This presentation by Fabienne ILZKOVITZ & Adriaan DIERX from the DG Competition at the European Commission, was made during the Workshop on market studies selection and prioritisation of sectors and industries held on 9 March 2017 at the OECD Headquarters. More papers and presentations on the topic can be found out at http://www.oecd.org/daf/competition/market-studies-workshop-on-selection-prioritisation-of-sectors-industries.htm

1. Fabienne ILZKOVITZ & Adriaan DIERX
Economic Evaluation of Competition Policy
DG Competition, European Commission
Workshop on the selection and prioritisation of sectors or
industries for market studies
Paris, 9 March 2017
Selection and prioritisation of sectors or
industries for EU sector inquiries
1

2. Outline
1. Scope
2. Definition, purpose and legal basis
3. Approach used to select sectors
4. Overview of main reasons for past Sector Inquiries
5. Concluding remarks
2

3. Definition of tools to deal with poorly performing markets
3
Tools Objectives
Sector screening Identification of poorly performing markets/sectors
Market monitoring
First analysis of market/sector developments with a
view to identify the nature and source of problems
Market study/
Sector Inquiry
In-depth analysis of the problems detected with a
view to identify if there is scope for policy
interventions
1. Scope

4. 4
Market studies are defined as (ICN 2016 Report):
Research projects aimed at gaining an in-depth
understanding of how sectors, markets, or market
practices are working.
Why conduct a market study?
To gain a better knowledge of poorly performing
markets/sectors with a view to identifying if there is
scope for policy interventions that could remedy the
poor performance.
1. Scope

5. 5
European Commission Sector inquiries are market studies aimed at
determining whether competition is restricted or distorted, and if
there is scope for competition policy interventions.
Other types market studies in the European Commission:
 Sectors not functioning well from a consumer's perspective 
Market studies on e-commerce, second-hand cars, internet
service providers, meat, retail financial services, and retail energy
to identify if there is scope for consumer policy interventions.
 Sectors not functioning well from a Single Market perspective 
Single Market Information Tool to identify important cases of
cross-border Single Market malfunctioning.
1. Scope

6. 6
2.1 Definition
Sector inquiries are:
 investigations that the European Commission (DG
Competition) carries out into a particular sector of the
economy or into a particular practice across various
sectors in order to better understand how competition
in the sector works in practice;
 when it believes that a market is not working as well
as it should, and also believes that breaches of the
competition rules might be a contributory factor.
2. Definition, purpose and legal basis

7. 7
2.1 Definition
Sector Inquiries can be carried out in the areas of
antitrust and State aids
Antitrust:
 To identify agreements or other practices breaching
antitrust rules
State aid:
 To identify whether State aid measures in a particular
sector distort competition within the Internal Market
 First State aid inquiry into electricity capacity
mechanisms launched in April 2015 .
2. Definition, purpose and legal basis

8. 8
2.2 Main purpose
To achieve a better knowledge of a particular sector of the
economy or a particular practice/aid instrument across various
sectors with a view to identifying areas where competition
policy interventions may be necessary.
Further beneficial effects:
 Deterrence of anticompetitive behaviour
 Strengthening of the complementarities between
competition and regulatory policies
 Competition advocacy
2. Definition, purpose and legal basis

9. 9
2.3 Legal basis
In the area of antitrust, Article 17(1) of Regulation
1/2003 allows the European Commission to conduct an
inquiry into a sector of the economy or into particular
agreements across various sectors if
 Trend of trade between MS
 Price rigidity
 Or other circumstances
suggest a restriction or distortion of competition within
the Internal Market.
2. Definition, purpose and legal basis

10. 10
2.3 Legal basis
In the area of State aid, Article 25 of the State aid Procedural
Regulation empowers COM to conduct an inquiry into a sector
of the economy or the use of the aid instrument:
 where the information available substantiates a reasonable
suspicion that State aid measures in a particular sector or
based on a particular aid instrument may materially restrict
or distort competition within the internal market in several
Member States, or
 that existing aid measures in a particular sector in several
Member States are not, or no longer, compatible with the
internal market.
2. Definition, purpose and legal basis

