Opinion

Held og lykke, Commissioner Vestager

Tomorrow, new European Commissioner Margrethe Vestager will take control of the Commission’s most powerful tool: the enforcement of European Union competition law.

By: Date: October 31, 2014 Topic: Innovation & Competition Policy

Tomorrow, new European Commissioner Margrethe Vestager will take control of the Commission’s most powerful tool: the enforcement of European Union competition law. She will have the power to block mergers or require the sale of companies’ assets for deals go through. She will be able to fine companies that breach antitrust rules up to 10 percent of their global turnover. She can oblige EU member states to take back subsidies granted to firms if the money gives an unfair advantage.

The power of the European Commissioner for Competition needs to be exercised with care

Such power needs to be exercised with care. Vestager inherits a number of high profile and sensitive cases: Google’s alleged self-bias in internet search, Gazprom’s alleged excessive gas prices, the tax-sweetener cases involving Apple, Starbucks and Fiat. In addition, there are new possible merger waves and industrial restructuring and ongoing high profile cartel cases in the financial sector. Although enforcement is strictly governed by law, the Commission retains a margin of discretion in assessment; appeals are rare (more than two-thirds of antitrust abuse cases are resolved without ending up in court), meaning there is often no independent check on the Commission’s analysis. Vestager’s discretionary power will therefore play a crucial role – especially in the major pending cases, in which the Commission’s decisions will potentially have a huge impact on firms and markets.

But the apparent advantage of discretion can quickly turn into a burden for competition commissioners.  Given the high stakes, it exposes them to pressure to take bad decisions. For example, the Commission might be asked to act against successful foreign companies, because domestic industry fears their competition or because their prices are regarded as excessive and should thus be curbed to reduce input costs. Member states might fight hard to promote their own industries. For instance, they could claim that mergers that imply higher prices for European consumers are the only solution that allows European businesses to invest and regain prominence in global markets.

The new commissioner will only be able to negotiate the political swamp and shield her services from unsubstantiated criticism if she sends a clear, credible signal that her assessments will be guided by economics and that any decision taken will ultimately benefit consumers.

A company should be deemed guilty not merely by holding significant market power

An example is abuse of dominance cases. A company should be deemed guilty not merely by holding significant market power; it should be proved that such power is misused to penalise competitors and that ultimately consumers would suffer from it. An antitrust case against Google in the United States was cleared by the Federal Trade Commission because it found that even if Google’s algorithm penalises competitors, it might nevertheless improve American users’ experience by swiftly addressing their search queries.

Likewise, mergers that result in savings that compensate for reductions in competition should be cleared, and the existence of such efficiency gains should be duly acknowledged. At the same time the causal link between a merger and its benefits should be carefully and transparently substantiated, because higher investment levels are never obvious when market competition is reduced. For example, for more than a decade, US telecoms companies have been allowed to enjoy a significant degree of market power. In the 2003 Organisation for Economic Cooperation and Development country ranking for fixed broadband penetration, the US ranked tenth. In 2013, the US had dropped to sixteenth. Countries that implemented a pro-competition policy demonstrated a better investment performance. Vestager can reconcile business and consumer interests if operators can trust that future antitrust decisions will correctly capture the interplay between short-term effects (such as potential price increases) and dynamic/long-term effects (such as a potential supply of new or better products). Antitrust empowers consumers, who can threaten to switch suppliers, forcing companies to perform and innovate. But it also guarantees that innovative companies are fully rewarded for their efforts. Antitrust enforcement can be a resource for business, not a problem.

Antitrust enforcement can be a resource for business, not a problem

As the father of capitalism Adam Smith wrote: “consumption is the sole end and purpose of all production; the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of consumer”. By heeding Smith’s wisdom, Ms Vestager will get the most out of her new job in the interest of the European economy.

Republished from Altinget with permission.

Read also

Memo to the Commissioner for Competition


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to communication@bruegel.org.

View comments
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Frans Timmermans

The sixth event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Mehreen Khan, André Sapir and Frans Timmermans Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 11, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Manfred Weber

The fifth event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Anne-Sylvaine Chassany, Manfred Weber and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 9, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Jan Zahradil

The fourth event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Jim Brunsden, Maria Demertzis and Jan Zahradil Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 4, 2019
Read article More by this author

Opinion

Europe and the new imperialism

For decades, Europe has served as a steward of the post-war liberal order, ensuring that economic rules are enforced and that national ambitions are subordinated to shared goals within multilateral bodies. But with the United States and China increasingly mixing economics with nationalist foreign-policy agendas, Europe will have to adapt.

By: Jean Pisani-Ferry Topic: Global Economics & Governance, Innovation & Competition Policy Date: April 3, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Luis Garicano

The third event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Luis Garicano, Mehreen Khan and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 3, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Bas Eickhout

The second event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Bas Eickhout, Guntram B. Wolff and Rochelle Toplensky Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 2, 2019
Read about event More on this topic

Past Event

Past Event

Spitzenkandidaten series: Yanis Varoufakis

The first event in the The Road to Europe - Brussels Briefing Live: Spitzenkandidaten series. The series features the lead candidates for the European Elections of six parties and is jointly organised by Bruegel and the Financial Times in March and April 2019.

Speakers: Maria Demertzis, Martin Sandbu and Yanis Varoufakis Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 26, 2019
Read about event More on this topic

Past Event

Past Event

Rethinking industrial policy in the digital age: challenges for Europe

All-day conference about how the European policy-making will have to adapt to the digital transformation.

Speakers: Philipp-Bastian Brutscher, Teunis Brosens, Maarten Camps, Lise Fuhr, Padmashree Gehl Sampath, Andreas Geiss, Tony Graziano, Mathew Heim, Thorsten Käseberg, Thomas Kramler, Robert Kroplewski, Timothy Lamb, J. Scott Marcus, Philip Marsden, Jan Mischke, Joakim Reiter, Megan Richards, Valentino Rossi, Marietje Schaake, Reinhilde Veugelers, Guntram B. Wolff and Georg Zachmann Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 21, 2019
Read article More by this author

Opinion

New EU industrial policy can only succeed with focus on completion of single market and public procurement

France and Germany recently unveiled a manifesto for a European industrial policy fit for the 21st century, sparking a lively debate across the continent. The fundamental idea underpinning the manifesto is a good one: Europe does need an industrial policy to ensure that EU companies remain highly competitive globally, notwithstanding strong competition from China and other big players. However, the Franco-German priorities are unsuitable for the pursuit of this goal.

By: Simone Tagliapietra Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: March 18, 2019
Read article More on this topic More by this author

Blog Post

The Alstom-Siemens merger and the need for European champions

What’s at stake: The European Commission blocked the merger between Alstom and Siemens, triggering the ire of the French and German governments. A Franco-German proposal to revamp merger control in the EU has given rise to a lively debate on the need for European champions.

By: Konstantinos Efstathiou Topic: Innovation & Competition Policy Date: March 11, 2019
Read about event More on this topic

Past Event

Past Event

Market power and its implications to competition policy

What are the reasons behind the global trends in corporate margins and market concentration?

Speakers: Adina Claici, Fiona Scott Morton, Nicolas Petit, Georgios Petropoulos and Arno Rasek Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: January 16, 2019
Read article Download PDF More on this topic More by this author

External Publication

Vertical restraints and e-commerce

This article wishes to provide guidance on how the new vertical restraints linked to e-commerce should be treated and recommendations over the priorities and challenges that need to be addressed.  

By: Georgios Petropoulos Topic: Innovation & Competition Policy Date: January 15, 2019
Load more posts