Luxembourg: Competition Council

Presentation of the Council

The national law of 23 October 2011 on competition organises the structure and the functioning of the Competition Council.

The Council seeks to protect the interests of consumers and undertakings alike against the anticompetitive conduct of competitors, which may have the effect of restricting competition.

The Council consists of four permanent members (one of which is the president) and five substitute members. The president and the members of the Council are appointed by the Grand Duke for a renewable term of seven years. They are assisted in their work by a team of four case handlers with legal and economic background, as well as by a registrar.

The institutional format chosen by the legislator for the Competition Council is a dual structure, where the investigation and the adjudicatory functions are separated from each other and exercised by different bodies within the Council. This dual structure distinguishes the Council from most of the other competition authorities in the EU.

In practice the investigation is undertaken by one of the permanent members, assisted by a support team of case handlers, while the adjudicatory function is exercised by the board of members of the Council. The permanent member who undertakes the investigation is not part of the decision board in the same case.

The decisions of the Competition Council are subject to a full judicial review, exercised by the Administrative Tribunal of Luxembourg. This dual structure encourages the impartiality of the decision-making process and prevents the decision-making board from being influenced by the views of the member of the Council who undertakes the investigation.

Although the case law of the ECHR and the ECJ¹ do not impose the separation of the investigation and adjudicatory functions as a necessary step to ensure the impartiality of the decision-making process, the State Council of Luxembourg in its consultative function considered that the small dimensions of the national territory and the small number of employees working in the Competition Council call for the application of stricter standards than those applicable in bigger countries.

However, with the ECJ's case law in mind, it can be argued that the separation between the investigation and the adjudicatory function does not play a decisive role for the impartiality of the decision-making process, provided that the procedural safeguards which constitute the expression of the fundamental principle of the right to a fair hearing are fully respected in all proceedings. It is thus essential to give the parties the opportunity to be heard. In particular, this means following the classic adversarial procedure that implies a statement of objections and the possibility for the concerned undertaking to reply. It is paramount during the administrative procedure to give the opportunity to the undertaking concerned to challenge the facts and to give its interpretation of the file.

The ECJ has had the opportunity to present its views on this issue in relation to the procedure before the Commission. It established that a submission criticising the combination of the functions of prosecutor and judge within the same competition authority must be rejected as a misunderstanding of the nature of the procedure.² It goes without saying that such a statement only applies in the presence of an effective judicial review, specifically one that is in line with article 6 of the ECHR and article 47 of the Charter of Fundamental Rights of the European Union.

The Competition Council's mission is manifold. Firstly, it enforces competition law through the application of articles 3 to 5 of the national law, and articles 101 and 102 TFEU to undertakings. Secondly, it is entrusted with a consultative and advisory mission. The most important achievements in these two main areas of activity will be dealt with in the following section.

Landmark decisions of the Competition Council

This article covers decisions made between 2012 and 2016.

In 2012 the Council, in its current configuration, started its mandate. Since then, our young institution has had the chance to apply all instruments provided by the law in all types of cases, across a wide variety of markets. As of this point the Council has issued opinions; launched ex officio investigations; imposed fines for anticompetitive agreements and abuses of dominant position; imposed penalty payments for non-respect of the Council's decisions and for refusal to provide information; adopted decisions on interim measures requests; dealt with leniency applications; and conducted commitments procedures. The variety of our landmark decisions shows that all economic sectors have the potential to be dealt with in our enforcement activity.

The most frequently used instrument in the Council's toolbox has been the commitments procedure. Our enforcement activity in the past years has shown that this procedure is particularly well suited for the Luxembourgish market, with as many as seven commitments decisions adopted within a four-year period. As regards the fines imposed by the Council so far, three decisions stand out.

In December 2012 the Council decided to impose a fine of €676,800 to nine undertakings active in the market for civil liability insurance, as well as the Insurance Companies Association, for having entered in a cartel that led to price-fixing through the application of a fixed scheme of premiums.

