"For then shall be great tribulation, such as was not since the beginning of the world to this time, no, nor ever shall be." (Matt. 24:21)
If the certificate is in paper format, such person shall sign the certificate in black ink, shall state therein in what capacity such person so signs, and shall type or print in a legible manner the name of each person signing such certificate, under such person's signature. If the certificate is in an electronic format, such certificate shall be authenticated by the electronic vital records system of the department. Any certificate not complying with the requirements of this section shall be returned by the registrar with whom it is filed to the person making the same for the proper correction. whether derived from the general statutes, administrative regulations or court rules, policy, common law or any other source of civil law, as are granted to spouses in a marriage, which is defined as the union of one man and one woman.
by Julian Mathic Joshua, Barrister *
Setting the Scene
Since the beginning of the 1980's the EU Commission has proved itself a formidable detector of secret cartels. It has uncovered, pursued and sanctioned by heavy fines a whole series of huge, complex and clandestine market sharing and price fixing cartels in major European industries: chemicals, cement, steel and paper (carton board) are just some examples. Business delinquency on a truly massive scale has been revealed. As one practitioner aptly told you last year:
"The dramas associated with the investigations become more colourful, the fines bigger (and) the details published in the Official Journal more damning ...".
Certainly with secret meetings of industry chiefs in the legendary smoke-filled rooms of luxury Swiss hotels, elaborate choreography of "spontaneous" price initiatives, destruction and concealment of evidence and colourful sobriquets given to the leading actors like "the Bosses", "the Big Four" or "the Presidents", these cartels have all the hallmarks which the word "conspiracy" conveys to the layman. In the United States such misconduct is aggressively prosecuted as a conspiracy under Section 1 of the Sherman Act and senior executives can go to prison. Things are rather different on our side of the Atlantic. Many national regimes do not even have a prohibition system. The Commission does, but it has no jurisdiction over individuals. It may only fine companies. Its enforcement powers - for all they are criticised - do not even begin to compare with those available to the Justice Department.
Some industrial sectors have shown a depressing tendency to organise matters so as to avoid anything quite so inconvenient as competition. The Commission however regards cartels as the enemy of a free market economy. Last year it took three major decisions against cartels and imposed record fines in the Carton board, Cement and Steel Beams cases. It is now getting more geared up to enforcement and last November a special section was set up in DG IV to concentrate on cartels. However the very success of the Commission in uncovering these violations in three of Europe's biggest "blue chip" industries is itself disquieting. It is a strong indication that the message that cartels are harmful, damaging and illegal may not have got through. One could legitimately ask whether the enforcement system is really proving an effective deterrent against hard core cartel behaviour. Are these cases just the tip of the iceberg?
The EC enforcement system as it was originally conceived in the Treaties and Regulation N. 17/62 had the immense advantage of simplicity. There was a clear prohibition, powers of active investigation, and a fair procedure.
The Commission may not have had the investigative powers of the Justice Department or the oppressive value of criminal law enforcement, but it did have flexibility. That after all is the main advantage seen in administrative-style enforcement.
Over the years however following demands from the legal profession and others for more safeguards, checks and balances, we have seen grafted unmodified on to the Commission's procedures more and more of the incidents of the full 'judicial' model. These reforms were made for the best of motives, but one could question whether this hybridisation necessarily continues to ensure the efficient and fair despatch of complex contested cases.
In several recent judgments from the Court of Justice and Court of First Instance (CFI) have annulled Commission decisions in major cases entirely on procedural grounds.
The Courts have also shown themselves increasingly ready to undertake an extensive review of the facts in any case and in some examples one might ask whether they have exceeded the normal limits of judicial review in carrying out de novo their own investigation of the facts found in the decisions.
Of course one must have a system which is fair. It also has to be efficient. In the public interest, and indeed of all those concerned, the EU system of anti-trust enforcement must however ensure that serious violations are detected, pursued and deterred without eternal legal wrangling leading to protracted delays, excessive proceduralism and inconclusive results.
You may recall that last year Mr John Ferry in this venue said that recent case law developments had
"done much to make the Commission's task close to unworkable".
I can only hope that his fears are not realised, namely that the EU:
"by erosion will end up with a system for the non-enforcement of competition laws. . . . ."
The Emergence in EC Law of the Serious Anti-trust Infringement Concept
Unlike the Justice Department, the Commission does not only chase blatant price fixers. Most of DG IV's activity in the Competition field is not really even concerned with enforcement as such but with the essentially regulatory and administrative task of vetting notified commercial agreements, contracts and proposed industry alliances for compatibility with the rules.
However even if the Treaty does not say so expressly, a clear distinction has emerged in practice between justifiable or at least condonable restraints on competition and a very different type of business conduct which is far more harmful, has no redeeming features and can never benefit from any exemption. Market sharing and price fixing cartels in particular constitute the cardinal sins against Article 85. If discovered and proven they will nowadays inevitably be sanctioned by condign fines. (The same of course applies to blatant abuse of market power by a dominant company under Article 86.)
EC enforcement in this area has understandably been heavily influenced by the doctrine of conspiracy as developed in the United States under the Sherman Act. Direct evidence of an express cartel agreement is almost by definition hard to come by. The Commission has invoked many of the evidential rules which characterise the process of proof in a Section 1 prosecution: for instance, what in America is (somewhat misleadingly) called the 'co-conspirator' exception to the hearsay rule, ie. statements made in furtherance of the conspiracy by one member are evidence against all of them, etc. Further, while it is necessary to demonstrate by coherent proof as against each addressee of the decision that it participated in the violation, this does not require direct evidence that each alleged participant took part in each and every individual aspect or manifestation of the cartel throughout its duration. Rather, the proper approach for the Commission is to demonstrate the existence, operation and salient features of the cartel as a whole and then determine whether each participant is linked by credible proof to the common scheme. At a substantive level the principle has been established that a complex cartel is not to be split up into a whole lot of separate infringements: it is all one continuing offence which members may join or leave but in which each subscribes to the overall plan.
And just as in the United States, the Commission has 'operationalised' the concept of the prohibited anti-trust agreement. In the old days, when the Commission did not exploit its investigative powers under Regulation 17 to the full, it tended to concentrate perforce on the 'outcome' of the cartel. One had to work backwards from the observed phenomenon of the parallel pricing (with all the analytical and practical problems this entails) to try to find some evidence of collusion. Usually this was pretty sparse. There were endless arguments about whether conduct was an agreement or a concerted practice. Now, however, with the evidential record full of direct proof of the whole complex of secret discussions, cartels and meetings, the focus of the prohibition of Article 85 is on the 'process': the partnership for unlawful purposes with all the possible disagreements about methods that may occur in such a venture without affecting the cohesion of the shared purpose and design. Just as with the Sherman Act conspiracy, this approach underlines the fact that the principal vice of the prohibited behaviour lies in:
"collective decision making plus mutual assurances of compliance".
The Nature of the EC Adjudicatory Process
Whatever the similarities in the type of conduct which the system targets in the United States and in Europe, a fundamental difference is found in the enforcement and adjudicatory process. In the US, cartels are prosecuted as felonies in Federal Court. In the EC system it is the Commission which both investigates and decides. In due process terms there is of course nothing wrong with such a combined role. In the United States it is now common for modern administration agencies to exercise both an investigative and an adjudicatory function.
For its part, the Court of Justice in the past always made it abundantly clear that in the Commission's procedures the highest standards of administrative justice had to be observed, and in particular the right to be heard which lies at the heart of any civilised system of law. The procedure is said to be 'administrative' but this does not imply that any lower standard of justice is condoned, rather that the application of the principles of due process must take account of the nature of the structure of the Commission and the collegiate and hierarchic nature of its decision making process.
Labels and the attendant ideological baggage are not really very helpful however and the most accurate categorisation is to say that the legal system set up by the Treaties is sui generis. Contrary to the usual model for international organisations, the Communities have in certain defined areas of competence the direct power to implement and - to a slightly lesser extent - enforce their own policies. Competition is one example. The drafters of the EC Treaty gave the Commission the power not only to develop competition policy but also to apply it through individual cases. Competition rules are not self-enforcing and without some mechanism for repressive control they would be no more than a pious expression of hope. The Commission's remit therefore also includes the duty to search out and sanction violations of EC Competition Law.
But while the Member States may have been willing to give the Commission direct powers to investigate and, even to punish violators, the clear understanding on all sides was that there would be no transfer of criminal law powers to the Community. The furthest the Member States were willing to go was to let the Commission have a limited jurisdiction over business undertakings. If fines there had to be, the institution of the administrative and expressly non-criminal sanction was already familiar enough in at least some of the national legal systems and could be taken up as a model for EC procedures.
In the desire perhaps to avoid any suspicion of a criminal enforcement procedure, the Member States did not set up a special tribunal on judicial lines to hear fining cases. It is therefore the Commission which decides in contentious cartel cases just as it does in matters of exemption and negative clearances.
The persistent argument and pressure from the defence bar further to 'judicialize' the Commission's procedures in Competition enforcement matters entirely missed the point. Indeed to American administrative lawyers - and even their British counterparts - the siren calls for reform must be baffling. In the United States, where the right to a fair hearing is constitutionally guaranteed by the Fifth Amendment, the hallmarks of due process in an all but fully judicialized procedure have been summarised as the rights to:
With due allowance made for the fact that along the lines of the droit civil the Commission's procedure is mostly written rather than oral, this could be a summary of the safeguards built into Regulation N. 99/63. The procedure in EC Competition cases thus comes very close to the full evidentiary hearing of the type required by the US Supreme Court in Goldberg v Kelly.
One would have thought therefore that Regulation 99/63 provided an admirably succinct code for ensuring a fair hearing process. It set out the basic machinery but did not go into excessive detail. There is a wise old adage: if it ain't broke, don't fix it! But following sustained criticism from various legal and industry quarters, and the endorsement of many of these complaints against the system by the House of Lords Committee in 1982, the Commission introduced a number of changes. A Hearing Officer was appointed to supervise the hearing process. Far wider documentary disclosure than the law required was announced. At a higher level, and at the Commission's recommendation, the CFI was set up, the argument having apparently been accepted that the Court of Justice did not provide an adequate machinery for the scrutiny of the Commission decisions.
While the defence bar has generally applauded these changes dissatisfaction was not allayed, and the foundation of the Commission's powers is still being called into question.
