Opinion of the Economic and Social Committee on the "XXXth Report on competition policy 2000"

(2002/C 48/02)

On 10 May 2001 the Commission decided to consult the Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the "XXXth Report on competition policy 2000".

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 21 November 2001. The rapporteur was Mr Sepi.

At its 386th plenary session (meeting of 28 November 2001) the Economic and Social Committee adopted the following opinion by 108 votes to one, with one abstention.

1. Introduction: general background

1.1. In addition to the regular review of the activities of the Competition DG, the XXXth report on competition policy includes a series of important pointers for the future of this policy.

1.2. Major new developments at institutional level, such as the advent of the Euro, and internationally, such as the growing trend towards globalisation and imminent enlargement, and the increasingly high profile of this policy in a period of technological change and industrial mergers, have prompted the Competition DG to make a number of fundamental changes to structures and practice.

1.3. This makes it important that rather than just passing judgment on the past, this opinion should use the past as a starting point to highlight these changes and outline their possible consequences.

1.4. Moreover, as has been mentioned several times in previous opinions, an assessment limited to what happened in 2000, published only at the end of 2001, would be barely relevant given the extremely dynamic processes going on before our eyes, and the danger is that our institutional partners would view it as obsolete.

1.5. In the opinion on the XXIXth report, while stating its broad agreement, the Committee warned the Commission of the risks inherent in slowing down the process of modernising the legal framework, as this had become a vital precondition for addressing the new issues facing Community competition law.

1.6. The reasons for modernisation are, as mentioned in the XXXth report, the rapid development of three economic, interdependent and mutually supportive phenomena: the globalisation of the markets, the development of the new economy and the growing number and scale of transnational mergers, with important consequences not just for the economy, but for employment, too.

1.7. To complete the picture of the context in which the new regulations must operate, consideration must also be given to the imminent introduction of the Euro, the gradual enlargement process and the need as stressed in the XXXth report to give the citizen/consumer a central position in Community competition policy.

2. Content of the XXXth Report on competition policy 2000

2.1. The introduction to the XXXth report explains the thinking behind the strategy very clearly.

Technological developments and political initiatives are shaping a new economic environment, based increasingly on rapid access to information.

This has caused growth in the services sector and has forced companies to re-examine their business relations with both customers and suppliers. Furthermore, liberalisation has opened up a number of crucial sectors that were previously closed to competition. Competition policy is founded on the principle enshrined in the Treaty of "an open market economy with free competition", and is one of the pillars of the Community's action in the economic field. This principle does not however imply "an attitude of blind faith or, possibly, indifference towards the operation of market mechanisms; on the contrary, it requires constant vigilance aimed at preserving those mechanisms ... promoting competition by improving the business environment"(1).

For the above reasons, the report argues that it is absolutely essential to adjust competition rules and practice to the new environment.

2.1.1. The XXXth report looks at these activities in four chapters: I) Antitrust: Articles 81 and 82; state monopolies and monopoly rights: Articles 31 and 86; II) Merger control; III) State aid; and IV) International activities. It also includes a statistical review of activities and a chapter on the outlook for 2001.

2.2. Chapter I

On 27 September 2000, the Commission adopted a draft regulation which defined the competition rules applicable to restrictive practices between businesses and abuses of a dominant position (Articles 81 and 82). This is considered to be the most important legislative initiative in Europe in the competition field since the adoption of the Merger Regulation in 1989. In the field of vertical agreements, a new block exemption regulation and guidelines concerning distribution have been adopted. These cover all sectors with the exception of car distribution. In the area of horizontal agreements the Commission has adopted revised block exemption regulations for research and development, and specialisation agreements.

2.3. Chapter II

2.3.1. According to the report, the issue of mergers is the most sensitive in terms both of the modernisation of legislation and of checks and monitoring.

The Commission itself is very cautious in its approach partly owing to practical problems for which definitive solutions have yet to be found. For instance, it is asking whether the turnover thresholds are set at the most appropriate level and whether the established concept of a "concentration" is still appropriate in a world of strategic alliances, minority shareholdings and production joint ventures.

The Commission's approach here is two-pronged: introducing a simplified procedure and revising the regulation.

2.3.2. The simplified procedure was introduced by the adoption of a notice on the treatment of certain mergers under the regulation in force and it was put into practice on 1 September 2000.

