EU Competition law
The primary purpose of the competition law is to remedy some of the situations in which the free market system breaks down.
European Union competition law applies to all companies and individuals doing business within the Member States or which may affect trade between de Member States of the European Economic Area (EEA) regardless of whether these companies are established in one of these countries or not.
The Treaty on the Functioning of the EU (TFEU) provides for a single internal market, one of the basic goals of the EU, which has been described by the European Commission (the core of the EU competition policy) as one of the ‘EU’s biggest assets’ which it is determined to protect. This single market refers to the EU as one territory without any internal borders or other regulatory obstacles to the free movement of goods and services. A functioning single market stimulates competition and trade. In order to achieve this, the TFEU includes rules to ensure that competition within the EU is not restricted or distorted by cartels or anti-competitive agreements, abuses of market power, mergers and acquisitions, unfair State aid… The TFEU is supported by a number of regulations and directives intended to be observed by all members.
As mentioned above, competition rules are applicable not only to EU companies, but also to those carrying on business in Europe or whose business conduct may have effects in Europe.
The main rules
- Competition law and policy of the EU rules are set out mainly at Articles 101 and 102 TFEU. Article 101 controls agreements or concerted practice which is made between two or more independent business which may affect trade between the EU. It catches secret price-fixing or market-sharing cartels or any other agreements between business that have the object or effect of restricting competition (e.g. including exclusive dealing provision or territorial restrictions).
- In accordance to Article 102 TFEU, business may not abuse a dominant position in a particular market to squeeze out smaller competitors.
- In addition, the EU competition rules contain special rules aimed at preventing Member States rom distorting competition through the grant of State aid or other support. The following, for example, are forbidden unless they comply with certain criteria: loans and grants; tax breaks, goods and services provided at preferential rates, government guarantees which enhance the credit rating of a company compared to its competitors. Furthermore, there are special rules applicable to State monopolies and which seek to encourage the liberalisation of markets within the EU.
- Also, competition law and policy in the EU also controls mergers through the EU Merger Regulation, which complements articles 101 and 102. Business are not allowed to merge if that would put them in a position to control the market (in particular as a result of the creation or strengthening of a dominant position) and larger companies cannot merge without prior approval from the European Commission, even if they are based outside the EU.
EU Commission Manuscript. The EU Explained: Competition.