Neelie Kroes
Member of the European Commission in charge of Competition Policy

"Competition Law and the Liberalisation of the Polish Market"

Dutch-Polish Chamber of Commerce Conference
Warsaw, 24 ^th June 2005

Ladies and Gentlemen,

It is a great pleasure for me to be here today, just over one year after Poland's accession to the European Union, and just over six months since I took over from Mario Monti as the European Competition Commissioner. This has been a year of great change for us all. Today, I would like to look ahead, at the implications of competition law and policy for Poland in the years to come.

No discussion of the competition rules can begin without setting the scene in the context of the re-launched Lisbon Agenda. The re-launched Strategy for growth and jobs is fundamental to the future growth and competitiveness of the European Union. Vigorous competition, and sound competition rules, are essential for the implementation of the strategy. Competition makes European companies stronger. It ensures their sustainable growth by improving their efficiency and innovative capacity, improvements which ultimately benefit our citizens.

There are three ways in which a properly-managed competition policy leads to greater competition:

- through the enforcement of competition law against undertakings;

- through competition advocacy ; and

- through the application of the competition rules to legislation and State aid action.

If we want a strong and competitive market, we need to combine our actions to direct them towards improving both the conduct of companies, and the wider regulatory environment.

This means that competition policy is a long term project. It requires consistent efforts across all areas of the economy and demands the effective use of all legal instruments and measures available. There are few quick fixes in competition policy: determination, persistence and long term commitment are the order of the day! This is why the work done in the run up to Accession was so important for the new Member States.

Pre-accession phase and state-aid policy

As regards your own country, I am pleased to say that the impact of the competition rules upon Accession has been fairly smooth for Poland; there was no "big bang" on 1 May 2004. Several factors contributed to your success:

- first, the good enforcement record established during negotiations;

- second, the participation of the new Member States in the European Competition Network;

- third, the " existing aid " mechanism; and

- fourth, the coordination with national state aid bodies after Accession.

Of course, there are still some issues to be tackled, particularly in the field of state-aid control - such as resolving the last remaining Polish cases under the interim mechanism. There are also ongoing technical discussions on the interpretation of certain concepts, such as the "one time, last time"-principle in restructuring aid. But there have been few hiccups, a fact in which Poland can justly take pride! This is why our collaborative approach to competition has now become a model even for other chapters, in future enlargement exercises.

I have just mentioned that there are still a few outstanding questions to be solved. But I am firmly convinced that resolving them will strengthen the Polish economy. Let us look, for example, at the investigation the Commission just launched into restructuring the three Polish shipyards. We need to verify whether this will restore the long term viability of the yards, and whether the companies themselves are committed to restructuring. If these conditions are met, state aid will be approved. If not, then granting state aid would help neither the shipyards nor the workers in the medium term anyway. To state it simply: we all want to ensure the future viability of the yards. Let us now work together constructively to make this happen.

It is this focus on the future sustainability and strength of the EU economy that also inspires my proposals for State Aid Reform . On 7 June, the Commission adopted the State Aid Action Plan, a roadmap for comprehensive reform to be carried out over my entire mandate. This reform is based on the twin principles of efficiency and equity . It puts an increased focus on economic analysis, which helps us target state aid efficiently to improve the functioning of markets, to make them more able to deliver the political objectives we are working towards, like regional and social cohesion, human capital, cultural diversity or a sustainable environment. At the same time, a better economic focus means we can reduce as much as possible state aid that distorts competition.

This is why our Action Plan foresees a structured review of all state aid instruments, including regional aid - a point of particular interest to this country. We need to target regional aid better on those regions most in need. But we also need to take account of the specificities of our Member States. In the case of Poland, the whole country will continue to be eligible for regional aid. But in line with our overall aim of less state aid, subsidy levels across the EU may decrease. Our objective is to have detailed guidelines ready by the end of 2005, in good time for the next programming period.

Our reform should also make state aid rules more efficient by making them simpler, clearer, more user-friendly and more predictable. I want to reduce the administrative burden by focusing on cases that really matter, and facilitating the granting of aids that clearly promote the Lisbon Strategy.

This reform should take place in the most open way possible. The Commission is beginning a process, but if it is to work, it needs the partnership of all stakeholders. The Commission cannot improve state aid rules and practice without the support of Member States - their governments and regions, but also their citizens. I very much look forward to the contribution Poland will make to this important process.

