Short Paper: EU Competition Policy
Economic principles underlying EU competition policy
Effective competition between suppliers is important in the way that it allows to reduce prices, improve the quality of goods, and enlarge the quantity of items provided for the consumers due to the process of innovation. The European Commission’s purpose is to ensure fair competition in European markets. It promotes economic efficiency, an optimal allocation of resources, technical progress and the well-being of European consumers. To achieve this the European Commission has been granted wide powers. This is why principles were elaborated for companies within the UE to observe: they must respect some criteria in order not to be sanctioned by the European Commission. First of all, the competition between the companies must be unbiased. A company that is dominant in a market has no right to abuse its power to eliminate its competitors (e.g. the giant Intel tried to exclude competitors from the market of electronic chips, reducing the capacity of the competitors to compete with Intel in order to narrow consumer’s choices). Companies are not allowed to fix prices or share any markets (cartel: set a price higher than that resulting from free competition). Acting otherwise would be breaking the rules of pure competition and undermining market efficiency and consumer options. It is also an important thing that the largest companies may not exploit the smaller ones. That is to say large companies cannot use their bargaining power to force suppliers or customers not to trade with competitors (e.g. Microsoft who was sentenced to pay a fine for its practice of selling diverse software together, thus depriving customers of choice and thereby selling its software at a very high price). Large companies cannot merge if this allows them to control too much of the market. The mergers between different companies are taken into account when...
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