European competition policy Role of competition policy Promote

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 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