EU COMPETITION POLICY
1. Competition policy and the total surplus criterion
Competition is a basic mechanism of the market economy and encourages companies to provide
consumers products that consumers want. It encourages innovation, and pushes down prices. In
order to be effective, competition needs suppliers who are independent of each other, each subject
to the competitive pressure exerted by the others. Competition is believed to guarantee economic
efficiency (Paretian optimality).
How can competition be injured?
1) Competitors may agree to remove the rivalry existing between themselves and thereby
injure the competition process.
2) Competitors may inflict injury on their rivals and thereby injure the competition process.
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In other words, competition can be injured either by the agreed elimination of rivalry (e.g., through
cartel arrangements, i.e. secret agreements concluded among competitors to fix prices, restrict
supply and/or divide up markets, or monopolistic mergers, i.e. combining the activities of different
companies, thereby creating market power) or by a powerful attack upon rivals (e.g., by predation,
which can be defined as a firm’s deliberate aggression against one or more rivals through the
employment of business practices that would not be considered profit maximising except for the
expectation either that rivals will be driven from the market, leaving the predator with a market
share sufficient to command monopoly profits, or rivals will be chastened sufficiently to abandon
competitive behaviour the predator finds inconvenient or threatening.
The elimination of rivalry leads to a situation of monopoly power, that leads to an inefficient
equilibrium. In a first-best world, competition policy should restore Paretian optimality; however,
given that the State lacks the necessary instruments and information to achieve it, competition
policy adopts the second-best goal of maximising social welfare, represented by total surplus (W),
given by the sum of consumer surplus (CS) and profits (Π): W = CS + Π.
With perfect competition, W is maximised. In particular, CS is maximised and Π = 0.
Monopoly power has negative effects on social welfare: the related output restrictions translates
into a reduction of CS that is only partially shifted to producers in the form of Π, while a part of it is
simply lost (dead-weight welfare loss, DL).
Given this background, there are two basic alternative goals of antitrust policy.
1. The minimisation of the inefficiency in the allocation of resources caused by monopoly
power (DL): G1 = min DL.
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2. The minimisation of the damage to consumers deriving from the existence of monopoly
power, which is equal to DL + Π: G2 = min (DL + Π).
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Generally speaking, if DL goes to zero, then also Π goes to zero – if DL is minimised, also (DL +
Π) is minimised, and vice versa. In this sense, the social welfare criterion coincides with the
consumer welfare criterion.
For an exception, consider the case of a monopolist who succeeds in perfectly discriminating prices
so as to extract consumer surplus completely. In this case, Π is at its maximum together with W,
while DL and CS are equal to zero.
G1 considers Π simply as income redistribution and considers only DL as relevant for social
welfare. G2 does not consider an increase in Π as an increase in W and considers a loss the whole
reduction in CS. Economists prefer G1. Consider, for instance, a merger that both creates power to
restrict output and cuts costs. The cost reduction means that the saved resources are freed to
produce somewhere else in the economy. If prices are not reduced accordingly, the whole benefits
goes to the producer in the form of an increase in Π. The increased market power created by the
merger results in a restriction of output with a consequent DL. If the cost savings/increase in Π is
larger than DL, under G1 W increase.
This trade-off can be used to illustrate all antitrust problems, since it shows the relationship of the
only two factors involved, allocative efficiency and productive efficiency. The existence of these
two elements and their respective amounts are the real issues in every properly decided antitrust
case.
It should be noted that we can describe this relationship, but not quantify it: we do not know in any
actual case the slope of the demand curve, the location of the initial cost curve, the distance (if any)
the cost curve will shift, or the amount (if any) the output will change.
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It must also be remembered that there need not always be a trade-off. In some cases, economic
analysis will show that one of the elements does not exist, and decision of the case is therefore easy.
2. Historical foundations of antitrust policy
The first antitrust law is the Sherman Act, 1890, USA. In the US, the years 1890 to 1914 witnessed
the origin of every major theory that drives and directs the evolution of antitrust doctrine to these
days. The themes to be discerned in the legislation and judicial decisions from 1890 to 1914 are
numerous, but there are three major ones that deserve special attention: a) goals of antitrust policy;
b) business structure and behaviour; c) conceptual apparatus of the law.
a) In the early period of the law the dominant goal was the advancement of consumer welfare,
though the conflicting goal of small-business welfare was also introduced.
b) It was believed that competition could be injured to the detriment of consumers by the agreed
elimination of rivalry (through, for example, cartel arrangements or monopolistic mergers) or by
a powerful firm’s attack upon rivals with the purpose of driving them out of the market (by
predatory price wars or control of raw materials or transportation). At the end of the period
under examination, the concept of
“incipiency” was introduced, i.e. the idea that
anticompetitive activity could be identified in its early stages.
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During this period, too, antitrust began to work out theories concerning the three forms of
structure that it deals with today. A structure is “horizontal” when it involves only one market.
Thus, when we speak of a firm’s market share we are speaking of horizontal structure, and
phenomena such as price fixing by rivals or the merger of rivals are horizontal because the
rivals operate in the same market. Structure is “vertical” when it links two markets in the same
chain of manufacture and distribution, usually through the linkage of two firms that either do or
could stand in the relationship of supplier and customer. Vertical structures include a
manufacturer’s ownership of retail outlets, their exclusive contracts with independent outlets, or
their control of independent outlets resale prices. Structure is “conglomerate” when it links two
separate markets in any manner that is not vertical. Thus, a firm that operates in two distinct
product markets is conglomerate, as is a firm that operates in distinct geographical markets.
c) The law conceptual apparatus, or mode of analysis, is conventionally known as the “rule of
reason”. It consisted of two major categories: 1) business behaviour (or structure) that was
illegal per se; and 2) business behaviour that was judged by standards of the party’s intent or of
the effect their behaviour was likely to have, considering the market context. Behaviour is
illegal per se when the plaintiff needs prove only that it occurred in order to win the case. The
per se rule judges behaviour by its inherent effect. Behaviour not placed in the per se category is
properly judged by the criteria of the intent which accompanies it and its probable effect upon
competition.
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The Sherman Act (1890)
Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with foreign nations, is hereby declared to be illegal. …
Section 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any
other person or persons, to monopolize any part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a misdemanor. …
The statute was intended to strike at cartels, horizontal mergers of monopolistic proportions, and
predatory business tactics. In the courts, divergent strains in the rule of reason appeared, and these
irreconcilable traditions persist to these days. These traditions are defined primarily by their view of
the goals of policy.
1) Consumer welfare as the law’s guiding policy: When economic analysis shows that a
practice can have no significant beneficial effect but is solely a means of restricting output,
the inherent nature of the practice is injuriously to restrain trade. The practice then is
labelled illegal per se, as are pure cartel arrangements. When economic analysis does not
reveal that a practice is always harmful by nature (efficiency creating integration), the court
must pass on to two tests: the inherent effect on competition (market control) and the
evident purpose, i.e. the actual intent to monopolise.
2) Other goals, such as small-producer welfare, are admitted: Tempering competition by
private agreements is desirable; this eliminates the category of per se illegality, even in the
case of price fixing agreements.
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The Clayton and Federal Commission Acts (1914)
These laws entrenched one old idea and introduced two new ones that complete the basic antitrust
concepts.
The reinforced older idea was that some economic practices are particularly suspect, because they
provide means, other than superior efficiency, by which a firm may gain or keep a monopoly
position. This notion attained new potency because it was coupled with a second idea, the concept
of incipiency. This consists of the theory that the anticompetitive potential of suspect practices may
be discerned, and the practices stopped, well before they have actual anticompetitive consequences.
The two ideas were interrelated in the preamble to the original Clayton bill, which asserted that the
purpose of the legislation was “to prohibit certain trade practices which … singly and in themselves
are not covered by the [Sherman Act] … and thus to arrest the creation of trusts, conspiracies and
monopolies in their incipiency and before consummation”.
The third major idea of 1914 was that antitrust policy could best be developed by an administrative
body that would gradually acquire an economic expertise that Congress felt itself and the courts to
lack: hence the creation of the Federal Trade Commission.
The major structural feature of the law
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The per se rule against cartels
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The per se rule against naked price-fixing agreements means that no defences are permitted
once the agreement is proved to exist. The only value that the per se rule implements is
consumer welfare, since it implies a legislative decision that business units should prosper or
decline, live or die, according to their abilities to meet the desires of consumers. No
consideration of fragmentation or local ownership enters in, although it is clear that
permitting cartels to raise price above competitive levels would permit more firms to enter
and survive.
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The distinction between cartels and mergers
Mergers eliminate rivalry between the participating firms even more effectively than do
cartels, and they are much more permanent. Yet mergers were not intended to be illegal per
se either under the Sherman Act or under the more stringent standards of amended section 7
of the Clayton Act. This difference in treatment accorded cartels and mergers is provocative
but far from anomalous. It is explainable in terms of a policy of consumer welfare. The sole
difference between these two forms of elimination of rivalry is that mergers may lead to new
efficiencies while cartels, which do not integrate the productive activities of their
participants, have no or at best insignificant efficiency-creating potentials. A preference for
efficiency is explainable only by a pro-consumer policy. A policy designed to preserve
producers would reverse the law’s distinction and outlaw mergers while permitting cartels.
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The distinction between mergers and internal growth
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In enacting the Sherman Act, Congress made it clear that merger to monopoly position was
to be illegal but that growth to the same size, based upon superior efficiency, would be
lawful. The disparity can be explained on the basis of differing presumptions about the
presence of efficiency. Merger to monopolistic control of a market does not necessarily
reflect the expectation of new efficiencies from the integration; the merger may have been
motivated entirely by the anticipation of monopoly profits. Growth to the same size,
however, demonstrates the presence of superior efficiency.
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The distinction between competition and predation
The Congress that adopted the Sherman Act also made a sharp distinction between size
achieved by normal means, thought to reflect superior efficiency, and size gained by unfair
practices that prevented competition. The latter were unfair precisely because they were
means of winning without attaining superior efficiency.
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The Robinson-Patman Act’s cost-justification defence
The Robinson-Patman Act strikes at price discrimination that may lessen competition, but it
also provides a complete defence for the seller who can prove that the price differential did
no more than make allowance for differences in costs of the two transactions being
compared.
3. The competition policy of the European Union
(Materiali da sito Commissione)
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1) Antitrust
Competition encourages companies to offer consumers goods and services at the most favourable
terms. It encourages efficiency and innovation and reduces prices. To be effective, competition
requires companies to act independently of each other, but subject to the competitive pressure
exerted by the others.
European antitrust policy is developed from two central rules set out in the Treaty on the
Functioning of the European Union:
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First, Article 101 of the Treaty prohibits agreements between two or more independent
market operators which restrict competition. This provision covers both horizontal
agreements (between actual or potential competitors operating at the same level of the
supply chain) and vertical agreements (between firms operating at different levels, i.e.
agreement between a manufacturer and its distributor). Only limited exceptions are provided
for in the general prohibition. The most flagrant example of illegal conduct infringing
Article 101 is the creation of a cartel between competitors, which may involve price-fixing
and/or market sharing.
Second, Article 102 of the Treaty prohibits firms that hold a dominant position on a given
market to abuse that position, for example by charging unfair prices, by limiting production,
or by refusing to innovate to the prejudice of consumers.
