The competition policy is a part of the state of order and economic policy , which in the interest of consumers and of all companies (regardless of size and legal form) a functional, unrestricted as possible competition tries to ensure to ensure and sustainable.
In contrast to the regulatory policy aimed at a few sectors, which aims to prevent allocative market failure, the competition policy aimed at markets has the goal of preventing anti-competitive behavior. Regulatory policy intervenes, for example, in sectors in which the price between seller and buyer cannot be freely negotiated and has to be approved by the state (e.g. electricity prices). All indirect state measures that represent the framework conditions that are equally applicable to those involved in the market are therefore not part of the regulatory policy and, in the special case of the ban on cartels, would be part of competition policy.
The most important and at the same time most influential in terms of economic policy are neoclassical theory , the Freiburg School ( ordoliberalism ), the concept of freedom of competition , the concept of functional competition and, in a negative attitude, the Chicago School .
In classical liberalism there is neither competition policy nor the understanding of its necessity. During a dispute with mercantilism in the 18th century , Adam Smith put forward the thesis that the individual, through his natural drive, could promote social prosperity more clearly than was possible through the state through economic policy and dirigism . Smith stipulated that the state should concentrate on creating infrastructure (roads, bridges, ports, postal systems, etc.) and law and order. Protection of competition is not mentioned in Smith's thesis, but it provides for the abolition of guilds, tariffs and state legal monopolies.
The neoclassical model describes an environment of perfect competition and a general equilibrium, which is based on the homogeneity of the goods, an infinitely high reaction speed, the absence of preferences, complete market transparency and markets without exit and entry barriers. The guiding principle provides that a static market equilibrium results, in which the quantity offered on the market corresponds to the demand, the value-based turnover and the converted quantity are maximum, the entire competition makes the "right" selection and the providers achieve a maximum profit. However, the conditions of the mission statement are extremely seldom in line with reality (e.g. financial markets).
Freiburg School (Ordoliberalism)
In ordoliberalism , Walter Eucken and Franz Böhm established an overall connection between the state, social and economic order, in which the design of the competitive order becomes the core issue. In contrast to “perfect” competition, the “complete” competition described by Eucken and Böhm does not focus on avoiding measures that are hostile to the market economy or on optimizing price theory models. The core idea of the Freiburg School was aimed more at competitive structures and less at precise effects on competition. Ordoliberalism also had a strong influence on German antitrust law and, due to its position within the Directorate-General for Competition, also on European antitrust law.
The concept of freedom of competition (neoclassical)
Friedrich August von Hayek and Erich Hoppmann saw in their theory freedom of competition from the point of view of freedom as the absence of coercion by others and freedom as the absence of restrictions on barter by market participants. Restrictions on the freedom of market participants should only be possible through corresponding market performance, whereby artificial restrictions of competition by the state are to be prevented. Antitrust law should serve to safeguard freedom of competition. For the design of state competition policy, Hayek and Hoppmann envisage a differentiation between artificial (arbitrary) and natural restrictions, from which different “sectors” of competition policy can be derived.
The concept of working competition (Harvard School)
Coming from complete competition, John Maurice Clark put forward the thesis that the addition of imperfections to actually existing imperfections could make competition more functional (" antidote thesis ") than by reducing the existing imperfections. Building on the studies by Maison (1939) and Clark (1940), Joe Bain was the first to examine the relationship between the rate of return and the market structure. In addition, Bain put forward the thesis that concentrated companies tend to reduce competition in order to maintain their own market position and that barriers to market entry would only prevent discipline by potential competitors.
The Chicago School
Representatives of the Chicago School such as Richard Posner , Harold Demsetz and George Stigler reject the market structure-market behavior-market outcomes paradigm and fall back on neoclassical price theory. In addition, they reject state intervention in market structure and market behavior, as they are convinced that monopolies arise in a deserved manner, based on superior efficiency (“survival of fittest”) and that the only cause for long-lasting monopolies can only be the state. They believe that the cost of maintaining a monopoly in a free market economy is always high enough to automatically make long-term monopolies disappear, and that monopoly market structures have hardly any negative effects. The ideal state competition policy, according to this school, is total inactivity.
The main objective of competition policy is to prevent the economically or socially damaging effects of unfair or anti-competitive behavior. The latter include, in particular, cartels , certain mergers and the abuse of market power. Another aim of competition policy is to enable a fair distribution of income by creating a framework whereby income differences arise solely through differences in performance.
German competition policy
For a long time, the opinion prevailed in Germany that cartels were a good instrument to control price instability, which can arise, for example, from price wars. Only in 1923 was a state cartel supervisory authority established. The current law against restraints of competition (GWB) has existed since 1958. It introduced the Federal Cartel Office and the prohibition of cartels. German competition law also includes the law against unfair competition (UWG) from 1909, which protects competitors, consumers and other market participants from unfair and distorted competition.
German competition policy in its form of regulatory policy is based on legal instruments, which means that all three state powers bear responsibility for competition policy. The legislature ( Bundestag and Bundesrat ) is responsible for the formulation and political shaping of the competition laws. The judiciary (cartel senate) is responsible for the law of competition complaints and the executive (cartel authorities) ensure compliance with competition law regulations. The Federal Government, as the main body responsible for competition policy, on the other hand, ensures compliance, review and further development of the principles and legal norms of competition policy and participates in shaping European competition policy.
