IESE Celebrates 50th Anniversary of the Treaty of Rome
Europe: 50 Years Later

1957 saw the genesis of today’s European Union (EU) with the signing of the Treaty of Rome, as well as the creation of IESE Business School. EU Commissioner for Competition, Neelie Kroes, was the keynote speaker at a special conference marking the event, which reflected on “Fifty Years of the Treaty: Assessment and Perspectives of Competition Policy in Europe.”

IESE and the EU share more than just a birthday, though. The school’s founders were committed to improving the development of business leaders in order to contribute to the improvement of society. The treaty’s overriding priority in the harsh climate of post-war Europe was also to improve society by securing prosperity through a common market which united neighbors economically and politically.

Since then, the group of six founding countries has swollen to 25 creating the world’s largest single market. “500 million people made a statement that it is better to work together to turn good into gold,” Kroes said. “Europe has built a unique model on the basis of shared traditions, institutions, values, creativity, commerce and political leadership – and increasing the involvement of its citizens,” the commissioner said.

While IESE’s objective remains the same, the EU’s mission has evolved since its conception half a century ago when much of Europe was still recovering from World War II. “The world has changed greatly since then and the union has had to adapt to those changes,” Kroes noted.

The European Commission’s competition authority has also adapted to changes in the market. Microsoft agreed to share technical information to guarantee the compatibility of rival servers with its operating systems in October 2007, ending almost a decade of litigation with the antitrust body. The case would have been without precedent when the competition authority first gained enforcement powers in 1962. Since then, the commission has been a pioneer in establishing the foundations of EC antitrust law. Today, the Dutch commissioner puts Europe’s consumers at the center of the antitrust authority’s objectives. ”Competition policy has had to adapt to achieve a clear objective: to benefit consumers and the economy of the European Union,” she said. The authority imposed fines totaling over Euro 2.5 billion last year alone. The watchdog targeted industries as diverse as lifts and escalators, zips and fasteners, gas insulated switchgear and bitumen.

Kroes highlighted new measures under discussion to combat cartels during the conference. The proposed legislation would allow for speedy resolution for cases where a company acts as the “whistleblower.” “With these measures, the commission would have more resources to hunt down cartels while consumers would benefit as the companies involved would be penalized more quickly,” Kroes said.

The commissioner emphasized that the measures’ aim is to reach a resolution on cases faster, but that there will be no softening on the EU’s legal rulings. “Let me be very clear. The commission will not bargain about evidence or objections and the settlements will continue to lead to a formal decision."

Another focus of Kroes’s mandate has been the energy and financial services. Until now, Europe’s energy markets have mostly been defined by national borders and dominated by a small number of sellers, but the anti-trust body aims to force suppliers to “unbundle” energy production and transmission. The days of companies operating with a competitive advantage are over, Kroes warned.

The initiative brings into focus the debate over “national champions” – large sometimes partially state-owned suppliers operating in oligopolies. Some EU members argue that ensuring energy supply is of strategic importance. As a result, governments may help preserve national champions by providing aid or impeding cross-border takeovers. One of the European antitrust watchdog’s roles is to police this support for national champions.

On the other hand, some argue that “European champions” are needed to avoid reliance on countries such as Russia for the region’s energy, making cross-border takeovers a necessity.

But the competition authority has to walk a delicate path between limiting state aid and fostering economic development. Lars-Hendrik Röller, economics professor at Humboldt University in Berlin and president of the European School of Management and Technology, discussed the role of state aid in research and development. “Government policy on grants and aid is a fundamental part of competition policy,” he said.

IESE Prof. Xavier Vives coordinated the event which took place on November 19-20 in Barcelona and was organized by the school’s Public-Private Sector Research Center. Dean Canals welcomed a program of speakers from Europe and the U.S. including antitrust lawyers, academics and competition regulators.