The ecj’s JR [ jud.review]
the legality of legislative acts, of acts of the Council, of the EC, and of the European Central Bank, other than recommendations and opinions, and of acts of the European Parliament and of the European Council
European Courts carry out a comprehensive control of the legality of
the Commission’ decisions, which extends to the law, the facts and their appraisal. These elements are intertwined, since it is usually hard to distinguish between facts, law and economic appreciations18. Somehow, they both represent two facesof the same coin
ERRORS OF LAW AND MISUSE OF POWERS
The Commission [ enforcer of clp], has to apply the prohibitions as provided for and within the limitslaid down in the Treaty and the legal framework, according to the general
principles of law (Article 263 TFEU). In this sense, the European Courts play a
comprehensive review of issues of law. This comes as a no surprise, since
substitution of judgement on questions of law is the cornerstone of judicial
review
First, Courts must control whether the decision-maker had the power to act. If not,
the ultra vires decision must be voided. It is noteworthy that the power to act,
frequently, is also a duty to act. Then, there is also illegality when the Commission,
having the duty to act, remains inactive (CEAHR).
Second, Courts control errors of law in Competition law enforcement, as decades of
European jurisprudence shows. For instance, Competition law applies where there is an undertaking developing an economic activity. However, it is not easy to
identify when we are in presence of such elements. In this sense, public bodies can
also act as undertakings, since what matters is the entity being engaged in an
economic activity, irrespective of its legal status and the way in which it is
financed. Moreover, a public entity may be regarded as an undertaking in relation
to only part of its activities, those that can be classified as economic activities22. On
the contrary, there is no economic activity where the activity falls within the
exercise of public powers. In this sense, the fact that a service supplied by a
public entity and connected to the exercise by it of public powers is provided in
return for remuneration laid down by law is not alone sufficient for the activity
carried out to be classified as an economic activity.
In other cases, for example,
what is at stake is whether the parent company and its subsidiary form a single
economic unit and therefore the Commission may address a decision imposing
fines on the parent company, without having to establish the personal involvement
of the latter in the infringement. When a legal entity ceases to exist in law,
liability for its unlawful conduct is assumed by the absorbing company, since
otherwise undertakings could escape penalties by simply changing their identity
through restructurings, sales or other legal or organisational changes. Courts also
carry out a comprehensive review of the interpretation of law made by the
Commission in every aspect of mergers, cartel cases or in deciding whether the
undertaking is competing on the merits or abusing of its dominant position. The
same margin of appraisal can be found in the qualification of a measure as a State
aid or in assessing its compatibility with the common market.
Third, Courts control the misuse of powers, which results when a measure was
taken with the exclusive or main purpose of achieving an end other than that
stated. For instance, in Deutsche Telekom, the Court denied that when acting
against the undertaking for anticompetitive behaviour the Commission really
intended to act against the German authorities
Courts cannot substitute their assessment of the Community interest
for that of the Commission, but must focus on whether the contested decision is
based on materially incorrect facts, or incur in an error of law, a manifest error of
assessment or misuse of powers53. In this sense, in CEAHR, the Court annulled the
Commission’s decision declaring the absence of sufficient Community interest in
continuing the investigation, since such a conclusion was vitiated by insufficient
reasoning, the failure to take account of a relevant factor raised in the complaint,
and manifest errors of assessment54. On the one hand, the Commission did not
define the relevant market, but relied on a prima facie market definition to
underpin its conclusion that there was a low probability of there being any
infringements of Articles 101 and 102 TFUE, and on that latter conclusion to base
its finding that there was no evidence of disturbance of the market55. On the other
hand, the Commission rejected carrying out the investigation, while it was evident
that it was in the interest of the whole Community, as well as the fact that it was
the authority best placed for assuming this task56. This practice existed in at least
five Member States, perhaps all, and was attributable to undertakings located
outside the European Union, which suggested that action at European Union level
could be more effective than various actions at national level57.
In Hellenic Republic, the General Court annulled the Commission’s decision, since it
had not proved the abuse of dominant position (Article 102 TFEU). In this regard,
it does not suffice to argue that the State measure distorts competition by creating inequality of opportunities between economic operators (Article 106 (2) TFEU)
complex assessments are subject to an effective judicial review under Article 263 TFEU. According to settled case law, in cases involving complex economic and technical72 assessments, judicial
review is “limited” to verify whether: (i) the relevant procedure rules have been
complied with, (ii) there is a comprehensive statement of reasons, (iii) there was
any error of law, (iv) the facts are accurate, reliable and consistent (v) and the
evidence put forward contains all the relevant data that must be taken into
consideration to assess a complex situation (vi) and there has been any manifest
error of assessment of those facts (vii) or any misuse of powers or, on the contrary,
they are capable of sustaining the conclusions drawn from it
errors affecting the economic analysis that underlies competition
policy decisions may cause the Community to incur non-contractual liability107.
