scope and application of this (secret) doctrine. E,g., is it unclear if both private and public enforcement can (or must) be waived for (effective) ex-ante sector regulation. The doctrine’s compatibility with other rulings can also be discussed as the Court of Justice; otherwise, e.g., in Courage and Crehan (C-453/99), at paras. 25-26 has described access to private enforcement as a form of a fundamental right that could not be denied. It would, therefore, be beneficial if the Court of Justice was given the opportunity to revisit the matter, ideally reformulating its finding into a recommendation rather than an obligation. Which accidentally was the position advanced by the Advocate General in DB Station, at paras. 84 and 86-90. Its scope and application beyond national private enforcement must also be cleared. Having said this, prioritising ex-ante sector regulation appears prudent, provided it does not conflict with the citizen’s right to pursue competition law claims before designated and able bodies.

Christian Bergqvist, University of Copenhagen, and GW Competition and Innovation Lab at The George Washington University.

SUGGESTED CITATION: Bergqvist, C.; “Time to rethink the interaction between ex-ante-sector regulation and ex-post-competition law”, EU Law Live, 17/04/2024, https://eulawlive.com/competition-corner/time-to-rethink-the-interaction-betweenex-ante-sector-regulation-and-ex-post-competition-law-by-dr-christian-bergqvist/

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The case of EU telecoms – past and future

Martin Cave

Compared with certain other well-known network utilities – energy, rail and water – the telecoms sector has long been recognised as being more amenable to competition across its value chain, perhaps because it is less capital intensive than the others, and the unit costs (particularly electronic and software costs) of inputs actually go down by significant percentages each year. Indeed the inventor of price cap (RPI-X) control of UK telecoms 40 years ago, Stephen Littlechild, prophetically looked forward to it not being needed for long, since its task would be assumed by competitive processes. The chief instrument by which that goal has largely been reached in the EU was a set of Directives which came into effect in 2003. After a series of non-trivial but not monumental changes, they were re-christened the European Electronic Communication Code 2018. But now a more consequential rewrite is in train, illustrated by the recent publication in February of an EC White Paper entitled ‘How to master Europe’s digital infrastructure needs.’ This is widely expected to prefigure, when the new EU parliament and commissioners are in post, further changes in legislation for the sector’s regulation.

What follows briefly describes the EU’s experiences of the past twenty years of telecoms network regulation; makes some observations on the content of the White Paper; and suggests a means of identifying what an imaginative new regime might have to include if it is to have a chance of matching the ‘twenty-years and counting’ longevity of its predecessor.

The effect on EU network competition of the 2003 Directives. The stated long-term goal of the Directives was to take the sector to a place where anti-monopoly regulation was not needed, and competition law could take over. To do this it created an ersatz (forward-looking) version of dominance, called significant market power. In each MS, a finding of SMP in a number of pre-specified markets exposed the relevant operator to the most severe remedy, the unbundling by the NRA of the firm’s relevant network assets to competitors at a regulator-determined access prices.

The access prices to different bundles of assets could then be ruthlessly manipulated to promote further investment by competitors and pare down the scope of the access products demanded. And the imposition of sunset clauses on the regulation of any access or retail product ensured that whenever competition emerged, regulation ceased. The regulatory process involved a complex but workable division of labour between the EC and NRAs, usefully mediated by BEREC, the ‘college’ of national regulators.

This regime was successful to the extent that recent analyses of Member State national markets have found SMP in only two of the eighteen markets originally identified – namely, the wholesale distribution networks for services to households and firms. Moreover, this regime operated on top of a fundamental and unprecedented process in which fibre began quickly to replace copper as the main vector in the fixed local loop; it also saw in three successive generations of the already replicated radio access networks of mobile operators.

The content of the White Paper. The White Paper and the conclusions reached from it will be passed on to the succeeding Parliament and Commission later in 2024. It is, however, a formidable document, which brings together the progress on digital transformation made so far by the current Commission. In assessing the state of the sector, it finds a need to increase the availability of capital to the sector, to deliver the considerable future network investments which are needed to achieve the EU’s objectives to 2030 and beyond. There is also a substantial focus on the technological leap

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forward needed to fulfil those objectives, to be achieved by carefully designed programmes for identifying and realising new techniques. Many pages are devoted to this issue, and to the complex range of schemes available. The White Paper’s observations on extending the single market in telecommunications and on the approach to mergers in the sector have attracted considerable attention, but are not discussed further here.

However, the White Paper – no doubt intentionally - does not attempt a full ‘drains up’ specification of the next regulatory regime, the passages on this issue being somewhat backward-looking and incomplete. It seems highly desirable that this analysis should now be undertaken.

The next communications regulatory regime. The remaining paragraphs give a thumbnail sketch of how competition law and regulation in general have developed over recent years, and enumerate a couple of the key possible dimensions of a new approach – without at this early stage in the proceedings identifying any preferred option.

Given the growing competition in telecoms markets, one obvious option is to choose in future to rely broadly on EU competition law (except on telecoms-specific technical provisions). What might possibly help to sustain this view is the argument made in a recent book by Pablo Ibanez Colomo of the London School of Economics (the New EU Competition Law 2023, ch.1), that the passage of Regulation 1/2003 (on implementing Articles 101 and 102 of the Treaty) enabled the European Commission to extend its scope of competition law activity to ‘market-shaping’ or regulatory-like activities. In this view, enforcement became policy- or end state-driven, rather than law-driven. Few cases of this kind have emerged in the telecoms sector, compared say with energy, possibly because telecoms had its own specific market-shaping procedures described above.

Regulation has also grown, if less obviously, in its proclivity for intervention - especially by legislatures and governments, which stand above NRAs in the food chain of regulatory governance. This may be driven by the increasing political salience, in hard economic times, of how network regulation affects retail prices, and by the growth of new EU goals such as net zero carbon emissions. Thus regulators are no longer guided by timeless injunctions (such as ‘be nice to customers’), but are increasingly given express quantitative targets to achieve, such as universal gigabit connectivity by 2030. This predictably ratchets up ex ante interventions.

The term ‘pro-competition regulation,’ which emerged in particular in discussion of the Digital Markets Act and similar measures, covers some of these trends. It may connote the emergence of some ‘weighted average’ of competition law and regulation. If so, one key property of any such regime is likely to be: what component of competition law is appropriated? In the 2003 Directives, it was a revised version of dominance – significant market power or SMP- which played that role. But it was not the only one available and considered: one possible alternative is to hang regulatory interventions on a finding of ‘bottlenecks’ (a half-sibling of competition law’s ‘essential facilities’). This has the advantage of flexibility, especially if the nature of the value chain is complex and unpredictable. Remember that in certain circumstances, ownership of a unique bottleneck in any value chain can in principle confer an ability to suck out all the excess profits associated with customers’ willingness to pay for the final product or service; also, two similarly endowed firms can collusively generate the same result.

The second dimension is the scope of application of the approach. Choosing and amending that was a major part of the 2003 regime, where relevant markets were regularly rechosen. Digitalisation, AI and other developments are introducing huge changes in the value chain of the communications sector. An issue discussed in the White Paper is what to do about the cloud, already the object of multiple inquiries by global competition authorities. However, the virtualisation/ softwarization of communications switching has led to its cloudification. This illustration of ‘delayering’ might in extremis cause the mobile sector to be turned into a set of spectrum-licensed retail operators each of which owns a few antennae perched on a rented tower and connected by leased backhaul which takes all the necessary data to and from the cloud.

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The inevitable question is: should this new technical embodiment of traditional network activity be regulated at all, or if so, how?

Wider changes are occurring. Audio-visual services are an example. In content generation, AI wizardry now makes it possible not only to dub the voice-track from one language to another, but also to alter the visuals to lip-synch, with appropriate facial expressions, the new spoken words. This has considerable potential to promote international trade both within the Single Market, and outside the EU.

There are also additional multi-mode delivery options in use or coming into use - by DTT, geo-stationary and low-earth orbiting satellites, fibre or other fixed networks, mobile networks, etc.

In content aggregation and retailing, linear (scheduled) broadcast services are rapidly giving way to streaming, financed both by subscription and in the form of free ad-supported streaming services, known as FAST; and the way in which such personalised digital advertising is sold is under investigation in many jurisdictions. Streaming confers increasing returns to scale on the few players with the most subscribers, such as Netflix, Amazon Prime and Disney+, whose market shares may be beginning to show the characteristics of a dominant oligopoly.

Moreover social media, following Tik-Tok’s example, are now changing their offering: Facebook’s recent improved commercial performance is based on a switch from ‘family and friends’ postings and news consumption to viewing short videos, presented to users largely based on their individual characteristics. Google’s You-Tube is very active in this space too.

In competition law, the notion of a digital ecosystem has emerged to describe situations in which, as the digital sector is increasingly dominated by a small number of firms operating in a set of vertically-related markets, adverse effects on customers can be enhanced by the cumulative effects of such amalgamations. This notion has penetrated competition law analysis of mergers and the Commission’s recent Market Definition Notice. Its existence may also affect consideration of the question discussed above, which is what activities should be covered by the intended regulatory instrument.

What this discussion has surfaced is that omitting some activities from the scope of any forthcoming Regulation carries some risks, as does making it so comprehensive as to regulate everything that moves in a very dynamic sector. Building on an aspect of the 2003 Directives, this dilemma might be resolvable by having an initial list of markets/activities covered, which can be added to or subtracted from as things develop, and/or by having strict criteria for the application of regulation.

Finally and very briefly, any wholesale revision of the regulatory framework must confront the vexed question of who (among the Parliament, the Commission, the NRAs, or other European bodies) does what? The White Paper’s case for further centralisation of spectrum assignment and allocation looks very strong – but note the parallel issue of who keeps the auction money. This issue is intimately related to the potential ‘single market’ impact of the new regime, which I do not have space to consider here.

In summary, there are numerous vitally important economic and social issues for the EU at stake in this discussion. The famous ‘Brussels effect’ may spread whatever the EU chooses to do even more widely, as is currently happening with the DMA. It seems to me that reaching good decisions requires as full a consideration as is possible of all the issues involved, and an initially open mind over where the argument might lead.

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Martin Cave, visiting Professor, London School of Economics

SUGGESTED CITATION: Cave, M.; “The case of EU telecoms – past and future”, EU Law Live, 02/05/2024, https://eulawlive.com/competition-corner/the-case-of-eu-telecoms-past-and-future-by-martin-cave/

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The Transformation of the Electricity Market Design within the Economic and Legal Context of Competition Law Analysis

Melani Dumancic

I. Introduction

The application of competition law in regulated network industries has always been a highly debated topic. While nobody would contest anymore that competition law is applicable in regulated markets, various problems related to the concurrent application of regulation and competition law remain unsolved.