11. 3.1 Main principles
The European Commission has a wide discretion in
choosing when and where to launch a Sector Inquiry.
Sector selection is based on a flexible approach
combining:
 Top down and bottom up criteria
 Objective criteria and judgement
 Not used in a mechanical way
11
3. Approach used to select sectors

12. 3.2 Top down criteria
Has the sector been identified as a strategic priority?
A sector can be considered as a strategic priority because it is
important for economic efficiency and welfare of consumers.
A sector can also be selected because considered as a strategic
priority by the European Commission (EC). The EC may also take
into account requests by the European Parliament (EP) but the EP's
requests have no binding power.
12
3. Approach used to select sectors

13. 3.2 Top down criteria
Has the sector been identified as a strategic priority?
For example, strategic priority for the European Commission:
 E-commerce Sector Inquiry  Digital Single Market = one of the
ten most important priorities of the Juncker Commission.
 E-commerce = important driver of price transparency and price
competition.
For example, strategic priorities for the European Parliament:
 In its March 2010 resolution on the Annual Competition Report,
the European Parliament called on the Commission to carry out
Sector Inquiries in certain specific areas: food supply, media
concentration, telecommunications and financial services.
 European Commission has followed up by launching sector
inquiries or expert studies in these areas. 13
3. Approach used to select sectors

14. 3.2 Top down criteria
Are there indications that a sector/market is not
functioning well from a competition policy perspective?
Readily available information is used to determine whether
 Obstacles to trade and a lack of integration of the Internal
Market
 Price rigidity leading to differences in prices between
Member States
 Lack of market entry by competitors, decrease in innovation,
misuse of IPRs, …
may be due to a restriction of competition.
(criteria Article 17(1) of Regulation 1/2003) 14
3. Approach used to select sectors

15. 3.2 Top down criteria
Are there indications that the sector/market is not
functioning well from a competition policy perspective?
For example, in June 2005 the Commission adopted a decision
launching the energy sector inquiry inter alia because:
 Cross-border flows seemed to be limited and integration between
national wholesale markets had been slow
 Prices had risen and forward prices pointed to further price rises
in the future
 Market concentration remained very high and limited new entry
+ Sector representing a strategic priority 15
3. Approach used to select sectors

16. 3.2 Top down criteria
Sector Inquiry requires significant resources from the European
Commission and represents a burden on those under
investigation
Is the Sector Inquiry the appropriate and necessary tool?
A decision needs to be taken as to the proportionality of
launching a Sector Inquiry
 SI appropriate and necessary:
- when the competition problems are industry-specific
- when it is likely that competition problems concern various
categories of actors or types of agreements
- when it is necessary to make use of the Commission’s
formal investigative powers to get the relevant information
16
3. Approach used to select sectors

17. 3.2 Top down criteria
A sector Inquiry may not be necessary and appropriate:
 If there are no suspicions of industry-specific competition
problems
 If the main objective is to get general information on a sector
In this case, less burdensome, time-consuming and resource-
intensive means should be considered.
Examples of other means to get such information:
- Informal contacts with market players
- Expert study
17
3. Approach used to select sectors

18. 3.3 Bottom-up approach
Based on information obtained from market players or case
handlers specialised in the sector:
Market players:
 Complaints from competitors, consumers
 Market players’ submissions to the Commission about the
sector
Case handlers responsible for regular sector monitoring:
Sector monitoring = Monitoring of sector developments by
collecting and organising readily available information about the
sector with a view to identifying problems of malfunctioning
18
3. Approach used to select sectors

19. 3.3 Bottom-up approach
Matrix organisation of DG COMP allows to carry out sector monitoring
Matrix organisation allows combining policy instrument and sector
knowledge
19
Sector Directorates/Instruments Antitrust Mergers State aid
Energy and environment
Information, communication and media
Financial services
Basic industries, manufacturing and agriculture
Transport, post and other services
3. Approach used to select sectors

20. Flexible approach combining top down and bottom up
information taking into account:
 Strategic importance
 Indications of competition problems
 Proportionality of the Sector Inquiry
 Information from market players
 Information from case handlers
3.4 Summary
20
3. Approach used to select sectors

21. 21
Since 1999, six antitrust Sector Inquiries and one
State aid Sector Inquiry have been launched:
 Telecommunications
 Media
 Financial services
 Energy
 Pharmaceuticals
 E-commerce
 Capacity mechanism in the area of State aid
4. Overview of main reasons for past Sector Inquiries

