Antitrust Alert: New EU Commissioner Designated for Competition Policy
On 27 November 2009, the President of the European Commission, José Manuel Barroso, unveiled the designated team of 26 new Commissioners who, if confirmed by the European Parliament, will serve for the next five years term, until October 2014. Joaquín Almunia, 61 – a Spanish socialist and currently EU Commissioner for economic and monetary affairs – has been designated to be EU Commissioner for Competition Policy and a Vice-President of the Commission.
Mr. Almunia will replace the current EU Competition Commissioner Neelie Kroes, who has been designated to be Commissioner for the “Digital Agenda,” with a portfolio covering telecoms and information and communication technology policies. Working closely with the new commissioner will be Alexander Italianer, who was named as Philip Lowe’s replacement as director general of the Commission’s Directorate General for Competition. Italianer is a Dutch economist and former deputy head of President Barroso’s cabinet.
Mr. Almunia began his career as chief economist for a Spanish trade union and entered the Spanish Parliament in 1979. He studied law and economics in Spain, completed follow-up work in Paris, and studied in the U.S. at the Kennedy School of Government at Harvard University. Mr. Almunia held two ministerial posts in Spain, between 1982 and 1986 as Minister for employment and social security, and between 1986 and 1991 as Minister for public administration. Before joining the Commission in 2004, he was leader of the Spanish socialist party between 1997 and 2000 and candidate for Prime Minister in Spain in 2000.
Commission’s officials who have worked closely with Mr. Almunia say he is a competent and reflective person, who “likes to get into the details of his dossiers” and carefully listens and evaluates pros and cons before making any important decision. Several persons inside the Commission have stated that, due to his solid economic and legal background, he will be able rapidly to familiarize himself with the competition portfolio and gain the confidence of the services that report to him.
In his new job, Mr. Almunia will have to address numerous ongoing matters inherited from his predecessor in the areas of cartels, abuses of dominant position, private enforcement, distribution agreements, mergers and acquisitions, and state aids.
Cartels and abuses of dominance
Commissioner Kroes’ time in office will be remembered for a spiral of ever-higher fines for cartel conduct and abuse of dominant position. In February 2008, Ms. Kroes imposed a €899 million penalty on Microsoft for non-compliance with its obligations under the Commission’s 2004 abuse of dominance decision against the company. Also in 2008, she imposed the highest-ever cartel fine (€896 million) against a single company, Saint Gobain. In May 2009, she levied a record €1.06 billion fine on Intel for abuse of a dominant position by allegedly shutting out rival AMD. Commission officials knew that, when presented with two alternative fines, Ms. Kroes invariably would choose the higher. As Competition Commissioner since 2004, Ms. Kroes has levied more than €9,000,000,000 in cartel penalties against companies from around the world.
A fine is the Commission’s only instrument to punish violations and deter antitrust infringements (criminal and personal sanctions not being available under EU competition law). However, Kroes’ tough approach has attracted some criticism towards the end of her mandate. Certain members of the European Parliament have openly stated that high fines are inappropriate in the current economic environment, because they endanger the viability of companies and may have negative effects on the growth and jobs agenda. Another recurrent criticism is that companies do not really get a fair trial in EU antitrust cases, because the Commission alone investigates, prosecutes, and decides cases and fines.
Due to these criticisms, and to his political and trade-unionist background, some commentators believe that Mr. Almunia might be more sensitive than his predecessor to social and job-related concerns in making cartel and abuse of dominant position enforcement decisions.
Another challenge Mr. Almunia will have to face is in the area of private enforcement. In October 2009, the consideration of Commissioner Kroes’ proposed directive on “collective redress” or “private damages actions” was postponed by President Barroso due to pressure from European Parliament members who considered the new regime excessively burdensome on business without sufficient counterbalancing benefits for consumers. It will have to be seen whether Mr. Almunia will push for the adoption of a similar directive or will make substantial amendments to overcome the European Parliament’s concerns.
The current EU regulation establishing “safe harbors” from the application of EU competition law for certain categories of vertical agreements is due to expire in May 2010. Consequently, the adoption of a new regulation in this area will be one of Mr. Almunia’s most delicate and important tasks as new EU Commissioner for competition.
In July 2009, the Commission announced its intention to revise the EU competition rules applicable to vertical restraints and launched a public consultation on a proposed new regulation and a new set of guidelines on vertical restraints. The Commission’s proposed amendments in the area of internet sales have generated a heated debate between online commercial platforms and luxury goods producers. For example, online sellers oppose any safe harbor for restrictions on internet sales (such as suppliers requiring distributors to have a brick-and-mortar shop before engaging in online distribution), and producers advocate greater freedom to set standards for online sales of their luxury branded products.
One of Mr. Almunia’s most difficult task in this area will be to strike the right balance between these opposing interests without losing sight of the ultimate goal of competition policy, the interest of consumers.
Former Competition Commissioner Mario Monti will be remembered not only for his decisions to prohibit mergers in high profile cases, such as the proposed merger between U.S. companies General Electric and Honeywell, but also for the number of merger decisions that were annulled by the European courts during his term (such as Schneider/Legrand and Tetra Laval/Sidel). Following this relatively negative record, Ms. Kroes’ approach to mergers has been particularly cautious. Indeed, during her five years term, Ms. Kroes has blocked (so far) only two out of some 60 proposed mergers that raised serious enough concerns to be taken to “phase two” investigations.
As a result of the economic crisis, consolidations are expected to occur over the coming years in various sectors, and “failing firm” and “efficiency” defenses may play an increasingly important role in merger review proceedings.
During the financial crisis, President Barroso set up a steering group composed of himself, Commissioner Almunia, Commissioner Kroes, and Commissioner McCreevy. Commission sources report that Mr. Almunia played an important role in making sure that EU state aids rules in the banking sector would be applied as flexibly as possible to maintain the EU’s financial stability. It can therefore be expected that he will also pursue this approach in his new capacity.
President Barroso has also announced that the new Competition Commissioner will be responsible for the assessment of state aids in the transport and energy sector, which are currently within the respective portfolios of the Commissioner for Energy and the Commissioner for Transports.
The new Commission must be approved by the European Parliament before it takes office. Commissioners-designate will appear in individual hearings before Parliamentary committees from 11-19 January 2010. On this occasion, Mr. Almunia’s agenda as EU Commissioner for competition may become more clear. The vote of consent on the new Commission as a whole is foreseen to take place on 26 January 2010. On the basis of the vote of consent, the Commission shall be appointed by the European Council. Then it will start working.
Read the Commission’s press release at the EU web site.
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Bernard E. Amory
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