France, Germany, Italy and Poland have urged European Commission Vice President Margrethe Vestager to stop dragging her feet on competition law reforms that they insist are needed to forge European champions to rival China and the U.S.
For more than a year, Paris and Berlin have been pushing for new EU antitrust rules after Vestager blocked a mega merger in the rail sector between France’s Alstom and Germany’s Siemens. They reckon that deal would have created the sort of corporate giant that Europe needs — an Airbus of the train sector — while Vestager argued that the merger would have harmed European consumers.
After months of resisting the Franco-German onslaught, Vestager unexpectedly announced in December that she would review the rulebook, but then declined to map out any timeframe. In late January, Vestager said the process would “take some time.”
Paris, Berlin, Rome and Warsaw — four of the EU’s political heavyweights — have now taken the unusually confrontational step of telling Vestager to hurry up and produce her action plan on various competition reforms within weeks. Their letter, dated February 4 and obtained by POLITICO, comes amid a major European strategic shift toward a centralized industrial policy, and only weeks before the Commission is due to launch its own industrial strategy agenda on March 10.
The four member countries are specifically targeting measures that they know Vestager is largely able to finalize herself. It’s a more pragmatic tack than their original calls to change Europe’s competition rules, which included plans to change treaties and regulations requiring unanimity among the member countries.
Explaining that “the nature of global competition has changed,” ministers from the quartet called “on the Commission to adopt a work plan in the forthcoming weeks with practical proposals and rules to address these specific challenges.” The letter was signed by German Economy Minister Peter Altmaier, France’s Bruno Le Maire, Italy’s Stefano Patuanelli and Poland’s Jadwiga Emilewicz.
Member country muscle
In a conspicuous sign that member countries are willing to flex their muscles, the ministers concluded that they were confident that Vestager’s “involvement in long-term strategy for the future of European industry would lead to greater collegiality in the assessment of the EU’s long-term industrial challenges in the evaluation of competition rules, merger control and state aid rules.”
The reference to “collegiality” picks up on long-standing frustration among member countries that the EU’s competition police are lone guns, who do not allow a significant role for other parts of the Commission and the national capitals. Vestager is a key personality in the Commission as she acts as both digital supremo and competition commissioner.
A senior competition lawyer in Brussels noted the hint of menace in the demand for “greater collegiality.”
The review of market definition is exactly the topic where Vestager has been elusive on providing a timeframe.
“The common theme throughout the letter is: Commissioner, you’ve got an awful lot of power now, but that means you’ve also got to listen more to the member states,” the lawyer said.
China looms large in the ministers’ wish list. France and Germany argue that Brussels was wrong to block Alstom-Siemens because the antitrust enforcers failed to take a sufficiently global view of competition that would have shown the rising threat posed by state-backed Chinese industries. For this reason, one of the key demands from member countries is a new “market definition” that would put greater focus on China.
The letter called for “an evaluation and modernization of the current European Commission’s guidelines on the assessment of horizontal mergers and on the definition of the relevant market in order to ensure fair and undistorted competition.”
The review of market definition is exactly the topic where Vestager has been elusive on providing a timeframe. The letter also called for specific guidelines, to be drafted in “forthcoming weeks” to provide clarity on the “efficiencies brought about by a merger.”
In another measure apparently aimed squarely at China, the ministers asked for a “competition toolbox more efficient and effective in tackling potentially abusive behavior in the single market of economic actors from outside the EU, including state-backed or subsidized companies.”
One of the proposals favored by more defensive EU industries is the suggestion that the onus would fall on Chinese investors to prove that they are not backed by state subsidies when operating in Europe, rather than the burden being on the EU side to prove that they are state-backed.
“European companies now have to compete with foreign companies that sometimes benefit from substantial state support or from protected domestic markets, in some instances to a very high degree,” the letter from the four ministers reads.
U.S. technology companies are as much in the crosshairs as China. In perhaps the most taxing deadline in the whole document, the quartet also sought proposals on how to deal with the competitive challenges of big technology “ideally by the end of the second quarter of 2020.”
This refers to a major strategic shift being planned in various parts of the EU, whereby the authorities would no longer wait for a big technology company such as Google to commit an infringement, but would impose a certain set of precautionary (or ex ante) rules on them.
Momentum for this new regulatory system built up last year after calls from the Netherlands, the U.K., France and Germany. The wording used in the ministers’ letter on tackling “digital platforms with paramount importance for competition” is directly reminiscent of a German bill that was approved by the Cabinet in Berlin earlier this year and is expected to be made law by parliament before February 2021.
The senior competition lawyer, however, thought the ministers would be unlikely to be able to force through a proposal by the second quarter of 2020. “That is unrealistic. They just want to say: this is very important for us,” he said.
The pressure for competition rule reform originally came from France, Germany and Poland. Italy is a newcomer to the lobbying campaign.
Last year, Rome seemed more inclined to cozy up to Beijing, when it agreed to sign up to China’s One Belt, One Road infrastructure initiative to improve Asia-Europe trade networks.
For a while, this proximity to China was seen as a factor in keeping Rome away from a radical shift toward a more protectionist EU industrial agenda.
Italy has now, however, thrown its weight fully behind the broader drive to “adapt competition policy” to the new “market trends.”
Giorgio Leali contributed reporting
Want more analysis from POLITICO? POLITICO Pro is our premium intelligence service for professionals. From financial services to trade, technology, cybersecurity and more, Pro delivers real time intelligence, deep insight and breaking scoops you need to keep one step ahead. Email email@example.com to request a complimentary trial.