Article

EU Competition Policy’s Broad Application

 

Robert Miklós Babirad

 

1          Introduction

On October 18, 2012, Mr. Joaquín Almunia, Vice President of the European Commission responsible for Competition Policy delivered a speech entitled “Competition Enforcement in the EU: Beyond the Integration of Markets”[1] at the twentieth anniversary of the Academy of European Law.  Mr. Almunia’s speech reflects the important idea that EU competition policy has a broad application and impact on the EU’s citizenry.  Additionally, the scope of EU competition policy necessarily extends beyond furthering development of the Single Market and economic efficiency objectives.  It may be argued that a broad and diverse application of EU competition policy, which is not limited solely in its employment to increasing economic efficiency, will lead to greater diversity and abundance of derived benefits for all EU citizens as well as furthering the Union’s development as a whole.  A key example of an expanded application for competition policy provided by the speech is that of its use as a tool for effectively responding to the present financial crisis.[2]

 

This article will begin by briefly discussing the debate concerning the role of competition policy.  EU competition policy as a unique tool, which differs from that which may be available in other competition systems will then be discussed.  The views set forth in Mr. Almunia’s speech concerning the historical, present and future application of EU competition policy will be offered.  The article will conclude by suggesting that Mr. Almunia’s speech demonstrates the continued importance and need for competition policy to be applied in context and its necessity as an instrument with broad application for enhancing the welfare of all EU citizens.  It will also be argued that placing competition policy in the greater context of the Union’s goals as a whole, and affording competition policy the opportunity to be an instrument responsive to its societal context, is preferable over an approach that is solely concerned with generating economic efficiency.

 

2          The Role of EU Competition Policy

 It is interesting to read Mr. Almunia’s speech in the context of the debate over the “correct” role for EU competition policy.  The majority of global competition law systems presently consider the enhancing of economic efficacy to be their primary goal.[3]  Objectives related to public policy have diminished as an important consideration in these systems.[4]  The U.S. antitrust model provides an example of this approach where all effective discourse must be presented in terms of economics and no provision is made for successful, non-economic, policy related arguments.[5]  A solely economic approach would not be effective under the EU system, because different societal values including that of the Single Market, as well as the attendant policy considerations of the Treaties are at stake.

 

The alternative and perhaps more helpful viewpoint, particularly with regard to the EU, is that competition policy should apply broadly and also promote a nation’s policy objectives, or in this case those of the Union as a whole, objectives which may not be related solely to increasing economic efficiency.[6]  However, the European Commission is restricting the consideration of policy objectives within EU competition policy.[7]  Mr. Almunia notes in his speech that one important change has been a trend toward an approach that is to a greater degree economically oriented and this is reflected in the regulations for block exemptions and establishment of guidelines relating to policy in varying fields.[8]

 

Dr. Townley states that competition policy is “not an end in itself,” but is rather more appropriately employed as a tool for achieving the objectives set forth in the Treaties.[9]  Additionally, the EU competition provisions do not operate independently and it is preferable to view them instead as “part of a web of inter-related Treaty articles.”[10]  The EU Treaties and their embedded objectives provide the context in which competition policy must be interpreted.[11]  Mr. Almunia’s speech also indirectly alludes to this contextual approach for EU competition policy, but stops short of directly calling for the greater incorporation of policy under the competition provisions.  It is this contextual approach, which appears to be of the greatest helpfulness if EU competition policy is to be used as an effective tool for promoting the values of the Treaty as well as those of the EU and its citizens as a whole.

 

An example of the Commission’s limitation on considering objectives other than economic efficiency under EU competition policy is demonstrated by its statement that the objective of Article 101 TFEU (previously Art. 81 EC) is to protect competitive conditions on the Single Market with the goal of promoting consumer welfare as well as the allocation of resources in an efficient manner.[12] Goals relating to policy expressed in the Treaties, may only be considered under Article 101 TFEU if they fall within the limited conditions of Article 101(3) TFEU.[13]  However, it has also been argued that Article 101(3)’s conditions for exemption of otherwise prohibited agreements are not necessarily meant for the incorporation of policy, but are rather “economic efficiency” considerations.[14]

 

It may be argued that EU competition policy has necessarily gone beyond the role of considering solely economic efficiency and must continue to do so moving forward.  The need for its broad application as a tool not only for creating economic efficiency, but also as a contextually responsive instrument for responding to the present economic crisis appears to be evident.[15]  It is in this application that competition policy may have the greatest effect and benefit the largest number of individuals.

