Global Antitrust Enforcement Symposium, Georgetown Law School, 25 September 2018
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Ladies and gentlemen
I’m delighted to be here with you today.
When you’re invited to DC in the fall, it’s hard to say no. It’s hard to turn down the chance to be here when the summer heat is starting to fade and the leaves are starting to turn. These are the days when many of the tourists have gone. And you can take a morning run almost alone, along the Reflecting Pool down to the Lincoln Memorial. And feel, in that place, the incredible sense of being in the presence of history.
I think one reason why Lincoln’s story is still so powerful, more than 150 years later, is that we can see that his world wasn’t so remote from our own.
Human nature hasn’t really changed in that time. It’s easy to recognise familiar traits in the people he dealt with. And his approach to dealing with the problems he faced still resonates for us today. When he formed his cabinet, he had a hard choice to make. Should he keep out the powerful, ambitious rivals who had fought him for the nomination? Or should he bring them on board, so he – and the nation – could benefit from their energy and talents? And he chose the second option – because he knew that strength, ambition, imagination, are things to welcome, not fear – if you can guide them in the right direction.
Striking the right balance in antitrust enforcement
So we needn’t be afraid, when we find that our markets are full of big, ambitious, innovative companies. Far from it. We should welcome it – as long as those energies are guided in the right direction.
That ambition can bring us the things consumers want – the innovative products, the wide choice, the low prices. Our job is just to make sure those companies use their energies to compete to be better; and not to undermine competition.
So we need to be sure that we strike the right balance. We need to give businesses room to grow and compete; but we also need to be ready to step in, when they act in a way that harms competition.
Because if we intervene when we shouldn’t, consumers will suffer. If we block a merger that would have helped the companies to cut their costs, without seriously harming competition in the process, then consumers can lose out on lower prices.
But if we go the other way, and don’t act when we should – if, for example, we let powerful companies misuse their power to drive rivals from the market – then consumers lose again, from higher prices and lower quality in a market that’s not competitive.
The right competition policy for business
And when we strike the right balance in our competition enforcement, we don’t just do the best we can for individuals. We also create a good environment for business.
There’s a show called MasterChef that’s very popular back in Denmark, and many other countries. I think you have it here, too.
Each day, the competitors have to produce a spectacular dish in a very short time – and as they cook, the presenters come round and ask them what they’re making.
And I’m always surprised when I hear one of them say that they’re cooking a dish they’ve never made before; or never under such pressure of time. Because to compete on the big stage, you have to be at your best. And you only get that way if you first hone your skills at home.
And that goes for businesses too. The companies that succeed in today’s global markets will be the ones that are best prepared for the big contest. They’ll be the ones that are ready to compete under the bright lights of global competition; because they’ve been working at home in Europe to be more efficient, more innovative, better at serving their customers.
So the champions Europe needs are not coddled favourites, freed from the need to compete within Europe. The champions we need are the ones that can fight their way to the top of a competitive market in Europe – and go on to do the same across the world.
And that’s why I’m convinced that there’s no such thing as a competition policy that’s “pro-business” or “pro-consumer” – unless it’s both. For business as well as consumers, the best competition policy is the one that hits the sweet spot, where we act when businesses harm competition, and hold back when they don’t.
State aid rules
And for us in Europe, that doesn’t just mean antitrust and merger procedures.
The state aid rules are unique to Europe. But they’re every bit as important as the rest of competition law. Because it isn’t only the actions of businesses that can harm competition. Governments can do it too, when they hand out state money to some companies, and not to their rivals.
That’s why, in the last few years, we’ve dealt with several cases where European governments have given state aid through special tax treatment.
Most recently in the case of McDonald’s. Luxembourg allowed the company to rely on the double tax treaty between the US and Luxembourg to avoid paying tax on the income of its US branch. The result was double non-taxation: income that was taxed neither in Luxembourg nor the US.
So we opened an investigation to see whether Luxembourg gave illegal state aid to McDonald’s, by giving the company special treatment that wasn’t in line with the double tax treaty and national tax rules.
But the responses we got, and the further digging we did, made it clear that this wasn’t the case. The treatment McDonald’s received was allowed under the treaty. Luxembourg had not given illegal state aid to McDonald’s in the way we set out when we launched the investigation – because the same arrangement was available to anyone who was in the same position.
That doesn’t mean that nothing was wrong. It isn’t exactly good news, to know that McDonald’s, and any business in the same position, could exploit differences between Luxembourg and US tax rules to escape paying tax. So I’m glad that the government of Luxembourg has proposed new laws to help put this right.
But competition enforcers can’t intervene just because something’s not right. We act if – and only if – it turns out that a company or government has broken the rules.
The continuing relevance of competition principles
But we also need to be ready to think about whether the framework of our rules is still fit for purpose.
When you do that, I think you see that we have the right principles. The EU antitrust rules are sixty years old. And they’ve worked for so long, precisely because they don’t try to anticipate everything. They lay down the principles, and leave it to competition authorities and courts to apply them in practice.
And that gives us the best of both worlds. Stable principles, that guide the way businesses behave – but which are open enough to deal with new technologies and new markets.
The modern market for smartphones and tablets is not much more than a decade old. In those ten years, technology – and markets – have been transformed. But our rules can handle that – because human nature hasn’t changed. And nor have the ways that companies try to undermine competition.
