Competition Policy: Delivering for Consumers · Tuesday, 14 July 2015, 9.00 to 10.30 hrs., European...

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DIRECTORATE-GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENTECONOMIC AND SCIENTIFIC POLICYA

Economic and Monetary Affairs

2015

Competition Policy: Delivering for

Consumers

Study for the ECON Committee

Competition

Policy:Delivering

forConsumers EN

DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICY

Competition Policy: Delivering for Consumers

Proceedings of the Workshop

BRUSSELS, 14 July 2015

STUDY

Abstract

Allowing consumers to have a fair share of the benefits resulting from effective competition is one of the targets of competition policy. Better quality and innovative products, more choice and lower prices are the most prominent practical results. However, distortion of competition by antitrust infringements or an inefficient enforcement of competition rules still causes consumer harm. This workshop aims to examine in which areas consumers actually benefit from competition and where there is still room for improvement.

This workshop and the respective document were prepared by the Policy Department A at the request of the Committee on Economic and Monetary Affairs (ECON).

IP/A/ECON/WS/2015-12 August 2015 PE 563.433 EN

This document was requested by the European Parliament's Committee on Economic and Monetary Affairs (ECON).

RESPONSIBLE ADMINISTRATORS Stephanie HONNEFELDER Doris KOLASSA with assistance of Annalena BURTSCHEID, trainee Policy Department A: Economic and Scientific Policy European Parliament B-1047 Brussels E-mail: [email protected]

EDITING ASSISTANT Iveta OZOLINA

LINGUISTIC VERSION Original: EN

ABOUT THE EDITOR Policy departments provide in-house and external expertise to support EP committees and other parliamentary bodies in shaping legislation and exercising democratic scrutiny over EU internal policies. To contact the Policy Department or to subscribe to its newsletter please write to: [email protected]

Manuscript completed in August 2015 © European Union, 2015

This document is available on the internet at: www.europarl.europa.eu/supporting-analyses

The web stream of the event is available at: http://www.europarl.europa.eu/ep-live/de/committees/video?event=20150714-0900-COMMITTEE-ECON

DISCLAIMER The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament.

Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy.

Competition Policy: Delivering for Consumers

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CONTENTS 1. PROGRAMME 4

2. CURRICULA VITAE OF THE SPEAKERS 5

3. CONTRIBUTIONS BY THE SPEAKERS 7

3.1. Frédéric JENNY 7

3.2. Peter FREEMAN 19

3.3. Isabelle BUSCKE 23

4. SUMMARY OF THE DISCUSSION 32

5. BACKGROUND 33

ANNEX: DG COMPETITION CITIZENS SURVEYS 2014 36

Policy Department A: Economic and Scientific Policy

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1. PROGRAMME

DIRECTORATE GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICIES

WORKSHOP Competition Policy: Delivering for Consumers

- Programme -

Tuesday, 14 July 2015, 9.00 to 10.30 hrs., European Parliament, Brussels

Room ASP 5E2; DE/EN/FR interpretation; the event is public and will be web-streamed

9.00 - 9.05 hrs. Welcome and Introduction: Markus FERBER, ECON Vice-

Chair and Chair of the ECON Working Group on Competition Policy

9.05 - 10.25 hrs. Introductory statements by expert speakers followed

by a discussion with ECON Members Frédéric JENNY Professor for Economics, Director of International Relations at

ESSEC, Co-Director of the European Center for Law and Economics at ESSEC Business School, Cergy Pontoise, France

Peter FREEMAN Chairman of the Competition Appeal Tribunal (CAT) and

former Chairman of the Competition Commission, London, UK Isabelle BUSCKE Head of the Brussels Office of Verbraucherzentrale

Bundesverband (the Federation of German Consumer Organisations), Brussels

Possible points/issues to be discussed:

Which are the core areas where competition policy delivers significant results for

consumers? In which areas are consumers currently not benefiting from competition policy? Did the adoption of the EU Directive 2014/104 on Actions for Damages of 26 November

2014 change the situation for consumers? Did a change of mentality occur? Will the various EU activities concerning the digital sector (e.g. announced antitrust

inquiry in e-commerce, adoption of the Digital Single Market-package, etc.) lead to a fair share in the resulting benefits in this sector?

