1. 1 BIICL Conference London, 24 November 2006 Championing National Or European Interests? Merger control and the integration and liberalisation of markets in the EU Nadia Calviño Deputy Director-General, DG Competition, European Commission

2. 2 Overview n Open, competitive markets are key drivers for growth in Europe: Internal Market provides opportunities for expansion and prosperity – Lisbon Agenda designed to accelerate this process. n Integration of markets implies that industrial restructuring can take place across national borders. n Competitive process requires that industries can restructure as they see fit – including by changes in ownership. n European industry is seizing these opportunities and integrating at EU level and worldwide. Is there a “Europeanisation” of EU industry? What is a national champion?

3. 3 EU cross-border mergers n Trends in EU cross-border mergers: – ECMR filing statistics: over 2/3 mergers notified to Commission in 2000-2005 period were not “domestic” (between firms within one Member State) – Geographical source of company revenues: over 50% from “home markets” (within one Member State) in 1997; less than 40% in 2005 n Marked increase in cross-border mergers in network industries (telecoms, transport – postal and energy sectors).

4. 4 Merger control in regulated markets n Important role of competition policy in the liberalisation of the Telecoms markets. n Ongoing liberalisation in the energy market: - EU regulatory process: 2003 gas and electricity directives. - Absence of real european energy markets: outstanding national regulations and market structures. n Accelerating process of cross-border energy mergers + Commission’s sector enquiry: Preliminary report identifies market concentration (national markets with strong incumbents + vertical integration) as major concern. n merger control can facilitate energy market liberalisation by – ensuring that “horizontal” concentration does not impede effective competition by strengthening incumbents – ensuring that “vertical” integration does not impede effective competition by foreclosing access to national markets

5. 5 Energy mergers: horizontal and non-horizontal effects EFFECTS n Unilateral effects, eliminating both: – Actual competition (EDF/Suez (2006)) – Potential competition (EDF/ENBW (2001);EDF/ENI/GDP (2004)) n Coordinated effects (VEBA/VIAG (2000)) n Input foreclosure (EDP/ENI/GDP (2004); Eon/MoL (2005); GDF/Suez (2006)). n Customer foreclosure (EDP/ENI/GDP (2004)) REMEDIES n Traditional remedies: divestiture of production/distribution assets; severing of ownership/supply links between competitors; gas/contract releases n “Ownership unbundling” remedies (i.e. structural separation into unaffiliated entities): objective is to achieve vertical separation, thereby contributing to market liberalisation – examples: Eon/MoL; DONG/Elsam/E2; GDF/Suez

6. 6 National or European Champions? n Merger wave: Increasing numbers of transnational mergers. n EC merger control does not impede creation of European/global firms but aims at protecting effective competition: productive efficiency and consumer welfare. n Complex assessment in regulated markets: Concentrated structure, vertical integration, barriers to entry: The absence of an internal market. n Merger control is a powerful tool for reinforcing integration and liberalisation of EU markets but it is not the only one. n The Commission has played a relevant role in liberalisation of regulated markets (telecoms, rail, postal). n The need for an integrated European energy policy: Creation of a single market.