Abstract
Interest groups are part of any political regime and perform a relevant role in the regulatory environment of a country. Recently, because of geopolitical changes and technological advancements, antitrust rules are being questioned and subjected to adaptations when needed. This study aims to understand how interest groups, in general, are enabled to conduct their work in the European Union and whether the EU’s antitrust regime is currently being put into a stress test. Specifically, it investigates which actors are mostly involved in today’s scenario in actions to promote changes in the competition regulations and what are the arguments used by these interest groups to sustain the claim that a change is needed. The results suggest that many different interest groups are always engaged in policy change in the European Union’s antitrust law, but the member states are advocating for a substantial transformation in the field due to external threats being presented that generate pressures for an adequate response in the EU level.
1. Introduction
The increasing scenario in terms of globalization in every sector of human force and work drives the creation of different elements in every field of human aspects. The concept of globalization and its inner elements which have increased the integration at the international level are bringing links between sectors of the economy and areas of work more connected. This level of increased international aspects inside of the human life creates the inevitable results as the increased amount of complexity in every sector of the economic life and in the new steps of mankind to take as the future planning. One of the examples of this complexity in economic sectors is the changing dynamics of the antitrust policies. The word antitrust is one of the most well-known words of the 21st Century because of its changing dynamics, people that trying to understand the word to create an optimal approach that can be useful for every people and every economic sector from the unification of the approach of the court decisions in the antitrust law and cases of antitrust to the future planning of the governmental steps that can be significant for the companies and their plans with a reciprocal behaviour with the governmental decisions. Therefore, as it can be seen, even the word ‘antitrust’ is majorly heard, especially in the field of economy, the real scene is telling that the word contains huge importance in ever since sector that people work, from the legal field such as the court decisions to political attitude of the administrators take with respect to coming up with decisions that may lead the attitude of other sectors.
It can be stated as the sectors in the working life, from the administrative side as the political career to the basic labour force, every decision under the concept of Antitrust is linked with each other. Concerning the fact that the Antitrust laws which get its source of creation from the need of regulating every risky behaviour of companies, from small to major as the scale of the company, they are also relatively new in terms of their creation and the fact that the concept and the word of ‘Antitrust’ contain several question marks in people’s minds which make the word to be hardly understandable. Therefore, we can observe the rapid and quick changes related to the Antitrust Laws and regulations both in the local and international point of view, that it is possible to state the European Union’s (EU) attitude towards the concept of Antitrust and the creation of several regulations, especially in order to maintain a balanced view to regulate the antitrust policies in every sector of the economy and lead the origination of a unified scene and attitude in those sectors of life and also the works of the governments to create their understandings to regulate the Antitrust policies of their national level of sectoral empowerment and their also own empowerment as the dominance of the administrative field.
The aim of the figures as the international unions as the European Union to governments as a local approach is to have more voice in terms of the coming up regulations in the field and concept of the Antitrust and therefore the Antitrust law and regulations. This may lead to more figures from the associations to legal force to have the same aim and attitude with a different area of the working field. The common and general aim is to be a part of the regulations of the Antitrust laws and regulations by implementing their own sectoral understandings and approaches to get more advantage from the changeable structure of the Antitrust regulations and therefore, with the right- direct correlation, their results. The actors in that sense who try to implement their own set of goals and approaches in the creation of the regulations and behaviour of the Antitrust Laws and regulations are referred to as the interest groups.
The interest groups contain a tremendous spectrum containing approximately every sector of the economy or with a general saying, every sector that humankind works into. Judges in the legal field in the economy can be referred to as one of the examples of the interest groups, so the administrators or administrative committees of the companies. Therefore, even it is driving a scenario for the Antitrust concept and therefore its regulations as being hard to be fully understood, the actions of every interest group that majorly on implementing their own set of ideas and sectoral behaviours in the structure of Antitrust law and regulations, are stating and taking the Antitrust concept more complex because every economical sector, or with a generalization that can be referred as the sectors of the work contain their unique features and therefore, it is a difficult goal to create a unified structure for the regulations in the Antitrust policies and also make every economic sector satisfied with the regulations as a general overview.
2. Relational IGs and antitrust rules dynamics
Policymaking is a time interval, which has an accessible structure for aspects and effects that are coming from outside. One of the most effective subjects that put an effect on the shape of the policy-making process is the general naming: interest groups. The term interest groups contain several types inside, which makes the definition for interest groups more complex. In a direct/positive correlation, the policy-making process may take place in several areas, from economy and politics, specifically on the state of the power. To understand how interest groups act and aim, it is beneficial to understand the basis of the term itself. The term ‘interest groups’ consists of gatherings of individuals or organizations that form an association among those key people. The association that people form as interest groups has a main aim which is affecting the government actions, specifically on policy-making periods in different areas, from economy to international trade. The effect of them on the policy-making power of the government acts in favour of the interest groups’ benefits about their specified areas as their target areas. Interest groups contain a variation in their structure. Related to this fact, it is possible to state that there is more than one interest group in affecting government policymaking, such as economic groups, professional groups, and public groups. The list continues to the division of labour and sectors inside the country and/or in a global scope.
The unions, in terms of the working fields, both having their work nationally and internationally. The concept of the unions contains a big and detailed historical background, with respect to the fact that one of the main reasons to form a union or be a part of a union relies on the desire to be with people that are focusing and working on the same working field, inside the economy. This main reason is beneficial to speak up and have support inside the working field. In that case, there are countless unions in different economical areas. One of the examples of unions is the labour unions, inside the economic system. The labour unions are the gatherings to speak up, get to know the network of the working field and support further developments or changes in the respective area of work. It is important to mention that labour unions are one of the leading interest groups in terms of the changes in the Antitrust policies both nationally and internationally. Using the power of the labour union by the workers, it is possible to make an influence of the changes of the payment for the labour. The collective changes of the payment with respect to the usage of the labour union contain an effect on the power to compete with other actors in the relevant industry, as an outcome. The main force inside the labour unions to gain power or be an actor on future changes is coming from human dynamism, as labour unions contain great importance in representation of a specific group of people in a working area and bringing the sense of a union within people which belong to a specific working group. The concept of unions is making the working groups gather up under one name to state the needs and ideas louder, with official support. The aim to make an influence on governments’ policies and revisions of them, contains a systematic behaviour of the interest groups to follow up, in stating their output as a beneficial result. This common behaviour is leading the creation of regulations, specifically on interest groups. The regulations on interest groups are stating the behavioural structure of the groups should make an action according to their specific sector. With respect to the behaviour of IGs on policies, to maintain their actions to avoid the possible outcomes that restrain the trade, regulations are on the actions of IGs to regulate how they have an action, and therefore, their power on putting an influence on policymaking. The regulations on interest groups give a more transparent structure for people to observe their moves clearly by, for example, requiring them to register with government authorities and declaring their funds and objects of expenditure. Organically it creates a controlling mechanism though, basically, the public disclosure and the monitoring of IGs activities.
