What changed

Follow-up to the European Parliament non-legislative resolution on competition policy – annual report 2023

25.10.2023

1. Rapporteur: Stéphanie YON-COURTIN (Renew / FR)

Ms Irene Tinagli

2. Reference numbers: 2023/2077 (INI) / A9-0427/2023 / P9_TA(2024)0011

Chair

3. Date of adoption of the resolution: 16 January 2024

Committee on Economic and Monetary Affairs

4. Competent Parliamentary Committee: Committee on Economic and Monetary Affairs (ECON)

BRUSSELS

5. Brief assessment of the resolution and the requests made in it:

Subject: Opinion on Competition policy – annual report 2023 (2023/2077(INI))

The European Parliament resolution concerns the Commission’s Annual Report on Competition Policy 2022 (COM(2023) 184) and its accompanying Staff Working Document (SWD(2023) 76), adopted on 4 April 2023. These documents together are referred to as the Annual Competition Report 2022 (ACR 2022). The ACR 2022 presents how the Commission implemented its competition policy in 2022, how it contributes to the EU economy and how it is improving the welfare of EU citizens.

Dear Madam Chair,

Below, the Commission highlights some of the key paragraphs in the resolution. In section 6, the Commission provides brief comments on each of these paragraphs.

Under the procedure referred to above, the Committee on the Internal Market and Consumer Protection has been asked to submit an opinion to your committee. At its meeting of 23 May 2023, the committee decided to send the opinion in the form of a letter.

The European Parliament takes note of the Temporary Crisis and Transition Framework (TCTF), as well as of the update of the State aid rulebook that allows investments for the green and digital transitions; takes note of the 2023 adoption and inclusion of the ‘matching clause’; calls on the Commission to carefully avoid creating the conditions for a subsidy race and to use the tools at its disposal to prevent and counteract unfair subsidy competition; stresses that any additional state support must be targeted and temporary in nature [...] (paragraph 2).

The Committee on the Internal Market and Consumer Protection considered the matter at its meeting of 25 October 2023. At that meeting, it decided to call on the Committee on Economic and Monetary Affairs, as the committee responsible, to incorporate the following suggestions into its motion for a resolution.

The European Parliament recalls that a fragmented approach to State aid has the potential to create an uneven playing field within the EU internal market as not all Member States have the same fiscal space to provide support; calls, therefore, for the monitoring of potential distortive effects and for any flexibility of the public support to be applied solely to support provided at EU level (paragraph 5).

Yours sincerely,

The Parliament calls on the Commission to look into how inflation impacts competition by creating incentives for companies to cooperate with competitors to coordinate prices, as well as its consequences for markets and consumers’ welfare; [...]; calls on the Commission to closely monitor, along with the national competition authorities, the consequences of anticompetitive conduct and its role in inflation developments [...] (paragraph 6).

Anna Cavazzini

The European Parliament underlines the importance of the Important Projects of Common European Interest (IPCEIs) for financing large transnational projects and achieving the EU’s strategic priorities; takes note of the specific criteria for IPCEIs for the analysis of the compatibility with the internal market of State aid; deplores that the lengthy and complex procedures required are often too burdensome for small and medium-sized enterprises (SMEs); it calls on the Commission and the Member States to ensure that any notification is completed within six months at the latest; stresses that IPCEIs should have genuine European added value (paragraph 8).

SUGGESTIONS

The Parliament underlines the key role of the European Competition Network (ECN) as a forum to foster collaboration and cooperation among European competition authorities; [...] welcomes the relevant role of national competent authorities (NCAs) in enforcing the Digital Markets Act (DMA) rules and the national legislative initiatives that are being put in place to tackle the anticompetitive behaviour of large online platforms in digital sectors; stresses, in this regard, the importance of coordinated and homogeneous action that does not undermine the application of the DMA, on the one hand, and national competition rules in the digital sector, on the other hand, as provided for in Article 1(6) DMA (paragraph 17).

