Explanatory Memorandum to COM(2017)257 - Conditions and procedure by which the Commission may request undertakings to provide information in relation to the internal market and related areas - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2017)257 - Conditions and procedure by which the Commission may request undertakings to provide information in relation to the internal ... |
|---|---|
| source | COM(2017)257  |
| date | 02-05-2017 |
1. CONTEXTOFTHEPROPOSAL
Reasons for and objectives of the proposal
Europe is home to the world’s largest single market1 where citizens and businesses benefit from the right to work, study, travel, establish a business, and provide goods and services across borders. All this comes with the guarantees of health, safety, and environmental and consumer protection granted by EU legislation. For citizens and businesses to fully enjoy these rights and to ensure they retain confidence in the single market, it is essential that EU rules are complied with. Therefore, in its Communication ‘Upgrading the Single Market: more opportunities for people and business’ the Commission announced that it would set up a smart enforcement strategy. This strategy pursues ‘a holistic approach, covering all stages of policy-making from policy design, implementation, to information, in line with the Better Regulation approach. This includes better integration of evaluation and enforcement aspects in policy design, better assistance and guidance to Member States in the implementation of Single Market rules and a more consistent and efficient enforcement policy aimed at improving overall compliance with Single Market rules and EU law in general’2.
One of the difficulties encountered in ensuring internal market rules are complied with is timely access to reliable data. For this reason, the Commission announced that ‘it will propose a regulatory initiative allowing it to collect reliable information directly from selected market players, with a view to safeguarding and improving the functioning of the Single Market’3.
In the same line, in its communication ‘EU Law: Better Results through Better Application’, the Commission highlighted the importance of a robust and efficient enforcement system and outlined that enforcement supports and complements the delivery of policy priorities. It explained that its ‘current enforcement policy involves monitoring how EU law is applied and implemented, solving problems with Member States so as to remedy any possible breaches of the law, and taking infringement action when appropriate’4. However, ensuring the correct and full application of EU law remains a challenge. Therefore the Commission has proposed a series of measures to strengthen the enforcement system to benefit citizens and businesses and ensure their rights in the single market are respected. ‘Effective enforcement of EU rules […] matters to Europeans and affects their daily lives’.
In certain specific instances, access to reliable information about the conduct of market participants is needed to enforce internal market rules, in particular market information concerning private firms. This proposal does not aim at creating new enforcement powers for the Commission such as the powers to pursue infringements of Union law in the internal market area against individual market participants. This Regulation aims to help the Commission monitor and enforce internal market rules by enabling it to timely obtain comprehensive and reliable quantitative and qualitative information from selected market players through narrowly targeted information requests. The proposed Regulation will help the Commission ensure that the single market rights of citizens and businesses are respected, and will help strengthen cooperation with Member States. It will also ‘help the Commission to propose improvements where evaluation shows that enforcement deficits are due to flaws in
In this Explanatory Memorandum the expressions single market and internal market are used
interchangeably.
Ibid., p. 17.
C(2016)8600, OJ C18, 19.1.2017, p.10.
legislation’5. The proposed Regulation
the relevant sectoral legislation’ . The proposed Regulation is intended for specific instances where the benefits of quick and precise enforcement clearly outweigh the burden and costs imposed on the undertakings or associations of undertakings involved.
This new tool will be used in areas where the EU can deliver tangible results that are most important to citizens and businesses. With more efficient enforcement tools the EU will be able to act and ensure full compliance more quickly and more effectively in its chosen priority
areas.
• Consistency with existing policy provisions in the policy area
The proposal is consistent with Article 3(3) of the Treaty on European Union (TEU), which sets out the establishment of an internal market as one of the EU’s main objectives, in cooperation with the Member States. It is also consistent with Article 26 TEU, which empowers the EU to adopt measures to ensure the internal market functions properly, and with Article 17 TEU, which entrusts the Commission with ensuring that Treaty rules and EU secondary legislation are applied and with overseeing the application of EU law. This proposal does not aim to create a new procedure for enforcing EU law. Rather, the proposed information tool may be used in the context of the existing procedures, such as the infringement procedure envisaged by Article 258 of the Treaty on the Functioning of the European Union (TFEU).
