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The International Dimension of EU Competition Policy:
Does Regional Supranational Regulation Hinder Protectionism?
Hikaru YOSHIZAWA Thèse présentée en vue de l'obtention du grade académique de Docteur en Sciences Politiques et sociales sous la codirection de Madame la Professeure Janine GOETSCHY (ULB & CNRS) et Monsieur le Professeur René SCHWOK (UNIGE)
Année académique 2015-2016
Abstract
There is an increasing recognition of the international presence and regulatory influence of the EU in competition policy. Despite a scholarly focus on its international dimension, the issue of nationality-based (non-) discrimination has insufficiently been investigated in the existing literature on EU competition policy. Thus, this research aims to fill this gap in the literature by examining whether the EU internally and externally utilizes its competition rules for the objective of promoting (potential) national and European champions, while
disadvantaging non-EU based companies operating inside and outside the European internal market. Empirical findings validate two hypotheses of this research: that the supranational institutional setting of the EU in competition policy constrains the ability of member states to use their competition policies for neomercantilist, and even for protectionist purposes; and that the institutional setup assures nationality-blind enforcement by EU competition
regulators, even vis-à-vis non-EU based companies. The research also identifies key systemic factors which either constrain or empower the EU as a regulatory power in the competition policy domain. The empirical analysis draws on both quantitative data and in-depth studies of recent major cases. Most cases are from the period between September 1990 and August 2015, involving American and Japanese companies, which have a strong presence in European economies.
EU competition policy is highly supranational and has a distinctive goal of market integration. In order to understand better how these features shape EU competition policy, this research proposes an original model of ‘stringent competition policy’, drawing on the
theory of regulatory states. This model is more useful than the essentially neomercantilist
model of strategic competition policy in explaining the EU’s enforcement without regard to
the nationality of firms. Internally, the supranational institutional setting significantly
constrains the ability of the member states to utilize their competition policies for
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neomercantilist and protectionist purposes. Regarding external consequences of this policy, the EU stringently enforces its competition rules regardless the nationality of firms involved in law infringements, though some cases involving non-EU firms were highly politicized and contested. To ensure that its stringent competition policy does not deteriorate the
international competitiveness of European firms, the EU has been promoting competition policy externally, especially since the 1990s. However, the EU’s ability to play a leadership role in global multilateral fora is limited, despite its dedication and ambitions. This is because the EU’s regulatory power is fundamentally constrained by systemic factors such as a sharp increase in the number and heterogeneity of competition policies around the world, the deadlock of WTO negotiations on world competition law, and the emergence of
transgovernmental networks such as the ICN. At the same time, these systemic factors have
created the demand of younger competition authorities for reference points, if not models,
and this opened up a window of opportunity for the EU to promote its competition policy
rules and norms more extensively in third states. Overall, this research contributes to the EU
competition policy literature by firmly placing it in a wider debate on competition and/versus
competitiveness in the study of global political economy.
Acknowledgment
I would like to express my sincere gratitude to my supervisors, Prof. Janine Goetschy and Prof. René Schwok, who always encouraged me and gave me a lot of valuable comments when I was struggling with my thesis. I am also thankful to Prof. Amandine Crespy, who helped me a lot since the first year of my doctoral research, and Prof. Chad Damro and Prof.
Sandra Lavenex, who kindly agreed to become members of my thesis committee. With no doubt, I could not produce this thesis without continuing support and advice from GEM PhD School Director Prof. Mario Telò, and Mr. Frederik Ponjaert and Mr. Johan Robberecht of the GEM Central Executive Office.
My research hugely benefited from interactions with my GEM mates and those colleagues whom I met at various conferences and meetings in Belgium, Switzerland, the Netherlands, the UK, China, Japan and Canada. In particular, I am grateful to Prof. Raffaele Marchetti, Dr.
Angela Wigger, Dr. Davor Jancic, Prof. Yane Svetiev, Mr. Hassan Qaqaya, Dr. Duncan
Wigan, Mr. Matthew Maguire, Ms. Basje Bender, Ms. Pola Cebulak and Ms. Anna Chung,
who kindly took the role of my discussants at various academic events. My special thanks
also go to Ms. Ee Lyn Chin, Ms. Sarah Goler, Ms. Coraline Goron, Mr. Gustavo Müller and
Mr. Shunsuke Sato. They read my papers and/or thesis drafts, and gave me very useful
feedback. I got valuable insight from the interviewees, too. Last but not least, I would like to
thank Prof. Hidetoshi Nakamura and Prof. Koji Fukuda at Waseda University for their
continuing guidance for many years, and my EUIJ Waseda colleagues for their warm
encouragement.
