Competition policy, through advocacy and enforcement, is essential in ensuring effective industrial policy strategies and outcomes. Drawing on examples from telecommunications, public procurement for the green transition, and digital payment infrastructure, this article highlights certain pro-competitive industrial policies and the role of competition authorities in co-designing policies that promote open, dynamic and competitive markets. Despite the risks of tensions, this article underscores how competition and industrial policy can be aligned to achieve long-term growth and consumer welfare by emphasizing the importance of policy coordination and regulatory vigilance.
By Antonio Capobianco & Beatriz Marques[1]
I. The Revival of a Bolder Industrial Policy: Market-Crafting
The last decade has witnessed a resurgence of industrial policies, a largely debated and, at times, controversial topic area.[2] This revival can be attributed to a general weakening of the belief that market mechanisms on their own can deliver optimal policy outcomes and to the need for government intervention to shape better outcomes by intervening and more actively responding to multiple simultaneous challenges, including global financial, economic and health crises, geopolitical tensions, technological advancements, and climate change. While industrial policy traditionally focused on objectives such as economic growth, productivity, competitiveness, employment and inclusiveness, the focus has expanded to include economic resilience (the ability of an economy to withstand and recover from shocks) and strategic autonomy (the capacity to make independent decisions and actions in key economic sectors), reducing inequality, and supporting the climate and digital transition.[3] But the list is swiftly growing! The complexity and urgency of the current economic goals have necessitated the adoption of bolder public policies, which have expanded beyond addressing market failures to potentially creating new markets or shaping existing markets.[4] This expansion has reopened a long-standing debate about the relationship between industrial policies and competition policy, a debate that has never really stopped but has regained momentum in the last years. We argue that, despite the risks of tensions and trade-offs, sound industrial policy is not incompatible with competition policy. They are complementary policies, as well-designed industrial policy opens new opportunities and potential benefits for markets and consumers.
Global events such as the 2008 global financial crisis and the COVID-19 pandemic have underscored the necessity for government intervention, where markets on their own could not respond effectively to crises. The latter, in particular, has highlighted the vulnerability of various industries and their supply chains, necessitating government intervention to stabilise production capabilities and innovations or stimulate demand. Ongoing geopolitical tensions may also impact supply chains, leading to higher global prices across strategic supply chains, from energy to food. The increased reliance on certain technology infrastructures and the emergence of transformative technologies, such as artificial intelligence, further emphasise the potential need for governments to step in and mitigate potential risks while preserving the potential benefits for markets and consumers of the technology and ensuring they are widely felt. Climate change challenges require fostering the development and adoption of clean or climate-neutral technologies. Government intervention is necessary because markets often do not cater for societal or environmental concerns. Market-led innovations are often path-dependent, with previous investment decisions determining future investment directions.[5] In turn, through industrial policy, governments can invest in or shape the direction of future innovations, especially where this investment may be riskier or too high to diffuse.
Broadly defined, industrial policy is government action that explicitly seeks to transform and improve the structural performance of key strategic economic activity or sectors to pursue a specific goal (e.g. growth, defence, energy transition, or security of supply).[6] A wide range of instruments are available to governments to help achieve industrial policy objectives. These include:[7]
- Supply-side instruments that affect firm performance include direct measures such as public spending to incentivise investment, such as grants, subsidies, tax incentives, loans, and guarantees. Governments may also affect firm performance by providing access to public infrastructures and addressing information asymmetries through knowledge-sharing of government research and development.
- Supply-side instruments that affect industry dynamics between firms include promoting well-functioning capital markets that facilitate the flow of capital from investors to businesses and governments, labour mobility, efficient tax systems, intellectual property, and technical standardisation policies.[8] While these instruments may achieve broader objectives, they may complement targeted industrial policies in specific sectors.
- Demand-side instruments that affect the demand for products and services incentivise domestic consumption by influencing the price, availability, and public demand through public procurement, product regulation, standards, and awareness-raising campaigns.
- Governance instruments oversee supply and demand-side instruments and incentivise coordination among stakeholders and between the private and public sectors, avoiding coordination failures.
While this list is not exhaustive, it includes a large set of instruments frequently used in combination by governments.[9] These instruments can address multiple externalities, from informational externalities to overcoming external economies of scope through shared infrastructures. As discussed below in Section II, complementary policy areas such as competition policy can bolster these instruments’ effectiveness.
Industrial policy can be a very effective tool in fixing market failures, particularly when markets alone cannot generate efficient or inclusive outcomes. When carefully targeted, industrial policy interventions can correct structural distortions, such as underinvestment, that prevent markets from functioning optimally. While the objectives of industrial policies are not always framed explicitly in terms of market failures but rather in terms of broader political or strategic objectives, market failures are often at the core of such goals.[10] For instance, catching up with the technological frontier or ensuring inclusive access may entail addressing the positive externalities of innovation and coordination failures in interlinked investment decisions.
By addressing market failures, industrial policy can enhance the functioning of markets and support competitive outcomes. If well-crafted and successful, it is a win-win case. In this sense, successful industrial policy restores the conditions under which markets can function effectively, reducing the need for prolonged intervention.[11] A well-designed industrial policy can repair malfunctioning markets and pave the way for competition to flourish by addressing the root causes of inefficiency. In other words, regulation may not be required where industrial policies effectively address market failures and, as a result, markets restart their effective functioning.
