Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Competition policy as promoter of innovation is topic of Almunia address, (Sep 16, 2013)

By Tobias J. Gillett, J.D., LL.M.

Joaquin Almunia, European Commission (EC) Vice President for Competition Policy, urged the use of competition policy to increase innovation in Europe in a speech before the International Bar Association’s 17^th Annual Competition Conference in Florence, Italy on September 13.

Almunia opened his speech, titled “EU Competition Policy and Innovation,” by noting the two strategies taken by policymakers in businesses in responding to “innovative products, processes and business models” that challenge established companies and disrupt entire industries,” one he identified as “openness” and the other he dubbed “protectionism.”

“The business practices and the policies that can foster innovation have nothing to do with the recipe offered by protectionists, which is conservative, static, and backward-looking,” Almunia declared.

He then proceeded to discuss the EC’s current efforts to reform state aid policy to align it with the EC’s Europe 2020 growth strategy. He noted that the “main objective” of the EC’s new guidelines for assessing national Research, Development and Innovation schemes “is to increase the level of R&D&I activities in the EU, while limiting distortions to competition.” He set forth three significant aspects of the new guidelines, including (1) “simpler and clearer rules to build a regulatory environment that will encourage the collaboration of public and private actors”; (2) the inclusion of new categories of aid; and (3) higher notification thresholds “to exempt small aid measures from notification,” thus increasing legal certainty and reducing the administrative burden.

Almunia noted that effective competition can spur innovation, and reviewed the EC’s targeting of companies employing anti-competitive practices, most prominently its campaign against cartels. He cited the EC’s sanctioning of a cartel for TV and computer tubes, which “artificially extended the lifetime of an outdated technology and hampered the diffusion of its replacement.” He also referred to the EC’s imposition of fines on five producers of wire harnesses for automobiles in its ongoing investigation of collusion in the automotive parts industry, which he described as historically “highly innovative.”

Almunia then transitioned from discussing the EC’s efforts to curb anticompetitive practices to its efforts promote innovation through competition policy, beginning with its action against major players in the e-books market, in which the EC closed its investigation after Apple and five of the world’s largest publishers “pledged to change their potentially illegal practices quite radically.” He observed that in cases such as the e-books case “it is often better to take quick and decisive action rather than to follow the much longer procedure that leads to the imposition of fines.” Almunia also referred to the EC’s current investigation of Google’s search practices, noting that he would have to decide in the coming weeks whether to use Art. 9, and transform Google’s proposals intro legally binding commitments, “or go through the Art. 7 route towards a SO and a possible negative decision.”

Almunia noted another approach to competition policy in his discussion of the EC’s actions with respect to the payments market, the proposal of new EU laws following years of antitrust enforcement. The EC’s revised Payment Services Directive would “explicitly allow non-bank players in internet and card payments to operate in competition with banks,” following the EC’s now-dropped case against the European Payment Council. The EC’s regulation on interchange fees for card-based payments also “takes account of two decades of proceedings involving card companies. These regulatory efforts would counter existing business arrangements that “stifle innovation,” according to Almunia.

Misuse of intellectual property incorporated in standard-essential patents could also limit innovation, in Almunia’s view. He observed that the use of injunctions against companies that are willing to license patents on fair, reasonable, and non-discriminatory (FRAND) terms by companies that have pledged to license their patents on FRAND terms in order to have them be incorporated into a standard “can clearly be anti-competitive as it prevents innovative products from coming to the market to the detriment of the general public.”

The misuse of intellectual property in the pharmaceutical sector has also attracted the EC’s attention, Almunia noted. He cited its recent actions against AstraZeneca, for giving misleading to patent offices, thus extending its exclusive rights and delaying the sale of generic alternatives, and against Lundbeck and other companies “for concluding pay-for-delay agreements under the guise of patent settlements.”

Finally, Almunia addressed the EC’s efforts toward creating a single market for telecommunications in Europe. He noted the EC’s approval of a new “telecoms package” last week, but observed that “there is still a long way to go.” Mergers, investments, and acquisitions proceed across the EU and even globally, but the relevant markets remain national, he observed, contending that “a genuine Single Market for telecoms would give a much needed boost to our economy and would help European integration.”

He described three aspects of a genuine single market for telecommunications, including (1) customers could obtain service from any EU provider, regardless of location; (2) operators could offer services competitively throughout the EU; and (3) customers would not have to pay extra charges for intra-EU calls, or for roaming within the EU, a provision incorporated in the regulation the EU approved this week. Almunia observed that the greatest obstacles “against the creation of a single telecom regulator at EU level come from market participants and national capitals.” He warned market participants against creating artificial barriers to intra-EU trade, and urged member states “to commit to the goal of achieving a single market in mobile telecoms.”

“Now that an economic upturn looms on the horizon, we need more than ever the firms that can challenge established companies and disrupt markets,” Almunia concluded. “We need to make room for the more competitive business models they are developing and the new products and services that they can bring to the market. Above all, we need the invigorating push of innovative firms to improve economic dynamism and boost productivity in Europe.”

News: Antitrust