Principles derived from the case law of the European Court of Human Rights in Strasbourg are now increasingly being invoked. It is argued that the present system violates the undertakings' Human Rights. In the past the Court of Justice was markedly unimpressed by arguments that the Commission procedure broke the European Convention. For instance, the Court always 'held the line against equating fines under Regulation N. 17/62 with criminal penalties'.
Some lawyers insist that the Commission's procedure is 'criminal'. The object is to convince the Courts that a whole raft of safeguards and procedures appropriate (sometimes even inappropriate) to the criminal trial must be read into the rules without the Commission's having any of the powers of investigation or sanction which are available in real criminal proceedings. It must be clear enough that the sanctions in an EC competition case have nothing to do with the administration of criminal justice. Decisions imposing fines under Article 15 are expressly of a non-criminal law nature. Individuals are not at risk. Nobody goes to prison or gets a criminal record. The Commission may fine only business entities. Indeed in some national jurisdictions, the fines are treated for corporate tax purposes as a legitimate and deductible business expense!
The fallacy in asserting that EU competition procedure is penal in nature because of the size of the firms is demonstrated by recent proposals in some national jurisdictions to "decriminalise" certain major financial frauds - while increasing the fines that could be imposed.
Just so we are under no illusion, let us remember how a real criminal enforcement system operates. In the United States the Justice Department always prosecutes suspected price fixers criminally. The primary investigative instrument is the Grand Jury. Targeted individuals are summoned for examination on oath by hostile prosecutors without benefit of judge or counsel. Vast quantities of documents are subpoenaed. Corporations cannot hide behind the Fifth Amendment, and individuals who invoke the constitutional privilege against self-incrimination may find themselves obliged to testify nevertheless under strictly limited court-ordered immunity. Failure to cooperate will mean prosecution for contempt of court, obstruction of justice or perjury. Remember too that the Justice Department now often calls on the FBI to assist: house searches, consensual telephone monitoring, sending turned conspirators "wired up" into cartel meetings - these are commonly employed to gather evidence. And of course a Sherman Act indictment can well be reinforced by prosecutors adding a racketeering or wire fraud count. Grand Juries, it should be said, almost always find a "true bill", i.e. they vote to indict.
The criminal trial itself is usually before a Federal jury - that is, if the accused plead not guilty. Almost invariably where the evidence is convincing they will seek a plea bargain on the best terms they can get. The Justice Department on conviction will always press for a prison term as well as fines: under recent amendments it is a felony and the jail sentence can be up to three years.
A jury verdict is final as to the facts. One can go to the Circuit Court of Appeals, but while most appeals are on evidentiary questions, they are concerned with narrow questions of admissibility or the adequacy of the judge's directions to the jury. As long as there was some evidence on which to convict, the Appeal Court does not go into the facts.
The Standard of Judicial Review
Let us turn now to the review process in the EU.
In the scheme of the Treaties and the institutional structure of the Communities, it is for the Commission in anti-trust cases to take the initial - and indeed the final - decision disposing of the matter. Contrary to the habitual press usage, it is not a 'provisional' or 'preliminary' finding.
The decision of the Commission in a competition case was always subject to review by the Court of Justice under Articles 172 or 173 of the EC Treaty. Article 173, the basic provision of the Treaty on judicial review, set out four grounds: lack of competence; infringement of an essential procedural right; infringement of the Treaty or any rule of law relating to its application; or misuse of powers.
Article 172 however allowed the Council by regulation to give the court 'unlimited jurisdiction' in respect of the penalties provided for in those regulations, and this option was expressly taken up in Regulation N. 17. The provision did not however confer carte blanche on the Court simply to substitute its own opinion on the facts for that of the Commission: the 'unlimited jurisdiction' is a term of art derived from French administrative law and is not as discretionary as it suggests at first sight. It allows the court to cancel, reduce or indeed increase the fine imposed (rather than simply annul the decision) but it does not give it any greater powers to intervene on the facts than does Article 173.
Acting as the Treaty required it to do as a Court of review of the legality of the decision, rather than as a Court of Appeal with full powers to rehear and decide the case, the Court of Justice increasingly attracted the criticism that it was overly indulgent "towards the Commission". Quite apart from the not unimportant fact that the Commission is acting not in its own partisan interest but in that of the Communities, such arguments overlooked the reality that the Court had if anything interpreted its remit liberally, and on the appropriate occasion did not hesitate to address factual issues and overturn decisions for inadequate fact-finding.
It would however surely have undermined the scheme of the Treaties, which for better or worse gave the Commission full competence and jurisdiction to take the decisions, if the Court had been permitted to substitute its own view of the facts for that of the Commission. While some lawyers might complain of the Court's alleged 'allergy to reviewing the facts', the Court was in reality acting with the proper degree of judicial prudence incumbent on a tribunal of review, or indeed of appeal. It was of course never a question of requiring the applicants to 'prove their innocence'. What they had to do was something else entirely, namely to demonstrate that the Commission's decision was unlawful.
While the Court had always been rigorous in its review of legality, it had generally applied, as is perfectly normal in the administrative law context, what American lawyers call the 'harmless error' principle: a decision will not be overturned for some perceived procedural mistake unless it made or could have made some real difference to the outcome. It had to be demonstrated that the applicant had in substance been denied the right to be heard. The Court of Justice took a robust view towards technical procedural arguments. Furthermore the Court would not invalidate the decision as a whole when some deficiency had occurred in the hearing process if it related only to matters of secondary importance to the infringement found.
The CFI was however set up in a climate in which the Commission's decision making process was deemed inadequate and the Court's review of it perfunctory. The CFI was not given any wider powers of review under Articles 172 or 173 than the Court of Justice possessed. It has however taken upon itself the duty of going through Commission decisions with a fine-tooth comb.
In the Polypropylene case, where the CFI first adopted this methodology, the Commission could not have objected, at least as regards the outcome. The gist of its decision and the fines survived microscopic scrutiny.
But on what basis does the CFI apply an intensively activist standard of review to questions of fact? The relevant Treaties and Regulations do not prescribe any explicit test. In an appeal proceeding it is usually for the applicant to make out its case, rather than for the respondent (ie Commission) to prove that it was right. The best statement of the true legal principle in the case law is perhaps that of Sir Gordon Slynn AG in the Pioneer case:
"Once a finding has been made that a concerted practice exists, since it is the applicant who is claiming that the Commission's decision should be annulled, the burden of proving the illegality of the decision falls, in general and in the first instance, on the applicant. This follows from a principle of law recognised in all Member States, that the legal burden of proving the facts essential to an assertion normally lies on the party asserting it. On the other hand, the allegations of facts made by the Commission in a decision must be such as to warrant the conclusion drawn from them. If they do not warrant that conclusion, the decision may be annulled, even in the absence of any evidence adduced by the applicants."
It should be noted that Sir Gordon did not suggest a burden of proof being placed on the Commission, still less that the standard required was proof beyond reasonable doubt. Indeed later on in his opinion he said that while the applicant did not actually have to prove the decision was wrong;
"it may suffice if he can show that it was enough or sufficiently proven. There must be material upon which the Commission can be satisfied reasonably that there was a concerted practice."
Defence lawyers however always like to invoke the ringing and time-honoured words of the common law criminal standard and say that the Commission has to
"prove the case beyond reasonable doubt".
Strictly speaking it is misleading to talk as though a burden of proof is placed on the Commission at any stage of the procedure. The notion (which is closely linked to the different question of the standard of proof) derives from the common law concept of litigation as an adversary procedure. The Commission's procedure is however more inquisitorial in nature. At the administrative stage, it has to take the decision itself. It has to find the facts proved. On an application to the Court under Articles 172 or 173 it is for the applicant to show the decision was illegal. Increasingly however the Commission is being called upon by the CFI to defend its decision and prove in Court that the facts can lead to no alternative explanation or conclusion to that set out in the decision.
This kind of formulation of the way factual issues fall to be decided on appeal (to use the term loosely) leads in turn to a curious reversal of the burden of proof: the Commission is thrown on the defensive.
What should the appropriate standard of review be? It is of course the Commission which is the primary fact-finder in contested competition proceedings. Is it really the task of a reviewing Court to second-guess the Commission's detailed fact-finding on each and every allegation? In the United States, if there is a jury verdict under the Sherman Act, the Court of Appeals does not review the evidence, as long as there was some evidence that supported the verdict. I am not for a moment suggesting that this should be the review test in our proceedings. While a decision of a competent fact-finding authority exercising its proper jurisdiction pursuant to a public duty is entitled to some respect, it does not of course have the status of a verdict of one's peers.
Under the "substantial evidence" standard applied in the United States to review of agency findings under the FTC Act:
"the Court must accept the [Federal Trade] Commission's findings of fact if they are supported by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion".
This sounds very much like the test suggested by Sir Gordon Slynn AG and quoted above.
In any case, the court may not embark on its own de novo appraisal of the evidence.
In the Wood Pulp case - incidentally it was not a judgment of the CFI but the last big competition case to be determined on appeal direct to the European Court of Justice (ECJ) -Advocate General Darmon had been careful to base his adverse opinion in relation to "announced prices" on the Commission's failure to give reasons rather than making his own assessment of the facts. The distinction is perhaps a fine one but the implication is that if the Commission had examined each case individually rather than lumping all the producers together in an undefined wrap-up charge of "concertation", the Advocate General might have considered its findings reasonable. The Court on the other hand gave as its ground for annulment simply that the alleged concertation "has not been established by the Commission".
There is a legal truism that conspiracies are rarely susceptible of proof by direct evidence. Their very secrecy means that the full truth will probably never be revealed. That having been said, it is remarkable how often the Commission has during its investigations under Article 14(3) discovered the "smoking gun": the Cartel blueprint, the minutes of secret meetings, the detailed calculations of the quota schemes . . . . it has obtained documentary evidence which Justice Department attorneys would give their eye-teeth to obtain in a Sherman Act case.
There are cases where the evidence is not so obviously damning. This may happen in oligopoly pricing. Parallel pricing is some evidence of collusion but it is never on its own conclusive. Standing alone, the price uniformity may be explained by circumstances other than agreement. Where however there are indicia of agreement besides consciously parallel action, the parallelism itself becomes evidentially significant - the two strands have to be examined together.