Notwithstanding industrial policy’s rationale and important objectives, if it is not well-designed, it can undermine competition and competitiveness (e.g. misallocating resources, undermining contestability, and distorting competition by creating an uneven playing field by picking winners and losers). Indeed, one of the risks of industrial policy is that it may translate into protectionism, limiting international competition, with negative consequences for total welfare. Thus, competition principles are the cornerstone of well-designed industrial policy, providing a solid foundation for ensuring pro-competitive outcomes. Subsidies for example, may be a useful industrial policy tool when carefully targeted to complement certain policy goals. In infant industries, temporary subsidies may nurture these nascent industries, fostering their growth and competitiveness. However, like all industrial policies, subsidies are most effective when the goals incentivising the use of these tools are well-defined, and their application is narrowly tailored.
II. Complementarity of Competition and Industrial Policy
Competition and industrial policies are not substitutes. Each achieves distinct results that the other cannot.[12] Combined, they can create a virtuous cycle that drives innovation and productivity. There are at least three ways each policy complements the other.[13]
Industrial policy is most effective in competitive markets and should be designed to preserve or enhance competition. Competitive markets amplify the impact of industrial interventions, including by boosting productivity growth. Competition enforcement plays a crucial role in this, strengthening the dynamism and contestability of markets and providing a strong foundation for successful policy implementation. For instance, through merger control, competition enforcement can directly support some industrial policy objectives, encouraging innovation, investment, and long-term growth and preventing incumbent firms’ attempts to increase and entrench their economic power.[14] However, the success of industrial policy may depend heavily on choosing and designing pro-competitive policy instruments, as discussed further in Section III. For example, research and development subsidies can incentivise innovation or facilitate market entry. Yet, poorly designed subsidies can distort competition by protecting incumbents or discouraging the entry of more efficient firms, strengthening and entrenching existing market power. This underscores the need for careful design and selection of policy instruments, which are critical to ensuring that interventions maintain a level playing field and deliver the intended benefits.
Competition and industrial policy can complement each other by fostering competition through different mechanisms, including reducing barriers to entry or expansion. Lowering barriers to entry or expansion is a critical aspect of promoting competition. Industrial policy can play a key role in addressing structural barriers to entry, such as high capital requirements, by offering subsidies, reforming regulations, or supporting new entrants.
Last, but certainly not least, competition enforcement also plays a vital role by actively combating exclusionary practices that block, delay, or steer market entry. Through merger control and enforcement against anticompetitive conduct, competition authorities ensure that dominant firms do not engage in conduct that unfairly raises entry or expansion costs or limits opportunities for nascent or potential entrants. This combination of industrial policy and competition enforcement thus may create a level playing field, encouraging innovation and ensuring that established firms face ongoing competitive pressures.[15]
III. Pro-Competitive Industrial Policy Design
The design of pro-competitive industrial policy requires a broad and long-term strategic view, recognising that its full impact will affect other policies and may unfold over many years. Industrial policy often aims to achieve efficiencies and to foster economic growth, which takes time to materialise. As such, policymakers must consider the immediate effects of their interventions as well as their longer-term consequences, which may include unintended distortions in market dynamics or the entrenchment of market power. To mitigate such risks, policies should be designed with continuous monitoring and evaluation mechanisms. This allows for adjustments as necessary, ensuring that the policy remains proportionate and aligned with its objectives without undermining other policies, including competition.[16] For this reason, industrial policies should also include clearly defined exit strategies and sunset clauses, ensuring that measures, such as subsidies or preferential support measures, are wound down once policy objectives are met. This ensures that market forces can resume their role in preserving the firm’s incentives to increase efficiency and innovate, preventing dependency or distortions from perpetuating beyond what may be considered necessary.[17]
Achieving pro-competitive industrial policy requires a competitively neutral approach to policy design — ensuring that no market player, regardless of nationality, size, or market position, is unfairly advantaged by a government intervention. The OECD’s Competition Assessment Recommendation and related Toolkit provide a starting point to assist governments in weighing different policy objectives and identifying less restrictive measures that achieve the same policy objectives.[18]
Competitive neutrality principles in designing industrial policies can ensure that policy interventions foster competition, enabling market players of all sizes to compete on equal footing. One additional way to ensure neutral industrial policy is to involve diverse stakeholders in the policy design process. This includes competition authorities, industry participants, potential market entrants, academia, and civil society.[19] By engaging various stakeholders, policymakers can identify possible areas where competition might be compromised and design interventions that foster inclusivity and innovation across the market.
A. The Critical Role of Competition Authorities
Competition authorities can (and probably should) play a crucial role in advocating for the effective design of successful industrial policy and warning against poorly designed instruments with anti-competitive effects. Their expertise ensures that industrial policy interventions achieve their goals while safeguarding competition. Coordination between competition authorities and other regulators is essential to ensure that pro-competitive industrial policies are effective and coherent. Industrial policy decisions often have long-term consequences for market competition, and competition authorities are uniquely positioned to understand the market dynamics at play. Therefore, it is vital for competition authorities to work closely with other public bodies to ensure that industrial policies do not inadvertently stifle competition.
