{"id":5371,"date":"2024-11-22T09:22:28","date_gmt":"2024-11-22T08:22:28","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=5371"},"modified":"2024-11-22T09:22:28","modified_gmt":"2024-11-22T08:22:28","slug":"protecting-competition-to-grow-europe","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2024\/11\/22\/protecting-competition-to-grow-europe\/","title":{"rendered":"Protecting Competition to Grow Europe"},"content":{"rendered":"

Fiona M. Scott Morton is an American economist and the Theodore Nierenberg Professor of Economics at the Yale School of Management, where she has been teaching since 1999. From 2011 to 2012, she served as Chief Economist at the Antitrust Division of the US Department of Justice.<\/span><\/p>\n

A little over a year ago, Fiona Scott Morton\u2014despite her impressive CV\u2014declined the position of Chief Economist at the Directorate-General for Competition at the European Commission. The reason? A matter of nationality: opposition came from three ministers in the Macron administration, who petitioned President Ursula von der Leyen in the name of “European sovereignty.” But it was the head of the \u00c9lys\u00e9e Palace who delivered the final blow, expressing strong doubts about the absence of “great European researchers with the academic skills to do this job.” Scott Morton is an expert in digital platforms: she worked in US antitrust under Barack Obama and has consulted for several Big Tech companies. Despite this, her attitude toward them is anything but soft, as is clear from her articles, which led Margrethe Vestager to push for her appointment, and from this interview.<\/span><\/i><\/p>\n

Fiona Scott Morton, do we really need to create more “European champions” capable of competing with American and Chinese companies, as Mario Draghi’s report seems to suggest?<\/b><\/p>\n

We need successful European companies\u2014productive ones of all sizes\u2014that can provide goods and services consumers want, both in Europe and globally. It doesn\u2019t matter if these companies are competing with rivals from India, Brazil, or China. What matters is that they offer a product so good that consumers choose it, generating profits and economic activity in Europe while also offering more choice for European consumers.<\/span><\/p>\n

What negative repercussions could arise from creating larger companies capable of competing globally, especially regarding competition within the EU single market and consumer prices? What balance can be struck?<\/b><\/p>\n

There\u2019s no need to seek a balance. If European companies are productive and innovative, competition will increase both within Europe and globally, lowering prices and improving the quality of goods and services. The alternative would be to distribute subsidies to companies well-connected to the government, wasting money on politically motivated activities without needing to innovate or be productive to survive. The result would be less competitive global companies, higher prices, and reduced domestic competition. There\u2019s no possible compromise here.<\/span><\/p>\n

In an interview in <\/b>Eco’s<\/i><\/b> May issue, Enrico Letta emphasised the importance of transitioning from 27 national telecommunications markets with hundreds of operators to a single significant European market with 4-5 multinational operators. Do you agree, and is this feasible?<\/b><\/p>\n

I completely agree, and I see no technical obstacle to a single operator serving such a large number of consumers. The real barrier is the lack of economies of scale between member states, each of which has different frequency allocation policies. In many sectors, national regulators want to keep power, forcing local companies to follow the directives of local politicians. But building a single market requires less involvement from national regulators.<\/span><\/p>\n

Let’s talk about Big Tech. According to the US Department of Justice, Google has built an illegal monopoly by investing $20 billion a year to exclude competitors. We\u2019ll see what the courts decide, but what could be the outcome for Alphabet and Big Tech in general?<\/b><\/p>\n

Google has been found guilty of violating US antitrust laws, as the European Commission had already determined ten years ago. While US enforcement is much further behind Europe\u2019s, they could contribute in terms of remedies. The remedies adopted by the EU haven\u2019t had a significant impact, and even the Digital Markets Act (DMA) doesn\u2019t seem promising in the search sector. A strong remedy in the US could make a global difference.<\/span><\/p>\n

For a long time, US antitrust authorities were more cautious than their European counterparts in tackling monopolies by major digital platforms. But the US case against Google seems to have flipped the roles. How do the EU and US approaches to Big Tech monopolisation differ?<\/b><\/p>\n

The EU realised that antitrust cases take too long and that the remedies are often limited or ineffective. That\u2019s why it turned to regulation. The Digital Markets Act allows the European Parliament to adopt the solutions it deems necessary to ensure that markets work for consumers, without the need for endless antitrust cases that don\u2019t solve structural problems. In the US, there are ongoing lawsuits against Google Search, Google Ad Tech, Facebook\u2019s serial acquisitions, Amazon\u2019s price parity conduct, and Apple\u2019s monopoly. It will take years before we see judgments and remedies in these cases, while the EU\u2019s DMA is already moving forward.<\/span><\/p>\n

The European Union lags behind in the digital economy: none of the companies that have driven technological innovation in the last ten years are European. Is this due to stricter competition rules than in the US? Are new regulations solving or exacerbating the problem?<\/b><\/p>\n

