TIMELINESS OF PRESENT EXERCISE

57. This is an opportune moment to consider reforming the position of the Hearing Officer. First, the Community's competition procedures (the enforcement of the Competition Rules) are about to undergo their most radical amendment since 1962. Scarce Commission resources would be redirected towards the uncovering and prosecution of large-scale, hard core cartels and Member States' competition authorities would shoulder some of the burden of enforcing the Competition Rules. The Commission would have increased powers of investigation. National competition authorities would operate under domestic (but likely similar) procedural rules, though the general principles of Community law, including the rights of defence, would apply. Standards set for or by the Commission will have an impact on the behaviour of national competition authorities. Second, the Commission is beginning a substantial review of the operation of the Merger Control Regulation. Commissioner Monti has indicated that the review should be far broader than just the thresholds at which the merger falls to be dealt with by the European Commission and should consider all possible ways of improving the overall accountability of the process and respect for the rights of the parties.[32] The question of strengthening the role of the Hearing Officer has special significance in the context of EC merger control, as we shall explain.

STRENGTHENING THE HEARING OFFICER'S ROLE

58. The Commission's competition enforcement procedure is an administrative one, in which it exercises both investigative and decision-making powers. The role of the Hearing Officer plays an important part in that procedure, by safeguarding the rights of defence (through his responsibilities concerning the oral hearing and the reports he writes afterwards) and mediating in interlocutory matters. It is unlikely, however, that all parties will always be satisfied with the end result of those proceedings; for example, a formal decision finding infringement of the Competition Rules and imposing fines. But those concerned should have confidence that in exercising their rights of defence they have had access to all relevant documents, that there has been "equality of arms"[33], and that their evidence and arguments, both as to procedure and substance, have received the Commission's proper attention. The aim of the present exercise should be to promote changes in the Commission's procedural rules and practices that would reinforce the independence and authority of the Hearing Officer and also enhance the objectivity and quality of the Commission's proceedings and its ultimate decision. That is what we understand by "strengthening" the role of the Hearing Officer. Before looking at ways in which that objective might be achieved, two preliminary observations should be made. First, the Hearing Officer is not meant to be a judicial officer in the process any more than DG Competition/the Commission is meant to be a court. That does not, however, preclude building greater safeguards into the Commission's procedures. Second, enlarging the role of the Hearing Officer, by adding to his functions and giving him more work to do, would not necessarily strengthen his position.

DISCLOSURE OF THE REPORT

59. One possible way to strengthen the role of the Hearing Officer would be to disclose his report to all interested parties. We made a recommendation to similar effect in our 1993 Report and the Commission's failure to adopt that recommendation was the starting point of the current inquiry. What we have heard and learnt confirms our view that disclosure of Hearing Officers' reports would be a most significant improvement. It is clear that the Commission (DG Competition) pays close regard to what the Hearing Officer says in his reports. They may point out any weakness, whether in procedure or substance, in the Commission's case that needs to be remedied. The Commission takes them seriously. There is no doubt that the reports are potentially very influential documents. Yet despite the fact that the Hearing Officer's role is to safeguard the rights of the parties, his reports are not made available to the undertakings concerned or published. The reports are treated as internal documents and are used by the Commission to improve their decision-making.

60. The Hearing Officer plays an important part in ensuring that proceedings are conducted fairly and that due process rules are properly respected by officials in DG Competition. But at present, however critical the Hearing Officer may be of the procedure or the strength of the Commission's case, his reports are "denied the oxygen of publicity" [34] and may be perceived as providing little protection to the parties. Under the present regime only the Commission, who see the reports and can react, are direct beneficiaries. If DG Competition officials knew that the Hearing Officers' reports would be given to the parties in all cases, they could be expected to be particularly careful to ensure that reports did not contain any criticism of their procedure, evidence or argument. This would substantially increase the Hearing Officer's influence over the entire conduct of the case, thus helping to safeguard the legitimate interest of the parties in the fair conduct of the proceedings as well as greatly enhancing the transparency of the Commission's procedure.

