Europe must not tie its hands in the fight against corporate power

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The writer is director of Europe and Transatlantic Partnerships at the Open Markets Institute

Last week, as she prepared to step down after a decade as the EU’s competition commissioner, Margrethe Vestager saw her efforts to force Apple to pay back taxes and to crack down on Google’s abuse of its market power vindicated by the European Court of Justice. While Vestager could and should have gone further, she deserves credit for putting competition enforcement back on the map.   

European Commission president Ursula von der Leyen has appointed Teresa Ribera, currently Spain’s deputy prime minister, as Vestager’s replacement. One immediate challenge Ribera faces is that her portfolio is far broader than her predecessor’s — not only must she handle competition, she also has to ensure the EU meets its climate targets and lowers energy prices while driving forward a new “clean industrial deal”.

There is a risk that competition enforcement falls through the cracks as a result. But allowing that to happen would be a serious error. Intelligently done, this is the most powerful tool the commission wields to shape markets in the public interest.

However she handles the role, Ribera will face immediate pressure to take a different approach to Vestager. Both Enrico Letta’s report on the single market and Mario Draghi’s on competitiveness have called for competition enforcement to enable corporate scale. Their recommendations are mirrored in the “mission letter” issued by von der Leyen to Ribera, which advocates a “new approach to competition policy . . . more supportive of companies scaling up in global markets”.

This is problematic. While Europe’s internal market is too fragmented, monopolistic European champions aren’t the solution. Neither is giving dominant European firms a blank cheque to merge a recipe for global competitiveness. As a recent report by the commission itself found, rising market concentration in Europe has not only raised prices but also lowered wages, stifled business dynamism and weakened the continent’s resilience.

At the same time, competition policy cannot continue to operate in a vacuum. Despite using its competition powers more proactively under Vestager, the EU remains wedded to a narrow enforcement philosophy that limits its ability to address the many threats posed by corporate power. This includes failing to grasp how concentrated markets undermine not just consumer welfare but many other public interest objectives, including good employment, sustainability, innovation, resilience and media plurality.

Draghi is right to suggest that competition, industrial and trade policies are common “building blocks” that should be more “aligned as part of an overall strategy”. The EU can draw on the example of the Biden administration, which has aligned these policy tools to good effect. Similarly, von der Leyen calls for Ribera to “work closely with other commissioners” so competition enforcement “takes into account sectoral policies” and vice versa. 

In practice, this should entail designing industrial policies that promote competition rather than concentration. It also means using digital regulation such as data protection rules to prevent big tech companies from abusing their dominance over consumers and businesses. In this regard von der Leyen’s decision to split the competition and digital portfolios, united under Vestager, is a step backwards. 

Most importantly, EU competition policy must recognise that growing market concentration isn’t just an economic problem but a political one, too. Corporate concentration has exacerbated problems such as rising prices, stagnant wages and barriers to starting and growing a business, undermining faith in the economic system and in democracy itself. If Ribera is looking for a problem to solve, then that would be a good place to start.