Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Almunia discusses the role of financial market competition in EU economic recovery, (Feb 7, 2014)

By Linda O’Brien, J.D., LL.M.

The internal market and implementation of European Union (EU) competition law are core elements of public policies that will put the EU economy back on track after years of recession, said Joaquin Almunia, Vice President of the European Commission for Competition Policy, in a February 6 address before the UCL Economics and Finance Society at University College London.

Almunia began his remarks, entitled “Opening a Path for Recovery: Competition in Financial Markets,” by stating that a competitive and open internal market has been a boon to Europe’s businesses and consumers and crucial to bringing Europe closer together socially and politically. Although the economy has shown signs of recovery in recent months, unemployment—the consequence of the long economic downturn—is a concern, Almunia said. There are 26.5 million people in the EU who are looking for a job and cannot find one. Such a high jobless rate casts a shadow on the future of the EU. To prevent an impending disaster, Almunia pointed out that public policy needs to create the best possible conditions for sustainable growth, which requires a sustained reform strategy.

There are two main levelers that the EU can use to help realize the full growth potential of the internal market. First, the EC, European Parliament, and Council can agree on legislation to tear down remaining barriers. As an example, completing the Single Market in financial services, the digital economy, and energy markets should be top priorities. A call for protectionism to raise barriers around the Single Market or protect national interests over common European interests would be a mistake, in Almunia’s view. The foundation for a sound growth strategy for all Europe should be based on a stronger, deeper, and competitive Single Market.

The right approach would be to continue to open up markets in banking and finance, according to Almunia. However, financial markets remain fragmented across Europe and this prevents optimal allocation of capital across national borders. Europe lags behind its global competitors, which causes difficulty for start-up businesses and innovation.

The competition department of the EC is active in three domains: (1) corrective and deterrent action taken in antitrust decisions; (2) preventive work in reviewing proposed mergers; and (3) State aid. In the antitrust area, the most straightforward type of infringement is the pursuit of cartels. Cartels harm economic activity by forcing consumers and client companies to pay above-market prices. In the area of merger control, the EC’s responsibility is to ensure that the resulting entity does not have too much market power. State subsidies and other forms of public support, are often important to fix market failures, foster growth, and strengthen the internal market, Almunia stated.

In assessing of the state of competition in banking and financial services, Almunia observed that his experience as European Commissioner suggested that some individuals and organizations find it hard to “kick bad habits,” despite the EC’s efforts to better supervise and regulate these industries. The financial world needs a profound culture change and “every player in this sector should recognize that they too have a corporate social responsibility,” in his view. A goal should be to bring together the many efforts taken by public authorities around the world to discipline the sector and provide more stringent rules. Financial markets remain a top enforcement priority and the EC will continue to be alert to keeping financial markets open, competitive, and transparent, Almunia concluded.

News: Antitrust