Competition policy remains a vital tool serving the needs of European citizens: both as consumers (benefiting from lower prices, wider choice and higher quality) and as workers (benefiting from a vibrant labour market). Besides, various forms of businesses benefit from innovative, diverse and reliable development in a level playing field. The Commission’s Communication this November underlined that competition policy shall “fit for new challenges” while showing the EU states most effective paths towards recovery, green and digital transitions in a resilient single market.
The contribution of the EU’s competition policy to a resilient single market (it is an exclusive EU competence) provides for open and competitive markets with predictable conditions for companies by offering innovative products and services at affordable prices. The open and competitive markets work in favour of strong and diversified supply chains, and prevent fragmentation of the single market. When markets alone do not deliver (sometimes the risks incurred are too large for a single member state or a company to take) the EU state aid rules can offer solutions. For example, the rules on Important Projects of Common European Interest – the so-called IPCEIs – enable the states and industrial sectors to jointly invest in breakthrough innovation and infrastructure. At the same time, they ensure positive spill-over effects for the EU economy at large.
The Commission in the ongoing review of these rules will maintain its existing scope: there are just some targeted changes, e.g. those for improving the openness of IPCEIs and facilitating participation of SMEs in areas of microelectronics, hydrogen, cloud and health.
The EII has already revealed some competition policy’s aspects during post-pandemic; see: https://www.integrin.dk/2021/11/21/post-covid-effect-on-modern-competition-european-commissions-vision/
Commission’s key arguments on modern competition rules
First, strong competition enforcement is fundamental for businesses and consumers to reap the full benefits of the EU’s single market arrangements; they give all sorts of businesses a fair chance to compete and make sure that businesses are stimulated to deliver the best and most innovative solutions for consumers. Besides, optimal competition in the markets gives customers a choice of products and services, while contributing to reliable and diverse supply chains.
These are the main reasons for a modern and effective EU competition policy to provide the member states’ economies the agility and drive to overcome the existing challenges.
Second, competition rules have an in-built “adaptation flexibility”: therefore the EU institutions adopted the sixth amendment to the State Aid Temporary Framework that enabled the states to provide necessary support to businesses during the pandemic. Presently, the Commission is preparing a EU’s competition policy review with the “unprecedented scope and ambition”, i.e. to make sure that all competition instruments remain “fit for purpose”, namely merger, antitrust and state aid control, as well as tackling foreign subsidies and/or digital services’ providers. Source:
State aid: temporary framework
The pandemic that affected the EU states since March 2020 has changes the lives of European workers, businesses and governance: people were asked to stay home, shops and offices were closed, and factories stopped operating; without extraordinary public support, viable companies would not otherwise have survived.
With this in mind, the Commission put in place the Temporary Framework using the full flexibility of state aid rules, which enabled targeted and proportionate support to businesses in need, while putting in place safeguards to preserve the level playing field in the EU single market. During last year, in close cooperation with the member states, the Commission adopted more than 670 decisions and approved over €3 trillion of state aid across the EU states.
The Commission has prolonged the application of the Temporary Framework for six months, until the end of June 2022, the action that reflects the feedback received from the majority of the EU-27. At the same time, the framework’s prolongation would give the opportunity for a progressive and coordinated phase-out of crisis measures, without creating cliff-edge effects while providing for strong recovery of the member states economies.
Some new measures
At the same time, the EU institutions will continue to closely monitor the worrying rise in COVID-19 infections and other risks to the economic recovery in the states: to further support the recovery, two new tools to kick-start the economy and crowd-in private investment for a faster, greener and more digital recovery were introduced.
These measures will have a longer effect in confronting the crisis situations: first, they would enable the states to create direct incentives for private investments; it could give a push to companies to start filling the investment gap left by the crisis. This measure is expected to provide the needed flexibility based on the specific needs in the member states, e.g. while supporting the 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 companies need today and in the future. In order to avoid undue competition distortions, the support must be widely available to a significant number of companies.
Second, the Commission will introduce a solvency support measure to improve access to equity finance for smaller companies; this measure will enable the states to give guarantees to dedicated investment funds and make it more attractive to invest in these companies by reducing the risks for private investors.
Third, the EU and the member states’ recovery will succeed if common efforts are undertaken among EU-27. Particularly, the states have to take “associated” efforts in tackling the challenges of green and digital transition. However, profound changes are required by the national governance to make sure that the states’ economies are future-proof.
Revising competition rules and guidelines
EU’s competition policy has an important role to play in green and digital transition: presently, Commission has reviewed more than 20 sets of competition rules and guidelines, across all spheres of competition regulations. For example, the new Climate, Environmental Protection and Energy Aid Guidelines will support the decarbonisation of industrial production processes in line with European “green deal’s” objectives. These guidelines will also facilitate support for clean mobility and buildings’ energy efficiency, as well as a sustainable use of resources in an increasingly perspective circular economy.
For companies that cooperate in developing more sustainable or more innovative digital products, the Commission will provide guidance and legal certainty through the ongoing review of the Horizontal Block Exemption Regulations and Guidelines.
Actions to enforce antitrust rules are vital for the competition agenda: e.g. the Commission is investigating main global internet providers like Facebook, Google, Amazon (two cases) and three Apple cases. Thus at the end of November 2021, the EU courts upheld the Commission’s 2017 decision that Google abused its market dominance, by favoring its own shopping comparison service.
This experience from competition enforcement helps the Commission to prepare another set of legislation concerning the Digital Markets Act, which will regulate the activities of large and international digital platforms.
Another sphere of actions is in microchips: this issue is currently in the spotlight of both the EU and national policies; e.g. Commission President in the 2021 State of the Union address announced the European Chips Act. However, there are some extraordinary factors in this regard: the global shortage has exposed the importance of this industry across for the European economy – from automotive to consumer electronics to pharmacy. The approach to regulation is complicated by a very concentrated market with high barriers to enter, and a specific geopolitical context. In view of all these factors, the Commission intends to provide financial and funding support for the states’ semiconductor system, in particular for European first-of-a-kind facilities and the scale of chips or other parameters.
In each case concerning supply of semiconductors the Commission will rigorously assess the level of competition based to ensure that projects have a European nature and without subsidies within the Union and beyond. As the Commissioner for competition acknowledged “self-sufficiency is an illusion”, i.e. taking into account the scale of what is needed in the states, it is clear that “no country and no company can do it alone”. Therefore, the Commission’s aim is creating a necessary diversification among sectoral partners in order to build resilient supply chains, and avoid single points of failure in chips’ supply.
General reference to: https://ec.europa.eu/transparency/documents-register/detail?ref=COM(2021)713&lang=en