Beyond acting as advisors to other parts of government to help design effective industrial policies, support by competition authorities for industrial policy goals can take place in various forms. For example, enforcement could be more pronounced in industries that are key for industrial policy objectives. In some cases, enforcement could be prioritised or even slightly adapted to better align with specific industrial policy goals while maintaining competitive market dynamics. For example, competition authorities can clarify the scope of pro-competitive co-operation between firms, helping to understand which types of co-operation, such as those aimed at achieving sustainability goals, do not contravene and align with competition law. This contributes to incentivising collaboration where it is beneficial for broader policy objectives, such as environmental sustainability, while avoiding harmful anti-competitive conduct and effects.
In addition to traditional enforcement, competition authorities can leverage advocacy tools like market studies to gain insights into how industrial policy measures affect competition in a particular sector. These studies can reveal where existing policies hinder market competition and guide the development of new, more effective policy interventions. Some jurisdictions have also introduced pro-competitive intervention powers, allowing competition authorities to take targeted actions to address market failures, for example in digital markets stemming from network effects and other innate characteristics of these markets, even without direct competition violations. These powers can be beneficial in advancing industrial policy goals while maintaining market fairness.[20]
That said, aligning industrial policy with competition policy is not necessarily straightforward. Competition enforcement is inherently reactive and case-specific, focused on identifying and remedying anti-competitive conduct or structures based on facts and effects in a given case and in identified relevant antitrust markets. Industrial policy, by contrast, is proactive and systemic, at times, aimed at transforming entire sectors of the economy through broad-based interventions. Industrial policy typically seeks visible, short- to medium-term results — such as boosting demand for specific products or promoting investment, increasing capacity, or accelerating deployment of strategic technologies — while the full effects of competition enforcement, such as restored rivalry or market entry, may take longer to materialise. These temporal and methodological differences can create complexity when aligning the two policies. For instance, a government may prioritise rapid consolidation of companies and resources to achieve scale or deploy infrastructure, while competition authorities may need to assess whether such consolidation risks entrenching market power or undermining longer-term dynamic competition. As such, achieving coherence requires deliberate institutional dialogue across policy communities, mutual understanding of policy tools and objectives, and an appreciation for the long-run benefits of contestability — even when short-run pressures push in other directions.
B. Effectively Combining Policy Instruments
One of the hallmarks of pro-competitive industrial policy is the effective combination of different policy instruments to achieve broader goals. First, relying on a single policy tool may not address complex challenges, particularly those involving market failures, such as externalities. For example, to promote climate neutrality, supply-side measures like subsidies for innovation should be complemented by demand-side instruments, such as carbon taxes or public procurement, to stimulate market demand for cleaner technologies.[21] By combining instruments in this way, industrial policy can create a more dynamic and competitive market environment.
Second, ensuring the effectiveness of industrial policy requires more than just designing appropriate interventions. A holistic, coordinated approach between competition authorities and other regulatory bodies is necessary to foster a competitive environment that promotes long-term innovation and growth. For example, in addition to competition policy, trade policy may also play an important role in enhancing the effectiveness of industrial policy by creating a more competitive and dynamic external environment that complements domestic policy interventions. For example, trade policy may open domestic markets to global competition and enable firms to access larger markets, achieve economies of scale, and benefit from increased competitive pressures.
In sum, through continuous engagement and co-operation, competition authorities and regulators can help ensure that industrial policies achieve their objectives, foster competition, drive innovation, and benefit consumers. Multilateral and multidisciplinary international organisations, such as the OECD, are critical in supporting this engagement. They offer a unique platform for dialogue, peer learning, and evidence-based guidance across policy communities. By bringing together competition authorities, sector regulators, and policymakers responsible for multiple policy areas, international organisations help bridge disciplinary silos, align incentives, and foster a more coherent policy ecosystem.
IV. Addressing Tensions: Industrial Policy, Competition and National Champions
Industrial policy is not inherently synonymous with supporting protectionism or national champions. Indeed, where industrial policy aims to improve an industry’s competitiveness and intensify the innovative drive, one can distinguish it from a national champions policy and ensure that it pursues the same objective as competition policy. Empirical evidence does not support any perceived benefits of adopting a national champion policy.[22] Where scale can be significant in certain industries, its expected benefits, such as cost savings and increased innovation, are best realised when companies are not shielded from dynamic competition.
Nonetheless, perceived tensions between industrial and competition policies have arisen, particularly in merger control, where competition authorities assess mergers that could create national or regional champions. A notable example is the 2019 Siemens/Alstom merger, where the European Commission blocked the deal on competition grounds despite the strong support of the French and German governments for such consolidation of two European champions on arguments that it would create an even more formidable European competitor in the global market.[23] This case highlights the delicate balance between promoting industrial strength and safeguarding market competition.
While industrial policy can pursue a wide array of legitimate goals — ranging from promoting innovation, fostering employment, boosting resilience, and enabling strategic autonomy, to accelerating clean or digital transitions — competition and merger control are typically anchored in a more narrowly defined objective: protecting and promoting consumer welfare through the preservation of competitive markets. This divergence can complicate alignment.
