Speech by Joaquín Almunia, Vice President of the European Commission responsible for Competition Policy at Georgetown University Law Center, 7th Annual Global Antitrust Enforcement Symposium
Washington DC, 25 September 2013
Ladies and Gentlemen,
It is always a pleasure to attend your conference and I thank Larry Center for his invitation.
But this year I have an additional reason to address this audience here in the States – and a very good one.
What I have in mind are the negotiations on the Transatlantic Trade and Investment Partnership that started in earnest last July.
This crucial initiative – which received the political support of President Obama and of the leaders of the EU – represents a fantastic opportunity to strengthen the economic pillars of our transatlantic alliance.
If we succeed, both of us will be better equipped to tackle the challenges of this century. And not only from the economic standpoint.
Our success will allow us to adjust our economic and political institutions to take full advantage of a changing world in which powerful new actors are increasingly challenging the leadership of traditional industrialised regions.
Today I want to start by sharing with you my views on some general aspects of these talks.
Indeed, competition is a policy area where the transatlantic partners have shown an excellent level of cooperation during the past few years. I would very much like that similar results were reached in all the areas under discussion in these negotiations.
In the second part of my speech, I will review the work that US and EU competition authorities are doing together to fight anti-competitive practices.
And before I close, I will briefly give you the latest on an important policy development. This is the legislation on private damages proposed by the European Commission last June.
With the negotiations on the Transatlantic Trade and Investment Partnership, the traditional trade partnership between the EU and the US is poised to reach a whole new level.
Already, the EU and the US are each other’s largest economic partners and represent the world’s largest bilateral trade relationship, amounting to roughly one third of world trade in goods and services, and about half of the world’s GDP.
The negotiations are not only about bilateral trade relations. The strategic importance of a common EU-US approach in our bilateral exchanges will be much broader, notably because they aim at aligning regulatory standards and boosting bilateral investment.
Total US investment in the EU is three times higher than in all of Asia, and EU investment in the US is around eight times the amount of EU investment in India and China together.
It is clear that a successful outcome for these negotiations, difficult as they will be, will have a significant impact on our economies.
The TTIP will cover a wide range of industries and topics from reducing and eliminating quotas and tariffs to dismantling non-tariff barriers and harmonising regulations.
The talks offer us the prospect to cut the costs of our exchanges in key sectors, where there is room for improvement on both sides of the Atlantic, and can reduce double work.
The talks should aim at mutual recognitions, so if a product is safe enough for consumers at one side, it should be considered safe enough for the other side.
And even in sectors where this goal cannot be achieved, we should still be able to improve our flows of information and avoid unnecessary regulatory discrepancies.
Regulatory and administrative hurdles are aimed in principle to serve the purpose of keeping consumers safe, but sometimes they are also used to pursue protectionist goals by erecting non-tariff barriers.
We need to take a hard look at our rules on both sides and make sure they only serve the first purpose, not the second.
Last but not least, by signing a comprehensive transatlantic agreement, the EU and the US can create a good precedent for future global regulations and standards, show to the world the benefits that dismantling cross-border barriers can bring to people’s living standards, and encourage other countries to get the stalled multilateral trade negotiations moving again.
Ladies and Gentlemen,
Let me now analyse in some detail a possible issue to be discussed during these negotiations; one that is connected with my direct responsibilities as EU Commissioner for Competition.
In Europe, we control government intervention through State aid, which has been a pillar of competition policy since the creation of the EU.
Every year, we review hundreds of individual projects or schemes drafted by Member States and we put strict conditions to make sure that their financing does not distort competition in the internal market.
This is fundamental for the Single Market. When Member States protect certain national players against competitors, subsidies become barriers to trade and investment within the EU.
By obliging Member States to inform the Commission about their planned subsidies, our system creates transparency. It is then our responsibility to assess the support and approve it if it is compatible with the Single Market.
I often hear complaints by European firms that their competitors in other jurisdictions do not have the same constraints and receive public subsidies. At a time when our economies are increasingly global, I think they may have a point.
Government subsidies and enterprises with special rights – whether they are state-owned or not – are two issues that are not covered well at multilateral level.
Unfortunately, the WTO enforcement capacity in this area is still weak, and the TTIP talks are an opportunity for both sides of the Atlantic to seek common rules in these domains.
Anti-competitive behaviour – by both companies and governments – is in nobody’s interest because it ultimately undermines trust in international trade and investment rules. And trust is the most precious commodity in today’s global economy.
