On 6 February 2019, the European Commission prohibited the proposed Alstom-Siemens merger—a heavily-discussed decision that fueled a pre-existing debate on whether or not to reform EU competition rules. Since then, several submissions have been made by Governments, academics and practitioners on the merits of the existing system and the need for a thorough review of the rules.
The new President of the European Commission, Ursula von der Leyen, has now mandated her designated Competition Commissioner, Margrethe Vestager, to “evaluate and review Europe’s competition rules, including the antitrust regulations that will expire in the course of the mandate, the ongoing evaluation of merger control and the review of state aid rules and guidance.”
Against that backdrop, we wanted to understand how this debate resonates with opinion leaders.
The Brunswick Study
Brunswick conducted a survey of European opinion leaders to gauge how well competition policy is understood in Europe, how much appetite there is for reform and how far the concept of European champions is understood, accepted, or rejected. Our objective is not to offer an opinion on the need for reform, but rather to provide data to sustain an informed discussion.
We defined opinion leaders as those who are highly educated, follow top-tier financial news, are civically engaged and work in industry or services across eight Member States — France, Germany, Ireland, Italy, the Netherlands, Poland, Portugal and the UK. These countries were chosen as representing various economic interests, industrial cultures, and political weight in the EU.
We then presented our findings to 12 policy and legal experts within the ‘EU bubble’ to hear their reaction.
More details about the methodology of this study can be found in the Annex to this note.
What did we find?
84% of opinion leaders indicate they are familiar with the topic of EU competition policy.
When we spoke to experts on the matter, few were surprised that this number was so high. They cited the international media attention on Vestager, and her predecessors, decisions and widespread political debates about platform dominance as the likely cause of this familiarity. High-profile decisions on conduct cases involving Google, which generated over 1,200 unique English-language articles over the past year, state aid and tax cases involving Apple and merger cases such as Alstom-Siemens drive very high media coverage.
As an example, there were over 5,000 unique articles (in English, French and German) mentioning the Alstom-Siemens merger alone from the time it was first announced in September 2017 to February 2019.
This intense media exposure of competition decisions far outweighs other EU policy issues—regional policy, agriculture, and even trade do not receive the same attention. But with a lot of coverage comes a certain politicisation as readers form opinions of the cases and the decisions taken. Such readers may include national leaders, who, as exemplified by President Trump, will seek to ascribe political motives to competition decisions.
Opinion leaders question the role of price as a sole measure of consumer welfare.
One area of focus in the study is the concept of “consumer welfare”, often cited as the ultimate purpose of competition policy.
When asked whom European competition rules are designed to benefit, only 26% of respondents say it is the consumer, while 43% say it is large companies. The European Commission has asserted for many years that competition policy protects the interests of consumers, but that message is not getting through, perhaps because media coverage focuses more on the impact on large companies than on consumers. The corrective measures introduced by decisions may also not have a sufficiently substantial impact on a company’s behaviour for consumers to sit up and notice.
62% of opinion leaders surveyed believe that “ensuring price competitiveness” should be a goal of Europe’s competition policy; however, just as many respondents believe “preserving employment and welfare” and “preserving and encouraging innovation” should also be top goals. While impact on innovation is central to many recent competition assessments made by the Commission, the social impact of transactions has often been excluded from the remit of competition policy.
Question: Which, if any, of the following should be the goals of Europe’s competition policy?
Policy and legal experts we spoke to agree that additional non-economic factors could be considered beyond price. They understand that price is a favoured metric because it is objective and can be measured, but question whether it is sufficient. Some suggest that the definition of consumer welfare be broadened to include factors such as data protection, environmental impact, and strategic autonomy, and that analytical tools be developed to measure impact on employment and innovation. They see the challenge in identifying the right methodology and criteria for measuring these factors but think that competition authorities are capable of doing so.
To a certain extent, this has already been done in certain jurisdictions, such as South Africa, where public interest tests (PIT) are conducted alongside a traditional competition test to complete a merger assessment. When justifying a merger on public interest grounds, the Competition Commission must consider the effect that the merger will have on a particular industrial sector or region, employment, the ability of small businesses, or firms controlled or owned by historically disadvantaged persons, to become competitive, and the ability of national industries to compete in international markets.