On the one hand, evidence of increased market concentration combined with high profits in certain industries has led to arguments that merger control has not been enforced vigorously enough in recent decades, leading to a softening of competitive pressure and to increased market power.[24] From this perspective, stricter enforcement is necessary to protect and preserve contestability and promote more competitive market structures. On the other hand, it has also been argued that merger control has been too rigid, curbing firms’ ability to scale, integrate vertically, or pool resources — particularly in strategic sectors — thereby limiting the emergence of globally competitive players. These competing perspectives reflect tensions, especially when industrial objectives call for consolidation while competition enforcement raises concerns about diminished rivalry.
Reconciliation requires nuanced approaches. A competition authority’s role is not to promote consolidation for its own sake or to block mergers reflexively, but to thoroughly assess whether the likely effects of a transaction are compatible with competitive, dynamic, and innovative markets. Where complementary industrial policy objectives are at stake, they can be considered by competition authorities — but not at the expense of long-term consumer welfare. Clear frameworks for integrating efficiency considerations and engagement with industrial policymakers can help ensure that competition assessments remain rigorous while responsive to legitimate policy goals. In the coming years, an example of how competition authorities are trying to address these tensions and establish balance will emerge from the United Kingdom. As underscored in the 2025 to 2026 Competition and Market Authority programme, the Competition and Markets Authority commits to driving growth and investment as a key priority while fulfilling its core purpose of promoting competition and protecting consumers.[25]
Striking the right balance between these objectives is essential, as effective merger control not only preserves dynamic markets but it can also provide room for efficiencies that could align with broader industrial policy goals. Integrating competition and industrial policy requires a nuanced understanding of the relevant market, market forces, efficiencies, and the long-term competitive landscape, all of which require the expert analysis of competition authorities.
More broadly, and as underscored by the Draghi Report for the European Union, multiple pro-competitive opportunities exist that can align with industrial policy, thus revamping competition.[26] Enforcement could be more pronounced in industries that are key to industrial policy objectives. For example, enforcement could be prioritised or even slightly adapted in those industries, including by providing relevant recommendations for designing industrial policies where, for example, certain enforcement or authorisation of a merger would not achieve the sought-after objectives.
V. Pro-Competitive Industrial Policy Opportunities
The section below does not aim to be exhaustive but provides some examples of the role of competition authorities and opportunities for designing industrial policies that are pro-competitive.
A. Mergers in the Mobile Communication Market and Spectrum Assignment
The mobile communication market offers a clear example of how competition and industrial policy can pursue shared objectives — driving innovation, encouraging investment, and improving consumer outcomes. Rather than viewing merger control and industrial policy as inherently at odds, the two can be aligned to shape better market outcomes, provided enforcement is forward-looking and policy design is well-informed. A key message emerging from recent policy debates — including the Draghi Report — is that Europe must unlock more significant investment and innovation in strategic sectors such as telecoms.[27] However, simply allowing consolidation to proceed in the hope of achieving scale is not the answer.[28]
The evidence on global mergers in the mobile communication market has shown that consolidation does not automatically lead to higher investment or innovation, but substantially lessens competition.[29] Studies suggest that some mergers have been associated with reduced network investment, higher prices, and weaker competitive incentives. This includes mergers that were approved with investment commitments and structural remedies.[30] This raises legitimate questions about whether remedies can be counted on to preserve dynamic rivalry in highly concentrated markets.[31]
On the other hand, this does not mean that all mergers are undesirable. Instead, it means their review should be guided by rigorous competition analysis that integrates industrial policy goals. For example, competition authorities may consider tailored remedies that preserve competition while requiring commitments to invest in infrastructure, improve service quality, or expand coverage. Such conditions align with industrial policy aims while maintaining the benefits of a contestable market. However, they require scrutiny and ongoing monitoring, and their success may not achieve the same results as competition would have.[32]
In the future, the UK’s recent experience with the Vodafone/Three merger will prove informative regarding implementing remedies in mobile communication mergers. In December 2024, the UK Competition and Markets Authority (“CMA”) conditionally approved the creation of a joint venture combining the UK mobile network operators of Vodafone Group and Three, subject to behavioural remedies. The decision has been strongly criticised on traditional competition grounds as it would promote further consolidation in the UK mobile industry and strengthen an incumbent mobile operator by eliminating a maverick competitor.[33] However, for purposes of this article, it is interesting to note that the CMA imposed legally binding commitments on the combined entity, including a GBP 11 billion network investment programme to deploy a 5G standalone (“SA”) network and time-limited price caps on key tariffs pending the 5G SA network roll-out.[34] While the success of these behavioural remedies will rest on their ongoing monitoring, scrutiny and enforcement by the CMA, they indicate a desire to integrate industrial policy considerations in merger control.