In the United States the succinct phrase 'plus factors' was coined by the Ninth Circuit in Co-Two Fire Equipment v US to denote the additional evidence pointing to concertation which was required before the issue could go to the jury. The plus evidence in Co-Two consisted inter alia of a background of illicit resale price maintenance, artificial product standardisation, raising prices in time of surplus, using delivered pricing, exchange of price lists and identical bids. There was evidence of meetings but no direct proof of what was discussed.
The Court of Appeals emphasised however that while on its own each of these plus factors could not be said to point directly to guilt beyond reasonable doubt, taken together and in their proper context they spelled out that irresistible conclusion.
Plus factors may also be found in the economic evidence. Conspiracy may be inferred in circumstances where it is unlikely that the parallelism of action was merely coincidental. But over-reliance on economic plausibility arguments is always problematic, as the Commission discovered to its cost in the Wood Pulp case. There was in fact in that case a good deal of ordinary conspiracy-type evidence, including many detailed notes of price fixing meetings, but the decision tended to play down its significance.
How did the ECJ approach the question of circumstantial evidence in that case? There was an indisputable pattern of parallel pricing in the industry, a practice facilitated by pre-announced prices and the adoption of a delivered price system with only two zones.
The Commission here relied on (1) the parallel pricing and (2) "different kinds of direct or indirect exchange of information" - i.e. the plus factor approach. During the procedure however the Court required the Commission to specify precisely between which producers the concertation established by each individual telex or document took place and for what period. The Commission obviously did not accept the basic premise that circumstantial evidence could or should be thus compartmentalised: in its reply to the Court it argued that these documents were relevant not only as regards the undertakings and periods specifically referred to therein but also to all the undertakings for the whole duration of the parallel conduct.
The Court rejected the Commission's explanations of the relevance of the 'collusion' documents, and stating tersely that
"since the identity of the persons taking part in concertation is one of the constituents of the infringement, it is impossible to rely as evidence of that infringement on documents whose probative value in that respect the Commission has been unable to specify ..."
it dismissed all the collusion evidence entirely from consideration.
While there are clearly limits beyond which the exercise becomes speculative, the US Courts by contrast are usually fairly liberal in allowing inferences to be drawn from circumstantial evidence considered in its entirety. This is an empirical process involving inductive reasoning: inference based on the cumulation of persistent data. It is not really one susceptible of sophisticated analysis. So for the US courts, a finding of fact may be based entirely on circumstantial evidence, unless some hypothesis inconsistent with these facts can reasonably be predicated on that evidence (effectively the Rheinzink test of the ECJ).
This test must not however be applied in isolation to each item of evidence or each link in the chain: the various items of circumstantial (and direct) evidence may be considered together so that one element reinforces the other with respect to the facts in issue. Each fact is meaningful as part of a pattern. The Supreme Court has therefore stressed that in an anti-trust conspiracy case the evidence should not be fragmented or compartmentalised:
"It hardly needs statement that the character and effect of a conspiracy is (sic) not to be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole".
In Continental Ore Co v Union Carbide & Carbon Corporation the Supreme Court instructed lower Courts that:
"plaintiffs should be given the full benefit of their proof without tightly compartmentalising the various factual components and wiping the slate clean after scrutiny of each . . . . [T]he duty of the jury was to look at the whole picture and not merely at the individual figures in it."
Indeed in Dyestuffs - twenty years before the Wood Pulp judgment - the Court of Justice itself had emphasised that the evidence in a collusion case must not be compartmentalised:
"... the question whether there was concerted action in this case can only be correctly determined if the evidence on which the contested decision is based is considered, not in isolation, but as a whole".
In Wood Pulp however the ECJ seems to have considered that the probative value of each 'collusion' document had to be limited to the intrinsic facts (parties and duration). The Commission was required (and, in the Court's eyes, failed) to specify for each quarter in the period under review the producers between which concertation was alleged and
"separately for each concertation at issue, the evidence on which it relied".
No doubt it would have been better had the Commission in the original decision drawn the evidential strings together more tightly and relied less strongly on contested economic plausibility arguments. When asked for clarification by the Court on the parallel pricing it could not however have done other than maintain its argument that (a) the price fixing evidence had to be read together with the factum of parallel behaviour and (b) was relevant as against all the participants in the alleged concertation, not just those named in the particular document.
The relevance of the documentary evidence on price fixing was surely threefold:
Fatally for the Commission however it had not articulated any 'theory' (in the sense used by common lawyers in conspiracy cases) for the structure of the alleged concertation. Nor had it tied in every single producer to a single common scheme. The collusion evidence cited in the decision was surely relevant as plus factor evidence to the general charge of concertation on announced prices, and while its persuasiveness against the individual alleged participants is another matter, it is difficult to see on what grounds it could simply be excluded altogether. The evidence in Wood Pulp may well not have been sufficient to link every single one of the fifty pulp producers into a price fixing cartel, but the Court's categorical assertion that
"the Commission has no documents which directly establish the existence of concertation between the producers concerned"
needs to be read with some qualification.
For its part, the CFI has usually adopted the 'global' approach, at least as regards the characterisation of the substantive offence in a complex cartel case of long duration. The Commission's technique, which was to treat the cartel as a single continuing violation, a 'partnership in illegality' as it were, and not as a series of discrete infringements, was expressly upheld in Polypropylene:
"Those schemes were part of a series of efforts made by the undertakings in question in pursuit of a single economic aim, namely to distort the normal movement of prices on the market in polypropylene. It could thus be artificial to split up such continuous conduct, characterised by a single purpose, by treating it as consisting of a number of separate infringements. The fact is that the applicant took part - over a period of years - in an integrated set of schemes constituting a single infringement, which progressively manifested itself in both unlawful agreements and unlawful concerted practices".
As regards the evidential aspect, the CFI in Polypropylene generally eschewed the compartmentalised approach adopted by the Wood Pulp Court of looking at each item or link individually and in isolation: see in particular Rh^ne-Poulenc v Commission.
The CFI's characteristic technique - very apparent in its judgments in Polypropylene - is however to examine in turn each principal factual allegation or manifestation of the cartel under sections like "The price initiative of July to December 1979" which are then further divided into: (a) "The contested decision"; (b) "Arguments of the parties"; © "Assessment by the Court". Such an approach is not without its inherent dangers. The Supreme Court in the United States has always enjoined the Courts from combing through the minutiae of the trial record for some item of conflicting circumstantial evidence if on a consideration of the evidence as a whole the overall pattern of guilt is established.
In general the CFI in Polypropylene did not accept the argument that the absence of direct evidence that a cartel participant had taken part in one or another individual price initiative out of the whole series should lead to a piece-meal slicing of the fine. But why should a participant, shown by ample evidence to have been a long standing member of the cartel, be allowed to plead successfully that the Commission has not proved beyond reasonable doubt that it was still in the cartel on the day of the investigation? In at least one of the Polypropylene appeals the CFI gave a not insignificant reduction of the fine on precisely this ground.
In the United States, the rule is the opposite: once it is proved that a defendant is a member of a conspiracy, the burden of proof is upon him to show that he left it by an affirmative act.
Procedural Questions
In PVC the CFI declared the decision 'inexistent', relying on a notion hitherto almost unknown in Community Law and which had never even been pleaded by the parties. The CFI had of its own motion launched investigations into the circumstances of the adoption of the decision by the College of Commissioners. It claimed to have found a whole series of "particularly serious and manifest defects". It is instructive to know what these actually were. The Commission had (not surprisingly) adopted the decision on the basis of the full English, French and German texts - the three 'working languages'. The other two 'authentic' language versions - Italian and Dutch - were available to the Commission but in the interests of efficiency were not physically included by the Secretariat-General in the documentation for the Wednesday Commission meeting. The draft - reasoning and operative part - was complete in the three languages except for blank spaces for the fines to be filled in: this is because the College always discusses the fines - it doesn't just rubber stamp the Competition Commissioner's proposal. After full discussion the Commission decided to 'adopt the draft' (the jargon seems to have led the CFI to believe the college merely approved a draft for others to work into shape: in fact on adoption, the draft becomes a 'decision'). The fines fixed by the Commission on each undertaking were recorded in the official minutes. The Commissioner for Competition was delegated formally to 'adopt' the other language versions. When the text as adopted was later tidied up by the Commission's legal revisers for publication and notification, a few infelicities - one or two words here and there, a line or so which had slipped out of the word processor by inadvertence - were corrected. The Commission could not however, as the CFI insisted, produce in Court a final text in all languages authenticated in each version by the signatures of the President and Secretary-General. This formal provision in the Internal Rules, dating from the days before photocopiers and word processors, had admittedly not been followed in this case. The minutes of the meeting did of course record the adoption of the decision, something never disputed.
In a judgment described as "truly Solomonic" by one commentator, the ECJ decided the decision was not inexistent (the Advocate General had exposed a multitude of basic errors in the CFI's judgment) but annulled it instead. The Court considered that the authentication requirement in the Rules of Procedure was not a mere formality. This finding was however justified in terms of a presumed violation of the principle of 'collegiality'.
According to the Court, the College of Commissioners had to adopt both the operational part of and the statement of reasons for its decisions (which it had in fact done) in all authentic languages (which it had not): the college as a whole had to be involved in the drafting, finalisation and reduction in to writing of its decision, as well as any subsequent alterations other than simple corrections of spelling and grammar.
As for the Court's notion of the principle of collegiality and what it requires, Professor Toth has commented:
"One cannot but agree with the Commission and the Advocate-General that the adoption of an act in its final form by the full Commission in one or more of the Commission's working languages wholly satisfies the principle of collegiate responsibility, and the translation of the act into other languages in which it is binding is a measure of practical execution which may be delegated to a Member of the Commission. Such translation cannot be regarded as part of the process of deliberation and decision-making which alone is the exclusive province of the Commissioners."
American constitutional lawyers may recall the bind the US Supreme Court got itself into in the Morgan cases. There the statutory requirement that a hearing had to be held before the Secretary for Commerce decided whether or not to issue a stockyard licence was interpreted as obliging him to preside over it personally on the basis that "the one who decides must hear". Finally the Court had to explain that all it really meant to say was that "the one who decides must decide". The agency head did not have to hear the evidence himself or see the witnesses. However he did have to take the decision himself; it was the responsibility for taking the ultimate decision that could not be delegated.