10.25 - 10.30 hrs. Closing remarks by Markus FERBER, ECON Vice-Chair

and Chair of the ECON Working Group on Competition Policy

Workshop: Competition Policy - Delivering for Consumers

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2. CURRICULA VITAE OF THE SPEAKERS

Frédéric JENNY Frederic JENNY holds a Ph.D in Economics from Harvard University (1975), a Doctorate in Economics from the University of Paris (1977) and an MBA degree from ESSEC Business School (1966)

He is professor of Economics at ESSEC Business School in Paris. He is Chairman of the OECD Competition Committee (since 1994), and Co-Director of the European Center for Law and Economics of ESSEC (since 2010).

He was previously Non Executive Director of the Office of Fair Trading in the United Kingdom (2007-2014 ), Judge on the French Supreme Court (Cour de cassation, Economic Commercial and Financial Chamber) from 2004 to August 2012, Vice Chair of the French Competition Authority (1993-2004) and President of the WTO Working Group on Trade and Competition (1994-2003)

He was visiting professor at Northwestern University Department of Economics in the United States (1978), Keio University Department of economics in Japan (1984), University of Capetown Business School in South Africa (1991) and Haifa University School of Law in Israel (2012). He is currently Visiting Professor at University College London Law School (since 2005) and Global Professor of Antitrust in the New York University School of Law’s Hauser Global Law School (2014).

He is member of the editorial board of several scientific journals (“Concurrences”, “Journal of Competition Law and Economics”, “World Competition”), member of the advisory board of the “Interdisciplinary Center for Competition Law and Initiative, Middle East Initiative” and Chairman of the scientific board of Consumer Unity Trust of India (CUTS), the largest consumer organization in India.

Frederic Jenny has written extensively about trade, competition and economic development and has served as an adviser to many developing countries on competition and trade issues

Peter FREEMAN Peter Freeman is a Chairman of the Competition Appeal Tribunal (CAT). He is a member of the Lloyd's Enforcement Appeal Tribunal Panel and from 2005 to 2011 was Chairman of the Competition Commission (CC), having been a Deputy Chairman since 2003. He was a consultant at Cleary Gottlieb Steen & Hamilton from 2011-13. Before joining the CC, he practised for 30 years at the international law firm Simmons & Simmons, 25 of them as a partner, managing the Commercial Department and heading the EC and Competition Law practice group.

He was for many years Chairman of the Regulatory Policy Institute, Oxford, and has written and spoken widely on competition and regulatory law. He is a member of the advisory board of the International Competition Forum, University of St Gallen and of the Scientific Board of Concurrencia e Regulacao, Lisbon.


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Isabelle BUSCKE A German and French national, Ms. Buscke holds a Master's degree in Political Science and Linguistics from the University of Freiburg im Breisgau, Germany.

Ms Buscke is Head of the Brussels office of the German Consumer Federation vzbv where she deals with the entire breadth of consumer policy ranging from financial services, energy digital, mobility and consumer rights. Along with energy policy, internet and media policy are one of the focus areas for vzbv. She is also the German member of the European Consumer Consultative Group (ECCG).

Before joining vzbv in 2012, Ms Buscke has worked for different Public Affairs consultancies focussing on energy and digital topics. Before moving to Brussels, she worked for a German architecture firm in Freiburg where she was responsible for ensuring smooth cross-border operations.


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3. CONTRIBUTIONS BY THE SPEAKERS

3.1. Frédéric JENNY


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3.2. Peter FREEMAN


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3.3. Isabelle BUSCKE


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4. SUMMARY OF THE DISCUSSION After having listened to the presentations of the invited experts, Markus FERBER gave the floor to Tanya VERRIER, DG Competition, to give an overview of the main results of the most recent Citizens Surveys conducted by DG Competition and Eurobarometer published in March 20151.

