Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Wednesday, November 16, 2011

Industrial Policy and European Merger Control - A Reassessment

Posted by D. Daniel Sokol

Damien Geradin, Tilburg University - Tilburg Law and Economics Center (TILEC), University of Michigan Law School, Tilburg Law School and Ianis Girgenson address Industrial Policy and European Merger Control - A Reassessment.

ABSTRACT: The relationship between industrial policy and merger control is one of the most controversial topics in European competition law. The debate has become particularly intense in recent years given the perceived failure of free markets and the return of government intervention into the economy.

In Europe, the concepts of industrial policy and competition policy conjure up “a great ideological divide.” Modern competition policy is inspired by the neoliberal ideas of the Chicago school that place great confidence in free markets. Industrial policy reflects a more interventionist approach, based on the assumption that markets are fallible and that governments should correct their imperfections.

Industrial policy dominated the early years of European merger control. However, following the adoption of the Merger Regulation in 1989, the European Commission largely ignored industrial policy considerations, focusing instead on the strict implementation of the competition-based test. This approach was unsurprising given the triumph of the neoliberal agenda and the corresponding lack of interest in or support for industrial policy.

However, the challenges of globalisation and the 2008 economic crisis inspired a growing number of observers to argue for an increased intervention of public authorities into the economy. The role of competition policy has also been called into question. In particular, some observers argued that EU merger control prevented industrial consolidation. In several recent cases, national governments set aside merger control rules to facilitate the creation of “national champions” or used them as a protectionist tool to disrupt undesirable transactions.

Against this background, we seek to address the issue of whether merger control rules should be relaxed in order to accommodate industrial policy objectives. Answering this question is complicated by the lack of clarity of the concept of “industrial policy.” In Section II of this paper we define industrial policy and summarise the debate relating to this concept. In Section III, we demonstrate that industrial policy has always been present in European merger control even though its influence has decreased considerably following the adoption of the Merger Regulation. In Section IV, we describe how globalisation and the 2008 economic crisis led to the revival of industrial policy in Member States and at the EU level. In Section V, we attempt to determine whether industrial policy should take priority over competition policy in the area of merger control in light of these developments.

Our conclusions are twofold. First, carefully selected industrial policies can successfully address market failures, e.g., by supporting national or European champions. Second, we do not think that merger control rules should be relaxed or set aside in order to facilitate the creation of industrial champions. On the contrary, correct application of merger control rules enhances the efficiency of industrial policies.

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