Toespraak eurocommissaris Kroes (mededinging) over succes kartelbestrijding en de voordelen voor consumenten (en)
European Commissioner for Competition Policy
Many achievements, more to do
Opening speech at International Bar Association conference: "Private and public enforcement of EU competition law - 5 years on"
Brussels, 12th March 2009
Ladies and gentlemen,
ECN
If a week used to be a long time in politics before this crisis, I am not sure what label five years in competition policy deserves! But I think we can look back with some pride at the last five years.
In particular, we can take pride in the network of competition authorities that we created together, the ECN. Since 2004, when our new framework came into being, the enforcement of EC competition law has hugely increased. Not only have we collectively opened more than 1000 cases under Article 81 and 82 in those five years, more importantly we have issued over 300 final decisions.
The ECN model of co-ordination and co-operation is a triumph. Our coherent application of the rules is widely regarded as a model for other regulators and policy communities.
In my opinion this success is because the ECN offers both formal and informal ways of interacting. While the Commission has certain specific functions, this does not stop the informal exchanges that network members value. That is possible because of the commitment of hundreds of us from all over Europe.
I, for one, am eager to keep improving – we have much to do this year and beyond. Your feedback today and tomorrow will help make those improvements possible, so please share your experience freely.
Commission achievements
Looking back on the last five years and also to the challenges ahead in this recession: the clear message for us is that our competition systems work and now is no time to relax the rules.
Our four years of continuous internal and policy reform at the Commission put us in good shape to deliver quicker, better decisions. And we delivered strong results that benefited consumers and helped build a stronger European economy.
Someone told me recently that Competition Commissioners are remembered only for their cases. I doubt anyone will forget Microsoft or Mastercard or the big cartel cases such as the car glass cartel – they do indeed prove that no company is above the law. But I think there is a wider impact that the Commission has had in these last four or five years.
The impact stretches from the concrete consumer savings that run into tens of billions, to better use of taxpayer money because of well-targeted state aid and on to our efforts to build up the ECN and ICN. And I think there can be no doubt that through constant engagement and communication there has been a culture change around how people see competition policy and enforcement. I see it at the board level and in the street. It is not that everyone understands the detail ... but they see the point and they know we mean business.
Within the Commission competition policy has a prominent and secure place. Whether it is in spreading the use of effects-based approaches to policy, helping to build a new energy economy, or creating solutions to the financial and economic crisis – we have a seat at the table and often lead the debate.
The price we have paid for these achievements is low. I do not believe we have let any important issues slip, yet we have preserved our principles. That is no small thing given the bruising debates around the single market and protectionism.
It would be madness to suddenly undo that work or stop that work. So I want to assure you for the Commission it is business as usual in cartels, mergers and antitrust.
There will be no rubber stamps – there remains enforcement across the board –AND this will be a crucial component of our eventual economic recovery.
2009 Agenda
We will also continue to push forward with our work on private damages actions – last week supported without dissent by the European Parliament's ECON committee. We have the Pharmaceutical sector inquiry nearing completion and we will deliver reports on Regulation 1 and the Merger Regulation, and continue our reviews of the horizontal and vertical block exemptions as well as sectoral regulations.
By the way, I should mention that we think the Merger Regulation will be able to handle anything thrown at it in 2009. There may be difficult decisions, but we have the flexibility we need to take account of changing market circumstances.
And, of course, in 2009, our core business of enforcement in individual cases will continue.
Tackling crisis not a 'zero-sum game'
With extra staff recruited for the crisis issues, and rigorous testing in recent years of what works and what doesn't, we are able to run a very tight operation in 2009. Far from being an army of bureaucrats my services for all of competition in all of Europe are actually smaller than the team I had looking after Holland's canals when a Minister in the 1980s! They are as efficient as any team I have worked with in the private sector.
Of course, we can do our jobs better and quicker if companies come to us early and transparently with economic problems they are facing. Dealing in this honest, active way is in the interests of all parties.
Having said that, whether we get this cooperation or not, we are able to manage the new realities, let there be no doubt.
Consumer harm from cartels
Moving on to cartels. Estimating the harm of hidden conspiracies such as cartels is always going to be difficult, and can never be precise. The best we can hope is to provide reasonable estimates.
We have been looking at how to estimate in very rough terms the consumer harm caused by cartels. To do this, we used the 18 cartels which were the subject of Commission decisions during the years 2005 to 2007, and we looked at the size of the markets involved and the duration of the cartels. We then used some very conservative assumptions about the estimated overcharge of prices.
If we assume that consumers were overcharged between 5% to 15%, then the harm suffered ranges from around €4 billion to €11billion for these 18 cartels. Taking the middle point of this overcharge range - 10% - we can see a conservative estimate of consumer harm of €7.6 billion from these cartels.
This figure is probably too low. Most economic literature on the subject suggests that the average overcharge in prices is more likely 20% to 25%.
But the point remains – under any analysis cartels cause terrible damage. And under any analysis we save consumers a great deal by ending them. I hate to think of the harm that would be caused if we let them run for the extra years they would likely survive without our intervention.
Of course, these rough estimates do not include deterrence effects. A successful cartel policy is, above all, one that discourages cartels. It is very difficult to establish how many cartels competition authorities prevent. The OFT has recently carried out a wide ranging study in this area that estimated that for every cartel discovered there were at least five others that were abandoned or which stalled before they could do real damage. If we apply the OFT's findings to our 18 decisions, the deterrence effect means we avoided €60 billion of consumer harm for the period 2005-2007. In other words: the deterrence effect of our policies may be in the order of €20 billion each year.
Fines: the price is right
People who argue that our fines are too high I think ignore the real harm that cartels cause. Even considering recent record fines of around €3 billion per year, this amount is a fraction of the total harm caused each year in Europe by competition problems. Indeed, individual fines mostly fall far short of the limit of 10% of turnover that the Council has set.
But if a company thinks fines are too high, I have an excellent suggestion ... don't engage in cartels.
It is right and legal that we use fines to deliver tough punishment – the legal basis dates back to 1962 and it is virtually unchanged. Why? Because it works. It has withstood decades of court review. If we did not have this system we would have to invent it to fill the gap: breaches of the law require punishment.
The fines that we impose also send a message that deters future offences and forces executive culture change. In this way fines are also an effective signal to the dozens of other would-be cartelists and rule-breakers.
In summary: our approach to fines is no surprise to the marketplace – it's clear, it's needed and it works.
This is completely consistent with my view that enforcement is toothless without fines, and that a competition authority is nothing without enforcement.
To create the culture of good behaviour that helps markets work best, we need these clear and strong rules. Those rules give certainty about the behaviour that is expected in our marketplaces.
If we create the impression that it is OK to 'turn a blind eye' to cartels or for an executive to fail to ask questions about suspicious behaviour, then we create only more trouble – not only in competition, but across all our markets. This sort of misbehaviour is infectious. They breed the sorts of complacent cultures that have generated our current financial and economic situation. As guardians of the Treaty and in particular the Single Market, we cannot allow even a passive acceptance of this sort of behaviour.
It is therefore essential that we send the strongest possible signals about the value of the single market and competition. Fines are that signal.
My final message is this: I would like nothing more than a year when we don't have to issue a fine. If you don't break the law, then we don't have to fine you.
Conclusion
But I'm not naïve about the fact that we will always have to enforce. History shows us that economies are better off when we as competition authorities do our jobs without fear or favour.
This matters more than ever in 2009 as millions of families face problems with their budgets, and law-abiding businesses struggle to survive.
None of these people need the cost and hassle of competition problems to make life worse for them. So we have no intention of doing anything except maintaining our enforcement AND finding ways to speed our economic recovery.
Anyone who thinks we are distracted or going soft will find out the truth the hard way. It is not a choice between the crisis and our other work – we must do both.
I hope this leaves you with a sense of the strategic clarity we feel we have about our work in 2009, and how the last five years have prepared us for this challenge.
I can assure you we will be using every last day of this Commission mandate to meet these goals. I hope you are ready to join me in this.