Bundeskartellamt 19th Conference on Competition, 14 March 2019
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Ladies and gentlemen
I want to thank Andreas Mundt, and the Federal Cartel Office here in Germany, for inviting me to be here today. And I also want to say thank you to Peter Altmaier, for the clear and powerful way that he set out the challenges that face Europe today.
I think we all agree that Europe today has big choices to make. And that’s familiar territory, for those of us here today. Because after all, choice is what competition policy is all about.
Competition and choice
It’s about the way something as simple as choice – making sure consumers have the option to go somewhere else if they don’t think they’re getting a fair deal – can unlock all the vast potential of our industries to produce better, more innovative products at lower prices.
But it’s also about choice in another, equally fundamental way.
When the founders of the European Union decided to include competition rules in the Treaty of Rome, they were making a choice about the sort of society they wanted to build. So, for that matter, were the leaders of the Federal Republic, when they adopted Germany’s pioneering competition law.
They were choices to put a fair market for everyone ahead of the interests of powerful companies. Ludwig Erhard, then minister of the economy, put it well when he described Germany’s competition law as “the basic law of the social market economy”.
A diverse industrial ecosystem
And that basic law, that fundamental choice, has left a deep impression on the way Europe’s economy works. It’s guided us on a different path from some of our trading partners, like the US or China, to create the open, diverse economy that fits with our values.
There are more than twenty million businesses in Europe. But less than fifty thousand – just a fifth of one percent – have 250 staff or more. Europe’s small and medium-sized businesses account for more than half of all Europe’s business income, and nearly two thirds of our jobs. And despite the challenges that smaller companies face when they sell beyond the single market, they still account for about a third of the value of Europe’s exports.
In the natural world, an ecosystem is strongest and healthiest when it’s diverse, with thousands of species filling every niche.
And what’s true of natural ecosystems is also true of our economy – our diversity is our strength. It makes us more resilient – by letting us put our money on a series of small bets, instead of staking all we have on one throw of the dice. It makes us stronger – because the fierce competition that our companies face in Europe drives the quality and efficiency they need to face foreign rivals. And it helps us reach into more places than we could with just a few big companies.
Each year, one German business magazine prints a list of the companies here in Germany that are leaders in world markets. And of course, that list is headed by the big companies that everyone knows, like Volkswagen or Siemens. But almost three quarters of the companies in the latest list are businesses with sales of less than a billion euros a year; companies which few people may have heard of, but which, in their own markets, are the best in the world.
Adapting to change
And we need to bear that in mind, as we look to the future.
We’re facing huge changes in the way our economy works. Digital technology is transforming the most traditional of industries. Europe’s place in world markets is changing, as increasingly sophisticated global rivals compete with our companies.
And all Europe’s policies – including competition policy – need to adapt to those changes.
But we need to do that in a way that plays to our strengths. A way that supports the diversity and openness that work so well for us – and preserves the values that make us who we are.
This is why it’s important that we keep the protection of consumers at the heart of all that we do.
For example, when we define the geographic market where companies compete, we concentrate not on whether those companies are active globally, but on the options consumers really have in Europe, if prices here go up.
Because it’s no use to an Internet user in Germany to know that Google faces tough competition in China. And though of course there are plenty of steelmakers outside Europe, that doesn’t keep costs down for European carmakers, if those foreign plants can’t deliver the high-quality steel they need, exactly when they need it.
Of course, search engines and steelmakers are global companies. But that’s not the issue. The question is whether there is global competition that actually benefits their customers in Europe – whether that means individuals, or the European companies that need low prices, to help them compete on world markets.
The future of competition in a digitalised world
But we also need to be willing to take stock of whether our rules – and the way we apply them – will still be able to keep competition working well, in future markets that will look very different from today’s.
And that means, in particular, that we need to be ready for the vast changes that digital technology will bring – not just to the markets we think of as part of the online world, but to every bit of our economy.
That’s why we’ve asked three special advisers to examine what a digitalised economy means for competition and consumers – and how the competition rules should adapt. And while we wait for their report – which should be with us in the coming weeks - we’ve also brought together more than 500 people to discuss these issues with some of the world’s leading experts on technology and society. We’ve also collected more than a hundred written contributions, from every side of the debate.
And in all those discussions, we’ve found that some concerns about the future of competition come up again and again.
The more digital our markets become, the more businesses depend on platforms to help them reach customers. But when the company that runs a platform also competes with businesses that depend on that platform, we face the risk that it could use its power to drive out competition in not one market, but dozens.
