THE BLOG
07/29/2016 02:58 am ET Updated Dec 06, 2017

Making markets work for citizens

By European Commissioner for Competition Margrethe Vestager

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We deal with issues that affect people's daily lives but are cross border so no single member state can solve them on its own. And what we do is about people - no matter if you see yourself as a consumer, a worker, a business owner or a citizen. It's about coming together to find answers to the problems we have in common. This also concerns competition.

In general, competition drives companies to cut prices, improve their products and invent new ones - to innovate. That's good for the people who buy those products. And it also brings along the investment that makes our economy grow and creates jobs. It may even minimize the use of resources such as water, energy and raw materials.

Do you remember what it was like to search the Internet before Google invented their search machine? I myself have a vague memory of it being very difficult. Today it is easy. But these fabulous innovations don't give the company the right to stop others from competing. Because consumers need competition and innovation, so they can choose the product that's best for them. And the economy needs competition, to drive companies to invest.

That's why we're concerned that Google seems to have favoured its own comparison shopping service in its search results. It means consumers see the results that Google wants them to see, which might not be the most relevant ones. And if Google's rivals believe that their services will never be as visible as Google's, no matter how good they are, that could discourage them from investing and invent new services all together.

We want to ensure that consumers have a choice, and to make sure Internet businesses keep investing in better products. Markets need to stay competitive because in a competitive market companies will invest. And have a fair chance to make it in the market.

But it's not only consumers and businesses that depend on us enforcing the competition rules. It matters to workers as well. All over Europa workers in general benefit if competition is fair - but not if the competition is flawed or unfair. Let me give you a very painful example: The European steel industry has much more capacity than it can use. Our state aid rules don't allow pumping taxpayers' money to keep failing producers to keep overcapacity on the market.

Earlier this year, we launched an investigation into whether Italy did just that for Ilva, which runs the biggest steel plant in Europe. Because the effects of such a support go far beyond Italy.

Other steel makers all over Europe also have to deal with excess capacity and large imports from low-cost countries. Many have already gone through extensive restructuring to make them competitive. So keeping Ilva going with Italian taxpayer money would put other steelworkers' jobs at risk across Europe. Of course: If Ilva can restructure with a new buyer and no taxpayer money it is another story.

We need state aid rules, to keep competition fair and to make our economies strong. To reward the companies that produces the best products at the lowest possible costs and with efficient use of resources. Not just the ones that get the best hand-outs from governments. And at the same time we can protect the steel makers form unfair competition from outside of Europa trough anti-dumping measures. That's only fair.

Europe has become wealthy, thanks to free trade and open markets. And yet many people don't feel the benefit. They see the executives and shareholders of big companies getting richer. And they ask - where is my share?

Competition enforcement isn't the answer to everything. But it can help to stop inequality getting out of hand, by preventing powerful companies from misusing their power to deny anyone else a chance to also succeed.

By opening markets for competition, European politicians - ministers from member states and members of the European Parliament - have helped millions of people. Opening up the right to provide phone connections, supply energy or run trains has helped cut prices and raise quality and choice. But it only works if new rivals can enter the market. So competition enforcement also needs to make sure that former monopolies improve their services and don't just try to keep others out of the market. Otherwise, it's the least well off citizens who will suffer most by high prices and low quality.

For example, affordable rail transport is important and nearly a fifth of freight within the EU is carried by rail. And that proportion will have to increase, if we're serious about cutting our carbon emissions. So the whole society suffers, if the old rail monopolies can stop competition.

Three years ago, the Commission was concerned that Deutsche Bahn was using its monopoly on supplying power to trains to keep competitors out of the market. It was charging prices that seemed to be so high that rivals just couldn't compete. The commitments that the Commission agreed with Deutsche Bahn have worked so well in removing its monopoly over power supply to trains that we've been able to end the commitments two years early.

We've also looked into taxation. In the cases we're dealing with, tax authorities have approved arrangements that allowed very profitable multinationals, like Fiat and Starbucks, to avoid paying the tax they should have paid. Meanwhile, SMEs and other standalone companies couldn't get those benefits even if they wanted to. As well as in the cases in Luxembourg and in Netherlands, we have taken a decision on the Belgian excess profits arrangement, which gave tax benefits to at least 35 multinationals. We've opened in-depth investigations into possible illegal state aid/tax benefits in Ireland to Apple, and in Luxembourg to Amazon and McDonald's. And we've looked at more than a thousand tax rulings, as part of an investigation that has been going on since 2013.

Of course, competition enforcement alone can't close all the tax loopholes that help multinationals avoid tax. So the Commission has also put forward a whole series of proposals for new legislation. That should help make sure companies pay tax where they make profits.

It's vital for the health of our society, not just our economy, that we fix these problems. It is not fair that taxes go up for citizens or that there's no money to provide services to the most vulnerable, when only some companies pay their taxes. All companies should contribute.

In this regard, the public country by country reporting on what taxes a multinational company pays is important. The reporting will ensure that large multinationals that operate in the EU have to publish information showing where they made their profits, and where in the EU they paid tax.

This sort of transparency is essential to rebuild our confidence in a fair society. Three years of parliamentary inquiries, journalists' investigations and state aid cases have shown that we need to enable citizens, journalists and tax authorities to follow closely the facts of tax. We now need to show people that the system is truly fair.

Competition saves both consumers and businesses money. It can save precious resources as water, energy and raw materials. It also makes sure that our system works fairly in finding answers to problems we have in common.