The only way in the US system for an aggrieved individual to find out whether the agency head had in reality given the case his personal attention was to have him cross-examined in court. In a later case in the Morgan saga this procedure had been followed, but the Supreme Court held it was improper for the Secretary of State to be interrogated in this manner:
"Just as a judge cannot be subjected to such scrutiny, so the integrity of the administrative process must be equally respected."
The CFI by contrast seems to have gone out of its way (in some cases at least) to unearth supposed procedural defects. In Soda Ash it ordered 'measures of inquiry' with a view to discovering whether or not the decisions, accepted for years by all concerned as validly adopted, were in fact authenticated or not. The parties had only raised the point after the PVC judgment over two years after they lodged their appeals. On the usual principles of pleading, the argument had been made too late. In addition there was nothing on the face of the notified decisions to indicate any possible irregularity in its adoption. For a Court to search zealously for a possible formal defect is difficult to reconcile with the principle, apparent on a fair reading of the case law cited by the CFI in PVC, of the presumption of validity of the acts of institutions. As the CFI itself recognised in other cases, the question of 'authenticity' only arises when the party alleging a failure to authenticate has provided clear and cogent evidence casting doubt on the authenticity of the notified text.
In the light of the judgments on "authentication" in PVC and Soda Ash, one might well ask what the purpose of procedural requirements really is. In administrative style procedures, surely their raison d'Ltre is protection against arbitrary behaviour by an administration. Procedural requirements seek, by means of a fair decision making process, to reach a just decision.
Did the CFI and ECJ in their judgments in PVC and later cases lose sight of the real purpose of procedure? For the Advocate General, the question was whether any failure to apply the internal rules of procedure could substantially have influenced the content of the decision and hence the position of its addressees. For the Court however procedure almost seems to have acquired the status of an end in itself.
One may also query whether the Courts have adopted a consistent line in their approach to 'authenticity'.
In PVC, a decision which the Commission said it intended to adopt and did adopt was held not to exist by the CFI (and annulled by the ECJ). On the other hand, in Air France a statement by the press spokesman of one Commissioner was held by the CFI to be an existing and challengeable "decision" even though the Commission insisted it was never intended to be one. One ends up in the anomalous position that an informal 'statement' on behalf of a single Commissioner does not have to respect the collegiality principle whereas the purely mechanical exercise of putting a decision already adopted by the full college in the three working languages into Italian and Dutch apparently does. In one case the form is totally immaterial. In the other it is everything.
This curious anomaly in the case law is likely to lead to further contradictory and arbitrary results. The question whether an administrative act is a binding and reviewable decision arises more and more often in appeals. It is compatible with any notion of equity or the proper administration of justice to have diametrically opposed results in two similar cases? It is instructive to compare Soda Ash with Tetra Pak. That decision was adopted in July 1991 (ie. shortly after the five Soda Ash decisions of 19 December 1990 but before the PVC judgment came out). However the CFI in its judgment of 6 October 1994 never mentioned the issue of authenticity and confirmed the Commission decision in its entirety as well as upholding the ECU 75 million fine. In Soda Ash by contrast because of a formal procedural breach of internal rules which could in no way have prejudiced the applicants a decision finding a grave violation is annulled.
It is all very perplexing indeed.
Document Disclosure: The Soda Ash Cases
The background to this aspect of the Soda Ash cases is a debate which has gone on for many years. The Defence demands ever more and more production of documents. The Commission of course nowadays discloses all the evidence relied on. In addition however, defendants want to see all the unused material. They say it may help their case, but they don't specify how. Nor do they identify a particular line of defence - they say they can't do so unless they see the documents first! The Commission has gone a long way to try to meet their demands. It keeps issuing statements in the Annual Competition Reports. However, the ECJ confirmed as recently as April of this year - in the BPB case - that no obligation of blanket disclosure of unused material is placed on the Commission.
There is of course a very good reason for this. The Commission, when it carries out Article 14(3) investigations in multi-handed cartel cases gathers a vast quantity of internal business information from companies. Most of the material eventually turns out to be irrelevant to the fair disposal of any issue in the case but it would provide inquisitive competitors with an open window as to how their rivals conduct their business affairs. It is probably not a "business secret" in the sense of a secret formula or the like, but it is sensitive: all commercial information has some value. It particularly behoves a Competition authority not to air companies' confidential business before all and sundry. If it did, they might well be reluctant to make any disclosure to the agency. So confidentiality is an aid to effective investigation. It is in the public interest to maintain it.
Indeed the Court of Justice had expressly recognised this principle in Hoffman-La Roche:
"The said Article 20 by providing undertakings from whom information has been obtained with a guarantee that their interests which are closely connected with observance of professional secrecy, are not jeopardised, enables the Commission to collect on the widest possible scale the requisite data for the fulfilment of the task conferred upon it by Articles 85 and 86 of the Treaty without the undertakings being able to prevent it from doing so . . . ."
It is of course a qualified confidentiality. As the ECJ pointed out, the Commission's duty of professional secrecy has to be reconciled with the right to be heard; the obligation of confidentiality is expressly subject to Article 19. For present purposes, this provision is the only legal 'gateway' out of Article 20. Article 19 as interpreted by the ECJ requires that in any proceeding the Commission must disclose the information and documentation necessary to enable the undertaking concerned to get a fair hearing. It certainly does not oblige the Commission to open the records of undertakings to their competitors.
In two of the Soda Ash cases the CFI annulled the Article 85 decision for a supposed breach of the right to be heard. It was not because the Commission had based its decision on crucial evidence not disclosed to the defence. Nor was it because it had turned out that the Commission had deliberately concealed some obviously exculpatory evidence - Brady material as it is called in the US. The reasoning of the CFI was that the Commission had failed to disclose to the applicant material - unspecified and unidentified - coming from other companies which might have been "useful for the defence".
According to the CFI, under the 'general principle of equality of arms' it was unacceptable for the Commission to be able to decide on its own whether or not to use documents against the applicant when the access was unable likewise to decide whether or not to use them in its defence. In principle the CFI considered that the Commission had to disclose to the applicant all the unused material obtained from its competitors unless it was a "business secret".
The CFI did not even look at the unused documents (as the applicant had in fact invited it to do) for it merely
"the possibility that such documents may exist must be a sufficient ground for finding that the rights of the defence have been infringed".
To overturn a decision for lack of due process for the non-disclosure of unused material whose evidential significance was - to use the CFI's own words in another case - "uncertain and hypothetical" seems somewhat severe, particularly since the applicant had during the procedure been able to address the very issues to which the unused documents were putatively relevant.
Is not the whole point of a requirement to disclose unused material to apprise the defendant of relevant facts of whose existence it could not have reasonably been aware? On the fragile hypothesis that exculpatory evidence really does exist in a particular case, it is far more likely to be in the possession of (and so known to) the firm itself than at other producers. Nor does a firm need to rove through its rivals' business records in order to know whether or not it is innocent.
The Commission is of course open in a particular case to a reasoned request by the defendant for the disclosure to it of any specified categories of unused documents or documents relating to an identified issue. The right to be heard surely does not entitle the defence to conduct a random fishing expedition in its rivals' business documents in the hope of finding some minor inconsistency or contradiction.
The Commission had indeed in Soda Ash invited the applicants to specify a particular category of documents or identify a line of possible enquiry, but they had declined to do so. The Commission officials had even reviewed all the unused material to see whether any of it was potentially exculpatory.
For the CFI however it was a question of 'equality of arms':
"(I)t was not for the Commission to decide on its own whether the documents obtained in the investigation . . . were exculpatory or not".
Rather, the Commission had to
"give the advisers of the undertaking concerned the opportunity to examine documents which may be relevant so that their probative value for the defence can be assessed".
This requirement was in the Court's view dictated by the (undisputed) fact that the Commission acts as both the body notifying the objections and the deciding authority.
Contrast this approach with that of the Courts in the United Kingdom. Thus McPherson J in R v Monopolies and Mergers Commission, ex parte Brown:
"It is wrong in my judgment to seek to impose on the [Monopolies and Mergers] Commission any . . . . uniform requirement that every piece of material which may in any way influence its report must go to all parties or even to the opposing main parties . . . . The question in each case is whether the Commission has adopted a procedure so unfair that no reasonable Commission . . . . would have adopted it, so that it could be said to have acted with manifest unfairness".
The US adjudicatory model gives no support to the notion of general access. Most agency proceedings have no procedure for discovery at all. Contrary to assertions made by British lawyers to the House of Lords Select Committee, the Federal Trade Commission does not make its full file available to all parties. The FTC does permit parties to obtain discovery under the supervision of the Administrative Law Judge but 'fishing expeditions' are out. A few head notes from FTC dockets convey the general flavour:
"General Access to FTC Records. Good cause, that is, real or actual need was not shown for the production of confidential information in the Commission's files, since the respondent, in effect, was asking for general access to confidential investigational files merely to see whether something useful to its defence may turn up. The respondent did not show in any specific way that the material was necessary to its defense, and it did not seek any specific material relating to any specific defense.
Relying on the traditional confidentiality of the FTC's investigational files, the informer's privilege and the attorney's work product rule, and FTC hearing examiner denied production of documents contained in FTC files. Even assuming relevance of the documents sought, the examiner said, the fact that material sought by the company is not being offered in evidence by the government, doubt as to its necessity in establishing a defense was shown. The motions could therefore be denied as premature."
Even American prosecutors, whom nobody would ever consider 'neutral' or 'judicial', have the daily task in criminal cases of determining whether exculpatory material - Brady material - should be delivered to the defence. (I should perhaps spell it "defense".) Few voices are raised to protest against this procedure. Even - perhaps 'especially' is the word - prosecutors have to be fair.
In Brady v Maryland the Supreme Court had held that
"the suppression by the prosecution of evidence favourable to an accused on request violates due process when the evidence is material either to guilt or punishment."
Disclosure is however required only if the unused evidence is both favourable to the accused and material to guilt or punishment.
In US v Agurs the Supreme Court explained that
"[a] fair analysis of the holding in BRADY indicates that implicit in the requirement of materiality is a concern that the suppressed evidence might have affected the outcome of the trial."
The Supreme Court has also made it clear on several occasions that
"the prosecutor is not required to deliver his entire file to defense counsel, but only to disclose evidence favourable to the accused that, if suppressed, would deprive the defendant of a fair trial."
Attempts to obtain blanket disclosure on grounds of general prosecution 'bias' have therefore invariably failed.
