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Competition and regulation

Competition between enterprises is important for the EU economy as a whole because it creates benefits for consumers and enterprises themselves in the form of lower prices and better products. To ensure fair competition, well-designed and effectively enforced competition rules are essential. In sectors which have only recently been liberalised, such as network industries, competition is gradually developing and performance in terms of prices and productivity is improving.

Competition policy

Competition is a means to bring about benefits for the economy as a whole. It encourages enterprises to become more efficient and innovative and ultimately to offer more diverse products and services at lower prices and a higher quality. This in turn increases the welfare of individual consumers and households facing a broader range of choices and having a greater purchasing power. Likewise, enterprises have access to cheaper and better inputs, making them more competitive and able to contribute to higher economic growth.

Therefore, it is important that competition between enterprises should not be distorted. To ensure fair competition, the EC Treaty and the secondary legislation deriving from it define a set of rules that enterprises and governments have to abide by. In particular, the Treaty prohibits restrictive agreements (e.g. cartels), abuses of a dominant position, and those state aids (subsidies) which distort competition to an extent contrary to the common interest.

The proper application of competition law and its enforcement is carried out by competition authorities in the Member States and at the European level, where the Commission itself is the competition authority. The competition authorities also have the task of controlling mergers between firms. The design of competition policy has to be kept under continuous review to ensure that it is keeps abreast of changes in the economy and in our knowledge of the way the economy works. DG ECFIN plays a role in this by contributing economic analyses of competition policies and notably their effect on competition itself.

Regulation and evaluation of the performance of network industries

Many sectors of the economy have only recently been opened up to competition, notably the electricity, gas, air and rail transport and telecommunications sectors – generally referred to as network industries. Traditionally, these sectors were characterised by the presence of single national providers, leaving consumers little freedom of choice and making entry by potential rivals impossible.

The rationale of the EU's liberalisation policy has been to increase, through an intensification of competition, the efficiency and the performance of these network industries. Ultimately this is expected to lead to lower prices and better services for households and enterprises, thereby increasing the overall competitiveness of the economy.

To monitor whether and how this liberalisation of sectors has delivered on its promises, and in particular to ensure that competition does not result in any adverse effects on the provision of universal network services, the European Commission, and DG ECFIN in particular, evaluates annually the performance of these sectors as a whole.

In general, it is safe to say that liberalisation has led to considerable improvements in performance: i.e. generally lower price levels, expanded output and productivity gains.

Overall, DG ECFIN’s work in the field of competition and regulation is twofold. First, it contributes to the economic analysis of competition policy, which is an important tool in improving its design. Second, it evaluates the performance of network industries on an annual basis in order to ensure that the recent liberalisation of these industries leads to a change in the competitive environment and benefits users in terms of lower prices, while maintaining high-quality services.