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7 May, Competition Day, Riga
Meeting face to face twice a year is an important way to exchange views and experience as part of Europe’s competition enforcement community. This is my first European Competition Day and the first impression is really good. It sends a strong signal that each Presidency devotes an event in its programme to the joint efforts of Europe’s competition authorities to keep the Single Market open, vibrant and competitive.
And it is also important that this event reaches beyond the professionals who deal with competition policy on a day to day basis. The subject is too important to be left to experts alone. So I am particularly happy with the broad range of participants here today.
As competition agencies, of course, we talk to each other on a regular basis. Our staff is in constant contact as they work on cases; and we have the European Competition Network bringing together the Commission and national competition authorities.
The system we have set up in the EU over the past decade is quite remarkable. In the first ten years since the entry into force of the Antitrust Regulation in May 2004, we have adopted almost 800 decisions and over 650 of them have been taken by national authorities.
Together, we are stronger, more effective and a better deterrent for any company that may be tempted to ignore competition law in the internal market.
Our authorities apply the same rules, but that’s only one of the reasons why we are part of a close-knit network. Above all we pursue common values, principles and ultimate goals.
Our legitimacy, our credibility and – ultimately – the impact of our work depend on our independence from political influence and business interests.
This leads back to the quality of our investigations and fair, balanced and impartial decisions. It also means respect for procedural rights and due process must be ensured. This is only to be expected in a community of law such as the EU.
But there is one more factor that unites the competition authorities of the EU. And this is the common realisation that competition policy matters more than ever in the aftermath of the financial crisis.
We know we should redouble our efforts to keep markets contestable and encourage innovation. In today’s economy, these are crucial factors to create the best possible conditions for business in the Single Market.<>
We need the power of the Single Market to boost growth and create jobs. Especially in the recovery after this long and painful crisis.
This insight underpins much of the programme of the European Commission. If you go through the priorities laid out by President Juncker, you will see that many of them pursue precisely this goal.
If the most dynamic sectors of our economy were truly integrated across the continent, Europe’s competitiveness would improve dramatically.
A good example is that yesterday the European Commission unveiled its plans to build a genuine Digital Single Market in the EU.
It’s a broad strategy that goes from copyright rules to telecoms regulation, from e-services to the digital skills of our fellow citizens. And following up on the strategy with more in-depth analysis to put flesh on its bones will now be the focus of our work and attention.
So this is also a good moment to reflect on the relationship between this Commission's policy initiatives - such as the Digital Single Market or the Energy Union – and the enforcement of competition law.
As making markets work better is our goal, then competition law has a key role to play. And the Commission's credibility as an enforcer means that our work has to be based on facts, the interpretation of facts, sound economics, respect of procedures and the fair application of the law. Those who talk of political influence and corporate pressure are miles off the mark.
So the enforcement of competition law can complement the Commission's policy initiatives – without compromising on the rigour and impartiality, which will remain our hallmark.
Coming back to the digital world, this is why yesterday, we launched an anti-trust sector inquiry on e-commerce.
Of course, there are a number of reasons which can explain the slow uptake of cross-border e-commerce in the EU. Language barriers, consumer preferences and differences in legislation across Member States can all play a role. And the regulatory barriers that hamper cross-border e-commerce are identified in the Digital Single Market Strategy.
But there are also indications that companies active in e-commerce may restrict cross-border online trade within the EU by deliberately creating private – and in particular contractual – barriers.
We have indications that competition in online markets may be distorted by certain business practices. These may prevent companies and distributors from selling their products or services across national borders even when EU consumers or businesses express a demand.
I imagine that many of us have tried to access a service or buy a product online only to hit a notice saying that they are not available in our territory.
At other times, we are re-directed to a national site where the product we are looking for may be more expensive or not there at all.
This is what happens when distribution contracts include restrictions such as geo-blocking. We have seen quite a few of them in our case work.
Now, we are going to look into e-commerce contracts in a systematic way. I want to collect solid information from a large number of firms and from every country of the EU.
The inquiry will give us a better understanding of how these markets work and how anti-trust rules apply. This way, we will be able to take more informed decisions in the future – decisions based on facts.
Our work in the energy sector is another priority area.
That's why last week we launched another sector inquiry - using the state aid instrument for the first time - into an important aspect of electricity markets and how EU governments support them: the so-called capacity mechanisms.
This inquiry is part of what competition policy can do to complement another major initiative of the European Commission; the Energy Union.
The ultimate goal of the Energy Union project is building energy markets in Europe that are integrated, interconnected, resilient and secure. We see this as a triple-win strategy, because it will benefit citizens, businesses, and the environment.
Integrating energy markets is a key objective of the Energy Union. If gas and electricity flowed freely around the EU, energy would be cheaper, more secure and more sustainable.
So, why is this not happening yet? I can see three main problems.
One is that national grids are not well connected to one another – and that requires significant investment.
Another is that EU governments do not coordinate their policies well enough.
