The Draghi report on The Future of European Competitiveness (Draghi 2024) is a milestone – 400 pages of dense analyses and prescriptions to address a profound crisis of productivity and growth in Europe (major loss of ground in digital technologies, persistent focus on ‘mid tech’, lack of suitable capital, fragmentation and lack of coordination at multiple levels). ¹ The broad thrust is a call for muscular industrial policy led from the centre, options for funding, and simplification of an ever-expanding maize of regulations that European businesses struggle with. The report has been well received, although developing a central vision and action plan for industrial policy hits against the reality that we don’t have a federal government making industrial policy decisions for the bloc, and we have no one-stop shop role for the European Commission (except for state aid to curb national excesses).     

What has captured much attention is a perception that Draghi is also prescribing a rollback of competition enforcement and regulation, a much more laissez-faire approach particularly in telecoms and digital – music to the ears of US tech giants subject to European Commission scrutiny (e.g. Washington Post 2024).

This is in fact not the case. It is a misrepresentation of what Draghi says, weaponised by Big Tech proxies and telecoms incumbents in their campaign to stave off merger vetos and curb regulation.  Draghi does say “there is a question about whether vigorous competition policy conflicts with European companies’ need for sufficient scale”, and “lack of innovation in Europe is sometimes blamed on competition enforcement” (p. 298). However, he also stands by the received wisdom that “stronger competition not only delivers lower prices, but also tends to stimulate greater productivity, investment and innovation” (ibid), and puts forward proposals which would do anything but relax competition.

His competition recommendations do not involve reforming existing laws, but adopting a more “innovation and growth-focused” posture in selecting and investigating cases. In practice, enforcers will argue this is nothing much new and they are either already doing that, or have tried to do that. But the recommendations are also not a prescriptive manual. The message to be taken from Draghi is really this (paraphrasing): Whatever competition enforcers are doing, it is not really working to help innovation and growth in Europe. It is not delivering on that goal.  We need more and different. Go back to the drawing board, antitrusters, and rethink. Competition policy “must continue to adapt to changes in the economy so that it does not become a barrier to Europe’s goals”. And it must align “industrial, competition and trade policies, which interact closely and must be part of an overall strategy” (p.9). No siloes. Joined-up thinking....

 more at CEPR