In Short
The Development: For the first time in nearly two decades, the European Commission ("Commission") plans to impose "interim measures" to remedy perceived competition issues even though its antitrust investigation has not concluded.
The Background: Interim measures are a Commission order that prohibits certain conduct (or requires other conduct) before the Commission reaches a final decision on the merits of a competition case.
Looking ahead: If successful, the Commission is likely to use interim measures more frequently in future competition cases, including in investigations in the technology sector, which has received much Commission scrutiny in recent years.
Background
A 1980 European Court of Justice ruling first added interim measures to the EU law toolbox. Under certain conditions during an investigation, the Commission can issue an order that temporarily alters alleged anticompetitive behavior before the Commission reaches a final decision. The measure can either require the company to act (e.g., a compulsory license) or refrain from acting (e.g., a prohibition on tying or bundling). The 1980 ruling triggered the adoption of interim measures in a number of cases in the subsequent years. In 2001, however, parties in the IMS Health case successfully obtained the suspension of the Commission's interim measures, which it had to withdraw, and the General Court set a high legal threshold for their use. Since then, interim measures have remained a dormant tool.
The EU codified the conditions for use of interim measures set forth in the IMS Health case in Regulation 1/2003. The Commission must show that (i) there is evidence, "at first sight," of a competition law violation, and (ii) the measures are necessary to prevent serious and irreparable harm to competition while investigation is pending. Mere financial loss, however, cannot be considered as irreparable harm unless, for example, the survival of a competitor is at stake. In addition, the Commission's interim measures must be temporary and proportionate.
Except for the proportionality requirement, there is no legal boundary as to the type of interim measures that the Commission can impose. Given that Commission antitrust investigations can last for years, such cease and desist orders, and interim measures more generally, can have far-reaching consequences for the companies involved.
Calls for Increased Use of Interim Measures
The Commission's decision to seek interim measures for the first time since the enactment of the European Union's primary antitrust regulation comes in the midst of calls for swifter Commission action in fast-moving technology markets. According to critics, Commission investigations in such markets have sometimes concluded too late to prevent harm, such as market exit by small or nascent rivals.
These cases have led to a demand for increased use of interim measures by the Commission and national competition authorities. The recent Furman Report for the UK Competition and Markets Authority ("CMA"), for instance, advocates streamlining CMA procedures and increasing the use of interim measures, which the report deems of particular importance for digital markets. Other EU Member States such as France and Belgium frequently use this tool.
Earlier this year, the Commission acknowledged that it was searching for a test case to revive interim measures. Against this background, the Commission decision to impose interim measures is not a surprise. However, it marks a pivotal change in antitrust investigations. Critics argue that interim measures are difficult to reverse and can lead to unintended consequences, especially if the Commission closes its investigation or loses a challenge in court. In cases where the conduct proves to be procompetitive, interim measures may themselves lead to competitive harm, albeit for a limited period, if reversible. For these reasons, the use of interim measures in rapidly evolving technology markets is particularly controversial.
An Efficient Tool?
Although interim measures are intended to deal with urgent situations, EU procedural steps mean that they can take months to implement. The Commission must first issue a Statement of Objections ("SO") that demonstrates how the conditions for interim measures are met. The Commission must then grant the company access to the case file. The company has time to answer the SO and a right to an oral hearing, if requested. Further, the Commission must consult the Advisory Committee before it decides whether to proceed with the measures. A company can appeal the Commission's decision to impose interim measures to the General Court. Pending the appeal, the company must comply with the measures, except if it obtains an interim order from the Court that suspends the Commission's measures, as was the case in the IMS Health case. Procedural hurdles and delay therefore may limit the effectiveness of the Commission's interim measures.
Three Key Takeaways
- The revival of its long-dormant interim measures authority highlights the Commission's continued and aggressive enforcement of the antitrust laws, particularly in the technology sector. If successful in its test case, expect the Commission to expand use of interim measures in future cases.
- Given the length of such investigations, interim measures are in place for the duration of a Commission investigation. Given the length of Commission investigations, such measures may have far-reaching, unintended, and potentially irreversible effects in the marketplace.
- The EU's interim measures procedure is time consuming. In practice, interim measures take many months for the Commission to implement and are likely to lead to litigation independent of the merits of the case. This long timeline may limit the effectiveness of the tool.
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