• Consistency with other Union policies
The Commission already has investigative powers to enforce the EU competition rules necessary for the functioning of the internal market. The use of these powers has proven very effective in ensuring that those rules are applied: for instance, in the field of State aid, the Commission was able to directly collect vital firm-level information in two high impact cases, resulting in the recovery of unpaid taxes consisting of unlawful State aid6.
In addition, this proposal is consistent with other EU legal instruments that grant EU bodies or national authorities the power to collect firm-level information and share it with the Commission in specific areas related to the internal market (e.g. consumer protection, financial services, market surveillance, network industries). The Commission will only use the proposed Regulation as a last resort if other means to obtain essential information fail.
2. LEGALBASIS, SUBSIDIARITYAND PROPORTIONALITY
• Legal basis
This proposal is based on Articles 43(2), 91, 100, 114, 192, 194(2) and 337 TFEU.
Article 337 TFEU provides for the Commission's power, within the limits and under the conditions which the Council may lay down acting by a simple majority, collect any information required for the performance of the tasks entrusted to it. The Court of Justice of the European Union (CJEU) has already held that this Article may be used as a legal basis for secondary legislation concerning the general activity of collecting information carried out by the Commission, without requiring that such collection be needed to achieve the objectives of a given EU policy7. However, the CJEU has also said that an EU act does not fall under Article 337 TFEU solely because it aims to establish a system to collect information8. It is
5 COM(2015)550, p. 16.
6 Cf. Commission press release of 21 October 2015.
7 Judgements in cases C-426/93, §22 and C-490/10, §64.
8 C-490/10, §68.
therefore necessary to examine whether this initiative, as regards its aim and content, is needed to achieve the objectives specifically assigned to an EU policy. This initiative aims to improve the Commission’s access to market information necessary to carry out its tasks under Article 17 TEU, in orders to address serious problems with the application of internal market rules. This can only help to improve the Commission’s work in ensuring the application of EU law in that area. Therefore, this initiative is needed to achieve the objective of ensuring the functioning of the internal market as referred to in Article 26 TFEU. For this reason, Article 337 TFEU must be supplemented by an internal market legal basis, such as Article 114 TFEU which provides for the adoption of measures necessary for the smooth functioning of the internal market. Improved Commission’s work in that context would help prevent the emergence of obstacles to the functioning of the internal market9, which is one of the policy objectives envisaged by Article 114 TFEU10. Therefore, choosing Article 114 TFEU to supplement Article 337 TFEU is justified. Beyond Article 114 TFEU, the use of other Articles of TFEU as additional specific legal base is appropriate in order to cover the internal market fields that rely on specific articles in TFEU for legislative action: i.e. Articles 43 (agricultural goods), 91 and 100 (transport) or 194 (energy); or areas related to the internal market: Article 192 (environment).
Articles 114 and 337 TFEU have been jointly used as the legal basis in a previous EU legislative act entrusting the Commission with information collection powers in the internal market area: Directive (EU) 2015/1535 of the European Parliament and of the Council of 9 September 2015 laying down a procedure for the provision of information in the field of technical regulations and of rules on Information Society services11.
• Subsidiarity (for non-exclusive competence)
EU action is needed to strengthen the Commission’s access to market information necessary to addressing serious problems with applying EU law in the area of the internal market when carrying out its tasks under Article 17 TEU. The information tool established by this initiative is a last resort measure when all other means to obtain information have failed. Thus, it will be used only for those cases where national intervention would not be successful, due to their scale or effects, and the EU would be better placed to act. In particular, the information tool will be used when those problems have impacts beyond one Member State and addressing them requires collecting information uniformly and consistently from selected market operators in more than one Member State. Such EU action would fulfil the necessity requirement and would only strengthen the Commission’s ability to ensure EU law is respected in the internal market area.
In terms of added value, this tool will simplify coordination between the Commission and the Member States in cases with a strong cross-border dimension when information is needed from market participants operating in more than one Member State. Such EU action would also enable timely access to the information, ensure that the cross-border data collected is
10
The CJEU has recognised that, when enforcing EU law and in the absence of investigative powers of its
own, the Commission largely relies on the information provided by complainants, public and private
bodies and the Member States. Under those conditions, enforcement action must rely on the existing,
imperfect, legal framework for collecting information, resulting in uneven and insufficient collection of
firm-level information. As a result, such enforcement action is rendered more difficult or, in some
instances, impossible, which may result in obstacles to the proper functioning of the internal market
being created and not properly addressed.
