The Visible Hand: Government Hand-outs and Hand-ups (Panel Transcript)

• Pages: 315-349

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CHAPTER XII

THE VISIBLE HAND: GOVERNMENT HAND-OUTS

AND HAND-UPS (PANEL TRANSCRIPT)

Moderator

Andrew Renshaw

Freshfields Bruckhaus Deringer, Brussels, Belgium

Panelists

Thomas Deisenhofer

European Commission, Brussels, Belgium

Lawson A.W. Hunter

Stikeman Elliott LLP, Ottawa, Canada

MR. WILSON: We‘re grateful that Andrew Renshaw is going to

moderate this panel. He is a partner at Freshfields, an expert on this area

of state aid, and also in mergers and other matters before the European

Commission.

Andrew, thank you.

MR. RENSHAW: Thanks very much, Jim.

First of all, let me say it is an honor and a privilege, not only to be

able to moderate a panel, but also deliver a paper to this august

gathering. So thank you for that.

I am not alone, of course. We have a very distinguished panel.

We have Lawson Hunter, who needs no introduction from me. He

is, of c ourse, one of Canada‘s preeminent regulatory and government

relations lawyers. He has had an interesting and varied experience. He

is one of the few practicing lawyers that I know of who has not only had

the luxury of drafting the law on which he advises, but also has actually

joined companies to sit on their boards and to advise them in relation to

those laws. I think that is quite an achievement. He originally was one

of the first drafters of the Canadian Competition Act. He then became a

partner at Stikeman Elliott. From 2003 to 2008, he was Executive Vice

President and C hief Corporate Officer of Bell Canada. Now he is back

in private practice as counsel with Stikeman.

I‘m really very pleased that Thomas Deisenhofer has a greed to join

our panel. For the last five years or so, Thomas has been advising

somebody who is particularly well known in the European Union

316 Competition as Public Policy

antitrust sphere, namely the Director General for Competition in the

European Commission, Philip Lowe. Thomas is indeed one of the brains

in the European Commission on state aid policy, and he has played a

very active role in shaping that policy during the current economic and

financial crisis. Before he was doing that, he was again on the policy

side in the European Commission. He worked on the Article 82 review.

He also was one of the first people t o sit on the D evil‘s Advocate panels

that the European Commission introduced.

I should also add, just to show you that Thomas does have an

invisible hand behind many important documents, he was also a clerk to

one of t he great advocate generals of the European Court of Justice, Sir

Francis Jacobs. He clerked for him for many years. We are delighted to

have Thomas with us.

Let me just give you a bit of guidance as to where we hope to go.

Bill Lewis put up some quotations during his presentation yesterday,

some quotes of economic commentators and past presidents, which

actually reminded me of a quote from President Reagan, which I actually

remember him making, which was: ―The nine most terrifying words in

the English language are ‗I‘m from the government and I‘m here to

help.‘‖

Well, things have moved a long way since then in a very short space

of time. The consensus around the table seems to be that government

intervention has been required to stabilize the economy and to avoid

what we in Europe call ― the unacceptable social consequences‖ if banks

in particular—I‘m not so sure about the auto industry, but banks in

particular—were allowed to fail.

But it is also clear that there is a consensus that it is competitive

markets that produce the best outcomes. It seemed to Thomas, Lawson,

and me that really the issue now is: how do you establish t hat

government intervention is necessary, and how do you establish whether

that government intervention is helpful or harmful to enhancing welfare?

Now, Carl Shapiro talked last night about how antitrust regulators

need to become advocates of competition law within government. He

also talked about the need to continue to enforce the law rigorously.

That is the theme, I think, that Lawson wants to take up.

The theme that Thomas and I want to take up, though, goes

somewhere a bit further than that: is advocacy actually enough within

government? Wouldn‘t it be better, as well as having advocacy, to have

some principles to measure how government intervention is actually

helping competition. Is it actually helping the economy, or not?

Government Hand-Outs and Hand-Ups (Panel Tra nscript) 317

There is one model in the world, which is the European state aid

model, which purports to regulate government intervention in accordance

with competition law principles. I will spend a little bit of time

explaining how that works. Then Thomas has kindly agreed to go back

to the policy, look at the benefits of a state aid control system, look at the

challenges that any substantive control system needs to meet, and then

we will have a little discussion as to whether it is appropriate to have

global rules in relation to government intervention to at least ensure

some degree of consistency around the world.

I am going to turn now to Lawson to kick off.

MR. HUNTER: Thank you, Andrew.

I am going to come at this at a pretty high level and, in part, maybe

from my most recent experience at Bell Canada, where we were subject

to a type of regulation that somebody said yesterday was obsolete—

certainly it was in my view, and I think the company‘s view—but also

when I had responsibility for monitoring how governments actually act,

and how you influence those actions and what are the factors that go into

establishing public policy.

I have to say I have found the discussion here in some ways a little

removed from the real world, and I hope to bring that back a little bit in

what I have to say. You will also find that some of what I say has been

said by others already.

First, obviously the global recession really has raised a debate about

the shortcomings or excesses of the free market. For those of you who

read The Economist, their most recent editorial is almost shocking in

their recognition and acceptance of that problem.

As was said by Alan Greenspan—and I think Carl [Shapiro] said it

yesterday—―Those of us who have looked to the self-interest of leading

institutions to protect s hareholder‘s equity—myself especially—are in a

state of shocked disbelief.‖

Now, he was commenting on financial markets. He pointed out,

however, that the free market system was not immune from

shortcomings and failings.

By the way, just from my own observation of these issues over the

last several months, I was quite concerned about where we were heading

last fall, and I want to talk a bit more about that.

In October of 2008, Lawrence Summers wrote in The Financial

Times, in an article entitled The Pendulum Swings Towards Regulation,

that ―All of these considerations suggest that the pendulum will swing—

and should swing—towards an enhanced role for government in saving

the market system from its excesses and inadequacies.‖