Has EU Competition Policy Diverged From Its Foundations? | Brunswick Group

Has EU Competition Policy Diverged From Its Foundations?

Brunswick Global Antitrust and Competition Practice Group

Takeaways for Business

On February 7, Brunswick Group hosted the European Commission’s (EC) Director-General for Competition Olivier Guersent for a discussion on potential changes from past approaches to EU competition policy that are currently being debated and tested. He was in conversation with Sir Jonathan Faull, partner and chair of European public affairs, with questions by John Davies, senior advisor and colead in our Global Antitrust and Competition Practice.

Below are the seven key takeaways from the conversation. 

1. Expect foreign subsidies from third countries to be subject to the same level of scrutiny as state aid granted by member states

Speaking on the human resources needed to ensure proper enforcement of the new Foreign Subsidy Regulation, Olivier Guersent argued that the 120 staff foreseen “is obviously the bare minimum if you want to do something meaningful.” Fortunately, he noted, the European Commission was granted a lot of discretion on which cases to take up, allowing the executive body to prioritize. To compensate for the small number of people enforcing the new rules, the Commission will look to work with national tax and customs authorities.

Moving to merger control, Guersent dismissed rhetoric in EU member states, particularly France, which advocates for tougher stances toward Chinese and American firms and softer approaches with German and French firms. "We have to apply the same standard to the same situations," he said. As an example, he mentioned that the Commission has been tough, to the point of withdrawal, with both a Canadian and Spanish merger in the aviation industry.

2. Recommendation on referring below-thresholds deals up to the Commission has changed, not interpretation of EU merger regulation

Sir Jonathan argued the predictable merger control system which is underpinned by quantitative thresholds that would trigger a review was a "major selling point" to the member states and the wider business community. He took note of the EU’s new “interpretation” of the Article 22 mechanism, allowing below-thresholds referrals from the EU’s national competition authorities, and the uncertainty this spread.

Guersent stressed that "the Commission has not reinterpreted Article 22," but until 2020 recommended member states not to use the mechanism. He argued that the interpretation was never changed; the recommendation did, due to the changing nature of markets. On balance, the disadvantages in the past of referring cases up to the Commission outweighed the advantages. At present, the Commission is of the belief that "now it is the other way around,” hence the change in recommendation, Guersent noted.

3. The EC is as coordinated as it can be with CMA and DOJ/FT

While the Commission is inevitably less coordinated with the UK’s Competition and Markets Authority (CMA) post-Brexit, Guersent noted that “we are as coordinated as we can be.” The case teams talk on a regular basis and try not to impede each other’s investigations, he noted. With the US Department of Justice (DOJ) and Federal Trade Commission (FTC), he argued that they “probably [have] one of the most intense cooperations we have had ever,” further substantiated by strong convergence in competition analysis.

4. Cross-border telco deals are becoming more favorable

Responding to an audience question on the Commission’s stance vis-à-vis telco mergers, Guersent agreed with comments recently made by EU Internal Market Commissioner Thierry Breton who argued in favor of cross-border mergers (compared to domestic mergers), as those have a “higher likelihood” of creating efficiencies than domestic mergers. He called 3-to-2 mergers a “no-go.”

5. “Zero chance” of territorial battles in DMA enforcement

On the Digital Markets Act (DMA), speakers discussed the advantages and disadvantages of the foreseen combined enforcement between the European Commission's competition department and digital department (DG CNECT). While such a joint task force can be fragile, Guersent reassured the audience that "fortunately, I think for as long as it would be Roberto Viola [Director General of DG CNECT] and me, there is zero chance that [territorial battles] happen."

6. Digital ecosystems continue to increase the complexity of the competition analysis

Both Olivier Guersent and Sir Jonathan Faull underlined that the revised draft Market Definition Notice (currently under consultation and to be adopted later this year) was not a radical departure from the original. Those who were hoping “for a less consumer-focused view of market definition” would be disappointed, Guersent stated, emphasizing that in any event market definition is simply the starting point of the competition analysis.

He added that the greater challenge in the future would be understanding the subtleties of competitive interactions in digital markets, commonly referred to as “ecosystems.” Each instance will need to be analyzed on a case-by-case basis, he underlined.

7. Commission rethinking its approach to dominance-abuse

In the recent Intel case, the Commission's enforcement method for dominance cases was challenged in court (a judgment is due later this year). Guersent acknowledged that, even for him, it is now difficult to understand fully the evidentiary standard that the Commission is being subjected to in dominance cases, but he doesn’t believe the case should render the Commission's entire findings invalid. Guersent told the audience he believes that the evidentiary standards being applied are overly stringent.

To continue the conversation:

John Davies,
Senior Advisor, Global Antitrust and Competition Co-Lead, London
[email protected]