QUESTION 1

IMPACT OF EU COMPETITION POLICIES ON ECONOMIC GROWTH

There are numerous competition policies that European Union (EU) uses to control

the region’s economy. Thus paper however limits itself to those EU policies that limit

anticompetitive behavior by firms and those that ensure consumers benefit from

choice. Anticompetitive behaviors are the arrangement or business practices that

lessen the rate of competition in the market. 1 The aim of most competitive conducts

by firms is always to ensure that there is monopoly and market dominance in a

specific industry. Secondly, the EU also has policies that ensure that consumers

benefit from choice. This means that the consumers have the wide variety of

products to choose from.

One of the main anticompetitive policy control by EU is Article 101 of the Treaty on

the Functioning of the European Union (TFEU). These policy ensure that the

agreements between the two or more independent market operators are not

anticompetitive. The agreements that lead to mergers or takeovers that reduce

competition and enhance market dominance are thus prohibited vide this provision.

Article 102 of TFEU also is another example of a policy that prohibits abusive

behaviors by companies holding a dominant position on any given market.

The law also provides for competition policies that are meant to protect consumers

from unfair competition practices in the market. The European Union has strict

competition rules, the violation of which can lead to serious penalties and fines

against the offenders. These policies have, in one way or another, had an impact on

the growth of the economy.2 There is also the Merger Regulation (Council

Regulation (EC) No 139/2004) and its implementing rules (Commission Regulation

(EC) No 802/2004); which are used effectively to reduce the unfair competition

1
Nicolai Van Gorp and Olga Batura, ‘DIRECTORATE GENERAL FOR INTERNAL POLICIES
Challenges for Competition Policy in a Digitalised Economy STUDY’ [2015] Economic and
Monetary Affairs .
2
Diw Berlin and Analysys Mason, ‘Economic Impact of Telecoms Markets in the EU on the
Functioning of Final Report Competition Policy Enforcement’ (2017).

1
created by merger of dominant market shareholders. This policy provides for the

application of rules that facilitate and enhance fair competition practices by

companies in the same line of business in product and service provision. This

enables more consumers to have a wide variety of products to choose from, access

to improved quality of goods and services and reduced prices for the goods and

services. Article 107 of TFEU is also another policy that prohibits anticompetitive

behaviours. It contains a general prohibition of State aid in order to prohibit

distortions of competition in the internal market that could result from the granting of

selective advantages to certain companies. This means that there is no aid that

should be granted by any government towards a particular company in a secluded

manner. For example if taxes are levied from companies, then state is not allowed to

provide tax aid or leave to some companies and not to all companies. However, such

prohibition do have some exception especially where there is legitimate objective of

selective aid to specific companies.

The antirust policies highlighted above also have effect on the consumer choices.

They ensure that the number of producers or sellers are not reduced din the market

to crate monopoly. It therefore means that there is a variety of producers who provide

a wide range of products to consumer. This then increases their discretion for choice

and consumers are then able to buy from different suppliers. The antitrust policies

thus can be viewed as measures of protecting consumers from exploitation by

monopolistic market.

The EU and its members have practiced measures that ensure there are no negative

effects on competition upon the merging of companies. It is thus an example that

such policies are not just paperwork but they are actually being implemented. For

example, according to Article 22 of the European Union Merger Regulation,

mandates the European Commission to examine mergers referred to it, to determine

whether the merger will have an adverse effect on competition in the market. If the

merger impedes effective competition and no commitments are proposed to remove

2
the risk, then the merger is prohibited so as to protect the market and consumers

from imposition of exorbitant prices and other factors arising from abuse of

dominance. In the matter of Acquisition of SYNETIQ Holdings Limited, the merger

was allowed and not referred under section 22(1) of the Enterprise Act 2002 as the

Competition and Markets Authority did not believe that the merger has led or will lead

to a substantial lessening of competition within the market.3

There are several effects of anti-trust polices to the EU economy. On the

advantageous side, the policies ensure that young domestic producers and small

enterprises are protected from unfair competition by the market dominators. This

thus ensure that the economy thrives as small enterprises are supported. Secondly,

it also ensure that the market is regulated to enhance market efficiency which then

lead to boosted economic growth. The antitrust policies also ensure that the unfair

competitive techniques such as price fixing and mergers of dominant market

shareholders are not implemented and this helps in enhancing market entry and

continuous survival of small enterprises.4 Creating favourable environment for trade

thus is an aid to trade and consequently a booster to economic growth.

On the other hand, there are those who believe that the regulation of market is a bad

idea. The theory of Laissez-faire is a policy of minimum governmental interference in

the economic affairs of individuals and society. Following this theory, one can thus

argue that control of market by reducing the rate of competition has adverse impact

to the general economy.5 It allows everyone into the market and thus affecting the

practice of trade my reducing the level of profit earned by sellers.

In conclusion, despite the counterargument above, fair and effective competition is

encouraged in the EU in order to protect consumers from unfair business practices

3
IAA, Inc. / SYNETIQ Holdings Limited merger inquiry, 2 March 2022.
4
Mattia Guidi, ‘The Impact of Independence on Regulatory Outcomes: The Case of EU
Competition Policy’ (2015) 53 JCMS: Journal of Common Market Studies 1195
<https://onlinelibrary.wiley.com/doi/full/10.1111/jcms.12280> accessed 13 May 2022.
5
Umut Aydin and Kenneth P Thomas, ‘The Challenges and Trajectories of EU Competition
Policy in the Twenty-First Century’ (2012) 34 https://doi.org/10.1080/07036337.2012.707359
531 <https://www.tandfonline.com/doi/abs/10.1080/07036337.2012.707359> accessed 13
May 2022.

3
by dominant players in the market. The measures put into place to safeguard this are

seen to be effective in consumer protect as well in the promotion of growth in the

economy.

4
 List of Authorities

Treaty on the Functioning of the European Union 1958

The Merger Regulation (Council Regulation (EC) No 139/2004) and its implementing

rules (Commission Regulation (EC) No 802/2004)

Bibliography

Aydin U and Thomas KP, ‘The Challenges and Trajectories of EU Competition Policy

in the Twenty-First Century’(2012) 34https://doi.org/10.1080/07036337.2012.707359

531 <https://www.tandfonline.com/doi/abs/10.1080/07036337.2012.707359>

accessed 13 May 2022

Berlin D and Mason A, ‘Economic Impact of Telecoms Markets in the EU on the

Functioning of Final Report Competition Policy Enforcement’ (2017)

Guidi M, ‘The Impact of Independence on Regulatory Outcomes: The Case of EU

Competition Policy’ (2015) 53 JCMS: Journal of Common Market Studies 1195

<https://onlinelibrary.wiley.com/doi/full/10.1111/jcms.12280> accessed 13 May 2022

Van Gorp N and Batura O, ‘Directorate General For Internal Policies Challenges for

Competition Policy in a Digitalised Economy STUDY’ [2015] Economic and Monetary

Affairs