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Vice President of the European Commission responsible for Competition Policy
Presenting the Annual Competition Report for 2011
ECON Committee, European Parliament - Brussels
19 June 2012
Ladies and Gentlemen:
I wish to thank the ECON committee and its Chair for inviting me to present the Annual Competition Report for 2011.
Our meeting today takes place at a critical time for the EU, a time that requires important changes, bold decisions, and political ambition.
The outcome of the Greek elections last Sunday was a positive step and confirmed the country’s place in the euro area. Another important step is just ahead of us. In ten days’ time the European Council will have to take resolute decisions to relaunch our financial, economic and political union. The magnitude of Europe’s challenges calls for leadership, political determination and a strategic vision.
Competition enforcement has operated in a difficult environment last year and since the crisis began. By its nature, our work allows us to touch first-hand the impact of the crisis on the ground. The report I am presenting to you today is the result of this experience.
The ultimate goal of our work is to establish the best possible conditions for growth and job creation in the internal market. It is more important than ever to release the potential of the Single Market to find a way out of the crisis and stimulate the economy.
From among the wealth of information that the report presents in its new, policy-driven format, I would like to highlight three areas that represent well the breadth of our action: financial services, food and State aid.
The State aid modernisation initiative is a major policy development that could not find a place in the report because it was launched only a few weeks ago, but I would like to discuss it with the Committee today.
I will start with a look at our work in the financial markets. Once again, our main goal in 2011 was maintaining stability amid persisting turbulence.
We continued to use State aid rules to restructure and resolve banks which needed public support to preserve financial stability, minimise the cost to public finances, and ensure that restructured banks are sufficiently viable to be able to lend to companies and households.
When the sovereign-debt crisis worsened last summer, we had no option but to extend the temporary State aid regime for banks into 2012. We will introduce a new permanent regime when the markets stabilise.
Under the special rules, we have decided on the viability, restructuring or resolution of 46 banks and are still working on over 25 cases.
For almost four years, we have also served as a de facto crisis management and resolution authority at EU level, also addressing the structural problems that had emerged well before the crisis.
In spite of our good record, what we need is a fully fledged resolution and supervision system at EU level. Together with an EU deposit guarantee scheme, these are the ideas behind the banking union.
With this, the EU will have the right tools to effectively restructure and resolve banks so that the impact of their failures will no longer be felt by the taxpayer.
But our work in the financial markets is not limited to managing the public bailout of banks. We also have a number of antitrust cases.
Two cases are related to concerns about the excessive prices and restrictions imposed on the use of proprietary financial markets data. The companies involved are Standard and Poor’s, where we found a solution via commitments, and Thompson Reuters.
In addition, in April 2011 we launched two antitrust cases in the CDS market to look into the cooperation between different investment banks that may have adopted strategies to preserve their stronghold in the profitable Over-The-Counter market. Here too the control of financial market information might have played a role.
The CDS cases touches upon another important issue: access to financial markets’ infrastructure. I believe that open and accessible financial infrastructure is necessary for the provision of efficient financial services to firms and investors.
We defended a competitive view of financial markets in our Deutsche Börse/NYSE Euronext decision. Payment markets are another area where we have been quite active. A recent judgment of the European Courts in the MasterCard case confirmed our findings about Multilateral Exchange Fees in credit card services. We will continue our work in this area. I will take steps in the next few weeks to move forward with our on-going investigation on VISA. In addition we should explore regulatory solutions that would provide legal certainty to the entire industry.
Earlier this year we opened an investigation into the operations of the European Payments Council in response to allegations that the interoperability standards they were developing for online payments risked foreclosing payment services offered by institutions other than banks.
We support standardisation as an essential instrument to boost efficiency and foster market integration. For this reason, we must promote fair and transparent standardisation processes. This means we cannot accept standardisation processes that are captured for the purposes of foreclosure against innovative outsiders.
I will now turn to our work in food markets. From a competition perspective, the Commission has been mainly involved in reviewing some transnational mergers with EU-wide scope.
For instance, we have cleared the acquisition of a large sugar trader by Südzucker – Europe's largest sugar producer – with remedies that would preserve competition in the Italian market.
However, given that many food markets tend to be local or national, a lot of antitrust enforcement is done in parallel by national competition authorities. This is why the work carried out by the National Competition Authorities is so important.
The report published last month by the ECN tells us a story of robust competition enforcement in the EU.
Between 2004 and 2011, Europe’s competition agencies handled about 1,300 merger cases and 180 antitrust cases, half of which were cartels, mostly in food processing and manufacturing.
The report also identified several structural obstacles, such as persisting regulatory barriers in retail markets in some EU countries.
I would now like to tell you about the recent policy developments in State aid.
In December last year the Commission approved the reform of the Services of General Economic Interest, and the first case analysed under the new rules – concerning the UK Post Office – was decided last March.
This reform paved the way for a major overhaul of this policy area – the State aid modernisation initiative – which I launched just over a month ago.
The spirit of the reform is to help Europe’s governments boost growth at a time when many of them need to consolidate their budgets.
To this end, the regime that will emerge from the reform will encourage aid that targets market failures; has a real incentive effect; does not waste taxpayers’ money; and has no better market alternative.
These are the defining features of what I call ‘good aid’. Aid that promotes environmental protection; supports research and development; and gives incentives for the development of the digital economy – but only when the support is targeted at genuine market failures and actually changes the behaviour of its recipients.
Conversely, we want to discourage the bad aid we can no longer afford, such as spending that crowds out private investment or keeps inefficient companies on the market.
The spirit of the reform will find concrete expression in the review of many sectoral guidelines across the board, including the Guidelines on national regional aid; the Guidelines for Research, Development and Innovation; and the Environmental Aid Guidelines – which, together, account for about two thirds of the amounts we approve.
The initiative will also produce a leaner and clearer regime. The changes that will streamline our control include an update of the Procedural Regulation and the review of the General Block Exemption Regulation, the Enabling Regulation and – if necessary – the de minimis Regulation.
The General Block Exemption Regulation is an important instrument to enable quick implementation of aid measures, with minimum administrative burden for national authorities, but also to ensure that the conditions under which public support is given are targeted and cause limited competition distortion.
In this context, although the Commission will not give up any of its exclusive competences in the enforcement of State aid law, a new level of commitment will be required from national governments.
This will help to address an issue we identified in our monitoring of aid measures after they are approved. At present, our analyses found potential problems in about 40% of the cases.
To conclude, let me tell you when the changes of the State aid modernisation initiative will be introduced.
As we work on the review that will lead to the adoption of the new guidelines, the Commission will present its proposals to the Council to change the Procedural and Enabling regulations before the end of the year.
The main elements of the package should be in place at the end of 2013 or – at any rate – within the term of this Parliament and Commission.