Vice President of the European Commission responsible for Competition Policy
Converging paths in unilateral conduct
ICN Unilateral Conduct Worshop
Brussels, 3 December 2010
Ladies and Gentlemen:
I am happy to open this second day of your workshop given that I couldn't attend the opening session yesterday.
I know that your working group – and the ICN as a whole – are lively organisations, and your achievements are there to prove it.
I will take the opportunity to speak before such a distinguished audience to talk about the need for practical cooperation between our agencies and for a process of convergence in our legal and economic analyses.
Earlier this year, at the opening of the ICN Annual Conference in Istanbul, I stressed the importance of global convergence in competition policy. And the ICN – with its 114 competition agencies - has become the world’s forum for such convergence and the promotion of competition policy, which is more important than ever in these difficult times.
The ICN and all its members must remind governments, business and citizens of what competition policy can do to support the recovery and to put the world economy back on track.
I would also like to commend the inclusive approach of the ICN, which is open to authorities from all the world’s regions. But let me repeat that agencies from some important countries have yet to join. So I would like to encourage again the ICN to aim at full representation.
The need for global convergence
Let me start by telling you why I support your efforts to establish a common ground for our enforcement work.
In the age of global business, it no longer makes sense to have competition enforcement confined within national boundaries.
We will always need a diversity of approaches to reflect our specific institutional features and traditions; but we also need to be able to work with each other on cases that straddle many jurisdictions.
Reducing – and eventually eliminating – conflicting rules in the different jurisdictions can bring only benefits to business and to competition authorities. And of course, we will eventually benefit consumers.
Conflicting rules are bad for business, because they often translate into higher compliance costs for companies. A global level playing field – in contrast – gives firms more transparency and predictability.
However, this does not mean that we should converge on the lowest common denominator. By agreeing on a balanced and adequate level of intervention, we will be able to close the gaps between the different jurisdictions.
This means that our agencies too will benefit from more compatible competition regimes, because we will become more efficient and we will all gain in legitimacy.
The goals of enforcing unilateral conduct rules
Ladies and Gentlemen:
Why are unilateral conduct rules crucial in this progressive process of convergence?
In my view, they are important because they help us pursue three goals: keeping markets open and fair, promoting innovation, and making sure that no harm is done to consumers.
Companies that abuse their dominant position to prevent the entry of new competitors or to squeeze existing competitors out of the market break the law; we all know this part of the story well.
But by throwing sand in the wheels of the market, these companies also hinder innovation and growth; which means that firms and consumers are made to pay for their unlawful gains.
And preventing consumer harm is our main purpose. Protecting the interests of ordinary citizens is the main rationale of the rules that our respective competition agencies have devised to prevent and fight anti-competitive unilateral conduct.
I would like to say a few words on each of these goals, and I will draw on a handful of cases dealt with by the European Commission to make my points.
To understand the magnitude of our challenge, we should bear in mind that in many countries – both in Europe and elsewhere in the world – we have a historical legacy of state-owned monopolies that occupied large parts of the economy until not so long ago.
In the EU, our unilateral conduct rules respond to this legacy. Managing the transition from these national monopolies to a borderless market for 27 countries is a lengthy process and cannot be done only by means of regulatory measures.
Without a robust implementation of competition rules, large and dominant firms would probably reintroduce by the back door the barriers that our governments have eliminated, especially in traditionally regulated markets, such as the network industries.
So, my first examples will come from the energy and telecoms markets, where we have often dealt with the exclusionary practices of dominant incumbents that tried to prevent access of competitors.
For instance, at the end of September we imposed structural remedies on ENI to grant access to Italy’s natural gas market, and – two years ago – on Germany’s E.ON to increase competition in Germany’s electricity market.
I am also keen to support the liberalisation of the telecoms markets.
I welcome the judgement of the Court of Justice in the Deutsche Telekom case, which confirmed a decision taken back in 2003. In particular, the decision agreed with the effects-based approach followed by the Commission.