61. It is, we understand, common ground that a fair balance needs to be struck between effective application of the competition rules and ensuring that the rights of defence are respected, and that both interests benefit the citizens of Europe. Disclosure of Hearing Officers' reports would not upset the balance. There is, in our view, no conflict between a fair hearing of the parties and reaching a decision which promotes an effective competition policy. Disclosure would, we believe, lead to an improvement in the decision-making process and the decision itself. It might also serve, in merger cases, to reassure critics that the Commission's decision (at least before considered by the college of Commissioners) was not influenced by policies other than competition or other not strictly legal considerations.

THE TIME FACTOR

62. Even if it is accepted that Hearing Officers' reports should be disclosed, there is an issue of timing. If the report were to be disclosed during the proceedings (ie before the Commission had reached its decision in the case) then there is a risk that the proceedings would become protracted, possibly disadvantaging the companies concerned, third parties and even consumers generally. On the other hand, if those advising the parties can see the report and are satisfied that it shows a fair procedure and that regard has been had to all relevant factors, it might actually discourage appeals or at least serve to limit the grounds of appeal. In our view, reports should be available to the parties in order to inform any possible appeal to the Court, but disclosure should not in our view create an opportunity for any party to delay the Commission's decision-taking in a case. Promptness is especially important in merger cases. But the time factor may also have relevance in the detection and prohibition of cartels, particularly where injured parties may be pursuing damages claims in national courts. We believe that it would serve to bolster the independence of the Hearing Officer and to increase the objectivity of the Commission's decision-making if the Hearing Officer's final report (ie that referred to in Article 10 of the 1994 Decision) were made available to all the parties and the Member States at the same time as the Commission's decision disposing of the case was communicated to them. This would require a final report to be produced in every case. As we indicate below, this would involve a change in practice but should not be burdensome.

63. We also recommend that the position of the Hearing Officer might be strengthened at the critical time when the draft decision is before the college of Commissioners. Article 9 of the 1994 Decision entitles the Hearing Officer to refer his observations direct to the Competition Commissioner. He can thus bypass the hierarchy in DG Competition if necessary. But Article 9 does not give him the right to have his report circulated to all Commissioners. It would strengthen his position if he had access to the whole college. In our view, the Hearing Officer should have the right to make observations and to have his final report circulated to all Commissioners along with the Commission's draft decision. The effect of these recommendations would involve reconsideration of the style and content of the final report. In some cases we would expect them to be fuller than we understand them to be at present. The report should identify and address all points made in the earlier (Article 8) report (that report also could be annexed for convenience) and comment on any matter remaining of concern to the Hearing Officer.

MERGERS - A SPECIAL CASE

64. The disclosure of the Hearing Officer's final report, in the form we envisage it, would go a long way in improving the position not just in Articles 81 and 82 cases but also in merger cases. That said, it is, we believe, necessary to consider other ways in which the procedure in merger cases could be improved. It is often said that the parties have little choice, especially in Phase II proceedings, but to do what the officials in the Commission's Merger Task Force tell them, because if the merger is prohibited, an appeal to the Court of First Instance will take too long for it to be possible to carry out the merger even if the appeal is successful. The dice are loaded in the Commission's favour.

65. The problem is most manifest in the negotiation of concessions/remedies in order to secure clearance of a merger proposal. Typically one party will have to give a commitment to divest itself of a part of its existing business. Such negotiations occur in the closing stages (the last month) of Phase II proceedings and also towards the end of Phase I. An increasing number of mergers are now being cleared at the end of Phase I on the basis of commitments given by the parties, where the time pressure may be as great, if not greater than, Phase II. Disclosure of the final report of the Hearing Officer, as described above, might go some way in ensuring that the Commission officials' requests were reasonable, but such reports would only be prepared in Phase II, which provides for an oral hearing. Something more may, therefore, be needed, particularly in relation to Phase I proceedings. It has been suggested that the Hearing Officer should be formally consulted and asked to assess whether commitments requested from undertakings seem well-founded and appropriate in view of the competition issues raised during the investigation. Another, possibly more practical, idea is that the Hearing Officer could chair meetings between the parties and the Merger Task Force and generally act as mediator. Giving the Hearing Officer some such oversight/superintendence of the procedure would, we believe, be helpful, though there are obvious resource implications given the number of merger notifications being processed at any one time.