But it is still too soon to elaborate on the details of our transatlantic negotiations. The talks have just started, and the actual application of the agreements they will produce will take time.
As competition agencies, we don’t have to wait for these exciting developments to improve our cooperation.
The first challenge that I would like to mention is the increased activity we are observing on the mergers and acquisitions front.
This is prompted by the signs of global recovery after years of crisis and uncertainty, and a number of deals involve both Europe’s Single Market and the US market.
The recent acquisition by General Electric of the aviation business of Italy’s Avio is part of this trend. We have had an extensive dialogue with the FTC before clearing the deal in early July.
Both authorities initially shared a concern about the fact that Avio was a key supplier of Pratt & Whitney, a competitor of GE, for a new aircraft engine; but in the end no remedy was necessary in this respect in Europe.
Additionally, there were also issues in Europe about the potential impact of the merger on the Eurofighter jet in which Avio is a partner; but this concern was allayed by GE’s commitments.
This case follows another successful example of cooperation in this important industry; the recent merger between UTC and Goodrich, which was also cleared.
I believe that, almost 15 years after the GE/Honeywell saga, a lot has been made to ensure that our respective authorities understand each other’s concerns when they arise.
More recently, the DoJ and the Commission also exchanged views in the assessment of the proposed merger between US Airways and American Airlines.
Although the companies involved are both American, the deal would also have a potential impact on European consumers and, for this reason the European Commission had the responsibility to review it.
We found that the merger would lead to a monopoly on a London-Philadelphia route and our clearance decision was made conditional upon commitments which induce entry on that route.
We shared our views on the transatlantic routes with the Department of Justice, which is now challenging the transaction because it has important effects on domestic routes here in the US.
This shows that, because of the different features of our respective markets, good cooperation not always leads to identical decisions.
As to the near future, I expect our dialogue to continue – among other cases – on the transactions between the US advertising group Omnicom and its French competitor Publicis; a deal that would create the world’s biggest advertising group.
Still in the merger domain, let me add that we are improving some aspects of our procedures at the European Commission. The merger simplification initiative – as we call it – will make our review process more efficient for unproblematic transactions.
It seems that we are on the right track. We have launched a public consultation on this initiative and most respondents have welcomed it.
This procedural reform – which I expect to adopt before the end of the year – will make merger review lighter and less costly for business, in part thanks to a greater use of our simplified procedure, and will make pre-notification simpler and more focused.
In addition, we are also considering a reform of the EU Merger Regulation to extend our merger control to the acquisition of non-controlling minority shareholdings.
We are looking at the experience of some EU countries and of other jurisdictions such as the US, where merger-control rules already cover this type of acquisitions.
Should we follow that path, this would involve a proposal by the Commission next year to amend the current EU Merger Regulation, requiring the unanimous agreement of Member States.
Our work in the EU and the US do not overlap only in mergers. One example that springs to mind are our respective investigations into the business practices of Google, although in different market contexts.
We cooperated with our colleagues of the FTC since the beginning of our investigation, almost three years ago, but our conclusions are no identical. One of the reasons is that Google’s market position in Europe – with a market share of over 90% in on-line search– is much higher than in the US.
While the FTC settled with the company last March, we are at a crucial passage in our discussions.
Earlier this year we market tested Google’s proposals to address our antitrust concerns. The results of this market test were largely negative. Therefore, I have asked Google to improve its offer and the discussions are on-going during these days.
The case can still proceed in one of two ways: either the company offers improved commitments that would address our remaining concerns, or we’ll set out our concerns in a Statement of Objections – the equivalent of a charge sheet – and take the longer route that may possibly lead to a negative decision and a fine.
We will not have to wait a long time to see which of the routes will be chosen.
But this is only one case among many others, albeit a very visible one.
There are other industries in which both US and EU authorities are vigilant. Let me comment on two areas; the pharmaceutical sector and the car industry.
The latest decision we took in the pharmaceutical industry was a fine meted out to the Danish company Lundbeck and several other companies for pay-for-delay agreements. We are looking into other similar cases in this sector.
We took this decision in June. In the same month, the Supreme Court decided that pay-for-delay may be anti-competitive in its judgement on FTC vs. Actavis. In this area, the competition systems in the EU and the US seem to find a similar approach to common problems.
As to the automobile industry, our long-standing cooperation with the DoJ has led us to coordinate inspections in many international cartel cases, notably in car-parts investigations.
Over the last few years, the major competition authorities around the world have been investigating companies that supply parts to car manufacturers. Overall, more than 100 products and over 70 companies are involved.