Finally, there is the problem of illegal business practices that keep markets apart – and competition enforcement is key to addressing this.
In fact, we already have quite a good record.
The Commission has used its antitrust powers against a number of incumbents that have abused their dominant positions.
Our goal in these cases is to make sure that energy companies do not hinder competition; block energy flows from one EU country to another; keep competitors out of the market or threaten to close the tap.
For example, we sent our concerns – in what we call Statements of Objections, as you know – to the Bulgarian incumbent BEH on two occasions; in 2014 and again in March of this year.
The first laid out our concerns that the company may be abusing its dominant position by imposing territorial restrictions on the resale of electricity.
The second was about concerns that the company may prevent its competitors from gaining access to its gas infrastructure.
A more recent example is the Statement of Objections we sent to Gazprom in April. Our concerns there are that some of its business practices may amount to an abuse of a dominant position in breach of EU antitrust rules.
Gazprom may have pursued an overall strategy to partition Central and Eastern European gas markets by reducing its customers’ ability to resell gas cross-border in eight Member States. This may have enabled Gazprom to charge unfair prices in five of those countries. We also believe at this stage that Gazprom has made gas supplies conditional on obtaining unrelated commitments from wholesalers concerning gas transport infrastructure in two countries.
I am sure that here in Riga you are very much aware of the level of Gazprom's market share in Latvia. It is high.
The Commission takes the preliminary view that Gazprom is dominant in the market for the upstream supply of gas to wholesalers in Latvia.
Our investigation covers Latvia in two aspects of the case.
One is the territorial restrictions imposed by Gazprom and which might have prevented wholesalers from re-selling the gas they purchased from Gazprom. The other aspect is the unfair prices Gazprom might have charged to its customers.
Inevitably, when we send Statements of Objection to large companies, the press is full of speculation about the political and strategic implications. I understand that. But, my role is to enforce the competition rules. Regardless of the nationality of the companies involved, those who may be breaching EU rules should expect us to act.
This much for our antitrust investigations. We also use our State aid tools to ensure fair competition in energy markets.
Our enforcement here is based on the State aid guidelines for Environmental Protection and Energy adopted last April.
The guidelines include, for the first time, a section dealing with capacity mechanisms.
This term refers to the subsidies and other support that national governments give to their utilities to make sure that there is enough electricity supply to meet demand in the long term.
A number of Member States see a risk of insufficient investment in new electricity generation over the coming five to ten years. If these investments do not take place, eventually we may have more blackouts across the EU.
This is why about half of Member States have – or are about to introduce – capacity mechanisms.
Now, capacity mechanisms are a legitimate means to prevent power cuts, but as things stand many countries develop solutions only for themselves. They only take into account capacity located within their own borders. Some of them focus mainly on boosting supply, forgetting that blackouts can also be avoided by managing demand.
These solutions are not only inefficient; they also undermine the internal market for electricity and our climate goals.
Moreover, some capacity mechanisms support only specific technologies and companies, rather than adopting a technology-neutral approach that would increase competition and give users cheaper bills.
That is why the guidelines specify how to design capacity mechanisms to preserve competition and cross-border trade. They must be open to all potential providers and technologies. And they have to offer consumers the possibility of cutting their demand when electricity is scarce.
I want to have good and systematic information on capacity mechanisms before deciding on next steps.
It is the first time the Commission launches a sector inquiry in State aid, which is a new tool. But DG Competition already conducted an anti-trust inquiry into energy markets between 2005 and 2007. That probe helped the Commission prepare the Third Package for the internal energy market, adopted in 2009.
In contrast, the inquiry we launched last week will address public authorities and stakeholders in Member States where capacity mechanisms are in force or planned. We want to find out how these mechanisms affect market participants, and trade between Member States.
Above all, we want to learn what has worked, and what has not.
We are planning to publish an interim report at the end of the year and we will invite the public to give us their comments on it. The final report is due to be published next summer.
The results of the inquiry will help us implement the State aid Guidelines in this area. It will also help the Commission draft the legislative proposals slated for 2016 on electricity market design and the security-of-supply side of the Energy Union.
To sum up: competition policy is doing a lot to help put Europe’s economy back on track.
These initiatives are part and parcel of the overall strategy of the Commission to leverage the untapped growth potential of the Single Market.
We all work together to achieve that.
And teamwork is also crucial for us as members of the European Competition Network, and for our common goal to keep competition alive in the internal market.
All competition authorities in the EU should be independent; they should have the resources and the staff they need to carry out their work; and their enforcement powers should be adequate.
These are the goals and we should all work to find the best ways to reach them.
The European Competition Network has engaged in detailed fact-finding. This helps us have clear and comprehensive data as a basis for our discussions. It has been a time-consuming process and I would like to thank all national authorities for their efforts and cooperation.
Your input will help to ensure that we take the best possible decisions on the future of the European Competition Network. A network where competition authorities are truly independent, well-funded, and effective.