Competition authorities can help shape better industrial policy by advising governments on how proposed policies affect market dynamics or how to achieve certain goals based on industry-specific expertise. More broadly, competition authorities’ expertise is crucial in advising governments and communication regulators on market design — particularly concerning access to critical and scarce national resources, such as spectrum. Spectrum is a key component of wireless networks and applications, and its assignment remains a cornerstone of the mobile communication market structure. Especially in cases where demand exceeds supply in certain spectrum bands, such as those for mobile communication services, market assignment mechanisms, such as auctions, are best practice in OECD countries.[35] Given the necessity of spectrum to provide mobile services, spectrum auction design can significantly influence competitive outcomes and market structure. Here, competition agencies are well-placed to advise on how to lower entry barriers, encourage innovation, and avoid undue concentration of essential inputs. Spectrum auction design, therefore, is one possible policy lever to increase investment in mobile communication infrastructure and improve consumer outcomes while incorporating appropriate pro-competitive safeguards against monopolisation.[36]
Ultimately, the experience of the mobile communication industry is that markets will operate most effectively when industrial and competition objectives are pursued together. Ensuring that market structures remain competitive while facilitating investment and innovation is not a trade-off but a shared goal. Competition enforcement can catalyse investment in mobile communication infrastructure to support inclusive access to mobile communication networks and services when aligned with industrial priorities.
B. Public Procurement Creating Demand for Sustainable Innovations
Public procurement can serve as a strategic tool to pursue a variety of policy objectives. For example, governments can incentivise firms to shift their innovation trajectories by designing tenders targeting cleaner, more sustainable technologies. Public procurement measures favouring environmentally friendly solutions can break the path-dependency cycle, compelling firms to invest in greener alternatives.[37] This proactive use of public procurement can stimulate innovation in sustainable technologies and broaden market participation. For example, the Norwegian government mandated that all new ferry tenders prioritise low or zero-emission technologies. The government employed a strategic tendering process emphasising environmental performance without prescribing specific technologies. This approach encouraged a diversified supplier base and spurred technological advancements across the industry, encouraging new and established suppliers to propose diverse solutions to meet the zero-emission requirements. The policy led to the development and deployment of electric and hybrid ferries.[38] Moreover, results from an OECD 2022 survey on green public procurement (“GPP”), carried out in 38 countries, underscore that countries increasingly recognise GPP as a major driver for innovation.[39]
Competition enforcement is critical in ensuring that the public procurement process remains fair and competitive, preventing collusion, bid-rigging, or other anti-competitive behaviours that could undermine the intended outcomes of procurement tenders. Well-designed competitive tenders can promote wider participation, lower bidding costs, and foster more innovative solutions — particularly through transparent, proportionate, and streamlined procurement processes. The OECD Recommendation on Fighting Bid Rigging in Public Procurement and accompanying Guidelines highlight how strategic tender design, including lot structuring and appropriate qualification criteria, can strengthen competition and reduce the risk of collusion.[40]
By monitoring and intervening when necessary, competition authorities can ensure that dominant or incumbent firms do not unfairly dominate the procurement process, allowing new and innovative players to compete on an equal footing. This combination of pro-competitive public procurement practices and competition enforcement helps to create a more dynamic market, encouraging innovation and providing opportunities for emerging firms to challenge established players.
C. Access to Digital Infrastructure for Payments
In mobile payments, the design and provision of digital infrastructure can significantly shape market outcomes — determining whether innovation flourishes, new entrants thrive, and consumers benefit from lower prices and greater choice. When left entirely to market forces, mobile payment systems often develop in a fragmented, siloed manner. Large incumbents frequently have access to key technical infrastructure that may entrench their market position, where interoperability is restricted. In response, many jurisdictions have adopted a proactive approach: building open, inclusive, and publicly operated infrastructures that level the playing field and promote contestability. These initiatives are examples of pro-competitive industrial policies.[41]
Notable among these initiatives are India’s Unified Payments Interface (“UPI”) and Brazil’s Pix — public digital infrastructures that have transformed their respective payment landscapes. UPI, launched by the Reserve Bank of India and operated by the not-for-profit National Payments Corporation of India, enables real-time, bank-to-bank transfers through a unified platform accessible to all providers. Mobile payment developers can build applications on top of UPI, and transactions can be initiated and received across apps using interoperable QR codes and secure APIs. UPI has dramatically increased access to mobile payments and enabled FinTech competition by decoupling front-end service provision from back-end infrastructure. Notably, regulators have also introduced safeguards to avoid new monopolies — such as capping the volume of transactions any one app can process — to ensure continued dynamism and user choice.
Similarly, Brazil’s Pix — designed, managed, and operated by the Central Bank of Brazil — was introduced as a public good to address long-standing inefficiencies in a fragmented payments system dominated by a few large banks. Pix enables free or low-cost instant transfers between individuals and businesses, with mandatory participation for banks to ensure broad uptake and strong network effects. The central bank’s direct involvement, including the imposition of interchange fee caps and open API standards, has allowed new providers — especially FinTechs — to compete on fairer terms. Pix is now used by nearly 90% of Brazil’s population, and its widespread adoption has lowered transaction costs, increased inclusion, and fostered a more competitive market structure.
These examples highlight how publicly provided open payment infrastructures can serve as a form of “market-crafting” — actively shaping the competitive environment through industrial policy by dismantling bottlenecks and reducing dependencies on certain digital infrastructures. When underpinned by open architecture, inclusive governance, and pro-competitive rules, public digital infrastructure can unlock entry, reduce switching costs, and drive down prices.
Notably, such initiatives complement — rather than replace — competition enforcement. Even in jurisdictions with robust public infrastructure, dominant actors may still engage in exclusionary conduct. Thus, regulatory vigilance and effective enforcement remain necessary to ensure that new forms of “gatekeeping” do not undermine the benefits of open infrastructure. Finally, as more jurisdictions explore similar models, opportunities for international co-operation grow. Harmonising technical standards — especially around APIs and messaging protocols — can help reduce cross-border frictions and extend the benefits of interoperability and inclusion beyond national borders.
VI. Conclusion
The renewed prominence of industrial policy offers a timely opportunity to address complex challenges and carefully assess trade-offs. Its success depends on how it is designed and implemented. Poorly crafted interventions can entrench incumbents, distort markets, and ultimately hinder innovation and growth. This article argues that industrial and competition policies are compatible and mutually reinforcing. When grounded in competitive principles, industrial policy can correct market failures, open bottlenecks and catalyse innovation.
Conversely, competition policy helps ensure that industrial strategies do not result in concentrated markets or inefficient allocation of resources.
Several key takeaways emerge:
- Pro-competitive industrial policy design matters. Success depends on the choice of instruments — and they must be neutral, proportionate, and well-targeted — combined with mechanisms for continuous evaluation and adaptation.
- It is beneficial for competition authorities to participate as co-designers of industrial policy actively. Leveraging their market expertise and tools, such as market studies, will help to shape open, dynamic markets.
- Thorough merger control remains essential. This is especially where industrial policy objectives are invoked to justify consolidation.
- Domestic and international coordination is critical. Achieving coherent policy outcomes requires close collaboration and policy cross-fertilisation among competition authorities and regulators, also across borders.
Effective industrial policy may mean rethinking the state’s role as a market shaper, which crafts markets to be competitive, contestable, and innovation-driven. With thoughtful design and institutional co-operation, industrial and competition policies can help address many complex challenges today.
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[1] OECD Competition Division. This article benefited from contributions from colleagues from across the OECD, including Ori Schwartz, Federica Maiorano, Alexia Gonzalez Fanfalone, Lauren Crean, Karim Bensassi-Nour, Sara Calligaris, Guy Lalanne, Antoine Dechezlepretre, Lukasz Rawdandowicz, Douglas Southerland, and Alvaro Pereira. This article is inspired by and benefitted from the 2024 OECD Roundtable discussion on “Pro-competitive industrial policy” and related materials, see infra at 3. All views expressed herein are the authors’ personal views and do not necessarily reflect the views of their respective employers (past or present) or officials and members associated with those employers.
[2] Cherif & Hasanov (2019), The return of the policy that shall not be named: Principles of Industrial Policy, IMF Working Paper WP/19/74, International Monetary Fund, Washington, DC, https://www.imf.org/en/Publications/WP/Issues/2019/03/26/The-Return-of-the-Policy-That-Shall-Not-Be-Named-Principles-of-Industrial-Policy-46710.
[3] OECD (2024), “Pro-competitive industrial policy,” OECD Roundtables on Competition Policy Papers, No. 309, OECD Publishing, Paris, https://doi.org/10.1787/7c6b4708-en.
[4] Supra, at 3.; Hughes, C. & P. Spiegler (2023), “Marketcrafting: A 21st-Century Industrial Policy,” The
Roosevelt Institute, https://rooseveltinstitute.org/publications/marketcrafting-a-21st-century-industrial-policy/; Andrews, et al. (2015), Frontier Firms, Technology Diffusion and Public Policy: Micro Evidence from OECD Countries, OECD Productivity Working Papers, Vol. 2,
https://doi.org/10.1787/5jrql2q2jj7b-en.
[5] Supra, at 3.
[6] Supra, at 3.
[7] Ibid., at 10-11; see also OECD (2023), Government support in industrial sectors: A synthesis report, OECD Trade Policy Papers, No. 270, OECD Publishing, Paris, https://doi.org/10.1787/1d28d299-en; Criscuolo & Lalanne (2023), A New Framework for Better Industrial Policies, https://www.promarket.org/2023/01/17/a-new-framework-for-better-industrial-policies/.
[8] The regulatory framework, including competition law, can also affect industry dynamics between firms.
[9] These instruments may also serve other policy objectives, which may be complementary. As such, industrial policy should focus on its objectives rather than specific instruments.
[10] A more broadly encompassing notion of market failure — including traditional static inefficiencies and dynamic failures such as missing markets, lack of public inputs, or the entrenchment of market power — can be instrumental in designing bolder industrial policies.
[11] For example, industrial policies designed to improve rural broadband access have corrected long-standing under-provision, enabling market-driven service expansion across jurisdictions. A notable example is Estonia’s EstWin project. Funded by European Structural and Investment Funds (“ESIF”), this initiative, launched in 2009, has extended broadband access to citizens by addressing the under-provision of digital connectivity in rural regions. By providing the foundational infrastructure, private operators have been enabled to offer last-mile services, fostering market-driven competition and significantly enhancing Estonia’s digital landscape. See European Commission (2024), Digital Connectivity in Estonia, https://digital-strategy.ec.europa.eu/en/policies/digital-connectivity-estonia.