The Commission is empowered by the Treaty to apply these rules and has a number of
investigative powers to that end (e.g. inspection at business and non-business premises, written
requests for information, etc.). The Commission may also impose fines on undertakings which
violate the EU antitrust rules. The main rules on procedures are set out in Council Regulation (EC)
1/2003.
National Competition Authorities (NCAs) are empowered to apply Articles 101 and 102 of the
Treaty fully, to ensure that competition is not distorted or restricted. National courts may also apply
these provisions to protect the individual rights conferred on citizens by the Treaty. Building on
these achievements, the Communication on Ten Years of Antitrust Enforcement identified further
areas to create a common competition enforcement area in the EU.
As part of the overall enforcement of EU competition law, the Commission has also developed and
implemented a policy on the application of EU competition law to actions for damages before
national courts. It also cooperates with national courts to ensure that EU competition rules are
applied coherently throughout the EU.
Towards more effective antitrust damages actions in Europe
Infringements of the EU antitrust rules (Articles 101 and 102 TFEU), such as price cartels or abuses
of a dominant position in the market, are not only detrimental for the economy and consumers at
large: they also cause concrete harm to infringers' customers and competitors (e.g. higher
prices, lost profits).
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The Court of Justice of the European Union has established that any citizen or business has a right
to full compensation for the harm caused to them by an infringement of the EU antitrust rules.
However, most victims, particularly SMEs and consumers, rarely obtain compensation in practice.
The right to compensation is an EU right, but its exercise is governed by national rules. These often
make it costly and difficult to bring antitrust damages actions.
That is why on 11 June 2013 the Commission proposed a Directive on antitrust damages actions to
remove the main obstacles standing in the way of effective compensation, and to guarantee a
minimum protection for citizens and businesses, everywhere in the EU. Following ordinary
legislative procedure, the Directive was signed into law on 26 November 2014 and published in the
Official Journal of the European Union on 5 December 2014. Member States need to implement the
Directive in their legal systems by 27 December 2016.
You can find the text of the Directive and an explanation of its main provisions, the Commission
proposal, preparatory work, relevant case-law and other documents here.
The Commission also took initiative on two other issues directly relevant to antitrust damages
actions:
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Commission Recommendation on collective redress, which concerns all breaches of EU
law, and thus is also relevant for harm suffered by victims of breaches of EU competition
law, particularly victims that individually suffered relatively low-value damage.
Commission Communication and Practical Guide on quantifying antitrust harm in damages
actions.
Apart from the above legislation and specific policy initiatives, the Commission is committed to
providing assistance to national courts in the application of Articles 101 and 102 TFEU. This
includes a funding programme for training of national judges in EU competition law and judicial
cooperation between national judges.
2) Cartels
Action against cartels is a specific type of antitrust enforcement. A cartel is a group of similar,
independent companies which join together to fix prices, to limit production or to share markets or
customers between them.
Instead of competing with each other, cartel members rely on each others' agreed course of action,
which reduces their incentives to provide new or better products and services at competitive
prices. As a consequence, their clients (consumers or other businesses) end up paying more for less
quality.
This is why cartels are illegal under EU competition law and why the European Commission
imposes heavy fines on companies involved in a cartel.
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Since cartels are illegal, they are generally highly secretive and evidence of their existence is not
easy to find. The 'leniency policy' encourages companies to hand over inside evidence of cartels to
the European Commission. The first company in any cartel to do so will not have to pay a fine. This
results in the cartel being destabilised. In recent years, most cartels have been detected by the
European Commission after one cartel member confessed and asked for leniency, though the
European Commission also successfully continues to carry out its own investigations to detect
cartels.
Since 2008 companies found by the Commission to have participated in a cartel can settle their
case by acknowledging their involvement in the cartel and getting a smaller fine in return.
Accordi anticoncorrenziali
Le imprese possono falsare la concorrenza mettendosi d'accordo con i concorrenti per fissare i
prezzi o ripartirsi il mercato, in modo che ognuna abbia il monopolio sulla parte ad essa assegnata.
Gli accordi anticoncorrenziali possono essere palesi o segreti (come nel caso dei cartelli). Possono
essere scritti (come "accordi tra imprese" o in una decisione o in uno statuto di un'associazione di
categoria) o informali.
Perché i cartelli sono un fenomeno così negativo e come individuarli?
Le imprese che fanno parte di cartelli che controllano i prezzi o ripartiscono i mercati non sono
stimolate a lanciare nuovi prodotti, migliorare la qualità e mantenere bassi i prezzi. I consumatori
finiscono per pagare di più per una qualità inferiore.
I cartelli sono vietati dal diritto della concorrenza dell'UE e la Commissione sanziona le imprese
che ne fanno parte. Essendo illegali, i cartelli mantengono in generale la massima segretezza e non è
facile smascherarli.
Ecco perché la Commissione incoraggia le imprese a fornire le prove dell'esistenza di cartelli
promettendo loro un "trattamento favorevole". L'impresa facente parte di un cartello che si
autodenuncia per prima non paga l'ammenda. Questa politica ha avuto molto successo nello
smantellare i cartelli.
Le imprese concludono accordi ogni giorno. Sono tutti illegali?
Sono quasi sempre illegali gli accordi con i quali i partecipanti:
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fissano i prezzi
limitano la produzione
si dividono tra loro i mercati o i clienti
fissano i prezzi di rivendita (tra un produttore e i suoi distributori).
Un accordo può invece essere autorizzato se:
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i suoi effetti positivi sono maggiori di quelli negativi
i partecipanti non sono concorrenti
è concluso tra imprese che insieme detengono solo una piccola quota di mercato
è necessario per migliorare prodotti o servizi esistenti, per svilupparne di nuovi o per metterli a
disposizione dei consumatori in modi nuovi e più efficienti.
Esempi
Gli accordi di ricerca e sviluppo e di trasferimento di tecnologie sono spesso compatibili con il
diritto della concorrenza perché alcuni prodotti richiedono un lavoro di ricerca che costerebbe
troppo a un'unica impresa. Possono essere legali anche gli accordi sulla produzione, gli acquisti o la
vendita in comune e in materia di standardizzazione.
Gli accordi di distribuzione possono essere illegali se, ad esempio, i produttori pretendono che i
negozi abbiano un'immagine precisa o il personale di vendita sia formato in modo particolare.
Clausole simili possono però essere permesse se mirano a che i prodotti siano immagazzinati o
venduti in luoghi adatti e i clienti possano beneficiare di consigli personalizzati, oppure a evitare
che un distributore si avvantaggi gratis dell'azione promozionale di un concorrente. Ogni caso va
valutato individualmente, tenendo conto della posizione di mercato delle aziende e delle cifre in
gioco.
3) Mergers
Why are mergers examined at the European level?
While companies combining forces (referred to below as mergers) can expand markets and bring
benefits to the economy, some combinations may reduce competition. Combining the activities of
different companies may allow the companies, for example, to develop new products more
efficiently or to reduce production or distribution costs. Through their increased efficiency, the
market becomes more competitive and consumers benefit from higher-quality goods at fairer prices.
However, some mergers may reduce competition in a market, usually by creating or
strengthening a dominant player. This is likely to harm consumers through higher prices, reduced
choice or less innovation. Increased competition within the European single market and
globalisation are among the factors which make it attractive for companies to join forces. Such
reorganisations are welcome to the extent that they do not impede competition and hence are
capable of increasing the competitiveness of European industry, improving the conditions of growth
and raising the standard of living in the EU. The objective of examining proposed mergers is to
prevent harmful effects on competition. Mergers going beyond the national borders of any one
Member State are examined at European level. This allows companies trading in different EU
Member States to obtain clearance for their mergers in one go.
Which mergers are examined by the European Commission?
If the annual turnover of the combined businesses exceeds specified thresholds in terms of global
and European sales, the proposed merger must be notified to the European Commission, which
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must examine it. Below these thresholds, the national competition authorities in the EU Member
States may review the merger. These rules apply to all mergers no matter where in the world the
merging companies have their registered office, headquarters, activities or production facilities.
This is so because even mergers between companies based outside the European Union may affect
markets in the EU if the companies do business in the EU. The European Commission may also
examine mergers which are referred to it from the national competition authorities of the EU
Member States. This may take place on the basis of a request by the merging companies or based on
a request by the national competition authority of an EU Member State. Under certain
circumstances, the European Commission may also refer a case to the national competition
authority of an EU Member State.
See more on the procedures followed by the Commission.
When are mergers prohibited or approved?
All proposed mergers notified to the Commission are examined to see if they would significantly
impede effective competition in the EU. If they do not, they are approved unconditionally. If they
do, and no commitments aimed at removing the impediment are proposed by the merging firms,
they must be prohibited to protect businesses and consumers from higher prices or a more limited
choice of goods or services. Proposed mergers may be prohibited, for example, if the merging
parties are major competitors or if the merger would otherwise significantly weaken effective
competition in the market, in particular by creating or strengthening a dominant player.
When does the European Commission approve mergers conditionally?
However, not all mergers which significantly impede competition are prohibited. Even if the
European Commission finds that a proposed merger could distort competition, the parties may
commit to taking action to try to correct this likely effect. They may commit, for example, to sell
part of the combined business or to license technology to another market player. If the European
Commission is satisfied that the commitments would maintain or restore competition in the market,
thereby protecting consumer interests, it gives conditional clearance for the merger to go ahead. It
then monitors whether the merging companies fulfil their commitments and may intervene if they
do not.
4) Liberalisation
Overview
Services such as transport, energy, postal services and telecommunications have not always been as
open to competition as they are today. The European Commission has been instrumental in opening
up these markets to competition (also known as liberalisation).
What are the advantages of liberalisation?
In the EU Member States, services like these have previously been provided by national
organisations with exclusive rights to provide a given service. By opening up these markets to
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international competition, consumers can now choose from a number of alternative service
providers and products.
Opening up these markets to competition has also allowed consumers to benefit from lower prices
and new services which are usually more efficient and consumer-friendly than before. This helps to
make our economy more competitive.
How has freedom of choice been introduced?
The approach of the European Commission has evolved over the years. In 1993, when requiring
Denmark to end the monopoly rights of the State-owned railway company DSB on the port
facilities at Rodby, the European Commission left the Danish government the choice to allow
competitors to use the same facilities or, alternatively, to construct new facilities near the existing
port. However, it soon became apparent that establishing competing facilities, especially in the case
of nationwide networks, requires a great deal of investment and is usually inefficient. So the
European Commission developed the concept of legally separating the provision of the network
from the commercial services using the network.
In the railway, electricity and gas industries, the network operators are now required to give
competitors fair access to their networks. In these industries, monitoring fair network access by all
suppliers is essential to allow the consumer to choose the supplier offering the best conditions.
Does this have a direct effect on consumers?
In the two markets which were opened up to competition first (air transport and
telecommunications), average prices have dropped substantially. This is not the case for markets
which were opened up to competition later or not at all (such as electricity, gas, rail transport and
postal services), where prices have remained unchanged or have even increased. Although this may
be due to sector-specific factors — for instance, gas prices are closely related to oil prices – it seems
that consumers have been able to benefit more easily from lower prices in sectors which are more
open to competition.
Can public services be delivered properly in a competitive market?
Opening up new markets requires additional regulation to ensure that public services continue to be
provided and that the consumer is not adversely affected. When applying competition law, the
European Commission always takes account of the special obligations placed on any organisation
benefitting from ‘monopoly rights’. This approach ensures that there is fair competition without
handicapping the State-funded provider, which is obliged to provide services in the public interest
even where this is not profitable.