Liberalisation, SGEI and Article 82

It is perhaps inevitable that in the pre-accession years, much emphasis was placed on state aid control. Nevertheless, this is only one part of what is needed to create a competitive market and a strong economy. The liberalisation of economic activities that are subject to legal monopolies represents another, equally important, instrument of competition policy - and this is the area which this Conference will look at in more detail today.

Sector monopolies in key services such as gas and electricity, transport or postal services have often proved to be inefficient - both in terms of cost-efficiency and ability to satisfy citizens' expectations for quality and price. Competition can improve the performance of these sectors and improve consumer satisfaction and welfare, as the EU's experience in telecoms and energy - to name but two sectors - has shown.

The Commission attaches great importance to ensuring accessible and affordable public services, and to the social policy objectives that underlie them: liberalisation at Community level supports social objectives, while maintaining the provision of high quality and accessible public services. This is why competition policy allows financial compensation for firms that carry out public service obligations. It only intervenes where there is `over-compensation' or `cross-subsidisation'. The key objective for public services is therefore to set up a framework which guarantees the financing and provision of public services, but avoids unnecessary distortions of competition.

In those areas where regulatory monopolies have been removed, we need to stop former monopolists from preventing market entry by new suppliers. Article 82 is therefore an important tool, and vigorous Article 82 enforcement in newly liberalised sectors is essential to ensure the success of liberalisation. This is why the Commission has pursued cases against Deutsche Telekom and France Telecom, for example. I know that similar conduct by the Polish TP has been attacked by the Polish competition authority. I can only congratulate the Polish authorities for their resolve, and encourage them to maintain their vigilance!

Deregulation

State aid control, liberalisation and Article 82 enforcement are perhaps the most visible ways in which the application of sound competition principles can strengthen the Polish economy. But competition policy also plays a more subtle role, in preventing government regulation - at national, as well as at European level - from distorting the market. That is why one of my priorities is to increase the competition screening of EU and national legislation, to improve the quality of legislation and to make sure it meets its purpose without unduly distorting competition. A competition test has therefore been included in the Impact Assessment of EU regulatory proposals. And I am encouraged that increasing numbers of Member States are routinely resorting to this practice for national regulation too.

Sector inquiries

The tools I have discussed so far address regulatory measures or the conduct of companies that distort competition. Sometimes, however, it is not immediately obvious why competition does not work properly in a given market. A Commission " sector inquiry " may then be needed. This allows us to gather information from a broad range of economic actors and to identify the reasons why markets do not fully function. If a sector inquiry confirms the existence of anti-competitive practices, the Commission or the national competition authorities can then look at remedial actions.

A few days ago, the Commission endorsed my proposals to open sector inquiries in the energy and financial sectors . In the energy sector, I am most concerned about the alignment of suppliers' offers, the rising prices and the insufficient unbundling between network operators and incumbent suppliers. We will look closely at these and other issues, and hope to publish an interim report towards the end of this year. As for financial services, we will look at retail banking and business insurance services.

Sector inquiries are complex and resource intensive. It is therefore likely that these inquiries, and any cases which may flow from them, will cover a good part of my mandate. Other `candidate areas' for sector inquiries will certainly appear. But I want to see progress on these inquiries first, before choosing further sectors.

Ladies and Gentlemen,

Over the past forty-seven years, the competition rules of the European Union have helped create a single European market and, more importantly, to make it work effectively and fairly. I am pleased that Poland is increasingly sharing the benefits of this market, where companies can fulfil their growth potential, and consumers enjoy lower prices and higher quality goods and services.

The challenges we face to keep this market open are constantly changing, and we need to adapt. In addition to vigorous pursuit of individual cases, I have outlined today a set of areas - state-aid reform, the screening of EU and national legislation, sector inquiries - where new actions can meet the new challenges.

But we will not be able to make this policy a success without the support and commitment of all of you. Not only to ensure that state aid targets social and regional cohesion or innovation, but also in following through on liberalisation, screening national regulation, and ensuring strict scrutiny of dominant companies under Article 82.

There is a lot to do. But if we work together, if we ensure that sound competition principles and sound economics apply throughout the Polish economy and throughout the EU, then we will build a strong, vibrant economy, to the benefit all of our citizens.

Ladies and Gentlemen, thank you for your attention.