See judgments of the CJEU in cases C-380/03, §§ 38 to 42 and 80; C-434/02, §§ 31-34; and C-376/98,
§ 86.
OJ L 241, 17.9.2015, p. 1.
9
11
comparable and result in more efficient enforcement, thus reducing the total administrative burden on the firms and public authorities involved.
This initiative, while respecting the Commission’s obligation as ‘guardian of the Treaties’ to oversee the application of EU law, does not deprive Member States of their important role, alongside the Commission, in applying rules in the fields of the internal market or other related areas. They continue to have their own investigative powers and remain free to extend them. Moreover, the operation of this Regulation will involve Member States in different instances, reflecting the principle of sincere cooperation between the Commission and the Member States.
In particular, any Commission decision stating its intention to use the power to request information from undertakings or associations of undertakings under this initiative will be notified to the Member State or the Member States concerned. Furthermore, this initiative establishes mechanisms for the sharing of information between the Commission and the Member States in relation to the requests for information and the replies to such requests, without prejudice to professional secrecy obligations.
It is further consistent with the TFEU in so far as it expects the Commission to be able to collect the information required for the performance of the tasks entrusted to it, under the appropriate conditions fixed by the legislative power.
• Proportionality
This proposal is proportionate to the objectives pursued and does not go beyond what is necessary to achieve them. First, there would need to be a serious problem with the application of EU law in the areas covered by the scope of the Regulation. Second, this investigative tool is to be used only as a last resort, when no other alternative way of obtaining information relevant for addressing such a problem is capable of delivering results. Third, the Commission will need to demonstrate, in a formal decision, that such information is necessary to tackle the problem, that the information is likely to be readily available to the addressees of the requests and that other means to obtain the information have failed. Fourth, the information requests would be narrowly targeted, both as regards the length of information requests and the number of respondents. The Commission’s compliance with these conditions would be subject to judicial review before the CJEU. Finally, the overall administrative burden is minimised, both for businesses (by excluding micro-undertakings and minimising the impact on small and medium-sized enterprises (SMEs) – see below) and public authorities (by avoiding inefficient coordination mechanisms between the Commission and the Member States, while ensuring full transparency towards them).
The proposal allows the Commission to impose penalties on undertakings or associations of undertakings that intentionally or through gross negligence fail to comply with information requests or decisions issued under the proposed Regulation. Penalties are not intended to correct any underlying market behaviour by undertakings. The threat of penalties is an incentive to ensure that addressees of information requests reply on time and in a complete, accurate and non-misleading manner. The proposal establishes the maximum level of penalties that are modelled on the rules in the State aid field where they serve as a deterrent. However, the proposal does not require the Commission to automatically impose penalties on non-responding undertakings, nor does it establish a minimum penalty amount, as the Commission needs to carry out a case-by-case assessment with due regard to proportionality, especially in the case of SMEs. Any Commission decision imposing penalties would be subject to judicial review.
Choice
of the instrument
A regulation is an appropriate legal instrument for establishing the rules that aim to strengthen
the Commission’s direct access to relevant information12. Indeed, both the procedure leading
obligations imposed on undertakings, including sanctions as the case may be, should be laid
down in a Regulation. Compared with the possible harmonisation of national rules through a
directive to achieve that goal, a regulation would result in more legal certainty and be liable to
ensure a uniform interpretation. A standalone instrument would also avoid interfering with
existing legal instruments that provide investigative powers to the Commission in other policy areas13.
