# EUR-Lex - 52012DC0253 - EN

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# 52012DC0253

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Report on Competition Policy 2011 /* COM/2012/0253 final */**

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COMMUNICATION FROM THE COMMISSION TO
THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS

Report on Competition Policy 2011

Introduction

2011 was a year of
turbulence. The financial crisis turned into a sovereign debt crisis in parts
of the euro area, threatening the banking sector and the fiscal sustainability
of many European governments. It also severely impaired credit flows towards
the real economy.

In that economic context, fair competition continues
to be an essential condition for the full realisation of the Internal Market
and a key component of a common strategy to contribute to the recovery of the
European economy and thrive at the global level.

This Communication presents how in 2011 the
Commission used competition policy as an instrument in the resolution of the
financial and sovereign debt crises and how, generally, competition policy and
enforcement actions taken during the year contributed to the wider policy objectives
of the Europe 2020 strategy and supported growth, jobs and the competitiveness
of the EU economy.

Using a new format, this Communication gives
a non-exhaustive overview of Commission activities in the field of competition
policy in 2011, with a particular focus on the financial services, food and
airline sectors. The new structure aims at better explaining how the Commission
implements competition policy and how the policy contributes to the
European economy and to increasing the welfare of EU citizens.

A dedicated section on interinstitutional
relations reports on the continuous dialogue with the European Parliament and
how the Commission responds to its requests. Further information can be found in a more detailed Commission Staff
Working Document (SWD) and on the website of the Competition
Directorate-General.

1.           Competition policy in the current
economic context

The fragile signs of economic recovery in 2010
and early 2011 were not sustained throughout the year. In fact, the last months
were marked by increasing instability and difficulties in the public sector.
Member States continued to assist financial institutions, many of which had to
receive liquidity support from central banks. Public deficits have become a
source of concern regarding sovereign risk, which has led to disturbances on financial
markets.

The financial crisis has had a dramatic
effect on the real economy, through reduced lending to households and
businesses, with serious knock-on effects on investment and employment. Several
Member States had to implement austerity measures and cuts in their public
spending, instead of further investing in measures aiming at re-launching the
economy.

As soon as the crisis broke out, the EU
coordinated the European economic stimulus package to promote recovery. It applied
the State aid regime firmly but flexibly to avoid distortions of competition
while requiring banks to restructure and address the weaknesses of their
business models. Following that first wave of “emergency” measures, the
Commission launched a programme of reforms to tackle more structural issues in
the financial sector through a clear, comprehensive and consistent scheme of measures
with a timetable and end date[1].
That programme is linked with the Commission's overall strategy for growth and
jobs, as the stability of the financial sector is clearly one of the key
objectives in the Annual Growth Survey[2].
In addition, the Commission subsequently launched regulatory initiatives for
changing the financial industry's regulatory landscape. Their focus lies on
re-orienting the sector towards its core function: meeting the financing needs
of companies and households.

How State aid policy contributes to
financial stability

The EU State aid framework remains a unique
coordination tool at EU level

The worsening of the sovereign debt crisis during
the summer led the Member States and the Commission to agree on a package of
measures to strengthen banks' capital and provide guarantees on their
liabilities (the banking package)[3].
On 1 December, the Commission prolonged the State aid crisis measures for the
financial sector, clarifying and updating the rules on pricing and other
conditions[4].
Once the situation stabilises, a more permanent set of State aid rules will be
established for banks.

Since the beginning of the crisis, and
until 31 December 2011, EUR 1.6 trillion of State aid have been used to rescue
and restructure European banks. The Commission has taken 39 decisions on restructuring,
for which the Commission monitors the effective implementation of the restructuring
plans. 24 banks are still undergoing restructuring The Commission has also
approved national schemes in 20 Member States that use an array of tools
provided under the crisis regime. They include capital injections, support for
the divestment of impaired assets, and guarantees.

In October, the ECOFIN Council concluded
that the EU State Aid Framework should continue as the sole EU level
coordination tool and that – in the short-/medium-term – no further frameworks
are required. The Commission has used the State aid instrument in a manner that
has fostered bank restructuring while maintaining a level playing field in the
market. Conditions for crisis State aid rules for banks were set down with a
triple objective: safeguarding financial stability, preserving the internal
market, and restructuring aid beneficiaries for long-term viability. Banks were
required to move away from unsustainable business models based on excessive
leverage and overreliance on short-term wholesale funding and encouraged to
focus again on their core business. The Commission is the only institution that
explicitly imposes burden-sharing conditions on bailouts, helping to curtail
moral hazard in the future.

Responding to a call from the European
Parliament[5],
the Commission prepared a Staff Working Document which explains how the
Commission's State aid policy responded to the financial and economic crisis[6].

In 2011, the Commission continued its
approach to failing banks through a number of important State aid decisions.
The troubled Irish lender Anglo Irish Bank[7] is a good example. The
Commission approved the plan submitted by the Irish authorities, which foresees
a joint wind-down of Anglo Irish Bank together with Irish Nationwide Building
Society over a period of ten years. The case of long-time ailing German
Landesbank WestLB[8]
is another prominent example. WestLB will ultimately be split up; the remaining
assets and liabilities will be transferred to a bad bank in order to be wound
down. By 30 June 2012 WestLB will stop its banking activities and henceforth
only provide asset management services. Only the small part of WestLB’s most
conservative business activities - the services it provides to small local
savings banks - will stay in the market, but they will be taken over by Landesbank Hessen-Thüringen (Helaba).

Banks which relied heavily on State aid can be allowed to stay on the market where parts of their
activities have a realistic prospect to return to viability, provided that they
considerably reduce their size and substantially change their business model to
focus only on the viable activities. That approach is
well illustrated by the approval of the restructuring of the German bank, Hypo
Real Estate[9].
The bank will shrink to 15% of its pre-crisis balance sheet and phase out a number
of business fields. Similarly, the Commission approved restructuring aid to
another German bank HSH Nordbank[10]
in light of a commitment to reduce its balance sheet size by 61% compared to
pre-crisis levels by exiting certain business lines. The Commission also
applied that approach in the context of smaller banks. For instance Eik bank[11] in Denmark was split into a
bad bank put in liquidation, while the good part of the bank was subject to a
sale via a bidding process. A similar line was taken for Austrian Kommunalkredit[12] which had to be nationalised
in a rescue operation. The bank's business was split into non-strategic
activities (to be wound down) and strategic activities (corresponding to
approximately 40% of the balance sheet) which will be re-privatized.

In the case of ABN Amro Bank[13], the need for State aid
stemmed primarily from the specific separation context: separation of the Dutch
bank activities from the ailing Fortis group and from the previously existing ABN
Amro Group. The two businesses were left with insufficient capital to face the
crisis and finance their merger. The Commission took into account that the bank
did not need aid primarily because of mismanagement or excessive risk taking at
its level and therefore only requested behavioural safeguards (i.e. it
did not seek divestment of businesses by the bank).

The specific situation of Programme Countries

Competition policy
contributes to financial stability and structural reforms related to the
adjustment programmes

The crisis has
led to major economic imbalances in most Member States and as from 2010 some
had no option but to request external help from the European Commission and the
International Monetary Fund (IMF). Financial stability is indeed of the utmost
importance for the European Union, as three of those Member States (Greece,
Ireland and Portugal) are also members of the wider Eurozone. Those so-called “Programme
countries” are subject to economic adjustment programmes. Those programmes
impose a wide range of conditions, which may include restructuring of the
financial sector and the need to introduce structural reforms for other sectors
of the economy, the administration and the judiciary[14]. On the economic structural
side, the programmes may include, inter alia, the privatisation and/or
restructuring of State-owned enterprises (SOEs). Such steps may entail State
aid issues that the Commission will need to address promptly so that the
programmes can be successfully implemented. Privatisation objectives are
particularly important for Greece, Portugal and Romania. The programmes for those
Member States also aim at making the competition law enforcement regime as
effective and efficient as possible, with National Competition Authorities
(NCAs) asking for increased powers and (human) resources.

The Commission, together with the IMF and
the European Central Bank (ECB), has been closely associated with the
restructuring of the financial sector in Programme countries, to ensure that
the massive support necessary to keep those institutions alive in a difficult
macro-economic environment does not result in undue distortions of competition.
The Commission has authorized the prolongation of the existing bank guarantee
and recapitalisation schemes for the three Eurozone countries. The Commission verifies that the State aid
is limited to the minimum necessary and that moral hazard is properly
addressed, notably by requiring not only that banks remunerate and eventually
repay the aid they received, but also that they share the burden of the
restructuring and take measures to address the competition distortions brought
by the aid.

