Check against Delivery!
1. Welcome
When I was asked to speak to this meeting that I was a bit hesitant, I must confess. Because today I am, after all, the guest at a kind of merger, or at least a cartel agreement: That is the simultaneous opening of
But I was told that I need not worry; There was no problem with anti-trust legislation with this form of cooperation. So, I am glad to be here, and I should like to welcome you warmly to these two events in my capacity as the Federal Minister of Economics and Technology and as the chairman of the European Competitiveness Council:
The large number of participants from Germany and abroad, from government ministries, competition authorities, the European Commission, from science, from prosecution authorities and the business community proves the ongoing interest in issues of competition policy. And if such a conference is held at such a beautiful place of venue as the capital of the Free State of Bavaria, the journey has been worthwhile in any event.
2. Competition as a guarantor of a free economic and social order in Germany
The motto of this event is: „Competition as a guarantor of a free economic and social order in Germany.“
It was Ludwig Erhard, who translated this sentence into practical German policy. In 1948, Ludwig Erhard, who was to become our first Federal Minister of Economics, lifted state control of the economy and liberalised pricing. With this policy decision in favour of competition and the social market economy he has freed citizens from state tutelage. Ludwig Erhard firmly believed that people need freedom, scope of action and responsibility. He was convinced that competition is a corner stone in a free social order. He established the present competition system without which our present prosperity would be unimaginable.
3. Competition is the guarantor of peaceful integration in Europe
For 50 years now, freedom and competition have been the driving force of integration of national economies. The foundation of the European Economic Community after the catastrophes of two World Wars was the first serious attempt at uniting Europe in a peaceful way. From its beginnings with originally six Member States, the European Union with 27 Member States has meanwhile become the world’s biggest common market with almost 500 million inhabitants. States that during the cold war were irreconcilable antagonists nowadays meet in Brussels in order to discuss how to make a joint effort in increasing competitiveness.
4. Competition in a globalised environment
Europe and its Member States are nowadays in fierce competition with the USA as well as with Asian countries like China and India. These countries increase their shares in world trade by buoyantly rising exports and become more and more attractive to foreign investors. I know the kind of anxiety the resultant change generates with many people and small enterprises. But globalisation is a fact which Europe has to face. Individual Member States are hardly in a position to successfully represent their interests in the globalised world. Europe is a „global player“ of first rank and need not fear global competition. Europe is a winner of globalisation. Instead of protectionism, we therefore need competition and an outward-looking and liberal trade policy. It is therefore of particular importance for the German EU Council Presidency and for the G8 to provide new impetus to the Doha Round.
5. Competition in present politics
In order to prove that all this is not simply lip service of the Federal Minister of Economics in the tradition of Ludwig Erhard, let me give you a few examples from government policy.
First: Liberalisation of postal services
I abide by the decision to end the letter monopoly on 31.12.2007. We need open postal services markets in all EU countries:: From 2009 all monopoly areas are to be liberalised. It is also true for postal services markets: Market opening leads to lower prices, greater diversity and better quality. The often quoted scenario of an invasion of the German market by foreign postal companies is no realistic threat, in my view.
Second: Energy
In Europe, the big energy suppliers are suspected of abusing their market power for lack of competition - to the detriment of the consumer. There is a whole series of proposals on how the situation could be remedied, both nationally in Brussels. The EU Commission, for instance, has proposed to disinvest the grids – the so-called „ownership-unbundling“. Whether we will have to go that far in the end, remains to be seen. In my mind, however, it is important to carefully examine all options. Despite all criticism of different scientific bodies and the Monopolies Commission, I am firmly convinced: We must also make full use of existing possibilities of the competition law and react without delay. I want to enable the cartel authorities to provide evidence of abuse and to combat abuse effectively. I have therefore initiated an amendment of the German Act against Restraints of Competition.This amendment aims at making the instruments of the Cartel Office more effective until such time as new power stations have been put in place and new providers have entered the market. And the newly emerged suspicion that electricity providers have manipulated prices at the Leipzig Energy Exchange (EEX) shows that there is a need for action.
Third: Competitive federalism
A few days ago, the Commission on Federalism was constituted in Berlin. Its purpose is to modernise financial relations between the Federal and the Länder levels as well as among the Länder and to stop increasing government borrowing. In my opinion: The success of such modernisation will be all the greater the more elements of competition are built into our financial constitution. The Länder need more freedom to that effect. In practical terms, this means: More autonomy of the Länder on the revenues and spending sides.
Four: Labour market
Odd coalitions have emerged on the topic of minimum wages: Hand in hand, trade unions and employers fight for minimum wages in some sectors of the economy – though for entirely different reasons. The ones call for minimum wages meaning minimum income. The others call for minimum wages meaning the elimination of unwelcome competition. This is the opposite of freedom and competition. None of the two sides are concerned about jobs in Germany and even less about competition.
Fifth: Railway reform
We need more competition also in the railway track system, not less. I will pay special attention to that as soon as a concrete government bill on the privatisation of the German railways is discussed. Competitors of the railways must have non-discriminatory access to the track system. And the Federal Network Agency must be enabled to monitor this development effectively.
