The Draghi Report: A Blueprint for the EU Competition Commissioner-Designate?
The Draghi report and a new Competition Commissioner
On 17 September, Ursula von der Leyen, President of the European Commission announced
the designation of Teresa Ribera Rodriguez as executive vice-president for Clean Just and Competitive Transition. She will also be responsible for the Competition Portfolio. The Report will serve as a potential blueprint for Teresa Ribera Rodriguez, the Competition Commissioner-Designate and the European Commission to shape and execute competition policy.
A new Competition Commissioner and the Draghi ReportOn 17 September, the President of the European Commission, Ursula von der Leyen, announced
the designation of Teresa Ribera Rodriguez as executive vice-president for Clean, Just and Competitive Transition, charged also with the Competition Portfolio.
The appointment follows the publication of Mario Draghi’s report “The future of European Competitiveness” that was commissioned a year ago by President von der Leyen and published on 9 September 2024. The Report’s competition section is relatively small, but other elements such as the industrial policy goals, security considerations, and trade defense, cross over with classic competition law goals. The Report suggests “a new approach to the competition policy that supports a new Industrial Deal”. (page 299) Von der Leyen’s Mission Letter to Teresa Ribera Rodriguez takes inspiration from the Draghi Report to call for modernisation of EU competition policy. We set out below the main proposals. The weight of innovation and future competition
The Report recommends that emphasis be placed on “the weight of innovation and future competition in DG COMP decisions”, embracing a more forward-looking approach and advocating an assessment of the impact of competition enforcement on incentives to innovate. This would include reforming the Horizontal Merger Control Guidelines.
This is also reflected in Ursula von der Leyen’s Political Guidelines
, where the president of the Commission tasks the Commissioner Designate to review the Horizontal Merger Guidelines to “give adequate weight to the European economy’s more acute needs in respect of resilience, efficiency, and innovation” (page 7).
Loss of innovation can be seen as a concern. Loss of innovation can be a concern. We have yet to see instances where innovation is effectively used as an efficiency to offset other potential competitive harm. In practice, the Commission doesn’t fully understand the need for companies to scale up in order to fund R&D. The standard for demonstrating pro-competitive efficiency is often too high and difficult to meet. It is difficult to assess innovation ex ante because it is unpredictable. Clear guidance and templates for novel agreements, coordination, and co-deployment among competitors–
The report highlights the “need to have a simple and streamlined process which groups of EU industry can follow in order to work together in order to reach scale”. The Report recommends that parties to an agreement adopt “templates for novel agreements”. The Report specifically lists “defence” as “a crucial case where co-deployment and coordination are needed (page 300).
In this respect, the Commission recently revised its Horizontal Block Exemption Regulation
(“
HBER
“) and Guidelines on the Applicability of Article 101 to horizontal co-operation agreements
that provide guidance in relation, in particular, to agreements which promote sustainability. The HBER and the accompanying Guidelines do not currently give special treatment to agreements relating to the defence industry. The implementation of the Report would probably mean an expansion of the HBER and of the Guidelines. Develop security and resilience criteria by expert authorities and include them in DG COMP assessmentsThe Report calls for a “security and resiliency assessment” to be performed by a separate body “outside the Competition unit”, e.g. The report calls for a Resilience Assessing Body (page 300). It is not clear how the new instrument will be coordinated with national FDI policies of EU Member States. The Report calls for two major changes to the State Aid policies: (i), enhancing coherence and efficiency between State Aid and wider EU policies; and (ii), incorporating assessments of resilience and innovation into decisions regarding State aid control. The report comes at a moment when the internal market is fragmented due to the aid given during the COVID-19 pandemic, and the energy crisis. Within the framework of Article 107(3)(b) TFEU, which allows Member States to grant aid to “remedy a serious disturbance in the economy of a Member State”, or under Article 107(3)(c) TFEU, which permits aid to “facilitate the development of certain economic activities or of certain economic areas”, the Commission’s assessment is based on the criteria of appropriateness, necessity, and proportionality.Given these existing provisions, there is already a basis for arguing that aid not aligned with broader EU policies should not be approved. In the same way, considerations such as innovation and resilience can be integrated into Commission assessments. The Clean Industrial Deal includes a prominent mention of state aid policy in the Mission Letter. State aid policy appears prominently in the Mission Letter, as part of the Clean Industrial Deal.
Reform and expand the Important Projects of Common European Interest (IPCEIs)
Additional proposals in relation to IPCEIs include to (i) make part of EU funding available for these projects; (ii) lessen the burden for proposing projects; and (iii) streamline and accelerate the review process.
In 2021, the Commission published a Communication on criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of important projects of common European interest
. The Report proposes lowering the standard to qualify a project as an IPCEI, by adopting a “broader concept of innovation” (page 301). The Commission’s actions alone do not seem to be enough to achieve the stated goals of the Report. Notably, the Mission Letter specifically refers to the Draghi Report in relation to IPCEIs.
