In the first of two articles, Ioannis Lianos analyzes the implications of Mario Draghi’s report on the future of European Union competitiveness. He explores its suggestions for protecting competition, moving to an ex-ante regulatory regime, and moving beyond traditional consumer welfare goals, dispelling exegesis from those who cite the report in support of and against current competition policies.
The recently published Draghi report on the future of competition in the European Union has sparked considerable debate within the competition law community, particularly regarding its suggestions for revamping EU competition law. Some commentators referred to the report to support their criticisms of aggressive EU competition law enforcement and the EU digital regulation’s “red tape,” arguing that these could stifle innovation and disincentivize investment. A closer examination, however, reveals a more nuanced and forward-thinking approach proposed by Draghi, as recognized by others.
Building upon Draghi’s broader perspective on competition policy, my analysis takes a step further by asserting that the report is sympathetic to a polycentric vision of competition law that takes into account untraditional goals for competition policy, such as sustainable development or increasing social mobility. Draghi recognizes the value of competition, albeit primarily from an economic standpoint rather than moral or political ones (hence, his is a “weak” polycentric approach as opposed to a “strong” one that would have argued for a pluralist perspective on the value of competition based on economic, but also moral and political considerations). Crucially, the report advocates for moving beyond a price-centric, static view of competition. It acknowledges the importance of other dimensions of competition and societal goals, including quality, innovation, resilience, security, and sustainability that are also crucial for sustainable productivity growth. This multi-dimensional view aligns with recent global trends in competition policy, where competition authorities and courts increasingly acknowledge that price competition is not the sole relevant factor. By incorporating these broader considerations, the report reflects a growing understanding that competition policy operates within a complex societal context and interacts with various social goals.
The report’s treatment of the General Data Protection Regulation (GDPR) serves as an illustrative example of this nuanced approach. The GDPR regulates data privacy in the EU. While acknowledging the potential economic costs of GDPR in terms of compliance burdens and potential innovation constraints, Draghi also recognizes this as a necessary trade-off between what he seems to consider as conflicting values: protecting privacy and promoting innovation. He observes that “limitations on data storing and processing create high compliance costs and hinder the creation of large, integrated data sets for training AI models,” putting EU companies at a disadvantage relative to the United States and China. However, Draghi frames this not merely as an economic calculation but as a policy choice that should be made through democratic means and in accordance with the European social contract. He writes, “we must ensure that our democratically elected institutions are at the centre of these debates” since “[r]eforms can only be truly ambitious and sustainable if they enjoy democratic backing.” Certainly, as an economist he focuses on the costs of the GDPR, but he does not ignore the benefits of promoting a privacy-centered model of digital economy and data protection. Although some commentators are right to put forward the need of further “democratizing Draghi,” his discussion of democratic decision-making and societal consensus in shaping (privacy) policy distinguishes the report from more conventional economic approaches that might prioritize economic efficiency above everything else.
This weak polycentric approach, while offering a more comprehensive framework for competition law, also introduces new challenges. Adjudicating under multiple, sometimes conflicting objectives could make decision-making more complex and potentially less predictable for businesses and other stakeholders. The practical implementation of these ideas will be crucial. Competition authorities will need to develop new methodologies to weigh various factors in their assessments, potentially requiring new analytical tools and expertise. This may lead to significant changes to legal frameworks, institutional structures, and even in the education of future competition law enforcers, lawyers and economists.
In considering the report’s recommendations, it’s important to view them within a global context. How does this approach align with or differ from competition policy trends in other major jurisdictions, such as the U.S. or China? The answer to this question could have significant implications for international cooperation and regulatory harmonization in an increasingly interconnected global economy. If widely adopted, this approach may lead to a fundamental shift in how we conceptualize and enforce competition law globally. It also invites us to reconsider fundamental questions about the purpose of competition policy and its role in shaping a fair, innovative, and resilient economy.
As evidence of this new direction, one may refer to his suggestion of a “Resiliency Assessment Body” for those sectors where the security and resilience dimensions are “particularly crucial” and that “[t]his assessment should then be used as an input for DG COMP as an additional public interest criterion.” Both quotes indicate his call for a broader value framework to analyze competition law.
Competition plays a central role in all chapters of a report that essentially advocates a new European “Industrial State.” Coined by John Galbraith in 1967 the concept of “Industrial State” does not only refer to government intervention through planning in order to promote national champions or to intensify efforts of industrialization. It also includes the organization of economic activity by large multinational M-form corporations (conglomerates and vertically integrated firms), whose tight managerial structure has been a key mechanism for managing savings, developing investment strategies in new markets, and unlocking productivity in the decades following the Second World War.