However, the legal requirements are higher in this case, since the Commission’s act
must constitute a sufficiently serious breach of a rule of law intended to confer
rights on individuals
COURTS CANNOT REPLACE THE EC, IN MAKING POLICY CHOICES (DISCRETIONARY
POWERS)
the Commission can decide what is most convenient to achieve the Treaty goals, by choosing among different interests. Thus, discretionary powers are the lawful power to choose110 between
more than one outcome
The first way through which the European Commission exercises discretionary
powers is by acting as regulator. The Commission is entitled to propose
regulations (Article 289 (1) TFEU) and to address directives to ensure fulfilment of
competition rules by undertakings with special or exclusive rights or by
undertakings entrusted with the operation of services of general economic interest
or having the character of a revenue-producing monopoly (Article 106 (3) TFEU).
Second, the European Commission has discretionary powers to launch sector
inquiries, as a way to detect anticompetitive behaviours. For instance, it is for the
Commission to decide whether its staff should focus their attention on monitoring
patent settlements between originator and generic companies in the
pharmaceutical sector or if it is better off targeting the electricity markets.
Third, sometimes advocacy can be the most efficient means to pursue the
competition authority’s goals112. In this case, it is also for the Commission to decide
on the best way to persuade governmental bodies to design competition friendly
policies and to alert consumers to the benefits of a well-functioning market.
Forth, to a limited extent, the regulatory framework allows taking into account
non-competition goals when applying Competition law113. To achieve the Article
107(3) TFEU goals, State aids may be considered to be compatible with the
internal market. According to settled case law, it confers on the Commission a wide
discretion to allow State aids by way of derogation from the general prohibition
laid down in Article 107(1) TFEU114. In this regard, for instance, the Court states
that in the application of the exception to facilitate the development of certain
economic activities or of certain economic areas (Article 107 (3) c) TFEU) the
Commission has a wide discretion, the exercise of which involves complex
economic and social assessments, which must be made in a Community context115.
Fifth, more doubtful is whether discretionary powers are provided for in Article
101(3) TFEU. The prohibition of agreements between undertakings, decisions by
associations of undertakings and concerted practices may be declared inapplicable,
provided that the Treaty conditions are fulfilled. Under a system of individual
exception granted by the Commission, it could be argued that the European
Commission enjoyed discretionary powers. For instance, in Consten/Grundig116, the
Commission’s refusal to grant an exemption plainly involved a degree of political
and policy discretion…
Discretionary decisions must be annulled when they infringe the legal framework
or are deemed not to be reasonable, suitable or proportionate. However,
discretionary powers are subject to a limited judicial review121, since Courts cannot
make administrative policy choices in the place of the public bodies charged by the
Treaty with Competition law enforcement122. As we have seen, discretionary powers
grant the European Commission the ability to decide what is more convenient to
achieve the Competition policy goals, by setting priorities and choosing the means
and criteria by which the decision has to be reached123. Therefore, decisions
implying elements of economic policy would be clearly excluded from a
“comprehensive” review
For instance, focusing investigations on certain sectors or allowing State aids to
protect environment or culture are decisions to be taken by the European
Commission, not by Courts. It is settled case-law that judicial review of the
Commission’s discretion in applying the Article 108 (3) TFEU exception is confined
to establishing that the rules of procedure and the rules relating to the duty to give
reasons have been complied with, and to verifying the accuracy of the facts relied
on and that there has been no error of law, manifest error of assessment of the
facts or misuse of powers125. The Court must also verify whether the Commission
has observed the requirements laid down in the Guidelines126. In fact, in Electrolux,
the General Court annulled the Commission’s decision, because of the manifest
error of assessment in the examination of the distortion of competition127.
