SAMENVATTING
EU COMPETITION POLICY
INTRODUCTION TO COMPETITION POLICY
The European Union's competition policy aims to ensure fair and open competition within the internal market. This policy is
essential to prevent dominant firms from abusing their power or distorting markets through illicit agreements or state aid. By
promoting effective competition, the EU aims to protect consumers, encourage innovation and improve market functioning.
THE CONCEPT OF COMPETITION
Competition is a multifaceted concept that refers to the rivalry between companies competing for market share, profits and
customers. Although companies compete primarily for their own self-interest, this usually leads to benefits for society, such as
lower prices and better products.
There are different levels of competition, depending on the market structure:
- Perfect competition: Many suppliers, no single firm has market power.
- Monopoly: Only one supplier dominating the market.
- Oligopoly: A few large firms dominate the market.
- Monopolistic competition: Many suppliers with differentiated products.
A well-functioning market with sufficient competition offers several advantages:
- Lower prices: Companies compete to offer the best value for money.
- More innovation: Competitive pressure encourages companies to develop new products and technologies.
- Wider choice: Consumers benefit from a wider range of products and services.
- Efficiency: Companies are encouraged to be cost-efficient.
Without regulation, companies may collude to divide the market or abuse their dominant position, to the detriment of
consumers and smaller competitors. The EU pursues strict competition policies to prevent these unfair practices and correct
market failures.
Key reasons for EU competition policy are:
- Protecting consumers from unreasonable prices and limited choices.
- Preventing concentrations of power that hamper innovation and competition.
- Guarding a level playing field for all firms in the single market.
1
, THE 3 PILLARS OF EU COMPETITION POLICY
EU competition policy focuses on three core areas: antitrust, merger control and state aid.
1. Antitrust: This section focuses on countering anti-competitive practices and abuse of a dominant position.
o Horizontal agreements (between competitors) such as price agreement, output restriction, market allocation
and bid rigging
o Vertical agreements (between different links in the supply chain) such as exclusive supply contracts, tie-in and
resale price maintenance.
o Hun and spoke: horizontal anticompetitive practice through coordination via hub
o Abuse of dominance, for example through exploitative practices (excessive pricing, discrimination) or
exclusionary practices (predator pricing, refusal to deal)
2. Merger control: The EU controls mergers and acquisitions to prevent them from restricting competition.
o Horizontal mergers: Between direct competitors, which can lead to price increases or less innovation.
o Vertical mergers: Between firms at different stages of the production chain, which may exclude competitors.
o Conglomerate mergers: Between firms in different sectors, which can indirectly strengthen market dominance.
o Other types of concetration such as acquisition or full function joint venture
3. State aid = government financial support to specific companies, which can distort competition. In principle, it is
prohibited within the EU unless it contributes to goals such as innovation or regional development
o Conditions to qualify as state aid:
▪ It must involve public funds.
▪ It provides a selective advantage to a company.
▪ It distorts competition.
▪ It affects trade between member states..
o Sometimes other elements of competition policy could also include:
▪ Liberalizing markets
▪ Market regulation
▪ Public procurement rules
▪ …
WHO ENFORCES COMPETITION POLICY
Enforcement is done at both national and supranational levels:
- DG Competition (European Commission): The main EU-level authority responsible for investigating and enforcing
competition rules.
- National competition authorities (NCAs): Enforce the rules within their own countries, such as the Belgian Competition
Authority.
Key milestones in the history of EU competition policy
- 1957 - Treaty of Rome: The basis for EU competition rules.
- 1962 - Regulation 17: The European Commission is given the power to investigate infringements.
- 1990 - Merger Regulation: Introduction of regulations to control mergers.
- 2003 - New Antitrust Regulation: Removal of mandatory notification of agreements, allowing for more decentralised
enforcement.
- 2004 - New Merger Regulation: Introduction of the SIEC test to determine whether a merger distorts the market.
2
, CONSEQUENCES OF COMPETITION POLICY VIOLATIONS
Companies that violate competition rules can face severe penalties, including:
- Company fine
- Personal fine
- Imprinsonment
- Loss of reputation
- Damage claims
- Agreements are void
- Delay
- Recovery of aid
CURRENT CHALLENGES AND DISCUSSION
Current affairs surrounding EU competition policy are widely discussed in leading publications such as The Economist and The
Financial Times. These media shed light on the growing challenges arising from market concentration, the dominance of
technology companies and the tension between competition policy and industrial policy.
THE NEED FOR A “NEW CAPITALIST REVOLUTION”
According to The Economist, the capitalist model has suffered significant reputational damage in recent decades. It calls for a
revision of competition policy to address the fundamental problems arising from market failures and increasing concentrations
of power.
Key reasons for this call for change are:
- Increased market concentration: A few large players have become dominant in many sectors, hampering competition.
- High profits: Firms in concentrated markets achieve structurally higher profits than in competitive markets, indicating a
lack of effective competition.
- Difficulties in entry: New or smaller players increasingly struggle to enter or survive in sectors dominated by
incumbents.
Although globalisation has intensified competition in some markets, there are still many sectors where firms can maintain their
dominant position for long periods without being challenged.
