Abstract
This paper examines the aims behind the incorporation of competition rules into the European project and studies how the development of the doctrine has been molded to the specific circumstances and outlooks encountered in postwar Europe. It argues that the objectives of competition law in the EU go beyond economic or legal standards that are applied in individual cases; rather, competition law and policy have been calibrated to contribute to allowing the EU project to harness the benefits of an open capitalist economy within the context of a democratic European society. The analysis aims to demonstrate that while Ordoliberal thinking played a role in the development of European competition law and policy, there were several other social, political, and macroeconomic influences at play as well. As such, the strain that competition policy has come under is a result of attempts to use competition policy to balance several public policy objectives.
1. Introduction
National political and policy-making systems are alive and well in the European Union (EU), but the complementary political system centered on Brussels means that some major questions of how to balance and implement political ideals are made at a central EU level. One such question is how to apply a specifically European version of capitalism to an area as diverse as the EU in a democratically legitimate and socially acceptable way. This paper argues that competition policy constitutes one of the most important tools that the EU has used to balance the economic, social, and political goals of the European project. Given that national governments, parliaments, courts, and other bodies participate in the EU system, alongside the EU institutions such as the European Commission (Commission) and the European Parliament, competition policy in the EU has developed in different directions and at different speeds since the European integration project emerged following World War II. This paper examines the ever-evolving aims behind the incorporation of competition rules into the European project and studies how the development of the doctrine has been molded to the specific circumstances and outlooks encountered in postwar Europe. Before embarking on an examination of the internal balancing undertaken by the European Court of Justice (ECJ) and the Commission between the sometimes conflicting goals within competition policy, the doctrine itself must be placed in its wider European context in order to understand its role as part of the greater integration project.
In contrast to the totalitarianism that characterized much of Europe until the end of World War II, the EU project sees itself as pluralistic and open, as a place where individuals and corporations are free to pursue their ambitions. This vision of a pluralistic society and the horror of concentrated power provide the backdrop for the development of competition policy within the EU framework in the 1950s and 1960s. Mainstream social scientists and legal scholars were inspired by the image of a unified European marketplace for ideas, goods and services, capital, and political decisions. However, a recurring problem in this vision is the undemocratic persistence of enormous disparities in power. The collision between the elements in the evolving ideology, including competition policy, took place through debates in the domains of politics and economics, with public interest groups, corporations, legislators, and judges all participating. This contribution investigates these collisions and the effect they had on the theories and policies that emerged as the EU searched for a compass to navigate between the different ethics and outlooks that fed into the European project’s vision of marketplace pluralism. The investigation conducted here leads to a conclusion that competition law in the EU context plays a role akin to a public law function, whereby it represents a tool for balancing the effects of the different strands of development in the European project. As such, it is argued here that the objectives of competition law in the EU go beyond economic or legal standards that are applied in individual cases; rather, competition law and policy have been calibrated to contribute to allowing the EU project to harness the benefits of an open capitalist economy within the context of a democratic European society.
The aims of any law or policy initiative are closely linked to the specific and general intentions of the drafters, and both have a direct impact on the choice of standards used to apply it in practice. In the case of competition law, for instance, if the objectives of the European Union’s competition rules were accepted as being aligned with purely “Ordoliberal” teachings, this would exclude the application of “welfarist” efficiency-based standards as well as having fundamental impacts on the legitimate use of competition law in an internal and external context. 1 The analysis in this paper aims to demonstrate that while, undoubtedly, Ordoliberal thinking played a role in the development of European competition law and policy, there were several other social, political, and macroeconomic influences at play as well. The fact that competition policy was able to absorb diverse influences has been especially important in an EU context because of the multitude of goals that the grand European project has had over the years. It is argued here that competition policy has been called upon to fill gaps and reach places that Brussels’ other tools cannot, even if ultimately this has been to the detriment of the internal coherence of competition doctrine in the EU. Aside from the annual economic benefits to the EU from having a competition regime, the EU has benefitted in a social and democratic sense from prohibiting the unchecked exercise of market power. Indirect social benefits of the EU’s antitrust regime come about because this limitation on the exercise of market power prevents the excesses of capitalism negatively impacting on the democratic societal structures of the EU.
For each individual instance of competition law being applied at the EU level we can point to several different objectives at play. Oftentimes they are internally coherent—a short-term tactic employed to reach a long-term strategic outcome, for example—but not always. It is when there is a clash of such objectives, however, that we see the real direction the law is going—and the cases studied below aim to give an insight into the Commission and ECJ’s thinking. As we shall see, times of economic and financial crisis are more likely to produce such flashpoints between competition objectives, so a degree of focus on decisions made under such strained circumstances garners some interesting conclusions.
A further view proposed here is that European competition law is best seen as a form of public law and not as simply a form of private market regulation. Since European capitalist economies are heterogeneous, this demands a form of competition law that is innately political rather than merely technical. Simply recognizing the different political goals behind competition law within standard doctrinal jurisprudences tends to obscure the innately political balancing behind the European capitalistic order enshrined in the EU and, therefore, promoted and facilitated by EU competition law. By recognizing that European competition law is ultimately a form of public law, one can obtain a better understanding of the process of political balancing behind each step of the development of EU competition law. From one perspective, competition policy in the EU is a necessary complement to the bloc’s trade policy because the liberalization which underpins the whole European project would be frustrated by an absence of enforcement of competition policy. In practice, the essence of the EU is a joint political decision to simultaneously and gradually liberalize trade, thereby allowing a potential flow of imports following the reduction or elimination of trade barriers. The EU model is based on the benefits of this liberalization accruing to consumers, and undoubtedly competition policy acquired its important status within the EU project due to the realization that those all-important benefits of trade liberalization can be defeated by restrictive practices in the liberalizing market. For example, an agreement whereby retailers and manufacturers restrict imports or prohibit entry into a sector clearly causes trade policy liberalization to be frustrated. Therefore, competition policy plays a crucial role in the other public law initiatives that drive the overall European integration project, and the pressures and strain that it has come under over the course of the development of the European Union are a direct result of the attempt to use competition policy as a forum within which to balance several public policy objectives.
2. Democratic and Capitalist Influences Behind European Competition Policy
By way of a starting point, it is proposed to commence with the proponents of Ordoliberal principles who came to prominence under the so-called “Freiburg School” in the interwar period and have retained an influence over the drafting of competition laws in both Germany and Europe ever since. 2 Wernhard Möschel distilled an Ordoliberalist’s approach to competition policy down to four preliminary elements, which must be outlined before we can begin to assess the extent of the doctrine’s impact on the rules as they developed and as they stand today. 3
The four preliminary elements identified by Möschel were as follows: guaranteeing individual economic freedom; the state’s strong role in preserving the competitive system, but without direct government intervention; competition policy as a rule of law; and competition policy must be embedded into the economic constitution of a free and open society.
