Guntram B. Wolff
Director and CEO, German Council on Foreign Relations
Director and head of the Brussels office at Copenhagen Economics,
Director-General of Economic Policy, Federal Ministry for Economic Affairs and Energy, Germany
Professor of Economics and Deputy Director of the Centre for Competition Policy, University of East Anglia,
Deputy Director, BusinessEurope,
Director Directorate C, DG COMP,
President, ZEW – Leibniz Centre for European Economic Research and chairman of the German Monopolies Commission,
Computer and Communications Industry Association,
Deputy Head of Unit, European Commission, DG COMP,
Head of Economic Affairs, Permanent Representation of the Netherlands to the European Union,
The question whether trade policy instruments are fit for coping with the rise of state capitalism and a new dimension of state subsidies has already been discussed intensively in trade policy debates. Whether in this context competition law might also need to be updated and whether this should encompass new instruments are less debated questions which the first panel addressed.
The second panel built on this and discussed whether (and how) competition law needs to be updated with a view to ongoing digitization of the economy, seeing that digital technologies not only change the structure of markets but also open up new levels of strategic global competition. Access to data or digital infrastructure are important facets of this discussion in which Europe needs to find its own answers.
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The first panel discussed state capitalism and subsidies and how the level playing field can be ensured in the internal market. Philipp Steinberg argued that competition policy is only one element in combatting the distortions created by state-owned enterprises to achieve open markets, multilateralism and global value chains. He explained the need for updating the regulators’ toolbox with defensive instruments as well as active policies to make Europe more attractive. The former include, amongst others, the following measures. First, the market definition should encompass global markets. Second, clear advice on how firms can cooperate under competition law should be made available. Third, article 102 should be updated to be fit for the digital era. This includes a clear and quick definition of platforms, the inclusion of data in the essential facility doctrine and the reinforcement of procedural instruments such as to counter the tipping effect. Finally, the need for investment screening and the issues in international public procurement were raised. The latter ensures that the EU is still attractive by using an appropriate policy framework including targeted industrial policy measures, attracting venture capital and others.
Christof Schoser stressed that regulatory measures should not block foreign investment in the EU. He also stated that the European Commission launched a process to improve EU-China communication. In response to Mr. Steinberg, he said the Commission is currently looking into the changes to the market definition and will publish a white paper with proposed measures in the next quarter.
Luisa Santos exemplified the relevance of the topic. As China is not converging towards a market economy as expected, Chinese champions hurt European firms that follow the rules. She argued the EU needs better tools to address the consequential issues in procurement, competition, investment and trade. Many of her proposed tools align with those of Mr. Steinberg. She concluded that the regulatory framework should not create a “fortress Europe” and that the EU should work together with the US in negotiating with China.
Alicia García-Herrero elaborated on the role of China in international competition. She raised an important question: “if the Chinese model exhausts itself, and we fear that it is unsustainable, why should we care if our consumers are subsidised in the meantime?”. The reason why it poses an issue is that some sectors are characterized by important lock-ins and economies of scale which then could be captured by Chinese firms. She concluded that a multilateral approach is necessary. The WTO only encompasses trade, for this reason only the OECD seems equipped at this point.
The audience raised questions about the EU’s FDI screening regulation, the OECD’s competitive neutrality and the exclusion of specific industries in the regulatory framework. The panellists answered the first question by stressing the need for harmonisation within the EU and the fact that regulation should not deter foreign investment. They addressed the second by pushing for WTO reform and looking at the Australian counterpart. Regarding the final question, the panel agreed that a one-size-fits-all approach will be detrimental to reaching the objectives.
The second panel discussed whether the competition law framework should be updated for the digital age and the potential antitrust challenges brought on by online platforms. Achim Wambach, President of the Leibniz Centre for European Economic Research (ZEW) and chairman of the German Monopolies Commission, started the discussion by emphasising the need for more legal certainty, for instance in data sharing between firms.
Adina Claici, Director of the Copenhagen Economics Brussels office, discussed the European Commission’s review of the market definition framework for digital business models. She noted that the basic economic principles that underlie market definition exercises still apply in digital markets. In the context of e-commerce platforms, for instance, should offline markets be included? She argued that, in the end, these are empirical questions. Ms Claici also addressed so-called ‘killer acquisitions’ in the digital context. Ms Claici cited some research suggesting that, in some cases, killer acquisitions can have pro-competitive effects. She therefore advocated for a case-by-case analysis.
Kay Jebelli, from the Computer and Communications Industry Association, highlighted the benefits of technological change and digitisation, including for competition. He argued that ex ante regulation could undermine these benefits. He also pointed to the dangers of industrial policy under the guise of competition policy.
Kai-Uwe Kühn, Professor of Economics and Deputy Director of the Centre for Competition Policy at the University of East Anglia, warned against mixing competition policy with other regulatory issues. While there is a need to adapt privacy and consumer protection regulation, he argued, these regulatory goals are different from (and indeed often in conflict with) competition policy objectives. Mr Kühn then elaborated on the market definition and killer acquisition issues. He clarified that market definitions should not be legislated. Market definitions are a methodological issue; it’s about taking substitution effects into account. On killer acquisitions, Mr Kühn warned against reversing the burden of proof. Indeed, he claimed, in digital markets it is often not clear whether goods are substitutes or complements. He concluded with a word of caution: when thinking about regulating, we need very clear reasons to do so.
Guillaume Loriot, Director Directorate C at the European Commission DG COMP, distinguished between two debates: (1) how to regulate platforms? and (2) should competition tools be modernised? Mr Loriot proposed that these questions be explored through concrete problems. Different cases call for different answers. There are two broad types of cases. Cases around the preservation of competition between platforms, and cases around the promotion of competition within the platforms. In sum, he concluded, it may be hard to issue simplistic messages; authorities must take a close look at the facts.
After taking questions from the audience, the panellist addressed the following concerns. First, Achim Wambach argued that there is a need to move towards a more rule-based system; the essential facility doctrine, for instance, may reaching its limits in data-driven markets. More guidelines are required, according to Mr Wambach, to address new theories of harm. Kai-Uwe Kühn cautioned that, while there are clear cases when regulation is needed (e.g. as regards privacy), in other cases blanket bans would be highly problematic (e.g. to address ‘market tipping’). Second, Guillaume Loriot stressed that now is the time to decide what the issues are and to have concrete discussions around these issues—for example around pre-installation neutrality or cross-border sales. Mr Loriot emphasized that the market needs clear guidance as to what is allowed and what not. Achim Wambach retorted that while new forms of anti-competitive behaviours emerge all the time, there is really one issue: to prevent harm to competition.
By Julia Anderson and Tom Schraepen