Opening Remarks by Angel Gurría
5 December 2019 - OECD, Paris
(As prepared for delivery)
My dear colleague, Frédéric Jenny, Ambassadors, friends, colleagues, ladies and gentlemen,
It is my pleasure to open the 18th edition of the OECD Global Forum on Competition and to welcome so many leaders and experts in competition policy from so many different jurisdictions, (despite the important strikes!)
Your participation reflects a strong commitment and a continued belief in the importance of dialogue, and peer learning.
This year’s theme “Competition Under Fire” captures the prevailing atmosphere in many of our societies. Not only are the objectives and enforcement of competition law under fire, but also many governments, corporations, banks, whole economic systems are being challenged around the world.
Many are questioning the extent to which post-crisis economic growth has been sustainable, fair, and inclusive. Many also question whether investment and business practices are aligned with societal values, such as social and environmental issues. Income inequality in OECD countries is at its highest level for the past 50 years. The average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago.
Unsurprisingly, many citizens are feeling left out. Our Trust in Government Initiative shows that in OECD countries only 43% of citizens trust their governments. Our latest Business and Finance Outlook finds that trust in business also remains weak: 44% of people do not trust business to “do the right thing” according to the 2019 edition of the Edelman Trust Barometer. Across OECD countries, business and investment activities have been anaemic, and markets are increasingly vulnerable to downside risks. Progress in implementing financial reforms is uneven. New concerns have arisen regarding consumer protection and privacy in digital markets. And of course competition is a key area where we are facing important challenges.
Digitalisation is also raising concerns for competition – from killer acquisitions of nascent competitors to algorithmic collusion. We have also seen that mark-ups – which are a measure of the market power of firms – are on the rise. In particular, OECD research has found that mark-ups have increased an estimated 4% to 6%, on average, across 26 countries between 2001-2014. In addition, fewer start-ups are being created, and the fall in the entry of new firms has been twice as fast in digital markets.
At the same time, merger activity is accelerating, meaning that the economic concentration of industries is on the rise. While these trends are being observed across the entire economy, they are particularly evident in digital sectors and in sectors that use digital technologies intensively.
A further challenge is the fact that digitalisation is changing the nature of competition. In this respect, many countries are reviewing their industrial policies, eager to promote growth, productivity and high-quality employment. However, industrial policies must be designed carefully. At their most effective, they can prepare domestic companies with the tools they need to succeed in global markets, including talented workers and solid infrastructure. However, we must be aware of the risks of industrial policies that seek to distort competition and choose winners and losers – these can end up costing domestic consumers dearly, and could mean that domestic firms will be unable to face tough global competition. Inclusive growth would suffer as a result.
In the wake of these challenges, we must continue to advocate for effective competition policy. This may require some changes – competition authorities need to adapt their tools to digital markets, and legislative changes are being proposed to tackle concerns such as killer acquisitions. But at the same time, the core of our message has not changed. Competition is an essential ingredient in inclusive growth, and we cannot tackle today’s challenges with distortionary policies that make our firms less efficient and our citizens poorer.
Competition can open business opportunities to citizens and reduce the cost of goods and services throughout the economy. It is essential to make sure that the benefits of globalisation and growth trickle down. Let me give you a couple of concrete examples.
Laws and regulations can restrict competition in the marketplace. Some may go further than necessary to achieve their policy objectives. Many of you are familiar with the OECD’s Competition Assessment Toolkit. Following our assessment in 2018, the Portuguese Competition Authority approved an action plan for the implementation of the OECD recommendations in transportation and self-regulated professions. If fully implemented, the Portuguese economy will benefit from a total positive impact of around EUR 250 million per year, equivalent to 0.14% of GDP. In addition to the estimated quantifiable benefits, the cumulative and long-term impact of lifting the restrictions identified will produce long-term effects on employment, productivity and growth.
Fighting bid-rigging lowers prices paid by governments, saving taxpayers money, and helping to fight corruption. The Mexican Social Security Institute, by implementing the OECD recommendations on procurement centralisation, has realised savings of between 7.4% and 8.8% in spending over 2009-2016; this translates to savings of approximately MXN 13 to 15 billion.
This is why the OECD has been at the forefront of competition policy efforts for decades. We have been delivering policy tools, as well as research and discussion in the Committee and the Global Forum on Competition, that are helping governments strengthen the competitiveness and efficiency of sectors such as, pharmaceuticals, logistics, and retail trade.
We are also working hard to provide data and address the many manifestations of inequality, be it in gender, tax, health or in education; for example, through our OECD Framework for Measuring Well-Being and Progress and our Centre for Opportunity and Equality.
The OECD also recently created the Business for Inclusive Growth Platform (B4IG), to unite governments and businesses behind a broad-based, sustainable growth agenda. It is specifically designed to better link public policies and business practices for inclusive growth and to accelerate on-the-ground initiatives that bring concrete results for people and places left behind.
Looking ahead, the work of the OECD Competition Committee, and this Global Forum, will aim to feed into the OECD’s efforts to stimulate our economies, promote inclusive growth and strengthen international co-operation. Through our work on Measuring the Digital Transformation, we know that our economies have changed rapidly since 2014 and our Recommendations and Guidance need to keep pace.
I am particularly struck by your session tomorrow on Merger Control in Dynamic Markets. The modern business models observed in rapidly-evolving sectors, such as high-technology, consumer services and online retail, have called into question the efficacy of merger control tools in protecting competition. Your discussions tomorrow will be an important contribution to rethinking merger enforcement in the new economy.
Ladies and Gentlemen,
I encourage you to think boldly whether competition, as we know it today, is helping to address these complex challenges as bravely and as effectively as it could.
Competition policy is about giving everyone – businesses and people – a fair chance to reach their potential. It lies at the core of the OECD’s efforts to create more inclusive and sustainable economies, and to ensure a fairer globalisation.
Let’s keep enriching our work together to promote better competition policies for better lives. Thank you.
OECD work by Directorate for Financial and Enterprise Affairs