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European Commission

Joaquín Almunia

Vice President of the European Commission responsible for Competition Policy

The role of competition policy in times of crisis

29th Annual AmCham EU Competition Policy Conference (Brussels)

6 December 2012

I was happy to receive your invitation to address this conference, as it is the perfect time to analyse the role of competition policy from a transatlantic perspective.

The EU has opened the discussion about the future of the Economic and Monetary Union and tries to find a way to start a new phase of sustainable growth. And President Obama has just been re-elected and everybody in the US and around the world is looking ahead at the challenges and priorities for the next four years. I hope that strategic decisions will be adopted on both side of the Atlantic in the near future.

We need this level of ambition, because we must put behind us the crisis and its consequences once and for all. And we know that, in the past, our economies have benefited every time we have decided to work together to tackle our common challenges. This is even more relevant today, because the EU and the US share more interests than five years ago, before the crisis started to rock the boat of the global economy. Of course, there are important differences as well, but active policies are needed here and in the US to promote growth and jobs; consolidate public budgets; and increase competitiveness to keep pace with the emerging world economies. In this context, each side is of strategic interest for the other. America needs a stable, dynamic and prosperous Europe and vice versa. The need for a closer relationship is pretty clear.

Fortunately, we have a long tradition of fruitful dialogue and co-operation to build on. In spite of the recession and of the rise of the new economic giants, the transatlantic economic area remains the largest market in the world, accounting for over half of the world’s output. The EU-US trade in goods grew by 63% between 2000 and 2011 to reach over $630 billion. But our economic links run deeper. Beyond trade in goods and services, the EU and the US are each other's main sources for foreign direct investments and in 2010 the sales of US affiliates in Europe reached $2.7 trillion. Conversely, the sales of European affiliates in the US reached $1.9 trillion – more than three times the value of US imports from Europe.

In the competition-control domain, our relations are just as important. I can personally testify of the excellent state of health of our cooperation. I regularly discuss with the heads of the US competition authorities on matters of common interest – this week I met the FTC Chairman Jon Leibowitz – and our frank dialogue makes the enforcement of competition rules easier and more effective both in Europe and in the States.

The main reason why we need to build even closer links between our economies is that the state of the world economy will remain uncertain for some time to come. Here in Europe, the first order of business is responding to the difficult and complex conditions created by this long crisis, especially in the euro area. It’s not going to be easy, but the latest signs are encouraging. We are working hard to find a common response at EU level. Important decisions have been taken in the recent meetings of the European Council, and I am convinced that more good news will come soon.

But let me focus on competition policy. How should it change to respond to these challenges? The obvious answer is improving competition conditions on the market and not putting limits to it. Let me explain what I mean by this.

I hear calls from several quarters for a more lenient implementation of competition law. For instance, at times I’ve been asked to soften our control of mergers to help create the so-called "European champions". But merger control does not stand in the way of creating successful European corporations – I will not tire of pointing out this fact. In over two decades, under the Merger Regulation we have cleared more than 4,600 transactions and blocked only 22. Of course, companies can also grow by increasing market shares on their own, but I will not hinder their efforts to scale up through unproblematic mergers. At the same time, I will make sure that they do not carry out their plans at the expense of European consumers, of their business partners, and of the competition conditions in the internal market.

I will give you an example. I have recently heard statements claiming that consolidation in the telecommunications sector is inevitable and that the European market is too fragmented. I fully agree that there is fragmentation in this sector in Europe. But the fragmentation that concerns me is the continuing fragmentation of the internal market into separate national markets.

As to the calls to shelter European companies from the discipline of global competition, I am convinced that protectionism – in its many forms – is a poison for our economies, not a medicine. The Commission is aware that Europe needs a modern industrial policy; we have recently adopted a Communication setting out our ideas. But the solutions we have in mind have learned the lessons from the past and should be designed to reap the benefits of a global level playing field. We are in favour of a modern industrial policy that is open and coordinated at European level, because the Single Market is Europe’s decisive edge and it is in our best interest not to raise barriers around it against our partners in the world. But we need to keep our distance from the policy of picking winners of past decades. If we were to revert to our old habits, we would be wasting public resources at a time when they have become very scarce indeed. The money of European taxpayers should go to create business opportunities for innovative and promising companies and trace a healthy growth path for the whole economy. We cannot afford to use it to build hospices where sick firms are kept on life support.

Ladies and Gentlemen:

These are the broad goals of competition control in the present stage of the crisis. What are we doing in practice to pursue them?

This is really a busy time for competition enforcement at the European Commission. Only yesterday we imposed about €1.5 billion in fines against several companies that had formed two cartels in the market for TV and computer-monitor tubes. Other important antitrust decisions are planned until the end of the year in a wide range of industries, including the new sectors of the digital economy. Nick Banasevic will tell you later about the fresh challenges we meet in these new markets.

But we are also busy in policy development. Currently, we are working on three main fronts: the modernisation across the board of our control of State aid, the reform of Merger policy, and an initiative to give every European the same opportunities to exercise their right to seek compensation if they are victims of violations of antitrust rules. Let me say a few words on the latter two.

In the coming months, I intend to submit to the College of Commissioners a legislative proposal on antitrust damages actions. The proposal will give more legal certainty on a number of issues that lie at the crossroads between the public and private enforcement of EU competition law, in particular when it comes to access to the evidence related to leniency requests. Rainer Becker will debate this issue in the afternoon. But what if a competition-law infringement affects many people who then decide to seek redress as a group? Earlier this year, the European Parliament stressed the need for a European initiative on collective redress to ensure appropriate access to justice for all. In its resolutions, the Parliament acknowledges the specificities of competition law, but considers that this issue should be addressed on a wider scale. I took note of these conclusions and – together with my colleagues at the Commission – I will continue to work towards a coherent European policy on collective redress.

