The values of competition policy

Keynote speech at CEPS Corporate breakfast" one year in office"

Brussels 13.10.2015

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Introduction

 

Good morning ladies and gentlemen and many thanks for the kind invitation to speak before you here at the CEPS Corporate breakfast today. 

 

Everyone here will have noted that the European Union has had a lot of media coverage in the past months – and not all of it flattering.

We have heard a lot about the Greek crisis and we have seen and heard about hundreds of thousands of refugees seeking shelter from war-torn areas, and many more displaced in neighbouring countries.

 

Something which has given space to numerous articles, radio and TV coverage throughout not only Europe but the rest of the world.

 

Europe’s responses are watched closely all over the world. And I believe that all our responses will have profound implications for Europe’s future and our place in the world.

 

But beyond the news and the front page headlines, we also get a lot of work done. We do have a European Union that works; takes decisions; and delivers. But a working machine room generally does not make it to the headlines.

 

This is something important both for Europe and for the rest of the World. Because a strong well-functioning Europe is a factor of stability in today’s World.

 

The values of Competition policy in Europe

Today I would like to be a bit more specific about the part of the machine room that I represent and have represented for almost a year now – competition policy. 

 

I'm often asked about the values underpinning our competition policy.  More specifically, people ask about the role of politics.

 

We can look at the politics of competition enforcement from three angles, starting from whether competition policy is based on political values and principles. The answer is, obviously, yes.

 

Keeping markets fair, level, and open is good for our economies and societies. It establishes a good environment for business in Europe where companies can generate wealth, create jobs, and invest in the future.

 

The second question is: Does competition enforcement relate to wider political priorities? And does it inform regulatory and other action taken to implement such priorities? Again, the answer is: Yes, it does.

 

The Juncker Commission is a political Commission with a clear set of objectives and the College of Commissioners plays as a team.

 

Competition policy – and I as Competition Commissioner – clearly have our own space in it. But there should be no doubt that I will do my part to help achieve the Commission’s broader objectives.

 

The final question is: Is competition enforcement in individual cases politicized? Here the answer is a resounding No.

 

We enforce the law and serve the common European interest. We are committed to the principles of fairness, good administration, transparency and due process. There is simply no room to spare for political interference.

I'd like to share my position on each of these points.

 

Antitrust 

One of the pillars of the union is the Single Market. When our founding fathers were laying the foundations of a united Europe, they saw the need to protect consumers and honest businesses from the anti-competitive practices of rivals. This is where EU competition law plays a central role.

 

Devolving competition control to an EU-wide authority ensures that the EU can talk with a single voice to large multinationals and other jurisdictions.

 

This facilitates enforcement in the EU and effective cooperation across borders between the EU and its partners. 

 

Antitrust law was also extended to include the control of government subsidies - State aid. Governments were major economic actors in post-war Europe. They had the potential to undermine the internal market as much as private companies.

 

Competition policy is very much at the core of the process of European integration. Our work is based on Treaty articles that have not changed since 1958.

 

The founding fathers of Europe understood that there would be no genuine integration without a Single Market – and no functioning Single Market without a strong competition policy enforced by a central competition authority.

 

Six decades later, here we are. The Single Market has been – and still is – a powerful engine of European integration in the economic sphere and beyond.  And this will continue into the future.

 

Of course, our first goal is preserving good competitive conditions in the markets, which translates into lower prices, better quality and wider choice for consumers.

 

Therefore, every time the Commission takes a competition-policy decision, we defend the interests of the citizens of the EU. Competition policy brings the Union closer to the people in a very tangible way.

 

When we bust a cartel – say – or make sure that a merger between two companies does not turn them into a monopoly, we also show to all European citizens that the EU is on their side. We bring the Union closer to the people.

 

Competition policy supports a broader strategy

Competition enforcement is also, as already mentioned, related to wider political priorities.  For instance, competition policy - applied rigourously and in a fact-based fashion – can support one of our main pillars in the ambitious energy strategy of the European Commission.  This is policy, not politicisation.

 

There are two themes where the Competition portfolio is directly relevant and plays an important role for the overall energy strategy:  

 

1) that we can increase the renewable sources of energy in the system.

2) that we can adapt our system to this vision for Europe's energy

 

With more renewables, we would pollute less and rely less on imports. But wind and solar are intermittent sources. Now if one grid spanned the whole of Europe, wind turbines in the North Sea could offset a cloudy day over the solar plant in Sicily. 

 

So we need to tear down the technical and regulatory barriers that keep Europe's energy markets fragmented. An EU-wide energy market must continue to be open and level. Only when energy markets work well can operators vie with each other to give us the best prices and services. 

EU countries have been supporting renewables and we are making good progress. Electricity from renewable sources as a share of the total EU electricity mix has grown from 14 % in 2004 to 26 % in 2013. Renewables have also become cheaper.

 

My task as Competition Commissioner is to make sure that our support; our subsidies do not distort the market. The subsidies that distort the market the least are often also the ones that provide most value for taxpayers' money. 

