The European Unions Control of Dominance in European Business Environment - Essay Example

?Harvard, Total word count at the end The European Union’s Control of Dominance in European Business Environment The European Union’s Control of Dominance in European Business Environment Introduction There have been experiences on European Union’s enlargement which have since been portrayed as ushering a number of changes in European business environment. There are particular areas of European Union law which have experienced dramatic adjustments thereby posing consistent complicated queries as regards regulations. This is focused on the fact that the law is involved in playing the role of controlling dominance by way of competition legislations especially in liberalized European markets. Such markets have been seen to offer new competition law challenges especially when there are new emergences for business platforms. Also attached to the same is the fact that there have been identification of the extent to which freedom for private law right has to rights and contracts of property (Egli 2005: 235). The main consideration in this aspect is on how these can be reconciled especially following demise of states offering important services to their citizenries alongside replacement of the same services on the basis of communal requirements accruing from either state or private initiatives. The European Union competition law’s background is pinned on aims and goals which were looked forward into by the European Union of establishing a single market for European Union Member States. So as to achieve this, a transparent, compatible and fairly homogenized framework of regulation of competition law was created. An act of Council Regulation was brought into existence through constitutive legislation process. This was developed during evolution of European Commission’s supremacy law which was not yet established. Savage and Verdun (2007: 852) note that “To avoid different interpretations of EC Competition Law, which could vary from one national, court to the next, the Commission was made to assume the role of central enforcement authority”. With time, a number of reforms have followed especially since many other things have surfaced out within the European business environment. The European Union’s Control of Dominance The European Union competition law came into being following the need to ascertain that government efforts were not altered with by corporations which mostly abuse market power. Following this, treaties reached on through European Union are a provision intended for ensuring that there is a liberalized competition prevailing within the union (Collignon 2007: 172). This is further meant to discourage monopolies and cartels who engage in fixing of prices and sharing out of markets. The European Union competition law operates through four major policy segments which according to Akman (2009) include: Mergers, control of proposed mergers, acquisitions and joint ventures involving companies that have a certain, defined amount of turnover in the European Union/European Economic Area. This is governed by the Council Regulation 139/2004 European Commission (the Merger Regulation); Monopolies or preventing the abuse of firms' dominant market positions. This is governed by Article 102 Treaty on the Functioning of the European Union (TFEU). This article also gives rise to the Commission’s authority under the next area; State aid, control of direct and indirect aid given by European Union’s Member States to companies. Covered under Article 107 of the Treaty on the Functioning of the European Union; and Cartels or control of collusion and other practices on anti-competition that affect the European Union (or, since 1994, the European Economic Area). This is covered under Articles 101 of the Treaty on the Functioning of the European Union. The European Union competition law was developed with goals which mainly number into two schools of thought yet not clear. Main opinion and view pertaining to these is that the only relevance is in consideration of consumer welfare and wellbeing. Nonetheless, Appeldoorn (2005: 656) argues that this position is erroneous and that other Member State and European Union public policy goals, for instance public health and the environment, should also be considered there. If this argument is correct then it could have a profound effect on the outcome of cases, as well as the Modernization process as a whole”. These are held in the European Union competition law’s Article 101 TFEU. It has also been noticed that in the recent past there have been considerable litigations opposing domination by certain firms in European nations. This has not only been through competition in business by competitors but also by both regional and national regulatory bodies and institutions or agencies (Riley 2009). Following this, Europe has experienced mergers as well as some anti-competitive reactions from firms dominating supply of important services and goods thereby impacting on economic innovation and development. This has been felt in various European nations’ economy and the whole business food chain in Europe (Syszczak 2011). In turn, this has resulted into moire roles and tasks for courts to shape policy responses in attempt to contain regulation of firms that are dominating business environment. Liberalization in Prevailing Competition The European Union has been in the forefront as far as European landscape is concerned. Through the Union, there has been initiated a turning point, through formulation of a single European market, for direction and modernization of laws on competition within Europe (Tsalikis and Seaton 2007: 232). There has been seen a wave of privatization and liberalization of European country’s markets which were previously owned, controlled and/or regulated through interventions by states. Besides, the European Union has worked into restructuring, acquisition and merging activities