Essentially, the primary goal of competition is the guaranteeing of individual economic freedom, from which the goal of economic efficiency is merely derived and to which all other goals are subservient. In order to help ensure a sufficient level of freedom, the state has a strong role preserving the prerequisites of the competitive system, but no direct government intervention (in the form of price controls, for instance) would be sanctioned. It is also essential that competition policy be enacted as a rule of law, and not subject to discretionary powers capable of political manipulation while also, finally, being embedded into the economic constitution of a free and open society—again in the aim of allowing the attainment of a fruitful economic freedom. 4 As the freedom to act is paramount, rules that attach normative significance to ensuring the prerequisites for this are preferable to those that deem the performance more essential. 5
Particularly important for the purposes of this discussion is that Ordoliberalism would not allow any selective intervention by government, even on a very exceptional basis, because such policies tend to represent a view of competition policy as a kind of governmental management technique for the achievement of concrete goals. The theory behind this is that the all-important freedom to act in the economic sphere is effectively eliminated if the context of an actor’s decisions is determined in advance. 6 In practice then, the focus of Ordoliberal competition rules should be the monitoring of the exercise of economic freedom in order to prevent this freedom from destroying its own prerequisites. Mestmäcker interpreted the importance placed by the school’s founding fathers—in particular Walter Eucken—on the possibility of competition to prevail in modern economies as being in direct response to the great contradiction, noted by Marx and Schumpeter, whereby capitalism requires a healthy degree of competition yet actors are liable to do everything they can to destroy their competitors. 7 Thus, by the time of the Ordoliberals’ first contributions, cartels and business conglomerates had come to be seen as an inevitable phenomenon of a late capitalist economy. A key aim of the Freiburg writers such as Franz Böhm was, therefore, to convince contemporary politicians that competition left to its own devices eventually self-destructs, while still expounding the virtues of rivalry and arguing that restraints on competition should be made illegal in order to protect it. 8 For such a system to be practically sustainable, markets and market actors cannot be left to develop alone, so an Ordoliberal competition policy plays a regulatory role in the sense that creating and maintaining a functioning market place requires the forging of a balance of power between various socioeconomic players. 9 In other words, under Ordoliberalism one abandons the hope that the market will develop perfect competition without state intervention because it will always be in the interest of companies to rid themselves of irksome competition in order to secure monopoly profits. In this sense, competition policy consists of the active engagement of the state, but strictly with the sole goal of preserving or enhancing competition. 10
It is important to note at this point that there were significant economic and, particularly, macroeconomic, influences on the development of European competition policy. One undeniable influence on the European economic order and, therefore, the shape of the competition law approach adopted, was the American ambition at the time. At the time, the U.S. aimed at a major reorganization of the European state system in a viable framework for controlling Germany, containing the Soviets, and sparking an economic recovery through creating and securing multilateral trade between the continental countries. 11 Sharing the German force and industrial might amongst the rest of Europe was seen as the only way to reconcile the German revival with the security and economic concerns of neighbors. 12 Against that political and economic background, the role of competition policy and enforcement begins to gain increasing importance from a pan-European perspective. As occupied Germany was gradually being freed of economic controls, the French began to develop measures to “bind Germany economically and politically into the structure of Western Europe” in order to remove Germany’s opportunity and need to seek new markets through a rapprochement with the Soviet Union or, indeed, another invasion of her Western European neighbors. 13 The resultant Schuman Plan received a warm reception from the Americans in part because, by binding Germany thus to Western Europe, it also bound France to Western Europe and her Atlantic allies: up until this point, the threat of a revival of German economic and military might had seen France keep the door open for a possible rapprochement with the Soviet Union in order to contain an independent and strong Germany. By ending Franco-German enmity, the plan would see America reposition the Soviet Union as the main threat. 14
European integration, and therefore a unified competition order, was also crucial to the overall economic project of the U.S. in securing democracy and capitalism in Europe because it allowed for the merging of economically sovereign states into an integrated economic order superintended by a supranational institution of coordination and control. It was sold as a way of allowing France and the rest of the Western continent to use German resources without becoming dependent or dominated by her. 15 One reading of the literature on the events leading up to the creation of the European integration process would put the role of competition policy, as we know it today at least, very much in the background compared to wider political and security concerns. As Germany was being rehabilitated as a member of the European community of nations, the French realized that only an offer of equality and cooperation on a permanent basis and in a new form would see Germany agree to participate in her own containment. A public preoccupation with coal prices and levels of steel production—widely circulated as the practical reasons for the creation of the European Coal and Steel Community (ECSC)—concealed a historic reversal of policy and a diplomatic revolution. 16 Given these overarching policy concerns, the drafters of EU competition policy always had one eye on the external political and macroeconomic dimension of the EU, and it is submitted that competition policy retains this preoccupation today. This is clearly evidenced by the role of competition policy during economic downturns when governments try to evade their international commitments by relaxing free competition in relation to particular strategic, prestige or traditionally embedded industries and products. Therefore, preventing the return of protectionism in advanced industrial countries is a key driving factor in modern-day European competition policy. Behind competition policy pronouncements and enforcement strategies is the underlying belief in a competition theory that asserts that those countries that have the highest rate of technical progress will also have the highest rate of growth and that the greater or more intense the competition, the greater the rate of technical progress. On that basis, the internal and external dimensions are reconciled in that competitive markets are seen as being the best way to efficiently organize the production and distribution of goods and services, while domestic and, in the EU context in particular, external competition provides the incentives that promote entrepreneurship and technological progress.
3. Birth of the Integration Project and Europe-Wide Competition as a Consolation Prize
The next step in our analysis is an examination of the ideals and objectives at play during the drafting of the competition provisions of the European project’s foundational documents. The main actors up to this point were the European states themselves along with the sporadic but crucial input of the United States. Once we move into the 1960s, however, the European institutions, in particular the European Commission and the ECJ, take up a more prominent role. In light of this contribution’s aim of highlighting the balancing exercise being undertaken as between the different interested parties that influence the fixing of European competition policy objectives, there is some attention also devoted to the role of industry players and their representative groups.
While the ECJ has since followed a “teleological” method of interpretation with the effect of reading the competition provisions in light of what it deemed to be required for the integrationist goals of the Treaty, the legislative intent can still matter when there is uncertainty as to the aim or scope of the rules at hand. 17 Gerber, on the other hand, goes even further and states that to get to the root of the rules eventually enshrined in the Treaty in 1958 one must recognize the depth of the preexisting European traditions in competition issues at the national level. 18 This is especially true as regards the works of Ordoliberal authors in Germany, whose belief in a market economy where competition policy formed the cornerstone of the economic constitution constituted the starting point for the European debate. 19 Although these ideas helped shape the mindsets, they were far from the sole dominant force, with American encouragement and interest from the UK also playing a role in the balancing process, as did the caution of the French when it came to ceding ground on the preponderant issues for them, namely, agriculture and nuclear energy. 20
The unique economic and political backdrop provided by postwar Europe for the 1950 Schuman Declaration 21 and the subsequent Treaty of Paris 22 cannot be fully analyzed here, but its influence remains relevant because the establishing of the ECSC was the crystallization of a struggle between different legal and social heritages who set aside a part of their traditions in an ambitious collective project. Competition policy arose as part of the idea of closer integration through the creation of a common market, which itself was attractive to the different original “ECSC 6” for diverse reasons, both inward- and outward-looking. The Messina Conference in July 1955 was an important signal of the desire to relaunch the idea of a united Europe. 23 A clear mandate was given to an Intergovernmental Committee of delegates and experts formed under the chairmanship of Paul-Henri Spaak, the Belgian Minister for Foreign Affairs, to come up with workable tools that could be used to bring about the politicians’ ambitious aims of liberalization and integration—in other words, to put flesh on the bones of the concept of the common market. 24 Against this background, the Spaak Report explicitly promoted the adoption of competition rules directed at enterprises, in addition to its support for provisions that would guarantee the free movement of production factors, and it has been opined that the Spaak Report clearly shows that economic efficiency was an original objective within the field of EU competition law. 25
The three major schools of thought present at the time were the federalists like Monnet, the German Ordoliberals, and the American probusiness lobby. Where the objectives of all three overlapped was on the use of the integration experiment to modernize and instill more political and economic efficiency into European governance and culture. Thus the creation of the common market was not only an inward-looking goal but also an instrument to strengthen the competitiveness of European industry as regards their international rivals, something emphasized when the Commission subsequently took the reins of the bloc’s competition policy. 26 In the immediate aftermath of World War II continental cultures were not only statist, there was a rooted principle that the cartel was a positive manifestation of the freedom of trade. 27 In the face of increasingly efficient competition and struggling domestic industrial investment and innovation, state protectionism and intervention in the guidance of the economy had become seen as a commonplace hindrance and was viewed as another barrier to integration that could be tackled through the deployment of competition rules.
