Documents considered by the Committee on 14 October 2009, including the following recommendations for debate: Security of gas supply, Financial management - European Scrutiny Committee Contents


15  ANNUAL REPORT ON COMPETITION POLICY 2008

(30850)
12567/09
+ ADD 1
COM(09) 374
Commission Report on Competition Policy 2008


Legal base
Document originated23 July 2009
Deposited in Parliament 7 August 2009
DepartmentBusiness, Innovation and Skills
Basis of consideration EM of 7 September 2009
Previous Committee Report None
To be discussed in Council No date set
Committee's assessmentPolitically important
Committee's decisionCleared

Background

15.1 Each year, the Commission produces a report on competition policy, and the present document relates to 2008. As is customary, it is in various sections, dealing with how the policy instruments have been developed and applied; how they have been deployed in specific sectors; consumer related activities; cooperation within the European Competition Network and with national courts; international cooperation; and inter-institutional cooperation. It also includes for the first time a chapter on a topic considered to be of particular importance — in this case, cartels and consumers.

The current document

POLICY INSTRUMENTS

Anti-trust measures

15.2 The Commission notes that, although the European Court of Justice has stated that individuals can claim compensation for harm suffered as a result of prohibited anti-trust measures, they very rarely do so in practice, and that it therefore produced in April 2008 a White Paper[51] on damages action for breach of the EU anti-trust rules. In addition, it introduced a new mechanism enabling cartel cases to be settled by a simplified procedure, including reduced fines for companies acknowledging their involvement in such cases; guidance on enforcement priorities when dealing with abusive exclusionary conduct by dominant undertakings; and revisions of the Block Exemption Regulation applicable to vertical distribution agreements, as well as those applying to motor vehicles and the insurance sector.

15.3 As regards the application of the anti-trust rules, the Commission notes that it adopted in 2008 decisions to fine 34 undertakings in seven cartel cases a total of €2.27 billion (including €1.38 billion in the Car Glass case, involving a repeat offender); that, as regards non-cartel cases, it adopted a decision prohibiting members of the International Confederation of Societies and Authors and Composers from maintaining membership restrictions and exclusivity clauses; and that it also took action against abuses of dominant position in cases involving Microsoft, Intel and E.ON.

State measures

15.4 The Commission says that it been active in relation to Article 86 (which prevents measures by Member States which are contrary to competition rules, particularly as regards public undertakings granted special rights). This included decisions regarding Greek restrictions on access to lignite mines, and the provision of postal services in Slovakia.

Merger control

15.5 The Commission notes that it introduced a new Notice on Remedies,[52] which imposes more stringent information conditions and clarifies a number of requirements. It also points out that it received 347 merger notifications — the third highest on record, though 14% below the level in 2007 — and that it adopted 340 decisions during the year, of which 307 were without conditions (118 under the normal procedure, and 189 using the simplified procedure). A further 19 notifications were cleared subject to conditions, whilst ten were subjected to more detailed examination, though no prohibition decisions were taken during the year.

State aid control

15.6 The Commission recalls that, whilst its focus at the beginning of 2008 was on the implementation of the State Aid Action Plan (SAAP), the financial and economic crisis subsequently required it to issue three Communications on the role of state aid policy in connection with the recovery process.[53] As regards the SAAP, it points out that it adopted a General Block Exemption Regulation giving automatic approval for a range of aid measures (allowing aid fulfilling the necessary conditions to be granted without prior notification); that it adopted new guidelines on state aid for environmental protection, extended the framework on rules for shipbuilding, and introduced a new notice of state aid in the form of guarantees. In addition, it launched public consultations relating to public service broadcasting, training, disadvantaged and disabled workers, as well as on a number of procedural issues, and it published a vade mecum summarising the main rules applicable to state aid control. It also continued its efforts to improve enforcement and monitoring, notably in relation to recovery decisions, where it notes that, of the €10.3 billion of aid to be recovered under decisions adopted since 2000, €9.3 billion had been recovered by the end of 2008: and it highlights the strict line taken towards Member States which had failed to implement recovery decisions effectively. The Commission also draws attention to the state aid scoreboard[54] it produced in autumn 2008, and to the extent to which Member States are now directing aid at horizontal objectives, such as research and development, rather than sectoral measures.

