German Monopolies Commission calls for greater focus on competition in economic policy

Germany’s Monopolies Commission has called for economic policy to place greater emphasis on competition, innovation and productivity rather than sector-specific support measures in its 26th main report presented to Federal Minister for Economic Affairs Katherina Reiche.

The report argues that the challenges facing German industry cannot be addressed through additional targeted interventions alone and instead recommends policies that strengthen competition and improve the business environment.

According to Tomaso Duso, chairman of the Monopolies Commission and head of the Firms and Markets Department at German Institute for Economic Research (DIW Berlin), many of Germany’s largest industrial companies continue to grow, but an increasing share of their expansion is taking place outside Germany. The report identifies this trend, together with declining domestic productivity in manufacturing, as a signal that Germany’s competitiveness as an industrial location needs to improve.

The commission recommends reducing state-related energy costs, accelerating the transfer of research into commercial applications and simplifying administrative procedures to encourage investment and innovation.

It also argues that subsidies for individual industries or companies should be used only where market failures or strategic investment gaps can be clearly demonstrated. According to the report, any such support should be transparent, time-limited, open to competition and subject to regular evaluation.

The report highlights Germany’s system of electricity support schemes, including electricity price compensation, industrial electricity subsidies, electricity tax reductions and grid fee assistance, arguing that these measures primarily benefit larger industrial users while smaller businesses often receive limited support. The commission instead recommends broader measures to reduce electricity costs across the economy and improve the overall efficiency of the power system.

The report also addresses the adoption of artificial intelligence, stating that Germany is lagging behind due to a combination of regulatory uncertainty, organisational barriers within companies and compliance burdens that particularly affect smaller businesses and start-ups.

To support greater competition in digital markets, the commission recommends consistent enforcement of EU competition rules and the Digital Markets Act, while also calling for simplified AI regulation and the avoidance of overlapping regulatory requirements.

Source: DIW