As the second president of the Federal Cartel Office, Wolfgang Kartte, rightly said on one occasion: „Competition has no lobby. Correct! It is therefore the task of the government to protect competition and secure freedom for all market participants. Government must set the rules of the game and see to it that they are obeyed. As in every game, competition produces winners and losers – even where the umpire or referee sees to fair compliance with the rules. Without the chance of making a profit and without the fear of being defeated, competition would not be competition! Competition needs this harsh and ruthless principle of selection. This does not mean that competition is liked for this reason! No wonder that losers appeal to the government for help to make life less disagreeable. It is one of the greatest challenges of the social market economy to handle this in an adequate way without ruining competition at the same time. At the end of the 18th century, Adam Smith in his famous and important book „The Wealth of Nations“ wrote: „Merchants are interested in limiting competition“. For entrepreneurs, competition means risks and costs. Aspirations for a market leadership that is as safe as possible together with the associated profits are quite understandable from the entrepreneurs‘ point of view. Many companies use their freedom in order to eliminate unwelcome competitors by way of cartel agreements and the abuse of their dominant market positions. This is where government and competition authorities have to come in. They protect competition in order to safeguard the freedom of consumers. The competition authorities need appropriate tools for an effective and targeted regulation and supervision of competition. In Germany, the independence of the cartel authorities has stood the test. Such independence is the best guarantee of a long-term and sustainable competition policy alleviating the pressure of day-to-day politics on those who have to apply the law. And in important issues, there normally is such pressure. Ministerial permission is the safety valve which lets off this pressure in individual cases. In exceptional cases, the instrument of ministerial permission allows corrections to be made for reasons other than those of competition. The independence of competition authorities, however, also implies special responsibility of the authorities vis-à-vis market participants. It must always be examined whether the restriction of freedom associated with government interference weighs more heavily than the restriction caused by the issue at the base of the complaint.
Conclusion: Effective protection of competition leads to better market results. And better market results are at the same time the best advertisement for competition.
An important sub-topic of this Conference is „National Champions“. National Champions are amongst the best of their country: This applies to sports, it applies to schools and universities as well to companies. In football, big and successful clubs like Bayern München are important for the attractiveness and the success of the national football league and for the reputation of German football all over the world.: Just as much we need businesses which play a leading role in their economic sectors: Businesses negotiating as equals on an international scale and are able to hold their own in global competition. Such national champions, however, are often not only big businesses, and this is especially true for Germany.
National Champions are also SMES that – in their niches – play a leading role in innovation whereby some of them are even world market champions. Regardless of company size: As in football, national business champions also have to abide by the generally accepted rules of the game. Often mergers generate national champions. But mergers must not end up in market dominating positions. National Champions dominating the market on account of internal growth must be subjected to effective abuse control. Above all, national Champions must not be abused as an instrument of national protectionism and isolation: This is the danger which I see in the energy sector. Even the competition authorities are regularly helpless against such practices: European and international competition falls by the wayside. And the consumer is left with footing the bill by having to pay higher prices.
Tomorrow, you will be discussing yet another topical issue: „Consumer welfare and efficiency – New Guiding Principles of Competition Policy?“ The choice of this topic I find rather surprising. I was and I am convinced: Competition that works is the best consumer protection. Protection of competition and consumer welfare are therefore no opposites, as far as I can see. It is the task of competition policy to hold up both aspects while observing economic principles. Positive market results for consumers can only be achieved regularly via competitive structures. It is therefore my aim to full range to market mechanisms, wherever this is possible. And I believe that the European Commission agrees with me on this view. The European Commission protects both competitive structures and consumers. This is demonstrated by the Commission proposals on boosting competition in the energy sector. With its proposals on „unbundling“ or independent grid operators, the Commission applies structural means to boost competition in the energy sector. Successful competition policy, its strict implementation and effective competition law must observe market structures in the same way as market results.
Finally, I will not omit, dear Dr. Böge, to thank you as the host of this double conference. When you took office in Bonn over seven years ago, it was the first time that an economist became the President of the Federal Cartel Office. In your term of office, you have gained great merits both at the national and the international levels in promoting competition and its effective implementation. In 2001 you were one of the founder fathers of ICN and also its chairman until last year. In this forum you have established and steadily improved global cooperation among competition authorities. This has greatly improved the effectiveness and weight of competition law rules. You will also be recorded in the annals of the history of competition as a courageous protagonist of consumer interests at national level. Inspired and relentlessly you have fought against price cartels in different sectors of the economy as for instance in cement production and insurance. You have also been highly successful in the proceedings of the Federal Cartel Office against gas suppliers on account of long-term supply contracts.
Dear Dr. Böge: Let me thank you for your great sense of commitment in the course of the last seven years and wish you all the best for your future. I expressly include the whole staff of the Federal Cartel Office in my words of thanks. I wish us and especially you, dear Dr. Böge, that this last conference with you in the chair will produce a flood of ideas on how to improve competition.
