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Competition in the EU: How it is Regulated
Transcript of Competition in the EU: How it is Regulated
How it is Regulated INTB30660: Exploring Global Markets By: Farah Samsudin (N0295640) Learning Outcomes After this presentation, you should have an understanding of competition regulation in the EU, especially on how the competition policy affect the operation of the Single European Market (SEM). Structure of Presentation 1. What is Competition Policy in the EU?
2. Who Enforces EU Competition Law?
3. The EU Competition Policy
4. The Effects of Competition Policy on Consumers & Businesses
5. Recommendations for a Better Competition within (and outside) the EU The EU Competition Policy Antitrust Cartels Mergers Liberalisation State Aid International Cooperation Article 101 Article 102 prohibits agreements between two or more independent market operators which restrict competition;
covers both vertical and horizontal agreements prohibits firms holding a dominant position on a determined market to abuse that position Who Enforces
EU Competition Law? European Comission National Competition Authorities National
Network (ECN) What is Competition Policy in the EU? "Competition policy is an integral part of the process towards protecting the consumer and delivering some the static and dynamic efficiency gains that the creation of the European single market seeks to achieve in the long run." (Riley 2003) The Effects of Competition Policy on: Consumers Businesses 1. Wider choices,
low prices for all, better quality and innovative products & services
2. Increased standard of living; employment 1. Become better competitors in the global market:
SEM competing with other big nations
2. Clear legislation framework on business practices Negative Effects? Conclusion a type of antitrust enforcement under Article 101 A cartel is a group of similar, independent companies joining forces to: 1. Fix prices;
2. Limit production or;
3. Share markets/ customers Impact on Businesses: Reduces incentives to produce better products & services at competitive prices Impact on Consumers: Paying more for less quality European Commission's
Actions Allowed if: 1. Not hindering competition & increase the competitiveness of European industry
2. Improving conditions of growth & raising the standard of living in the EU Some mergers may reduce competition in a market by creating/strengthening a dominant player 1. Higher prices
2. Reduced choices
3. Lesser innovation Impacts on Consumers Fines Leniency
Immunity Fines Reduction Community Law on Merger: Regulation (EC) No 139/2004 - the merger regulation Services such as transport, energy, postal services and telecommunications are now more open to competition. Advantages on Consumers: What is Liberalised? 1. Product/providers alternatives
2. Lower prices
3. New services; more efficient & user-friendly When is State Aid allowed? Companies/activities that engage in: Impacts on Businesses: 1. Unfair competition 2. May reduce innovative performance of the business receiving State Aid Recommendation for a Better Competition
inside (and outside)the EU References How are prohibited competitive practices handled outside the EU? 2. International Competition Network (ICN) 1. Competition authorities outside the EU Advantages on EU
Consumers & Businesses Arguably, illegal business conducts are inevitable especially due to the increasing globalisation... Creation of World Competition Organisation (WCO)
(Bannerman 2002) **WTO created a working group on trade and competition, but is left undeveloped... So, does the competition policy strengthen the EU as a single market? Thank You! Bannerman, E. (2002). The future of EU competition policy. London: Centre for European Reform.
Cini, M., McGowan, L. (1998). Competition policy in the European Union. Palgrave Macmillan.
European Commission (2013). Competition. [online] Available at: http://ec.europa.eu/competition/index_en.html [Accessed 14 January 2013].
European Commission (2011). Communication From The Commission To The European Parliament, The Council, The European Economic And Social Committee And The Committee Of The Regions: Report on Competition Policy 2011. Brussels: European Commission Publication.
European Commission, Directorate-General for Competition (2004). EU competition policy and the consumer. Office for official publications of the European communities. 5/12/12: The EC has fined seven international groups of companies a total of € 1 470 515 000 for participating in either one or both of two distinct cartels in the sector of cathode ray tubes ("CRT") - tubes for television; computers. 10% of annual turnover 21/9/12: The EC has approved the proposed acquisition of EMI's recorded music business by Universal Music Group.
The Commission's concerns: To remove the Commission's concerns, Universal committed to: under Article 106 of TFEU Air Transport: Significant growth in Low Fare Airlines (LFAs). The European Low Fares Airline Association (ELFAA) was officially launched in January 2004. 1. In Europe, the EC cooperates with the EFTA Surveillance Authority. Examples of International Cooperations: An example of Cartels... An example of a Positive Merger... 30-50%,
up to 20%. 1. Get the best deal in prices & quality there is by taking uniform decision against cartels that affect different countries/regions. under Article 107 of TFEU The main aims of competition policy is to increase economic well-being by:
• Promoting competition
• Creating a deeper European single market which transcends national boundaries** Elimination of restrictions between member countries on trade and free competition
+ policy to promote fair competition
= increase of standard of living From 1996-2006, the cartelists carried out the most harmful anti-competitive practices:
price fixing, market sharing, customer allocation, capacity and output coordination and exchanges of commercial sensitive information. Chunghwa, LG Electronics, Philips and Samsung SDI participated in both cartels;
Panasonic, Toshiba, MTPD and Technicolor participated only in the cartel for television tubes. Chunghwa received full immunity under the Commission's 2006 Leniency Notice for the two cartels. Other companies received reductions of their fines. higher prices and more onerous licensing terms on digital music providers negatively affect the possibilities for innovative providers to expand or launch new music offerings ultimately reduce consumers' choice for digital music & cultural diversity in the European Economic Area (EEA). divest significant assets including EMI Recording Limited, EMI France , EMI's classical music labels, Chrysalis, Mute, various other labels, local EMI entities & Coop (a label licensing business selling artists). selling EMI's 50% stake in the popular Now! That's What I Call Music compilation JV & to continue licensing its repertoire for that compilation in the next ten years. not include Most Favoured Nation (''MFN'') clauses in its favour in any new or renegotiated contract with digital customers in the EEA for ten years. In Norway, Posten Norge was fined 11.112 million for abusing its dominant market position. The company also claimed EEA antitrust procedures were contrary to human rights but defended by the Authority with support by the government and the EC. 24/2/2010: The EC, US & Japanese authorities coordinated a surprise raids at the premises of electrical car parts manufacturers suspected of participating in a global price-fixing cartel; Yazaki, Tokai Rika, Leoni, Denso International 2. The EC has coordinated with the Canadian, Japanese & US competition
authorities Decrease in margin? References cont'd European Low Fares Airline Association (2004). Liberalisation of European Air Transport: The Benefits of Low Fares Airlines to Consumers, Airports, Regions and the Environment. Belgium: European Low Fare Airline Association.
Riley, G. (2003). Economics Case Study: European Competition Policy and the Single European Market. Tutor2u Limited.
SJ Berwin (2010). Community Week: A weekly summary of competition law and policy. England: SJ Berwin LLP. 1. Development of disadvantaged region; promoting SMEs & R&D
e.g. R&D Aid for Motorola, Philips & St Microelectronics 2. Protection of the environment; training; employment & culture
e.g. Training aid for FIAT