Post-accession effects of conditionality: new member states and the implementation of the EU competition policy.

• Author: Mihaila, Roxana
• Position: Report

The modernization of the EU competition policy has shifted the focus of research from the legal and political implications to the role of national administrations in the implementation process. The 2003 Modernisation Package has granted national competition authorities and national courts competences to directly apply and enforce anti-trust laws, generating concerns as to the effectiveness of the implementation process. Additionally, the EU's Eastern enlargement has brought new challenges to the uniform enforcement of European legislation in general and competition legislation in particular. Competition does not follow the classical pattern of convergence of national legislation since it does not fully shift toward a common European content and style of policy, but still retains national patterns of implementation (Cini, 2003, van Waarden, 2002). Owing to stringent conditionality, Central and Eastern European national administrations were required to rapidly adopt and put into practice an unfamiliar enforcement system in a short period of time, jeopardizing efficient implementation. This article examines the capacity of national administrations to ensure effective policy implementation. It looks comparatively at the performance of national implementing actors (i.e. national competition authorities, national courts) in seven of the new member states comprising the 2004 Eastern enlargement (Poland, Hungary, Czech Republic, Slovakia, Estonia, Latvia, and Lithuania). By employing Fuzzy Sets Qualitative Comparative Analysis (fsQCA) it investigates the causal combinations of factors determining the effectiveness of the process of legal implementation. This research does not assess the actual degree of effectiveness achieved by Central and Eastern European countries (CEECs), but compares their performance to deduce the factors that condition effective implementation. It does not claim to be exhaustive in terms of the issues covered, but to offer an indication as to where to look for further explanations or potential for deregulation related to competition policy enforcement.

The analysis in this article can be generalised for the current economic context, especially from the viewpoint of the importance of the clarity of laws and regulations for the efficient implementation of competition policy. Similarly to the first year of the implementation of the Modernisation Package, the current competition environment is dominated by legal uncertainty, differential application of EU legislation, and a propensity to circumvent existing rules to safeguard domestic interests. In spite of the Commission's "flexibility in procedure and rigidity in principles" (Reynolds, 2011:1672) approach, member states now have a series of legal loopholes to speculate these circumstances to their advantage.

1. National Administrations and Policy Implementation

   National administrations are crucial actors which determine the effectiveness of the implementation process (see Knill and Leskow, 1998; Riley, 2003; Wilks, 2005; Borzel, 2004; Sedelmeier, 2006; Nicolaides, 2006). Drawing on a model proposed by Knill (1998), who looks at their role in determining the successful implementation of environmental policy in the UK, this article investigates the capacity of CEECs' national administrations to cope with the EU requirements in the field of competition policy. It sets to identify the necessary conditions, in terms of national administrative capacity, for the effective implementation of competition legislation.

   Implementation refers to the process of transposition, application and enforcement of EU legislation (Steunenberg, 2003:5), while effectiveness is defined as "the degree to which both the formal transposition and the practical application of supranational measures at the national level correspond to the objectives specified in the European legislation" (Knill, 1998:595). Literature identifies two main factors that affect the implementation process: effective administrative organization and clearly worded provisions at national level and the degree of fit or misfit between European rules and existing institutional and regulatory traditions (Treib, 2006). Overall, implementation remains an under-researched area. Most studies limit themselves to the degree of implementation achieved by a state while leaving aside the variables influencing this process, and conclude that "Community law, once it has been incorporated, is applied neither better nor worse than national law" (Ciavarini, 1988:199; qtd. in Treib, 2006:8). This article moves further along this line by looking at the factors that condition effective implementation. It adds to the research on the impact of enlargement conditionality by providing an analysis of the CEECs' experience with implementing competition legislation.

