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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 |