COMPETITION LAW

Competition Law

Competition Law

Introduction

Effective competition between suppliers is important in the way that it allows to reduce prices, improve the quality of goods, and enlarge the quantity of items provided for the consumers due to the process of innovation. The European Commission's purpose is to ensure fair competition in European markets. It promotes economic efficiency, an optimal allocation of resources, technical progress and the well-being of European consumers. To achieve this, the European Commission has been granted wide powers. This is why principles were elaborated for companies within the UE to observe: they must respect some criteria in order not to be sanctioned by the European Commission. The competition between the companies must be unbiased. A company that is dominant in a market has no right to abuse its power to eliminate its competitors.

Discussion

Government intervention into the workings of the business sector, designed:

to prevent the abuse of monopoly power and to restrict or punish anticompetitive behaviour (such as predatory pricing);

to control business agreements that might be anticompetitive in effect, or which might have the effect of creating cartels;

to regulate mergers, and

to promote competition generally.

In the UK, policy is upheld by the Office of Fair Trading and the Competition Commission, and much important competition work is pursued by national authorities in most countries, often at a local level.

However, the important development of the last decade has been the increasingly international character of competition policy, with the authorities of the European Union (EU) and US dominating the arena, even to the extent of investigating mergers between companies of other jurisdictions (the EU investigated the merger of the American giants Time Warner and AOL in 2000, for example). At the level of the EU, the European Commission is responsible for competition policy, acting most importantly under the broad terms of Articles 85 and 86 of the Treaty of Rome (now renumbered 81 and 82) supplemented by subsequent regulation and interpretation. It is worth reprinting the actual text as EU law applies throughout the EU, and is the basis of much domestic law as well.

Experts differ in their view of how competition policy should be handled. On one side are those who believe in activist competition policy, exemplified in the US Department of Justice case against anticompetitive behaviour by Microsoft in the late 1990s. On the other side is the more laissez-faire school (associated with economists at the University of Chicago) which believes unfettered markets tend to have benign effects, and that even if monopolies emerge, they will tend to do so where they offer real consumer benefits, and will usually be transient. On no issue do the two schools clash more than that of vertical restraints — agreements between firms and their suppliers or their customers. In the 1960s in the US, and in the 1990s in the European Union, these kinds of arrangements were treated with great suspicion. But the non-interventionists argued these were typically legitimate business arrangements, with a number of benefits to firms and consumers alike, and that only where ...