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Table of Contents
Abstract……….. 2
Acknowledgment………... 4
Table of Contents………... 5
List of Abbreviations………. 8
List of Tables, Figures and Boxes……… 10
Chapter 1: Introduction
... 121.1 A strange combination? EU competition and industrial policies ... 13
1.2 Puzzle and research questions ... 18
1.3 Key variables and definitions ... 19
1.4 Scope and intended merits ... 22
1.5 Methodological choices ... 24
1.6 Structure of the thesis ... 27
Chapter 2: The Functioning of EU Competition Policy ………...
302.1 Policy objectives: change and continuity………... 30
2.1.1 Protecting people from giants: a broad political context………... 31
2.1.2 The persistent market integration ethos: a distinctive European approach ... 34
2.1.3 A development of the international dimension since the 1990s ... 40
2.2 Substance of policy: introducing the four main components………... 46
2.2.1 Restrictive practices………... 47
2.2.2 Abuse of dominance………... 52
2.2.3 Mergers ... 55
2.2.4 State aid ... 58
2.3 Evolving supranational characteristics ... 63
2.3.1 The centrality of supranational actors in individual cases ... 63
2.3.2 Marginal roles of intergovernmental actors in individual cases ... 65
2.3.3 Limited impacts of recent institutional and treaty reforms………... 66
Conclusion ... 68
Chapter 3: Theoretical Framework ...
703.1 Gaps in the literature ... 71
3.2 Strategic competition policy: a neomercantilist perspective ... 74
3.3 Stringent competition policy: a regulatory state perspective………... 80
3.3.1 Limitations of the first model……… 80
3.3.2 External implications of the regulatory state………. 82
3.3.3 Differences and commonality between the two models……… 91
3.4 Further debate: EU competition policy in a global context……….. 94
3.4.1 Not only a trade and market power, but also a regulatory power?……….... 94
3.4.2 Two aspects of regulatory power……….. 97
Conclusion ... 101
Chapter 4: Dynamics between National and European Regulation – Does
Supranational Action Hinder National Neomercantilist Policies? ………..
103
4.1 Merger control as a typical area wherein national and supranational policies clash ... 103
4.2 The motor vehicle sector ... 107
4.3 The energy sector ... 109
4.3.1 Salience of networking industries ... 109
4.3.2 E.ON/Ruhrgas, E.ON/Endesa, and Commission v. Spain……… 114
4.4 Sensitivity to prevailing politics: state aid control after the global financial crisis…….… 118
Conclusion ... 121
Chapter 5: A Rhetoric or a Reality? The Equal Treatment of Firms Based inside and outside the EU ………..
123 5.1 EU competition policy beyond its borders: a legal basis ... 1245.2 Cartel control ... 128
5.2.1 A political commitment to non-discrimination ... 129
5.2.2 Nationality-blind enforcement in practice………. 130
5.2.3 Unpacking entangled complaints from the Japanese business community…………... 135
5.3 Monopoly control ... 142
5.3.1 The relatively frequent involvement of US firms ... 142
5.3.2 The Microsoft cases ... 145
5.3.3 The Intel case ... 147
5.4 Merger control ... 152
5.4.1 The relatively frequent involvement of US firms ... 152
5.4.2 The GE/Honeywell case ... 155
Conclusion ... 162
Chapter 6: Commitment to Multilateral Rule Making as an Initial Response to Cross-border Issues ...
165 6.1 Incremental development of international competition law after the World War II……… 1666.2 The deadlock of WTO negotiation on competition law………... 172
6.2.1 The EU initiative under the leadership of Karel Van Miert……….. 173
6.2.2 Initial exploratory discussion: from Singapore (1996) to Doha (2001)……… 177
6.2.3 A collapse of the negotiation: the Cancun Ministerial Conference (2003) and its aftermath 181 6.3 Two competition-related trade disputes at the WTO………... 188
6.3.1 The Japan–Film case………... 188
6.3.2 The Mexico–Telecoms case……… 194
Conclusion ... 197
Chapter 7: Systemic Constraints on and Opportunities for the EU as a Regulatory Power ………...
2007.1 A rapid increase in the number and heterogeneity of competition laws……….. 201
7.2 Engaging in and adapting to the ICN………... 205
7.2.1 The rise of the ICN as a main driver of international policy convergence ... 205
7.2.2 Constraints on and opportunities for the EU………. 220
7.3 FTAs as a major instrument for international policy transfer?……… 225
7.3.1 Persistent competition-trade nexus in bilateral relations………... 225
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7.3.2 Externalizing state aid rules: the case of the EU-Korea FTA………... 231
Conclusion ... 235
Chapter 8: Conclusions ...
