It is to be hoped that Estonia will soon pass legislation to render competition supervision more effective, not because the EU has already fined us for failure to comply, but because we cannot become a corner of Europe where companies can commit competition violations with impunity, Minister of Justice Kalle Laanet writes.
The Ministry of Justice has sent to the government long-in-the-making draft legislation to create a new kind of competition supervision procedure in Estonia.
Even though the goal is noble – to protect consumers and honest businesses from those who violate competition rules – the proposed solution has split the legal community. Some believe that administrative proceedings are not a good way to handle competition law violations, while others maintain that misdemeanors are unsuitable for the purpose. Unfortunately, argumentation bordering on lies has also been let fly.
While other EU Member States usually process competition violations in administrative procedure, Estonia is one of just a handful of states where criminal or misdemeanor proceedings have until recently been used instead. The ECN+ directive, which Estonia will have to adopt to improve competition supervision, basically rules out the use of criminal procedure and makes it difficult to use misdemeanor procedure.
With this in mind, Estonia has made the carefully considered choice of creating a completely new kind of administrative fines procedure with which to process competition violations.
The change is fundamental in nature and has understandably led to some passionate debates. At the same time, it begs the question of how is it possible that such a solution works in almost all other EU Member States, just not Estonia? Can we say that other Member States don't have rule of law or fail to ensure the rights of entrepreneurs?
It is claimed that the amendments would force entrepreneurs to incriminate themselves because the Competition Authority would be given the right to demand to see documents and factual information. I can assure the reader that this is not the case and say that the bill has been complemented in the past year by adding clauses according to which companies must not be forced to incriminate themselves when information is requested, nor can anyone be made to incriminate loved ones.
Any request for information from the Competition Authority must be concrete and tied to specific circumstances or factual matters as well as sporting a limitation period. The authority will not be given the right to ask to see all of a company's documentation, which has never been the aim of changes.
The Estonian Competition Authority is the only competition watchdog in Europe that does not have the right to seek relevant information, while it is impossible to exercise competition supervision without access to it in most cases. For example, if there is reason to believe prices are shaped with the help of an algorithm or based on correspondence between competitors.
The exact limits of requests for information can be determined in the Supreme Court should it prove necessary. But European Court of Justice practice clearly suggests that even though companies cannot be obligated to provide answers through a representative that might be construed as an admission of guilt, a legal person can be obligated to surrender documents and factual information at its disposal even if it could be incriminating.
The ministry has put together a thorough 17-page constitutional analysis on the subject, meaning that claims according to which the Justice Ministry has not carried out a constitutional analysis or has only done so formally are baseless.
The ministry is also criticized for failure to involve target groups to a sufficient degree or consider criticism. Target groups have been regularly engaged since the fall of 2020 and the bill has passed through a round of public approval twice, in late 2021 and the spring of 2023.
Pain spots were once again discussed with the Estonian Bar Association and business organizations this fall. As a result and a way to facilitate the wishes of attorneys as much as possible, several provisions of the bill have been complemented. Client-attorney or contractual representative confidentiality has been expanded to protect all exchange of information between clients and counsels.
A court warrant has been a prerequisite for searching a company's premises from day one, just as it would serve as the basis for confiscating data carriers. The latter need to be returned to companies as soon as they become unnecessary for the purposes of proceedings. Another addition is giving companies the right to designate data that is confidential or protected by client-attorney privilege. The Competition Authority would not be given the right to access such information.
There is a range of circumstances, including aggravating and mitigating ones, the Competition Authority will have to consider when ordering fines.
As said, creating a new kind of competition supervision procedure has been a very carefully considered choice. Entering all necessary requirements (to comply with the directive – ed.) into existing proceedings and the continued plurality of proceedings would bring legal clarity neither for businesses nor consumers. Similar procedures exist in all EU Member States for competition supervision, with Estonia the only country not to have adopted the directive.
Major cross-border competition violations, including in Estonia, have been processed with the help of similar administrative proceedings by the European Commission since 2004. This means that some Estonian businesses are already familiar with the procedure.
I hope we will be able to pass the law soon, not because the EU has already fined us for failure to comply, but because we cannot become a corner of Europe where companies can commit competition violations with impunity.
Editor: Marcus Turovski