EU competition chief warns against Franco-German push to loosen merger rules

3 months ago 8

European Commission Executive Vice-President Margrethe Vestager has warned against the idea of watering down competition rules to allow for “European champions”, an age-old idea that could gain new momentum as part of an expected “competitiveness deal” by the next Commission.

A drive to boost EU competitiveness in global markets has been taking over the Brussels bubble in recent months, materialised in two high-level reports on the topic – by former ECB President Mario Draghi and former Italian prime minister Enrico Letta.

Within this debate, competition rules like the ones Vestager is in charge of are perceived by some as impeding the emergence of EU-based giants, sometimes dubbed “European champions”, so they have come increasingly under the microscope.

With this, the idea of revising merger rules to allow for more “scale” is starting to simmer in Brussels and European capitals.

However, Vestager is pushing back.

At an event of Brussels-based think-tank Bruegel on Wednesday (19 June), the EU competition chief said the discussion is “based on the wrong premise, which is that you need to be sheltered and coddled and nurtured within Europe in order to make it in the global market”.

“I think it’s the other way around: I think you need to be challenged in order to be really good. If you want to create businesses that can compete in the global market, they need to be exposed to competition in Europe.”

Vestager vs French-German axis

Germany and France already made sure in May to lay out their own priorities for the upcoming EU mandate in a joint statement titled “Agenda to boost competitiveness and growth”, which called, among other things, for the revision of the EU policy on mergers.

“Structural competition problems in the global context, in particular in sectors which have an international dimension and are of high importance for the overall EU economy, should be tackled properly by assessing the need to introduce any new legal instrument,” the two governments wrote in their joint statement.

“We need to review the current European competition rules and practices [to see] whether they are still appropriate to contribute to achieving this goal and allow for establishing consortia and consolidation in key sectors (e.g. mobile network sector, airspace) in order to strengthen European resilience,” they added.

The idea of “European champions” was particularly prominent in 2019 when Vestager blocked a high profile takeover of French train manufacturer Alstom by German industrial giant Siemens.

At the time, both governments criticised Vestager’s opposition to a merger they said was needed for both companies to be able to withstand Chinese competition.

Vestager said on Wednesday her team had “just revisited that specific market,” and found there are “no Chinese suppliers in these markets that were crucial”.

“What we do find is that the two most successful businesses globally are indeed Siemens and Alstom,” she said.

The reshuffle of Commission portfolios, however, may her leave after two mandates at the helm of the competition unit: Vestager’s socialists-led government in Denmark could prefer to nominate someone from the same political group, given the stronger shift to the right in the EU’s political landscape compared to five years ago.

Draghi report: balancing scale and competition?

Several sources told Euractiv they are pinning their hopes on the much anticipated Draghi report to lay out policy strategies that can enable companies to find enough capital and operational support in Europe, without opting to leave for other jurisdictions like the US to scale.

In a speech Draghi gave last Friday (14 June), he said “competition policy needs to facilitate scale by weighting innovation and resiliency criteria […] with the evolving market and geopolitical contexts – of course, avoiding at the same time, excessive market concentration that raises consumer prices and lowers quality of service”.

The report itself has been postponed several times to move its presentation to after the European elections as legislators expected it to touch on highly political topics, such as the role of public funding, industrial policy, and trade policy.

Euractiv understands that Draghi’s publication, now expected to come out between the end of June and mid-July, will inform the next Commission’s priorities, and has been redacted in close collaboration with different Commission units.

Meanwhile, Letta’s report to strengthen the single market was somewhat ambivalent on competition policy. For example, with regards to telecoms, he suggested respecting national competition laws but also fostering market consolidation.

“The Letta report did not say that we should weaken competition law in order to achieve this end,” Bruegel Director Jeromin Zettelmeyer stressed on Wednesday.

Additional reporting by Anna Brunetti, Thomas Moller-Nielsen

[Edited by Eliza Gkritsi/Anna Brunetti/Zoran Radosavljevic]