PLMJ
  April 20, 2006 - Portugal

EU and Competition Law the European Dimension of Company Law
  by Mr. José da Cruz Vilaça

Twenty years after Portugal’s accession to the European Community, it has begun to be understood in Portugal that membership of the EU does not merely constitute for us a source of subsidies and aids of any kind, increasingly less so since the latest enlargement from fifteen to twenty-five Member States. It is, rather, a source of regulation for companies (and directly or indirectly for consumers) in a wide range of economic areas. The most striking example is the sectors which are being privatized and opened to competition, ranging from telecommunications, energy and public transport to water supply and even the post office. The opening of such sectors to market logic has taken place gradually, with greater or lesser degrees of difficulty, but at any rate always fostered by the European Commission. It is the Commission which has lent initiative to the opening and liberalisation programmes which generated successive directives that paved the way from public monopolies to competition between public and private entities. Community legislation made ever-greater encroachments (until it was stopped in its tracks by a stricter interpretation of the principle of subsidiarity) into new areas of social and economic life, where it was thought that the European perspective was the appropriate level for finding solutions for economic and social problems. Environment, health, the protection of consumers, workers and shareholders, tax, intellectual property, education, scientific research, sport and the media became other areas in which Brussels and Strasbourg amassed as much weight as national governments and parliaments. Furthermore, membership of the EU obliged business-people and managers to a change in thinking, in which our inward-looking domestic market perspective steadily gave way to a new view, not only of commercial integration but of economic, financial and monetary integration as well. The area in which our competitiveness shall be gauged ceased to be our own domestic economy and moved onto the European scale, within the boundaries of what came to be known after 1986 (the year of Portugal’s accession) and the Single European Act as the great barrier-free internal market. Of course the long-term view inderpinning the launch of the single market programme in 1992, along with the European Monetary Union and the Single Currency introduced at Maastricht, has sometimes clashed with clear trends towards a renationalisation of policies and blatant protectionism. As it is incumbent on the Commission to look out for the common interest using the powers conferred upon it for this purpose by the Treaty, it is not to wondered at in such circumstances that it has often locked horns with some national governments which are less sensitive to the logic of integration and more inclined to create new protectionist barriers inspired by a short-term nationalism. It makes little sense, however, to talk about national champions at a time when even the building of giant European companies has failed to tilt decisively the balance of ntercontinental economic relations in favour of Europe. Yet the overwhelming success of certain European business projects, often supported by national governments, shows that it is only at a European level that the size necessary for success in certain markets can be achieved. The best example is probably the success of Airbus visà-vis its greatest rival Boeing. In any case, the simple truth is that the European dimension has become an unavoidable reality in almost all social and economic fields. Companies today are increasingly facing this reality in the course of their day-to-day business in matters as diverse as distribution, supply and representation agreements and major strategic decisions to invest in a certain market or to take control of another company or group. The creation of a Community-wide competition law framework, the gradual pread of the need for such a legal framework in all Member States, and the establishment in each State of an independent authority charged with enforcing these new laws, has brought about a new and particularly demanding branch of law to which companies must now adapt. In Portugal, the establishment of the Competition Authority in 2003 and the simultaneous enactment of the new Competition Law (Law 18/2003) are part of this structural transformation, which is vital to the modernisation of an economy scarred by decades of corporatism, protectionism and statist socialism. At the same time, Community competition law has undergone a true revolution with the introduction through Regulation 1/2003 of a decentralised model of application for community competition rules, which poses new challenges for companies and domestic courts. Community rules on the control of oncentrations have also seen major change as a result of Regulation 139/2004, while the framework on abuse of a dominant position is currently under debate and Commission policy on State aid is being reformulated. The new Competition Authority has been trying to enforce the new rules and to diffuse what is commonly referred to in Portugal as a “competition culture”. We must not, however, forget that it avails nothing to kill the patient with huge doses of sometimes untested remedies which, if applied theoretically across the board without considering the reality of the companies for whom they are destined, are capable of creating serious flaws in the fabric of the economy. In this context, the possibility of recourse to a sound, effective, quick and competent judicial control mechanism is absolutely essential for the protection of company rights and the control of legality. Unfortunately, we are still very far from being able to take advantage of this possibility, a possibility which must be embraced as indispensable to bolstering the rule of law in this country and not viewed simply as a luxury for wealthy countries, to which we have no right to aspire. In this newsletter, the EU and Competition Law Department offers its clients, and any others who may read it, some ideas on current interest topics in the areas it works with. I hope that it will help to increase awareness of the problems faced by companies in this field and instil a willingness to adapt actively to a legal environment where the ship of change is well under way.