In recent years, the EU competition policy has been held in less than high regard by some EU countries; in fact, some have dismissed it as a rigid, naive and even outdated. The discussion gained momentum after the European Commission decided to prohibit the merger of Siemens and Alstom in February 2019, saying it would violate the EU Merger Regulation.  

Countries calling for an update of the competition policy have been demanding a relaxation of competition rules to make the EU better equipped to compete against third countries. In the aftermath of the COVID-19 pandemic, the discussion became more nuanced. Some demand that the EU’s competition and state aid rules should be eased because it is necessary in order to safeguard the EU’s resilience. Pressure has intensified particularly with respect to merger control and the state aid rules for Important Projects of Common European Interest, or IPCEI projects.

On the surface, it seems that a strong competition policy has not had many supporters in the EU’s political circles even though its defenders have strongly advocated it on other fronts. However, in October-November the situation changed. 

On 11 November, Tuula Haatainen as the minister responsible for competition affairs expressed Finland’s opinion in a joint article by six EU Member States, supporting strong competition and state aid policy. The article was published in the Politico online media. At the end of October, Finland and nine other Member States wrote a joint letter to the Commission, proposing that the basic principles of competition policy remain unchanged. The views presented in this letter received strong support from industry confederations in many countries.

Why did competition policy defenders become active right now?

There are growing concerns that the pressure for change, which has been bubbling under the surface, would lead to concrete new policies. With their joint article, the Ministers strive to influence the Commission’s future policies. 

• On 17 November, the Commission will issue a communication on the future of competition policy, in which it is expected to outline ways in which the EU competition and state aid rules can best support the EU’s resilience and the objectives of digitalisation and green transition. 
• The Commission will also announce whether the temporary relaxation of state aid rules introduced in the context of the COVID-19 crisis will continue, and whether the rules will be eased to some extent. The current rules will expire at the end of 2021.
• In addition, the Commission is expected to issue new rules later this year on the conditions under which support may be granted to Important Projects of Common European Interest (IPCEI).

Why is Finland in favour of a strong competition and state aid policy?

Finland has traditionally been a supporter of a relatively strict competition and state aid policy in the EU. Although it makes sense that both competition and state aid rules evolve over time, no changes are required in their fundamental principles.

For instance in competition control, enforcement must be based on decisions made by independent authorities and on fact-based market estimates. Regulation should focus on the impact on competition and consumers; it should not be used to promote other policy objectives, such as resilience across the EU.

If we look at the big picture, relaxing the rules would reduce competition, which is not in Finland’s interests. Effective competition drives innovation, keeps prices in check, and makes us equipped to respond to global changes. Effective and impartial implementation of competition rules is therefore crucial for the functioning of the internal market, for Finnish companies operating in the internal market, and for consumers.

A key feature of the EU state aid rules is the requirement to target Member States’ business aid measures to actions that promote sustainable economic growth and address market failures, such as innovations and the promotion of the green transition. At the same time, the rules must ensure that companies operating in the EU enjoy a level playing field and that the internal market remains as open and competitive as possible. It is always a question of finding a balance between different objectives. 

With regard to IPCEI projects, the rules already allow flexible support for breakthrough innovations essential for the competitiveness of the EU. A significant easing of the rules to include, for example, production-related investments, would significantly increase the risk of distortion of competition and harmful subsidy race in the EU.

A similar search for balance applies to temporary relaxed state aid rules that were due to the COVID-19 situation. Relaxation is justified for as long as the COVID-19 epidemic continues to affect the EU’s economic situation. However, now that the economies and the COVID-19 situation are stabilising across Europe, there are no grounds for continuing to apply the relaxed rules and the generous criteria adopted in the early stages of the crisis.

Even though we advocate a strong EU competition policy, it doesn’t mean the rules should not be updated or streamlined from time to time. The Commission had its finger on the pulse when it launched projects to assess the importance and timeliness of EU competition and state aid rules in the implementation of EU policy objectives. That said, for new policy formulation, it is important to remain cool-headed when assessing the benefits and risks of possible changes. Moving forward, advocates of competition policy should remain alert and ready for action.

Olli Hyvärinen, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment