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Vice President of the European Commission responsible for Competition policy
Presenting the Annual Competition Report
European Parliament – ECON Committee
Brussels, 23 September 2014
This is the last in a long string of appearances before the ECON committee.
The first one was in April 2004, when I was nominated Commissioner for Economic and Monetary Affairs to replace Pedro Solbes in the Prodi Commission.
I stood again before this committee some months later as Commissioner-designate of the first Barroso Commission and, in January 2010, to seek confirmation for my present post.
My dialogue with the Parliament has been one of the highlights of my more than ten years as member of the Commission. It has been a very fruitful dialogue and I am deeply grateful for it.
In my hearing almost five years ago, I said that competition policy had a key role to play to help Europe’s economy grow and create jobs, our most important priority. My experience during these years clearly reinforces that point.
The Annual Competition report for 2013 I am presenting today focuses on the role of competition policy as a tool to foster competitiveness.
All competition policy instruments help Europe’s companies and economies to become more efficient, increase productivity and foster innovation:
On top of this, competition enforcement is essential to leverage the EU's principal economic asset – the Single Market. And the elimination of internal barriers is also about the political dimension of EU integration.
In my remarks during the hearings of January 2010, I made reference to other, more specific goals for my tenure. Let me recall some of those.
I said we would need to restructure Europe’s banks, which had been hit by the financial crisis; I spoke of my intention to modernise State aid control; and to fully involve the Parliament through the co-decision procedure in our initiative to ensure effective rights to obtain compensation for damages caused by competition infringements.
I will say a few words on each of these three points.
Controlling the support that Europe’s governments have given to banks in distress has been quite a task. 110 EU banks – representing about a quarter of the EU banking system by assets – have directly received State aid since October 2008.
For 13 of these banks, we found that the support could be granted with no additional conditions. As to the others, we have negotiated restructuring plans for 52 banks and 33 were put into orderly resolution. At present, we are still working on 12 cases.
Public support to banks has come in two main forms:
From 2008 to the end of 2013, EU governments injected €608 billion into banks, equivalent to just over 5% of EU GDP. As of today, a number of banks have been paying their governments back with interests.
As to the other measures, the peak of States’ outstanding guaranteed liabilities was reached in 2009, when it totalled €835 billion. The figure has since declined and stood at €400 billion at the end of last year. These guarantees have generated fees for €38 billion whereas only €3 billion of the guarantees provided were actually triggered by the banks between 2008 and 2013.
I can see three main achievements in this vast operation:
A year ago, I updated the rules for State aid to banks. Under the new framework, we aim at dramatically reducing the amount of public funds needed to sustain a solvent and resilient banking sector. Banks need to lend to the real economy and should no longer rely on moral hazard. These same principles underpin the Banking Union reform that is starting to be implemented.
As announced at the start of my term, the State aid instrument has also seen a complete overhaul with the State aid modernisation strategy.
The strategy is designed to help EU governments support growth and create jobs. To this end, new priorities are set to focus on cases with the biggest impact on the internal market. The new rules are also simpler and easier to comply with.
In practice, the modernisation effort has meant issuing ten guidelines, five regulations and two notices.
The sectoral guidelines cover areas that are crucial for Europe’s competitiveness and for a deeper Single Market. These include – among others – energy and the environment, aviation, research and development, risk finance for SMEs, regional aid, and broadband connections.
Finally, the damages directive is about to see the light of day. I hope that the formal adoption will take place as planned in the coming weeks.
The directive is a milestone in the evolution of competition law enforcement in the EU and will make it easier for citizens and companies to claim damages if they are victims of infringements of EU antitrust rules.
It is the first time that draft legislation in the competition domain reaches the Parliament as co-legislator under the ordinary legislative procedure.
The work of the European Parliament has been essential to reaching the balanced agreement with the Council on the final text. I wish to thank especially the ECON committee and its members directly involved in this work.
I will now turn to some examples of other enforcement areas that show competition policy’s potential to create good conditions for growth.