Currently, we are investigating cases involving possible margin squeeze and other forms of refusal to supply in Poland and Slovakia.
And we will continue working in this direction, and cooperating with those in charge of its regulation.
I will now move on to the second objective I have identified for our work on unilateral conduct; promoting innovation.
Europe must tap its huge potential for innovation to boost the recovery and drive smart, sustainable and inclusive growth for many years to come.
It is not by chance that the first flagship initiative of the overall EU strategy for this decade – the so-called Europe 2020 strategy – is about innovation, research and development, and closing the gap between new ideas and new products and services.
We have all it takes: a tradition of excellence, a highly educated, creative and diverse population, and the largest single market in the world where new products and services can reach half a billion people.
Let me illustrate in practice the contribution competition enforcement can bring in this context. The IT sector, which is the innovation powerhouse of today’s economy and one of the Commission's priorities through the Digital Agenda, offers various examples of our action.
All our past cases – from Intel to Microsoft – tell the same story: we have the responsibility to protect vigorous competition of innovative players because innovation is a crucial factor of our future growth.
This is a long-standing policy of the European Commission which I intend to preserve and develop in the years to come.
I will carefully scrutinise the digital arena: behaviour such as limiting the availability of information as a technical means to stifle competition will not be accepted.
It is also crucial to ensure that access to standards is available on fair, reasonable, and non-discriminatory terms. In the IPCom and Rambus cases, for example, we have shown that we are ready to intervene to enforce such principles.
Finally, let me mention that earlier this week we also decided to open formal proceedings in our Google investigation. Our interest in Google follows complaints we received from search service providers which alleged to have received an unfavourable treatment.
Of course, this does not necessarily mean that we will find an infringement – not every case that we open results in a negative decision. But it means that we need to conduct an in-depth investigation on these issues.
Preventing and sanctioning consumer harm
Finally, I will say a few words on the impact that the illegal behaviour of some companies has on consumers. Actions taken in the pharmaceutical industry provide good examples to illustrate this aspect of the issue.
As competition authorities, we have the responsibility to ensure that consumers are not charged unjustified bills for their medical needs.
Also, our work can contribute to keep health-care expenditures within justifiable limits. In countries where health care is financed largely from the public coffers, this may help our governments bring down their budget deficits.
Let me give you here again an example.
Last July the Court of Justice confirmed that we were right to sanction Astra Zeneca back in 2005.
In that decision, we found that the company had blocked the access to market of products from generic competitors which were just as good as their own but considerably cheaper.
Building on our recent sector enquiry, I will continue to enforce with determination competition rules in the pharmaceutical sector.
The golden mean
Ladies and Gentlemen:
I would like to close with one final appeal for the progressive convergence of the enforcement of competition rules in the different jurisdictions around the world.
I do not think that we should aim at full convergence, because it would not be a realistic goal and because I value and respect the diversity of historical, legal, and political traditions in our jurisdictions.
But I know that we can make good progress in this area; and the mutual understanding that is emerging from within the ICN can drive the process.
I am convinced that looking for the golden mean between under-enforcement and over-enforcement is the way forward.
We have ample evidence from the past of the failure of both an unfettered free-for-all and of stifling regimes.
Our efforts to find a good balance have resulted in the adoption of the Commission’s 2008 Guidance detailing the enforcement priorities for unilateral conduct by dominant firms.
The Guidance is based on the principle that all firms, including those that hold a dominant position, are entitled to compete on their merits.
What these firms cannot do is use their position to impair competition and harm consumers. It is the likelihood of a negative impact on consumers that governs our enforcement policy.
I am aware that finding a good balance between under-enforcement and over-enforcement is a challenge that many jurisdictions around the world have struggled with in the past few years.
It’s not going to be easy to bring these efforts on a global scale, but I encourage everyone to press on.
I strongly support a process of gradual, long-term convergence in enforcement standards across the world.
With this call, I close my address to you. I wish the ICN – and its Working Group on unilateral conduct – every success.