On September 9, 2024, Mario Draghi, former President of the European Central Bank and former Italian Prime Minister, presented his report on the Future of European Competitiveness (the “Report”), with the objective to inform the work of the incoming Commission.  Featured in President von der Leyen’s Political Guidelines issued in July,[2] and in several mission letters for the new Commissioners, the Report revived the debate concerning the competitiveness of EU companies in global markets.

Background

The Report highlights the EU’s need for higher economic growth and enhanced productivity to finance investments needed to pursue the bloc’s key priorities: digitalizing and decarbonizing the EU economy, increasing the EU’s defense capabilities, and preserving the EU social model.[3]  To address these demands, the Report proposes a “New Industrial Strategy” based on four pillars: (i) full implementation of the Single Market; (ii) alignment of industrial, competition, and trade policies; (iii) “massive” investment on a scale “unseen for half a century in Europe;” and (iv) governance reforms deepening coordination and reducing the regulatory burden on companies.[4] 

The Report combines ten sectoral policy proposals with five broader horizontal initiatives which apply to all sectors.[5]  With respect to competition enforcement, the Report backs a strong competition policy that “delivers lower prices” and stimulates “greater productivity, investment, and innovation.”  However, it raises concerns about the rise in concentration around the world over the past few decades and argues that competition enforcement needs to adapt to a “radically changing world.”[6]

Articles 101 and 102 TFEU

The Report supports adapting competition enforcement so that it does not inhibit certain forms of intra-industry cooperation, by simplifying existing review processes, and issuing “clear guidance, templates and ease of access” from the Directorate General for Competition for specific sectors.[7]  Additionally, it proposes that competition enforcement should enhance job mobility in labor markets, and recommends scrutinizing practices such as non-compete and no-poach agreements.[8]

The Report also favors ex post competition enforcement over ex ante national-level regulation in abuse of dominance cases,[9] as the latter “disincentivises investments and risk-taking.”[10]  It criticizes the new draft Guidelines on the application of Article 102 TFEU to abusive exclusionary conduct by dominant undertakings[11]—which are under review after being subject to public consultation—for the “excessive discretion” that they grant to the Commission in finding exclusionary abuses.  In particular, the guidelines neither: (i) detail under which conditions tying can be presumed to have exclusionary effects; nor (ii) provide a safe harbor for dominant firms setting prices above average total cost.[12]

Merger control

The Report calls for “a change in operating practices and updated guidelines to make the current Merger Regulation fit for purpose.”[13]  More specifically, the Report advocates for the introduction of an “innovation defence,” which would allow the merging parties to show that their transaction increases their ability and incentive to innovate.  The defense would entail an ex post monitoring mechanism of investment commitments and requirement for the parties to show that their merger “would cause no harm to consumers in the long run.”  Competition authorities would weigh the short term benefits to innovation linked to increased scale against future costs of lower innovation incentives.[14]

The Report also proposes additional reforms for simplifying and refining merger procedures, such as expanding the 2023 Merger Simplification Package[15] and clarifying the use of the Article 22 EU Merger Regulation,[16] especially after the Court of Justice’s Illumina/GRAIL ruling.[17]  Draghi considers that a “simple solution to the ambiguity” would be to set a threshold for mandatory notifications based on the value of the transaction, following the Austrian and German models.[18]

The Report calls for selected sectorial consolidation, notably in the telecommunication and defense sector.  In Draghi’s view, the proliferation of regulation is costly and disincentivizes investment in the telecoms sector.[19]   

State Aid and the Foreign Subsidies Regulation (FSR)

Draghi advocates for a return to a “normal” and “strong” enforcement of State aid rules, moving beyond the temporary frameworks triggered by the COVID-19 and energy crises.  While he acknowledges that these measures helped expand state support to ease “the pain of EU citizens and businesses”, he critiques them for fragmenting the common market, distorting competition, deteriorating public finances, and triggering “inefficient” subsidy races.  The Report supports reforming the State aid compatibility assessment to: (i) consider whether a measure is coherent with EU-wide industrial policies; (ii) allow for more aid where EU coordination is being enhanced and make it conditional on the enhancement of open access and interoperable solutions, and the development of Europe-wide standards; and (iii) give more weight to potential impacts on resiliency and innovation.[20]  The Report also advocates for reforming and expanding the Important Projects of Common European Interest (“IPCEIs”).  Draghi proposes that IPCEIs should benefit from a faster administrative approval process and finance a “broader” class of innovations in strategic sectors—instead of only breakthrough innovations.[21]

Draghi supports applying the FSR “effectively” so that it results in “the intended benefits for EU consumers and businesses.”  He warns that, otherwise, the EU would have lower credibility as a regulator and would suffer a “reduced appetite of multinational companies to invest in Europe and the delayed deployment of technological advances.”[22]

The Digital Markets Act (DMA) [23]

The Report praises the DMA’s goals of facilitating competition, fairness, and contestability in digital markets.  It warns that the DMA’s implementation must not become an administrative and compliance burden, nor create legal uncertainties akin to GDPR, and must be enforced within shorter time frames.[24]  The Report advocates resources for the Commission to apply its DMA powers “effectively.”[25]  Specifically, it proposes clarifying Article 1(6)(b), which allows national competition rules to impose additional obligations on gatekeepers, to prevent regulatory fragmentation within the single market.[26]

