Reports

EU Competition policy

12 October 2007


Philip Lowe, the European Commission’s Director-General for Competition, said the discussion at the June 2007 EU summit about competition in the context of the new Reform Treaty was a “wake-up call” to governments to acknowledge the important role it played.

The debate at the summit ensured that the legal framework for a strong EU competition policy remains intact in the treaty. He also pointed out that existing EU treaties tended to talk about ‘activities’, rather than ‘objectives’, but he believed competition should be accepted as an explicit political objective.

An important aspect of DG Competition’s work is to examine the role played by state aid, ensuring that it not only benefits consumers but also does not undermine the level playing field between and within EU Member States. In a globalised world, all governments want to create the most favourable environment possible for their countries’ business activities, but Mr Lowe insisted that this could be done without public subsidies, by offering training and education or investing in infrastructure.

Another key issue is where the boundary lies between public services and commercial economic activities, as there may be cases where it is legitimate for a Member State to designate and protect certain activities as ‘public services’.

Competition policy delivers something that is valuable for everyone in society, said the Director-General, as it delivers direct benefits to consumers, companies and suppliers. Competition law must be strongly enforced so that competition operates in a healthy environment, giving consumers more choice and maintaining the quality of goods and services produced.

At the same time, there may be cases where it is better to use regulation, or sectoral legislation, to ensure competition. For example, in the energy market, following a DG Competition investigation into why markets were not working for consumers, it was decided that there needed to be a clear distinction between suppliers and distributors to open up markets and make them more competitive. This proposal had been included in the Commission’s new energy package

Mr Lowe also pointed to DG Competition’s work on international roaming charges, where competition law had been enforced as the prices charged seemed to be very high. This had involved applying credible benchmarks to decide on a reasonable level of charges and, while legislation was used in this case, Mr Lowe hoped that in the long run it would not be necessary.

In general, he argued, it is better to look at competition problems from a “holistic view point” and to begin work “up-stream” to get markets to work better, rather than focusing on individual cases.

Mergers and other restrictive practices

DG Competition also examines the operation of mergers and other restrictive agreements. Recent changes in legislation mean that it is now easier for the Commission and national governments to work together on investigations.

 

Referring to controversial cases such as the successful action brought against Microsoft, he said the Commission was “satisfied” with the results, and was waiting to see how the Court’s ruling would be implemented. Mr Lowe added that he did not believe that the ruling would have an adverse impact on innovation.

DG Competition is also considering reforming its procedures for investigating competition, said Mr Lowe. At present it is not able to investigate national markets in a systematic way as it has to rely on information proffered by the Member State itself.

Musing on whether state aid in Europe was bad for competitiveness in a global economy, Mr Lowe said there was a way of aiding companies to become more competitive through public support, but this had to be assessed carefully to ensure it did not distort the market.

Overall, he said, DG Competition has “never been so active”. Each year, it deals with about 400 merger cases, a further 400 state aid certifications and around ten decisions on cartel enforcements. In general, its emphasis is on arguing the case for competition policy by relating it to the benefits to consumers and to society in general. This is a debate that needs to be continued.