Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

EU competition policy needs a fundamental rethink

Séverine Picard 30th June 2023

Competition policy has been based on a presumption of market equilibrium. Mushrooming corporate power has passed it by.

At a European Parliament hearing earlier this month, the head of the European Central Bank acknowledged the role of rising corporate profits in fuelling inflation—according to Christine Lagarde, there may be a mismatch between supply and demand. In fact, large firms have become so dominant that they are able to increase their prices beyond the cost of production and yet not lose customers. Trade unions have long been denouncing such ‘greedflation’, driven largely by oligopolistic power and profit maximisation.

While lamenting the lack of relevant data, Lagarde called on competition authorities to look at the situation. But can, and will, they?

Technocratic exercise

A recent report with colleagues published by the European Trade Union Confederation (ETUC) reveals growing criticism of traditional competition tests in a context where corporate power is at an all-time high. Lagarde’s call will remain wishful thinking for as long as competition enforcement remains a technocratic exercise, isolated from the public interest and the impact on stakeholders.

Corporate dominance can be inferred from the ability of a firm to charge excessive prices, well above the costs of production, without suffering competitively. Other indicators include the weight of the largest firms within an industry and the size of extraordinary profits (‘economic rents’). All three measurements (Figures 1 and 2) point towards corporate power increasing across all sectors, with multinational enterprises becoming fewer and larger.

Figure 1: concentration of manufacturing and services in Europe and north America

Picture 1 1
Source: OECD, 2019

Figure 2: global increase in corporate power—markups and profitability indicators in 2019

Picture 1 2
Source: IMF, 2019

In contrast with mounting corporate power, workers’ ability to bargain collectively for a higher share of value added is shrinking. Collective-bargaining coverage and trade-union density have been on the decline for more than a decade. Thus, there is an increasing asymmetry between corporate and labour power.



Don't miss out on cutting-edge thinking.


Join tens of thousands of informed readers and stay ahead with our insightful content. It's free.



Lasting trend

In a labour market that is ‘fully competitive’, any attempt to pay a wage below market equilibrium would result in all workers leaving the firm immediately to take up a job elsewhere. Things are quite different in reality where the employer is unlikely to be confronted with a complete lack of available workers and so can set the wage somewhat lower while still retaining a certain volume of labour.

A labour market dominated by a few employers (‘labour-market monopsony’) has become a lasting trend throughout the countries of the Organisation for Economic Co-operation and Development—particularly pronounced in the United States but also evidenced in the European Union. Such labour-market concentration has an exacerbating impact on the income distribution between labour and capital.

In recent years, profits have increased more rapidly than wages (Figure 3), in spite of serious economic disturbances which would normally occasion a drop in corporate profitability. This feeds into ever-widening income inequalities in our societies.

Figure 3: growth in nominal wages and corporate profits in the euro area, Q1 2019 to Q2 2022

Picture 1 6
Source: Bassanini et al, 2022

‘Market power’

Yet competition authorities do not necessarily consider that there is a problem of dominance. ‘Corporate power’ connotes the concentration of capital ownership but such authorities prefer the usage ‘market power’. This a narrower notion, where relevant markets are defined from the subjective standpoint of consumers, almost exclusively in relation to specific products. A multinational enterprise can thus, objectively, be dominant overall because of its ability to increase markups and profits but be investigated by competition authorities only sporadically and in relation to particular goods or services.

In the EU, most mergers and acquisitions are cleared by the European Commission—often on condition that the participating companies implement targeted remedies to address competition concerns in neighbouring markets. Such a narrow perspective fails to capture the reality of today’s economic ecosystems: while the range of products and services in output markets can be diverse, multinational enterprises oversee the same business and labour strategy across their entire operations. Different markets controlled by the same corporation cannot reasonably be considered as if disconnected.

Yet the overall impact of concentrated corporate ownership is not assessed. Crucially for the labour movement, EU competition authorities invest no resources in measuring the concentration of labour markets and its consequences for wages and working conditions.

Sticking-plaster solution

Efficiency tests and considerations of impact on consumer choice may have led competition authorities to refrain from taming corporate power for fear they would kill the goose that lays the golden egg. Consumers are more than ever enjoying the choice offered by increased innovation and a very diverse range of products and services—we can watch thousands of series, at a time of our choosing and from the comfort of our own homes. But multinational enterprises are becoming bigger and bigger, so all our choices lead to the same few online platforms.