1. Recalls the integral connection between competition policy and the internal market, which is clear from the text itself of the Treaty articles governing EU competition policy, Articles 101 and 102 TFEU; welcomes the fact that the Commission, in both its legislative and policy work, has recognised the need to integrate competition policy with the internal market objectives which frame it; notes, in this regard, that the foreword of Executive Vice-President Vestager to the Commission’s Annual Competition Report 2022 (COM(2023)184) starts from the 30th anniversary of the single market;

The European Parliament welcomes the Commission’s initiative to review its notice on the definition of ‘relevant market’ and looks forward to the outcomes of the public consultation; underlines the need to adopt a more dynamic approach that goes beyond the traditional approach, especially for new emerging markets such as in the digital sector, and takes into account a longer-term vision encompassing the global dimension and potential future competition; deplores the fact that, in the past, the Commission sometimes took too narrow a perspective on the relevant market, thus depriving European companies of the opportunity to effectively compete in a globalised arena; supports the Commission in taking into greater account the potential harm to competition when assessing mergers in which expansion into adjacent markets would have the effect of further strengthening market dominance in the acquiring company’s core market (paragraph 24).

2. Further recalls the fundamental orientation of competition policy towards strengthening the single market and empowering businesses to foster the green and digital transitions; recalls that competition policy is designed to maintain an open market economy with free, fair and effective competition favouring an efficient allocation of resources in order to enhance consumer welfare by not only delivering affordable prices and greater choice of innovative and more sustainable products and services, but also better quality production, guaranteeing a high level of consumer protection;

The European Parliament [...] stresses the need for the effective coexistence of the ex-post enforcement of competition law and the ex-ante enforcement of the DMA, given their complementary nature; stresses the need to deploy sufficient staffing resources and synergies for an effective implementation of the rules, and to avoid overlaps or duplications of existing structures and measures (paragraph 44).

3. Points out the need to effectively address market distortions and boost competition by removing existing unjustified regulatory barriers and reducing unnecessary administrative burdens to facilitate entry for new competitors; stresses that increased product market competition coupled with eliminating unjustified regulatory barriers reduces profit margins and price levels;

6. Response to the requests and overview of the action taken, or intended to be taken by the Commission:

4. Considers that competition rules should align with the overall goals of a sustainable and fair transition, including by supporting the objectives of the European Green Deal and Climate Paris Agreement;

On paragraphs 2 and 5: By regularly sending surveys to Member States, the Commission seeks information on the implementation on measures approved under the Temporary Frameworks or directly under the Treaty based on their principles. The Commission refers to the Competition State Aid Brief (2022 and 2023 editions). In addition, the Commission has done a comprehensive overview and analysis of State aid granted under the Temporary Crisis Framework and the Temporary Crisis and Transition Framework and its impact on competition in the Single Market and on EU competitiveness in the Annual Competition Report 2023. The Commission notes the concerns raised that the Temporary Crisis and Transition Framework may possibly distort competition in the Single Market because Member States have diverging financial capacity to subsidise companies negatively affected by Russia’s war of aggression against Ukraine. However, the Commission only approves measures after careful analysis and when they are considered necessary, appropriate, and proportionate in order to limit competition distortions and maintain the level playing field.

5. Recalls the adoption of the Digital Markets Act (DMA) and the Digital Services Act (DSA) as essential steps towards a harmonised, fair and competitive digital single market;

On paragraph 6: The Commission agrees that an effective competition policy is important during times of high inflation. An effective enforcement of the competition rules makes it harder for companies to implement unjustified price increases resulting in disproportionate profit margins. Effective competition fosters an environment where companies operate efficiently, innovate, and offer competitive prices to attract and retain consumers. This helps to keep prices in balance and benefits consumers by providing them with choices and reasonable pricing options. Conversely, companies active in markets with inadequate competitive pressure, particularly those exhibiting oligopolistic or non-well-functioning characteristics, may engage in collusion even amidst market conditions characterised by low inflation or even deflation.

