Navigation path

Competition


The EU's rules on competition are designed to ensure fair and equal conditions for businesses, while leaving space for innovation, unified standards, and the development of small businesses.

Competition must be fair

Unloading lorry © Imageselect

Some international removal firms have been fined for price-fixing.

Under EU rules, businesses may not:

  • fix prices or carve up markets amongst themselves
  • abuse a dominant position in a particular market to squeeze out smaller competitors
  • merge if that would put them in a position to control the market. In practice this rule only prevents a small number of mergers going ahead. Larger companies that do a lot of business in the EU cannot merge without prior approval from the European Commission – even if they are based outside the EU.

The Commission may agree to a company having a monopoly in special circumstances – for example where costly infrastructure is involved (‘natural monopolies’) or where it is important to guarantee a public service. However:

  • monopoly companies must be able to demonstrate that they treat other companies fairly
  • natural monopolies must make their infrastructure available to all users
  • profits from providing a public service may not be used to subsidise commercial operations, potentially undercutting competitors' prices.

The large may not exploit the small

In doing business with smaller firms, large firms may not use their bargaining power to impose conditions which would make it difficult for their suppliers or customers to do business with their competitors. The Commission can (and does) fine companies for this practice.

EU investigations into anti-competitive practices cover not only goods but also the liberal professions and services, including financial services, such as retail banking and credit cards.

Repairing car © Carofoto

Competition in car repairs is keener thanks to the EU.

No props for lame ducks

The Commission also monitors how much assistance EU governments give to businesses (‘state aid’), for example:

  • 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.

Under no circumstances may governments provide any form of aid to ailing businesses that have no hope of becoming economically viable.

Exceptions

Some exceptions to the general rules are possible:

  • companies may be allowed to cooperate in developing a single technical standard for the market as a whole
  • smaller companies may be allowed to cooperate if this strengthens their ability to compete with larger ones
  • governments may be allowed to grant aid if there is a real chance that a business in difficulty (or a new venture) can eventually become profitable - if it is in the interests of the EU (e.g. by preserving or creating jobs).

The overriding considerations are whether consumers will benefit or other businesses will be harmed. The Commission often allows aid for research and innovation, regional development and small businesses, because these serve overall EU goals.

Benefits in practice

One of the European Commission's highest profile competition cases involved the US computer giant, Microsoft. The Commission fined Microsoft for its practice of bundling various types of software together in a single package. It decided that Microsoft had been unfair to consumers by depriving them of choice, keeping prices artificially high and stifling innovation in the software industry.

In the car industry, the Commission has also intervened to bring greater transparency in pricing, resulting in substantially smaller differences in pre-tax prices across the EU.

The Commission has also intervened to open the way to multi-brand car dealerships, enabling car dealers to operate in more than one EU country, freeing the way for non-authorised dealers to sell parts and carry out recognised repairs.

Checks and balances

The Commission's extensive powers to investigate and halt violations of EU competition rules are subject to judicial review by the European Court of Justice. Companies and EU governments regularly lodge and sometimes succeed in appeals against Commission decisions.

Top

Competition

Published in July 2013

This publication is part of the 'European Union explained' series


Top



CONTACT

General information enquiries

Call
00 800 6 7 8 9 10 11 See details of service

E-mail your questions

Contact and visit details for institutions, press contacts

Help us improve

Find what you wanted?

YesNo

What were you looking for?

Any suggestions?