The commission regularly announces its intention to increase its scrutiny over unfair consumer practices, in particular in the digital sector. This is however a sticking-plaster solution, dealing with the consequences rather than the causes of mounting corporate power. A fundamental debate must be held on the objectives and tools of competition policies. Competition authorities must raise their game to capture the reality of economic power as a whole, rather than continue to focus narrowly on consumer interests.

Progressive forces from various constituencies are already putting in place co-ordinated strategies to bring visibility to the impact of corporate power, in the public interest. The ETUC report spotlights the impact on employment and the need to strengthen counterbalancing power within corporations through worker participation and social dialogue. It must also be possible to stop mergers when labour-market monopsony is around the corner.

Such interventions should pave the way towards a fundamental rethink of the goals of competition law. In the longer term, introducing a public-interest test would increase the capacity of competition authorities to capture economic power—having regard not just to individual products but broader sustainability goals and employment in particular.

Countries outside Europe—for instance, South Africa and the US—have introduced or are exploring public-interest tests as an aspect of competition policy. The EU should not continue to lag behind.

Severine Picard
Séverine Picard

Séverine Picard is head of Progressive Policies, a socially minded consultancy.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u42198344ce 92c9 4f54 9a14 edee35fb9221 3 Europe’s Quest for Technological Sovereignty: A Feasible Path Amidst Global RivalriesChristian Reiner and Roman Stöllinger
u4219834670ab 1 Reclaiming Sutan Sjahrir: The Quiet Moral Core of Democratic Socialism in Southeast AsiaDeny Giovanno
u421983467 4b96 a2b4 d663613bf43e 0 A Fair Future?  How Equality Will Define Europe’s Next ChapterKate Pickett
u42198346742 445d 82f2 d4ae7bb125be 2 A Progressive Industrial Policy for the Global South: A Latin American PerspectiveJosé Miguel Ahumada and Fernando Sossdorf

Most Popular Articles

u4219834676 bcba 6b2b3e733ce2 1 The End of an Era: What’s Next After Globalisation?Apostolos Thomadakis
u4219834675 4ff1 998a 404323c89144 1 Why Progressive Governments Keep Failing — And How to Finally Win Back VotersMariana Mazzucato
09d21a9 The Future of Social Democracy: How the German SPD can Win AgainHenning Meyer
u421983462 041df6feef0a 3 Universities Under Siege: A Global Reckoning for Higher EducationManuel Muñiz

Eurofound advertisement

Ageing workforce
The evolution of working conditions in Europe

This episode of Eurofound Talks examines the evolving landscape of European working conditions, situated at the nexus of profound technological transformation.

Mary McCaughey speaks with Barbara Gerstenberger, Eurofound's Head of Unit for Working Life, who leverages insights from the 35-year history of the European Working Conditions Survey (EWCS).

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Foundation for European Progressive Studies Advertisement

Spring Issues

The Summer issue of The Progressive Post is out!


It is time to take action and to forge a path towards a Socialist renewal.


European Socialists struggle to balance their responsibilities with the need to take bold positions and actions in the face of many major crises, while far-right political parties are increasingly gaining ground. Against this background, we offer European progressive forces food for thought on projecting themselves into the future.


Among this issue’s highlights, we discuss the transformative power of European Social Democracy, examine the far right’s efforts to redesign education systems to serve its own political agenda and highlight the growing threat of anti-gender movements to LGBTIQ+ rights – among other pressing topics.

READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

S&D Group in the European Parliament advertisement

Cohesion Policy

S&D Position Paper on Cohesion Policy post-2027: a resilient future for European territorial equity

Cohesion Policy aims to promote harmonious development and reduce economic, social and territorial disparities between the regions of the Union, and the backwardness of the least favoured regions with a particular focus on rural areas, areas affected by industrial transition and regions suffering from severe and permanent natural or demographic handicaps, such as outermost regions, regions with very low population density, islands, cross-border and mountain regions.

READ THE FULL POSITION PAPER HERE

ETUI advertisement

HESA Magazine Cover

With a comprehensive set of relevant indicators, presented in 85 graphs and tables, the 2025 Benchmarking Working Europe report examines how EU policies can reconcile economic, social and environmental goals to ensure long-term competitiveness. Considered a key reference, this publication is an invaluable resource for supporting European social dialogue.

DOWNLOAD HERE

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

BlueskyXWhatsApp