ISSN 0259-3157 861 2001 European Commission KD-AC-02-001-EN-C XXXIst Report on Competition Policy XXXIst Report on Competition Policy 2001 (Published in conjunction with the General Report on the Activities of the European Union — 2001) Price (excluding VAT) in Luxembourg: EUR 20 ISBN 92-894-3547-X OFFICE FOR OFFICIAL PUBLICATIONS OF THE EUROPEAN COMMUNITIES ,!7IJ2I9-edfehf! L-2985 Luxembourg EN European Commission XXXIst Report on Competition Policy 2001 (Published in conjunction with the General Report on the Activities of the European Union — 2001) Brussels • Luxembourg, 2002 A great deal of additional information on the European Union is available on the Internet. It can be accessed through the Europa server (http://europa.eu.int). Cataloguing data can be found at the end of this publication. Luxembourg: Office for Official Publications of the European Communities, 2002 ISBN 92-894-3547-X © European Communities, 2002 Reproduction is authorised provided the source is acknowledged. Printed in Belgium PRINTED ON WHITE CHLORINE-FREE PAPER FOREWORD BY MARIO MONTI Member of the Commission in charge of competition policy The year 2001 saw intense activity in all three areas of competition policy: antitrust, merger control and State aid. Several cases decided by the Commission aroused considerable public interest, either because of particularly high fines or aid amounts or because of the size of mergers that eventually were not authorised, or because of important settlements in antitrust cases linked to sports (footballer transfers, Formula One). In the merger field, activity continued to be very substantial, although the rate of notified concentrations resulting in a prohibition decision remained very modest. The Commission adopted a Green Paper on the review of the merger regulation with the aim of launching a debate on how to improve the current EU merger control system. Substantial progress was also made in the area of State aid policy. The Stockholm European Council called on all Member States to demonstrate a downward trend in State aid and to redirect aid toward horizontal objectives of common interest. The increased transparency resulting from the new State aid register and State aid scoreboard will make it possible to monitor the progress achieved by Member States. Major areas where we broke new ground include our proposals to end State guarantees for public banks in Germany, the launching of a wide-ranging investigation into the effects of aid in the form of fiscal measures, and our decisions on stranded costs in the electricity sector. In the light of these developments, it is particularly important for me as Member of the European Commission with special responsibility for competition to explain the benefits of competition policy and the relevant work of the Commission. This annual report is a good opportunity to look back critically at what we have achieved, to draw conclusions for future action and to verify whether our action is in line with our objective. Our objective is to ensure that competition is undistorted, so as to permit wider consumer choice, technological innovation and price competition. This is achieved if companies compete rather than collude and if market power is not abused. When competitive conditions prevail, producers try to attract customers by offering them lower prices, higher quality or better service than their competitors. In other words: we undertake to work for the benefit of the European citizen. It can be seen from the examples given in this report whether this objective is being attained. The report will give a broad overview of how the Commission has performed its task of monitoring the proper functioning of competition in the single market. Here, I should like to focus on two topics where crucial progress was made in 2001: the fight against cartels, and international and multilateral cooperation (including enlargement). Cartels Record amount of fines One of the things for which 2001 will doubtless be remembered is the unprecedented activity that took place in the sphere of cartels. With 10 negative decisions against 65 enterprises, fines totalling over COMPETITION REPORT 2001 4 FOREWORD BY MARIO MONTI EUR 1 800 million, nearly half of which in the Vitamins case alone, and the largest individual fine ever imposed (in the Carbonless paper case), the year will go down as a milestone in the Commission’s struggle against cartels. Since I took up my present duties in September 1999, I have stated on a number of occasions, clearly and publicly, that I consider cartels to be a veritable cancer in an open, modern market economy. Unlike other forms of anticompetitive behaviour, they serve one purpose and one purpose alone: that of reducing or eliminating competition. They bring no benefit to the economy and can therefore never be viewed favourably from an economic standpoint. Their impact is entirely negative in that they lead to less choice for consumers, higher costs and reduced competitiveness for industry, delays in firms making essential adjustments and less innovation. Such is the price to pay for a cartellised economy. And it is a high price as far as the European economy is concerned. As the decisions taken this year show, cartels are numerous, affecting as they do many sectors ranging from banking services to industrial products, and from air transport to consumer goods. They involve both small firms and world leaders, and concern local markets and world markets alike. Increased enforcement efforts When I assumed office as competition commissioner, I was determined to step up the Commission’s efforts in the area of enforcement. I am convinced that the effectiveness of an anti-cartel policy depends first and foremost on its capacity to dissuade managers from engaging in collusive behaviour. Such dissuasion is effective only if there is a real chance of being punished and if the amount of the penalties is sufficiently high compared with the profits to be earned from a cartel. This priority has been translated over the past two years into radical action in the case-handling sphere. We have considerably strengthened the human and material resources of our unit specialising in the handling of cartel cases and we shall continue to do so in 2002. We have shifted the focus of the other antitrust operational units of the Directorate-General for Competition towards the fight against cartels, both as regards the detection and as regards the prosecution and punishment of cartels. We have intensified our contacts with our opposite numbers in the Member States’ competition authorities, and with those further afield, especially in the United States and Canada, in order better to combat practices that are becoming worldwide. And we have put in place management tools enabling more efficient and more speedy management of cartel cases. The resounding successes in 2001 are the first fruits of this action. I am very pleased with them. But they are just a beginning. The credibility of an anti-cartel policy, its power to dissuade and hence its effectiveness are built up over time. The managers and directors of companies engaging in such practices must be in no doubt that we shall leave them no respite, that they will be detected and that the penalties will be heavy. In a word, that it is more dangerous than profitable to participate in a cartel and that their only chance of lessening the financial consequences of their actions is to put a stop to them and come forward and talk to us under the leniency programme. Enlargement and competition The year 2001 was also an important year for the accession negotiations on competition. These were provisionally closed in early December with Estonia, Latvia, Lithuania and Slovenia. Negotiations are COMPETITION REPORT 2001 FOREWORD BY MARIO MONTI 5 being pursued with Bulgaria, Cyprus, the Czech Republic, Hungary, Malta, Slovakia, Poland and Romania. Even with the four candidate countries for which the competition chapter was provisionally closed, continuous monitoring will apply. The provisional closure of the negotiations with four candidate countries in 2001 reflects the important progress they have made in the adoption and implementation of the Community’s competition acquis. In the coming months, the Commission will continue to assist the candidate countries in their transformation process in the competition field. In this context, I would like to emphasise the problem of incompatible State aid measures in the candidate countries, in particular those aimed at attracting foreign direct investment. Indeed, a lack of proper State aid discipline seems to be the major stumbling block for those candidate countries for which the competition chapter has not yet been provisionally closed. As we need to preserve the integrity of the single market, the EU cannot accept any continuance of incompatible State aid measures in the candidate countries after accession. This is of crucial importance, not least for investors who seek legal security. In fact, the Commission is actively helping the candidate countries in converting incompatible State aid into permissible aid arrangements before accession. For their successful integration into the Union, the candidate countries also need a competition culture where businesses have learnt to obey the rules and where consumers become increasingly aware of its benefits. This is particularly important inasmuch as awareness of the important role played by competition policy also leads to enhanced enforcement of the rules. Companies and private individuals can do much to help to enforce the rules by bringing competition cases before the courts and complaints before the competition authorities. I hope this will also increasingly happen in the candidate countries, thus helping to ensure healthy competition on the markets and hence to complete those countries’ transition to well-functioning market economies. The Commission’s modernisation proposals in the antitrust area are precisely tailored to promoting the growth of such a competition culture.