Competition is decisive for economic growth, and a central objective of EU policy. This is why the EU has set down rules to guarantee free and fair competition within its market. The European Commission (EC) is responsible for ensuring that competition is not distorted, and is empowered to correct anticompetitive behaviour.
Antitrust rules forbid companies from reaching agreements between themselves that restrict competition, or from abusing a dominant market position.
Agreements between two or more companies which restrict competition are prohibited (Article 101 of the Treaty). For example, cartels among competitors to control prices or share markets limit competition.
Some agreements prove beneficial - by promoting technical progress or improving distribution, for example - and so can be allowed. There are even block exemptions for certain categories - such as research and development and technology transfer. These agreements must meet certain conditions in order to be compatible with EU competition rules.
Abuse of dominant position
Businesses in a dominant position within a market are prohibited from abusing this position (Article 102 of the Treaty). An example of abuse is when a company uses predatory pricing to eliminate competitors from the market.
The EC pays particular attention to complaints made by smaller businesses in this area.
In order to apply competition rules, the EC may launch investigations and impose penalties. It can request information and make surprise inspections of business premises. Companies infringing EU antitrust rules can be fined or be required to change their behaviour.
Larger companies planning to merge need approval from the EC, irrespective of where they are headquartered: the criterion is the amount of business they do within the EU. Mergers between small businesses are generally not subject to EU procedures, but national rules may apply.
EU countries sometimes use public resources to promote certain economic activities or protect national industries. This kind of government assistance risks putting certain businesses at an advantage over their competitors, thereby distorting competition. This is why the Treaty generally prohibits state aid.
Exceptions exist for aid justified by a common interest and the Treaty lists the circumstances in which public support may be allowed. The European Commission is responsible for monitoring such support and balancing the positive and negative impacts on competition.
Companies can report state aid which they think has been illegally granted to competitors, using an online complaint form.
Over the years, the EU has drawn up block exemption regulations which clearly indicate when support is considered justified and which allow EU countries to grant certain types of support without having to notify the Commission each time in advance.
The current rules have now been harmonised and consolidated into a general block exemption regulation covering, notably: small businesses, regional development, research, innovation, training, employment and risk capital, environment protection, and the promotion of entrepreneurship.
State aid in favour of small businesses
The general block exemption regulation makes it easier for governments to assist small businesses, simplifying rules and raising the threshold beneath which public support is not considered to threaten competition. It also supports the EU Small Business Act, allowing member countries to help small businesses at different stages of their development.
State aid reform
Since 2005, EU countries have been encouraged to provide less but better-targeted assistance in order to help promote jobs and growth, and to address the market failures small businesses encounter.
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