Competition policy was developed as an essential part of the integration process, both in the Treaty of Paris, establishing the European Coal and Steel Community, and in the Treaty of Rome. Competition policy is aimed at preventing distortions in competition caused either by private firms, or by government actions. EU competition policy is complementary to national measures, but in cases of conflict EU competition law prevails.
Central to the analysis of the likely benefits of integration are the cost and price reductions that were expected to accrue.
There is a risk that restrictive practices between otherwise independent firms, or the behaviour of dominant (or monopoly) firms, might prevent these price reductions from being realized. Integration is also expected to lead to increased competition, and to meet these additional pressures firms might be induced to form cartels or undertake mergers in order to reach dominant market positions. National governments may be tempted to help their firms face the additional competitive pressures by granting them state aids.
To prevent such developments undermining competition, EU policy therefore covers:
■ Antitrust measures, or the fight against cartels and restrictive practices (Article 81) and against dominant position (Article 82);
■ Mergers (Reg. 4064/89 of 1989); and
■ State aids and regulated industries (Articles 86–88).
To prepare for EU enlargement, the EU introduced new rules on competition policy from 1 May 2004.
We'll spend the lecture talking about these new rules and discussing how the simple monopoly/perfect competition model can be adapted to allow us to understand cartelisation and industrial policy.
You can watch the lecture below and download the slides, and there will be a podcast after the lecture.
Download the handout by clicking the image below.