From this reading of the first stage of the evolution in European competition policy we can see the main factor driving its development was the need of the main players for a reliable yet adaptable tool around which to base the integration process. Competition policy was attributed wide-ranging goals from the outset: beyond mere economic integration, there was a sense that it had a contribution to make to Germany’s general rehabilitation as a part of the European family. A clear declaration of the policy’s important status came by way of its prominent place in the Treaty’s proclamation of the movement’s goals and activities and, although scholars may not have realized its significance amidst the other symbolic gestures of the time, the dramatic effect it would have on the European economy would soon become apparent to all. From this it is clear that competition law, as it is understood in a European context, is indeed a form of public law in the sense that it is a branch of law that governs the governing of the state. As such, European competition law developed into an inherently political form of regulation as it is strained and stretched in order to take into account factors going far beyond the mere promotion of the economic efficiency of the market.
The end result of trying to reconcile the different national ideas and concerns from interested observers was that the Treaty provisions were rather vague and short on detail, to such an extent that Motta states that it was “difficult to see exactly what the objectives of competition policy were for those who drafted the Treaty of Rome.” 28 This has meant that those in charge of applying the provisions have had broad discretion to shape them by means of their interpretation. Thus the doctrine has the ability to shift between the prevailing schools of thought on any given issue much more easily than other areas of law, so over the years we have encountered a variety of approaches to competition law. 29 Recognizing the initial pragmatic use of competition rules as a tool for bringing about an unprecedented level of integration amongst the major continental European powers, Wesseling observes that the rules on competition had a “normative-functional” character. 30 The introduction of the element of free competition can be seen as functional in light of its envisaged role in generating one common market on the basis of a prohibition of discrimination along national lines. Wesseling argues that the competition rules represented a normative sociopolitical choice in favor of using a competition framework, instead of regulation, as the primary means of integrating the economies and then governing these economic processes in the nascent common market. 31
In light of the duality highlighted by Wesseling, there was a wide remit for steering and nurturing the growth of the competition rules, so the role of Competition Commissioner and the makeup of its Services was to have an important influence on the direction competition policy took from the outset. In the horse-trading and bargaining processes of the corridors of power in Brussels, control of one or other of these offices has been widely sought after. This effect would also tie in with the tendency towards the creation of independent regulatory authorities, considered very important under Ordoliberal thinking. 32 Much of the importance of these roles has also been borne out in practice, as even modest changes in philosophy or attitude of the holder of the Commission’s competition portfolio have been shown to have had wide ranging effects on the direction the Community’s enforcement policy has taken. 33
The influence of Ordoliberalism in the final wording of Article 101(3) can be seen in how the language used deliberately left room for the establishment of a strong enforcement agency with discretion to calibrate the implementation of the rules in a way it deemed appropriate. In particular, Wesseling points to the references to terms such as “substantial” part of the market, requiring consumers to receive a “fair” share of the resulting benefits, promoting “technical or economic progress,” and the requirement that restrictions be “indispensable” to the particular goal, which are all vague enough to allow for a wide discretionary scope. 34
The founding Treaty and the implementing Regulation 17/62 35 established a centralized system for the development and enforcement of competition rules. This allowed for the Commission to take over the direction of the Community’s competences in the area, and since then, it has always pursued, with more or less rigor depending on the surrounding circumstances and the political will, a strategic competition policy. 36 The factors influencing the approach taken by the Commission have been a topic of constant debate since then. Giocoli, for one, claims that American antitrust tradition had less influence than is commonly claimed over EU competition policy and that Ordoliberalism played a more important role in the birth of EU competition policy as we now know it. 37 During the early application of the competition rules by the European Commission we see the economic logic of marginal utility come to shape the view of consumer preferences. This rhetoric often took on a political aspect, in that consumer-led democracy would bring about progress capable of defusing the dangers of class dissent and inequality that threatened to pull at the loose threads of the European project. Internally, the European project was based on a “Community” model designed to forge an ever closer union among the peoples of Europe with the first major objective from the trade perspective being the removal of interstate tariffs achieved in 1968. From the point of view of developing a distinctive brand of European capitalism, the EU at this point represented more than a customs union but less than an a full economic union. This was so because the common policies in coal and steel as well as agriculture brought it outside the definition of a simple customs union, as did attempts to unify transport and energy sectors. However, it remained less than a full economic union as the barriers to the free circulation of goods, services, and capital hampered the economic integration while there were still no common macroeconomic or specific sectoral policies. It is submitted that the Commission’s use of competition policy played an important role in filling these gaps and pushing the EU further along the road to becoming an “ever closer union” in the social, political, and macroeconomic sense.
4. Competition Law in the EC Context—An Application of Ordoliberal Principles?
The major practical problem identified as preventing the full implementation of the Freiburg School’s ideas was that it is not sufficiently empirically oriented as a model and so is criticized as being incapable of providing satisfactory analytic tools for a functioning competition policy. 38 It has been said that this weakness in Ordoliberalism as a set of workable principles has led to space being left for pure Ordoliberal objectives to be diluted and pushed to the periphery in the practical application of competition policy by the European Commission. 39 So, although the Ordoliberal theories have been drawn upon by the Commission in some of its latest policy guidelines, discussed below, this is only done in combination with more economic insights which enable a “more realistic, case-orientated approach.” 40 Although the promotion of economic democracy is still widely seen as more important than achieving a perfectly efficient allocation of resources, the role of competition is no longer seen as based solely around ensuring economic freedom. 41 Thus, in a gradual change also witnessed at the European level and explored further throughout this article, it is now argued that a fundamentally different concept of competition has eventually been settled upon such that it has effectively become an instrument for the realization of more pluralistic objectives laid out by the economic policy authorities. 42
An absolute priority of competition over democratic and social interests has never existed in EU constitutional law. Such an option is excluded by the very wording of the Treaty, and neither the ECJ nor the Commission has ever contended that such interests could only be provided for subject to the goals of competition being realized. The legal debate, instead, takes place in terms of whether there should be a relative priority of competition over those, and other, interests at any given point. Since the text of the Treaty lends itself to different readings, the point of departure could not be more open. In choosing an interpretation, authorities and lawyers are, to some extent, guided by their political conceptions and understanding of the underlying purpose of EU law. A competition law exclusively aimed at economic efficiency may be given more or less weight in a given instance, but lying behind the European conception of competition law is an Ordoliberal influence in favor of taming private economic power and guaranteeing economic liberty since this balancing of the capitalist tendencies in the bloc is seen as important, socially and constitutionally. Therefore, competition law assumes a public law role revolving around the maintenance of a free and competitive economic system.
