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Competition policy remains a vital tool that serves the needs of all EU states: consumers benefit from lower prices, wider choice and higher quality; workers gain from a vibrant labour market, and corporate entities benefit from innovative, diverse and reliable market inputs on a level playing field. However, the pandemic and modern challenges required competition policy’s quick adaptations. Thus, the Commission adopted a Communication to the states (18.xi.2021) aimed to assist them along the existing paths towards recovery, green and digital transitions…
Out of numerous EU integration policies, the competition one is, probably the most vital and controversial (after ago- and cohesion-policies). No doubt, that was the reason the member states about a decade ago adopted new EU treaties which included “competition rules necessary for the functioning of the internal market” as the EU-wide exclusive competence (in the Treaty on “EU’s functioning”) along quite a few other EU exclusive competences, such as e.g. customs union, monetary policy for the states with the euro, conservation of marine biological resources under the common fisheries policy, common commercial policy, and conclusion of international agreements (art. 3, TFEU).
Besides, competition has a vital role in the EU’s internal market, which “shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress…” (art. 3, TEU). Actually, the arsenal of European competition policy’s “instruments” is quite limited: i.e. antitrust, cartels, mergers and state aid.
More in: https://ec.europa.eu/competition-policy/index_en
In delivering on these issues, the Commission works closely with the competition authorities in EU-27 states through the European Competition Network (ECN), which creates an effective mechanism to counter companies that engage in cross-border practices restricting competition. The ECN members apply European competition rules; it provides a means to ensure their effective and consistent application. Through the ECN, the competition authorities inform each other of proposed decisions and take on board comments from the other competition authorities. In this way, the ECN allows the competition authorities to pool their experience and identify best practices.
More: https://ec.europa.eu/competition-policy/european-competition-network_en
Suggested adaptations
During the post-pandemic period and presently, the Commission sees the following arguments for suggesting adaptations:
First, strong competition enforcement is fundamental for businesses and consumers to reap the full benefits of the EU’s Single Market as it provides all sorts of businesses with a fair chance to compete; it forces businesses to deliver the best, most innovative solutions for consumers. At the same time, competition gives customers a best choice of good products, services while contributing to reliable and diversified supply chains; most of these factors have been damaged during the pandemic. Bottom-line: the member states urgently need adaptive and effective competition policy to give the states’ economy vital means to overcome present challenges.
Second, the EU competition rules have been quite flexible recently: the EU introduced a new amendment to the “State Aid Temporary Framework” that has enabled the states to provide necessary support to businesses during pandemic period. Besides, the Commission is preparing a new review of competition policy with the “unprecedented scope and ambition”: i.e. to make sure that all competition instruments remain “fit for purpose”, including merger, antitrust and state aid control, as well as tackling foreign subsidies and/or digital gatekeepers.
State aid: temporary framework
The pandemic that hit the EU states in March 2020 had changed the Europeans’ life fabric: citizens have been obliged to stay home, shops and offices were closed, businesses and factories stopped operating; without extraordinary public support most viable companies would not otherwise have survived.
The Commission’s initial Temporary Framework has been using flexibility of state aid rules: it enabled targeted and proportionate support to businesses in need, while putting in place safeguards to preserve the level playing field in the Single Market. Since then, in close cooperation with the EU member states, the Commission has adopted more than 670 decisions and approved over €3.1 trillion of “state aid” support for the states.
This November, the Commission has prolonged the application of the Temporary Framework for another six months, i.e. until the end of June 2022: on one hand, the prolongation gives the opportunity for a progressive and coordinated phase-out of crisis measures, without creating cliff-edge effects; this reflects the projected strong recovery measures in states’ economy. On the other hand, the framework will allow the Commission to closely monitor the still “worrying pandemic’s effect on growth” and possible risks to the socio-economic recovery.
Additional tools
In order to further support the resilience and recovery measures in the states, the Commission introduced two new tools to facilitate economic growth and public-private investment for a faster, greener and more digital recovery; the new tools are expected to last longer than the immediate crisis measures.