The Supreme Court has also rejected as imposing an impossible burden on the government any rule that the prosecution commits reversible error by any failure to disclose evidence favourable to the accused no matter how insignificant. Even if it transpires that relevant material has not been disclosed, such failure does not call for automatic reversal. The Brady requirement is aimed at ensuring that a real miscarriage of justice does not occur:
"[a] constitutional error occurs, and the conviction must be reversed, only if the evidence is material in the sense that its suppression undermines confidence in the outcome of the trial."
Evidence is not to be considered 'material' unless there is a reasonable probability that had the evidence been disclosed to the defence, the result of the proceeding would have been different. In the American trial context this means that it would have to be so convincing that it might well have caused the jury to reach a different verdict. The test laid down by the Supreme Court in Bagley for Brady material is thus very similar to that of the ECJ (mutatis mutandis) in cases like Telefunken and Pioneer to non-disclosure of documents relied on in the decision. A decision will not be annulled for non-disclosure of documents "of secondary importance to the infringement found".
If non-disclosure of evidence actually relied on by the Commission does necessarily to lead to automatic annulment, how can this extreme sanction be the logical result for allegedly "exculpatory" material, particularly where it has not even been shown to exist?
In England the prosecution is also under a general duty to disclose documents which could be relevant to an issue in the trial or which raise a new issue whose existence is not apparent from the evidence the prosecution propose to rely on. Judges now tend to take a somewhat more robust view of defence demands for open file disclosure than did perhaps the CFI:
"It is after all for the prosecution to decide in accordance with clearly established principle what is material. That responsibility rests with them . . . . I would express the hope that those representing the defendants would not too readily seek to challenge a responsible prosecutor's assertion that documents are in his considered view not material . . . . ©ourts should in my judgment treat such applications with some scepticism and should certainly decline even to examine further documents unless the defendant can make out a clear prima facie case for supposing that despite the prosecution's assertions to the contrary the documents in question are indeed material".
For English courts, just as in the United States, the prosecution has the responsibility for deciding what is relevant and so has to be disclosed. Of course the defence are entitled to raise with the prosecution the suggestion that unused documents are material, but they may not fish. They have to be specific:
"It is open to the defence to indicate to the prosecution a defence or an issue they propose to raise as to which material in the possession of the prosecution may be of assistance, and if that is done the prosecution may need to reconsider what should be disclosed."
In R v Brown (Winston) the court referred to
"the undoubted fact that defence lawyers sometimes bombard the prosecution with requests for thousands of documents with little regard for their relevance",
as well as the need for trial judges to
"firmly discourage unnecessary and oppressive requests for discovery".
Apart from relying upon the confidentiality requirement of Article 20(2), the Commission had drawn the CFI's attention to the enormous burden on time and resources which would be entailed in checking every single one of thousands of unused documents for 'business secrets' still less the preparation of a summary of every document. The CFI however considered that:
"®espect for the rights of the defence should not be allowed to conflict with technical and legal difficulties which an efficient administration can and must overcome."
Compare the approach of English courts to arguments that fairness requires elaborate procedures to be set up. In the wise words of Sachs LJ in Re Pergamon Press:
"It is only too easy to frame a precise set of rules which may appear impeccable on paper but which may yet unduly hamper, lengthen and perhaps even frustrate . . . . the activities of those engaged in investigating or otherwise dealing with matters that fall within their proper sphere."
Courts in the United States have been equally insistent that due process does not require the creation of and adherence to complicated sets of rules and procedures:
"Once it is determined that due process applies the question remains what process is due. We turn that question, fully realising as our cases regularly do that the interpretation and application of the Due Process Clause are intensely practical matters and that "[t]he very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation"."
The US Supreme Court has identified three distinct factors which have to be considered in determining the procedural incidents required by due process in any given case. It is particularly useful when it is agreed that due process requires some additional procedural safeguards over and above those provided for in the legislation. The Court will consider and weigh: (1) the private interest that will be affected by the official action; (2) the fairness and reliability of the existing procedures and the probable value, if any, of additional or substitute procedural safeguards; and (3) the public interests including the function involved and the fiscal or administrative burdens that the additional or substitute procedural requirements would entail. The determination of the appropriate measure of due process in a particular case is thus to be seen as a complex balancing operation. The benefit of the incremental procedural safeguard proposed has to be compared with the additional cost it will entail, not only in financial, but also in practical terms.
Attitudes to Anti-Trust
Is it perhaps all a question of attitudes? There is a world of difference between the perception of anti-trust in Europe and in the United States. Many industries in Europe still seem to have a cartel culture. In America by contrast there is a compliance culture. There is simply no debate in the United States as to whether cartel participants ought to be prosecuted.
However, on our side of the Atlantic, calls still go out for the Commission's powers to be further restricted. Rarely does one hear any arguments from the Bar for the Commission to be given greater powers. Oddly enough, while the practising lawyers demand that the EU system be reformed out of all recognition, some elements closer to government propose that their own inadequate national enforcement systems be brought into line with ours! It is heartening though to see one influential legal body advocating more positive enforcement:
"Senior Law enforcement officials should publicly identify cartel conduct as a form of reprehensible conduct, comparable to fraud, embezzlement and similar forms of covert economic crime. Law enforcement authorities should state publicly their intention to prosecute such conduct aggressively.
Cartel conduct should be aggressively prosecuted as a crime. In nations in which the imposition of criminal penalties is not allowed within the existing law enforcement regime, other remedies having equivalent deterrent and punitive effect should be applied to cartel conduct. The investigative and adjudicative procedures, institutions and remedies employed for this purpose should be of the type appropriate to prosecution of similar covert economic crimes, generally including the following:
! The enforcement institution should be in the nature of a prosecutorial agency preferably within the overall jurisdiction of a public law enforcement agency rather than an economic, business, commercial or trade ministry.
! The investigative and prosecutorial techniques available to the enforcement agency should be appropriate for criminal prosecution of covert economic crime. The agency should have permanent staff, including appropriate legal and economic specialists, whose primary mission is the successful prosecution of cartel conduct.
! Cartel conduct should be punished with actual incarceration of guilty individuals and with fines set at levels that will be recognised as punitive."
But this is the American Bar Association Special Committee on International Anti-trust speaking. More typical perhaps of attitudes on our side of the Atlantic is the evidence given to the House of Lords by the Joint Working Party of the English Bar and Law Society:
"The Joint Working Party has, for some time, felt considerable concern about the Commission's procedures in contentious competition cases. In essence these concerns centre around:
! the lack of respect for natural justice and the rights of defence; and the absence of any interlocutory procedure to resolve disputes during contentious procedures so as to ensure that those rights are respected in the conduct of proceedings;
! the lack of any adequate direction and supervision over the decision-making process of the Commission, from the Statement of Objections to the taking of the actual decision. This includes the fact-finding processes;
! the lack of any independent control over many of these processes and the considerable disappointment at how the position of the Hearing Officer, as specified in his Terms of Reference, has fallen far short of what was expected when this proposal was first mooted."
The Commission's investigations under Article 14 are sometimes directly resisted. Officials have no direct powers to force their way in. A Commission decision is not like a search warrant issued by a criminal court. It cannot be executed directly. Companies know very well that there are no criminal sanctions for failing to submit to an enquiry. Passive resistance is rather more common. 'Dummy runs' are carried out in anticipation of an expected Commission investigation: documents are sometimes removed "for further examination".
Unless the Commission during the first 'dawn raids' happens to find not only one smoking gun but a whole arsenal it will probably have to drop the case. However, after the most successful Article 14(3) investigations it will still have to make further enquiries simply to fill in the gaps and complete the evidence. Article 11 requests for information are invariably met with a solid closing of ranks. Companies know that the worst they can expect for failing to reply truthfully, or even deliberately providing false information, is a small and non-criminal fine.
The Orkem judgment of the Court of Justice, even if it explicitly rejected the existence of a right of silence, can always provide an excuse for not answering the really pertinent questions.
Once proceedings are opened and objections served, everything is denied even in the face of seemingly watertight evidence. Every possible argument, is advanced. All-embracing demands for document production are made by the defence. Companies see no contradiction in insisting on the right to peruse, on an entirely speculative basis, all the internal commercial documents of their ostensible competitors which are in the Commission's possession while claiming that all their own analogue commercial records are a business secret.
Procedure is intended to ensure that justice is done. It is not an end in itself. It should enjoy no talismanic status. It is certainly not an obstacle course or trial of ordeal through which the Commission - a public law body exercising its public law function in the public interest - has to pass before reaching the truth. The very fact that appeals against Commission decisions take so long to be determined - and are then often decided on a point of procedure, so that even after going up to the Court of Justice the whole cumbersome process may well start up again - is surely in itself a cause for concern.
Back to Basics
What can be done to make enforcement procedures more efficient?
One thing is to go back to the Regulations. Regulation N. 17 and its implementing measure Regulation 99/63 laid down the basics of a fair procedure. They were short. They were admirably flexible. They also worked. The Commission should be free to act as master of its own procedure and, provided it acts fairly and objectively, not run the risk of its decisions being overturned years after the event for a supposed technical breach of some legal principle borrowed from other jurisdictions. We should 'go back to basics'.
The genuine interests of a defendant are ensured by the disclosure of all the relevant evidence. I am not suggesting we turn the clock back to pre-Hercules. If the Commission really does possess exculpatory material of which a defendant has no knowledge, it should be under an obligation to disclose it. The Commission can not and does not hide relevant evidence behind a sliding notion of confidentiality. But it must be for the Commission as a public authority to hold the balance between the two competing public interests of disclosure and confidentiality. Fishing expeditions by defendants into the business records of their competitors should not be permitted. If Article 20(2) is torn up, many sources of information would dry up.
The Hearing Officer's mandate has recently been extended. He can now decide on questions of evidence disclosure. Where good cause is shown, he could order the Commission to divulge unused material. But the applicants must be specific: they should have to identify a line of defence to which the material requested is relevant. They should also come in good time. And lastly, any decision of the Hearing Officer on disclosure should be final. It ought not to be the subject of interlocutory appeals which would only delay the procedure still further. And on any substantive appeal one would hope the CFI would be reluctant, given his disinterested role, to call his decision into question.
