1. EUROPEAN COMPETITION POLICY
Chapter Five
EUROPEAN COMPETITION POLICY

2. Role of Competition Policy
Promote economic efficiency
To control intensity of competition within economy
Some areas it is promoted
In others, it is limited
Consumer protection

3. Business Strategy and Competition Policy
Provides legal framework
Guides commercial activities
Offers check upon corporate power

4. Requirements of Business
Business requires:
Credibility of enforcement
Certainty of application
Consistency of policy outcomes
Effective sanctions

5. Why a policy for competition ?
Competition is seen as a socio-economic good due to:
improved quality
stimulates innovation
lower prices
economic efficiency
choice

6. Theory and Real World Theory expressed in policy
Perfect Competition traditional basis for policy
Monopoly is bad
But theory is often ambiguous vis-a-vis real world

7. THE CORE PARADIGM
STRUCTURE
CONDUCT
PERFORMANCE

8. EU Competition Policy Applies to trade between member states
Aim to sustain free and fair trade
Rising in importance and influence as integration deepens

9. 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

10. Article 81
Cartels etc.
Restrictions on distribution, production, technological development
Price discrimination
Unfair prices
Predatory pricing

11. Article 81(3) of Treaty of Rome
An agreement or arrangement could be exempted 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.

12. Article 81 Car industry -exclusive dealerships
Steel Industry - Crisis cartels
Airbus - Global market place
Telecommunications Sector - Mergers alliances
Telecoms and Cable Concerns

13. Article 82 Abuse of dominant position
Single enterprise exert influence over market
Note: dominance not bad per se: only abuse

14. Article 86
Applies Articles 81 and 82 to state-owned or protected enterprises
Used for telecoms, energy and other network or protected industries

15. Article 87 State Aids (subsidies, low interest rates loans etc.)
Market Investor Principle
Airlines - struggle with EC
Some aid allowed

16. 1999 - Reform of EU Policy Decentralise investigations
Joint responsibility between EU and States
Limit exemptions from EU Law
Free up EU resources is aim of reform
EU merely target biggest competitive distortions
Enterprise focus on Member states

17. Reforms of 1999 (2) Less time-wasting on small cases
Become effective trust buster
Result of excessive case load from SEM Programme
Also inflation had lowered value of thresholds
Further tightening of state aids
Exempt agreements between enterprises that have > 30% of market

18. Future of EU Policy
Integration deepens - increase salience of Competition policy
EU-wide cartel body
Convergence of national laws
Single body inevitable - will aid business strategy formation
seek international agreement

19. Future of EU Policy Business increasingly concerned of intervention
Feel too tough on big business