The Pros and Cons of Industrial Policy

The Pros and Cons of Industrial Policy - 19 May, 2025

Speech by the SCA Director General Marie Östman

Dear Guests,
Welcome to the 23rd edition of our Pros and Cons conference!
Since 2002, these conferences have been a meeting point for academics and practitioners from all over the world to exchange ideas on competition policy and enforcement. Every year we seek a timely topic and a good mix of experts to share ideas and engage in the debate. This year’s theme, the Pros and Cons of Industrial Policy was an obvious choice.

We now live in a world of rising geopolitical tensions and increased competition between trade blocks and regions. The challenges for the European economy and the internal market are felt more acutely today than only a few years ago.
 
The debate on the need for a more activist and dynamic industrial policy in Europe has been intense, especially since last summer, and I think that the competition community needs to be an active part of it.

A clear example is EU merger control: the current review of the horizontal and vertical merger guidelines, launched only ten days ago, are expected to give more weight to innovation and resilience considerations.

The important task here, and I acknowledge the many views that have already been aired around this very subject, is to preserve and protect the core competition principles and yet modernise the merger regime to be fit for new market realities in a lasting and transparent framework.
 
How can that be achieved?
How do we ensure legal certainty for undertakings and clear assessment criteria for enforcers?
 
And in future cases yet to come: preserving competitive markets and preventing monopolisation will continue to be the task of competition authorities. But in doing that how should we weigh in potential harm or benefits in dimensions such as resilience and security?

Enforcement is seldom easy. Every case is a special case. Each market is different from every other market. We are adapting the legal framework to evolving markets and identified legal gaps. New arrivals such as the DMA, DSA, FSR, FDI, increased call-in powers for mergers and new competition tools: these were but vague ideas only a few years ago. Today, they are an integral part of the EU framework, helping to ensure competitive markets and a level playing field in Europe, and have inspired many other jurisdictions around the world.
 
The process we are now in is a natural continuation of this evolution. The competition enforcement community is adapting to a changing world. As we always have. As we always will.

Now, do we need a rehaul of competition policy? My contribution to the debate can be summed up in four points.

Firstly, it is both necessary and natural to better integrate the goals and tools of industrial and competition policy. Industrial policy can correct market failures and foster a conducive economic environment for firms.
Competition policy is there to preserve the selection mechanism. Its job is to ensure that the best firms and innovations get their fair chance in the market place, without anticompetitive agreements, abusive behaviour by super-powerful firms, or mergers between close competitors.
 
The interplay between these two policy areas is important. Together, they can achieve good economic outcomes, perhaps better than we see today. Divided and poorly integrated, we will all suffer.

Secondly, and I have to admit this perhaps a bit reluctantly, effective competition is not solely the outcome of an efficient competition authority, led by a single brilliant Director General with superpowers, fitted with competition rules with claws and teeth, but also of trade policy, sector regulation and consumer protection rules. These policy areas need to be onboard as well. Competition policy may however serve as an enabler, to help give effect to other well-designed policies.

Thirdly, I am well aware that the regulatory burden for companies is at the core of the debate right now. To minimise compliance costs for businesses, we need to think of ways to make the rules easy to understand, while preserving the objectives and sharpness of our legal toolbox.
 
Finally, all these points, what do they mean for national competition authorities? What should be top on my list as I come to work every day? What items should I promote, which should I demote? Are there any missing pieces?

Dear colleagues and friends, when we leave this room this afternoon to enjoy a Swedish fika, I feel confident that we will have a much better understanding, and indeed, a better capacity to grasp and handle questions such as these.

I will now let my colleague, Karl, briefly outline the day for you, and then we will kick off. Again, to all of you, a very warm welcome, I truly look forward to being part of the discussion today!

Dr. Antonio Capobianco opened the session by noting that the discussion on the interplay between industrial and competition policy is not new, but has gained renewed relevance in light of current economic and geopolitical challenges. He invited the panellists to reflect on the relationship between the two policy instruments and whether they think competition policy needs to undergo a facelift.

Dr. Lluís Saurí noted that when industrial policy is defined as a long-term, welfare-oriented, policy instrument aimed to increase market-efficiency; it serves as a complement to competition policy. As such, calls for a major overhaul of competition policy may be overstated. Dr. Saurí also emphasized the growing importance of policy instruments in addressing innovation gaps and called for designing public policy that focuses on incentives for productivity driven parameters such as innovation.

Professor Reinhilde Veugelers emphasized innovation as a critical metric for future policy analysis. She highlighted the EU’s innovation gap, particularly in digital sectors and in digital using sectors such as health and mobility. In order to decrease the innovation gap, she highlighted that the European Commission could use more innovation assessments, including also ex post assessments. One example is market monitoring and, more specifically, to focus on certain technologies. Industrial policy should therefore work alongside competition policy and enforcement to support innovation-driven productivity growth.

Professor David Bosco noted that recent reforms, such as the ECN+ Directive, have already modernized competition policy by strengthening the discretion of national competition authorities and their role in shaping economic policies. While supportive of proposals suggested by Draghi as an “innovation defence”, he stressed for the need for competition authorities to clarify to parties what is needed for an innovation defence as well as finding the right balance for such a defence. Professor Bosco also noted that a face-lift should not mean that competition authorities are able to implement industrial policy objectives, as it is not their role.