66. In the institutional balance which underpins competition policy and other Community policies much weight is placed on the fact that the Community Courts exercise an extensive supervisory jurisdiction over the Commission. But the criticism is made that effective judicial oversight is absent in merger cases. Complex and protracted litigation is often not a viable option for interested parties, in particular in the context of the Merger Control Regulation. We do not believe that this amounts to the Commission having unchecked discretion in merger cases. The Commission is a responsible body and its Legal Service, which has to defend the Commission before the Community Courts, will seek to ensure that the Commission acts within the powers conferred by the Treaties. But it is, nonetheless, uncertain to what extent the ability of the parties to have recourse to the Court of First Instance acts as a real constraint on the Merger Task Force, whether on issues affecting the merits of a particular decision or on procedure.

67. It has been suggested, however, that there should be a "fast track" procedure for merger cases. Changes have been, and are continuing to be, made to the procedures of the Community Courts with the aim of making them more efficient. Arrangements are in hand for the introduction of an expedited procedure in the Court of First Instance that might be suitable for merger cases.[35] It seems to us that in a case concerning the lawfulness of a Commission decision approving or prohibiting a merger where the consequences for the future, as opposed to conduct in the past, is at issue, a speedy decision that gives certainty for all parties is important. We expect the Court to be sympathetic to an application for expedition in such cases (the Court's own proposal expressly identified the problem of merger cases) and that the necessary redeployment of resources and adjustment of priorities could be made. We return to the issue of length of time taken in proceedings before the Court at paragraph 78.

GREATER INDEPENDENCE

68. It will be recalled that the post of Hearing Officer emerged as a response by the Commission to the call from industry and legal practitioners for an "independent person" to be appointed to participate in and superintend the Commission's procedures. It was accepted that anyone appointed could not, without an alteration of the Treaty, be truly independent. The person appointed would therefore have to be an officer or, perhaps, a consultant of the Commission.[36] But there remains a concern that disclosure of the Hearing Officer's report would not greatly improve the situation for the parties so long as he remained in DG Competition and an employee of the Commission. He should, it is argued, be more independent. Critically, it is suggested that he should no longer be part of the Directorate to whom he currently owes his appointment and allegiance.

69. Various, some quite radical, ideas have been floated, including the Hearing Officer taking on a role such as the administrative law judge in the procedures before the US Federal Trade Commission. Another suggestion is that he should be like the Advocate General in proceedings before the Court of Justice. Such ideas call into question the whole scheme of the enforcement of the Competition Rules and the exercise of EC merger control. One might criticise a system under which one body, the Commission, acts as investigator, prosecutor and judge. But such systems are not unknown elsewhere, in enforcement of national competition laws and other regulatory regimes. It is, we accept, difficult to see the Hearing Officer being truly independent as he is presently constituted and appointed and so long as he remains a paid official of the Commission. But we are not persuaded that the Hearing Officer should be made a judicial officer or a court. Nor does one want unnecessarily to convert the oral hearing into a trial or make it any more adversarial, lest that diminishes effective regulation. The parties' access to justice should remain directly before the Community Courts. It is sufficient that there is an independent court that is able to provide full safeguards against abuse by scrutinising the legality, rationality and fairness of the Commission's decisions. The question of whether the Commission has acted lawfully and reached the right decision on a case is reserved to the Court of First Instance.

70. Indeed even if we thought radical change desirable, it seems clear that such a change is not in the Commission's field of vision at present. It is more profitable to concentrate on looking for ways of increasing the fairness and transparency of the Commission's procedures and for ways in which, given the absence of any interim appeal mechanism, the Hearing Officer might resolve disputes relating to the rights of defence during the course of an investigation. In addition to the disclosure of the Hearing Officer's report (described above) there are a number of other practical ways, some not requiring legislation, that would serve to enhance the Hearing Officer's independence. We accept, however, that there is a limit to which it is reasonable to expect to be able to interject an independent person, in the true sense, at this stage of the procedure.