2388.1 Key empirical findings………. 239
8.2 Theoretical contributions and limitations………. 242
8.3 The distinctiveness of EU competition policy: a comparative perspective……….. 244
8.4 Further reflections:are there any reasons for the EU’sstringent competition policy other than the institutional constraints?…...………...……….. 247
8.5 Venues for further research……….. 248
Rerefences……… 251
Appendix 1: List of interviewees……… 277
Appendix 2: List of current and former European Commissioners for Competition…….. 277
Appendix 3:The European Commission’s method of fines calculation under its 2006 guideline concerning the breach of TFEU Articles 81 and 82………... 278
Appendix 4: Number of notifications and decisions under EU merger regulation, 1990- 2013………. 279
Appendix 5: List of EU legislation (chronological)……….. 280
Appendix 6: List of cases (chronological)………. 282
List of Abbreviations
ASEAN: Association of Southeast Asian Nations CARICOM: Caribbean Community
COMESA: Common Market for Eastern and Southern Africa ECSC: European Coal and Steel Community
EEC: European Economic Community EFTA: European Free Trade Area EU: European Union
DG COMP: Directorate-General for Competition DG TRADE: Directorate-General for Trade FTA: Free trade agreement
GATS: General Agreement on Trade in Services GATT: General Agreement on Tariffs and Trade ICN: International Competition Network
ICPAC: International Competition Policy Advisory Committee ITO: International Trade Organization
JBCE: Japan Business Council in Europe JETRO: Japan External Trade Organization JFTC: Japan Fair Trade Commission
MERCOSUR: Mercado Común del Sur (Southern Common Market)
9 METI: Japanese Ministry of Economy, Trade and Industry MITI: Japanese Ministry of International Trade and Industry OECD: Organization for Economic Cooperation and Development SII: Structural Impediments Initiative
TEC: Treaty establishing the European Community TFEU: Treaty on the Functioning of the European Union UN: United Nations
UNCTAD: United Nations Conference on Trade and Development WAEMOU: West African Economic and Monetary Union
WTO: World Trade Organization
List of Tables, Figures and Boxes
Tables
Table 1.1: Levels of analysis reflected in the thesis structure
Table 2.1: The frequency of international enforcement cooperation in competition policy, 2007-2011 (by enforcement areas)
Table 2.2: EU's dedicated competition cooperation agreements as of April 2015 Table 2.3: Legal sources and targets of EU competition policy, by policy component Table 2.4: Cartel fines for the infringement of Article 101 TFEU, 1990-2004
Table 2.5: Top 10 cartel fines under Article 101 TFEU (by cases) as of 2 February 2015 Table 2.6: Major legal measures of the European Commission in EU competition policy Table 3.1: A comparison of the main and rival models
Table 3.2: Cartel fines of 20 selected countries in 2010
Table 4.1: Combined market shares of Volvo and Scania in selected Northern European countries in 1998
Table 5.1: Top 10 cartel fines under Article 101 TFEU (by firms) as of August 2015
Table 5.2: Fines in the vitamins cartel case (2001) (after reduction under the leniency notice) Table 5.3: Fines in the case of TV tubes and computer monitor tubes cartels (2012) (after reduction
under the leniency notice)
Table 5.4: Top 7 cartel penalty fees imposed by the EU on Japanese companies, as of April 2015 Table 5.5: Prohibition decisions in the area of abuse of dominance under Article 102 TFEU, 1999-
2014
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Table 5.6: Commitment decisions in the area of abuse of dominance under Article 102 TFEU, 1999- 2014
Table 5.7: Prohibition decisions under Council Regulation 139/2004 (EU merger regulation), 1990- 2014
Table 7.1: Chief characteristics of the WTO and the ICN in comparison
Figures
Figure 3.1: Summary of the theoretical framework
Figure 4.1: Number of cartel members penalized by the European Commission, period 2003-2009 (by countries)
Boxes
Box 2.1: Ordoliberalism
Box 2.2: The positive comity principle embedded in the 1991 EU-US competition-dedicated cooperation agreement
Box 2.3: Thresholds for mergers over which the EU has exclusive jurisdiction Box 6.1: GATT Article 23 (Nullification or Impairment) (1)
Box 6.2: GATS Telecommunications Annex, Reference Paper, Section 1 Box 7.1: A simplified structure of the ICN (as of April 2015)
Chapter 1: Introduction
Competition policy is not an afterthought in the process of European integration. In fact, it is at its core.
Margrethe Vestager,
European Commissioner for Competition (2015a: 2)
In the study of European Union (EU) competition policy, there has been a growing interest in potential tensions between two distinctive objectives of the policy, namely the promotion of market competition for the functioning of the European internal market (a competition- oriented argument), and the enhancement of international competitiveness of European firms (a competitiveness-oriented argument) (Blauberger and Krämer 2013; Bruzzone and Prosperetti 2009; Dewatripont and Legros 2009; Roth 2006). While there is no consensus in academia on the question of which of the two logics actually takes precedence in the EU’s market regulation, it is generally acknowledged that this dilemma of competition policy could be serious when the level of regulation in the EU is substantially higher than that of major trading partners. This research aims to contribute to this debate by analyzing how the EU copes with the challenges internally and externally.
Since there is a possibility that the promotion of competitiveness of firms by competition
authorities could lead to a neomercantilist and, in extreme cases, protectionist idea, as will be
presented below, the research centers on the treatment of non-EU companies by EU
supranational regulators in terms of nationality based (non-) discrimination. Furthermore, the
research investigates how key systemic-level factors such as the global diffusion of
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competition policy and the emergence of transgovernmental networks of competition policy officials, especially the International Competition Network (ICN), constrain the EU’s regulatory power in this policy area.
The main contention of this research is that the supranational institutional structure of the EU originally designed for internal competition regulation makes it difficult for the union to take a neomercantilist competition policy externally. In order to alleviate the competition/competitiveness dilemma arising from this situation, and to reduce the possibility of interjurisdictional political conflicts, the EU has been trying to promote competition policy internationally through bilateral and multilateral channels. This attempt is relatively effective in relation to candidate and neighboring coutries. However, it should be noted that the EU’s ability to set international regulatory rules, standards and norms is significantly constrained by systemic factors such as the increasing diversity and number of competition laws around the world, and the rise of the ICN. A major challenge for the EU is how to play a key role in the multilateral process of consensus-based policy convergence through the ICN, in which parties with larger domestic markets do not necessarily have stronger influence than others.
1.1 A strange combination? EU competition and industrial policies
Competition policy, which is also known as antitrust or antimonopoly policy in some countries, is one of the core policies of the EU. It has a solid legal basis and is crucial for the functioning of the European internal market. EU competition law prohibits certain conduct of private and public companies
1: (1) hardcore cartels such as price fixing, and other
1EU legislation and court judgements on competition use the term undertaking instead of more widely used words such as company, firm and corporation, and the former concept is defined by the nature of conduct rather than the nature of actors (Jones and Sufrin 2011: 124-126). It means that an entity could
competition-restricting agreements between firms, be they horizontal (i.e. between competitors in the same market) or vertical (i.e. between producers, retailers and distributors); (2) the abuse of monopolistic power, for example predatory pricing to force competitors to exit from the market (and raise the price later); (3) mergers and acquisitions which would directly trigger a sharp price increase resulting from a decreased number of market players; (4) in addition, the EU controls public aid granted by member states to certain firms, industries and regions. Typical examples of these are market-distorting subsidies, public guarantees, and public loans below the market rate. In short, EU competition law has a wide coverage and, as in many other competition laws, it is prohibitive in nature.
Without any public regulation of these anticompetitive practices, it would be largely ineffective to get rid of traditional trade barriers between states such as tariffs and quotas.
This is because, for instance, the creation of a free trade area may stimulate cross-border mergers and foster international monopolists possessing the capacity to make extra profit by abusing their dominant market positions. In terms of total economic welfare
2, such behind- the-border private distortion of market competition could be even more harmful than the traditional, at-the-border public regulation of the market, especially for consumers, and small and medium-sized enterprises (SMEs). Similarly, trade liberalization within a regional organization may result in subsidy races among its member states, unless effective state aid control exists. These are key reasons why the Rome Treaty signed in 1957 by the original six
legally be a non-profit organization and yet subject to EU competition law as long as its activity affects market competition in the union. Nevertheless, this research avoids the use of this jargon because it could easily deteriorate readability, and does not fundamentally affect the fact that the main target of EU competition law is the company, be they public or private.
2Total economic welfare is a term used in economics and means a sum of producers welfare, consumers welfare, and the tax revenue of the government. By definition, total economic welfare would be
maximized when productive and distributive resources are used in the most efficient way.
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member states (France, West Germany, Italy and the three Benelux countries) had provisions on competition. It should be noted that competition policy was one of the first few areas wherein the Treaty granted exclusive competence to the European Community (now the European Union) institutions (for greater details of the historical context, see Chapter 2).
Yet, not everyone supports the teleological argument that the creation of the European internal market in turn necessitates strict supranational competition rules. Some people insist that supranational competition regulaftion should not go as far as hindering the rise of national and European champions. According to this perspective, the benefits of market concentration and business cooperation should not be forgot because those practices would allow European companies to compete with non-European ones on the global stage while taking advantage of the economies of scale. This is why some politicians of EU member states call for more flexible EU competition regulation and greater discretion for national industrial policies.
Even after nearly six decades since the Rome Treaty was signed up, it is still important to question how far the idea of supranational competition regulation is accepted by the governments of EU member states. One should recall the recent open attack of former French President Nicolas Sarkozy on the principle of market competition codified in Article 3 (1) g of the Maastricht Treaty establishing the European Union. At the European Council meeting in Brussels in June 2007, he proposed to downgrade EU competence over competition, arguing that EU competition policy was over-constraining national industrial policies.
Sarkozy even argued that the protection of market competition should be removed from the
union’s main goals spelled out in the draft Reform Treaty – which is now known as the
Lisbon Treaty (Sierra 2012). This episode is widely considered as a case which revealed the
member states’ divergent degrees of commitment to market regulation based on competition
law (for details concerning the political debate on the Lisbon Treaty’s competition provisions,
see Chapter 2). Equally importantly, many politicians and commentators suspect that industrial rather than competitive considerations are behind day-to-day EU competition policy decisions. They argue that the EU’s competition regulators focus too much on multinational companies, such as American and Japanese ones – a viewpoint which EU officials have not surprisingly been denying for a long time. Such interpretation of EU competition policy as an instrumental one is a subject of empirical inquiry, whereas at the national level there are apparent cases of protectionism. A typical example is the maneuver of merger control by member states so as to hinder the acquisition of energy companies by foreign competitors, effectively blocking market entry by the latter (See Chapter 4). Taken together, it is clear that the competition policy of the union is not merely a technical issue underpinned by a consensual conception of capitalism.
Taking this into consideration, it is important to pay particular attention to the parallel development of competitiveness-oriented policy of the EU, which could have a profound impact on its competition policy. The EU is incrementally developing industrial policy, while EU competence in this area remains supportive
3. A political debate on the possibility of establishing EC industrial policy began in the late 1960s and 1970s, primarily as a regional response to the devastating oil crisis as well as increasing international competition with companies from the US, Japan, and newly industrialized countries. The seminal Colona Report in 1970 was a clear sign of European ambitions, although its achievements were quite modest. In 1992, the Maastricht Treaty codified the idea of European industrial policy for the first time, while former European Commissioner for Industry Martin Bangemann paved way for EU-wide industrial policy during his term between 1989-1999, in cooperation with member states and other supranational organizations. An ever-increasing demand of member
3The Lisbon Treaty spesifies which of the three categories of competence (exlcusive, shared or supportive) the EU has in a given policy field (TFEU Article 3 (1)).
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states for a horizontal (i.e. cross-issue and cross-sectoral) socioeconomic strategy coordinated by supranational institutions led the EU to articulate the Lisbon Strategy by 2000.
The Lisbon Strategy (2001-2010) is an encompassing multiannual policy package aiming at the establishment of a knowledge-based highly-productive European economy by the year 2010 (European Council 2010; see also Rodrigues 2009). While its ambitious goals were not adequately achieved, as the EU itself admitted (European Commission 2010 a: 3-9), the strategy was modified, updated and materialized as the Europe 2020 program (2011-2020).
The principal aim of Europe 2020 is to pursue smart (i.e. knowledge-based), sustainable and inclusive economic growth by the year 2020 (European Commission 2010 b). For example, under the name of sustainable development, the Directorate-General for Enterprise and Industry of the European Commission launched in 2010 an initiative, entitled An Industrial Policy for the Globalization Era, with special emphasis on the global competitiveness of European firms (European Commission 2010 c).
The brief overview of policy development in the areas of competition and industry raises a
point that this research aims to problematize, namely potential tension between the goals of
competition and competitiveness. While competition policy is often referred to as a success
story of European economic integration, not only by EU officials but also by numerous
academics and stakeholders, this policy could actually be part of the problem rather than part
of the solution. In its Annual Reports on Competition Policy, the European Commission and
its Directorate-General for Competition (DG COMP) continuously emphasize the positive
contribution of the policy to the Lisbon Strategy, and more recently, Europe 2020. Their
argument is based on a strong (but not full) trust in market competition: that competition
policy corrects market failures, fosters competition among companies, boosts innovation, and
ultimately, makes European companies ready for competition at the global level. However,
this discourse is and has almost always been contested inside and outside Europe. There is a
wide belief at least in academia that the international competitiveness of European firms could be undermined if EU competition law is substantially more rigorous than that of the union’s major trading partners (Blauberger and Krämer 2013: 173-175; Dewartripont and Legros 2009: 89). In other words, few people deny the necessity of a certain level of market regulation given the inexistence of perfect competition in the real world (this is the very starting point of the extensive literature on public economics). Yet, one could still argue that a higher level of market regulation in comparison with other jurisdictions could be a serious disadvantage for companies operating within the EU in terms of international competitiveness.