that permit non-European Union firms to get into and trade within European Union markets thereby ascertaining that they are protected from competition (Egli 2005: 233). An applicable instance is seen in a competition law that was recently formulated against Microsoft, Intel and Qualcomm in the European Union markets. Through European Union’s regulations, a number of prohibitions have been enforced as not compatible with the common European Union markets. Kolasky and Dick (2003: 207) point out that the prohibitions include: concerted activities which are able to affect trade among member states; decisions made by associations which may have features of restriction, prevention or alteration of competition in the European Union’s market; all agreements made on undertakings that are capable of affecting trade between the European Union’s member states. Beus (2001: 286) identifies particular areas of concern in these considerations are attached to fix selling or purchase prices directly or indirectly as well as any other conditions on trade; control and/or limit markets, production, investment or technical development; sources of supply or share markets; making contract solutions pertaining to acceptance by any other parties with complementary responsibilities which have no linkage with the contract following their commercial application or nature; and application of conditions, which are not similar, to the same transactions with regard to other trading parties, hence rendering them disadvantaged. Cartels and Collusion Based on European Union law, there has been banning of cartels following the requirements on Article 101 TFEU which categorizes clearly competition law targets. These are into two stages and “undertaking” has been assumed as an agreement term. The term is used to describe persons who are involved in economic activities though according to Wiley (1996: 37) excluding “both employees, who are by their very nature the opposite of the independent exercise of an economic or commercial activity, and public services based on solidarity for a social purpose. Undertakings must then have formed an agreement, developed a concerted practice, or, within an association, taken a decision”. Like for the case of United States antitrust, so is European Union competition law in that it implies to any kind of contract or dealing between involved parties. This therefore covers behaviours of wide range. There are a number of prohibitions from the competition law for instance all undertakings’ agreements which may have impacts on member states’ trade are prohibited by the European Union competition law (Akman 2009). Included in such are vertical agreements which involve agreements between suppliers and retailers, and horizontal agreements amongst retailers. In this case there is effective outlawing of cartels’ operations within the European Union. The European Union has also ensured that the competition law is widely construed to incorporate both concerted practices and informal agreements in which firms attempt to lower or raise prices ago without any physical agreements for the same (Anderson and Goodman 1995: 631). Nonetheless, any coincidental rise in prices will probably not prove practices that are concerted. Rather, there has to be proof that parties engaged were aquatinted of their conducts which may be prejudicial on usual competition operation within the union’s common market. For the European Union, this subjective knowledge requirement in not a necessity as far as respecting of agreements is concerned (Beus 2001: 394). Thus, mild anticompetitive impacts are sufficient enough to make it unlawful even if the involved parties were not aware or had no intention of such impacts to occur. The European Union through the competition law has also had exemptions regarding behaviour in European business market environment. One consideration in the article has created exemption for actions which are a benefit to consumers for instance facilitation of advances accruing from technology (Syszczak 2011). However, this is carried out without limiting all competition in the market. Practically, the European Commission gave little official exclusions, and ate the same time new approach for handling them is still on review. Another fact is that the European Commission consented to exempting minor performance agreements. This exemption is applicable to micro companies and small firms, as well holding of not more than the relevant market’s 10%. Following this, definition of market has been focused on as a crucial matter that needs resolution even though it has been highly hard to go by. One other consideration is the fact that the Commission has introduced a number of mass exemptions for various types of contract (Tsalikis and Seaton 2007: 237). In this are included list of terms banned in the exemptions along with contract terms which are permitted in the exemptions. Mergers and Acquisitions The European Union, under Article 82 TEC’s authority, became capable of not only to control behaviour of large firms claiming abuse of market power or of dominant positions, but also the potential of such firms acquiring position in the market structure which, in the first place, enables them to act abusively. According to Egli’s (2005: 234) observation, “Regulation 139/2004 deals with mergers that have a Community dimension and lays out a procedure whereby all concentrations (that is, mergers, acquisitions, takeovers) between undertakings are subject to approval by the European Commission. A merger or acquisition involves, from a competition law perspective, the concentration of economic power in the hands of fewer than before”. The European Union came up with the European Union under the Merger Regulation (EUMR) as an authority under it to help in passing regulations on the same as depicted in Article 83 TEC. The European Union has therefore ensured it controls the market environment by making an enforcement of competition