The procedure applies to the treatment of three categories of merger that do not raise serious concerns in terms of competition.

2.3.3. The conference on mergers, staged by the Commission and the International Bar Association (IBA) in September 2000, provided an opportunity to discuss a wide range of issues, many of which are now being explored in the context of the review of the merger control regulation.

The Commission is now at the fact-finding stage, in consultation with the Member States, the applicant countries, business associations and the legal community.

During 2001, the Commission will produce a document setting out its conclusions and recommendations for change. This will then form the basis for a further round of official consultations.

2.4. Chapter III

In 2000, the Commission adopted three regulations, on the application of the de minimis rule to state aid, on aid to small and medium-sized enterprises and on aid to training.

The eighth survey of state aid in the EU showed that in the period 1996-1998 an average of EUR 93 billion per year were paid by the 15 Member States to the manufacturing, agricultural, fisheries, coal mining, transport and financial services sectors.

The Commission notes that while this constitutes a considerable amount in absolute terms it nevertheless represents a reduction of 11 % in relation to the previous period.

2.5. Chapter IV

2.5.1. Enlargement

The Commission reports regularly to the Council on the progress made by each of the applicant countries towards accession. According to the report, the achievements in the area of antitrust and merger control are generally satisfactory, both on the legislative side and with regard to administrative capacity. All the applicant countries have adopted basic competition laws and most of them have also established merger control.

In contrast to the progress made in the field of antitrust policy, state aid control has proved much more difficult and politically sensitive.

Most applicant countries have set up national monitoring authorities. However, to ensure transparency, several have still to draw up comprehensive inventories of aid.

2.5.2. Bilateral cooperation

According to the report, the Commission has continued to cooperate closely with the US and Canadian antitrust authorities in the context of the agreements signed. The trend towards market globalisation continued apace during the year and 2000 saw a considerable increase in the number of transactions notified to both the Commission and the authorities in the above-mentioned countries.

The Commission began wide-ranging, informal, exploratory talks with Japan during which the two delegations managed to resolve all issues; and at the EU-Japan summit held in Tokyo in July it was announced that the two sides had reached a mutual understanding on the draft cooperation agreement, which should be signed during 2001.

2.5.3. Multilateral cooperation

The Commission continued to play an active part in the work of the WTO and the OECD and participated in the fourth UN conference on reviewing the set of equitable competition principles.

As the increasing internationalisation of economies makes ever greater demands of competition authorities, Commissioner Monti, in addition to creating a multilateral competition law framework at the WTO, has proposed the establishment of an "International Competition Forum". This will serve as a basis for national competition authorities to share experience and find a common understanding on central issues of competition law.

3. General comments

3.1. A series of Committee opinions have underlined the legislative work being done by the Commission as part of the process of overhauling and decentralising competition policy. An outline of these will be given in the Specific Comments in point 4 below.

3.2. The Committee is pleased to note that this change is possible now that the long battle to introduce a competition culture to our countries is all but won. The Competition DG can thus take on its proper guiding role and intervene only in the most important cases.

3.3. The establishment of competition authorities in all the Member States is the most telling institutional sign of this. They allow for a more rational organisation of responsibilities and enable the Commission to operate in the area that suits it best.

3.4. Here, however, the Commission's proposal to delegate powers to the national authorities does raise a few concerns.

3.4.1. Firstly, uniform application of competition policy is demanded of bodies which differ in terms of powers, institutional position and membership criteria: this could lead to divergent decisions and conduct.

3.4.1.1. Serious concern is aroused by the activity of the new competition authorities which have recently been established in the applicant countries, either because they still lack the necessary experience, or because the Commission's competition policy reform gives them greater responsibilities. It would be helpful in this respect for the Competition DG to set out a number of criteria to ensure that these new bodies can act in a uniform and effective manner.

3.4.2. Secondly, companies with a presence in more than one country could quite legally remove themselves from the reach of stricter authorities in one country by choosing a more favourable environment in another.

3.4.3. Lastly, it is not certain that all the national authorities have the resources required to fulfil this role, particularly in the smaller countries.