As to the Commission, last July we imposed the fines against five producers of wire harnesses – the devices that conduct electricity in cars – and more decisions in this sector will follow.
I would like to close this brief review of some of the competition challenges we are facing in cooperation with our colleagues with a look at our work on the cases that the media have dubbed the Libor-fixing scandal.
Let me first say that the Commission adopted draft legislation last week designed to make benchmarks such as Libor and Euribor more robust and reliable.
On the enforcement side, we are investigating suspected cartel arrangements between traders of interest-rate derivatives involving a number of international banks and, in certain cases, brokers.
We believe that traders of interest-rate derivatives colluded to manipulate the Euribor and Libor rates of the banks to influence them and obtain a benefit in their own trading positions.
I am convinced that the rigorous enforcement of competition rules in these cases, in addition to ex ante regulation, is essential for restoring trust in the reliability of benchmark rates and in the financial industry at large.
In another case in this industry, we are also looking into the market for Credit Default Swaps, where we suspect that a number of large investment banks acted collectively to prevent exchanges from entering the credit derivatives trade.
Whereas in the CDS case the Commission sent a statement of objections last July, some of our investigations related to the Libor scandal are more advanced, and there are prospects for a settlement with the parties involved by the end of the year.
There are differences between cartel settlements in the EU and the process followed in the US. Under the EU settlement procedure, a party must acknowledge liability for the infringement and receives a 10% reduction of the fine imposed.
In the US, instead, plea bargaining is used as an investigation tool which rewards cooperation – this is perhaps closer to our leniency programme.
Another key difference is that while US plea bargaining is concluded with one party at a time, the EU settlements are normally concluded with all parties at the same time.
Let me stress that if a company ultimately decides not to join the others in a global settlement, it will continue to be investigated under normal proceedings.
We have already done this in the past. In the Animal Feed case, the Commission adopted two decisions; a decision for the parties willing to settle and another, standard decision addressed to the party that did not want to settle.
Ladies and Gentlemen:
I will now turn to the last topic of my presentation; the EU law on antitrust damages actions proposed by the Commission last June.
When it is passed, the new EU law will make it easier for individuals and businesses that have suffered from illegal anti-competitive practices to seek redress in national courts.
I know this would hardly be news here in the States. But it’s quite a step in Europe where competition law is enforced by the European Commission, together with the competition authorities in the Member States, but where hurdles still exist for victims to obtain effective compensation in court.
The draft is now going through the EU legislative procedure, which involves the European Parliament and the Council. If everything goes well, it will become law in Spring next year.
The new law addresses two urgent needs:
- it gives victims of competition-law infringements more tools to obtain damages, thus making the existing EU right to compensation a reality in all Member States; and
- it creates legal certainty on the status of leniency-related documents, ensuring a smooth interaction between public and private enforcement.
Let me tell you about two concrete measures included in our proposal.
First, the courts in the Member States will have the power to order companies to disclose evidence so as to allow victims to make their case.
However, self-incriminatory information already submitted voluntarily to competition authorities will never be made accessible. Specifically, this includes leniency corporate statements and settlement submissions.
Second, final infringement decisions taken by national competition authorities will constitute proof before civil courts that the infringement occurred. This is already the case for the decisions of the European Commission.
Our proposal sets out rules that are applicable to all antitrust damages actions – individual and collective. However, it does not require Member States to introduce collective damages actions in the competition field if they don’t have any yet.
But, looking forward, the internal market must be a level playing field in legal terms too. So, with a Recommendation approved last June, the Commission invites all Member States to allow collective actions in all areas of law, including antitrust.
The Recommendation sets out common principles and safeguards for these actions. For example, representative entities must fulfil certain conditions before they can go to court on behalf of a group of victims. Also, opt-in should normally be the default model for these actions.
These and other principles of the Recommendation – such as on costs, funding, and alternative dispute resolution – can bring the EU a bit closer to the court cases that are common here in the US, but will make us immune to the abuses and excesses that are possible in class-action litigation.
Ladies and Gentlemen,
The message that emerges from the various topics I have discussed today is that the competition authorities on both sides of the Atlantic have a golden opportunity.
We must strengthen our traditional ties to lead by example, shape the international competition agenda, and help build a global playing field to sustain the recovery – still weak and uncertain – after the long global slowdown.
The courage and determination that we’ll be able to show in improving our relations will bring large benefits to our respective economies and fulfil our responsibility towards the rest of the world.
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