Requests for state support have soared since the outbreak of the global economic crisis, putting governments under pressure to save national industries, but the business sector is worried about the creeping return of market distortions.
The European Round Table of Industrialists (ERT), a group of CEOs and chairmen of multinational corporations, is demanding that competition law be enforced, even if local businesses are pleading for government bailouts.
"Some of the successes achieved by EU competition policy in ensuring the good functioning of markets could be jeopardised in times of economic crisis," Jacob Wallenberg, chairman of an ERT working group on competition policy, writes in the foreword of a new report.
The report, 'Challenges in EU Competition Policy', notes that state aid has always been an area where political pressure is at its highest but warns against "throwing the baby out with the bathwater" in an effort to save jobs in the short term.
"Competition policy needs to be enforced - in particular in the area of state aid - so that markets continue to be open and transparent. Distortion of competition across member states needs to be prevented by a consistent application of the European state aid rules," says the group.
The ERT says state aid presents the European Commission with an opportunity to assert itself and play an important role in the EU's post-crisis industrial policy.
"How we handle the industrial restructuring during the crisis is of paramount importance to what happens when economic activity picks up again," according to the report, which warns against sacrificing future growth by allowing national interests to trump long-term industrial development.
Distortions in competition must be avoided to safeguard the EU common market, the industrialists say in the report, which was commissioned from Lars-Hendrik Röller, former chief economist at the Commission's antitrust department.
The EU also has a role to play in working with emerging economic powers to help develop competition policy, according to the ERT, which wants to see China, India, Mexico and Brazil fully integrated into the global competition architecture.
"Providing a potent European voice on competition-related issues in the international context - such as in state aid - is becoming more and more relevant. It is important for Europe to have a relevant voice to keep a level playing field on the global stage," say the industrialists.
They want the EU to strengthen its relationship with US antitrust agencies, which have indicated a willingness to take a tougher stance in areas such as mergers and monopolies.
Competition policy should be fully integrated into the EU's external policy where it would sit next to trade policy, the ERT says.
The report also calls on Brussels to maintain a "consumer orientation" in competition policy, and to increase coordination across policy fields such as the environment and consumer protection.
Wallenberg, chair of the ERT's competition policy working group and chairman of Investor AB, warns against taking the free market for granted.
"We believe that the formation of a single European market leads to growth and innovation in that market. The benefits to consumers should not be underestimated in this context. In a global economy such competition rules are of even greater importance," he writes in the report.