3.5. The Commission seems to be aware of these difficulties, as indicated by the choice of a regulation as the preferred legal means of implementing this reform, the proposal for an information network and cooperation instrument for national authorities, and the plans for joint training courses for their members and the judges involved.

3.6. While welcoming and supporting these measures, the Committee remains convinced that the introduction of this new distribution of responsibilities must be closely monitored.

3.7. The Honeywell-General Electric case is highly significant as it raises at least three major considerations for the future.

3.7.1. The first is that the importance of the European market obliges even economic giants like the two companies mentioned above to comply with European competition rules. The Commission must draw the right conclusions from this and extend its analyses to other multinationals in new sectors.

3.7.2. The second consideration is that competition policy must be based on real economic trends and not just on formal legal criteria. As the Commissioner states in his introduction, applying competition policy is not a static exercise but demands choices that take account of the economic significance of the issues and the overall objectives of EU economic policy.

3.7.3. A further problem raised by the Honeywell case is the need to internationalise competition principles. The Commission's proposal to work on this area within the WTO seems to be extremely well-timed. The Committee has raised this issue time and again in its previous opinions over the last four or five years. The forum proposed by the Commission, however, can be considered only a first step in this direction. At the same time, bilateral cooperation with the leading industrial nations should continue.

3.8. The Committee also endorses the Commission's attempt to involve consumers and other relevant categories to an ever greater extent in its competition policy, both to demonstrate the benefits for them and to encourage them to file complaints and criticisms, as has already occurred in a number of cases.

3.9. It would perhaps be useful to stress that the Committee, with the various interests it represents, could play a much more significant role in tightening the link with the public in general and consumers in particular.

3.10. In this context, the Competition DG's communication policy must be improved. Although the official report could not be produced any faster, the Commissioner's introduction and a brief summary of the Competition DG's legislative and "legal" activities could be issued on their own earlier.

3.11. The publication of on-line information on state aid should be extended to other subjects and accompanied at regular intervals by paper summaries.

3.12. The Committee would restate its position in favour of controlling not only state aid, but all other public aid, so that it does not distort inter-company competition.

3.12.1. However, economic intervention by the public authorities may now be necessary given the weak economic phase which Europe and the United States had already entered, but which is set to worsen in the wake of the terrorist attacks of September 2001, especially in terms of the resulting market uncertainty and fall in demand. Such intervention must, in any event, be carefully channelled towards productive investment, in line with the objectives defined by the EU at Lisbon.

3.12.2. At the same time, the enlargement process could have the effect of reducing Community aid to the more disadvantaged areas of the present EU, and require further intervention to ensure a proper territorial balance, at least during a transitional phase.

3.13. Regarding liberalisation processes and, more generally, the relation between the public and private sectors of the economy, it would appear increasingly necessary - as previously indicated in the opinion on the XXVIII report on competition policy(2) - for the Commission to carry out periodic analyses of the impact of such processes over recent years, in terms of both economic and social effects, as well as of citizens' safety.

3.14. The need for such an analysis is now all the greater in that a debate on the future European constitution is in full swing: and the Committee must extend the discussion from purely institutional aspects to encompass the "unwritten constitution", in order to identify the social structures which will underpin the new institutional architecture.

3.15. Enlargement brings with it the major challenge of promoting competition culture and modernisation in the applicant countries. The process will be much harder and will have to happen much more quickly than in the 15 Member States. The Committee understands the reasons for the acceleration explained in the Commissioner's introduction, but it cannot underestimate the profound social damage that could result if changes are made too suddenly and without any social shock absorbers: this applies equally to the applicant countries and the existing Member States.

3.15.1. The Committee feels that if social aspects are sacrificed the accession of these societies into the Community could generate major disappointment and a backlash. The process must therefore be accompanied by robust, targeted economic and social policy measures, including an improved climate for enterprise development potential, particularly for SMEs. To this end the Committee believes the European Union must provide far greater resources than those presently available.

3.16. Certain full-blown international cartels that dominate the world economy, for instance in the oil and natural gas markets, must be confronted. The cartel policy conducted by OPEC, and also by the oil companies, clearly runs counter to competition policy, and should be confronted with the appropriate instruments and the necessary level of political determination. In a global economy, even economic actions directly conducted by national governments must obey the rules of economic propriety and competition policy.

