Opinion of the Economic and Social Committee on the 'XXVIIIth Report on Competition Policy (1998)'
Date: 1999-12-08
Institutions: European Economic and Social Committee
Subjects: EU Member State, European Economic and Social Committee, competition policy

23.2.2000

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II

(Preparatory Acts)

ECONOMIC AND SOCIAL COMMITTEE

Opinion of the Economic and Social Committee on the ‘XXVIIIth Report on Competition Policy
(1998)’

(2000/C 51/01)

On 31 May 1999 the Commission decided to consult the Economic and Social Committee, under Article
262 of the Treaty establishing the European Community, on the ‘XXVIIIth Report on Competition Policy
(1998)’.

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 25 November 1999. The Rapporteur was
Mr Bagliano.

At its 368th plenary session (meeting of 8 December 1999), the Economic and Social Committee adopted
the following opinion by 97 votes to 1 with 2 abstentions.

1.
The XXVIIIth Report on Competition Policy is of particu-
lar importance, not only because it documents the Com-
mission’s outstanding administrative and legislative work, but
first and foremost because it provides an early interpretation,
in terms of action and initiatives, of the marked changes
characterising the Community’s new competition policy. There
are two keys to understanding the 1998 report: the first is
modernisation and the second is cooperation. These are the
keys to the Commission’s future scenario for competition
policy.

1.1.
In 1998, the Commission’s supervisory activities as
well as its initiatives and proposals already reflected the
modernising approach made necessary by globalisation:
in
other words, the need to take account of an outside world
which is changing much faster than in the past. The Com-
mission fully expressed its awareness of this in the new
regulatory and legislative approach to vertical agreements and
in the subsequent highly innovative White Paper which was
formally adopted in early 1999.

Such modernisation is also necessary and urgent at this
1.2.
key stage in the completion of the single market on account
the
of

influence on competition policy of

the powerful

widespread restructuring under way on the European market,
which is partly a result of
increasing company merger
initiatives. This is combined with the beneficial and invigorat-
ing effects on the Community economy of the introduction of
the single currency and the rapid public sector liberalisation
processes.

1.3.
The road ahead is therefore clearly mapped out. It is
consistent with past action, but is mainly geared to ensuring
rapid and constant adjustment to current and future changes:
most urgently,
the numerous problems arising from EU
enlargement. To meet these new commitments and increased
responsibilities, a new way of shaping and implementing
cooperation must be found — not only with but also between
Member State authorities and judiciaries. All parties in any
way involved must be in a position to cooperate with
each other in the interests of the fair competition between
companies which it is competition policy’s task to guarantee.
All future plans and action must, however, be placed in an
international context.

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2.
The XXVIIIth Report on Competition Policy is preceded
by an introduction which briefly outlines the content of
the report itself. The question of international cooperation,
however,
is dealt with separately in a foreword by Com-
missioner Van Miert. The Committee sees this as intended to
place particularly strong emphasis on the international aspect
of competition policy, and hopes that it will form an integral
the report rather than an addition — however
part of
prestigious this may be, bearing Commissioner Van Miert’s
signature.

2.1.
The Committee welcomes the decision to give this
year’s preface over to the Commission’s work at international
level, in view of the growing importance of the international
dimension. As the Commissioner acknowledges, his proposal
for competition policy to be seen in a broader perspective
echoes the Committee’s oft-repeated call.

2.2.
The comment that the ever-increasing integration of
the world economy is creating an unprecedented inter-
dependency between countries is perfectly accurate. Inter-
dependency has not only now become one of the defining
features of the current economic situation, but is set to grow
still
further in tandem with the irreversible globalisation
process. Against this backdrop, competition issues also take
on a necessarily global dimension. International cooperation
is therefore essential.

2.3.
Cooperation with the United States, under an agree-
ment dating back to 1991 (but, as the Commissioner points
out, coming into force in 1995), confirms that bilateral
agreements can be highly effective. The results of action on
bilateral cooperation with a view to enlargement also confirm
that the Commission is moving in the right direction. The
Committee, however, agrees with the Commissioner that steps
need to be made towards multilateral agreements as a matter
of urgency. Progress here is much more difficult, but it is the
only possible path: efforts must be stepped up.

2.4.
Under these circumstances, the aim of establishing ‘a
comprehensive worldwide multilateral framework, providing
for the application of a basic set of common competition
rules’ comes to the fore. The WTO working group is examining
proposals on the best approach to adopt, and should be
encouraged and supported in every way possible.

