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Vice President of the European Commission responsible for Competition Policy
Competition enforcement in the EU: Beyond the integration of Markets
The citizen at the heart of EU law: 20th anniversary of the Academy of European Law (ERA) Trier
18 October 2012
Ladies and Gentlemen,
I would like to thank Dr. Wolfgang Heusel for the kind invitation to participate in your Academy’s anniversary celebration, and I congratulate you for 20 years of service devoted to the dissemination of EU law across Europe.
I am very happy to be here today, although I could only attend this dinner and I could not join you earlier to follow your discussions on very interesting and important topics.
I am aware of the intense efforts of your organisation in training practitioners and national judges across Europe. I understand that last year alone over 8,000 practitioners passed through your doors and that by the end of this year you will have counted 100,000 participants since the creation of ERA.
Your anniversary celebrations provide me with the opportunity to reflect on what the EU has done for us. When we consider the achievements of the last 50 years – especially after the recognition the EU received last week from the Norwegian Nobel Committee – we can realise in full that a brighter future for Europe is worth fighting for.
In these troubled times, we must build on our successes, learn from our mistakes, and move on. The EU can still make a difference.
Today, I want to share with you my views about the importance of competition policy for EU integration and, more broadly, for our citizens.
From this perspective, it has a role that goes beyond the preservation of a level playing field in the internal market, because competition policy – as reflected in our Treaties – is also a major tool for the political and institutional development of Europe.
Let me briefly illustrate this idea by looking at the history and development of competition policy over the years.
We all know that the call of Europe’s founding fathers for economic integration had a more profound and more noble motive.
After World War II, Europe’s countries had to tie their economic links and had to become so closely interdependent that another war would become impossible.
This bold vision was the foundation of what would become the most innovative political project of the past century.
Since then, European integration has brought peace, democracy and prosperity to growing numbers of Europeans and, in this respect, it is a resounding historical success.
On the opening day of a European Council with many difficult issues on the table, it is good to recall the vision, courage and leadership of our predecessors.
At the same time, they were able to translate their vision into concrete results. They realised since the start that competition policy was essential if their plans for a common market were to succeed.
They knew that governments and private companies may not play fair and would try to re-build the barriers that the Treaties pledged to tear down. They understood that a common set of rules was needed to prevent them from engaging in practices that would undermine the objectives of the Treaties.
There is evidence of their foresight in the Spaak Report, in the spirit and letter of the European Coal and Steel Community, and in key founding texts such as the Treaty of Rome.
In 1955, Jean Monnet pointed out that:
The body of consumers will not enjoy the benefits of the Community unless discriminatory arrangements are prohibited and unless all activities are placed on the same footing and are given the same chance to develop.
Only if competition between users is not distorted by discriminatory behaviour on the part of producers or governments will the pooling of markets achieve the most rational distribution of activities and maximise productivity growth.
So, from the very beginning, competition was one of the very few policies that would be transferred from the national level to the Community.
Let me stress the unique feature that makes us different from any other competition authority in the world. When enforcing our rules, we in the European Commission deal with both private and public behaviours affecting competition in the internal market.
On the private front, antitrust rules prevent companies from re-erecting barriers to trade and safeguard a level playing field between all businesses operating in the internal market.
On the public front, in addition to preventing governments from distorting competition, State aid rules prevent subsidy races and ensure that there are no differences in the ability of governments to grant subsidies, no matter how prosperous they are.
This has given us a formidable tool at the service of the economy and of the citizens. No other country or international organisation benefits from a similar array of instruments.
Of course, the achievements of the Single Market cannot be credited to competition policy alone.
From the start, the Commission – as the guardian of the Treaties – has been pursuing infringements by Member States to the free movement principles.
The Commission has also strived to bring down the regulatory barriers that prevented the creation of genuine pan-European markets; such as in air and rail transport, telecommunications, energy, and postal services.
There is still a lot to be done to complete the Single Market and this is the reason why we have recently launched the second phase of our Single Market Act.
Competition policy has always complemented these efforts. In all these sectors, we have been watching closely the behaviour of incumbents in markets that used to be state monopolies and were later opened to competition.
We have also made sure that mergers involving some of these companies would not de facto re-create barriers to entry and give them back excessive market power.
Looking at the last 20 years – the lifetime of your organisation – EU competition law has seen a profound transformation in its substantive nature and in its institutional set up.
Notable landmarks include:
Along the way, the European Court of Justice and the General Court have been guiding us and promoting vigorous competition enforcement. Ever since the mid-fifties, they have repeatedly stated that agreements aimed at partitioning markets frustrate the Treaty objective of achieving the establishment of a Single Market.
Early rulings defined the application of the competition provisions in ways that would contribute to European integration. For example, the Court gave a broad interpretation to concepts such as “undertaking”, “concerted practices”, and “effect on trade”.
The Court also made clear that the Commission could look into mergers and anticompetitive practices irrespective of where the headquarters of companies are located as long as the EU is affected.
Over the years, this has allowed us to deal with many non-EU companies, from the US or elsewhere. Such rulings were important landmarks because they allowed us to catch a broad range of practices within our competition rules.
Other judgments also helped to refine the enforcement architecture in Europe. The Masterfoods ruling, for example, stated that a national court cannot take a decision contrary to decisions that the Commission has taken or is merely envisaging. This important, quasi-constitutional principle was later included in the modernisation package of 2004.