Electricity markets are no strangers to regulation, having been liberalised almost 30 years ago and regulated on a European level with four liberalisation packages. In the beginning, the focus lay on creating an internal electricity market by introducing competition to the markets (Electricity Directive 96/92/EG, recital 2). Over time, additional objectives were added and significantly shaped European electricity policy, most notably the development of an integrated and competitive European electricity market, the rollout of environmentally friendly electricity generation, and security of supply (Article 194 TFEU). Nowadays, the electricity sector is undergoing a profound transformation towards renewable electricity generation, decentralised markets with more players, and better interconnected, Europe-wide systems. In addition to that, security of supply and affordable and stable electricity prices have been hot topics since the energy crisis. This has prompted the European Commission to propose a regulation reforming the EU electricity market design, on which the Council and the Parliament have reached a provisional agreement

It is undisputed that the regulatory framework, as a significant part of the market structure, has to be taken into account in competition law assessment. The changes brought about by the profound transformation of electricity markets will therefore inevitably also change the application of competition law in electricity markets. Against this background, I explore how the regulatory changes to the electricity markets and the objectives pursued with them may affect the determination of a restriction of competition by object under Article 101(1) TFEU.

II. New electricity market design and its objectives

The new electricity market design will be a Regulation changing and adding provisions within the Electricity Regulation 2019/943 and the Electricity Directive 2019/944. Its main aims are to make electricity prices less dependent on volatile fossil fuel prices, accelerate the rollout of renewable energies, shield consumers from price spikes, and improve consumer protection. This is done through various measures, including, inter alia, the protection from disconnections for vulnerable customers or the right to participate in energy sharing for households and small and medium enterprises. Additionally, renewable electricity generation is supported by adding provisions for power purchase agreements (the electricity produced by renewable energy is sold in a bilateral contract between the producer and large consumers, usually for a longer period) and support schemes involving contracts for difference. Measures to integrate and secure liquidity in the day ahead, intraday, and forward markets are introduced. Member States shall also report on their needs

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for flexibility and establish targets for flexibility, that is not based on fossil fuels, focusing on the contributions by demand response and energy storage.

Achieving those regulatory objectives will not only require support from the EU and Member States but also initiatives from the undertakings active in the electricity market. High investment costs and the required know-how will encourage cooperation. Competing undertakings operating wind and solar power plants might, for example, decide to jointly sell their produced electricity (“the joint selling agreement”). Several electricity producers could also cooperate to build a new battery storage facility, allowing for more flexibility in the grid and simultaneously generating economies of scale. These are just two examples of the endless possibilities for cooperation within the new electricity market design. When examining the conformity of these agreements with Article 101(1) TFEU and whether they are restrictive of competition by object, the current changes to the electricity markets and the pursued regulatory objectives play an important role in the analysis.

III. The legal test for identifying restrictions by object

Article 101(1) TFEU does not prohibit just any agreement between undertakings, but only those that have as their object or effect the prevention, restriction, or distortion of competition within the internal market. If it is established that an agreement has the object of restricting competition, the actual anticompetitive effects of the agreement do not have to be examined.

The relevant criterion to finding a restriction by object is that the agreement in itself presents a sufficient degree of harm to competition, in other words, when it has no plausible purpose other than the restriction of competition. This involves examining the content of the agreement, its objectives, and the economic and legal context of which it forms a part (Super Bock Bebidas C-211/22, paragraphs 31–35). It is also important to keep in mind that the form of an agreement in itself is not enough to establish an anticompetitive object. For example, a price-fixing agreement might not be restrictive by object when examined in light of the economic and legal context. However, in respect to agreements, which have traditionally been regarded as particularly serious infringements of competition law, such as price fixing or market sharing agreements, the analysis of the economic and legal context may be limited to what is strictly necessary in order to establish the existence of an object restriction (Toshiba C-373/14 P, paragraphs 28–29).

When examining the economic and legal context of an agreement, regard must be given to the nature of the goods or services affected and the actual conditions of the functioning and structure of the market or markets in question (Generics C-307/18, paragraph 68). Within the economic and legal context, the procompetitive effects of the agreement can also be taken into account. These can reverse the classification as a restriction by object only if they are demonstrated, relevant, specifically related to the agreement concerned, and sufficiently significant to justify a reasonable doubt as to whether the agreement causes a sufficient degree of harm to competition (EDP C-331/21, paragraph 104).

IV. Regulatory measures and objectives within the legal and economic context

In EDP (C-331/21, paragraph 102), the ECJ held that the anticompetitive object of an agreement may “be borne out by the fact that it occurs in the particular context of market liberalisation, which is similar to the dismantling of significant barriers to entry.” Similar to this, I think the economic and legal context of an agreement should take into account the way the electricity markets are currently changing. Like market liberalisation almost 30 years ago, the changes were prompted by a legislative decision and are being pursued through various regulatory measures. Similarly, the new electricity

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market design proposes steps to establish an integrated European electricity market and lowers entry barriers for the production of renewable electricity. In a way, the current changes are even more significant, as the landscape of electricity production and consumption is significantly changing with more decentralised production by smaller undertakings and even consumers. The shift from big, conventional power plants to renewable production makes features like grid stability and flexibility even more fundamental for a functioning market. In this regard, a cooperation agreement might be beneficial or detrimental to the achievement of such regulatory objectives and thereby the successful transformation of the electricity markets. The economic and legal context allows for both scenarios to be taken into account. This is illustrated by these examples:

Electricity producers might agree to sell their independently produced electricity exclusively through bilateral agreements without involvement of the electricity exchange. This would take liquidity out of the intraday and dayahead markets operated by the electricity exchanges. These markets are crucial for the integration and competitiveness of wind and solar power plants because they allow for the balancing of supply and demand shortly before delivery. This might in itself be an anticompetitive object, as the entry of new competitors in the form of renewable electricity producers is hindered. In light of the regulatory framework, which emphasises the significance of liquid intraday and day-ahead markets (for example, see provisional agreement, recitals 14, 15 and Article 19a), this anticompetitive object should carry even more weight. Thus, the impediment of a regulatory objective may be used to support the finding of an object restriction.

The same logic can apply the other way around. The joint selling agreement can have an anticompetitive object when, for example, the selling price is agreed upon. Apart from the considerations in the Horizontal Guidelines (paragraphs 222 et seqq.), the promoted regulatory objectives should be taken into account when determining the object of the agreement. Such a cooperation can further the successful implementation of renewable energies. The joint sale of electricity produced by wind and solar power plants permits the operators to balance the unpredictable production more easily and saves costs. This allows for easier entry into the electricity production market for producers of renewable electricity. Additionally, balanced production of renewable electricity supports security of supply by enhancing grid safety. Increasing flexibility to the electricity markets is also a specific objective of the new electricity market design (for example, see provisional agreement, recital 47). These positive effects, however, are only eligible for consideration if they meet the preconditions outlined above for procompetitive effects: they must be demonstrated, relevant, specifically related to the agreement concerned, and sufficiently significant to justify a reasonable doubt. In most cases, such considerations will, however, be better placed as efficiency justifications.

The European Commission has in the past taken regulatory objectives into account when assessing potentially anticompetitive behaviour in electricity markets: for example, liquidity on electricity exchanges and security of supply in OPCOM (AT.39984, paragraph 178), the creation of an integrated internal electricity market in DE/DK Interconnector (AT.40461, paragraph 66), security of supply in German Electricity Wholesale/Balancing Market (COMP/39.388, 39.389, paragraph 34), and Jahrhundertvertrag (IV/33.997, paragraph 31).

V. Conclusion

These examples show that pursuing regulatory objectives and competitive markets are not mutually exclusive but can complement each other. This does not, however, imply that an anticompetitive agreement can evade competition law enforcement on the grounds that it serves a regulatory objective alone. The pursuit or the impediment of regulatory objectives can only be taken into account as additional arguments underlining the anti- or procompetitive object of an agreement. This outlines one approach to deal with the concurrent application of competition law and regulation.

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Mag.a Melani Dumancic, LL.M. (King’s College London) works as a research and teaching assistant at the University of Vienna. She is currently writing her doctoral thesis in the field of competition law in electricity markets.

SUGGESTED CITATION: Dumancic, M.; “The Transformation of the Electricity Market Design within the Economic and Legal Context of Competition Law Analysis”, EU Law Live, 24/04/2024, https://eulawlive.com/competition-corner/the-transformation-of-the-electricity-market-design-within-the-economic-and-legal-context-of-competition-law-analysis-by-melani-dumancic/

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REMIT II: new investigatory powers for the EU agency in Ljubljana to strengthen the fight against market abuse in the European energy markets

Giuliana D’Andrea

On 11 April 2024, the EU co-legislators adopted Regulation 2024/1106. This amends the EU Regulation 1227/2011 on Wholesale Energy Markets Transparency and Integrity (‘REMIT’), and thus gained in the energy world the name of ‘REMIT II’.

REMIT II aims at improving oversight of the European wholesale energy markets, one of the main novelties being the new investigatory powers for the European Union Agency for the Cooperation of Energy Regulators (ACER) in cases of cross-border market abuse.

For select cross-border cases, ACER now has investigatory powers (such as requesting information and conducting dawn raids) akin to those of the European Commission in antitrust cases. However, ACER can only investigate with the consent of the energy national regulatory authorities (‘NRAs’) and, most notably, ACER does not have enforcement powers alongside its investigatory powers. Instead, ACER’s investigations complement and support those of the NRAs, who continue to be fully responsible for the enforcement. It is the NRAs that will adopt final decisions on the existence of a REMIT breach and defend such decisions before their national courts.

This unique set-up under EU law bears the promise of having cross-border cases of market abuse in wholesale energy markets investigated more effectively at EU level. At the same time, the full separation of the investigation and the enforcement, assigned to different institutional actors, is a high procedural safeguard for the investigated persons.

Background: What’s REMIT?

REMIT came into force in 2011 to foster open and fair competition and promote trust in the integrity of the European gas and electricity markets.

It saw the light on the wave of the Energy Sector Inquiry Report published by the European Commission’s DG COMP in 2007. DG COMP’s Report pointed, among other issues, to the limited transparency in the liberalised wholesale energy markets. This, in combination with the specific product characteristics, make these markets prone to market abuse, contributing to distrust in the pricing mechanisms.

REMIT thus provided, for trading in wholesale energy markets, an additional sector specific regulatory layer to the prohibition of abuse of dominance under Article 102 TFEU. It did so by mirroring, to a good extent, the Market Abuse Directive (now replaced by the Market Abuse Regulation or MAR), applicable almost exclusively to the trading of pure financial instruments. REMIT notably introduced the general prohibition of market manipulation and insider trading in wholesale energy markets (jointly referred as ‘market abuse’). The prohibition of market abuse in REMIT applies regardless of a dominant position in the market, and closed the gap with the financial markets left by the former Market Abuse Directive. REMIT also introduced registration and data reporting obligations for market participants and market monitoring obligations for energy trading platforms.

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As for the governance architecture, it foresaw a split of powers and responsibilities between the energy national regulatory authorities (NRAs) and the European Union Agency for the Cooperation of Energy Regulators (ACER).

