Neelie Kroes
Member of the European Commission in charge of Competition Policy

The First Hundred Days

40th Anniversary of the Studienvereinigung Kartellrecht 1965-2005, International Forum on European Competition Law
Brussels, 7 ^th April 2005

Dr Canenbley, ladies and gentlemen,

It is with great pleasure that I join you today to celebrate forty years of the Studienvereinigung Kartellrecht.

Some of us are sufficiently mature to remember the mid-1960s, when your Association was founded. The world has changed a lot since then, and I am not just talking about the Beatles, mini-skirts and long haircuts!

Over forty years you have earned a reputation as a respected forum for discussion on anti-trust and wider competition issues.

You have succeeded in getting all stakeholders - judges, practising lawyers, governments, administrators and enforcers, business and, last but not least, academics - together in one room to exchange ideas and experience.

Not only were you quick to spot the importance of European competition law, but you also saw that in a globalised world we have to put European rules into a wider, international, perspective. The quality of the series of International Forum meetings you have organised over the years is rightly recognised.

I am flattered that, on the occasion that you celebrate more than fourteen thousand days, you have invited me to reflect on my first hundred days as Competition Commissioner.

Competition policy for jobs and growth

One fundamental issue has profoundly marked the direction I have elected for my work over the coming four and a half years. Indeed, it was one of the factors which motivated me to accept the position of Competition Commissioner in the first place. Europe and Europeans need jobs and growth, and competition policy can make a real difference in delivering them.

Sadly, this is nothing new. I would like to read you a quote:

"The new Commission has to take up a formidable array of challenges [...]. Structural unemployment has to be overcome and the competitiveness of European business strengthened [...]. The decisive point is that an active competition policy is needed if the growth potential of European industry is to be exploited to the full."

Sounds familiar? These are the very words with which Karel Van Miert addressed this very Forum on its 30 ^th anniversary in 1995.

No-one can deny that the pertinence of his message resounds perhaps even more loudly in 2005.

The Barroso Commission is determined to put jobs and growth at the heart of everything it does. And I will ensure that competition policy plays a full and proactive part. I committed myself to this on day one in the job. My experience over the past four months has only reinforced my determination.

I have already set out in general terms how I plan to implement this by prioritising state aid reform; effective anti-trust enforcement; and a more proactive approach to mainstreaming competition concerns into all relevant policy areas.

Today I would like to develop the second aspect - effective anti-trust enforcement - in a little more detail. You know that we are working hard on a review of our action under Article 82 in tackling abuses of market power. We will be consulting widely on a series of working papers in this field with a view to providing better guidance to business. By the beginning of next year, I hope to be able to report real progress in this area. Today though, I want to focus in particular on the fight against cartels.

Effective anti-cartel enforcement poses an ongoing challenge to all competition authorities. For the perpetrators of cartels globalisation is really working - to the detriment of the consumers who suffer at the hands of international cartels. How Europe tackles such cases has a direct impact on the actions and effectiveness of our fellow competition authorities around the world. And - in a global market - Europe cannot expect to deliver an effective anti-cartel policy alone. We rely on cooperation and coordination with our fellow competition authorities world-wide.

Cartels - from crack-down...

Over the past months I have had the opportunity to look closely at how the European Commission fights cartels. The means are well-known. A leniency programme, first introduced in 1996 and reinvigorated in 2002. A set of guidelines on fines, introduced in 1998 and since enforced with vigour, raising the level of effective deterrence. All of which allowed the Commission to deliver an unprecedented crack-down on cartels in the first half of this decade, with striking results.

And we now have a new regulatory framework which allows deeper cooperation and thereby more vigorous cartel enforcement between the Commission and the national competition authorities. The Regulation opens the way for focusing resources on fighting practices that are most harmful to competition and consumers. It also provides the Commission with new investigative tools to fight cartels and maximise detection.

In just four years since mid-2001, the European Commission has adopted 31 new decisions against hard-core cartels and imposed nearly €4 billion in fines. That amounts to some 35% of all anti-cartel decisions taken since the first one back in 1969.