Typically, analyses of legal and other competition-policy experts are based on cases, but as we reflect on the contribution of competition policy to European integration and on the benefits it has brought to our citizens, we have to look further.
I believe that, beyond individual decisions, competition policy has done a lot to strengthen our continent-wide polis.
It has equipped Europe with a common body of law. Without it, the free-movement principles of our Treaties would have remained just that – principles.
Under EU competition law, the same rules apply to all undertakings and Member States, and they can be directly invoked by businesses and citizens at national level.
When a precedent is set, it applies across the whole of Europe – and national competition authorities have also become instrumental in this respect.
Between 2004 and September 1st 2012, the European Commission and the national authorities that are part of the European Competition Network have exchanged notes on over 1,500 antitrust investigations.
It is a great asset for business to know that they can freely operate cross-border wherever they are in Europe. And if anti-competitive practices prevent them from doing so, they will be protected by the same laws.
Ensuring that this common body of law has the intended effects is our service to businesses and citizens and it has played a particularly important role in the countries that have joined the Union since 2004.
Ladies and Gentlemen:
When citizens wonder in these difficult times what the EU is doing for them, competition can be presented as a community policy that delivers practical benefits.
Our action has helped – among other things – to give Europe cheaper telecom services; it has made it easier to choose between airlines; it has accompanied the emergence of the digital sector – as in the landmark Microsoft cases – it has brought more choice and better prices to a range of consumer goods, and much more.
So where are we now?
Enforcing EU law does not occur in a vacuum; we must always be aware of the economic and social context in which we operate. And the context these days is one of rising unemployment, stalled growth, and unsustainably high levels of public debt that must be brought under control.
Competition policy must take these conditions into account and do its part to lead Europe out of the crisis and towards sustainable growth. Let me say a few words on this important point.
In this difficult juncture, the calls for protectionist measures become louder. I believe it is our duty to resist them and make the case that fair, contestable and well regulated markets are a more responsible and more effective answer.
This is a typical implication of our fight against cartels. The economic crisis cannot be an excuse for shielding European companies from competition.
Companies must always trust the Single Market and the discipline imposed by open competition to provide the spur they need to grow stronger and succeed in the global markets.
This is also what we have in mind when we review mergers and acquisitions. We are perfectly aware that in some industries companies need to reach a certain scale. But this legitimate goal cannot be pursued at the expense of competition in Europe.
In addition, competition, not protectionism, is the best way to foster innovation, a crucial factor of growth in the knowledge economy.
A string of antitrust cases over the past couple of years shows our determination to keep the best possible conditions for pioneering firms to challenge the more established players with new products, services and processes.
This is the story of some decisions we have taken in the high-tech sectors, where we have prevented companies from keeping competitors at bay using proprietary technologies and other means.
More than ever, our main objective is to create the best conditions to do business in a well-functioning internal market. I am convinced that this is what the EU needs to overcome the worst crisis it has seen in its history.
The biggest threat this crisis brought to the Single Market came in late 2008, when its shockwaves first hit Europe and the rest of the world.
We had to innovate and quickly find solutions to fill in the gaps, because there were no EU-wide mechanisms to manage the impact of the crisis on our banks.
Competition policy was the only common instrument at hand to tackle the challenge and avoid the meltdown of the financial system.
A special State aid regime was set up to control the government bail-outs of banks in distress. After almost five years, I am happy to report that it has served us well.
We have kept under control the massive public funds needed to rescue Europe’s banks and we continue our work under the emergency regime to repair the financial sector and put it on more solid ground.
The current plans for the creation of a banking union can build on the experience gathered during these years. It is vital that we repair our financial infrastructure, because no new cycle of growth can be envisaged until banks return to financing the real economy.
State aid – which has proved to be a supple and effective instrument – is also the place of major policy developments.
In times of fiscal consolidation, we are in the process of modernising State aid rules across the board. Our goal is helping Europe’s public authorities to spend more wisely on growth-enhancing projects.
The reform will also allow us to focus our control on the cases with a significant impact on the internal market and to streamline our decision-making.
At the start of the year, another reform of State aid became operational; the rules regarding public spending on the Services of General Economic Interest.
Our reform sees the light of day at a time when many of Europe’s governments are strapped for cash while the demand for public services is pushed up by rising income inequality and uncertain prospects for the future.
This is why the new rules will help public authorities design and provide smarter, more efficient, and more effective services.
There is no better example to illustrate the link between competition control and our fundamental values. Public services are Europe’s hallmark and one of the pillars of our social and economic model.
The idea that the community – through its public institutions – takes responsibility for certain social needs and public goods translates into practice the basic principles on which our democracies are built.
Without good public services available to all, such values as solidarity, social justice and social cohesion would remain mere ideals. Instead, in their different ways, they are a reality across the whole of Europe.
Ladies and Gentlemen:
Let me close by repeating that, over the years, competition policy has made important contributions to the standards of living of Europeans, to the structure of the Union, and to its political achievements.
All our instruments – from State aid through mergers to antitrust – have given tangible expression to Europe’s core principles.
By equipping the EU with a solid common body of law, we have given our citizens and companies one of the most valuable parts in the acquis of the Union.
EU competition law, with its unique scope encompassing both private companies and governments, has now become part of our core European heritage.
Thank you for your attention and – again – my warmest congratulations to the Academy of European Law on its 20th anniversary.