The Commission should also emphasise the message of the Carton Board case that cooperation with the Commission pays. The wall of silence that so often faces the Commission investigations in cartel cases should be broken. In that case, one major company which after the investigations had started (and the smoking gun was already found) gave the Commission full details of the cartel, earned a substantial reduction in the fine. Mr Van Miert has already announced that he will propose to the Commission, along the lines of the Justice Department's corporate leniency programme, a machinery by which we could give full immunity to those firms which come forward before any investigation, or at least at an early stage, and provide us with the evidence of the conspiracy.
In the slightly longer term, the question of the Commission's investigatory powers should be tackled. It is not necessary to open Pandora's Box by tinkering with Regulation N. 17. If the powers given to the Commission under Articles 11 and 14 could be effectively exercised, they could be enough. The problem is that they have no back up. Perhaps the Member States could consider passing national legislation making destruction of evidence, obstruction of an investigation and refusal to provide information or providing untrue information an offence. Such legislation should be directed at individuals. Furthermore it should be specifically provided in such legislation that, as in the United States, individuals may not invoke any 'privilege against self-incrimination' on behalf of a corporation. There is nothing revolutionary about this: similar legislation already exists in many of the national legal systems to back up the powers of an investigating agency. None of it would 'criminalise' the proceedings of the Commission or the nature of a violation under Article 85.
It would be most welcome too if private plaintiffs were to bring damages for injury caused by cartels. So far there is no reported case in Europe of such an action ever going to a full trial. The availability of treble damages action in the United States has made the legal profession aware that anti-trust is a sword as well as a shield. Given the difficulties, even the impossibility, of obtaining discovery in most jurisdictions, private suits can only be brought in Europe once the Commission has obtained the evidence and taken and published its decision.
It should also be possible to define with greater clarity the grounds on which the CFI might annul a Commission decision. A 'substantial evidence' rule on the lines of that applied in the United States to agency decisions would allow the CFI ample ground to exercise its proper functions of review.
It could also be expressly affirmed that the CFI is on points of law bound by the decisions of the senior court. This would give the advantage of legal certainty.
It might also be a salutary measure for discouraging unmeritorious applications if the CFI began to use its full jurisdiction to increase fines.
If none of this works, there is another solution. It has already been put forward by practising lawyers. It is not one I am necessarily advancing myself but it is one to which one is logically pushed by the incessant demands for greater 'judicialisation' of the procedures. It is also dictated by the insistence of some lawyers that the penalties imposed by the Commission are criminal. And it even derives some logic from the CFI's readiness (in certain cases) to act as a primary judge of fact.
As an enforcer, I would have no objection to the Commission's investigating a case, amassing and examining and marshalling the evidence and then presenting it to a specialist anti-trust Court for decision. Such a Court could determine the factual issues. It could decide the question of guilt or innocence and fix the appropriate fines. The procedure would not - or need not - involve the 'criminalisation' of the enforcement process.
I repeat that this is entirely my personal view. It does however have its advantages. The eternal arguments about the propriety of the Commission's combined function would end.
The whole emphasis of the judicial process would be changed. Instead of the Commission being thrown on the defensive in the Court as is now almost invariably the case, it would be seen as an officer of justice.
What we can all do now is change our attitudes to anti-trust. I doubt whether I qualify as one of the 'senior law enforcement officials' which the ABA Special Committee had in mind. It is heartening however that the Commission has by its firm action in recent big cartel cases underlined the anti-trust message: this sort of conduct is disgraceful and unacceptable.
In business, there should be a greater awareness of the harm done by such blatant anti-trust violations. A company's standing is surely not enhanced by being branded a price fixer. Perhaps greater consideration could be given to the personal liability of directors who involve their company in cartel agreements and expose it to fines. Shareholders and non-executive directors might have an important role to play in this respect.
Authoritative reassurance that enforcement is being taken seriously would be gratefully received. Let us condemn cartels a little more and understand them a little less.
WHAT IS THE "GIFT OF GOD"?
A Study of Ephesians 2:8-9
"For by grace are ye saved through faith; and that not of yourselves: it is THE GIFT OF GOD: Not of works, lest any man should boast." (Ephesians 2:8-9)
What is "the gift of God" which is referred to in these verses? This is a key question which must be carefully answered. There are basically two possible answers. There are many who teach that the gift of God referred to in this passage is FAITH. Others teach that the gift of God mentioned here is SALVATION.
What is "the gift of God" in Ephesians 2:8-9? Is it faith or is it salvation?
The key to understanding Ephesians 2:8-9 is to correctly identify the antecedent of the pronoun "that" [τοØτο]. Does the pronoun "that" (v.8) refer to faith or does it refer to salvation? There are those who say that "faith" is the gift of God and there are others who say that "salvation" is the gift of God.
View #1-Faith is the Gift of God
"For by grace are ye saved through faith; and this faith is not of yourselves, this faith is the gift of God, this faith is not of works, lest any man should boast" (in this case the antecedent of the pronoun is identified as "faith").
Most Reformed men understand the gift of God in Ephesians 2:8-9 as referring to FAITH. This raises some interesting questions. If saving faith is the gift of God, then how does the sinner receive this gift? Does he pray that God will give him the gift of faith? Does he hope that God will sovereignly bestow this gift upon him so that he can be saved? What must he do to have faith?
Reformed theology teaches that for a person to be saved, God must first bestow upon him the gift of saving faith. Before he receives this gift he must first be regenerated, because Reformed theology teaches that unregenerate sinners who are dead in sins are unable to believe.
Charles Spurgeon has given a good answer to those who insist that regeneration is necessary before a sinner can believe:
In our own day certain preachers assure us that a man must be regenerated before we may bid him believe in Jesus Christ; some degree of a work of grace in the heart being, in their judgment, the only warrant to believe. This also is false. It takes away a gospel for sinners and offers us a gospel for saints. It is anything but a ministry of free grace. If I am to preach the faith in Christ to a man who is regenerated, then the man, being regenerated, is saved already, and it is an unnecessary and ridiculous thing for me to preach Christ to him, and bid him to believe in order to be saved when he is saved already, being regenerate. Am I only to preach faith to those who have it? Absurd, indeed! Is not this waiting till the man is cured and then bringing him the medicine? This is preaching Christ to the righteous and not to sinners. [Charles Spurgeon, in his sermon, "The Warrant of Faith."]
Some Reformed men carry the idea of "regeneration precedes faith" to a ridiculous extreme. For example, R. C. Sproul and others teach that it is possible for an infant to be regenerated and not come to faith in Christ until years later. [For full documentation, see our study entitled, Does Regeneration Precede Faith?]
The view which insists that regeneration precedes faith is inconsistent with the clear teaching of the Bible. For example, John 1:12 does not say: "As many as have been regenerated, to them gave He the power to believe on His Name, even to those who have become the children of God." Instead John 1:12 teaches that those who receive Christ by faith become children of God (that is, they are born of God or regenerated). In a similar way John 20:31 says, "believing ye might have life." It does not say, "having life ye might believe" (which is what one would expect it to say if regeneration precedes faith). Numerous passages in the Gospel of John teach that LIFE (eternal life) is the result of believing in Christ (John 3:15,16,36; 5:24; 6:47; etc.). Reformed men teach that LIFE results in FAITH. The Bible teaches that FAITH results in LIFE. The Biblical position is that a sinner is regenerated the moment he believes on the Lord Jesus Christ. These issues are more fully discussed in our paper, Does Regeneration Precede Faith?
There is a variation of View #1 which is held by the esteemed Princeton theologian, Charles Hodge, as well as others. This is discussed in Appendix #1.
View #2-Salvation is the Gift of God
"For by grace are ye saved through faith; and this salvation is not of yourselves, this salvation is the gift of God, this salvation is not of works, lest any man should boast" (in this case the antecedent of the pronoun is identified as "salvation" which is the idea of the main verb "are ye saved").
This view is clearly reflected in the IFCA [Independent Fundamental Churches of America] doctrinal statement [Article IV, Section 1, Paragraph 6] which says, "We believe that SALVATION is the GIFT OF GOD brought to man by grace and received by personal faith in the Lord Jesus Christ." This well-worded statement makes it clear that salvation is the gift of God and this gift is received by personal faith. The gift is salvation; the receiving of that gift is by faith.
There is another view which is a variation of View #2 (which says that salvation is the gift of God) and for a discussion of this variation, see Appendix #2.
A Lesson in Greek
If you look at an interlinear Greek New Testament, you will see that the passage reads as follows: "For by grace ye are saved through faith, and this [τοØτο] [is] not of yourselves, [it is] the gift of God, not of works lest anyone might boast" (Eph. 2:8-9).
The pronoun [τοØτο] is a demonstrative pronoun. It points out the thing that is referred to. In gender it is neither masculine nor feminine, but it is neuter. It could be translated "this thing." In number it is singular. It refers to something, but not several things. In case it is nominative (the subject of the verb). "This thing is not of yourself, [it is] the gift of God."
What Does "This Thing" Refer To?
The Biblical expositor needs to correctly identify the antecedent of the pronoun, that is, to identify what the pronoun refers to.
Some might argue that "faith" is the nearest antecedent: "For by grace are ye saved through faith and this [is] not of yourselves" (Eph. 2:8). It is certainly true that "faith" is the nearest antecedent, but since there are a great number of cases in the New Testament where the nearest antecedent is not the correct one, we should be very careful before making this identification. There are other far more important considerations.
Here is the correct rule that Greek grammar demands be followed: Pronouns agree with their antecedent in gender and number. Their case is determined by their use in their own clause. [A Manual Grammar of the Greek New Testament by H. E. Dana and Julius Mantey, p. 125 (Section 135).]
This rule argues forcefully against the identification of "faith" as the antecedent because "faith" does not agree with the pronoun in gender. The pronoun "this" (verse 8) is NEUTER, and the noun "faith" (verse 8) is FEMININE. If Paul wanted his readers to understand the pronoun as referring to "faith," then there is no reason why he would not have used the feminine form of the demonstrative pronoun [which would be the Greek word αυτη]. This would have settled it. The verse would read, "For by grace are ye saved through faith, and this feminine thing [namely faith], is not of yourselves, it is the gift of God." If Paul had used the feminine pronoun then it would be very clear, obvious and indisputable that FAITH is the gift of God. However, Paul did not use the feminine pronoun.