APPOINTMENT AND TENURE

71. To date Hearing Officers have been appointed from senior, both in rank and age, members of DG Competition. We see no reason why the Hearing Officer should have to be appointed from within DG Competition or why the post should necessarily be regarded as a pre-retirement job. The Commission should show a greater preparedness to appoint Hearing Officers from outside DG Competition. Indeed we would go further and recommend that the Commission should advertise the appointment widely, inviting any suitably qualified person from within the Community institutions or from outside to apply. Some knowledge and experience of competition law and procedure would be needed, but apprenticeship within DG Competition should not be a prerequisite for appointment.

72. The Hearing Officer should have a guaranteed minimum term of appointment. He should not be able to be retired "in the interests of the service".[37] He should only be removed from office if he no longer fulfils the conditions required for the performance of his duties or if he is guilty of serious misconduct. The main rules concerning the appointment and removal of the Hearing Officer should be clearly set out and included in a regulation. More generally, there is a need for far more openness regarding the appointment of Hearing Officers and greater visibility concerning the terms of their employment.

TRANSPARENCY

73. There would be considerable benefit in replacing the 1994 Decision and setting out the Hearing Officer's role and functions more fully and formally in a new instrument. The current Modernisation exercise provides an opportunity for describing the Hearing Officer's position and responsibilities in the replacement for Regulation 17/62. The regulation might also set out the Hearing Officer's powers over issues relating to time limits, disclosure of documents and access to the file. It should make clear those matters where his determination, made on behalf of the Commission, constitutes an appealable decision. This would facilitate the development of a better interlocutory control by the Court of First Instance. It is desirable that such matters as access to the file should be dealt with expeditiously as they arise during the Commission's procedure, thus avoiding unnecessary delay, legal uncertainty and cost.

OTHER PROPOSALS FOR REFORM

74. Commissioner Monti's announcement that he was exploring possibilities of strengthening the Hearing Officer's role has stimulated a number of practical proposals. Some of these would give the Hearing Officer a greater oversight of the Commission procedure and involve him in resolving disputes at an earlier stage. They include the possibility of his intervention where there is disagreement as to whether the Commission, in exercise of its powers of investigation, has allowed sufficient time for the parties to respond to requests for information. Another suggestion is that the Hearing Officer should be able to mediate where the Merger Task Force proposes to declare a merger notification incomplete. We draw these to the attention of the Commission and would strongly encourage them to explore these and other ways in which the Hearing Officer might assist in the resolution of disputes relating to the rights of defence during the course of the Commission's proceedings. The debate should be a public one in which all interested parties can have the opportunity to put their views.

ARTICLE 6 ECHR

75. Article 6 of the European Convention on Human Rights (ECHR) guarantees the right to a fair and public hearing in the determination of an individual's civil rights and obligations or of any criminal charge against him. Any procedure where a competition (or other) authority acts as both prosecutor and judge in a case has the potential to fall foul of the Convention. The Strasbourg Court concerns itself only with the overall protection of Article 6 rights, not with the individual's dissatisfaction with a particular administrative decision. The Commission is not meant to be a court and its procedure is, as already mentioned, an administrative, not judicial, one. However, it would seem that the possibility of a full and independent review of the Commission's decision by the Court of First Instance would satisfy Article 6.

76. The key question is therefore whether the Court of First Instance has full jurisdiction over the law and the facts and the procedure to ensure that the law is observed. There seems little doubt that this is so where the Court is exercising "unlimited" jurisdiction under Article 229 EC, when the appeal concerns a fining decision. But where the Commission's decision does not involve a fine but, for example only finds certain anti-competitive behaviour to be unlawful or prohibits a merger, any appeal is limited to the four grounds set out in Article 230 EC. Whether this allows for a full retrial of the issues is yet to be finally determined. Further the Community Courts have often said that they will not review Commission assessments of economic issues unless there has been a manifest error.[38] The Court of First Instance has in practice exercised a close supervision over the Commission in competition cases and has not been reluctant to undertake detailed factual examination of the facts.