Another way in which European competition policy making and implementation does not strictly adhere to an Ordoliberal point of view is the dubious degree of political intervention into, and sometimes downright manipulation of, the decision-making process. In being subject to the approval of the college of Commissioners, the independence of the EU civil servants charged with developing and applying competition rules is sometimes characterized as unduly compromised and influenced by both national and industrial concerns. The granting of broad discretion to political executives is commonly justified on the grounds of being necessary to properly manage new circumstances, such as rapid developments in the legal, economic, or technological spheres. 43 The law, and in particular administrative law, responds to the urge to bring that discretion under the control of transparent rules, even as new discretions are granted. 44 By the same token, this discretion formed part of the incentive for the emergence of Euro-level lobbying. 45 As European decisions can have an adverse effect on interests, some affected parties will always attempt to reduce their own uncertainty by influencing the shaping of new measures and policy. 46 Of course, such lobbying leads to more lobbying as one side’s attempts to reduce its uncertainty creates more uncertainty for others, which in turn begets more lobbying. 47 For instance, trade unions were inspired to form European-level organizations not only by the opportunity to be involved in meaningful policy development with regional organizations as the EC, but also because of a perceived threat from the expanding multinational corporations who had already organized business groups. 48 As regards the development of competition policy in the emerging EU capitalist order, the Commission has proclaimed that it is generally receptive to interest groups to a certain extent because “interest groups can provide the services with technical information and constructive advice.” 49
Although faced with considerable structural restraints on decisional freedom, former Competition Commissioner Mario Monti always publicly maintained that competition policy was “a matter of law and economics, not politics,” 50 and even at the height of some of the most controversial transatlantic disputes, the relative independence shown by the Commission’s services has been lauded. 51 With time and experience the confidence and capacity of the Commission’s Competition Directorate has grown, and it now operates with significant autonomy—despite the inevitable lobbying and pressure received from above and below. Notwithstanding this, much of the criticism the Commission continues to face is due to its inherently contradictory role in providing both political leadership and an impartial civil service. 52 The large lobbying community which is active in competition law circles in Brussels represents one of the main points of interaction between antitrust, democracy, and capitalism in the EU. Following a serious scandal (dubbed the “cash for amendments” affair 53 ), the European Parliament recently introduced a stricter Code of Conduct for MEPs, 54 requiring them to declare payments received and potential conflicts of interests, in order to complement the “Transparency Register” 55 which lists the activities and means of organizations representing particular interests at EU level. Critics complain that the Code of Conduct is not sufficiently well enforced and emphasize that registering with the Transparency Register is still voluntary. On the other hand, advocates of the current system argue that EU institutions must interact with a wide range of groups and organizations representing specific interests as part of their function, and since this is required to ensure EU policies reflect citizens’ real needs, lobbying is a legitimate and necessary part of the decision-making process. The measures to introduce increased transparency are an acknowledgement that EU decision-making processes must allow for proper scrutiny and accountability.
As a substantive area, competition law and policy has seen a significant growth in the lobbying activities and strategies targeted to it. 56 Due to the plurality of access points to the decision-making process, commentators note that influence can be exerted by pressure groups on specific politically sensitive cases. Overall, however, the European competition law enforcement system seems prepared to accept efforts made by companies to influence relevant authorities, including the European Commission, as being a legitimate part of the democratic process, which recognizes the right of association and petition. 57 Initially, the Commission deliberately kept a low profile, conducting cases via negotiations and seeking minimal publicity, and the few cases pursued tended to focus on the “closed circuit”–style cartels which protected a national market. 58 Despite the fact that cartels had been tainted by their association with the Third Reich and could arguably have been a legitimate target, the application of the market unification goal instead manifested itself by way of investigations into vertical agreements involving individual private companies. 59 The Commission’s early enforcement priorities thus seemed to revolve around empowering businesses engaged in cross-border transactions and thereby showcasing the benefits of competition as opposed to the traditional “stability” that, seen from today’s perspective, amounted to masked discriminatory treatment. 60
A careful line was tread by the Commission in the development of its competition law competences. On the one hand, its style of implementing and enforcing the bloc’s antitrust law aimed to promote integration by guaranteeing the proper functioning of the capitalist free market mechanism. On the other hand, as Wesseling points out, this freedom of competition did not stretch as far as to allow business practices which were capable of redividing the nascent internal market along national lines, even if it could be argued that they enhanced competition. 61 Integration, however, was never fixed as the sole goal of competition so the objectives of the policy have since been seen as capable of changing as society’s needs change—with the result that the Commission has had to juggle, without necessarily assigning priority, a multitude of economic, social, and political goals. 62 In its role as a competition policy maker, Stucke has noted that the Commission accumulates various objectives in the knowledge that some of them will inevitably conflict, such as in the classic example of “freedom of trade, freedom of choice, access to markets, and achievement of economic efficiency to maximize consumer welfare.” 63
Thus, when combining a competition policy with an ambitious project to integrate traditionally independent and rival domestic markets, a delicate balancing act was called for. From a realistic point of view, Bouterse rightly notes that it was unavoidable that this process of establishing, and then ensuring the proper functioning, of a single market that itself assumed many characteristics of a national market would require at least some intervention in markets with the aim of economic development. 64 Warlouzet interprets the early years of the Commission’s enforcement of competition policy as typical of the first main transitional period in the history of the European project, and concludes that it was legitimate for Brussels to concentrate information and decisions in its hands because of the public policy justifications supplied by the overarching common market goals. From here on in, however, a slight ideological shift can be identified—within competition policy but also regarding the Community as a whole—whereby the enforcement of the Treaty rules began to be viewed as capable of engendering benefits beyond integration per se, such as protecting consumers, limiting inflation, and promoting economic growth. 65
To assess whether the EU’s competition laws have been successful in contributing to achieving faster economic growth in the macroeconomic context is difficult because of the various other factors that affect the overall economic growth rate, including other policies introduced at the same time. One positive effect of competition law on economic growth is typically ascribed to the increased productivity that a competition regime tends to facilitate, but a further important impact comes via an effect on investment, especially in development of the EU, because the EU competition regime has had the effect of boosting business confidence and the perception of a level playing field. Perhaps what has impacted on the EU’s macroeconomic situation more directly has been the product market deregulation that tends to accompany the application of strong competition principles. Furthermore, regulatory policies specifically designed to introduce and promote competition—especially in network industries—have resulted in productivity gains.
The evolution of the approach to competition policy witnessed within the framework of the European integration project is somewhat matched by the variance in the mainstream view of industrial policy or public support to business. Some authors claim that there is a new European economic and constitutional order centered on state aid law, liberalization, public monopolies, and public procurement, which together represent a means of compromising the traditional ideals of European democracy. 66 Whilst no state has ever possessed, or could ever possess, complete freedom of action, nonetheless the emergence and gradual strengthening of the Commission’s competences in the state aid field means that national autonomy as regards granting direct and indirect supports to domestic industry is now significantly restricted. The way in which these economic constraints have been brought into existence has been through the adoption of effective enforcement machinery, both embedded within the nation-states, through the principle of direct effect, 67 as well as at transnational level through the European Commission’s services. The result is that each EU Member State is now enmeshed in a web of supranational economic and legal structures whereby the principles of competition law are applied so as to restrict the manner in which a democratically elected European government decides to spends public money.
In the context of an effort to distill the influencing factors behind EU competition policy generally, in the state aid sphere it is necessary to look first to the problem of the differing national approaches to industrial policy. The classic example in the European context is between that of the clash between the French and German conceptions. 68 In France, strong political interference traditionally prevailed, while in Germany’s post-WWII social market economy, industrial policy was more implicit and ambiguous and the role of the state was “primarily to develop a regulatory framework (Ordnungspolitik) that ensures equilibrium between market and social justice.” 69 During the second part of the 1980s, France turned towards a more market-oriented organization of the economy and, more generally, the gradual completion of the Single Market and the well-documented neoliberal turn in Western European economic policy served to delegitimize widespread state interventions in industry. 70 This demonstrates the major tension that characterized the modern chapter in the development of the role of competition policy within the overall EU movement. Given the diversity of European society, clearly some important constituents of the European integration project have very different takes on how markets should work. As competition policy has come to be viewed by many as a free market–oriented neoliberal tradition, a tension arises vis-à-vis left-wing political parties, which have a traditionally strong core of support in Continental European countries in particular and have long opposed the policies of privatization and market liberalization that have permeated the EU in its modern, neoliberal-inspired, configuration. Yet despite the strong influence of parties of the Left in many arenas in Europe, competition policy continues to play a role and gradually increased its importance within the European order.
