Concurrences’ New Frontiers of Antitrust – Paris, 15 June – Keynote speech
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Good morning Ladies and Gentlemen,
First of all, let me thank the organisers for inviting me to speak at the Concurrences conference in Paris.
This is the perfect venue to reflect on the state of competition policy eight months into my mandate as Commissioner.
Stimulating growth, investment and innovation will be at the top of the agenda of the Juncker Commission for the next five years.
And for good reason.
Europe is turning the page on this long crisis. So we need investment as the basis for sustainable growth and development. Private as well as public investment.
This is the rationale of the Investment plan for Europe. The European Fund for Strategic Investment is at the heart of that plan, and is ready to become operational after the summer.
We are talking about unlocking more than 300 billion euros over the next three years for strategic sectors, such as energy, the digital industries, and research and innovation.
And Europe urgently needs to invest in innovation. We are still lagging behind our own target of increasing research and development investments in the EU to 3% of the Gross Domestic Product. Investing is about the future. Investing in innovation is Europe's future.
Success in stimulating investment and innovation will depend on many factors. So the Commission’s response to the challenge is teamwork. Many European policy areas converge on these goals – and competition policy is one of them.
In fact, competition policy is a key factor in creating a climate that fosters investment and innovation. And this will be the focus of my remarks today.
In the State aid field, the new rules introduced over the past couple of years steer public support towards boosting new investment and innovation.
We need to focus not just on the quantity of public investment but also its quality. We need to make sure that public money is well spent. In particular, we need to make sure public funding incentivises private investment rather than simply replacing it.
This is one of the central pillars of our rules on subsidies and other forms of government support to the economy. Taxpayers’ money should never crowd out private investment. To the contrary, it should induce it.
To quote John Maynard Keynes on this point: “The important thing for Government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all”.
In the area of research and development, the state aid rules aim at making sure that public funding goes to research projects that would not have happened otherwise. To projects that truly go beyond the state of the art. As a result, it will be easier to bring innovative products and services to the market and ultimately to consumers.
Fortunately, this is working. Since 2007, the Commission cleared 250 Research & Development schemes. We approved 55 large projects worth 2.5 billion euros, mostly in promising technologies such as nanoelectronics and advanced materials.
In sum, we want to encourage public support for the industries of the future. We want to promote collaboration between industry and academia.
But Europe cannot rely on public funding alone. We need to make sure that firms invest in our future.
And when do firms invest? Above all, they invest in order to out compete their rivals. Competition spurs them to invest in differentiation. In other words, they need to innovate to stay ahead of the game.
We all know the old saying that necessity is the mother of invention. My key point is that competitive markets create that necessity.
This is seen most clearly in our review of mergers.
Of course, price is a critical parameter of competition. And we will continue to analyse likely price effects in our enforcement work. But not only price effects. We also assess what will happen to innovation. Will firms after the merger preserve their ability and incentive to innovate? Safeguarding the competitive pressure that drives investment and innovation is therefore at the core of our analysis.
The telecommunications industry is a good example. This is a sector in which our merger review often has to verify that competition and customer demand will continue to drive investment.
Incumbent operators argue that if they cannot merge with their rivals in the same country they will be unable to increase their investment. I’ve heard this claim quite often, but I have not seen evidence that this is the case.
Instead, there is ample evidence that excessive consolidation may lead not only to less competition and more expensive bills for consumers, but that it also reduces the incentives in national markets to innovate.
In fact, infrastructure investment can be stimulated by competition. In 2009 a new player, Free Mobile, entered the French telecoms market. Following that entry, the overall level of telecoms investment in France grew, and remains at higher levels than at the moment of Free's entry.
In these markets, we have also seen established players abuse their dominant positions to try and prevent competition from alternative operators. And we shouldn't forget that these alternative operators are also behind major network investments in the EU.
Our focus on investment and innovation in merger control is also clear in the pharmaceutical sector.
