Competition Policy in the European Union: Origin, Importance, and Implications for Business

This essay discusses the origin and importance of competition policy in the European Union, including its different policies and regulations related to competition. It evaluates the role of competition policy in promoting and maintaining a healthy and competitive market, and its implications for businesses. The essay also discusses the different procedures and policies related to trade, transport, and agriculture, and their impact on competition policy.

Running head: EUROPEAN IN BUSINESS
European in Business

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Introduction
European competition policy is a significant policy technique for the European Commission.
Furthermore, competition policy has increased considerably at the time of growing European
activity. This policy can be used within the economies of European nation where, a company
shift from single to beyond currency (Aydalot and Keeble, 2018).
In this essay, competition policy is discussed and also elaborates from where it is originated. It
would also assess the significance of competition policy within the European economy in current
and future. This easy will also evaluate the implication for business by giving some illustration
related to competition policy within workplace.
Competition Policy
Siciliani Chalkley and Gravelle (2017) argued that competition policy has created the effect
regarding Treaty of Rome in the year of 1957. There were different members of the European
community at that stage but none of members had recognizes effective strategy in this
community. Initial policy is highly relied on anti-trust policy of US. Along with this, European
Commission develops strategy at the super-national level in union such as the 1957 European
Economic Community (EEC) Treaty. This treaty was implemented in order to remove tariff
barriers and other quantitative restrictions which were imposed on companies while they trade
between different member states. The ability to formal national level strategies are recognized
and effective part of European policy. Article 85 and 86 of treaty are particularly incorporated
into competition policy.
In support to this, Dür Bernhagen and Marshall (2015) stated that Article 85 of cartel rule
prohibited that any agreements as well as practices can be restricted and distorted in the

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competition of European Union. It may affect trade among member states which was shows by
the example of two cases which include Schenker (in case C-263/16 P) and Kühne (in case C-
261/16 P). Both these parties made an appeal in the European Court of Justice (ECJ) by arguing
that the New Export System (NES) cartel (related to exporting of goods from the UK to countries
outside the European Economic Area) and the Advanced Manifest System (AMS) cartel
(agreements to comply with legal requirements to ship goods to the US) did not fall within the
scope of Article 101 of TFEU (Treaty on the Functioning of the European Union) (Burton,
2018). Thus, the cartel policies make it difficult for companies situated in member states to
export goods through these cartel systems which affected their business operations. This Article
may apply only to a company,which has a market share of more than 5% in European Union
along with, where turnover is higher than 5 billion of ECU (European Currency Unit). In
addition, a company, which does not come into this nation, is exempt. This article focuses on
restrictive agreements such as large mergers and also prevents the dominance of the market. For
example, a proposed merger between General Electric and Honeywell was stopped by the EU on
the grounds that they were likely to create monopoly and reduce competition (Meller, 2005).
In contrast to this, it is stated that article 86 of monopoly rule restricts the mistreatment by a
company having leading position in marketplace and also affected the trade among member
states. For example, the oil monopoly enjoyed by France (a member state) was prohibited since it
affected competition between member states. It particularly entails the conventional monopoly
behavior in which company with monopoly position restricts the production for keeping the high
rates (Goldthau, and Sitter, 2015). This article is used for restricting the merger behavior and gets
leading position outcomes. Other areas are also demonstrated in the treaty of competition policy

