EU competition law is up for revision. The European Commission has opened the discussion on several fronts, now is more than ever the time to have your say.
As COVID-19 measures are being relaxed across Europe, one can only be impressed at the work of DG COMP during the lockdown. In addition to elaborating a dedicated state aid framework to try and salvage EU companies from the economic impact of the health crisis, the Commission is delivering on its project to ensure the fitness of competition rules for our digital times. It is also tackling competitive issues posed by foreign subsidies. To do so, it has launched three key open public consultations to gather feedback on the existing law as well as on the proposed new tools.
The first consultation seeks views on a New Competition Tool (NCT) to tackle structural issues, the second asks for feedback on a White Paper on foreign subsidies to level the playing field on the global stage and the third enquires about the opportunity of review of the core tool of competition analysis: the 1997 Market Definition Notice. Participating in these three consultations is a rare opportunity to shape the EU’s sacred competition rules as all three will feed into future crucial initiatives.
A new competition tool to fill existing gaps
On 3 June 2020, the Commission published an open public consultation on expanding its powers to allow it to investigate structural market problems. This consultation forms the third pillar of the Commission’s ‘holistic and comprehensive approach’ to tackle emerging competition issues in the digitalised world. The other two pillars are the continued enforcement of existing competition rules and a consultation on the regulation of digital platforms through the Digital Services Act. According to the Commission, current competition rules fail to address certain structural risks for competition across markets. Certain market dynamics favouring sudden and radical decreases in competition (‘tipping’) and ‘winner-takes-most’ scenarios have made a position of market power or dominance, once acquired, difficult to contest. This can often be found in the platform economy where the Commission considers that a few large platforms have become gatekeepers for many digital and non-digital products and services. To fill the gaps of current competition enforcement, the Commission suggests creating a new complementary tool, a kind of market optimisation tool.
However, this is no revolutionary tool. It is said to be inspired by the UK’s Competition and Markets Authority (CMA) toolbox. The CMA may launch a market investigation under circumstances where it believes that a market appears not to be working well for consumers, or when it seems unlikely that any problems that exist will be corrected by normal competitive forces. Used judiciously in the UK, many fear that such a tool in the hands of the Commission could open a pandora’s box without any checks and balances. Some wonder why this is needed, when the Commission already has at its disposal a sector inquiry tool which it has used to probe energy, pharmaceutical and most recently e-commerce. The consultation provides an opportunity to say whether there is indeed a need for such a new competition tool and which characteristics it should have. Feedback is welcome until 8 September 2020. A proposal is expected in Q4 2020.
White Paper on foreign subsidies: levelling the playing field
Two weeks following the call for feedback on the NCT, the Commission adopted on 17 June 2020 a White Paper on “levelling the playing field as regards foreign subsidies“, which contains proposals for new tools to address the potential distortive effects caused by foreign subsidies in the single market, in acquisitions of EU companies and during EU public procurement procedures. Under this proposal, the Commission and national authorities will be able to assess the role of subsidies granted by non-EU governments and their impact on competition in the EU, and possibly impose ‘redressive measures‘ in order to resolve these concerns. The new mechanisms would apply to all non-EU companies benefitting from non-EU subsidies. “Europe’s economy is open and closely interlinked to the rest of the world. If this is to remain a strength, we must stay vigilant. That is why we need the right tools to ensure that foreign subsidies do not distort our market, just as we do with national subsidies,” said Internal Market Commissioner Thierry Breton. He highlighted: “We welcome everyone, we compete, but the rules of the game must be the same for everyone.” Translation – the EU will no longer be naïve in the face of unfair competition.
Already in train before Covid-19, the importance of the White Paper was heightened by sovereignty issues raised during the crisis. EU companies have complained for years against the favours granted by third countries to some companies, crying unfair competition. With the crisis, the strategic issue became very sensitive as many feared foreign state-owned firms would try to acquire European companies in order to take control of key technologies, infrastructure and expertise. For instance, on 4 June 2020 the European People’s Party (EPP) sent a letter to Executive Vice-President Margrethe Vestager urging a temporary ban on foreign takeovers, targeting Chinese companies in particular. As a result, the White Paper not only intends to level the playing field, but most importantly will define the EU’s strategic autonomy. Open for feedback in an open public consultation until 23 September 2020, it proposes several “Modules”, which would be complementary to each other, and are aimed at addressing the distortive effects caused by foreign subsidies.
Revision of the market definition notice
Finally, but not least, the market definition notice is up for review. As you might have seen, at the heart of the pandemic, DG COMP has made a first call for feedback on 3 April 2020 on its plans to update the 1997 Market Definition Notice, its key merger and antitrust analysis tool (see our previous article here). It was the first opportunity to get involved in the consultation process of a potential major reform that will shape the Commission’s antitrust enforcement and merger control practice in the coming years. Following up, on 26 June the Commission launched a public consultation inviting stakeholders to voice concerns or comments on the Notice by 9 October 2020 to assess whether the current rules are “fit for purpose”.
Some countries such as France and Germany continue to pressure the Commission to review the market definition notice. They see it as an opportunity to enable the creation of European champions, i.e. big EU companies, to compete on the international arena. Recently the Commission has not been pulling any punches on this issue, openly questioning such a prospect. On 1 July, the Commission’s Director General for Competition, Olivier Guersent, told a panel at POLITICO’s Competitive Europe Summit, “There are many reasons why we don’t have GAFAs [companies such as Google, Amazon Facebook and Apple] in Europe, none of which I suspect is related to competition policy. […] If the best way to be successful worldwide would be to shield it from competition at home, I think we would know by now and we would be dominated by the mighty Soviet industry”. He noted the fundamental question is whether companies are more competitive abroad if they are shielded from competition at home. It remains to be seen what will be expressed in the consultation’s feedback.
Overall, with such a busy and important agenda, it is time for companies to get out of the bunker to participate on the different fronts. It is key to seize this rare opportunity to try and get the rules fit for business.
For further detail on the recent White Paper on Foreign Subsidies, please join our event Levelling the global playing field on June 15, 2020.