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Chillin' Competition Conference, Brussels, 20 November 2018
Ladies and gentlemen
I’m delighted to be back here at the Chillin' Competition conference in Brussels.
Brussels is so familiar to those of us that live and work here that we may have overlooked the fact that it is the most diverse city in Europe. Over 180 different nationalities make their home here. In fact, Brussels is the second most diverse city on the planet, after Dubai.
Personally, I consider diversity to be a huge asset for Brussels. Just as diversity is one of Europe’s greatest assets.
Europe’s industrial diversity
And that’s true in every part of our lives. It’s true of politics and culture; of science and of art; and it’s also true of European industry.
Europe has more than twenty million businesses. But less than fifty thousand – a fifth of one percent – have 250 staff or more. Like an ocean, placid on top and teeming with life underneath, most of the action goes on beneath the surface, among Europe’s small and medium-sized businesses. And though each one is small, together they add up. Together, they account for more than half of Europe’s business income, and nearly two thirds of its workers.
And that diverse collection of businesses – like a healthy, varied ecosystem in the natural world – can help to keep our economy strong and resilient.
The strategic challenges for European industry
Because the one thing that’s certain today is that nothing is certain.
Competition in many sectors is becoming global. Businesses around the world today are developing new skills. And they’re challenging European firms to keep doing better, to stay ahead.
And at the same time, technology is changing the rules of the game. Digital technology can cut marginal costs almost to zero, so it costs almost nothing to sell one more copy of a movie, one more subscription. Data is becoming a vital part of all sorts of businesses – not just in what we think of as digital sectors, but helping manufacturers and even farmers to run their businesses better.
And amid all that change, it’s easy to go wrong. Big, successful companies have been brought to their knees by missing out on the way that digital technology would revolutionise photography, or movie rental, or mobile phones.
Anyone can make that sort of mistake. But if we put all our eggs into one basket, if we combine all Europe’s businesses in a certain sector into one European champion, the results of getting it wrong can be devastating. Because doing that means that thousands of jobs, the future of a whole European industry, depend on the decisions of just one company.
The benefits of diversity
So like a shrewd investor, we should know that the route to success is not picking a single winner, but building a portfolio. We need many businesses, big or small, all making their own decisions – because then, there’s a very good chance that at least some will get it right.
And diversity is also the secret to innovation.
The success of Europe’s industry, in the decades to come, depends on our ability to innovate. But no one can say exactly where we’ll find the innovation that will keep Europe ahead of the curve. And no company, no matter how powerful or rich it is, has the magic formula to guarantee success in that search.
But when our markets are open, with many different businesses all bringing innovative ideas to the market, that gives us the best chance to find the breakthroughs we’re looking for.
And a diverse ecosystem is good, not just for one industry, but for its customers too.
We all know what can happen when supply chains go wrong. We’ve seen battery problems that made a new aeroplane seem unreliable. A fire at a supplier’s factory that tipped a struggling mobile phone maker over the edge, when it couldn’t find new supplies. Millions of euros lost, and reputations shredded – because the supply chain let companies down.
And if there’s just one supplier that can meet the needs of European businesses, then those risks become a constant menace. There’s no chance to spread the risk, by buying from more than one company. There’s no fallback, if something goes wrong with a supplier. But a diverse economy, with many different suppliers, can help to make Europe’s industry more resilient.
Competition and cooperation
And having the choice of more than one supplier also means that customers gain the benefits of competition. They get the power they need to demand a better deal, and to push suppliers to keep looking for ways to cut prices, improve their products, produce innovative ideas. That’s good news for consumers; it also helps to get European businesses fit for the challenges of global markets.
This is why competition matters – because when companies have to compete, it makes our economy grow, and work better for everyone. But that doesn’t mean we’ve forgotten the importance of working together.
Cooperation, after all, is what we humans are all about. It’s why we come together to create societies and states and businesses – because we can do things together that we couldn’t manage alone. And that’s every bit as true when it comes to our economy.
The benefits of cooperation
European business doesn’t exist in a vacuum. The prices paid to farmers in developing countries can determine if they have the money to feed their families. How efficiently products use electricity can affect climate change. And it’s only right that businesses should take responsibility, not just for the quality of their products, but for their effect on the world around them.
Of course, in the first place, that’s what regulation is for – to hold business to the values that we find important. But we shouldn’t rule out the possibility that businesses could get together and take their own action to live up to those values. That they could agree, for instance, not to make products that use energy inefficiently.
And there’s much more to cooperation than helping business take responsibility. It can also help our economy get some of the benefits of size – without losing out on the diversity we also need.
When it comes to data, for instance, size can really matter. Insights that you just wouldn’t see with small data sets can leap out when you have more information to hand.
