Brunswick Review The Resilience Issue

Questions for Europe

No less than the future of competition law is at stake in a confused and shifting political terrain.

Three interrelated themes dominate EU politics so far this year: the European Parliament elections in May and subsequent appointment and confirmation of senior EU leaders, Brexit, and the future direction of competition (antitrust) policy.

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Illustration by David Plunkert

Not long ago we would have said with some confidence that 2019 will be an interesting year, but no more than that. Certainly, there will be European elections and appointments of new leaders in the European institutions. The Brexit negotiations will be finalized and the UK will leave the EU but remain closely tied to the European single market. The European Commission’s DG Comp will continue to be the pre-eminent competition authority in Europe, secure in its role at the center of a mature system of law and policy, buttressed by a stable body of case law.

We can no longer be sure of any of that. Brexit has turned into a nasty, protracted drama and no-one can say today with any degree of certainty what will happen.

Meanwhile, the decision to prohibit the Siemens-Alstom merger has sparked great controversy and added fuel to the fires already burning in contemporary European politics about Chinese competition, growing protectionism in the US and loss of faith in markets, globalization and multilateral institutions.

We are not talking here just about a threat to the established order posed by populist upstarts. The French and German governments are calling for a new European industrial policy and fundamental reform of European competition law. Unsurprisingly, they reach for their own national models, the German Ministererlaubnis political override and the French politique industrielle volontariste. Is price the main criterion for judging competition or is innovation, particularly in digital services, just as or more important?

This crystallizes a debate that has been waxing and waning for decades and in which British influence played a major part: What is the purpose of competition law and by what criteria should it judge corporate behavior and mergers? The negotiation of the EU’s merger regulation in the late 1980s saw all of these issues aired extensively. The regulation as enacted in 1989 bears some traces of the arguments that raged at the time.

Nevertheless, the final text of the regulation and the way it has been applied ever since are rightly seen as predominantly competition-based to the exclusion of other policy concerns. Many in Europe viewed that outcome as an espousal of British views and a victory for the competition Commissioner at the time, the late Sir Leon, later Lord Brittan. More broadly I think it is fair to say that the influence of British lawyers, academics, officials and politicians on the development of EU merger law over the last three decades has been considerable.

So the challenges of 2019 are enormous—including nothing less than to determine the future direction of EU competition law.

That era is about to come to an end. What we have taken for granted is open to debate and up for grabs. European elections will take place in May. A new President of the Commission will be designated and the Parliament will question him or her about many things. Competition policy is bound to be one of them. A competition Commissioner will also be designated and face questions in Parliament. You can imagine the scene and some of the questions. “Will you undertake to propose amendments to the merger regulation? If so, what will they say? Do you agree with this or that Government’s position? Do you think Siemens-Alstom was rightly decided? Should there be an overriding public interest test to assess mergers? What will you do to promote and defend European champions? Do you think you have the right law and policy to put Europe in the forefront of the digital economy?”

Remember, there will probably be no Brits in sight, and there will be many honorable (I hope) members from new parties or ones outside the traditional European framework of Christian Democrats, Social Democrats, Conservatives, Liberals and Greens.

So the challenges of 2019 are enormous—including nothing less than to determine the future direction of EU competition law. Will the Commission’s DG Comp remain the main enforcer and guiding spirit it is today? Will it be hived off and become an independent agency? Which bits of it? Only mergers? All antitrust? What about state aid?

Will the Council be given powers to overrule Commission decisions? Or will all this blow over as the New Hanseatic League (a bloc that includes Denmark, Estonia, Finland, Ireland, Latvia, Lithuania, the Netherlands and Sweden) replaces the UK as the bastion of competition and free trade, while the Franco-German machine stalls again?

The Commission without DG Comp would be a much diminished institution, with far less impact on the European economy than it has today. This diminution could take place in a wider context in which the Commission is downgraded to a less political, more technocratic body, as some member states want.

There are contradictory arguments swirling around. Some say the Commission has to choose between being political and enforcing the law; it can’t be both. The stability and growth pact in support of the euro has been a fertile terrain for this debate: Is saying “France is France” to explain breaches of the pact sensible politics or failure to uphold the rules? We live today in a world where the Commission broadly holds the ring between big and small member states, the pure letter of the law and practical politics, east and west, north and south.

It’s not textbook stuff, but would any textbook writer invent the European Commission as it is today? And what would Europe look like without it? We should think carefully about where changes might lead before embarking on them.

The Brexit saga illustrates this convincingly. The current settlement of affairs in Europe, however hard to describe using the traditional categories of political science, may be better than plausible alternatives and is certainly a marked improvement over previous European dispensations.

Meanwhile, look at the uncertainties in the UK revealed by the Brexit debate and then think about the future direction of British competition law. What will Britain do and how will it interact with EU law in cross-border situations? From the unilateral throwing open of borders advocated by some within the Conservative Party, to the much more regimented economy favored by Jeremy Corbyn and his allies in the Labour Party, there are many policy options open to the UK.

Further afield, will US antitrust law be caught up in the Trump administration’s way of dealing with the rest of the world? Many of these issues have been aired before, only for passions to subside as the difficulties of fashioning alternatives proved insuperable. No one can be sure where we will end up, but we should all be prepared for a mighty debate.

Sir Jonathan Faull is Chair of Brunswick’s European Public Affairs team and is based in Brussels. He was a senior official of the European Commission.

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