“As freak legislation, the antitrust laws stand alone. Nobody knows what it is they forbid.”
WHAT IS COMPETITION POLICY?
Competition policy deals with the organisation of domestic market economics. It aims to allocate resources in the most efficient way.
Competition policy does not exist in a vacuum: it expresses the values and aims of the society, and evolves over time. Its features are based on the particular economic, social and political objectives of a country.
The objectives that it pursues can be categorised in the four following groups:
- creation of a competitive market to safeguard economic freedom;
- maintenance of a competitive market to boost economic efficiency, technological and economic progress;
- maintenance of free and fair competition, and prohibition of restrictive, illegal and clandestine practices, and the granting of unfair advantages through public subsidies; and
- support of small and medium size enterprises and decentralised structure of supply.
“The liberty of a democracy is not safe if the people tolerate the growth of a private power to a point where it becomes stronger than the democratic state itself…Among us today a concentration of private power without equal in history is growing.“
President Roosevelt to US Congress, 1938.
How competition policy can have a positive effect in your life
EU Competition policy aims to create a level playing field for businesses; and it is a tool to establish the EU Single Market.
EU Competition policy is centred on the following pillars:
- Anti-cartel enforcement
A cartel is a group of similar, independent companies which join together to fix prices, to limit production or to share markets or customers between them. Instead of competing with each other, cartel members rely on each others’ agreed course of action, which reduces their incentives to provide new or better products and services at competitive prices. As a consequence, their clients (consumers or other businesses) end up paying more for less quality.
- Abuse of dominance enforcement
To be in a dominant position is not in itself illegal. A dominant company is entitled to compete on the merits as any other company. However, a dominant company has a special responsibility to ensure that its conduct does not distort competition. Examples of behaviour that may amount to an abuse include: requiring that buyers purchase all units of a particular product only from the dominant company (exclusive purchasing); setting prices at a loss-making level (predation); refusing to supply input indispensable for competition in an ancillary market; charging excessive prices.
- Regulation of mergers, takeovers and acquisitions
EU Competition law prohibits mergers and acquisitions which would significantly reduce competition in the Single Market, for example if they would create dominant companies that are likely to raise prices for consumers.
- State aid
A company which receives government support gains an advantage over its competitors. Therefore, the Treaty generally prohibits State aid unless it is justified by reasons of general economic development. State aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities. Therefore, subsidies granted to individuals or general measures open to all enterprises are not covered by this prohibition and do not constitute State aid (examples include general taxation measures or employment legislation).
- Private Enforcement
In 2014, the EU adopted the Antitrust Damages Directive to make easier for individuals and businesses harmed by an anticompetitive conduct to receive damage reparation. Deadline for implementation fo the Directive expired at the end of 2016.
(Yes, there is such a thing)
Three prisoners are sitting around comparing stories. Eventually the subject turns to what crimes they committed to end up in their predicament.
The first prisoner says, “I charged higher prices than everyone else and they accused me of profiteering and price gauging.”
The second prisoner says, “I charged lower prices than everyone else and thy accused me of predatory price cutting and cut-throat competition.”
The third prisoner says, “I charged the same prices as everyone else and they accused me of collusion and cartelization.”
*This post and the others linked in the text were prepared as supporting materials for the EU Competition law module of the European Public Policy Analysis course organised by the Institute for European Studies of the Vrije Universiteit Brussel.