The 2024-2029 Commission Political Guidelines: Where Is Competition Policy Likely Headed

On 18 July 2024, the current President of the European Commission ("Commission"), Ursula von der Leyen, was reconfirmed by the European Parliament for a second 5-year term. As part of her reconfirmation, President von der Leyen delivered a speech before the European Parliament, complemented by a 30-page program, which lays down the Commission's political program for the next five years.

A key pillar of the program - "A new plan for Europe's sustainable prosperity and competitiveness" - has the objective of combining competitiveness and prosperity with the achievement of the European Green Deal goals.

Specifically on competition policy, according to President von der Leyen, a new approach is needed to achieve this objective. This blog post projects where competition policy is likely headed in the 2024-2029 period by commenting on the most relevant paragraphs of the program.

Von der Leyen: "I believe we need a new approach to competition policy, better geared to our common goals and more supportive of companies scaling up in global markets - while always ensuring a level playing field. This should be reflected in the way we assess mergers so that innovation and resilience are fully taken into account. We will ensure competition policy keeps pace with evolving global markets and prevents market concentration from raising prices or lowering the quality of goods or services for consumers. We will look at all of our policies through a security lens."

• This statement reaffirms the classic principles underlying competition law, i.e., the focus on ensuring a level playing field, preventing market concentration, and ultimately avoiding a negative impact on prices/quality of goods or services.
• However, the President's comments recognize the impact of global dynamics and the need for EU companies to be able to respond to global pressures. In the context of Siemens/Alstom and Lufthansa/ITA, there is growing pressure from EU Member States to allow European champions and this program could signal an openness to that effect.
• The President also calls for an increased focus on innovation and resilience in the substantive assessment of mergers. This could mean (i) that the Commission will expand its assessment of the impact of ESG (Environmental, Social, and Governance) standards and security, (ii) that the Commission would be open to a greater role of wider efficiency justifications/public interest considerations in merger control and competition law assessments, and/or (iii) that the impact on the overall economic competitiveness of the EU, and the aim of geopolitical de-risking for critical supply chains and technologies, may play an increasingly important role in the assessment of mergers.

Von der Leyen: "We also need to better support firms whose size and financing capacity cannot be compared to large corporations. They are often the target of killer acquisitions from foreign companies seeking to eliminate them as a possible source of future competition."

• The President stresses the importance for the Commission of being able to intervene to assess so-called "killer acquisitions", notably by non-EU companies. In a number of cases, these transactions by larger, established companies, in a number of cases based outside of the EU, were not notifiable due to the target's relatively small turnover.
• The President's comment is likely a reference to the application of Article 22 of the EU Merger Regulation ("EUMR") and Article 102 TFEU in the context of the Towercast judgment which holds that national competition authorities and courts can review acquisitions under abuse of dominance rules, even if those acquisitions are not notifiable under EU or national merger control laws.
• Pending the Court of Justice ruling in Illumina/Grail, which will clarify the Commission's power to review concentrations not meeting the EU merger control thresholds on the basis of Art. 22 EUMR, and given the uncertainties linked with the application of Article 102 TFEU to concentrations (even after the Court of Justice's judgment in Towercast), this comment by the President suggests that the Commission could seek to achieve this objective even through a legislative initiative, if necessary.
• The President's comment also seems to suggest that the Commission would consider using its powers under the Foreign Subsidies Regulation to call-in the notifications of such concentrations, where facilitated by foreign subsidies, even if these would not meet the thresholds for compulsory notification.

Von der Leyen: "Looking ahead, the Clean Industrial Deal must enable us to invest more together in clean and strategic technologies and in energy intensive industries. The future of the clean and cutting-edge tech industry must be made in Europe. This is why I will put forward a new European Competitiveness Fund as part of our proposal for a new and reinforced budget in the next multiannual financial framework. This investment capacity will invest in strategic technologies - from AI to space, clean tech to biotech - to ensure that we develop strategic technologies and manufacture them here in Europe. And it will ensure that we use the power of our budget to leverage and de-risk private investment in our common goals. I will propose a revision of the Public Procurement Directive. This will enable preference to be given to European products in public procurement for certain strategic sectors."