3. RESULTS OF EX-POST EVALUATIONS14, STAKEHOLDER
Contents
- CONSULTATIONS
- COM(2015)550, 28.10.2015, p. 16
- The CJEU has recognised that, when enforcing EU law and in the absence of investigative powers of its
- imperfect, legal framework for collecting information, resulting in uneven and insufficient collection of
- A regulation is an appropriate legal instrument for establishing the rules that aim to strengthen
- to the adoption of an information request by the Commission and the possibility of the
- 14 15 16
- E.g. Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of
- Business associations (31), including associations representing SMEs only; and firms (13), including
- 19 20 21
- 47 of the Charter). The rules on the possible imposition of fines or periodic penalty payments respect the right to presumption of innocence and the proportionality of penalties (see Article
- Chapter I (General provisions) presents the subject matter, scope and definitions (Articles 1 to 4). It entrusts the Commission (Article 4) with the power to request information directly from
ANDIMPACTASSESSMENTS
• Stakeholder consultations15
The Commission carried out a public consultation on this initiative, between 2 August and 7 November 2016. It received 71 responses: 44 from the business sector16; 16 from consumers, non-governmental organisations or civil societies; and 11 from public authorities. Participants came from 18 EU Member States (68), an EEA country (1) and a non-European country (2). Responses showed that firms are often reluctant to share commercially-sensitive information with public authorities, not only when responding to public consultations but even when needed to support allegations of infringements of their rights. Respondents reported that they would be willing to provide sensitive information to the Commission if confidentiality was assured and the administrative burden limited. However, several firms supported only voluntary participation in data requests.
In addition, the Commission has carried out targeted consultations with several large business associations who expressed reservations about empowering the Commission to request information from firms beyond the sphere of competition law. They raised concerns about the protection of commercially-sensitive data, the administrative burden, and possible fines for not responding to requests. Firms expressed frustration at the Commission’s slow response to cases involving infringements of EU rules by Member States.
At the Council working party on competitiveness and High Level Group meetings, the Member States enquired about the conditions to be satisfied by the Commission for requesting information, their role in the process, the resulting administrative burden, and the proportionality of any sanctions.
Stakeholders’ suggestions have been largely taken on board, particularly regarding the calls for the limited use of the tool (translated into the (pre-) conditions for the use of the
The use of Article 114 TFEU as legal basis for a regulation has already been accepted by the CJEU. See
case C-270/12, §§97 and seq.
Article 108 of the Treaty on the Functioning of the European Union, OJ L 248, 24.9.2015. This
Regulation has a different legal basis with a different legislative procedure and was tailored to the
specific objectives, procedural steps and powers of the Commission in the area of the State aid.
Not applicable.
See Annex 2 of the Impact Assessment for more detail.
Business associations (31), including associations representing SMEs only; and firms (13), including
SMEs and micro enterprises (9). Altogether, the responding business associations represented over 20
million firms.
12
3
investigative tool – including the role of the Member States) and the administrative burden (for example, the possibility of requesting only information that is readily available to the responding firms). The questions of the safeguards for protecting confidential information and of penalties for non-reply were addressed based on the established practices in the competition law domain.
• Collection and use of expertise
The Commission did not rely on specific external expertise for this initiative.
• Impact assessment
The Impact Assessment Report explained how the lack of reliable and accurate firm-level information available to the Commission and Member States creates a problem in situations when access to such information is needed to timely enforce internal market rules. The report further examined, beyond the existing baseline scenario, different policy options to address that problem, namely: (1) the voluntary exchange of best practices between Member States and with the Commission, and developing guidance on collecting firm-level information; (2) the lifting of national rules preventing Member States authorities from sharing firm-level information they already have or could get access to with the Commission and other Member States; (3) the introduction of residual investigative powers at national level17 so that Member States are able to collect firm-level information in all cases and share it with the Commission; i the introduction of an investigative tool of last resort for the Commission to use where suspected obstacles to the functioning of the internal market may exist and the requested firm-level information is necessary for timely and effective decision-making and not readily available through other means; and (5) a combination of options 2 and 4. Options 2, 3 and 4 are of a legislative nature. Discarded options include expanding the coverage of EU statistics and introducing regular reporting obligations for firms.
The introduction of an investigative tool of last resort for the Commission (option 4) was considered the best policy choice in terms of subsidiarity and proportionality, while also being the most effective and cost-efficient option. Option 4 overcomes the coordination and legal jurisdiction problems in the event that Member States were acting alone when dealing with cases that have cross-border dimension. It should result in having more robust information on malfunctions in the internal market. In turn, this should enable the Commission and Member States to ensure a higher degree of compliance with internal market rules. This would strengthen consumer trust in the internal market and contribute to fulfilling its potential. Better access to information should result in better-informed enforcement of internal market rules at Member State level, limiting infringement proceedings against Member States. Businesses and consumers would benefit from the better functioning of the internal market: e.g. lower entry barriers, greater competition, more competitiveness and easier/cheaper crossborder (and potentially international) expansion.
