The European Union’s competition policy aims to ensure fair competition within the EU single market. Its main goals are to promote economic efficiency, consumer welfare, and an open and competitive internal market. The competition rules are set out in the Treaty on the Functioning of the European Union (TFEU) and enforced by the European Commission and national competition authorities.
What are the main competition rules in the EU?
The core EU competition rules prohibit:
- Anti-competitive agreements between companies (Article 101 TFEU)
- Abuse of a dominant position (Article 102 TFEU)
- Anti-competitive mergers and acquisitions (Merger Regulation)
- Unlawful state aid that distorts competition (Articles 107-109 TFEU)
Anti-competitive agreements (Article 101 TFEU)
Article 101 prohibits agreements between two or more independent companies which restrict competition. This includes price-fixing, market-sharing, bid-rigging, and the exchange of commercially sensitive information. The Article applies to both horizontal agreements (between competitors) and vertical agreements (between firms at different levels of the supply chain).
Abuse of a dominant position (Article 102 TFEU)
Article 102 prohibits the abuse of a dominant position within the EU single market or a substantial part of it. Dominance is defined as a market share over 40%. Abusive conduct may include predatory pricing, tying customers to exclusive contracts, refusing to supply, and charging excessive prices.
Merger control
The EU Merger Regulation requires that mergers and acquisitions which meet certain turnover thresholds must be notified to the European Commission for prior approval. The Commission assesses whether the merger would significantly impede effective competition, in particular through the creation or strengthening of a dominant position.
State aid control
EU state aid rules aim to ensure that government interventions do not distort competition by selectively favoring certain companies over others. Member states must notify the Commission of any state aid measures over a certain threshold. The Commission will assess whether the aid serves a public objective, is appropriate, has minimum distortion, and does not unduly affect trade between member states.
Who enforces EU competition law?
EU competition law is enforced through a system of shared competence:
- The European Commission investigates suspected infringements of Articles 101 and 102 TFEU. It has the power to impose fines on companies found to violate the rules.
- National competition authorities (NCAs) also enforce Articles 101 and 102 within their territory. They cooperate with the Commission through the European Competition Network (ECN).
- The Commission has exclusive competence over merger control and state aid investigations.
- National courts can hear competition lawsuits and award damages to victims of infringements. They also enforce Commission decisions.
What are the sanctions for breaching EU competition law?
There are three main types of sanctions:
- Fines – The Commission can impose fines of up to 10% of a company’s total worldwide turnover for breaching Articles 101 or 102 TFEU.
- Commitments and injunctions – Companies may offer commitments to bring infringement to an end. Non-compliance can result in fines.
- Damages – Victims can claim compensation before national courts for harm suffered from infringements.
What are the benefits of EU competition policy?
An effective EU competition policy brings many benefits:
- Promotes economic efficiency and productivity growth
- Drives innovation and quality improvements
- Keeps prices competitive
- Increases consumer choice
- Levels the playing field for small businesses
- Integrates the EU single market
By cracking down on cartels and preventing abuses of dominance, competition policy aims to stimulate competitiveness, economic dynamism and growth.
What are the main developments in EU competition policy?
Some key policy developments include:
- Tighter rules on horizontal co-operation agreements adopted in 2010.
- Revised rules on technology transfer agreements adopted in 2014.
- New Market Definition Notice published in 1997 and updated in 2021.
- Revision of the Merger Regulation in 2004 – expanded scope and simplified procedure.
- New state aid guidelines for aviation, broadband, and important projects of common European interest.
- Increasing focus on digital markets and global competition enforcement co-operation.
What are the main challenges for EU competition policy?
Key challenges looking ahead include:
- Applying rules effectively to fast-moving digital markets.
- Scrutinizing mergers in the pharmaceutical and agri-food sectors.
- Curbing state aid used for political ends.
- Balancing competition enforcement with wider public policy goals.
- Engaging more deeply with stakeholders and non-governmental organizations.
- Cooperating with global partners to tackle international anti-competitive conduct.
Conclusion
EU competition policy is a key pillar of European integration and the single market. Core aims are protecting consumer welfare, ensuring a level playing field for business, and driving efficiency and competitiveness. Looking ahead, challenges include keeping pace with digitalization and globalization, while balancing competition goals with broader socio-political objectives.