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What is the European Union Competition Law?

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  • Written By: Elise Czajkowski
  • Edited By: Susan Barwick
  • Last Modified Date: 26 November 2016
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European Union, or EU, competition law is the law regulating the power of corporations and other entities within Europe. Seeking to provide a fair business environment for companies and consumers within the EU's member states, the European Union places various restrictions on corporations and governments. European Union competition law is overseen by the European Commission.

Competition law exists to ensure that business is conducted in a fair, open manner. Business competition is considered a central tenet of capitalism because competition ensures that consumers receive the best possible product for the lowest possible price.

In European Union competition law, the main focus is eliminating unfair market advantage by any company. One major element of this is focusing on private cartels, or agreements between companies in the same industry. Cartels collude by agreeing to anti-competitive practices for the benefit of all the companies involved.

A cartel may break European Union competition law by price fixing, setting minimum prices for the same product sold by different companies, which drives prices up. Cartel members may also agree to only produce a certain amount of a particular product, making the product more scarce and forcing prices up. Cartels may also collude on contract terms with non-cartel members, which gives the cartel members at an advantage.

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European Union competition law also seeks to ensure that monopolies do not occur within the EU. A monopoly is the domination of an industry by a single corporation, which makes it very difficult, if not impossible, for smaller companies to become competitive. A company may be allowed to hold a majority market share so long as they do not abuse this power by forcing out competitors.

Monopolies can also occur when companies in the same field merge. Mergers and acquisitions are heavily regulated in the EU to ensure that they do not result in monopolies. European Union competition law reviews all proposed mergers, acquisitions, and joint ventures to make sure that large companies are not simply seeking to reduce competition.

Another important element in European Union competition law is to ensure that no corporations are receiving unfair state aid. Since the EU was created to allow borderless business within member states, any corporation receiving funding from a government would put all other EU corporations at an automatic disadvantage. While some assistance from governments may be allowed, it is closely regulated by the EU to ensure that it does not become anti-competitive.

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