Additional competition proposals

The Report lays out a range of reform proposals, some of which are inextricably linked to competition enforcement and policy:

  • Adoption of the so-called New Competition Tool (“NCT”).  The NCT was considered, but ultimately abandoned, by the Commission in 2020.[27]  It is “a market investigation instrument designed to address structural competition problems and to determine a solution together with firms.”[28]  The NCT would allow the Commission to undertake market studies and investigations to identify competition problems, and impose binding remedies.  It would be implemented across five priority areas.[29]
  • Security and resilience criteria in DG COMP’s assessments.  This security and resilience assessment should be carried out exclusively in sectors where those dimensions are crucial (e.g., security, defense, energy, and space), and outside of the competition unit, for instance by a Resiliency Assessment Body.[30]

Conclusion 

The Report has sparked considerable media interest and debate[31].  President von der Leyen’s declaration that all Members of the College of Commissioners should draw on the Report to inform their tenure reinforced the Report’s political importance, framing it as a key priority within the broader EU strategic agenda.[32]  In particular, von der Leyen has endorsed the proposals that envisage linking competition enforcement to the EU’s key goals of decarbonization and digitalization, emphasizing innovation in competition assessments, and reforming the EU merger guidelines.[33]  The Report is already at the core of key initiatives of the new Commission, like the new Competitiveness Compass, which von der Leyen called “the translation of the Draghi report with inputs of the Letta report into a communication of the Commission.”[34]

The report has also elicited reaction from EU governments,[35] legislators,[36] competition authorities,[37] the private sector,[38] academia,[39] and civil society.[40]

Executive Vice-President Teresa Ribera has similarly expressed support for Draghi’s proposals.[41]  In terms of regulatory reform, Ribera has promised to “significantly simplify and speed up processes” and “cut red tape,” in line with Draghi’s recommendations.[42]   Specifically, she has highlighted that the Horizontal Merger Guidelines need to be revisited and killer acquisitions targeted, and that she will prioritize DMA and FSR enforcement “to deliver real added value for EU consumers and businesses.”[43]  Ribera has echoed Draghi’s view of Chinese and US competition to “lead in green technology, microchips, and digital innovation” as an “existential challenge,” and insisted, in line with the report, that  “it’s the investments we make today that shape the reality we live in tomorrow.”[44]  This alignment with Draghi’s vision highlights a shared commitment to regulatory reform and strategic investment, reinforcing the urgency of addressing global competition and ensuring Europe’s economic resilience in the years to come.

[1]           The authors wish to thank David Pérez de Lamo for his input, as well as Antoine Winckler and Isabel Rooms for their review.

[2]             See President von der Leyen, “Political Guidelines For the Next European Commission 2024–2029,” July 18, 2024, available here.

[3]             Mario Draghi, “The future of European competitiveness,” September 2024, available here, Part A, pp. 1–5.

[4]             Draghi Report, Part A, pp. 17–18.

[5]             The ten sectoral policy proposals concern: (i) energy; (ii) critical raw materials; (iii) digitalization and advanced technologies; (iv) energy-intensive industries; (v) clean technologies; (vi) automotive; (vii) defense; (viii) space; (ix) pharma; and (x) transport.  The five horizontal initiatives concern: (i) accelerating innovation; (ii) closing the skills gap; (iii) sustaining investment; (iv) revamping competition; and (v) strengthening governance.  

[6]             Draghi Report, Part B, p. 298.

[7]             Draghi Report, Part B, p. 300.

[8]             Draghi Report, Part B, p. 247 and p. 255.

[9]             Draghi Report, Part A, p. 35.

[10]            Draghi Report, Part B, p. 75.

[11]            See European Commission, “Guidelines on exclusionary abuses of dominance,” European Commission, 2024, available here.

[12]            Draghi Report, Part B, p. 304 and footnote 9.

[13]            Draghi Report, Part B, p. 299.

[14]            Draghi Report, Part B, pp. 299–300.

[15]            See European Commission, “Simplification of merger control procedures,” European Commission, 2023, available here.

[16]            Draghi Report, Part B, p. 304.

[17]            See Cleary Antitrust Watch Blog, “Illumina/GRAIL: ECJ Rules European Commission Lacks Jurisdiction to Review Merger Falling Below EU and National Merger Thresholds,” September 6, 2024, available here.

[18]           Draghi Report, Part B, p. 304 and footnote 9.  See Cleary Alert Memorandum, “Germany and Austria introduce Transaction Value Merger Notification Thresholds,” June 28, 2017, available here.

[19]            Draghi Report, Part B, p. 70.

[20]            Draghi Report, Part B, pp. 301–302.

[21]            Draghi Report, Part B, p. 301.

[22]            Draghi Report, Part B, p. 302.

[23]            Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act), OJ 2022 L 265/1.

[24]            Draghi Report, Part B, p. 79.

[25]            Draghi Report, Part B, p. 302.

[26]            Draghi Report, Part B, p. 304 and footnote 9.