The NRAs were assigned the core task to investigate market abuse cases and sanction breaches of REMIT. Conversely, the newborn ACER was tasked with the EU-wide central collection of trading data from market participants and, alongside NRAs, with the monitoring of energy trading. REMIT assigned to ACER the key tasks to detect and signal to NRAs suspicious trading activities and to ensure, in the enlarged European Union, coordination and consistence in the application of REMIT by NRAs. Therefore, while not directly being responsible for the investigation and enforcement of REMIT cases, ACER was given a key role in monitoring European energy markets, and in guiding and coordinating NRAs in the investigation and enforcement of market abuse cases. REMIT also assigned to ACER the responsibility of providing guidance on the application of REMIT to NRAs, thus putting ACER in the driving seat for shaping REMIT policy discussions.

Regarding investigations, REMIT envisaged for ACER a mere coordination role, including the possibility to establish cross-border investigatory groups involving multiple NRAs, financial regulators, and/or competition authorities. However, the complexity of cross-border cases, including the jurisdictional challenges and the difficulty for some NRAs to allocate adequate resources to such cases, have traditionally been an obstacle to the conduct of thorough cross-border investigation. This left an important investigatory gap and likely limited deterrence.

ACER’s new investigatory powers in REMIT II

Thirteen years after REMIT, the energy crisis prompted a call for more Europe and more integrity of the energy markets, resulting in REMIT II. In this new setting, ACER gained investigatory powers over certain cases of market abuse and breach of data reporting obligations with a cross-border dimension.

ACER’s investigatory powers under REMIT II are comparable to those of the European Commission under Regulation 1/2003. Namely, the power to conduct on-site inspections (including dawn-raids), the power to request information, and the power to take oral statements. ACER’s inspection powers include the power to conduct unannounced inspections, even in private premises. If a person hinders an ACER inspection or does not comply with a request for information, ACER can impose periodic penalty payments.

Upon completion of its investigations, ACER will issue an Investigation Report addressed to the competent NRAs, setting out the Agency’s findings and recommendations to NRAs about enforcement measures. The enforcement of the REMIT prohibitions and obligations remains exclusively with the NRAs, who continue to be the ones adopting legally binding decisions relating to breaches of REMIT and imposing fines. For cases investigated by ACER, there will be a full split between the role of investigator at EU level and the role of enforcer at national level. This unprecedented legal set-up under EU law, while potentially raising some practical difficulties, seems to set very high procedural guarantees for the persons suspected of breaching REMIT.

Some elements of ACER’s investigations under REMIT II are interesting in comparison with the Commission’s investigation procedure under Regulation 1/2003:

A request for information from ACER can be addressed to any person, including natural persons, and an on-site inspection can be conducted also in private premises, even if not of a company director or staff member. This reflects the fact that the prohibitions of market abuse apply also to natural persons, who can therefore also be subject to a REMIT investigation.

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ACER has the possibility to “personalise” its investigations, formally appointing from its staff a dedicated Investigating Officer to lead a specific investigation. This is not a novelty in EU law. For instance, the EU Financial Regulations already foresee the Investigating Officer’s role within the European Securities and Markets Authority (ESMA).

Before the adoption of ACER’s investigation report, the investigated persons have a right to comment on facts concerning them. This is a considerable difference compared to the right of the entities subject to a Commission’s antitrust investigations to comment on the Commission’s objections. It reflects the fact that enforcement measures for REMIT breaches are left to the NRAs.

For each day of non-compliance with an on-site inspection or a request for information, ACER can impose periodic penalty payments up to: 2% of the average daily income of the preceding calendar year for natural persons; and 3% of the average daily turnover of the preceding business year for legal persons. This is also a considerable difference, as the Commission cannot impose penalty payments to natural persons, but has a higher threshold for penalty payments for legal persons (5%).

Unlike the Commission, ACER does not have a power to impose fines for procedural breaches relating to the noncompliance with its inspections and requests for information, this power being left to the NRAs.

“Conditional” investigatory powers

The extent of ACER’s investigatory powers is broad. However, the distribution of powers foreseen by REMIT II puts some constrains on ACER’s investigations.

ACER will investigate cross-border cases of potential REMIT breach either on its own initiative (when the jurisdictional criteria set in REMIT II are met) or upon request from an NRA. In any event, ACER’s investigation will not automatically take precedence over the investigation of an NRA. On the contrary, the NRAs of the Member States where the possible REMIT breach has taken place can object to the investigation of the case by ACER.

The Agency needs to notify the relevant NRAs of its intention to open an investigation, and, within three months, each of the relevant NRAs can object. While the grounds for an NRA to object to an investigation from ACER are predetermined in REMIT II, they amount to a de facto veto power. An NRA can claim that it is investigating or open an investigation ‘on the same facts’, and thus stop ACER from investigating those facts in its jurisdiction.

Furthermore, ACER’s decision-making powers are limited to the imposition of periodic penalty payments for procedural breaches, while only NRAs have the power to adopt final decisions on whether a breach of REMIT has occurred. Therefore, even if not opposing to ACER’s investigation, the competent NRAs still need to assess ACER’s investigation report and decide whether to enforce it. NRAs are obliged to communicate their intended course of action to ACER and, where necessary, to the European Commission.

The governance architecture established in REMIT II confines the room for ACER’s investigatory powers to the willingness of NRAs not to pursue the case themselves, in a setting that continues to look more intergovernmental than communitarian.

What to expect in practice from REMIT II?

An accurate prediction of what to expect in practice from REMIT II is difficult to make. While setting the scene for a greater role for ACER, REMIT II left the concrete dynamics of the investigation of cross-border cases dependent on the NRAs’ willingness to forego control over such investigations.

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The first practical consequence of REMIT II can however already be seen: ACER’s new organigramme includes a REMIT Investigations Department and the Agency is working at full steam to start delivering on its expanded mandate. From the 1st of January 2025 and on a rolling basis until 2027, the green capital of Slovenia will welcome a total of 25 EU officials who will have the exciting task to investigate, for the first time, market abuse in the wholesale energy markets at EU level.

Giuliana D’Andrea is a Policy Officer at the European Union Agency for the Cooperation of Energy Regulators (ACER). She holds a Master’s degree from the College of Europe in Bruges. Before joining ACER, she worked as Case Handler at the European Commission (DG Competition), and as a lawyer in an international law firm, specialising in EU Competition Law.

This article was written by the author in her personal capacity. The views expressed in this article are the author’s own and do not necessarily reflect the view of the European Union Agency for the Cooperation of Energy Regulators (ACER).

SUGGESTED CITATION: D´Andrea, G.; “REMIT II: new investigatory powers for the EU agency in Ljubljana to strengthen the fight against market abuse in the European energy markets”, EU Law Live, 20/05/2024, https://eulawlive.com/competition-corner/remit-ii-new-investigatory-powers-for-the-eu-agency-in-ljubljana-to-strengthen-the-fight-against-market-abuse-inthe-european-energy-markets-by-giuliana-dandrea/

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Revitalising the EU Postal Market: Lessons from Telecom’s Competitive Edge

Mateusz Chołodecki

This text explores the transformative potential of adopting pro-competitive regulations within the postal market, drawing inspiration from the telecommunications sector’s evolution, mainly through the European Electronic Communications Code 2018/1972 (‘EECC’) lens. It proposes key regulatory reforms aimed at ensuring accessibility and maintaining competitiveness in the face of the e-commerce boom and changing consumer demands.

Parallel between Postal and Telecom Markets

The evolution from monopolistic control to competitive markets through privitisation has profoundly reshaped the landscape of the EU’s postal and telecommunication sectors, though their paths diverge in pace and regulatory approach. Historically, these industries were dominated by state monopolies, with a single entity monopolising both postal and telecommunication services. This arrangement, deeply entrenched within public administration, granted exclusive rights and maintained the status quo well into the late 20th century. However, the advent of liberalisation in the 1999s began dismantling these monopolistic structures, steering these sectors towards a more open and competitive marketplace.

In this transformative journey, the telecommunication sector emerged as a frontrunner, capitalising on digital transformation and technological innovation. The EU was instrumental in setting the stage for a harmonised and competitive market ecosystem underpinned by a pro-competitive regulatory framework. This framework was meticulously crafted to remove barriers to entry and cultivate a competitive environment. The telecom sector witnessed the introduction of sector-specific regulations, including ex-ante obligations, which facilitated access to essential facilities previously monopolised, thereby invigorating competition and fostering innovation.

In contrast, the postal sector’s march towards liberalisation has been characterised by caution and gradualism. The overriding aim here was not just to fuel competition but to ensure the continuation of the universal service obligation (‘USO’) and, by that, to protect incumbent operators. This is evidenced by EU cases concerning postal incumbents, such as Deutsche Post I (C-399/08), Post Danmark I (C-209/10), and Post Danmark II (C-23/14). Such protective measures resulted in a regulatory landscape where the courier, express, and parcel (‘CEP’) market enjoys complete freedom from stringent regulatory oversight by postal National Regulatory Authorities (‘NRAs’). While the Postal Service Directive (97/67/EC, amended by Directives 2002/39/EC and 2008/6/EC) successfully lifted barriers to market entry, they concurrently aimed to preserve the critical role of universal service providers (‘USPs’), thus marking a clear division between traditional postal services and the dynamic CEP segment. Numerous postal incumbents capitalise on the liberalisation wave, expanding their reach into the CEP market by establishing specialised courier subsidiaries, like DHL, GLS, or DPD (GeoPost).

This dichotomy underscores a deeper understanding of the postal market’s inherent challenges, particularly the imperative to sustain traditional services amidst dwindling mail volumes and the rapid growth of e-commerce. Nevertheless, it

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simultaneously reveals a stark contrast in regulatory philosophies when juxtaposed with the telecommunication sector, which embraced a more pro-competitive stance from the outset. This variance highlights the unique trajectories of these two critical sectors and the potential for regulatory strategies to adapt and evolve in response to changing market dynamics and technological advancements.

The Case for Pro-competitive Regulation in Postal Services

By leveraging the transformative journey of the telecommunications sector, there is a strong argument for embracing pro-competitive regulations within the postal market. The telecommunications industry’s shift toward liberalisation, characterised by the breakdown of monopolies and the promotion of competitive practices, has spurred remarkable gains in efficiency and innovation. This narrative offers a compelling model for the postal sector, especially relevant today, as the e-commerce boom and the corresponding decline in traditional mail volumes reshape the market landscape.

Adopting a pro-competitive regulatory stance in the postal sector promises substantial benefits. Competition fuels innovation, motivating entities to elevate service quality, cut costs, and forge new products and services that meet changing consumer demands. For the postal sector, innovation is not merely advantageous but essential. The burgeoning e-commerce sector necessitates a postal infrastructure that is both adaptable and efficient, capable of managing the growing volume and diversity of parcel deliveries. Furthermore, as the volume of traditional mail wanes, the future of the USO depends on the sector’s ability to evolve and tap into new sources of revenue.