In Greece, the situation is very complex.
The banking sector suffers both from deep recession and from its large holding
of sovereign bonds. The restructuring of the banks which
received State aid as of 2009 onwards continues in that very difficult context.
Agricultural Bank of Greece's (ATE) restructuring plan was approved on 23 May. Following the write-downs in September due to the participation of
ATE in the Private Sector Involvement (PSI) which was decided in July 2011, ATE
needed a further capital injection by the State. That recapitalisation requires
the submission of an updated restructuring plan to the
Commission. The decision of the European Council of 27 October to increase
private sector contribution to Greece's rescue by increasing the cut on Greek
bonds from 21% to 50% will significantly affect the Greek banks, in proportion
to their holding of sovereign bonds. To fill the resulting capital needs, the
second programme for Greece which was decided on the same day provides a
significantly increased budget for aiding banks, the use of which the
Commission will scrutinize.

Unlike Greece, Ireland's debt crisis
originates from the banks yielding massive losses after the property bubble
burst. The EC/IMF/ECB Programme of 28 November 2010 has a budget of EUR 85 billion,
of which EUR 35 billion are earmarked for the financial sector. Major steps
have been taken towards the recapitalisation, restructuring and deleveraging
objectives of the Programme. In terms of recapitalisation, the authorities have
carried out an extensive analysis of the capital requirements of the four
remaining Irish banks (BOI, AIB/EBS and IL&P) through the Prudential
Capital Adequacy Review (PCAR) 2011. That review included an analysis of the
expected loan losses by external independent advisors. It covers the expected
losses on the loan book and the costs of the deleveraging process necessary to shrink
the banks to a sustainable size and reduce their reliance on Central Bank
funding. The Irish authorities recapitalised the banks by the Programme
deadline of 31 July. They spent considerably less than initially earmarked, due
to liability management exercises carried out by the banks and private participation
in the capital raising of BOI. In July, the Irish authorities presented
restructuring plans for the banks, containing their deleveraging targets and
other actions. The plan for BOI was approved under State aid rules on 20
December, while the others are currently being assessed.

In May, the ECOFIN Council and the IMF
Executive Board agreed on a EUR 78 billion support package for Portugal. In
order to strengthen confidence in the financial sector, the
Programme requires banks to deleverage in an orderly manner and achieve higher levels of capital. So, a new recapitalisation scheme was
put in place with an increased budget of EUR 12 billion (from EUR 3 billion).
The banks benefitting from that capital support will have to submit a
restructuring plan to the European Commission in line with State aid rules. A
formal State aid procedure was opened for the aid granted to BPN (Banco
Português de Negócios), which was nationalised in November 2008; a formal decision was to be taken in the spring 2012.

How antitrust
enforcement fosters fair competition and transparent financial markets

Europe needs transparent, open and
innovative financial markets

Financial markets, as any other market,
provide more efficient service when they are open and competitive. This is
exactly what the Commission is striving to accomplish through its antitrust
investigations in the Over-the-Counter (OTC) derivatives market, the payments
services sector, and the distribution of trading data and financial information
to the market.

Over-the-Counter Derivatives and Credit
Default Swaps

The lack of transparency in relation to the
trading of OTC derivatives and financial instruments became apparent during the
recent financial crisis. Drawing lessons from that crisis, the G20 agreed at
the 2009 Pittsburgh summit on the need to improve the transparency and
oversight of less regulated markets, with specific focus on OTC derivatives. In
2010, the Commission therefore proposed to improve the regulation of Credit
Default Swaps (CDS[15])
and other OTC derivatives through the European market infrastructure regulation
(EMIR[16]).
Moreover, in October 2011 the Commission also tabled proposals to revise the
Markets in Financial Instruments Directive (MiFID) to further enhance
transparency of OTC markets[17].

Ongoing
antitrust investigations in relation to CDS and the EURIBOR

Competition
policy supports these legislative initiatives. Lack of transparency on the
market can work to the benefit of certain market players, which therefore have
an incentive in maintaining it, to the detriment of new entrants into the
market and of final consumers. More generally, financial information is of central
importance for the financial markets and prone to the risk of collusion or
abuse, so particular vigilance on the part of competition authorities is
justified.

In
2011 the Commission opened two antitrust investigations regarding possible collusion
and/or abuses of dominance by investment banks in the markets for CDS trade
data and for CDS clearing services[18]. The
first antitrust case concerns 16 investment banks and Markit, the leading
provider of financial information on the CDS market, where the Commission is
investigating whether the parties have colluded and/or may have abused a
dominant position in order to control financial information on CDS. The second
case concerns nine of the dealer banks and ICE Clear Europe, the leading
clearing house for CDS. The Commission will investigate in particular whether
the preferential tariffs granted by ICE to the nine banks have the effect of
locking them into the ICE system, to the detriment of other competing clearing
systems.

In
addition, in October the Commission undertook unannounced inspections at the
premises of a number of companies active in the sector of financial derivative products
linked to the Euro Interbank Offered Rate (EURIBOR) in a number of Member
States, as it has concerns these companies may have violated EU antitrust
rules.

Both the Commission's antitrust action and
the regulatory measures are complementary, as they seek to ensure safe, sound
and efficient financial markets.

Single Euro Payments Area (SEPA)

Seamless, efficient and innovative payment
markets are key to a well-functioning single market and to economic
integration. SEPA is an excellent example of how self-regulation, regulation
and competition law enforcement can and should work together to create open,
efficient and innovative market structures. This multipronged approach has
proven very successful when adopting in 2010 a Commission proposal for a
Regulation to promote the transition from the current domestic to new, pan-European
SEPA credit transfer and direct debit schemes.

The proposed regulation also addresses the
issue of interchange fees for financing the SEPA Direct Debit (SDD) model as the
industry requires greater clarity and predictability on the lawfulness of such
collective agreements. The main objectives of the Commission proposal on
interchange fees include establishing a level playing field between payment
service providers, establishing a single market for credit transfer and direct
debit payments, fostering migration to SDD and achieving efficient direct debit
services. The regulation was adopted by the Parliament in plenary session on 14
February 2012 (following the adoption of a report by the Economic and Monetary
Affairs (ECON) Committee[19])
and by the Council on 28 February. It will enter into force upon publication in
the second quarter of 2012.

Standardisation
of e-payments

Along
with these regulatory initiatives, the Commission is seeking to tackle barriers
to new entrants and innovation through antitrust scrutiny in order to promote
efficient pan-European payment systems that would lower the costs of payments,
produce innovative payment methods, and ultimately facilitate trade across the
EU. In September 2011, it opened an antitrust investigation into the
standardisation process for payments over the internet ('e-payments')
undertaken by the European Payments Council (EPC)[20]. The
investigation will focus in particular on whether the standardisation process
limits market entry or innovation, for example through the exclusion of new
entrants and payment providers who are not controlled by a bank.

Financial services data sector

Well-functioning financial markets rely on
access to information and the availability of high quality and timely market
data on the price and structure of financial instruments. The markets for the
provision of financial information are often characterised by a high degree of concentration.
This means that the major global financial institutions and information
services providers enjoy significant market power. Industry standardisation in
such markets can also lead to the development of de facto market standard
products, services, financial identifiers and indices. The Commission is currently
investigating a number of issues in this sector, (including access to
information or services, standard setting, IP rights and interoperability
between different products or services.

Legally
binding commitments for ISIN

International
Securities Identifier Numbers (ISIN)
codes are 12-character alpha-numerical codes that serve for uniform
identification of a security at trading and settlement, but do not contain
information characterizing financial instruments. The Commission initiated an
investigation because the use of ISIN records was
subject to a licensing fee charged by Standard & Poor's (S&P) and on 15
November made binding for five years commitments offered by S&P. These
commitments are two-fold: first, indirect end users will no longer have to pay
licensing fees to S&P for the use of ISIN records; second, S&P will
also offer a new service consisting only of ISIN records, at a price of USD 15 000
per annum for the provision of the new service to Information Service Providers
and direct end users.

Credit Rating Agencies (CRA)

CRAs are companies that assign credit ratings for issuers of certain types of debt obligations (such as governments), as
well as for the debt instruments themselves (i.e. sovereign debt). Those
ratings are then used by investors, issuers, investment banks, broker-dealers, and
governments. Ratings have become important parameters to assess the risks
related to financial investments.