ENERGY
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Overview
Reliable energy supplies at reasonable prices for businesses and consumers and with the minimum
environmental impact are crucial to the European economy. The European Union has therefore
identified energy as one of its priorities.
In these pages you will find information about what the European Union does to ensure competition
in the main energetic sectors: electricity, gas and oil. You can find more about the EU policies
related to the energy sector on the pages of the Commission departments for Energy and Transport,
Environment and Research.
Liberalisation of the electricity and gas markets
During the 1990s, when most of the national electricity and natural gas markets were still
monopolised the European Union and the Member States decided to open these markets to
competition gradually. In particular, the European Union decided to
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distinguish clearly between competitive parts of the industry (e.g. supply to customers) and noncompetitive parts (e.g. operation of the networks);
oblige the operators of the non-competitive parts of the industry (e.g. the networks and other
infrastructure) to allow third parties to have access to the infrastructure;
free up the supply side of the market (e.g. remove barriers preventing alternative suppliers from
importing or producing energy);
remove gradually any restrictions on customers from changing their supplier;
introduce independent regulators to monitor the sector.
The first liberalisation directives were adopted in 1996 (electricity) and 1998 (gas) and should be
transposed into Member States' legal systems by 1998 (electricity) and 2000 (gas). The second
liberalisation directives were adopted in 2003 and were to be transposed into national law by
Member States by 2004, with some provisions entering into force only in 2007) (EU legislation
applicable to the electricity and gas markets).
Liberalisation of a similar kind was introduced in a number of other sectors.
Sector inquiry
Although significant progress had been made, competition was slow to take off, with markets
remaining largely national, with relatively little cross-border trade, and highly concentrated.
Companies trying to enter the market, business leaders, parliamentarians, and consumer groups
were concerned about the slow development of wholesale gas and electricity markets, high prices
and limited choice for consumers. The Commission therefore launched a sector inquiry in 2005 to
identify the barriers preventing more competition in these markets. The results were published in
2007.
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The third liberalisation package
Based on the Commission's energy package of January 2007, including the results of the sector
inquiry the Commission brought forward in September 2007 legislative proposals to strengthen
competition in the electricity and gas markets.
Energy and climate change package
Competition cases
Given the concerns about concentration in the energy markets, the Commission has been vigilant
when controlling mergers. For example, in 2004 the Commission prohibited the proposed merger
between EDP and GDP in Portugal; in 2006 it imposed significant remedies in the mergers between
GDF and Suez and E.On and MOL.
The Commission has also acted when the conditions imposed by national authorities create
unjustified restrictions to mergers of Community dimension. In particular, the Commission has
adopted under Article 21 of the Merger Regulation three decisions (two in the framework of the
E.ON/Endesa case and one in the Enel/Acciona/Endesa case) to declare that some measures adopted
by the Spanish authorities were incompatible with Community law, constituted unjustified
restrictions to those mergers and should, therefore, be withdrawn. Given the Spanish authorities'
failure to comply with the Commission request to withdraw the illegal measures, the Commission
started infringement proceedings under Article 226 EC in the two cases. The European Court of
Justice has recently clarified that in relation to the first one of these infringement cases
(EON/Endesa) Spain violated EC law by failing to comply with the Commission decisions adopted
on 26 September and 20 December 2006. (Read press release on the judgement)
When controlling State aid to energy companies the Commission ensures that any aid is necessary
and proportionate. For example, in 2005, the Commission opened the in-depth investigation
procedure regarding long-term energy supply contracts in Poland and Hungary between the State
and certain energy suppliers and which were rather advantageous for the latter. In 2007, the
Commission opened the in-depth investigation procedure on the regulated electricity tariffs in Spain
and in France. More information is available on the electricity page.
In antitrust, the Commission carried out inspections in a number of energy companies in 2006. As
a result it has opened proceedings in a number of cases. It has also adopted a decision against
Distrigas, the incumbent gas supplier in Belgium, concerning its long-term gas supply contracts and
making legally binding remedies proposed by Distrigas.
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Electricity
Electricity is essential for modern life, and it represents around a fifth of all final energy
consumed in the EU. The EU is essentially self-sufficient in electricity generation, although of
course the primary fuels used for electricity generation are themselves often imported. Trading
between Member States is of more importance than imports into the Union, with some Member
States importing over half of their total power requirements. Cross-border transport of electricity
has increased recently, with greater co-ordination between neighbouring networks and easier access
to cross-border capacity, for example with implicit or explicit auctioning of capacity.
In 1996 the EU agreed to liberalise the electricity sector. A short summary can be found in the
overview or a more complete explanation on the website of DG Transport and Energy.
Because electricity cannot be stored cost-effectively on a large scale, the national and international
grids must balance electricity generated with electricity used at every moment. Suppliers who use
the networks are obliged to input the same amount of electricity as their customers take out and are
charged by the network operator for any imbalances. The network operator also maintains some
generating reserves with which to ensure that the network can remain in balance. This creates
inherent complexity and inter-dependencies across all users of the networks.
In recent years electricity wholesale markets have developed in most Member States which allow
the electricity producers, the large suppliers and some customers to trade standard contracts in
electricity (e.g. a base load contract for the following calendar year whereby a constant amount of
electricity is supplied every hour for the whole year to come; or base load contracts for the days,
weeks or months ahead; or peak load contracts, etc). The wholesale markets play a key role in the
electricity sector as they set the prices that are then passed on in some manner to the retail
customers.
The introduction of emissions trading certificates has also had an important impact on the
electricity markets. Electricity producers need emissions trading certificates to cover their
production of greenhouse gases, for example from coal, oil or gas generation. So far, electricity
generators have received most if not all their emissions certificates for free, but the certificate
nevertheless has a value and this "opportunity cost" has been included in wholesale electricity
prices to a greater or lesser extent.
Sector inquiry
Given the perceived problems with competition in the electricity markets, DG Competition
launched a sector inquiry covering the electricity industry in June 2005. The objective was to
identify the barriers that impede the development of a fully functioning open and competitive EUwide energy market that would provide fairer prices for the final consumer, more efficient
allocation and use of the resources and supply, more openness for renewable energies and an
economically sustainable basis for security of supply. The final report of the sector inquiry,
published in 2007, revealed serious distortions of competition in the sector, in particular:
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Most wholesale markets remain national in scope, with high levels of concentration in generation,
which gives scope for exercising market power.
Vertical integration of generation, supply and network activities, which reduces the incentives to
trade and for new companies to enter the market, has remained a dominant feature in many
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electricity markets.
The low level of cross-border trade is insufficient to exert pressure on (dominant) generators in
national markets.
There is a serious lack of reliable and timely information (transparency) in the electricity wholesale
markets that is widely recognised by the sector.
Price formation is complex, and many users have limited trust in the price formation mechanisms.
In February 2007 the Commission published a detailed analysis of electricity wholesale prices in six
Member States on the basis of replies received in the sector inquiry
Regulation
Given the concerns identified in the Sector inquiry, the Commission proposed further liberalisation
of the electricity sector on 19 September 2007. On 23 January 2008 it further proposed tougher
environmental rules, including a revised emissions trading scheme, greater energy efficiency and
ambitious targets for renewable energy, which will have an important effect on electricity
generation. These measures were coupled with new guidelines on State support to environmentfriendly activities, such as renewable energy production.
Competition cases
On the antitrust side, in 2007 the Commission opened proceedings against EDF and Electrabel due
to concerns that they could be foreclosing access to customers in France and Belgium, respectively,
through the use of long-term electricity supply contracts.
More recently, in 2008, the Commission has received a proposal for commitments by E.On in order
to settle ongoing antitrust cases.
The Commission has used its powers to control mergers to ensure that electricity markets remain
competitive (e.g. it prohibited EDP/GDP/ENI and it imposed significant remedies in EDF/EnBW
and GDF/Suez).
Some recent State aid cases are highlighted below. A complete list of cases in the energy sector is
available in the State aid Register.
Stranded costs compensations in Poland
In November 2005, the Commission opened an in-depth investigation on long-term Power Purchase
Agreements (PPAs) in Poland. Under these agreements, the network operator had a purchase
obligation for a guaranteed quantity of electricity at guaranteed prices. The last PPA would end in
2027. Around 40% of the Polish electricity generation market was covered by the PPAs. The
Commission considered that these agreements confer a State aid to the concerned generators.
During 2006 and 2007, the Polish authorities worked out a new draft law that foresees the end of
the PPAs and a compensation system to the generators in line with the Commission's methodology
for analysing State aid linked to stranded costs. That methodology allows stranded cost
compensations alleviating the effect of liberalisation without threatening the continuation of
electricity supply. Such compensations should be proportionate, and not discourage the entrance of
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new companies into the generation market.
In September 2007, the Commission closed the in-depth investigation with a positive decision with
certain conditions.
Stranded costs compensations in Hungary
The Hungarian authorities informed the Commission in 2004 about the existence of long-term
power purchase agreements (PPAs) between the State-owned and monopolistic network operator
and certain power generators. The PPAs guarantee a return on investment to the generators and a fix
profit margin. The agreements end between 2010 and 2024 and cover around 80% of the Hungarian
electricity generation market. In September 2005, the Commission opened an in-depth investigation
on the PPAs in Hungary, since it consider that they confer a State aid to the generators benefiting
from them. The Commission concluded in May 2008 that these agreements constitute unlawful and
incompatible state aid to the power generators and requested Hungary to terminate them before the
end of 2008 and to recover the aid granted to the generators concerned since the country's accession
in 2004.
Electricity tariffs in France
In France, the electricity price for each category of users is regulated by law. Over the last few
years, the market price of electricity has increased considerably, whereas the tariffs for large
industrial users have remained relatively stable. As a result, certain these users are enjoying tariffs
considerably below the market price.
Until the beginning of 2007, clients who had left the regulated market could not return to it: the
choice of the liberalised market was irreversible. In 2006, the French authorities made such return
possible, under certain conditions, by creating the "TaRTAM" system. Under this system, clients
who had left the regulated market for the liberalised market can ask to benefit again from regulated
tariffs on their electricity for a period of two years. However, they have to pay a penalty. To finance
the TaRTAM system, France has introduced two levies, one payable by all French electricity
consumers, and the other payable by the large producers of electricity from nuclear and hydro
power.
The Commission opened in June 2007 the in-depth investigation procedure on the regulated
electricity tariffs in France.
Electricity tariffs in Spain
In January 2007, the Commission opened the in-depth investigation procedure to examine the
potential aid to large and medium-sized companies and to electricity distributors in Spain in the
form of artificially low regulated industrial tariffs for electricity. These regulated tariffs led in 2005
to a deficit of €3.8 billion in the Spanish electricity system, which will be financed by a new charge
paid by all Spanish consumers in their electricity bill for the next 14 years. The Commission is
assessing whether the 2005 tariffs provided State aid to energy intensive, large and medium-sized
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industries and to the electricity distributors and if so, whether such aid could give rise to
disproportionate distortions of trade and competition within the EU's Single Market. The
Commission's State aid investigation does not concern the regulated tariffs for small companies and
households.