6. Reiterates the need for full and timely implementation of the DMA, so as to deliver on the potential which open markets can bring for businesses and consumers; encourages the Commission, in this regard, to pay particular attention to full and timely enforcement of the interoperability obligations for gatekeepers under Article 7, including the possibility of extension of the scope of this provision to cover social networking services, as foreseen in the DMA’s review clause; looks forward to a transparent and successful conclusion of the process for designation of gatekeepers not only on the basis of the quantitative criteria in Article 3(2), but also on the basis of the qualitative assessment in Article 3(8);

On paragraph 8: Important Projects of Common European Interest (IPCEI) must aim to contribute to the achievement of EU objectives, for example the green and digital transitions. IPCEIs are, by nature, large, complex projects requiring extensive coordination at the design and implementation phases and involving very large amounts of aid from scarce taxpayer money. The Commission assesses them as a matter of priority. It also has assigned additional resources for the assessment of IPCEIs and set up the Joint European Forum for Important Projects of Common European Interest (JEF-IPCEI) which brings the Commission and the Member States together to identify, design, assess and implement IPCEI.

7. Invites the Commission to envisage already now launching a market investigation under Article 19 DMA with the aim of examining whether there are new services in the digital sector that should be added to the list of Article 2(2) DMA in the light of the latest technological developments; encourages the Commission to adopt delegated acts soon in order to extend the modalities of application or to specify the modalities of implementation of the obligations laid down in Articles 5, 6 and 7 as set out in Article 12 DMA in the light of what has been learnt -also- from the workshops organised over the past year;

However, it must be first noted that for a proper assessment of an IPCEI, the Commission requires a complete notification, i.e. a complete set of information. The Commission has devised a comprehensive template for the provision of information for an IPCEI project, and reproduced its experience in a best practice code. Notwithstanding this, the provision of the required information remains a matter for the Member State only. Given that this exercise is out of the Commission’s control, the Commission does not consider that introducing a six-month time limit for ensuring that any notification of an IPCEI is completed would be appropriate.

8. To this end, acknowledges the significant work the Commission has done so far in providing the necessary resources for implementation; nevertheless emphasises the urgent need for the Commission to deploy as many resources, both financial and human, as possible and as efficiently as possible to ensure successful implementation of the DMA;

Second, in order to alleviate the burden of providing information for SME, the IPCEI rules allow for a more flexible approach for SMEs. For example, SMEs are not required to contribute with significant own funds or to justify why they need aid for their projects and normally no claw-back for higher profitability applies to SME projects. The average SME participation rate in IPCEIs so far has reached 17%.

9. Welcomes the recent adoption of the delegated act specifying the very large online platforms and very large search engines under the DSA; underlines that such platforms and search engines must identify, analyse, and assess systemic risks and put in place effective mitigation measure; encourages the Commission to pay particular attention to the enforcement of these requirements alongside the enforcement of the DSA as a whole;

In addition to regionally anchoring IPCEI – for instance by requiring that they involve at least four Member States -, the 2021 IPCEI Communication mentions as a positive indicator the involvement of undertakings of different sizes and, in particular, cooperation between large enterprises and SMEs, including start-ups, in different Member States and supports the development of more disadvantaged regions.

10. Insists on the need for the Commission to continue to pursue, as a fundamental approach, a policy of active enforcement of the competition rules as regards the digital single market, which is crucial if consumers are to feel the benefits of such important markets in terms of greater choice and lower prices and to boosting business competitiveness; in this regard, welcomes the Commission’s active case management over the past few years concerning several players in digital markets, although sometimes the decision-making process both to open new investigations and to close open ones still takes too long; calls for such robust and impartial enforcement of the competition rules to be continued and for enforcement proceedings which have been opened to be brought to a conclusion as quickly as possible, with the greatest regard for the full maintenance of competition on the EU’s digital markets;

Third, all IPCEIs approved by DG COMP had genuine European added value. The State aid guidance published under the IPCEI Communication considers it as an eligibility requirement for all integrated IPCEI that they “significantly add value in their contribution toward the achievement of the European objectives” (paragraph 13 of the Communication).