In the turmoil of the financial crisis, concerns have been raised about
the market for CRAs and the modus operandi of certain companies active
in this field. In November, the Commission proposed amendments to the existing
regulation on CRA[21]
to address certain issues of overreliance on ratings and relating to conflicts
of interest, market structure and accountability of CRA. The Commission also continues
to monitor the competitive situation in the CRA market, which has an
oligopolistic structure with high barriers to entry. No indication of
anti-competitive practices in this market has been found so far.

How the application of the EU merger
rules contributes to maintaining fair competition in financial markets

Trading and post-trading infrastructures,
for cash and derivatives, operating in a safe, efficient and competitive manner
are essential components of modern and dynamic capital markets which ultimately
allow companies and investors to remain competitive at a European and global
level. Since stock exchanges
are crucial actors in capital markets, competition between them is of utmost
importance.

Competition
for exchanges in European financial derivatives

On 29
June, Deutsche Börse (the owner inter alia of the Frankfurt Stock
exchange) and NYSE Euronext (the owner inter alia of the New York,
Paris, Brussels, Amsterdam and Lisbon Stock exchanges) formally notified their
proposed merger to the Commission under the EU Merger Regulation (EUMR)[22]. The operation would have combined
the two leading European stock exchanges active over the entire life chain of
trading, clearing and settlement of financial instruments (both cash
instruments and derivatives). Following an initial market investigation, the
Commission initiated an in-depth investigation with a particular focus on
derivatives trading, as the transaction would have brought together the two
largest derivatives[23]
exchanges in European financial derivatives. The Commission concluded that the
merger would have led to a near-monopoly in the area of exchange-traded
European financial derivatives resulting in fewer possibilities for free
competition and less innovation. Customers who would have been affected by this
include pension funds, mutual funds and retail banks, as well as professional
brokers and investment banks. In the absence of access to the merged company's
enlarged post-trade clearing facilities (i.e. in the presence of a
closed “vertical silo”), entry by rival derivatives platforms would be made
more difficult in a market already characterised by high barriers to entry. The
Notifying Parties claimed that the merger would result in significant
efficiencies. However, any such benefits would be significantly less than
argued by the Notifying Parties and they could in part be achieved without the
merger. In any case, any efficiencies would not be substantial enough to
outweigh the harm to customers caused by the merger and because of the creation
of a near monopoly, any benefits would also be unlikely to be fully passed on
to customers. The Notifying Parties submitted proposed remedies to address the
Commission's concerns, but these were ultimately deemed insufficient.

2.           Competition policy in the broader
context

Against that background, a major part of
the Commission's actions in the field of competition policy and enforcement in
2011 addressed the effects of the crisis in the financial markets.

Nevertheless, competition enforcement and
advocacy also serve other wider longer-term objectives such as enhancing
consumer welfare, supporting the EU's growth, jobs and competitiveness in line
with the Europe 2020 Strategy for smart, sustainable and inclusive growth[24].

The Strategy sets
out concrete targets to be achieved within the next decade in areas such as
employment, education, migration, energy use and innovation as well as
milestones for resource efficiency, in order to overcome the impact of the
financial crisis and place the EU back on track for economic growth.
Competition and a strong competition policy, designed and implemented by the
European Commission and the Member States in the European Competition Network
(ECN), play a major role in ensuring that the Europe 2020 objectives can be
reached, as competition has a direct impact on the key drivers for productivity
growth.

Sound framework for enforcement of
competition rules

2011 was also an important year for issues
of due process concerning the EU's institutional framework for the enforcement
of competition law. Both the European Court of Human Rights (ECtHR)[25] and the Court of Justice[26] confirmed that the
institutional framework for the enforcement of competition law, by which and
administrative organ as the Commission takes decisions which are subject to
full judicial review, ensures an adequate protection of the fundamental rights
of the persons concerned by those decisions. The Commission is committed to
further improving its investigative procedures and increasing transparency. This
is demonstrated by the adoption of a package of measures in 2011[27], consisting of Best practices for
proceedings under Article 101 and 102[28]
(similar best practices are already available in merger control and State aid),
revised Terms of Reference of the Hearing Officer[29] (extending the role of the Hearing
Officer to the investigative phase), as well as a Staff Paper on the submission
of economic evidence[30].
The purpose of this package is to enhance transparency and help parties in
their interaction with the Commission and the Hearing Officers in antitrust and
merger investigations.

Better rules for compensation of public
service obligations

The new Services of
General Economic Interest (SGEI) package[31] provides Member States with a
simpler, clearer and more flexible framework for supporting the delivery of
high-quality public services to citizens. Member States are largely free to define
which services are of general interest, but the Commission must ensure that
public funding granted to provide such services does not unduly distort
competition in the single market. Previously only hospitals and social housing
were exempted, but with the new package many more social services are exempt
from the obligation to notify to the Commission, regardless of the amount of
the compensation received. The services must meet social needs (i.e.
health and long term care, childcare, access to/reintegration in the labour
market, social housing, care and social inclusion of vulnerable groups).
Conversely, the Commission will undertake greater scrutiny of other SGEIs for
which the compensation exceeds EUR 15 million a year.

2.1.        How competition enhances
consumer welfare

In difficult times, there may be calls to
set up protectionist lines of defence. However, as history has confirmed, competition
enforcement and advocacy cannot be reduced in times of economic crisis, as any
weakening of the competition framework would worsen the medium- to long-term
growth trend.

Consumers are better off when they have
access to open and competitive markets

The fight against
collusive agreements and abuses of dominance is an on-going priority for the
Commission. In 2011, the Commission adopted four cartel decisions, including
two relating to consumer products (consumer detergents and exotic fruit) imposing
fines exceeding EUR 614 million on 14 undertakings[32]. Three out of these four
decisions were settlements. Settlements are important, as they allow the
Commission to proceed more swiftly, bringing benefits as regards both time and
resources. They also contribute to increasing the deterrent effect of the
Commission's fight against cartels.

Consumers are also the main beneficiaries
of the decision adopted against the Polish telecoms incumbent in June, for stifling
the development of competition on Polish broadband markets for over four years[33]. The Commission opened the
case on its own initiative in 2009, after having observed that Poland had one
of the lowest broadband penetration rates in Europe, that consumers suffered
from lower connection speeds and that monthly prices per advertised Mbit/s were
much higher than the prices in other Member States (and among the highest in
the OECD).

The Commission also protects competition
and enhances consumer welfare when applying its merger policy, striking a
balance between the economic benefits of the merger and other parameters such
as price, choice, quality or innovation. This approach has proven effective in
the IT sector, where the Commission has reviewed and approved mergers amongst
competitors in already concentrated markets, such as the hard disk industry[34] and the plans by some
companies to modify their business model (such as the acquisition by chip
producer Intel of IT security producer McAfee, subject to commitments to ensure
interoperability)[35]
or diversify their portfolio of activities (such as the acquisition by
Microsoft, producer of operating systems, of Internet voice and video
communication provider Skype)[36].
Consumers are also expected to benefit from wider choice and better prices when
travelling by rail on certain European routes, following the approved joint
ventures paving the way for the introduction of new high speed services on the
Paris-Milan[37]
and Vienna-Salzburg routes[38],
in competition with existing rail services provided by incumbent operators.

Improving
consumer welfare: the practical example of the food sector

Rising
and volatile food prices might adversely impact the European economy

The way competition enforcement and
advocacy can effectively contribute to improving consumer welfare is well
illustrated in relation to the food sector, where citizens are confronted with
the reality of the market on a daily basis. Food represents a large part of citizens' budgets, accounting on
average for about 14.1% of total household expenditure in the EU in 2011[39].

The food supply chain connects three important
sectors of the European economy: (1) agricultural production; (2) food
processing; and (3) distribution (wholesale and retail). They play a significant role in Europe's economic, social, and
political life and are considerable contributors to EU added value, trade and
employment, especially in rural areas[40]. From about mid-2007 onwards, food prices
increased significantly at all levels of the supply chain, and consumer food
prices have become a major contributor to overall inflation[41]. At the same time, volatility
of prices, notably producer prices for food commodities, has also increased.

The Commission has responded on several fronts

Rising and volatile food prices have raised
the awareness of policymakers and regulators about potential problems in the
food supply chain, for which actions have been taken. At EU level, the Commission established in 2010 a High
Level Forum for a Better Functioning Food Supply Chain (HLF), with a mandate until
the end of 2012[42].
The HLF brings together a number of Commission initiatives in different policy
fields. It has established a number of expert platforms to focus on different
aspects of the food chain. Among these platforms, three are of particular
interest from a competition policy perspective: (i) a platform on business-to-business
(B2B) contractual relations; (ii) an expert group developing a food price monitoring
tool; and (iii) a platform on competitiveness in the agro-food industry.

For instance, the work of the platform on B2B contractual practices deals with concerns about uneven
bargaining power in the food supply chain, which is an issue often raised in relation
to competition law enforcement. Within this platform, stakeholders have agreed
on common principles of fairness guiding commercial relationships in the food
sector as well as on examples of fair and unfair trading practices, which are however
not captured by EU competition law. The work of this platform is ongoing.

The reforms of the Common Fisheries (CFP)
and Agricultural Policies (CAP) put forward by the Commission in 2011 also have
important repercussions for competition in these sectors[43]. In
particular the CAP rules play a significant role in competition
in the upstream food supply chain. Although Articles 101 and 102 TFEU apply to
agricultural products, the CAP proposal maintains certain derogations from
Article 101TFEU, despite the general objective to increase the market orientation
of the CAP.

Uneven bargaining power has also been an
issue in discussions regarding CAP reform, as many stakeholders have stressed
that primary food producers lack bargaining power because of the high
fragmentation of the agricultural sector compared to the other levels of the
food supply chain. This view is also expressed in recent reports by the
European Parliament on CAP reform[44].
To remedy the lack of bargaining power, the CAP proposal seeks to strengthen
the role of Producer Organisations (POs) in all sectors of agricultural
production. As the members of POs are independent agricultural producers and
their production is integrated to varying degrees in the POs, it is however
essential to ensure that the POs function in a pro-competitive way.

Competition authorities ensure that food
markets work well for consumers ...

High food prices result from a number of
factors beyond the scope of competition policy. Recent price increases can mainly
be explained by rising commodity prices, which are passed along the food chain
resulting in higher consumer prices. Nevertheless, competition law plays an
important role in ensuring that food markets work well for the consumer. In
this vein, many NCAs in the EU have conducted inquiries into the food sector in
recent years with the aim of clarifying how these markets work, of identifying
potential problems and proposing solutions.

At the retail level, food markets are often
national or regional in scope. NCAs play a key role in applying competition law
in this sector. The Competition DG has cooperated closely with NCAs within the
framework of the ECN to further develop a coherent and common approach and to ensure
that food markets remain competitive and work efficiently. One of the results
of this cooperation is the preparation of an ECN Report on the most significant
enforcement, advocacy and monitoring actions undertaken by European Competition
Authorities in the last eight years[45].
The draft report illustrates the impressive work of NCAs in this field, with
about 170 antitrust enforcement cases, 1300 merger control cases and around 100
market monitoring actions (including sector inquiries, market studies and
advocacy opinions). The cases and monitoring actions covered a wide range of
products and sectors, across all levels of the supply chain.

As the Report outlines, cereals, dairy and
a category of multi-products are the most investigated sectors in antitrust
cases. The main competition concerns related to cartel behaviour, but also
included vertical restraints and abuses of dominance. The main purpose of
market monitoring actions has been to better understand the functioning of food
markets, such as the way prices are passed along the different supply chain levels.
NCAs have, as a result of these actions, put forward a number of
recommendations to improve competition in the relevant markets. Some of them
have also established principles for contractual relations between retailers
and suppliers.

Alongside NCAs, the Commission has also enforced competition rules in the food sector, notably by
investigating and fining illegal cartels as well as through merger control. For
example, in October, the Commission adopted a decision in which it found that
the Chiquita and Pacific Fruit groups had operated a price fixing cartel for
their banana sales in Southern Europe[46].
The companies had fixed weekly sale prices and exchanged price information in
relation to their brands.

... and that consolidation does not harm
the competitive process

The food sector is subject to ongoing
globalisation and consolidation, as reflected in the number of merger notifications
the Commission dealt with in 2011[47].
In particular, consolidation can be observed in the dairy sector, where the
Commission approved three proposed concentrations[48]. In the case of Arla taking
over Allgäuland, the Commission opened an in-depth investigation but ultimately
decided that the commitment offered by the notifying party was not necessary; the
proposed transaction was thus approved without conditions. The orange juice[49] and sugar industries also were
subject to merger review in 2011.

Ongoing
consolidation in the sugar sector

The
sugar sector is a concentrated market, with high entry barriers. The regulatory
reform of the sugar sector has accelerated market dynamics, resulting in a
smaller number of players active in several Member States. The Commission
decided to deepen its probe into the acquisition of control by Südzucker over
sugar trader ED&F MAN[50]
as the preliminary investigation had indicated potential competition concerns on
the markets for white sugar, in particular in Southern Europe; for imports of
raw cane sugar for refining for the whole of the European Economic Area (EEA)[51]; and for molasses, especially
in Central Europe. The Commission's decision is expected in April 2012.

2.2.        How competition policy
supports growth, jobs and competitiveness

In advanced economies, total factor
productivity is the main source of growth. In recent years a broad consensus
has emerged as to the main drivers of total factor productivity: knowledge-based
innovation and an economy that facilitates dynamic reallocation of production factors
across different sectors and industries. Competitive markets are best placed to
deliver firms that are equipped for long-term success. A
strong competition policy is a key element of a coherent and integrated policy
to foster the competitiveness of Europe’s industries.

Research,
Development and Innovation

Competition
is a fundamental driver of innovation and total factor productivity

By stimulating innovation of technologies
and methods of production – either incrementally or in breakthrough fashion –
competition policy can make a significant contribution to productivity and
growth. Cartels prevent industries from reinventing themselves and turn the
focus of activity to the maximisation of rent extraction rather than on
innovation. The Commission's investigation of alleged practices by some
publishing houses to exert collective control over the development of e-books,
possibly hurting the prospect of development of a competitive and digital
single market in this area, is one example of the Commission's actions in this
field[52].

In highly innovative environments,
established firms may also be tempted to control the process of innovation to
their own advantage and to the detriment of new entrants. Antitrust enforcement
must ensure that dominant firms are not able to use their dominance to thwart
the entry of smaller challengers with viable new ideas. The Commission's ongoing
investigations against Google with regard to its activities in online search,
online search advertising and online search advertising intermediation[53] demonstrates the Commission's
commitment to enforcing the competition rules in fast-moving digital sectors
with a view to ensuring their proper functioning as part of the broader Digital
Agenda goals. The Commission is considering in particular allegations that
Google is lowering the ranking of the unpaid search results of competing search
service providers, while according preferential treatment to the results of its
own vertical search services as well as allegations that it imposes exclusivity
obligations on advertising partners and restricts the portability of online
advertising campaign data to competing online advertising platforms.

Similarly, the pharmaceutical sector is Research
and Development driven and highly regulated. As the Commission's report on the
Pharmaceutical Sector Inquiry shows, some of the main competition concerns in
the sector relate to the potential undue delay or blocking of entry of generic
medicines and the development and launch of innovative medicines[54]. In view of the global nature
of the pharmaceutical industry, preserving a sound competition in this sector
is not only necessary for domestic reasons, but also to enhance the provision
of affordable and innovative medicines to those in need in developing
countries. Agreements and contractual arrangements to delay market entry for
generic products have hence been under the spotlight in 2011, as the Commission
opened two cases[55]
in this context.

The amount of State aid to support
expenditure in research, development and innovation has increased from EUR 6.2
million in 2005 to EUR 10.9 million in 2010 (+75%) to support job creation and
increase Europe's competitiveness, through individual cases and regimes. In
2011, the Commission cleared Member States' support for such objectives in at
least 33 instances relating to environmental protection, 43 relating to
regional development, 20 relating to research and development, and at least 11
relating to support to SMEs[56].

Greener
growth

Europe needs competitive energy prices,
security of supply, investments in infrastructure and energy sources that
respect environmental targets

In line with the objective of supporting
sustainable growth, the Commission has started to prepare guidelines for the
treatment of State aid in relation to the Emissions Trading System (ETS). They
will aim at balancing three objectives: to prevent a significant risk of carbon
leakage due to the increase of CO2 costs in electricity prices; to
preserve the price signals created by the EU ETS to achieve cost-effective
decarbonisation; and to minimise competition distortions in the internal market
by avoiding subsidy races within the EU at a time of economic uncertainty and
budgetary discipline.

Competition policy encourages the most
efficient use of existing technologies and resources

Figures show a growing demand for meeting
energy requirements from sustainable sources. The Commission has authorised
joint ventures in the solar (both thermal and photo-voltaic)[57] and wind power[58] sectors. Member States have provided
funding to measures in support of energy from renewable sources under the
horizontal Environmental Aid Guidelines[59],
while at the same time several Member States aimed at promoting environmental
friendly cars and green products.