We also hear concerns about what it could mean for competition, if a few companies come to control the data you need to compete. And there are worries, too, about how innovation could suffer, if big Internet companies get in the habit of buying up startups that might have competed with them.
The future of competition policy
So I’m keen to see the ideas that our special advisers will put forward, when they present their report.
I’m looking forward to their ideas for new ways to help us understand the power that platforms have.
I’m also looking forward to what the report will have to say about how to tackle the risk of companies monopolising the data you need to develop and compete – while still being fair to businesses that have put money and effort into building those sets of data, and respecting the privacy rights of the people whose data it is.
And finally, I’m interested in our advisers’ ideas on how we can put a stop to mergers that would harm innovation, even when they happen early in the life of a startup. Right now, it isn’t easy to be sure whether those startups would have turned into serious rivals if they hadn’t been bought. And they may even have so little turnover that they don’t need our approval for the merger at all. So we need to see if there are ways to overcome these problems – without getting in the way of mergers that keep the startup market working well.
Because there is no more fundamental change going on in our economy than this digital transformation.
So it’s important that Europe’s businesses are able to develop the innovative ideas that will keep them ahead in this digital age.
And they can often do that best by working together. Because cooperation can help push the pace of innovation. It can let companies put together the really big investments that none of them can afford on their own. And it can bring together expertise from different industries, in teams that are more than the sum of their parts.
The competition rules don’t stop that – just as long as consumers don’t suffer. As long as cooperation doesn’t spill over into collusion, or end up killing competition. And our job is to make sure businesses have the information they need to stay the right side of the line – so they can go ahead confidently with cooperation that’s good for our economy.
That’s why, in our horizontal cooperation guidelines, we’ve published more than seventy pages of advice on what companies can and can’t do. And in the next few months, we’ll be launching a review of those guidelines, to make sure they’re doing all that they can to give business the certainty it needs to invest in the future.
But of course, there are times when private investment isn’t enough – when the innovation we need is so difficult and risky that it needs public money to get off the ground.
As the world becomes more digital, microchips and sensors become the foundation for success in dozens of industries. If Europe can take the lead in this technology, we can build a bright future throughout our economy. But if we fall behind – and become dependent on suppliers outside Europe – we run the risk of losing the race before we start.
That’s why the EU state aid rules aim to make it as straightforward as possible for EU governments to come together and support companies investing in these important projects of common European interest. And in December, we approved Europe’s first integrated research project under these rules. Four EU countries – France, Germany, Italy and the UK – will together put 1.75 billion euros in to a series of 40 closely linked projects, all aiming to build better European sensors and microchips.
A smart industrial policy for all
At the conference we held in Brussels earlier this year, the Nobel prize-winning economist, Jean Tirole, spoke about the future of industrial policy. And he mentioned that support for innovation can make a huge difference – if public money goes into the right projects, alongside private investment, and isn’t just given to the biggest businesses, with the loudest voices.
Because the thing is, Europe needs an industrial policy, to help our companies compete with the best in the world. But that has to be a policy that plays to our strengths. One that benefits, not just a few companies, but our whole ecosystem.
So we need to make the most of the potential of Europe’s single market, to give all our companies the space to grow. We need to break down the barriers that get in the way of a true single market for services, and in digital markets. We need to invest in the skills and the infrastructure that will keep Europe ahead in global competition.
Maintaining a global level playing field
And we also need to make sure Europe’s companies have the chance to compete on a level playing field – not just in Europe, but across the world.
So when we see foreign companies competing unfairly, by dumping cheap products into our markets, we need to use our powers to respond – as we already do with dozens of products, from bicycles to steel.
We need to respond, when European businesses don’t get the same chance in foreign public procurement markets as their companies do in Europe. So the time has come for the European Parliament and the Council to move forward with the revised International Procurement Instrument we proposed in 2012 and revised in 2016.
And we also need to make full use of Europe’s new procedures to screen foreign investment, so we can make sure that foreign investment in our businesses comes with the right interests.
These are challenging times. The world we know is changing before our eyes – and we’re having to change too, without really knowing for sure what the future will look like.
But the answer is not to lose faith in the choices we made, sixty years ago – choices that have made Europe the best place to live in history.
Because in those two generations, we’ve seen that Europe made the right choice. We’ve seen that an open, diverse economy can provide a fair deal to consumers – and also give us the ability to compete against the best in the world.
And if Europe has the confidence to go on doing what we’re best at – in a way that’s adjusted to the demands of the modern world – then we have an even brighter future ahead of us.