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The evolutionary pressure of globalisation on competition control
Commission Européenne - SPEECH/13/360 24/04/2013
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Vice President of the European Commission responsible for Competition Policy
The evolutionary pressure of globalisation on competition control
ICN 12th annual conference
Warsaw, 24 April 2013
I am very happy to address for the fourth time the annual conference of the International Competition Network, and I am honoured to have the opportunity to do so after the speech of President Komorowski, to whom I am grateful for being with us today.
Since its establishment in 2001, the ICN has grown year after year and today, under the chairmanship of my good friend Eduardo Pérez Motta, it includes 127 member agencies representing 111 jurisdictions.
Eduardo and I share a common view on the role of competition and have written an article on the importance of a competition-friendly environment in national and regional strategies to boost growth. The article will be published in the coming days.
The success of ICN reflects the increasing relevance of competition enforcement throughout the world. Its reports and recommended practices represent a very useful guidance for all of us and its annual conferences have become one of the main global events for enforcers and representatives of the legal and business communities.
We all appreciate the excellent work done by each and every member of the network. One of the clearest success stories is the one of the Polish competition agency, which is hosting us today in Warsaw.
I would like to express my thanks and congratulations to Małgorzata Krasnodębska–Tomkiel and her team for their excellent work and for having organised this event.
You know first-hand what it means to implement modern and efficient competition rules in an economy that has changed dramatically over the past two decades.
The UOKIK has a precious experience to share. On the one hand, with the European Commission and the other agencies of the EU – as a member of our European Competition Network; on the other hand, with participants hailing from developing countries and emerging markets; to which some panels are also devoted tomorrow afternoon.
Our enforcement must take into consideration the challenges that our economies and our societies face.
When the EU was created, the challenge was rebuilding an efficient market economy as the firm ground that would guarantee peace and democracy in Europe.
When the Berlin wall fell down, the task was opening the door for the reunification of our continent.
When the ICN was created – and as a logical consequence of globalisation – the aim was to promote cooperation amongst competition agencies, including from emerging and developing countries.
During the twelve years since the first ICN Conference, many changes have had a profound influence on the priorities and tools of competition policy.
But, probably, the most significant feature of our time is the increasing economic integration on a world scale.
What does globalisation mean in practice? There are countless indicators to account for such a broad phenomenon.
One trend we’ve all observed these years is the spectacular growth in foreign direct investment, which passed from 6.5 % of world GDP in 1980 to over 30 % before the onset of this long crisis.
We have also seen the expansion of world trade, which has risen on average by 5.3% a year for the past two decades.
These trends have been affected by the global slowdown, but the fact remains that value chains have been created over the past years that span the entire world.
Very few things produced today do not incorporate either a component or a service from another country. Before the crisis, trade in intermediate goods was about 60 per cent of the total trade in goods.
But the largest effect of globalisation – and not only for competition authorities – is the rise of new relevant economic players on the international scene.
The old economic giants in the West now have new trading partners and competitors, but it is also true that each major player has made significant investments in each other’s economies and our interests are now linked more closely together.
The growth in trade and investment and the progressive integration of our economies have brought cheaper goods on world markets and pulled millions of people out of poverty.
Of course, globalisation has also brought challenges and risks, but we should look at the whole picture when we assess the pros and cons.
On balance, the rise of world trade has promoted growth and has built international confidence and cooperation.
The integration of world economies is a historical trend. It would be foolish to try and stop it. What we can and should do, is get together to channel its force. This way we can minimise the tensions it generates and maximise the benefits it brings to us all.
The EU itself – the only workable experiment in regional integration – can be described today as an attempt to manage globalisation. And in its own but important way, this is also what the ICN does.
More and more of the cases that cross our desks involve companies that operate in a global market. This is why we must multiply our bilateral and multilateral exchanges to carry out our control in the best possible conditions.
But let us not forget that our work together is also promoting the emergence of a set of principles, rules and best practices for the global market. And this is not a small task.
An internal survey we have recently conducted found that our conversation with world authorities has become quite intense.
In 2010-2011 we worked with agencies outside the EU in one unilateral-conduct decision in three, in half of our major merger investigations – that is, cases involving remedies – and in 60% of cartel decisions.