A PIT was employed in the ABI/SAB merger, for example, prompting the companies to make significant commitments to alleviate public interest concerns.
85% of opinion leaders agree that European competition rules should be reviewed and reformed.
This push is not coming from France and Germany alone. 89% of respondents in Poland and 75% of respondents in the Netherlands agree with the need for reform. The appetite for reform is not necessarily linked to any decision or national agenda, but more to the belief that rules should be updated regularly to reflect political, economic and technological changes. Respondents also cited the need to reflect geopolitical developments and the general trade environment. As the liberal and multilateral order is challenged by the US and trade tensions loom between the large blocs, there is a certain appetite for more interventionism in the control of investment flows, supply chains and the protection of technological independence.
There was also considerable agreement among respondents (72%) that EU competition policy should include the ability to split up companies that are too dominant, with 80% of respondents in the UK and 60% of respondents in Ireland agreeing with the statement.
Policy and legal experts questioned whether it is realistic to expect legislation to force unbundling and prevent dominant vertical concentration within the tech sector specifically, while pointing out that the energy and telecom sectors were examples of the successful implementation of a strategy of competition enforcement and sector-specific legislation.
A majority of opinion leaders do not believe the European Commission should have sole authority over competition decisions.
Only 40% of respondents across the eight Member States surveyed believe that “the European Commission is best positioned to maintain independence over competition decisions.” 78% of respondents agree that an independent third-party competition agency should be established to make competition decisions.
Some respondents are also keen on a form of political supervision, with 31% of them believing that the European Parliament and 29% believing that the European Council, should have more power over competition decisions.
Experts believe that the advantage of competition policy is that it is fact-based and developed on the basis of well-defined rules, but they challenge whether the drafting and enforcing of those rules should be handled by different entities. Some experts warn of the idea of giving the Parliament or Council more influence, saying this move would be regressive and only make the process more political. They argued that the European Commission is already an independent authority and that there is no need to establish another body.
Opinion leaders are unable to describe in detail the concept of “European Champions” and are divided on their impact on Europe.
When asked to explain the concept of “European Champions,” respondents were unable to define the term in detail but described them as corporate “leaders” able to “compete against large players in other countries.”
79% of respondents believe European Champions have a mostly positive impact on Europe. However, they struggle with the tradeoffs — 46% believe that European Champions stifle innovation and growth in Europe and create monopolies, while 54% believe that without European Champions, other global economies will grow faster and dominate European economies.
This divergence is particularly strong between respondents in France and Germany. While the two countries are often seen as the leaders of the reform movement, they disagree on the role of European Champions. 60% of French respondents agree that without European Champions, other economies will grow and dominate Europe economies, while 64% of German respondents believe they stifle innovation and growth.
Policy and legal experts see a need for European Champions in cutting-edge industries, providing technological independence. They also believe European Champions can be created through a subsidy system, creating market leaders in smaller, niche and often supplier roles.
We hope this study contributes a data-driven perspective to a conversation we expect to become increasingly relevant for policy and business stakeholders in Brussels and beyond. The current challenges of multilateralism, Brexit, and quickly advancing technologies, among other issues, raise questions we must answer.
- Does the scope of competition policy need to be reviewed?
- Does it need new tools?
- How does the distribution of power over these decisions affect consumers?
- Would an overt policy of creating and protecting European Champions trigger retaliation elsewhere?
Brunswick Group’s in-house research team surveyed 1,099 respondents online in France, Germany, Ireland, Italy, Netherlands, Poland, Portugal, and the UK from 8 May 2019 through 6 June 2019. The criteria this audience needed to meet in order to qualify for the study was high education, high income, top-tier financial news readership, civic engagement and a professional focus in industry and services. This sample has a margin of error of 2.87%.
Brunswick then reached out to 12 policy and legal experts and interviewed them one-on-one about the survey results. These interviews were free ranging in nature and were used to learn their perspective. These conversations were conducted confidentially.