Has the financial and economic crisis pushed aside the fundamental elements of EU competition policy to the benefit of industrial and social concerns? The issue is under debate, but one thing is certain: the European Commission does not intend to give in on the basis of Community law. In this special dossier, Europoliticsprovides insight into the debate underway, as well as the actions undertaken by the EU executive, particularly in terms of state aid.

The Commission did not lose its touch in terms of competition between European businesses across all areas: the control of state aid as well as of mergers with a European dimension, the fight against cartels as well as abuse of dominant position. This was proven by the record fine of €1.06 billion imposed on the world’s leading semiconductor producer, Intel, on 13 May, for abuse of dominant position. Or the unprecedented combined fine of €1.38 million on four car glass manufacturers, in November 2008, found guilty of forging a cartel.

The fact remains that the subprime mortgage crisis, which was born in the United States and subsequently had a violent impact on European banks, led to an overhaul. If only because, in the case of state aid, the EU executive had to speed up its decision making in the second half of 2008, in order to give the green light to the rescue plans for banks which were then plummeting. This necessitated additional work, “including the weekends,” insisted Neelie Kroes, the competition commissioner, on several occasions. But the return to protectionism was flatly refused: “Some observers have declared that competition rules are an obstacle to resolving the crisis. This is not true: they are, on the contrary, essential,” maintained the Dutch commissioner.

At the height of the crisis, in the second half of 2008, member states in fact criticised the Commission for not having reacted quickly enough. In response, the College provided Neelie Kroes with the means to take decisions more quickly in order to authorise emergency aid. This did not prevent her – in a second period anticipated by the authorisation of aid – from putting pressure on the major banks rescued at national level. For example, on 12 May, the large German regional bank, WestLB, assisted by North Rhine-Westphalia (west) and the local savings banks, was urged to make a clean sweep of its assets in order to get rid of the riskiest ones. “And who says that the Commission is not active,” said the commissioner. “Since the start of the financial crisis, state aid has been part of the solution and not the problem,” she commented.

Such were the emergency reactions to the national rescue plans. On the other hand, therefore, there was no change in sight for the fight against abuse of dominant position and cartels (illicit arrangements between businesses on prices or even market share). More than ever, the Commission has them in its line of sight. All that remains is company mergers.

FLEXIBILITY ON MERGERS?

In the area of mergers/acquisitions of companies with a European dimension, several lawyers agree that the crisis does not lead to substantial modifications in the basic aspects of the law. Kroes is, however, “locked inside a tight straitjacket,” commented Jacques Buhart, a lawyer and partner at the Herbert Smith practice in Paris. The Commission’s objective being, in fact, to obtain a decision that has the least risk of being contested before the EU Court of Justice.

“Will the Commission consent to sacrificing the long-term advantages of a competition system and opt for short-term solutions to the damage that competition may pose, in certain cases, if it is too fierce? I doubt it,” added Dominique Brault, a lawyer at the court, who specialises in Community and French competition law and is also a partner at the Herbert Smith practice.

And yet, “will the Commission’s action not become much more complicated,” asks Maître Brault. And not really for quantitative reasons - because the EU executive could have fewer merger dossiers to deal with than in the past - but for qualitative reasons. “Here we can expect a strong development, because there will be far fewer operations that do not pose many problems, such as acquisition of equity by the investment funds. On the other hand, there will be more sensitive intrasector operations, which pose competition problems, and which do not go via simplified procedures. Average lead times for handling cases could therefore increase,” he said.

Finally, sums up Maître Brault, “if the basics are not required to move, at least in the discussions and texts,” the way in which they will be applied, “will evolve”.

This is what Europoliticsis striving to analyse in this dossier n.

“Will the Commission consent to sacrificing the long-term advantages of a competition system and opt for short-term solutions?”