Finding new drugs to treat diseases that currently have no cure and to offer a better quality of life to patients crucially depends on research and development by pharmaceutical companies.
When pharmaceutical companies announce a merger, we have to carefully balance the benefits of pooling their resources with the potential negative impact of eliminating an innovator.
This is something that the Commission looked at when approving Novartis’ acquisition of the oncology business of GlaxoSmithKline in January of this year.
Thanks to the deal, Novartis is widening its portfolio of cancer drugs.
However, we identified the risk that Novartis would stop developing two innovative drugs that show great promise for the treatment of skin cancer and many other tumours, because it was acquiring similar drugs from GSK.
That's why the deal got the green light on the condition that Novartis sell its entire clinical-trial programme for the two drugs.
As a result, our action has made sure that patients will continue to benefit from future innovation.
At this time of year the holiday season is fast approaching.
Now you can take all the books you want to read with you on your e-book reader.
Companies invest in innovative products such as e-books and e-book readers because they need to compete.
Competition pushes firms to be more efficient and inventive than their rivals. And it allows productive firms to replace unproductive ones.
Companies invest and innovate because they want to maximize profits and grow. This is normal.
And if they are successful, innovative companies become market leaders – and this is absolutely fine.
The problems begin when market leaders abuse their position in the market to stop others from growing, investing and innovating. That's when the anti-trust rules can step in.
Last week I took the decision to open a formal investigation into the contracts that e-book publishers are asked to sign to sell their products through Amazon.
The concern is that many clauses in Amazon’s contracts with publishers appear to shield the company from competition. We are looking at clauses that prevent publishers from offering better conditions and services to Amazon’s rival online booksellers. In short, we are looking at the contractual terms that generally go by the phrase ‘Most Favoured Nation’ and similar clauses.
Our investigation will focus on the English- and German-language markets because these are Europe’s largest and most developed markets for e-books.
We need to better understand the impact that these clauses have on competition between different platforms.
We want to make sure that the contracts that publishers sign with Amazon do not prevent rival platforms from bringing smarter, more efficient, and more innovative services to consumers.
In other words, Amazon should not use its strong position to close the door behind it and prevent companies with new ideas from contesting the market.
That would hamper innovation, reduce investment and ultimately reduce choice for the final consumer.
But it is not only companies that have to innovate. So do competition authorities.
Since taking up my post last November, one of the happiest discoveries has been the remarkable achievements made jointly by the Commission and national competition authorities in the European Competition Network. Since 2004, more than 800 anti-trust decisions have been adopted applying the same EU competition rules.
It is essential for our internal market that business can rely on consistent application of EU competition rules regardless of which authority is in the lead.
But I do want to point to one particular challenge. How can we make sure that our European family of antitrust authorities stays at the cutting edge of developments? Inevitably new technologies bring about new markets and dilemmas. We need to work together to determine whether those dilemmas are genuinely new or just old dilemmas in new disguises. There is after all a limit to the variants of human behaviour.
In any event, I would be the last person to say that Brussels holds a monopoly on new ideas. Innovation can and should also come from National Competition Authorities. But we do need to make an extra effort within the antitrust family in these circumstances. To discuss openly and to compare notes. To cooperate pragmatically. And above all, to keep an open mind that it may be one of the other family members that has the best answer to the newest problem.
It goes without saying that this is not only wise for cooperation between competition authorities!
I'd like to finish by giving you a great example of innovation. It doesn't need a battery. It is extremely mobile. There is no need to adapt the keyboard if you bought it in France.
This is of course a book. An amazing innovation that is many centuries old. But still very relevant today.
Competition policy is vital to ensure that incentives to invest in new products are maintained. Although it remains to be seen which of today's innovations will beat the book for long-lasting success!
The strongest incentives remain consumers’ demand and competitive markets.
These are the main factors that push companies to bring new products and services to the market, create wealth, and improve our wellbeing.