Nevertheless, the current regulatory framework governing the postal sector, especially the CEP market, falls short of fully capitalising on competition advantages. The dominance of operators like Deutsche Post/DHL in Germany and InPost in Poland, each holding substantial market shares and boasting the country’s largest networks of automated parcel machines (’APM’) and ‘Pick Up, Drop Off’ (‘PUDO’) locations, call to mind the telecom sector’s pre-liberalisation scenario. The robust demand for APMs creates substantial barriers for newcomers, echoing past telecom challenges. The telecom industry’s response—sector-specific regulations to democratise access to infrastructure and stimulate competition— offers a roadmap for the postal sector. The postal sector could cultivate a more competitive and dynamic market by easing entry barriers and fostering infrastructure sharing, such as APMs or PUDOs.

Drawing parallels with the telecom industry’s regulatory evolution underscores the potential impact of integrating procompetitive regulations within the postal market. These adjustments could propel the sector towards more significant innovation, service quality, and efficiency, benefiting established operators and potential new market entrants.

Learning from Telecoms

Drawing lessons from the EU telecommunications sector’s comprehensive liberalisation and regulatory progression offers invaluable insights for the postal market’s transformation. The liberalisation of the EU telecom market ignited a shift in market dynamics and endowed NRAs with significant regulatory authority. These powers played a crucial role in cultivating a competitive, innovative market focused on consumer interests. The newest adoption of the EECC was pivotal in this evolution, marking a substantial reform of the EU’s telecommunications regulatory framework.

The EECC introduced broad and adaptable definitions, expanding the understanding of telecommunication services. This approach promoted flexibility and a capacity to evolve alongside technological progress, ensuring the regulatory framework’s relevance in an increasingly digital era. Additionally, the EECC upheld a robust pro-competitive orientation,

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aligning regulatory goals to encourage competition, to facilitate market entry and expansion, and, ultimately, to improve consumer offerings.

Key features of the EECC that underline its pro-competitive objectives include:

1) Promotion of competition: The Code explicitly aims to enhance efficient infrastructure-based competition, creating a level playing field for both new and existing telecom operators. This environment is designed to spur innovation and afford consumers access to a wide array of quality services.

2) Universal Service Modernisation: The EECC reaffirms the commitment to universal service, updating this principle to guarantee access to high-speed internet for all citizens, acknowledging its fundamental role in today’s society.

3) Regulatory Agility: It empowers NRAs with the flexibility to adjust regulatory actions in response to market shifts, ensuring that the regulatory landscape is conducive to sustaining competition.

By drawing on the EECC’s successes, applying similar regulatory strategies and authorities to the postal sector could trigger a vital reform. Specifically, by embracing open definitions, advocating for competition, modernising the universal service obligation, and providing NRAs with the agility to confront emerging challenges, the postal market can progress towards a landscape marked by competitiveness and innovation. This evolution would better serve the contemporary needs of consumers and businesses, paving the way for a more dynamic and digital-forward postal sector.

Proposed Changes for Postal Regulation

The postal market’s regulatory framework is at a critical turning point. The rapid growth of e-commerce and evolving consumer expectations necessitate a postal system that is both innovative and adaptive. The postal industry can also leverage regulatory instruments aimed at fostering competition. Proposed reforms for postal regulation should focus on lessons learned from telecommunications regulatory experience:

Facilitating Access to Postal Infrastructure: Granting new market entrants easier access to postal infrastructure, such as sorting centres, delivery networks, and last-mile solutions like APMs and PUDO points, is critical. This approach would diminish barriers to entry, stimulating innovation and competition within the postal ecosystem.

Revitalising the USO: The USO must be reimagined to meet the digital era’s demands. Expanding the USO to include digital services would not only ensure the continued relevance and accessibility of postal services but also address the needs of those digitally underserved or choosing to exercise their digital rights by opting out of internet use. This modernisation could extend to e-government services and digital communication tools, ensuring the USO adapts to and reflects the necessities of a digital society while still considering the preferences of those who wish to remain offline. USO must ensure that no one is left behind as services evolve..

Ensuring Equitable Market Conditions: The prevailing market conditions often skew in favour of established incumbents, particularly within the CEP segment, where entities like DHL, DPD (GeoPost), and InPost benefit from their extensive networks. Regulatory actions should aim to level the playing field, ensuring fair competition among all postal and delivery service providers. This might include measures to curb anti-competitive behaviours, promote shared use of infrastructure, and enforce transparency in pricing and access conditions.

Implementing these pro-competitive regulatory measures would herald a transformative postal sector era marked by heightened innovation, operational efficiency, and service quality. Such reforms are essential to accommodate the

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e-commerce sector’s growth, ensuring the postal system’s enduring significance in the global communication and delivery landscape. Through thoughtful regulatory evolution, the postal industry can strike a harmonious balance between maintaining the USO and fostering the competitive zeal characteristic of the telecommunications revolution.

Conclusion

The postal market is navigating unprecedented transformation, driven by the rapid expansion of e-commerce and evolving consumer expectations. The journey of the telecommunications sector, particularly the implementation of the EECC, offers valuable lessons for reimagining postal regulation. By adopting a pro-competitive regulatory stance, the postal sector can foster an environment ripe for innovation and competition, ensuring it remains responsive to the digital age’s demands.

Key proposals for regulatory reform in the postal market include facilitating access to infrastructure, modernising the USO to encompass digital services, and ensuring a level playing field for all market participants. These measures are designed to lower entry barriers for new entrants and ensure that postal services remain accessible and relevant to all segments of society, including those digitally excluded.

As the postal market stands at this critical juncture, it is imperative to seize the opportunity to craft a regulatory framework that balances the need for competition with the mandate to provide universal service. Embracing the competitive dynamism revitalising the telecommunications sector can propel the postal market towards a future marked by innovation, efficiency, and enhanced service delivery. Through thoughtful regulatory evolution, the postal sector can meet the challenges and opportunities of the e-commerce era, ensuring its vital role in the global communication and delivery ecosystem for years to come.

Mateusz Chołodecki, PhD, serves as the Head of the Postal Market Laboratory within the Centre for Antitrust and Regulatory Studies (CARS) at the University of Warsaw. Specialising in postal, telecommunications, and ICT regulations, his research focuses on the increasingly convergent nature of these fields.

SUGGESTED CITATION: Chołodecki, M.; “Revitalising the EU Postal Market: Lessons from Telecom’s Competitive Edge”, EU Law Live, 29/04/2024, https://eulawlive.com/competition-corner/revitalising-the-eu-postal-market-lessons-from-telecoms-competitive-edge-by-mateusz-cholodecki/

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Moving past “Crime and Punishment” in European financial regulation: lessons from competition law on commitment decisions

Enrico Sartori

Introduction

Public enforcement of EU financial markets law is clearly based on a sanctioning pillar. Public authorities tasked with enforcing financial markets law throughout the EU can impose hefty pecuniary penalties and several other administrative measures. At times, even criminal penalties can apply, such as in the most serious cases of market abuse. However, something more is required to increase the enforceability of financial markets law. In particular, the development of a second public enforcement pillar, based on negotiated solutions, is advisable. The present contribution advocates for the introduction of commitment decisions – a decades-old practice in EU competition law – in EU financial markets law.

Public enforcement of EU financial markets law: standing on a sanctioning pillar

After the global financial crisis of 2008, the European legislator felt a heightened urgency of punishing misconduct in financial markets. The ensuing quest for harmonisation of sanctioning regimes led to the development of a minimum sanctioning toolbox to be made available to public enforcers (national competent authorities, or “NCAs”) throughout the EU. Accordingly, current European legislation includes detailed sanctioning provisions, such as art. 30 ff. of the Market Abuse Regulation (Regulation (EU) No 596/2014), art. 38 ff. of the Prospectus Regulation (Regulation (EU) 2017/1129), and art. 70 ff. of MIFID II (Directive 2014/65/EU).

Within the new regime, the high foreseeable amount of pecuniary penalties attracted particular attention. In fact, in the case of violation of financial markets law provisions, Union legislation requires that NCAs may impose fines based on entities’ economic strength. For example, pecuniary penalties for violations of the Prospectus Regulation can amount to 3% of a firm’s turnover. Notably, fines can reach as high as 15% of an entity’s turnover in serious cases of market abuse (thus even higher than the maximum fines for competition law violations, currently set at 10% of a firm’s turnover). Other administrative sanctions and measures, both for natural and legal persons, further bolster NCAs’ enforcement powers. Such provisions form the “sanctioning pillar” of EU financial markets law.

Achieving a stronger sanctioning framework was thought to be the optimal reaction to a financial environment seen as plagued by widespread violations and corporate impunity. However, this approach led to overlooking other important aspects of an effective public enforcement. In fact, a system of public enforcement based primarily on criminal and administrative sanctions is constrained within well-known limits. For example, the scarcity of personnel and resources pushes public enforcers to concentrate on selected potential violations. It is therefore impossible for NCAs and prosecutors to adequately pursue all the potential violations they detect.

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Focusing enforcement on a sanctioning pillar also has broader implications. In fact, the type and amount of sanctions imposed in a jurisdiction constitute an important competitive factor for its financial markets. Under-, or overdeterrence may reduce the appeal of the jurisdiction at issue for investors, or for companies seeking a listing on a stock exchange. Where the only possible reaction to a suspected violation is the opening of a sanctioning proceeding, a financial hub may acquire a reputation for overdeterrence.

More generally, financial regulation is shaped by numerous and detailed provisions, at times of difficult interpretation and often dealing with minutiae of firms’ business activities. Especially for smaller firms, this creates the potential for relatively minor infringements of formal requirements, or violations due to simple negligence. Dealing with minor violations by means of sanctions may not always be the most conducive to a well-functioning market, especially when alternatives exist.

The use of commitment decisions in EU competition law

Interesting alternatives are indeed offered by other areas of EU law. Notably, EU competition law has developed a series of non-sanctioning tools to deal with potential anti-competitive behaviours. Settlements and commitment decisions are both successful examples of such an approach, but I believe that commitments are of particular interest. Through commitments, companies can avoid sanctioning proceedings by proactively addressing concerns as to the conformity of their activities with competition law. In particular, companies can undertake to follow a specific course of action; companies’ commitments are then made legally binding through a decision of the competition authority.

With a commitment decision, the competition authority does not take a position as to the existence of a competition law violation, and the firm is not required to recognise its liability. Due to their consensual nature, such tools require less resources than sanctioning proceedings, and the resulting economies can be thus directed to other potential violations. Moreover, the decision is unlikely to be contested in court by the addressee, since the latter has been involved in its elaboration.

Of course, commitments are not adequate for every type of conduct which raises competition law concerns. First of all, such tools can only address future behaviours. Secondly, commitment decisions are considered not applicable in hardcore cartel cases and other particularly serious infringements.

Still, competition law commitments show that compliance with applicable laws can be pursued not only through sanctions, but also through cooperation between public authorities and regulated entities. In fact, the tool has proven so convincing to the EU legislator that commitments, initially developed in the practice of the European Commission (now enshrined under art. 9 of Competition Regulation 1/2003), are now part of the enforcement toolbox of all EU national competition authorities (under art. 12 of ECN+ Directive 2019/1).

