“Germany and France should defend European competition policy, not attack it!”

Statement of February 20, 2019

The German and French economics ministers have introduced a Franco-German manifesto for a 21st century European industrial policy. Tomaso Duso, competition economist and head of the Firms and Markets Department at the German Institute for Economic Research (DIW Berlin), comments as follows:

BlockquoteSeveral proposals put forward by the German and French economics ministers with respect to a new European industrial policy are extremely worrisome. At times when leading expert voices are complaining that competition policy is being enforced too loosely, it seems odd for politicians to propose softening European merger control as a way to respond to the challenges of globalization. In many markets across all sectors and countries, a few big corporations are becoming increasingly powerful, rising their profits at the expense of the consumers and workers. Facilitating the creation of European global players is the worst possible response to these developments. But the Franco-German manifesto does not stop there. It even proposes to interfere with the independent assessment of antitrust authorities in the definition of the relevant markets. Additionally, the manifesto’s proposal to introduce a right of appeal to the Council to override Commission decisions is also very misleading. Who should have this right and why? Should the German and French governments have the right to appeal because they do not like the decision on Alstom and Siemens? Would other European countries also have a say? Simply put, this would undermine one of the most successful EU institutions: the independence of DG Competition, which substantially contributed to a successful European integration. Germany and France should continue to support effective competition in the European single market and the independent competition policy institutions that they helped create. As an engine making all European companies strong and efficient over the past 50 years, DG Competition is a treasure that must be protected, not attacked. Strictly enforced competition policy is a fundamental part of a modern industrial policy. By enabling fair competition, it stimulates companies to innovate and to stay close to the technological frontier. If politics artificially nurtures its “champions” by protecting them from competitive pressure in the internal market, the “chosen” firms will lose their innovative strength and long-term competitiveness. While protectionism and massive subsidization may be working in China at the moment, creating a poor and stripped-down copy of it in Europe will not succeed. Instead of recreating weak Goliaths following the Chinese model, Europe should train agile Davids.