Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Almunia discusses significance of competition policy for Europe’s economic integration process, (Jan 17, 2014)

By Linda O’Brien, J.D., LL.M.

Robust enforcement of European Union competition law is necessary to develop the internal market, improve productivity, and promote growth in Europe, Joaquin Almunia, Vice President of the European Commission for Competition Policy, said today in an address before the College of Europe’s Global Competition Law Centre Conference in Bruges, Belgium.

In a speech, entitled “Competition policy for the post-crisis world: A perspective,” Almunia set forth the reasons why pro-active enforcement of competition law will reinforce the foundations of a credible and sound EU strategy for growth.

Before the recent economic crisis, critics of the role of competition policy were motivated by perceived threats to competition posed by emerging economies or by resistance to the creation of an EU Single Market in certain areas, such as energy and financial services. Additional concerns have been added as a result of the economic crisis about deindustrialization and the inefficiencies of financial markets. In Almunia’s view, the concerns are wrong and can represent a danger for the future of European integration. “What Europe needs today is exactly the opposite of laxer competition control and protectionism,” he said.

In a global economy, a credible plan for higher and sustainable growth in the EU must rely on the internal market as a basic ingredient so that Europe is not left behind by more vigorous and dynamic competitors. Realizing the full potential of the Single Market is of the essence and any move toward protectionism is a recipe for disaster, Almunia noted. Competition enforcement is absolutely necessary to remove the barriers that still encumber many sectors, particularly where national regulations hinder growth possibilities and competitiveness.

Sectors where national barriers exist include telecommunications, online transactions, energy, banking, and financial sectors. Although temptation by governments to protect their national champions is strong, competition policy is already contributing in practice to the establishment of the internal market for key sectors. Competition policy works for open and fair pan-European markets, fights cartels, ensures that mature industries do not live off monopolistic rents, and keeps governments from supporting failing companies. Effective competition contributes to productivity, and therefore to economic growth, Almunia observed.

Antitrust and cartels. In discussing how different instruments of competition policy contribute to the goal of enhancing growth across the EU, Almunia set forth three types of action undertaken by the EC Director-General (DG) Competition: (1) corrective action for antitrust practices, including cartels; (2) preventive action in the review of proposed mergers; and (3) policy action in the state aid domain. A main priority of the DG Competition is to fight against cartels, which impose higher prices on consumers, limit competition among rivals, and raise barriers to new entrants to the market. The ability and incentives of firms to grow push them to invest and innovate, and are key drivers of economic growth. Obtaining a dominant position through internal growth is not a competition issue in itself. What EU competition law prohibits is the abuse of a dominant position, Almunia observed.

Merger control. Almunia noted that, through a careful assessment of proposed mergers, the EC can ensure that firms do not create market structures with excessive market power. In its review of mergers, the focus remains on the impact of the merger on regional markets rather than EU-wide markets, even where no national trade barriers exist.

State aid. Government support of underperforming companies upsets the entry and exist process, and hampers productivity. State aid can foster growth and strengthen the internal market when it is well designed. The EU is responsible for the control of all forms of public support, including taxation. Its revision of guidelines launched in 2012, with the state aid modernization strategy, ensures that state aid will foster entry, innovation, employment, access to finance, and environmental protection, according to Almunia.

Strong competition policy is one of the best tools EU authorities should use to create better conditions for investors and innovators, increase productivity levels, and raise European competitiveness. Better-functioning markets that reconcile the market economy with the aspirations of EU citizens can be achieved by completing a real Single Market at the EU level. Also, a simple but robust state aid control can preserve a level playing field and make the best possible use of scarce public resources.These are the objectives of EU competition policy which are also the essential elements of a sound growth strategy, Almunia concluded.

News: Antitrust