While some of these ideas remain low on substance, it is clear that the Commission considers it necessary to renew the EU’s rulebook and toolbox for a fast-changing world. It is therefore important for interested parties to keep a close eye on these developments and to participate in public consultations if and when possible.
Fair competition is a cornerstone of the European Union. The European Commission is constantly reviewing, revising and redesigning its competition policy and enforcement methods. Prior to the outbreak of Corona virus, the Commission’s policy agenda for State Aid and for Antitrust and Mergers was already mapped out until 2024. The New Industrial Strategy for Europe (New Industrial Strategy) had brought new focus and several Member States had also pressed the Commission to review the competition rules (while others stress the importance of the existing principles).The current Corona crisis has led to even more (and faster) policymaking, with as yet unknown effects on the other timelines.
In this article we have summarised the Commission’s most important plans and initiatives, and the relevant dates, grouped by policy area. In our August 2019 and March 2020 newsletters we already discussed the Commission’s (competition) objectives in the digital sector, which we will therefore only briefly touch on below.
Temporary Framework for the Corona crisis. The Commission on 19 March 2020 adopted the State aid Temporary Framework to support the economy in the context of the coronavirus outbreak (“Temporary Framework”). The Temporary Framework provides for five types of aid, which can be granted by Member States.
- Up to EUR 800,000 in direct grants, selective tax advantages or advance payments for companies to address urgent liquidity needs.
- State guarantees, to ensure banks keep providing loans to companies for immediate working capital and investment needs.
- Subsidised loans with favourable interest rates.
- Payments to banks, to be channeled to businesses (which is considered direct aid to the banks' customers, not to the banks themselves).
- Short-term export credit insurance.
Members State must notify the Commission of proposed aid under the Framework. The Commission has already approved several schemes.
On 27 March, the Commission proposed to extend the Temporary Framework with the following measures:
- More support for coronavirus related research and development.
- More support for the construction and upgrading of testing facilities for products relevant to tackle the coronavirus outbreak.
- More support for the production of products relevant to tackle to coronavirus outbreak.
- Targeted support in the form of deferral of tax payments and/or suspensions of employers' social security contributions.
- Targeted support in the form of wage subsidies for employees.
These measures are currently under consultation with the Member States.
State Aid Modernisation fitness check. In 2019, the Commission started a review of the state aid rules in respect of, inter alia, energy and the environment, and Important Projects of Common European Interest (ICPEIs). These are priority areas in the context of the New Industrial Strategy. Further public consultations will be held later this year and into next year. The implementation of the revised rules is planned for the second half of 2021. However, the Commission has already indicated that the outbreak of the Corona crisis will cause delays in this timeline.
New ETS Guidelines. Under the EU Emission Trading System, Member States can compensate companies for increased energy costs resulting from the ETS. The Commission has drafted new guidelines for granting compensation for these costs, in light of the revised ETS Directive. Under the proposed new guidelines, (i) the number of sectors eligible for compensation are reduced, (ii) the compensation rate is lowered, and (iii) compensation becomes conditional on decarbonisation efforts from the companies concerned.
The current Guidelines expire on 31 December 2020. The Commission held a consultation for the proposed new guidelines until 10 March 2020; the implementation of the proposed new guidelines is set for 1 January 2021.
Revision of Block Exemption Regulations. EU antitrust rules prohibit agreements between undertakings that restrict competition, unless (in short) they generate efficiencies that result in benefits for consumers. The Commission can declare certain types of agreements to be exempt on this basis through measures known as Block Exemption Regulations (BERs). Several BERs will expire in the next few years, and the Commission has undertaken consultations to decide if they should be extended or revised instead.
- Horizontal Block Exemption Regulations (HBER). The HBERs set out the circumstances where competitors are allowed to cooperate. The current HBERs are set to expire on 31 December 2022. The Commission has recently evaluated the HBERs and will decide on their future. The results of the evaluation will be published in 2021, together with a final round of public consultations.
- Vertical Block Exemption Regulation (VBER). The VBER provides a safe harbour for certain agreements between companies that operate at different levels of the production or distribution chain. The VBER will expire on 31 May 2022. As with the HBER, the VBER has recently been evaluated, with a publication of that evaluation and a public consultation planned for the end of 2020. An update of the VBER will be particularly welcomed since the growth of e-commerce has increased the need for more clarity on restrictions relating to, for instance, online marketplaces, price comparison tools, dual pricing and online sales.
