Published on Jul 23, 2024
Recent elections in France have weakened Emmanuel Macron in Paris and Brussels. But the push by the French president and other senior European politicians for less aggressive European Union competition enforcement to favor companies in the region over foreign rivals will remain strong, according to EU policy and competition law experts.
Throughout his tenure, Macron has promoted a Europe-first revamp of competition policy that would give preferential treatment to companies based on the Continent, allowing them to consolidate at a national level or across borders within the bloc to compete better globally. Critics of this approach such as EU competition chief Margrethe Vestager and one of her predecessors, Mario Monti, have warned that approving mergers of EU companies to create so-called “national champions” or “European champions” would lead to higher prices for European consumers and ultimately leave the companies less able to compete with rivals abroad.
But even with the head of state of Europe’s second-biggest economy mired in domestic political chaos after being weakened by election defeats at home, the political pressure to change competition rules to aid European “champions” isn’t going away, experts said.
The shift toward a politicization of markets, away from Vestager’s vision of what a competitive EU should look like, is coming from so many different places, said Kate McNamara, a Georgetown University professor and author whose work focuses on European markets and politics. “Macron’s difficulties will not change the path of the EU’s movement in this direction,” she added.
This shift was recently affirmed by none other than European Commission President Ursula von der Leyen in a document outlining her policy plans ahead of the European Parliament’s July 18 vote that handed her a second term.
“We need a new approach to competition policy, better geared to our common goals and more supportive of companies scaling up in global markets – while always ensuring a level playing field,” the policy statement said. “This should be reflected in the way we assess mergers so that innovation and resilience are fully taken into account.”
The European Commission’s Directorate-General for Competition is unlikely to “have any relief or any relaxation because those calls for more industrial policy, less competition policy, keep happening from different stakeholders [in] the private and public sector,” said Pablo Asbo, a former DG Comp official who’s now managing director of consulting firm Eurocompetition and a senior adviser at the communications firm Trilligent. These longtime pressures are now coming from trade associations, governments, industries and other players, he said.
Yet EU policy and competition law experts said that DG Comp will likely resist any push that would overturn longstanding practices and precedents, or that would violate its own rules.
Competition officials in Brussels might be hearing a little less from Macron after the EU and French elections. The authority of Macron, one of the most high-profile supporters of the “champions” viewpoint, took a hit vis-à-vis his European Council counterparts after the far-right Rassemblement National (RN) won twice as many votes as the president’s coalition in France’s European Parliament elections in early June. Then in two rounds of legislative voting, his coalition was first beaten by the RN and a leftist alliance on June 30 and by the latter group on July 7.
Macron is now wrapped up in the difficult task of working with a divided National Assembly to pull together a functioning government, starting with the choice of a new prime minister, who in turn could end up undermining him in EU talks. (The National Assembly last week reelected a member of Macron’s party as its leader, a sign that the French government may be nearing the end of its political deadlock and getting on a path to uniting in sufficient numbers behind a candidate for prime minister.)
German Chancellor Olaf Scholz, an ally of Macron on the competition issue, likewise saw his party take an election beating in June, falling behind even the right-wing Alternative for Germany (AfD).
Macron’s weakness may translate to a bit less political pressure on DG Comp, said Chase Foster, a public policy and management lecturer at SOAS University of London who studies competition law and political economy in Europe. But Foster thinks Europe’s turn toward reorienting antitrust policy to accommodate its industrial policy goals “is going to keep going.”
The world’s largest digital companies aren’t in Europe, and even the few exceptions—such as Amsterdam-based hotel reservation website Booking.com, itself a flagship website of Connecticut-based Booking Holdings (BKNG)—aren’t as core to the 21st century economy as technology giants like Amazon (AMZN), Microsoft (MSFT) and Apple (AAPL) are, Foster said. This has been such an existential pain point for European leaders across the political spectrum that they’re unlikely to deviate from supporting policies that seek to bolster national or European champions, he added.
Forceful voice. Macron has been an especially vocal and powerful proponent of this vision. In a speech at the Sorbonne this past spring, Macron said the EU had been “relying too much on a model of competitiveness, including intra-European competitiveness,” and needed to “take responsibility for the evolution of our competition policy, to help European champions emerge.” A month later, he and Germany’s Scholz wrote in a Financial Times op-ed that the bloc must “modernise our competition rules in view of global competitiveness.”
The piece ran days before the release of the two leaders’ policy agenda, which says the EU needs “to review the current European competition rules and practices [and consider] whether they are still appropriate to contribute to achieving this goal and allow for establishing consortia and consolidation in key sectors (e.g. mobile network sector, airspace) in order to strengthen European resilience.”
In a similar 2019 manifesto, the governments of Macron and then-German Chancellor Angela Merkel called for revisions to EU merger guidelines and the bloc’s merger control regulation “to take greater account of competition at the global level.”
“Competition rules are essential but existing rules need to be revised to be able to adequately take into account industrial policy considerations in order to enable European companies to successfully compete on the world stage,” the manifesto said. “Today, amongst the top 40 biggest companies in the world, only 5 are European.”
The document’s release followed months of lobbying by both governments for the commission to approve the proposed acquisition of French rail multinational Alstom (PAR: ALO) by German manufacturing conglomerate Siemens (XETR: SIE), a deal touted by the companies as the formation of “a new European champion.”
The combined company, officials argued, would create a rail version of Airbus (PAR: AIR) to counter the state-owned Chinese company CRRC, one of the world’s largest producers of railcars and locomotives. When Vestager blocked the deal, less than two weeks ahead of the release of that Franco-German manifesto, she said that the merger threatened to raise prices for train signaling systems and that the companies “are both champions in the rail industry.”
