Neelie Kroes
Member of the European Commission in charge of Competition Policy

Competition Policy - Past, Present and Future

Meeting with Committee on Economic and Monetary Affairs, European Parliament
Brussels, 21 ^st June 2005

Madame Berès, Honourable Members,

Thank you for inviting me to join you today for one of our regular exchanges. Today's discussion forms part of a wider process of ongoing dialogue between our two institutions on policy priorities, as foreseen in the Framework Agreement signed at the end of last month.

As you are aware, following the adoption of the Annual Policy Strategy for 2006, the Commission is preparing the next stage in its planning process. Before we present our Legislative and Work Programme for 2006, every Commissioner is taking part in a dialogue with the relevant Parliamentary Committee to review implementation of the current Work Programme and discuss next year's programme in each policy area.

I would therefore like to structure my opening remarks in three parts . I will first briefly summarise the achievements of 2004 , for the vast majority of which we have to thank Mario Monti. I will then address the state of implementation of this year's work programme , before concluding with a word on priorities for 2006 .

I. Achievements in 2004

I am pleased to present to you today the Commission's Annual Report on Competition Policy for 2004 .

The Report describes the most important developments and decisions in the competition field in 2004.

I would like to emphasise just a few of the highlights:

Firstly, anti-trust and cartels . The key development was the entry into force of our new enforcement system for Articles 81 and 82 on 1 May 2004. The Commission adopted a package of Notices and Guidelines to help apply the new regime, as well as a block exemption regulation and Guidelines on technology transfer agreements.

In terms of anti-trust casework , the Commission adopted three decisions under Article 82, on Clearstream (financial services), CEWAL (shipping liner conference) and Microsoft.

The focus on anti-cartel activity continued, with six cartel decisions in a variety of sectors and fines totalling some 390 million euro. We took action under Article 86 with Article 82 against certain provisions of German postal regulations.

Secondly, mergers . The recast Merger Regulation entered into force on 1 May 2004, and the Commission subsequently adopted a new implementing Regulation, a package of updated Notices and Guidelines, and Guidelines on the assessment of horizontal mergers.

The number of notified mergers and acquisitions rose from 212 in 2003 to 249 in 2004). The Commission carried out seven in-depth investigations, resulting in one prohibition decision and four decisions requiring commitments from the merging parties.

Thirdly, in the state aid field , rules were put in place to implement and clarify the procedural regulation. The scope of the block exemption regulation for Small and Medium sized Enterprises was extended to include aid for research and development, and the Rescue and Restructuring Aid Guidelines were revised and updated.

The Report gives an overview of state aid control in each sector. I would highlight in particular our state aid work in the environmental field as regards the national EU emission trading plans for delivering the Kyoto Protocol.

II. Implementation of the 2005 Work Programme

Mrs Berès, Honourable Members, let me turn to the progress made so far in 2005. Our activities focus on ensuring that competition policy plays its full part in the implementation of the renewed partnership for economic growth and jobs.

In the field of anti-trust, mergers and liberalised sectors , our objectives for 2005 are firm enforcement action, effective merger control, and advocating competition principles in key sectors and the regulatory framework in general.

We are setting up a dedicated directorate in DG Competition to strengthen anti-cartel activity . We are reviewing our policy under Article 82 to provide better guidance to companies on tackling abuses of market power. We are working on improvements to the leniency regime in cooperation with our colleagues from national competition authorities, and identifying the scope for enhancing the current guidelines on fines in terms of deterrence and transparency. In the context of wider discussions on financing development aid, I suggested to President Barroso that the revenue from anti-trust fines could be used for this purpose. I am happy to see that a discussion has been launched on this, as I think it could make a real difference.

In terms of specific cases, I would highlight last week's decision prohibiting behaviour by AstraZeneca . The company seriously abused its dominant market position by misusing the patent system in order to delay market entry of competing generic drug manufacturers. The Commission imposed a fine of 60 million euro.

I know that the Committee follows developments in the Microsoft case closely. I am pleased that Microsoft has made concrete proposals outlining how it will respond to last year's decision in the field of interoperability. Microsoft has agreed to make a number of changes to the conditions linked to access to and use of interoperability information. We are market testing these proposals at present. The Commission remains committed to ensure that all elements of the 2004 decision are properly implemented. This includes, in due course after what I hope will be a favourable ruling by the Court, the possibility to use certain interoperability information from Microsoft in software products distributed under an open source licence.

As concerns our proactive competition advocacy programme, last week we launched sector inquiries in two key areas of great relevance for the Lisbon Agenda objectives. Our inquiry into the gas and electricity markets has been launched in response to concerns voiced by consumers and new entrants concerning the development of wholesale markets. The other inquiry will focus on retail banking and business insurance. I see this as an important first step in identifying ways to improve competition in EU financial markets.

Throughout these inquiries, I intend to maintain an open dialogue with all stake-holders. Some preliminary findings and information on possible barriers to competition should be available by the end of year.

I should add that the Commission has recently published an issues paper in the context of its ongoing sector inquiry into the provision of sports content over third generation (3G) mobile communications networks.

The other key thread of our advocacy work concentrates on mainstreaming competition principles into all relevant EU legislation . Last week the Commission published its new internal Guidelines on Impact Assessment, which incorporate measures to deliver "competition screening" of EU legislative proposals. We want to take our decisions in full knowledge of their social, environmental and economic (including competition) impacts. I am convinced that this more evidence-based approach will lead to an improvement in the quality of European legislation, as well as ensuring that the regulatory and administrative burden is kept to the minimum.

Turning to state aid control , our objectives for 2005 are effective enforcement focused on the most distorting types of aid and sectors that are key to competitiveness, and to start our state aid reform to reduce overall aid levels and promote better targeted aid in the pursuit of the Lisbon objectives.

I am grateful to Mrs Berès for chairing a special open meeting of the Committee Coordinators in Strasbourg on 7 June 2005, where I presented the State Aid Action Plan immediately after its adoption by the College. The Action Plan outlines a comprehensive five year reform of state aid policy, with the double objective of achieving greater efficiency and greater equity.

In line with the European Council's call for "less and better targeted state aid", we propose to concentrate aid where it adds greatest value: where it contributes to social or regional cohesion and where it boosts innovation, risk capital, research and development.

More emphasis will be given to the Lisbon priorities, through more use of economic analysis. At the same time, our plans fully recognise the importance of other state aid objectives in the common interest, such as social and regional cohesion (regional aid), environmental protection, or culture.

The Action plan makes proposals to improve the efficiency of state aid procedures, to speed up decision-making and to make the partnership with Member States work better. We want to reduce the notification requirement for straightforward, low-impact aids, and to focus resources on checking the more problematic high-impact subsidies.

The interest and involvement of the European Parliament in the process of reforming the rules of state aid is something I greatly appreciate and support. Your opinions are important to me, as are your efforts to ensure that policies such as state aid are better understood by the citizens of Europe. The specific instruments implementing state aid reform will be shaped by the public consultation exercise already launched. On a subject as important as this one, any reform can only be successful if it is built on a broad consensus amongst all stakeholders. Parliament is a key interlocutor in this regard.

Last week I was invited to the Regional Development Committee to discuss regional aid. I highlighted that the reform of Regional aid Guidelines is an integral part of the overall reform process. Regional aid should remain the main instrument to redress imbalances in regional development and to contribute to cohesion.

In making plans for the reform of Regional aid Guidelines we recognise:

• The need to concentrate regional aid on the regions most in need, whilst recognising that there may be justification for some flexibility for the Member States themselves to designate other regions as eligible for support based on local conditions in terms of wealth and unemployment;
• The need to provide for an adequate range of clearly differentiated and well-balanced aid intensity ceilings, with a view to strike an appropriate balance between the needs and interests of all Member States;
• The need to provide adequate transitional rules to ensure a smooth transition to the new system as well as a certain degree of continuity in the present regional development efforts.

We are currently reviewing our proposals in the light of comments from Member States. In the coming weeks we will circulate draft guidelines for a second consultation of Member States. My firm aim is to have the guidelines in place before the end of 2005, in good time for the next programming period.

Before the summer, I will invite the Commission to adopt the package of texts on Services of General Economic Interest on which this Committee has already made a very constructive and useful contribution.

In early autumn 2005, the Commission will present a Communication on State aid for Innovation , in which we will suggest ways to address the specific market failures which are currently hampering the innovative process.

III. Priorities for 2006

Looking ahead to 2006, the Annual Policy Strategy presents four priorities: prosperity; solidarity; security; and a stronger voice in the world. Our competition policy priorities for 2006 will make a direct contribution to this agenda, focusing on key sectors for the internal market and the renewed Lisbon Agenda in order to put Europe back on track for the economic prosperity we so badly need.

So the key message here is continuity and determination on four key fronts:

• First, strict implementation of EC competition rules , focusing enforcement actions on the most harmful anti-competitive practices and forms of State aid. This includes intensified monitoring of the implementation of the Commission's state aid decisions.
• Second, implementation of the State Aid reform on the basis of the results of the consultation process.
• Third, promotion of competition in key sectors for European industry, such as the knowledge society and liberalised sectors (energy, telecommunications and transport). This could include launching new sector inquiries, for example on telecommunications, learning from the experience of the two inquiries launched in 2005.
• Fourthly, contributing to a favourable business climate by helping to shape the regulatory climate in the EU and at international level. This includes pursuing an active role in international fora such as OECD and the ICN and next steps for closer cooperation with the US, as well as supporting EU candidate countries in the context of enlargement discussions.

Mrs Berès, Honourable Members, I will stop there. Thank you for your attention, but most importantly, thank you for this opportunity to discuss and debate the current state of play and future direction in my portfolio.