However, the Court cannot substitute its own economic assessment for that of the
Commission
VIII. COURTS CANNOT BECOME COMPETITION AUTHORITIES
The principle of separation of powers guarantees the administrative body’s ability
to act within the territory assigned to it by the Treaty129. It explains that control of
legality under Article 263 TFEU enables the Courts to annul the European
Commission’s decisions, but not to substitute them. Competition enforcement is
entrusted to the Commission, which act as investigator, prosecutor and decision-
maker. The role of the Courts is to verify the legality of the contested measure130,
testing whether the information and evidence relied on by the Commission in its
decision is sufficient to establish the existence of the alleged infringement
In Competition law cases, the European Union Courts enjoy of “unlimited
jurisdiction with regard to the penalties” (Article 261 TFEU in relation to Article 31
of Regulation No 1/2003). They are allowed not only to annul the contested
decision, but also to reduce or increase the fine or periodic penalty imposed, by
taking into account all of the factual circumstances (Article 31 of Regulation No
1/2003)… In other words, this is not just a control of the lawfulness of the
penalty, but also a control of the merits,
Ecj JR CONCLUSIONS
(1) The Treaty on the Functioning of the European Union is based on a confusing
distinction between control of legality (Article 263 TFEU) and unlimited
jurisdiction (Article 31 of Regulation No 1/2003 in relationship to Article 261
TFEU). Limits to judicial review should not be deemed linked to the way of
challenging the administrative performance, but to the principle of
separation of powers and to the exercise of discretionary powers. The
European Commission is an administrative body engaged in the day-to-day
management, aimed at achieving of social, economic and political goals, while
Courts are independent and impartial bodies, responsible for declaring the
law and protecting citizens’ rights. In this institutional system, control of
legality cannot be seen as a “limited jurisdiction”, but as a comprehensive way
to review the law, the facts and their appraisal. The reason being that what is
at stake is not just the control of legality of the Commission’s decisions, but
also the protection of citizens’ rights.
(2) Notwithstanding it, according to the jurisprudence of the European Courts,
the Commission enjoys some discretion in the assessment of complex economic
and technical issues. In these cases, judicial review limits to control whether
the Commission committed a manifest error of assessment. As case-law
shows, this is an effective control of legality, which leads Courts to annul the
Commission’s decisions when they are not based on sound economics.
However, if the decision does not appear as manifestly erroneous, it is
necessary to recognize the Commission’s a margin of discretion in the
appraisal of complex issues. The reason lies in the fact that such assessment cannot be controlled by the legal principles, nor by alternative technical
reports, which would not lead to more certainty in the analysis, but merely to
another assessment. In other words, there is a margin of discretion for the
Commission that cannot be controlled by the Courts, since it would not mean
reviewing but enforcing Competition law.
(3) Moreover, the European Commission has discretionary powers, which involve
the ability to make competition policy choices. Discretionary decisions must be
annulled when they infringe the legal framework or are deemed not to be
reasonable, suitable or proportionate. However, within those limits, in
essence, discretionary powers leave the Commission the ability to choose
what is more convenient for the competition policy goals. Thus, under no
circumstances, can the Courts rule on the substance, which would involve
taking policy options in the place of the public body charged by the Treaty
with this task.
(4) According to the European legal framework, the role of the Courts is
controlling not defining competition policy, nor enforcing Competition law.
Therefore, Courts have to limit themselves to quash the decision, but cannot
substitute their point of view for that of the Commission. It would involve
developing administrative tasks, such as carrying out investigations,
collecting evidences or making economic and technical assessments on their
own. In other words, it would mean the Courts becoming competition
authorities, which would be inconsistent with the European institutional
system.
(5) In Competition law, the European Union Courts enjoy “unlimited jurisdiction
with regard to the penalties”, so that they are not only allowed to annul the
contested decision, but also to reduce or increase the fine or periodic penalty
imposed. In fact, Courts amend the Commission’s decisions when they do not
respect citizen’s rights or do not comply with the legal requirements,
including the general principles of law. However, in practice, control of the
merits has a limited scope. There are two reasons for this. On the one hand,
the exercise of unlimited jurisdiction does not amount to a review of the
Court’s own motion, since proceedings before the Courts of the European
Union are inter partes. It is for the applicant to raise pleas in law against that
decision and to adduce evidence in support of them. Thus, it is doubtful that
increasing the fine conforms with this understanding of the proceeding, along
with its aim to protect citizens’ rights, due to the dissuasive effect linked to
the reformatio in peius. On the other hand, “unlimited jurisdiction” does not
alter the role of the Courts, which is to control and not to enforce
Competition law. The Commission’s power to impose fines is a mean to carry
out a general competition policy in the light of the principles laid down in the
Treaty