Introducing commitment decisions in EU financial markets law: towards a public enforcement pillar based on negotiated solutions

Competition law practice reveals several advantages of commitment decisions. But could commitment decisions, and the connected benefits, be imported into EU financial markets law? In my view, the answer is positive. First of all, public enforcers of financial markets law throughout the EU are subject to the resource paucity typical of any public enforcement authority. Therefore, they would only benefit from employing proceedings which appear less resource-intensive than sanctioning proceedings when dealing with minor violations.

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However, the main benefit of introducing commitment decisions in financial market legislation at the EU level would be qualitative. In fact, such a reform would complement the existing sanctioning pillar with a different one, based on negotiated solutions. In particular, this second pillar would foster supervisory cooperation between regulated entities and public authorities, with several positive spillovers.

First of all, the process to reach a commitment decision involves a dynamic information exchange between NCAs and firms. Over time, NCAs would gather valuable information on the inner workings of firms, whereas firms at issue would be better informed about the views and expectations of supervisors. Secondly, the result would be less contentious than a sanctioning decision, leading to a more acceptable solution. A diminution of enforcement resources devoted to litigation can be expected. Ultimately, commitments would enable NCAs to gently steer the development of market practices according to regulatory goals, with a view to market integrity and investors protection.

In light of the above, it should not surprise that commitments made their way into the financial markets law of certain EU member states. Lastly, for example, the Italian legislator (with art. 23 of Law No 21 of 5 March 2024) enabled CONSOB, the Italian financial markets authority, to issue commitment decisions with reference to all types of infringements of the Italian Consolidated Financial Law (Legislative Decree No 58 of 24 February 1998).

Of course, commitments should be handled with care. An inappropriate use could lead, depending on which of the actors is tilting the balance, to unwarranted supervisory intrusion in market practices, or to a weakening of the enforcement regime. Such risks advise a particularly careful selection of the violations to which commitments should be applicable, and a calibration of the criteria that should guide their use.

Several potential violations of EU financial markets law could be best remedied through commitment decisions, especially with reference to protracted conducts, which can still be changed in the future. In this light, commitments should be applicable to potential infringements of governance and organisational provisions. Additionally, they would apply well to potential breaches of conduct of business duties by firms vis-à-vis investors.

On the contrary, commitments are ill-suited for instances of market manipulation and prospectus violations, as these conducts cease abruptly in a specific point in time. However, concerning minor prospectus violations, commitments should still be admissible to help remedy the consequences of the violation. For example, they may include the obligation to compensate damaged investors.

Closing remarks

As demonstrated by competition law, an enforcement approach which includes negotiated solutions alongside traditional sanctions is possible and operable. Within negotiated solutions to potential violations, commitment decisions present several advantages.

Such benefits would be easily replicated in the enforcement of EU financial markets law if commitment decisions entered the toolbox of financial NCAs. As a result, public enforcement of EU financial markets law would be standing on two pillars: one providing for hefty sanctions, and one based on consensual solutions. Ultimately, market integrity and investors would turn out to be the real beneficiaries.

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Enrico Sartori is a Doctoral Researcher at the Luxembourg Centre for European Law, pursuing a joint PhD program at the University of Luxembourg and at Goethe University Frankfurt.

SUGGESTED CITATION: Sartori, E.; “Moving past “Crime and Punishment” in European financial regulation: lessons from competition law on commitment decisions”, EU Law Live, 06/05/2024, https://eulawlive.com/competition-corner/ moving-past-crime-and-punishment-in-european-financial-regulation-lessons-from-competition-law-on-commitment-decisions-by-enrico-sartori/

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The Principle of ne bis in idem in the Digital Economy EU Competition Law vs. the DMA?

Bernadette Zelger and Ina Kapusta

1. Setting the scene

The digital economy has expanded ever since the invention of the Internet and its becoming accessible to the public in the 1990s. It has brought changes in many ways and been a breeding ground not only for new technologies, but also business models, online markets as well as the rise of the so-called Big Tech companies (GAFAM/GAMAM, since Facebook was named Meta). Moreover, their business models combined with the characteristics of online markets and particularly (also) platform markets (i.e., for example, economies of scale, network and lock-in effects, etc.) have become quite a challenge for competition policy makers around the world. The answer of the European Commission has been fierce competition law enforcement while, at the same, adopting “sectoral regulation” as regards gatekeepers in the digital economy by means of the Digital Markets Act (“DMA”). These developments bring along various different issues concerning, inter alia, questions of parallel application of the two frameworks, i.e., the competition provisions of the TFEU and national competition provisions vs. the provisions of the DMA, as well as the very potential of a parallel application of the latter on procedural tenets such as the principle of ne bis in idem. It is the latter which shall be dealt with in the following.

2. The legal framework for the application of the ne bis in idem principle after bpost (C-117/20) and Nordzucker (C-151/20)

Undoubtedly, the principle of ne bis in idem as it is enshrined in Art 50 of the Charter of Fundamental Rights of the EU (“CFR”) is a fundamental principle of EU law that not only applies to criminal procedures but also to those, which are “sufficiently similar in nature”, including competition law (Bania 2023, pp. 141–142). Up until recently, the approach as regards the ne bis in idem principle in the area of competition law differentiated from the one adopted in other areas of EU law, as the Court of Justice of the European Union (“ECJ” or “Court”) applied a so-called “triple identity” test as regards the idem. Hence, the test for the establishment of the idem condition not only required the identity of the facts and unity of offender, but also the unity of the legal interest protected (Aalborg Portland [C-204/00], para 338; Toshiba [C-17/10], para 97; Nazzini 2014, p. 284). This latter criterion of the so-called “competition approach” (Tomkin 2021, para 50.86) has been considered irrelevant in other areas of EU law (Van Esbroeck [C-436/04], para 32; van Straaten [C-150/05], paras. 41 and 44; Zelger 2023, pp. 239–240) where it was not necessary to identify the same legal interest in order to fulfil the test.

With its decisions in bpost (C-117/20) and Nordzucker (C-151/20) the ECJ has abandoned the “competition approach” and introduced a uniform twofold criterion as regards the idem condition. It thereby converged the approach in the area of competition law with the standards as regards the idem in other areas of EU law. Furthermore, as regards the bis condition it adopted a “restriction-justification approach” (Zelger 2023, 241 referring, as regards the notion of a “restriction-justification approach”, to Tomkin 2021, para 50.86) thereby abandoning the tenets as established in Åkerberg Fransson (C-617/10) and following its line in the case law (Rossi-Maccanico 2021, pp. 269–271) established

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in Menci (C-524/15), Garlsson (C-537/16) and Di Puma (joined cases C-596/16 and C-597/16). Doing so it aligned its jurisprudence with the case law of the ECtHR (A and B / Norway [Applications nos. 24130/11 and 29758/11]) allowing for a dual or “double track enforcement” (Opinion of AG Bobek in bpost [Case C-117/20], heading of section 4) of different proceedings in response to the same behaviour (Vetzo 2018, p. 57).

a. The main takeaway from Nordzucker (C-151/20): the abandonment of the “competition approach” and the twofold condition of the idem

The ECJ clarified that the application of the principle of ne bis in idem is subject to a twofold condition: firstly, there must be a prior final decision (bis condition) and, secondly, this prior decision must concern (idem condition) the same facts (bpost [C-117/20], para 28; Nordzucker [C-151/20], paras. 32-33; Volkswagen [C-27/22], para 57; Mayr 2022, p. 554; Kreße 2023, p. 44). The same facts, i.e., the idem condition, requires the identity of the material facts, i.e., “a set of concrete circumstances stemming from events which are, in essence, the same, in that they involve the same perpetrator and are inextricably linked together in time and space” (Juan [C-164/22], para 32; similar in bpost [C-117/20], para 53; Nordzucker [C-151/20], para 38). The idem thus requires the unity of the offender and the identity of facts. As regards the establishment of the identity of the facts the ECJ stuck to its “effects approach” as adopted in Toshiba (C-17/10; Zelger 2021, p. 266). This means that in order for parallel proceedings to be considered concerning the same facts, the decisions imposing the penalties must relate to the same effects of a measure in a certain territory and within a certain period of time (Zelger 2023, pp. 252–256).

b. The main takeaway in bpost (C-117/20): the abandonment of Åkerberg Fransson (C-617/10) and the “restrictionjustification” approach as regards the bis

In bpost (C-117/20) the Court has furthermore clearly continued its approach regarding the bis as developed in Menci (C-524/15) and subsequent case law (Garlsson [C-537/16], Di Puma [joined cases C-596/16 and C-597/16) and thus abandoned its approach as adopted in Åkerberg Fransson (C-617/10). In other words, the ECJ, unlike in Åkerberg Fransson (C-617/10), where it left it to the national court to decide whether in case of successive penalties according to tax and criminal law, the tax penalty was indeed considered criminal in nature and thus suitable to establish a bis, it did not avoid ruling on the bis in case of parallel administrative and criminal law proceedings in bpost (C-117/20). Rather, it affirmed the existence of a bis by means of the proceedings of the Belgian telecommunication regulator and the Belgium competition authority. However, the Court also emphasised that such a breach of the prohibition of double jeopardy might nevertheless be justified pursuant to Art 52(1) CFR (Zelger 2023, p. 254). Such justification is subject to different criteria (Menci [C-524/15], paras. 44, 46 and 49; Robertson 2023, pp. 7–9) and thus, among others, the requirement that the two sets of rules pursue distinct legitimate objectives (bpost [C-117/20], paras. 44 and 47).

3. EU Competition Law vs DMA: dual proceedings – how to solve the matter?

With this framework in mind, what are the consequences of the aforementioned for potential dual proceedings of (EU or national) competition law on the one hand, and the DMA (or even national DMA-like provisions) on the other hand in the digital economy? There are various constellations possible; however, the following two shall be dealt with in this blogpost

a. Parallel proceedings of the Commission according to the EU competition provisions and the DMA

As argued elsewhere (Zelger 2023, p. 258), considering the approach as established in bpost (C-117/20) and Nordzucker (C-151/20), parallel proceedings according to the DMA as well as the EU competition provisions would very likely constitute an infringement of Art 50 CFR. However, such a breach of the ne bis in idem principle could still be justified

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under Art 52(1) CFR and thus the Menci (C-524/15) test (Andreangeli 2022, pp. 499–504; van den Boom 2023, pp. 79–80). Hence, it is pivotal in this regard whether the two sets of rules pursue distinct legitimate objectives. In other words, it all boils down to the question of whether or not the DMA and the competition provisions “pursue the same objective of general interest of ensuring that competition in the internal market is not distorted” or rather “pursue complementary aims relating to different aspects of the same conduct” (Nordzucker [C-151/20], paras. 56-57). While such question will be ultimately for the ECJ to decide, there are, as often, arguments on both sides.

