"What competition can do – and what it can't" | Margrethe Vestager

Competition Commissioner Vestager has been on the stump again, this time speaking at the 3rd annual Chillin' Competition law conference in Brussels yesterday, 25th October 2017.In a wide ranging speech, she covered topics as diverse as pesticides, vehicle emissions, privacy and banks and how competition law doesn't just "help set the rules of the race" in the world of commercial markets, but also "establish a floor that the market cannot circumvent" for for consumer, environmental and employment standards.But, she emphasised, competition law can only go so far in establishing "basic standards that can’t be traded off for a lower price" stating that "whilst competition can drive businesses to do better, it can't, on its own, stop some of them doing worse".  Regulation of markets and dominant companies are too important for the benefit of society, she said, to be left to markets and companies themselves, as to do so risks undermining competition and market forces which encourage and reward companies that meet their corporate social responsibilities and to meet consumer's needs.In conclusion, Mme Vestager stated:

It won't stop some companies selling pesticides that are bad for us, or some banks making risky investments that could bring down our financial system.That's why we need both regulation and competition enforcement.Markets that are open for competition still need the right regulation.Because it's when competition enforcement and regulation work well together that we get a market that really serves the needs of Europe's people.

A full copy of her speech is re-produced below, courtesy of the European Commission Press Office:

Ladies and gentlemen

It's a very great pleasure to be with you today. I'm especially glad to be here in the year when we celebrate sixty years of European competition law, in the form we now know it.

I’m sure that a lot of your discussions today will be – and have been – about the future of the competition rules. But I think it's worth taking a moment to remember their past.

Sixty years ago, when the Treaty of Rome was signed, Europeans could see the evidence all around them of what happens when power tramples the rights of individuals. And that persuaded our founders to try something new. To create a Europe ruled by law. A Europe that put its people's needs first. And the competition rules were an important part of that.

Because competition means that businesses have to take their customers’ needs seriously. That they have to keep cutting prices, keep offering more choice. Keep coming up with innovative products that meet people’s needs. Because they know that if they don't, those customers can simply go to someone else who will.

Competition and regulation

We know how much competition can do to make people's lives better. But that doesn't mean it can do everything on its own.

Kazuo Ishiguro, who just won the Nobel Prize for Literature, is not only a novelist. He's also written lyrics for the jazz singer, Stacey Kent. One of his songs ends like this:

Don't neglect the Belgian waffles.

You'll soon forget your troubles.

When you have breakfast on the morning tram.

Belgian waffles are pretty good, but I do think Ishiguro is using a littlepoetic licence. But we do all like the idea of finding something that can make all our troubles disappear. It’s just that in reality, we know it's much more complex than that. And that the competition rules – like Belgian waffles - aren't really the answer to everything.

Competition puts power in the hands of consumers. And that makes it a great way to encourage companies to do better. It pushes them to enter a race to the top.

Competition law helps to set the rules of that race. It stops dominant businesses abusing their power. It prevents companies coordinating in a way that harms consumers. And there are also regulations that help to make competition work better, like the rules that give competitors access to railways or telecoms networks.

But we also need rules that go well beyond the competition between companies. Rules that set out the basic standards that can’t be traded off for a lower price. Like our health, and the health of the environment around us. Decent working conditions, for the people who make the products we buy. Protection for young people, from content that could harm them.  We need to establish a floor that the market cannot circumvent.  And that takes more than competition law.

Pesticides

Take pesticides, for instance.

Our farmers depend on competition to get pesticides that meet their needs. Competition drives down prices, which helps cut the cost of food. And it drives companies to keep developing new and better pesticides.

That's why we only approved the merger between Dow and DuPont after the companies agreed to sell large parts of DuPont’s pesticide business – including its worldwide research arm. So there would still be enough competition to keep prices down – and still enough competition to come up with innovative pesticides.

So by protecting competition, we’ve made sure that companies still feel the drive to do better. And we’ll do the same with the planned merger between Bayer and Monsanto, which we’re looking at right now.

But competition isn't the right way to set the basic standards for all pesticides. And on its own, it can't make sure that innovation develops in the right way, concentrating on new pesticides that are not only more effective, but also safer. On pesticides that don't harm the environment, or put our health at risk.

That matters a lot to people all over Europe. I've seen that from all the messages I've had from people who are worried about these mergers.

And I agree – we must make sure pesticides are safe. But we shouldn’t expect the merger rules to make that happen on their own. We need strict regulation – and that's exactly what we have. Here in Europe, our safety rules for pesticides are some of the toughest in the world – and they’ll be just as effective after these mergers as they are today. Those rules set the basic standards that companies have to meet. And they help to steer innovation in the right direction – towards pesticides that are safer for people and the environment.