In its opinion (1) on the XIXth annual report, the Com-
mittee concluded that

‘although the final goal may seem distant, work should
continue on the internationalisation of antitrust rules, and
harmonisation (even partial and gradual) of the rules of
international
the
‘one-step-at-a-time’ policy needs to speed up or it will be
left trailing by events.

trade’. Almost a decade has passed:

A stronger political will
is now needed. This is a further
challenge, which needs to be faced gradually but determinedly.

In the meantime, ‘turmoil and uncertainty’ are increas-
2.5.
ing ‘the threat posed by anticompetitive practices’. Further on
in his introduction, the Commissioner makes the following
comment, as courageous as it is important: ‘so-called “crony
capitalism” meant that competition between firms was very
often foregone in favour of opaque arrangements which have
very little to do with market forces. I am convinced that the
pursuit of a robust competition policy, at both the national
and the international
level, would provide an important
antidote to such tendencies by promoting the competitiveness
of industry, decentralising commercial decision-making, fos-
tering innovation and maximising consumer welfare’.

The WTO’s role will be crucial in this respect. The Committee
hopes that this acknowledgement on the part of the outgoing
commissioner will be fully matched by both his successor and
the Commission as a whole in the exercise of its full powers.
To cite the most notorious case only (which has had a major
impact on the Community’s economy, and is also damaging
to the majority of developing countries), the fixing of oil prices
by international cartels must no longer be tolerated.

The Commission was highly active in 1998 at both the
3.
legislative and administrative levels under its programme of
modernisation of Community competition law. This represents
yet another challenge, going beyond the simple replacement
of one law with another. The Commission also imposed severe
penalties in cases of market partitioning, price cartels and
abuses of dominant market position. In practice, modernis-
ation — synonymous with ‘refocusing’ — has meant concen-
trating ‘on those cases where the Community interest is
manifest’. The policy is undergoing consolidation and is giving
rise to ambitious projects for change. The Committee supports
the Commission’s interesting initiatives and action in this
direction.

(1) OJ C 60, 6.3.1991, p.19.

4.
The notice on cooperation between Community and
national competition authorities seems to be producing its
first results, as reflected in effective collaboration (exchange of
information on notifications, joint handling). The anomaly

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whereby seven national authorities are still not authorised to
apply Articles 81 and 82, however, remains unresolved. In this
connection, the Committee would repeat its insistence on the
urgent need for harmonisation of national
legislation on
competition through the application of Articles 81 and 82, as
a prerequisite for any improvement in cooperation and, above
all,
this
‘harmonisation’ will encompass the principles underpinning
national legislation on competition.

for effective decentralisation.

It also hopes that

The Commission should devote a chapter (including
4.1.
comparative tables) of
to the state of
its annual report
application of Community (as well as national) competition
law in each Member State. This would also serve to assess the
degree of transposition, as well as decentralisation, actually
achieved. Here, the Committee wonders which of the effects
of insufficient harmonisation in the different Member States
are most damaging. It should be borne in mind that markets
are still segmented and national diversities still strong, and that
a number of dominant national positions remain in existence
and have major, serious distorting effects on competition. A
carefully-planned information campaign will be needed if
greater transparency is to be achieved. Harmonisation takes
time. Pending more substantial results, it might be necessary
to look into at least specific supervisory instruments, with the
same aim of preventing distortion or unduly advantageous
positions.

5.
Liberalisation has proceeded apace in telecommuni-
cations, but has been slower in the energy sector. The
Committee views these sectors as providing a considerable spur
for competitiveness and for consolidating and invigorating the
single market.

5.1.
In this context, the Commission should also examine
the overall effects of liberalisation processes, and of the ending
of certain monopolies. The purpose would not, of course, be
to try to turn the clock back, but to fine-tune supervision and
identify new trends or signs of change at an early stage. A
further aim would be to keep a close eye on the possibly
significant repercussions for employment. The Committee
suggests that following an in-depth ad-hoc investigation, the
Commission should publish periodical
information reports
and updates. These would be of great value to economic
operators as well as to national institutions and authorities.

