Opinion of the Economic and Social Committee on the 'XXVIIth Report on Competition Policy (1997)` (1999/C 101/01)

On 24 April 1998 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the 'XXVIIth Report on Competition Policy (1997)`.

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 19 January 1999. The rapporteur was Mr Sepi.

At its 360th plenary session (meeting of 27 January 1999), the Economic and Social Committee adopted the following opinion by 37 votes to three, with four abstentions.

1. Introduction

1.1. The Economic and Social Committee first and foremost welcomes the inclusion in the XXVIIth Competition Report of a foreword by Commissioner Van Miert outlining the prospects, role and general objectives of this policy sector.

1.2. The Committee has, in fact, always been in favour of viewing the Commission's work on competition policy as an instrument for pursuing the general objectives of EU economic policy and not as an end in itself.

1.3. In numerous opinions () on past reports, it has been stressed that excessively juridical and formalistic interpretations of competition policy should be avoided. Instead more emphasis should be placed on economic and societal factors.

1.4. It is important, therefore, to highlight this new approach (which, in the Committee's view, is not merely formal) whereby this report is not just an account of the work carried out by the bodies responsible, but is also an outline of the future prospects which constitute the framework for Commission action.

1.5. The Committee believes that this is an important message for the business world and, more generally, for the EU public, who can bear it in mind before making decisions.

1.6. This kind of approach is essential at a time when economic integration is about to make a quantum leap with EMU, which will complete the single market, and when EU enlargement is on the horizon.

1.7. In this context, it is equally important that the Commission continue its streamlining of legislation, so as to ensure that the Treaty is applied more effectively and consistently.

1.8. Lastly, the Committee wishes to highlight the growing importance of market globalization for several products and services. Greater weight must be given to this when assessing the effective implementation of the Treaty articles, as when the latter were drawn up globalization had only just begun.

1.9. The Commission must therefore take account of European companies which operate on the international market, and must keep this broader context in mind when it applies the rules.

1.10. The Committee draws attention to the excessive time lag between its opinion and the events illustrated in the Commission report. It therefore calls for a more streamlined presentation/communication schedule between the Commission and the ESC, to enable opinions to impact more quickly and effectively on the other institutions.

2. The report

2.1. As previously stated, the report contains a political foreword by the Commissioner for competition policy, Mr Van Miert, which highlights the relationship between competition policy and the general economic objectives of the EU.

2.2. The report acknowledges the new situation brought into being by the Treaty of Amsterdam, notably the new Article 7d which deals with services of general interest and their role in furthering economic and social cohesion.

2.3. The Commission underlines the need to modernize competition policy, which is 'still rooted in the early years of the common market`.

2.4. With regard to the antitrust aspects, the report highlights the efforts made to modernize both the vertical restraint policy, which should culminate in concrete legislative measures in 1998, and the policy on horizontal agreements, the updating of which has only just begun. There are three objectives: to adapt the legislation and to make it more effective, to ensure transparency and to apply the principle of subsidiarity.

2.5. As for mergers, the report mentions the amendment of EEC Regulation No 4064/89, which makes it simpler and more effective, particularly because of the new definition of 'joint venture`, but also because it confirms the single-authority principle for cross-border mergers.

2.6. The Committee stresses the importance of the notice on the new definition of agreements of 'minor importance` which are not normally covered by Article 85(1) of the EC Treaty.

2.7. Another innovation is the establishment of criteria and procedures for cooperation between the Commission and national competition authorities, confirming the single-authority principle.

2.8. The Commission has taken significant action on state aid, submitting a proposal for regulation on horizontal state aid and, subsequently, one on procedures applying to state aid, published in 1998. In this connection the Commission has issued a notice with the objective of 'clarifying and reinforcing the application of the state aid rules in order to reduce distortions of competition in the single market` ().

2.9. The Commission states that EU enlargement will inevitably lead to considerable difficulties in monitoring state aid.

2.10. In 1997, supervisory activity was particularly intense. The Commission dealt with 1338 cases - a significant increase of 92 cases over 1996. However, while the total number of state aid cases remained more or less stable, merger cases grew by 31 %. 1,165 of all cases have been closed.

2.11. The Commission frequently highlights the successes of the liberalization of public services, 'in accordance with the principle of access for all Union citizens`. Particular progress has been made in the transport and telecommunications sectors. The main problem for the future lies in the liberalization of the energy sector.

2.12. The Commission report also underlines the two main problems in the field of international relations: the adoption of the competition rules by applicant countries and cooperation with competition authorities outside Europe, notably with the US Antitrust Commission.