In October 2013 the Council decided to impose a fine of €1.3 million to Voestalpine BWG and Schreck-Mieves GmbH, two undertakings active in the market of railroad switches, for having distorted the competition through bid-rigging from 2005 to 2011. Although the decision was subsequently challenged by one of its addresses, the Administrative Tribunal of Luxembourg upheld the Council's decision.

In November 2014 the Council decided to impose a fine of €2.52 million to EPT, the historic incumbent of mail and tele­communications services based in Luxembourg, for having abused its dominant position according to article 5 of the national law and article 102 of the TFEU. An annulment procedure against the Council's decision is pending, therefore we will not be offering any further discussion of the case.

Advocacy

Besides its enforcement actions the Council makes regular use of its power to issue opinions.

According to article 29 of the law on competition, the Council has the power to issue opinions over any legislative or regulatory proposal or over any other measure touching competition. The Council can exercise this power ex officio or on demand of the minister having economy among its powers.

Moreover, article 76 of the law of 27 February 2011 on networks and electronic communication services requires the Council to issue its opinion on every draft measure of the Luxembourg Regulation Institute (ILR) that could potentially have an effect on the market.

So far the Council has actively pursued its advocacy activities, issuing 19 ILR opinions and 11 article 29 opinions.

Among the article 29 opinions issued by the Council in the recent years, a few stand out:

• Opinion 2014-AV-01 of 14 February 2014 concerning the draft legislation on specific rules applicable to the distribution agreements in the automotive sector.
• Opinion 2014-AV-02 of 28 February 2014 concerning the draft Grand-Ducal Regulation laying down certain detailed rules for the application of the Council regulation (EC) No. 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products.
• Opinion 2014-AV-05 of 12 May 2014 concerning the draft legislation on the taxi services sector and the amendment of the Consumer Code. Given its potential impact on the branding of the country and insofar as it represents a part of the market for services of transport of persons, the taxi-services sector is of high importance. In its opinion 2014-AV-05, the Council expressed its concerns relating to the proposed draft legislation, insofar as it maintained the previous structure of the market, by limiting the number of taxi licences, combined with price liberalisation. It thus places the current market players at an advantage compared to the newer entrants.
• Opinion 2015-AV-02 concerning the draft legislation No. 6795 amending the law of 13 December 1989 organising the architect and consulting engineer profession.
• Opinion 2016-AV-01 on the draft legislation No. 6857 on support for the sustainable development of rural areas.
• Opinion 2016-AV-02 on the draft legislation No. 6867 concerning measures to reduce the cost of deploying high-speed electronic communications networks and amending the amended law of 16 May 1975 on the co-ownership status of buildings.
• Opinion 2016-AV-03 on the draft legislation No. 6864 concerning commercial lease. The acknowledged purpose of the draft legislation was to rectify a deficit in the protection of tenants of commercial premises which left room for potential abuses of the landlord or other traders. The alleged abusive behaviour would have led to the disappearance from the market of numerous retailers, as well as an increase in prices for the financial commitments required to open a business. In its opinion the Council expressed its views that the proposed draft legislation was too restrictive of the parties' freedom, and could therefore be justified only in exceptional circumstances. The effect of the proposed draft legislation was to protect the current tenants of commercial premises, to the detriment of newer players on the market. Therefore, the Council criticised this draft legislation.
• Opinion 2016-AV-05 on the draft legislation concerning certain rules governing actions for damages for infringements of competition law and amending the law on competition of 23 October 2011.
• Opinion 2016-AV-08 on the draft law No. 6831 on the creation of companies with societal impact. Broadly, the proposed draft legislation concerned the actors of social and solidarity economy. In its opinion the Council concluded that the draft legislation distorted competition, favouring social undertakings, to the detriment of regular undertakings. The Council fosters a healthy competition environment, taking into account the various players in the market and their contribution to the diversity of the market. The Council approved the draft legislation on condition that the legislator takes into account its observations.
• Opinion 2016-AV-09 on draft legislation No. 6982 on public procurement, on draft legislation No. 6984 on the award of concession contracts and on the draft Grand-Ducal Regulation implementing the law on public procurement and the law on the award of concession contracts and amending the threshold provided for in article 106 (10) of the amended Municipal Law of 13 December 1988.
• Opinion 2016-AV-11 on the amended law of 21 March 2012 on waste management.

