Opinion of the Economic and Social Committee on the 'XXVIIth Report on Competition Policy (1997)'
Date: 1999-01-27
Institutions: European Economic and Social Committee
Subjects: ESC opinion, competition policy, report

12.4.1999

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Official Journal of the European Communities

C 101/1

II

(Preparatory Acts)

ECONOMIC AND SOCIAL COMMITTEE

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 Compe-
tition 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.

In numerous opinions (1) on past reports, it has
1.3.
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

(1) Reports on Competition Policy: OJ C 73, 9.3.1998; OJ C

75, 10.3.1997 and OJ C 39, 12.2.1995.

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.

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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.

2.7.
Another innovation is the establishment of cri-
teria and procedures for cooperation between the Com-
mission and national competition authorities, con-
firming the single-authority principle.

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.

2.8.
The Commission has taken significant action on
state aid, submitting a proposal for regulation on
horizontal state aid and, subsequently, one on pro-
cedures 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’ (1).

2. The report

As previously stated,

the report contains a
2.1.
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 mod-
ernize 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 amend-
ment 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.

2.9.
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 suc-
cesses of the liberalization of public services, ‘in accord-
ance 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.

The Commission report also underlines the two
2.12.
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 pursu-
ing, amongst other things, the EU’s general social
objectives via competition policy, the foreword on
strategy reveals how this aspect may have been some-
times neglected in the past. While reiterating the con-
siderable 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

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.

(1) OJ C 384, 10.12.1998.

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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.

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.

3.2.
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.

The Committee wishes to emphasize that the
3.3.
internal (EMU, single market etc.) and external (enlarge-
ment, 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.

It is also essential to modernize the instruments
3.9.
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.

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

In any event, these new areas of Community
3.11.
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.

3.5. More effective monitoring is a necessary (albeit
insufficient) condition for ‘downward price conver-
gence’ — 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 Luxem-
bourg summit suggested that ‘it is important to focus
on aid arrangements which favour economic efficiency
and employment without causing distortions of compe-
tition’. 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

3.12.
EU competition policy must be a living instru-
ment 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.

In several technological sectors in economic
3.14.
areas outside Europe, public support is far more wide-
spread 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

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importance to the economy and are global market
players.

4. Specific comments

4.1. Numerous Committee opinions (1) (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 (2), 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.

The Committee emphasizes the need to fully
4.4.
revise the rules, to give legislative substance to Com-
mission 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 Com-
mittee 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 notifi-
cations 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
it might be
certain economic processes. However,
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.

As announced in the annual report (3),

in
4.10.
November 1998 the Commission published a ‘frame-
work’ 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 ‘train-
ing that is in the interests of the company’.

(1) 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.

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

(3) Point 293.

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4.11.
Life-long training is essential in today’s infor-
mation society. Reducing or obstructing workers’ train-
ing 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 hori-
zontal 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.

The annual report is becoming increasingly
4.15.
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 Com-
mission’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 agree-
ments 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