It’s not new for powerful companies to tie products together, forcing customers that want a popular product to buy others as well. And nor is it new for some of those ties to be used as a way to undermine competition. In the past, that involved products like nails for nail guns. Today, in the case of Google’s Android operating system, it involved making customers who wanted the Play Store agree to pre-install apps like Google Search and Chrome – the main ways of directing search queries to Google.
And it’s not new for companies to shut out their rivals, by paying customers to use their products exclusively. Once, that meant exclusive deals to buy sugar. In the Android case, it meant payments in return for making Google Search the only pre-installed search app.
These two restrictions – together with a third, which blocked the chance for companies to sell devices using different operating systems based on Android – held back innovation in some of the most advanced markets in the world. And yet, underneath, many of the issues were familiar – and our rules were well suited to handle them.
Or take another example - the proceedings we opened last week, looking at whether a number of German car companies formed a cartel.
The Commission has been dealing with cartels for sixty years. But this case is a bit different. There’s no indication that the companies agreed to fix prices. There’s nothing to suggest that they increased prices by cutting the number of cars that they made, or divided the market between them. Instead, we’re looking at whether they held back their competition to introduce newer, better technologies to cut down on harmful emissions.
I can’t say today – because the formal, in-depth investigation is just getting started – whether those companies broke the law or not. But what I can say is that a cartel that holds back innovation is every bit as illegal as one that fixes prices.
Keeping our tools sharp
So our competition rules have shown they can deal with new technologies, and new ways of doing business.
But we have to make sure our rules will stay relevant for the future.
This is why, in March, I appointed three special advisers to look at how a more digital economy will affect consumers – and whether competition policy needs to respond. They’ll produce their report by the end of next March.
And in the meantime, in January, we’ll hold a conference in Brussels to discuss these issues. We’ve asked for public contributions for that conference – and there’s still time, until the end of this month, for anyone who wants to have their say.
And we’re also watching the hearings that the FTC is now holding on these and other subjects with a great deal of interest. It’s true that our markets and laws are different from those in the US – sometimes very different. But we all need to deal with the same new technologies. So we have a lot to gain by learning from each other.
And not just in the digital area. In the last few decades, we’ve developed a whole range of ways to help us work with sister agencies across the world. We coordinate on individual cases. And there’s no one we work with more closely than the US authorities – both the FTC and the Department of Justice.
Because it’s important that authorities across the world work together on cases. But also to bring our rules – and the way we apply them – as close together as we can.
Less than twenty years ago, a group of fourteen authorities – including the FTC, the DoJ, and the Commission – launched the International Competition Network. Today, the ICN has more than one hundred and thirty members, and it deals with some of the trickiest issues in competition policy.
The ICN – together with the OECD Competition Committee – has played a vital role in discussions on companies’ procedural rights. In March this year, the ICN adopted Guiding Principles for procedural fairness. And in June, the OECD produced a Scoping Note which moved its own work forward too.
And that’s crucial. Authorities as well as businesses gain, when companies that we suspect of breaking the rules have strong procedural rights – rights to defend themselves, and to put their own case.
Assistant Attorney General Delrahim put it nicely in a speech in Italy this spring – which sounds almost as appealing as Washington in September.
He reflected on the way the Department of Justice engages deeply with businesses involved in antitrust investigations, and how difficult and time-consuming that engagement can be. And he concluded that, “I have yet to see a matter in which it did not yield a better and more thoughtful substantive result.” I couldn’t agree more.
So procedural fairness is something we can all get behind. And by working towards common standards together – giving everyone the chance to take part in the discussion – we can produce something that has genuine support and commitment from authorities throughout the world. So whatever we do in the future to improve the rules and procedures that apply round the world, we need to do it through organisations like the OECD and the ICN.
Supporting inclusive global institutions
And that isn’t only true of competition. In many areas of policy – from the environment to taxation to international trade – each of us is best off when we find ways to work together.
And the agreements that last – the ones that really help us to put our common interests first – are not the ones that a few powerful countries impose. They’re the ones that are freely agreed between our nations – with rules that everyone, big or small, obeys.
And this is why we need to defend the international systems of rules that we’ve built up over two generations. Systems like the rules of the WTO, which have given countries around the world the confidence to lower their trade barriers, and allowed all those countries to become richer as a result.
It’s why the EU has responded to the US tariffs on steel and aluminium in ways that are in line with the WTO rules, not least by bringing a legal case against them. Because without those rules, everyone loses out – and we want to support them, not undermine them.
Ensuring global fairness
Of course, that doesn’t mean the system can’t be improved. We need to make sure global trade is fair as well as free. And that’s a goal that we share with the US – as President Trump and President Juncker’s meeting in July showed.
The WTO rules could be better at dealing with subsidies that hurt competition, not just for goods but for services too. They ban some types of harmful subsidies - but not enough. They require members to be open about the subsidies they give - but in the last round of reporting, only about half of all WTO members reported any subsidies at all.
That’s why we’ve agreed with the US and Japan earlier this year that we’d work together, along with our other trading partners, to improve the WTO rules. Because this is the way to deal with worries that world markets aren’t working fairly for us. Not by undermining international rules. But by focusing our efforts on the particular concerns that we face – and wherever possible, by working together.
And when we face problems over whether our companies get fair access to government procurement contracts in other countries, the answer is not to punish foreign companies. The answer lies in agreements, like the WTO’s Government Procurement Agreement, where countries agree to open up their markets.
Our job, as competition enforcers, is not to replace the markets. It’s businesses, not us, that produce the good things that consumers are looking for – low prices, choice, innovation. We just have to set those energies free. We have to make sure cheats don’t prosper – so that competition can make markets work better for everyone.