European Union’s member states are within the spectrum of the so-called ‘pluralist’ and ‘corporatist’ interest groups systems. These models define the process through which IGs act and somehow exert influence because they are related to the very structure and organization (regime) of groups in each political system. In the EU, in general, it is possible to affirm that these processes are transparent because of the methods used and the publicity that characterizes them. This article does not intend to discuss the differences between these two types, so it is enough, here, to explain that the first one understands that the policymaking process occurs in a competitive marketplace, largely used in the United States. While the second perceives a dynamic of commitment between the main societal actors (government, labour and business) that voluntarily agree about needed actions in order to keep the public interests protected and promoted.
To understand the impacts of the interest groups, it is essential to be aware of the discussions which are related to the implementation between antitrust laws and the economical approach on the concept of antitrust. In that matter, with respect to the general approach on antitrust, and therefore the antitrust laws in accordance with the development of this concept is that the antitrust concept and the laws are working to reach economic efficiency. Economic efficiency relies on the idea of the level of interaction, between the companies and the money. Therefore, the main aim, as the beginning of the understanding of the creation of antitrust, relies on economic efficiency, which suggests that it is significant to allow the amount of transaction with respect to the fact that sectoral division does not contain any limitations as the monopoly. However, according to Judge Robert Bork (1979) and Peter Arch (1970), there is a concept called ‘the Antitrust Paradox’, also named as ‘The Antitrust Dilemma’. This dilemma states the fact that even though there is an inevitable relationship between the concept of antitrust and legislations, the antitrust law does not focus on the economic efficiency idea which is stated as the main idea of the antitrust regulations in the field of economy. The dilemma (or the paradox) states that away from the understanding of focusing on maintaining and developing economic efficiency, Antitrust regulations and laws majorly focus on the actions of the interest groups, such as corporations, unions, and NGOs. Therefore, even the antitrust policies are related to the economic goals, the goals to create laws in order to regulate the Antitrust policies do not majorly get the source to create from the economic approach. Government, corporations, unions can be counted as the interest groups, which contain a major influence on the development of the Antitrust laws to maintain and regulate the economic life with the scope of competition. It is, with respect to the difference of the focus of the economic approach and law, normal to observe a velitation. This velitation brings a ‘dilemma’ with the right correlation.
The importance of understanding the actors in the antitrust regulations and the approaches is relying on the fact that the actors contain interest within themselves. This interest of the actors in the field of antitrust can be specifically stated as the ‘special interest’. Special interest is the interest of the groups that may lead them to act according to. In that case, it is possible to count the ‘special interest’ as ‘interest’. Special interest is not, therefore, a common interest, which can differ from actor to actor in the field of antitrust. Every actor, who in the action to contribute, maintain and change the antitrust policies contain their own specific interest to engrain in the antitrust law. In that sense, it is not possible to come up with a common scale to observe every interest at the same time. The structure of the actors, or with another saying, ‘interest groups’, differ from each other and so that their interest with the positive correlation. Companies, governments and unions are the most commonly known actors as interest groups in order to shape the antitrust regulations. The main reason for those three actors to be mostly known relies on the fact that the antitrust regulations are majorly seen in the economic field, especially on trade and other transactions. However, even that companies, governments and unions are known as the most, it is not possible to mention that these three actors are the only interest groups in the antitrust regulations. The NGOs and even the judges can also be counted as the actors in terms of maintaining, changing and continuing the antitrust policies as the interest groups. The judges, as being specifically saying, are the groups that focus on reaching justice as a general scope. In that case, judges mainly focus on how to implement the laws to the scenarios to reach the general scope of justice. The importance of the effect of the judges as the interest groups in terms of shaping the antitrust regulations is solid in thinking as judges are the main organs of the legal decision-making process, and therefore the implementation of the law and the codes to the scenarios. This, therefore, creates a legal common attitude towards the conflicts which are related to the antitrust policies, with respect to the fact that the effects of the globalization that bringing participants to focus on a common idea and as can be counted as the result of globalization, the global economy theories and the increase of the multicultural corporations and companies.
The complexity of the idea of creating a common behaviour in terms of the antitrust policies as a general and whole spectrum is having a difficult structure, and even for some research, it is an idea or a goal that will not be achieved as fully expected. The major reason which shows how difficult to achieve a common structure or behaviour in terms of the creation of antitrust policies is visual in the legal field. The qualifications of the legal conflicts in the antitrust basis, with respect to different interest groups which contain different special interests, the judges who are counted as a special interest group, are the groups that make synthesis from thesis and antithesis. The creation of the synthesis for the legal cases on antitrust policies and conflicts on them, cannot be a fully easy process to achieve, with respect to the fact that it can be counted as the meeting point of three or more interest groups at the same time. This meeting can also be a visualization of the general scope of antitrust policies and the effects of the interest groups as a general observation. Different interest groups bring different behaviours, attitudes, theories, and dynamism in the antitrust concept and therefore the policies. This spectrum of difference may also be one of the reasons that the antitrust law and regulations are having a changeable structure.