Network industries

The Commission's work in the antitrust field
has focused on improving the market functioning of key sectors of the economy such
as network industries.

Competition policy promotes efficient
and integrated services and prevents market segmentation

The completion of the single market cannot
become a reality if companies conclude agreements to share the market along
national borders. Agreements which include non-compete clauses put the
integration of the single market at risk. The Commission thus sent a Statement of
Objections to Telefónica and to Portugal Telecom, as the companies had agreed not
to compete on their respective telecommunications markets within the Iberian Peninsula[60].

Growth is also at the heart of State aid
policy in the telecommunication sector. In 2011 the Commission scrutinised almost
EUR 2 billion of State funds to finance the rollout of broadband and next
generation networks in various European countries. As a result, 18 aid schemes were
approved to build new telecommunication infrastructure in underserved areas of
Europe. They contribute to reducing the gap with more advanced countries
worldwide, increasees competitiveness of the markets and ultimately brings new
services to consumers.

Competition
policy facilitates a dynamic reallocation of resources (entry and exit)

In the energy sector, competition
enforcement can contribute to resolving security of supply issues, by
facilitating access to the market and encouraging investment. In 2011, the
Commission initiated a formal investigation against electricity provider ČEZ,
upon suspicion that it may have had abused a dominant position by, hindering
the entry of competitors, on the Czech electricity market[61]. The Commission also carried
out unannounced inspections at the premises of gas companies in Central and
Eastern Europe, regarding the existence of behaviour that might potentially
exclude competitors from providing alternative sources of gas, or that might
involve the abuse of a dominant position in the supply of gas, for instance by the
charging of excessive prices.

Improving the functioning of the air transport
sector: the role of competition policy

Air passenger transport has been less
affected by financial crisis than air transport of goods

Today air travel is taken for granted. The
number of air passengers tripled between 1980 and 2000 and is expected to
further double by 2020. In 2010 the number of air passengers carried on routes
involving EU airports reached 777 million, a 3% increase in comparison with
2009. Around two-thirds of that travel was within the EU. That steady growth
illustrates the benefits of market liberalisation supported by competition
policy enforcement. Forecasts indicate that over the next decade air traffic
will continue to grow by around 4% annually[62].
Civil aviation greatly contributes to the European economy as it involves more
than 150 scheduled passenger carriers, a network of over 450 airports and some
4.5 million employees[63].
Its activities contribute 1.5% to the EU GDP. The fact that the civil aviation
sector has grown significantly since the early nineties is mainly a result of
the liberalisation of the sector, which led to price decreases and the entry of
numerous new companies. The number of intra-Union routes increased by 140%
between 1992 and 2010.

In 2010, 13.1 million tons of cargo was
transported by air, 20% being intra-EU freight. This represents a 16% increase as
compared to 2009, when the European air freight transport sector was hard hit
by the collapse in trade resulting from the financial crisis.

Liberalisation has fostered competition
and increased choice for passengers, but ...

The process of liberalisation in air
transport is at a relatively advanced stage. Following the completion of the
single market in air transport in 1997, a number of new
airlines have entered the market and developed swiftly, increasing competition
and providing a wider choice to
passengers. This has also been reflected in the
relatively sharp increase in passenger numbers at regional airports. However,
over the past couple of years the competitive position of regional airports
appears to have weakened: airports with less than five million passengers per
year now have growth rates that are similar to those of larger airports.

... consolidation has raised concerns
about various forms of cooperation between airlines

At the same time, there has been substantial
consolidation amongst airlines, notably because the previous market structure,
based on the existence of national flag carriers, proved to be inefficient in
an open European market. A number of mergers have taken place, notably
involving some of the smaller and/or less efficient flag carriers – which used
to be protected by legal monopolies. Looser and various forms of cooperation
have also developed, which range from bilateral code share arrangements to alliances
(a large number of airlines within Europe and beyond are part of the big three
alliances, Oneworld, Star Alliance and SkyTeam) or
joint ventures. Restrictions on
foreign investment across different jurisdictions (such as the EU and the US)
are a major reason for the popularity of such looser forms of cooperation
between international carriers.

The Commission's merger and antitrust
investigations in 2011 have considered both the competitive effects of the
increased concentration of supply on certain routes and the competitive impact
of coordination between airlines.

The Commission proposes a new Slot
Regulation aimed at increasing competition

In March, the Commission adopted a
comprehensive strategy setting out a roadmap towards a competitive and resource
efficient transport system[64].
The roadmap contains 40 concrete initiatives aimed at increasing mobility while
reducing carbon emissions in transport by 60% by 2050. Adopted in December
2011, the Better Airports Package insists on the capacity challenge. In the
context of growing airport congestion and the limited development of major new
airport infrastructure, access to airport slots, a rare resource, limits
competition. One of these initiatives is a proposal for a new Slot Regulation[65] adopted on 1 December,
which aims at facilitating market entry and encourages more efficient use of
airport capacity. The proposed regulation strengthens the independence of slot
coordinators, foresees increases in the required slot utilisation rates, and
expressly allows secondary trading of slots, which would favour entry of
competitors, to the detriment of incumbents. At the same time, competition
authorities will need to ensure that the increased ease of secondary trading
will not be used by incumbent airlines to further strengthen their positions.

The Better Airports Package contains also a
new Groundhandling Regulation[66]aiming
to enhance efficiency and overall quality of groundhandling services, by
ensuring an increased competition within the sector.

Slot commitments have been offered as
remedies in merger and antitrust cases

In a number of merger and antitrust cases,
parties have offered slots as a way to facilitate entry of competitors, thereby
aiming to address the concerns raised by competition authorities. Slot commitments
are particularly effective at congested airports, where access to slots is
essential for airlines to be able to compete.

Slot
commitments were implemented by a transatlantic airline joint venture, but ...

In 2010, British Airways, American Airlines
and Iberia, members of the Oneworld alliance, agreed to coordinate flight
schedules, fares and capacity on routes between Europe and North America. The
Commission's investigation of this joint venture led to a decision that made binding
the commitments by the three carriers[67].
Subsequently, several competitors applied for slots or other special
arrangements offered by the joint venture partners. Following review, the
Commission approved on 20 December 2010 Delta Airlines' application for slots,
allowing it to start new services from London Heathrow to Boston and Miami. The
Commission continued in 2011 to investigate arrangements under the Star[68] and SkyTeam[69] alliances and opened two
investigations[70]
to verify the legality of code-share agreements implemented, in one case,
between Lufthansa and Turkish Airlines and, in the second case, between TAP Air
Portugal and Brussels Airlines.

... were considered insufficient in the
proposed Aegean Olympic merger

Preserving
consumer choice and price competition on Greek routes

On 26
January, the Commission prohibited the proposed merger between Aegean Airlines
and Olympic Air, the two largest airlines in Greece, which had been notified in
June 2010. As with previous airline mergers the Commission analysed the
combined effects of the proposed merger on the individual routes on which both
companies operate. The Commission found that the proposed merger would have
resulted in a quasi-monopoly for the merged entity on nine routes, including
between Athens and Thessaloniki, Herakleion or Rhodes, to the detriment of the
over four million passengers who travel on those routes each year. As part of a
remedy package Olympic and Aegean offered to make available to any potential
new entrant certain take-off and landing slots at Athens and other Greek
airports. However, the Commission considered that these remedies were insufficient
because neither Athens nor any of the other Greek airports are congested.

Indeed,
unlike in previous airline cases, the problem was not the availability of slots.
The problem was that even with slots available, there was no company that would
credibly enter the market. Therefore, the release of slots would not have
improved the likelihood of, or made it easier for, a new entrant to emerge on
these routes. In the absence of any suitable remedy the Commission had no
choice but to prohibit the proposed merger[71].

Emergence of low-cost carriers and their
attractiveness for regional airports...

The air transport sector has changed
dramatically in recent years, especially because of the spectacular rise of
low-cost carriers since 2005. Those carriers have gained substantial market
shares but have also benefitted from considerable public support. For example,
in a number of cases the public authorities have offered discount schemes to
low cost carriers for the use of regional airports, which have also benefitted
from public money. In addition, some former flag carriers may not survive the
current economic crisis and have requested public support. So it should not
come as a surprise that the Commission has received complaints from
competitors.

... feed
reflection on the Aviation Guidelines.

