Google and European Competition Policy

The European Union is the most powerful economic and political union in the world while competition policy is a cornerstone for economic success and the European project in general. As corruption is still present in some European countries nowadays, the general aim of the EU competition policy is to safeguard the functioning of the single market and to ensure that enterprises have equal possibilities to compete against each other. When Google had highlighted its own price check in disfavour of others, it trespassed the law and abused its market power. The fine Google got was record breaking although the EU Commission waived the maximum sentence of 10% of the company’s annual turnover. This would have been a fine of almost 9 billion instead of 2.4 billion Euros (Die Zeit, 2017).

Googles legal opponent is the European Commission, which enforces law through its powers of investigation and sanction. The General Court deals with cases of competition. Appeals will be heard by the Court of Justice. Besides that, the European Parliament adopts the legislation under the consultation procedure (Szczepański, 2014).

As the European Union is a block of 28 Member States, the enforcement of law needs to be coordinated. National courts need to apply to the EU competition law, where effects on trade between members are identifiable. The commission cooperates with national courts to share information, to provide advice, and to submit observations. This involvement of NCAs (National Competition Authority) and national courts led to a substantial increase in the number of cases (Ibanez Colomo, 2013). Furthermore, the European Competition Network, which consists of NCAs of all Member States and the Commission, divides up competition related work and applies EC competition rules across the EU. The participants do not only coordinate exchange evidence and investigations, but also share information on planned enforcement decisions and recent cases. Besides that, Article 101 of the TFEU comes with two interesting antitrust regulations. On the one hand witnesses that unveil illegal agreements will be granted full exemption, on the other hand victims can sue responsible companies for compensation. Therefore, Article 101 causes deterrence and ensures recovery. The result is a highly effective competition policy within all states of the Union (Szczepański, 2014).

The annual Global Competitiveness Report of the World Economic Forum measures the effectiveness of antimonopoly policy on a scale between 1 (not effective) and 7 (effective). This index covers 148 countries. In the 2013-2014 report half of the EU Member States were in the first 31st places worldwide and Finland was first. Another study based on data from 102 countries states that the EU has the strongest competition regime in the world and the most extensive national competition law (Hylton Deng, 2007). In addition, EU competition policy increases the competition intensity, but also states that a better design, implementation and enforcement would increase the effectiveness of the policy (Buccirosi, 2008). This would help to reduce the abuse of market power and lower the price-cost margin on individual markets (Szczepański, 2014).

An appropriate example for the positive impact of competition policy within a national market of the EU is the merger of PT Portugal and Altice. As both were telecoms companies the European Commission was worried about higher prices and less choice of product and service in general. That’s why, the Commission intervened and made both companies sell their overlapping businesses. In co-operation with Portuguese authorities the merger was finally approved, while the customers protections could be ensured. Nevertheless, the European Commission alleged in 2017 Altice breached EU rules as it seems to have started implementing its acquisition of PT before the actual approval of the Commission. This shows that the Commission does not only deal with merger a priori but also a posteriori (European Commission, 2017).

As competition increases the productivity and efficiency of enterprises and creates favourable conditions for innovation and growth, the EU competition policy increases the attractiveness of the regional market in general (Holmes Schmitz 2010, Aghion Schankerman 2004 and Lianos 2013). Furthermore, the policy prevents distortions and ensures fairness for all market participants. This makes Europe to one of the most interesting markets in the world, not only because of its 512 million potential customers, but also because of its legal and political framework. Although, the effects of competition policy on economic growth are not settled exactly, a World Bank study states a correlation between sustainable growth and efficient enforcement of competition and antitrust policy. Besides that, a bulk of economic literature assumes that an increase of efficiency leads to an increase of productivity (Szczepański, 2014).

The Sapir Report goes even further and states that the EU competition policy may have contributed to technological innovation and EU’s macroeconomic stability. This is in accordance with the World Bank that states “(…) we find that the adoption and continuous existence of a competition law, on average, both substantively and statistically significantly increases the rate of innovation” (World Bank 2017, p. 216). Nevertheless, some contest the relation between competition policy and growth as an intuitive statement or conventional wisdom (Voigt 2006).