As it stated how interest groups aim to make an influence on policymaking, one of the major impacts is on the government’s actions related to antitrust policies. Antitrust means the collection of laws that act on prohibiting the behaviours as business practices that lead to several effects majorly on trade, from the creation of a monopoly within the sector to corporate mergers. The antitrust institute works for the public good in the sense that its absence would lead to harmful costs to society's well-being as a collective but also the consumer autonomy. The laws on the broad term of antitrust, have a direct effect on the public for trade to be seen as transparent and understandable related to business-related actions or with a broader term, transactions. With respect to the dynamic structure of the developments within laws for antitrust (Antitrust Laws), several points are prevented. The monopolistic structure of the economy as sectors, the cartel structure of the companies in their own working area are examples of the Antitrust Laws behaviour to eliminate. The main general idea of the antitrust laws is to fix the competitive structure in the economy and pricing with its regulations. In a general saying, interest groups must consider the laws on antitrust to create, change or maintain their behaviour in the economy. In addition to this fact, it is possible to mention that the effects are vice versa between the Antitrust regulations and the policies of the interest groups. Both sides of the economical behaviour affect each other, and this effect exchange is also on the future policymaking strategies related to the antitrust policies. The changes because of the effects between the interest groups and the antitrust policies, lead the structure of the antitrust policies and antitrust laws dynamic in terms of the change.
To build on this topic, it is relevant to mention the political settlements framework, which understands the distribution of organizational power within society as a very strong determinant of the amount of economic and political power possessed by an institution/organization or exerted by a policy. This is directly linked to how resources are allocated between actors in each organizational context and how this allocation creates an environment of intense power owned by a specific organization. In this environment, the organization in vogue will eventually have to deal with external dynamics and actors, by supporting, resisting or distorting other organizations or policies, depending on its interests. Attention must be paid to this relative power exerted by one organization, how/if it changes over time and in different contexts. How one organization engages with its environment and the other actors/policies there will define its relative power over that context.
One organization’s ability to reflect its interests over other organizations in the same environment will vary according to how capable it is to exercise its agency, which will depend on how flexible the structure of the political settlement is in relation to the specific organization. In more advanced political regimes, formal rules are usually able to adapt (the government exerting its influence), so the distribution in this given context will be forged by the government’s willingness. Stronger organizations have more resources to allocate to influence or to cause monetary costs in others, and consequently making the others subject to their preferences.
Concentration makes organizations stronger and imperfect competition is traditionally a cause for government intervention Pigou (1912) and Samuelson (1947). As already mentioned, IGs can fight against or in favour of this intervention, and this paper will analyse this dynamic and what are the most relevant influences found in the domain of EU’s antitrust law. But first, it is important to ponder that public policy should not always try to fix market failures except if it considers broadly the potential political consequences that fixing a market failure could bring, even if it makes sense economically. There are some specific conditions under which politics and economics are conflicting logics/forces, so the simple correction of a market failure does not necessarily, by itself, correct the distribution of resources (political equilibrium) and can harm this equilibrium, making clear that a cost-benefit analysis of the situation is not enough. To avoid unintended political consequences, it is important to holistically analyse the political and economic mechanisms that might generate non-desired effects.
This work deeply focuses on, not only, but mainly, answering the following question: how successful are the IGs attempts to influence antitrust rules in the European Union? This involves an analysis of the factors that most determine their potential success but also a comprehension about if the all-powerful interest groups always get what they want.
It is undeniable that in today's world some issues require an international approach. The international approach, which differs from the topic, in general, is the approach that to be observed, behave and think with the common understanding. The international approach takes place, mostly, when the topic requires to be talked about in a global manner. The processes being carried out by civil society, businesses, governments and other actors tend to increase the interdependency between national and international interests because the connections and new flows of people, goods and capital are being established. Howard Tolley argues that because of the political parties and elections void at the international arena, interest groups are even more relevant in global affairs than at the domestic level. Not coincidentally, the neo-functionalism and the liberal intergovernmentalism theories of European integration imply huge importance to interest groups actions (Grossman 2004). So, it is also required to comprehend how this influence process of IGs takes place on the broader level of international policy and if there are relevant differences compared to the domestic playing field.
There is also an extremely valid discussion about the transboundary effects (extraterritoriality) of unfair competition and the consequent necessity of establishing international antitrust rules, but how would be the most effective and feasible way of doing it? In this field, multilateral cooperation has great potential but few achievements until now, the Doha Round at the World Trade Organization being a good illustration of this, because it was not effective for antitrust purposes. Then, non-multilateral, more horizontal, means to solve this issue can be considered (e.g. bilaterally, plurilateral agreements and networks), but not every antitrust issue is compatible with this kind of solution, remaining the need for top-down action in these cases (subsidiarity principle). It should be stated with the fact that the European Union contains several principles in terms of regulating the attitude of the EU as a whole with the general overview of the EU and the Member States of it. In that sense, one of the major and tremendously important principles in terms of the foundation and the maintaining of the unified EU attitude is the principle of subsidiarity. The principle is also containing benefits not only on having a common attitude within the EU as its Member States but also protecting the attitudes, especially in terms of competence and therefore the concept of proportionality within the EU in general with its Member States. The principle of subsidiarity and proportionality is stated within the regulations of the EU, as in Article 5/3 in the Treaty on European Union (TEU) and the Protocol as No.2. The importance of the principle of subsidiarity is having a major background dated back to the time of the Maastricht Treaty in terms of the foundation and creation of the EU in general. Therefore, the maintenance of the competence and the need to coming up with the common sense of regulations to create unified behaviour inside the EU as its Member States were a need from the very beginning of the origination and foundation of the Union from the time dated back to the Maastricht Treaty to today and the future planning. It is possible to mention that the principle of subsidiarity and proportionality in the EU is not having the same structure and understanding inside the union from the Maastricht Treaty to today’s understandings of the EU. Concerning the time and especially the major impact of the increased globalization in every field from the social life to the economic working areas from the legal understandings to companies and their expansions as can be given as examples for the working fields, may cause the understandings change and transform, or sometimes vanish but having a re- creation. In that case, the principle of subsidiarity and proportionality is not in the same structure as it was at the time of first spoken during the creation of the Maastricht Treaty. The globalization, with respect to the changing structure of the Antitrust regulations and policies, is putting another dimension of the principle of subsidiarity and proportionality of the EU to maintain and monitor the competence more within the Member States and also to create a common attitude towards it since the dimensions of the working areas in the economy are majorly getting more complex and therefore, with the positive- direct correlation the competition within the companies and also in the interest groups is getting a more complex structure because the complexity of the Antitrust Law and Regulations are having major importance with the global interactions in every single economic field of the human work life, as sectors.