6.
Legislative activity in the field of vertical agreements and
state aid has been particularly intense (1). Real reform, as part
of the broader reform contained in the White Paper on

modernisation, adopted in early 1999(2), has been set in train.
It provides the legislative ground-work for the new criterion
for interpreting competition rules, which should henceforth
place the emphasis on economic rather than legal or formalistic
aspects. The Committee, which has already voiced its approval
of the relevant options set out in the Green Paper, is drawing
up an opinion on this matter, but wishes at
this stage
to acknowledge the Commission’s consistency and clear,
responsible vision of the problems.

7.
The Commission has taken landmark decisions and
imposed fines in application of the Merger Regulation. These
decisions have always provided thorough documentation,
in-depth analysis and solid economic and legal reasoning to
back the conclusions reached.

7.1.
Here again, however, the Committee believes that the
time has come for the effects of this action to be verified,
including at international level, as they may generate new
forms of oligopoly or even monopoly, with repercussions on
the Community market. The Committee calls upon the
Commission to add to its annual report by including the
results of its checks on the effects of formal commitments
entered into by companies in the first and second phases of
conditionally authorised merger operations. It must be borne
in mind, particularly with regard to the employment market
— to which the Committee is always highly attentive —
that jobs in traditional sectors are contracting, having been
decimated over recent years by automation and, more recently,
by the unstoppable processes of relocation. Factories are
switched, in part or in whole, to countries with lower labour
costs, as a result of non-compliance with the ILO’s minimum
key standards. Competition policy cannot afford to overlook
these aspects: it must be fleshed out and integrated — here
again, by means of cooperation, first and foremost within the
Commission itself — if application of competition rules is to
be the result of a real Community policy.

7.2.
Individual Member State markets must also be super-
vised for this purpose, so that concern for the global dimension
does not have the effect of downgrading the importance —
which is clearly primordial — of an efficient, competitive
and expanding internal market. Many further mergers and
concentrations may be expected to take place in the future,
and at a faster pace. The speed of change in market and
production structures inside and outside the single market
must be matched by swift adjustment of rules and controls.

(1) OJ C 270, 24.9.1999, p.7.

(2) COM(1999) 101 final, 12.5.1999.

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8.
In the area of state aid the Commission defined its aim
as being ‘to improve transparency and legal certainty, to make
the state aid monitoring system more efficient, to reinforce
vetting, in particular in cases involving large volumes of ad
hoc aid, and to simplify the monitoring system for more minor
cases’. The Committee supports this objective as a matter of
course.

8.1.
The Commission’s regulatory activity has also been
intense in this area. A regulation aimed at codifying the various
aspects of the monitoring system while strengthening its
powers was proposed, and has now come into force. It will
clearly be a valuable instrument in managing competition
policy in the highly sensitive area of state aid. The Commission
has in any case always acted with dispassionate objectivity
and down-to-earth realism. The innovative proposal for a
regulation enabling the Commission to exempt certain categor-
ies of horizontal aid from the notification requirement also
appears to reflect a healthily pragmatic approach, and naturally
meets with the Committee’s support.

The Committee also welcomes the new framework
8.2.
on training aid. Facilitating training initiatives is a secure
medium-term investment which will help to boost social and
economic stability within the Member States. More, however,
is in line
needs to be done. A competition policy that
with current circumstances and with the needs of European
integration must facilitate all initiatives designed to encourage
and stimulate employment.

8.3.
Aid should in principle be progressively reduced, as
the Committee has always recommended. The Treaty, however,
makes provision for such aid within a competition policy
which is simultaneously designed to help secure the cohesion
targets also pursued by other Community policies.

8.4. With regard to regional policy, in March 1998 the
Commission adopted an important document: the guidelines
on national regional aid, which simplifies and updates the
criteria for applying Treaty rules. The Committee agrees
with the principles and with the evaluation and monitoring
mechanisms set out in the document.

8.5.
The Committee must, however, once again point to
the very different situations in the various Member States,
which continue to counteract all cohesion policies with clear
implications for competition.

considerable portion of public aid within the EU. A new
concept of ‘public aid’ needs to be adopted, including not only
level — but also
state aid — at national and regional
Community aid.

8.7.
The CEEC are quite another matter. In paragraph 300
of the XXVIIIth Report on Competition Policy, the Commission
acknowledges that ‘In contrast to antitrust policy, the introduc-
tion of state aid control in the CEEC has proven to be much
more controversial and difficult to bring about ... a lot of work
remains to be done. The most urgent priority is to create
transparency ...’. The situation is also extremely diverse: an
extreme example might be heavy industry, which is in state
hands to the tune of 80%. The adjustment process will be
lengthy. The Committee is aware of these circumstances and
difficulties, but for this very reason would again urge the
Commission this year to exercise careful supervision of
these problems and play an active part in any contacts or
negotiations.

