European Commissioner for Competition Policy
Hungary and the EU: better together
Address at conference organised by the Hungarian Competition Authority - GVH
Budapest , 25 th November 2009
L adies and gentlemen,
I firmly believe the EU is a family and that families stick together. So there are many people who will want to write reports about how newer Member States are integrating with the EU, what changed after 5 years and 10 years and so on.
But as we have those discussions, we need to remember the most important thing: families stick together in good times and bad.
They help each other with problems, and they don't have different categories of membership. I have kept that in my mind as we deal with the financial and economic crisis which – like any crisis – tests the family bonds.
So - that is the spirit I want to bring to discussions about the relationship between Hungary and the EU.
It doesn't matter when Hungary joined the EU - the preparations date back to 1998 after all – what matters is the commitment we still have to each other.
Each family member might have different responsibilities, but everyone is equal.
And overall, I think our relationship is getting stronger, so that is indeed a very good sign.
Building the competition culture
The good relationship between Hungarian authorities and the European institutions is no surprise, however. Hungary has been part of worldwide competition trends for the past 20 years.
That trend has seen virtually every significant economy accept the need for competitive markets, and to establish a formal regime to make sure that competition exists.
But unlike many economies, Hungary had a tradition dating back to 1923 of acting against unfair competition. To have a cultural background in these issues is important; it helps Hungarians to be excellent advocates of a competition culture.
And that is what is needed as the legal base and enforcement go through their development stages.
GVH is making that progress. From no involvement in the privatisation period, to stronger and stronger competition laws and involvement in the wider liberalisation of Hungarian markets, the action is there for everyone to see and debate.
This has been excellent preparation for the discipline of the joining the EU Single Market, and involvement in groups like the European and International Competition Networks (ECN and ICN).
I think the OECD's choice to set up its Regional Centre for Competition in Budapest is a sign of how seriously Hungary's efforts are taken internationally; and of your ability to positively influence the competition culture in Central and Eastern Europe and surrounding areas.
Beyond this region, since Hungary's accession to the EC, the GVH has been widely recognised as a highly dedicated and pro-active national competition authority.
Your ECN working group participation has been very welcome, and your investigative record is impressive. Recent work in cartel investigations and forensic IT is something others are really taking notice of.
Your forward thinking approach has been demonstrated by your domestic cases on Multilateral Interchange Fees against MasterCard and VISA.
For me, I am especially pleased to learn that you were able to impose fines, not just on MasterCard and VISA but also on 8 Hungarian banks who agreed to charge the same interchange fees for card transactions.
I say this not because I have a problem with banks making money, but because I strongly believe that no sector of the economy should be exempt from the competition rules.
Your recent decision sends a clear message: banks are not above the law and if they behave anti-competitively, you will pursue them. I couldn't have done better myself!
Energy Market Unbundling
European competition law is having a positive impact in Hungary. Under the EC Merger Regulation we have acted in several merger cases to make sure consumers are not harmed by energy company power plays. After all - why should aged pensioners or poor citizens suffer from a corporate deal?
Take the unbundling remedies offered in the E.ON/MOL merger case back in 2005. These are a good example of how the European Commission will step in to address a market failure, and to get that market working better.
In this case, our intervention really helped liberalisation, as it enabled MOL to propose the New European Transmission System, for the creation of a secure and efficient regional energy network.
European competition law reforms 2004-2009
As this example shows, the reforms to European competition law introduced over the last five years have focused on adopting an economic approach to make markets work better.
Effective enforcement of Articles 81 and 82 and Articles 87-89 results in clear benefits for consumers and taxpayers as well as businesses.
It is estimated that by focusing our enforcement efforts on cartel busting, we have saved European consumers over €7.6 billion between 2005 and 2007 alone.
We don’t have an exact figure for Hungary – but it is obviously hundreds of millions of euros.
Businesses are also benefiting from legal certainty and transparency in our improved procedures, for example under Regulation 1/2003 and the General State aid Block Exemption Regulation.
We in turn, of course, need all market players to act in an open and transparent way so that we can make real and sensible decisions that have the necessary impact on markets.
I believe that the way we made these reforms was also important. We did not wait for competition problems to find us. We actively looked for evidence of problems; tried to anticipate issues and trends.
