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Vice President of the European Commission responsible for Competition Policy
Competition policy and the global economy
IBA 10th Competition Mid-Year Conference
Cape Town, 7 March 2014
Ladies and Gentlemen,
I would like to thank Mr Reynolds for his kind invitation to address once again the IBA Competition mid-year conference, now in its tenth year.
Let me take up this opportunity to congratulate the IBA Antitrust Committee for reaching this landmark. I wish you a happy 10th anniversary and many more years of success.
I would also commend the organisers for focussing this conference on aspects of competition policy in Africa. I see this as a natural development, one that goes hand-in-hand with the increasing contribution of the different regions of the continent to global growth.
Africa has grown by 5.6% a year in the past decade; a figure that is significantly higher than the growth rates for the EU and other industrialised regions of the world.
And, to give our hosts their due, let us not forget that South Africa is already among the top thirty largest economies in the world.
These are excellent news. There is nothing like sustained economic growth to lift entire populations out of poverty and give them better prospects of social and personal development.
At the same time, I am also convinced that reducing the gaps in the distribution of income between developed and emerging world regions will ultimately benefit developed countries as well.
If wealth and growth opportunities are more evenly distributed, we can all look at the prospect of a more just and stable world order.
So, we are looking at a virtuous circle, but we have to be realistic; many geo-political and economic factors must come together before it can be set in motion.
One of these factors directly involves competition authorities, whose operations rest on the pillars of open markets, economic integration, and global co-operation.
Let me stress this last point – co-operation. The EU competition authority has a long record of co-operation with the more established authorities – especially those in the US.
Our constant dialogue on policy initiatives and individual cases has produced very positive results in our practice and has also helped to build mutual trust beyond our domain.
In the past few years, the network has expanded to include the competition authorities of newly industrialised countries.
Only last November I signed a Memorandum of Understanding with the Competition Commission of India, which follows those established in previous years with the authorities of Brazil, Russia and China.
This has been the traditional policy of the competition department of the European Commission and I can tell you that it will certainly continue to be our policy in the future.
Going forward, we will continue to extend and intensify our co-operation with sister organisations, including in emerging countries.
This is a logical response to the progressive integration of world economies. In almost every industry, more and more companies have operations in several continents and make use of supply chains that span the whole world.
In this new and fast-developing setting, the number of cases that may be of interest to competition authorities in different parts of the world is bound to increase.
In this setting, our ability to protect competition on the merits, foster innovation, and keep markets open and fair will depend on how well we manage to establish a common set of principles and goals for our enforcement work.
These common principles and goals will have to be sufficiently flexible to take into account the different legal and institutional frameworks in which each authority operates.
However, I am convinced that it is in everyone’s interest that we develop a shared understanding of the need for high standards of transparency, independence, and impartiality.
In particular, this means that enforcers should be strong and respected enough to resist any undue interference from political and business circles. Our investigations should be based only on the criteria that are proper to competition control.
It also means that our analysis of the cases and the decisions we take as a result should not be affected by the nationality, status or size of the companies involved.
But there is another level where we can stand together to turn global markets into genuine level playing fields.
I am referring to our continued commitment to the International Competition Network, the forum now including 130 competition agencies from every continent.
The real advantage of a multilateral forum for co-operation is the possibility to agree international standards and promote substantive convergence in our enforcement action.
This is crucial if we are serious about reducing or, in the best scenario, eliminating the risk that we reach different outcomes when we investigate the same mergers, cartels or unilateral-conduct cases.
The clearest example is our efforts to uncover and sanction the large, worldwide cartels that are becoming increasingly common in our practice – and I will say a few words on them later.
In these cases, our success depends to a large extent on our ability to coordinate investigations across jurisdictions – for instance, by synchronising our inspections.
I know that my call for a serious involvement in the ICN will be well-received in South Africa. The Competition Commission has been a key member among the authorities involved in advancing common practices in merger review – and I commend Mr Bonakele for this.
In addition, among the enforcement agencies that have recently joined the Merger Working Group, there are those of Namibia and Kenya – the latter represented here by its Director-General Francis Kariuki.
Ladies and Gentlemen:
At a time of globally integrated business, we should seek to make competition rules and their enforcement as consistent as possible across jurisdictions.
If we don’t, companies would take advantage of the gaps we leave open to the detriment of other businesses and of consumers.
In the long run, diverging rules and enforcement standards would put an unnecessary break on global growth.
They would also undermine the legitimacy of competition policy not only in individual jurisdictions, but across the global system.
So, let me briefly review some enforcement areas with clear international implications, starting – as I said earlier – with our fight against cartels.
An important part of our work in this domain concerns the automotive sector. More specifically, we have been looking into the behaviour of companies that supply parts to car manufacturers.
To illustrate what we do in this area, let me mention a cartel decision the European Commission took in July last year.
In the so-called wire-harnesses case, we fined a group of car-part suppliers over €140 million for running a cartel that inflated the prices of the cables used to conduct electricity in cars.