• The program suggests the creation of a new "European Competitiveness Fund", dedicated to the EU industrial policy. This may be a lesser version of the EU Sovereignty Fund aimed at levelling the support capacity throughout the EU, that was announced by the Commission with its Green Deal Industrial Plan ("GDIP"), but rejected by (some) EU Member States.
• This new fund could replace the Strategic Technologies for Europe Platform ("STEP") adopted in February 2024 and repackaging various EU funds to allow EU institutions or EU Member States give more support to large business for establishing production facilities (see our blog post on amended regional aid rules to foster support for strategic technology projects).
• Instead of having various funds to support the development and manufacturing of strategic technologies, the "European Competitiveness Fund" may simplify access to public funding through a centralised fund.
• EU Member States with less funding capacity may be able to draw from that fund to grant State aid for the development and manufacturing of strategic technologies, for cohesion purposes (under the Regional Aid Guidelines) and even outside of disadvantaged areas under (i) the "Chips Act" Communication, for the construction of chips manufacturing facilities, or (ii) the "Temporary Crisis and Transition Framework" ("TCTF"), for facilities manufacturing equipment relevant for the transition towards a net-zero economy until the end of 2025 (e.g., batteries, solar panels, wind turbines, heat-pumps, electrolysers, carbon capture usage and storage, as well as key components and critical raw materials to produce such equipment) (see our blog post on this here).

Von der Leyen: "We will start by focusing on the implementation and enforcement of the digital laws adopted during the last mandate. Tech giants must assume responsibility for their enormous systemic power in our society and economy. We have begun the active enforcement of the Digital Services Act and the Digital Markets Act. We will ramp up and intensify our enforcement in the coming mandate. We will support this by tackling challenges with e-commerce platforms to ensure consumers and businesses benefit from a level playing field based on effective customs, tax and safety controls and sustainability standards. Reaching our digital targets and building a true digital single market would be a gamechanger for our productivity and competitiveness."

• The Commission aims to intensify the Digital Markets Act ("DMA") and Digital Services Act ("DSA") enforcement. Under the DMA, the Commission has currently designated 7 gatekeepers and 24 core platform services and opened 6 investigations for non-compliance with DMA obligations. As stated by the President, the objective is the creation of a "true digital single market."
• In its recent ByteDance judgment, the General Court confirmed the Commission's decision designating ByteDance as a gatekeeper. The judgment also discussed some key concepts of the DMA, which might provide more legal guidance to digital businesses in their assessment of the DMA.

Von der Leyen: "I will make IPCEIs simpler and faster to get financed and off the ground. The first new set of common projects will be proposed in early 2025."

• Important Projects of Common European Interest ("IPCEI") are large cross-border projects financed by EU Member States (at least four) to overcome market failures or social challenges and to create positive spill-over effects for the EU economy.
• The Commission relies on ad-hoc guidelines to assess IPCEI compliance with State aid provisions and so far authorised ten IPCEIs, involving 22 EU Member States and 247 different companies (see our blog post on this here).
• Since the authorisation process is still lengthy, new streamlined IPCEI rules, already announced in the GDIP and confirmed in the program, will be very welcome. At the moment, based on the available decisions, 16 months elapse on average between the pre-notification of the projects and their authorisations by the Commission.

Von der Leyen: "The more aggressive posture and unfair economic competition from China, its "no limits" friendship with Russia - and the dynamics of its relationship with Europe - reflect a shift from cooperation to competition."

• The President refers to the competition coming from subsidised non-EU companies, against which the Commission appears ready to use the whole toolkit at its disposal. In particular, the Foreign Subsidies Regulation ("FSR"), adopted at the end of 2022, has been pitched by the EU as a key tool to remedy perceived distortions of competition in the EU caused by foreign subsidies (for a complete overview, see our blog).
• The FSR enforcement has so far led to two public procurement investigations involving Chinese State-owned manufacturers of clean tech (Longi and Shanghai Electric) and rolling stocks (CRRC). No remedies or prohibitions were imposed as those Chinese companies withdrew their bids. In addition, an investigation into the acquisition by e&, majority owned by the UAE government through an Emirates Sovereign Wealth Fund ("SWF"), of a telecom business in Central Europe, and two ex officio investigations into Chinese manufacturers of wind turbines and of security equipment are still ongoing.
• The FSR, together with trade investigations (such as the anti-subsidy investigation concerning electric vehicles from China) and the relaxation of the parallel EU state aid framework, will likely generate higher trade frictions, especially with China, which is now questioning the legitimacy of the FSR before the WTO. This may complicate non-EU companies' investments in the EU, in a context where EU State aid rules are being relaxed to foster the EU manufacturing of certain equipment and components, currently sourced overseas.
• This shift from cooperation to competition may also result in a stricter approach under foreign investment control regimes and may also influence the merger control assessment, allowing the creation of European champions.

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