European competition policy
Overview of key aspects of European competition policy.
It is illegal under European Union competition rules for businesses to fix prices or carve up markets between them. Companies with a dominant position in a particular market may not abuse that power to squeeze out competitors.
The European Commission’s Directorate General for Competition (DG Competition), working in cooperation with EU Member States’ national competition authorities, is responsible for the investigation and enforcement of EU competition rules. The key aim is to ensure that markets operate as efficiently as possible to the benefit of consumers, and to actively root out practices which lead to a distortion of competition. This enhances the welfare of consumers and the competitiveness of European business and the European economy.
The Department for Business, Innovation and Skills (BIS) has responsibility for competition policy both at the UK and EU level. The Office of Fair Trading is the UK’s leading national competition authority with responsibility for enforcement policy and enforcement of competition rules, and deals directly and independently with the Commission on individual competition cases.
EU Competition rules prohibit agreements or conduct that prevents, restricts or distorts competition in the Single Market. This includes membership of cartels that fix prices, limit production or share markets to the detriment of consumers. EU Competition rules also prohibit abuse where a company has a dominant position within a market or markets and seeks to exploit this by, for example, limiting production or imposing unfair trading conditions
European Competition rules provide for exemptions for certain agreements between companies (eg exclusive distribution agreements). These exemptions, referred to as block exemptions, create a so called ‘safe harbour’ from EU competition rules on what would otherwise be restrictive business practices where cooperation and collaboration between businesses create efficiencies that directly benefit both consumers and the relevant business sector.
The Commission also investigates those mergers that have a large European dimension. The test is that potential mergers will only be blocked if they reduce competition in a relevant market by either creating or strengthening a dominant firm, though in practice only a small number of mergers have been blocked. Mergers that fall to the Commission’s jurisdiction, (based on annual turnover within the EU), must pre notify the Commission for prior approval. The European Community Merger Regulation (ECMR 2004/139) gives the European Commission jurisdiction to investigate and make decisions on those larger mergers. They will usually consult with member states as part of the process of investigating relevant markets.