1.2 Puzzle and research questions
After understanding the contested balance between competition policy and industrial policy,
one would find EU competition policy intriguing with regard to its treatment of non-
European companies. In theory, competition policy could be strategically used to promote the
international competitiveness of domestic firms. One possible option for governments is to
target foreign companies. If the EU makes policy based on a pure cost-benefit calculation, it
is most likely to take this aggressive strategy so as to protect and foster national or even
European champions. In reality, however, there are numerous hints here and there indicating
that the EU treats EU and non-EU based companies on an equal basis. It is particularly
noteworthy that this opinion comes from some outsiders as well as the EU. One good
example of this is a report in 2008 of the Study Group regarding Competition Law
Compliance, which was appointed by the Japanese Ministry of Economy, Trade and Industry
(See Chapter 5).
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In light of this puzzle - the neutrality of EU competition policy with regard to the nationality of firms - and the dilemma of supranational competition policy explained above, this research addresses the following primary research question: does the EU strategically use its competition policy, internally and externally, to enhance European companies’
international competitiveness? In order to answer this broad question, two subsidiary questions should be raised:
Research Question 1: Does EU competition policy foster European monopolists even at the expense of competition-promotion purposes?
Research Question 2: Is this policy discriminatory against third-country based companies?
Companies referred to here may (a) operate within the European single market or (b) do business outside the EU but have substantial effects on its market competition.
After evaluating those points, which are directly relevant to the puzzle mentioned above, the role of the EU in global competition governance will be examined. Specifically, drawing on the existing literature that analyzes the regulatory power of the EU in the area of competition among others (Young 2015a; Aoyagi 2012; Bradford 2012; Endo and Suzuki 2012; Bach and Newman 2007; Fox 2001), this research addresses a further question:
Research Question 3: How do systemic variables such as the growing diversity among
competition regimes and the rise of transgovernmental networks such as the ICN constrain the EU’s regulatory power?
1.3 Key variables and definitions
The independent variable of this research is the supranational institutional setting of the EU.
This supranational institutional setting is a legal and political structure where supranational
actors (regarding competition policy, especially the European Commission and the EU Courts) have extensive competences and considerable autonomy from particularistic national and industrial interests. A common methodological problem in social science is that the independent variable actually does not vary. While this research argues that EU competition policy was and remains substantially supranational (see Chapter 3), it makes a comparison with the national competition policies of member states (see Chapter 4) and therefore does not face this issue.
The dependent variable is EU competition policy within and outside the union, while the control variable is the general trend of minimalist or maximalist public regulation of the market depending on prevailing politics and macroeconomic situations. Early political science literature on EU competition policy tended to insufficiently address the importance of broad socioeconomic context in Europe, but in reality it fundamentally affects the conceptions of competition policy (McCann 2010; Wigger 2008). The current economic and financial crisis in Europe since 2007/08 only confirms this point.
In addition to key variables, it is important to define four key concepts at this stage for the sake of clarity:
(1) Competition policy: a regulatory policy which is prohibitive in nature, primarily uses legal rather than administrative rules, and covers various areas of cross-sectoral market regulation such as control of restrictive practices, abuse of monopolistic power, and mergers
4. International competition authorities may also have statutory power to control state aid which would create an artificial comparative advantage of indigenous companies.
4For the distinction between competition policy and industrial policy in terms of regulatory instruments, see Sugiura (1994: 106).
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(2) Industrial policy: proactive policy of governments in areas of market expansion, structural adjustments, and technological development. It often involves direct budgetary expenditure and uses administrative directions as the main instrument.
(3) Protectionism: governmental practices of protecting domestic industries from international competition by limiting the access of foreign firms to the domestic market, and by privileging domestic companies with various financial and regulatory instruments.
(4) Supranationality: the extent to which the formation, interpretation and enforcement of an international entity’s policy are isolated from political intervention by the member states in pursuit of their individual interests. The supremacy of international law (here, EU law) is an important underlying component.
It should be noted that competition policy is defined here in terms of regulatory areas and
modes rather than policy objectives, and this conceptualization directly reflects the central
point of this introductory chapter. Key textbooks on competition law and economics tend to
define the goal of competition policy a priori, especially from the neoclassical economics
perspective with its emphasis on market efficiency, and numerous political science works on
this policy in turn reinforce this bias without sufficiently problematizing normative
implications it would have (for this critique, see Buch-Hansen and Wigger 2011: 6-7). It is
important to remember, however, that goals of EU competition policy themselves are an
outcome of the political process in which various governmental and societal actors interact
and promote their own interests, ideas and discourse. In a word, what is the primary goal of
EU competition policy, that is the question, and this research empirically examines it rather
than predefines it.