SECTORAL DEVELOPMENTS

15.7 This section deals in greater detail with developments in a number of sectors which have a bearing on competition. As regards energy and environment, it notes the internal energy package proposed in September 2007, the various measures proposed to deal with climate change, the Second Strategic Energy Review, and the steps taken by the Commission to ensure that new entrants have access to energy networks and customers; it expands on the various measures taken in relation to financial services; it summarises action taken under the EU regulatory framework for electronic communications, and the continuing work to review that framework; it recalls the action on information technology, including that taken against Microsoft and Intel, and in relation to the satellite navigation industry; as regards the media, it details the action taken on music rights, the monitoring of the transition from analogue to digital terrestrial broadcasting, the state financing of public service broadcasters, and support for the cinema; in the case of transport, it says that the Commission continues to monitor public service contracts and obligations on road transport, state aid for railways, the application of Article 81 of the Treaty to maritime transport, the application of the new Air Services Regulation, various rescue and restructuring measures relating to airlines, state aids for airport infrastructure, and the signing of the EU-US open aviation agreement; it notes the launching of an enquiry into the pharmaceutical sector and the subsequent publication of a preliminary report; it recalls the Commission's Communications on food prices and the functioning of the food chain within the Community; and the adoption of the third Postal Directive.

CONSUMER ACTIVITIES

15.8 The Commission says that consumer concerns are at the heart of its competition activities, and that the main thrust of competition should be to maximise consumer welfare, as is evidenced by the action it has taken in various areas. It also notes the establishment of a dedicated Consumer Liaison Unit within its Competition Directorate.

EUROPEAN COMPETITION NETWORK AND NATIONAL COURTS

15.9 The Commission summarises the actions of the Network, including the development of its Model Leniency Programme (and the related steps taken by Member States) and the cooperation between national competition authorities on individual cases. It also notes the mechanisms which exist for cooperation with national courts.

INTERNATIONAL ACTIVITIES

15.10 The Commission says that, in an increasingly globalised world economy, competition policy must also adopt a global outlook, and that it has reinforced and extended its relations with other competition authorities on both a bilateral and multilateral basis. It also notes the cooperation with Croatia and Turkey in connection with the prospective further enlargement of the Community.

INTER-INSTITUTIONAL COOPERATION

15.11 The Commission records its continuing cooperation with other Community institutions, notably the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions.

FOCUS CHAPTER: CARTELS AND CONSUMERS

15.12 The Commission regards cartels as among the most serious violation of competition law, and the fight against them as central to ensuring that markets benefits are felt by consumers, noting that the effect can be either direct or indirect (as for example where a cartel operates further up the supply chain). It also points out that fines imposed on a cartel are intended, not only to punish its members, but to deter others from engaging in anti-competitive behaviour and to encourage a culture of compliance more widely, and that it has made a practice of imposing higher fines on repeat offenders. The Commission notes that it can uncover cartels in a number of ways, for example by analysing markets, or by obtaining evidence from different sources, including consumers and individual "whistle blowers": and it points out that its Leniency Programme, under which the first company to provide evidence can obtain full immunity from fines, provides an incentive to cartel members to withdraw from a secret agreement and cooperate with it.

The Government's view

15.13 In his Explanatory Memorandum of 7 September 2009, the Minister for Further Education, Skills, Apprenticeships and Consumer Affairs at the Department for Business, Innovation and Skills (Kevin Brennan) says that the UK supports the proactive competition policy of the Commission, and in particular welcomes its commitment to more evidence-based, impact driven and output focussed policies as a means of facilitating a better functioning Single Market and competitiveness in key strategic sectors. He also notes that the UK has been actively engaged in a number of areas, such as the Motor Vehicle Block Exemption, work on private damages, and the inquiry into the pharmaceutical sector, and says that it continues to support the goals of the State Aid Action Plan, as well as the need for temporary measures to alleviate the effects of the financial and economic crisis.

Conclusion

15.14 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 2008 — we think it right to draw it to the attention of the House.



51   (29603) 8235/08: see HC 16-xxviii (2007-08), chapter 6 (22 July 2008). Back

52   Modifications proposed by merging parties to remove competition concerns identified by the Commission. Back

53   The action taken in connection with the recovery process was recorded at greater length in the Commission's State Aid Scoreboard for spring 2009 (30548) 8812/09: see HC 19-xviii (2008-09), chapter 14 (3 June 2009).  Back

54   (30200) 15977/08: see HC 19-ii (2008-09), chapter 13 (17 December 2008). Back


 
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