Select Committee on European Scrutiny Thirty-Third Report


2 Competition policy in 2006

(28739)

11296/07

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COM(07) 358

Commission Report on Competition Policy 2006

Legal base
Document originated25 June 2006
Deposited in Parliament29 June 2007
DepartmentBusiness, Enterprise & Regulatory Reform
Basis of considerationEM of 16 July 2007
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionCleared

Background

2.1 The purpose of the Community's competition rules is to prevent the restriction or distortion of competition in the Single Market through restrictive practices or the abuse of a dominant position, although certain restrictive agreements considered by the Commission to have a beneficial effect are permitted under procedures for individual or block exemptions. Competence in this area is shared, with the Commission being particularly concerned with anti-competitive practices which affect trade between Member States.

The current document

2.2 The Commission reports annually on the exercise of its powers in this area, and the current document is the latest in this series, relating to the activities which took place in 2006 under the following main headings.

INSTRUMENTS

Anti-trust measures

2.3 In 2006, the Commission adopted decisions against 7 cartels, which led to it fining 41 undertakings a total of €1,846 million,[6] and, in order to increase the deterrent effect of such fines, it adopted new guidelines on how they should be set. It also comments that the leniency programme,[7] helped by a revised Leniency Notice which provided more guidance to whistle-blowers, continued to be an effective tool in breaking up cartels, with a total of 104 applications for immunity and 99 applications for a reduction in fines having been received at the end of 2006.

2.4 Other activities in this area included abuses of dominance, where the Commission says that it concentrated on network industries which are key for European competitiveness, and the application of its power to make commitments binding on undertakings in anti-trust proceedings. It also notes that 2006 was the first year in which it had to use its powers to fix a periodic payment in order to compel an undertaking to bring an infringement to an end, a penalty of €280.5 million having been imposed on Microsoft for non-compliance with an infringement decision made in 2004 under Article 82 of the Treaty.

Mergers

2.5 The Commission investigated a record number of mergers in 2006, adopting 352 final decisions, of which about two-thirds made use of simplified procedures, with only 13 cases requiring an in-depth investigation. The Commission says that it did not prohibit any of the mergers it investigated, and that, in only a few cases, was the clearance given subject to certain conditions being met. It also published in 2006 a draft "Consolidated Jurisdictional Notice" which covered all issues of jurisdiction relevant to the establishment of its competence under merger regulations, and which will replace four existing Notices adopted in 1998.

State aid

2.6 The Commission says that significant progress was made in modernising the current framework of state aid rules in line with the State Aid Action Plan which it launched in 2005, the four guiding principles being less and better targeted state aid, greater emphasis on economic analysis, more effective procedures, and a shared responsibility with the Member States. In addition, the approval of regional aid was simplified through the adoption of a block exemption regulation, which releases Member States from the need to notify regional investment aid schemes if they comply with new guidelines and the approved regional aid map for 2007-13; a new state aid framework was put in place for research, development and innovation; new risk capital guidelines were adopted, which the Commission says mark a step forward in targeting public subsidies on proven market failures in order to help promote conditions for economic growth and jobs; and a new de minimis regulation was adopted, exempting small subsidies (up to €200,000 over three years) from the need to be cleared by the Commission in advance.

SECTORAL DEVELOPMENTS

2.7 The Commission undertook two major sector enquiries in 2006 — on energy and financial services. In the former case, it concluded that there were core competition problems, including highly concentrated wholesale markets, insufficient unbundling of network and supply activities, insufficient or unavailable cross-border capacity, and limited retail competition. In view of this, it plans to present proposals in September 2007 for a further legislative package to promote effective competition in the gas and electricity sectors. In the case of financial services, a report on retail banking (based on two interim reports on card payments and current accounts) found that there were a number of competition concerns, with large variations in fees for payment cards, barriers to entry to markets for payment systems and credit registers, obstacles to customer mobility, and product tying. Also, an interim report on business insurance, to be followed in September 2007 by a final report, produced evidence of fragmented markets and highlighted factors which may adversely affect competition.

2.8 In addition, the Commission provides a more detailed account of its activities in a range of sectors, including electronic communication, information technology, media, transport and postal services.

EUROPEAN COMPETITION NETWORK

2.9 The Commission notes that 2006 saw a further strengthening of cooperation between members of the European Competition Network. In particular, national competition authorities are obliged to inform the Commission where new cases are opened and before a final decision is taken, and it says that it received 150 new notifications during the year, of which it has reviewed or given advice on 125 (without having had so far to take action to ensure a consistent application of the competition rules). The Commission also comments on the application of Community competition rules by national courts, notably as regards requests made to it for information or opinions, the receipt by it of written judgements issued by such courts, the exercise of its right to submit written observations on individual cases, and the co-financing of training programmes for national judges on Community competition law.

INTERNATIONAL ACTIVITIES

2.10 The Commission says that it monitored the preparations for Romania and Bulgaria joining the Community. More generally, cooperation was continued on a bilateral basis with the United States, Canada and Japan, and the Commission offered assistance in the drafting of competition law in China and Russia. It also took an active role in the International Competition Network, which promotes best practice among competition authorities, and in the OECD.

The Government's view

2.11 In his Explanatory Memorandum of 16 July 2007, the Parliamentary Under-Secretary of State for Trade and Consumer Affairs at the Department of Business, Enterprise & Regulatory Reform (Mr Gareth Thomas) comments on a number of the issues raised in the report. He says that the work on anti-trust measures has been strongly supported by the UK, and that the relevant policy departments recently organised an informal discussion between Member States and the Commission to help prepare for the Commission White Paper which is due in early 2008; that the sectoral enquiries have been important in furthering the Single Market, and that the UK is planning a follow-up seminar this autumn; and that the UK also strongly supports an effective state aid regime, being committed to the Lisbon aim of reducing such aid as a percentage of GDP. It therefore supports the Commission's commitment to reforming the state aid regime, and would like to see it placing more emphasis on a much lower burden of administration where competition is not, or hardly, distorted at all. It also considers that block exemptions are a valuable tool in dealing with the administration surrounding state aids.

Conclusion

2.12 For the reasons set out in the Commission's report, competition is an important area. Consequently, although we are clearing this document, which gives a useful summary of ongoing activity and of developments in 2006, we think it right to draw it to the attention of the House.





6   In 2005, 33 undertakings were fined €683 million. Back

7   Under which immunity from fines can be available for the first undertaking to provide evidence of a cartel to the Commission, with a substantial reduction for any subsequent applicant. Back


 
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