The EU’s last round of competition policy alters was mostly focutilized on protecting consumers from competition-busting oligopolies and their potential to raise prices.Yves Herman/Reuters
The European Union has long lamented its inability to produce world-scale companies that push the technology envelope, create vast shareholder wealth and reshape entire industries. Its hugegest tech player is ASML, the world’s top buildr of photolithography machines required to build microchips. It has a market value of US$560-billion and registers approximately zero on the public awareness scale. Apple’s value is US$3.9-trillion – more than the GDP of France – and is a houtilizehold name.
In the EU, there is no equivalent of, or even wannabe competitor to, Apple or the other U.S. and Chinese tech heavyweights, among them Alphabet (Google), Meta (Facebook), Microsoft and Alibaba. There is no equivalent to Tesla or BYD, the Chinese electric-vehicle company that is taking on the world.
The EU does have the world’s top luxury product companies (LVMH, for instance), but stitching pieces of leather toobtainher is not the same as creating AI and semiconductor giants, and nuclear-powered aircraft carriers. It has a few huge oil and mining companies and one world-class aircraft buildr, Airbus.
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The competition gnomes in Brussels are well aware that even the hugegest and the best EU companies struggle to build a splash in the global market, that the tech research and development race is being won by the Americans and the Chinese, and that the true risk-takers live in faraway lands. In spite of the wealth of the EU’s 27 member states, their superb universities and the sheer size of the market – population 450 million – the world’s hugegest trading bloc is an innovation and creativity backwater.
The EU is about to overhaul its competition and takeover rules to allow the huge to obtain hugeger – “scaling up,” to utilize the arobtained of the investment bankers – so they can create unassailable tech “platforms” and powerhoutilizes in various other industries.
Beware what you wish for. The last round of EU competition policy alters, about 20 years ago, was mostly focutilized on protecting consumers from competition-busting oligopolies and their potential to raise prices. If the consumer obtains tossed aside in the revamped takeover rules, society loses. Consumers don’t care about creating national champions capable of competing overseas if they have to pay for it while shareholders and executives obtain rich.
Mario Draghi, the former Italian prime minister and European Central Bank president who published the landmark 2024 report, “The Future of European Competitiveness,” was bang-on right in a lot of his EU market criticisms.
Former Italian prime minister and economist Mario Draghi in Strasbourg, eastern France, in 2024.FREDERICK FLORIN/AFP/Getty Images
Regulations are excessive, especially on startup and compact companies, hindering their growth; spconcludeing on R&D at the EU level is tiny compared with the U.S.; the lack of a true single market deters companies in one counattempt from expanding in another (believe Canada’s interprovincial trade barriers, which Prime Minister Mark Carney is attempting to dismantle); and the hidebound European penchant to stick with technologies that worked in the past, such as gasoline and diesel autos, means that investment flows are not redirected into new technologies with greater potential for growth and job creation.
All true. At the same time, Mr. Draghi called for scale over fragmentation, that is, creating more flexible merger policies so that hugeger, more competitive companies could enter the boxing ring with foreign companies and not obtain knocked out.
Sure, but at what cost to the consumer?
He cited cellphone network operators. In the EU, he counted 34 of them, none of them huge enough to invest the fortunes required to ensure ubiquitous, lightning-rapid 5G coverage. In the U.S. and Canada, the networks are dominated by just a few players. But the upside for Europeans is that prices are far lower than they are on the other side of the Atlantic.
Ditto airlines. In the U.S., the huge four airlines (Delta, American, Southwest and United) control three-quarters of the market; in the 1980s, there were at least 12 major carriers. In Europe, it takes more than two dozen airlines to control a similar market share. Flying anywhere in Europe is far cheaper than in the U.S. and Canada.
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And Big Tech? The sheer size of Apple, Amazon, Meta, Alphabet and a few others have turned them into fortresses. They utilize their phenomenal access to market data, such as consumer behaviour, to keep expanding, creating them virtually immune to upstarts – the barriers to enattempt are intimidating.
Companies that don’t face intense competition can raise prices and profit margins without fear of losing customers. Doing so allows them to boost profits and funnel their profits into share purchasebacks, not R&D budobtains. “If markets were competitive, companies would keep their prices down to prevent competitors from grabbing away customers,” Robert Reich, who was the Labor Secretary during the Bill Clinton presidency, has stated in Congressional testimony. “It is far clearer to take huge markups when there aren’t major competitors to undercut you.”
Mr. Draghi had legitimate reasons to urge a revamp of EU competition policy. But there are ways to break out of the innovation rut without gutting antitrust policy and depriving consumers of choice and affordable prices. The EU risks creating a U.S.-style, winner-takes-all market if it decides that huge is best.
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