In some sectors, monopoly profits (also known as 'rents') are clearly visible, while in others they are more hidden.
- Hidden monopoly profits: These often occur in two-sided markets (such as Google and Facebook), where dominance is
less visible by offering services to consumers 'for free' while generating revenue from advertising sales.
- Apparent monopoly profits: Sectors such as aviation, telecoms and media show explicit forms of market power through
high tariffs, limited competition and structural barriers to new entrants.
3
, One proposed solution to address the challenges of contemporary competition policy is to modernise antitrust laws. Current
rules are sometimes considered inadequate to effectively regulate the complex power structures of digital markets.
- Objectives of modernised antitrust policy are:
o Normalisation of profits: Returning excess profits to 'normal' levels.
o Increasing wages: Effective competition allows workers to command higher wages.
o Increasing choice: Consumers should have access to a wider range of products and services.
o Stimulating productivity: Competitive pressure creates technological advances and more efficient production
processes.
o Restoring confidence in capitalism: A fairer and more balanced market model should reduce public scepticism
about capitalism.
AN AGE OF GIANTS
The presentation outlines a scenario in which consumers constantly interact with a few technology giants during an average
day:
- Communications through Apple or other tech giants.
- Mobile services from a concentrated telecoms sector.
- Credit card payments from a small number of dominant financial institutions.
- Online searches through Google.
- …
This dominance illustrates how deeply intertwined and inevitable these major players have become in everyday life. In the
absence of competition, prices remain too high and innovation too limited, creating a wider social impact.
Despite the expectation that markets correct themselves through competitive pressures, some industries remain exceptionally
profitable and uncompetitive. Possible explanations for this are:
- Lack of entry of new players: There are significant financial, legal and technological barriers to start-ups.
- Acquisition of innovative start-ups by large companies: Big players buy up smaller, innovative companies to neutralise
potential competition ('killer acquisitions').
- Investments in power concentration: Large companies invest significantly in maintaining their dominant position
through research, patents and legal strategies.
- Role of the technology sector: Digitisation strengthens power concentrations through network effects, with dominant
platforms only getting stronger as more people use them.
THE TECH ANTITRUST PARADOX
The dominance of technology companies entails a fundamental paradox: while they foster innovation and provide consumers
with new opportunities, their dominance also threatens to undermine competition.
ADVANTAGES DISADVANTAGES
Promote innovation and disruption Strengthen market power and dominance
Higher investment in technology Less choice for consumers
Efficiency and low prices Data abuse and privacy risks
Improved service delivery Limited alternatives and lock-in effects
4
EU COMPETITION POLICY
INTRODUCTION TO COMPETITION POLICY
The European Union's competition policy aims to ensure fair and open competition within the internal market. This policy is
essential to prevent dominant firms from abusing their power or distorting markets through illicit agreements or state aid. By
promoting effective competition, the EU aims to protect consumers, encourage innovation and improve market functioning.
THE CONCEPT OF COMPETITION
Competition is a multifaceted concept that refers to the rivalry between companies competing for market share, profits and
customers. Although companies compete primarily for their own self-interest, this usually leads to benefits for society, such as
lower prices and better products.
There are different levels of competition, depending on the market structure:
- Perfect competition: Many suppliers, no single firm has market power.
- Monopoly: Only one supplier dominating the market.
- Oligopoly: A few large firms dominate the market.
- Monopolistic competition: Many suppliers with differentiated products.
A well-functioning market with sufficient competition offers several advantages:
- Lower prices: Companies compete to offer the best value for money.
- More innovation: Competitive pressure encourages companies to develop new products and technologies.
- Wider choice: Consumers benefit from a wider range of products and services.
- Efficiency: Companies are encouraged to be cost-efficient.
Without regulation, companies may collude to divide the market or abuse their dominant position, to the detriment of
consumers and smaller competitors. The EU pursues strict competition policies to prevent these unfair practices and correct
market failures.
Key reasons for EU competition policy are:
- Protecting consumers from unreasonable prices and limited choices.
- Preventing concentrations of power that hamper innovation and competition.
- Guarding a level playing field for all firms in the single market.
1
, THE 3 PILLARS OF EU COMPETITION POLICY
EU competition policy focuses on three core areas: antitrust, merger control and state aid.
1. Antitrust: This section focuses on countering anti-competitive practices and abuse of a dominant position.
o Horizontal agreements (between competitors) such as price agreement, output restriction, market allocation
and bid rigging
o Vertical agreements (between different links in the supply chain) such as exclusive supply contracts, tie-in and
resale price maintenance.
o Hun and spoke: horizontal anticompetitive practice through coordination via hub
o Abuse of dominance, for example through exploitative practices (excessive pricing, discrimination) or
exclusionary practices (predator pricing, refusal to deal)
2. Merger control: The EU controls mergers and acquisitions to prevent them from restricting competition.
o Horizontal mergers: Between direct competitors, which can lead to price increases or less innovation.
o Vertical mergers: Between firms at different stages of the production chain, which may exclude competitors.
o Conglomerate mergers: Between firms in different sectors, which can indirectly strengthen market dominance.
o Other types of concetration such as acquisition or full function joint venture
3. State aid = government financial support to specific companies, which can distort competition. In principle, it is
prohibited within the EU unless it contributes to goals such as innovation or regional development
o Conditions to qualify as state aid:
▪ It must involve public funds.
