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Guidance allowing companies to collaborate with rivals on investment. A regime to police potentially worrying mergers after they are approved, rather than before. New principles to vet corporate tie-ups on an EU-wide basis, instead of reviewing market power at the national level.
Of all the 400 pages of Mario Draghi’s report on European competitiveness, the recommendations directed at the EU’s antitrust division — long seen as the vanguard of Brussels regulation — are some of the most radical.
If the approach were adopted, the former European Central Bank governor was clear about the potential result: a green light for deals such as the train megamerger between France’s Alstom and Siemens of Germany, which was blocked by Brussels in 2019.
Draghi’s overall message for Brussels is unforgiving. Europe’s competition enforcers, driven by a relentless focus on consumer prices, had been out of step with a global digital economy where companies need scale to compete and innovate.
“There is a question about whether vigorous competition policy conflicts with European companies’ need for sufficient scale to compete with Chinese and American superstar companies,” Draghi’s report concludes.
His remedies — which in effect reinterpret how the competition rules are applied — are to give more leeway to dealmaking and collaboration, and tackle problems as they arise.
“Competition should be more forward looking rather than prudential,” he told reporters on Monday.
With regard to mergers, it would represent the biggest shifts in the EU’s competition regime since the birth of Europe’s single market in the 1990s.
Unlike some other ambitious Draghi proposals in the report, the fundamental rethink of competition enforcement certainly chimes with the political mood in Brussels. Ursula von der Leyen, the European Commission president who requested Draghi’s report, called in July called for “a new approach” on competition that is “more supportive of companies scaling up in global markets”.
Margrethe Vestager, the EU’s outgoing competition chief, also pointed to big changes on the horizon. “A profound updating of European competition rules is in motion,” she said last week.
Any serious overhaul would face a major political backlash. Signs that the commission is veering from its traditional approach have already alarmed some EU officials and smaller countries, who fear that talk of “European champions” is merely a cover for allowing greater consolidation that would drive up prices and reduce investment incentives.
“This is madness,” said one senior EU official closely involved in competition policy.
“The new competition commissioner will be under huge pressure to introduce doses of industrial policy in competition policy,” they said. “It’s a weakening of competition policy to large industrial interests in Europe.”
Draghi argues that his goals can be achieved without rewriting the EU’s core competition goals, merger control regulations, or indeed state aid rules. The key reform would be changing the commission’s own in-house guidelines for how those rules are enforced so they are “fit for purpose”.
One example would be to make innovation — and the development of new technologies — a more important factor in assessing whether high concentrations of market power can be tolerated.
To prevent this defence of a deal being misused, Draghi proposes requiring companies to commit to levels of investment that can be monitored in the years after a merger is approved. The commission could, for example, require companies to report metrics on pricing or investment that could be challenged if they show an abuse of market power.
“You allow a merger and you see if this has the chance to be translated after a while into something that is anti-consumers,” Draghi said on Monday.
He also suggests that the commission, in markets such as telecoms, should assess whether a proposed merger stifles competition on an EU level, even if the markets are mainly national.
A merged telecoms group, for instance, could hold a near monopoly position in Austria or Denmark as long as their market share across the entire single market was less than 40 per cent, the rule of thumb for blocking mergers.
Finally Draghi proposes taking a more relaxed approach to collaboration between rival corporate executives, which is generally barred if it distorts competition. Draghi argues there are cases where co-ordination is necessary to maximise investment in research and development, or standardise technology.
“There is a need for a simple, streamlined process that groups of EU industries can follow to work together to reach scale when it would benefit consumers,” the report said.
Fiona Scott Morton, a senior fellow at the Bruegel think-tank, said Draghi’s report had “several creative and well-founded competition enforcement ideas”.
But such proposals will be a hard sell in parts of Brussels, which has spent decades fending off similar arguments from dealmaking executives, or companies that co-ordinated standards to keep out challengers.
A second senior EU official described Draghi’s report as “one of the most wonderful ways to weaken competition policy in a way that will be very negative for the real integration of the internal market”.
Whether the European Court of Justice would accept such a radical reinterpretation of how competition rules are applied would also be an open question.
Competition enforcers in Brussels have long argued that the Siemens-Alstom deal would not have created a European rail champion, but a global monopolist in certain categories of high-speed train technology.
Now, thanks to the deal being blocked, “we have not just one but two international champions — Alstom and Siemens”, said a third EU official.