3. The balance of power and its structures in the European Union
Andreas Dür (2009) argues that the lack of concrete conclusions about IGs’ empirical influence in the EU would happen because of the difficulties to define what means ‘influence’, ‘power’ and how to measure these terms considering the varying tactics used by interest groups to achieve its policy goals. Additionally, the number of studies conducted about the EU case is low and many times they are not able to converge in terms of conclusions and common ground for moving the research forward. The measurement of the influence with respect to the power of the interest groups in terms of the changes in the policymaking process should be done with the combination of different perspectives, such as the international and national/local perspective. The actors or main parameters are the points that we should focus on in terms of the measurement of the power and influence of interest groups on policy-making processes.
From the perspective of the European Union and the law, it is necessary to understand the general structure of the European Union, as a beginning. From being one of the successful international unions to the pillar system as the development of the inner structure and laws, the European Union contains major importance, because of the several aspects which it contains and the relations among the European countries. As being the link between its member states, the EU contains a web of laws, as in the ‘free movement’. Several free movements within the EU bring several actions to its member states and so to the citizens of those EU member states, with respect to being under the umbrella of being an ‘EU Citizen’. Free movement is an umbrella concept under the general structure of the EU. The general concept contains sub-concepts as free movement of people, free movement of services and the most related for the development of the antitrust regulations, free movement of capital. Those free movements are one of the most important facts in terms of understanding the general structure of the EU, in the beginning. The free movement brings a common area in terms of the free movement of workers, the capital and the goods. This concept increases the number of transactions within the countries that are members of the EU. With respect to this increased transaction, free movement creates a scene for firms to be more visual in other EU countries. In this visuality of the firms, the general result is to see the market expanded through the other member countries. The concept of the ‘free movement’ is settled under the regulations, specifically to Article 45 of the Treaty of the Functioning of the EU and is developed with the EU secondary legislation. As it is stated before, the free movement contains a structure as an umbrella concept which increases several transactions, specifically the transaction of services and people. As mentioned, the Antitrust law and the regulations, such as the handbook of ‘Rules Applicable to Antitrust Enforcement’ of the EU under competition law, get and effect from several concepts. The transactions and the results of those transactions have a direct effect on the EU Antitrust regulations and laws. It creates the expansion of the firms in other countries, and unions to have more member capacity since there is a concept of ‘free movement of people’ which allows people to have a job opportunity and work in another country as long as it is a member of the European Union. These results show the effect on the firms to have a role in other EU member countries’ economical structure since they will have an expanded scope in the specific working area. That also brings the fact that, as the scope of the firm drives a power for that firm to go for a monopoly, it will affect not only a country but more countries inside the EU structure. Since the regulations under the European Union allows firms to be visible in more than one state, as long as the other states are counted as the member states, and the free movement of capital and people allow the firms to maintain and expand their actions. These facts can make the international and national perspective to understand the creating and development of the Antitrust law and regulations within the EU, as it is needed to be mentioned that the EU was one of the first sources that came up with regulations and laws to put the concept of Antitrust with a structure. Especially concerning the fact that the concept of digitalization increases every time, the digitization process also shows its effects on the working atmosphere that firms can transform their work into digital, in their working area. The digitalization of the work of the firms also increases the amount of reach to the work from the other countries, and therefore, it makes the visibility of the firm and the works of the firm more solid, and this brings the result of expanding the working capacity, even more than the EU member states. The expansions with respect to the digitalized era bring a multidimensional state within firms in terms of their working capacity.
Every industry has evolved but the tech sector, which includes specifically four big companies that can be stated as Google, Apple, Facebook and Amazon (GAFA), (GAFA) has reached unprecedented dimensions and influence because of the digital economy movement that reorganizes society in the way individuals transact, interact and act, so it is indispensable to bring this subject to the discussion given its relevance. The particularity of this sector shows up, for example, when analysing the emergent needs for recent regulations over the use of data and against unfair competition.
Therefore, it is important to keep in mind that there are distinguishing aspects between the many companies or industries that assume the role of interest groups, which are determined, among other things, by the sector. For example, when talking about big tech, it is necessary to consider specificities such as how companies are regulated in a certain location on the ‘intermediary liability’, i.e., the responsibility the firms have in relation to the content put up by others in their platform. If protected against it, companies in this industry have a considerable advantage and the business model is substantially reinvented thanks to the range of actions provided by this protection. Users are responsible for creating content, not the firm, and the latter will not be sued because of its users’ activities inside the platform (with just a few exceptions). As part of this business model enabled by this legal protection, the company is able, consequently, to explore a whole range of possibilities such as analysing its users, understanding behaviour and exploring it economically. In the United States, this protection was given by Section 230 of the 1996 Communications Decency Act. It is possible to state that Facebook, Google, YouTube and Amazon, for example, could grow similarly to monopolies.
Differences in the way competition are perceived vary depending on the moment and context in question. These changes are reflected, for example, in the way, in 2016, Margrethe Vestager, Commissioner of Competition, talked about ‘Competition in a big data world’ when she stated that ‘... I hope it makes clear that we don't need a whole new competition rulebook for the big data world’, and in the way she expressed concerns, in 2019, in another speech about ‘Defining markets in a new age’, when she stated that ‘the challenges we're facing, at the start of this new decade, mean that we need to look again at the tools we use to enforce the competition rules’ and concluded by saying that it is needed to ‘keep the rulebook up to date’.
These fast changes in the discourse reflect changes in the way society is organized and this context marked by intense transformations brings to the discussion the issue of, for example, managing the trade-off between the positive and the negative sides of concentration, and how to define the relevant market to analyse the concentration. In December 2019, Commissioner Margrethe Vestager expressed the necessity of adapting the 2004 Horizontal Merger Guidelines to the new realities presented in today’s world and the definition of ‘relevant market’.
An antitrust intervention is an intervention to change the political equilibrium in a certain direction. Assessing mergers and acquisitions between companies that exceed a determined revenue is a way of preventing detrimental concentrations in the relevant competitive environment. A cost-benefit analysis is also a way of understanding the effects of such a merger, that can guide the authority to take a decision making sure the consumer and producer surpluses are increased, but as already mentioned in this work, this purely economic analysis is not enough to measure and take into consideration the political consequences.
