32 Competition policy 2012
| (35059)
11017/13
COM(13) 257
| Commission Report on Competition Policy 2012
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| Legal base | —
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| Document originated | 7 May 2013
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| Deposited in Parliament | 19 June 2013
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 3 July 2013
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| Previous Committee Report | None
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| Discussion in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
32.1 Each year, the Commission produces a report on competition
policy, and this document relates to 2012.
The current document
32.2 The report commences with a brief summary of the evolution
of competition within the EU, from the first anti-trust cases
in the European Court of Justice in the 1960s, the adoption of
the Merger Control Regulation in 1989 (which the Commission describes
as a qualitative leap reflecting the development of the internal
market after the entry into force of the Single European Act of
1987), the gradual increase in State aid control, and finally
the adoption of Regulation 1/2003 (which the Commission says marked
a new era in the enforcement of EU anti-trust laws, in which national
competition authorities have become very active players).
32.3 The Commission comments that, without an effective
competition policy, the Single Market cannot reach its full potential,
and that the policy has also been crucial in enabling the EU to
crack down on abuses of dominant position, cartels and concentrated
policies which harm consumers. It adds that, despite occasional
calls for a softer stance in the light of the economic crisis,
it has continued in 2012 to ensure the sound functioning of the
Single Market, with all the main tools continuing to be deployed,
and with there having been close cooperation with national authorities
within the European Competition Network, including efforts to
foster convergence of national procedures for the enforcement
of anti-trust rules (which are not generally regulated by EU law).
32.4 The Commission says that in the past year competition
enforcement has also focussed on sectors of systematic and cross-cutting
importance to the EU economy, notably financial services, key
network industries, and knowledge-intensive markets, and this
is reflected in the issues dealt with in this report.
THE FINANCIAL SECTOR
32.5 The Commission says that it has continued to
apply the State aid rules to control parts of the EU banking sector
in the wake of the financial crisis, with the bulk of activity
involving restructuring. It notes that, at the outbreak of the
crisis in 2008 and 2009, these controls were the principal EU
tool, with a special regime being put in place to control government
bail outs of distressed banks to safeguard the stability of the
wider financial system and the sound functioning of the Single
Market. It says that, between 1 October 2008 and the end of 2011,
about €1.6
trillion was transferred to banks, mainly in the form of guarantees
of bank liabilities and other forms of liquidity support, accounting
for over 9% of EU GDP, while recapitalisations and impaired-asset
support accounted for over 3% of GDP. It comments that these rules
ensure that the banks concerned were supported on the same terms
across the Single Market, and that support continues to be available
for those banks which are prepared to restructure.
32.6 The Commission points out that the restructuring
of individual banks also seeks to ensure viable business models
which support the real economy, with particular care having been
taken to ensure that banks will be returned to long-term viability,
and that in the medium term taxpayers will be paid back without
losses. In addition, it says that State aid control has contributed
significantly to the restructuring of the banking sectors in Ireland,
Portugal and Greece, with this having involved the European Central
Bank and in most cases the International Monetary Fund, with a
key concern having been to ensure the integrity of the Single
Market.
32.7 The Commission also says that an ambitious Single
Market regulation package is being put in place to make financial
markets more transparent in order to address the financial crisis
in areas such as derivatives; that it investigated in 2012 a number
of anti-trust cases relating to Libor, Euribor and Tibor benchmark
rates,[107] with the
financial derivative products linked to these benchmarks playing
a key role in the management of risk within the Single Market
that it pursued two anti-trust investigations into the credit
default swaps market in order to establish whether a number of
leading investment banks and an information service provider had
sought to preserve their stronghold in the Over-The-Counter market
by hindered the development of exchange traded derivatives in
a way which may have infringed EU competition law; and that merger
control tools were used in 2012 to ensure competitive prices for
companies which manage their risks by investing derivatives in
the EU (leading to a prohibition on a proposed merger between
Deutsche Bourse and New York Stock Exchange Euronext).
32.8 Finally, the Commission says that it pursued
its antitrust enforcement against anticompetitive behaviour relating
to the multilateral interchange fees charged by credit card companies,
which make up a significant part of the total cost which retailers
must pay for accepting such cards. It says that its preliminary
conclusion is that the fees charged by Visa[108]
reduce competition between acquiring banks, inflate the cost of
credit card acceptance for merchants, and ultimately increase
consumer prices: and it found that the obligation on cross-border
acquirers to pay multilateral interchange fees applicable in the
country of transaction hindered cross-border acquiring and maintained
the segmentation of the Single Market. (The Commission also notes
that its analysis in the Visa case closely follows a judgement[109]
of the EU General Court in May 2012 in the MasterCard case, which
fully upheld the Commission's findings on the anti-competitive
nature of these fees.)
STATE AID REFORM
32.9 The Commission says that 2012 saw the first
decisions applying the new framework for State aid for Services
of General Economic Interest (SGEIs)[110]
adopted in 2011, which will assist public authorities in designing
more efficient and effective services in areas such as energy,
transport, telecommunications and postal services, and which will
enable the Commission to focus on those SGEIs receiving large
government funds (and thus more liable to distort competition).
32.10 In addition, it launched in May 2012 its State
aid modernisation (SAM) with a view to reforming the whole of
State aid policy by prioritising cases with a significant impact
on the Single Market and ensuring that public budgets are targeted
at real market failures. It says that the process began through
revisions of a number of key guidelines and frameworks in order
to bring them in line with a coherent overall philosophy and methodology,
with public consultations having been launched on the current
rules applying to broadband infrastructure, environmental protection
and regional development. Work is also progressing on reviews
launched earlier on aid for research, risk capital and rescue
and restructuring, the intention being for the bulk of SAM related
rules to be in place by the end of European Parliament's current
term.
SECTORAL ISSUES
Network industries
32.11 The Commission recalls that an enquiry in 2005
found that concentrated gas and electricity markets, with
high entry barriers, and often dominated by vertical integrated
incumbents, provided serious obstacles to competition, and it
says that, as EU competition on its own cannot integrate these
markets, it is currently legislating for an EU-wide Single Energy
Market by 2014; that, despite the great strides made in injecting
competition into the telecommunications markets, there
is still no EU Single Market in this sector, and that antitrust
cases have been pursued against a number of companies, including
the first in the sector involving cross-border market-sharing;
and that postal services, which constitute a fundamental
service of general economic interest, saw the first application
of the new framework for State aid for SGEIs, also having been
a merger scrutiny of cross-border parcel markets.
The knowledge economy
32.12 The Commission says that it has worked in support
of continued innovation across a range of digital sectors from
smartphones to music, and highlighted the potential misuse of
standard-essential patents in the smartphones market; that a major
takeover (by Universal of EMI) was approved on the basis of commitments,
including licensing agreements with digital music services; and
that commitment decisions of the kind adopted in the e-book case
in 2011 can deal with Commission concerns and provide a flexible
alternative to lengthy proceedings.
Pharmaceuticals
32.13 The Commission says that, although patent
settlements reached by patent holding and generic companies when
basic patent protection nears expiry can be rational and socially
useful, they can also give rise to competition concerns, and it
notes the follow up work it undertook in 2012 to its earlier inquiry
into the sector. It also notes a very big increase in patent settlements
in recent years, but a fall in the proportion which were anti-competitive.
COMPETITION DIALOGUE WITH OTHER INSTITUTIONS
32.14 The Commission says that it maintains a continuous
structured dialogue on competition issues with the European Parliament,
and that it also informed the European Economic and Social Committee
and the Committee of the Regions about major policy initiatives.
The Government's view
32.15 In her Explanatory Memorandum of 3 July 2013,
the Minister for Employment Relations, Consumer and Postal Affairs
(Jo Swinson) comments that the report looks back on the main activities
of the Commission on competition issues in 2012, and does not
in itself have any policy implications. However, she says that
Government welcomes it as a useful round-up.
Conclusion
32.16 For the reasons set out by the Commission,
competition policy is an important area of EU activity. Consequently,
although we are clearing this document — which gives a comprehensive
account of ongoing activity and of developments in 2012 —
we think it right, as with previous such reports, to draw it
to the attention of the House.
107 The London Interbank Offered Rate, and its Euro
and Tokyo equivalents. Back
108
The Commission says that Visa's credit and debit cards represent
about 41% of all payment cards issued in the European Economic
Area. Back
109
Case T-111/08. Back
110
These are public services which would not be provided by market
forces alone (or at least not in a form available to all). Back
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