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SPEECH/10/305

Joaquín Almunia

Vice President of the European Commission responsible for competition policy

New Transatlantic Trends in Competition Policy

Figures and graphics available in PDF and WORD PROCESSED

Friends of Europe

Brussels, 10 June 2010

Ladies and gentlemen,

Introduction

I am pleased to be here today to speak about Transatlantic trends in competition enforcement, and I am delighted that Commissioner Rosch has been able to join us to deliver his perspective on current competition issues.

I would like to talk about Transatlantic co-operation with a specific focus on an issue that is of increasing importance to all of us, that of encouraging innovation.

Cooperation and common approaches on cases

But let me talk first about the relations with our US partners. The European Commission has a deeply-rooted cooperation with the Federal Trade Commission, the Antitrust Division of the Department of Justice as well as the Department of Transportation.

The contacts we have at all levels between our administrations - , starting with my personal meetings with Joe Liebowitz and Christine Varney - not only increase the effectiveness of our interventions but also, importantly, reduce the risk of divergence or incoherence of those interventions.

One of the best examples of EU-US co-operation was just a couple of months ago, with the Cisco-Tandberg merger that was dealt with in parallel by the European Commission and the Department of Justice. Commitments accepted by the European Commission were considered by the Department of Justice in its decision not to challenge the merger.

The Microsoft-Yahoo! case was another example of a successful parallel review.

One of the elements that enable a good cooperation between the two authorities is something as simple as the timing of the notifications. A simultaneous process in the EU Commission and in the US favours transatlantic cooperation. Playing one side against the other by notifying noticeably earlier in one jurisdiction to influence the outcome in the other does not.

The European Commission and the Department of Justice also cooperated in the Oracle-Sun merger case, but because the case was notified much later in the EU, divergences arose due to differences in our procedural rules and also to the evidence available to the agencies at certain points in time. Ultimately, however, our analysis was not markedly different.

But if our contacts with our US counterparts are perhaps most visible in our merger investigations, our cooperation goes well beyond.

Simultaneous investigatory measures such as surprise inspections in global cartels are a good example, as they require a great deal of mutual trust and coordination.

On unilateral conduct (or abuse of dominance as it is called in the EU) we probably have more convergence between the views of the agencies than we might have had a few years ago.

On Intel, one of our most prominent recent abuse cases, I note that the FTC, in December, issued a complaint against the company for essentially the same type of conduct as that covered by the Commission's prohibition decision of 2009. This suggests that we are not far apart in our thinking.

Indeed, there is a case for yet more cooperation as we need to deal with companies that operate globally and may adopt similar commercial strategies on both sides of the Atlantic.

The work done in the ICN in recent years has already been an important step in this process. And I am very pleased that DG Competition will be organising the ICN Unilateral Conduct Conference next December in Brussels, so as to consider further convergence in this field.

Of course, divergences cannot always be avoided, and nor should they be. There will be cases where a merger or a cartel affects the EU differently to the US. There will be cases where, with the best intentions in the world, reasonable people can disagree on the right outcome. That’s not a crisis, that’s just life.

Trends in underlying thinking: innovation as a case in point

One area on which we can certainly build consensus is the central role that innovation must take in our respective competition policies.

Innovation is of paramount importance because it stimulates competitiveness, growth and employment. This is crucial for both our regions in a context of an increasing share of the emerging economies of world production and trade.

Innovation is not only an EU concern. In the US, the proposed revision of the US Merger Guidelines gives greater emphasis to the innovation issues. And both the DOJ and the FTC have underlined the importance of giving due regard to innovation and companies' incentives to innovate in their antitrust enforcement.

I have the same objective. The European Commission is currently reviewing the application of its antitrust rules to R&D, standard-setting and other horizontal agreements between companies. The public consultation we launched early May largely aims to adapt or clarify the existing, 10-year-old framework in view of market developments.

Most notably perhaps, this is the case for standards. Standards have become increasingly important in our inter-connected knowledge-based world. They bring great benefits to consumers by ensuring compatibility and inter-operability between products, especially in the fast-evolving Information and Communication Technologies. This allows competition to unfold on the basis of innovation, not only price and output. Standards can, however, confer to a specific company significant market power that can be abused, causing harm to innovation and ultimately to consumers.

Our proposed draft horizontal guidelines clarify what is expected from standard setting organisations. Over the years, the Commission has been faced with a number of allegations of abusive conduct as a result of standard setting procedures - allegedly - not being conducted as they should. The Commission has continually advocated that standardisation must take place in an open, transparent and non-discriminatory manner, as this is the basis for fostering innovation.

