By prioritising cooperation between companies instead of increased consolidation in key sectors, it might be possible to bridge current tensions between industrial policy and merger control, the Belgian competition watchdog’s chief investigator has said.
Enabling European companies to ‘scale up’ – as espoused in recent months by several EU policymakers – does not always require companies to merge, says Damien Gerard, prosecutor general and board member at the Belgian Competition Authority.
The EU is currently grappling with a perceived decline in competitiveness, causing it to lag behind the US and China. Industrial policy has been touted as a means to address this imbalance, with an influential report by former Italian Prime Minister Enrico Letta recently becoming central to a push for increased consolidation in several key sectors, including telecoms.
This would require a change in competition policy, which has long resisted the creation of “European champions”. Indeed, EU competition chief Margrethe Vestager has repeatedly defended the status quo in recent months.
Gerard told GCR today that cooperation amongst rivals could “be a good alternative” to this push for sector concentration. Such an approach “would necessarily be less impactful on the structure of markets, and therefore on competition in the future,” he said.
As an example, he cited the telecoms sector in Belgium, which lags behind on the deployment of fibre networks. In light of this, the competition watchdog and telecoms regulator have signalled an openness to cooperation between telecoms operators to encourage the roll out of this infrastructure.
“You can reasonably consider that infrastructure competition is probably less important than downstream competition at the level of the service being supplied to end users,” Gerard said.
He added: “It makes sense to facilitate the roll-out of infrastructure under specific conditions, to enable access at fair, reasonable terms, that would then enable and promote competition downstream at service level between operators.”
In such a situation, “everybody wins”, Gerard said. Large operators make significant savings and can invest in other projects, with better quality and cost of the service provided to end users.
In discussions around “scaling up”, specificity is important – as achieving that goal can vary from one market or project to the next, Gerard emphasised.
“Mergers, acquisitions are certainly not necessary in each and every case,” he said, adding that if the objective can be met through effective cooperation, that should be prioritised.
This should take place under conditions that ensure end users reap the benefits, if necessary, with oversight by competition authorities, Gerard told GCR.
“A good industrial policy is an industrial policy that ensures end users benefit, and that means that it makes sure that competition is not totally eliminated,” Gerard said. Competition remains the main incentive for companies to develop the best services under the best conditions, he added.
“I don’t understand this apparent opposition, or definitive trade-off, between industrial policy and competition,” Gerard said. “The two are complementary and should be combined.”
Such a view does not diverge much from the Letta report, which emphasised that companies should only be permitted to scale up providing fair competition is not undermined.
“It’s about creating the conditions for scaling up, for cooperation, in a way that provides companies with the necessary incentive and also the legal certainty that it can do so under conditions that are compatible with competition,” Gerard said.