The 16th Meeting of the OECD Global Forum on Competition
Remarks by Angel Gurría
OECD, Paris, Thursday 7 December 2017
(As prepared for delivery)
Colleagues, Ladies and Gentlemen,
I am delighted to welcome leaders and experts in competition policy from so many different countries. This is one of the OECD’s most important Fora. Let me congratulate Frederic Jenny, the Chairman of the OECD Committee on Competition for keeping the OECD at the forefront of competition policy efforts.
Competition is an essential ingredient for our economies
Competition is extremely important for our economies and its positive effects tend to spread beyond economic growth, helping us to raise well-being and living standards. Increased competition can improve a country’s economic performance, open business opportunities to its citizens and reduce the cost of goods and services throughout the economy.
Competition drives companies to be more productive and innovative. Industries where there is greater competition experience faster productivity growth. And because more competitive markets result in higher productivity growth, policies that lead to markets operating more competitively, will result in faster economic growth.
This is why we are so active in this area delivering different policy tools that are helping governments strengthen the competitiveness and efficiency of important sectors. For example, the toolkit delivered in Greece in November 2016, focused on the sectors of wholesale trade, construction, e-commerce, media and manufacturing sub-sectors. It identified restrictions that if removed could lead to a positive impact on the Greek economy of over EUR 400 million.
Also in 2016, we completed a competition assessment of Romania, focusing on construction, transport and food processing sectors. It identified harmful restrictions that, if all were lifted, could provide a positive quantifiable effect of at least EUR 434 million.
The study I will deliver in Mexico in January on competition in the pharmaceutical and meat sectors includes recommendations that could result in savings for consumers between MXN 10 billion (EUR 450 million) and MXN 44 billion (EUR 1.98 billion), depending on the chosen methodology.
And currently, we are working with Portugal to identify and lift regulatory barriers in the transportation sector – railways, road, maritime transport and the ports – and self-regulated professions, including lawyers, solicitors, notaries, architects and engineers. We look forward to sharing our results with you in January next year.
Competition is important for promoting inclusive growth
Competition can also help us to deliver inclusive growth, which sits at the core of the new OECD vision for recoupling economic and social prosperity. Our Inclusive Growth analysis of the linkages between productivity dynamics and inclusiveness has indeed shown that competition is key to ensure that innovation and new technologies trickle down and diffuse across the whole economy, accelerating the catching up of laggards firms and regions to the productivity frontier.
This in turn can translate into higher wages of workers (of these firms) and therefore higher inclusiveness. These mechanisms of diffusion will become even more crucial in the transition to the digital economy, which by nature amplifies the initial gaps between frontier and laggards firms (both in the tech sector and in sectors that are just users of ICT). This is why robust competition, nationally and globally, becomes a key priority.
In addition, stronger competition is vital to reduce the widening gaps between the rich and the poor in many countries that result from higher profits due to market power and associated higher prices. Indeed, according to our recent paper “Inequality: A Hidden Cost of Market Power”, market power and higher prices lead to a reduction in the disposable income of the poorest 20% in 8 OECD countries by 14% to 19%.
Competition can help us tackle these challenges by ensuring against the abuse of market power regulation with anticompetitive effects leading to greater profits for business owners, but also imposing higher prices on consumers and disproportionately harming the poor who will pay more for goods without receiving a counter-balancing share of increased profits.
Competition helps us keep up with digitalisation
Last but not least, we are all aware of how digitalisation is continuing to transform the competitive landscape at breakneck speeds and in ways which are not easily perceptible. In this respect, competition can play a paramount role in helping us to keep up with the pace of digitalisation and to tackle the challenges that it creates.
For example, some of these challenges are related to the use of Big Data to reinforce market power, and of algorithms to change the competitive landscape of digital markets and, in some cases, to facilitate collusion and cartels.
In addition, policymakers also face the challenge of firms using digitalisation to protect their market power by excluding potential entrants from the market. For example, due to data-driven network effects, large, dominant tech firms can use their data advantage to detect and squeeze out competitors – either tactically by preventing or limiting their access to data required to compete, or strategically by acquiring potential competitors or imposing switching costs on consumers.
As such, competition authorities must remain vigilant in order to prevent the current market leaders from putting in place such anti-competitive strategies. Some are taking action, as we have seen in recent high-profile cases against Google and sellers on Amazon marketplace, for using their control over online platforms, privileged access to user data, and complex algorithms to engage in anti-competitive conduct.
But we are covering new ground here where competition enforcers still have a lot to learn. In this respect, the OECD Competition Committee is playing a fundamental role in this endeavour. While it has been monitoring these dynamic markets since 2002, the Committee is strengthening its efforts to address disruptive innovation in various sectors such as legal services, land transport, financial markets and electricity. In particular, it is helping countries tackle these new digital-driven challenges through its “Competition, Digital Economy and Innovation” work. We look forward to sharing the results of this work that’s now underway looking at regulation and competition in the digital era.
Ladies and Gentlemen,
“Competition policy is about giving everyone a fair chance to reach their potential – businesses as well as people. It shouldn’t only be big companies that can succeed, but whoever has the best ideas – even the smallest start-up.”
These words by the European Commissioner for Competition, Margrethe Vestager, remind us why we work so hard in this area. Competition goes straight to the heart of what we do here at the OECD, giving a fighting chance to all. It lies at the core of our efforts to create more inclusive and sustainable economies, and to ensure a fairer globalisation. And we must ensure strong multilateral co-operation. Let’s keep enriching our work together to promote better competition policies for better lives. Thank you.