Peterson Institute for International Economics

Washington DC, 16 April 2015

***Check against delivery***

 

This is the first time I address a U.S. audience since I took up my post as European Commissioner for Competition last November.

It is always a pleasure to be in your nation’s capital.  And even more so in my new role, given that this is the country where competition policy was born at the end of the 19th century.

It took over six decades for it to find its place in the Treaties marking the birth of the then European Economic Community in 1957.  And when competition policy landed in Europe it acquired an additional layer.

Apart from the need for government safeguards to fix market failures, our founding fathers saw that competition policy was needed to build an internal market for the more united Europe they had in mind.

This was important for their political project, too; because they saw that a common market would bring together the peoples and countries of Europe in a very real and pragmatic way.

And all this time later, EU competition policy still sits at the core of our process of integration.

After the financial and economic crisis and these years of uncertainty, Europe is turning the page.

The European Commission headed by President Juncker has a comprehensive agenda to create jobs, relaunch the economy, and restore the confidence of our citizens in the European project.

Much of the strategy stems from a simple assumption. If we are serious about boosting growth in Europe, we must rely on the Single Market.

The output of the EU internal market is comparable to that of the US economy. Tapping its potential to the full would go a long way towards kickstarting Europe’s economy.

This is where competition enforcement comes into the picture, because it is our task to keep the Single Market open and efficient.

This is good for Europe’s firms, because it trains them to take on their competitors around the world.  The best way to be competitive globally is to be competitive at home.

It is also good for overseas companies, because they can do business in Europe safe in the knowledge that the game is fair and the playing field level.

And if a player – whether European or not – believes that its rivals are rigging the game; rest assured that the referee is competent, independent and impartial.

These are the two main topics of my presentation today. First, I will give you a few examples of the policy initiatives that the European Commission is putting on the table and of the role of competition policy. 

As you know, issues related to banks have kept competition agencies quite busy over the past few years. And one of the priorities on the Commission agenda is the plan for a Capital Markets Union launched in February this year.  But today, I'll focus on energy and digital markets.

Next, I will talk about yesterday's announcements in Brussels regarding the sending of a Statement of Objections to Google and the opening of a formal investigation on Android.

 

Energy Union

Another priority in the agenda of the European Commission is the creation of an Energy Union – a big step towards an energy market that is integrated, interconnected, resilient and secure. This should benefit citizens, businesses, and the environment at the same time.

Integrating energy markets is a key objective of the Energy Union. If gas and electricity flowed freely around the EU, we would make a big step towards economically sustainable, environmentally friendly, and socially inclusive solutions.

Part of the problem is that national grids are not well connected to one another ­ – and that requires significant investment. Uncoordinated national policies may also hamper the integration of markets. Finally markets are also kept apart by unfair business practices.

Competition enforcement can help on all three fronts. Consistent enforcement of the rules helps give investors the legal certainty and predictability they need.  Coordination can be improved by applying the rules in the EU Treaty on financial support granted by EU countries.  And acting decisively against energy companies that harm rivals, block energy flows from one EU country to another, or threaten to close the tap can help deter others.

In fact, we already have a good record. The European Commission has adopted detailed rules on financial support by EU countries to the energy sector, and it has taken several decisions against incumbents that abuse their dominant positions.

We will certainly continue those efforts in the years to come.

 

Digital Single Market

Then there is our plan to extend the Single Market for physical goods to the digital world.

Once again, the main problem is fragmentation. One European consumer in two used e-commerce last year, but only 15% did so across national borders and only 7% of SMEs sell cross-border.

Of course, many people and firms are put off because of stop before language barriers – there are 24 official languages in the EU – but there are other factors as well, such as a jigsaw puzzle of tax and copyright rules.

Under the leadership of Vice-President Ansip, the Commission will put forward its strategy to achieve a Digital Single Market on 6th May of this year.  As far as I am concerned, I want to ensure that competition law plays a full part in addressing any barriers that are erected by firms.

Here’s how things stand. In Europe, you can drive to a nearby country; buy a pair of shoes, for example when they are cheaper, and take them home. Nobody will check at the border. This is the norm in a Single Market.

But you can’t always buy the same shoes online from the comfort of your sofa. When you try, sometimes you hit a digital wall erected by a company that restricts online sales abroad. This prevents consumers from taking advantage of better offers and prices.

There are signs of various types of online sales restrictions that impede cross-border e-commerce.  

This is why I intend to launch in the coming weeks an anti-trust sector enquiry to look into e-commerce in Europe and to tackle contractual restrictions to cross-border, on-line sales. 

 

Google investigations are moving on

These are some of the goals that the European Commission has set for the next five years. We are committed to bringing together the markets for capital, energy and the digital economy – and competition policy can help a great deal.

As you know, there have also been recent developments in our Google investigations. Since I took office last November, I have given high priority to the Google antitrust investigations. Given that we are dealing with fast moving markets, I have first updated the information in our files to make sure they reflect latest market developments. I have also met a broad range of players active in many markets, including Google. I am fully aware of the importance of these investigations and their relevance to consumers and market players. 

