State Action Defence in EC Competition Law

Abstract

The State action defence doctrine arises in cases of possible conflict between regulation and competition law, i.e. when regulation restricts competition. Which rules prevail? Is the undertaking responsible for behaviour which has been required by public regulations? EC Courts have shown a readiness to apply competition prohibitions in the presence of regulatory measures that simply facilitate or encourage the very same forbidden conduct, but they may find that the issue falls outside the scope of competition provisions when the Court is satisfied that the Member State has left no room for autonomous decisions by market participants. However, Member States are bound not to render ineffective antitrust prohibitions, as this would be a violation of Article 10 in combination with Articles 81 or 82 EC, and primacy of EC law over national law requires a national competition authority (NCA), in the course of an investigation under Article 81 EC into the conduct of undertakings, to be able to declare a national measure contrary to those provisions and, consequently, to disapply it. As regards the penalties which may be imposed on the undertakings concerned, if a national law precludes undertakings from engaging in autonomous conduct which prevents, restricts or distorts competition, the duty of NCAs to disapply such an anti-competitive law cannot expose the undertakings concerned to any penalties, either criminal or administrative, in respect of past conduct where the conduct was required by the law concerned. However, conduct after the NCA’s decision finding an infringement and disapplying such an anti-competitive national law has become definitive, can be penalised. If a national law merely encourages, or makes it easier for undertakings to engage in autonomous anti-competitive conduct, those undertakings remain subject to Articles 81 EC and 82 EC and may incur penalties, including in respect of conduct prior to the decision to disapply that national law. This case law still leaves a number of questions unanswered, and the scope of this defence is far from clear.