Competition is good for industrial competitiveness. The European competition policy is not what it once was. Firstly, new regulations and other texts on cartels, abuses of dominant position and controls on mergers have entered into force. Secondly, this policy was more explicitly brought in under Community policies and the Lisbon strategy. The document prepared under the aegis of Mario Monti and approved by the European Commission, "a pro-active Competition Policy for a Competitive Europe", adds to and clarifies that on industrial policy, which was summarised in this column on 29 and 30 April (both documents continue several references to each other ).
Some principles have been clearly confirmed. The Commission stressed that competition policy represents "a key element of a coherent and integrated policy to foster the competitiveness of Europe's industries and to attain the goal of the Lisbon strategy (...). It complements and reinforces other Community policies aiming to make this strategy a reality". A bit further: "competition is not an end in itself". We must not forget the global nature of the Lisbon strategy. The sentence stating the objective of creating in Europe the most competition knowledge-based economy in the world is always quoted, because it is the most spectacular, but it says nothing of the multiplicity of objectives and instruments, which also include education, life-long learning, research and even full employment. The competition policy is at the service of these objectives. The Commission observes that: "competition puts pressure on firms to innovate and to reorganise their business activities (...), because firms in a competitive marketplace relentlessly seek innovations (...). Lack of competition can slow down innovation and hinder research effort. The positive effects of competition can boost the efficiency of an entire industry, including related and supporting industries in the surrounding region (...). Competition at national level improves a firm's capacity to be competitive abroad". The sentence on services of general economic interest has clearly been weighed word for word. It reads: "by carefully opening up these markets to competition, respecting the public service obligations as independently defined by the responsible authorities, has delivered significant economic benefits to users'.
Such being the advantages and objectives of competition, the first objective must be to bring competition to places it does not yet exist, because, according to the Commission, "many economic sectors in European remain fragmented and are characterised by weak competition and persistently high prices that harm industries and consumers alike".
Revision became possible. As we can see, the Commission has vigorously reaffirmed the fundamental principles which justify, and even demand, an efficient competition policy. Should we conclude from this that the Commission is challenging all the criteria and rejecting demands to change various guidelines? Absolutely not; otherwise, it would not have devoted so many years to studies and analyses and the revision of this policy, definitively approved by the Council and Parliament, and now in force.
But revision is not a criticism of what went before. When the Treaty of Rome entered into force, only one Member State had any competition rules: neither firms nor national courts had any experience of it whatsoever. The policy defined in the Treaty had to be centralised upon the Commission, with the obligatory notification of all business agreements. Over the years, a body of law has built up and various provisions of the Treaty clarified; in particular, affirmation of the fact that the creation of a dominant position can itself be an abuse led to the concept of the prior approval of mergers (which was not initially planned). Now, national provisions exist everywhere, courts have valuable experience, companies themselves know what's allowed and what isn't. It became possible to get rid of prior notification of agreements (which filled up the archives and corridors of the directorate general on competition, forcing staff to examine an avalanche of insignificant agreements, whereas banned ones remained underground), and allow national courts to interpret Community law. I'm not going to sum up the reform here; there are some highly admirable texts which do so in detail. Some of them are very impressive. How many things lawyers know and understand, and judges, teachers, experts!
On one line, on just a word, they can write pages and pages of commentary and analysis. How could I compete?
Happily, the Commission's new document is a political one. It has not yet analysed the new legislation (it has done in the past), but played up the intentions and effects, which I will summarise in three points:
a) establishing a unified legal framework for all firms within the Union. Thus the same competition conditions will exist for all firms, plus co-operation and distribution agreements, and ones on licences and technology, facilitated. National courts will apply European rules on agreements directly (consumers and businesses who feel put at a disadvantage by restrictive practices will be able to complain), and at the same time a network is set up, creating a co-operation system which will guarantee the uniform interpretation of Community law, with the option of requesting the Commission's opinions;
b) stressing economic analysis more. This is the most interesting point for the political forces and businesses themselves. Whenever the Commission has been criticised in the past, the reason was almost always the same: it was reproached for its excessively legal approach to the operations under the microscope, which did not sufficiently take account of the aspects of industrial policy, competition from third-country giants, the global nature of markets, etc. It now says: "economic analysis is central (...): it shifts the focus firmly onto the economic effects of firm behaviour or of government measures, and helps to identify the circumstances in which characteristics such as high profits and substantial market shares are signs of market power". This last sentence means that high profits or the conquest of a substantial chunk of the market are not necessarily signs of abuse: this depends on the circumstances. But this is not all. In a note, the Commission adds: "economic instruments indicate whether certain commercial practices aiming to subordinate sales of one product to that of another, discounts or territorial restrictions, harm the consumer or provide greater competitiveness". The three commercial practices referred to by way of example are not necessarily illegal; their effects can even be positive; it's the economic analysis which determines it. Furthermore, various economic rules become applicable automatically. For example, market share thresholds will be set, and as long as firms stay within this limit, its behaviour is within the rules, and it doesn't have to worry about whether the agreements it concludes are compatible with the competition rules, because they are by definition. This rule covers most SMEs.
Merger-related increases in efficiency boost competition. Controls on mergers benefit from similar clarification and simplification. The main innovation concerns the basic criterion for assessing a merger: "the new regulation sets a clear and unambiguous criterion, based on the effects of the operation, which strengthens the Commission's capacity to intervene in the small number of operations which infringe competitiveness (...). The new criterion will be applied on the basis of an analytic framework to judge the effects of mergers on competition on the basis of solid economic principles". On this framework, the Commission refers to the regulation and guidelines published, concluding: "the Commission can take account the increases in efficiency which could be due to a merger", explaining that it reached the conclusions "that there were excellent grounds for taking account of increases in efficiency more explicitly than has been the case in controls on mergers". It now recognises that" mergers can allow firms to reorganise their activities or regroup their additional capacities in such a way as to lead to more intense competition, which balances out the harmful effects of these operations on competition". It adds that "the guidelines define a more modern approach of a more economic nature to increases in efficiency, allowing the Commission to distinguish better between mergers which harm competition and those which boost it".
On first sight, this new guideline responds to most previous criticisms on the way the Commission assesses mergers. It opens up a new phase in competition policy.
It remains for me to say something about the reform underway on the assessment of State aid, which is also essential and is also covered by the Commission's document.
(F.R.)