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Gas
Natural gas is one of the most used fuels in the European Union, accounting for approximately a
quarter of our primary energy. In 2006 around 38% of this gas was produced within the EU, in
particular in the UK, Netherlands, Germany, Italy, Denmark and Romania. 54% is imported, and
this proportion is growing. Norway (16%), Algeria (10%) and especially Russia (23%) are
traditionally the most important sources of gas imported to the EU, although imports of liquefied
natural gas by ship are growing fast, and from a wider range of producing countries (Egypt, Nigeria,
Libya, Trinidad, Qatar, Oman). As gas production in the EU declines in the coming years, the
proportion imported is expected to increase substantially.
In 1998, the EU decided to liberalise the gas markets. See the overview for a short summary or the
European Commission gas website for a full account.
Sector inquiry
The perceived problems with competition in the gas markets prompted the Commission to launch a
sector inquiry covering the gas industry in June 2005. The objective was to identify the barriers that
impede the development of a fully functioning open and competitive EU-wide gas market that
would provide fairer prices for the final consumer, more efficient allocation and use of the resources
and supply, more openness for renewable energies and an economically sustainable basis for
security of supply. The final report of the sector inquiry, published in 2007, showed that there are
serious distortions of competition in the sector, in particular:
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At the wholesale level, markets generally maintain the high level of concentration of the preliberalisation period. (read about liberalisation here)
Lack of liquidity and limited access to infrastructure prevent new entrant suppliers from offering
their services to the consumer.
Cross-border sales do not presently exert any significant competitive pressure.
There is a lack of reliable and timely information on the markets - normally the lifeblood of healthy
competition.
More effective and transparent price formation is needed in order to deliver the full advantages of
market opening to consumers.
Regulation
Given the concerns identified in the Sector inquiry, the Commission proposed further liberalisation
of the gas sector on 19 September 2007.
Competition cases
On the antitrust side, in 2007 the Commission completed an investigation into long-term contracts
concluded by Distrigas, the traditional gas supplier in Belgium, and their effect on alternative
suppliers trying to build up a customer base. The Commission adopted a "commitments decision"
under which commitments offered by Distrigas to limit the duration of its contracts with customers
in Belgium were made legally binding.
The Commission carried out inspections in a number of energy companies in 2006. During these
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inspections a seal was broken in E.On's premises and the Commission fined the company. As a
result of documents found during the inspections and following subsequent investigation the
Commission has opened a number of cases in the gas sector against:
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E.On and GDF for alleged collusion
ENI for alleged foreclosure of the Italian gas supplymarkets
RWE for alleged foreclosure of German gas supply markets
Merger and State aid cases have also been investigated and significant remedies have been
necessary (see, for example, the mergers DONG/Elsam/EnergiE2 and GDF/Suez).
For a more exhaustive list of cases, see the mergers and State Aid case pages.
Oil and its derivatives
The EU is heavily dependent on oil, in particular for use in the transport sector and for domestic and
industrial use in some Member States. In 2005 18% of this demand was produced within the EU (in
particular in the UK and Denmark), but this is declining and the EU as a whole is a significant
importer of oil and derivative products (in particular from Russia (30%), Norway (17%), the Middle
East (19%) and North Africa (12%)).
Oil has many uses, and the oil industry has many distinct sectors, such as exploration and
production, and related services; refining; transportation; and wholesaling and retailing, notably as
transport fuel.
DG Competition’s main involvement with these sectors has been through merger control. Owing to
the large size of many oil companies and their global activities, many mergers and joint ventures
have fallen within EU competence.
On the anti-trust front, the European Commission has adopted a formal decision under EC Treaty
competition rules which renders legally binding commitments entered into by the Spanish motor
fuel company REPSOL. These commitments have the effect of opening up its long term agreements
with service stations. REPSOL will free hundreds of service stations from long-term exclusive
supply contracts. This will bring a wider choice and scope for reduced prices to the benefit of the
consumer. Read the press release here.
In 2007, following pressure from the Commission, the Maltese Government changed its law to
remove its previous oil monopoly. Read the press release here.
Financial sectors
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Overview
Rebuilding the financial services sector for the future
The financial crisis that began in 2007 hit Europe very hard. The European Commission has
taken swift action since the beginning of the crisis to overcome it and to create a more
transparent and stable financial system. EU competition policy has a central role to play, as the
Commission works together with other public authorities to provide legal certainty in the fields
of State aid and merger control.
Competition in the financial services sector
The European Commission has the power to apply the competition rules to the financial services
sector. This sector includes the banking and insurance markets, which are integral parts of
European citizens' lives, and the capital markets. These financial markets are the lifeblood of
the real economy, giving businesses and consumers access to financial products. The better and
more competitively they function, the better the economy will perform.
The Commission’s competition department works to enhance competition in these markets, and
has handled many antitrust, merger, and state aid cases in the financial services sector.
The Commission seeks to use competition policy pro-actively to identify and help tackle
barriers in the Single Market, in order to deliver benefits to businesses and consumers The
Commission’s sector inquiries into retail banking and business insurance provided significant
knowledge of the sector and made a fundamental contribution to the continuing efforts to
strengthen competition in financial services.
In the framework of antitrust cases in the area of payment cards, the European Commission is
currently conducting a study of merchants' costs of processing payments by card and by cash.
Merchants are invited to participate in the two surveys currently being carried out as part of this
project. To find out more or to take part in the study, please see the Payment systems page.
Banking & Payment systems
Consumers and businesses alike use the financial services provided by the banking and payment
sectors. The Commission applies the EU competition rules fully to these sectors, and recently DG
Competition has played an important role in tackling the financial crisis in the banking sector.
The banking sector includes retail banking (for individual consumers), wholesale banking (for
financial institutions) and corporate banking (services to companies). The Commission has carried
out a sector inquiry into retail banking.
The payment sector includes a wide range of services, such as inter-bank payment systems (Target,
Euro1, etc.), corporate and retail payments and payment cards. Competitors commonly participate
in co-operative arrangements in this sector, and these could give rise to competition concerns. The
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Commission, and competition and regulatory authorities all over the world, actively investigate
anti-competitive practices in the payment sector and in payment cards in particular.
The Competition and Internal Market departments co-operate in this field to ensure that EU
financial regulation is pro-competitive from the outset.
26
Insurance
Overview
When private customers or companies buy insurance, they transfer risk that may arise from their
personal or business activities to the insurance company. The insurance company is better able to
manage and absorb the risk because it aggregates risks from a large number of customers.
Moreover, the insurance company has better knowledge of the probability of a specific event
occurring as well as the severity of the losses that might be incurred. Insurance companies also offer
their clients additional services, such as loss prevention and safety advice, loss settlement advice
and other legal services.
Private customers and businesses alike benefit greatly from the services offered by insurers. In
particular, as far as business is concerned, the transfer of risks associated with commercial and
investment activities allows the economy as a whole to function more effectively.
The service provided by insurance companies depends on an uncertain factor, i.e. the occurrence of
the insured risk. Cooperation amongst insurers can enhance efficiency, for instance by helping
insurers to share large and unpredictable risks or to gain better understanding of certain specific
risks. Competition concerns arise, however, where such cooperation distorts competition and
exceeds what is necessary to achieve substantial efficiency gains.
As early as 1972, the Commission stated in its Second Report on Competition Policy that the EU
competition rules apply to the insurance industry. The Court confirmed this in 1987 in Verband der
Sachversicherer when it found that a recommendation by an insurance association to its members
on the level of gross insurance premiums was at odds with the EU competition rules.
European Competition Network (ECN) - Insurance
Insurance markets are still largely national, so often the national competition authorities are best
placed to address possible competition issues. Information exchange is clearly necessary between
the Commission and national competition authorities so that, where possible, coherent or even joint
action can be taken.
The Commission set up the insurance network of the ECN, consisting of insurance experts from all
27 national competition authorities. The insurance network facilitates the exchange of information
and best practice and serves as a forum for discussion amongst experts. It is designed to develop
synergies and enhance the use of resources.
Insurance Block Exemption Regulation
The Regulation grants an exemption to the application of competition rules to certain types of
agreements in the insurance sector, namely agreements on:
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Joint compilations, tables and studies
Co-(re)insurance pools (common coverage of certain types of risks).
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This Regulation is valid for seven years and will expire on 31 March 2017.
A detailed history of the BER is available here.
Study on co(re)insurance
Study on co(re)insurance pools and on ad-hoc co(re)insurance agreements on the
subscription market, July 2014, (13 035 Kb)
New edition of the study which was commissioned by the European Commission to Ernst & Young
following a tender in 2011. This new edition is an amended version of the edition published on
February 8th 2013, Following the first edition of the report and comments received by some pools,
the report was updated. It provides an:
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Overview of co(re)insurance pools after the adoption of the new BER;
Overview of ad-hoc co(re)insurance agreements on the subscription market;
Analysis of similarities and differences between co(re)insurance pools and ad-hoc co(re)insurance
agreements on the subscription market.
The information gained through this survey will contribute to improving the level and extent of
public information on these co(re)insurance schemes.
The study was performed at EU27 level and will be used in the future review of the Block
Exemption Regulation (EU) No. 267/2010, which will expire on 31 March 2017. In this regard, a
Report to the European Parliament and Council will be submitted by 31 March 2016.
The report also takes a closer look at market practices concerning ad-hoc co(re)insurance
agreements following up on the Commission's report on the Business Insurance Sector Inquiry,
published in 2007.
Workshop
The Commission has organised a workshop on 12 March 2013 where Ernst & Young presented the
findings of the study. The presentation was followed by a discussion of the main findings.
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Programme
Practical information
Sector Inquiry into Business Insurance
In 2005 the Commission launched a sector inquiry to gain better understanding of the functioning of
the sector and ultimately to detect possible distortions of competition. The inquiry focused on the
provision of insurance products and services to business and also covered reinsurance as well as
insurance and reinsurance intermediation.
The inquiry's results have helped the Commission to assess structural and behavioural aspects
affecting competition in the market, including forms of existing cooperation, conditions of
competition and market entry barriers. The inquiry revealed that there were a number of practices at
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all levels of the supply chain that may prevent the insurance markets from working as well as they
should.
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Capital markets
An integrated financial market at European level plays a crucial role in making European businesses
more competitive and generating growth and jobs. A single, deep and liquid capital market can
eliminate inefficiencies in the financial system, increase returns on savings and reduce the cost of
borrowing.
Although much progress has already been achieved, the current economic and financial crisis
revealed that more needs to be done to improve the safety, security and efficiency of capital
markets. To this end, the Commission has set out an ambitious roadmap of measures to regulate
financial services for sustainable growth and ensure more responsibility and competitiveness in the
European Financial Sector .
Competition rules apply to capital markets in the same way as to any other industrial or services
sector. Whilst recognising and respecting the fact that financial institutions have special
responsibilities which are regulated appropriately, they still must respect competition rules.
As in other sectors, the European Commission takes a two-fold approach:
1. enforcing existing competition legislation and
2. promoting the integration of pro-competitive measures in other legislative initiatives related to
the internal market.
The interdependency between the internal market policy and competition policy is particularly clear
in the financial services sector, as VP Almunia set out at a conference organised by the CASS
Business School in London on 16 May 2011:
"The regulatory measures taken by the European Commission will shed more light into the way
financial markets operate and will prevent a dangerous accumulation of risk. But regulation alone
is not enough. Whereas regulation tackles broad structural market failures, you need competition
policy to tackle the harmful behaviour of individual market participants. Competition control
should ensure that the actual evolution of the market does not lead to structures that harm users
and legitimate market participants,"
The application of competition law ensures to the benefit of users that credit institutions and other
financial service providers do not behave in a manner that hampers the efficient functioning of the
internal market. The common objective of the internal market and competition policies is indeed to
open up national markets with the ultimate aim of delivering efficiency gains to the benefit of
consumers.
