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European Commission

Joaquín Almunia

Vice President of the European Commission responsible for Competition Policy

European and global perspectives for competition policy

IBA 9th Competition Mid-Year Conference

Sydney21 March 2013

Ladies and Gentlemen,

I thank Michael Reynolds for his invitation to address once again an IBA conference.

Holding this mid-year event in Sydney is a well-deserved recognition of Australia’s prominent place in the international competition-policy community.

I understand that the Australian Competition and Consumer Commission enjoy a high reputation in this country. The ACCC is one of the main partners for the European Commission in our common efforts to keep markets fair and contestable in the global age.

Today, before our round-table discussion, I would like to give you a brief update of our current work at the EU competition authority.

In doing so, I will stress how it can help Europe to overcome this period of sluggish economic performance and take the road of sustainable growth.

I will also say a few words on the need of competition authorities around the world to strengthen their bilateral and multilateral ties.

This is a must, because if international corporations operate on a global level, we have to team up to preserve the effectiveness of our action.

The Commission has recently taken a snapshot of the state of Europe’s economy.

The winter forecasts released a month ago found a marked improvement in the conditions of financial markets since the summer of 2012.

Unfortunately, they also found that economic activity had not picked up in the second half of last year. The recovery is now forecast to start as of next year.

Europe needs to act swiftly and with determination, and needs to stand united to overcome this difficult period.

We must use all the tools that we have crafted in six decades of integration to defend our common interests. And I am firmly convinced that competition policy has pride of place among these tools.

Effective competition control in the Single Market is crucial to help our economy become more resilient and more competitive.

If we look at Europe from a global perspective – which is easier to do speaking from Sydney – we can see that achieving the Single Market can give us the decisive edge over our global competitors.

The path to deepen and extend the internal market is traced by the regulatory initiatives taken by the Commission, starting from the Single Market Acts of the past two years.

I wholeheartedly support these efforts, which are urgently needed in growth-promising areas such as telecoms, energy, services, payments, and the digital economy.

Competition policy goes hand in hand with our regulatory action. It makes sure that the Single Market actually brings to the economy the benefits it can deliver at each stage of its development.

Let me give you three examples of our recent and current work to make this point.

The first example of the impact of our control is the review of the proposed acquisition of TNT by UPS, which the Commission stopped at the end of January.

The take-over would have reduced from four to three the number of significant competitors in the market for international express deliveries of small packages in Europe – and in some countries the number of players would have gone from three to two.

We studied with great care the efficiencies claimed for the transaction and the remedies offered by UPS, but we concluded that they were not enough to allay our concerns.

In the end our investigation found that the deal would have likely produced higher prices for individual and business users of these services.

Now, many companies with operations in the EU need to send small items to another European country with guaranteed next-day delivery. These can be spare parts to restart a device that has broken down, documents needed to conclude a contract, and other time-critical items.

So, keeping a healthy competitive pressure in this industry is important for the overall competitiveness of these businesses at a time when our economy most needs it.

Another telling example comes from a close but distinct market.

A year ago, almost to the day, we imposed a €169 million fine on 14 international groups of companies which had run four distinct cartels in the market for international freight forwarding.

Between 2002 and 2007, these companies had agreed surcharges and other mechanisms which eventually showed up in their clients’ bills as additional costs.

Our intervention will likely bring lower prices to the customers and business clients that need to use these services. I am also sure that the fines will deter other companies from even thinking to adopt this illegal practice in the future.

Considering the overall impact of cartels, one can see that they impose the equivalent of a private, hidden tax on the economy. To help Europe start growing again in these difficult times, it is more vital than ever that we stamp it out.

That is why the fight against cartels remains a priority for me. We have other important cases in the pipeline in various sectors, ranging from finance to the automotive industry, which are also essential for Europe's competitiveness.

Finally, let me say a few words on our action in the pharmaceutical industry, in which a sector inquiry we closed in 2009 showed that there are significant competition issues.

We have a number of current investigations in the sector; in particular, we are looking at the so-called pay-for-delay patent agreements.

These are agreements in which the producers of brand-name medicines may induce manufacturers of generic medicines to delay the entry of their products on the market, in exchange for payments or other benefits.

Our interest in the industry is not new.

Even before the sector inquiry, the Commission had fined AstraZeneca for delaying market entry of generic competitors of its ulcer drug Losec in 2005, and the European highest Court has recently confirmed our decision.

Then, in the past few months, we have intensified our work in the sector sending Statements of Objections to a number of pharmaceutical companies in three major cases.

I regard these as major cases because they raise an important issue. Strong competition from generic competitors reduces costs for patients and health-care systems. It also keeps pressure on manufacturers of brand-name products to evolve, innovate, and become more efficient.

In a period when public finances are strained and many households struggle to get going, we must be particularly vigilant on the respect of competition rules.

But these cases are not only about access to cheaper generic medicines. They are also about the interplay of competition and intellectual property rights.

We know that patents are essential to encourage the development of new treatments. But the protection they offer is not boundless and unconditional; this is not how we understand the patent system.