We’re not the only ones to spot this trend.
The joint OECD/ICN survey presented last February also shows an increase in the number of cases where authorities from the member countries of these organisations have worked together.
Between 2007 and 2012, cooperation grew by 30% in unilateral conduct cases, 35% in mergers, and 15% in cartels.
So, we have to learn how to continue along this road while avoiding the inevitable pitfalls.
For instance, the OECD/ICN survey I’ve just mentioned found that it’s not easy for our agencies to exchange confidential information when the parties have not signed waivers.
And even when they are granted, we sometimes see that they can exclude certain agencies or be limited to procedural matters.
One example is our 2010 investigation of the proposed joint venture between Rio Tinto and BHP Billiton, which the companies eventually called off. In this case, waivers could not be secured for all the jurisdictions involved.
Other common obstacles include the so-called blocking statutes; that is, when the law prohibits national companies from responding voluntarily to foreign agencies’ requests for information, or requires them to obtain prior approval.
An example that drew a lot of press coverage last year was Russia’s presidential decree, which was introduced when the business practices of Gazprom came under investigation by foreign competition authorities.
There are also practical gaps to close – such as the different timelines which are so crucial in merger proceedings. And at times collaboration is hampered by a lack of transparency on enforcement actions and policy developments.
The role of the ICN is absolutely crucial to tackle these issues. I encourage the efforts made to improve exchanges of confidential information, possibly together with the OECD.
I also encourage you all to continue to look for convergence – such as in the working group on mergers – improve the framework for cooperation on individual cases; and make progress with the practical, day-to-day guidance to competition authorities.
My words of encouragement have a special sense of urgency today. Open markets, vibrant competition, and a global level playing field are more important than ever.
Earlier this month Pascal Lamy warned us once again against the rising threat of protectionism. He said that the risks “may be greater now than at any time since the start of the crisis”.
He has a good point – I fear.
Five years into this crisis, the expansion of world trade I referred to earlier looks decidedly subdued. Last year it grew only 2%. The forecast for 2013 is a bit better, but it will only be a 3.3% increase.
The longer we spend in this crisis, the stronger will be the temptation for some to blame it on someone else; either our commercial partners or a demonised globalisation.
The suffering inflicted by the recession in Europe and other economic difficulties elsewhere in the world is real. But trade barriers, misguided regulations, and attempts by governments to keep unviable businesses on life support are not the cure.
In fact, measures like these will inevitably end up making matters worse; perhaps triggering the subsidy and regulatory races that have wrecked the world economy after the Great Depression.
We must learn the lessons of history.
The world’s competition agencies are naturally part of this contest. I call on the governments of all the countries represented here to keep robust competition rules in these difficult times and support the agencies that implement them.
There are other ways to bring relief to households and firms without poisoning the wells of productivity and competitiveness, which we would pay for a long time to come.
On our part, we must continue to keep our respective houses in order, so that our enforcement action is as efficient as possible.
We can also focus our resources on the cases that do the most harm to consumers and to the economy as a whole.
Finally, we can become more vocal about the benefits of well-regulated markets in our respective jurisdictions.
Competition agencies should reach out towards businesses to foster a culture of compliance and towards the civil society to muster support for their work. Transparency and advocacy should become central to our action.
In a spirit of respect for our different legal and institutional traditions, these are some of the things we could all do to unleash the power of the markets at a time when it’s most needed.
It is not by chance that the next panel talks about competition as “the road to economic welfare.”
And it’s good to have in it representatives of the WTO and the World Bank, which are important allies in our struggle for open, competitive and well-regulated markets around the world.
Ladies and Gentlemen:
The more I reflect on these matters the more I’m convinced that we need to renew our commitment and continue to invest in the ICN.
In many areas of competition policy our organisation is developing standards to which established agencies are converging and from which emerging ones draw inspiration.
Because of the proliferation of competition regimes, we need to step up our multilateral efforts and help newer jurisdictions build up their capacity.
In an age shaped by the progressive integration of the world economies, nothing less than a global forum would do to help us keep the global market a level playing field.