 

To sustain these policy drives, the Directorate-General for Competition has launched large fact-finding exercises on the subsidies that some EU governments grant for energy generation. One thing is to adapt our grids to intermittent energy sources. Wind, sun and other renewables are clearly the sources of the future but they do not produce consistent levels of power. Conventional generation - such as gas - can act as a backup when the sun does not shine or the wind falls.

 

But gas plants are expensive and this creates a difficult investment climate. 

As a result, fewer conventional generation plants are being built that in the past and fewer still are being projected in the future. This raises concern whether there will be enough capacity to cover demand. One European country in two has a capacity mechanism in place - or is planning to introduce one. These are support schemes to guarantee that conventional plants stay open and generate electricity when demands peak. These schemes are a motley crew. There is a wide variety of them and sometimes they are poorly coordinated. 

 

My task is to ensure that this form of adaptation to a greener energy mix does not end up distorting the markets. These fact-finding exercises – or sector inquiries as they are called – will give us clear and updated pictures of the obstacles to competition in these markets.

 

Competition policy can help reach the objectives of the European Commission. We will use our results to set our enforcement priorities and fine-tune our policies. And this is important in itself, because public policy only works when based on facts.

 

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So far we have seen that antitrust enforcement is a political endeavour in the EU in at least two respects: it plays a role in the process of European integration and it helps the European Commission reach its overall goals.

The third and final dimension is, of course, the need for fair and independent decision-making in individual competition cases. Decision-making in individual competition cases cannot be bent to political priorities.

I would like to give you just one example:  In Europe, we have around 35 mobile network operators at group or company level.

 

The two biggest players are present in eleven and twelve EU countries respectively. The four biggest operators serve around 60% of EU subscribers. In each of the national markets, there are typically three, at most four, mobile network operators.

 

So, while the biggest companies in the EU are present in multiple territories, consumers in each territory are captive in national markets. They cannot access the same offerings as their neighbours across national borders.

 

It should come as no surprise, therefore, that mobile mergers are assessed on the basis of national geographic market definitions. The past few years have seen a number of mobile mergers in Europe – in Austria, Ireland and Germany.  Each was a four-to-three merger and each was approved subject to conditions. I’d like to focus now on the most recent mobile four-to-three transaction – concerning the Danish market.

 

This concerned a proposed joint venture between the Danish operations of two Scandinavian telecom operators, the Swedish-Finnish TeliaSonera and the Norwegian Telenor.

 

The companies decided to abandon the transaction on 11 September. We were, however, on the road to prohibit the merger. We considered the remedies offered by the parties to be insufficient to address our competition concerns.

 

The merger would have created the largest mobile network operator in Denmark and would have resulted in a highly concentrated market structure.

If the deal had materialised, there would have been two large mobile operators – the merged entity and the former national monopolist, TDC. Between them, they would have had around 80% of the market. The third, smaller player would have been Hi3G.

 

According to our analysis, the merger would have had anti-competitive unilateral effects across the board from retail private and business customers to wholesale customers and co-ordinated effects at least on certain retail customers.

 

And while the companies claimed that the merger would lead to greater investments, our investigation did not show how these investments would materialise.

 

And in any event, even if the investments did materialise, we could not see how the benefits for consumers would outweigh the expected price increases induced by the loss of competition.

 

When reviewing mergers, we follow a strictly case-by-case approach assessing each transaction on its own merits. Each market is different and they must be assessed individually.

So we follow the same rationale that underpins our review of all mergers – whatever the industry and the geographic area concerned. We strive to make sure that they do not weaken competition to the detriment of consumers and businesses.

 

Closing remarks

Ladies and Gentlemen:

 

The European Union is based on the Rule of Law, and competition policy is implemented within our Union of Law.

 

When we look at individual cases and the Commission takes decisions on them, competition enforcement follows its own principles and rules – and they are cast in stone:

 

It must be impartial;

It must be blind to the nationality of the companies we investigate; and

It must be impeccable – our decisions are subject to very close scrutiny – internally and by the Union courts – on the facts, on process and on the law.

 

The Commission’s decisions can be challenged both by the parties – when they think our decisions are too strict – and by third parties – when they think our decisions are too soft.

 

All that contributes to independence and fairness.

 

But decisions also have to be seen as independent and fair.

 

I am sensitive to this, and it is one of the reasons why I refrain from commenting about on-going investigations in public.

 

Our investigations and decisions are based exclusively on legal and economic analysis, the jurisprudence of the Court, and the facts of the case – the relevant facts.

 

I listen to everyone, of course, because antitrust enforcement does not happen in a vacuum.

 

But not all the wishes and views of commentators, politicians and business representatives are relevant to our assessment and to the decisions of the Commission.  They must have foundation in facts and law.

 

This means that impartiality is simply non-negotiable. Because we know that our legitimacy, our credibility and – ultimately – the impact of our action depend on it.

 

Thank you for listening.

 

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