Why Europe wants to change its competition policy

Margrete Vestager has earned plaudits in some circles as EU Competition Commissioner for boldly applying EU competition law to tech giants. But as she prepares to bow out at the end of her term this year, the Commissioner is expected to leave a legacy that will last beyond her time as competition enforcer. Indeed, she is laying the foundation for a sea change in the way the EU intervenes in digital markets.

Her planned reforms will shift the focus of competition policy in digital markets from consumer welfare to societal welfare – low prices and convenience must also benefit society, or at least not bring about negative social consequences. This could effectively mean new approaches to defining digital markets as the EU’s competition authority becomes more proactive to avert competitive harm before it happens. This could also mean new, more stringent regulations on how, and by whom, data is collected, used and accessed.

The aim is to ensure that tech firms play fair – not just in the market, but also in our personal and civic lives. It is recognition that digital technology is about more than business: it is also about our personal liberties and democracy. As Commissioner Vestager put it during her Mackenzie Stuart lecture in Cambridge in early February: “We can’t trade our freedom for better maps, or our democracy for a better social media algorithm.”

Competition and competitiveness

Her plans for competition reform may however have to be squared with a Franco-German reform plan coming in the wake of Vestager’s decision to block the merger between France’s Alstom and Germany’s Siemens. The two rail giants claimed, along with their governments, that the merger was needed to create a global industrial titan to stave off competition from China’s CRRC in the rail sector. Vestager said the deal was “incompatible” with the EU’s internal market, infuriating German Economy Minister Peter Altmaier and his French counterpart Bruno Le Maire. France and Germany are now joining forces to propose a political veto that will enable selective application of merger rules.

At heart, this debate is about the distinction between harm to competitiveness and harm to competition. At first glance, competitiveness and competition may appear more or less the same. However, there are crucial differences. Competitiveness refers to the ability of countries to compete while competition policy refers to the ability of companies to compete.

The Commissioner argues that more competition makes European companies more competitive at home and abroad. In other words, more competition increases the competitiveness of Europe. However, Germany and France argue that more competition is good for some sectors (like digital technology) but bad for other “strategic” sectors where investments are, in the words of Le Maire “massive” and “long-lasting” (like rail). France and Germany imply that they do not consider digital technology a strategic sector – and if that is the case, it would be an important conclusion that may merit debate by the rest of Europe, given the enormous role that digital tech is already playing in almost every sector of the economy.

Shaping our future

The real question is how these possible changes in competition policy will affect our increasingly digitally connected existence. These changes may be inspired by a desire to regulate powerful tech platforms or counteract competition from China, but they will also regulate the activities of all companies, big and small.

As more products and services connect to the Internet – from cars to refrigerators to medical treatments – nearly all companies will collect and/or use large amounts of digital data. That data will be analysed by human and artificial intelligence to make all kinds of continuous adjustments and innovations in both on-line and off-line markets. In the not-too-distant future, competition policy for digital markets will affect nearly everyone participating in the economy, period. One thing is certain: business will have to grapple with increased legal and regulatory uncertainty.

Against this background, it is clear that the next few years will be formative. Policymakers in the new European Parliament and European Commission will be constructing our future. But as Commissioner Vestager stressed in her lecture, “We must not be afraid, as a society, to take control of this new world. Because in the end, it’s not technology that will decide our future. It’s us.”

Author: Livia Solange West

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