I will start with our action in payments.
The fees charged between banks when we use payment cards – the so-called MIFs – cost EU retailers, and ultimately consumers, an estimated €10 billion a year.
In addition, the difference in fees between EU countries distorts competition and hinders innovation in card payments and in related markets, such as internet and mobile payments.
Against this background, we’ve had quite a few cases in these markets.
We have obtained good remedies from Visa Europe in two decisions – for debit cards in 2010 and for credit cards in 2014 – which cut the cost of these fees in relevant countries by 30 to 50 percent.
In the latter decision, the company also pledged to allow retailers to use the services of banks located in any other EU country against the same lower fees.
At present, we still have ongoing investigations involving MasterCard and Visa international.
In the market for online payments, we’ve had a case against an organisation representing Europe’s banking industry called the European Payments Council, or EPC.
So, we have been quite active in this area; but our experience has taught us that competition enforcement has its limitation in these markets.
We need to create a level playing field for payments across Europe; banks and merchants need legal certainty; consumers need reasonable fees; and – as regards e-payments – we should create the conditions for non-bank players to enter the market and innovate.
The best way to reach these goals is through legislation. You are dealing right now with two initiatives: the Regulation on Interchange Fees for card-based payments and the broader Payment Services Directive. I very much hope the Regulation can be adopted by the end of the year.
Some key points of our proposal on Interchange Fees has recently received support by the ECJ when it confirmed that MasterCard’s fees restrict competition in the Single Market.
Other crucial areas for Europe’s present and future competitiveness are ICT and the digital economy. Let me mention some examples of our work there.
In the absence of a genuine internal market for telecoms, when recently reviewing some mergers we had to take account of the fact that competition in this industry still takes place on a national basis and that remedies were needed to preserve competitive prices for consumers, and not only the need to finance fresh investments.
At the end of 2012 and in the summer of 2013 we also took antitrust decisions involving Apple and major publishers, which restored fair competition on price to Europe’s e-book market.
Earlier this year, we’ve adopted two important decisions involving smartphone manufacturers – Motorola and Samsung – which I hope will ensure that standard-essential patents are not misused in the future.
Other major decisions involving IPR's were adopted in the last twelve months to declare anti-competitive some pay-for-delay agreements between originators and generic producers in the pharmaceutical sector.
The challenges of enforcing EU competition law in digital markets are mostly linked to their rapid evolution and to the fact that dominant companies can quickly rise to prominence and become gatekeepers for other market players.
This is often the result of innovation and smart business models, which we have to support. Market dominance through internal growth, innovation and success is not a competition problem. However, the abuse of a dominant position is indeed a serious competition problem.
This brings me, to conclude, to the ongoing Google investigation.
The case has attracted a lot of attention from the media, the industry, and political circles – including this Parliament.
Of course, everyone is entitled to have their opinions and views on the issues included in this investigation or on other aspects.
However, when it comes to conducting antitrust investigations and preparing decisions capable of removing competition concerns – in this as in any other case – the facts and arguments that really matter are those that fall within our formal proceedings.
I am sure you will agree with me when I strongly reject attempts to transform competition enforcement into an ordinary political debate.
Having said this, let me tell you where the case stands. As part of our standard practice in an Article 9 procedure – which leads to a commitments decision – and in response to our pre-rejection letters sent before the summer, some of the twenty formal complainants have given us fresh evidence and solid arguments against several aspects of the latest proposals put forward by Google.
At the beginning of the month, I have communicated this to the company asking them to improve its proposals. We now need to see if Google can address these issues and allay our concerns.
If Google’s reply goes in the right direction, Article 9 proceedings will continue. Otherwise, the logical next step is to prepare a Statement of Objections.
But regardless of the course this case will take, the European Commission – and in particular the Commissioner for Competition – must stand firm to preserve the independence, impartiality and objectivity of our procedures and decisions.
We are the most respected competition authority in the world precisely because of the way we guarantee these principles.