▪ It provides a selective advantage to a company.
▪ It distorts competition.
▪ It affects trade between member states..
o Sometimes other elements of competition policy could also include:
▪ Liberalizing markets
▪ Market regulation
▪ Public procurement rules
▪ …
WHO ENFORCES COMPETITION POLICY
Enforcement is done at both national and supranational levels:
- DG Competition (European Commission): The main EU-level authority responsible for investigating and enforcing
competition rules.
- National competition authorities (NCAs): Enforce the rules within their own countries, such as the Belgian Competition
Authority.
Key milestones in the history of EU competition policy
- 1957 - Treaty of Rome: The basis for EU competition rules.
- 1962 - Regulation 17: The European Commission is given the power to investigate infringements.
- 1990 - Merger Regulation: Introduction of regulations to control mergers.
- 2003 - New Antitrust Regulation: Removal of mandatory notification of agreements, allowing for more decentralised
enforcement.
- 2004 - New Merger Regulation: Introduction of the SIEC test to determine whether a merger distorts the market.
2
, CONSEQUENCES OF COMPETITION POLICY VIOLATIONS
Companies that violate competition rules can face severe penalties, including:
- Company fine
- Personal fine
- Imprinsonment
- Loss of reputation
- Damage claims
- Agreements are void
- Delay
- Recovery of aid
CURRENT CHALLENGES AND DISCUSSION
Current affairs surrounding EU competition policy are widely discussed in leading publications such as The Economist and The
Financial Times. These media shed light on the growing challenges arising from market concentration, the dominance of
technology companies and the tension between competition policy and industrial policy.
THE NEED FOR A “NEW CAPITALIST REVOLUTION”
According to The Economist, the capitalist model has suffered significant reputational damage in recent decades. It calls for a
revision of competition policy to address the fundamental problems arising from market failures and increasing concentrations
of power.
Key reasons for this call for change are:
- Increased market concentration: A few large players have become dominant in many sectors, hampering competition.
- High profits: Firms in concentrated markets achieve structurally higher profits than in competitive markets, indicating a
lack of effective competition.
- Difficulties in entry: New or smaller players increasingly struggle to enter or survive in sectors dominated by
incumbents.
Although globalisation has intensified competition in some markets, there are still many sectors where firms can maintain their
dominant position for long periods without being challenged.
In some sectors, monopoly profits (also known as 'rents') are clearly visible, while in others they are more hidden.
- Hidden monopoly profits: These often occur in two-sided markets (such as Google and Facebook), where dominance is
less visible by offering services to consumers 'for free' while generating revenue from advertising sales.
- Apparent monopoly profits: Sectors such as aviation, telecoms and media show explicit forms of market power through
high tariffs, limited competition and structural barriers to new entrants.
3
, One proposed solution to address the challenges of contemporary competition policy is to modernise antitrust laws. Current
rules are sometimes considered inadequate to effectively regulate the complex power structures of digital markets.
- Objectives of modernised antitrust policy are:
o Normalisation of profits: Returning excess profits to 'normal' levels.
o Increasing wages: Effective competition allows workers to command higher wages.
o Increasing choice: Consumers should have access to a wider range of products and services.
o Stimulating productivity: Competitive pressure creates technological advances and more efficient production
processes.
o Restoring confidence in capitalism: A fairer and more balanced market model should reduce public scepticism
about capitalism.
AN AGE OF GIANTS
The presentation outlines a scenario in which consumers constantly interact with a few technology giants during an average
day:
- Communications through Apple or other tech giants.
- Mobile services from a concentrated telecoms sector.
- Credit card payments from a small number of dominant financial institutions.
- Online searches through Google.
- …
This dominance illustrates how deeply intertwined and inevitable these major players have become in everyday life. In the
absence of competition, prices remain too high and innovation too limited, creating a wider social impact.
Despite the expectation that markets correct themselves through competitive pressures, some industries remain exceptionally
profitable and uncompetitive. Possible explanations for this are:
- Lack of entry of new players: There are significant financial, legal and technological barriers to start-ups.
- Acquisition of innovative start-ups by large companies: Big players buy up smaller, innovative companies to neutralise
potential competition ('killer acquisitions').
- Investments in power concentration: Large companies invest significantly in maintaining their dominant position
through research, patents and legal strategies.
- Role of the technology sector: Digitisation strengthens power concentrations through network effects, with dominant
platforms only getting stronger as more people use them.
THE TECH ANTITRUST PARADOX
The dominance of technology companies entails a fundamental paradox: while they foster innovation and provide consumers
with new opportunities, their dominance also threatens to undermine competition.
ADVANTAGES DISADVANTAGES
Promote innovation and disruption Strengthen market power and dominance
Higher investment in technology Less choice for consumers
Efficiency and low prices Data abuse and privacy risks
Improved service delivery Limited alternatives and lock-in effects
4