Incentivising the adoption of open access, interoperability, and adherence to EU standards through State aid and other competition tools
The Report proposes to expand the benefits of interoperability beyond the DMA, and that new regulations requiring open access and interoperability should be introduced when strong network effects and data-related barriers to entry hinder competitive dynamics in the market. To achieve this objective, the Report suggests using State aid tools as well as the New Competition Tool (see below).
Mandating further interoperability obligations, similar to those envisaged in the DMA, would require further regulation and a risk/benefit assessment. The Commission has a wide margin of discretion when assessing State aid. Supporting open standards through State aid is therefore relatively easy, as it can be done with ease. The FSR division was initially affected by a lack of staff, but the need for personnel in both Regulations has decreased over the past few months. Despite the fact that it will be difficult to ensure that both instruments are implemented efficiently, especially for the DMA, due to the high level specialisation required. It will require a significant amount of resources and, therefore, political commitment to make the Report’s ambitions a reality. The DMA is also explicitly referenced in the Mission Letter to Henna Virkkunen
, executive vice-president-designate for Tech Sovereignty, Security, and Democracy tasked with ensuring that “the Commission takes rapid and effective enforcement actions under the
Digital Services Act
and the
Digital Markets Act
whenever necessary” (page 7). In other words, the sharing of DMA competencies between DG COMP and DG CNCT will continue.
Reinforce ex-post versus ex-ante regulation and monitoring
The Report proposes that companies involved in competition decisions should be mandated to report metrics that enable the assessment of competition levels post-decision (ex post). These reports will allow competition authorities to intervene in the event of concerns based on these reports. The Report suggests that, to facilitate this process and to make it more efficient, the Commission should be given the authority to ask parties for information on a regular basis. The Report suggests that companies involved in mergers or antitrust proceedings, agree to provide this information as part of their commitment proposals.
While it is common for reporting obligations to be imposed in cases of merger control and antitrust proceedings concluded with commitments, the Report advocates for more extensive obligations. The Commission could then use the relevant data and data after the case has been closed. Implementing this recommendation could lead to further changes to the EUMR Regulation 1/2003, which the Commission has been evaluating after 20 years. Introduce a “New Competition Tool” (NCT) for four areas
The concept of an NCT has been around for a long time. The Commission proposed to introduce such a tool alongside what was formerly known as the “Ex Ante Regulation” and which became the DMA in December 2020
. The UK’s system of market investigation, which aims to address structural competition issues, is the inspiration for this tool. The Report sees the following areas where such a tool could be employed:
Tacit collusion;
Markets requiring heightened consumer protection, particularly for vulnerable groups;
Markets with weak economic resilience, such as reliance on a single supplier leading to shortages; and[a]Insights from past enforcement actions that suggest further issues (see above on ex post assessments).The Report does not clarify whether this NCT would “coexist” with the NCTs already available to Member States (such as Germany, Greece, Romania and other recent adopters), or if it would force the NCAs to “delegate” to the Commission the power to use this tool to address cross-border competition issues – which would be preferable. The Commission’s enforcement powers would be greatly increased if it adopted such a tool. The report specifically refers to “decade-long cases such as the Intel case” (page 304), and the 2023 merger simplification package. The Report identifies that merger control, exclusionary abuses, and the DMA require urgent streamlining.The current merger control review process has become complex and uncertain due to several factors: the use of Article 22 of the Merger Regulation for non-notifiable mergers, the application of Articles 101 and 102 to review non-notifiable mergers, emerging theories of harm and innovative approaches, the FSR, and the DMA.According to the Report, a proposed solution for the ambiguity of non-notifiable mergers is to establish a transaction value threshold for mandatory notifications, similar to practices in Austria and Germany.The draft Guidelines on the enforcement of Article 102
leave excessive discretion in identifying exclusionary abuses. Examples include the lack of detailed conditions under which tying is presumed to have exclusionary effects and the absence of a safe harbour for dominant firms setting prices above average total cost.
Article 1(6.b) of the DMA, which states that the Regulation does not prejudice the application of national competition rules that impose additional obligations on gatekeepers, introduces uncertainties.
Outlook
Despite the initial hype surrounding the Draghi Report, it is important to temper expectations. Many of the ideas may be difficult to implement in practice. Some proposals will also face significant challenges because of their legal basis, and other complex legal considerations, which the report, written by an economist understandably overlooks. This document’s primary purpose is to provide a general framework for Teresa Ribera Rodriguez, and the Commission as a whole. It is important to pay attention to the document’s contents as it provides an interesting perspective on future directions in competition policies. The most likely changes to come include a new mechanism for capturing below-threshold deals and a revision of the horizontal merge guidelines.