More generally, according to Antonio Andreoni and Ha-Joon Chang industrial policies are broadly understood as “a political economy process of coordination and alignment across the public-private spectrum, towards feasible and desirable techno-economic trajectories and associated policy interventions.” Alternatively, Réka Juhász, Nathan Lane, and Dani Rodrik define industrial policy more narrowly as “government policies that explicitly target the transformation of the structure of economic activity in pursuit of some public goal.” Industrial policies aim to address different forms of market failure, such as externalities, coordination or agglomeration failures, lack in the provision of public goods and inputs, imperfect capital markets, and imperfect information (including lack of reputation in export markets).
Critics see EU’s competition law as an obstacle (e.g. in its restriction of state aid) to implement a virtuous industrial policy. But competition policy is more than competition law enforcement. In the era of the entrepreneurial state and of the mission economy, it is also about shaping markets so as to enhance competitiveness. Market-shaping policies give the framework for markets and thus significantly influence the resource allocation required for economic development. These include policies influencing market infrastructure, external trade , firm entry and exit , intellectual property rights, privatization, investment , procurement, regulation, and innovation, all of which are important for the functioning of efficient and fair competitive markets. These policies constitute the foundation in which a competition law regime operates.
Draghi’s approach to competition policy represents from this perspective a departure from conventional competition law and economics thinking, extending the scope of EU competition policy well beyond the traditional boundaries of competition law. Throughout various horizontal and sectoral chapters, he consistently emphasizes the crucial role of competition policy in enhancing the dynamic efficiency and productivity of the European economy.
This article delves into Draghi’s comments on the role of competition law, broadly defined, and its implications for the future. The analysis begins by extracting the main lessons from Draghi’s report regarding the future direction of European competition law, offering a perspective that may diverge from interpretations rooted in the libertarian competition law tradition. Following this examination, the discussion explores the potential concrete implications of Draghi’s report for reshaping competition law. By considering this expanded view of competition policy and its interaction with broader economic goals, the post aims to shed light on how Draghi’s vision could influence the evolution of competition law and policy in Europe, potentially bridging the gap between traditional competition enforcement and more comprehensive economic development strategies.
What does the report really say?
An innovation-centered precautionary principle for competition law and policy?
Draghi’s report presents a nuanced and seemingly paradoxical approach to the precautionary principle in regulatory and competition policy, which insists on regulation when market activity poses a significant threat of harm, however speculative. On one hand, Draghi expresses concern that the broad application of the precautionary principle through symmetric (as they apply to all firms, not just those business entities with economic power) regulations like the AI Act and GDPR may hinder innovation. However, when it comes to asymmetric regulation targeting firms with significant economic power, Draghi appears to endorse a precautionary approach for protecting innovation and dynamic entry, particularly in the realm of competition law (e.g. see his recommendations for a New Competition Tool) and digital regulation (e.g. see his call for a “strong enforcement of the DMA provisions” and “new requirements involving open access and interoperability […] when the presence of strong network effects and barriers to entry related to data impede market competition”).
This dichotomy is evident in his recommendations for merger evaluations in the tech sector. Draghi advocates for a more forward-looking and agile approach by competition authorities, emphasizing the need to assess how proposed concentrations might affect future innovation potential and investments in critical areas. He writes: “merger evaluations […] must assess how the proposed concentration will affect future innovation potential, despite its uncertainty” and “it is for non-tradable sectors that the enforcement of competition policy needs to be particularly careful against the risks of any abuse driven by concentrations.” This stance implicitly supports at least a weak, if not stronger, precautionary principle when evaluating the innovation effects of conduct and mergers involving powerful firms.
Draghi’s position is further reinforced by his citation of empirical evidence showing that stronger competition generally leads to lower prices and tends to stimulate greater productivity, investment, and innovation. This acknowledgment serves as a foundation for his support of more aggressive competition law enforcement, as evidenced by his call for increased resources for DG COMP.
This approach reflects a sophisticated understanding of the differing impacts of regulation on various market participants. While symmetric regulations might inadvertently stifle innovation across the board, asymmetric regulations targeting dominant players are seen as a means to protect and promote innovation in the broader ecosystem (see also here). By enabling a precautionary approach in competition law, particularly for powerful tech firms, Draghi seems to be aiming to create an environment where innovation can flourish among a diverse range of market participants, rather than being concentrated in the hands of a few dominant players.
Agile competition law and policy experimentation
Draghi’s emphasis on the importance of policy experimentation and agile competition law aligns with a polycentric vision of competition law, as it recognizes the complex interplay between market power, innovation, and regulatory intervention. It suggests a more nuanced application of competition policy that goes beyond simple efficiency considerations to encompass broader economic and social goals, including the promotion of diverse sources of innovation and technological opportunities, which are crucial for productivity growth. As is put forward by non-libertarian approaches drawing on complex economics, a true evolutionary approach is profoundly linked to the existence of competition. As Giovanni Dosi recently observed, “technological advance needs to be understood as proceedings through an evolutionary process […] meaning at least that at any time there are generally a wide variety of efforts going on to advance the technology, which, to some extent, are in competition with each other, as well as with the prevailing practices.”