Isabelle De Silva, the president of French competition regulator Autorité de la Concurrence at the time, supported the commission’s decision. She warned that year of “a risk of politicization” in competition policy, according to the French newspaper Les Echos. Macron chose not to renew De Silva’s five-year term in 2021, just as she was raising concerns about the proposed merger of two of France’s largest private broadcasters, a deal pitched as “a great opportunity to create a French total video champion” that was ultimately abandoned.
Macron’s decision, anonymous sources told Politico, stemmed from “her unwillingness to fall in line with Macron’s economic agenda—namely its embrace of corporate champions that, the theory goes, will help France and the European Union better compete against the United States and China on the world stage.”
Today Macron is perhaps better known for his involvement in another antitrust personnel decision: the ousting of Fiona Scott Morton, an American economist who in 2023 was set to take the DG Comp’s chief economist position. Macron denounced her appointment as counter to Europe’s strategic autonomy, due to her nationality and prior work for U.S. Big Tech firms.
Macron is hardly by himself among European leaders in favoring this approach.
There’s been “an evolution by the European institutions themselves, acknowledging that it was important for the European Union’s resilience and autonomy from other continents that there would be strong European companies,” said Margarida Rosado da Fonseca, an independent competition lawyer in Lisbon who represents clients before the commission. “I’m not sure whether you still need France and Germany to speak about this.”
So, Macron is weakened at the EU level, “but how important is that?” asked Vivien Schmidt, a professor emerita of European integration at Boston University and founding director of the school’s Center for the Study of Europe. “France is still a big voice, but we also have Giorgia Meloni,” the Italian prime minister and another European national “champions” standard-bearer, Schmidt said. “It may not be so much that France is weakened, but that Italy is stronger.”
Meloni’s far-right party won 28% of Italy’s votes in the European Parliament elections, the most of any of the country’s parties and more than four times its tally in the 2019 round. While Macron may have less time to invest in bargaining over top jobs such as Vestager’s replacement, Meloni has been demanding more authority in the negotiations due to her coalition’s strong election performance.
“It is necessary to draw up a strategy to protect European companies against unfair competition, to help them grow,” Meloni told one of the houses of Italy’s parliament ahead of a European Council summit in late June. A common industrial policy is needed, she later added, to boost “cooperation between our national champions with a view to European sovereignty.”
Meloni’s predecessor, former European Central Bank President Mario Draghi, is set to release a report in September that’s expected to lay out a sprawling plan to boost EU “competitiveness,” including by making it easier for companies in the region to scale up and compete against the U.S. and China.
While cautioning against “excessive market concentration,” Draghi in a June speech said, “Competition policy needs to facilitate scale by weighting innovation and resiliency criteria in tune with the evolving market and geopolitical contexts.”
The Draghi report will likely push for fundamental changes to treaties and argue that “for getting more power, we have to be more coordinated, and for more coordination, we have to look towards the commission,” said Delphine Bernet-Travert, secretary general of the International Regulators Group, an organization of national telecommunications regulatory agencies.
Lately, the sector has been a focal point of these tensions. Enrico Letta, another former Italian prime minister, argued in an April report that the way for Europe to strengthen its telecom markets is through consolidation. With the caveat that competition law ought to be “respected,” he wrote that the high level of investment needed to deploy new technologies in the sector, such as 6G wireless, “implies that due consideration should be given to the necessity of some level of consolidation within national markets or strategic alliances between market players.”
Standing firm. The rhetoric has pushed the commission into an outspoken posture, said Asbo, the former DG Comp official. During a conference celebrating the EU’s merger regulation one day after the Letta report was published, he noted, Vestager told the audience that “global champions” perform best when they face tough competition at home, and that the customers of these companies and their suppliers would suffer if the commission took this lax approach to enforcement.
“One does not foster competitiveness by abandoning it within the EU in the hope that European monopolies will better compete with rivals outside the EU,” she said, according to prepared remarks.
The commission updated its guidelines for defining the market in which merging companies operate early this year to state that relevant markets can be considered global in certain sectors such as civil aerospace or when customers across the world can, regardless of location, access the same suppliers on similar terms. In announcing the changes, Vestager noted that competitive pressures can come from outside the EU through imports.
Still, she dispelled any notion that the revisions were in response to pressure to greenlight deals like Siemens/Alstom. The commission blocked that transaction because—contrary to claims of the deal’s proponents—the Chinese rail sector was unlikely to flood the EU market with products. That still hasn’t happened five years later, Vestager said.
The economic nationalism behind the “champions” concept hasn’t penetrated DG Comp’s merger analysis, experts said. The commission, for instance, blocked Booking.com’s planned acquisition of flight-booking company Etraveli just last year.
But economic nationalism has yielded some results: Rather than stretch merger rules to cushion EU players, DG Comp is aggressively policing the conduct of foreign tech behemoths. The new Digital Markets Act, for example, is often criticized as an attack on U.S. companies since five of the seven “gatekeeper” firms subject to the law are American. The other two are Chinese TikTok parent ByteDance and Booking.com, which has an American parent. And the EU’s new Foreign Subsidies Regulation has added a layer of scrutiny to merger reviews, targeting acquirers or procurement bidders with foreign government financial backing.
DG Comp can’t go as far as breaking its own rules, however, said Rosado da Fonseca, the Lisbon-based antitrust lawyer. A blatant capitulation to political pressure from advocates of European “champions” would severely damage the commission’s credibility and leave it vulnerable to court losses, the attorney said.
But as von der Leyen made clear, with raw materials scarce amid supply chain snarls and the war in Ukraine fueling protectionism and calls for “resilience,” Rosado da Fonseca said, the pressure to back those “champions” is here to stay.