law requiring that companies and/or firm that propose merging have to gain authorization from appropriate authorities from their respective governments or by carrying on though with probability of facing prospect of being demerged (Akman 2009). This would be in the case that concentration turns to be lessening competition in the common market. The idea of mergers follows the fact that transaction costs can be minimized as compared to operations on open market especially through contracts which are bilateral in nature (Collignon 2007: 178). The European Union’s major considerations in this case are that concentrations are able to raise economies of scale as well as scope. Firms and companies most likely take advantage of increased market power on their part, minimized number of competitors in the market and their increased shares in the market. Thus, there is probability of experiencing a knock on impact on the deal which consumers acquire. Control of merger by the European Union is an implication attached on prediction of what might be in the market (Kolasky and Dick 2003: 209). This is without any knowledge of any probable judgments or even making of any judgment of the same. Following this, Riley (2009) points out that “the central provision under European Union competition law asks whether a concentration would, if it went ahead, significantly impede effective competition... in particular as a result of the creation or strengthening of a dominant position”. This is in the consideration that under European Union law, a concentration subsists when there is adjustment in control on a lasting basis that accrues from either “(a) the merger of two or more previously independent undertakings. (b) The acquisition... if direct or indirect control of the whole or parts of one or more other undertakings” as held by the European Union Merger Regulation (EUMR). This is to mean that a given firm purchases another firm’s shares. There are similarities in reasons for making economic concentrations’ oversight by states so as to restrict companies or firms which engage in abuse of their dominance positions. However, regulations on acquisitions and mergers effort to deal with such problems well enough in time before they occur. Tsalikis and Seaton (2007: 236) point out that the EU has been very keen on prevention of market structure establishment that may develop, create or even strengthen any dominant position alongside lack of the need to have direct control over abuses of dominant positions in the market. Monopoly and Dominance The European Union, in its competition law’s Article 102, aims at averting undertakings who are dominant in as far as their position in a market is concerned especially from abusing their position in detrimental to consumers. The European Union competition law in the Article 102 holds the following: “Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States”. The implication of this is that there is indirect and direct imposition of unfair selling prices and purchase prices or any other forms of unfair conditions for trade. It has therefore been necessary for the European Union to establish if at all a firm is dominating in business environment in the market or if it behaves appropriately so as to help in appreciating the scope independently of customers, competitors and finally consumers in general (Savage and Verdun 2007: 857). Under the European Union’s law, large market shares contribute to a presumption that there is domination by a given firm in the market which may actually imply as rebuttable. In case a firm’s position is so dominant in the market due to having excess of the market share, there is a responsibility which is special in a way. This is so in that it does not permit for its condition to prejudice the common market’s competition (Wiley 1996: 38). The European Union has been in the forefront determining market shares with regard to specific markets within which products and particular firms in question are involved as far as collusive conduct is concerned. Even though the lists are rarely closed, some abusive conduct categories are normally prohibited with regard to country legislations. An instance is in the limitation of production at a port by way of avoiding to increase expenditure, as well as upgrading of technology could turn out to be abusive. Egli (2005: 233) argues that “As have been realized, market definition is arguably the most important part of any competition case brought under Article 102. However, it is also one of the most complex areas. If the market is defined too widely then it will contain more firms and substitutable products making a finding of a dominant position for one firm unlikely”. Moreover, if at all it is defined so narrowly, there is probability of presuming that defendant firm or company will be rendered dominant in the common market. Appeldoorn (2005: 657) notes that the European Union has therefore, practically rendered market definition to be for economists instead of lawyers to make a decision on. The Impact of Public Funding On Competition Industries within the public sector or industries that are in their nature providing services to the public are normally involved in competition law whereby they are in a number of similar ways as those applied by private firms and/or companies. From the European Union law, there is creation of exemptions for ascertained provisions for public sector service achievement (Anderson and Goodman 1995: 623). Quite a number of these industries for example telecommunications, railways, electricity, water, gas and media among others have their independent regulators. These are mostly government agencies and they are charged with ascertaining that players in the private sector get mandated for some duties in the public service with respect to social welfare objectives and goals (Akman 2009). The European Union has therefore, formulated a programme for liberalization which entails wide scope of sector regulation which also extends to competition law stating industries that are monopolized. Conclusion Control by states of indirect and direct aid from companies in European Union’s Member States is unique amongst European Union competition law. This follows the fact that European Union comprises independent European member states, therefore both creation of a common market for the union and existence of European Union competition law could be deemed not effective if the member states were free to give support to their respective companies as they deemed in shape. For all these to be realized, the European Commission has been mandated to play the role of being the central authority to help in ascertaining the application of European Union competition law. There has been initiated regime which is decentralized and is charged with antitrust so as to increase European Union competition law’s application by national competition courts and authorities within the European Union Member States (Akman 2009). The European Commission also could become aware of a potential competition violation through the complaint from an aggrieved party. In addition, Member States and any natural or legal person are entitled to make a complaint if they have a legitimate interest. For the EU to realize its objectives as pertains to dominance in market then it is proper and in order for the it to put reference to value on services and goods for which there are infringements relating to definition of fines. A considerable observation herein is that there is a probable negative consequence as far as firms and companies involved in cases of cartel are concerned (Egli 2005: 234). This follows the fact that such cases have great potential of causing them adverse publicity thereby resulting into damaging their reputation. Reflective Journal Following the development and production of the coursework herein, I have gained a number of skills valuable in understanding and interpreting concepts and aspects accruing from the subject focused on. This has come about following me realization on the relevance of the subject in as far as its value is concerned. Further to these, I have acquired meaningful and essential approaches and techniques for analysis and presenting issues pertinent on a given subject while at the same time enhanced my capability in planning,, as well as skills on proper time utilization, hence my motivation in the same. One of the major problems I did encounter was identifying and selecting the best materials to gather or draw facts for discussion from. Another problem which I faced was the challenge of clearly understanding the policy or law clauses and how they operate as depicted in the coursework in that they were not anything I am familiar with alongside them being applied in an expansive geographical region. Besides, I experienced mild difficulty in fully employing adopted teaching approaches as far as relating the level of interpreting the findings was concerned. In the case I find another opportunity to handle such coursework, I will ascertain I review my way of approaching the work by widely referring to a wide range of materials, clearly studying them then comparing their vies and concepts of interpretation as used in them. When completing the work, it was easy to understand the way the facts are presented concerning the subject even though difficulty was encountered in settling for the final facts to present in that they were varied. All in all, it is my belief that I have done the best of my ability in the coursework. References List Akman, P. (2009). Exploitative Abuse in Article 82 EC: Back to Basics? 11 Cambridge Yearbook of European Legal Studies Working Paper 09-1 Akman, P. (2009). Searching for the Long-Lost Soul of Article 82 EC, 29 OXFORD J. OF LEGAL STUD Anderson, J. and Goodman, J. (Autumn, 1995). Regions, States and the European Union: Modernist Reaction or Postmodern Adaptation? Review of International Political Economy, Taylor & Francis, Ltd.; Vol. 2, No. 4, pp. 600-631 Appeldoorn, A. (2005). He Who Spareth His Rod, Hateth His Son? Microsoft, Super dominance and Article 82 EC, 26 EUR. COMPETITION L. REV. 653, 656–57 Beus, J. (May, 2001). Quasi-National European Identity and European Democracy, Law and Philosophy, Springer; Vol. 20, No. 3, pp. 283-311 Collignon, S. (Mar., 2007). The Three Sources of Legitimacy for European Fiscal Policy, International Political Science Review / Revue internationale de science politique , Sage Publications, Ltd.; Vol. 28, No. 2, pp. 155-184 Egli, P. (Jan., 2005). Biret International SA v. Council of the European Union. Case C-93/02 P. 2003 ECR I-10497; Etablissements Biret & Cie SA v. Council of the European Union. Case C-94/02 P. 2003 ECR I-10565. The American Journal of International Law, American Society of International Law; Vol. 99, No. 1, pp. 230-235 Kolasky, W. J. & Dick, A. R. (2003). The Merger Guidelines and the Integration of Efficiencies into Antitrust Review of Horizontal Mergers, 71 ANTITRUST L.J. 207, 209 Riley, A. (Sept., 2009). The EU Reform Treaty and the Competition Protocol: Undermining EC Competition Law, CEPS POLICY BRIEF, Centre for European Policy Studies, Brussels. Savage, J. D. and Verdun, A. (Dec., 2007). Reforming Europe's Stability and Growth Pact: Lessons from the American Experience in Macro budgeting, Review of International Political Economy , Taylor & Francis, Ltd.; Vol. 14, No. 5, pp. 842-867 Syszczak, E. (2011). Controlling Dominance in European Markets, Fordham International Law Journal, The Berkeley Electronic Press; Volume 33, Issue 6 2011 Article 4 Tsalikis, J. and Seaton, B. (Oct., 2007). The International Business Ethics Index: European Union, Journal of Business Ethics, Springer; Vol. 75, No. 3, pp. 229-238 Wiley, J. (1996). The European Union's Single Market and Latin America's Banana Exporting Countries, Yearbook, Conference of Latin Americanist Geographers, University of Texas Press; Vol. 22, pp. 31-40. Read More