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INDUSTRIAL POLICY AND COMPETITION ENFORCEMENT: IS THERE, COULD THERE AND SHOULD THERE BE A NEXUS?

INDUSTRIAL POLICY AND COMPETITION ENFORCEMENT: IS THERE, COULD THERE AND SHOULD THERE BE A NEXUS?. Nicolas Petit and Norman NEYRINCK 9 November 2012 GCLC Annual Conference 2012 www.chillingcompetition.com. Purpose of the Presentation.

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INDUSTRIAL POLICY AND COMPETITION ENFORCEMENT: IS THERE, COULD THERE AND SHOULD THERE BE A NEXUS?

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  1. INDUSTRIAL POLICY AND COMPETITION ENFORCEMENT: IS THERE, COULD THERE AND SHOULD THERE BE A NEXUS? Nicolas Petit and Norman NEYRINCK 9 November 2012 GCLC Annual Conference 2012 www.chillingcompetition.com

  2. Purpose of the Presentation • Should there be a nexus between EU competition law and industrial policy?

  3. Outline • Variants of Industrial Policy • A Review of the Economic Literature • What does EU law say about this? • Enforcement Implications?

  4. I. The Two Variants of Industrial Policy Targeted Industrial Policy Competitiveness Policy • Picking winners, saving losers • Supports specific domestic firms/sectors • State aid and government sponsored mergers • Reactive (Alstom) or Pro-active (EADS) • Strong anticompetitive potential • Horizontal policies • Correct market failures • Smart regulation • Competition policy as part of competitiveness policies • Less anticompetitive, in principle • But non price competitiveness

  5. II. Review of the Economic Literature (1) Targeted industrial policy Competitiveness policy • Pros • Safeguards domestic employment; keep capital national; big is beautiful; “infant industry” theory; etc. • Cons • Asymmetrical information; rent seeking; public choice issues; distortion of investment incentives • Pros • Less documented • Avoid the pitfalls of industrial policy • Cons • Poor empirical evidence • Winners and losers • Rent seeking • “Sprinkling” of resources

  6. II. Review of the Economic Evidence (2) Targeted individual policy Competitiveness policies • Confirmative examples • Alstom, EADS, etc. (+ China, Brazil and India) • Unsupportive examples • Bull, Nokia (?), etc. • Confirmative examples • Silicon Valley, Hartz reforms in Germany • Unsupportive examples • The Lisbon Strategy, and the EU 2020 Agenda…

  7. III. What does EU law say about this (1)? • Treaty Law • Article 173(1) TFEU: “The Union and the Member States shall ensure that the conditions necessary for the competitiveness of the Union's industry exist”. • But Article 173(3), industrial policy ‘”shall not provide a basis for the introduction by the Union of any measure which could lead to a distortion of competition”

  8. III. What does EU law say about this (1)? • Case Law (post introduction of Article 173 TFEU) • GC,T-17/93, Matra Hachette SA v. Commission, [1994] ECR II-595 • See also GC, T-112/99, Métropole télévision (M6), 2001, ECR II-2459, para 118 • Bottom-line: competition policy does not apply in a vacuum • Best practice => EU competition enforcement should pay heed to industrial policy considerations

  9. IV. Enforcement (1) • So far, no space for targeted industrial policy: • “The price of creating a European champion cannot be to let a de facto monopoly dictate its commercial conditions on thousands of European firms operating with European derivatives” (J. Almunia, re. Deutsche Börse/NYSE prohibition) • And competitiveness? • “Competitionenforcement and advocacyalso serve otherwider longer-term objectivessuch as enhancing consumer welfare, supporting the EU'sgrowth, jobs and competitiveness in line with the Europe 2020 Strategy for smart, sustainable and inclusive growth” (Annual Report on Competition Policy for 2011)

  10. IV. Enforcement (2) • Hot air? • Not so sure • “the EU [must] develop a stronger horizontal coordination of its various instruments and policies. A more in-depth articulation of competition, trade and industrial policies has to be developed, in order to ensure a coherent and consistent approach to the protection of industrial value chains” (2011 Competitiveness Report). • Four strategic interests where adjustments may be deserved

  11. IV. Enforcement (3) • Access to Resources • Enforcement priority under 102 TFEU (EFD-style theories of harm) • Leniency against joint purchasing agreements 101(3) TFEU • Increased scrutiny of mergers that involve the acquisition of EU input manufacturers, by State-controlled foreign firms • Fact finding • Innovation • Build larger innovation capacities in Europe => more lenient towards innovation-efficient mergers between EU firms, than re. mergers between non-EU firms • State aid => lower thresholds for industrial research and experimental research => avoid “Valley of Death” • Access to Markets • Restructuring • … And the Competitiveness Defense?

  12. Thank you!

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