New tools and remedies against market dominance. The Commission is concerned that the current competition rules cannot properly prevent digital markets from tipping to the point where fair competition is no longer possible. This can result in digital markets becoming dominated by single companies. Therefore, the Commission is considering tools to prevent these ‘tipping points’, even before companies have actually broken the competition rules (see our January 2020 newsletter). Furthermore, the Commission is thinking about new remedies to roll back the effects of a dominant company’s actions on competition.
Applying existing tools provide clarity. In addition to strengthening its powers against anti-competitive behaviour, the Commission also intends to make more use of its powers to reassure companies that they are not acting anti-competitively. The Commission can give either informal guidance or formal decisions in that regard. A recent example is a statement on the application of competition law during the Corona crisis issued by the Commission, with the European Competition Network (ECN), on 20 March. In this statement the ECN, inter alia, announces that it will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply of scarce goods. In addition, the Commission has indicated that companies can seek informal guidance on the compatibility of specific Corona-related cooperation initiatives.
Initiative to improve labour conditions of platform workers. The growth of the digital economy and online platforms has also led to a proliferation of so-called ‘platform work’. The employment status and security of platform workers is often uncertain, as is their right to negotiate collectively. The Commission has however stated that the competition rules should not stop workers from forming a union. A consultation on this issue will be launched this year, and new rules could be adopted in 2021.
Market definition review. The Commission will review its 1997 Market Definition Notice with a focus on digital markets and the effects of globalisation on markets. A public consultation is planned for the second half of this year.
Merger Regulation review. The results of the Commission’s long-term evaluation of the Merger Regulation will be published later this year. The results are likely to deal with the question whether the turnover thresholds will need to be amended to ensure the Commission sees the ‘mergers that matter’.
Measures relating to third countries
FDI Screening Regulation. This Regulation contains a framework for the screening of foreign direct investment into the EU and its Member States, and will be fully applicable from October 2020. We discussed the adoption of this Regulation in our November 2019 article. The Commission intends to further strengthen this framework. To this end, and in relation to the outbreak of the Coronavirus, the Commission on 25 March issued guidelines for the Member States. In these guidelines the Commission calls upon Member States to make use of their FDI screening mechanisms (and to adopt them if necessary) to protect their critical infrastructure, including in relation to health.
Foreign subsidies. The Commission will publish a White Paper on an Instrument on Foreign Subsidies in June. This relates to subsidies from third countries for companies to (for instance) set up a business in the EU, buy EU companies, or bid for EU public tenders. According to the Commission, these subsidies can have distortive effects on the Single Market. The Commission will propose a legal instrument to address this in 2021.
International Procurement Instrument. The Commission already proposed a special International Procurement Instrument in 2016. This instrument addresses issues of reciprocity between the EU and certain third countries, where companies from third countries have access to EU procurement markets, while EU businesses cannot participate in tenders in those third countries. So far this proposal has remained dormant, as discussed in our November 2019 article, but the Commission hopes to revive it.
Carbon Border Adjustment Mechanism. The energy transition and transformations envisaged in the European Green Deal will lead to increased costs for businesses. This could lead to carbon leakage; for example, due to businesses shifting their activities outside of the EU. To reduce the risk of carbon leakage, the Commission is considering a Carbon Border Adjustment Mechanism, which will put a carbon price on imports of certain goods from outside the EU. This idea is currently open for public consultation and the Commission intends to adopt a Directive in 2021.
The Commission does not lack for ambition in its 2019-2024 term, and its ideas are far-reaching. The Temporary Framework has been adopted quickly and can help companies receive necessary aid. The antitrust reviews have clear roadmaps and can help to make the rules fit for modern market trends. On the other hand, the Commission’s plan for new tools and enforcement methods still seem far away. They have been dormant for years and are no closer to implementation, or remain little more than a proposal for discussion. The impact of all these initiatives can be high, however, and the Commission should ensure they are proportionate, with proper legal safeguards build in. We therefore advise interested parties to keep a close eye on these developments and to participate in public consultations if and when possible.
This article was published in the Competition Newsletter of April 2020. Other articles in this newsletter: