Another instrument for maintaining
competition is control of mergers regulation.
A merger comes within the
scope of this regulation if it exceeds a certain size – the
aggregate world turnover
of the merged units must exceed e5000 million and the
Community-wide turnover of
at least two of the undertakings must exceed e250
million. Proposed mergers
have to be notified to the Commission. Sometimes
they are rejected,
sometimes approved, and on other occasions approved with
qualifications. Merger
policy in the EU, as in many other countries, is predicated
on the assumption that,
provided no significant increase in market power ensues,
mergers are
efficiency-enhancing. Entrepreneurs are considered better equipped
to judge the future
economies to be gained from a merger than outsiders – though
they are far from being
infallible in this regard, as we have seen.
State aids have been an intrinsic component
of the industrial and regional policies
of many states. Government
aid which distorts competition and which
affects cross-border trade
is regarded as incompatible with the common market.
The main thrust of policy
has been to ensure that state aids are transparent, monitored and subjected to
upper limits. Any new state aid likely to affect trade
between Member States has
to be approved by the Commission. The thrust of
policy has been to curtail
the amount of subsidies and other indirect supports
provided by Member States.
Of course, political and economic considerations can
conflict on these issues,
and the Commission has been criticised for being overly
influenced by political
pressures, particularly where powerful state companies are
involved.
The European Commission sometimes acts on
its own initiative and at other
times responds to
complaints from the public or competitors concerning the
abuse of monopoly power.
Sometimes action is triggered by tip-offs from insiders.
Its investigative powers
are considerable. These include ‘dawn’ raids whereby its
officials arrive without
prior notice at the premises of companies in order to
search for evidence.
Executives can have their offices searched, an alarming experience, and can be
subjected to oral questioning even before any charges are
brought against the
company. Telephone print-outs, possession of competitors’
business cards and even
invitations to business lunches can be used as indirect
evidence of
‘concertation’. The scale of the dawn raids can be considerable. A
dawn raid was carried out
in April 1995 on the offices of 40 newsprint producers
in seven European countries suspected of price collusion. After all
this, the
Commission can order firms
to refrain from certain practices which it deems anticompetitive.It can also
impose fines of up to 10 per cent of a company’s worldwide turnover, as some
major EU firms have discovered to their cost. Fines of
e248 million ,for example,
were imposed on 33 European cement producers in November 1994, on the grounds that
they used secret agreements to reduce price differences between them in order
to protect their national markets. Prestigious companies such as Blue Circle
The monopoly power of public utilities has
been the subject of special attention.
Often what is required is
the application of competition law combined with
specific legislation. The
Rail Directive of December 1991 is one of many examples
of action to enhance
competition in Europe ’s state-owned
infrastructure companies.
The Directive sought to
introduce greater financial discipline and more
operational competition
within Member States and across borders. National
railways were pressed to
separate track infrastructure from train operations and
to produce transparent
accounts revealing the respective costs and revenues
attributable to
infrastructure and to services. This approach was based on the belief that the
provision of rail services on that infrastructure, for freight and passengers,
can, and should, be opened
to competitive tender._11 Similar initiatives were
taken in the case of
energy, telecoms and postal services.
In addition to the 1992 programme, the EU
is committed to further trade liberalization.Liberalisation of foreign trade
can be a potent antidote to monopoly power. The expectation is that exposure to
global competition –increasing the degree of contestability of the domestic
market – will make industries more efficient. More concentration and
rationalisation at a domestic level may be a fall-out of this policy and need
not necessarily be a cause of concern. A more open market is, by definition, a
more competitive market and the competition authorities’ job is done for them
by the market. This saves on the high compliance costs attached to enforcement
of competition by legal means.
Competition law is being applied with
increasing rigour across a growing
number of countries. The
1998 Competition Act, regarded as the biggest shake-up
in British competition law
in 25 years, brought UK
that of the European Union
for the first time. It gave sweeping new powers of
investigation to the
Office of Fair Trading and opened the way for massive
fines if companies break
the rules. Directors and employees can be sent to prison
for obstructing
investigations. The OFT has been given powers to demand information and carry
out dawn raids if it suspects anti-competitive behaviour.
Interestingly, earlier
that year the loss to the UK
behaviour was estimated at
1 per cent of GDP or about £7.6 billion at 1996
prices.
In 1999 the mighty Microsoft ran foul of
the US
Thomas Jackson began his
207-page ruling with a four-word sentence: ‘Microsoft
enjoys monopoly power. He
went on to rule that the company used its power to
eliminate competition from
a range of rivals across the industry, particularly
from Netscape. Emerging
relatively unscathed from the American anti-trust proceedings,Microsoft faced a
new assault from competitors on the European front.
An umbrella organisation
representing Sun Microsystems, Oracle and Nokia,
among others, filed a
complaint against the latest version of the Windows
operating system. The
European Commission expressed concern that Microsoft
was leveraging its Windows
monopoly into the servers and audiovisual software
markets.
hich � �
u a ��S 8S ition and
allow business a
reasonable degree of certainty, but have enough flexibility
to deal with cases
where market power may be necessary on technical grounds.
No comments:
Post a Comment