22. 22
Sector Period Reasons for selecting this sector
Telecommunication
services, including
international
roaming and leased
lines
1999-2002  Strategic sector
 No competitive prices and pan-European
offers. For example, large difference in price
between roamed and non-roamed
international mobile calls to the same
destination within the EU
 Complaints about extremely high roaming
charges and collusion on roaming rates
 Complaints about very high leased line
prices
4.Overview of main reasons for past Sector Inquiries

23. 23
Sector Period Reasons for selecting this sector
Financial services, including
retail banking and business
insurance
2005-2007  Priority sector (parallel initiatives to
remove regulatory barriers within the
Single Market for financial services)
 Sector important for competitiveness
and consumer welfare
 Indicators of market fragmentation and
entry barriers such as variation of prices
for comparable products across the EU
 Indicators of lack of countervailing
demand power in retail banking
 Concerns regarding market foreclosure
and practice of excessive cooperation
4.Overview of main reasons for past Sector Inquiries

24. 24
Sector Period Reasons for selecting this sector
Energy 2005-2007  Gas and electricity provide crucial inputs for
European industry
 Potential important benefits for consumers in terms
of lower price and larger choice.
 High concentration and small number of entrants
 Limited market integration (in particular, limited
cross-border flows)
 Significant price increases and lack of transparency in
prices
 Network operators favour their affiliates due to
vertical integration and inadequate unbundling
 Consumer complaints (lack of competitive offers
from existing suppliers and little trust in existing
mechanism of price formation)
4.Overview of main reasons for past Sector Inquiries

25. 25
Sector Period Reasons for selecting this sector
E-commerce 2015-2017  Priority sector: improving online access is one of the
pillars of the Digital Single Market strategy.
 Sector important for consumer welfare as business
practices adopted by e-commerce operators limit the
ability of consumers to find the best deals.
 Limited cross-border online trade and significant
differences between member states in the proportion of
customers that shop online from retailers located cross-
border.
 Concerns about vertical restrictions, in particular
suppliers’ restrictions imposed on retailers and affecting
online sales.
4. Overview of main reasons for past sector Inquiries

26. 26
Sector Period Reasons for selecting this sector
New media
(3G/Sport Rights)
2004-2005  Availability of attractive content, in
particular sports-related content, has a
critical role to play in the roll-out of 3G
technology which is important for growth
and innovation.
 Media sector characterised by strong
contractual relations between a limited
number of players, thus raising barriers to
entry.
 Concerns that commercial practices in the
sale and purchase of sport rights could
hinder the development of sports services
over 3G networks.
4. Overview of main reasons for past Sector Inquiries

27. 27
Sector Period Reasons for selecting this sector
Pharmaceuticals 2008-2009  Sector vital to the health of Europe's
citizens
 Decline in innovation as measured by
number of novel medicines
 Delayed generic market entry
 Indication of anti-competitive commercial
practices by pharmaceutical suppliers
(using patents to block innovative and/or
generic competition)
 Concerns about agreements
 Market information/monitoring and
information through cases ( e.g., Astra
Zeneca case)
4.Overview of main reasons for past Sector Inquiries

28. 28
Important to use a flexible approach combining top-
down and bottom-up information to select the sectors
Overall practice shows that Sector Inquiries were
mostly launched in sectors that are:
 highly regulated;
 important for economic efficiency and consumer
welfare;
and often where
 undertakings have significant market power
 the application of competition rules raises
complex issues
5. Concluding remarks

29. 29
Sector Inquiries have proven to be an effective and
efficient tool for
 collecting valuable information; and
 contributing directly (through case enforcement) and
indirectly (deterrence effect, regulatory changes) to
improved competition.
Very important to select the right sectors:
 Benefits of the intervention.
 Credibility of the institution.
 Resource requirements
 Burden for stakeholders
5. Concluding remarks

30. 30
• See the website of DG Competition
• on Sector Inquiry
• http://ec.europa.eu/competition/antitrust/
sector_inquiries.html
• http://ec.europa.eu/competition/state_aid
/overview/state_aid_procedures_en.html