Priorities for the coming year

Ongoing reform of the law

One of the main challenges in the coming year is the reform of the current national legislation. After more than five years of application, the national competition rules, which are largely inspired by Regulation 1/2003, are in need of an overhaul in order to fine tune them to the specificities of a small country like Luxembourg.

Moreover, the absence in the current legislation of certain instruments is deeply felt in an authority of the size of the Competition Council. In this respect, newer instruments - such as the settlement procedure that the European Commission has applied since 2008 - would be a welcome addition to the toolbox that the Council has at its disposal to tackle anticompetitive behaviour on the market.

The success of the settlement procedure is hard to deny. Since its introduction, the European Commission notes, half of the decisions adopted in cartel cases were conducted following the settlement procedure. Moreover, the length of proceedings for undertakings facing competition law charges forces them to carry the burden of legal uncertainty. The simplified and shortened settlement procedure would therefore be beneficial for both the undertakings and the Council, allowing for a better use of the available resources. In turn, this would lead to increased consumer welfare.

Sector inquiries

The Council is currently conducting a sector inquiry in the beer brewing sector. The subjects of this sector inquiry are bars, restaurants and hotels, as well as wholesalers and breweries.

The inquiry is taking place in the context of specific legal provision foreseeing a limited number of licences necessary to pursue such a business. The purpose of the inquiry is to determine how the Luxembourgish beer brewing sector is organised and to shed light on the contractual relationships that exist between the various players.

Moreover, the inquiry will reveal whether the market is sufficiently exposed to competition, or whether the current system might entail market partitioning effects. Finally, the inquiry aims to evaluate whether the system has any negative impacts on the pricing policy and choice of the consumers.

The Council is currently evaluating the observations submitted by the various stakeholders and is assessing whether any further actions are necessary on this market.

Geo-blocking and verticals sector inquiry

Another area of focus for the coming period is geo-blocking, due to its high relevance for the Luxembourgish market. Indeed, in a small market where the consumers are used to being able to cross the border at any time to shop for goods and services, having restrictions imposed on the online purchase of such goods and services is difficult to conceive.

Geolocation clauses prevent the Luxembourgish consumer from having, for example, a complete choice over films or music. On price comparison websites, most of the products are not delivered to Luxembourg, unless the distributor has a brick-and-mortar presence in Luxembourg. The offer of an online books retailer is not always available when the client uses a Luxembourgish credit card to complete the transaction. These examples, to name just a few, show the extent to which Luxembourg, where 68% the residents do their online shopping in other EU countries, is affected by geo-blocking.

Moreover, vertical restrictions are increasingly coming in the focus of competition authorities, and the Competition Council is also focusing on this type of restrictions which are of particular interest to us, given the small size of the Luxembourg market. The Luxembourgish retailers are allegedly facing restrictions when it comes to parallel distribution channels. More generally, the industry has been complaining about the distribution conditions being imposed by suppliers, which would represent discrimination compared to neighbouring countries. Therefore, a sector inquiry concerning distribution agreements is ongoing.

Merger control

In 2015, the Competition Council launched an important brainstorming process on its legal framework and the competition rules that it applies. More specifically, regarding the opportunity to introduce merger control in Luxembourg, the Council established a working group of academics and legal practitioners. The results of the working group were published in a 2016 report on merger control. For the coming period, policymakers are expected to draw on the conclusions of the report and take appropriate action.

Notes

1. See judgment of 7th of June 1983, M.D.F., joint cases 100-103/80, EU:C:1983:158.
2. Idem, paragraph 11.