European Commission Proposal: New Competition Tool

The EU Commission has launched a public consultation on a New Competition Tool which is intended to address perceived gaps in current EU competition rules. The submissions to the consultation will inform the development by the EU Commission of a proposal for a new Regulation signalled for Q4 2020.

The Department is seeking the views of any interested parties on the EU Commission’s proposal for a New Competition Tool and to the measures proposed and policy options identified by the EU Commission.

The increasing digitisation of our daily lives has brought many benefits to society and to our economy but, from a competition point of view, these developments have posed new challenges and regulatory concerns. In this emerging environment, some larger entities such as platforms have become what are known as gatekeepers for many digital and non-digital products and services. Such a dominant position can be underpinned by additional factors which can include extreme economies of scale and scope, strong network effects, zero pricing and data dependency. In other instances, structural competition problems may be arising where concentrated markets can allow companies to monitor the behaviour of competitors and create incentives to compete less vigorously without any direct coordination.

The consultation on the new competition tool is being run in conjunction with the Commission’s new initiative on platform-specific ex ante regulation, part of the Digital Single Market package announced in the “Shaping Europe’s digital future” Communication. To ensure consistency and avoid possible overlaps, both public consultations and the impact assessments are being conducted in parallel. More information on the Department’s consultation on the Digital Services Act is available at DBEI Consultation on the Digital Services Act.

The EU Commission have suggested the following policy options for consideration in addition to the current operation of EU competition rules:

Option 1. A dominance-based competition tool with a horizontal scope

Option 1 would address competition concerns arising from unilateral conduct by dominant companies without any prior finding of an infringement pursuant to Article 102 TFEU. Similar to the existing EU competition rules, it would be generally applicable across all sectors of the economy. The goal of this tool would be to allow the Commission, in close cooperation with the national competition authorities, to identify competition problems and intervene before a dominant company successfully forecloses competitors or raises their costs. The tool would enable the Commission to impose behavioural and, where appropriate, structural remedies. However, the Commission would not make any finding of an infringement of the EU competition rules, nor impose fines and thus not generate rights to launch damage claims.

 Option 2. A dominance-based competition tool with a limited scope

Similar to the tool presented under Option 1, this option would address competition concerns arising from unilateral conduct by dominant companies without any prior finding of an infringement pursuant to Article 102 TFEU. Under Option 2, however, the use of the tool would be limited in scope to sectors in which the characteristics mentioned in the context and problem definition sections of the European Commission’s Inception Impact Assessment document that are most prevalent. These could include certain digital or digitally-enabled markets, as identified in the report by the Special Advisers (please follow this link: ec.europa.eu/competition/publications/reports/kd0419345enn.pdf) and other recent reports on the role of competition policy, and/or other sectors identified as being especially prone to such concerns due to entrenched dominance, high entry barriers, etc.

Option 3. A market structure-based competition tool with a horizontal scope

This option would allow the Commission to identify and remedy structural competition problems that cannot be addressed (at all or as effectively) under the EU competition rules. Thus, unlike Options 1 and 2, it would not be limited only to companies that are already dominant. Similar to already existing competition tools of this kind, this tool would be based on a test allowing the Commission to intervene when a structural risk for competition or a structural lack of competition prevents the internal market from functioning properly. The tool would enable the Commission to impose behavioural and, where appropriate, structural remedies. The Commission could also recommend legislative action to improve the functioning of the market concerned. As under the previous options, there would be no finding of an infringement, no fines and no damage claims.

Similar to the existing EU competition rules, the tool would be generally applicable across all sectors of the economy. 

Option 4. A market structure-based competition tool with a limited scope

Similar to the tool presented under Option 3, this option would address structural competition problems. Under Option 4, however, the use of the tool would be limited in scope to sectors in which the characteristics mentioned in the context and problem definition sections of the European Commission’s Inception Impact Assessment document that are most prevalent. These could include certain digital or digitally-enabled markets, as identified in the report by the Special Advisers (please follow this link: ec.europa.eu/competition/publications/reports/kd0419345enn.pdf) and other recent reports on the role of competition policy, and/or other sectors identified as being especially prone to such concerns due to entrenched dominance, high entry barriers, etc.

The Commission suggests that the limited scope of Options 2 and 4 could target the issues identified in markets as being most prone to such problems. While the most pressing competition problems are widely perceived to occur in digital or digitally-enabled markets, other sectors, such as pharma, energy, media, farming and manufacturing could also be considered under these options.

The EU Consultation is open until 8 September 2020 and it can be accessed by following this link: ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12416-New-competition-tool/public-consultation

The accompanying Inception Impact Assessment which includes the policy options set out above can be accessed by following this link: ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12416-New-competition-tool

Department consideration

The Department is seeking the views of any interested parties on the EU Commission’s proposal for a New Competition Tool and to the measures proposed and policy options identified by the EU Commission. Please send your submissions to Helen McCarthy by Friday, 24 July 2020 (email conspol@dbei.gov.ie).

Publication of submissions and relevant provision of the Freedom of Information Act 2014

The Department may publish all submissions received under this consultation on its website. However, should you submit information that you consider commercially sensitive, please identify that information in your submission and give reasons for considering it commercially sensitive. The Department will consult with you regarding such information before making any decision to publish.

Attention is drawn to the fact that information provided to the Department may be disclosed in response to a request under the Freedom of Information Act 2014. Therefore, should it be considered that any information provided by a respondent is commercially sensitive, please identify same, and specify the reason for its sensitivity. The Department will consult with interested parties regarding information identified by them as sensitive before making a decision on any Freedom of Information request.

Published by Commerce, Consumer and Competition

Topics: Competition and Consumer Policy

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