[12] Competition policy refers to the set of laws, enforcement practices, and economic policies aimed at preserving and promoting competitive markets. Well-designed competition law, effective enforcement, and competition-based economic policy work together to safeguard consumer welfare and support economic growth. By preventing anti-competitive conduct and fostering open and fair markets, competition policy enhances market flexibility, encourages innovation, and ensures efficient allocation of resources across the economy.
[13] Supra, at 3.
[14] The most effective industrial policies target strategic sectors, such as energy, technology, and healthcare. They reinforce competition by ensuring competitive access to or supply of inputs and fostering investment, innovation, and technological adoption, contributing to both productive and allocative efficiency.
[15] See e.g. Calligaris at al. (2024), Exploring the evolution and the state of competition in the EU, Protecting competition in a changing world, European Commission, https://competition-policy.ec.europa.eu/system/files/2024-06/Exploring_the_evolution_and_the_state_of_competition_in_the_EU_launch.pdf.
[16] That said, there may be instances where trade-offs against competition are considered necessary to achieve broader public interest objectives, such as security, environmental sustainability, or technological sovereignty. In such cases, it is essential that any deviation from competitive principles be transparent, proportionate, and time-bound. The OECD advocates maintaining competitive neutrality even within industrial policy frameworks, ensuring that any preferential measures do not unduly distort competition or entrench advantages absent clear, legitimate policy justifications, as discussed in this Section.
[17] Supra, at 3.
[18] OECD (2019), Recommendation on Competition Assessment, OECD/LEGAL/0455; OECD (2024), Competitive Neutrality Toolkit: Promoting a Level Playing Field, OECD Publishing, Paris, https://doi.org/10.1787/3247ba44-en; Supra, at 1. (Questions such as the following help guide the design and implementation of industrial policy: What are the core objectives of the policy? What are the means to achieve these objectives? Is there proportionality between the policy instruments and the objectives? How will the policy be evaluated over time?).
[19] Industry participants have a significant and legitimate interest in the direction of competition policy. However, certain industry participants are likely to have specific vested interests in the direction of competition policy. Therefore, it may be a concern if these vested interests exert an outsized influence on the direction of competition policy independently of the optimal design of such policies. The OECD Competition Committee will discuss Corporate Influence in Competition Policy Making [unpublished] in its June 2025 session. See OECD (2025), Corporate Influence in Competition Policy Making, OECD Publishing, Paris, https://www.oecd.org/en/events/2025/06/corporate-influence-in-competition-policymaking.html#:~:text=In%20June%202025%2C%20the%20OECD%20will%20hold%20a,as%20the%20challenges%20in%20distinguishing%20between%20the%20two.
[20] Supra, at 3.
[21] Governments should, however, consider the optimal policy mix. This may include assessing the costs effectiveness of different measures and take into account limited resources.
[22] OECD (2009), Competition Policy, Industrial Policy and National Champions: Key findings, summary and notes, OECD Roundtables on Competition Policy Papers, No. 96, OECD Publishing, Paris, https://doi.org/10.1787/c22d258d-en.
[23] European Commission, Siemens/Alstom (COMP/M.8677), Commission decision of 6/2/2019.
[24] Calligaris, et al. (2024), Industry concentration in Europe: Trends and methodological insights, OECD Science, Technology and Industry Working Papers, No. 2024/06, OECD Publishing, Paris, https://doi.org/10.1787/c4c371fb-en; Gutierrez & Philippon (2023), How European markets became free: a study of institutional drift, Journal of the European Economic Association, https://doi.org/10.1093/jeea/jvac071.
[25]UK CMA (2025), CMA’s Annual Plan to drive growth by promoting competition, protecting consumers and enhancing business and investor confidence, https://www.gov.uk/government/news/cmas-annual-plan-to-drive-growth-by-promoting-competition-protecting-consumers-and-enhancing-business-and-investor-confidence.
[26] Draghi (2024), The future of European competitiveness, European Commission, https://ec.europa.eu/newsroom/growth/items/847989/en#:~:text=On%209%20September%2C%20Mario%20Draghi%2C%20former%20Italian%20Prime,the%20industry%20and%20companies%20in%20the%20Single%20Market.
[27] The Draghi Report generally advocates for the importance of competition to stimulate innovation and investment. See e.g. ibid., at 13-7 (“Promoting competitiveness should not be seen in a narrow sense of a zero-sum game focused on conquering global market shares and raising trade surpluses. It should also not lead to policies of defending “national champions” that can stifle competition and innovation, or using wage repression to lower relative costs. . .”; “The evidence is overwhelming that competition stimulates productivity, investment and innovation. . .”)
[28] OECD (2021), Recommendation of the Council on Broadband Connectivity, OECD/LEGAL/0322 (The OECD’s Council Recommendation on Broadband Connectivity underscores the importance of both competition and investment to promote high-quality connectivity at affordable prices.) See also Duso, et al. ( 2024), Draghi is right on many issues, but he is wrong on telecoms, CEPR, https://cepr.org/voxeu/columns/draghi-right-many-issues-he-wrong-telecoms#footnote5_65ng5r3 (last accessed 29 March 2025); Scott Morton (2024), The Draghi report and competition policy, Bruegel, https://www.bruegel.org/first-glance/draghi-report-and-competition-policy (last accessed 29 March 2025).