In doing so, we created a new culture – a proactive competition culture. Our use of sector inquiries has been a key element of this pro-active approach.
We’ve had to reorganise DG Competition to make these reforms work, creating case teams for each market and sector. And, we've hired economists, lots of economists.
We've also realised how important it is to make sure that the public understand what competition policy is about, and so we've also created a dedicated consumer unit to help spread the word.
In summary: we have shown that competition affects everyone and that communication matters.
The interface between competition and regulation
Competition is not a technical or isolated field. I have made sure that my Commission colleagues understand the need to think about how competition impacts on their policies.
Now, no-one doubts now that competition policy and industrial, trade and consumer policy are linked. They depend on each other.
The EU's recent reforms have helped us to appreciate how regulation and competition law are complementary policy tools.
We want to ensure that the Single M arket is a level playing field for all businesses operating within the European Union.
To do this, we need to harmonise our legal and regulatory environment and over time liberalise those sectors of our economy which have in the past been dominated by state owned monopolies.
Achieving this requires both smart regulation and strong competition enforcement.
Finding the right roles for regulation and competition enforcement in making markets work better is not easy! It requires constant dialogue between regulators and competition enforcers.
It also takes a certain amount of flexibility, as relationships with regulators differ from sector to sector, and the balance between ex ante regulation and ex post enforcement depends on the state of each market.
But our experiences have shown that the principles remain the same: regulation and competition law only work well when they work together and that to maintain a level playing field, no sector of the economy can be exempt from these rules.
In times of crisis, it is especially difficult to maintain an efficient Single Market because there is far greater political pressure on Member States to adopt protectionist measures.
But we have to maintain a strong line on enforcement. We have to say no to protectionism, so that the Single Market does not become fragmented along national lines.
I would hate for emerging Hungarian businesses to suffer, for example, because one large Member State put it's own short –term interests ahead of the greater European interest.
Our experience has shown that effective competition law enforcement is the key to maintaining the Single Market.
So we shouldn't allow the rules to be pushed aside in times of crisis. In fact, ensuring compliance with the Commission's state aid rules has shown itself to be the one way to be sure that Member States aren't propping up inefficient firms or sectors of the economy and leaving consumers and taxpayers with the bill.
My team and I have been working very hard over the last year to review the temporary state aid measures notified by Member States.
These measures mainly took the form of state guarantees or recapitalisation measures to banks, and in cases where the measures clearly complied with our guidelines, we were able to approve them very swiftly.
These temporary measures have avoided the collapse of the EU's banking and financial system and have been instrumental in making sure that lending to consumers and small and medium sized enterprises remained possible.
Every element of this crisis effort matters. The aid element of crisis support to business is at least €220 billion, and the total liabilities governments have taken on are around one trillion euros.
Every taxpayer would rightly expect that we work night and day to protect that investment.
The route to recovery
Of course, State support has to be temporary, and can only be granted to businesses that were fundamentally sound before the start of the crisis.
So for me, any rescue measures must be followed by restructuring so that we can be sure that we maintain a level playing field within the Single Market.
This is fundamental, as it is the only way to ensure that those firms that did not receive state aid are not put at a competitive disadvantage to those that did.
But restructuring is also about building a better future for the EU. We need to be sure that our banks and our businesses are not tied to Member States, that they are efficient and that they are strong enough to withstand future market shocks.
We need to encourage businesses to adopt innovative approaches to pull themselves out of the crisis as this will create new jobs and growth.
This is where we want to encourage Member States to invest in the future.
We want to promote s tate aid in the form of grants and loans to new small businesses and we want to encourage governments to stand behind companies investing in environmentally friendly technologies.
These measures are vital for Europe's recovery and to improving the EU's global competitiveness.
It's been an exciting 5 years for EU competition law and a great 5 years for the GVH. You've worked hard to embed the principles of EU competition law in to Hungarian society and you should be proud of what you have achieved so far.
Good progress has been made, but our work is not yet done.
Hungary needs to create stability and growth so that it can join the Eurozone if it wishes, which means that the steps it takes now to recover from the crisis are all important.
Ensuring the right regulatory settings and maintaining effective competition law enforcement in this environment is a challenge, but one that we must face.
Take heart that you are not alone in this task and know that you can count on the support of your European brothers and sisters.