The first one would enable the states to create direct incentives for private investments. This can give a push to companies to start filling the investment gap left by the crisis and provide flexibility based on specific member states’ needs: e.g. to support re-tooling of production lines in view of current supply shortages. It may also be used for investments to further improve energy efficiency, or to upgrade the digital equipment in companies. However, the incentives shall avoid undue competition distortions: they shall be widely available to a significant number of companies.
Secondly, the Commission introduces some solvency support measures to improve access to equity finance for SMEs; it would enable the states to provide guarantees to dedicated investment funds. These measures are intended to make it more attractive to invest in these companies as they would reduce the risks for private investors.
Competition policy through recovery measures
Many modern challenges for the EU member states, such as resilience and recovery, green and digital transition, etc. can be tackled through EU-wide integration. Certain role in overcoming these challenges plays competition policy, which is, by the way, the exclusive EU competence: i.e. there is no “states’ competition rules” – they are all EU-wide!
The Commission is quite active in constant rules’ adaptation: it is presently reviewing more than 20 sets of competition rules and guidelines, across all competition instruments. E.g. the new Climate, Environmental Protection and Energy Aid Guidelines will support the decarbonisation of industrial production processes in line with Green Deal objectives; it will facilitate support for clean mobility and energy efficiency of buildings, as well as sustainable use of resources in an increasingly circular economy priorities. The Commission will provide guidance and legal certainty for companies cooperating in developing more sustainable or more innovative digital products through the EU’s horizontal “block exemption regulations and guidelines”.
Another vital direction is that of enforcing antitrust rules: the EU has been investigating Facebook, Google, Amazon and Apple activities in Europe in numerous cases; e.g. the EU courts in mid-December 2021 upheld the Commission’s 2017 decision that Google abused its market dominance, by favoring its own shopping comparison service.
The EU’s “global experience” from competition enforcement feeds into the Commission’s legislative work in e.g. the Digital Markets Act; once adopted, it will set the working parameters for large digital platforms both in the EU and from outside.
Competition policy contributes greatly to the functioning of a resilient Single Market, which in great extent depends on open and competitive markets; the latter provide predictable conditions for companies to thrive in the markets by offering innovative products and services at competitive prices. Open and competitive markets work in favour of strong and diversified supply chains, and prevent fragmentation of the Single Market.
If the single market alone does not deliver (e.g. the risks are too large for a single state or a company), the EU state aid rules can offer solutions. For example, the rules on Important Projects of Common European Interest (so-called IPCEIs) enable member states and some industry sectors to jointly invest in breakthrough innovation and infrastructure. The ongoing review of these rules will, for example, improve the openness of IPCEIs and further facilitate the participation of SMEs with active support from the states; some additional IPCEIs are expected in the areas of microelectronics, hydrogen, cloud and health.
Digital issues and microchips
These issues are presently gaining importance due to several factors: a) the global microchips shortage has exposed its vitality for various sectors in the member states’ economy, including automotive industry, consumer electronics, pharmacy, etc.; b) existing complications in a very concentrated microchips’ market with high barriers to enter and a specific geopolitical context. Hence, the Commission’s activity followed to announce the European Chips Act, aimed at eliminate existing gaps for funding in the semiconductor system, in particular for European startups in, for example, the scale of chips or other parameters.
There are strong safeguards to ensure that such state aid is necessary, appropriate and proportionate, and undue competition distortions are minimized; each case for the supply of semiconductors will be rigorously assessed based on their own respective merits.
However, in microchip’s industry self-sufficiency principle doesn’t suffice and no country and no company can do it alone; bottom-line: the EU’s aim is diversification among like-minded partners in creating resilient supply chains and avoiding single points of failure.
References to press release: “Remarks by the Commission Executive Vice-President M. Vestager on the Communication on modern competition policy”, in: https://ec.europa.eu/commission/presscorner/detail/en/speech_21_6115