In the Maastricht Treaty, Article 130 (renumbered Article 157 by the Amsterdam Treaty, now Article 173 TFEU) endowed the Community with a mandate to coordinate the bloc’s policy based, inter alia, on the principles that free trade and the competitive functioning of markets should promote permanent adaptation to industrial change in an open and competitive market. 71 Meanwhile, a corollary of this was that industrial problems at a regional or sectoral level should be increasingly resolved by horizontal measures. 72 This reflected an agreement on a horizontal and pragmatic approach, aimed at improving competitiveness. 73 A horizontal industrial policy represents a market oriented approach, the goal of which is sometimes described as being to “get the basics right, so that firms and industries can emerge and prosper.” 74 Although most Member States outwardly support the Commission’s drive towards reducing state aids, their relationships with big business remain and governments, for political reasons, have sometimes sought to justify public funding of firms by looking to the general interest, both national and European. 75
If pushed to its limits, the competing logics of state aid and regional policy will generate contradictions. States aids rules fall under a market perfection logic, whereas regional policy is about social cohesion or market correction. For some Commissioners such as Leon Brittan, fair competition was a more important and legitimate goal than social cohesion or other values. Conflicts related to the interpretation of EU rules are not simply formal or legalistic, but deeply political so questions over the content and application of individual rules mask deeper political and ideological clashes. State aid controls must be viewed in the modern macroeconomic context and, in that sense, serve to tie the principles of capitalism and democracy together in the European context. For instance, imposing controls on state aids in a multinational context can help prevent harmful predatory behavior of national firms and, in the end, encourage domestic legislators to develop procompetitive solutions. State aid can correct market failures associated with capitalist systems, such as externalities and public goods, and informational asymmetries in capital markets. Clearly, however, all these potentially positive effects of correcting market failures have to be balanced against the possibly larger effects of government failure.
From one perspective, the European Commission could be seen as overstepping its role by preventing governments from engaging in certain types of public spending. In this sense, the Commission is necessarily overruling the citizens of a democratic country by restricting their governments from spending public funds inefficiently. However, even putting aside the question of whether such spending causes harm to other countries, state aid controls assist countries in their proper functioning by acting to limit the power of interest groups. Therefore, they should more correctly be seen as a supplement to national norms such as constitutional clauses constraining the ability of their governments or parliamentary majorities to favor arbitrarily selected private firms. State aid controls, like competition policy principles in general, have their basis in core values that are concurrently present in many constitutions, such as general antidiscrimination and equality clauses.
5. Mainstreaming and Glimpses of Competition Policy’s Role in Balancing a New Form of Capitalism
Continuing our study of how the European vision of competition policy emerged over time, the 1970s see the European Commission becoming more comfortable and assertive in its role as the engine behind the integration process. As alluded to above, the Commission benefited from the wide-ranging powers granted to it to guide the emergence of the EU’s capitalist economy through the competition provisions of the Treaty to overcome its initial—and arguably continuing—problems in proclaiming its relevancy and responding to criticism of its democratic legitimacy. By undertaking a study of the Commission’s policy pronouncements, Bouterse unearthed significant insight into how the different pieces of the puzzle were put together without any one completely overshadowing the others. 76 Initially, Brussels was careful to state that the rules on competition could be applied neither in isolation nor independently of Community action in other fields, so there appears to have been a clear awareness from the beginning that competition is a cog in the Community’s wheel rolling to grander destinations. 77 Indeed, even these early remarks must be seen in the context of the economic integration already underway at the time and in light of the Commission’s preexisting designs on founding not only an economic, but also a monetary union. 78
The European Commission’s reaction to economic developments must also stay somewhat in line with Member State and even corporate interests, albeit with a more Euro-centric approach. The view taken by the Commission during the economic downturn of the 1970s, for example, was ruthlessly pragmatic in that it effectively granted preferential treatment to certain sectors facing fierce competitive pressures and, in an attempt to discourage governments from wastefully supporting duplicate national favorites, promoted Eurochampions. Ostensibly its policy was shaped by democratic considerations of the public interest manifested in proemployment initiatives, but it was also conducted in an environment where the usefulness and relevance of competition rules were being questioned while the whole integration project again threatened to fall apart. 79
In this period, European competition law and policy distinguishes itself from the purist or orthodox model of competition law, as originated in the advanced industrial economies of the Fordist West, which presumes a capitalism system that is founded upon a rational set of objective economic principles that in turn objectively dictate the construction and demands of competition law. In such an environment, there cannot be any room for political influence as any such maneuvering amounts to introducing extraneous and often corrupting inputs into the regulatory process. As such, competition policy as it developed in Europe had to reconcile the mainstream capitalist tendencies that came to be the driving force of the trade bloc with the social and democratic character of the broader integration project.
At no time was this balancing act more apparent than with the onset of a deep economic crisis in 1973, which was to last well into the next decade. 80 Europe’s nascent competition policy found itself having to respond to an economy experiencing sharp decreases in output, productivity, and exports combined with increasing unemployment and inflation. 81 With their backs to the wall, integration and competition slipped down the list of priorities for Member States who largely sought to face up to the “American challenge” through the creation of national champions and boosting strategic national industries. 82 As regards the evolution and balancing of competition policy and enforcement objectives, here again we see the surrounding economic circumstances necessitating a distinct move away from Ordoliberal ideas, which would have envisaged an “ordered” economy, consisting to the maximum possible extent of small and medium enterprises, 83 competing vigorously against each other under the watchful eye of the politically neutral regulator. In fact, Buch-Hansen and Wigger see this period as a low point in the influence of Ordoliberal policies in European competition policy because national governments looked to bolster flagging industries through their acquiescence to economic concentration and the encouraged emergence of “big business.” 84
This period saw more discrete changes in the application and enforcement strategies of the Commission, rather than any great shift in the substantive aims of the policy as a whole. Rather, Brussels weathered the economic storm as best it could, protected its vulnerable reputation, and kept its powder dry for the challenges ahead. The Commission was not empowered to conduct a genuine industrial policy, which reduced the degree of flexibility it had when applying its antitrust policy. 85 Nevertheless, in those circumstances, the Commission felt a particular need for its competition policy to go beyond simply sustaining effective competition—it had to be used to further a more general “industrial policy which promotes the necessary restructuring.” 86
In its justification of the exceptional arrangements made in the mid-1980s to accommodate the petro-chemicals sector, 87 the Commission argued that consumers would stand to gain from the improvement in production since the industrial structure that would eventually emerge would be healthier and more competitive, and therefore able to offer them better products thanks to greater specialization. In the context of this paper, this view is interesting because this reasoning goes directly against belief in competition as the main principle for economic organization and illustrates the difference that a particular economic backdrop can make to the way in which competition policy objectives are expressed and rationalized. 88
In the context of the aims of this symposium, this period in the development of EU competition law and policy demonstrates that there are policy objectives other than purely capitalist goals, such as GDP growth, behind EU competition law and the EU has been—albeit occasionally and sometimes unpredictably—a champion of such objectives by taking them into account when formulating and applying policy. However, the impact of such noncapitalist or noneconomic goals is difficult to measure and the effect of the EU’s competition regime on social goals such as reducing inequality has been little studied. Competition regimes are often assumed to increase inequality as competition creates winners and losers, but the EU competition policy focus is on preventing restrictions of competition that benefit the select few while causing harm to the wider public. In that sense, EU competition policy is a public law tool to balance the excesses of a capitalist and competitive order and align the economic functioning of the EU with the democratic ideals of the EU societal structure. For instance, proponents of EU competition policy will point out that the poorest in society receive considerable protection from competition policies that prevent the higher prices or lower quality choice that results from restrictions on competition. Inevitably, however, there is a gap between reality and perceptions as regards the true strength of competition policy to protect social and democratic concerns in the broader economic context. For instance, employment concerns have been prominent in competition policy pronouncements and, occasionally, enforcement actions at different stages over the course of the development of the EU. Employment issues arise in the competition context because restrictions on competition have been shown to reduce output and employment. On the other hand, the productivity gains caused by competition can result in layoffs. Competition policy, therefore, impacts on unemployment because it represents a manifestation of practical capitalist policies of economic and technical progress. Within each competition decision, therefore, is an implicit or explicit attempt to temper the impact of capitalist-inspired economic progress in order to render EU competition policy—and with it the whole European integration project—more democratically acceptable to European societies.