Why then did Paul use the neuter pronoun? What is the antecedent? If Paul had wanted to refer to the idea contained in the main verb (the idea of being SAVED), then it would have been perfectly normal and appropriate for him to use the neuter gender. It would have been very natural for Paul to say, "For by grace ARE YE SAVED through faith and this thing that I'm talking about, namely salvation, is not of yourselves, it is the gift of God...." If Paul had wanted the pronoun to refer to the idea or concept contained in the verb, the neuter form would be the one to use. The pronoun "this thing" [τοØτο] commonly takes a conceptual antecedent. [Greek Grammar Beyond the Basics by Daniel B. Wallace, p. 335.]
We need to carefully think through Ephesians 2:8-9 in order to correctly identify the antecedent. We must ask, "What is Paul talking about in Ephesians 2:8-9? What is his main point?" It is obvious that Paul is talking about HOW A PERSON IS SAVED. The main idea of the sentence is found in the verb "ARE YE SAVED" [or "YE ARE SAVED"]. How is a person saved? Ephesians 2:8-9 answers this key question. Salvation is by grace. Salvation is through faith. Salvation is not of yourselves. Salvation is the GIFT OF GOD. Salvation is not of works. Paul is not giving a dissertation on faith, but he is giving a brief dissertation on salvation. SALVATION is his main subject. Faith is mentioned because you cannot answer the question "HOW IS A PERSON SAVED?" without mentioning faith. A person is saved by believing on the Lord Jesus Christ (Acts 16:31). God's gracious gift of salvation must be personally received, and it is received by faith in the Lord Jesus Christ. But the main thing that Paul is talking about in these two verses is salvation, not faith.
THE GIFT OF GOD
New Testament Usage
The Bible explains itself. We do not need to depend only on Ephesians 2:8 in order to find out what the gift of God is. There are many other New Testament passages which clearly tell us what the gift of God is. How is the expression "gift of God" used elsewhere in the New Testament by Paul and the other writers?
A study of the places where the word "gift" is used in the New Testament reveals the following:
δäρον (gift, present) neuter noun
This word is used to refer to the "gift of God" only once, and that is in the passage under consideration (Ephesians 2:8). However there are other related Greek words that are translated "gift" and these are as follows:
δωρεά (gift) feminine noun
John 4:10--the gift of God is everlasting life (compare verse 14).
Acts 2:38; 8:20; 10:45; 11:17--the gift of God is the Holy Spirit.
Romans 5:15,17--these verses speak of the gift of justification (righteousness) and life (compare verses 18,21).
2 Corinthians 9:15--this verse speaks of God's unspeakable gift which is Jesus Christ.
We should note that this word is never used of FAITH.
δώρημα (gift, present) neuter noun
This word is never used of FAITH but it is used of God's gift of salvation or justification (see Romans 5:16).
χάρισμα (a gift freely and graciously given) neuter noun
Romans 6:23--the gift of God is eternal life (compare Romans 5:15-16).
This word is never used of FAITH (except in 1 Corinthians 12:9 which is speaking of the temporary gift of miracle working faith and not saving faith).
* * * * * * *
Thus, in no other place in the New Testament does the word "GIFT" ever refer to saving faith. However, we recognize that apart from God's mercy and gracious enabling and enlightenment, saving faith could not be exercised (John 6:44,65; Romans 9:16; Matthew 11:27; 16:16-17; Acts 16:14; etc.).
We have seen therefore that there are many passages in the New Testament which speak of SALVATION (or justification or eternal life) as being the gift of God, especially in Paul's writings. In light of this, it would be much safer to identify "the gift of God" in Ephesians 2:8 with SALVATION unless there were some very obvious reasons for doing otherwise. If Ephesians 2:8 speaks of faith as being the gift of God, then this is the only place in the New Testament where Paul makes such an identification.
Since the pronoun is in the neuter gender (not agreeing with the feminine gender of the word "faith"), since Paul is talking about how a person is saved (salvation is clearly the matter being discussed) and since the New Testament elsewhere refers to salvation as the gift of God, we have good reason for concluding that salvation is the gift of God in Ephesians 2:8.
"Not of works"--New Testament Usage
"Not of works, lest any man should boast" (Ephesians 2:9). What is not of works? Is Paul saying that faith is not of works or is he saying that salvation is not of works? Here again it is helpful to do a study of New Testament (Pauline) usage:
In Romans 3:20 Paul says that justification is not of works.
In Romans 3:27 Paul says that justification is not of works.
In Romans 3:28 Paul says that justification is apart from works.
In Romans 4:2,6 Paul says that justification is not of works.
In Romans 9:11 Paul says that election is not of works.
In Romans 9:32 Paul says that righteousness is not of works.
In Romans 11:6 Paul says that election is not of works.
In Galatians 2:16 Paul says that justification is not of works.
In 2 Timothy 1:9 Paul says that God's salvation and calling are not according to works.
In Titus 3:5 Paul says that salvation is not of works.
If Ephesians 2:9 means that salvation is not of works, this would be in harmony with all of these above passages. That salvation is not of works is repeatedly taught by Paul, but in no other place in the new testament does Paul ever say that "faith is not of works." Again and again Paul says that salvation (justification) is not of works, but he never says that faith is not of works. It would be foolish to say such a thing. That faith is not of works is so obvious (or as Alford says "irrelevant") that it does not need to be said. As John Eadie has said, "you may declare that salvation is not of works, but cannot with propriety say that faith is not of works." This is why men like Charles Hodge are forced to put a parenthesis in this passage: "Ye are saved through faith (and that not of yourselves it is the gift of God), not of works" [See Hodge’s commentary on Ephesians under Ephesians 2:8.] Hodge wants to make the verse say that faith is the gift of God (because this fits in well with his Reformed theology). However, Hodge knows that Paul would never say that "faith is not of works" (see Appendix 1).
The Bible repeatedly says that we are not saved by works (see the verses cited earlier). Also the Bible repeatedly says that we are saved or justified by faith (Romans 5:1; etc.). If a man is not saved by works but by faith, then faith is obviously not a work: "but to him that worketh not, but believeth..." (Romans 4:5). Faith and works do not go together. Faith is not a work. Work is something that we take credit for. Work is something that we can be rewarded for. Work is something that we can boast about. Work is meritorious. Faith is non-meritorious. A person cannot "take credit" or "praise himself" for his faith, because faith is not meritorious (deserving of reward or honor). Faith is not something that a person can boast about. Faith does not take credit for itself. Faith gives all the credit to Christ. Faith acknowledges that Christ gets all the credit and praise and honor, for He did it all! Faith is not something "good" that a man does; it is simply a recognition on the part of man that "I cannot do any good thing, and therefore I need a Saviour." Only someone totally ignorant of the gospel and of the meaning of "faith" would ever try to take credit for faith. There is no merit in the act of believing.
To say that faith is a work is totally contrary to what the New Testament teaches on salvation. Salvation is "not of works" and entirely "apart from works" (Rom. 3:28; 4:6). Those who believe are those who "DO NOT WORK" (Romans 4:5). What then do they do? They merely REST upon the finished work of Christ who did it all and paid it all!
If Ephesians 2:9 speaks of faith as being "not of works," then this is the only place in the New Testament where Paul makes such a statement. If on the other hand the verse is saying that salvation is not of works, then this would harmonize with Paul's frequent teaching elsewhere and this would be one of many verses in the New Testament which teaches this truth.
As a practical example, think of how we share the message of salvation with those who are lost. Often we tell them that salvation is not of works. All false religions teach some form of salvation by a system of works. In our sharing of the gospel we make it clear to people that salvation is not of works and there is nothing that they can do to work for their salvation or to earn favor with God. On the other hand, we do not tell the sinner: "My friend, faith is not of works. There is nothing that you can do to believe." No, faith is something that the sinner is responsible to do. The sinner is responsible to take God at His Word and to rest his all upon the WORTH (who He is), the WORK (what He has done) and the WORD (what He has said) of the Saviour. Even though faith is not a meritorious work, it is a work that man must do: "Then said they unto Him, What shall we do, that we might work the works of God? Jesus answered and said unto them, This is the work of God, that ye BELIEVE on Him whom He hath sent" (John 6:28-29). It is something that man is responsible to do, and condemned for not doing (John 8:24; 3:18).
Saving Faith
In Ephesians 2:8, faith is not the gift. Faith is how we receive the gift. Faith is the HAND OF THE HEART that reaches out and receives that which God so graciously gives. Faith is man's response to God's gracious provision and promise. Faith is taking God at His Word and resting fully on Jesus Christ, WHO HE IS, WHAT HE HAS DONE and WHAT HE HAS SAID. What is saving faith? The hymn writer has expressed it well: "Tis so sweet to TRUST IN JESUS, [what does it mean to trust in Jesus?] → just to take Him at His Word, → just to rest upon His promise, → just to know THUS SAITH THE LORD."
Some extreme Calvinists tend to speak of faith as if it is something that man cannot do. This results in a wrong understanding of man's inability. The question the Philippian jailer asked was this: "What must I do to be saved?" (Acts 16:30). Some would answer in this way: "Nothing! You can't do anything! You are dead and totally unable to respond to God until you are regenerated. You have no part in salvation. God must do it all. You cannot exercise saving faith." This answer might harmonize with one's theological system, but there is only one problem. This is not how Paul and Silas answered the question! Paul and Silas told the jailer that there was something that he could do and was responsible to do: "BELIEVE on the Lord Jesus Christ!" (Acts 16:31 and compare how Peter answered a similar question in Acts 2:37-38).
Regardless of one's theological system, Acts 16:31 is very clear. God must do the saving; man must do the believing. The saving is something that God alone must do. The believing is something that the sinner must do. God does not do the believing for man. Even William Hendriksen (who is Reformed in his theology and who believes that faith is the gift of God in Ephesians 2:8) says, "both the responsibility of believing and also its activity are ours, for God does not believe for us." Another illustration would be the account of the deadly serpents in the wilderness in Numbers 21. Should we say that the Israelites had no part in their deliverance from the deadly snakes? Of course not! Their part was to LOOK; God's part was to HEAL. They did the looking and God did the healing.
Faith is when the sinner humbly recognizes his desperate need and acknowledges that God must do all the saving. Salvation is wholly the work of god; faith is wholly the responsibility of man. Man does not contribute to his own salvation. It is the work of God. God alone must do the saving; man must do the believing (Acts 16:31). Those who are saved have only God to thank; those who are lost have only themselves to blame. God gets all the credit for man’s salvation; the unsaved man must take full blame and responsibility for his eternal damnation. The saved person thankfully says, "I’m in heaven because of God!" The lost person must truthfully say, "I’m in hell because of me." His damnation is based, not on God’s rejection of him, but upon his rejection of God (Mark 16:16; 2 Thess. 2:10,12; John 5:40).
