Memo

VESTAGER MUST ENSURE GROWTH VIA COMPETITION

Margrethe Vestager conversing with Jean-Claude Juncker

Summary If Margrethe Vestager gets through the European Parliamentary hearings, as expected, she will take over the powerful post of Commissioner for Competition, which will give her a considerable influence on the further development of the EU’s internal market. She can bring an end to member state aid and prevent the largest companies from abusing their market dominance. She must ensure that the EU regulations are complied with, draw a clear line in specific cases and issue fines.
 
Fierce competition pushes companies to raise their productivity, cut their expenses and keep their prices down to the benefit of the consumer. That is why the European Commission’s competition policy is essential in ensuring growth and strengthening Europe’s competitiveness. As such, competition policy is not just about allowing the internal market to flow freely and guaranteeing consumers the best possible prices, but it is also about reinforcing a stronger benchmark for European companies in a globalised world. It is crucial that Margrethe Vestager positions herself as a strong Commissioner who establishes fair and reasonable boundaries and understands the fine balance of increasing competition to provide businesses better conditions for growth whilst taking the consumers’ needs into account.
 
Significant changes are anticipated in the internal market, and Margrethe Vestager and her Directorate-General will have a central role in managing and implementing them. The development of the internal energy market and the digital market will have an impact on competition policy and, in certain cases, the Commissioner for Competition must be a rock-solid guarantee that a fair, neutral and firm approach is taken to cases involving some of the world’s largest companies. This applies to, among others, cases against Google and Gazprom, which have been carried over from outgoing Commissioner for Competition, Joaquín Almunia.
 
Gazprom’s desire to run a gas pipeline through parts of Europe is good news for the countries that will buy the energy, but it will demand a compromise by way of free competition and an exemption from the EU’s third energy package. The way in which Vestager settles the pending case on Gazprom’s abuse of its market dominance could therefore end up having a significant influence on whether a new gas pipeline is established. Vestager’s decisions can also have an influence on the energy market, Gazprom and be a pawn in the EU’s relationship with Putin.
 
In the development of the digital market and within the telecommunications industry, German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker have been advocates for relaxing competition regulations to a certain degree, so that European companies are more able to withstand the global pressure. It is important that Vestager does not relax the rules on competition to create a form of European protectionism or favouritism in relation to, for example, American companies. It is in the whole of Europe’s best interest to ensure a well-functioning internal market with fierce competition for everyone, so that innovation and development of new technologies and new market solutions will be of benefit to consumers.
 
The outgoing Commissioner for Competition, Joaquín Almunia, often chose conciliation and settled many cases of mergers and market dominance without bans or fines. By contrast, he took a harder line on anti-cartel cases, having issued fines to 167 companies since 2010. Margrethe Vestager faces a fundamental choice and must decide whether she believes there is a need to establish a new, harder line. If she chooses a harder and more concrete line than her predecessor, it could create more administrative work, but it could also result in higher revenue through fines.
 
Margrethe Vestager could, among other things, seek inspiration from the US and introduce new tools to handle breaches of the competition policy. She could, for example, go after the people instead of the entire business by introducing personal finance penalties. At the same time she could work towards more shared coordination between the countries in their use of imprisonment. Breaches of the competition regulations should have the same consequences throughout Europe. Increased cooperation with competition authorities – both in the individual member states and globally with competition authorities from USA to Asia – can also be crucial in ensuring effective implementation of the regulations across national borders.

Main conclusion
  • Competition policy is often seen as a balancing act between consumer policy and efforts to ensure the survival of businesses and to protect jobs. In the new European Commission Margrethe Vestager must guarantee consumers reasonable prices whilst helping to create growth and jobs in the EU.
  • The financial crisis and globalisation put pressure on the Commissioner for Competition to allow more mergers and state aid to companies hit by the crisis. It is important that Margrethe Vestager does not give in to political urges to provide more support.
  • Margrethe Vestager will have a central role in furthering the development of the internal energy market and the digital market. Cooperation with other commissioners will be essential.
  • Gazprom’s desire to establish a gas pipeline through parts of Europe present the EU a dilemma in which Margrethe Vestager’s voice can be crucial.
  • In order to withstand global pressure, Angela Merkel and Jean-Claude Juncker have signalled changes that will weaken competition regulations for mergers between telecommunications companies. It is Margrethe Vestager who should make the final decision and ensure that there is also tough but fair competition in the digital market.
  • The case against Google on its abuse of its market dominance has implications for several companies and stakeholders, and the focus on Vestager will be immense when she is to decide whether the EU should seek conciliation or start a real case against Google.
  • Margrethe Vestager can take inspiration in her Commissioner post from, among other things, the USA’s success in its broader use of settlements and personal punishment.
  • Margrethe Vestager has an opportunity to put her own mark on the Commissioner for Competition post by choosing another, and potentially tougher, line than her predecessor.
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