Aims of European competition policy

Introduction

The main aim of EU competition policy is to increase economic well-being by:
Promoting competition (i.e. making product markets more flexible and dynamic), and
Creating a deeper European single market which transcends national boundaries

However, not all economists and politicians (especially in the UK) agree that European
economic integration has achieved these aims!

There are some industries in the EU in which a single, European market does not yet
exist. In these markets the extent of actual and potential competition is limited. There are
barriers to contestability in important markets such as energy supply, car retailing,
telecommunications and postal services industries.

In the car industry, manufacturers are able to control the sale of cars through exclusive
dealership networks. This is an exemption to the normal competition rules that apply to
other industries. There remain substantial price differentials within the single market.
Competition policy is an integral part of the process towards protecting the consumer and
delivering some the static and dynamic efficiency gains that the creation of the European
single market seeks to achieve in the long run.

Importance of Competition to the Consumer

The importance of encouraging competition in terms of getting the best deal for
consumers is illustrated in the following statement from the EU Competition Commission
web site

Competition in the marketplace is a simple and efficient means of guaranteeing
consumers products and services of excellent quality at competitive prices. Suppliers
(producers and traders) offer goods or services on the market to meet their customers'
demands. Customers seek the best deal available in terms of quality and price for the
products they require. The best deal for customers emerges as a result of a contest
between suppliers.

Competition policy aims to ensure:
Wider consumer choice
Technological innovation, and
Effective price competition
If achieved, the above aims contribute to both consumer welfare and to the
competitiveness of European industry.

How can this be achieved? The main thrust of European competition policy is to ensure
that:
Companies compete rather than collude
Dominant companies do not abuse their market power, and
Efficiencies are passed on to final consumers in the form of lower prices and better
products