The Competition DG started to focus its attention on capital markets in May 2006 with the release
of an Issues Paper on competition in securities trading and post-trading for public consultation. A
number of replies were received and are listed here. Commissioner Kroes' speech at the European
Parliament on 11 July 2006 summarizes some of the conclusions drawn from this public
consultation. The initiative of Commissioner McCreevy to sponsor a Code of Conduct for the
financial industry to foster an integrated and efficient post-trading market in the EU drew from the
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conclusions of the Competition DG's market monitoring.
Since then, several legislative measures have been proposed in this area:
Over-the-Counter (OTC) Derivatives and Credit Default Swaps
The lack of transparency in trading derivatives and financial instruments Over the Counter (OTC)
became apparent during the financial crisis of 2008. Drawing lessons from the crisis, the G20
agreed at the 2009 Pittsburgh summit on the need to improve the transparency and oversight of less
regulated markets, with specific focus on OTC derivatives. In 2010 the Commission proposed to
improve the regulation of Credit Default Swaps (CDS) and other OTC derivatives in the framework
of the European market infrastructure regulation (EMIR) (see IP/10/1125). In October 2011 the
Commission also tabled proposals to revise the Markets in Financial Instruments Directive (MiFID)
to further enhance transparency of OTC markets (see IP/11/1219).
The Commission's antitrust action is complementary to these regulatory measures, which together
seek to ensure safe, sound and efficient financial markets. In April 2011, the European Commission
opened two antitrust investigations concerning the CDS market (see IP/11/509). The purpose of
these investigations is to ascertain whether banks infringed the EU competition rules by engaging in
certain practices and behaviour which could have restrained the ability of service providers in this
market to offer innovative products to customers and/or to enter into competition with established
players.
Financial services data sector
Access to financial services information and the availability of high quality and timely market data
in relation to prices and structures of financial instruments is crucial for the functioning of financial
markets. The markets for the provision of financial information are often highly concentrated and
the major global financial institutions and information services providers enjoy significant market
power. Industry standardisation in such markets can lead to the development of quasi monopolistic
providers of de facto market standard products, services, financial identifiers and indices. The
Commission has been investigating a number of issues in this sector such as access to information
or services, standard setting, IP rights and interoperability between different products or services.
(See Standard and Poor's and Thomson Reuters)
Merger control
Merger control can also play an important role in ensuring that financial markets remain
competitive. One example is the Commission's decision of 1 February 2012 to block the proposed
merger between Deutsche Börse and NYSE Euronext, two leading stock exchange operators active
globally. The merger would have led to a near-monopoly on a global level in European financial
derivatives traded on exchange. These products are an important hedging and investment instrument
for both companies and investors, including institutional investors such as pension funds which act
on behalf of consumers. The merger would have taken away the benefits of price competition and
led to less innovation in the area.
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Information Communication Technologies (ICT)
Overview
Information and Communication Technologies (ICTs) are one of the key drivers for smart,
sustainable and inclusive growth, according to the new economic strategy for Europe "Europe
2020".
ICTs and the internet permeate the European economy, thanks to the increased use of broadband
applications and services, together with the spread of wireless devices including smartphones and
their applications. They are transforming the structures and dynamics of European society, by
enabling people to:
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organise their lives and businesses in new ways
build worldwide networks
manage information and learn throughout their lives
socialise and stay in touch with friends
contribute to the pool of online knowledge
create content for the new media.
The Commission's Directorate-General for Competition closely monitors the information
industry, consumer electronics and internet sectors to ensure that market players comply with EU
competition law.
Antitrust
The focus here is on stopping anti-competitive behaviour, to protect innovation and consumer
choice and ensure equal opportunities to compete.
Main investigations and outcomes:
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Microsoft – interoperability
2007 – European Court of First Instance confirms Microsoft has abused dominant position by
refusing to supply interoperability information to rival server vendors and tying Windows Media
Player to Windows.
Microsoft – choice of web browser
2009 – Microsoft bound by law to enable Windows to run a variety of web browsers in the EU –
and to allow computer manufacturers and users to turn off Internet Explorer.
Intel
2009 – Intel abused its dominant position on the x86 central processing unit (CPU) market by
granting anticompetitive rebates and making payments to delay / stop deployment of competing
products. Commission imposed €1.06bn fine and obliged Intel to correct t he situation.
Rambus
2009 – Rambus bound by law to cap its royalty rates for certain patents for "Dynamic Random
Access Memory" chips (DRAMS).
More cases
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Mergers
The Merger Regulation is intended to prevent mergers from seriously affecting competition. Given
the dynamic nature of the ICT market, the Commission focuses on keeping the markets open for
new entrants and encouraging technological innovation.
Main investigations:
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Videoconferencing solutions – conditional acquisition of Tandberg by Cisco Systems
online advertising – Google/DoubleClick (2008)
internet search – Microsoft/Yahoo! search business (2010)
digital maps – TomTom/TeleAtlas (2008) and Nokia/Navteq (2008)
relational databases management systems: Oracle/Sun Microsystems (2010).
More merger cases
State Aid
State aid is any intervention using public resources at national, regional or local level to support a
specific economic activity which affects trade between the EU Member States and may distort
competition. The Commission assesses public support for broadband networks, research and
development (R&D), productive investment in ICT companies and other such measures to ensure
they do not distort the market and fair competition.
The ICT sector mainly benefits from State aid for broadband network development, for R&D
and regional development.
The Commission examines whether:
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market failure has occurred and whether aid is an appropriate way to address it
the aid is necessary
the aid is proportionate and kept to a minimum.
The Commission takes a positive view of aid that:
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benefits consumers
provides new research grants
encourages the development of new products, such as open source.
extends broadband coverage to areas where such networks do not exist.
Further information

State aid to broadband cases
and press releases
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Media
Competition in the media sector
Media have a key economic role in the EU. In 2010, the size of the audiovisual market in the
European Union was €122 billion (source: European Audiovisual Observatory) and the audiovisual
sector directly employed over one million people in the EU.
Media is also vital for the development of information and communication technologies (a main
component of the Europe 2020 strategy) and to develop and preserve culture, information,
education and democracy.
The Commission's competition department works to ensure that the competition rules are respected
in the media sector.
Actions of the Commission in the fields of antitrust, merger and State aid control.
Antitrust
A number of media-related antitrust cases have already been pursued by the Commission and ruled
on by the Court of Justice. National competition authorities and courts also apply EU antitrust rules
in cooperation with the Commission.
Competition in content markets
Access to content is crucial to enable competition in media markets. This applies to infrastructure,
platforms and devices (satellite, cable and terrestrial networks, TV sets, PCs, mobile devices).
Availability of content on a multi-country basis is also vital for the single market to develop and
deliver the benefits of the digital era.
Competition restrictions hindering the development of digital book publishing initiatives should
also be prevented. In the eBooks case the Commission investigated Apple and some major
international e-book publishers, since it suspected that these companies may have contrived to limit
retail price competition for e-books in the European Economic Area, in breach of EU antitrust rules.
In December 2012, the Commission adopted a commitment decision that rendered legally binding
commitments offered by Apple and four international e-book publishers: Simon & Schuster (CBS
Corp.), Harper Collins (News Corp.), Hachette Livre (Lagardère Publishing) and Verlagsgruppe
Georg von Holtzbrinck (owner of inter alia Macmillan). In July 2013, the Commission adopted a
similar decision with regard to Penguin, which offered substantially the same commitments as the
other four publishers.
Collective management and licensing practices for content should not obstruct the development
of cross-border services on the internet or restrict right-holders' / users' choice.
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CISAC case – banned exclusivity and membership restrictions imposed by collecting societies, as
well as concerted territorial restrictions. In April 2013, the General Court partially annulled and
partially upheld the Commission's decision. The General Court examined for the first time and
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upheld the Commission's treatment of cultural diversity and protection of minority repertoires
arguments raised by the collecting societies.
IFPI case – ensured that collecting societies can compete in providing pan-European simulcasting
licenses
Online commerce roundtable – discussed how to take full advantage of opportunities to distribute
content online
Switch from analogue to digital TV broadcasting
The switch from analogue to digital results in freeing substantial spectrum resources, which will
become available to deploy new services and technologies (the "digital dividend"). To ensure that
the digital dividend leads to new entry and broader viewer choice, EU law requires that such
dividend is allocated subject to specific conditions (e.g. open, transparent and non-discriminatory
procedures). The Commission took action against Member States who favoured incumbents when
assigning the rights to use the 'digital dividend' spectrum, notably against France, Bulgaria and
Italy. Following the Commission's intervention, France assigned frequencies to new operators in
2012, Bulgaria took legislative steps to address the breaches and Italy took steps in order to assign
new digital frequencies (multiplexes) in 2013.
Mergers
As the media sector evolves rapidly, firms tend to develop new types of mergers and cooperation.
Digital content is increasingly available and can be distributed across various platforms (digital
terrestrial, cable, satellite, IPTV, Internet, mobile networks).
One of the Commission's main concerns is that mergers in the media sector do not significantly
impede competition and that access to key elements (whether content, technology or
interconnection) is not affected.
Broadcasting
The Commission analyses markets, taking into consideration the technical and regulatory
developments in the EU countries.
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Modification of merger commitment in the Newscorp/Telepiù case – In 2010 the Commission
modified a commitment imposed on News Corp in 2003 whereby Sky Italia was prevented from
participating in the public tender for the allocation of digital terrestrial television (DTT) frequencies
or multiplexes. The 2010 decision allows the company to bid for one multiplex, but to use it in case
of a successful tender for a period of five years only to broadcast free to air TV – not pay TV.
Recorded music
In September 2012, the Commission approved proposed acquisition of EMI's recorded music
business by Universal Music Group. The approval was conditional on the divestment of EMI's
Parlophone label and numerous other music assets on a worldwide level.
State aid
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State aid in the media sector supports public service broadcasting and films, a recognition that
government intervention may be necessary to fund services of general economic interest, to achieve
economic objectives of growth and innovation, social cohesion, cultural diversity and to satisfy
society's democratic, social and cultural needs. The positive effects of state aid must be weighed
against the risk of crowding out private initiatives and ultimately of hindering innovation.
Public service broadcasting
To minimise the impact of state subsidies on competition, the Commission requires EU countries to
define the public-service obligations broadcasters must meet and limit state aid to the actual costs
of these obligations. A public service broadcaster may carry out commercial activities, provided
they are financed commercially and follow normal market behaviour.
The Broadcasting Communication requires ex ante control of significant new media services
launched by public service broadcasters and which should receive State aid (balancing the market
impact of such new services with their public value); addresses the issue of pay services in the
public service remit; and requires effective control of overcompensation and supervision of the
public service mission on the national level, while offering financial flexibility for public service
broadcasters.
The Communication is designed to safeguard healthy competition in the rapidly evolving media
environment. Public service broadcasters can take advantage of digital technology and Internetbased services to offer high quality services on all platforms, provided they do not distort
competition unduly at the expense of other media operators. European citizens and stakeholders will
be able to give their views in public consultations before any new services are put on the market by
public service broadcasters.
