FRANCE STRATÉGIE & OECD WORKSHOP ON NEW INDUSTRIAL POLICY TOOLS Paris, 17 October 2022
Session 2: Can industrial policy be consistent with open and competitive markets? Anne Perrot Inspectrice Générale des Finances; French Treasury
Logo Name
2|
Criticisms directed at competition policy with regards to industrial policy objectives •
Rigor of merger control would prevent the emergence of European champions
•
Control and prohibition of state aids would prevent the development of strategic industrial projects
•
Rules protecting competition could not efficiently fight against subsidized foreign firms (for example through predatory pricing), mainly from the US and China, leading to « naive » behavior with regard to these firms
Defense of competition policy (M. Motta, a former chief economist of DGComp « competition policy is the best possible industrial policy »)
General arguments Big size does not favor investment and innovation •
Aghion’s work on the link between innovation and market structure: it’s more subtle than that, the relationship between size, concentration and innovation depends on the position of the firms and of the sector with regard to the technological border.
•
Philippon: productivity has not grown more in the US, where concentration has become higher compared to the EU, than in the EU; hence concentration does not favor investment and productivity.
On the opposite, competition policy, by its selection effects (inefficient firms are driven out of the market), allows to better allocate employment and capital towards the more innovative sectors and firms. Competition policy allows a better access to market by innovative firms facing incumbent firms.
On mergers Very few mergers rejected by the Commission: between 2010 and 2022, around 90% have been accepted without remedies and near 8% accepted with remedies. Some European champions have emerged (Luxottica Essilor, Lafarge Holcim) But it is true that DGCOMP does not often accept behavioral remedies and prefers structural ones (less costly to monitor), that lead to dismantling of merged entities: can be seen as putting European firms at a disadvantage compared to US ones.
On State Aids General Block exemption regulation now concerns a majority of cases, but use of this tool by France less intense than in other member states => perception of a stringent control, whereas other countries (Germany for instance) use this instrument more frequently New instruments IPCEI strategic cross border projects addressing a market failure, in line with recommendations by economists (that is, financing industrial projects without any identified market failure entails a risk of error due to poor information of state on the relevant projects/technologies/firms) A new question arises (mainly since the sanitary crisis and the war in Ukraine): that of sovereignty. Should this be considered as a market failure? Asymmetric regulation of dominant firm in network industries (telecommunications, energy) is a kind of industrial policy
|3
Many elements of criticism of competition policy concern in fact the field of commercial policy Commercial policy is supposed to regulate external markets with a competition « on the merits » by specific instruments This includes anti-dumping measures and countervailing measures for subsidies; triggered by complaints of firms for example regarding « low prices » (not exactly predatory prices in the sense of competition policy) of non-EU firms on the European market Need for a more intensive use of anti-dumping and anti-subsidies instruments Nomination of a chief trade officer in 2021 + screening of foreign investment are new measures in favor of a reinforcement of European industry with regard to extra European firms
Other elements of criticism regarding competition policy (in particular in the digital sector) Digitalization: •
need for quicker intervention
•
Response of the DMA that includes ex ante regulation.
•
DMA should be assessed in a few months/years.
Control of the court of justice prevents from applying easily interim measures at the EU level (practices have to be demonstrated first): this is a problem for the relevance of competition policy in rapidly evolving markets, or markets in which there is a lot of uncertainty. But many positive points in the DMA: •
Ex ante rules applied to some actors that have a gatekeeper position on the market
•
DMA prohibits some predatory behavior by gatekeepers
Killing acquisitions: •
Instruments to examine acquisitions under the thresholds