Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

This is not a post on Siemens/Alstom – Congratulations to DG Comp (and brace for what’s coming)

with 2 comments

pandoras box

I have no view on whether the Siemens/Alstom deal deserved to be prohibited or not. Even if I had one, I’m not even sure that I would be at liberty to share it, but I truly don’t. Like most of whom are criticizing the Commission’s decision announced today, I simply don’t have sufficient elements to have an informed opinion.

And nevertheless I have to congratulate the European Commission. Not for prohibiting the deal, but for resisting exceptional pressure. I would have also congratulated the Commission had it prohibited or approved this or any other deal in the face of extreme and virulent criticism. So this is not a post on Siemens/Alstom; it’s a post about the role and attitude of competition enforcers at a time of mounting political pressure to shake things on the basis of reflexes and short-term considerations packaged as long-term ones.

The fact is that today the Commission has shown that it can be an example of independence to other authorities around the world (who should also take note). And it has done so facing pressure from the most influential Member States, and at a time that wasn’t the most convenient for Commissioner Vestager. The Commissioner and the Institution have this time met the high standars that I referred to in my last post.  Commissioner Vestager has said today that the EU internal market is what enables EU companies to attain a global scale and compete in the worldwide market. That’s exactly the point, and the internal market is a rule-based construction.

Right or wrong, the Commission has applied the rules in what it believes is the right, objective way. This has earned them unusual public criticism. For example: “it must be bitter to be technically right but to do everything wrong for Europe”, or the comparison between “backward-looking technocrats or future-oriented Europeans” (see here). President Juncker even pointed to those “who are saying that the commission is composed of blind, stupid, stubborn technocrats.”

For a competition enforcer, being accused of “technocrat” doing the “technically right” thing should be a badge of honor. Competition authorities are there to apply the rules to a set of facts, not to do politics or shape markets according to the wishes of some [Member States/politicians/lobby groups/companies].

The institutional structure of the Commission arguably facilitates taking into consideration elements that may not necessarily be technical or at all related to the law (admittedly, we may have seen a bit of that in recent cases). But this time DG Comp has prevailed, and –regardless of whether their assessment is right or wrong- they have done what they believed was right no matter the cost. Too often decisions are simply adopted because they are the easy thing to do. This wasn’t the case.

Let’s nonetheless be aware that some disgruntled politicians will now want to use the occasion to do something about competition law (it’s shocking to have a technical area of law that does not explicitly accommodate all kinds of political goals!). So now a lead candidate to the EU elections says thatIf EU competition rules are not fit for today’s challenges, then we need to change the rules”. Other politicians in France and Germany have announced proposals to “overhaul EU competition rules” (not sure the recent reforms in Germany signal the way to go in terms of independence from pressure groups…). Even the European Parliament has just issued its annual report on EU competition policy calling for a  “fundamental overhaul of EU competition policy”.

To be sure, I’m afraid the competition law community was part of the problem, opening Pandora’s box, signaling that competition law could reach further, and reclaiming public attention. You know, be careful what you wish for. It’s difficult to argue that one can enlarge competition law to cover [x, you name it], but not climate change, labor standards or industrial policy. Perhaps we should all reflect upon this and revisit our attitudes and our complaints about alleged blind spots.

Everyone wants to change the rules when they are not applied in the way we like. But that’s the very reason why we have rules in the first place! It’s perhaps time to abandon this Marxist reflex towards competition rules (and I mean Groucho, not Karl).

Competition law is already vague enough to make it even more nebulous by accommodating all kinds of goals and in no particular order. I have often said half-jokingly that there are issues far too important to be left to competition authorities. The only thing that could make me revisit this view is that over the past few weeks competition authorities have proved to be more sensible than your average politician.

Anyone who understands and cares about this discipline should probably start realizing that competition law ain’t broke, but it risks being broken. Don’t let that happen.

Written by Alfonso Lamadrid

6 February 2019 at 3:18 pm

Posted in Uncategorized

2 Responses

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  1. Dear Alfonso,
    I can only agree in wanting to keep competition law from being broken (or further broken), but I do see a difference between climate protection and labor standards on the one hand and industrial policy at the other. Climate protection and labor standards are elements with regard to which competition is possible. We can already see that companies are using climate friendliness or respect for labor standards to set themselves and their products apart from the competition and their products. Integrating such considerations in competition law and policy – to my mind – makes perfect sense to incentivise companies to start including climate friendliness and other aspects in the quality of their products and production processes. If anything, that would mean a broadening or intensification of competition in the sense that companies would not just compete on price but also on a more broadly defined understanding of the quality of their products.
    Industrial policy, however, is fundamentally antagonistic to competition. Industrial policy – at least in the primitive way some politicians understand it – seeks to shield certain categories of companies from competition by excluding competition law.
    I would note, finally, that EU competition law already engages in a form of industrial policy as it is. The position of SMEs in competition law (e.g. Art. 11 of the Antitrust Damages Directive) is just one example.
    Anyway, as a consumer of railway transportation services in the Netherlands, I’m happy.
    all the best,
    Hans

    Hans

    6 February 2019 at 5:24 pm

    • Since “crude industrial policy” is traditionally driven by labour interests, I think it is a false dichotomy to distinguish between labour standards as a parameter of quality competition, and industrial policy. The real question is whether competition law can consider other interests without risking conflict with its goal of promoting allocative efficiency. Typically this is not the case when “quality competition” refers to qualitites of the product or service itself in relation to which there are monotonic preferences (as there are for price). But in case of labour interests, the conflict is pretty clear. I for one find it hard to imagine how the Commission should balance the interests of e.g. French/German workers on the one hand, and e.g. Spanish customers on the other hand.

      HK47

      13 February 2019 at 2:59 pm


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