The current legal framework, which consists
of the 1994[72]
and 2005[73]
Aviation Guidelines, addresses such concerns mainly by providing compatibility
criteria for the assessment of investment aid for airport infrastructure and
start-up aid to airlines from regional airports. In 2011, the Commission
launched a public consultation on the application and possible revision of
these guidelines. The Commission is considering adopting new guidelines in
2012, which would take into account the positive regional development impact of
airports and airlines while avoiding distortions in competition conditions and
duplication of non-profitable airports.

Commission increases scrutiny of aid to
regional airports and low cost carriers, and ...

Currently, the majority of regional
airports in Europe are not profitable and can only survive thanks to the
subsidies they receive from local authorities. Only 8% of the airports in the
EU-27 are privately owned, while 77% are public and another 14% have mixed ownership.
However, airport closure may not be an option, because of the important role
regional airports play in local/regional development. Nevertheless, State aid scrutiny
needs to ensure that such public ownership does not unfairly benefit some
airports and airlines to the detriment of others, thereby contributing to
correct allocation of public resources. Importantly, a number of judgments in
the sector have upheld that more stringent role for State aid review. In its
recent judgment on the Leipzig-Halle airport case, the General Court confirmed
that airport infrastructure construction is subject to State aid scrutiny, because
it is intrinsically linked to the operation of an airport as an economic
activity[74].

In 2011, the Commission opened formal State
aid investigation procedures in six cases[75]
of investment and start-up aid to airlines or regional airports. Most of those
cases involve discount schemes on airport charges given to low cost carriers,
often in combination with marketing agreements of doubtful value to the
airports.

... continues investigating restructuring
aid to flag carriers

At the same time, incumbent carriers have been
consolidated and restructured, giving rise to important State aid cases. The
opening of the formal investigation procedure on the restructuring aid for the
Czech and Maltese national flag carriers (Czech Airlines (ČSA)[76] and Air Malta[77]) are two good examples.

2.3.        How the Commission fosters
a competition culture

Enforcement
and advocacy are the two arms of an effective competition policy

Knowledge of the benefits of competition is
essential for citizens to exploit their opportunities as consumers, for
businesses to compete on the merits and for policy makers at EU, national,
regional and local level, to bring initiatives that support sustainable growth.

Companies and Member States need to be
aware and comply with the rules ...

Markets work better where consumers make
informed choices between products and services offered, businesses refrain from
anti-competitive agreements and practices and public administrations realise
how competition can contribute to addressing wider economic problems. In times
of economic slowdown, it is particularly important that policy makers
understand the beneficial effects competition has on growth and the harm that
could result from a relaxation of the rules. To foster awareness of the rules and
promote compliance efforts by companies the Commission issued a brochure
entitled 'Compliance Matters' and opened on its website an area guiding readers
to available materials on effective compliance strategies[78].

In 2011, further progress was made to ensure
that the Commission's state aid recovery decisions are
enforced effectively and immediately by the Member State concerned. The purpose
of recovery is to re-establish the situation that existed on the market prior
to the granting of the aid, in order to ensure that the level playing field in
the internal market is maintained. The percentage of illegal and incompatible
aid still to be recovered has fallen from 75% at the end of 2004 to around 12.3%
on 31 December 2011, while the amount of illegal and incompatible aid recovered
increased from EUR 2.3 billion in December 2004 to EUR 12.3 billion. Infringement
procedures and judicial actions against Member States that do not comply with a
state aid recovery decision have proven effective. In 2011, five cases were
closed after judicial actions before the Court of Justice; 29 out of the 45
open cases are still subject to litigation.

... while Competition authorities increase
their cooperation within the EU and internationally

Both the Commission and NCAs play important
roles in fostering a competition culture. They cooperate not only on cases but
also on policy developments through various fora within the ECN. Subgroups
active in 2011 covered sectors such as food, financial services and
pharmaceuticals.

Globalised markets need a competition
culture fostered internationally, and the Commission is promoting convergence
on substantive and procedural rules. Cooperation agreements have been concluded
with the competition authorities of the US, Canada, Japan and Korea. Farther
reaching agreements are currently being discussed with the Swiss and Canadian
authorities, to enhance the efficiency and effectiveness of case cooperation.

3.           Competition dialogue with other
institutions

3.1.        Structured dialogue with
the European Parliament

While the Commission has full competence
for the enforcement of EU competition law, subject to the control of the
European Courts, the Commissioner for Competition and his services take part in
a continuous structured dialogue on competition issues with the European Parliament,
in particular its committee on Economic Affairs (ECON).

Structured
dialogue with the ECON Committee

In
2011, the Commissioner for Competition visited the ECON committee three times in
order to take part in the structured dialogue, to present the Commission Work
Programme for 2011 (March), the Annual Report on Competition Policy (July) and the
Commission Work Programme for 2012 (November). He also attended a hearing on
collective redress and a meeting with the competition working group.

3.2.        Follow-up to Parliament's
Resolution on the 2009 Report on Competition Policy

In January 2011, the Parliament adopted its
Resolution on the Commission's 2009 Report on Competition Policy[79]. In that Resolution, it made a
series of requests to the Commission. In addition to its official response to the
Resolution, the Commissioner for Competition responded with a letter to the
Chair of the ECON Committee in March, and his services also submitted a
detailed response to all of the points made by Parliament in its Resolution.

Topics covered by the European Parliament's Resolution

Parliament
was particularly interested in the Commission's activities linked to the financial
and economic crisis, and asked the Commission to conduct an evaluation of the temporary
State aid measures introduced during the crisis. In response, the Competition
DG prepared an extensive Staff Working Document on the temporary State aid
rules during the financial and economic crisis[80],
submitted by the Commissioner for Competition to the Chair of ECON in September.

In its
Resolution, Parliament also recalled its earlier requests for the Commission to
bring forward legislation to facilitate individual and collective claims for
effective compensation for damages resulting from breaches of antitrust law. In
response to Parliament's call for a coherent approach across sectors, the
Commission launched a public consultation on collective redress in March. The
Commission Work Programme for 2012 also includes a proposal on antitrust damages
actions, which the Commissioner for Competition intends to present to the
College in 2012.

3.3.        DG Competition engagement
with Parliament's ECON committee

The
Competition DG organised two seminars for assistants and political advisers of
the members of the ECON committee in 2011. The first (February) covered the
main themes in the 2011 Competition Work Programme[81]. The second (July) was
organised to coincide with the presentation by the Commissioner for Competition
of the 2010 Annual Competition Report. In addition, the Director General of the
Competition DG spoke at an Open Coordinators meeting of the ECON Committee in
May.

Public consultations and Impact assessments

The Competition
DG provides information on the launch of public consultations to the secretariat
of the ECON committee and, more generally, welcomes timely contributions by
Parliament. The services of the Competition DG are available to brief MEPs on
aspects of particular interest. Responses to public consultations, background
studies commissioned, the Commission's Impact Assessments, and any related
Staff Working Papers are published on the internet. All information on current
and previous public consultations and Impact Assessments are also available on the
Competition DG website[82].

The
Commissioner for Competition and his staff participated in meetings of the
Public Services Intergroup on SGEI before the launch of the public
consultation in March. The Commissioner presented the Commission's initial
thinking to ECON in March, reported back to the committee in July and subsequently
in November. During the process the Commission amended its initial proposal to
accommodate some of Parliament's suggestions.

The members of the ECON Committee have also
expressed concerns about the Commission's fining policy and in response the
services of the Competition DG have explained the fining methodology in
seminars and through a detailed reply to an MEP's letter.

The
Commission's fining policy

In
2011, the Competition DG published a factsheet on fines[83], which seeks to explain the
reasons for fines and how they are calculated. It also published a brochure on
compliance for companies, which addresses the importance of encouraging
compliance, as well as ensuring effective deterrence. The Commission also published
its revised Best Practices package in October. It outlines measures to increase
the transparency of antitrust investigations. In particular, all Statements of
Objections, which set out the Commission's arguments at an early stage in the
case, and to which parties can respond in detail, now include an indication of
the parameters of possible fines.

MEPs frequently ask the Commission
questions about individual ongoing competition cases, to which the Commission
is unable to reply due to the confidentiality requirement of the investigative
procedures.

