Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Almunia Discusses How Competition Policy Can Influence Growth of European Economy, (Mar 1, 2013)

By Tobias J. Gillett, J.D., LLM.

Joaquin Almunia, Vice President of the European Commission responsible for Competition Policy, delivered a speech at the European Competition Forum in Brussels, Belgium yesterday, outlining his views on competition policy’s role in improving the European economy.

Almunia began his speech, titled “Relying on the Single Market for the Future of Europe,” by noting the “basic idea” running through the topics discussed at the forum, that “[w]e must deepen and refine our understanding of the power of an open economy and efficient markets as a means to bring prosperity and social welfare to our people and as one of the foundations of our democracies.”

He observed that the current state of the economy had led the European Commission (EC) to focus on three areas: (1) updating policies and tools, (2) improving the efficiency of the EC’s system, and (3) staying vigilant against illegal business practices.

Updating policies and tools. As an example of EC efforts to update its policies and tools, Almunia pointed to the EC’s plan to modernize the rules of the state aid regime, in particular to align it with the Europe 2020 growth and jobs strategy and other policies designed to improve the resilience of European economies.

Improvement of efficiency. The competition official illustrated the EC’s efficiency improvements by referring to the EC’s antitrust system, and identified three principles that guide it: “transparency, accountability and the constant drive to fine-tune our system.” Specific examples included adopting best practices for antitrust procedures, strengthening the role of hearing officers, and clarifying the relationship of public enforcement with private enforcement, including legislation he intends to introduce to provide a “legal framework in which public and private enforcement can reinforce each other.”

Enforcement of competition law. He expounded on his final category, enforcement of the competition law, by referring to a range of examples that demonstrated the EC’s “independence and impartiality.” These included the €1.47 billion fine on seven international groups that conducted a cartel in the cathode ray tube market; the remedies imposed on Apple and four international publishers in the e-book market; the on-going investigations of the pharmaceutical industry, Gazprom, and financial institutions involved in the LIBOR scandal; and the EC’s control of state aid to banks.

Almunia also found evidence of the EC’s “independence and impartiality” in its control of mergers, including its recent rejection of a merger between RyanAir and Aer Lingus. He defended the EC’s merger control against criticisms that it is too strict and their market definitions too narrow to account for global competition, describing the EC’s method of determining “alternative suppliers that European customers can turn to” and then defining the markets on that basis as global or national. He argued that the EC’s record since February 2010 of 826 unconditional clearances, 36 remedies, and 4 negative decisions showed the EC would not prevent European companies from scaling up.

The current European Union needs to re-launch growth and improve competitiveness, coupled with the increasing interconnectedness of present economies, required “a pro-active approach, not a defensive one,” according to the official. He argued that competition was a necessary “pre-condition,” with competition policy helping “to promote innovation and improve our chances of success vis-à-vis our international partners.”

To illustrate his point, Almunia discussed the EC’s work in the mobile telephony markets, identifying several concerns with competition in those markets, including the separate regulatory environments in each country, the low number of network operators in many countries, and the high barriers to entry. He indicated his support for a single market for telecommunications, but noted that 80% of mobile-phone subscriptions were with four European groups and expressed a concern that these groups “could play an asymmetric game in which they can move in the single market without restrictions whereas their users and business customers cannot escape from their national borders.”

Competition policy could “improve competitiveness by lowering price-inputs,” Almunia suggested. As examples, he pointed to the freight forwarding companies fined for operating a cartel, and EC’s prohibition of a proposed merger between the delivery companies UPS and TNT.

He argued that competition control presented an opportunity to “re-launch growth and create jobs,” identifying a variety of benefits from that control, including its ability to prevent competition problems from becoming entrenched; its market-wide, structural impact; its promotion of fairness and social justice; its work on behalf of consumers and customers rather than any particular business; and its ability to support other public policies to aid growth.

In relation to this final point, the competition chief discussed efforts at state aid control, to promote competitiveness across Europe. He indicated that EC’s reforms in this area would assist states in reducing and targeting their expenditures. The new state aid regime would work to address “genuine market failures without distorting competition in the internal market.” Other reforms he reviewed included market information tools to permit the EC to obtain information from industry; efforts to address the disparate ability of different states to spend on state aid; and attempts to introduce more transparency into the process.

News: Antitrust