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Competition in Markets and Its Safeguarding

In: Business and Management

Submitted By glotzbert
Words 495
Pages 2
This paper will explain why there is a need for competition in the markets and how the European Commission wants to safeguard and create conditions that function competitively.

Imagine a market where there is only one major supplier and a lot of demand for the product he is supplying. For example there is only one big supplier of gas and the whole world has a need for this gas. Then the consumers do not have any power and the supplier has it all.
In this particular situation the monopolist is no longer going to create innovative products (e. g. better fuel) and furthermore the prices will increase, because he can set the prices. The monopolist will no longer be interested in being competitive rather than in maximizing his profit due to minimizing the costs at which he is producing, resulting in a lack of quality. You can also observe that the total quantity of gas sold will be less than in a competitive environment, which is contra productive for the consumers.
In an environment where there are lots of suppliers all of the above mentioned problems will not occur due to the competition.
That is why the European Commission has a high interest in ensuring that there are competitive market situations everywhere.

They want to create these conditions in punishing companies or states that are trying to create non-competitive market situations such as price-fixing cartels, market-share cartels or state-aid to specific companies. Their 3 major instruments are the antitrust, the merge control and the state-aid control.

The antitrust area covers the two prohibition rules set out in the EU Treaty, which is first the prohibition of agreements between two or more firms that restrict competition (e. g. cartels) and second firms in a dominant position are prohibited to abuse their market position. Furthermore, it covers the leniency policy, which guarantees the first

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