As I announced yesterday, the Commission has sent a Statement of Objections to Google – the equivalent of a charge sheet here in the United States.

I also announced the opening of a formal investigation into the company’s practices regarding Android.

The Statement of Objections outlines our preliminary view that Google’s favourable treatment of its comparison shopping service, currently called "Google Shopping", is an abuse of Google’s dominant position in general internet search. Google now has 10 weeks to respond. I will carefully consider its response before deciding how to proceed.

My goal is to ensure that consumers and innovative companies can benefit from a competitive environment in Europe. Where concerns are expressed about Google’s conduct that can be addressed by EU competition law, I will approach the issues in a fair and objective way, on the basis of the evidence and in accordance with our rules.

Google has had market shares of more than 90% in general internet search in most EU Member States for many years.

Dominance is, as such, not a problem under EU competition law. However, dominant companies have a responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in neighbouring markets.

Today’s Statement of Objections focuses on the preferential treatment by Google in its general search results of one of Google’s own products: Its comparison shopping service, which allows consumers to search for products on online shopping websites and compare prices between different vendors.

Our preliminary view in the Statement of Objections is that in its general internet search results, Google artificially favours its own comparison shopping service and that this constitutes an abuse. Our investigation so far has shown that, when a consumer enters a shopping-related query in Google's search engine, Google's comparison shopping product is systematically displayed prominently at the top of the search results. This display is irrespective of whether it is the most relevant response to the query. Thus, Google's commercial product is not subject to the same algorithms as other comparison shopping services. Google has engaged in this conduct in a broad number of Member States since 2008, and continues to do so.

The commercial importance of appearing prominently in Google’s general search results is obvious. I am concerned that Google has artificially boosted its presence in the comparison shopping market, with the result that consumers may not necessarily see the most relevant results in response to their queries, and Google's competitors may not get the commercial opportunities that their innovations deserve.

Therefore, our preliminary findings indicate that in the present case, dominance in one market is used to create an advantage in a related market. The advantage in the related market does not appear to reflect the merits of Google’s comparison shopping service, but rather results from Google using its considerable power on the market in which it is dominant.

The Commission has previously also expressed three other concerns as regards Google’s conduct, namely its copying of rivals’ web content (known as 'scraping'), exclusivity in its agreements with advertising partners and undue restrictions of advertisers' ability to use competing advertising platforms. We will continue our investigations into these concerns.

***

As I mentioned, we are also launching a separate in-depth investigation regarding Android.

In recent years, smartphones and tablets have changed the way that consumers access the internet and the way that many companies do business. Mobile internet usage is growing rapidly and there is no reason to think that this will change in the coming years. I want consumers to benefit from the broadest range of mobile services and innovation in the sector.

The Commission has received complaints and also carried out an initial investigation on its own initiative. Today's launch of an in-depth investigation will give us the opportunity to examine in detail the allegations raised, in particular as regards three concerns:

  1. We will look into Google allegedly requiring or incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services, in particular Google’s search engine;
  2. We will look at the alleged bundling together of certain Google products with other apps and services;
  3. We will investigate if Google is hindering the ability of manufacturers of smartphones or tablets, who want to use the Android operating system, from being able to use and develop other open-source versions of Android (so-called “Android forks”).

These are issues distinct from the Google comparison shopping case, and their investigation will be separate.

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Before I conclude, let me say a few more words on the nature of our actions.

First, there is no doubt that the conduct of Google and other internet players can raise concerns on several fronts, from copyright to data protection.

I want to draw a clear line here between those issues that fall under competition law and those that belong with other policy areas.  The Statement of Objections we sent yesterday is strictly limited to the company’s conduct that falls under competition law.

The second point that I want to make has to do with how we enforce competition rules at the European Commission.

In all our cases, we are indifferent to the nationality of the companies involved. Our responsibility is to make sure that any company with operations in the territory of the EU complies with our Treaty rules.

I listen to all without prejudice or preference. We try to collect all the data that are relevant to a given case. And then we apply the law.

It is clear that U.S. companies are strong players in the IT sector, so it is normal that they are often involved in our cases in this sector.  And that can be on both sides of the argument. So one out of four individual companies that complained in the Google search case is a US company. Companies from the US also play a major role in complaining business associations.

At the same time, since we enforce EU competition rules in the EU Single Market, the chances are that the companies that fall under our scrutiny are European.

For example, between 2010 and 2014 we adopted 30 cartel decisions involving 231 companies and imposed fines totalling €8.9 billion.

Of these, 190 European companies received fines totalling €4.8 billion – just over half of the total – while 17 US-based companies received fines of €652 million – about 7% of the total.

The point I want to make is quite simple.

It is inevitable that cases involving Google – in Europe or in the States – attract the attention of the media, but I will not allow this to become a distraction. Our actions are based exclusively on the evidence before us and our rules.

The authority and credibility of competition enforcers anywhere in the world depend on their independence, on the quality of their work, and on impartial, consistent and balanced decisions.

I will stick to these principles with great determination, for the sake of the consumers and of the law-abiding businesses we are there to protect.