But you don’t need to have just a single large company, to be able to collect enough data to serve customers better. Instead, companies can get together to pool data into one data set – provided that’s in line with the privacy rules – to help even smaller businesses compete in the age of data.
And cooperation can also help to speed up innovation.
When it comes to climate change, for instance, we’ve reached the moment of truth. We need to act now, before it’s too late. And since nearly a quarter of the EU’s carbon emissions come from transport, we urgently need to find cleaner ways to get around.
And cooperation can help. It can allow companies to put together the money you need to make big investments that push the pace of innovation. It can bring together expertise from different businesses, so we can tackle these tricky challenges from many angles at once.
Cooperation and the competition rules
And so in all these ways – and many others – cooperation is a fundamental part of the way our economy works.
And the competition rules aren’t there to stop that from happening. We just need to make sure consumers don’t suffer.
It’s good when companies get together to talk about research, or environmental protection. The trouble comes if those discussions spill over into collusion. Or if they shut others out of the market.
We don’t mind companies getting together to share ideas about how to raise the quality of their products. But we are concerned if they agree not to compete with each other, by not raising quality, by keeping prices high – or by keeping cleaner products out of the market. That’s the issue we’re looking at now, with the so-called “Circle of Five” German carmakers – though the investigation is still at an early stage, and we have no preconceptions about whether, in the end, it will turn out that these companies broke the competition rules.
And it can also be good when companies get together to set standards – whether that involves charging equipment for electric cars, or a label showing that clothes were made in factories that respect workers’ rights. But if they don’t let others use the standard they’ve created – or if they go too far the other way, and force companies to sell only products with the label – then either way, that can shut out competition.
So it’s important that businesses know what they can and can’t do, so they can cooperate without harming competition. That’s why we’ve published seventy pages of advice – what’s known as our “horizontal cooperation guidelines” - to help companies stay within the rules. And if companies find that they’re still unsure about the rules, then industry is welcome to let us know. So we can look at whether it would help to give companies more guidance.
State support for innovation
But there are times when even cooperation between businesses isn’t enough to hit the goals that we’re aiming for. And that’s when governments might need to get involved.
There are times, for example, when private money won’t fund the innovation we need. When success is so uncertain that investors won’t take the risk. And at those times, public support can help us achieve things that just wouldn’t be possible otherwise. And my job is just to make sure that’s done in a way that doesn’t undermine competition.
Helping the state aid rules to support innovation
So we’ve been working very hard to make sure those things go together – that we can make sure state aid doesn’t harm competition, without making it hard to give the support our economy needs. And today, more than 95% of all state support measures for innovation are put in place without the Commission’s approval in advance.
But here too, when it comes to the really big challenges, we have the best chance of success when we all work together.
Solving a few basic innovation challenges can unlock possibilities in dozens of industries. And by innovating in those key enabling technologies, like microelectronics and new batteries for e-mobility, we won’t just benefit one company. We can help the whole of Europe leap ahead in innovation.
So it makes sense for European governments to come together to support this work. That’s why we have special state aid rules to smooth the way for these important projects of common European interest – projects where different EU countries come together to support big investments that benefit Europe as a whole.
Right now, we’re looking at an integrated project that would bring together dozens of companies, big and small, in four countries – Germany, Italy, France and the UK – to support innovation in microelectronics. That will put billions of euros of public and private money into nearly fifty different, interlinked projects. It’s an exciting prospect, and we want to see it move ahead as quickly as possible.
This would be the first project of its kind to receive green light under State aid rules but certainly not the last – and we will draw on experience from this case to reflect on how our rules and processes can best make these important projects a success. What is clear is that the size and complexity of such projects requires all parties – the Commission and governments and companies - to each pull their weight.
And it’s hard to think of a better example of how a diverse European ecosystem, networked together with a web of cooperation, can help Europe stay ahead of the game.
It’s a bit like knitting.
When you first get out a ball of wool, it’s soft and formless and unimpressive. It’s hard to believe that it will soon be a sweater that will keep someone warm in the winter. And that’s because it isn’t only the wool that’s important. What really makes the difference are the stitches, the connections, the links that you build between one piece and another as you knit. And those connections create a remarkable thing: a fabric that’s supple and adaptable – but also very strong and warm.
And just as with our economy, the key to that is not just what the material can do. The key is the way that it’s networked together.
In my home country, it’s a fundamental principle of our culture, that we need to cooperate to succeed.
Perhaps that goes back to when the Vikings had to pull together, to steer their longboats safely across the stormy seas. But I’m not sure. Because when I’m here in Brussels, or in other towns and cities across the EU, I see the same thing. The same determination to link up the diverse parts of our society, our economy, into a strong and supple network.
That’s what Europe is about. It’s what we do well. And it’s the way to keep on doing well, as we enter an uncharted future.