Speech/00/207 Mario Monti Commissioner for Competition Policy European competition policy and the citizen



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SPEECH/00/207

Mario Monti
Commissioner for Competition Policy


European competition policy and the citizen

European Competition Day



Lisbon, 9 June 2000

Minister, Madam Chairman, distinguished guests, Ladies and Gentlemen,

Let me tell you how pleased I am to open this first European Competition Day in Lisbon.

When I was appointed Commissioner for competition last September, I realised immediately that the business community was fully aware and supportive of our work – with the exception of those companies of whose mergers or state subsidies we did not approve!… The wider public, however, has very little idea of what we are doing and how competition policy makes a real difference to their daily lives.

We need to do more to explain what our fight against cartels, our scrutiny of mergers and acquisitions and the control of state subsidies means to the man in the street: greater choice of products and services, better quality, better prices. We can be very proud of the story we have to tell. It is thanks to the opening up of markets such as telecommunications and air transport to increased competition, that phone tariffs and air fares have dropped significantly all over Europe. Today people who could never previously afford it are travelling to places they always dreamed of visiting – in large part thanks to the work of the European Commission’s competition authority.

This is why I think that citizens should be better informed about what competition policy means for them and for the functioning of the economy as a whole. Once EU citizens understand these facts, they will become our best supporters in the Member States, for example on the liberalisation of postal services – the Commission’s latest challenge - or our challenging of unjustified subsidies to white elephants or inefficient firms which could see their money go wasted!… We are all consumers, and we are all taxpayers. This is to me the main purpose of the Competition Day.

Before continuing, I would like to thank Minister Joaquim Pina Moura for taking on the challenge and helping organise the first Competition Day in Lisbon. I launched the idea in October last and hope it will take place twice a year in the country that hosts the presidency of the European Union. I would also like to extend my thanks to Mrs Randzio-Plath and Mr von Wogau of the European Parliament for their participation in this conference. Last but not least, I wish to thank Mrs Celeste Fonseca, director general for trade and competition in the Portuguese Finance Ministry , for the assistance her services have lent to the organisation of this event.

Let me now give you an overview and some examples of the benefits citizens can get from EU competition policy.


I. Overview of the benefits for EU citizens

Our job is to ensure fair competition between companies operating in the European Union’s single market by fighting excessive and unjustified subsidies and anti-competitive practices such as abuse of dominant positions and cartels. This in return, brings about innovation, cost reductions and production efficiencies – all benefits, which are passed on to the consumer. In a competitive environment, companies need to offer the best goods and services at the best prices if they do not want to be driven out of business by their rivals. In other words, competition policy puts markets at the service of consumers, which can choose from a wide range of good quality products and services at attractive prices. After all we say that the consumer is king! Moreover, because of these above-mentioned efficiencies, companies are stronger to compete on the world markets enabling them not only to preserve but also to create new jobs which Europe so badly needs.

In order to get down to concrete examples of how competition policy worked in favour of the consumer, let me ask you a riddle. What is the relationship between an Austrian buyer of a car in Italy, the customer of a Finnish supermarket, the user of a GSM in Spain and a German worker in the former East Germany? They all watch the Eurovision song contest or the Euro 2000 Football Championship starting tomorrow?!. Well yes, that too. However, for the purpose occupying us today, they have all benefited from our action in the competition area at one point or another. I am sure most of them were not even aware of this at the time, but they certainly benefited.

Anti-trust

I will take the example of antitrust policy, where the Commission basically tackles price-fixing and other cartel agreements as well as abuses by companies dominant in their sector.

In 1998 the EU executive fined German carmaker Volkswagen a record 102 million euros for agreeing with its Italian dealers not to sell cars to consumers living in Austria and Germany who had tried to take advantage of Volkswagen’s lower prices in Italy. This is a clear violation of the special car distribution rules and a flagrant negation of a European single market for consumers, not just for companies.

Last year, British Airways was also fined for offering loyalty discounts to travel agents which had the effect of shutting out competing carriers and resulted in less choice for travellers. The Commission is examining the policy of other dominant airlines with regard to travel agent commissions.


Mergers

In reviewing mergers and acquisitions, another area where the Commission’s work skyrocketed in recent years, our mission is to prevent the creation or the strengthening of dominant positions, which would leave consumers at the mercy of a single big player or only a few.

