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Liberalisation

Overview

Services such as transport, energy, postal services and telecommunications have not always been as open to competition as they are today. The European Commission has been instrumental in opening up these markets to competition (also known as liberalisation).

What are the advantages of liberalisation?

In the EU Member States, services like these have previously been provided by national organisations with exclusive rights to provide a given service. By opening up these markets to international competition, consumers can now choose from a number of alternative service providers and products.

Opening up these markets to competition has also allowed consumers to benefit from lower prices and new services which are usually more efficient and consumer-friendly than before. This helps to make our economy more competitive.

How has freedom of choice been introduced?

The approach of the European Commission has evolved over the years. In 1993, when requiring Denmark to end the monopoly rights of the State-owned railway company DSB on the port facilities at Rodby, the European Commission left the Danish government the choice to allow competitors to use the same facilities or, alternatively, to construct new facilities near the existing port. However, it soon became apparent that establishing competing facilities, especially in the case of nationwide networks, requires a great deal of investment and is usually inefficient. So the European Commission developed the concept of legally separating the provision of the network from the commercial services using the network.

In the railway, electricity and gas industries, the network operators are now required to give competitors fair access to their networks. In these industries, monitoring fair network access by all suppliers is essential to allow the consumer to choose the supplier offering the best conditions.

Does this have a direct effect on consumers?

In the two markets which were opened up to competition first (air transport and telecommunications), average prices have dropped substantially. This is not the case for markets which were opened up to competition later or not at all (such as electricity, gas, rail transport and postal services), where prices have remained unchanged or have even increased. Although this may be due to sector-specific factors — for instance, gas prices are closely related to oil prices – it seems that consumers have been able to benefit more easily from lower prices in sectors which are more open to competition.

Can public services be delivered properly in a competitive market?

Opening up new markets requires additional regulation to ensure that public services continue to be provided and that the consumer is not adversely affected. When applying competition law, the European Commission always takes account of the special obligations placed on any organisation benefitting from ‘monopoly rights’. This approach ensures that there is fair competition without handicapping the State-funded provider, which is obliged to provide services in the public interest even where this is not profitable.