1.4 Scope and intended merits
Regarding levels of analysis, this research studies both the interaction between national and supranational regulation, and the external consequences of supranational regulation. The relationship between national and supranational regulation will be analyzed mainly in two aspects – namely, competence allocation between national and EU competition authorities, and supranational action against the infringement of EU law by member states. As for regulatory areas, following chapters study the four substantive areas of EU competition regulation: restrictive practices, abuse of dominance, mergers and state aid. Associated areas such as competition advocacy and consumer relations are beyond the scope of the research because they are less relevant to the research questions. Interactions with industrial policy and common commercial policy are of great importance for the analysis of the international dimension of EU competition policy. By contrast, the interface with sectoral regulation is less relevant here, and it differs considerably sector by sector, making it extremely difficult to provide a single analytical framework. Therefore, this research does not focus on it.
One intended scientific merit of this study is the development of two contrasting models, namely ‘strategic competition policy’ and ‘stringent competition policy’. The former model is
developed to some extent in previous works, whereas the latter is an original contribution of this research. It should be noted that they are not ‘models’ in a normative sense. Rather, they
are heuristic devices for the better understanding in a complex reality in this policy field.
They rest on different balances between competition and competitiveness, and take opposing
positions concerning the (non-) discrimination of non-EU firms. Greater details will be
presented in Chapter 3 on the theoretical framework.
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Another intended merit is a ‘comprehensive’ approach in three aspects. First, it looks at both internal and external aspects of EU competition policy, while emphasizing the latter.
When attempting to situate the EU’s economic policies in the context of the global economy (regional v. global dimension), a good understanding of the internal dynamism within the EU is indispensable (EU v. member states dimension). Second, the theoretical framework builds on both EU studies and the study of international political economy, while acknowledging European and international legal context. Specifically, arguments in subsequent chapters draw on the theory of the regulatory state developed in EU studies, and aim to engage with the competition and/versus competitiveness debate in the International Political Economy.
Key concepts in EU law and international economic law such as the group economic unit doctrine, the implementation doctrine, and positive and negative comity principles will be introduced in order to explain legal foundations of the EU’s external competition policy.
Third, this research intends to investigate selected competition cases without losing sight of the broader political context. This point is inextricably linked to the interdisciplinary approach noted above. On the one hand, political science studies on this issue have a general tendency to mention individual competition cases as mere episodes and do not fully integrate them into theory-building and theory-testing processes
5. On the other hand, the majority of economic and legal studies of competition policy fall within either of two categories: purely theoretical research, and case-oriented or area-specific (e.g. merger control and cartel control) one. This research attempts to strike a balance between these two extreme approaches.
The research also aims to be up-to-date and to have policy relevance. In the face of current economic and financial upheavals, EU competition policy is at a crossroads. It is under pressure, particularly in the area of state aid control. A major reform of state aid control was
5However, there are some exceptions. See, for example, From (2002). It goes without saying that the usefulness of in-depth case studies largely depends on research questions.
recently proposed by the European Commission, and people even outside the union are carefully observing and speculating the direction of this reform and other areas of EU competition policy.
1.5 Methodological choices
Three methodological choices serve as guidelines throughout this research. The first one concerns the method of generating and testing hypotheses, while the latter two deal with the relevance of everyday politics in competition regulation and the importance of multiple sources respectively.
(1) Inductive and yet theory-informed method of hypothesis generation
Chapter 3 develops two theoretical frameworks, namely stringent competition policy (the main framework) and strategic competition policy (a rival one) based on empirical observations, including contemporary phenomena and historical events. After this, theories play an important role in developing the arguments in a coherent, cohesive and structured way. This stage of theory-building is followed by the theory-testing stage in the empirical analysis chapters. In order to avoid tautological arguments, the two stages use different data.
(2) Significance of ‘day-to-day politics’
Why do we study individual competition cases? This question may sound bizarre to
competition economists and lawyers, but it is a relevant and important question for political
scientists working on EU competition policy. It is possible to focus on materials such as
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treaty revisions and prominent secondary legislation, and a typical example of this approach in EU studies is (liberal) intergovernmentalism. Although it may look like a legitimate strategy of research in terms of parsimony, there is a serious shortcoming. In the area of competition, incremental policy development and changes through everyday politics, including court judgements and the Commission’s binding decisions and non-binding explanatory publications, are too crucial to ignore. The competition provisions of the Rome Treaty have been surprisingly intact despite changes in socioeconomic situations in Europe.
As for treaty amendments, the Council of EU’s legislation is rare in this area. For example, in cartel and monopoly control, Council Regulation 17/62 remained untouched for as long as four decades until Regulation 1/2004 replaced it. Individual competition cases are therefore of great importance to better understand this policy.
