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Archive for January 10th, 2019

Ahead of Siemens/Alstom, the competition law community should do more to defend the European Commission (and our law-based system)

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Readers of the blog know that I am sometimes critical of the European Commission. I regard it as my obligation. Since I am fortunate enough to devote my professional life to study the behaviour of competition authorities (and the evolution of the legal system), I have a duty to share my findings, wherever they take me.

Every now and then, however, people get confused about what drives my criticism. Make no mistake: if I am sometimes critical of the European Commission, this is because I believe in the crucial role of competition law in a social market economy and because I care about the system (its internal consistency, its predictability and the aspects that could be improved).

And because I care, I find it unacceptable when governments resort to all forms of lobbying to twist the arm of the European Commission in sensitive cases. The pending merger in Siemens/Alstom is one where the pressure is about to reach unbearable levels.

A few days ago, the French Minister for Economic Affairs claimed that it would be an economic and political mistake (no less) to block Siemens/Alstom. His arguments are the same tired ones (national champions and all the rest) that were advanced, back in the day, by Arnaud Montebourg, this blog’s favourite French (ex-)Minister.

Bruno Le Maire’s statements add to a plea, by 19 EU Member States, in favour of à la carte antitrust (see here). According to the reform suggested in a ministerial meeting, EU competition law would only apply to the baddies. The goodies, on the other hand, would not be subject to the rules, or would benefit from exemptions so they can become competitive at the global level.

One could say many things about these statements. One could say, for instance, that, if the approach they advocate were to be implemented, it would be the end of competition law as we know it. The French Minister’s arguments could very well be used to justify hard-core cartels: if a merger to monopoly should be allowed to go through in the name of the ‘competitiveness’ of domestic companies (whatever that means), why not allow EU firms to cartelise their activity and extract rents from companies based elsewhere?

One could also say that these statements are incredibly short-sighted and nothing sort of an own goal. If the EU system is the global reference, and if the European Commission is the leading authority in the world, this is because EU competition policy is enforced through law, not discretion or arbitrary distinctions between goodies and baddies.

If, as proposed by 19 EU Member States, the application of EU competition law were influenced by the firms’ place of establishment (or by their status as goodies or baddies), the system would lose its hard-won credibility. Such a move would play in the hands of those who argue (with no evidence so far) that EU competition law is tilted against foreign, in particular US, firms.

But there is something else that I would like to add to the above. I am always surprised that the competition law community does not do more to defend the European Commission, and our law-based system, in these circumstances. I tell myself that we should perhaps be more vocal.

One thing is to disagree with the Commission about whether Intel requires the application of the AEC test in every single rebates case, or about the legal test that should apply to constructive refusals to deal. And another thing is to question the very foundations of the system. When the latter are at stake, it makes sense to forget disagreements about particular points of law or policy (no matter how strong) and side with the Commission.

A consensus seems to be emerging across the political spectrum about the need for a well-functioning competition law regime. In particular, there is an understanding that the careful scrutiny of horizontal mergers, such as Siemens/Alstom, is indispensable (there are reasons to believe that the enforcement of merger control has been somewhat lenient vis-à-vis these transactions in the past couple of decades).

In these circumstances, and now that momentum is building, it would be terrible (for the economy, for consumers, and for our community) if competition law mutated into some sort of Frankenstein driven by political expedience (as opposed to rigorous legal and economic analysis grounded on consensus positions).

It is true that some have been vocal. At the risk of doing injustice to others, John Fingleton, for instance, has been vocal against proposed changes to UK merger control (see for instance here). It would be wonderful if others followed this example.

Written by Pablo Ibanez Colomo

10 January 2019 at 9:00 pm

Posted in Uncategorized