Mr. Jérémie Jourdan highlighted that competition policy and industrial policy have been intrinsically intertwined in the digital sector in recent years, and that competition policy has, to some extent, already gone through a facelift. For example,
Mr. Jourdan mentioned the DMA which can be seen as competition policy morphing into regulation to achieve industrial policy goals (make digital markets fair and contestable again). The facelift in competition policy in the digital sector is also apparent in recent conceptual developments, such as the notion of abusive self-preferencing or the relaxation of the Bronner criteria with the Google Android Auto judgment. As regards merger control, he noted that the enforcement tools are going through a facelift, with call-in powers being introduced in several countries. In this context, he questioned the desirability of merger control regimes featuring both thresholds and call-in powers, as they seem to leave businesses with the worst of both worlds (notification of mergers that have no impact on competition and removal of legal certainty).

Ms. Sara Calligaris started by explaining that, according to the data, the relationship between firm size and competitiveness in the EU is complex and varies significantly by sector and types of firms. In manufacturing, larger firms tend to be more productive, but in services, small firms can also be highly productive — though scale becomes critical due to network effects and high fixed costs for instance in digital sectors. Not all unproductive firms are small, and many small, young firms have high growth potential but face barriers in scaling, particularly in digital and knowledge-intensive sectors. These barriers include limited access to finance, and lack of technology and knowledge diffusion. As a result, acquisitions are common exit strategies, but often reduce startups’ innovation post-acquisition. The increasing market concentration and the rising importance of intangible assets further challenge small firms.

Professor Tommaso Valletti refuted the argument that competition authorities are preventing firms from achieving globally competitive scale through merger control. In reality, intervention in this area has been minimal over the past 30 years. What is needed instead is stronger enforcement of competition policy and better coordination of industrial policy – particularly by targeting sectors like manufacturing, which are relatively close to the frontier. Further, many obstacles to industrial policy stem from broader issues in the single market, including the need for more consistent regulation.

Mr. Fredrik Sjögren emphasized that the competitiveness of European firms varies by country – Swedish firms, for example, may not be too small to compete globally, and scale can be achieved without consolidation. Competitiveness expands beyond firm size, with investment decisions shaped by access to production inputs and large, unified consumer markets. The single market is crucial to enabling scale and international growth, and improving it is perhaps the most important policy task. A barrier-free market and a regulatory framework supporting firms throughout their lifecycle are essential. In this context, competition policy plays a key role in reducing distortions and enabling market entry.

Professor Otto Toivanen stressed that while there is a rationale for using policy to promote scale, the design and implementation of such policies must be carefully considered. Not all firms are suitable targets, and poorly designed tools risk being ineffective. While removing growth barriers is helpful, deeper structural reforms – particularly in education – are often more critical. Without the right foundations, industrial or innovation policies may fail. In this broader context, merger policy plays a minor role. Finally, echoing other panellists, Toivanen noted that the EU’s incomplete single market remains a disadvantage compared to the US.

Mr. Thomasz Chróstny began by questioning whether the current conditions of the European Single Market are sufficient to support the implementation of industrial policy. Fragmented internal markets and regulatory barriers hinder true competition in the EU. Rather than reshaping competition rules alone, focus should shift to enhancing overall competitiveness by identifying structural issues and promote a functioning Single Market. Competition authorities can be a strong advocate for why competition matters and advice politicians on sound economic policy in times of protectionism.

Ms. Christine Sampermans noted how bold industrial policy decisions from outside of the EU prompt necessary reflection on national security and self-sufficiency in the European market. While these concerns are valid, competition authorities lack the democratic mandate to make such policy decisions. Competition policy already supports innovation and growth by fostering competitive markets that drive demand. Instead of redefining their mandate, authorities should focus on more effective enforcement and sectoral relevance. On EU level, for example, FSR could be simplified in proportion to the interests that the regulation aims to protect. The EU needs to be aware of the possible protectionist effects that can arise from being too sceptical against non-EU competition, and acknowledge the importance of non-EU investment within the EU.

Ms. Silke Hossenfelder remarked that competition authorities
advise on how industrial policies can affect the overall competitive landscape but are not the agency deciding on what policies to adopt. The role of the competition authority is to ensure competition remains part of the solution by focusing on facts and market realities. Policy decisions create market effects that must be acknowledged, but accountability lies with policymakers, not competition authorities.

Mr. Marcus Bokkerink concluded that effective competition remains essential to driving innovation, productivity, and growth; and that viable competitive alternatives will become essential for the EU and UK's economic resilience and security in several key sectors. While scale can matter, what constitutes effective competitive conditions will vary across sectors and over time. Governments can increase the chances of success of their industrial strategies by being clear about the goals they seek to achieve; encouraging private sector innovation and investment in target sectors by favouring competitive supply over monopolies or duopolies; and applying system thinking by taking coherent actions across policy levers. Competition authorities can support these goals by promoting competition and therefore growth in target sectors; fulfilling their legal mandate objectively, transparently, and free from influence; and providing objective expert advice to governments. The observation that markets have become overregulated is true in general but this overregulation is in aspects such as planning, permitting, licensing, and administrative rules, not competition policy. Regulation by the market through customers making choices and businesses competing effectively should be seen as the opposite of regulation - rather, it is the unlock to reducing such regulation.