The total annual administrative cost for undertakings or associations of undertakings (i.e. compiling the information for preparing replies and legal advice) is estimated at between €370, 000 and €610, 00018. A slight additional cost could result from the submission of non-confidential replies (i.e. to protect the respondent’s business secrets). The costs derived from the preferred option for Member States are negligible (see below, Section 4, for the Commission). There would be no direct social or environmental cost if the preferred option is used.
17 Option 3 also integrates option 2.
18 Assuming five requests per year (but several addressees per request).
The Impact Assessment Report and an Executive Summary Sheet19 were submitted to the Regulatory Scrutiny Board. The board initially issued a negative opinion on 20 January 2017, followed by a positive opinion with reservations on 23 March 201720. The board requested that the report be adjusted in accordance with its recommendations21. The report now clearly focuses on the objective of addressing the lack of relevant information needed to ensure the application of internal market rules in those specific instances in which information is necessary and otherwise not available. It also better explains the conditions the Commission must meet before it can use the investigative tool (see the above sub-heading on proportionality), including the need to demonstrate that the required information is not available from other sources (the last resort aspect). Moreover, the report better presents the views of stakeholders22.
• Regulatory fitness and simplification
When issuing information requests to undertakings and associations of undertakings, the Commission is required to make a careful selection of addressees of the requests, so that requests are only addressed to undertakings and associations of undertakings that are able to provide sufficiently relevant information (Article 5(3)). Normally, only large undertakings with either a strong market position or significant trade volumes will be able to provide the relevant information to the Commission. Unlike SMEs, larger undertakings usually operate at a larger scale and with corporate sophistication allowing for a relatively easy retrieval of the requested information. Thus the resulting administrative burden and impact on these undertakings would not appear disproportionate.
SMEs may theoretically be asked to reply to information requests under this proposal (e.g. in specific sectors or market where they may have a strong market position). However, in view of the volume of their economic activity, it is anticipated that this would probably not happen. Nevertheless if it is necessary to send a request to an SME, the proposal would minimise its compliance costs: the Commission is specifically required to take due account of the principle of proportionality when considering the scope of the information requests to SMEs (Article 5(3). The estimated cost of replying for an individual SME ranges from €300 to €1, 000 per request with an additional potential legal advice cost of €1, 000, roughly 25 % of the estimated response cost for a large undertaking.
Micro-undertakings are exempted from this proposal in order to avoid imposing disproportionate administrative burden on them, considering in particular that they are unlikely to be in a position to provide sufficiently relevant information.
Firms of all sizes will benefit from a better functioning internal market, thanks to more targeted enforcement actions by the Commission and the Member States to ensure the application of EU law, inter alia in the field of the internal market.
22
ec.europa.eu/transparency/regdoc/?fuseaction=ia Ibid.
The Regulatory Scrutiny Board noted that: ‘The report is still not sufficiently clear and sometimes inconsistent with regard to the scope of the initiative. In several places the report still presents the SMIT as a solution to general problems of data availability, or as a source of information for single market related policy purposes that do not stem from specific enforcement deficiencies, while it does not provide justification to do so. (2) The report makes clear that the tool would be of last resort, but it is not clear about safeguards or the conditions that might trigger investigations. (3) The main report still does not reflect clearly enough Member States' and business interests' respective views.’ See the Impact Assessment Report for further explanation on the adjustments made.
The proposal does not prescribe any particular format or communication channel for processing the requests for information, being neutral as regards information and communication technology (ICT) developments.
• Fundamental rights
This proposal respects fundamental rights and observes the principles recognised, in particular, by the Charter of Fundamental Rights of the European Union. It includes safeguards and guarantees taking due account of the legitimate interest of undertakings to protect their business secrets: in Article 7 (protection of confidential information) and Article 16 (professional secrecy) of the proposal (see Article 7 of the Charter). The proposal also complies with the right to the protection of personal data (see Article 8 of the Charter) and is consistent with rules on access to documents held by the Commission (see Article 41 of the Charter). The proposal respects, in so far as addressees of information requests may challenge them before the CJEU, the right to an effective remedy and a fair trial (see Article
47 of the Charter). The rules on the possible imposition of fines or periodic penalty payments respect the right to presumption of innocence and the proportionality of penalties (see Article
48 and 49 of the Charter).
