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Competition Essay

668 words - 3 pages

Discussion of the European Union’s competition policies

Since the turn of the century, Europe’s economic prosperity has rested upon the European Union’s competition policies and regulation of abusive market structures and anti-competitive behaviour. The last fifty years have illustrated that open markets foster innovation and efficiency, while delivering Europeans higher quality products and services at lower prices. This will ultimately lead to Europe’s economic growth, despite the possible infiltration of foreign low cost, low skill producing firms. Suggesting Europe’s future shift towards a knowledge based economy with a focus upon the ...view middle of the document...

Likewise, merger control allows the EU to oversee and assess the effect of a merge, possibly through a joint venture, upon the market and competition. If a merger will create an overly dominant firm, the EU will prohibit the fusion of the two firms. A merge will allow a firm to develop economies of scale, creating barriers to entry that will stunt future innovation and efficiency. In the pharmaceutical industry mergers have been present due to the high cost of research for new drugs, estimated to be about $1 billion, however it is questionable whether a merge of this nature would foster competition or undermine it (Bannerman, 2002).

Lastly, state aid control is the EU’s supervision of government intervention to prevent the distortion of competitive markets and intra-community trade (EU, 2007). The abuse of state aid could result in an imbalanced market, where a state-backed firm would artificially rise as the dominant market leader annulling its competition, while not directly reflecting this position in the quality and price of their products and services. Despite receiving state aid, low-cost European airlines like Ryanair and EasyJet have been able to compete with American, state funded...

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