3. General comments

3.1. In emphasizing DG IV's commitment to pursuing, amongst other things, the EU's general social objectives via competition policy, the foreword on strategy reveals how this aspect may have been sometimes neglected in the past. While reiterating the considerable merits of DG IV's drive to modernize EU economies and businesses - not least because of the benefits to consumers - the Committee notes that DG IV displays an excess of formalism. Moreover, it calls on the Commission to redouble its efforts to raise public awareness of the results of its work.

3.2. The foreword states that EMU and, might we add, the single market, will lead to a huge restructuring of the economy. This will inevitably increase the number of mergers, although this is not necessarily detrimental for European competitiveness in certain globalized markets - hence the need for closer supervision to ensure that consumers and other economic operators are not put at a disadvantage.

3.3. The Committee wishes to emphasize that the internal (EMU, single market etc.) and external (enlargement, international cooperation) changes that are to take place over the next few years will demand careful consideration of the relationship between the new tasks and the resources needed to accomplish them. These new tasks and the increasing complexity of existing tasks will require an enhanced intervention capability.

3.4. The Committee believes that reforms are needed on four fronts: more efficient working patterns; judicious selection of cases to be handled at EU level; decentralization to the national authorities; and the adoption of clearer and more consistent legislation.

3.5. More effective monitoring is a necessary (albeit insufficient) condition for 'downward price convergence` - one of the advantages that European consumers are expecting from monetary union.

3.6. The Committee also draws the Commission's attention to the fact that the anticipated increase in mergers and acquisitions will bring a need for new rules, together with new instruments to cushion the social impact of restructuring. The single currency could also facilitate the formation of cartels (explicit or otherwise), and anti-trust controls will be needed.

3.7. For an effective employment policy, the Luxembourg summit suggested that 'it is important to focus on aid arrangements which favour economic efficiency and employment without causing distortions of competition`. To determine suitable guidelines on the matter, the Commission should urgently put forward its ideas on competition and other aspects and establish which instruments to use in order to pursue them.

3.8. The foreword acknowledges this need but does not indicate how it is to be addressed. In particular, it is not clear whether the Commission intends to treat this objective as a side-effect of improved competitiveness, or whether - as the Luxembourg summit seems to suggest - new, employment-oriented criteria for the Commission's action are being drawn up.

3.9. It is also essential to modernize the instruments and procedures involved in the liberalization of public services. The balance between the market and citizens' access to such services needs to be further redressed in pursuance of Article 7d of the Amsterdam Treaty.

3.10. An issue that has in the past been exclusively a matter for the Member States, but is now of considerable interest due to the advent of the single currency and the growth in competition, is that of taxation and social security contributions. Several countries are calling for coordination in this field. The Committee believes that failure to coordinate could lead to serious distortions of competition and a shift in the tax burden towards taxation of labour rather than of financial returns.

3.11. In any event, these new areas of Community policy will increasingly require an extension of the three-way dialogue between all the parties concerned, in view of the impact of competition on EU social and industrial policies.

3.12. EU competition policy must be a living instrument that keeps in step with the market and with market trends. When considering or taking decisions on this policy, careful thought must therefore be given to the best way of tackling new circumstances (as the Commission itself acknowledges in point 2.3). Here the Committee would highlight the concentration in the consumer product distribution sector and the resultant economic dependence vis-à-vis industry, the situation of the defence industry, or certain agreements on minimum fees; although these areas are somewhat delicate, they could affect general competitiveness.

3.13. Since the McDonnell Douglas/Boeing case, the problem of international controls for certain raw materials and advanced technology sectors has raised its head in many other sectors. A global competition policy requires international control instruments, and the Committee urges the Commission to pursue its negotiations with this aim in mind.

3.14. In several technological sectors in economic areas outside Europe, public support is far more widespread and multi-faceted than in the EU. The Committee asks the Commission to consider the case for introducing similar industrial policy instruments, so that European industry will not be at a disadvantage in these sectors (space, defence, aeronautics), which are of strategic importance to the economy and are global market players.

4. Specific comments

4.1. Numerous Committee opinions () (e.g. those on state aid and vertical restraints) have already set out the Committee's position on individual Commission regulations and communications. The present opinion therefore makes no comment on the latter, but merely confirms the validity of previous opinions. It should, however, be stressed that, as recommended in previous Committee opinions (), the Commission's 'legislative` initiatives (i.e. regulations and directives) and 'quasi-legislative` initiatives (communications) are becoming more important than case law.

