The report, prepared by former European Central Bank president Mario Draghi at the request of Euro-president Von der Leyen, was released on Monday, 9 September.

The proposal’s aim is to increase Europe’s ‘competitiveness’ in the world. Draghi calls for many deep reforms and 800 billion euro in investments that are to make Europe more innovative and stimulate economic growth. The report is expected to set the agenda of the new European Commission.

Schinkel, who is a professor of Competition Economics and Regulation at the University of Amsterdam, was asked about his opinion of the report’s proposed European competition policy reforms. These are found in Chapter 4, which contains many proposals for new tasks, tools, and budget for the Directorate General for Competition. Schinkel: ‘The good news is that competition policy is not made subservient to industrial policy and the lobbies for ‘European champions’. Still there is a lot to watch out for.’

Boosting Europe’s competitiveness

European competition policy, according to Draghi, focuses too much on consumer prices in national Member State markets, blocking companies’ abilities to obtain ‘scale’. His report calls for making it easier for firms to merge. The idea is that larger EU players will emerge, who can better compete in the European Union (EU) and with large American and Chinese companies.

Stronger regulations

‘This is a potentially dangerous reversal of the proper course of events,’ says Schinkel. ‘We first need to create a European market. One where, for example, all Europeans can easily sign up for a mobile phone contract with a provider based anywhere in the EU. This requires more uniform regulations and contracts. It's not so hard to implement. Only then can we perhaps allow telecom mergers to scale. But providers are not going to integrate an EU market by themselves, through private market power.’

Stricter post-merger control needed

Draghi also proposes fast-tracking mergers if the parties promise investments. The merged company would have to commit to specified amounts. The European Commission will then monitor the agreement following the merger. ‘It’s an innovative idea,’ says Schinkel, ‘but it would be difficult to enforce. So we need to be careful when relying on it for a more lax ex-ante merger control allowing mergers which would normally be stopped. Companies will easily make excuses why they did not invest as promised, like claiming the market has changed, competitors entered, or inputs have become more expensive. It would require possibilities for strong intervention if companies don't comply after a merger. This must include break-ups, as fines will not be enough of a deterrent: those can be paid comfortably from the profits that market power gives.’ Schinkel: ‘The Draghi report is a candy store for lobbies. Of its three pillars: ‘scale’ spells market power; ‘resilience’ may lead to production inefficiencies; and ‘security’ risks waste. We need very strong European leadership to focus on the public good in Draghi’s report.’

Schinkel was interviewed in articles about Draghi’s report that appeared in the daily newspapers FD on10 September 2024 and NRC on 12 September 2024.