In fact, considering the case law of the Court a breach of sector-specific regulation can still amount to an abuse of a dominant position within the meaning of Art 102 TFEU too (Slovak Telekom [C-165/19 P], para 57). Moreover, the DMA “aims to complement the enforcement of competition law” (recital 10). Therefore, the DMA expressly pursues an objective that is arguably complementary and thus different from the objective of protecting undistorted competition in markets, which is enshrined in competition law, namely, to ensure that markets in which gatekeepers operate are and remain contestable and fair (Horstkotte and Jannausch 2022, p. 152). This difference becomes particularly evident when considering the legal basis of the DMA. The regulation is based on Art 114 TFEU (the approximation of laws for the establishment of the internal market according to Art 26 TFEU) rather than on Art 103 TFEU providing the legal basis for competition law-related provisions (Ribera Martínez 2023, pp. 90–91; Bernatt and Zoboli 2022, p. 22). However, one could also argue the converse, i.e., that the ideological premise on which the DMA is based is the protection of undistorted competition as implicated in recital 7 (Bania 2023, pp. 146–147). Others go even further claiming that the DMA, in fact, could be (at least partially) considered lex specialis to competition law (Beems 2023, p. 20).

b. Parallel proceedings according to national competition provisions and the DMA

In case of parallel proceedings of a national competition authority due to a breach of the national competition provisions and proceedings of the Commission due to an infringement of the DMA, the pivotal questions in the context of the principle of ne bis in idem are twofold:

First, such a case could already be “solved” at the level of the idem condition (Zelger 2023, p. 259). Put differently, depending on which effects were taken account of by (i) the Commission and a subsequent decision of a national authority or, vice versa, (ii) the national authority and a subsequent decision of the Commission, such a case might not be caught by the prohibition of double jeopardy at all. This would be the case if either of the authorities excluded the effects already taken account of by the other authority in its earlier decision. By means of an example: Provided an infringement decision of the Commission considered the effects of an anti-competitive measure within the whole of the EU market, an infringement decision of, let’s say, the Austrian competition authority, would establish a breach of the ne bis in idem principle as the very same effects would have already been taken account of and fined by the decision of the Commission. However, in the case of an earlier decision of a national competition authority, the Commission could still penalise the very same anti-competitive behaviour without even triggering the ne bis in idem principle, given it excluded the effects of the measure in, given our previous example, the Austrian market (Bania 2023, p. 145; Engel et al. 2023, pp. 26–27).

Second, even if one were to conclude that there was indeed a breach of the principle of ne bis in idem, the arguments in favour and against a justification of the breach according to Art 52(1) CFR would be the same as under 3.a.

Similar issues surrounding the idem criterion as well as the notion of a distinct objective of general interest at the justification level could also occur in other constellations of parallel proceedings. The parallel application of stricter national provisions than Art 102 TFEU (e.g. § 19a dGWB) with parallel procedures under Art 102 TFEU on the one hand or parallel procedures under the DMA on the other, serve as examples to this effect. Here too, one might make

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the same claim as has been made in the context of the DMA, i.e., that they purportedly “pursue other legitimate public interest objectives as set out in the TFEU or […] as recognised by the case law” (recital 9; Art 1(6) DMA; Fratini 2023, pp. 68–69; Robertson 2023, pp. 8–9).

These questions and the high topicality of the issues stemming from the ne bis in idem principle at the intersection of competition law and its complementing laws (such as the DMA) is backed up by recent developments, e.g. the Commission’s recent decision to impose a fine on Apple in the amount of EUR 1.8 billion for abusing its dominant position for behaviour that is also prohibited under Art 5(4) DMA.

In light of this, the legal framework developed by the Court in its most recent case law and considering the various possible overlaps of competition law and the DMA as an ex-ante “economic regulatory law framework”, one thing seems to be certain: It won’t take long for the ECJ to get the chance to decide on the application of the ne bis in idem principle in case of such dual proceedings in the digital economy.

Dr Bernadette Zelger is an Assistant Professor at the Institute of European Law and Public International Law at the University of Innsbruck and currently an Emile Noël Fellow at the Jean Monnet Center for International and Regional Economic Law & Justice, NYU School of Law, New York, holding a Dr. iur., Mag. iur. from the University of Innsbruck, a Postgraduate Diploma in EU Competition Law from King’s College London and an LL.M. in Competition Law from Queen Mary University of London.

Ina Kapusta is an Assistant Professor at the Institute of Public Law, Constitutional and Administrative Theory at the University of Innsbruck and currently on a research stay at Max Planck Institute for Innovation und Competition in Munich, holding a Mag. iur. and LL.B. from the University of Innsbruck.

SUGGESTED CITATION: Zelger, B. and Kapusta, I.; “The Principle of ne bis in idem in the Digital Economy EU Competition Law vs. the DMA?”, EU Law Live, 15/04/2024, https://eulawlive.com/competition-corner/the-principle-of-ne-bis-in-idem-inthe-digital-economy-eu-competition-law-vs-the-dma-by-bernadette-zelger-and-ina-kapusta/

References

*Andreangeli, Arianna. 2022. The Digital Markets Act and the enforcement of EU competition law. European Competition Law Review 43 (11): 496–504.

*Bania, Konstantina. 2023. Fitting the Digital Markets Act in the existing legal framework: the myth of the “without prejudice” clause. European Competition Journal 19 (1): 116–149.

*Beems, Belle. 2023. The DMA in the broader regulatory landscape of the EU: an institutional perspective. European Competition Journal 19 (1): 1–29.

*Bernatt, Maciej and Laura Zoboli. 2022. Unveiling the Evolution of EU Competition Law Enforcement: Achievements, Challenges and Emerging (Digital) Questions. Jean Monnet Network on EU Law Enforcement Working Paper Series. https://jmn-eulen.nl/wpcontent/uploads/sites/575/2023/11/WP-Series-No.-22-23.-Unveiling-the-Evolution-of-EU-Competition-Law-EnforcementAchievements-Challenges-and-Emerging-Digital-Question.pdf. Accessed 11 March 2024.

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*Engel, Annegret, Xavier Groussot and Emilia Holmberg. 2023. The Digital Markets Act and the Principle of Ne Bis in Idem: A Revolution in the Enforcement of EU Competition Law? https://ssrn.com/abstract=4547947. Accessed 11 March 2024.

*Fratini, Alessandra. 2023. Double Jeopardy Between Regulatory and Competition Proceedings: The bpost Judgment and the Digital Markets Act. In Postal Strategies, eds. Pier Luigi Parcu, Timothy J. Brennan and Victor Glass, 59–70. Topics in Regulatory Economics and Policy. Cham: Springer Nature Switzerland.

*Horstkotte, Christian and Matthias Jannausch. 2022. Ne bis in idem im Europäischen Wettbewerbsrecht. Zugleich Besprechung der Urteile des EuGH vom 22. 3. 2022 in Sachen C-151/20 (Nordzucker) und C-117/20 (bpost). IWRZ (4): 147–153.

*Kreße, Bernhard. 2023. Entscheidungsanmerkung zu EuGH v. 22.3.2022 – C-151/20 – Bundeswettbewerbsbehörde ./. Nordzucker AG u.a. GPR 20 (1): 43–46.

*Mayr, Michael. 2022. Redefining the Ne Bis in Idem Principle in EU Competition Law: bpost and Nordzucker. Journal of European Competition Law & Practice 13 (8): 553–557.

*Nazzini, R. 2014. Fundamental rights beyond legal positivism: rethinking the ne bis in idem principle in EU competition law. Journal of Antitrust Enforcement 2 (2): 270–304.

*Ribera Martínez, Alba. 2023. An inverse analysis of the digital markets act: applying the Ne bis in idem principle to enforcement. European Competition Journal 19 (1): 86–115.

*Robertson, Viktoria H.S.E. 2023. The complementary nature of the Digital Markets Act and Articles 101 & 102 TFEU. https:// ssrn.com/abstract=4458112. Accessed 11 March 2024.

*Rossi-Maccanico, Pierpaolo. 2021. A Reasoned Approach to Prohibiting the Bis in Idem : Between the Double and the Triple Identities. eucrim - The European Criminal Law Associations’ Forum (4): 266–273.

*Tomkin, Jonathan. 2021. Commentary on Article 50 – Right not to be Tried or Punished Twice in Criminal Proceedings for the same Criminal Offence. In The EU charter of fundamental rights. A commentary, eds. Steve Peers, Tamara Katherine Hervey, Jeff Kenner, Angela Ward and Pekka Aalto. Oxford, New York, NY, Dublin, München, Baden-Baden: Hart; Beck; Nomos.

*van den Boom, Jasper. 2023. What does the Digital Markets Act harmonize? – exploring interactions between the DMA and national competition laws. European Competition Journal 19 (1): 57–85.

*Vetzo, Max. 2018. The Past, Present and Future of the Ne Bis In Idem Dialogue between the Court of Justice of the European Union and the European Court of Human Rights: The Cases of Menci , Garlsson and Di Puma. Review of European Administrative Law 11 (2): 55–84.

*Zelger, Bernadette. 2021. The Principle of ne bis in idem in EU Competition Law. WuW 71 (5): 261–268.

*Zelger, Bernadette. 2023. The Principle of ne bis in idem in EU competition law: The beginning of a new era after the ECJ’s decisions in bpost and Nordzucker? Common Market Law Review 60 (1): 239–262.

A Bias Towards Enforcement: How the DMA Changes the Landscape

Jasper van den Boom and Rupprecht Podszun

The regulation of digital markets is picking up steam. Last year, the long-awaited Digital Markets Act (‘DMA’) and Digital Services Act (‘DSA’) came into effect. As of 17 February 2024, the DSA applies to all platforms. Just this March, the first compliance reports were issued by designated gatekeepers under the DMA, marking the start of enforcement of the substantive obligations imposed under the DMA. These new, and far-reaching, regulations complement existing legislation such as the General Data Protection Regulation (‘GDPR’) and the P2B-Regulation. This regulatory deluge is far from over. For instance, the Data Act entered into force in January 2024 and will start to apply from 12 September 2025, the AI Act has passed the vote for adoption on the 13th of March 2024, and there is a proposal for a CHIPS Act, which would be aimed at stimulating the European semiconductor industry, rather than regulating software and how we use it. There is no indication that the European legislative pipeline is to run empty anytime soon, especially where it concerns the digital economy.

From largely unregulated to heavily regulated

As digital markets are becoming increasingly regulated, their nature changes. So far, markets have been largely unregulated which means that the behaviour of companies was only subject to competition scrutiny. Now, this turns into a (heavily) regulated sector. The introduction of new regulatory frameworks will change the application of competition law, as competition authorities will increasingly have to navigate sets of rules and obligations when it comes to enforcing competition law. These different regulatory frameworks have strongly diverging rationales, which range from protecting privacy and personal data (GDPR, Data Act), protecting customers and consumers, content moderation, and transparency (Digital Services Act, P2B-Regulation), enhancing competition (DMA) and industrial policy (CHIPS Act). This writing raises – and attempts to answer - the question how the emergence of such sector-specific rules changes the role of competition laws in digital markets and their enforcement. This analysis operates on the premise that some rules will have a stronger link to competition laws and policies than others, but that the role of competition law invariably changes with the growing body of legislation governing digital markets. This writing aims to answer the question how competition law and regulatory frameworks interact with one another, and how the introduction of these frameworks – in particular the DMA – may shape the application of competition law over time.