9.
The outlook for competition policy, confronted with the
dual challenge of enlargement and globalisation, can be
reasonably bright provided simplification and modernisation
are pursued more vigorously. The drive to modernise and
reform brings a need for an overall review which should also
serve to trigger new measures to encourage training, foster
initiatives in the most innovative and hi-tech sectors, and map
out new types of jobs.

The quickening pace of market globalisation has
9.1.
accentuated the role of innovation as the trump card for the
more advanced economies, which must counter the aggressive,
cost-based policies of the recently industrialised countries. In
this setting, only strong investment in innovation can shield
the developed countries from the competition, based on price
and rising product quality, offered by their new competitors.
In spite of this awareness of the strategic value of innovation
and of the new technologies, the Committee notes some
hesitation in seizing the related opportunities for modernis-
ation and growth. Community competition policy must seek
out appropriate areas in which to act as a driving and
sustaining force, and to create the most advantageous reference
framework for businesses, within which they must make
choices, take decisions, place investments and take risks. This
is where competition policy links in with other Community
policies.

In this regard,

the annual report on competition
8.6.
should also assess the effects of Community ‘aid’, which
has mushroomed over recent years, now accounting for a

10.
Competition policy is not simply a matter of legal
processes, penalties and controls. Nor is it divorced from other
Community policies. It should not be isolated from them, nor
should it seek to distance itself from them. Consultation and

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cooperation must be stepped up within the Commission. New
trends must be detected and interpreted. The Commission
possesses a tried and tested machine in its Competition
Directorate-General: it can use it to learn about and understand
its own policies promptly and
change and to ‘refocus’ all

consistently. The challenges of enlargement, globalisation and
the single currency demand a more rigorous, and at the same
time more far-sighted competition policy, backed up by
a stronger and more active Commission presence at all
international levels.

Brussels, 8 December 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

Opinion of the Economic and Social Committee on the ‘Commission Regulation on the
application of Article 81(3) of the EC Treaty to categories of vertical agreements and concerted
practices’ (1)

(2000/C 51/02)

On 21 October 1999, the Economic and Social Committee, acting under Rule 23(2) of its Rules of
Procedure, decided to draw up an Opinion on the above-mentioned proposal.

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 26 November 1999. The rapporteur was
Mr Regaldo.

At its 368th plenary session (meeting of 8 December 1999) the Economic and Social Committee adopted
the following opinion by 100 votes to one.

1.

Introduction

The Commission’s draft regulation on the application
1.1.
of Treaty Article 81(3)
to vertical agreements, and the
accompanying draft guidelines, were the fruit of a long debate
on the need for a thorough reform of competition policy in
this area.

1.2.
The reform process began in 1997 with the publication
of a Green Paper on Community competition policy and
vertical restraints (2). This was followed in 1998 by a Com-
munication (3) in which the Commission outlined a new policy
whose implementation would require changes to the current
regulatory framework, by means of:

— an amendment to Council Regulation No. 19/65 EEC, in
order to extend the powers assigned to the Commission
under Article 85(3) of the Treaty to categories of agree-
ments and concerted practices, for the purposes of decen-
tralisation;

— an amendment to Article 4(2) of Council Regulation No.
17, the first implementing regulation for Articles 85-86 of
the Treaty, to enable the Commission to exempt vertical
agreements retroactively when notification takes place at a
later point;

— the two Regulations No. 1215/99 and 1216/99, adopted

by the Council on 10 June 1999.

(1) OJ C 270, 24.9.1999.
(2) COM(96) 721 final of 22.01.97, ESC Opinion OJ C 296,

29.09.1997.

(3) COM(1998) 544 final and COM(98) 546 final, both OJ C 365,

26.11.1998, ESC Opinion OJ C 116, 28.4.1999.

1.3.
The new legislation is designed to replace the Com-
mission’s existing exemption regulations relating to exclusive
distribution agreements (Regulation No. 1983/83), exclusive
purchase (Regulation No. 1984/83) and franchising (Regu-
lation No. 4087/88). It also covers selective distribution, which
was not previously subject to exemption [with the exception