Huveneers pointed out that ‘should competition not only be effective for the benefit of the consumer, in the sense of distributive efficiency or should it also promote an efficient productive structure (productive efficiency)? This introduces a problem of trade-offs. Thus, increasing the number of competitors on a market allows a lower price level to be achieved which optimises distributive efficiency, but can degrade productive efficiency because this increase in the number of competitors may prevent economies of scale from being fully exploited and forces producers to spread their fixed costs over a more limited production volume, which may even cause certain firms to incur losses.’
Mergers can happen with different consequences. One case would be if the merger increases competition by creating challenges for the dominant player. Another case would be if the merger harms the competitive landscape by giving more power to the already dominant firm. The EU Commission responsible for competition works on analysing markets and seeking remedy for this kind of competition issues. There is a current recommendation for this institution to guide itself by the Swiss Merger Regulation, Article 10(2)b117 that states: ‘The Competition Commission may prohibit the concentration or authorise it subject to conditions and obligations where it appears from the examination that the concentration [...] (b) does not lead to an improvement in the conditions of competition on another market which outweighs the disadvantages of the dominant position’.
There has also been some recognition of efficiency defence in European merger control since the entry into force of the second merger control regulation of 2004 (Regulation 139/2004). Similarly, it may be noted that industrial policy concerns may occasionally arise, for example in paragraph 4 of the Regulation: ‘Such restructuring [of undertakings] should be assessed positively provided that it meets the requirements of dynamic competition and is likely to increase the competitiveness of European industry, improve the conditions for growth and raise the standard of living in the Community’.
For example, the recent Alstom-Siemens merger case, if executed, would have harmed the competitive landscape in the European rail industry by reducing the number of overall competing companies. China and the United States are world dominants in the high-tech sector, possessing the world’s 20 most prominent companies. Considering the recent developments in AI (artificial intelligence), big data, and genetics, the healthcare sector is going to be dominated soon by these two Nations. The question here is ‘what are the actions Europe should take to remain competitive in the markets where it is still relevant and to become competitive in the markets where it still is not, like health-care?’. Of course, that one possible answer here is to reform procedures and substantively the regulations in this field, by the revision of Article 173 TFEU or through the integration of other objectives into competition law by balancing the consumer welfare with overall welfare, for example.
After the Alstom-Siemens merger case, France and Germany, because supporters of this merger, announced the willingness to revise EU rules regarding this competitive matter, even with the Commission’s argument in this case that the merger would result in increased prices for consumers. This joint initiative from the French and German governments demonstrates how tensions take place between the EU mandate and the Member States role in this type of situation, where the latter would very much like to be allowed to question the first’s antitrust decision.
In 2018, the EU’s competition authority blocked 0 mergers, approved 370 unconditionally, and 23 conditioned, usually after one month of investigation. Two mergers were blocked in 2017 and since the adoption of the current regulation, less than 30 mergers were blocked by the authority. Considering these numbers, it is possible to state that the Commission is not unreasonably intrusive and is allowing most mergers without requirements of additional actions for companies. As it has been done currently, competition policy has been applied by politically independent entities, and in (a few) cases, when the circumstances clearly offer potential social harm, there is intervention and control.
The discussion here is if the enforcement should be in the hands of elected national officials or in the hands of EU’s competition authorities (Commissioner and the Directorate-General for Competition). It is recognized that Treaty’s provisions on competition enjoy almost ‘constitutional status’, but politicians are usually influenced or at least subject to the influence of the firms and industry organizations (relevant interest groups in this case), and this fact can tend to lead to harming the competition (and ultimately the consumer) instead of protecting it. The Director- General for Competition’s staff is composed of 30 PhD economists specialized in competition matters, which makes their decision more evidence-based than politicised.
But there is a big scepticism regarding the sufficiency of this solution, and the claim to find solutions in other spheres, such as international trade (World Trade Organization dispute settlement procedure) and State aid policy. Regarding focusing on the WTO, the current problem is its stagnation because of the United States’, more specifically Trump Administration’s actions against the appellate body, but, of course, Joe Biden’s election being a reason to be optimistic in this sense. There are no common competition rules adopted under the WTO umbrella, given that all attempts unsucceeded, and there is a recognized lack of political will in Europe also demonstrated by the small number of EU officials dealing with these issues (around 150) compared to the hundreds of US’.
Another complement for remedying this issue would be, for example, data law, because of the power of digital companies, or using the already mentioned international trade law for solutions to promote industrial strategies, and also the development of the European innovation policy. However, it is difficult to believe that these, by themselves, could be effective solutions for this broad problem because one would be assuming that the current competition policy is enough and does not require a deeper reform, for example, in relation to the already mentioned Treaty.
The current European Commission procedure for mergers (control of concentrations) is commonly criticised by companies for taking too long, so naturally, there is a demand to change it and making it quicker. For example, transitioning from a required pre-notification system to a voluntary one, which would inevitably require a unanimous willingness from member states. Especially for the tech sector companies that are inherently dynamic and being often contested in regard to ‘abuse of dominant position’, it is important to accelerate the responses. Finally, another possible reform would be related to the Article 8 of Regulation 1/2003 and the conditions for the utilization of ‘interim measures’, which could accelerate the process if used more often, but still properly.
Other actions that could work in the same direction but not necessarily linked to competition law would be initiatives like the Joint European Disruptive Initiative (JEDI) or the European Innovation Council (EIC). The first is a Franco-German initiative for the creation of a Disruptive Innovation Agency, which would focus on funding civilian projects, in a start-up model, aiming at projects that are limited in time and unprofitable in the short term. The idea is to promote revolutionary innovations so Europe would be able to compete worldwide in the tech sector. The second is a European Commission initiative and the aim is to make important reforms to the Horizon Europe programme, by helping start-ups and SMEs (small and medium enterprises) in funding new and innovative projects. Both of them are looking at the promotion of innovation at the European level mainly in strategic sectors/industries, which is also a way of tackling wicked societal problems and move the European agenda in the direction that supports the achievement of European policy goals.
Should a rebalancing be carried out between competition policy and industrial policy so that the objectives of the latter can be deployed? Operational solutions that will make the European competitive framework compatible with industrial policy objectives. In a conference organised by the OECD in December 2019, ‘Competition Under Fire’, Jean Tirole, Nobel Economics Prize winner, discussed the relationship between industrial policy and competition policy and raised the issue of ‘participatory’ antitrust.
