Competition and Merger Policy
Competition and Merger Policy in Europe
☑️ This element is an expansion of the content of Lawi's courses, guides, tools and other solutions. It offers facts, commentary, and analysis on this European topic. Do you like what you read? Like and share it with your family and friends so that others can discover it too. If you have been forwarded this element, please subscribe here.
Description of Competition and merger policy
The Concise Publication of the European Union describes competition and merger policy in the following terms: [1] Any anti-trust policy has inherent contradictions, and that of the EU is no exception. The 1957 Treaty of Rome, which is the foundation stone for EUcompetition policy, prohibits price-fixing, market-sharing, discriminatory agreements and abuse of dominant position, with the aim of promoting free trade; but it is a sufficient defence to prove public benefit. Thus state aid, theoretically forbidden as a distortion of markets, is often justified by elastic interpretation of clauses in the Treaty permitting aid for restructuring, regional problems and development. The clearest example of systematic anti-competitive activities is the Common Agricultural Policy, which is exempted by the Treaty from the general ban on restrictive practices, on the grounds that it aims to ensure rural prosperity and stability of food supply.
The Commission, subject to the ultimate jurisdiction of the Court of Justice, is responsible for the execution of competition policy. It has draconian powers, deriving from a Regulation of the Council of Ministers, which supersedes national law. It can enter premises without warning, seize documents, terminate agreements and fine an offender up to 10% of its annual turnover (see more in this European publication). In practice, many cases of suspected restraint of trade are settled by negotiation under threat of sanction; others are pre-cleared or exempted.
The progressive integration of the EU, allied to the advent of the single marketand the determination of recent commissioners, particularly Leon Brittan and Karel Van Miert, has led to an increasingly activist prosecution of competition policy. Since 1990 the Commission has also had specific authority to block or approve substantial mergers, provided that at least 6250 million of the turnover of the companies concerned is generated in more than one member state (see more in this European publication). The assumption of this power was a sensitive matter, although some companies have found that the Commission's remit - to judge amalgamations on competition grounds - has provided at least as much predictability as the politicised decisions often made by national monopoly-policing authorities.
The Commission growingly asserts extra-territorial jurisdiction. Restrictive practices within the EU on the part of subsidiaries of non-EU companies fall incontestably within the Commission's ambit, but alliances between European companies and, for example, US companies (such as between British Airways and American Airlines) would once have been considered the province of the relevant national regulators. A particularly controversial Commission action was its ruling in 1997 that the amalgamation of two US companies, Boeing and McDonnell Douglas, could not go through unless they rescinded 20-year exclusive supply contracts with three US airlines to which Airbus had ambitions to sell aircraft. Doubtless an element in the Commission's decision to intervene was resentment at the extra-territorial activity of US regulators. The Commission's policy adds complexity to the regulatory hurdles which any sizeable merger now faces.
The Commission's attempts to curb state aid have often been frustrated by chauvinism, notably its failure in 1998 to block France's massive cash injection into Air France (see more in this European publication). Nevertheless, it has had its share of successes, backed by the Court of Justice (see more in this European publication). Among its best-known cases have been those of Renault and Crédit Lyonnais; and it has also taken on German state aid to Volkswagen and the Bremer Vulkan shipyards, an attempted Belgian government bail-out of a steelworks and British restructuring subsidies to Rover's Longbridge car plant. In 1997 the Commission embarked on a campaign to dismantle European telephone monopolies. These activities have incurred the displeasure of governments, which take an elevated view of their own motivation and are sensitive to any move which might affect employment. On the other hand, the Commission is criticised by liberal economists for allowing too many subsidies, nor has it yet made significant inroads into opening financial services to free competition.
A new avenue for intervention currently proposed by the Commission concerns fairness of treatment of shareholders in takeover bids. Avowedly basing itself on the successful London Takeover Code, the Commission would like to introduce a Directive to enforce similar provisions by law. This proposal would offer the shareholder less protection than is afforded by the Code; but by substituting the law for the voluntary nature of the UK system, it would stifle flexibility and open the way to delaying tactics, thereby helping to entrench management and frustrate bids. The outcome of the proposal, which is being opposed by the UK, remains uncertain.
Competition and merger policy and the European Union
Resources
Professional Content and Learning Tools
☑️ Lawi offers educational solutions and professional insight, integrating content, tools, and practical technology to promote lifelong learning, personal and professional improvement, and human progress through knowledge. Our collections feature resources and solutions from a wide range of subject areas, from management and finance to law and cybersecurity. This text is only a brief introduction. If you would like us to expand on this content, please let us know in the comments. If you’re finding our platform and publications valuable, share it with a colleague or friend, leave a comment and consider subscribing if you haven’t already (thanks!). There are group discounts, gift options, and referral bonuses available.
See Also
Mergers
Resources
Notas y References
Based on the book "A Concise Publication of the European Union from Aachen to Zollverein", by Rodney Leach (Profile Books; London)
Professional Content and Learning Tools
☑️ Lawi offers educational solutions and professional insight, integrating content, tools, and practical technology to promote lifelong learning, personal and professional improvement, and human progress through knowledge. Our collections feature resources and solutions from a wide range of subject areas, from management and finance to law and cybersecurity. This text is only a brief introduction. If you would like us to expand on this content, please let us know in the comments. If you’re finding our platform and publications valuable, share it with a colleague or friend, leave a comment and consider subscribing if you haven’t already (thanks!). There are group discounts, gift options, and referral bonuses available.