3.17. The continued existence in individual countries of professional sectors benefiting from contractual, administrative or legislative protection represents an unacceptable breach of the principles of European competition policy. At a time when public service monopolies are being liberalised, multinational businesses are being punished, and all sectors are being urged to step up their competitiveness, these occupational cartels - which are a hang-over from the past - must be brought into line with the new situation. The Commission must take on this task, and not only with words, but with practical steps designed in part to encourage national authorities to take the appropriate action.

4. Specific comments

4.1. In order to provide our partners with a fuller picture of the Committee's views on the subject, it has been decided to include a summary of the Committee's opinions on the most recent significant legislative provisions concerning competition policy.

4.2. The first opinion concerns the regulation reforming Treaty Articles 81 and 82, and concludes as follows:

"The Committee wholeheartedly supports the reform of the system for applying competition rules. This initial legislative instrument establishes essential machinery, and the Committee appreciates the clear and bold wording used. However, in view of the complexity of the topic, and also in order to match the laudable commitment shown by the Commission, the Committee cannot hide the fact that it would have liked further clarifications and information, in the form of official accompanying measures, as stated in its December 1999 opinion. The Committee will follow the Commission's future work with keen interest, particularly as regards the important additional measures announced. The Committee promises to offer the Commission its usual constructive collaboration."

4.3. The second opinion concerns the Regulation on the application of Article 81(3) of the EC Treaty to categories of vertical agreements and concerted practices.

4.3.1. The Committee welcomes the broad lines of the proposed reform, as much of it mirrors the recommendations made by the Committee in previous opinions.

4.3.2. Concerning the scope of the block exemption, the Committee notes that, in cases where the turnover threshold is exceeded by a limited number of undertakings, a positive assessment of individual notifications would be possible. It considers that the Guidelines should better explain how the Commission intends to provide a realistic interpretation of the notion of "potential competitor" in order to prevent a large number of industrial supply agreements from falling outside the scope of the block exemption.

4.3.3. With regard to market shares, identification of the relevant market should be made clearer through a series of significant examples to help undertakings define their market share at the regional, national and European levels. The Committee also requests the Commission to insert clauses to limit, in the case under consideration, the powers of grantors in relation to distribution SMEs, or which at least would provide SMEs with effective safeguards.

4.4. The third opinion is on the Competition rules relating to horizontal cooperation agreements.

4.4.1. The Committee expresses its satisfaction with the considerable work carried out by the Commission and broadly supports the proposed reform of horizontal cooperation agreements.

4.4.2. It is nevertheless concerned by the partial nature of the reform, and most of all by the risk that Member States will differ in their assessments or take differing action as a result of non-uniform interpretation and application of the rules. The Committee thinks that the new block exemption regulations must be designed on the basis of decentralised application, and would prefer a single comprehensive block exemption on horizontal agreements.

4.4.3. The Committee would also like to see retrospective notification of horizontal agreements as is the case for vertical agreements, and calls for the Commission to take steps to resolve this problem.

4.4.4. The Committee therefore recommends:

- a market share of 30 % for research and development agreements;

- a market share of 25 % for specialisation agreements;

- a market share of 20 % for SME joint purchasing agreements;

- extending the transitional period for adaptation of the existing rules to the new provisions from one year to two, i.e. to 31 December 2002. Until then, agreements which comply with the existing rules should be allowed to continue unchanged.

4.5. The fourth opinion concerns the rules governing agreements of minor importance ("de minimis"), particularly for small and medium-sized enterprises, and concludes as follows:

"The communication(3) is part of the process of updating competition policy law. The Committee highlights the major improvements over the previous communication: the establishment of 'categories', the raising of existing thresholds, the establishment of a new threshold, improved legal certainty.

The Committee calls for further thought to be given to the concept of 'relevant market', and for further simplification of the categories of agreement giving rise to hardcore restrictions of competition policy and greater uniformity in the leeway allowed in the event of the market share laid down being exceeded."

Brussels, 28 November 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) SEC(2001) 694 final - Introduction, p. 8.

(2) OJ C 51, 23.2.2000, p. 1.

(3) Communication from the Commission relating to the revision of the 1997 notice on agreements of minor importance not covered by the provisions of Article 81(1) of the EC Treaty - SEC(2001) 747 final.