EU Competition Policy Flashcards
What treaty drove competition policy
Treaty of Rome, but overtime has been updated within the Treaty of Lisbon
Role of competition policy
Ensure competition in a common market is not distorted
What is compulsory for SEM functioning
Competition policy - as SEM allows less and larger firms, they have more power and so policy must ensure firms don’t misbehave
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From a firm perspective, 2 possible responses to the SEM
Firms act competitively
Firms react defensively and inhibit success of the SE,
Key: firms within SEM may be more globally competitive but may act uncompetitively in the EU
Horizontal cooperation
Merging between companies of the same sector
Sotheby’s & Christies case relating to an anti-competitive agreement (horizontal cooperation)
Tried to collude horizontally (auction houses) ,
Leniency programme
Improves efficiency - giving evidence/whistleblowing removes liability , and so Christie’s snitched and Sotheby’s fined 6% turnover.
Nintendo - exclusive territories
Vertical cooperation - worked with suppliers to prevent product being sold in Germany, Prevented people buying product in Britain and to undercut and sell in Germany.
This was wrong to do as it interrupted free market and were fined.
Example of cartels
Premier League
Premier league case
Cartel - fixing price of the TV deals, 20 clubs acting as one.
Why was their cartel allowed to carry on?
Allows competitive balance. To ensure sustainability of the league and prevent excessive dominance.
Explicit prohibitions example
Price fixing
Output fixing
Market sharing agreements (e.g sugar cartel in 1970s)
Tied contracts
Are foreign firms covered if their EU trade is affected by anti-competitive behaviour
Yes
Relationship between risk of collusion and number of firms in a market
More firms, less collusion
Less firms, more collusion
Perfect clllusion
Firms coordinate prices and sales perfectly
How do they achieve perfect collusion
Maximise profit from the charging monopoly price and quantity, and split sales among themselves
Perfect collusion diagram
2n’ business remain as perfect, and charge the monopoly mark-up
Partial collusion
Stops restructuring (the transition from short run to long run)
Partial collusion diagram
Equilibrium point B, so prices are higher.
Where is the welfare oss
Since higher prices
3 main Exemptions exist
Negative clearance
Block exemptions
SME’s
Negative clearance: when can exemptions for collusion exist (3)
If collusion improves production/distibtion of goods
Promotes technical or economic progress
If consumers benefit and no elimination of competition
Q
3 elements for monopoly abuse of power
Has to be dominant position
Abuse is illegal
Possibility of affecting intra-EU trade
They are less effective than article 101. Why?
Defining the market is difficult
Defining the market is difficult: Continental Can case
Hard to classify
Abuse of dominance includes
Unfair pricing
Limiting markets
Tied contracts
Coca Cola
Exclusivity agreements
Rebates for target & reserving shelf space
Use strong brands to sell weaker ones i.e Coca Cola made another drink called lilt , firms couldn’t just buy coke they had to sell lilt too.
Abuse of shopping - favours own google products e.g YouTube (part of google) , google play, google news etc.
Fined 2.4bn EUR
Treaty of Rome didn’t address mergers
Merger regulation was added following Continental can case - however ineffective
When is a merger prohibited
If strengthens dominant position which impairs competition
3 thresholds for mergers
Big mergers impacting intra EU trade
Not national mergers e.g Sainsbury’s Asda
Criticisms
Few are actually investigated
Public enterprises
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S
September 2024 - apple have to pay Ireland and the interest (almost 2m a day)
State aid effect on diagram
It stops movement from 2n’ to n’’, government aid prevents this process from occuring.
What if only some countries subsidise
If a partner subsdiies its firms to break even, all restructuring forced on home country
Competition policy in future