It is relevant to understand the correlation between competition and industrial policy. For this work, specifically, these relational dynamics play an important role in the analysis, because the more competitive a market is, the more efficient the industry policy will be on that specific market. Aghion et al. (2015) using data from China proved the statement above and found that productivity, growth and product innovation improves. At the same time, in sectors with a low degree of competition, the effects are not good.
When intervening on the market, the government can take ex-ante or ex post action, usually the first one for concentration issues (merger control) and the second for abusive dominance. But many other factors end up determining how influential, for example, the big tech companies are, and the antitrust regulations play a role in this, but other factors must be taken into consideration for a complete analysis. Specifically, for big tech companies, the current antitrust comprehension and concept is applied and has effects on keeping them influential when there is an abuse of dominance.
In other words, the company is already well established in the market and has achieved (naturally, in other words, ‘business acumen’ or ‘historic accident’) extraordinary dimensions, so not necessarily a merger happened, and abuses its dominance through specific practices. The unprecedented dimensions achieved by these companies create a relatively sui generis circumstance with the lack of competition (without merging) and lots of influence. Hence, there is a common understanding for the reinvention of the concepts of monopoly and concentration (including by courts), because of the unprecedented dynamic of this market format. It is consequently necessary to review the ways antitrust concentration mechanisms are used because they were usually used ex- ante, but now the reality demands change, when this new form of monopoly harms consumers, workers and even the democratic process. It creates the so-called ‘non-economic’ harms such as hate speech and fake news, having a direct impact on democratic levels. Although very relevant, these consequences are not directly linked to competition matters, but undeniably antitrust/antimonopoly rules would affect these negative externalities depending on the intensity of the intervention. In any case, it is an extremely relevant discussion to have, if these non- economic consequences should represent a motivation for competitive law action/intervention or if these issues belong to different fields of law and regulation in general. Historically, such important negative consequences, for example, to the democratic process, when ignored, generated huge dangers and true historical villains.
4. Permeating trends and futures building
Finally, what is also being discussed when the interest groups topic is brought to the table is the concept of ‘change’ and its bearer/holder`s role. After all, what is considered ‘change’ depends on the limitations or restraints allocated by the proponent entity when creating the meaning to the influence wished to be translated into policy and implemented. The relevance of this piece of work comes from this fact in great part. The ‘agent of change’ exerts control over the definition of ‘change’ and, therefore, designs the boundaries of the plausible futures that society will be able to experience. The forces that countervail this lobbying process surely also play an important role in defining the extent and meaning of ‘change’. That's why it is so important to understand the entire process because when all the elements and the ways they play together are comprehended it is possible to conclude which ways to better regulate and sophisticate this democratically phenomena in the modern world.
When a trend (understood as detrimental) is pointed out in a determined jurisdiction, it creates the possibility to reorganize the set of rules on that matter and act accordingly to generate the desired future. For example, one trend identified by Martin Gilens and Benjamin I. Page (2014) using a data set of the key variables for 1.779 policy issues indicates that ‘economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence’.
The future of antitrust law in the EU depends less on political matters than on technical ones. As seen earlier in this work, the entity responsible and competent for the decision-making process is part of the European Commission and highly considers empirical evidence of the impacts a specific practice is or will generate to consumers. Unlike in the US, where this matter depends more on political alliances in the congress and how policy changes because of that. So, given this assumption, it is possible to consider EU’s trajectory as a perception issue of what constitutes the role of competition law in this political system and, in contrast, what goals other regulatory fields should play to promote enough amount of innovation, competition and, of course, to keep the democratic process healthy. After the crisis originated by the COVID-19 pandemic, the European Union will have other priorities established, with all the negative consequences such as unemployment, economic recession, budget constraints and solvency. These elements play a very important role, one that is inevitable to talk about, because, most likely, the share of this crisis’ burden will fall over specific sectors and players and considering the already many times referred dimension of GAFA, one of the Commission’s options will be to attribute a substantial part of the burden over these players, what would reduce considerably the influence and resources of these companies to keep the status quo. The same could be argued about large oil, insurance, and banks private players, it could be expected a bigger burden over these players because of the external context that largely changed as a consequence of the pandemic, and the consumers are not capable of holding this alone.
The recent joint proposal by France, Germany and Poland does not completely cover the existing issues being faced in terms of competition policy, but it is possible to imply that the three member states go far enough, approaching determining matters such as merger control, member states influences and big tech. After the Siemens/Alstom case, there was a need regarding the European Commission’s power to analyse merger control, and the need was, according to these proposer nations, to increase the flexibility level in the Commission’s process to decide. Flexibility in the sense that allowing certain market movements to happen may bring global competitive advantages to the EU. By considering the global arena, EU (and member states’) competition authorities can enable greater competitive capacity for Europe, allowing it to stand next to other global leaders. Geopolitical reasoning behind the argumentation to benefit European companies and creating shared and broad benefits for Europe. The issue here is basically that this idea is usually mixed with the concept of selecting ‘national champions’ (or Europeans in this case), because of the necessary step of promoting individual firms’ interests in specific manners, leaving behind or aside the decision to benefit an entire market, in general. One could argue that one thing is not necessarily related to the other, which in other words would mean that envisioning this geopolitical reasoning to change European merger rules is not linked to the process of benefiting specific European winners. But the difference between the joint proposal and the promotion of champions is hard to identify and explore.
While privileging specific companies is ‘unhealthy’ from the competitive and social well-being perspectives, the necessity to compete on a global level is hard to ignore, mostly because of the tactics used by some other nations worldwide to drive companies not purely by a commercial rationale. These important geopolitical trends, sooner or later, must be internalized by Europe, in the reasoning of the joint proposal, and seeking a merger review in terms of EU regulation is one of the required steps to be taken. It is undeniable that there are impacts in the European market generated by third-country governments that exert directive powers over their companies to pursue their interests (internal policies and strategies), which escapes from a pure market rationale. This power exerted by third countries is the fruit of benefits (usually subsidies or soft loans), creating the so-called ‘state-controlled entities’. The argument here is that the European regulation should consider the impacts in its territory from these phenomena and adapt, for example, its merger flexibility.
Even more, in the long run, the kind of competition described above could have the capacity to create such distortive conditions in the market that European consumers would be negatively impacted as a consequence of the preference given to the third countries’-controlled companies in detriment of the European organizations that were fighting in the market with the commercial rationale. In other words, inefficiency has benefited over efficiency.