On this basis, Markus FERBER started the workshop discussion by asking about the on-going Google case, and in particular whether from the experts' point of view the commitments made by Google were sufficient. Frédéric JENNY explained that in this particular case it had to be taken into account that the market is transforming and therefore a proper market definition would not be easy. The character of a search engine would have to be determined and the business model would have to be taken into account to establish whether Google is competing on its merits. In particular to ensure clarity on the principles applied, Frédéric JENNY was favouring a formal decision in this case compared to the initially started commitment procedure. Peter FREEMAN added that a case of that kind fell into the same category as the investigations against IBM or Microsoft in the past and that these cases had to be ‘made relevant to the consumer’ in order to demonstrate the harm the investigated behaviour causes.

The discussion continued, touching on the different approaches of the US and the EU system in applying competition rules and compensating consumers who have suffered harm as a result of infringement of the competition rules. Peter FREEMAN explained that the EU rules-based approach tried to avoid the 'worst excesses' of the US procedure. The recently adopted EU Directive on Actions for Damages 2014/104/EU would support the application of competition rules because private enforcement could occur after the administrative procedure and add to its deterrent effect.

In view of current consolidation of markets like telecommunications or the postal market, Markus FERBER raised the question whether 28 different (national) markets with only a few competitors would allow for positive results delivered through competition or whether it would be more beneficial for consumers to have a single European market with some more cross-border competitors. Isabelle BUSCKE replied that competition policy should be applied with a view to ensure fair conditions on the markets and not in the sense of industrial policy with the aim to protect investments. A proper application of the rules was essential for an EU wide level playing field. Markus FERBER commented that in several sectors, such as aviation, energy or financial services there was no such EU wide market. Tanya VERRIER explained that the role of competition policy was not to steer but to assess how markets work and how consumers behave. Frédédric JENNY added that, on the basis of international experiences and observations by the OECD, the strength of economic interest is much less important than to find the right balance between efficiency and fairness on the markets. In this context Peter FREEMAN referred to an investigation into the UK grocery market carried out by the UK Competition Commission (now the Competition and Markets Authority) which showed that in practice consumers did not always behave as was predicted by economic theory and that aspects of the market such as treatment of food suppliers and independent stores were seen as unfair, even though the retail prices charged to consumers in supermarkets were low.

Isabelle BUSCKE replied that it was not the role of consumers to protect competition. She summed up with the observation that in the Single Market the right of freedom of establishment was sometimes abused in order to maintain 28 national markets because this set-up was economically much more interesting for traders. In this context consumer organisations were very interested in seeing the results of the on-going sector inquiry of DG Competition into e-commerce.

1 For a more detailed overview see the slides in the annex. The results are also available via this link

http://ec.europa.eu/competition/publications/reports/surveys_en.html.


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5. BACKGROUND The common target of EU competition rules is to avoid distortion of competition on the markets. However, effective competition is not a value in itself but a condition to achieve a free and dynamic Single Market. Effective competition serves as one of several tools to improve overall welfare. This includes, above all, a fair treatment of consumers by enabling them to obtain their fair share of the benefits resulting from competition.

In practice, there is evidence that effective competition entails the following positive consequences for consumers2:

wider choice because of open markets that allow for market entry of new competitors and product innovation;

lower prices, resulting from more competitors rivalling for customers;

improved quality of products and services as a consequence of the permanent pressure to compete for customers.

As markets are moving and companies tend to develop strategies to stabilise their positions and thus reduce competition, it is the task of competition enforcement authorities to constantly monitor and ensure that consumers obtain and stay in a position where they can make good use of developments on the markets or new technical achievements. In practice this means for instance:

Ensuring that a sufficient number of competitors remain on a relevant market via merger control. This issue has been discussed in the telecom sector as well as in the railway transport sector.

Investigating potential abusive behaviour in case a company enjoys a powerful position on the market. This does not exclusively relate to manufacturers, e.g. in the digital sector, but may also include for example retailers like large supermarkets that make use of their buying power in the food sector.