 

3          EU Competition Policy’s Unique Nature

Mr. Almunia’s speech demonstrates that EU competition policy differs from other competition law systems and therefore necessarily takes a different approach in its application.[16]  The European Commission, as a competition authority, is in a unique position, because its enforcement powers extend broadly to both bodies of a private as well as public nature.[17] It is important for both public and private actors to be made accountable to the competition rules and as such not only is competition increased, but greater consideration may be given to advancing the Treaty’s policy considerations with regard to both the public and private sector. Additionally, it is only through applying competition policy to both public and private actors that the Single Market and increased welfare of all EU citizens can become a functional reality.

 

Competition is safeguarded in the private sector by rules concerning antitrust, which seek to prevent the development of private restrictions to trade by businesses.[18]  Additionally, these rules operate with the objective of establishing equal operating conditions for businesses within the Single Market.[19]  In the public sector, rules concerning State aid inhibit governments from altering competitive conditions and ensure equality of opportunity in the ability of Member States to provide subsidies.[20]  The European Commission, because of its broad application of rules regulating competitive conditions is empowered with a “formidable tool,” which benefits both citizens of the EU as well as the Single Market as a whole.[21]  It is noted in the speech that neither other nations outside of the EU nor organisations operating at the international level have at their disposal the tools available within the EU competition system.   It is therefore important that these tools not be restricted by the establishment of a narrower application for EU competition policy. Additionally, a competition policy less insistent on policy will subsequently result in decreased societal benefits (namely, those advocated by the Treaties) that would have otherwise been available.

 

The application of EU competition policy is broader than that employed in most other jurisdictions and bases itself not only upon the unique situation of fostering development of a Single Market, but also upon the underlying idea of promoting the welfare of its citizens by monitoring competitive effects by both private as well as public actors.  The EU competition system’s broad application to both public as well as private actors thereby creates overall better conditions for the economy as well as its citizens than that which may occur under a more restricted interpretation.

 

 4          Application of EU Competition Policy

EU competition policy has traditionally embodied and continues to take on a broad role, not limited solely to creating economic efficiency in its application or corresponding benefits.  This is reflected by Mr. Almunia’s speech.  It appears that this is the most helpful approach and most in line with the goals of the Treaty, which necessitate the consideration of policy in applying the competition rules.[22]  The Single Market can only be effectively integrated if competition policy applies broadly, not only to public and private actors, but also through its application as an instrument for advancing the Union’s larger policy objectives.

 

The application of competition policy may focus upon and be predominantly motivated by economic considerations, but its broad application and derived impact as well as benefits have suggested a much greater influence.  The suggestion is put forth that competition policy does not operate in an isolated manner, which would insulate it from the surrounding social and economic situation.[23]  The present social and economic situation since the onset of the global financial crisis is comprised by a lack of growth, an increase in unemployment, and an elevated public debt situation.[24]  Competition policy must not only operate in this difficult context, but has the responsibility to aid in the creation of growth that is sustainable while also assisting Europe in its ability to withdraw from the present crisis.[25]  This in itself recognises an extended role for competition policy beyond that of generating economic efficiency and is clearly reflective of the important and necessary role of policy considerations.  However, it is not clear from the speech as to how competition policy should proceed in this regard nor is it evident how the competition provisions should be applied as a tool for addressing the present financial crisis.

 

Policy concerns are being implicated and alluded to in Mr. Almunia’s speech, such as that of competition policy serving a contextual purpose and being employed as a tool for responding to the present financial crisis, but how this is to be done remains unclear.  However, competition policy necessarily emerges as a tool that is most productive if enabled to be responsive to its context, rather than one which is isolated and solely focused upon the attainment of economic efficiency at the exclusion of considering the Union’s policy related Treaty objectives.