Ongoing
investigations and sector inquiries

Competition
DG staff regularly meet MEPs at their request, to explain the procedural steps
in an investigation, and to have a general discussion on a particular sector, as
far as is possible within the confines of the confidentiality obligation to
parties. Parliament has also repeatedly called for sector inquiries in a number
of areas, which the Commission has noted. The Commission has a range of tools
at its disposal for the enforcement of EU competition law, such as
investigations in individual cases, sector inquiries, and working with other
Directorates-General on regulatory measures. Sector inquiries are very
resource-intensive, and sometimes the same objectives can be achieved as
effectively through other types of investigation.

3.4.        Competition DG engagement
with the EESC

The Commission also keeps the European
Economic and Social Committee (EESC) informed about major policy
initiatives, and participates in study group and section meetings. Moreover, on
4 October the Commissioner for Competition attended the Section for the Single
Market, Production and Consumption, where he presented the Staff Working
Document on the temporary State aid rules during the financial and economic
crisis. On 7 December, the EESC adopted an opinion on the Report on Competition
Policy 2010[84].

[1]               The
roadmap for this programme was first laid out in the Commission Communication
of 4 March 2009, “Driving European Recovery”, and the plans were described
in detail in its Communication of 2 June 2010 “Regulating financial
services for sustainable growth”.

[2]               Commission Communication of 23 November 2011 “Annual
Growth Survey 2012”.

[3]               http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/125621.pdf

[4]               Communication from the Commission on the application,
from 1 January 2012, of State aid rules to support measures in favour of banks
in the context of the financial crisis, OJ C 356, 6.12.2011, p. 7-10; IP/11/1488.

[5]               Texts adopted, P7_TA(2011)0023.

[6]               Commission Staff Working Paper, The effects of
temporary State aid rules adopted in the context of the financial and economic
crisis. Available at: http://ec.europa.eu/competition/publications/reports/temporary_stateaid_rules_en.html

[7]               Case SA.32504
Joint restructuring plan for Anglo Irish Bank and Irish Nationwide Building
Society, decision of 29 June 2011; IP/11/801.

[8]               Case SA.29590, WestLB, decision of 20 December
2011.

[9]               Case SA.28264
Restructuring aid for Hypo Real Estate, decision of 18 July 2011, OJ L 60/2012;
IP/11/898.

[10]             Case SA.29338 Restructuring of HSH Nordbank AG, decision of 20 September 2011.

[11]             Case SA.31945 Aid for the liquidation of Eik Banki P/F and Eik
Bank Denmark A/S, decision of 6
June 2011, OJ C 274 17.9.2011, p. 3-6; IP/11/677.

[12]             Case SA.32745 Restructuring of Kommunalkredit
Austria AG, decision of 23 June 2011, OJ C 239, 17.8.2011, p. 1-3;
IP/11/389

[13]             Case SA.26674 Restructuring aid to ABN AMRO, decision of 5 April 2011, OJ L 333,
15.12.2011, p.1-46; IP/11/406.

[14]             In addition to these Eurozone members, Romania and
Latvia are also concerned.

[15]             CDS
are traded between financial institutions or investors. They are derivatives
originally created to provide protection to investors in the event a company or
State they have invested in default on their payments. They are also used as
speculative tools.

[16]             Commission Proposal for a Regulation of the European
Parliament and of the Council on OTC derivatives, central counterparties and
trade repositories, 15 September 2010, COM/2010/0484 final – COD 2010/0250*;
IP/10/1125.

[17]             IP/11/1219, 20.10.2011.

[18]             CaseCOMP/39730 CDS (Credit Default Swaps) – Clearing
and Case COMP/39745 CDS – Information market; IP/11/509.

[19]             Draft
Report on the proposal for a regulation of the European Parliament and of the
Council establishing technical requirements for credit transfers and direct
debits in euros and amending Regulation (EC) No 924/2009 (COM(2010)0775 –
C7-0434/2010 – 2010/0373(COD)) – The Essayah Report, http://www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A7-2011-0292&language=EN

[20]             Case COMP/39876 EPC online payments, Opening of
Proceedings 5 October 2011; IP/11/1076.

[21]             Regulation (EC) No 1060/2009 of the European Parliament
and of the Council of 16 September 2009 on credit rating agencies, OJ L 302,
17.11.2009, p. 1-31.

[22]             Case COMP/M.6166 Deutsche Börse / NYSE Euronext,
OJ C 199, 7.7.2011, p. 9.

[23]             Derivatives
are financial contracts whose value is derived from an underlying asset or
variable, such as stocks, interest rates or currencies. Derivatives are
generally used for hedging, investment purposes, and overall risk management in
financial markets. Clearing plays an important role in derivatives trading. The
purpose of clearing is to manage the risk of the trading parties in the interim
period between trading and settlement.

[24]             http://ec.europa.eu/europe2020/index_en.htm

[25]             Judgment of the ECtHR of 27 September 2011 in case A.
Menarini Diagnostics S.R.L. v Italy (Application No 43509/08), paras 57-67.

[26]             Cases C-272/09 P KME Germany AG and Others v
Commission, C-386/10 P Chalkor AE Epexergasias Metallon v Commission
and C-389/10 P KME Germany AG and Others v Commission, judgments of 8
December 2011.

[27]             Press release and Frequently Asked Questions available
at http://ec.europa.eu/competition/antitrust/legislation/legislation.html

[28]             Best
Practices in proceedings concerning articles 101 and 102 TFEU, OJ C 308,
20.10.2011, p. 6-32, available at http://ec.europa.eu/competition/antitrust/legislation/legislation.html

[29]             Terms
of Reference of the Hearing Officer, OJ L 275, 20.10.2011, p. 29.

[30]             Best Practices for the submission of economic evidence
and data collection in cases concerning the application of Articles 101 and 102
TFEU and in merger cases, available at http://ec.europa.eu/competition/antitrust/legislation/legislation.html

[31]             Communication from the Commission on the application of
the European Union State aid rules to compensation granted for the provision of
services of general economic interest, OJ C 8, 11.1.2012, p. 4-14.
Commission Decision of 20 December 2011 on the application of Article 106(2) of
the Treaty on the Functioning of the European Union to State aid in the form of
public service compensation granted to certain undertakings entrusted with the
operation of services of general economic interest (notified under document
C(2011) 9380), OJ L 7, 11.1.2012, p. 3-10.
Communication from the Commission – European Union framework for State aid in
the form of public service compensation (2011), OJ C 8, 11.1.2012, p. 15-22.
Available at http://ec.europa.eu/competition/state_aid/legislation/sgei.html

[32]             Cases COMP/39579Consumer Detergents, decision of
13 April 2011, OJ C 193, 02.07.2011, p 14-16,COMP/39482 Exotic Fruit,
decision of 12 October 2011, COMP/39605 CRT Glass, decision of 19
October 2011; IP/11/1214 and COMP/39600 Refrigeration compressors,
decision of 7 December 2011.

[33]             Case COMP/39525 Telekomunikacja Polska, decision
of 22 June 2011, OJ C 324, 9.11.2011, p. 7-10; IP/11/771.

[34]             Cases COMP/M.6214 Seagate Technology / the HDD
business of Samsung Electronics. decision of 19 October 2011; IP/11/1213
and COMP/M.6203 Western Digital Ireland / Viviti Technologies, decision
of 23 November 2011; IP/11/1395.

[35]             Case COMP/M.5984, Intel / McAfee, decision of 26
January 2011, OJ C 98, 30.3.2011, p. 1; IP/11/70.

.

[36]             Case COMP/M.6281, Microsoft / Skype, decision of
7 October 2011, OJ C 341, 22.11.2011, p. 2; IP/11/1164.

[37]             Case COMP/M.6150 Veolia Transport/Trenitalia/JV, decision
of 20 July 2011, OJ C 249, 26.8.2011, p.3;IP/11/917.

[38]             Case COMP/M.6269 SNCF/HFPS/Wehinger GmbH/Rail
Holding, decision of 20 July 2011, OJ C 222, 28.7.2011, p. 1.