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are state aids (article 92-94), technical standards (articles 100-102), and research and
development (Tutor2u, 2018).
According to Finsbury (2016), State Aids (Articles 92-94) serves for distorting rivalry within an
industry and it may affect trade between member states. State aids facilitate artificial benefits,
which is not available to the rivalry. Along with this, exemptions implement in which regional
aids are well-matched to the market and in which, the government offers support to poorer areas
inside member states. For example, 351.8 billion euros were set aside by the EU for its one of the
largest investment for cohesion in 2014-2020 and the biggest recipients of this investment
include poorer member states such as Poland, Italy and Spain (Guarascio, 2018).
In opposed to this, in Technical Standards (Articles 100-102), there is a certain technical
standard inside community such as non-tariff restriction to deal amongst nations. For example,
Latvia, Ireland and Denmark are the key trading partners of the UK that received effective non-
tariff barriers while engaging in business practices Byrne and Rice, 2018). This can limit the
rivalry among member states (European Parliament, 2018).
As per the view of Economics Online (2018), the company can focus on research and
development as it would gain the competence within the industry. For example, AstraZeneca is a
British-Swedish multinational company that invest heavily in research and development which
provides a competitive advantage to the company in the pharmaceutical and bio-pharmaceutical
industry (Brodie, 2017). Co-operation enables company for increasing economies of scale
together with, saves the resources by eliminating replication of investigation. It can be
recognized that level of state supports in Europe is too high. These measures provide unfair
benefit to some companies together with, develops a structure of protectionism. The purpose of
this moment is to decline degree of aid granted in union.

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Importance of Competition Policy
The economics times (2018) illustrated that at a supra-national level, European commission
develops a competition approach that is related to national regulation. Member states use own
system at nationalized level; for example, Germany has nationalized the railway system after the
World War I and the railway industry is still nationalized in the country even when other
member states have privatized the railway system. The resulting strategy could be outcome of
different negotiation among two parties. European court of justice assists the commission in
competition policy by prohibiting parties from engaging in practices that could eliminate
competitive and promote monopoly. In addition, this policy provides range of effective and
developed competition strategies without which, market cannot deal accurately together with,
consumers cannot obtain advantageous. This was illustrated by the example of stopping the
merger of GE and Honeywell as discussed earlier which shows that role of ECJ and how it
assists the commission in ensuring maintenance and promotion of competition it the market
(Meller, 2005). It is usually originated from liberal market system. Hence, tough rivalry could
be significant technique to move with respect to integrated European market.
In opposed to this, restrictive or cartels agreements are restricted in the European market and it
indicates the market can deal generally and stay open for external pressure. In addition,
customers can get full advantageous of healthy as well as competitive market. It permits different
category related to goods and services that are available for lowest possible rates (Frontier
economics, 2018).
Procedures
European Parliamentary Research Service Blog (2018) stated that commission should be notified
before developing any agreement and breaching the competition treaty. A violation could be

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resolved by voluntary policy transformation on the part of those entailed. Along with this, a
commission is free for imposing a penalty of up to 10% of the annual turnover of the company
and demanding transformation of policy. The company can appeal for court of justice when they
do not consent on results of the commission.
On the other side, another policy related to trade, transport and agriculture are also considered
into competition policy. For example, competition policy could be implemented to facilitate the
harmonization procedure, overcoming hurdles and developing internal market into different
areas such as transport and trade. The competition strategy is practiced at this initial phase as
there would be less possibility for restoring and endorsing rivalry at a later date. The exemption
is entailed for making sure winners of efficient market (Orbie, 2016).
Role of Competition Policy
Swann (2018) opines that competition policy is more significant because companies in the EU
are rapidly moving in order to expand their business. In addition, existing trends indicate the
increasing degree of globalization and higher rivalry (Swann, 2018). As Europe is becoming
more integrated at the internal level, hence the main focus moves on top of external atmosphere;
for example, EU companies exports a total of US$5.719 trillion for 2017 to other nations
(Workman, 2019). Although this number reduced by 4.7 percent since 2013; however, it has
improved 9.5 percent on a year-over-year basis from 2016 (Workman, 2019). Future policy can
gain the competition along with, enhances the rivalry of European products and services with
respect to Japanese and US products and services. For example, US companies are expanding
their customer base in emerging markets such as Tupperware Brands (58 percent) that operates
in food container business whereas EU companies such as Amcor and Sealed Air has failed to

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expand their operations (Wagstyl, 2011). Along with this, increasing competition may put
downward pressure on cost as well as prices.
On the contrary, when EMU (Economic and Monetary Union) is highly executed, then it will
increase pressure on companies. Due to common currency, rates would be highly visible in the
union. Moreover, European producer would not be competent to get benefit from price distortion
because of fluctuations in currency. Furthermore, customers will be competent in demonstrating
the price difference. It would gain internal rivalry (Ludlow, 2018).
Jenny Katsoulacos and Jenny (2016) stated that in the year of 1993, commission has developed
white paper regarding growth, employment, as well as competitiveness in European Union. The
goal is used to enhance the competitiveness in Europe. This purpose will dominant all the way
through 1990s, particularly in smaller nations. Along with this, the competitive environment is
basic for optimum utilization of resources as well as stimulates the investment innovation, and
research and development.
Implications for European Business
Molle (2017) argues that competition policy is essential and valuable for business in European
nation due to different causes. In such section, appropriate uses of policy and its significance will
be discussed since it enable Europe in becoming one of the key rivals of the global economy
such as the US and Japan. Moreover, Europe should be set for aligning itself alongside these two
nations. An effective execution of single currency together with, completion of single market
could be powerful for Europe.
In support of this, Pucciarelli and Kaplan (2016) stated that competition policy plays a
fundamental role in supporting the Europe and enhances its global competitiveness. Along with

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this, Europe should focus on competition policy that is implemented in European nation and is
favored via national governments since it enables the member states in building new trading ties
with each other and other nations that supports the economic growth of the EU. It is centralize
policy regarding idea of rivalry as compared to comparative benefits. The competitive benefit
highly relies on company strategy together with, public policy in against of endowments
regarding natural resources. Thus, both national and European organizations focus on developing
and executing the strong competitive elements for making advancement at international level.
On the contrary, Hasan and Marinč (2016) opined that in current times, Europe is competing
highly with Japan and the US with respect to price and quality of its goods and services as earlier
discussed in the example of Tupperware Brands, Amcor and Sealed Air (Wagstyl, 2011). Along
with this, state welfare compensation in certain European nations is very high. It may increase
the labor cost in European nation as compared to USA and Japan. There is inadequate investment
at European level hence; it can create complexities for enhancing viable strength.
As per the opinion of Wallace Pollack and Young (2015), competitiveness advisory group was
appointed through president of commission to look towards rivalry in rest of world. As per the
report of the national economic together with, social forum regarding EU integration and
enlargement, CAG (Competitiveness Advisory Group) has demonstrated requirement for
developing policy action at both European and domestic level. Along with this, CAG has
recommended co-ordination related to union, member states, and social and economic level.
On the other side, Dublin meeting of European council has determined that there should be
consistency in assessing the competitiveness of union at global level in December 1996. This
meeting was considered into the competition policy and it plays a significant role when
incorporates technical, industrial as well as trade policy. It was addressed that competition policy

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can be improved through generating benchmarking because technique to regular evaluation and
monitoring the European Union rivalry in against of global markets helps to develop an effective
competitive strategy. Competition policy should be developed in both internal and external
dimension, such as non-tariff internet policy and Common Commercial Policy which is an
external policy, as it is beneficial for sustaining into European market. In addition, there is a need
to increase in factor mobility at both levels internally and externally (Pucciarelli and Kaplan,
2016).
It is argued that Europe should develop a strong and viable business infrastructure. There are
some areas that are impacting on rivalry within European business atmosphere. These areas are
demographic development and trends, higher unemployment rate, emerging social class
structure, and developing political procedure makes competent to formulation and executing
strategic policies (Wallace, Pollack, and Young, 2015).
In support of this, Economics Online (2018) stated that small European nations have low degree
in technological development and innovation. They have high requirement related to indigenous
economic practices. Although, each member state does not create issues but it can affect the
internal level of rivalry within the union. There are small European nations that have a very low
degree of innovation and technological advancement such as Romania and Bulgaria (Noack,
2016).
In opposed to this, improvement can be done by effective tax system which will increase the
resources available for the government to invest in research and development process, and by
moving from grants to equity in the context of indigenous industries to support their innovative
and economic growth. A company can emphasize development sectors within the economy.
Moreover, eastward development in union, execution related to single currency, attainment

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regarding single market, cultural and economic factors as well as European recognition can
affect the European union.
In favor to this, European Parliament (2018) stated that a company can build a competitive
atmosphere for European Union with focusing on these factors. A good example is AstraZeneca
which is discussed earlier in this report. In long-term, the achievement related with internal
market would be feasible by considering rivalry of Europe and set free factor related to growth
and innovation.
A Working Example of Competition Policy
For example, the European economy is related to increases in merger and acquisition practices.
Furthermore, it has currently announced different largest accountancy companies in nation.
There are different expectations for a merger in the coming month for developing the two
different identities. Two proposed mergers are related to Price Waterhouse/Coopers and Lybrand
as well as, KPMG/Ernst and Young.
After the merger, two strong and larger identities will be incorporated. It would also cause a
large classification in the market of accountancy and it may develop different small consultancy
companies. Merger may lead to decline in the rivalry at marketplace that could be reason of
increasing the fees. There is a further hazard when a customer deals at large level from a
recognized company that provides a high range of services for the same amount (Dür,
Bernhagen, and Marshall, 2015).
There is some ethical instruction within the profession of accountancy that could be used for
protecting the conflict of interest that merger sometimes produces; for example, the code of
conduct for lawyers in the EU which provides various guidelines for professionals to discharge

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their duties in ethical manner (IDHAE, 2002). The European Commission is presently assessing
both mergers. It would not permit for processing in a case; commission incorporates anti-
competitive regardless of the opinion of shareholders. In addition, such development has a
different implication for concerned business. There is no matter how it is beneficial or profitable
the merger, it would not allow proceeding when the commission thinks they breach the
competition policy (Hasan, and Marinč, 2016).
Another illustration is related to General Eletric and Honeywell that are entailed into merger may
lose opportunity for gaining their profits, market share, power, and market capitalization. The
companies may experience the declining wealth of shareholders as a consequence of not being
competent to merge (Meller, 2005). In contrast to this, small corporations could be protected
hence they do not worry regarding being inclusively surpassed as it can be extensive for them to
beat it. There is wider corporation that would not lead the market, as well as price will not be rise
because there would be no deduction in the rivalry (Orbie, 2016).
For example, competition policy could be practiced in the form of protectionism. For example,
stopping large companies such as GE and Honeywell from merger to ensure that they did not
create a monopoly in the EU market which could adversely affect its economic growth. But,
even when merger is prevented from moving forward in the market then it would incorporate
into the larger and smaller corporations. Moreover, smaller organizations are not provided
special dealing as they can sustain into the market at longer term. Along with this, they are
secured from rivalry due to monopoly type of power. It can distort the rivalry and push smaller
company out of marketplace (Dür, Bernhagen, and Marshall, 2015).
Another illustration is competition commissioner i.e. Karel Van Miert stated in speech in the
year of 1997, competition policy could be applied for making sure that markets are open along

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with, protectionist actions can never be implemented by corporations. They also stated that new
form of policy should be developed by considering economic analysis. It may furnish the
business with an adequate extent of legal certainty (Hasan, and Marinč, 2016).
Conclusion
It can be concluded that European competition policy is an effective policy for the European
Commission which promotes competition between different countries and prohibit monopoly of
companeis which is crucial for the economic growh of the EU. There are some articles used in
competition policy such as Article 85 and 86 which prohibits cartel and companies from
engaging in unfair trading practices that might reduce competition from the market. It can be
summarized that Articles 92-94 serves for declining rivalry within the industry and it may
influence the trade among member states. It can be also concluded that article 100-102 depicts
the technical standard within community that incorporates non-tariff restriction for dealing with
different nations. Competition policy offers developed competition set of laws, without which,
market cannot deal accurately as well as, consumers cannot create benefits. It is suggested that
stricter competition laws should be implemented in the EU to meet the demand of changing
policies which will also enable member states in fostering innovation to sustain their economic
growth.

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