EU Competition Law

Introduction Competition law protects competition in a free market economy, that is, an economic system in which the allocation of resources is determined by supply and demand and is not directed by government regulation. Competition is believed to deliver efficiency, low prices, and innovation. Adam Smith (The Wealth of Nations, 1776) identified the “invisible hand” of competition as a force leading to the general good.

The objectives of Competition law A. The most important objective is economic efficiency. A perfectly competitive market is one in which there are a large number of buyers and sellers. All have perfect information, and there are no barriers to entry or exit. This market is said to lead to allocative efficiency (goods are produced in the quantities valued by society), to productive efficiency (goods are produced at the lower possible cost), and to dynamic efficiency (the market delivers innovation and technological progress).

In the real world perfectly competitive markets hardly ever exist. Most markets lie somewhat between perfect competition and monopoly. (Workable competition, the rules should aim to produce the best competitive arrangement practically attainable). B. Others goals for Competition law a) Avoidance of the creation of excessive private power. It decentralizes and disperses private power. It protects individual freedom (liberal democracy). b) Protection of small business from big business. Instead of protecting competition, it protects the competitors. It can be seen as fair than free competition.

c) It may be used to service other policies, such as social, employment, industrial, environmental and regional policy (by prohibiting mergers which will cause job losses, or allowing restrictive agreements which will protect environment). However, the pursuit of such policies may be incompatible with the pursuit of efficiency.

The objectives of EU competition law 1. The accomplishment of the tasks entrusted to the EU, and in particular, the functioning of the internal market. An internal market is an essential condition for the development of an efficient and competitive market. Market integration have to be promoted. 2. The maintenance of competitive markets. It is an instrument of to encourage industrial efficiency, the optimal allocation of resources, technical progress and the flexibility to adjust to a changing environment.

The prohibition of collusion between undertakings Article 101para 1 precludes restrictive agreements between independent market operators, whether “horizontal” (between parties operating at the same level of the economy) or “vertical” (different levels, agreements between a manufacturer and its distributor). This prohibition may be declared inapplicable to an agreement which fulfils four criteria, two positive and two negative (para 3). Provisions in an agreement that contravenes para 1 are automatically void where the agreement does not meet the conditions of para 3.

The notion of an Undertaking Undertaking is every entity engaged in an economic activity, regardless of the legal status of the entity or the way in which is financed. Entities performing tasks in the public interest fall outside the scope of the rules (for instance, a local authority carrying out an administrative duty, such as granting concessions for funeral services). Economic activity means an activity making profits. The European Organization for the Safety of Air Navigation (Eurocontrol) is not an undertaking. It exercises powers relating to the control and supervision of air space which are typically those of a public authority.

The meaning of agreement, decision and concerted practice. Agreement must be founded upon “the concurrence of wills between economic operators on the implementation of a policy. Decisions by associations of Undertakings: any coordination through a trade association (resolutions, recommendations, certification schemes). Concerted practice: any concertation between the undertakings which should be practiced or implement in the market. It aims at the removing in advance any uncertainty about the future conduct of the competitors.