The merger of China Shipbuilding Industry Corporation (CSIC) and China State Shipbuilding Corporation (CSSC) is one example that must be observed in the next months/years given the relevance for the global shipping market but also the European. How the competition agencies will react to this movement, also in relation to potential mergers happening between shipping European firms, will be defining the upcoming understanding of the regulations in this field and the possibility of developing regulations that are more coherent with these global trends.
Bruno Le Maire, former French minister of economy and finance, made an opening speech in 2019 which is an example that contextualizes these phenomena. He affirmed that Europe, compared to the United States and China, is investing much less in innovation, and supported a bigger budget to this area for the Union to be able to compete in the ‘technological race’ against the mentioned nations. He even conditioned Europe’s political sovereignty to its technological sovereignty, given the importance this area plays for European self-determining capacities. In this sense, thinking about and building a modern industrial policy for Europe is an essential key to pursue this goal, which, in his words, is ‘inseparable from competition policy and trade policy’.
It is inevitable to think about competition policy together with the other two mentioned fields because they are usually connected to other public policy concerns, such as consumer protection, jobs, unfair trade practices, intellectual property protection and data privacy, so they must be coherent and complement each other, and the French, German and Polish joint proposal comes as a force in this direction. For them, competition law must allow Europe to promote its own companies as world leaders, this being part of the ‘new industrial policy’ desired by Bruno Le Maire. It can make sense to deal with these issues in a holistic and unfragmented way.
To understand the trends in these three fields and how they are connected, it is possible to draw a historical view to visualize the determining factors of this recent political and economic scenario. The last decade significantly changed the context in which this kind of regulation is interpreted and applied. The intensity of globalization and the substantial technological advancements have a lot to contribute to this explanation and end up requiring competition law to change as well. For competition authorities, some firm behaviours that generate negative impacts for consumers, such as excessive pricing and exploitation, are long-standing and have been for a long-time concern. But recently, it is being noticed that such attempts by competition authorities take much longer than other potential solutions would. Also, a competition law case represents a remedy for the specific case and creates a precedent, but it does not mean that the whole market will change its behaviour, which would be the consequence of passing/implementing regulations.
The concern regarding the need for a more flexible competition policy as a consequence of the problem that state-owned or subsidized enterprises in other countries represented for the domestic market is also reflected by acquisitions. When a domestic company is acquired by a foreign state- controlled one many impacts can be generated in the local market, some of them potentially being negative and influential on the comparative advantages of the national economy internationally as a consequence of relocation of assets, for example. Because of this, existing legislation on foreign direct investment (FDI) guarantees that critical national security and long-term strategies are controlled and safe, such as electricity, communication and nuclear power.
In March of 2019, following this reasoning, it was adopted by the European Union regulation that guarantees the possibility for the EU institutions and member states to filter new FDIs when these may exert impacts on national security and public issues and raise this kind of concerns. This new filter can be used when a merger was approved from the competitive perspective (by a competition authority), but still may represent concerns on other legislative grounds (industrial or trade policy, for example), which potentially imposes more control over transactions that might be detrimental under the member states perspective, which gain the power to ‘correct’ the assessment made by the competition authority, complementing the article 21 (4) of the EU Merger Regulation. This initiative envisions the same goal of allowing the European competitive environment to flourish by promoting European companies but through imposing more control possibilities instead of through the flexibilization of competitive rules, because it aims to restrict acquisitions made by foreign firms while the other aims to loosen the acquisitions made between domestic firms. The argument here is that through flexibilization of competitive law European firms can reach ‘critical mass’ and compete in the global market while Europe also pays attention to the penetration of foreign companies in the domestic markets.
Product and geographical market definition are also important factors to be considered when analysing merger regulation. It is increasingly difficult to define what is the relevant market to be considered when assessing a merger case, because the merger may generate positive impacts (efficiencies) in many markets but negative in another and depending on the market extent this analysis will define the invalidity of the merger. It is important to consider that the Commission’s 1997 Notice on Market Definition may have to be updated as well given the recent technological advancements and economic structure changes already mentioned in this paper.
All the argumentation demonstrated here is reflected by the mentioned joint proposal, which claims for particular scrutiny in certain cases and a new vision for the European Union regarding the direction of its market and how the dynamic will take place in relation to the European positioning in the global market. The promotion of common European interest is the general goal that the proposal covers. As demonstrated here, there are strong arguments to explain the necessity to balance an active industrial policy at the European and national level with competition policy, considering the geopolitical competitive pressures of global markets and the changing structures that are currently happening in it. Transnational competitive pressures are changing and the European Union institutions and some of the member states are demonstrating that they are understanding this emerging need to realign and adapt while maintaining the rigorous assessment procedures conducted by competitive authorities and other relevant actors. This ‘judgement’ should of course be neutral and not respond to political or business interests while it guarantees gained efficiencies to firms and consumers in the relevant (defined) market, without harm.
The joint proposal also brings a section specifically about big tech. In this subject, the discussion changes because what the proposal focuses on is the necessity to regulate the ‘systemic platforms actors’ instead of the revision of merger rules. The proposal claims for a different treatment for these platforms and sustains the claim by arguing about the ‘critical role’ such platforms play nowadays. How regulators should deal with this issue is a struggle not only for Europe, but it is or should be a concern for all world jurisdictions.
It is important to understand how differentiable the proposal by France, Germany and Poland is, regarding the promotion of European leaders/champions, from detrimental public restraints. Anti- competitive public restraints are exposed in situations in which businesses achieve monopoly status through government power, by reducing the competition and increasing the barriers to entry in a certain market/industry/sector, including for foreign businesses. This form of governmental intervention necessarily harms consumers because of the increased prices or taxes needed to sustain the protection (immunity given by the state) and enables the privileged firm to act anti- competitively in its sector but also can create destructive distortions in other sectors.
