Evaluating the impacts on the internal market
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Scope
Does the option affect EU competition policy and the functioning of the internal market? For example, will it lead to a reduction in consumer choice, higher prices due to less competition, the creation of barriers for new suppliers and service providers, the facilitation of anti-competitive behaviour or emergence of monopolies, market segmentation, etc?[1]
Definition
Effective competition is crucial to an open market economy. It cuts prices, raises quality and expands customer choice. Competition allows technological innovation to flourish. For this to happen, fair play on the part of businesses and governments is essential. Before the opening up of borders to intra-EU trade, in fact, governments distorted competition: in some sectors prices were artificially kept, at the expense of the consumers, to a level that allowed the survival of marginal undertakings, in other sectors unprofitable businesses were kept alive by subsidies and other aids at the expense of the taxpayers.[1]
Damage to consumers can also emerge when providers of goods and services convene agreements that are restrictive of competition, such as agreements on the sharing of markets (e.g. the reciprocal respect of national markets), agreements on the fixing of prices and agreements that restrict the access to the market by new entrants.
The European Commission also seeks the prevention of abuse of a dominant position, which may consist in: imposing unfair purchase or selling prices or other unfair trading conditions; limiting production, markets or technical development; applying dissimilar conditions to equivalent transactions with other trading parties; making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which are not related with such contracts.[1]
Result
To screen the proposal for possible negative impacts on competition, you should start by determining in particular if the proposal includes:
- Rules on liberalisation (of formerly monopolised network utilities such as electricity, telecoms, postal sector, public transport, etc.) and internal market measures;
- Measures raising or lowering the barriers to entry or exit, making it harder or easier for firms to enter or leave the market;
- Rules introducing special commercial rights (e.g. IPRs) or exempting certain activities from the application of the competition rules;
- Sectoral rules pursuing economic, environmental or regional policy goals;
- General rules (e.g. corporate law) governing economic activity.[1]
If so, you should ask yourself the following questions (non-exhaustive list):
- Does the proposal contain rules which (partially) exempt a market/sector from the application of the competition rules, thus possibly creating/strengthening a monopoly?
- Does the proposal contain rules which directly interfere with the way firms market or price their products/services; does it limit or reserve distribution for certain channels/intermediaries, thus reducing consumer choice or creating barriers for newcomers?
- Does the proposal contain rules which facilitate or induce companies to agree on prices or divide up customers/markets, thus driving up end consumer prices or decreasing innovative activity?
- Does the proposal contain rules which restrict access to important resources (such as raw materials, land, IPRs, know-how or process technology) in concentrated markets, thus excluding or delaying market entry of alternative products/services?
- Does the proposal contain rules which (de facto) favour incumbent providers at the expense of new entrants thus mitigating the beneficial effects of liberalisation?[1]
Further information
EC related information:
European Commission: DG Competition
Other information:[1]
Indicators:
The following Eurostat Structural Indicators (Economic Reform) are relevant to address the key question:
- Public procurement
- State aid by type of aid
- Convergence in interest rates by type of loan
Market integration:
- Trade integration of goods and services
- Foreign Direct Investment Intensity [1]
See also
References
This text is for information only and is not designed to interpret or replace any reference documents. The text is partially adapted from the Commission Impact Assessment Guidelines SEC(2005)791 and from: