This paper assesses the role and working of EU competition policy from a wide range of perspectives. Consequently, this paper reflects on the economic significance of the EU competition policy. Besides, the document also sheds light on factors leading to EU regulating state aid, protection of consumer welfare etc. so as to prevent the misuse of monopolistic powers. In the final segment, the paper discusses ways to manage competition issues which arises from any merger.
Promoting competition in the markets has long been seen as a way to enhance customer-wellbeing in terms of greater quality, reduced prices etc. Based on these fundamentals, the EU competition policy first came into effect in 1957 with a purpose to provide businesses the chance to compete fairly on all Member States' marketplaces (Stewart-Moreno, 2020). Since then, EU competition policy has emerged as the key to a single fair market, enabling domestic companies and those from outside of EU to operate on equal terms in the entire European market (Dierx & Ilzkovitz, 2021). This policy guarantees the smooth operation of EU's market, making it a significant economic driver that affects the welfare of EU individuals, enterprises, and the society at large.
There exists a wide range of studies indicating government as the biggest disrupter to free market practice. The government through its regulation, taxes, subsidies or tariffs can significantly distort the market and companies receiving government support will immensely get benefitted from these regulations, subsidies, tariffs and tax exemptions (van Druenen & Zwaan, 2022). In this way, businesses receiving government support has an edge over its rivals and it also cause a negative impact on the free and fair market practice. In the context of European Union,
government intervention would mean a negative repercussion in terms of market integration between different EU member states. Therefore, the European Commission has put a restriction on EU member states on providing state aid to companies so that no company can get unfair advantage and they can fairly trade and compete between member states without distorting the competition and market integration (Jozepa, 2020). Such restrictions on state aid are unheard of in the whole globe; they go beyond analogous anti-subsidy regulations that apply to other WTO members.
Despite the fact that state aid is typically forbidden, the EU acknowledges that there may be legitimate justifications for states to employ it. Therefore, the EU state aid regulation involves a few exemptions as well to incorporate all such aspects. The "General Block Exemption Regulation" (GBER), which states that specific forms of help are permissible, is the major exemption included in this policy. These categories cover regional assistance, training, SMEs's subsidies, research & development (R&D), spending on public infrastructure, and environmental assistance (Pelin & Flynn, 2019).
Furthermore, the European Commission has the responsibility of making sure that state aid provided by all the member states conforms to EU regulations in order to guarantee that this restriction is maintained & exemptions are applied uniformly across the European Union.
There are numerous researches and evidences suggesting that the EU competition policy over a period has now evolved to be more concerned about protecting the rights and welfare the customers. For an instance, this policy eliminates all such practices which can have an adverse impact on market competition, sustain and promotes competition. Besides, this policy also prohibits all sorts of anti-competitive agreements between different market operators which can give monopolistic gain to some companies in the market. Altogether, customers are the ultimate beneficiaries of fair and competitive market. Apart from competition policy, the EU also has enforced antitrust regulations and authorities for the sake of customer welfare.
For an instance, the EU has adopted an “Antitrust Policy” developed under article 102 of the “Treaty on the Functioning of the European Union” (TFEU) (Dethmers & Engelen, 2011). Therefore, a hybrid model of EU competition policy and Anti-trust policy protects the rights and welfare of customers by:
Mergers and acquisitions are usually seen as beneficial for businesses & the economy as a whole, because it can improve efficiencies, synergies as well as scale of the economy. However, they may also undermine market competition and undermine consumer welfare if it leads to market concentration or boost market power. Because of this reason, the EU competition policy also includes mandates that all kinds of section on mergers & acquisitions should get approval from the commission before it actually gets commence (Parker, Petropoulos & Van Alstyne, 2021).
The policy provides a legal base to the commission to accept or reject mergers & acquisitions on evaluating its impact on customer and market competition (Budzinski & Stöhr, 2019). If a company is headquartered outside of the EU but conducts businesses in the EU market, the merger control regulations is also applicable to them. The rule forbids mergers & acquisitions which would severely lessen competition, such as those which that would establish monopolistic businesses that would probably raise consumer prices. For example, recently the EU commission prohibited the acquisition of “Daewoo Shipbuilding & Marine Engineering Co. Ltd.” (DSME) by “Hyundai Heavy Industries Holdings” (HHIH).
This merger would have given the new combined business a commanding position, reducing competition on the global market for the building of large liquefied gas carriers.
Overall, the EU Commission is effectively using its enforcement authority in acquisition & merger control, and antitrust procedures to address concerns about competition and safeguard the welfare of consumers in the EU region.
Budzinski, O., & Stöhr, A. (2019). Competition policy reform in Europe and Germany–institutional change in the light of digitization. European Competition Journal, 15(1), 15-54.
Dethmers, F., & Engelen, H. (2011). Fines under article 102 of the Treaty on the Functioning of the European Union. ECLR, 32, 86-98.
Dierx, A., & Ilzkovitz, F. (2021). EU competition policy: an application of the failing forward framework. Journal of European Public Policy, 28(10), 1630-1649.
Jozepa, I. (2020). EU State Aid Rules and WTO Subsidies Agreement. House of Commons Library Briefing Paper Number SN06775, 16.
Parker, G., Petropoulos, G., & Van Alstyne, M. (2021). Platform mergers and antitrust. Industrial and Corporate Change, 30(5), 1307-1336.
Pelin, A., & Flynn, L. (2019). Main developments in State aid control 2018. Competition Law & Policy Debate, 5(2), 4-12.
Stewart-Moreno, A. (2020). EU Competition Policy: Algorithmic Collusion in the Digital Single Market. York L. Rev., 1, 49.
van Druenen, R., & Zwaan, P. (2022). Distorted promotion of undistorted competition? Commission decisions after formal investigations in the EU state aid regime. Journal of European Public Policy, 29(6), 826-845.
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