Competition policy has traditionally been seen as a prerogative of the nation-state. The European Community/Union is the first group of states to practice a policy, which tries to deal with the impact that distortions of competition have on trade. The basic objective of the common competition policy is to prevent the unity of the common market from being called into question by measures that have the effect of giving preference to certain economic operators (businesses, companies) and of restoring the partitioning of domestic markets. In fact, whatever means are used to correct the rigours of competition, the usual effect consists in raising prices to restore business profitability, at the expense of the consumer or the taxpayer.
From the beginnings of the Community, an administrative practice developed gradually by the Commission and confirmed by the case-law of the Court of Justice has made it possible to interpret and improve the rules of the Treaty in order to establish a range of principles of fair behaviour which, while not hindering free enterprise, indicates to economic operators the rules to be complied with to ensure that free trade and equal opportunity are guaranteed within the common market. The practices of businesses directed towards impeding imports or exports, fixing production or sales quotas and generally sharing the market are accordingly actively proceeded against. Agreements, which have the effect of concentrating demand on specific producers, and exclusive distribution agreements which prevent traders and consumers from purchasing products in any Member State under the customary conditions there, are also prohibited. Companies which practice the prohibited restrictions of competition, thus jeopardising the unity of the common market, have to expect to have heavy fines imposed on them.
Legal proceedings are also brought against undertakings which abuse a dominant position by refusing to supply a long-standing customer, by applying discriminatory prices, unlawful practices which cause or could cause damage to customers or consumers or, lastly, by absorbing one another thus eliminating competition in a market. It would be absurd to take legal action against horizontal agreements between undertakings whilst at the same time permit the monopolisation of certain markets through uncontrolled vertical integration of undertakings in a dominant position. That is why, the Regulation on the control of major concentration transactions filled a legal vacuum which had been causing problems for a long time. The control of concentrations does not mean the prohibition of concentrations. Just as concentrations are dangerous when they strengthen the dominant position of major undertakings, so are they desirable when they strengthen the competitive position of small and medium-sized enterprises. Refraining from a strictly legal approach to problems of competition, the Commission conducts in fact two parallel policies: a policy for the elimination of abuse by major companies and a policy of encouragement of cooperation and concentration between SMEs. Even in regard to large companies, the Commission follows a double policy. On the one hand, it vigorously pursues all forms of corporate conduct that cause serious restrictions of competition and deprive other firms and consumers of the benefits of an open market economy. On the other, it authorises certain forms of cooperation (strategic alliances) between firms, taking the view that, provided certain guarantees are given that competition should not be distorted, such cooperation between undertakings can help them adjust to the new European and global economic environment [see section 17.2.4].
As regards State aids, the role of the common competition policy is not only to prevent national initiatives that are harmful to intra-European trade or to the economic activity of the other Member States, but also to limit state intervention to aid which fits in with the prospect of adjusting the structures of the Union's production mechanism to changes in demand and to the international division of labour. The Commission tries to ensure that aid to undertakings does not constitute the resurgence of protectionist measures in a new form. The common competition policy is thus not only pivotal to the good functioning of the single market, but also a complement to common sectoral policies - in particular in the industrial, energy, agriculture and transport sectors - aimed at improving production structures. Through its effect on the structure of markets, competition policy influences the competitiveness of the European economy and hence helps to orient the Union's macroeconomic framework towards better employment conditions.
It is no exaggeration to state that the Commission's competition policy has an influence on "industrial morality" in the EU. A very large majority of businesses respect the European competition rules and the observations of the Commission. There are just a few companies that yield only after lengthy discussions with the Commission or even following the judgment of the Court of Justice, which always has the last word in problems relating to competition. For its part, the Commission is adopting a pragmatic approach towards increased competition resulting from a number of factors, including rapid technological change, the completion of the single market, the globalisation of markets and economic difficulties in several sectors. It is modernising its rules and practices in the areas of restrictive practices, abuses of dominant positions, mergers and State aid, focussing on opening up markets where a competitive environment is not yet fully established, while at the same time guaranteeing a level playing field for all and safeguarding the provision of services in the general interest.