The protection given by the government to a firm, for example, incentivizes inefficiency because of the reduced competitiveness and as mentioned already produces international effects, the so- called ‘spillover effects’. This type of action may occur sometimes because of the lack of transnational regulatory coordination in this specific field, leaving the space for a nation to cause harm to another without any monitoring or sanction. This situation is complicated because it is difficult for the affected (harmed) country to respond in a way to neutralize the negative (spillover) effect generated by the country that provides the subsidy, for example. There is no perfect remedy for the situation because there is not a proper international instrument that allows one nation to directly influence the regulation in another’s territory (jurisdiction). It is still not possible to affirm, but it is important to keep in mind that the joint proposal brings some sort of beneficial treatment for European companies, for these companies to be able to balance the level playing field and compete in equal terms with global players that are also backing their domestic firms with incentives.
Because of the already mentioned void in international policy coordination in this field, it is even difficult for many countries to understand the extent to which their markets are being harmed by other nations’. This is exactly what would cause France, Germany and Poland, for example, to propose such a remedy, because given the current circumstance that is what exists and is possible to be done: not the best solution, but a way to minimize the negative effects in EU territory/market. Interestingly, a possible reason for a country to maintain its incentives to certain industries that cause international spill over effects is precisely domestic interest groups that may have influenced the political will for that to happen. It is known that the reduction of antitrust-related public restraints, also called ‘regulatory tariffs’, increases growth and benefits to consumers and represents most of international trade liberalization negotiations.
Public restraints may also be generated by the nation’s domestic regulations, being part of the regime and created, for example, by the legislative or judiciary powers. This of course restricts the extent to which the antitrust agencies are able/allowed to act against anti-competitive behaviour. This phenomenon can be explained by the public choice theory and it happens a lot because of the influence exerted by interest groups over the ways the government chooses to regulate and how these groups can benefit from it, many times having as consequence the so called ‘rent seeking’, which is when the group captures to its own private gain the public regulatory environment/regime.
This sort of interest groups’ actions generates inefficiencies because of its detrimental consequences to competitive levels in a jurisdiction. But how do interest groups have so much power in their hands and are able to cause such substantial distortions? The positioning of interest groups depends on many factors already presented in this paper, and of course, it varies according to each case, because each jurisdiction, political regime, industry sector and moment in history are unique. For the matters discussed in this paper, it is possible that antitrust agencies are less powerful than interest groups or not. And for the antitrust specific matter, it is noticeable that it is usually not very well organized or defended by strong political groups. The diffused benefits generated to consumers, which are also not commonly verified or informed, makes this regulatory area peculiar.
As already mentioned in this article, the joint initiative proposed by France, Germany and Poland justifies its claims a lot in the fact that some countries support their firms and therefore the European companies are harmed. China is surely one of these countries that do not promote competition rules as stringent as in Europe and the article 7 of the new Chinese Anti-Monopoly Law creates immunities from antitrust for state-owned enterprises in ‘strategic’ sectors, which include aviation, banking, electricity, oil, railroads, and telecommunications.
5. Conclusion
The maintaining and creating further on the Antitrust Law and therefore the regulations, the interest groups want to aim to implement their own sectoral approaches and main goals into the construction of the further Antitrust developments as regulations and in the current Antitrust attitudes. The aim of the interest groups, therefore differ from each other since the word ‘interest groups’ contains, approximately figures from all the working areas as from the legal field that judges want to come up with a unified regulation and procedural improvements to administrative that form governments to come up with the ideas on the generating regulations to support their economy and bring a more powerful structure to their stand especially on the international scene of the economy most specifically on empowering the national companies to be more present on the international economy and area because that there is a direct correlation between the speaking up of the companies and gaining more power to bring more change specifically in favour of the company and the company’s origin state. In that case, the European Union, which has a reputation as being one of the most successful international - regional unions to maintain the work and balance for a very long time, came up with several regulations as also being one of the interest groups on the changes in the regulations related to the Antitrust laws. Therefore, it is possible to come up with a visual understanding that interest groups are not also located in a different way in Antitrust laws but also contain a multi-dimensional structure as being an interest group that also containing more interest groups inside, as the European Union that having its member states, with respect to the fact that even the member states are the parts of the EU, they also contain their own national understandings, obviously that majorly focusing on their own interest in the very beginning. Therefore, the EU, as a union that also counted as one of the interest groups that try to be a part of the change in terms of the regulations and laws related to the general concept of the Antitrust, its member states also put another dimension to EU to have sub-interest groups inside which contain the same common aim in the Antitrust regulations and laws. In that sense the EU has its idea on being a part of the change to have a favour in the Antitrust regulations and laws, it should also, as an international-regional union, consider it in the favour of its own member states. This is leading to several consequences in terms of the approach of the EU, related to the fact that it has to focus on the general sake and act according to the ways that in favour of the general understanding as forming a union, but also there are several local sub-interest groups that also form the union; therefore, EU administration also has to focus on the needs of its member states as well. This can be stated as the clash between the international-general approach on the union and the minor understandings and approaches that also need to be integrated inside the international- general approach but still also remain its uniqueness as in favour of the member states specifically. In light of this, it is clear that certain member states, especially the ones mentioned in this paper illustrated by the joint proposal, have been actively working on promoting changes to the antitrust law at the EU level. In this sense, the member states act as interest groups at the regional level to make their voices heard and interests fulfilled according to what is more relevant for them to address in the present moment. Given the already mentioned and explained geopolitical circumstance and technological changes that recently altered the arena of global competition with new sorts of economic structures and business models, some member states felt the need to make sure they will remain relevant players internationally and with that in mind started to express their willingness to provoke changes in the EU regulation regarding competition law, especially antitrust law. These countries argue that because of the external forces surrounding Europe, it is important for the Union to be able to promote its own big players and compete in the international arena facing leading nations, such as the United States and China. It is important to keep in mind the fact that by creating European ‘champion’ businesses member states would be concentrating more power in the hands of a few companies and this will rebalance the power relations inside Europe.
The fact that this action can weaken antitrust and other governmental agencies are relevant to consider. Also, given the nature of antitrust laws already explained in this paper, it is reasonable to consider that the influence of member states in this field is substantial and will most likely generate effects to fulfil their agenda. It was noticed that efforts in the ‘big tech’ area were not very well defined and are still under analysis to understand what kind of regulatory actions should be taken. Initially, it seems that merger control is not considered to be the best option because of its inner characteristics and procedures that would not be sufficient to ‘tame’ these new private forces and, because of that, other regulation areas beyond competition law would have to coherently act to make sure the GAFA will be controlled in the sense of reducing its negative externalities.