The DMA is the focal point because it is the ex-ante regulatory framework with the most direct impact on competition law enforcement in digital markets. It has been argued that the DMA is in substance a sector-specific competition policy. [1] However, one must then wonder whether a ‘digital sector’ truly exists, and if there is some demarcation possible as to where this sector starts and ends.[2] The DMA diverges strongly from competition law in a number of aspects, as it pursues its own objectives (fairness and contestability), has its own mechanisms (designation of entities, which are then subjected to clear-cut rules and obligations, instead of enforcement on the basis of broadly applicable standards) and its own approach to enforcement, which is discussed hereunder.

Four major differences

The DMA’s approach to protecting and stimulating competition diverts from competition law enforcement in three major ways. Firstly, it only applies to a select group of undertakings which have been designated as gatekeepers following the procedure laid down in Article 3 DMA. Secondly, it relies on self-executing obligations rather than case-by-case analysis. Thirdly, it moves away from the ‘more economic approach’ used in competition law since the early 2000s, and towards a rules-based approach where the effects on consumers associated with certain behaviours are not studied on a case-by-case basis.[3] Fourth, and finally, the DMA does not allow for an efficiency defence as to justify certain behaviour on the basis of facts and circumstances surrounding the behaviour. With this approach, the DMA marks an explicit rejection of the important role individual economic assessments play in competition law cases in the past years. This is certainly a reaction to the complexities of such assessments – and the deficits perceived in the enforcement of competition law. In competition cases, proceedings got overly long and exhaustive (at least partly) due to the high hurdles set by the “more economic approach”.

By trading complexity and nuance for enforceability, the DMA seems more focused on preventing false negative than false positive interventions. In other words, there is a bias towards enforcement instead of against enforcement, even if the effects of certain behaviours are not necessarily well studied. The justification for such a bias if found partly in the scope of the DMA and is partly derived from competition law enforcement. Firstly, since the DMA only applies to a handful of very powerful undertakings, it can be argued that the effects of possible false positives are contained to undertakings which can afford to cope with unnecessary regulatory burdens. Secondly, the obligations imposed in articles 5, 6, 7, 14, and 15 DMA are largely based on experiences gained in competition law enforcement. With the DMA, lessons from the study of effects that took place in a specific case-by-case analysis have been generalized to develop detailed rules.[4] Consequently, it can be argued that while the DMA minimises the role of economic assessments, its foundation is still built on the study of economic effects.[5]

The feedback loop to competition law

A quick look at the nature and design of the DMA demonstrates why it should be viewed as a set of rules that complements competition policy, without the intention to replace the application of competition law in the digital sector. Its narrow scope and methodological approach allow it to speed up enforcement where it is deemed necessary, not to evolve into a horizontally applicable regime such as competition law. It is possible – and even likely – that the approach adopted in the DMA will work through in competition law and shape the application of competition law itself, especially in light of the complexities associated with enforcing competition law in digital markets. For instance, the use of specific obligations, formal requirements, no case-to-case assessment, less economic input, may seep through from ex-ante regulation to the ex-post enforcement of competition law. It may also be the other way round: with a strong regulatory regime there may a greater appetite for a more robust competition law application so that it complements the quick approach taken in the DMA. Finally, it may change the division of labour between one department and another. As digital markets are increasingly regulated under the DMA, this may free up attention to intervene in other sectors and areas which were previously underenforced. However, such a recalibration would require that there remains sufficient capacity for the general enforcement of competition law, even if a part of the resources is redirected to the enforcement of the DMA. The upcoming section discusses why it may be wise to reduce the complexity of assessments required in competition law, as to retain enforceability not just in light of the DMA, but also the net of regulations that spans across the digital sector.

A tighter net

The DMA is not the only regulatory regime that will impact competition law enforcement. Instead, the newly introduced regulations span across the digital network that encapsulates competition law. As the set of rules governing digital markets continues to grow, the number of interests, objectives, and effects which can – and maybe should – be taken into account by competition authorities grow as well. This may initiate or accelerate the shift from a monocentric to a polycentric competition law regime.[6] Here, monocentricity refers to a competition law which focuses wholly on price-based effects with the purpose of stimulating one objective, generally consumer welfare, while a polycentric competition regime would focus on a range of different objectives that competition authorities aim to stimulate, where authorities consider the complexity of social interactions across spheres of social activity.[7] Such a broad view may be particularly important in the networked economy, where competitive strategies affect overlapping networks of products and users and where success in one area of the network may have significant spillovers across the rest of the network, often with significant social and political implications.[8] While the modernisation of competition law in the past decades has moved us far past a sole focus on price within a specific market, the scope of competition law is still relatively narrow.[9] In order to reflect a reality with more complex and unpredictable effects related to distortions of competition, this scope may have to be broadened significantly.

In digital markets, the Facebook case initiated by the German competition authority (Bundeskartellamt; ‘BKartA’), should be considered as a step in the direction of polycentricity that is driven by the complexity of digital markets and the existence of specific regulatory frameworks that govern the digital economy. A polycentric competition law refers to a law that incorporates a multitude of interests and simultaneously pursues multiple objectives, moving it away from a monocentric competition law which merely focuses on economic considerations.[10] In the Facebook case, the BKartA took privacy considerations as laid down in the GDPR into account in its application of competition rules. With affirmation of the Court of Justice, the door towards including data protection considerations in applying competition law has been opened. The convergence of objectives pursued in competition law and the various regulatory frameworks are unlikely to stop there. In Google Shopping (par.180), the General Court referred to regulation specific for the telecommunications sector to impose a neutrality on Google, it motivated this ad hoc extension of regulatory principles by arguing that Google was super dominant in the market for horizontal search. Such ad hoc regulatory extensions – where the court directly transfers a principle from a regulatory framework to the realm of competition law, without intervention by the legislature - may continue as relevant rules specific to the digital economy emerge. For instance, one can imagine that the obligations on Very Large Online Platforms (‘VLOPs’) under the DSA are considered relevant in assessing competitive conduct or designing remedies, or that being active within certain high risk AI markets as defined in the AI Act may lead the court to the conclusion that dominance in this area is particularly problematic. It can also inspire remedies, for instance related to the access to certain types of data or moderating duties of VLOPs, or the divestment of certain important AI technologies following the abuse of dominance.

Sector-specific regulation, industrial policy and competition law.

Besides impact on the substantive assessment of competitive power and possibly anti-competitive conduct, the emergence of industrial policy rules such as the CHIPS Act may impact the balancing of interests between competition within the internal market and the global competitive position of European companies. We have seen in the assessment of the Alstom/Siemens merger that protecting competition within the European Union and protecting our global competitive position as the European Union may conflict with one another.[11] It could be possible that competition authorities may

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be inclined to accept certain mergers if this strengthens our global competitive position.[12] This may expand beyond the semiconductor industry, for instance where it relates to the objective of the EU as a global leader in ‘responsible AI’. [13]

A brief look into the emerging different regulatory frameworks regarding digital markets shows that we are increasingly moving away from relying on the unregulated free market. Instead, we see that there is a rapid and far-reaching increase in governmental steering within the networked economy, especially in sectors that are deemed critical or essential by the European legislature. It is clear that the European legislature no longer subscribes to the laissez faire approach to the operations of markets and competition. Instead, regulators are trying to steer the development of – especially digital and critical – technologies and products on a granular level. To ensure consistency between competition law and other regulatory frameworks, competition laws will have to become increasingly polycentric if we wish to ensure that competition law enforcement does not hinder or contradict the wider policies pursued in the European Union. This is, of course, no one-way-street: regulation needs to be driven by a pro-competitive purpose. If competition law enforcement becomes open to regulation, regulation should become open to competition concerns. Enforcing competition rules in regulated sectors is not new, it has happened before in other network industries such as the telecommunications sector. [14] In non-digital network industries, enforcing competition law often consisted of a balancing act between national and European interests, as well as national rules and regulatory agencies, on the one hand, and creating pro-competitive impulses on the other. A similar exercise will likely be needed in digital markets, which are more complex, global, and dynamic than non-digital network industries.

An additional layer of complexity is introduced with the increased reliance on EU-level industrial policies which aim to strengthen the global competitive position of the EU, as this may be at odds with the focus of stimulating intra-EU competition. In light of the rapid technological and societal developments and external pressures the EU faces, it seems unavoidable that competition law evolves and adapts. In changing, it is important to strike a balance between accuracy on the one hand and enforceability on the other. As such, it may be warranted that we attempt to reduce the role of complex economic assessments in enforcing competition rules, both in the DMA and beyond. By simplifying the assessments of the economic effects, competition law can retain its relevance while navigating an ever more complex network of industries, regulation, interests, and objectives. The DMA may serve as a testing ground for enforcement on the basis of rules and presumptions, which may in turn inspire competition law. It will be interesting to see how this multidirectional relationship between the DMA, competition law, and other regulatory frameworks unfolds. One thing that is clear is that in times of great uncertainty, we must embrace flexibility and adaptation. It is likely unwise, or even impossible, for competition law to retreat towards a monocentric approach in an attempt to retain the principles it has developed for non-digital markets in the digital age. At the same time, market freedoms and competition remain the fundament underlying competition law actions, much as they underlie the European Project itself. While it is possible for European institutions and Member States to attempt steering innovation, we cannot demand it through regulation. Thus, at its core competition law should remain concerned with protecting competition and the competitive process, even if other interests and objectives are taken into consideration.

Prof. Dr. Rupprecht Podszun is Professor at the Heinrich Heine University Düsseldorf (HHU), where he holds the Chair for Civil Law, German and European Competition Law. Rupprecht Podszun is also one of the Principal Investigators for the Shaping Competition in the Digital Age (SCiDA) Project; Dr. Jasper van den Boom is a postdoctoral researcher at HHU with the Chair of Civil Law, German and European Competition law, where he acts as a researcher and day-to-day coordinator for the SCiDA Project (https://www.scidaproject.com)

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[1] Petit N., The Proposed Digital Markets Act (DMA): A Legal and Policy Review, JECLAP 12/7 (2021).

[2] Podszun R., From Competition Law to Platform Regulation – Regulatory Choices for the Digital Markets Act, De Gruyter (2023).

[3] Ibid., p. 6-7.

[4] Ibid., p. 7-8 describes this as the difference between standards developed in competition law enforcement and rules as imposed under the DMA.

[5] de Streel, Alexandre and Crémer, Jacques and Heidhues, Paul and Fletcher, Amelia and Kimmelman, Gene and Monti, Giorgio and Podszun, Rupprecht and Schnitzer, Monika and Scott Morton, Fiona M., The Effective Use of Economics in the EU Digital Markets Act (July 30, 2023). Yale Tobin Center for Economic Policy Discussion Paper No. 8.

[6] Lianos I., Polycentric Competition Law, Current Legal Problems, Volume 71, Issue 1, 2018, Pages 161–213.

[7] Ibid.

[8] Ibid.

[9] Ibid.