In a nutshell, the question is whether holders can use their financial power to shelter their patents from lawful challenges. The incumbent producer, who holds a monopoly over the product, can afford to offer generic challengers more than they would have gained from selling the product.

This behaviour may be similar to that of two competitors who agree to set prices and volumes or share their markets and this should not be immune from competition scrutiny.

Our on-going investigations will help to draw a line to prevent patent-system abuses in the industry. But obviously, we will listen carefully to the arguments made in each case before taking our decisions.

Ladies and Gentlemen:

Another important objective of competition control can help to boost growth in Europe – preserving the integrity of the Single Market.

Any attempt made by companies or governments to partition the Single Market or create unequal conditions in it becomes a priority for the EU competition authority as a matter of course.

A good illustration of how we pursue this objective is our work with former monopolists in telecoms and energy markets.

In telecoms markets, the challenge has been to make sure that the new competitors are given fair access to the old incumbents’ networks. This is why we have seen several antitrust cases on margin squeeze issues.

These include a well-known case involving Telefónica – the old monopolist in my native Spain – which the EU Court fully endorsed last year.

A similar decision during my mandate involved Polska Telekom and we have more investigations pending, such as the one involving Slovak Telekom and its parent company Deutsche Telekom.

As to the energy markets, we have seen in our practice that some old incumbents could not resist the temptation to use anti-competitive means to keep new competitors at bay.

In recent years, the Commission took several decisions involving incumbents in Western Europe.

At present, we have a string of investigations in Central and Eastern Europe, which is complementing regulatory efforts to build a Single Market for energy.

The first decision we will probably take in this area involves the old Czech incumbent, ČEZ. We have just market-tested structural remedies offered by the company to see if they can resolve our concerns in the electricity market.

We also are looking into the practices of BEH in Bulgaria’s gas market and, as you know, last year we opened proceedings against Gazprom. Among other things, we suspect that the gas giant hindered the free flow of gas across EU countries thereby fragmenting gas markets.

The energy sector is also one of the areas covered by our State aid modernization strategy.

As part of our current review of the environmental guidelines, we are thinking of broadening the scope to cover energy as well, because the impact on the environment of our technologies for the production, distribution and storage of energy is well known.

Among the issues we are considering at this early stage, let me cite a stronger support for investments in energy efficiency, which is already part of our existing rules.

We are also looking at new rules for renewable energy sources, where aid could be made more effective by discouraging support to mature technologies which can already attract private investment.

Finally, we are considering how public aid can better integrate Europe’s energy markets, with more interconnections and the development of cross-border networks.

The overall goals of our review include helping national authorities direct their investments to improve security of supply and network stability and reducing the need for non-renewable sources.

Ladies and Gentlemen:

Some of the cases I mentioned today are about companies with global operations – and you also know of our other cases involving corporate giants such as Microsoft, Google and Samsung.

When dealing with large international corporations, competition agencies cannot remain behind national or regional fences. We need to pull our forces together.

In Europe, national competition authorities and the Commission cooperate smoothly thanks to the European Competition Network.

But globally there are now more than 100 jurisdictions with competition law enforcement and – apart from the work conducted within the OECD – the main multilateral forum open to all is the International Competition Network.

I think that we should direct our efforts towards a better convergence – or at least a better interoperability – between the different enforcement regimes. And the competition agencies of the emerging economic powers should be fully engaged in these efforts.

In addition to these multilateral fora, bilateral relations between individual authorities are also crucial, because they can produce innovative and tangible results.

Currently, we actively cooperate with the main competition agencies around the world, such as those in the US, Canada, and Japan, and of course with Australia and New Zealand.

We work together on a range of cases; from international cartels, to cross border mergers and major unilateral-conduct cases.

I am convinced that the level and scope of global cooperation among competition authorities can only increase in the future.

One step in that direction was the cooperation agreement that the European Commission signed in September last year with China’s antitrust authorities.

The Memorandum of Understanding creates a dedicated framework to strengthen relations between our authorities and will give new impetus to our relations with China.

Please allow me to add a special note for the Australian Competition and Consumer Commission.

The quality and the level of our cooperation are excellent and are based on mutual trust and a shared vision of the complex and evolving tasks that competition authorities carry out in today’s global markets.

The most advanced areas of cooperation with the ACCC so far have been cartels and mergers, as testified – for instance – by the hard-disk drive cases.

Our decisions in the Seagate/Samsung and Western Digital/Hitachi cases were prepared by extensive contacts with a number of authorities, including the ACCC.

Ladies and Gentlemen:

Today I have talked about how competition policy can help Europe’s economy become more resilient and competitive, take the path that leads to sustainable growth, and start creating much needed jobs.

I’ve also talked about what DG Competition is doing to protect the integrity of the Single Market and how we can support initiatives to extend and reinforce it.

Finally, I closed with our bilateral cooperation initiatives and the work carried out within our multilateral fora such as the ECN, the OECD, and the ICN.

My take-home message here is that we will have to work more closely with each other in the future because – if we don’t – we will simply invite global corporations to play one jurisdiction against the other.

Thank you.

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