Download European competition policy

European competition
policy
Role of competition policy
• Promote economic efficiency
• To control intensity of competition within
economy
• Some areas it is promoted
• In others, it is limited
• To enable private redress for harm caused
by antitrust infringements
Business strategy and competition
policy
• Provides legal framework
• Guides commercial activities
• Offers check upon corporate power
Requirements of business
Business requires:
•
•
•
•
Credibility of enforcement
Certainty of application
Consistency of policy outcomes
Effective sanctions
Why a policy for
competition ?
Competition is seen as a socio-economic
good due to:
• improved quality
• stimulates innovation
• lower prices
• economic efficiency
• choice
Theory and real world
• Theory expressed in policy
• Perfect Competition traditional basis for
policy
• Monopoly is bad
• But theory is often ambiguous vis-à-vis
real world
The core paradigm
Structure
Conduct
Performance
EU competition policy
• Applies to trade between member states –
subsidiarity test
• Aim to sustain free and fair trade
• Rising in importance and influence as
integration deepens
Economic integration and
competition policy
• Pro-active and re-active to policy
• Interdependence between different
national systems
• Need for common rules and principles
between states
• Allow consolidation and intensification of
competition
Article 101 TFEU
• Cartels etc.
• Restrictions on distribution, production,
technological development
• Price discrimination
• Unfair prices
• Predatory pricing
Article 101(3) of Treaty of Rome
An agreement or arrangement could be exempted by the
Commission if all of the following are satisfied:
1. It contributes to improving the production or distribution
of goods or promotes technical or economic progress
2. Consumers are allowed a fair share of the benefit
3. It does not involve any restrictions which are not
absolutely essential in order to attain these two objectives
4. Competition is not eliminated
Article 102 TFEU
• Abuse of dominant position
• One or more enterprises exert influence
over market
Note: dominance not bad per se – only
abuse
Abusive Behaviour
Includes:
• Limiting production, markets or technical
developments to the prejudice of consumers
• Applying dissimilar conditions to equivalent
transactions with other trading parties, thereby
placing them at a at a competitive disadvantage
• Directly or indirectly imposing unfair purchase or
selling prices or other unfair trading conditions
Modernisation of 101 and 102
TFEU
• Decentralisation on an unparalleled scale
• Member state competition regulators and
national courts can apply 101 and 102 TFEU in
their entirety. Previously the Commission dealt
with the majority of complaints and all 101(3)
exemptions
• Commission was simply overwhelmed
• Commission can now focus on major complaints
and investigations
Article 106 TFEU
• Applies Articles 101 and 102 to stateowned or protected enterprises
• Used for telecoms, energy and other
network or protected industries
Article 107 TFEU
• State Aids (subsidies, low interest rates
loans etc.)
• Market Investor principle
• Secondary airports granting financial
incentives to Budget Airlines
• Some aid allowed
ECMR (European Community
Merger Regulation)
• To help ensure a system of undistorted
competition within the Single Market
• Hence, a merger which would significantly
impede effective competition, in the EU or a
substantial of it, in particular as a result of the
creation or strengthening of a dominate position,
is prohibited
ECMR: Issues
• Misallocation issue caused by defective
jurisdictional test (thresholds or Community
Dimension tests)
• Inverts the principle of subsidiarity: with mergers
with a potential cross-border competition
concern being vetted under Member state law
and vice versa
• Requires cumbersome, time-consuming referral
mechanisms
ECMR: Issues
• Proposed extension of Merger Regulation to
encompass acquisitions of non-controlling
minority shareholdings
• Commission assert that there is an enforcement
gap in respect of such holdings which have an
anti-competitive cross-border effect
New development – private
enforcement
• Private damages actions by individuals and/ or
companies to gain compensation for harm
caused to them by an infringement of either
Article 101 or 102 TFEU
• This not only aims to compensate the victims but
also to reinforce the deterrent provided by public
enforcement fines
• The 2014 Directive reduces some of the barriers
that have limited or frustrated such actions
International dimension
• The EU’s competition policy agenda
recognises the challenges posed to
competition policy by the growing
economic interdependence resulting from
globalisation
International dimension
• The competition policy’s extraterritorial
policy has two fundamental goals:
1. To secure access to overseas markets for EU firms
by removing beyond-the-border competition distortion
and
2. To ensure that competition in the SEM is not distorted
by the anti-competitive conduct of non-EU firms
originating outside of the Union
International dimension
• In order to achieve the two goals, the EU has
adopted both a co-operative and non-cooperative approaches
• The former is predominant at both a multilateral
and bilateral level and has been used in pursuit
of both goals
• The latter is used unilaterally, primarily, but not
only, to achieve the second goal
International dimension
• The EU had a preference for multilateral over
bilateral action in relation to its co-operative
approach, but reaching a multilateral competition
agreement at the WTO proved impossible
• The EU’s co-operative approach has therefore
turned to bilateralism, but even here though
progress has been relatively slow
• The EU has been more successful in respect of
the non-co-operative approach – it now has
several jurisdictional constructs that enable its
competition law to be applied extraterritorially