We are in a position to provide these clarifications regarding standards because of our recent case experience, such as the patent ambush allegations concerning Rambus. During the standard setting process Rambus did not disclose that it held essential intellectual property rights relevant for DRAM chips and was therefore able to charge very high royalty payments, resulting in a substantial cost to the industry. The commitments made binding on Rambus by the Commission in December 2009 involved setting a cap on the royalty rates Rambus can charge for its DRAM technology. These maximum rates are fairer and provide predictability and certainty, which is valuable for other market participants.

Innovation and abusive conduct was also an issue in the Microsoft case that raised important questions of de facto standards and inter-operability.

The lessons we have learned so far from our enforcement in these ICT industries, and I just mentioned a few examples, is that that they are highly complex sectors, characterised by the need for interoperability and by potentially strong network effects or risks of lock-in. Often, these are markets where single companies dominate and it is therefore essential to ensure competition on the merits, notably through innovation.

In the EU, a discussion of competition policy and innovation would not be complete without a mention of the State aid rules. Unlike our US counterparts, the European Commission reviews state subsidies to business and assesses their impact on competition. This is key to the preservation of the Single market and the creation of a level playing field for businesses in the different Member States because this review of the state subsidies also looks at the impact they have on cross-border competition.

Thanks to our centralised State aid control, in Europe the amount of state support is transparent and therefore known. The lack of this control in the US risks creating imbalances in the markets. We must avoid that there are distortions of competition due to this difference.

For instance, in Europe, recently State aid control has played a determining role in the crisis, ensuring that a level playing field was maintained for financial institutions and businesses across the EU. State aid control is now playing an equally important role in exiting from the exceptional measures designed to tackle the crisis. This will contribute to Europe emerging from this crisis better equipped for a balanced and sustainable growth.

But State aid control is not only about coping with crises. Government intervention in the economy can, if designed well, be a great promoter of innovation. Our framework on Research, Development and Innovation encourages the right type of intervention by allowing Member States to subsidise young innovative enterprises or innovation clusters, boosting growth and employment and ultimately Europe's competitiveness.

Due process and Damages

Before I conclude, let me say a word on a couple of subjects that are regular topics of discussions when comparing competition enforcement in the US and in the EU.

The first one relates to "due process". This is a question that I take very seriously and which has had me thinking a lot since I took responsibility for this job in February.

I believe that both our systems in the US and in the EU have their own merits. What we have in the EU, in common with most Member States, is an administrative system under which the Commission must act as an impartial and objective public authority. The Commission's decision-making process is aimed at ensuring such impartiality: not only its decisions are extensively reasoned and subject to the Courts' judicial review, they also come after a process that fully involve the companies concerned.

Of course, we can look at ways to improve this process even further, and we will do so through our Best Practices, but the merits of our system as such should not be put into question. We will not follow those who ask us radical changes in this field.

Second, on damages. I believe that to be credible, antitrust rules must be accompanied by deterrent instruments. And in that regard, our fines should aim at preventing that any harm is caused to customers in the first place. I also believe that, where such harm occurs, our system in Europe should enable customers – whether companies or consumers –to claim compensation for the harm caused to them.

But before we consider introducing a system of "collective redress" in Europe, we need to think very carefully. There are indeed features of the US system that create economic incentives to abusive litigation and I understand that distinguished colleagues in the US share our concerns.

This is why the new Commission has been examining how to introduce a coherent framework for collective redress and plans to organise a public consultation on this in the autumn. Before taking any action, we first must agree on common principles that can be applied in various areas, beyond competition, such as the protection of consumers against faulty products.

Following this public consultation, the Commission will take a position, which will form the basis for individual legislative proposals, such as the one on antitrust damages actions.

I am confident that a solution can ultimately be found that will avoid the abuses due to excessive litigation and will guarantee real access to justice for all European consumers and businesses harmed by anticompetitive conduct.

Conclusion

To conclude, my assessment is that there is already a great deal of cooperation and convergence on competition issues between the two sides of the Atlantic.

As we have different systems, there is bound to be some divergences.

I am confident that with the new administration the gap will be narrowing.

As I tried to explain today, in addition to the existing cooperation we see a common trend in innovation. This is excellent news as innovation and competitiveness are fundamental to Europe and to a sustainable exit from the crisis whether in Europe or in the US.

I certainly look forward to strengthen our cooperation even further and our next bilateral meeting in Washington will be a good opportunity to do that.


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