The crack-down has undeniably delivered results. But we should be under no illusions. The flow of immunity applications is increasing quickly - 29 requests in 2004, compared to 16 in 2003. Ladies and gentlemen, this shows very clearly that the overall extent of this most intolerable form of abusive practice is far from declining. Whilst we can be satisfied with the results of the short sharp shock treatment, the Commission cannot rest on its laurels.

..to constant battle...

I am an economist by training. My analytical experience tells me that it is rare in life that issues are either entirely one thing or another - or, if you like, purely black or white. But with cartels my judgement is clear-cut. Cartel behaviour is illegal, unjustified and unjustifiable - whatever the size, nature or scope of the business affected.

Cartels attack free markets at their very hearts. They don't just mess up the grass on a level playing field - they blow great holes out of the surface. And it is consumers who are asked over and over again to pay the price of replacing the turf.

The long-term eradication of cartels is therefore essential if we are to deliver the fair competitive environment needed to allow growth and job-creation to flourish in Europe.

The crackdown has worked.

We need to build on the results of the recent offensive and consolidate our position.

That means putting in place a constant campaign strategy. A strategy which will result in lasting change in the way market players behave.

...which means managing the risk of overload...

This strategy needs to take account of the fact that the post crack down world brings its own new challenges. Immunity applications and court challenges are booming.

First, a high number of enforcement decisions inevitably brings a corresponding increase in the number of legal challenges. One cartel decision triggers an average of 3 to 4 court cases. Defending our decisions is an ongoing and implicit part of the process and needs to be planned for in terms of resources.

Secondly, the flow of immunity applications triggers a direct impact in terms of the number of inspections the Commission undertakes each year.

Thirdly, the current European leniency programme implies that, in an ideal world, the Commission would deal with every application addressed to us. Otherwise we might leave applicants in a situation of uncertainty, trying to second guess whether, and when, to rush to file separate applications with those national competition authorities which offer national immunity programmes.

My growing conviction is that the Commission therefore risks becoming the victim of its own cartel-busting success. This could undermine the effectiveness of our long-term, durable zero-tolerance strategy.

Regaining control of priorities means reorganising internally...

These risks were the subject of one of my first discussions with Philip Lowe. After a detailed review, we reached the conclusion that structural change within the Directorate General had to be part of the solution. A dedicated cartel directorate, with three units and an experienced management team, will bring economies of scale and pool the Commission's best anti-cartel knowledge. And I expect to see further cuts in lead times for cartel procedures.

This step is necessary. We are putting our house in order to implement and manage a lasting deterrence strategy. But alone it is probably not enough to guarantee that the Commission remains in the driving seat for cracking down on cartels.

...and changing the way the game is played

We need to look at wider systemic changes in the cartel area if we are to tip the balance back in favour of pro-, rather than re-, activity by the European enforcer.

I would like to share initial thoughts on five aspects of cartel enforcement with you today. I would emphasise that they are just that - ideas and preliminary reflections. Probably all raise more questions than they answer. But I think that they deserve a closer look.

1. One stop shop for leniency

First, the weaknesses identified in the present leniency application regime need to be addressed. I have already floated the idea of a one stop shop for leniency applications in the EU. Initial reactions have been mostly favourable, from practitioners and businesses alike. Detailed work is underway with the cooperation and input of our colleagues in the European Competition Network. The design of any future system has to take full account of the specific needs of those who will eventually have to operate it. This means that rather than limiting ourselves to centralising solutions, we have to look at the options for one-stop leniency which fully exploit the dimension of the network.

2. Direct settlements?

Ladies and gentlemen, alongside the many challenges of globalisation is a plethora of opportunities. Events such as today's International Forum and the OECD Global Forum meeting in February expose participants - wherever they call `home' - to alternative approaches to stamping out what are essentially the same anti-competitive practices all over the world. My second observation is prompted by a comparative glance across the Atlantic.

We have seen that the burden of immunity applications falls heavily on the European competition authority. Partly this is because in each and every case brought before us, we are obliged to investigate every last substantive detail. Our final decisions have to be fully reasoned on the basis of our own analysis of the facts.

Unlike some other systems - that of our American colleagues, for example - there is no arrangement for simplified handling of cases in which the parties to the cartel and enforcer concur as to the nature and scope of the illegal activity undertaken and the appropriate penalty to be imposed.