Using procedural tools such as leniency programmes3 or settlement procedures4 to end cartels and enforce antitrust rules.

Staying constantly updated about market developments, even in complex sectors, such as financial services, pharmaceuticals or e-commerce.

Even though methods are very complex, there are also estimations to quantify consumer savings. DG Competition published the following table in the context of ex post evaluation of competition policy enforcement5:

2 http://ec.europa.eu/competition/consumers/why_en.html. 3 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52006XC1208(04)&from=EN. 4 http://ec.europa.eu/competition/cartels/legislation/settlements.html. 5 http://ec.europa.eu/competition/publications/cpb/2015/004_en.pdf.


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Table: Estimates of annual consumer savings

Source: European Commission, Competition Policy Brief 2015-04, June 2015. Note: Data displayed is % of GPD x10-2

The table above shows estimates of annual consumer savings resulting from competition policy interventions. It displays annual consumer savings in 2008-2013 estimated for the respective geographical areas by the European Commission (EC), the US Department of Justice (DOJ) the US Federal Trade Commission (FTC), the UK Competition and Markets Authority (CMA) and the Dutch Authority for Consumers and Markets (ACM).

The data estimates did not change in the same way over the years for the different agencies. A clear trend is not recognisable. Regarding the data which the European Commission provided, the table shows that estimates for annual savings for consumers are shrinking over the years. Vice versa, the annual consumer savings estimated by the FTC are slowly rising, but still less than the estimated savings for consumers benefitting from interventions by the European Commission. There is also a significant difference in the level of figures between the European Union and the United States (DOJ and FTC taken together).

Furthermore, DG Competition is conducting stakeholder surveys6 to get feedback about its activities. In addition, a Eurobarometer study7 on EU citizens perception about competition policy has been done.

One of the most recent developments to let consumers benefit from the enforcement of competition rules is the Directive on Actions for Damages8 which was adopted by the Council and the European Parliament in November 2014. It provides rules for compensations of damages caused by infringements of competition law provisions of the Member States and of the European Union.

6 For the most recent results see http://ec.europa.eu/competition/publications/reports/survey2014/aggregate_report_en.pdf. 7 For the summary see http://ec.europa.eu/competition/publications/reports/survey2014/citizen_summary_en.pdf. 8 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0104&from=EN.


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For consumers as victims of competition law infringements, the Directive entails the following two rebuttable presumptions to make it easier for victims of such damages to prove a claim:

The first presumption states that cartel infringements indeed do cause harm. This is supported by economic evidence that more than 90 % of cartel infringements result in price increases9;

the second presumption states that cartel overcharges are at least partially passed on to indirect purchasers. This presumption aims to raise the chances for victims of getting compensated.

However, it still remains difficult to quantify harm caused by the infringement of competition rules. The Commission provides guidance on this issue to national courts in form of a Communication10 and a practical guide11.

The practical results of the application of these rules still remains to be seen as Member States must first transpose the Directive into national law until December 2016.

9 See Figure 4.1 on p. 91 of the 2009 Study on the quantification of harm suffered by victims of antitrust

infringements: http://ec.europa.eu/competition/antitrust/actionsdamages/quantification_study.pdf. 10 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2013:167:0019:0021:EN:PDF. 11 http://ec.europa.eu/competition/antitrust/actionsdamages/quantification_guide_en.pdf.


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ANNEX: DG COMPETITION CITIZENS SURVEYS 2014


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A POLICY DEPARTMENTECONOMIC AND SCIENTIFIC POLICY

DIRECTORATE-GENERAL FOR INTERNAL POLICIES

RolePolicy departments are research units that provide specialised advice to committees, inter-parliamentary delegations and other parliamentary bodies.

Policy AreasEconomic and Monetary Affairs Employment and Social Affairs Environment, Public Health and Food SafetyIndustry, Research and EnergyInternal Market and Consumer Protection

DocumentsVisit the European Parliament website: http://www.europarl.europa.eu/supporting-analyses

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