77. It is not for us to determine the adequacy of the Community Courts' jurisdiction and procedures when measured against the ECHR. But it does seem clear to us that, given the scheme adopted in the Treaty for the enforcement of the Competition Rules, any Article 6 ECHR problem is at the Court, not Commission, level. Changes to the Hearing Officer's position would not solve any problem that may exist. Trying to make the Hearing Officer more like a judge or making his functions or the Commission's procedure more legalistic would only blur the picture, possibly to the detriment of the effective application of the Community's competition policy.

78. A further consideration, whether or not the Court exercises full jurisdiction, is that the time pressures involved in competition (particularly merger) cases and the delay involved in taking a case to the Court, mean that Commission proceedings are rarely challenged. The competition procedures standing alone, without a real and effective means of judicial review, raise some doubt as to their fairness and compatibility with Article 6. The Court's proposed amendments to its Rules of Procedure would introduce an expedited procedure for cases requiring a speedy resolution, notably mergers. We welcome the Court's proposal aimed at overcoming the present obstacles to timely judicial review.

CONCLUSION

79. We welcome Commissioner Monti's decision to examine ways in which the role of the Hearing Officer might be strengthened. The aim should be to promote changes in the Commission's procedural rules and practices that would reinforce the independence and authority of the Hearing Officer and also enhance the objectivity and quality of the Commission's proceedings and its ultimate decision in the case. A key way in which the Hearing Officer's role could be strengthened would be by his final report being disclosed to the parties and the Member States at the same time as they receive the Commission's decision. The Hearing Officer should also have the right to have his report attached to the draft decision and thus made available for consideration by all the Commissioners when they adopt their decision. Merger cases deserve special attention. The time factor is frequently critical, adding to the pressures and risks. The Hearing Officer should have greater oversight of DG Competition's procedures and handling of merger cases, particularly in relation to the negotiation of remedies and commitments given by the parties to secure clearance of the merger. A number of other suggestions to improve the position have been made, including that there should also be greater openness and transparency in the appointment and tenure of Hearing Officers. We invite the Commission to examine these proposals. We also urge that the detailed debate in which the Commission is now engaged should be a public one, allowing the views of all interested parties to be heard.

RECOMMENDATION

80. The Committee considers that the proposal to strengthen the role of the Hearing Officer in EC Competition cases raises important questions to which the attention of the House should be drawn and makes this Report to the House for information.

33   The 'equality of arms' principle ensures that each party to a proceeding should have an equal opportunity to present his case and that no party should enjoy any substantial advantage over his opponent. Dombo Beheer: Judgment 27 October 1993, Series A no 274, p19, para 35 Back

34   Alec Burnside, The governance of EC Merger Control - Bumps in the level playing field, Paper presented to the EC Merger Control 10th Anniversary Conference, Brussels, 14-15 September 2000. Back

35   Certain amendments to the Rules of Procedure of the Court of First Instance were agreed by the Council on 16 November 2000. Back

36   For a brief account of the issues and arguments raised at the time, see our 1982 Report, Competition Practice 8th Report 1981-82, HL Paper 91. Paras 27-29. Back

37   It is a peculiarity of holding a post in grades A1 or A2 that the officer may be "retired in the interests of the service by decision of the appointing authority". Article 50 of the Regulations and Rules applicable to officials and other servants of the European Communities. Regulation 259/68,as amended (the Staff Regulations). Back

38   For a recent example see Case T-65/96 Kish Glass v Commission: Judgment of Court of First Instance 30 March 2000, at para 64: "As a preliminary point, the Court of First Instance observes that, according to consistent case-law, although as a general rule the Community judicature undertakes a comprehensive review of the question whether or not the conditions for the application of the competition rules are met, its review of complex economic appraisals made by the Commission is necessarily limited to verifying whether the relevant rules on procedure and on stating reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of assessment or a misuse of powers".  Back