To the four manufacturers directly harmed by the cartel in the EU, this has meant higher production costs and a loss of competitiveness. Needless to say, the cartel has also imposed higher prices on transport companies and ordinary car owners.
Another cartel decision we took in January has implications for the car industry. I am referring to the €114 million fine we imposed on four major producers of the foam used to make sofas and car seats.
Our work in the car parts sector is quite extensive and often involves companies with global operations.
As a matter of fact, we are currently investigating the markets for seatbelts, airbags and steering wheels, for air conditioning and engine cooling products, and finally for bearings and lighting.
This area of our action shows the general increase in defensive cartels we have been observing in our practice, where companies take the wrong-headed decision to react to tight business conditions by breaking EU competition law.
Our fight against cartels has taken us to another globally integrated industry; that of financial services.
At the end of last year, seven international banks and a broker received fines for a total of €1.7 billion for manipulating interest-rates benchmarks in two cases related to the so-called LIBOR scandal. Our investigation continues with one broker and three banks.
In similar cases, still at a preliminary stage, we are looking into possible collusions to manipulate other financial benchmarks for oil products and derivatives and in the foreign exchange markets.
Finally – still in the derivatives markets – we are investigating 13 among the world’s leading investment banks and two financial-information providers because we suspect them of colluding to prevent exchanges from entering the markets for credit derivatives.
I consider our enforcement work on global financial markets of primary importance; above all, because it points at the need for more stringent regulation and higher ethical standards for financial institutions.
To round up this part of my presentation, let me recall the most recent cartel decision we have taken involving European power exchanges, which are the platforms where electricity is traded.
Two days ago, the Commission fined two leading power exchanges €6 million for creating a cartel to avoid competing with each other. We also imposed a fine of just over one million euros on the Romanian power exchange for abuse of its dominant position by discriminating against non-Romanian traders.
This last decision leads me to the other big area in antitrust. Some prominent cases in the abuse of dominance domain involve global companies and have also been scrutinised by other competition authorities.
The example that first comes to mind is our current investigation into the business practices of Google, which reached an agreement with the US Federal Trade Commission in 2013.
Last month the company offered unprecedented concessions to address the competition concerns identified by the competition department of the European Commission.
The Commission will take a final decision in the coming months when the next steps of the procedure are cleared.
If the commitments offered by the company are accepted, they will have the effect of regulating and monitoring Google’s activities for the following five years.
There are other major cases in the abuse of dominance area involving large international companies, such as our current cases involving Visa and Mastercard.
On Visa Europe, I can report fresh news. At the end of last month, we accepted the pledge of the credit card company to cap the fees it charges for making credit card payments.
This means that the pledges offered by the company are now legally binding. Above all,it means that the costs of these payments for European retailers and consumers will belower. The decision adds to the achievements of previous antitrust investigations concerning these fees.
Our cases involving Visa Inc. and Mastercard are on-going.
Finally, let me just mention the current cases revolving around the use and misuse of Standard Essential Patents in the markets for smartphones and of patent settlements in the pharmaceutical industry.
Once again, the companies involved in these cases are household names around the world and their practices have kept several competition authorities busy in more than one continent.
I will now turn to some representative cases with clear international implications in the merger domain.
I could give you many examples. Only looking at recent major decisions, in December 2013 we gave the green light to the acquisition of Nokia's mobile device business by Microsoft.
At present we are reviewing two important mergers in the mobile-telephony sector, one in Ireland and one in Germany.
The companies involved may have global operations, but the likely impact of the transactions will be assessed on national markets reflecting the cross-border barriers that actually exist across the EU.
The industry says it needs to consolidate to invest in the next-generation networks. However, allowing fewer, larger players in individual EU countries would just reinforce market power at that level.
We are therefore assessing these telecom mergers with great care and will announce our decisions in the coming months.
In all our merger cases, our main task is to make sure that the entity resulting from them do not distort the competitive structure of their respective markets in Europe.
This is crucial, because our responsibility is protecting the interests of consumers, of the competing businesses that play by the rules, and of the companies that may want to enter their respective markets in the future offering cheaper, better and more innovative goods and services.
This is ultimately the reason why we occasionally must block a merger. One example is the proposed acquisition of TNT Express by UPS in the market for the express delivery of small packages we prohibited in January last year.
Following our analysis, the Commission found that the take-over would have restricted competition in 15 EU countries and the remedies offered during the review proved inadequate to address our concerns.
Ladies and Gentlemen:
Let me just repeat my main message today before I conclude.
The progressive integration of the world economy makes it imperative that competition authorities the world over come together to make global markets a genuine level playing field.
There is a sense in which extending and enriching our co-operation – both bilaterally and within the ICN – is part of the responsibility that each one of us has to all the others.
I am renewing my call because the decisions of competition authorities have important economic, social and political implications. They improve doing-business conditions and protect consumer welfare – that is, the interests of the people.
Let us be aware of these implications as we go about our work and strive to make it more effective.
Again, I wish every success to the Competition Commission of South Africa and to the authorities of all African countries.