Draghi’s proposal for an “innovation defense” is particularly revealing. This is primarily suggested for non-tradable sectors and subject to additional behavioral remedies and monitoring, hence its scope seems limited. This conditional nature ensures that the “innovation defense” cannot be misused to justify anticompetitive mergers without tangible benefits to innovation. Throughout the report, Draghi consistently emphasizes the importance of promoting competitive markets, as evidenced by his recommendations to encourage open access and interoperability, link state aid to these principles, and implement ex-post evaluation mechanisms for competition decisions. His endorsement of a New Competition Tool (that is a non-business tort-based competition law intervention like UK’s market investigation tool) to address structural competition problems further underscores this commitment.
The suggestion to allow the European Commission to maintain and use data and case information even after a case is closed indicates a move towards a more data-driven competition policy with enhanced institutional capabilities. Moreover, the emphasis on assessing future innovation effects in merger evaluations, particularly in the tech sector, demonstrates his forward-looking approach. This comprehensive strategy reflects a sophisticated understanding of the relationship between competition, innovation, and market structure, viewing competition policy not just as a tool for maintaining current market efficiency, but as a key instrument for shaping future market dynamics and innovation trajectories.
By advocating for these nuanced and sector-specific approaches, Draghi’s report pushes for a more dynamic and flexible competition policy framework capable of adapting to rapidly changing market conditions, especially in high-tech sectors, while still maintaining the fundamental principle that competitive markets are key drivers of innovation and economic progress. This is evident in his support for the adoption of “national” or “federated” sandboxes in key economic sectors for EU competitiveness, such as digital technologies, but also green growth, as has already been put in place by some national competition authorities. These sandboxes are intended to increase national incentives to policy experimentation, while enhancing EU-wide spill-overs and innovation.
Predictability and presumptions
His concern for maintaining investment incentives pushes Draghi to argue for more predictability and support for the use of presumptions that certain firm behaviors or market characteristics are anticompetitive. What does this exactly mean for antitrust? First, it involves the adoption of guidelines for competition law enforcement, as “[e]x-ante regulation like the DMA should not become the primary tool to foster competition in markets unless special structural impediments to competition.” Competition law enforcement is thus still central. Second, he argues for a value of the deal threshold for the notification of mergers like in Austria and Germany, thus ensuring a more aggressive ex-ante competition enforcement for suspected “killer acquisitions,” in which firms acquire a potential competitor to quash their innovative products. Third, he questions an “excessive discretion on the finding of exclusionary abuses” in Article 102 TFEU. Here he takes issue with the drafting of paragraph 95 of the Draft Guidelines of the Commission on Article 102 TFEU, where the European Commission notes that “in certain circumstances it may be possible to conclude that, due to the specific characteristics of the markets and products at hand, tying has a high potential to produce exclusionary effects and those effects can be presumed.” While he laments the lack of detailed conditions in the Guidelines regarding certain presumptions, this should not be interpreted as opposition to presumptions per se. Rather, it appears to be a call for greater clarity and specificity in their application. His concern about the absence of detailed conditions suggests a desire for more precise and transparent rules, which can enhance predictability and expedite enforcement processes. This stance aligns with a broader view that well-defined rules and presumptions can actually strengthen competition law enforcement by providing clearer guidance to both regulators and market participants.
Draghi’s apparent support for increased resources and powers for the Directorate-General for Competition or his view that competition policy should also address practices that limit labor mobility between companies, like the non-compete and no-poach agreements (page 255), further reinforces this interpretation, indicating a preference for robust and efficient antitrust enforcement. Importantly, his vision seems to encompass a broader approach to competition law than the mainstream consumer welfare approach. This is evident in his reference on page 298 to competition law enforcement as a means to prevent economic power from undermining “the competitive process, and harming consumers AND trading partners.”
Such a perspective broadens the scope of competition policy beyond narrow consumer welfare considerations, acknowledging the multifaceted impacts of market power on different stakeholders and societal interests. By advocating for this more comprehensive approach, coupled with clearer rules and presumptions, Draghi appears to be pushing for a competition law framework that is both more effective in its enforcement and more holistic in its consideration of economic and social outcomes.
Author’s Note: Ioannis Lianos is Professor of Global Competition Law and Public Policy and co-Director, Centre for Law, Economics and Society, UCL Faculty of Laws. He is also a Member of the UK Competition Appeal Tribunal. Any views expressed in this article are strictly personal. Many thanks to Stavros Makris (UCL) for helpful feedback.
Author Disclosure: the author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
