Kati Cseres is an Associate Professor of Law at the Amsterdam Centre for European Law and Governance (ACELG) and Program Director of the EU Law Masters at the University of Amsterdam.
This series of RevDem op-eds collects reflections on the contemporaneous challenges for the Rule of Law, which stemmed from the conference organized at Radboud University (Nijmegen) on 21-22 September in honour of Prof. Petra Bàrd. This is the latest entry following previous contributions by Benedetta Lobina on the Russo-Ukrainian war, and Pauline Thinus on EU spending conditionality.
The EU’s rule of law crisis that has unfolded over the past 10 years has triggered widespread discussions focusing on the drastic re-engineering of certain Member States’ constitutional systems and their (non)-compliance with the EU’s foundational values. There has been less discussion about how these constitutional transformations have impacted local markets, the economic freedoms of market actors, and ultimately the welfare of EU citizens.
Such discussions, however, should be inevitable as we have not just witnessed the breakdown of checks and balances in democratic legal and political systems, but also the accumulation of economic power and its dangerous “liaison” with the accumulation of political power. In Hungary, rule of law backsliding enabled the Hungarian government to intentionally use economic regulation to restructure markets and to override market mechanisms. By increasing state intervention in certain sectors of the economy the room for competition and equal opportunities for market actors was severely decreased and in certain cases eliminated altogether. Competition law instruments, such as merger control, that aim to disperse economic power have been systematically set aside for political purposes. A recent investigative journalist report bitterly reminds us of how real the harm caused by such arbitrary measures of the Hungarian government is to the economy, its market participants, and Hungarian citizens. The 2018 creation of the media conglomerate KESMA resulted in the control and operation of nearly 480 publications by a publisher known for his loyalty to the Hungarian prime minister and formed a massive advertising and readership bloc. This and similar exemptions for “national strategic interest” from the competition rules require thorough examination in order to expose how concentrated economic power reinforces political power and impacts citizens’ economic and non-economic interests relating to, for example, media pluralism, access to reliable information, and data protection.
Through preventing anti-competitive practices resulting from restrictive agreements between undertakings, abuses of dominant position, mergers leading to excessive market power, and state aid that provides economic advantages to selected firms, competition law structures markets and ensures they function properly for the benefit of all members of society. Its central tenet is to target firm behaviour that can harm the process of competition and consumers’ benefits.
Competition law is often seen as a distinctive area of law, as it depends on economic theory to define most of its substantive content, and it is functional in nature. While both these characteristics put it at some distance from traditional conceptions of the rule of law, this concept remains key to guard against arbitrary use of government power and to safeguard individual rights also in competition law cases. At the same time, competition as a specific institutional form of the market is conducive to democracy. Competition law, as a key ordering principle of markets, maintains control over excessive economic power. Such power risks eroding democratic processes and institutions and leads to rent-seeking, oligarchy, and crony capitalism. By dispersing economic power, competition law ensures the integrity and impartiality of political institutions making interest capture less likely. Hence, competition law safeguards the competitive process against overarching economic power that threatens the basic idea of a democratic society. This safeguards the autonomy and freedom of choice for equally empowered citizens who exchange their commodities in free markets. The role of competition as a fundamental institution of a democratic system is a salient concept that influenced the drafting of the Rome Treaty. Its central role in creating democratic political systems was re-stated in the 1993 Copenhagen (accession) criteria of the EU. Competition law in Europe developed as a quasi-constitutional foundation of liberal democracy and the role of competition law in governing the relationship between competitive markets and democracy has been a central pillar of the integration project from its early days.
Accordingly, the protection of the competitive process must be seen as an implementation of Article 2 of the Treaty on the European Union (TEU), which lists, among others, the EU values of democracy, equality, rule of law, and respect for human rights. When states join the EU, they commit to the EU’s economic and legal order, which as a ‘constitutional charter’ explicitly includes the system of undistorted competition. Accordingly, by joining, Member States commit to the values of EU law as laid down in Article 2 TEU and make a mutual promise that, in the enforcement of competition law, they recognize and respect the EU’s values and objectives. In its Sped-Pro judgment, the General Court recently confirmed that compliance with the fundamental values of Article 2 TEU applies to the EU’s competition law enforcement mechanisms under Articles 101 and 102 TFEU. In this judgment, the General Court for the first time established a direct link between systematic deficiencies in the legal order of a Member State and the ability of its competition authority to investigate and take enforcement action under EU law and properly protect a complainant’s rights.
Crucially, the fundamental role of competition law has also been transplanted since the 1990s into the national laws of all EU Member States as a key and indispensable component of economic policy. By the late 1990s, successful market integration and the process of EU constitutionalization, combined with solid supranational enforcement mechanisms, transformed competition law into a strong legal and policy field. Coupled with the increasing Europeanization of competition norms at the Member State level, competition law became a ‘common core’ of the EU and its Member States. By pursuing market integration as a public policy goal, EU competition law has acted as a vehicle for the proliferation of democracy and the rule of law. An explicit restatement of competition law as a building block of market economies and democratic societies was formulated in the governance mechanisms of the accession process for the Central and Eastern European countries from the late 1990s to the 2004 enlargement (Copenhagen criteria). However, unlike the Article 2 TEU values, which draw on the shared legal and constitutional traditions of the Member States, competition law was centrally established and developed with far-reaching powers unmatched in any other EU legal and policy field. Moreover, EU competition law is an exclusive competence of the EU with direct administration and with robust enforcement mechanisms, which, over the past seven decades allowed the Commission to defend competitive markets, and safeguard European undertakings’ freedom of economic activity and consumers’ choice across Europe.
This means that EU competition law is a fundamental part of the EU legal order that is implemented and enforced by all Member States, and that the protection of competitive markets is a shared value for all Member States. The effective enforcement of this shared value is for the Commission and national competition authorities to execute as public enforcers under the so-called decentralized enforcement of Regulation 1/2003. They have ‘court-like’ functions as they protect the legal position of undertakings as well as citizens’ rights to economic activity and free choice in markets. Accordingly, effective enforcement of competition law is not only crucial for safeguarding undistorted competition within the internal market, but also for effective judicial protection (Article 19 of the Charter of Fundamental Rights), which is relevant to both defendants and victims in the competition context. In light of the foregoing and on the basis of the second subparagraph of Article 4(3) TFEU, which requires Member States to take all appropriate measures to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union, the Member States must use their sovereign powers to enforce the Treaty’s competition rules as effectively as possible.
The central constitutional role and value of competition law in the EU’s economic and legal order, its exceptionally robust and direct enforcement by the European Commission, and its intimate relationship with the rule of law and democracy raises the question of how the EU competition rules and their enforcement can defend the rule of law in the EU. How can and should EU competition law, as a powerful legal and policy instrument, shape responses to the challenges of growing corporate and political concentration? The answer depends on how the authority of EU competition law is challenged or outright undermined by national economic policies and how the Commission takes up and enforces its own role as the guardian of the EU’s economic constitution.
