16 September 2019

Industry politics and digital economy drive new European Commission’s competition agenda

The newly elected European Commission has set its five-year agenda. Commissioner Margrethe Vestager’s mandate on competition law tackles three major subjects: (1) digital economy; (2) industrial strategy; and (3) foreign state ownership and subsidies. In addition to her current portfolio, she will be responsible for overseeing the European-wide digital transition. Recent competition enforcement and policy already focuses on the digital economy, and the call for a change in rules and tools continues unabated. The industrial strategy focus is no surprise in the aftermath of this year’s negative decision in the Siemens/Alstom merger case. The third focus area on foreign state ownership and subsidies can be viewed as part of the Commission’s industrial strategy focus. This may lead to changes in competition rules for platforms in the near future. Whether industrial politics will become part of merger control assessment remains to be seen, since not all member states oppose this idea.

Digital economy

In her mission letter to Margrethe Vestager, Ursula von der Leyen, President-elect of the European Commission, indicates that changes in digital economy legislation will go beyond competition law in the strict sense and will go in the direction of competition enhancing regulation as we have seen before in the telecom, postal and energy sectors. The Commission expects legislative proposals which will contribute to fair and open competition. In April 2019, a report commissioned by Vestager proposed measures (a) for competition between platforms (preventing foreclosure, especially by most-favoured nation clauses and multi-homing restrictions), and (b) competition on platforms (increasing transparency and prohibiting self-preferencing).

A number of national competition authorities and policy makers have also put forward their wish lists. A day before the new Commission was presented to the European Parliament, a group of German experts published A New Competition Framework for the Digital Economy, containing proposals to review competition rules at the EU level. ACM, the Dutch competition authority, has also published a two-page document in English, outlining a proposal for an ex-ante enforcement tool to address competition problems in the digital economy, at the EU-level as well. This was published to support the “wish list” of the Dutch State Secretary of Economic Affairs to introduce a formal regulatory framework in the EU for “gatekeeper” platforms. For an overview of this policy letter and recent British and EU reports on proposals for regulating platforms, see our Best Friends newsletter – Competition Law in the Digital Age. These policy papers are likely to form the starting point for proposed reforms.

Industry strategy and European champions

In referring to the competition portfolio, the President-elect’s mission letter underlines her desire to “contribute to a strong European industry at home and in the world.” In our view, this is an overt reference to the Siemens/Alstom merger that the Commission blocked earlier this year, giving a nod to the ensuing public debate and perceived policy failures in creating “European Champions.” In the Siemens/Alstom case, no industrial politics exception was made in favour of the creation of a European champion. The European Council has, however, called for “concrete action to ensure a strong and competitive industrial base for the single market.” With the mission letter, the Commission now takes up the challenge to consider making industrial strategy a part of competition law assessments.

Foreign state ownership and subsidies

The Commission also wants to develop a back-up plan and seems to want to do this by making competition policy part of its industrial strategy. It believes that foreign actions should not distort a level playing field and competition in the internal market.

There are several ways that an internal market can be distorted. First, distortion may result from state-subsidised exports. While this issue may partly be tackled by anti-dumping measures, Vestager will have to develop new tools and policies to effectively deal with these subsidies. Against the background of current tensions in global trade, it is not surprising that this is a priority for the Commission.

Second, foreign state-owned companies can also cause distortion. Vestager has to prevent distortions by foreign state-owned companies that play a role in the European economy. These companies may undermine the level playing field in Europe, because European businesses are generally restricted from receiving state aid, while certain foreign state-owned companies receive financial support from their home states. Preventative measures by the Commission will complement the regulation establishing a framework for screening of foreign direct investments into the EU, which was adopted earlier this year. For a further overview of this regulation, see our recent Best Friends briefing.

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