11. Insists also on the need for the Commission to coordinate its on-going enforcement in relation to digital markets under the traditional competition rules laid down in the Treaty, i.e. Articles 101 and 102 TFEU, which represents down-stream ex post enforcement, with upstream, ex ante enforcement in relation to the same markets as now is possible under the DMA, especially in those market areas that do not (yet) fall within the scope of the Regulation; calls for the Commission to be vigilant in this regard with regard to the legal effects of the different enforcement routes, and to ensure coherence in its approach as regards policy outcomes and strength of enforcement across the board;

On paragraphs 17 and 44: The Commission would like to highlight the nature of the Digital Markets Act. It is an internal market instrument and not a competition tool as such. However, as many of the obligations mandated by the DMA have been inspired by, or have a close relationship with, competition enforcement, it provides for a mechanism for close cooperation between the Commission as the sole enforcer of the DMA, and the National Competition Authorities (NCAs) in the enforcement of the DMA.

12. Calls on the Commission to strengthen merger control rules addressing so-called “killer acquisitions” in order to guarantee a level playing field for SMEs in Europe and the economy as a whole; adds that particular attention should be given to the impact of data concentration resulting from the concentration on the right to privacy and data protection; urges the Commission to take the aforementioned factors and non-monetary factors into account when defining digital markets and positions of power on such markets;

Article 38 of the DMA stipulates that the Commission and the NCAs will cooperate with and inform each other and inform each other about their respective enforcement actions through the European Competition Network. When an NCA based on its national laws referred to in Article 1(6) DMA intends to launch an investigation of a gatekeeper designated under the DMA, it shall inform the Commission of its first formal investigative measure. When an NCA based on its national law within the meaning of Article 1(6) of the DMA intends to impose obligations on designated gatekeepers, it will communicate the draft measures to the Commission at least 30 days before adoption. The Commission may ask the NCAs to support its market investigations under the DMA. The NCAs may on their own initiative investigate possible non-compliance by designated gatekeepers within their territories. The practical terms for the cooperation under Article 38 of the DMA are currently being determined.

13. Reiterates furthermore its call to the Commission to continue actively monitoring and removing unjustified geo-blocking and other restrictions on cross-border online sales, having at core a pro-consumer approach to allow consumers access to a greater choice of products and services across the EU;

As stated in the DMA (for instance, Recitals 10 and 11 and Article 1(6)), competition rules and the DMA are complementary and the enforcement of the DMA is without prejudice to the application of competition law in cases involving firms that have been designated as gatekeepers under the DMA. Even if the Commission’s case practice shows that competition rules are, in some cases, flexible enough to deal with the specific features of digital markets, for example strong network effects, data, zero-pricing, and market tipping, the DMA aims to correct ex ante certain dysfunctions in digital markets.

14. Welcomes the new approach in the latest antitrust cases, where the Commission for the first time and under certain conditions foresees the imposition of structural remedies to stop anti-competitive conducts, especially when the anti-competitive practice in question has been reiterated in other market segments by the same company over the years; in this regard encourages the Commission to continue in this direction for an effective ex-post antitrust enforcement;

In this context, it has to be recalled that the Commission, respecting the principles underpinning the current Multiannual Financial Framework (MFF), currently operates under a stable staffing principle. Any increases of the workload will need to be addressed by potential reallocation and redeployment within the services of the Commission.