See the list of cases handled by the Commission.
The legal framework and the Commission’s policy towards public service broadcasting is further
explained in:
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The Protocol on the system of public broadcasting in the Member States (Protocol 29)
2009 Broadcasting Communication and related press release
Commission Decision on state aid in the form of public-service compensation (also applicable in the
field of public broadcasting).
Further reading:

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"Increased Transparency and Efficiency in public service broadcasting" by Pedro Dias and Alexandra
Antoniadis, Competition Policy Newsletter 2007/2, p.67;
"Funding of public service broadcasting and State aid rules – two recent cases in Belgium and
Ireland" by Nóra Tosics, Ronald Van De Ven and Alexander Riedl, Competition Policy Newsletter
2008/3, p.81
"Commission and Germany agree on better control for the use of state aid in the broadcasting
sector" by Lukas Repa and Nóra Tosics, Competition Policy Newsletter 2009/1, p. 97
Film support
Commission policy regarding state aid for film and audiovisual works is laid out in its 2013 Cinema
Communication. The Communication allows film-support schemes meeting the following state aid
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assessment criteria to benefit from the cultural derogation to the general ban on state aid in the EU
Treaty:
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the aid must be legal under the EU Treaty (eg, it must not affect the internal market);
territorial spending obligations are acceptable if they do not link more than 160% of the aid
amount and in any case not more than 80% of the production budget to expenditure in the
granting Member State;
the aid must be directed towards a cultural product. Each Member State must ensure that the
content of the aided production is cultural according to verifiable national criteria (in compliance
with the application of the subsidiarity principle);
the aid intensity must in principle be limited to 50% of the production budget, except in the case of
difficult and low budget films
the aid must not provide supplements for specific filmmaking activities (eg. post-production).
The Cinema Communication refers to aid for film production, which represents about 80% of the
film support provided by EU member countries (an estimated €1.5 billion per year), for developing
film projects, for promoting and distributing films and for cinemas.
See a selection of decisions which illustrate how the Commission applies its policy towards film
support.
Further reading:

"State aid rules for films and other audiovisual works" – Competition Policy Brief
More about the Commission’s audiovisual policy:



audiovisual and media policies
cultural policy
intellectual property
37
Sports
Overview
Sport has a huge economic impact in the EU: €407 billion in 2004, representing 3.7% of EU GDP
and employing15 million persons (5.4% of the labour force). That impact has continued to grow,
and in many cases sport has become "big business" (primarily because broadcasting rights –
particularly for TV – have become very profitable).
The Commission has had to deal with an increasing number of competition disputes related to the
sport sector that have led to either formal decisions or informal settlements. The EU courts have
also handed down a growing number of important judgments in the field of sport. While many of
these are based on the EU internal market rules – for example, the free movement of workers
(Bosman ruling) – some are based on EU competition rules.
EU competition law covers antitrust, mergers and state aid. Most sport cases have been handled
under EU antitrust rules, which prohibit anti-competitive agreements and practices as well as abuse
of a dominant position. These cases concerned revenue-generating activities connected with sport,
such as media rights and ticket sales and regulatory/organisational aspects of sport.
While the application of EU competition law to economic activities in the sport sector is of great
importance, the Commission and the Courts of the EU have recognized the important social and
cultural role of sport when considering cases related to sport.
Antitrust
Economic activities related to sport fall within the scope of EU law, including competition law:

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
joint sale of sport media rights: the Commission has set forth the main principles in the UEFA
Champions League, the FA Premier League and Bundesliga decisions.
The Commission accepted the joint selling of sport media rights by football associations on behalf
of football clubs (as opposed to the sale of these rights by the individual clubs themselves),
provided certain conditions were fulfilled. These include, inter alia, the sale of sport media rights
through open and transparent tender procedures, a limitation of the rights' duration (usually not
exceeding three years) and the breaking down of the rights into different packages to allow several
competitors to acquire rights.
With respect to the joint acquisition of sport media rights, reference is made to the Eurovision I and
Eurovision II judgments.
ticket sales arrangements: – the most recent cases have concerned exclusivity arrangements
between the organisers and the sponsors of sports events whereby consumers could pay for tickets
by using the sponsor's credit card (credit card exclusivity).
regulatory/organisational issues: The Court of Justice has confirmed in the Meca Medina case that
the compatibility of sporting rules with EU competition law should be examined on a case-by-case
basis. The Court of Justice provided further clarification concerning the application of EU
competition law to sporting rules in the MOTOE case. In this judgment the Court confirmed that the
commercial exploitation of sporting events is covered by EU competition rules.
When an issue is strictly national or local, national competition authorities and courts apply EU
38
antitrust rules in close cooperation with the Commission.
State aid
State aid for sports essentially finances either infrastructure or individual sports clubs.
Infrastructure
The construction of an infrastructure with a view of its future commercial exploitation by the State
or third party operators, to which it is intrinsically linked, will constitute an economic activity. (See
related judgement of the Court).
Consequently, the public support towards sports infrastructure dedicated to or benefiting certain
undertakings is likely to involve State aid. However, under certain conditions, such financing of the
infrastructure, which is also open for the general public can be found compatible with the common
market under the Article 107(3) TFEU as it was demonstrated in the Commission Decision of 13
October 2011 concerning the support of the sports sector in Hungary through a tax benefit scheme.
Nevertheless, there could be also cases where certain infrastructure does not have state aid
relevance because it is strictly local and unlikely to impact trade between the EU Member States –
for example a local swimming pool or ski lifts at resorts with few installations or limited
accommodation for tourists. However, this might not be true for leisure parks, for example, which
can be advertised outside the country in which they are located and specifically target customers
from other Member States.
Clubs

Joint statement on Financial Fair Play (FFP) rules and state aid control in professional football en
fr . March 2012.
Letter by Vice-President Joaquín Almunia en fr - Letter by UEFA President Michel Platini en fr de
Press release
The Union of European Football Associations (UEFA) and the European Commission are concerned
that clubs in the short term pay inflated wages for players, even when their true financial position
should not allow them to do so. Such a policy seems particularly unjustified in the context of the
current economic downturn where austerity measures are being introduced in all Member States.
The central objective of Financial Fair Play (FFP, namely to "live within your means" or "break
even") ensures prudent economic management that will serve to protect both the interests of
individual clubs and players as well as the football sector in Europe as a whole. This principle is also
consistent with the aims and objectives of European Union policy in the field of State aid

The joint statement provides a basis for further cooperation between the Commission and UEFA
with a view to promoting fair competition between football clubs.
EU competition-law decisions related to sport include:
o subsidies to professional sports clubs with state-approved youth training centres (France) –
not considered state aid because the government was simply meeting its obligations as
regards education.
o laws on fiscal and accounting rules for professional sports clubs (Italy) – lower tax liabilities
for national clubs could effect trade between EU countries, because players are acquired
39
and media rights sold on international markets.
Motor vehicles
Overview
The motor vehicle sector is an important one, both from the point of view of the economy as a
whole and the individual consumer. DG Competition's work in this sector includes market
monitoring, competition advocacy as well as enforcement in individual cases in the merger, state
aids and anti-trust fields.
These web pages mainly contain information on the Commission's antitrust activities in the sector.
You will also find details of the applicable legislation, information on cases of relevance to the
sector, as well as the Commission's reports on car prices across the EU, and other relevant
documents.
Links are also provided to information on mergers and state aid in the sector.
Car manufacturers' contact points
List of contact points
set up by car manufacturers to help consumers that encounter difficulties
when trying to buy a vehicle.
Other Commission pages on motor vehicles
This site relates to the Commission's activities in the field of competition. Other Commission
departments deal with other aspects of EU policy relating to motor vehicles. If you require
information on these aspects, please visit the relevant pages at DG Enterprise, DG Environment and
DG Transport.
Pharmaceuticals & Health Services
Overview
European citizens need access to innovative, safe and affordable health products and services. The
health care sector of the economy accounted for about 9% of EU GDP in 2010, covering the
pharmaceutical sector (prescription and non-prescription medicines), medical devices and health
services.
Pharmaceuticals
The market for medicines is highly regulated within each country. National pricing and
reimbursement rules for medicines are not harmonised within the single market. This leaves less
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room for competition on prices and so market forces cannot realise their full effect here as they do
in most other industry sectors.
Furthermore, new medicines developed by "originator" or R&D companies are protected by
exclusive rights such as patents. This means that competition among originator companies is more
in the area of innovation, rather than prices. Still, once a medicine's patent expires, prices drop
significantly when generic versions come onto the market.
Health Services
The EU shares competences with its Member States, who are responsible for providing health
services and medical care within their territories (Article 152 of the TFEU).
Member States bear the largest share of health care costs, and patients pay over 11% of the costs
directly out of their pockets, equivalent to EUR 122 billion per year. Total expenditure on health
care is rising faster than economic growth in the EU, leading to an increasing ratio of health
spending to GDP.
The role of the Commission
The Commission works to ensure that under these conditions, market players (Member States,
national health services and pharmaceutical companies) respect the Treaty rules on free competition
and the free movement of goods and services within the internal market.
With this goal in mind, the Competition DG monitors business practices as well as company
mergers and State aid in the health care sector. In July 2010 it integrated its antitrust activities
regarding all health care sectors in a new unit called "Antitrust: Pharma and Health services",
responsible for competition law enforcement for all health products and services.
The Commission cooperates with national competition authorities through the European
Competition Network in this area, and the mandate of the European Competition Network Pharma
subgroup has been extended to cover health services and health products other than
pharmaceuticals.
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Postal services
Overview
Good postal services are a vital part of communication in the EU internal market. In 2009, the EU's
postal sector accounted for an annual turnover of €72 billion, representing 0.62 % of the EU's GDP
and about 1.5 million jobs in the EU. Other sectors such as e-commerce, publishing, mail order,
insurance, banking and advertising depend heavily on the postal infrastructure. Postal services
encompass a variety of services, from letters to parcels to value-added services.
One of the Commission's, and more specifically the Competition DG's, core tasks is to promote and
safeguard effective competition in the postal services sector. Promoting more competition in this
sector is also important in reaching the Europe 2020 goals for sustainable growth in a resourceefficient and more competitive economy.
The Commission has the power to do this in two ways: by opening up the postal services markets,
and by enforcing competition rules where relevant.
Opening up the postal services markets
The EU law on postal services consists of three postal directives: Directive 97/67/EC of 1997, as
amended by Directive 2002/39 and Directive 2008/6/EC. This law gradually liberalised postal
services. It also guaranteed citizens that postal services would remain accessible everywhere and to
everyone under the same conditions (i.e. the universal postal service). Customers can thus benefit
from new forms of services, higher quality and lower prices provided by both the incumbents and
alternative postal operators. At the same time, the universal service will be maintained. To that end,
universal service providers can be compensated for the net cost of providing the universal service
when this net cost represents an unfair burden for the operator.
Under the third postal directive, 16 Member States had to open their postal markets fully by 31
December 2010. The remaining eleven will complete liberalisation by the end of 2012. Some
Member States (Estonia, Finland, Germany, the Netherlands, Slovakia, Sweden and the United
Kingdom) had already fully opened their postal markets ahead of the EU deadline. Full
liberalization allows new operators and innovative services to appear, thus promoting competition
in terms of quality and price of postal services (see MEMO/12/43).
