The role that competition law plays in our day-to-day activities has come to the fore in recent times, particularly in relation to the ongoing cost-of-living crisis which has dominated the news in the past weeks and months.
Our competition watchdog, the Competition and Consumer Protection Commission (CCPC), came in for scrutiny following its preliminary advice which “strongly advised” the Government against introducing price controls in the grocery market after the recent Retail Forum meetings. The CCPC said it had not seen any evidence to suggest that an emergency or market failure exists in relation to the grocery market which would warrant such action, or that price controls would benefit consumers.
Indeed, notwithstanding heckles from members of the opposition, the CCPC doubled down by subsequently issuing public advice on price controls. That advice highlighted how implementing such measures may disrupt the natural dynamics of supply and demand in the market and flagged that only two countries in the EU — namely Hungary and Croatia — had taken such action.
Intuitively, this advice seems correct. Price controls are, by their nature, intrusive government-imposed regulations that limit the prices at which goods or services can be sold in the market. We limit such measures wherever possible — tobacco and, to some extent, minimum pricing for alcohol, being notable exceptions to that rule.
This is the way that modern competition law theory operates. The market will, given time, regularise pricing so that customers get the best value and intervening measures are invariably considered counterproductive.
However, these recent events in an Irish context also highlight the limits of regulation in an open market economy. Which leads to a broader question: Is it time for a change in our competition law policy? In particular, do we need to align competition policy better with that other crucial pillar of our economic landscape, namely industrial policy?
While competition law aims to ensure fair market competition and prevent anti-competitive practices, industrial policy seeks to promote the growth and development of specific industries. These concepts are not mutually exclusive.
There is now a growing debate at an EU level as to whether there needs to be a greater alignment of competition law with industrial policy to foster balanced economic development on a European-wide basis.
Some have interpreted this as a bald question as to whether competition law enforcement should become more lenient in favour of European or national member state champions, and much of the focus in this regard stems from a 2019 decision of the European Commission to block a proposed rail industry merger between Germany’s Siemens and France’s Alstom.
That prohibition decision was viewed as a major setback for the French and German governments who had hoped to create a European industrial champion.
The French finance minister, Bruno Le Maire, called the decision a grave political error, with the suggestion from many EU capitals being that Europe’s competition law policy no longer reflected the realities of the modern-day geopolitical position of the EU, with the growing power of US tech behemoths to the west and China’s increasing industrial strength to the east.
The issue of closer alignment is likely to come to the fore during the Spanish presidency of the Council of the EU, which will start on July 1.
Spain has stated that it intends to push for consolidation in the telecoms industry as part of its plans. This is likely to run into immediate problems with the European Commission, which has generally shown a preference for more competitors in national telecoms markets to provide consumers with choice, with the effect that there remains a downward pressure on prices. Spain is arguing the other side of that coin, saying more concentrated markets are necessary to bring economies of scale, increase efficiency, improve innovation, and most importantly, thereby permit investment in creaking networks.
But where to draw the line? Striking a balance between consolidation and competition is not easy. Attempts by the Spanish presidency must not lead to the creation or strengthening of market dominance by a few companies, but investment is needed.
Further, it will be essential to have close collaboration with the European Commission, and other relevant competition authorities, to align efforts and ensure compliance with EU competition laws.
This collaboration will need to reconcile the objectives of consolidation with the maintenance of healthy competition and consumer welfare.
Which leads us back to the question of alignment.
Industrial agencies — such as our own IDA — could work closely with competition authorities, both at the EU and domestic level, to identify sectors where targeted interventions or exemptions may be necessary to promote competition and innovation without distorting the market. By designating such industries, governments could provide targeted incentives, infrastructure development, and research and development support, creating an environment for these industries to flourish without falling prey to anti-competitive practices.
This could also help level the playing field for domestic firms, especially small- and medium-sized enterprises (SMEs), who often face challenges in competing with larger, more established firms due to limited resources and economies of scale.
Aligned policies could help play a role in supporting SMEs by providing financial assistance, access to markets, and regulatory simplification, enabling them to thrive.
Ultimately, bending the rules to allow European champions to be created seems like a short-term fix for a broader problem.
If the political threat of larger, better-resourced or more closely integrated businesses from non-EEA countries is real, then it seems the most sensible way to address this would be through detailed sector-specific policies that align with the EU’s industrial strategy and competition law. This would, of course, likely call for significant reform, but Rome was not built in a day.
- Ronan Dunne is a partner at law firm Philip Lee specialising in competition and commercial contract matters.