4. BUDGETARYIMPLICATIONS
This initiative does not create an additional enforcement scheme to be applied by the Commission. Instead, it gives the Commission a specific investigative tool of last resort, to be used as part of existing enforcement procedures and actions. It is estimated that the Commission could incur annual data collection and analysis costs of between €120,000 and €430,000, assuming five information requests are made per year23. The Commission costs indicated above would not require any new budgetary needs, only the redeployment of existing staff and infrastructure.
5. OTHERELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
The Commission will monitor the use of the Regulation with a view to assessing its effectiveness and proportionality. It will rely on the following criteria: exceptionality of the use of the Regulation, cooperation of the addressees of the request for information in providing such information and the quality of the information collected. The Commission will record the necessary data in that regard (e.g. annual use of the tool, area of the internal market concerned, undertakings or associations of undertakings covered, timeliness,
comprehensiveness, accuracy and quality of responses, response rate, whether the use of the tool resulted in better enforcement by the Commission). It will carry out follow-up voluntary feedback surveys addressed to firms covered by the requests to gauge their opinion of the process. Moreover, the Commission will also monitor the usefulness of this tool (e.g. success rate of infringement proceedings, stakeholders’ feedback on the issue). The results of these monitoring activities would be assessed after five years of application of the Regulation. The Commission must draw up a report on the application of the Regulation every two years.
Detailed
explanation of the specific provisions of the proposal
Chapter I (General provisions) presents the subject matter, scope and definitions (Articles 1 to 4). It entrusts the Commission (Article 4) with the power to request information directly from
23 The Commission is not obliged to use the investigative tool.
undertakings and associations of undertakings for addressing a serious problem with the application of Union law which risks undermining the attainment of an important Union policy objective.
Chapter II sets out the conditions and procedure for requesting information. Article 5 limits the Commission's power to act as a measure of last resort: where it cannot obtain the information from other sources in an adequate, sufficient or timely manner. The Commission must adopt a prior decision stating its intention to use the power in question, explaining the suspected serious problem, the information sought, why such information is needed, why other means to obtain such information failed, and the criteria for selecting the addressees of the requests (which cannot be micro-undertakings). The Commission is only empowered to request information that the addressee of the request is able to provide. The concerned Member State or States will be the addressees of the prior decision and the Commission is obliged to notify it to the Member State or States concerned without delay. Article 6 provides for the procedure to be followed for requesting information: the Commission may require undertakings or associations of undertakings to provide information by simple request or by decision and it must inform the Member State where the recipient of the request is situated. Where the Commission has launched a formal infringement procedure pursuant to Article 258 TFEU, the Commission is obliged to provide the Member State concerned by the procedure with a copy of all requests for information issued in the context of that procedure, irrespective of where the registered seat of the undertaking or association of undertakings is situated. Article 7 deals with the answers to the requests and the protection of confidential information. In particular, these provisions oblige the Commission to forward the answers received to the Member State concerned by the request where they are relevant for a formal infringement procedure pursuant to Article 258 TFEU against the Member State concerned. Where an answer includes information that is confidential vis-à-vis that Member State, the Commission shall only forward the non-confidential version of the submission. Article 8 restricts the use of the information collected to the purpose established in Article 4.
Chapter III (Articles 9 to 13) establishes the rules on fines and periodic penalty payments if a respondent supplies inaccurate or misleading information or if, in response to request made by formal Commission decision, it provides incomplete information or no information at all. These rules follow the model of Regulation (EU) 2015/1589 applicable in the State aid area.
Chapter IV (Final provisions – Articles 14 to 19) sets out rules on extension of time-limits; publication of Commission decisions; professional secrecy obligations for the Member States; data protection (EU officials are already bound by similar obligations under Article 339 TFEU); reporting obligations for the Commission and the entry into force of the Regulation.