The difference in the growth of digital startups across different jurisdictions isn\u2019t due to competition laws but rather to factors such as access to capital markets, attitudes toward risk, labour laws, and immigration policies. The Digital Markets Act and the Digital Services Act won\u2019t change innovation policies since they mainly regulate already-established digital companies. However, these regulations improve entry conditions for all commercial users, including European ones.<\/span><\/p>\n

Box: Digital Markets Act and Digital Services Act<\/b><\/p>\n

The Digital Markets Act (DMA) is a European Union law aimed at regulating large digital platforms (called “gatekeepers”) by imposing rules to ensure fair competition and prevent abuse of dominant positions, thereby promoting a more open and competitive digital market.<\/span><\/p>\n

The Digital Services Act (DSA) is an EU law that regulates digital services by imposing obligations to combat illegal content, protect users, and promote transparency on online platforms, ensuring greater responsibility and safety in the digital environment.<\/span><\/p>\n

Even well-intentioned regulations are sometimes seen as annoying by users (and as lost profit by companies). For example, after the DMA, we can no longer click on Google Maps directly from a Google search, and many people are complaining. How should we handle these complaints as the DMA’s application is refined?<\/b><\/p>\n

Consumers are used to buying a house and then deciding how to furnish it\u2014purchasing the furniture and having it installed. Furnishing a house is hard work, so a monopolist in the real estate market could offer fully furnished homes, or even sell only furnished homes. The monopolist might say it\u2019s much more convenient to buy a furnished house and that they have excellent taste in furniture. And if the housing market had always been dominated by this monopolist, there would be no independent furniture suppliers, and consumers would think it\u2019s normal to buy a house already furnished. But if the government required the monopolist to offer unfurnished houses, some buyers would take the opportunity to furnish their homes as they please. Those buyers would stimulate the furniture market, creating new opportunities and more choice. Of course, the monopolist would encourage consumers to complain to regulators about the \u201cannoyance\u201d of having to choose how to furnish their homes rather than buying an all-in-one package.<\/span><\/p>\n

Among the many provisions of the DMA, one requires gatekeepers to inform the Commission of every merger and acquisition. Do you think this will reduce the risk of \u201ckiller acquisitions,\u201d where giants buy smaller companies just to prevent future competition?<\/b><\/p>\n

That\u2019s one of the DMA’s goals, so we hope so.<\/span><\/p>\n

The reform of EU state aid rules and the implementation of the foreign subsidies regulation are clear reflections of trade tensions between the EU and the US, and a response to the Inflation Reduction Act. Do you foresee this trend intensifying, or do you see signs of a return to shared goals?<\/b><\/p>\n

I don\u2019t think the US is deliberately trying to harm Europe or European companies but is instead trying to bring the benefits of economic growth back to a segment of the population that has lost faith in democracy. Since the US cannot be a good partner for Europe unless it is a strong democracy, the trade restrictions imposed by the Inflation Reduction Act might have some justification.<\/span><\/p>\n

One last question about artificial intelligence. Doesn\u2019t an organic and pre-emptive regulation like the EU’s AI Act risk stifling innovation in such a rapidly evolving sector?<\/b><\/p>\n

I think the biggest risk is regulating competition in the AI sector too early because we still don\u2019t fully understand the problems that will arise from it. Many players are collaborating, the technology is evolving quickly, and use cases are still developing. On the other hand, it\u2019s possible to start regulating the use of AI in competitive contexts. For example, AI could facilitate collusion between competitors. There are also many other areas, such as safety, where we should already start regulating it.<\/span><\/p>\n

In late April, the US Federal Trade Commission (FTC) announced a ban on non-compete clauses in employment contracts, which we discussed in <\/b>Eco’s<\/i><\/b> June issue. Was it the right decision, or did it go too far? Why haven\u2019t European authorities been as active on this front?<\/b><\/p>\n

Formally limiting the use of non-compete clauses is a big step forward. Personally, I would support adopting similar regulations at the national level, like those in California, which include some reasonable exceptions. European authorities don\u2019t face the same degree of labour market exploitation, thanks to the stronger role of unions and much stricter labour regulation in Europe.<\/span><\/p>\n

Non-Compete Clauses<\/b><\/p>\n

A non-compete clause is an agreement or clause in an employment contract that prevents an employee from leaving their company to work for a competitor or start a new business in the same sector. Non-compete agreements are justified by the need to protect trade secrets and avoid discouraging companies from investing in their employees, such as providing specialised training that could be lost if the worker later moves to a different company.<\/span><\/p>\n

Bio<\/span><\/p>\n

Greta Ardito is a journalist and editorial coordinator for <\/span>eco<\/span><\/i>. She has worked for <\/span>Sky TG24<\/span><\/i> and <\/span>Class CNBC<\/span><\/i> and has contributed to <\/span>lavoce.info<\/span><\/i>, <\/span>Wired Italia<\/span><\/i>, <\/span>Linkiesta<\/span><\/i>, and <\/span>Il Foglio<\/span><\/i>.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Fiona M. 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