[29] OECD (2021), Emerging trends in communication market competition, OECD Digital Economy Papers, No. 316, OECD Publishing, Paris, https://doi.org/10.1787/4ad9d924-en.
[30] See e.g. Lear, et al. (2024), Exploring aspects of the state of competition in the EU: Final report, European Commission, https://competition-policy.ec.europa.eu/system/files/2024-06/KD0224126enn_exploring_aspects_of_the_state_of_competition_in_the_EU.pdf; Genakos et al., Evaluating market consolidation in mobile communications, Economic Policy, Volume 33, Issue 93, January 2018, Pages 45–100, https://doi.org/10.1093/epolic/eix020; Body of European Regulators for Electronic Communications (2018), BEREC Report on Post-Merger Market Developments -Price Effects of Mobile Mergers in Austria, Ireland and Germany, BEREC, https://www.berec.europa.eu/sites/default/files/files/document_register_store/2018/6/BoR_%2818%29_119_BEREC__Report_Mergers_Acquisitions.pdf.
[31] See e.g. New York v. Deutsche Telekom AG, No. 1:19-cv-05434 (S.D.N.Y. Feb. 11, 2020) (T-Mobile/Sprint merger litigation); OECD (2024), OECD Digital Economy Outlook 2024 (Volume 2): Strengthening Connectivity, Innovation and Trust, OECD Publishing, Paris, https://doi.org/10.1787/3adf705b-en (underscores that mobile communication prices in the United States are higher across most baskets as compared to other jurisdictions); Rewheel Research (2024), The Sprint / T-Mobile 4-to-3 mobile merger made the US one of the most expensive markets in the world, https://research.rewheel.fi/downloads/The_state_of_mobile_and_broadband_pricing_1H2024_PUBLIC_REDACTED_VERSION.pdf (last accessed 29 March 2025).
[32] See e.g. OECD (2022), Remedies and commitments in abuse cases, OECD Competition Policy
Roundtable Background Note, www.oecd.org/daf/competition/remedies-and-commitments-in-abuse-cases2022.pdf; OECD (2012), Remedies in Merger Cases: Key findings, summary and notes, OECD Roundtables on Competition Policy Papers, No. 125, OECD Publishing, Paris, https://doi.org/10.1787/51e1d94a-en.
[33] See e.g. Vickers (2024), Should competition monopolise merger policy, ACE Keynote Lecture, https://www.competitioneconomics.org/_files/ugd/9203cc_0ccee88c86644027b61142c48e8e220d.pdf (“Whereas structural remedies seek to safeguard competitive incentives, the investment commitment approach does not do so, for the commitment is presumably to undertake investments significantly above and beyond the level that the parties would themselves wish to do post-merger. . . So great scepticism seems warranted, no matter how many economic models have been supplied by the parties to the competition authority. Reculer pour mieux sauter might be all very well in theory, but just reculer in practice.); Valletti (2025), Vodafone/Three, LinkedIn, https://www.linkedin.com/posts/tommaso-valletti-95b079b_as-expected-the-vodafonethree-uk-mobile-activity-7270341334647943168-skDE?utm_source=share&utm_medium=member_desktop&rcm=ACoAABmQHwMBPT8pUCDHi88OILwCTbG8fDJfBTQ (last accessed 11 April 2025).
[34] See CMA, Vodafone/CK Hutchison JV, merger inquiry case page, https://www.gov.uk/cma-cases/vodafone-slash-ck-hutchison-jv-merger-inquiry.
[35] OECD (2022), Developments in spectrum management for communication services, OECD Digital Economy Papers, No. 332, OECD Publishing, Paris, https://doi.org/10.1787/175e7ce5-en (Market assignment mechanisms are an effective way to ensure the spectrum is used most efficiently, as it is granted to the party that values it most, and ensures transparency in spectrum assignment. Spectrum auction design can explicitly incorporate competitive aims, such as reserving spectrum blocks for new entrants, providing bidding credits for certain market participants, or implementing spectrum caps to prevent one market participant from concentrating spectrum resources.)
[36] Duso at al. (2024), supra, at 28.
[37]Aghion, et al. (2011), Rethinking Industrial Policy, Bruegel Policy Brief Issue 2011/04, https://www.bruegel.org/policy-brief/rethinking-industrial-policy.
[38] Nkesah & Solvoll (2024), Accelerating the transition to zero-emissions ferries, Danish Journal of Transportation Research, 10.54337/ojs.djtr.vi6.8072.
[39] ECD (2024), Harnessing Public Procurement for the Green Transition: Good Practices in OECD Countries, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/e551f448-en.
[40] OECD (2012), Recommendation of the Council on Fighting Bid Rigging in Public Procurement, OECD/LEGAL/0411; OECD (2009), Guidelines for Fighting Bid Rigging in Public Procurement, OECD Publishing, Paris, https://doi.org/10.1787/8cfeafbb-en.
[41] The OECD Competition Committee will discuss Competition in Mobile Payment Services in its June 2025 session. See OECD (2025), Competition in Mobile Payment Services [unpublished], OECD Roundtables on Competition Policy Papers, OECD Publishing, Paris, https://www.oecd.org/en/events/2025/06/competition-in-mobile-payment-services.html.