NICOLAS PETIT AND NORMAN NEYRINCK9 NOVEMBER 2012

GCLC ANNUAL CONFERENCE 2012

WWW.CHILLINGCOMPETITION.COM

INDUSTRIAL POLICY AND COMPETITION ENFORCEMENT: IS THERE, COULD THERE AND SHOULD THERE BE A NEXUS?

Purpose of the Presentation

Should there be a nexus between EU competition law and industrial policy?

Outline

I. Variants of Industrial PolicyII. A Review of the Economic LiteratureIII. What does EU law say about this?IV. Enforcement Implications?

Targeted Industrial Policy Competitiveness Policy

Picking winners, saving losers

Supports specific domestic firms/sectors

State aid and government sponsored mergers

Reactive (Alstom) or Pro-active (EADS)

Strong anticompetitive potential

Horizontal policiesCorrect market failures Smart regulationCompetition policy as

part of competitiveness policies

Less anticompetitive, in principle

But non price competitiveness

I. The Two Variants of Industrial Policy

Targeted industrial policy Competitiveness policy

Pros Safeguards domestic

employment; keep capital national; big is beautiful; “infant industry” theory; etc.

Cons Asymmetrical

information; rent seeking; public choice issues; distortion of investment incentives

Pros Less documented Avoid the pitfalls of

industrial policy Cons

Poor empirical evidence Winners and losers Rent seeking “Sprinkling” of resources

II. Review of the Economic Literature (1)

Targeted individual policy Competitiveness policies

Confirmative examples Alstom, EADS, etc. (+

China, Brazil and India)

Unsupportive examples Bull, Nokia (?), etc.

Confirmative examples Silicon Valley, Hartz

reforms in GermanyUnsupportive

examples The Lisbon Strategy,

and the EU 2020 Agenda…

II. Review of the Economic Evidence (2)

III. What does EU law say about this (1)?

Treaty Law Article 173(1) TFEU: “The Union and the Member

States shall ensure that the conditions necessary for the competitiveness of the Union's industry exist”.

But Article 173(3), industrial policy ‘”shall not provide a basis for the introduction by the Union of any measure which could lead to a distortion of competition”

III. What does EU law say about this (1)?

Case Law (post introduction of Article 173 TFEU) GC, T-17/93, Matra Hachette SA v. Commission, [1994]

ECR II-595 See also GC, T-112/99, Métropole télévision (M6),

2001, ECR II-2459, para 118 Bottom-line: competition policy does not apply in

a vacuum Best practice => EU competition enforcement should

pay heed to industrial policy considerations

IV. Enforcement (1)

So far, no space for targeted industrial policy: “The price of creating a European champion cannot

be to let a de facto monopoly dictate its commercial conditions on thousands of European firms operating with European derivatives” (J. Almunia, re. Deutsche Börse/NYSE prohibition)

And competitiveness? “Competition enforcement and advocacy also serve

other wider longer-term objectives such as enhancing consumer welfare, supporting the EU's growth, jobs and competitiveness in line with the Europe 2020 Strategy for smart, sustainable and inclusive growth” (Annual Report on Competition Policy for 2011)

IV. Enforcement (2)

Hot air?Not so sure

“the EU [must] develop a stronger horizontal coordination of its various instruments and policies. A more in-depth articulation of competition, trade and industrial policies has to be developed, in order to ensure a coherent and consistent approach to the protection of industrial value chains” (2011 Competitiveness Report).

Four strategic interests where adjustments may be deserved

IV. Enforcement (3)

Access to Resources Enforcement priority under 102 TFEU (EFD-style theories of

harm) Leniency against joint purchasing agreements 101(3) TFEU Increased scrutiny of mergers that involve the acquisition of EU

input manufacturers, by State-controlled foreign firms Fact finding

Innovation Build larger innovation capacities in Europe => more lenient

towards innovation-efficient mergers between EU firms, than re. mergers between non-EU firms

State aid => lower thresholds for industrial research and experimental research => avoid “Valley of Death”

Access to MarketsRestructuring… And the Competitiveness Defense?

Thank you!