4.2. There is a certain tendency to off-load part of competition policy to national authorities. The Committee agrees that this would help to avoid an overload of cases in Brussels, but believes that the rules should be harmonized and that competition authorities should be set up in all Member States with the same basic powers as those conferred upon the Commission by the Treaties. The Member States must ensure that decentralization does not lead to confused or inconsistent enforcement of the rules.

4.3. Here the Committee notes that the Commission communication mentioned in point 12 of the report is not binding on the Member States. Close vigilance will therefore be necessary, particularly in cases where the national authorities do not have appropriate machinery for enforcing EU rules.

4.3.1. The Committee feels that the proposed new regulations and policy on vertical restraints should place more emphasis on market data, rather than on abstract legal definitions.

4.4. The Committee emphasizes the need to fully revise the rules, to give legislative substance to Commission procedures and Court rulings, thus providing European citizens with a practical, transparent system and enabling applicant countries to adapt their systems rapidly. In this context, the Commission's proposals are positive, particularly the one on control procedures and sanctions on illegitimate state aid, as it demonstrates the Commission's aim to overcome the differences in the commercial law of Member States.

4.5. Given the above, and the Commission's position, an in-depth study should be made of taxation and social security contributions, with a view to competition regulations being included in the 'code of conduct` that the Commission has recently proposed. The Committee would be happy to contribute to this debate, which it hopes can be brought to a swift, fruitful conclusion.

4.6. Decisions sometimes take too long. The Committee stresses the need to set firm deadlines for the adoption of decisions in all fields of competition policy.

4.7. The Committee observes that merger notifications have increased, but there have been fewer infringements than in 1996, while the reverse is true for state aid. This clearly depends on the acceleration of certain economic processes. However, it might be expedient to re-examine state aid issues, particularly in the light of the above-mentioned restructuring.

4.8. With regard to regional state aid provided under Article 92(3) of the Treaty, the Committee notes the Commission proposal that areas eligible for Structural Funds support under Objectives 1 and 2 of the Funds should be the same as those areas assisted by Member States. Whilst the Committee accepts that this should be the case generally, it also recognizes that increased national support may be a corollary to intensifying the degree of concentration in the application of EU structural funding, and therefore would stress that regional state aid under Article 92(3) is a separate instrument of national economic policy which a Member State should be able to use at its discretion where the relevant case for so doing can be established.

4.9. In this regard, it has to be said that under the current system, and despite the Commission's valiant efforts, there are still great imbalances in state aid, which favour the larger countries.

4.10. As announced in the annual report (), in November 1998 the Commission published a 'framework` for vocational training aid which establishes new rules and procedures, on the grounds that some training aid can be considered as state aid. The Commission document introduces the rather vague concept of 'training that is in the interests of the company`.

4.11. Life-long training is essential in today's information society. Reducing or obstructing workers' training in this field, notwithstanding the employment and training objectives announced by the European Council at various summits, could make it even more difficult to respect commitments between now and the end of 1999 - the last year of the current programming period for the Structural Funds.

4.12. A qualitative shift of public aid towards horizontal objectives such as research, SMEs and vocational training should be encouraged, while at the same time reducing public aid for operating costs.

4.13. The Committee welcomes the recent agreement with the US antitrust authorities. However, the OECD and WTO must work for truly international regulations and make sure that these are enforced.

4.14. In order to fulfil its growing range of duties in this field, the Commission should set up in-house research facilities and promote external studies on specific issues.

4.15. The annual report is becoming increasingly user-friendly. The flow of information throughout the year should also be stepped up, in order to explain particularly significant initiatives and to give details of studies which have been conducted with a view to defining the most important cases.

4.16. In the Committee's view, the task of introducing the Member States' competition policies in the candidate countries remains extremely difficult, despite the Commission's efforts. Applying these policies too rigorously would have dramatic social consequences, but not applying them would seriously distort competition. A transitional stage is thus needed, to take account of the social as well as economic aspects of enlargement in this sector.

4.17. The WTO negotiations and bilateral agreements must always take account of ILO conventions on working conditions, which should dovetail with international trade rules.

Brussels, 27 January 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

() Reports on Competition Policy: OJ C 73, 9.3.1998; OJ C 75, 10.3.1997 and OJ C 39, 12.2.1995.

() OJ C 384, 10.12.1998.

() OJ C 129, 27.4.1998; OJ C 295, 29.9.1997; OJ C 129, 27.4.1998; OJ C 284, 14.9.1998; OJ C 287, 22.9.1997.

() OJ C 129, 27.4.1998; OJ C 295, 29.9.1997.

() Point 293.