 

Competition policy is an essential tool in Mr. Almunia’s view for the continued integration of the EU, but its role is not restricted to “the preservation of a level playing field” within the Single Market.[26]  The historical development of the EU’s unique competition policy regime as well as the support, which is offered by the Treaties and its accompanying policy objectives provide substantiation for this viewpoint.[27]  Mr. Almunia states, “[w]e all know that the call of Europe’s founding fathers for economic integration had a more profound and more noble motive.”[28]  Subsequently, it may be inferred that EU competition policy goes beyond protecting economic efficiency in its application and this is demonstrated by its role as an essential instrument for Europe’s institutional and political development.[29]  One is led to believe that policy considerations remain important in the application of competition policy, particularly if it is to be used as a tool for effective political and institutional construction.  However, one is left unsure as to whether an expanded role for policy is actually being advocated or whether Mr. Almunia’s remarks relate solely to economic efficiency.

 

Competition policy has also been used as an essential tool for development of the Single Market and the EU Courts’ manner of interpreting the competition provisions have occurred in a way that furthers integration.[30]  An example includes the EU Courts’ interpretation of concepts such as “effect on trade,” “concerted practices,” and the definition of an “undertaking” being afforded an interpretation that is generous and based upon the overriding policy interest of the Single Market’s development.[31]  As such, we see another example of competition policy being broadly applied.  It was traditionally necessary and continues to be essential for the EU Courts to follow this broad manner of interpretation if advancement of the Single Market is to be successful.

 

The importance of the relationship between competition policy and Europe’s public services is also noted.[32]  The public institutions of the community have the obligation of carrying out one of the most central tenets and fundamental values of the European model, that of providing for “certain social needs and public goods.”[33]  Mr. Almunia states that in looking at the field of public services in Europe, we are provided with “no better example to illustrate the link between competition controls and our fundamental values.”[34]  However, although a link is made between key European values and the competition provisions, the actual role of policy remains uncertain.  Policy is essential and must be considered to a greater degree in the application of the competition rules if there is to be such a link.  Applying competition policy to the provision of community public services clearly goes beyond the concern of generating economic efficiency.  It reflects important policy considerations, one example being that of Member States having the support of a competition law system, which assists in their ability to provide such services in a fair, effective, and cost efficient manner.  Unfortunately, the speech again stops short of directly supporting policy under the competition provisions.  However, the need for an expanded application of competition policy does appear to emerge as an important consideration in the continued development of the EU competition law system.

 

Competition policy has also assisted the Commission’s efforts to eliminate those existing obstacles, which may obstruct the development of unified European markets in areas as diverse as the telecommunications industry, the provision of postal services, railway networks, energy distribution and air travel with the goal of furthering the development of a single and unified EU marketplace.[35] Additionally, competition policy has made the principles of the free movement rules effective in practice.[36] It is essential for policy to be considered in applying competition policy broadly, particularly because of a propensity by the Commission and EU Courts to apply similar reasoning in their application of both the free movement and competition rules.[37] Unified markets and effective free movement rules are not only positive economically, but also foster a greater sense of European national, institutional and political unity, which are policy concerns.  The strengthening of the EU has in many ways been due to its competition policy and the broad application of that policy.[38]  The EU competition system has also delivered “practical benefits” to its citizens, because of its broad application and perhaps it may be argued that these have been derived, because of the recognition of policy and an application that has traditionally been contextually responsive.[39]

 

In the field of mergers, the EU Courts have afforded the Commission the ability to inquire into practices of an anticompetitive nature as well as mergers within the Single Market with the key requirement being merely that an impact upon the EU occurs even though a company may not have a physical headquarters within the European Union.[40]  EU competition policy has necessarily had a wide application and this is demonstrated by its application to foreign companies operating within the EU.  It is important that undertakings from outside of the Union are not provided with the opportunity to escape liability for actions, which lead to the distortion of competition on the Single Market, because of a narrow application of EU competition policy.