A noticeable effect of the aftermath of the economic, fiscal and employment crisis of the 1970s was that it served to strengthen the social aspects of the Community and saw the project take on deeper and broader goals. 89 There had already been a subtle change in tack as regards certain goals of the Community project in general: 90 after decades of social legislation focusing on the free movement of workers, the European movement declared that economic expansion was not an end in itself; rather, the Community should be geared to lead to improvements in general living standards and especially working conditions for its citizens. 91 This demonstrates that social concerns came to have an impact at a European policy-setting level, as political power was gradually being used to supersede, supplement, or modify the operations of the European economic system to achieve results it could not achieve alone. 92
This phenomenon manifested itself in competition law through the ECJ’s interpretation of the central aim of the then Article 81(3) as being to reach a degree of “workable competition” sufficient to achieve the basic requirements and objectives of the Treaty in general. 93 This came to light in the Metro case regarding a controversial style of selective distribution system. 94 The Court, in confirming the Commission’s practice, approved the selective distribution system in Metro because it did not threaten the formation of a single market or reduce “the degree of competition necessary to ensure the observance of the basic requirements and the attainment of the objectives of the Treaty.” 95 The Court also stated that this degree of competition may vary with the product and economic structure of the relevant market in question. The general tone of this judgment acted as confirmation that social policies did have a role to play in the competition framework after all—to such an extent that this case is sometimes seen as a departure point for the inclusion of noncompetition goals. 96 The Court’s treatment of the employment advantages of the arrangements was nonconclusive, but the mere reference to the unfavorable market conditions has been taken as conflicting with the traditional theory of viewing and trusting markets to be self-regulating. 97 This kind of decision is a good example of the balancing between the various goals within EU competition law and policy.
During the 1970s the development of competition policy bore witness to the strain being placed on the economic and political integration project as a whole, and the Ordoliberal principles in particular. The types of objective attributed to individual applications of competition policy often had pragmatic, crisis-related goals in the short term, but the long-term goals of integration and global competitiveness remained in the background of each instance of the Commission’s thinking. The painful restructuring processes imposed, albeit gradually, on some of the Community’s oldest industries show the Commission’s commitment to instilling a culture of competition in Europe and also serve as a testament to its confirmed position as the dominant force within the policy-setting arena.
From the 1970s onwards, big business took on a new dimension in Europe, and we see the forces of capitalism using channels of the Member States’ and the EU’s democratic institutions to influence competition law—and vice versa. The corporate growth, being a result of Member State industrial policy at the time, became a target for a relatively sudden reinvigoration of policy making and application in the 1980s. Political scientists argue that, in this regard, competition regulation merely reflected a broader shift towards a newly emerging neoliberal order—all of which took place against the background of globalization and the trans-nationalization of capital. 98 In practice, this translated the adoption of a “competition only” vision whereby primacy was given to efficiency criteria. Indeed, Apeldoorn has stated that the neoliberal view that competition, and competition alone, can create efficiency and economic growth has cast a spell over the European integration process ever since. 99 The ascendance of economic liberalism in policy-making circles also provided the European Commission President Jacques Delors with fertile conditions to advance the Commission’s institutional grandeur. The idea that economic competitiveness could best be served through more effective competition was deemed to require full implementation of the single market program—which could only be brought about by the European Commission’s regulatory apparatus. 100
The choice of a more integrated approach at this time was linked to the key neoliberal tenet of economic and social policy being two interdependent aspects of an indivisible whole. 101 Whereas, during the early stages of the single market project, the rhetoric about “social Europe” seemed to suggest Europe would aim to replicate Germany’s social market economy, when the liberal market dimension of the project gained momentum the “social” aspects of the model came to be iterated so as to highlight the benefits of economic efficiency and objectives related to job creation and social inclusion. 102
By way of investigating the source of this change, we can remark that, from the mid-1980s, European political and corporate elites started to follow the Anglo-Saxon world’s experience of Reaganomics and Thatcherism by endorsing neoliberal ideas. 103 In particular, the European Roundtable of Industrialists (ERT) was vocal in encouraging programs of privatization to put highly concentrated markets and monopolies in private hands, albeit under the supervision of European and national authorities. 104 Other potentially competitive markets were deregulated, and in the late 1980s, the reforming Delors Commission even eventually introduced merger regulation at the European level. 105 Once again, the influence of vested interests, especially the ERT, became particularly apparent during the 1980s, and these forces for change in competition policy were later seen as crucial in ending the general European integration paralysis that stretched back to the 1970s and was beginning to take hold again in the 1980s. 106 Although the 1980s are often downplayed when examining the history of European competition law, 107 the subtle readjustment in outlook outlined above has had a profound impact on the development of the doctrine henceforth. The trend begun by the Delors Commission has continued, as we shall see below, because the business lobby and the free trade objectives of the European project as a whole have retained a significant influence over the objectives and practices of competition policy.
6. Competition Policy in the Changing Macroeconomic Context
A remarkable combination of domestic agendas of the most powerful heads of state at the time and their respective views on macroeconomics resulted in the Single European Act of 1985 with the aim to create a single European market by the end of 1992. Germany’s Kohl was keen to build a reputation by acting on the European stage, France’s Mitterrand was looking for something to distract attention from a doomed domestic macroeconomic policy that had been humiliated by international financial markets, and Thatcher had finally found something from Brussels that she could support after years of obstructionism. 108
The Internal Market must be understood against the background of the mutual recognition of national rules by the ECJ in the Cassis de Dijon 109 case and the subsequent adoption of the Commission’s White Paper on the completion of the internal market in 1985. 110 The economic policy developed during this period, with competition policy at its heart, requires the primacy of the market, whereas the type of competition policy that some countries would have preferred, that is, one capable of being dominated by industrial policy prerogatives, requires the primacy of policy. Mestmäcker, for one, went to lengths to highlight this conflict by using the example of the need for the EU to be able to respond to the pervasive problems posed by stagnant industries. 111 Unlike its predecessor ECSC Treaty, the Treaty of Rome did not feature instruments to fight the structural crises that consumed the public’s attention for much of the 1970s and 1980s. Competition policy, by providing the tool for the European institutions to engage with struggling industries, allowed the EU to remain relevant. Even though, as we have seen, competition policy became increasingly influenced by neoliberalism, it still remained a sufficiently flexible tool to allow a plethora of social and democratic interests be recognized when dealing with industries hit by a crisis. In this sense, one could ask whether today’s competition policy operates subject to the primacy of the market. When it comes to balancing the negative aspects of capitalism and then overall competitive order introduced and encouraged by the European Union, a strong competition policy may play a moderating role which is capable of quelling the calls for the reintroduction of stronger regulatory policies and oversights in the aftermath of the political and financial crises of recent years.
In 1993, Commissioner van Miert showed signs of a further evolution in the set of goals pursued through competition policy by the Commission, as the Commission benefitted from having secured its position as the undisputed driving force behind the definition and development of the Community’s overall objectives. 112 On one level the realignment reflects the Ordoliberal influence on the development of modern competition policy in that it places a heavy emphasis on its role in nurturing a “pluralistic democracy which could not survive a strong concentration of economic power” while at the same time indicating its hybrid nature by referring to its economic, political and social goals—mentioning in particular the objectives of efficient production, building a common market with harmonized economic policies and growth. 113
This shift must be understood in the wider context of the Union becoming ever broader and deeper, and in light of then–Commission President Jacques Delors’ threefold blueprint for European economy and society, based on a “triptych” of cooperation between the social partners, competition in the market, and solidarity through redistribution. 114 The 1993 White Paper 115 was designed to redress the balance within the triptych in favor of cooperation and solidarity, with competition having been the key priority of the internal market program. 116 It also constituted the first endorsement of the idea that competition leads to more competitiveness—an idea that has been largely followed as recently as the Lisbon Agenda 117 and Europe 2020 118 policy restatements.