[39]             See the provisional figures by DG Agriculture, June
2011 update on recent agricultural commodity and food price developments in the
EU, page 6, Graph 5, available at http://ec.europa.eu/agriculture/analysis/markets/foodprices/food06_2011_en.pdf

[40]             For an overview, see the Report on the Competitiveness
of the European Agro-Food Industry of 17 March 2009 (“Competitiveness
Report”), page 59, available at http://ec.europa.eu/enterprise/
sectors/food/files/high_level_group_2008/documents_hlg/final_report_hlg_17_03_09_en.pdf

[41]             When looking at aggregate figures for the EU, it is
important to keep in mind that food price developments often vary strongly not
only from Member State to Member State but also from product to product, see
e.g. DG Agriculture, January 2012 update on recent agricultural commodity and
food price developments in the EU, page 3, Table 4, available at
http://ec.europa.eu/agriculture/analysis/markets/foodprices/food01_2012_en.pdf

[42]             http://ec.europa.eu/enterprise/sectors/food/competitiveness/forum_food/index_en.htm

[43]             http://ec.europa.eu/fisheries/reform/index_en.htm
and http://ec.europa.eu/agriculture/cap-post-2013/legal-proposals/index_en.htm

[44]             See, e.g. European
Parliament resolution of 7 September 2010 on fair revenues for farmers: A better
functioning food supply chain in Europe (2009/2237(INI)), available at http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2010-0302&language=EN&ring=A7-2010-0225; The CAP towards 2020: meeting the food, natural resources and territorial
challenges of the future (2011/2051(INI)), available at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A7-2011-0202+0+DOC+XML+V0//EN&language=EN

[45]             To be published in the second quarter 2012.

[46]             Case COMP/39482 Exotic fruit, decision of 12 October 2011.

[47]             In 2011 the Commission received 16 notifications in
relation to proposed concentrations in the agro-food sector.

[48]             Cases COMP/M.6119 Arla/Hansa, decision of 1
April 2011, OJ C 122, 20.4.2011, p. 6; IP/11/397, M.6242 Lactalis/Parmalat,
decision of 14 June 2011, OJ C 209, 15.07.2011, p. 14; IP/11/701and M.6348 Arla
Foods/Allgäuland, decision of 7 November 2011, OJ C 343, 23.11.2011, p. 14;
IP/11/2011.

[49]             Case COMP/M.5907 Votorantim /Fischer/JV,
decision of 4 May 2011; IP/11/531.

[50]             Case COMP/M.6286 Südzucker/ED&F Man,
decision of 9 November 2011, OJ C 335, 16.11.2011, p. 2; IP/11/1327.

[51]             The EU, Iceland, Liechtenstein and Norway.

[52]             Case COMP/39847 Ebooks,; IP/11/1509.

[53]             Case COMP/39740 Foundem/Google and related
cases; IP/10/1624.

[54]             For more details on those issues see the Final Report
of the Sector Inquiry from 2009, available at http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/index.html;
IP/09/1098, 8.7.2009.

[55]             Case COMP/39686 Cephalon; IP/11/511, 28.4.2011; Case
COMP/39685 Fentanyl; IP/11/1228. , 21.10.2011.

[56]             Those figures relate to cases where the stated
objective was the primary objective of the aid. The figure on support to SMEs
also includes aid to risk capital injections in SMEs. The figures refer to
decisions where the aid was found compatible with the internal market and also six
decisions where the Commission found that the State support concerned did not
constitute aid in the first place.

[57]             Cases COMP/M.6112 Good Energies/NEIF/Newco,
decision of 13 April 2011, OJ C 122, 20.04.2011, p. 6, COMP/M.6238 RREEF/SMAG/OHL/Arenales,
decision of 10 August 2011, OJ C 255, 31.08.2011, p. 1, COMP/M.6303 Antin/RREEF/Andasol
1&2, decision of 22 August 2011, OJ C 253, 30.08.2011, p. 1 and
COMP/M.6273 Samsung/Korea Development Bank/KNS Solr, decision of 3
August 2011, OJ C 236, 12.08.2011, p. 6.

[58]             Cases COMP/M.6233 FOEW/Dong Energy/Novasion/Aalborg
Universitet/Universal Foundation, decision of 27 July 2011, OJ C 228, 03.08.2011,
p. 4, COMP/M.6176 Mitsubishi Corp/Barclays Bank/ Walney Topco
I&II/SheringhamsShoal Topco, decision of 29 August 2011, OJ C 261,
03.09.2011, p. 1, COMP/M.6155 GEM/DEME/Electrawinds
Offshore/SRIWE/Z-Kracht/Power@sea/Rent a Port Energy, decision of 6 June
2011and COMP/M.6206 Iberdrola/Caja Rural de Navarra/Renovables de la Ribera,
decision of 30 June 2011, OJ C 198, 06.07.2011, p. 1.

[59]             Community guidelines on State aid for environmental
protection, OJ C 82, 1.4.2008, p. 1-33.

[60]             Case COMP/39839 Telefónica and Portugal Telecom; IP/11/1241,
25.10.2011.

[61]             Case COMP/39727 CEZ; IP/11/891, 15.7.2011.

[62]             Facts and Key developments on Air Transport, European
Commission – DG Mobility and Transport available at http://ec.europa.eu/transport/air/doc/03_2009_facts_figures.pdf

[63]             'Flightpath 2050': Europe's visions for aviation.
Report of the High Level Group on Aviation Research.

[64]             Roadmap to a Single European Transport Area –
Towards a competitive and resource efficient transport system, European
Commission White Paper, COM (2011) 144 final, 28.3.2011.

[65]             Proposal for a Regulation of the European Parliament
and of the Council on common rules for the allocation of slots at European Union
airports (Recast), European Commission, COM(2011) 827 final, 1.12.2011.

[66]             Proposal for a Regulation of the European Parliament
and of the Council on groundhandling services at Union airports and repealing
Council Directive 96/67/EC, European Commission, COM(2011) 824 final,
1.12.2011.

[67]             Case COMP/39596 BA/AA/IB, Commitments Decision
of 14 July 2010, OJ C 278, 15.10.2010, p. 14-15.

[68]             Case COMP/39595 Continental/United/Lufthansa/Air
Canada. See MEMO/09/168, 20.4.2009.

[69]             Case COMP/37984 SkyTeam

[70]             Cases COMP/39794 Lufthansa/Turkish Airlines and COMP/39860
Brussels Airlines/TAP Air Portugal. IP/11/147, 11.2.2011.

[71]             Case COMP/M.5830 Olympic/Aegean Airlines;
IP/11/68, 26.1.2011.

[72]             Application of Articles 92 and 93 of the EC Treaty and
Article 61 of the EEA Agreement to State aids in the aviation sector (OJ
C 350, 10.12.1994, p. 5).

[73]             Community Guidelines on financing of airports and
start-up aid to airlines departing from regional airports, OJ C 312,
9.12.2005, p. 1-14.

[74]             Joined Cases T-443/08 and T-455/08, Freistaat Sachsen
and Others v Commission, Judgment of the General Court of 24 March 2011

[75]             Cases SA.31662 Alleged State aid to Timisoara
airport, airlines operating from the airport and WIZZ AIR, decision of 22
July 2011, OJ C 270, 13.09.2011, p. 11-31, SA.29064 Unlawful State aid by
Ireland to Aer Lingus, Aer Arann and Dublin Airport Authority, decision of
13 July 2011, OJ C 306, 18.10.2011, p. 10-16; IP/11/874, SA.30743 Leipzig-Halle
airport – further infrastructure measures, decision of 15 June 2011, OJ C
284, 28.09.2011, p. 6-23, SA.32833 Frankfurt-Hahn - Alleged State aid to the
airport and Ryanair, Decision of 13 July 2011; IP/11/874, SA.22932 Air
France complaint against aid granted to Ryanair by Marseille, decision of
13 July 2011, OJ C 334, 15.11.2011, p. 8-61; IP/11/874 and SA.30931 Scheme
investment aid to airports in Romania, decision of 23 June 2011, OJ C 207,
13.07.2011, p. 3-15.

[76]             Case SA.30908 CSA - Czech Airlines – Restructuring
Plan, decision of 23 February 2011, OJ C 182, 23.06.2011, p. 13-28; IP/11/214.

[77]             Case
SA.33015 Air Malta plc.

[78]             See at: http://ec.europa.eu/competition/antitrust/compliance

[79]             Texts adopted, P7_TA(2011)0023.

[80]             Commission Staff Working Document on the effects of
temporary State aid rules adopted in the context of the financial and economic
crisis economic crisis SEC(2011) 1126 final (5.10.2011).

[81]             Issues
covered included Services of General Economic Interest, the Rescue and
Restructuring Guidelines, the Commission's public consultation on Collective
Redress and fines.

[82]             http://ec.europa.eu/competition/index_en.html

[83]             Available at http://ec.europa.eu/competition/antitrust/compliance/factsheet_fines_nov_2011_en.pdf

[84]             Opinion of the European Economic and Social Committee
on the 'Report from the Commission – Report on Competition Policy 2010', 7
December 2011, OJ C 43, 15.2.2012, p. 25 – 29. Available at http://www.eesc.europa.eu/?i=portal.en.int-opinions.19680