Thirty years of the Single Market: corporate complaints and deregulation pressure endanger the ecological transition

This article was first published by Heinrich-Böll-Stiftung Brussels

While it makes sense to celebrate 30 years of a border-free EU market for goods and services, there is also an urgent need for a critical assessment. This should start with discussing the limits of the Single Market, namely which areas of our societies should be covered by Single Market rules and which should not. This debate is crucially important because of the reality that the European Commission (notably its DG GROW department) has a permanent agenda of expanding Single Market rules to all areas of society and of tightening the enforcement of these rules. The end result would be a Europe where even the most sensitive areas, such as water, healthcare and education, are opened up for privatisation and corporate expansion, and where public authorities have ever-decreasing rights and space to regulate the economy in the public interest.

An example was the Services Notification Procedure[1] directive, proposed in 2017 and withdrawn in 2020; its name is typical neutral-sounding EU jargon, but the directive had very deep potential social impacts. It would have introduced a far stronger enforcement system for the EU’s existing Services Directive (also known as the ‘Bolkestein’ Directive). The 2006 Bolkestein Directive – named after the Dutch European Commissioner who proposed it – aimed at sweeping ‘big bang’ liberalisation, outlawing obstacles to “freedom of establishment” and the “freedom to provide services” across the EU.

After trade unions and citizen movements protested against the negative impacts (such as privatisation of public services and social dumping), the final version of the directive was amended somewhat and excluded several sectors, including drinking water delivery. But the neoliberal core of the directive was left untouched. A 2019 report by Jana Mattini and Thomas Fritz[2] shows how the Bolkestein Directive limits public authorities’ right to regulate in many ways.

The proposed services notification directive was opposed by mayors from cities all over Europe, trade unions and NGOs alike, because it would have severely limited the democratic policy space to regulate that is still available to cities and other public authorities across Europe. The reason why cities like Amsterdam, Berlin, Madrid, Barcelona, Budapest and Riga (as well as civil society groups and trade unions) were up in arms was simple: the directive would have forced local, regional and national authorities to notify the European Commission of any new planned regulations affecting the services sector three months in advance (rather than afterwards as is currently the case).This would not only have meant a delay, while municipalities waited for the European Commission to use its advance veto power to reject or approve the planned regulation, but it would also have given the EU Commission sweeping new powers to impose its corporate-friendly interpretation of Single Market legislation and control what public authorities across Europe are allowed to do. As an example of what was at stake, the directive would have given the European Commission strong new powers to block Amsterdam, Paris and other cities in Europe from introducing ambitious measures to regulate Airbnb and other platform corporations whose expansion endanger affordable housing.

The European Commission’s withdrawal of the proposed directive in October 2020 was an important victory,[3] but unfortunately the EU executive has not abandoned its agenda of ever-deeper ‘liberalisation’ and ever-tighter enforcement (of its interpretation) of Single Market legislation. Even after the directive was defeated, the EU Commission went ahead and implemented one of the key business lobbying demands: giving ‘stakeholders’ the right to see and comment on new measures put forward by public authorities.

Thirty years after the creation of the Single Market, it is high time for a critical evaluation of the how the liberalisation and privatisation experiment has impacted key sectors such as energy provision. The unprecedented energy price crisis that is now hitting European societies hard shows that change is needed, both in the short term (intervening in speculative energy markets) and medium term. Liberalised energy markets based on ruthless competition is the model preferred by the giant energy corporations who have gained control of the market, but it is clearly not the best way to achieve the much-needed fast transition towards renewable energy. The report "Going Public: A Decarbonised, Affordable and Democratic Energy System for Europe”[4] concludes that the energy liberalisation experiment “has failed to achieve its goals and was probably always doomed to fail because of the nature of the electricity and gas sectors”. The report points out that “there is now an urgent need to tackle the climate emergency and the liberalised model has shown that it is not up to the job”. The solution for greening the energy system, the report’s authors conclude, is “public ownership and control over energy supply through the nationalisation of the biggest supply companies”, combined with “the establishment of local or regional public supply companies”.

At your service

Corporate lobby groups are continuously playing the Single Market card in their lobbying, presenting many of their demands as a matter of removing “regulatory barriers” in the Single Market or preventing new ones from emerging. Many politicians parrot the mantra of “completing the Single Market”, all seemingly convinced this is the cornerstone of the EU that has brought wealth and prosperity for all, and unaware of or ignoring the considerable downsides and risks. The latest example of pushing the Single Market towards the new frontier is the high-profile campaign[5] launched by the European Roundtable of Industrialists (ERT) in December 2021, a campaign that has since been joined by several other corporate lobby groups.

In its December 2021 report,[6] the ERT claims that there is a major problem with old and new "regulatory barriers" in the Single Market and that a far stronger EU governance system is needed to remove such "obstacles". And although there is often a case to be made for harmonisation of national level rules at the EU level, the ERT’s demands should be handled with care and critical scrutiny. Many of these perceived "regulatory barriers" are in fact entirely legitimate progressive regulations. The ERT report, for instance, demands getting rid of "protectionist retail restrictions, at the regional and local levels”. This is a reference to entirely legitimate city-level rules that limit the expansion of hypermarkets on the outskirts of cities, in order to protect healthy city centres and local economies.