In line with the view presented here of competition policy as a tool for political balancing between the social, capitalist, and democratic tendencies of the EU, the contemporary academic reaction to Commission pronouncements from this era was that more and more decisions took the efficient allocation of resources to be the predominant goal of EC competition policy. 119 This supports the view that there was, during this period, a discernible and deliberate shift away from the focus on achieving market integration through the protection of the economic freedoms of market participants, and the trend has largely continued in the meantime.
From the above, one can observe the effect that changes in the overarching aims of the European project had on the immediate goals of competition policy. It has been argued that this change in emphasis in competition policy came as a part of political attitudes in Europe generally shifting towards supporting market forces, as illustrated especially in the context of the deregulation and liberalization of key network industries around this period. 120 More poignant, perhaps, is the sense of competition rules once again being instrumentalized by an opportunistic Commission with the result that some of its core original principles, such as those inherited from Ordoliberalism, were marginalized. Importantly, competition policy further enhanced its status as a considerable tool at the Commission’s disposition and its timely manipulation is testament to its importance for the project as a whole.
The main reason behind this change may well be the Commission’s attempt, according to its rhetoric at least, to develop European competition policy as an apolitical element of the European project by placing the emphasis on the economic and efficiency aspects of competition law in practice. However, in line with the thesis presented here, each substantive position taken by the Commission based ostensibly on economic grounds is, simultaneously, a decision to follow a particular political path. Since economic viewpoints are not politically neutral, the Commission’s longstanding rhetoric that competition is “apolitical” and “based on economics, not politics” belies competition policy’s overarching function as a malleable political tool in the broader European project.
Competition policies and rules have been adopted throughout the world, including by number of ostensibly communist countries. The seemingly universal acceptance of competition policies, and particularly their ever increasing popularity amongst the demos, may only be partially attributable to market liberalization and neoliberal values. The European Commission has been careful to present tackling anticompetitive behavior as being about preventing concentrations of economic power from being artificially created and abused. In that sense, competition policy provides an important tool for the European Commission to balance some of the unpopular and harsh aspects of capitalist economies. Competition policy as it has been developed in the EU context prevents wealth transfers from consumers to wealthy businesses, promotes and protects individual choice and brings a host of other benefits that the European Commission in particular are quick to emphasize.
The founding Treaty and the implementing Regulation 17/62 established a centralized system for the development and enforcement of competition rules, which was in itself unusual in that the competition sphere was the only one where the Commission is entitled to apply Community-based rules directly to citizens and firms. 121 Nevertheless, by the 1990s there was a sense of equilibrium in the enforcement of competition rules and the development of policy goals within Europe. The Commission operated within its sphere, seldom causing problems for Member State authorities; and although there were complaints that the Commission was becoming too powerful and that the most important decisions were moving from the Member States to Brussels, the period between 1963 and 1998 was, from the point of view of practitioners and most likely the large enterprises who had benefitted from the policy’s flexibility, seen as “unquestionably … one of success.” 122
During this period, the implementation of Community competition law had been dominated by the Commission, which had built a Brussels-centric system around its monopoly on examining notifications and granting exemptions while national competition agencies’ incentives to follow independent interpretations were “chilled” by the Commission’s dominance. 123 Rather, the national agencies and courts were recruited as decentralized enforcers of the Commission’s creed: firstly through the ECJ’s application of its direct effects and supremacy doctrines to establish that individuals could enforce competition complaints at the national court level; and then through the Delimitis 124 jurisprudence that set out a standard approach for national courts to ensure conflicting decisions were avoided. 125
Whether or not this central accumulation of power in the hands of the Commission resulted in the optimum possible level of compliance and enforcement activities is debatable, but over the years the Commission did succeed in sowing the seeds for a competition culture to take root across the Union. 126 The perennial tension between French “dirigisme” and German “Soziale Marktwirtschaft,” as touched upon above, continued at a European level and governmental interference in markets was increasing at the behest of promoters of industrial policy. 127 In the macroeconomic scenario that had prevailed up to this point, the vested interests impacted by competition reforms were so tightly entrenched that a strategy of widening the political base for reform through social and political dialogue would have needed the support of virtually all social or political actors, with the result that convincing opponent to the reforms through targeted concessions would not have been feasible without a massive watering down of the reforming effort. Thus, the legal and political climate was essential for the acceptance and feasibility of competition as the underlying market principle could only really be imposed from above by the Commission. Once this was sufficiently in place, it could proceed with the decentralization process which came as part of the fundamental changes undertaken by the European project around forty years after its inception.
With the expansion of EU membership to fifteen in 1995 and the prospect of even more new Member States on the horizon, there arose a need to adapt the functioning of the European competition authorities—both at the central and Member State level. 128 This led to a series of political and diplomatic power-plays in which the main actors in the competition field sought to fight their corner and influence the outcome of these unavoidable changes. The vested interests saw this as a once-in-a-generation opportunity to influence the future direction of the system, so the winds of change served to fuel criticisms of the existing system. In line with the trend highlighted in the preceding sections, the business and legal circles were very effective in representing their complaints and, perhaps sensing blood, swiftly became more targeted and specific as regards the broad areas of discretion held by Brussels under the then Article 81.
While these perceived improvements in Member States’ status and role within the competition law regime had the effect of ensuring that they were collectively passive in the drafting process, the Commission cemented its central role as the driving force in the domain by requiring that EU competition law be applied by Member States to all conduct that had a European dimension. This strengthened the position and role of the Commission and becomes even more significant when seen in light of the substantive changes in the make-up of competition law and policy which occurred parallel to these procedural changes. 129
As witnessed by the preceding sections, the surrounding economic and political context can have an important effect on the choice of goals sought through competition law, and therefore how those rules are calibrated and applied in practice. This is also true when we speak of the modernization process undertaken in the early years of the 2000s. The disparity between the rapid growth enjoyed by the U.S. economy in the 1990s and the difficulties encountered by their European counterparts saw a reemergence of the “American challenge” as a policy concern, with consequent effects on the goals pursued by the EU’s brand of a capitalist economy and EU competition policy in particular. 130 Generalist measures were designed to foster the competitiveness of European industry, 131 but there was also a push to remove any laws affecting businesses that could be perceived as stricter than their American equivalents and thereby inhibiting growth. 132 Thus, the period was one when the aim was not to develop a distinctly European regime to suit the needs of European businesses, consumers, and societies but, rather, when EU policy makers came under pressure to replicate the U.S. system in a transatlantic game of competitiveness catch-up. 133 The types of reforms envisaged by the EU involved taking away rents, often by reducing or modifying perceived “acquired” rights, across social groups that had been better protected in some national economies than in others. Clearly, competition policies affect the rents of both entrepreneurs and their workers and resistance from the beneficiaries of such rents or acquired rights formed the major to introducing reforms due partly to the political influence of such social groups in the Member States. Therefore, the strength of resistance in an industry was not only affected by the size of rents, but also by the ability of workers, firms and their national representatives to organize and have their interests taken into account at the supranational level. This process of introducing reforms in the face of macroeconomic trends coupled with social pressures from well-resourced national lobbies, tells the tale of European competition law and policy as it relates both to the intrinsic characteristics of the industries and to the degree of market and bargaining power allowed by product and labor market institutions.
Throughout this tumultuous period, however, the Commission strived to ensure that it was in a position to introduce a successful competition policy for the EU with a balancing function and ultimate definition of success based on the needs of European interests—not a copy and paste of U.S. ideals. In this respect, the important outcome of this period was the dual procedural and substantive modernization that has seen the European Commission augment and fence its power in important ways so that it retained effective control of most significant competition law issues throughout Europe.