Protecting consumers
Consumers need to know that the quality of service will not worsen as the postal markets open up.
They should enjoy more reliable and higher quality postal services as reserved areas (i.e. parts of
the postal market where only the incumbents were allowed to provide postal services) are gradually
removed and competition grows.
The current requirements for high quality universal service (such as density of post offices and
letter boxes) are fully maintained, and closely monitored by national authorities. When competitors
enter the market, universal service providers come under pressure to become more efficient and
more customer-focused. Consumers then benefit, as senders and receivers of mail, from a more
quality-focused service. They should also benefit from savings passed on to them through cost
42
reductions for business users and large volume mailers such as banks or utility companies. In any
case, the universal service obligations guarantee that all Member States will ensure the continued
full coverage and affordability of postal services.
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Competition instruments
In parallel with liberalisation, the Commission applies the competition rules to the European postal
services markets. The Commission acts under principles set out in the "Notice from the
Commission on the application of the competition rules to the postal sector and on the assessment
of certain State measures relating to postal services".
The Competition DG focuses on anti-competitive behaviour in the postal services markets,
monitors State aid to the postal services sector, and also contributes to the development of State aid
policy in this field.
DG Competition also enforces the Merger Regulation in the postal services markets with the aim of
preventing effective competition from being hampered by merging companies.
See recent cases in the postal sector.
State aid
The goals of State aid control in the postal sector are: to ensure a level playing field for postal
operators, to promote competition between them, and to ensure that high quality postal services can
continue to be delivered at affordable prices.
Under Article 107 of the Treaty on the Functioning of the European Union, State aid is defined as
any aid granted by a Member State or through State resources which distorts competition by
favouring certain undertakings and which affects trade between Member States. The basic rule is
"no State aid".
However, aid necessary for an undertaking to perform a service of general economic interest like
the post may be allowed under certain conditions. For example, Member States can compensate, but
not overcompensate, a USP (universal service provider) for the net cost of the public service. Also,
where postal incumbents - as a legacy of their past as State administrations - have to pay higher
pension costs for civil servants, unlike their competitors, Member States can provide relief as long
as it does not put the incumbents in a better position than their competitors.
Another challenge ahead is to ensure that competition develops in former reserved areas, where
barriers to entry still remain. The Commission and national authorities will have to monitor closely
the market behaviour of incumbents.
The Community Framework for State aid in the form of public service compensation, which entered
into force on 31 January 2012 (IP/11/1571), defines the conditions under which public service
compensation can be authorised. Among others, the compensation must not exceed the net costs of
the undertaking of providing the public service. This aims to prevent undertakings from using
public service compensation to cross-subsidise commercial activities. The rules established by the
Communication comprise, in particular, a methodology to determine the amount of compensation, a
requirement for Member States to introduce efficiency incentives in compensation mechanisms, the
requirement to comply with EU public procurement rules and equal treatment of providers of the
same service for determining compensation. Moreover, the Commission may require Member
States to adopt measures to reduce the anticompetitive effects of certain compensations that present
a particularly strong potential for distorting competition in the Internal Market.
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45
Professional services
Overview
Professional services (also known as "liberal professions") are loosely defined as occupations
requiring special training in the arts or sciences, such as lawyers, notaries, engineers, architects,
doctors, and accountants.
These professionals form an integral part of the EU economy. The services they provide are
essential to businesses and consumers, and this has a knock-on effect on the competitiveness of
other sectors.
A highly regulated sector
Some of these professions are closely regulated by national governments and professional bodies,
with varying restrictions on:
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

number of entrants into the profession
rates charged and billing arrangements
organisational structure of businesses providing professional services
exclusive rights enjoyed by practitioners
ability to advertise
Application of competition rules
As operators providing professional services qualify as undertakings, EU competition rules apply.
The Commission has three tools to make sure they are followed:
1. Advocacy
Encouraging professional bodies to use their self-regulatory powers to benefit not just their own
members, but consumers as well. For more details, see the Commission reports.
2. Case work
Dealing with complaints alleging infringements of EU antitrust rules with regard to
professional services.
Applying EU competition rules (for example: Commission condemns Belgian architects' fee
system) has promoted reform.
See a list of Commission decisions and case law relating to professional services.
3. Cooperation with other authorities
Coordinating work with national competition authorities through the European
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Competition Network. Many national authorities are reforming the regulatory landscape for
professional services by, for example, applying EU competition rules.
The Commission's Competition DG works closely with Directorates-General dealing with
the internal market, enterprise and industry and consumer affairs. The Commission also
discusses reform with professional bodies and consumer organisations.
The European Parliament supports the Commission's efforts to eliminate anti-competitive
regulation, for the benefit of the EU economy and consumers.
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Telecommunications
Overview
European citizens and businesses rely more and more on convenient, reliable and high quality
telecoms networks and services. Today there are more than 250 million daily internet users in
Europe, and virtually every European owns a mobile phone. The competition rules work side by
side with regulation specific to the telecoms sector to bring innovative, affordable services to
European consumers.
Digital Agenda
The Commission's Flagship Initiative on a Digital Agenda for Europe, launched in August 2010,
sets out the Commission's priorities in the field of the digital economy and highlights the creation of
a single market for content and telecom services as a vital tool to regain progress lost during the
economic crisis.
In particular, the Commission aims to bring to near zero the difference between roaming and
national tariffs by 2015. It also sets ambitious targets for fast and ultra-fast internet access in
Europe.
The European Commission has worked successfully to increase competition in this area, bringing
new entrants into the telecoms sector throughout Europe, forcing incumbent providers to raise their
standards of service and reduce their prices, and applying the competition rules to maintain
competition between telecoms operators. All of these actions are vital to continued growth in the
sector.
Competition Rules
The Directorate-General for Competition – in cooperation with national competition authorities –
ensures that telecoms networks and services can expand and innovate, by safeguarding a level
playing field in and access to the IT and telecoms markets. This means applying the general EU
competition rules on



Antitrust: prohibiting anti-competitive agreements or abuse of dominant positions
State aid: prohibiting certain types of State aid that distort competition
Mergers: prohibiting mergers that would significantly impede competition on a market.
All of these rules apply to the telecoms sector, where the Commission's most recent action was the
opening of a formal investigation in January 2011 into a possible violation of EU competition rules
by Telefónica and Portugal Telecom, who are suspected of agreeing not to compete with each other
in their respective home markets (IP/11/58).
Broadband
Mobile
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Further information
For more detail on the Commission's activities in this area, please see the Commission's Annual
Report on Competition Policy for 2010.
Other Commission activities
The EU regulatory framework for electronic communications was revised in 2009, providing for
new consumer rights, more consumer choice and better protection of privacy.
Other strategies with an impact on telecommunications include EU 2020 and the Digital Agenda for
Europe – one of whose key priorities is speeding up the spread of high-speed internet by
encouraging investment in broadband and fibre-based networks.
Transport
Overview
EU competition policy in the transport sector
Competition policy and legislation aim to ensure that transport markets operate efficiently. This is
especially important when newly competitive markets are emerging as a result of either
liberalisation or repeal of specific antitrust rules, as has happened in the transport sector in recent
years. The Commission remains vigilant to any signs of price fixing, market sharing or other kinds
of anticompetitive behaviour which would impede effective competition and thus harm EU
consumers' welfare.
In September 2010, the Commission proposed a recast of a directive establishing a single European
railway area, aiming to increase competition in the rail market by improving access to terminals and
maintenance facilities and strengthening the powers of national rail regulators. The proposal
currently is being considered by the European Parliament and the European Council.
The application of competition instruments (antitrust, merger control and state aid control) in
the transport sector
International cooperation
The Commission cooperates to varying degrees with third countries in the field of antitrust, which
also concerns the transport sector.
The EU-US air transport agreement signed in April 2007 (so-called "open skies agreement")
includes provisions for strengthening cooperation between the Commission and the US Department
of Transportation (DOT) in the field of air transport competition.
In 2008, the Commission and the DOT launched a joint research project on airline alliances, to
increase their understanding of transatlantic air services and the effects of alliances on airline
49
competition, and to examine possible changes in the role of alliances following the EU-US open
aviation agreement.
The culmination of the project was the publication of a report on the role of alliances in the market
for transatlantic air services in November 2010. The report concluded that despite significant
differences in their legal regimes, the Commission and the DOT can work to promote compatible
regulatory approaches aiming at pro-competitive outcomes for consumers and the airline industry
alike.
In the area of maritime transport, the Commission continues to advocate the gradual removal of
existing exemptions for liner shipping "conferences" (a type of price-fixing cartel). Toward that
end, the Commission has held talks with transport ministries and competition authorities in several
countries, including Japan, China and the US.
About the transport sector
Transport is critical to the everyday lives of European citizens. Efficient and effective transport
facilitates the free flow of people, goods and services, contributes to productivity in all other
economic sectors, and is a vital part of Europe's sustainable growth strategy. Indeed, the transport
sector accounts for about 3.7% of European GDP and for around 5.1% of employment in the EU.
Along with other sectors, the transport industry has suffered from the economic downturn. From
2010 into the beginning of 2011, passenger numbers and freight volumes recovered steadily, but
now the pace of recovery is slowing down.
Related transport pages in other
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Competition instruments
All competition regulations and guidelines that apply to the transport sector are on the legislation
pages, where you will also find links to laws that apply to the transport sector in general, and
archives of historical policies.
Antitrust
In recent years, as more transport markets have been liberalised, a key objective of competition
policy has been to bring transport within the generally applicable competition law framework.
Council Regulation No 1/2003, which defines the extent of the Commission's investigative and
enforcement powers, now covers the implementation of the competition rules for all transport
activities.
Many regulations granting exemptions to some transport activities have been repealed over the
years. As a result, there are now only a very limited number of sector-specific regulations in the
transport sector. The most recent block exemption for maritime consortia entered into force in April
2010, and will apply for five years.
Merger control
Mergers and acquisitions with a European dimension are reviewed under the Merger Regulation
in order to ensure that effective competition in transport markets in the EU is not impeded.
In particular, the Commission examines concentrations in passenger and freight/cargo transport
activities, such as maritime, road and rail transport and logistics.
Air transport mergers have been a particular focus in recent years, in light of the ongoing industry
consolidation (see for instance the mergers British Airways/Iberia, United Airlines/Continental and
US Airways/American Airlines). In October 2013, the Commission approved the acquisition of
Olympic Air by Aegean Airlines. This transaction concerned a merger of two Greek carriers based
at the same "home" airport, Athens, with very high if not monopoly market shares on a significant
number of Greek domestic routes. The merger had been notified and rejected in 2011. However,
under changing economic conditions following the Greek crisis, the parties notified the transaction
again in early 2013. The Commission's investigation showed that Olympic Air would be forced to
exit the market due to financial difficulties if not acquired by Aegean. Once Olympic would be out
of business, Aegean would become the only significant domestic service provider and would
capture Olympic's current market shares. Therefore, with or without the merger, Olympic would
soon disappear as a competitor to Aegean. The merger was deemed to cause no harm to competition
that would not have occurred anyway.
Mergers in the rail sector were also of particular importance in 2011 as a result of liberalisation of
passenger rail transport. An increasing number of EU companies have set up trans-national joint
ventures in order to penetrate non-domestic markets (see inter alia the decisions in the cases Veolia
Transport/Trenitalia/JV and SNCF/HFPS/Wehinger GmBH/Rail Holding).