No one will ever stand before God and say, "I am condemned because God never gave me the gift of faith." No such excuse will ever be uttered. All men are responsible to believe. All men are commanded to believe and to repent (1 John 3:23 and Acts 17:30). God says, "Look unto Me [that's faith!] and be ye saved all the ends of the earth" (Isaiah 45:22). According to 1 Timothy 2:4, God desires ALL MEN to COME unto Himself (and coming to Christ is equated with believing on Him--John 6:35). Men are responsible to believe and to come and to repent. Men are condemned eternally for their failure to do this (John 8:24; 3:18; etc.).
D.L. Moody once said, "Some say that faith is the gift of God. So is the air, but you have to breathe it; so is bread, but you have to eat it; so is water, but you have to drink it. Some are wanting some miraculous kind of feeling. That is not faith. 'Faith cometh by hearing and hearing by the Word of God.’ It is not for me to sit down and wait for faith to come stealing over me...it is for me to take God at His Word."
According to the Apostle Paul, faith is "being fully persuaded [convinced] that, what He had promised, He was able also to perform" (Rom. 4:20-21). God has promised to save all those who come unto Him through Christ (Heb. 7:25), and the man of faith is fully persuaded and convinced that God will do this. Notice also that Romans 4:3 and Romans 4:5 speak of "his faith" (Abraham's faith) not God's faith. A study of the verb "believe" in the New Testament reveals that the subject of the verb is man (it is always men or persons that do the believing) and the verb is most often used in the active voice, which means that it is men, women, boys and girls who must perform the action of the verb. People must do the believing. God holds them responsible for whether or not they do this.
The IFCA doctrinal statement sums it up well: "We believe that salvation is the gift of God brought to man by grace and received by personal faith in the Lord Jesus Christ." According to this statement, it is SALVATION not FAITH which is the gift of God. This gift of God (this gracious salvation) is received in only one way: by personal faith in the Lord Jesus Christ.
What Difference Does It Make?
What is wrong with saying that FAITH is the gift of God? Does it make any real difference? What are the practical implications of saying such a thing?
I would recommend an article by Roy L. Aldrich entitled "The Gift of God." [Bibliotheca Sacra, July 1965.] The author convincingly shows that the interpretation of Ephesians 2:8 which says that FAITH is the GIFT OF GOD leads to a hyper-Calvinistic doctrine of faith, which in turn leads to an unscriptural plan of salvation. For example, Shedd says: "The Calvinist maintains that faith is wholly from God, being one of the effects of regeneration" [Dogmatic Theology, Vol. II, p. 472]. This results in a strange plan of salvation. According to Shedd, because the sinner cannot believe, he is instructed to perform the following duties: 1) Read and hear the divine Word; 2) Give serious application of the mind to the truth; 3) Pray for the gift of the Holy Spirit for conviction and regeneration [Dogmatic Theology, Vol. II, pp. 512-513].7 Arthur Pink agrees with Shedd saying that the sinner is to "ask God...to bestow upon him the gifts of repentance and faith" (The Sovereignty of God, pp. 198-199). Here is Roy Aldrich's excellent comment: "If the sinner is so spiritually dead that he cannot believe, then how can he hear the divine Word, give serious application of the mind to the truth and pray for the gift of the Holy Spirit? The extreme Calvinist deals with a rather lively spiritual corpse after all...The tragedy of this position is that it perverts the gospel. The sinner is wrongly instructed to beg for that which God is already beseeching him to receive. He is really being told that the condition of salvation is prayer instead of faith" [Bibliotheca Sacra, July 1965, p.249].
Another illustration of this is from the pulpit of Dr. John MacArthur, a very popular Bible teacher in America. Dr. MacArthur believes and teaches that faith is a gift of God. [See MacArthur’s major commentary on Ephesians, p. 61 and see also his major commentary on Romans 1-8, p. 55 and the book Faith Works, pages 24, 43, 69, 149, 185.] Such teaching has some very practical implications and it will affect the way a person presents the gospel.
If faith is a gift of God, THEN HOW DO I GET IT? Do I do nothing and hope that God will sovereignly bestow it upon me? Or, do I cry out to God and pray that He will give me the gift of saving faith? Dr. MacArthur apparently holds to this second option. At the end of one of his messages he gave a salvation appeal and said the following: "Faith is a gift from God...it is permanent...the faith that God gives begets obedience...God gave it to you and He sustains it...May God grant you a true saving faith, a permanent gift that begins in humility and brokenness over sin and ends up in obedience unto righteousness. That's true faith and it's a gift that only God can give, and if you desire it pray and ask that He would grant it to you." [Tape GC 90-21 on Lordship salvation, last part of tape, comments made during the closing invitation]
Notice carefully what MacArthur is doing. He is not telling the sinner to believe on the Lord Jesus Christ (Acts 16:31), but to PRAY and ASK GOD to grant the GIFT OF FAITH! This perverts the gospel of Christ by making the condition of salvation prayer instead of faith! Sinners are commanded to believe on Christ. They are not commanded to pray for the gift of faith.
* * * * * *
Ephesians 2:8-9 is not complicated. It was one of the first passages that I memorized as a new believer. I always understood it to mean that salvation was God’s gracious and free gift, and that faith was how we received this gift. It was not until I began reading certain theologians that I became aware of the other interpretation. May God help us not to complicate and corrupt the simplicity of the gospel message, a message so straightforward and simple that even a child can understand it.
* * * * * * *
Appendix #1
View #1 says that the gift referred to in Ephesians 2:8-9 is faith. There is a variation of this view which says that the gift of God is faith, but unlike View #1 it says that salvation, not faith, is "not of works." This is the view of Charles Hodge [See Charles Hodges’ commentary on Ephesians, under Ephesians 2:8-9] and others. These men realize that Paul would never have said that "faith is not of works" (for reasons which have been already been discussed in this paper), and therefore they are forced to place an awkward and unnatural parenthesis in the middle of these verses. This view could be stated as follows:
"For by grace are ye saved through faith (and this faith is not of yourselves, this faith is the gift of God), not of works [that is, this salvation is not of works] lest any man should boast."
Hodge is a Reformed theologian and is quite comfortable saying that faith is the gift of God. He is very uncomfortable saying that faith is not of works. The reason for the parenthesis is that men like Hodge are aware of the difficulty of saying that "faith is not of works." Charles Hodge is correct in saying that salvation is not of works; he is wrong in saying that this passage teaches that faith is the gift of God.
Appendix #2
View #2, as discussed in this paper, is the view which understands the gift of God in Ephesians 2:8-9 to refer to salvation. There is a variation to this view which says that the entire salvation process (including faith) is the gift of God. An IFCA position paper states it this way: "he [the sinner coming to Christ] realizes that the totality of the salvation process is a gift of God, including the grace of God and his own choice to believe (Ephesians 2:8-9)." [This quote is taken from an IFCA position paper, November 1990, entitled, Salvation by Grace through Faith.] John Calvin also held this view. Calvin did not believe that the pronoun referred to "faith." He believed it referred to "salvation by grace through faith" (to the entire salvation process, including faith). Is salvation the gift of God? This view would answer "yes." Is faith the gift of God? This view would again answer "yes" because faith would be considered part of the totality of the salvation process. Thus, according to this view, not only salvation, but the reception of salvation ("faith") would be the gift of God.
This view confuses the gift with the reception of the gift. [Notice how Romans 5:17 makes a clear distinction between the gift and the reception of the gift.] It is interesting that the IFCA doctrinal statement, in contrast to the IFCA position paper, makes a clear distinction between the gift and the reception of the gift: "We believe that salvation is the gift of God brought to man by grace and received by personal faith in the Lord Jesus Christ." But in the IFCA position paper which was written in order to clarify "saving faith" (in light of the Lordship salvation controversy) this distinction is lost. In the IFCA position paper faith is included as part of the gift (part of the total salvation process). This leads to an obvious problem. Let me put myself in the place of the sinner. If faith in Christ is itself God's gift, then how do I receive this faith? Instead of asking, "What must I do to be saved?" I must now focus on the question "What must I do to believe?" If faith is God's gift, then how do I get this gift? Do I pray to God and ask for the gift of faith? Do I sit back and do nothing and hope that I am one of the chosen ones who will be given this gift? How do I get the gift of saving faith? It is all very confusing and it takes away from where the focus of the sinner ought to be, which is upon Jesus Christ and Him crucified.
Appendix #3
There are some who give another explanation for the neuter gender being used. Mr. Stephen Parker, for example, argues that the pronoun is attracted to the neuter gender of the word "gift," and he cites Mark 15:16 as an analogy. [See Stephen Parker’s booklet, Calvin’s Specs Examined and Re-examined, pages 9-10.] It is true that attraction does take place in Mark 15:16 as Mr. Parker correctly points out. This is one of those rare cases where the pronoun agrees with the PREDICATE when the relative clause is an explanation. Another example would be in Ephesians 6:17: "the sword (feminine) of the Spirit, which (neuter) is the Word (neuter) of God" (the antecedent is "sword" but the pronoun is attracted to the neuter gender). However, we do not really have the same thing in Ephesians 2:8. First of all, in Mark 15:16 we have a relative pronoun, but in Ephesians 2:8 we have a demonstrative pronoun [τοØτο]. In Mark 15:16 the verb is explicitly stated, but in Ephesians 2:8 the verb is understood (the words "it is" are in italics). The greatest problem, however, is that in Mark 15:16 the word "praetorium" comes right after the word "hall" but in Ephesians 2:8 there is a whole additional phrase which comes between "that" and "gift," and this would make attraction much less likely: "...through faith and that NOT OF YOURSELVES, it is the gift..." In other words, in Mark 15:16 there is only one word (the verb εστιν) which comes between the pronoun and the word to which it is attracted. In Ephesians 2:8 there are five Greek words which come between the pronoun and the word which Mr. Parker claims it is attracted to. This explanation seems highly unlikely, and I did not find this argument in the respectable commentaries that I consulted, even among those men who believe that the antecedent is "faith." It could also be noted that Mr. Parker is wrong when he says that the words "hall" and "which" in Mark 15:16 do not agree in number. They do agree. They are both singular in number.
--George Zeller (1/80; revised 6/91, 8/98, 5/07)
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