EU Competition Policy

Question 1

What treaty drove competition policy

Answer 1

Treaty of Rome, but overtime has been updated within the Treaty of Lisbon

Question 2

Role of competition policy

Answer 2

Ensure competition in a common market is not distorted

Question 3

What is compulsory for SEM functioning

Answer 3

Competition policy - as SEM allows less and larger firms, they have more power and so policy must ensure firms don’t misbehave

Question 4

Q

Question 5

Q

Question 6

From a firm perspective, 2 possible responses to the SEM

Answer 6

Firms act competitively
Firms react defensively and inhibit success of the SE,

Question 7

Key: firms within SEM may be more globally competitive but may act uncompetitively in the EU

Question 8

Horizontal cooperation

Answer 8

Merging between companies of the same sector

Question 9

Sotheby’s & Christies case relating to an anti-competitive agreement (horizontal cooperation)

Answer 9

Tried to collude horizontally (auction houses) ,

Question 10

Leniency programme

Answer 10

Improves efficiency - giving evidence/whistleblowing removes liability , and so Christie’s snitched and Sotheby’s fined 6% turnover.

Question 11

Nintendo - exclusive territories

Answer 11

Vertical cooperation - worked with suppliers to prevent product being sold in Germany, Prevented people buying product in Britain and to undercut and sell in Germany.

This was wrong to do as it interrupted free market and were fined.

Question 12

Example of cartels

Answer 12

Premier League

Question 13

Premier league case

Answer 13

Cartel - fixing price of the TV deals, 20 clubs acting as one.

Question 14

Why was their cartel allowed to carry on?

Answer 14

Allows competitive balance. To ensure sustainability of the league and prevent excessive dominance.

Question 15

Explicit prohibitions example

Answer 15

Price fixing
Output fixing
Market sharing agreements (e.g sugar cartel in 1970s)
Tied contracts

Question 16

Are foreign firms covered if their EU trade is affected by anti-competitive behaviour

Answer 16

Yes

Question 17

Relationship between risk of collusion and number of firms in a market

Answer 17

More firms, less collusion

Less firms, more collusion

Question 18

Perfect clllusion

Answer 18

Firms coordinate prices and sales perfectly

Question 19

How do they achieve perfect collusion

Answer 19

Maximise profit from the charging monopoly price and quantity, and split sales among themselves

Question 20

Perfect collusion diagram

Answer 20

2n’ business remain as perfect, and charge the monopoly mark-up

Question 21

Partial collusion

Answer 21

Stops restructuring (the transition from short run to long run)

Question 22

Partial collusion diagram

Answer 22

Equilibrium point B, so prices are higher.

Question 23

Where is the welfare oss

Answer 23

Since higher prices

Question 24

3 main Exemptions exist

Answer 24

Negative clearance

Block exemptions

SME’s

Question 25

Negative clearance: when can exemptions for collusion exist (3)

Answer 25

If collusion improves production/distibtion of goods Promotes technical or economic progress If consumers benefit and no elimination of competition

Question 26

Q

Question 27

3 elements for monopoly abuse of power

Answer 27

Has to be dominant position Abuse is illegal Possibility of affecting intra-EU trade

Question 28

They are less effective than article 101. Why?

Answer 28

Defining the market is difficult

Question 29

Defining the market is difficult: Continental Can case

Answer 29

Hard to classify

Question 30

Abuse of dominance includes

Answer 30

Unfair pricing Limiting markets Tied contracts

Question 31

Coca Cola

Answer 31

Exclusivity agreements Rebates for target & reserving shelf space Use strong brands to sell weaker ones i.e Coca Cola made another drink called lilt , firms couldn’t just buy coke they had to sell lilt too.

Question 32

Google

Answer 32

Abuse of shopping - favours own google products e.g YouTube (part of google) , google play, google news etc. Fined 2.4bn EUR

Question 33

Treaty of Rome didn’t address mergers Merger regulation was added following Continental can case - however ineffective

Question 34

When is a merger prohibited

Answer 34

If strengthens dominant position which impairs competition

Question 35

3 thresholds for mergers

Answer 35

Big mergers impacting intra EU trade Not national mergers e.g Sainsbury’s Asda

Question 36

Criticisms

Answer 36

Few are actually investigated

Question 37

Public enterprises

Question 38

Q

Answer 38

Q

Question 39

Q

Question 40

S

Question 41

September 2024 - apple have to pay Ireland and the interest (almost 2m a day)

Question 42

State aid effect on diagram

Answer 42

It stops movement from 2n’ to n’’, government aid prevents this process from occuring.

Question 43

What if only some countries subsidise

Answer 43

If a partner subsdiies its firms to break even, all restructuring forced on home country

Question 44

Competition policy in future