EU Competition policy out of control?

A leader in this week's Economist looks at one of the areas where the EU is rarely criticised: its competition policy.

EU Competition policy can broadly be divided into two main areas.

The first area deals with state aid - it is the job of the EU to prevent member states from subsidising their favorite industries. This task has proven particularly challenging in the crisis , as the Opel-Vauxhall case illustrates.

But that is not what the paper is criticising.

The article deals with the second area of EU Competition policy: fighting cartels, monopolies, and abuses of dominant market positions; and controlling proposed mergers, acquisitions and joint ventures. This area deals with firms rather than states.

The leader argues that “by acting simultaneously as investigator, prosecutor, jury and sentencing judge, the commission is denying defendant firms the basic right to be heard by an impartial tribunal”, adding that “In no other area of law would it be thought acceptable for the outcome of such important cases to be determined by a bunch of politicians.”

Another article notes that the EU’s antitrust case against Microsoft, which resulted in a €1bn fine, revealed that investigators failed to keep record of a meeting with an executive from Dell, raising suspicions that Commission staff overlook potentially exculpatory evidence.

This is indeed extraordinary: Politicians in the European Commission have the power to impose a €1.06 billion fine on a company without proper due process. €1 billion is a lot of money. It is more than the annual net contributions to the EU of countries such as Austria and Denmark.

What's more - and what isn't mentioned in the article - the EU can "hoard" the money it raises in fines by lining its own pockets, as Ashley Fox MEP recently pointed out. He said Competition Commissioner Joaquín Almunia had told him that the fines would be held by the Commission and used as part of the EU budget - and that Almunia had no plans to reform the practice. Fox proposed - quite sensibly - that instead: "Monies raised from anti-competition fines should ideally be returned to those consumers who have paid over the odds for products and services. However, as this would be virtually impossible to implement the best alternative is to return the money to the member states."

Apart from the EU's heavy regulatory burden, if unreformed, EU competition policy might become another factor deterring business from coming to, and staying in, the EU.