Kroes evalueert haar eerste twee jaar als eurocommissaris (en)
European American Press Club
Paris, 8 th January 2007
Ladies and gentlemen,
I'd like to thank Senator Giraud and Peter Campbell for their kind words of introduction, and to say how pleased I am to be here with you today to talk about some of the most important developments in European competition policy over the last two years.
Meeting here in Paris today under the auspices of the European American Press Club in Paris is most apt. One of the real success stories of the past few years has been how closely the European Commission and European national competition authorities have worked with our counterparts in the US. Personally, I find my regular exchanges with colleagues from the Department of Justice and the Federal Trade Commission amongst the most stimulating and enjoyable aspects of my work as European Competition Commissioner.
On both sides of the Atlantic we share the same vision, of authorities working together for effective competition in a global economy, where businesses operate in many countries around the world. This means teaming up to assess global mergers. It means coordinating dawn raids to uncover cartels that span many countries. And it also means learning from each other's experiences and best practice, and gradually adapting our working methods accordingly. Looking forward to the fruits of initiatives to enhance investment flows and trade between the US and Europe, such as those which Chancellor Merkel is spearheading through Germany's EU and G8 Presidencies, it is clear that the importance of transatlantic competition cooperation only increase in the future.
Of course, there are differences between the European and American approach to competition policy, reflecting our different historical and legal backgrounds. But we share a rather convergent position on the fundamentals. We both think that open competition – aggressive competition even – is essential for a healthy and dynamic economy. And we agree that competition rules are designed to protect competition – not competitors – and that guaranteeing free competition is in the interests of consumers!
Competition on merit drives companies to provide high-quality, innovative products and services at attractive prices, to exploit economies of scale and increase productivity. These disciplines learnt through competition in Europe's single market empower our companies to face globalisation – to take on the world and win.
The EU's 490 million citizens appreciate the direct advantages of lower prices and greater choice. But we must not forget the indirect benefits of a more competitive economy - sustainable growth and sustainable jobs. These are the indispensable basis for Europe and its Member States to safeguard public interests that markets alone are unlikely to deliver: social cohesion, high-quality public services, security, environmental protection.
European competition policy uses a range of tools that work to get the best deal for European consumers and underpin the Lisbon Strategy of developing a sustainable European economy in a globalised world.
As Commissioner for Competition I have been very clear that we need to focus the use of these tools on actions which have a real impact on the market place, reducing harm to consumers and raising European competitiveness. Two years ago I set out three strategic objectives for my mandate:
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-renewing the legislative framework for State subsidies
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-more effective enforcement in antitrust and merger cases and
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-promoting a proactive competition policy to complement the traditional – reactive – case based approach.
Today I'll look more closely at how, with the support of President Barroso and my colleagues in the College, I have been working to deliver these objectives. And, in keeping with today’s venue, I'll offer a few insights into the European and US approaches to competition policy along the way.
Reforming European State Aid rules
As you know, the people of the country I know best are well-known for their directness. So I’d like to start with the area in which, perhaps, the American and European approaches most differ: State aid control.
State aid is in principle banned in Europe. In general State subsidies distort the market, resulting in less competitive businesses, less innovation and higher prices for consumers. 'Subsidy races' are rarely a good way to use taxpayers' money. And – worse still – they also put less affluent regions at an unfair disadvantage against richer areas which can afford to offer more aid - as the experience of some US States has shown. Issues of equality of opportunity and solidarity are thus central to the logic which led to State aid being in principle banned under the Treaty of Rome very nearly fifty years ago.
But there are some cases where the benefits of limited, efficient, equitable and carefully-targeted State aid can outweigh the distortion caused, and hence can be allowed. This is true where the market alone will not deliver important shared objectives, such as social and regional cohesion, and environmental protection to name just three examples.
I have prioritised overhauling the European rules on state subsidies, to help Member States deliver on their repeated commitment to 'less and better' state aid. By refocusing aids to where they will contribute to the Lisbon strategy, and making better use of economic analysis, I also want our new rules to be more predictable.
2006 saw some key achievements. Top of the list is the new Framework on Research, Development and Innovation (R&D&I), which was adopted in November. European companies need to invest more in R&D&I if they are to compete globally. But only 1.9% of Europe’s GDP is spent on R&D, compared to 2.5% in the US and 3% in Japan. The bulk of the investment shortfall has to come from private, not public, money.
The new Framework sets out guidelines for specific types of State aid that Member States can use to lever in more R&D&I spending by companies, and to address problems such as insufficient spill-overs between research and industry. Examples include aid for R&D projects, innovation clusters, and young innovative enterprises - to whom Member States can now provide up to € 1 million of aid.
Last year we also put in place new Risk Capital guidelines, because too many of our 23 million European SMEs face difficulties accessing capital. We doubled the de minimis ceiling to € 200,000, enabling more guarantee schemes to support SMEs.
These measures are intended to allow national governments to better harness State aid to promote growth in a way that does not distort competition, and with the minimum of paperwork and delays. Our work will continue in 2007 with a new General Block Exemption Regulation (GBER) to simplify and consolidate the existing rules under which certain types of aid - such as those for SMEs, training or employment - can be considered compatible and do not need to be notified to the Commission. I also want to open this simplified approach to new areas like regional or environmental aid schemes.
