• Wednesday, July 24, 2024
businessday logo


Margrethe Vestager examines curbs on non-EU state-backed companies

Margrethe Vestager

Brussels’ competition chief is examining ways of curbing unfair competition from non-EU state-owned enterprises, as bloc member states urge closer scrutiny of Chinese investment on the continent.

Margrethe Vestager, the competition commissioner, said some companies outside the EU were able to use government backing to gain an advantage when acquiring European rivals. She said the commission was looking at possible responses, including proposals for sweeping new powers submitted by the Dutch government.

“We found that there was a gap if, for instance, a state-owned company buys a European company and can pay anything if they want to because other potential buyers are bidding against state coffers,” Ms Vestager told the Financial Times. “We are in the process of trying to figure out what to do about that.”

EU politicians are demanding responses to an aggressive push by Chinese state-supported companies to snap up European assets. Chinese investment in the EU peaked at €37.2bn in 2016, according to figures from the Rhodium Group.

Ms Vestager praised as “very handy” a Dutch proposal, first reported in the FT this month, which would add a pillar to EU competition law, allowing the European Commission to intervene when state-owned companies were distorting competition.

“It is very ambitious and it is also quite worked through. So I think it’s an important contribution to the debate,” the EU executive vice-president said. She stressed she had reached no conclusions on possible reforms to the rules.

Another person with direct knowledge of the commission’s thinking said proposals such as the Dutch idea were “high on the list” when it comes to debating what instruments are needed to better deal with distortions in competition.

Under the Dutch plan, the commission would take on new powers to conduct investigations into a company’s conduct if it thought the business was engaging in “distortionary” behaviour thanks to government subsidies, or if it were deemed to be making excessive profits thanks to a dominant market position in its own country.

The commission could respond by forcing the non-EU company to be more transparent in its book-keeping, or by prohibiting certain behaviour — such as charging artificially low prices in the EU or pursuing takeovers that are not genuinely profitable.

Ms Vestager has just assumed a broader role as executive vice-president of the new commission, which took office this month, giving her powers not just over competition but over the digital agenda and artificial intelligence.

Her comments come as the EU debates whether it needs to foster its own corporate “champions” as part of a more directly interventionist approach to industrial policy. Ms Vestager this year decided to block the rail merger between Alstom and Siemens, dealing a severe blow to a Franco-German plan to create a European behemoth to compete against state-sponsored rivals, mainly China’s CRRC, the world’s largest trainmaker.

Ms Vestager spoke to the FT on Friday during a week in which the commission launched its Green New Deal, an initiative to push the bloc towards carbon neutrality by 2050. With her new powers, she wants to look at the digital implications of Europe’s drive for carbon neutrality.

“For fighting climate change digital technology is not just a nice add-on, it is one of the things that are essential to make this fight successful,” she said. “I don’t think that we can be successful in fighting climate change and become a carbon neutral continent if we don’t use all the technologies available.

“The research and innovation community will have to step up when it comes to reducing the carbon footprint of digital technologies. That’s absolutely significant and cannot be ignored.”