EUROPA - Gateway to the European Union
Effective competition to provide goods and services cuts prices, raises quality and expands customer choice. Competition allows technological innovation to flourish. The European Commission has wide powers to make sure businesses and governments stick to EU rules on fair competition. But in applying these rules, it can take account of the interests of innovation, unified standards, or small business development.
International removal firms are among those fined for price-fixing.
It is illegal under EU 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. Big companies may not merge if that would put them in a position to control the market, though in practice this rule only prevents a small numbers of mergers going ahead. Larger companies planning to merge need approval from the European Commission – irrespective of where they are headquartered: the criterion is the amount of business they do within 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, and thus potentially undercut competitors on price.
In doing business with smaller firms, large firms may not use their bargaining power to impose conditions which would make it difficult for their supplier or customer to do business with the large firm’s competitors. The Commission can (and does) fine companies for all these practices.
Its investigations into anti-competitive practices are not restricted to goods. They also cover the liberal professions and services, including financial services, such as retail banking and credit cards.
Competition in car repairs is keener thanks to the EU.
In addition, the Commission monitors closely how much assistance EU governments make available to business (‘state aid’). This aid can take many forms – loans and grants, tax breaks, goods and services provided at preferential rates, or government guarantees which enhance the credit rating of a company compared to its competitors. No state aid in any form is allowed to an ailing business that has no hope of ever becoming economically viable.
Some exceptions to the general rules are possible. The Commission can allow companies to cooperate in developing a single technical standard for the market as a whole. It can allow smaller companies to cooperate if this strengthens their ability to compete with larger ones. State aid will get a green light if there is a real chance that a business in difficulty – or a new venture – can eventually become profitable and if it is in the interests of the Union (e.g. by preserving or creating jobs).
The overriding considerations are whether consumers will benefit or other businesses be harmed. Aid for research and innovation, regional development or small and medium-sized enterprises is often allowable because these serve overall EU goals.
One of the European Commission's highest profile competition cases has 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.
Intervention by the Commission has also resulted in cheaper cars for many people. The Commission’s efforts to bring greater transparency in pricing have meant that differences in pre-tax prices across the EU have narrowed considerably. Country-to-country price differences remain, because tax systems vary, but they have narrowed markedly.
It is also thanks to the Commission that the way cars are sold and serviced now offers consumers more options. Multi-brand car dealerships are now possible, car dealers can operate in more than one EU country, and it is no longer necessary to be an authorised dealer to sell parts and carry out recognised repairs.
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.