[27]            See European Commission, “Impact Assessment for a possible New Competition Tool,” European Commission, 2020, available here.

[28]            Draghi Report, Part B, p. 303.

[29]            Draghi Report, Part B, pp. 302–304.  The five areas are selected based on where current competition tools are known to be insufficient.  These five areas are: (i) tacit collusion; (ii) markets where the need for consumer protection is more likely to be needed (e.g., due to behavioral biases); (iii) markets where economic resilience is weak (e.g., due to reliance on a single source of raw material); (iv) past enforcement actions where the information received from the authorities indicates that the commitments or remedies adopted are not delivering competition; and (v) digital markets where strong network effects and data barriers to entry impede competition, and these cannot be addressed by the DMA.

[30]            Draghi Report, Part B, pp. 300–301.

[31]            See, e.g., The Editorial Board, “Whatever it takes to boost European competitiveness,” Financial Times, September 9, 2024, available here and Catherine Laurence Martens-Preiss, “Mr Draghi’s Report is a Wake-Up Call for Europe,” Renew Europe, September 9, 2024, available here.

[32]            See European Commission, “Speech by President von der Leyen at the European Parliament Plenary on the new College of Commissioners and its programme,” European Commission, November 27, 2024, available here.  Notably, President von de Leyen’s Mission Letter to Teresa Ribera draws significantly from the Report in many of its directives, such as reforming merger policy to enable greater innovation and scale, making IPCEIs swifter and more focused on strategic sector innovation, and effectively enforcing both the FSR and the DMA.  See European Commission, “Mission letter, Teresa Ribera Rodríguez, Executive Vice-President-designate for a Clean, Just, and Competitive Transition,” European Commission, September 17, 2024, available here.

[33]            See Statement by President von der Leyen at the joint press conference with Mario Draghi on the report on the future of EU competitiveness, September 9, 2024, available here,  “…to be competitive, we need to master the clean and digital transition. We set the basis for this, as you know, the clean and digital transition, in my first mandate. Now it is time to see it through. We must support our industry to go through decarbonisation through innovation and turn this into a competitive advantage.”

[34]            See Statement by President von der Leyen on the EU Competitiveness Compass, January 29, 2025, available here.

[35]            See Carlos Cuerpo, “L’Europe omnivore. La doctrine espagnole en réponse au rapport Draghi,” Grand Continent, September 19, 2024, available here and Raphael Minder, “Mario Draghi’s ‘old Europe’ mindset overlooked eastern dynamism, ministers complain,” Financial Times, September 26, 2024, available here.

[36]            See Magnus Lund Nielsen, Nicholas Wallace, and Nicoletta Ionta, “EU politicians weigh in on Draghi report,” Euractiv, September 9, 2024, available here.

[37]            See Tono Gil and Chris May, “EU competitiveness won’t improve by reducing competition, Germany’s Mundt says,” MLex, September 11, 2024, available here and Sarah Cardell, “Driving growth: how the CMA is rising to the challenge,” Government UK, November 21, 2024, available here.

[38]            Markus Reinisch (VP Public Policy Europe at Meta) said in his LinkedIn post in October 2024 that “As it stands, companies looking to rollout AI products in Europe face fragmented and overlapping regulation, and an incomplete Digital Single Market. All things identified by Mario Draghi in his recent report on European competitiveness. It’s a much needed wake-up call, as Europe is losing out on new generations of AI products and models as a result of this uncertainty,” available here.  Similarly, Matt Brittin (President, Google EMEA) highlighted that “Developing good policy and responsible AI will need close coordination between governments, the private sector, academia and civil society. Through our AI Opportunity Initiative and other partnerships we’re committed to working with others to get this right. But, as Mario Draghi highlighted, change is also needed in the regulatory environment.”  Google Blog, October 1, 2024, available here.  See also Lucy C. Cronin, “Poland’s EU Presidency – A secure and resilient EU supported by a competitive Single Market,” Amazon News, January 28, 2025, available here.

[39]          Maciej Bukowski, “Draghi Deficit: Overlooking Europe’s Eastern Strength,” CEPA, October 31, 2024, available here.

[40]            Paula Soler, “Critics slam Mario Draghi’s landmark EU competitiveness report as ‘one-sided’,” Euronews, September 20, 2024, available here.

[41]            Questionnaire to the then Commissioner-designate, Teresa Ribera, Executive Vice-President for the Clean, Just, and Competitive Transition, October 2024, available here.

[42]            Questionnaire to the then Commissioner-designate, Teresa Ribera, Executive Vice-President for the Clean, Just, and Competitive Transition, October 2024, p. 4 (“…in order to be successful in the current global environment, we need a well-functioning single market to boost prosperity, protect the consumers and build an appealing ecosystem for investment, innovation, clean industry and employment to compete globally,”) available here.

[43]            Questionnaire to the then Commissioner-designate, Teresa Ribera, Executive Vice-President for the Clean, Just, and Competitive Transition, October 2024, p. 13, available here.

[44]            See Speech by Executive Vice-President Teresa Ribera at the CRA Annual Conference on the Competition policy adapted to the new global realities, December 10, 2024, available here.