   "The acquis, the whole acquis and nothing but the acquis" policy towards the CEECs (Grabbe, 2006:33)--non-negotiable and allowing for no opt-out possibilities--and the close monitorization during and after the accession negotiations process left them with little to say when negotiating the content of their agreements. Conditionality, a "bargaining strategy of reinforcement by reward" (Schimmelfenning, 2004:662), triggered legislative adaptation and the transfer of institutional models, whether by strengthening existing institutions or creating new ones (on the impact of conditionality see also Spendzharova, 2003). The latter created institutional isomorphism, which in the field of competition policy took the form of competition authorities modelled on DG Competition--an example of "mushrooming of regulatory agencies" (Schimmelfenning, 2004:676). In assessing the conditions that influence effective implementation, this article does not look at states' willingness to implement the required legislation, but at their administrative capacity to do so (see Putnam 1988; Chayes, 1993; Borzel, 2004; Nicolaides, 2006; Treib, 2006).

   The degree of domestic change as a result of conditionality is referred to as the Europeanization of national norms, policies and institutional structures. A general consensus exists in literature that Europeanization, based on a "misfit" between the national and European levels, ultimately creates pressure and fosters domestic change (Borzel, 2000; Caporaso, 2001, qtd. in Olsen, 2002; Cini, 2006; Grabbe, 2006; Montpetit, 2000; Papadimitriou, 2004; Radaelli, 2006; Schmidt, 2002). In comparison to the "older" member states' competition policy, analyses of the impact of Europeanization on newly acceded countries have been scarce. Some scholars have assessed the progress achieved by a number of, at that time, accession and candidate countries (Hungary, Poland, Slovenia, and Romania) to conclude that the current EU approach towards them might not be feasible, but the study was limited to the degree of transposition achieved by each state (see Holscher, 2004). Others provide a more in-depth approach by looking at the major constraints to implementation, but consider only specific areas of the policy (e.g. vertical restraints, Lorentzen 2002).

   The most regulated EU policy area, competition aims to prevent discriminatory practices on the common market (Wallace, 2005). Unlike in other policy fields, the Commission did not explicitly seek to change national legislation, but only to ensure EU rules would apply to cases affecting trade between member states (Cini, 2003; van Waarden, 2002). The Eastern enlargement created pressure for effective and uniform application of competition legislation through the "harmonization of national legislation with EU provisions and institutional coordination among member states and between these and the Commission" (de Rosa, 2003:22). For CEECs, the blueprint for these laws and policies was provided in the Association (Europe) Agreements (EA), where the provisions regarding competition rules reproduced entirely the articles in the EC Treaty. In the aftermath of the Copenhagen Council, the Europe Agreements emerged as the legally binding framework for accession (Muller-Graff, 1997:34) and legal approximation became a prerequisite for membership and a goal for Europeanization (Bossche, 1997; Vink, 2002)5. The emphasis on competition acquis originated in concerns that, faced with competition on the European market, the CEECs' governments would ultimately resort to discriminatory practices such as state subsidies for poorly performing firms and industries (Holscher, 2004:323).

   The increased burden of investigation placed on the Commission has also led to reforms. The so called "Modernization Package" (one Commission Implementing Regulation and 6 Notices) and Regulation 1/2003 provided for decentralization, for vertical and horizontal coordination, and a two-tiered system of monitoring of competition policy, where the Commission and National Competition Authorities (NCAs) share competence in investigating anti-competitive practices (for an overview of the monitoring process see de Rosa, 2003). To ensure coordination, Regulation 1/2003 set up of a European Competition Network (ECN) to facilitate cooperation between NCAs and between NCAs and the Commission and to "ensure both an efficient division of work and an effective and consistent application of EC rules" (Commission, 2003). NCAs are under obligation to "inform the Commission at an early stage of cases that they are investigating under Article 81," and facilitate exchange of information on such cases (Montag, 2003:121).

   The role of NCAs is critical for the effective application of competition rules. Regarding antitrust provisions, Regulation 1/2003 gives direct effect to Articles 81 and 82 TEC, empowering national courts and NCAs to apply them. It provides for greater involvement of national authorities in securing the provisions of EU law than any other policy. These changes operate with the assumption that NCAs have acquired a "culture of competition" and are...