Vehicle emissions

Of course, consumers can change our world for the better. Many people worry about their effect on the climate and the environment. They're prepared to pay for a car that doesn't produce harmful emissions. That's one reason why there are now more than a million electric vehicles on the world's roads.

But that doesn't change the fact that we need basic standards on emissions, to protect our health and our climate. And we need firm enforcement  to make sure that they’re followed. I'm thinking of things like the new rules on carbon dioxide emissions, which the Commission is working on right now. Setting standards for cars and vans after 2020, as well as our first ever standards for trucks.

That’s not a matter for competition. But competition rules can make sure companies don't agree to stop trying to do better.  To do more than the minimum required by law.

Last month, we fined Scania more than 880 million euros, for its part in a cartel with five other truckmakers. Those companies coordinated on the gross list prices of trucks. But they also agreed not to meet new emission standards before they were legally obliged to do so. So that cartel took away the pressure to try to do better – and that's what, as competition enforcers, we need to prevent.

Privacy

We see the same sort of thing happening when we think about the privacy of our data.

The right to decide what happens with our personal information is one of our most fundamental rights as individuals. And we can't just leave it to the market to protect those rights. Which is why we need rules like the new general data protection regulation, which will give people throughout the EU the same protection from next May.

But as competition enforcers, we can make sure companies have room to compete, to offer even better protection to people who want it.

Last year, when we looked at Microsoft’s merger with LinkedIn, we found that the companies planned to link their products together after the merger. For example, they planned to pre-install the LinkedIn app on Windows PCs.

That could have shut other professional social networks out of the EU markets. And that would have denied users the chance to choose a network that protected their data better. So by getting commitments from Microsoft that will keep the market open, we’ve helped to allow companies to compete to protect privacy more effectively.

Banks

In all these cases, competition and regulation work together. Regulation sets the basic standards. Competition drives businesses to do better. And when it's necessary, we work with regulators to get the right results.

That's been the case throughout the financial crisis, every time that we’ve dealt with state aid for failing banks.

We need competition to encourage banks to serve their customers better, and keep prices down. But that mustn't come at the expense of a safe financial system – and for that, we need regulation.

Europe’s supervisors are responsible for keeping an eye on whether banks are in good health. The resolution authorities are there to restructure failing banks without weakening the financial system, at the lowest possible cost to taxpayers.

But when banks need public money to help them restructure or close – or as a precaution in case the economy turns out much worse than expected – then we need to make sure that doesn't harm competition. So we insist that banks which get state aid don't use that money to compete unfairly. That shareholders and junior creditors share the cost of fixing the bank’s problems. And throughout that process, we work closely with the authorities that regulate those banks, to make sure that nothing we do undermines financial stability.

Public and private regulation

Because even though competition and regulation can have different aims in mind, it's important that neither one undermines the other.

And that's one reason why it can be difficult when businesses try to take responsibility for regulation into their own hands.

I'm always glad to see businesses owning up to their impact on our environment or our society, and trying to do better. Business is part of society, and it needs to play its part. So the competition rules don't stand in the way of companies taking their corporate social responsibility seriously.

But when companies get together to set standards for everyone, there's a danger of that becoming a way to undermine competition. So what we need are not exclusive rules, put together in secret. But standards that anyone can contribute to, and anyone can use.

But we can't simply leave regulation to business. Because lot of the choices it involves are really decisions about our values. What rights for workers do we think are fundamental? What sort of control should people have over the way their data is used? Different people, quite legitimately, see those questions in different ways. And it's only through a democratic debate that we can come to the best conclusion.

Conclusion

And we need to leave room for those debates. Because competition can't do everything.

I was sorry that I wasn't able to have lunch with you earlier, and to extend a hand of welcome to people who have been driven from their homes by war.

When the EU was founded, millions of Europeans still lived with the memory of being displaced from the homes where they felt safe. Today, at a time of peace and stability in Europe, we can offer to others what our parents and grandparents needed then. Not just a refuge from conflict, but a way to take part in the life of their new home. By inviting the organisation “We Exist” to provide today's lunch, you've helped to provide exactly that.

Because as human beings, there are many ways we can make life better for others.

But in our day jobs, we need to realise that we can't do everything.

Of course, competition makes a big difference in people's lives. It drives businesses to do better to meet consumers’ needs. And even though the market obviously isn't the same thing as society, those positive experiences in the market can help people trust the society around them.

But even though competition can drive businesses to do better, it can't, on its own, stop some of them doing worse. It won't stop some companies selling pesticides that are bad for us, or some banks making risky investments that could bring down our financial system.

That's why we need both regulation and competition enforcement.

Markets that are open for competition still need the right regulation.

Because it's when competition enforcement and regulation work well together that we get a market that really serves the needs of Europe's people. And that's how we make the principles of our Treaty a reality in people's everyday lives.

Thank you.

Source: What competition can do – and what it can't | European Commission