For the time being, I make this comment as a simple comparative observation. The measures we are already committed to taking to improve anti-cartel enforcement need to bed down and have a chance to demonstrate their effectiveness. But if, despite these efforts, the Commission is not able to deliver swift enforcement with timely punishment, we may need to look at how some form of plea bargaining procedure could bring advantages in the context of European competition law.

3. The interface between EU immunity and procedures in non-EU jurisdictions

Thirdly, we need to address the challenges arising from the interaction of European administrative immunity and civil procedures beyond the borders of the Union. In some other jurisdictions undertakings found guilty of anticompetitive behaviour can be obliged to pay civil damages to the consumers affected. Discovery of evidence rules sometimes oblige undertakings to reproduce before the national court the information already provided to the Commission as part of an immunity application. This threatens the credibility of the European programme and limits the willingness of undertakings to come forward to expose illegal activities to the Commission. We are working on practical solutions to this question of compatibility, and I intend to incorporate these in a revised version of the 2002 Leniency notice.

4. Rights of the defence

As European Commissioner I am committed to the highest quality of procedural practice. My fundamental principles of course make me adamant that defence rights be upheld in full. And while I know that lawyers love easy wins on points of procedure, I find it difficult to accept that companies clearly responsible for illegal behaviour escape punishment on the basis of purely procedural grounds.

Supporting me in this work are the two Hearing Officers who report directly to me and do an excellent job. Together with Philip Lowe and the whole DG Competition team, we are working to provide more clarity on defence issues. The notice on access to file is being reviewed to that end. I intend to look carefully at the comments we are receiving and to issue the final notice later this year.

5. Reviewing the fines system

Fifthly, a word on the 1998 guidelines on fines. In my view the guidelines are well done and have been endorsed by the Court of First Instance. I know they are criticised in some other quarters for lacking sufficient transparency. I take this allegation seriously; however, I have to say that I do not agree. I cannot see how allowing potential infringers to calculate the likely cost/benefit ratio of a cartel in advance will somehow contribute to a sustained policy of deterrence and zero tolerance.

But what does puzzle me is the rigidity of the present guidelines. The current system of fixed minima according to the gravity of the infringement appears to hit small and medium sized enterprises harder than larger businesses. If an ongoing analysis of the evidence proves this perception, I will not hesitate to look at ways to improve the current guidelines in this respect.

Ladies and gentlemen, the first hundred days in any job are always a time for both assimilation and reflection. Time for a fresh look at what is already in place, and time to consider whether and how it can be improved. And even if that results in dismissing certain ideas for the medium term, I think you will agree that the stock-taking process in itself is a healthy one.

International cooperation

I should like to conclude by returning to the reason we are gathered in this International Forum today. We are here because European competition law does not operate in a black hole but in a world packed full of interacting elements.

Globalisation is very much a reality of business life. Open and competitive markets abroad offer enormous opportunities for all players.

Europe has every reason to support market-oriented reforms elsewhere, and the introduction of competition regimes which flank these reforms. But the proliferation of competition regimes has led to sometimes divergent standards. Compliance with these can raise transaction costs, generate red tape, and create legal insecurity for firms active in many parts of the world. At the same time, it is clear that some kind of global competition authority is neither realistic nor desirable.

That is why international cooperation - both bilateral and multilateral - is vitally important for modern competition authorities. The more specific approaches converge, the easier it is for globally-active companies to comply. The OECD and the International Competition Network have made substantial progress in developing common standards to help address some of the specific issues I have mentioned. The results are convincing because they represent a broad consensus nurtured during multilateral discussion. We need a globally shared commitment to ban hard core cartels. We are nearly there.

As regards bilateral relationships, our cooperation with the United States has developed in a very satisfactory way during the last five years. I have asked my services to explore with their American counterparts the scope for a second generation agreement allowing for a deeper degree of cooperation in the field of cartels.

The European Commission is committed to playing its role in the forefront of international efforts. Through our daily contacts with our counterparts throughout the world we will continue to contribute to a global competition culture based on a shared vision for the direction of competition policy.

I believe that this is also the guiding philosophy of events such as today's International Forum.