 

A unified and shared body of law that all EU citizens are able to rely upon has also been provided by the unique application and interpretation of EU competition policy.[41]  Legal precedents have applicability throughout Europe providing a common body of law for its citizens, businesses and national competition authorities.[42]  The competition rules are also universally applicable to all undertakings and it is possible for these rules to be invoked directly by citizens as well as businesses at the Member State level.[43]  Businesses are able to operate effectively and freely across Member States, because of competition policy and its enforcement against anti-competitive practices, which provides protection and universal applicability to companies throughout the European Union.[44]  A uniform body of law that applies throughout all of the Member States has economic, societal and political benefits and is possible, because of a broad and policy cognizant application of competition policy.

 

Mr. Almunia also states that in 2008 at the onset of the financial crisis, competition policy was employed as the only shared available device for confronting and preventing the collapse of the financial system in Europe.[45]  Government bail-outs were also controlled by the timely creation of a system concerning State aid and plans presently exist for a banking union’s future development.[46]  Additionally, State aid has been flexibly employed as an integral part of the EU’s competition policy.[47]  These actions clearly demonstrate the importance of a competition policy that is necessarily wide, contextually responsive, cognizant of policy, and subsequently varied in its scope, application and derived benefits.

 

5          Conclusion

The contributions of EU competition policy have improved the standard of living within Europe because of their broad application to a wide array of areas, resulting in the improved development of the Union’s structural, political and legal composition.[48]  EU competition policy should not be limited to solely attaining economic efficiency and now more than ever must be an instrument cognizant of greater European policy concerns.  Competition policy in the EU has not been traditionally restricted in its application or corresponding benefits to economics or the objective of advancing the Single Market, which may itself be looked upon as a predominantly economic concern.[49]  It continues to be important for EU competition policy to serve as a multipurpose instrument that is aware of its operating context and Treaty obligations, particularly if it is to be an effective tool for responding to the present financial crisis and the attainment of its timely resolution.

 


[1] Almunia, P, Competition Enforcement in the EU: Beyond the Integration of Markets, The citizen at the heart of EU law: 20th anniversary of the Academy of European Law (ERA) Trier, Speech /12/742, 18 October 2012.  <http://europa.eu/rapid/press-release_SPEECH-12-742_en.htm>  Accessed 12th of November 2012.

[2] See Almunia, p. 5.

[3] Townley, C. Article 81 EC and Public Policy (Hart Publishing, Oxford, 2009), p. 14.

[4] Ibid., p. 313.

[5] Monti, G. EC Competition Law (Cambridge University Press, New York, 2007), p. 79.

[6] Townley, p. 14.

[7] Ibid., p. 11.

[8] Almunia, p. 3.

[9] Townley, p. 314.

[10] Ibid., p. 48.

[11] Ibid.

[12] Commission Notice, Guidelines on the Application of Article 81(3) of the Treaty OJ 2004 C101/97, para. 13.

[13] Ibid., para. 42.

[14] Monti, p. 45.

[15] Almunia, p. 5.

[16] Ibid., p. 3.

[17] Ibid.

[18] Ibid.

[19] Ibid.

[20] Ibid.

[21] Ibid.

[22] See Townley, pps. 48-50.

[23] Almunia, p. 5.

[24] Ibid.

[25] Ibid.

[26] Ibid., p. 2.

[27] Ibid.

[28] Ibid.

[29] Ibid.

[30] Ibid., p. 4.

[31] Ibid.

[32] Ibid., p. 6.

[33] Ibid.

[34] Ibid.

[35] Ibid.

[36] Ibid., p. 4.

[37] Mortelmans, K. “Towards Convergence in the Application of the Rules on Free Movement?” (2001) 38 Common Market Law Review 613, pps. 613, 645-46.

[38] Almunia, p. 4.

[39] Ibid.

[40] Ibid., p. 4.

[41] Ibid.

[42] Ibid.

[43] Ibid.

[44] Ibid.

[45] Ibid., p. 5.

[46] Ibid.

[47] Ibid., p. 6.

[48] Ibid.

[49] See Commission, Article 81(3) Guidelines, para. 13.