State aid
The number of state aid notifications has been increasing, partly due to the economic downturn.
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Although the sector is recovering gradually, this trend is expected to continue through 2012.
Many of the general state aid rules are applicable to the transport sector (for example, the general
block exemption Regulation, the de minimis Regulation and others). There are however specific
sectoral rules on state aid granted to the transport sector.
Maritime transport
The Commission consulted the public on the application of the 2004 EU Guidelines on state aid to
maritime transport in the first half of 2012. The Commission will soon decide whether the
Guidelines need to be revised. In the absence of any revision the current Guidelines continue to
apply.
Aviation
The air transport market has evolved dramatically in recent years. Low-cost carriers have developed
new and comprehensive business models linked to regional airports and have gained substantial
market share. In a recent landmark ruling in the Leipzig Halle airport case, the General Court
confirmed that airport infrastructure construction is part of the economic activity of operating an
airport and that State financing of it is State aid, except when it is for infrastructure used to perform
public interest tasks such as security, air traffic control, police and customs. However, the General
Court in December 2008 also annulled the Commission's decision in the Ryanair-Charleroi case.
The Commission has a significant number of complaints and on-going investigations related to
these issues.
The Commission is currently revising the Guidelines on financing of airports and start-up aid to
airlines departing from regional airports ("State aid aviation guidelines"). Two consultations have
taken place in 2011 and 2013.
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Agriculture and Food
Overview
EU competition rules apply, with certain exceptions, to the agricultural sector: to farmers,
associations of farmers, producer organisations, cooperatives, and interbranch organisations, among
others.
The sector-specific rules can be found in Regulation 1184/2006 and Regulation 1308/2013, known
as the "Common Market Organisation (CMO) Regulation".
Agriculture
Agriculture is changing rapidly due to globalisation and technological innovation. The reform of the
Common Agricultural Policy (CAP) took place in 2013. The reform modified the competition rules'
application to the agricultural sector. It introduced new derogations based on efficiencies for joint
negotiations through producer organisations in the olive oil, beef and veal and arable crops sectors, a new
derogation for agreements in situations of extreme crisis that have not been remedied by public
intervention, and some specific derogations.
Regarding the producer organisations in the olive oil, beef and veal and arable crops sectors, they
may negotiate, on behalf of their members, contracts for the supply for the delivery of some or all of
their production. In others words producers may jointly negotiate their products but to benefit from
this derogation they need to meet certain conditions. In particular the producer organisation which
commercialises the products must integrate activities that are likely to create significant
efficiencies. These efficiencies would ensure that the activities of the Producer Organisation
contribute overall to the fulfilment of the objectives of the CAP (as defined in Article 39 of the
Treaty on the Functioning of the European Union). The Commission has announced
(MEMO/13/621 ) that it will publish guidelines on the implementation of this derogation. In this
context the Commission has commissioned a report defining and assessing the efficiencies
generated by producer organisations in the agricultural sectors. The report gives (i) a review of the
existing empirical literature from the European Union and the United States that focuses on the role
of producer organisations in increasing productivity, increasing farmers´ incomes and ensuring
reasonable consumer prices and (ii) case study evidence on producer organisations in the beef and
veal sector in Poland, and on producer organisations in the arable crop sector in Rumania.
One of the CAP's aims is to keep effective competition on the markets for agricultural products. This would
help fulfil the five goals of the CAP according to the Treaty (Article 39 TFEU): increasing agricultural
productivity, ensuring a fair standard of living for the agricultural community, stabilising markets, assuring
availability of suppliers and ensuring reasonable prices for consumers.
The European Commission's competition department works to ensure that all legislative proposals
contribute to making agricultural markets more competitive, and will not have anti-competitive effects. It
further works on guidelines to clarify the application of competition rules in the sector.
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The Competition department also enforces the competition rules that prohibit restrictive agreements and
abusive conduct by dominant companies on agricultural markets, in parallel with national competition
authorities. The Commission has also adopted a number of decisions relating to mergers in the agricultural
sector.
The Commission’s department for competition does not deal with state aid in the agricultural
sector. This is handled by the department for agriculture, which is active in the control of state aid
to the production, processing and marketing of agriculture products.
Recent advocacy actions in the agriculture sector focused on measures proposed by the High Level
Group on Milk to limit competition in milk markets. This included a brochure which explains how
co-operation between farmers can be strengthened without the need for derogations from
competition rules. More recently, the European Competition Network (ECN) has published a
Report on the activities of competition authorities in the food sector. The report provides detailed
information and findings on how competition works in the food sector on the basis of the most
recent enforcement and monitoring actions undertaken by national competition authorities and the
Commission in this area.
Retail
The Commission has received many complaints that food retailers and food manufacturers have
become more concentrated in the past decade and that they are using the resulting increased
bargaining power to the detriment of their smaller trading partners.
According to such complaints, the higher bargaining power of retailers had a negative impact on
investment in the food supply chain, resulting in less choice for consumers and fewer innovative
products.
Modern retail study
The Commission (DG Competition) launched its "modern retail study" to examine whether
increased concentration (of food retailers/food brand manufacturers) or other factors (such as shop
type/size, private label penetration, socio-demographic characteristics) have affected choice and
innovation for the consumer in European shops. This study assessed how concentration and
potential imbalances between retailers and brand manufacturers have been developing in the EU
food supply chain over the last decade.
Please note that the DG Competition's modern retail study has been revised since the conference on
2 October 2014 and that a new version is now available on the website en fr . The new version of
the report updates the results on the relationship between private label penetration and
choice/innovation following refinements made to the econometric analysis.
Press release - Speech by Director-General Alexander Italianer
- Presentation
Executive summary of the retail study (FR version, the EN version is included in the study) fr
The study also includes six additional case studies which analyse the supply chain and the evolution
of choice and innovation for certain agricultural products in several EU countries: tomatoes, apples,
olive oil, milk, cheese and pork meat.
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Follow-up on retail issues
The Commission is looking forward to hearing the views and comments of those interested in the
study, its results and possible follow-up. All submissions should be made to [email protected], before 30 January 2015.
Consumer goods
Overview
Consumer goods are items you buy for yourself or your home. This means products like food,
tobacco, clothing, footwear, wood/rubber/glass/ceramic/plastic and metal products, detergents,
cosmetics and perfumes, household appliances, watches and clocks, furniture, musical instruments,
sports goods, toys and tools.
People are directly affected if competition in the consumer goods sector is weak. So, the European
Commission aims to safeguard competition for the benefit of consumers.
The Commission's Competition DG has investigated a range of cases involving various products in
this sector, both under Article 101 of the Treaty on the Functioning of the European Union (TFEU)
(restrictive business practices) and Article 102 TFEU (abuse of dominant position).
In December 2012, the Commission fined seven international groups of companies a total of EUR
1.47 billion for participating in either one or both of two distinct cartels in cathode ray tubes
("CRT"). CRTs are important components of both televisions and computer monitors. The
Commission also fined members of a cartel in CRT glass EUR 127 million in October 2011.
In April 2011, the Commission fined Procter & Gamble and Unilever a total of EUR 315.2 million
for operating a cartel together with Henkel in the market for household laundry powder detergents
in eight EU countries. The three companies are the leading producers of washing powder in Europe.
Joaquín Almunia, Vice-President of the Commission in charge of competition policy, said at the
time of the detergents decision: "... companies should be under no illusion … that the
Commission will give up on its relentless fight against cartels, which are the worst violation of
competition rules by extracting higher prices from consumers than they would pay when
companies compete fairly and on the merits."
5) State aid
Why control State aid?
A company which receives government support gains an advantage over its competitors. Therefore,
the Treaty generally prohibits State aid unless it is justified by reasons of general economic
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development. To ensure that this prohibition is respected and exemptions are applied equally across
the European Union, the European Commission is in charge of ensuring that State aid complies with
EU rules.
What is State aid?
State aid is defined as an advantage in any form whatsoever conferred on a selective basis to
undertakings by national public authorities. Therefore, subsidies granted to individuals or general
measures open to all enterprises are not covered by this prohibition and do not constitute State aid
(examples include general taxation measures or employment legislation).
To be State aid, a measure needs to have these features:
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there has been an intervention by the State or through State resources which can take a
variety of forms (e.g. grants, interest and tax reliefs, guarantees, government holdings of all
or part of a company, or providing goods and services on preferential terms, etc.);
the intervention gives the recipient an advantage on a selective basis, for example to
specific companies or industry sectors, or to companies located in specific regions
competition has been or may be distorted;
the intervention is likely to affect trade between Member States.
Despite the general prohibition of State aid, in some circumstances government interventions is
necessary for a well-functioning and equitable economy. Therefore, the Treaty leaves room for a
number of policy objectives for which State aid can be considered compatible. The legislation
stipulates these exemptions. The laws are regularly reviewed to improve their efficiency and to
respond to the European Councils' calls for less but better targeted State aid to boost the European
economy. The Commission adopts new legislation is adopted in close cooperation with the Member
States.
How is State aid verified?
The European Commission has strong investigative and decision-making powers. At the heart of
these powers lies the notification procedure which -except in certain instances- the Member States
have to follow.
Read about the procedures the Commission follows in its investigation.
Aid measures can only be implemented after approval by the Commission. Moreover, the
Commission has the power to recover incompatible State aid.
Three Commission Directorates-General carry out State aid control: Fisheries (for the production,
processing and marketing of fisheries and aquaculture products), Agriculture (for the production,
processing and marketing of agricultural products), and Competition for all other sectors.
Companies and consumers in the European Union are also important players who may trigger
investigations by lodging complaints with the Commission. Furthermore, the Commission invites
interested parties to submit comments through the Official Journal of the European Union when it
has doubts about the compatibility of a proposed aid measure and opens a formal investigation
procedure.
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International
Facing the challenges of globalisation
In today’s globalised economy, companies operate increasingly across national borders. A growing
number of merger transactions have an international dimension, affecting markets in several
countries, often in different continents. The integration of national economies also enables
companies to organise cartels and other anti-competitive practices on an international or even global
basis. An effective enforcement of EU competition policy in a global environment therefore
requires intensive cooperation with competition authorities outside the EU.
The European Commission cooperates closely with competition authorities of countries outside the
EU for many years, and this both on policy and enforcement issues of mutual interest. Our main
objective has been to promote convergence of competition policy instruments and practices
across jurisdictions and to facilitate cooperation with competition authorities in other jurisdictions
in enforcement activities.
Cooperation with other competition authorities takes place at two levels.
At bilateral level, the Commission has engaged in a wide range of cooperation activities with
competition authorities in a number of third countries on the basis of bilateral agreements or
memoranda of understanding. The nature of the cooperation activity varies between countries and
can cover coordination of enforcement actions, sharing of information on cases of mutual interest,
dialogue on competition policy issues and, in some cases, also capacity building support. A special
aspect in this context is our cooperation with enlargement countries.
In addition, the Commission participates actively in the competition-related activities of a number
of multilateral organisations such as the International Competition Network (ICN), the
Organisation for Economic Cooperation and Development (OECD), UNCTAD, the World Trade
Organisation (WTO). The main emphasis is on the promotion of policy convergence through
dialogue and exchange of views on broader policy and enforcement issues, and in some cases
through the establishment of recommended practices.
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