EU Competition Policy

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  • EU competition Policy
    • agreements between companies that restrict competition
      • cartels or other unfair arrangements in which companies agree to avoid competing with each other and try to set their own rules
        • Agreements are almost always illegal if the participants agree to:
          • fix prices
          • limit production
          • share markets or customers
          • fix resale prices (between a producer and its distributors).
        • But an agreement may be allowed if it:
          • has more positive than negative effects
          • is not concluded between competitors
          • involves companies with only a small combined share of the market
          • is necessary to improve products or services, develop new products or find new and better ways of making products available to consumers.
    • Abuse of a dominant position
      • where a major player tries to squeeze competitors out of the market
        • charging unreasonably high prices
        • depriving smaller competitors of customers by selling at artificially low prices they can't compete with
        • obstructing competitors in the market (or in another related market) by forcing consumers to buy a product which is artificially related to a more popular, in-demand product
        • refusing to deal with certain customers or offering special discounts to customers who buy all or most of their supplies from the dominant company
        • making the sale of one product conditional on the sale of another product.
    • mergers (and other formal agreements whereby companies join forces permanently or temporarily)
      • legitimate provided they expand markets and benefit consumers
        • Why do mergers need to be cleared at European level?
          • So that companies trading in more than one EU country can obtain clearance for their mergers in one go.
          • Combining their activities may allow companies to develop new products more efficiently or reduce production or distribution costs. Through increased efficiency, the market becomes more competitive, and consumers benefit from better goods at fairer prices.
          • But some mergers may reduce competition, usually by creating or strengthening a dominant player. This is likely to harm consumers through higher prices, reduced choice or less innovation.
        • Which mergers does the European Commission examine?
          • Any merger that would create a company with an annual global and European turnover exceeding preset thresholds.
        • When are mergers rejected or approved?
          • Mergers are rejected when they would significantly restrict competition in the EU.
          • Mergers are approved unconditionally if the Commission concludes they would not restrict competition.
    • efforts to open markets up to competition
      • in areas such as transport, energy, postal services and telecommunications. Many of these sectors used to be controlled by state-run monopolies and it is essential to ensure that liberalisation is done in a way that does not give an unfair advantage to these old monopolies.
    • financial support (state aid) for companies
      • from EU governments – allowed provided it does not distort fair and effective competition between companies in EU countries or harm the economy
        • Have state authorities given support
          • e.g. in the form of grants, interest and tax relief, guarantees, holdings in companies, goods and services provided on preferential terms, etc.?
        • Is the support likely to affect trade between EU countries?
          • (support for companies worth less than € 200 000 in a 3-year period is reckoned not to affect EU trade.)
        • Is the support selective – does it confer an advantage on specific companies, parts of industries or on companies in specific regions?
          • General tax measures and employment legislation, for instance, are not selective because they apply to everyone.
        • Has competition been distorted or might it be in future?
          • If so, the Commission must disallow the support – unless it is shown to be compatible with the common market.
    • cooperation with national competition authorities in EU countries
      • (who are also responsible for enforcing aspects of EU competition law) – to ensure that EU competition law is applied in the same way across the EU
  • But an agreement may be allowed if it:
    • has more positive than negative effects
    • is not concluded between competitors
    • involves companies with only a small combined share of the market
    • is necessary to improve products or services, develop new products or find new and better ways of making products available to consumers.

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