Tough enforcement against cartels
So the last two years have been marked by rather radical overhaul as concerns State aid control. As for anti-trust, I’d say the two big stories of the past months – if you measure these things by the length of newspaper columns - have been the fight against cartels and managing the monster merger wave.
The Barroso Commission has bolstered the fight against cartels that fix prices or share markets. Fair procedures and rigorous judicial review mean that such cases take time, but it is time well spent. Cartels inflict severe damage on both the European and global economy and reduce the quality, diversity and levels of innovation of European companies. All too often it is consumers all around the world who pay the bill, through prices which are artificially high. Indeed the OECD estimates that cartels can raise prices by up to 50%. That is why our close relations with other competition authorities around the world are so important in this area.
We have recently acted against cartels in intermediate products like chemicals, that impose extra costs on downstream European companies, as well as cartels in end products ranging from copper plumbing tubes to buttons and zips, that directly hit citizens' purses.
I am determined to ensure that the future for cartelists looks as bleak as possible. One of my first actions as Commissioner was to create a dedicated Cartel Directorate within DG Competition. In 2006 we imposed record fines totalling over 1.8 billion euros. We have recently put in place new fines guidelines and an improved leniency programme will deliver an even more effective deterrent against secret cartels. From now on repeat offenders will face a 100% fine increase, whilst fines will also be multiplied by the number of years that a cartel is in operation. Unlike our colleagues in Washington, we in the Commission can’t threaten cartelists with a spell in prison – although some of our Member States can - but our very tough attitude to administrative fines aims to achieve a similar deterrent effect.
And I am committed to ensuring that customers can obtain compensation for losses caused by illegal behaviour, including, but not exclusively – cartels. Private enforcement should complement public enforcement to deter potential anti-trust lawbreakers. But for me this issue is primarily about rights. Victims of antitrust infringements are entitled to obtain compensation for the damages they suffer. But in Europe these rights too often exist on paper only. We looked at the various reasons for this in our Green Paper, and are now focusing on finding European solutions for some of the obstacles identified. Later this year I will present a White Paper setting out some ideas for concrete improvements, taking careful note of the lessons to be learnt from the experience in the US.
I'll not say too much about the merger wave. We should not be shocked by it or fear it: consolidation and restructuring are a normal and essential part of business activity. Last year, the Commission reviewed 356 cross-border merger cases – an all-time record - within the tight deadlines required. In cases like EDP/GDP, E.ON/MOL, and, most recently, GDF/Suez, the Commission has ensured that consumers are not deprived of the benefit of energy liberalisation through incumbents buying their way to market power.
We will continue to examine all cross-border merger notifications with impartiality and purely on the basis of their potential effects on competition. And where there are no competition concerns, or where these can be counteracted through appropriate remedies, we will expect Member States to ensure that the mergers go ahead without undue hindrance. The EU’s single market rules as well as Article 21 of the EC Merger Regulation clearly ban unjustified measures taken by Member States to prevent cross-border mergers of a European dimension. The Barroso Commission is determined to ensure that these rules are observed and respected in all cases. So since late 2004, we have taken tough action against protectionist national measures that impeded banking and energy mergers like ABN AMRO/Antonveneta and E.ON/Endesa, which the Commission had already authorised.
A proactive approach to shaping competitive markets
The third objective I set out at the start of my mandate was to develop a more pro-active approach to shaping competitive markets. The energy and financial services sector inquiries, which we will soon complete, have been cornerstones of this policy. In each of these sectors we have found evidence that markets are not yet delivering to their full potential for private and business customers.
This Wednesday, the Commission will present the final report of the energy inquiry, in conjunction with a strategy paper on the internal energy market. To follow up, I will pursue specific cases of anti-competitive behaviour by energy companies. But more generally, the inquiry has provided crucial evidence about whether current EU liberalisation legislation is conducive to effective competition, investment and consumer choice and about the appropriate regulatory or structural solutions.
The Commission's combined roles as initiator of European legislation and as competition enforcer help us reach the right balance between competition policy and regulation in helping shape the most effective markets. Deregulation may be justified in areas where competition policy is sufficient to make markets function correctly. European law exceptionally provides for ex-ante regulation at national level for certain telecoms markets where competition tools are inadequate to deal with the entrenched power of incumbents. And where there is clear evidence of a Europe-wide problem – as is the case for international roaming prices - Europe-wide regulation can be the right tool.
In other cases, my fellow Commissioners and I simply need to ensure, through even-handed enforcement action, that all Member States respect the common European rules on which the single market is built. And here I come back to the comments I made earlier as concerns mergers. Ours is a Union of law, and the European Commission is committed to ensuring that remains the case.
It's been a busy two years, and we are hitting the ground running in 2007! This year will be the one where we start to see the first fruits of our reforms in state subsidy rules and cartel-busting. I'm looking forward to another full and interesting year – there are some important policy initiatives to come as concerns completing the State Aid Action Plan, facilitating direct settlements and helping more private damages actions find their way to national courts.
But most importantly, I expect 2007 to be a year of firm yet fair enforcement. Competition policy involves tough decisions. For every decision I have proposed to the College, I have been assured of the full backing of José Manuel Barroso. Together we have ensured that competition policy plays its rightful place in this Commission’s pursuit of better regulation, and I think our track record to date proves our commitment to deliver the results that Europe's citizens expect.
Thank you for your attention, and I look forward to taking your questions after hearing what I know will be a stimulating contribution by Bruno Lasserre.