(3) Multiple sources, both EU and non-EU
This research extensively investigates primary sources by authorities both within and outside
the EU. Considering the nature of the above mentioned research questions, this point is
crucial in order to develop a balanced argument. Main EU documents used in this research
are: (1) annual reports of the European Commission on competition policy, and associated
staff papers prepared by DG COMP; (2) speeches by past and present European
Commissioners for Competition and Directors-General of DG COMP; (3) various documents
detailing the EU’s Lisbon Strategy and Europe 2020; (4) several publications by DG
Enterprise and Industry, especially its annual Competitiveness Reports; and (5) a few
Commission White Papers which discuss competition policy issues in the context of
enlargement policy. As for material from third states, particularly noteworthy ones include
(1) policy reports of the Japanese Ministry of Economy, Trade and Industry; (2) annual
reports of the Japan Business Council in Europe, which is a leading business association based in Brussels and represents interests of multinational companies of Japanese parentage operating in European markets; and (3) speeches of senior officials of the US Fair Trade Commission and the US Justice Department, Antitrust Division. Last but not least, the research also uses documents of international organizations, especially for the analysis of global institutional structures constraining EU competition policy. These documents include those of the ICN (policy documents; recommended practices and manuals, speeches of senior officials), the WTO (dispute panel reports; annual reports of the Working Group on the Interaction between Trade and Competition; contributions to the working group discussion by the WTO member states), the OECD (reports and recommendations) and UNCTAD (recommendations).
It is worth explaining sources of aggregate data and case-specific information used in this
research. Regarding quantitative data, the DG COMP website is the most comprehensive. It is
therefore one of the major sources of information used in this study. In particular, Chapter 5
which directly examines the question of nationality-based discrimination extensively uses
data based on an online competition cases database (search engine) available on the website
of DG COMP. This database provides basic information about individual competition cases
(e.g. case numbers and links to related documents), and covers cases during the period 1999-
present for restrictive practices and abusive dominance policies, and 1990-present for merger
policy. Statistics on EU competition policy compiled by the Japanese Ministry of Economy,
Trade and Industry is also going to be analyzed in Chapter 5. Finally, the chapter refers to a
recent study of EU merger control by a political scientist Mark Thatcher (2014), based on his
original dataset of EU merger cases during the period between 1990 and 2009 in energy,
telecommunications and banking sectors.
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Case-specific information is equally important. The collected information falls within four categories: (1) decisions of the European Commission and judgements of EU courts; (2) press releases are less informative in general, but they sometimes provide information supplementary to the Commission decisions; (3) Competition Newsletters, a quarterly journal of DG COMP, and various academic publications (especially those on EU competition law) are also informative and insightful concerning very technical aspects of individual cases; (4) since the research analyzes the (non-) discriminatory nature of EU competition policy, several interviews were conducted not only with EU and EU member state officials but also with an official of the Japanese Mission to the EU (see Appendix 1: list of interviewees).
However, the interview material does not dominate the direction of the research. Rather, it complements published case-specific information.
1.6 Structure of the thesis
The structure of this thesis takes into account three levels of analysis –namely, the internal dimension of EU competition policy, its external implications, and external relations. Table 1.1 presents a simplified version of the organization. It should also be noted that the structure reflects the inside-out perspective of this study, that is, a view that EU competition policy is originally devised as an intraregional policy, and that the development of its external dimension was greatly constrained by internal historical experience as well as broader political context at the global level.
As a point of departure, Chapter 2 explains the functioning of EU competition policy from
historical, legal and political perspective. First, it explains the historical context and
underlines the continuing importance of ‘market integration’ goal in EU competition policy.
Then, the chapter introduces the four core components of this policy, while briefly setting out its evolving supranational character in legal terms.
Table 1.1: Levels of analysis reflected in the thesis structure
Theoretical framework
・Making a heuristic distinction between strategic and stringent competition policies
・Identifying key variables which constrain the EU’sinternal and external action in the area of competition (Chapter 3)
Internal dimension
・The objectives, substance and decision-making process of EU competition policy (Chapter 2)
・Dynamics between national and supranational competition regulation (Chapter 4)
External consequences of 'internal' competition policy
・The EU's regulation of third states' companies operating within and outside the internal market (Chapter 5)
・The role that the EU played in the failed WTO negotiation (preliminary discussion) on world competition law (Chapter 6)
External dimension
・The global diffusion of competition policy and the emergence of multilateral transgovernmental networks
・Challenges and opportunities for the EU as a regulatory power (Chapter 7)
In turn, Chapter 3 presents the theoretical framework of this research. Based on a critical review of the literature, the chapter provides two competing conceptual frameworks, namely the model of stringent competition policy, which draws on the theory of the regulatory state, and the model of strategic competition policy, that is essentially a neomercantilist reading of the policy . The former is the main and original analytical tool of this study, while the latter is a rival model.
The Chapters from 4 to 6 are directly relevant to the first two research questions. Chapter 4
takes the internal aspect of EU competition policy. So as to directly test the competing
theories, the chapter examines cases from three selected areas of high political sensitivity,
namely motor vehicle and energy as well as the contentious state aid control since the
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