Philip Lowe

Directorate General for Competition, European Commission

It is a pleasure to introduce The European Antitrust Review 2010. Competition policy has enjoyed unprecedented successes in recent years, with the expansion of competition regimes worldwide and a significant increase in enforcement and in advocacy efforts in all jurisdictions. Today competition policy is facing some important challenges in the ongoing financial and economic crisis. The increased pressure on government and business in more difficult economic times has also rightly renewed pressure on competition agencies to deliver effective and efficient decisions which really bring benefits to business and consumers, while ensuring that companies' rights are respected.

Trends in competition policy

Competition policy is an increasingly global phenomenon: there are now over 100 competition regimes in place worldwide, compared with fewer than thirty in 1990.

DG Competition's objective is to make markets work well for the benefit of business and consumers - and, although they may formulate it differently, that is an objective shared by most competition authorities.

In general, we agree that markets are the best way to organise the delivery of goods and services to businesses and final consumers in terms of price, quality, choice and innovation. We work to achieve effective markets through enforcing antitrust, cartels, mergers and - in our case - state aid rules. Market players expect us to deliver a level playing field, predictability in terms of enforcement action and decisions within a timeframe which is relevant to the competition problems we are trying to solve. But competition law enforcement is not always the best solution to every competition problem. Sometimes the best way to get the market working properly is to put in place the right framework of regulation. So we may need to devote a significant part of our resources to advocacy, alongside our work against cartels and anti-competitive practices.

The financial and economic crisis in particular has had a huge impact on our state aid work. But it has not altered our conviction that respect of competition principles is an essential component of effective economic policies. If anything, the crisis has actually strengthened this conviction. However in the state aid field, we have obviously had to be more flexible on procedures, in the interests of allowing member states to move quickly in order to preserve the stability of the banking system. As to mergers, we believe that the EC Merger Regulation constitutes an appropriate and sufficiently flexible tool for merger control enforcement in times of crisis as well as normal times - for instance, allowing us to take account of evolving market conditions in our competition assessment. In recent years we have made cartels - arguably the most harmful type of competition infringement - a priority. As a result, we have a strong enforcement record in cartels and that is not about to change because of the crisis.

European Commission - the EU competition authority

Developments in competition policy in recent years have emphasised the need for a judicious combination of law and economics and for more analysis of the effects of company behaviour on market functioning and consumer welfare. Even where the law does not require us to prove effects, we cannot really expect much public support for competition policy unless we can demonstrate how our investigations and decisions maintain and improve competition to the benefit of businesses and consumers. We have implemented a policy of pursuing those infringements that cause the most harm to consumers, in relation to anti-competitive agreements, mergers, and abuse of market power. This focus on eliminating consumer harm should stand us in good stead in the current crisis.

The move towards an effects-based approach is best coupled with some ex ante rules, set out in guidelines and guidance, such as our Guidance on enforcement priorities in relation to exclusionary abuses of dominance. I believe that is the way to achieve the most effective enforcement.

More broadly, effective enforcement of competition principles also involves understanding how case-related law enforcement can be best combined with changes in the regulatory environment. Our sector inquiries - in energy, for example, and most recently in the pharmaceutical sector - have resulted in both individual investigations and decisions, and the uncovering of issues best dealt with through regulatory reform.

The fact that DG Competition is part of the European Commission brings considerable advantages in working towards the best combination of competition law and regulation. The European Commission is after all the EU's competition authority - not DG Competition. It is a collegiate body which has responsibilities in a variety of policy areas - and crucially, it is genuinely independent. So, while preserving the independence of its investigations, and ensuring that all Commission decisions based on competition law remain anchored in competition principles and case law, DG Competition is in an excellent position to pursue a competition advocacy agenda and to push for an agenda of regulatory reform which incorporates competition objectives.

Cartels, fines and criminalisation

It is hard to overestimate the damage caused by cartels to consumers, to businesses and to the economy as a whole.

The most efficient weapon we have against cartels and other anti-competitive behaviour is fines. Fines have two aims. First, they punish the perpetrators. Second, and perhaps more importantly, they have a deterrent effect: where fines are sufficiently high, they will discourage other companies from engaging in anti-competitive behaviour and force through changes to executive culture.

In 2006 we revised our fining policy: while fines decided under these revised guidelines are undoubtedly higher than previously, they are usually still well below the maximum allowed under the 1962 Regulation adopted by the Council on the implementation of Treaty rules on antitrust (up to 10 per cent of worldwide turnover).

In the current economic climate we are facing criticism about the size of the fines we impose. We welcome the current debate on this issue. However, most academic economic commentators rather take the view that our previous fines were too low to have the necessary deterrent effect.

The purpose of our 2006 Guidelines on fines was to align fines more closely with the infringement - ie, ensuring that larger companies should be fined more heavily for longstanding infringements. The size of the company and the duration of the infringement are now better taken into account - and in practice this has meant higher fines.

Some commentators are suggesting that our fines are so high that they are quasi-criminal sanctions, and that they infringe human rights. Our fines in no way constitute criminal sanctions. The legal basis for the Commission's power to adopt fines lies in a Council Regulation. In addition to internal safeguards implemented in our administrative procedures, our actions are scrutinised by the European courts, which ensure that due process is respected and that companies' rights of defence are upheld. However, we are taking advantage of the current debate on these issues to carry out a full review of our due process, in order to develop best practice standards.

We are also often criticised for a system that punishes the company involved in a cartel (and its shareholders) but lets off the actual perpetrators, namely the individuals who implemented the cartel.

Several EU member states can bring criminal proceedings against individuals in relation to cartel infringements.

Ideally we need a good combination of administrative sanctions against companies, with criminal sanctions against individuals. Europe's network of national competition authorities, including the European Commission, is an excellent framework for developing such an enforcement system.

More convergence

European and international cooperation has already delivered significant improvements in enforcement - through the ECN, and internationally in particular on merger procedures and cartel enforcement. But there is substantial scope for more convergence, Europe-wide and worldwide.

The recent change of administration in the US certainly holds out the prospect of even closer cooperation and convergence between EU and US competition enforcement agencies.