[10] Lianos (2018)

[11] Case M.8677 - SIEMENS/ALSTOM, Commission Decision of 6 February 2019; see also Konstantinos Efstathiou, The Alstom-Siemens merger and the need for European champions, Bruegel (2019) online: https://www.bruegel.org/blog-post/ alstom-siemens-merger-and-need-european-champions; Anja Naumann, The Siemens-Alstom merger-thriller – indicator of a new era for European champions?, Lexxion (2019), online: https://www.lexxion.eu/en/coreblogpost/the-siemens-alstommerger-thriller-indicator-of-a-new-era-for-european-champions/

[12] Ibid.,

[13] See European Commission, ‘Excellence and Trust in Artificial Intelligence’, online: https://commission.europa.eu/ strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/excellence-and-trust-artificial-intelligence_en

[14] De Streel A, ‘The New Concept of “Significant Market Power” in Electronic Communications: The Hybridisation of the Sectoral Regulation by Competition Law’ (2003).

SUGGESTED CITATION: Podszun, R. and van den Boom, J.; “A Bias Towards Enforcement: How the DMA Changes the Landscape”, EU Law Live, 07/05/2024, https://eulawlive.com/competition-corner/a-bias-towards-enforcement-how-thedma-changes-the-landscape-by-jasper-van-den-boom-rupprecht-podszun/

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Competition law and space regulation: Orbital markets, Martian efforts, and a planetary champion?

Fabian Ziermann

For a long time, Apollo 11 and the first manned landing on the moon in 1969 were our first thoughts of space exploration. Since then, Elon Musk’s SpaceX (founded in 2002), Jeff Bezos’ Blue Origin (founded in 2000), and Richard Branson’s Virgin Galactic (founded in 2004) have pushed the boundaries of (sub-)orbital exploration. SpaceX and Blue Origin lead the field in terms of revenue, while SpaceX and the United Launch Alliance (ULA), a joint venture of Boeing and Lockheed Martin, lead the field in terms of launch capabilities. Thus, the days of government-led space exploration may be slowly but surely coming to an end, with NASA frequently awarding billion-dollar contracts to SpaceX and Blue Origin.

The Canadian science fiction television series Continuum aptly depicts the world of 2077 and an oligarchic dystopia run by the Corporate Congress, i.e., corporations that have succeeded in technology and space exploration. Since this appears to be the current trajectory, we no longer need to ask how to regulate space, but how to apply competition law to the corporations that may well control our planet’s space endeavours. At the same time, however, we should be careful not to stifle what could become one of, if not the, largest economies.

1. Satellite and launch ‘competition’

The first layer of competition in space can be derived from the types of orbits surrounding our planet and the capabilities required to reach them. The closest layer, known as Low Earth Orbit, or simply LEO, has an altitude of 2000 km or less. LEO is home to the International Space Station, and is often explored as the location for new platforms and applications to be built in space. As of May 1, 2023, it was also home to 6768 of the 7560 active satellites orbiting the Earth, 5165 from the United States, with 651 from the United Kingdom in second place. In other words, 89.5% of our current satellite efforts are located in LEO, of which 68.3% are from the US. Another 143 satellites were in Medium Earth Orbit (MEO), with an altitude between 2000 and 35786 km, representing 1.9% of our satellite efforts, and another 590 (7.8%) were in Geostationary Orbit (GEO), which is located at exactly 35786 km, has the same orbital period as the Earth, and is just above the equator. Last but not least is High Earth Orbit (HEO), where satellites can take more than a month per orbit, compared to 90 minutes or less in LEO. As a result, HEO is used less frequently (0.8%) and can even be used to depose of satellite junk in so-called graveyard orbits, several hundred kilometres above their operational orbits.

As of May 4, 2023, SpaceX reportedly had 4338 Starlink satellites in space, representing 57.3% of the planet’s satellite efforts at that time. On January 14, 2024, this number had increased to 5737, while on January 3, 2024, there were 8377 active satellites. This gives SpaceX a 68.4% share of all satellites in space and an increase of more than 10% in less than eight months. While it is difficult to determine a runner-up, obviously excluding military capabilities by states, a distinction recognised by the European Commission, noteworthy competitors are the post-2023 merger Eutelsat

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OneWeb which controls 648 LEO and 36 GEO satellites or Telesat with 198 LEO satellites. Amazon’s Project Kuiper aims to build a LEO constellation of 3236 satellites, but only two prototypes are currently in orbit. However, these notable competitors pale in comparison to SpaceX, which is pursuing a LEO-megaconstellation of around 42,000 satellites.

It should also be noted in this context that many competitors rely on SpaceX for satellite launches, for example through its rideshare program, with some referring to SpaceX’s position as a ‘near monopoly ’, since even Amazon’s Starlink competitor Project Kuiper cannot rely on SpaceX’s competitors for launches. It is therefore unlikely that anyone will be able to challenge SpaceX’s and Starlink’s grip on the market anytime soon. This is consequential in that it speaks to the efficiency and price leadership of Space X’s capabilities, while potentially enabling it to foreclose or hinder competitors from establishing satellite constellations that could compete with Space X in the long run, unless they make comparable investments in launch capabilities. In addition, it could potentially give Space X the ability to pick and choose which space projects to further, thereby giving it the de facto power to control (to some extent) emerging space markets. This may warrant considering Space X’s launch capabilities as an essential facility.

2. Orbital markets and competition

In 2019, both the UK’s Competition and Markets Authority (CMA) and the European Commission approved the Inmarsat/Viasat merger on the basis of a ‘market for the supply of broadband in-flight connectivity’. SpaceX is also active in this market, providing services to some airlines. Both the CMA and the EC concluded that the satellite market was competitive and expanding, driven by demand for connectivity. Of course, much has changed since 2019. However, this satellite-functionality-centric approach may not be appropriate for examining space operations in the future. Instead, a (launch) capability-centric and a ‘(lack of) space-in-space-centric’ approach may be more appropriate. For instance, as the Los Angeles Times noted, ‘part of SpaceX’s goal in filing for 30,000 satellites may be to reserve its place and prevent competitors from taking its desired orbit and frequency first.’ Since satellites, and especially large constellations, can interfere with other satellites, a first-mover advantage may be absolute in some respects, as the very existence of one’s space efforts can interfere with or even prevent the space efforts of another ‘by taking up some of the frequency spectrum needed to communicate with Earth.’ This may justify considering orbits, rather than Earth locations, as the relevant geographic market for competition law purposes. Consequently, orbits such as LEO, MEO, or GEO may be considered as a single relevant market. In particular and more likely, orbital shells, e.g., 525, 530, and 535 kilometres and inclinations of 53, 43, and 33 degrees respectively, and their surroundings may constitute potential (sub-)markets, as exemplified by the orbital locations of Starlink.

This also follows from the fact that the ‘usefulness’ of each orbit or orbital shell is further constrained by the service that the satellites provide. For example, while broadband satellites are located in both LEO and GEO, allowing for some orbital substitutability, GPS satellites are located in MEO, and satellite television requires the dish to be pointed at a specific, stationary GEO satellite. With the rapid growth of LEO satellites and their capabilities, it may only be a matter of time before one (or a few) undertakings achieve an absolute first-mover advantage for certain orbits, services, and frequencies.

Thus, the EC’s Inmarsat/Viasat claim that satellite markets offer ‘significant opportunities for both current competitors and potential new entrants’ may be outdated due to SpaceX’s efforts.

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3. Martian efforts and a planetary champion?

The above assessment - which is far from straightforward and only scratches the surface - is arguably further complicated by the fact that SpaceX’s Starlink was arguably born as a by-product of Elon Musk’s Mars ambitions. For example, SpaceX’s investment in launch and transportation capabilities, particularly the reusability of its rockets, has reduced the cost of a pound of payload to a market-leading $1,200, compared to up to $30,000 for a pound on NASA’s Space Shuttle. This is, of course, because government space exploration has declined significantly since the days of Apollo 11, and this is unlikely to change with the emergence of the civilian players discussed. Thus, SpaceX has largely filled a void left by the government’s retreat and/or inefficiencies.

While it is irrelevant to a competition law assessment that Starlink’s dominant satellite efforts and SpaceX’s dominant launch efforts may be a mere by-product of Elon Musk’s Mars ambitions, competition law does recognise the concept of national champions. National champions are benefactors of financial aid, are backed by extensive lobbying and/ or diplomatic efforts, and are subject to a more lenient application of competition law. In other words, against the backdrop of the massive financial investments required to: 1) reach Mars; and 2) colonise it, it might be an acceptable consequence, in this particular instance, to support SpaceX’s tendency to monopolise (or at least dominate) the satellite and launch markets, thereby designating it as the first planetary champion. This is because once these colonisation efforts are sufficiently advanced, new markets or even entire economies may open up, such as asteroid mining, markets, or economies on or for Mars, to name but a few of the otherwise potentially unattainable economic benefits.

Space X’s designation as a planetary champion, rather than a national or international champion, may be justified on the one hand by its competitive edge in reusable rocket technology, such as the Falcon 9/Falcon Heavy, of which it plans 148 launches in 2024. In contrast, Blue Origin’s New Glenn reusable rocket was debuted on the launch pad in late February 2024, while Space X launched its first Falcon 9 in June 2010. In other words, in the private sector, Space X could be more than a decade ahead of its competitors, while already developing the next generation of space exploration: Starship. Moreover, in terms of (inter)national space efforts, government spending also speaks to the leadership of the US efforts, with the US spending more than the next ten countries and the European Union combined. With ULA, Virgin Galactic, Blue Origin and Space X all operating from the US, the US national champion may very well be the planetary champion.

The question of how to regulate these efforts is as much a question of competition law as it is of competition policy. On the one hand, in terms of competition law, Space X may certainly tip the space race in its favour (if it has not already done so), thereby closing off particularly lucrative markets and enabling it to reap monopoly profits (in the short run). On the other hand, what we are witnessing with the US (private) space efforts is mirrored by China’s land and deep sea mining efforts, where it is trying to extend its land monopoly for critical minerals to the deep sea. Thus, regulatory efforts may ultimately be overridden by policy considerations to obtain minerals, whether on or around Earth, and said policy considerations may well be the designation of champions.

However, this approach would not render competition law inapplicable, but merely postpone its application, and could be followed by a later ‘liberalisation’ of the market(s) should SpaceX come to control entire sectors of the economy. The tools required for this process of liberalisation are not alien to competition law, but can be found in constructs similar to the European Digital Markets Act, only for different industries, in the sense that markets or their complements, once developed, are made contestable, through the application of competition law disguised as regulation. In the short term, however, a combined effort is certainly more useful than a myriad of fragmented efforts, since space markets and industries need to be developed first, and given the scale of space exploration, pre-market development competition may hinder progress. In other words, a temporary Continuum dystopia might not be the worst idea.

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Fabian Ziermann is Doctoral Researcher at the WU Vienna and Recipient of a DOC Fellowship of the Austrian Academy of Science.

SUGGESTED CITATION: Ziermann, F.; “Competition law and space regulation: Orbital markets, Martian efforts, and a planetary champion?”, EU Law Live, 07/05/2024, https://eulawlive.com/competition-corner/competition-law-and-space-regulation-orbital-markets-martian-efforts-and-a-planetary-champion-by-fabian-ziermann/

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