The Gazette 1985

JULY/AUGUST 1985 The Competition Policy of the European Community Part I by Peter D. Sutherland Member of the Commission of the European Communities (The following is an edited version of an article first published in the St. Louis University Law Journal.)

GAZETTE

Introduction T HE competition policy of the European Community 1 is part of the wider endeavour of European integration on which repose the hopes of our citizens for recovery and sustained prosperity 2 . Article 3(0 of the EEC Treaty included "the institution of a system ensuring that competition in the common market is not distorted" among the activities of the Community to achieve the purposes set out in Article 2 \ The Treaty is the Constitu- tion of the EEC and its substantive provisions should be regarded as constitutional in scope and importance. I propose in this article to describe how competition law and policy contribute to the Community's economic recovery strategy based on the dual objectives of the completion of a large, unfettered internal market and the enhancement of the competitiveness of European industry. The role of competition policy in the Commission's overall strategy for the Community may be seen in terms of concentric circles. From the core, anti-trust rules applied to companies 4 , one moves outwards to the other competition rules applied to States in respect of public monopolies 5 and aid schemes 6 , and then to other policies laid down by the Treaty and developed by the Community institutions. Of the policies which interact closely with competition policy in their common pursuit of the Community's objectives, I would mention specifi- cally those dealing with industrial, internal market and fiscal matters. It must be stressed that competition policy is neither developed nor applied in a vacuum and that it interacts constantly with the Community's economic and even social policies. The Commission will continue to combat agreements and other restrictive practices which lead to a partitioning of markets within the Community. Attempts to thwart the objectives of the common market by cross-frontier price or quota fixing will meet with a vigorous response, as will measures impeding the free flow of goods and services within the large market which our industries have called for and needed for so long. Restrictions of output or consumer choice within the common market will be tolerated only in exceptional circumstances. However, it is not sufficient in terms of competition policy to punish violations and abuses. Part of our task is also to create and foster conditions in which undistorted competition may thrive. This may take the form of permitting, even encouraging coordinated measures to reduce surplus capacity in certain industries or of taking action against

Member States in order to break down national attempts to distort competition by favouring domestic industries. The Commission is not just a law enforcement agency: it is an executive body which instigates legislation in the Community to give legal expression to its policies. The Commission has been active recently in adding to the legislative framework of competition policy by enacting some important Regulations concerning Patent Licensing, Research and Development, Specialisation and Motor Vehicle Distribution and Servicing agreements 7 . In the State Aids sector too, legislation has been enacted concerning the "transparency" of public sector funding and aids to specific industries such as steel and shipbuilding. We are nowengaged in monitoring the implementation of the recently enacted Regulations to which I have referred. The enactment of these Regulations will enable us to work rapidly through the backlog of notifications under Article 85 of the Treaty: this is already being done. In addition, the opposition procedure contained in the Research and Development patent licensing and specialisation Regulations, whereby in general the Commission has six months in which it may raise an objection, will lead to a much more rapid treatment of notifications in areas covered by those Regulations. Some other areas at which we are looking at present with a view to considering how best to formulate our policy in legal terms are joint ventures, know-how licensing, and franchising. Our concern is to provide a clearly understood framework for the dissemination of technology in ways which respect the imperatives of the common market, benefit the European consumer and make a contribution to the competitiveness of European industry. As regards competition policy towards state aids, state monopolies and public undertakings, we shall be concentrating on the battle against distortions of competition and internal protectionism. Enforcement policy will therefore focus on detailed examination of the extent to which national aids distort competition within the Community and, if so, whether the distortions to which the aids give rise are outweighed by their benefits. Among the legislative, explanatory and procedural changes already introduced or contemplated in this sector are the following:

- Guidelines on research and development support schemes which will describe the conditions and 229