7. Conclusions—Influence of Democracy and Capitalism on European Competition Policy
The gradual and incremental way in which competition policy was mainstreamed into the European Community’s overall objectives has a clear result: competition rules, for better or worse, are at the heart of the grand European project, and they have been used as a tool for the original goal of integration as well as to contribute towards the EU’s more rounded and socially aware objectives. So it is not just the objectives of competition policy that shift and morph, but also the reasons underlying its presence at the top table of EU policy branches and even its very identity.
Economic analysis of the relative economic performance of the EU and other capitalist economies generally tends to emphasize the role of labor and capital markets in differentiating between the different outcomes achieved by different economies. However, it is clear in this author’s view that a strong competition policy, or the absence thereof, can interact with and facilitate other economic policies to such an extent that it has as important a role in achieving economic outcomes as macroeconomic policies writ large. When it comes to introducing capitalist economic and technical progress, for instance, the presence of a competition policy as has been developed in the EU can balance the harsh aspects of the capitalist-inspired policies in order to render the overall project more acceptable to modern democratic societies. Due to the labor intensity of certain well-protected sectors of the European economy, socially inspired labor laws had the effect of hindering new entrants by denying them the full flexibility in employment conditions that would otherwise be permitted under legislation drafted purely from a modern capitalist standpoint (such as flexibility in wages and work rules). Such rules threatened the fabric of the EU since they risked restraining the direct competition that liberalization was introduced to foster. However, gradually competition law was employed, in tandem with other policy initiatives, to ensure that labor regulations do not pose a significant impediment to liberalization of strategic sectors and markets in the EU as whole, even if provisions and industries in certain member states may warrant further consideration to this day.
Since the modernization process in EU competition law, many have come to perceive competition policy as a purely economic policy or simply an instrument in the EU’s general industrial policy. 134 From this perspective, competition policy is reduced to being merely a question of regulating the market and enforcing the rules in the light of precise economic objectives. However, others have broader perceptions of EU competition law and policy. This contribution has set out to show that competition policy in postwar Europe has not purely been about regulating the economy along free market principles, but rather it has always had “political” goals. 135 Competition policy, therefore, plays a role in the overall political and economic order of the EU, and is crucial to the way in which the EU’s initiatives impact on ordinary EU businesses and citizens. Going forward, it would appear that the role played in balancing the capitalistic tendencies of the European Union project as it has evolved. This is demonstrated in how the European public’s overall attitude towards punishing anticompetitive behavior has hardened considerably since 2007, perhaps as a result of the financial crisis and the various financial scandals that have emerged in that time. Clearly, in light of the EU’s ongoing problems in terms of its perceived democratic deficit, any contribution that competition policy can make to balance the harsh capitalist aspects of the European Union as it has become in the neoliberal era will be welcome from Brussels’ perspective. Neoliberal policies (such as the promotion of privatization) are criticized in some quarters because they tend to erode democracy by transferring decision making away from state structures that are subject to potential democratic influence or control and into the hands of unelected and unaccountable corporate agents.
Some commentators have warned that “the inclusion of other, non-competition values is very dangerous, and we need to be very careful with it;” 136 while Semmelmann adds that this is accentuated by the fact that the procedures used to decide upon and apply competition rules are often very complicated and far removed from the gaze of the public. On the other hand, the caution called for should not be overstated since the political and sociopolitical goals cannot, and do not, drive competition policy alone because they lack the precision and immediate specificity, despite their relevance to decision makers. 137
The balancing process undertaken by EU institutions, especially the Commission, is complicated by the difficulty of being responsible for such a flexible policy that is capable of impacting citizens and firms across the continent. For many years, the Commission’s Services have been under pressure from industrialists to broaden its definition of consumer interest to encompass more long run effects whereby European consumers will apparently benefit most from European companies that are able to compete on a global scale. 138 In its much-publicized efforts to keep the policy up to date and relevant, the Commission opens itself up to the demands of all European stakeholders, backed up by increasingly complex economic arguments. Thus, in the context of an EU founded on the ideals of democracy and participation, the choice of policy goals becomes ever more contentious, and any evolution in objectives, strategies, or priorities is subject to intense scrutiny.
We have seen from the analysis of the evolution of competition policy in postwar Europe that Europeans have always had a unique, pluralist view of competition policy and what it can and should achieve. If today’s competition policy has left a purist Ordoliberal view behind in favor of becoming more orientated towards the single goal of the protection of competition for its own sake, it has not gone so far as to abandon completely its pluralistic nature.
European competition law and policy has always been used in a functional and multipurpose manner in that the Commission and national competition authorities have pursued objectives that were not directly related to competition. The most obvious example that is evident from the above is that of market integration, but competition policy as it has evolved in the EU has seen otherwise questionable agreements being permitted and even encouraged on noncompetition grounds as broad as social, environmental, and industrial policy and, albeit to a lesser extent, cultural policy. In searching for the point at which competition policy in Europe reached its limitations in terms of balancing interests of capitalism and democracy, one could point to communications markets, where European competition law was called upon to be applied in such a way as to not only safeguard a competitive market process by favoring the efficient production of media content and outlets, but also to ensure a democratic and pluralistic communications sector. Over the course of the past decade or so, the strong cultural, democratic and public policy arguments in favor of retaining a vibrant and pluralist media have seen theory and practice arguably diverge. Indeed, the result of the pressure on the relevant authorities caused them to, in a sense, revert to type and effectively begin regulating markets even where the competition rules would normally call for a lighter touch enforcement approach. From one perspective, this sector shows that European competition policy is a living body of law in that certain changes in the media ownership rules, which encompassed and applied competition principles in the media domain, came about in direct response to the wave of cross-sectoral consolidation inspired by the need for capital investment in digitization around the turn of the century. 139 However, the depth of the actual impact of the media on citizens gave rise to considerable concerns that the application of a standard competition approach to media markets would lead to undesirable outcomes in terms of democratic freedom and cultural diversity in the media. In certain situations, applying a standard approach will see competition authorities faced with an unenviable trade-off between achieving an acceptable solution from a competition view point, or alternative solution that protects or enhances pluralism. This led to the emergence of calls for the implementation of a “media-specific” competition law based on the unique nature of media markets in terms of the business models employed and the influence that the media has on democracy. Since there was a perception that fundamental democratic aspects of media markets were being overlooked by competition authorities, a parallel system of dual oversight has emerged in some EU jurisdictions. For example, in Ireland, obtaining regulatory approval for a media merger is now subject to a more involved process with the introduction of a dual notification to the Competition and Consumer Protection Commission (CCPC) and the Minister for Communications. In what amounts to a cumbersome bifurcation, the CCPC looks to the competition aspects of a media merger while the Minister reviews the merger from the perspective of media plurality in Ireland, including specifically reviewing the impact on the diversity of ownership and content.
To some extent, the example of media markets represents an instance where EU competition policy retained its integrity and forced legislators to proactively respond to citizens’ concerns, in this case based on democratic arguments, rather than leaving the issue to competition policy to deal with through a complex compromising of principles that risked knock on effects in other sectors. For example, competition policy enforcers could undoubtedly have found theoretical justifications for accepting or engineering outcomes that avoid damaging competition to the point of elimination, whilst still preserving democratic standards. However, in sectors that are as sensitive as the media, the existence of numerous inefficient entities is commonly perceived by society as having more than just economic value.
More generally, given the presence in many Member States of traditional state-interventionist attitudes and close ties between government and organized labor, it would have been understandable if the EU had taken a skeptical view of competition policy. However, a core competition policy goal is granting consumers lower prices and that can be very beneficial to salary earners so even traditional opponents of capitalism find a degree of support for competition policy. We have seen that European competition policy assumed a public law status in disciplining the different branches of the EU and balancing their disparate objectives. Acting on each such demand completely would require adopting a specified course of action, to the exclusion of a rival constituency. Instead, a balancing approach was adopted whereby competition policy, to the extent possible, set about beating a path between similarly legitimate outcomes. This is a task that European competition policy setters and decision makers have met with since the policy first emerged and is certainly one that they are going to be faced with for some time to come.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
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