The ERT uses references to the Covid crisis recovery, as well as the green and digital transitions, as a smokescreen for what is really an attempt to weaken social and environmental initiatives at the EU, national and local levels whenever these are not aligned with the corporate agenda. The ERT report advocates increasing the powers of the European Commission (with its consistently corporate-friendly interpretation of Single Market legislation), and demands far stricter enforcement of the EU’s Services Directive, essentially calling for a revival of the deregulatory agenda behind the failed Services Notification Procedure Directive.

The ERT’s call for “renewing the Single Market with a new governance structure” includes a wide range of measures, some of which are very worrying. Particularly problematic is the ERT’s demand that the European Semester process, and its country-specific recommendations, should be used to force governments and other public authorities to address “the obstacles for companies which they need to remove”. The Semester process, part of the EU's economic governance framework introduced after the euro crisis, gives the European Commission the option of handing out fines to governments that are not following its recommendations.

In June, the ERT, BusinessEurope and three other corporate lobby groups repeated their demands^[7] for removing "all barriers to cross-border business operations and intra-EU investments, forming a fully-fledged Single Market for all economic activities".

No paper tiger

This ongoing corporate lobby campaign ignores the fact that there is already a very comprehensive, tightly-knit enforcement system for the EU’s Single Market. Due to this system (which includes SOLVIT, the European Commission's general complaints handling system CHAP, the EU Pilot system, the Internal Market Scoreboard, notifications via the Technical Regulation Information System (TRIS) and other instruments), the overwhelming majority of complaints about perceived Single Market “barriers” are tackled early on. Businesses already have ample complaint opportunities at their disposal and the European Commission already has a wealth of strong enforcement instruments. On top of that, an EU Action Plan for Single Market enforcement was launched as recently as 2020, and there is a Single Market Task Force (SMET) at work.

The complaints-based enforcement system that exists for the EU Single Market is far from a paper tiger. Corporate lobby groups actively use this system to pre-empt new environment and social protection rules emerging at the national level. A recent example is the complaint submitted by both French and EU-level airport lobby groups against the French government’s ban on domestic flights of less than 250 kilometres (which can be easily done by train instead). The ban originates from the Citizens Convention for Climate (an example of enabling participation of the public in climate policy-making) and was part of the French 'Climate and Resilience' law adopted in July 2021. Airport lobbies claimed[8] that the ban violated “the freedom to provide services”. In December 2021, the European Commission launched an examination procedure, which means the French ban is currently suspended.

It remains to be seen whether or not the European Commission finds the French ban "proportionate" and "non-discriminatory". The verdict on the French ban will be an important indication of whether the EU Commission interprets Single Market law in a way that prevents much needed climate transition initiatives.

At the time of writing, the Commission’s investigation had been ongoing for 10 months. This painstakingly slow assessment delays a very laudable Member State initiative to address the burning societal challenge of preventing catastrophic climate change. The right of governments to introduce such measures is of major strategic importance.

Because of the lack of transparency, it is impossible to know how many cases of this kind exist. In response to an MEP question (”how many corporate complaints about ‘regulatory barriers’ in the Single Market has the European Commission received?”), the EU Commission recently disclosed that it had received 1,156 internal market complaints during the last three years. The European Commission states that these complaints were all examined and “the vast majority of complaints” did not lead to official investigations, but it does not mention how many corporate complaints did result in infringement procedures, EU Pilot cases or other interventions.

The French ban is just one of many examples of small and large initiatives to accelerate the transition to carbon-free societies with a better quality of life that are emerging at the national and local level. Initiatives from cities, regions and governments are crucially important for the ecological transition, securing genuine change on the ground and providing inspiring examples for others to follow. This dynamic should not be hindered by heavy-handed enforcement of Single Market rules or by giving corporations even more excessive power to challenge local regulations than they already have.

The proposed tightening of Single Market disciplines would not only harm democracy, but also stifle the ecological transition that Europe desperately needs. In fact, the exact opposite of what the ERT demands is needed: a critical assessment of the Single Market and its governance (shaped 20-30 years ago during the neoliberal peak years). Rather than being too weak, the Single Market governance is in fact too rigid and gives excessive rights to corporations.

It is high time for change to ensure that the Single Market is not holding back the ecological and social transition that Europe needs. Creating a supportive, enabling environment for ambitious transition initiatives requires changes in directives around services, state aid, public procurement and other Single Market legislation – which will take time. There is, therefore, also a need for short-term measures to enable governments, regions and cities to move ahead quickly. A Sustainability Exemption could be a way to signal that initiatives to accelerate a socially just climate transition will not be challenged as part of Single Market enforcement.

[1] https://corporateeurope.org/en/2020/11/wakeup-call-european-commission-its-failed-power-grab-over-local-services

[2] https://thomas-fritz.org/artikel/bolkesteins-hammer-schlaegt-wieder-zu%5D

[3] https://corporateeurope.org/en/2020/11/wakeup-call-european-commission-its-failed-power-grab-over-local-services

[4] https://www.epsu.org/article/going-public-decarbonised-affordable-and-democratic-energy-system-europe-new-epsu-report

[5] https://ert.eu/documents/harmony/

[6] https://ert.eu/wp-content/uploads/2021/12/ERT-Single-Market-Stories_WEB-low-res.pdf

[7] https://www.eurochambres.eu/wp-content/uploads/2022/06/Joint-industry-statement-on-the-Single-Market-27-June-2022.pdf

[8] https://blazetrends.com/ban-on-short-domestic-flights-the-eu-looks-into-the-french-project/