We did precisely that, for example last year, when the Commission blocked the acquisition by UK travel operator Airtours of domestic rival First Choice on the grounds that British consumers would not be left enough choice to buy their summer holidays in the Algarve or in the Costa del Sol.

The same concern led the Commission to take action in a number of supermarket mergers in Finland, Austria, France and Spain or in the recent acquisition of French oil company Elf by rival TotalFina, where it obtained the sale of 70 petrol stations. This was to avoid the company controlling petrol prices on French motorways.

This means mergers can take place, giving companies the size and the efficiencies required to compete globally while taking care of the consumers’ interests. Unfortunately, business consolidation may also be accompanied by job losses in the short run as the merging partners use the opportunity to restructure their operations. However, I am convinced that competitive pressure by improving efficiency is working in favour of sustainable jobs. It is very likely that without mergers and restructuring processes, companies would lose more jobs as they would not be competitive and could go out of business altogether.

Liberalisation

Nowhere have the consumer benefits been more obvious than when it comes to market liberalisation. The opening up of sectors previously run by monopolies such as air transport, telecommunications or electricity brought new competitors and resulted in more and better services at lower prices. This has been particularly the case of phone calls and air tariffs. A recent study revealed that the price of certain phone calls has fallen by 35% in the wake of liberalisation.

Despite such clear benefits, it is sometimes alleged that market liberalisation undermines public services and is not good for citizens, I disagree with this. Firstly, because past experience has proved to be extremely positive in terms of the quality and price of services. Secondly, because liberalisation does not spell the end of public services, which governments can safeguard and promote.

The key issue is that any special or exclusive rights given to certain companies should not exceed what is necessary to deliver the services of general interest entrusted to them. The Commission's policy in the field of liberalisation establishes therefore a balance between competition and public service. According to me, the benefits for European citizens are simply doubled.


State aid control

The Commission also has a duty to examine business subsidies granted by central or local governments which remain stubbornly high at some 38 billion euros (7.6 billion euros) a year for the manufacturing sector alone – or 1,000 euros per worker!

State subsidies almost always distort competition and if the company being aided is not viable in the long term they can also represent a waste of taxpayers’ money.This is because while public aid to help poor regions catch up with richer neighbours in the same country, or elsewhere in the Union can be beneficial – regional development in Portugal, or in the former East Germany is a living proof of this – other forms of aid can have negative effects.

Subsidies can run un-aided companies out of business, as they have to struggle on their own while competitive conditions are distorted on the market place, and represent a waste of precious state resources.

This is particularly relevant in the case of restructuring aid. The Commission accepts those aids insofar as they enable companies to restore their competitiveness. This means that such aids should be accompanied by an effective restructuring of companies and that they are granted for a limited period of time. European competition policy clearly prefers giving priority to measures which restore the competitiveness of regions or companies and improve competition in the Union.

II - Informing EU citizens

Consumers, users of public services, savers, workers, in one word, citizens benefit in many respects from European competition policy. I hope I have convinced you of this today and I will continue this crusade and take the good news to other countries and places.

First of all, I have decided to better explain our policy to citizens' representative bodies, starting with the European Parliament. In this respect, I undertook to meet regularly the Parliament’s Economic and Monetary Affairs Committee. Moreover, the Commission will establish a constant dialogue with Consumers' Associations and in particular with its European equivalent BEUC. I wish that the European Parliament and the Consumers' Associations will act as intermediaries and will pass on to European citizens our message as well as inform us of their grievances.

Secondly, in order to stimulate this exchange of views between the Commission and the citizens and their representatives, the Commission has recently made substantial efforts to increase transparency through the publication of its decisions and legislation on our website as well as to put the emphasis on the consumers’ interest, namely in the competition press releases.

Last but not the least, this "European Competition Day for citizens" favours a direct contact with citizens at national level. Of course, as the European Commissioner responsible for competition, every day is a competition day and I do not want you to think that the Commission is working only one or two days a year. Thus, today is special, this is the Citizens' Day. We will focus our efforts today to explain what we do in favour of 380 million people in Europe by picking a subject dear to their pockets if not hearts, I am thinking of car distribution, and the competition rules applying to liberal professions.

I hope that my modest words, this conference and following debates, the exhibition outside and the brochure we are distributing today for the citizens will achieve just that.

My best wishes to this first European Competition Day and welcome to all the participants.

Minister, Madam Chairman, distinguished guests, Ladies and Gentlemen,



Thank you.


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