As to merger control, we are working to fine-tune and improve the way we review mergers in the EU. We will further simplify merger procedures, in particular with respect to transactions that clearly pose no problems to competition. But I also intend to make EU merger control fit for the future. The procedures used to refer cases from EU countries to the Commission work well, but could be made smoother and shorter. Most importantly, we are looking at the enforcement gap concerning the acquisition of non-controlling minority shareholdings. We will soon consult our stakeholders to find the best way to resolve this problem. Johannes Luebking will give you more details during the panel on merger control.

Ladies and Gentlemen:

As you know, it is our responsibility to enforce EU competition law in the internal market regardless of the nationality of the companies involved. This means that we often have to look into the practices of companies from outside the EU and – because of the close ties that I described earlier – US firms are well represented. Some of our current, high-profile investigations involve household names in the States. You will have read in the press of our current work involving Microsoft and Google, but the list is longer.

For instance, we have been looking into the commercial practices of Apple and a group of big publishers – including Simon & Schuster, Harper Collins and other European publishers – in the market for e-books. In addition, a number of top investment banks are part of our investigation in the market for Credit Default Swaps. Finally, quite a few of the mergers we review concern US firms. Only this year, we cleared, with remedies, the acquisition of Goodrich by United Technologies, as well as the acquisition of Synthes by Johnson and Johnson. We have also cleared without remedies deals involving Procter & Gamble, the brewing company Molson Coors and the snack business of Pringles – acquired by the Kellogg Company. Back in February, of course, we approved the acquisition of Motorola Mobility by Google. At the moment, we are closely looking into the planned acquisition of TNT Express by UPS. We will analyse in the coming weeks the results of the market test of the remedies proposed, that will soon conclude. It still remains to be seen whether appropriate solutions will ultimately address our concerns for express-parcel deliveries in Europe.

Now, all this is about our official enforcement work. But when I speak with business and political leaders I keep hearing the same complaints regarding non-EU companies that do business in the Single Market. People tell me that non-EU companies enjoy higher public subsidies and are subject to a lighter control. This applies to companies from Asia and, according to some, also from the States. One recurring remark regarding American firms is that they have to pay a lot less for energy. It is a fact that the oil and gas boom in North America – especially the shale-gas revolution – gives an advantage to US manufacturing companies. Gas is currently around two and a half times cheaper in the US than in the EU. But one effect of this development is that liquefied natural gas from the Middle East is becoming available to EU buyers at lower prices. Whether this is a long-term development remains to be seen. In any event, because energy is such a crucial input for Europe's competitiveness, ensuring diversification and removing barriers to competition in the supply of energy will continue to be one of our priorities.

Some interlocutors also complain that US and other non-EU companies pay lower corporate taxes because they concentrate their tax compliance regarding European activities in a particular EU country. This may be true in some cases, but I have to recognise that non-EU companies simply take advantage of our inability or unwillingness to impose fair tax levels on all companies that do business in Europe. I very much hope that the EU will be able to close this loophole.

At any rate, to the extent that these complaints are grounded, not all of them can be addressed using competition-policy instruments. A lot can be done for our respective economies through further improvements in the trade relationship between the EU and the US. My colleague Karel de Gucht – as Trade Commissioner – has been preparing the ground to launch formal negotiations for a comprehensive Free Trade Agreement together with his counterparts in the US. The process launched at the latest EU-US Summit clearly moved in the direction of a ‘package deal’. We have the common objective of promoting open, fair and competitive international markets – and a comprehensive Free Trade Agreement would bring that objective closer.

In addition, if the agreement were to include a specific chapter on competition, it would set a benchmark and send the right message to our commercial partners around the world. This would be especially important in two areas; common rules for state-owned enterprises and government subsidies, and the need to make subsidies transparent for both goods and services. Just like improving competitive conditions on the market, the agreement would give a boost to growth and jobs that costs taxpayers nothing. The transatlantic economy is so huge that even small improvements can have a large and lasting impact.

The road is still long and while industry is generally very supportive of a deal, there will also be special sectors and interest groups that may try to resist or delay progress because they benefit from the current arrangements. But we will press ahead regardless, because our responsibility is to serve the interests of all and not to protect the privilege of some.

Ladies and Gentlemen:

I have shared with you my views of the role of competition enforcement in an uncertain period for our economies, marked by years of crisis and by the need to adjust to the relentless pace of globalisation. I have also argued that if we are serious about creating growth and jobs on a sustainable basis – we must strike the right balance between the needs to re-industrialise and to keep our economies open to the more dynamic world markets. We must strive to export our good practices rather than to import the bad ones from abroad.

To those who call for a more relaxed competition control, I say that keeping markets level, open, and contestable is part of the solution, not of the problem. Particularly in these troubled times. There is no doubt in my mind that a robust competition control is an essential part of any plan to create the best environment where our companies can grow and create jobs.

Let me tell you one more thing in closing. To take the road of sustainable growth, Europe needs to launch structural reforms. Everyone agrees on this point. Well, competition enforcement is the cheapest and most effective structural reform I can think of. It is a reform that is deployed every day bringing direct and lasting benefits to our companies and to our citizens. At a time when people start to turn their backs on the EU, competition policy shows that Europe can make a difference.

Thank you.

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