15. Reiterates its call on the Commission to address the anti-competitive effect of territorial supply constraints with a view to ensuring a fully functional single market and harnessing its potential benefit for consumers; reiterates that these types of constraints can take different forms, such as refusals to supply certain products or services, threats to interrupt supply to a particular distributor, limitation of quantities available for sale, unexplained differentiation within product ranges and prices between Member States or limited of language options on product packaging; recalls that product differentiation and price discrimination do not automatically constitute territorial supply constraints and, as long as they are compliant with applicable Union law, might be based on reasonable and justifiable practices or business decisions;

On paragraph 41: The Commission notes the high levels of concentration in cloud computing in Europe where three companies have a combined market share exceeding two-thirds. The Commission shed light on these concentration levels in its 2020 European Industrial Strategy. Several National Competition Authorities (NCAs) subsequently conducted their own national cloud market studies. On 27 July 2023, the Commission opened proceedings against Microsoft to investigate if it anti-competitively ties Teams (which is a cloud service) with its dominant productivity software. Such conduct could limit the opportunities for cloud customers to use multiple types of software from different providers. This investigation is ongoing. The Commission is also investigating complaints by mainly European cloud providers that Microsoft leverages its popular products such as Office and Windows to the benefit of Azure and other cloud-based products.

16. Recalls, globally, the need for efficient allocation of sufficient public funding, and access to affordable private financing, on a yearly and on-going basis, to ensure the fulfilment of the objectives of the Single Market Programme, including its competition policy component, namely improving the functioning of the internal market and protecting and empowering citizens, consumers and businesses, in particular SMEs;

On paragraph 24: The Commission is currently engaged in an extensive review of the competition rules, covering all competition tools: antitrust, merger control and State aid control. As part of this review, the Commission has reviewed more than 20 sets of competition rules and guidelines, including the Notice on the definition of the relevant market. All revisions of the competition rules are done according to the Better Regulation rules, after carefully considering relevant aspects, including the regional dimension and the effects on SMEs.

17. Notes that in March 2022 the Commission adopted a Temporary Crisis Framework, now prolonged until the end of 2023, to reduce the negative social and economic impact on the EU by Russia’s war of aggression against Ukraine; calls on the Commission to monitor closely any developments in this field and assess whether further temporary changes to the State aid rules are called for, while ensuring that these temporary measures do not create permanent distortions in the internal market;

The Commission welcomes the European Parliament’s support for the adoption of the Commission notice on the definition of the relevant market. The Commission notes the European Parliament’s call for a more dynamic approach taking into account in its competitive assessments a longer-term vision and a global dimension.

18. Notes that mobilising investments at the scale needed to meet the 2030 emissions reduction targets will require in certain appropriate cases the provision of State aid as recognised by the Commission; calls therefore on the Commission to align State aid rules with the EU’s efforts towards decarbonisation, in particular for the energy transition; deplores that, as a general rule, no green conditioning is attached to the approval of State aid; calls for State aid rules to be aligned with the overall goals of a sustainable and fair transition;

In February 2024, the Commission adopted a revised Market Definition Notice. The review of the Notice is central to the Commission’s ambition to ensure transparency and predictability in its competition law enforcement. The revised Notice brings the Commission’s guidance in line with new market realities, as well as with developments in the Commission’s case practice and EU case law. It will enhance transparency and legal certainty for businesses, facilitate compliance and contribute to a more efficient competition enforcement. The revised Market Definition Notice offers expanded and up-to-date guidance on the Commission’s approach to market definition. It adapts the definition of markets in antitrust and merger cases to modern circumstances, including principles, methodology, case law and best practices. Some key elements of the revised notice include:

19. Emphasises that competition rules in the area of services of general economic interest (SGEI) should protect citizens’ access to basic public services; recalls the need for better-targeted State aid for SGEI, including energy, transport, telecommunication, health and housing.

a recognition of the importance of non-price parameters for market definition, including innovation, quality, reliable supply and sustainability;

specific guidance on the application of market definition concepts in specific circumstances, such as innovation-intensive industries and digital markets, for instance with respect to multi-sided markets and digital “ecosystems”;

clarifications on dynamic and forward-looking assessments in markets undergoing structural transitions;

expanded guidance on geographic market definition focusing on factors that can justify defining markets as global, EEA (European Economic Area)-wide, national, or local, and on the role of imports when defining the relevant geographic market.