RAPID - PRESS RELEASES

Neelie Kroes

European Commissioner for Competition Policy

“Developments in competition policy since October 2006 - and a look forward into 2007”

European Parliament, Economic and Monetary Affairs Committee

Brussels, 20 March 2007

President Berès, first please allow me to congratulate you on your re-election as Chair of this Committee. The quality and volume of the work this Committee does are impressive, and I am sure that under your leadership this reputation will be consolidated over the coming years.

Honourable Members,

It is a pleasure to be here to exchange views on developments in competition policy since we last met in October and on the challenges ahead. Over the past months, we have made good progress. The new State aid Framework on Research, Development and Innovation, the updated de minimis rules and the revised Leniency Notice are just a few of the highlights.

But there is always more work to be done. Although we took seven cartel decisions in 2006 and imposed fines totalling over 1.8 billion euros, we still have had to take another two decisions with fines already this year. That saddens me. In this area, I measure success in negative terms. I look forward to the day when my services come to me and say that - no matter how hard they have worked - they have not found a single cartel. Now that would be good news for the European economy! And it would be good for consumers, who are at the heart of what we, together with this Parliament, are trying to deliver.

The Commission's energy and financial services sector inquiries, the results of which we published in January, are all about helping consumers get the best out of the internal market.

Energy sector inquiry

The energy sector inquiry report confirmed all our fears. European energy markets are not functioning properly despite 10 years of liberalisation. This is undermining efforts towards secure, sustainable and affordable energy supplies across the Union.

The Sector Inquiry put the hard facts on the table. I don't need to repeat the problems here. The current system creates mixed messages and conflicts of interest, resulting in a kind of "investment paralysis". This situation is simply untenable, damaging Europe's competitiveness and security of supply.

The Commission drew a clear conclusion from all this: the best way to tackle these problems is through full structural unbundling. The European Council has now invited the Commission to present measures to ensure effective separation of supply and production activities from network operations.

Ownership unbundling is the most effective way to deliver non-discrimination, to encourage new investment in power plants and gas import infrastructure, and equally to give incentives to network companies themselves to reinforce the European electricity and gas grids. There are other options but these require a lot of detailed and complex regulation and so more burden on business.

I will of course follow up the inquiry’s findings through a number of competition cases. But let me stress that such cases will not open markets by themselves. We have to look seriously and urgently at an improved legal framework.

Financial services sector inquiry

Another sector that is absolutely critical to Europe's competitiveness is retail banking. I understand that you are considering an own-initiative report on this, which I would welcome.

Our final report of the retail banking sector inquiry found fragmented markets. We also found a huge variation of prices, fees, profit margins and selling patterns between countries. Competition in this sector - the pre-condition for consumers getting a good deal - is too often impeded by access barriers to payment card networks, payment systems and credit registers. Co-operation between banks may also be leading to an alignment of prices and selling patterns. And the fee structures and governance arrangements in some payment card networks and payment systems are a clear cause for concern. We are now looking further at the compatibility of individual practices with our competition rules, working in full cooperation with the National Competition Authorities.

Things are not all gloomy. Companies in Austria, Finland and Ireland have already taken action to address some of our concerns. I hope to see more proactive steps from the industry. By raising the profile of these problems, by engaging stakeholders, and by an enforcement partnership with National Competition Authorities, we can turn the situation around. The European Parliament can be a strong partner in advocating change.

The public consultation on the business insurance part of the sector inquiry runs until 10 April. Our initial findings show:

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  high underwriting profitability in the SME segment
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  foreclosure risks because of long-term insurance contracts and some networks of exclusive agents and
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  quite astonishing variations in the degree of horizontal co-operation.

I would be very interested in your views on these issues. Our Final Report is due in September.

Private enforcement

I'm looking forward to debating our work to facilitate actions for antitrust damages with you in Strasbourg in April.

I trust that Parliament will send a strong message to the outside world that it is not acceptable that competition law-breakers do not compensate the consumers and businesses their illegal action has harmed.

Of course it's always easier to agree on the definition of a problem than on the appropriate methods to remedy it and at what level - EU or national - any measures should be taken. But that is no excuse for putting our heads in the sand and doing nothing.

But that is exactly what some people would like. I've heard and read the arguments. The Financial Times' editorial last week was particularly interesting. It suggested three principles which the Commission should follow to keep the 'bogeyman' of US-style excesses away from our door:

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  First, the effect of our work should benefit consumers, not lawyers. I agree. That is why from the very start we ruled out class actions in which one single individual can bring an action on behalf of an unidentified class of persons.
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  Second, we should show convincingly how our plans will address specific problems not covered by existing processes. I agree. The White Paper will be accompanied by an assessment of the economic and social impact of possible measures. We will not tear up the procedural rules of the Member States for the hell of it. But if, and only to the extent that, national rules do not guarantee effectively the substantive rights conferred by the Treaty, the Commission may seek some approximation of these rules. Any steps we may propose will have to meet the strict tests of subsidiarity, proportionality and necessity.
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  Third, the article considered that, compared to the US, the EU has more upfront regulation and so making litigation heavier would be a real problem. I am not sure I agree on the comparative levels of regulation, but even if I did, this misses the point. This is not a question of balancing regulation against rights recognised by the Court of Justice. It is a question of companies complying with their obligations under Articles 81 and 82 of the Treaty. If they do, they will not face these litigation costs. Just as we commonly accept the "polluter pays principle" with regards to the environment, we must also accept and facilitate the "infringer pays principle" for competition infringements which cause very real damage throughout our economy.

Private enforcement is not about creating a litigation culture, it's about creating European solutions to allow consumers and companies to uphold their rights. We should make changes where this is necessary, but we will do so in a proportionate and measured way, in dialogue with stakeholders. The opinion Parliament will deliver in April is part of that process, and will be important in helping shape the White Paper we will publish around the turn of the year.

Conclusion - forthcoming reforms

President Berès, Honourable Members, I would love to go on to mention other projects in the pipeline: in the state aid area in particular, our forthcoming new draft guidelines on environmental protection, our new General Block Exemption and the forthcoming Notice on Recovery. But I think I should stop there, and perhaps we can touch on some of these points in our debate.