Competition policy has always been of central importance for the EC. In a market economy, competition promotes economic success, safeguarding the interests of European consumers and ensuring that European undertakings, goods and services are competitive on the world market.
The aim of the European competition policy is to ensure healthy competition and therefore to prevent companies from conducting anticompetitive practices such as Restrictive agreements , concerted practices and abuse of a dominant position or national authorities, Member States to grant state aid to certain enterprises and therefore distort competition. The competence of the European Community in competition matters is relevant in the intra-Community trade cases. It means that there must be an effect on trade between Member States to apply the Community rules, but it also indicates that European competition law can be applied to agreements or conduct of parties established outside the European Union if such agreements or conduct restrict competition in the common market and affect intra-Community trade.
The area of Community’s competition policy covers on the one hand anti-competitive agreements between firms, abuse of a dominant position and mergers. It also covers on the other hand state aids granted to companies by the member States and monopole rights under certain circumstances.
The objective of competition law is to enhance efficiency, in the sense of maximising consumer well fare and achieving the optimal allocation of resources. The second goal is to protect consumers and small companies in the market. A third objective is to facilitate the creation of single market.
Taking the quantitative limits of this treatise and the complex nature of the EC competition policy, which can be defined as a special profession, in the followings the main provisions of the rules applying to undertakings and those of the state aid policy are to be summarized.
(1) Rules applying to undertakings
The anti-trust rules of the Community prohibits agreements and concerted practices with an anticompetitive objective or effect on the market as a result to prevent, restrict or distort the competition within the common market, it also prohibits abuse of a dominant position. The reason of the prohibition of such behaviour is that it damages consumers and society as a whole since the undertakings involved set prices higher and conditions less favourable than they would in the case of free competition.
Certain type of Restrictive agreements and concerted practices are prohibited almost without exception, such as (1) horizontal or Vertical agreements that fix prices directly or indirectly; (2) agreements on conditions of sale; (3) agreements that partition market segments for example concerning price reductions; (4) agreements on production or delivery quotas; (5) agreements on investments; (6) joint sales offices; (7) market-sharing agreements; (8) agreements leading to discrimination against other trading parties; (9) collective boycotts.
Besides the general prohibition of anti competitive behaviour the EC rules stipulates that certain types of agreement may be exempted from the general prohibition. These exemption rules are called the "block exemption" regulations adopted by the Council or by the Commission. There are block exemption regulations for certain categories of vertical agreement and for certain categories of horizontal agreement. For Vertical agreements these are the block exemption regulations on supply or distribution agreements or on motor vehicle distribution agreements. For Horizontal agreements these are the block exemptions on technology transfer agreements, specialisation agreements , research and development agreements ,
It is also important to note that the agreements of minor importance (the de minimis principle) are generally considered to be incapable of affecting competition in the common market and useful in that they encourage cooperation between small and medium-sized enterprises. Therefore these agreements are not breaching the EC competition rules.
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Definitions Restrictive agreements and concerted practices A restrictive agreement is an agreement between undertakings whose objective is to limit or eliminate competition between them in order to increase the prices and profits of the undertakings concerned without producing any objective counterbalancing advantages. In practice, these agreements usually entail price-fixing; production quotas; sharing markets, customers or geographical areas; bid-rigging; or a combination of these practices. A concerted practice is a step below a restrictive agreement. It involves coordination among firms which falls short of an agreement proper. Horizontal agreements are agreements between actual or potential competitors, i.e. between undertakings at the same stage in the production or distribution chain, affecting, for example, research and development, production, purchases or marketing. Vertical agreements are agreements or concerted practices between two or more undertakings (each of which operates, for the purpose of the agreement, at a different stage of the production or distribution chain) which affect the conditions under which the parties can buy, sell or re-sell certain goods or services. |
The abuse with dominant position can also distort competition. A dominant position is a situation of economic power. It hinders effective competition in the relevant market . There is abuse of a dominant position when the conduct of the firm in question is such that it influences the structure of the relevant market or the degree of competition, and this is so even if such conduct is favoured by a provision of national law. The dominant position must be held with respect to the whole or at least to a substantial part of the common market. However, the extent of the market to be taken into consideration in a given case will depend on the nature of the product, the products with which it can be replaced, and consumer perceptions.
Such abuse may consist for example to directly or indirectly impose unfair prices or other unfair trading conditions; to limit production, markets or technical development to the detriment of consumers; to apply different conditions to equivalent transactions with other trading parties; to force the acceptance of supplementary obligations which have no connection with the subject matter of such contracts. In the case of abuse of dominant position there are, neither block, nor individual exemptions.
Control of concentration of undertakings or Merger is another important area of the anti-trust rules, given the fact they can obviously create or strengthen a dominant position which may give rise to abuse. Merger occurs where two previously separate companies merge, or a firm acquires control over another firm, or where on or several firms take control one or more other firms. Regulation 1310/97/EC amending Regulation 4064/89/EEC on the control of concentrations between undertakings lays down the detailed rules.
Definition
Merger or "concentration" = a firm acquires exclusive control of another firm, or of a firm it previously controlled jointly with another firm, or where several firms take control of a firm or create a new one. |
According to the procedural rules of the EC competition policy companies are obliged to notify their agreements to the Commission. The Commission has a unique executive role in the field of competition policy and is basically the Competition Authority of the EC. It works closely together with the national competition offices. In all cases which have intra-Community trade effects it is the European Commission to exercise the competition authority competences.
(2) Rules applying to state aid
Besides the behaviour of the undertakings certain actions of the Member States may also restrict competition in the internal market. Different aids granted by the State to certain enterprises may prevent, distort the competition, since they have a discriminative effect in favour of the company in question.
According to the EC state aid policy any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States be incompatible with the common market. The concept of aid has a very broad interpretation in the EC law, including any aid granted by government, a local or regional authority, as well as any aid coming from a private source over which the State exercises a dominant influence directly or indirectly. The form and the purpose of the aid is irrelevant. According to the Treaties there some cases when state aid can be granted. For example those having a social character and granted to individuals or eliminating the damages caused by natural disasters.
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