The competition policy instruments that are used to enforce and maintain competition can be divided into six groups. This first group includes the legal regulations to prevent unfair and immoral behavior by market participants. The second group consists of the instruments for dismantling non-arbitrary restraints of competition, which include measures to increase market transparency or to promote small and medium-sized enterprises. The third group of measures focuses on competition policy instruments in the form of arbitrary restraints of competition by the state, which creates the conditions for eliminating or hindering competitors. The fourth group contains all the instruments of antitrust policy which switch off agreements that lead to the hindrance of competition. The fifth group aims to prevent the abuse of a dominant role. Finally, the instruments of concentration control (merger control) are intended to prevent corporate mergers from giving rise to arbitrary restrictions on competition.
The general ban on cartels (Section 1 GWB)
The general prohibition of cartels has the task of preventing agreements and coordinated behavior between companies which prevent, restrict or distort competition.
Prohibition of abuse in the case of market dominance (Section 19 GWB)
The purpose of the prohibition of abuse is to prevent all abusive exploitation resulting from a dominant market position. This can include the demand for high or different fees, the impairment of competitive opportunities for other market participants and the denial of access to networks or infrastructure facilities.
Discrimination and disability prohibition (§ 20 GWB)
The prohibition of discrimination and unreasonable hindrances applies above all to companies that dominate the market and that have superior market power. The law stipulates that companies with a dominant market position neither unreasonably hinder another company nor treat them differently, not exploit dependencies on small and medium-sized companies and not ask other companies to grant advantages.
Boycott prohibition and prohibition of other anti-competitive behavior (§ 21 GWB)
Section 21 of the GWB regulates that companies and associations of companies do not call for delivery blocks or purchase blocks, do not threaten or inflict any disadvantages, promise or grant no advantages, do not impose any compulsion to join an agreement, do not behave uniformly in the market and none may inflict economic disadvantage on others because he has applied for or suggested intervention by the antitrust authority.
Recognition of competition rules (Section 24 GWB)
According to §24 GWB, business and professional associations can submit an application to the antitrust authorities at any time for recognition of competition rules. If the submitted competition rules are recognized, they have the character of voluntary rules of the game for the competition, which should apply equally to all companies involved in the association. The difference to the state rules of the game is that compliance with them cannot be enforced by means of sanctions.
Special regulations for agriculture (Section 28 GWB)
If no (horizontal) price fixing and anti-competitive measures are intended, the ban on cartels (Section 1 GWB) is invalid for agricultural producers and their associations. The cartel prohibition also becomes invalid in the case of vertical price fixing, which affect the sorting, labeling or packaging of agricultural products.
Vertical price maintenance for magazines and newspapers (Section 30 GWB)
Companies that produce newspapers and magazines can legally or economically bind the buyers of these products according to the law of vertical price fixing, agree on certain prices when reselling them or impose the same binding on their buyers until they are resold to the last consumer.
Merger control (Section 37 GWB)
The control of mergers (also known as merger control) is an instrument that aims to prevent the excessive concentration of entrepreneurial power .
Regulation of the award of public contracts (Section 97 GWB)
In § 97, the GWB regulates the award of public contracts (e.g. procurement of goods, construction and services) in competition and ensures a transparent award procedure.
The principles of equal treatment of the participants, the consideration of medium-sized interests and the award of contracts to competent, efficient and reliable companies apply.
European competition policy
The basis for European competition policy was laid in the Montan Union Treaty of 1951 and in the Treaty of Rome for the establishment of the European Economic Community (EEC) of 1957. The competition policy of the European Community was shaped by the same ideas that were decisive for German competition policy. In the meantime, European law has become more and more important and is beginning to have an impact on the national law of the members of the European Union (EU), so that within the EU there is a tendency towards standardization of competition policy.
Like the Federal Cartel Office, the European Commission with the Directorate-General “Competition” as the main body responsible for European competition policy has the right to information and prohibition as well as the right to impose fines.
The aim of European competition policy is to “(set up) a system that protects competition within the internal market from being distorted”. European competition law is based on four pillars, the first three of which are also anchored in German competition law: (1) prohibition of cartels (with exceptions), (2) prohibition of abuse for dominant companies and (3) merger control. The fourth pillar (4) combating state restraints of competition pursues the goal of market integration by opposing state restraints and distortions of competition which are initiated by the member states through different state monopolies, monopoly rights, preferential treatment of public companies, the approval of exceptional areas, state subsidies and aid , sets up. The comparison of the German and European instruments is shown in the table below.
|regulation||Law against Restraints of Competition (GWB)||European competition law|
|Ban on cartels with exemption options||§ 1 GWB ban on cartels (since 1957)
§ 2 Optional agreements
§ 3 SME cartels
|Article 101 TFEU|
|Prohibition of abuse for dominant companies
|Section 19 GWB||Article 102 TFEU|
|Merger control||Sections 35–43 GWB (since 1973)||EG-FKVO 139/2004|
|Combating state restrictions on competition||Article 106 TFEU: State Monopolies and Public Enterprises
Article 107 TFEU: State aid
State aid control (Articles 106-107 TFEU)
Aid includes benefits granted by the Member States, which can take the form of non-repayable subsidies, cheap loans, tax / duty exemptions, loan guarantees and government participation in companies. Since the Member States without control would promote their economy at their own discretion through subsidies, tax reductions, state guarantees, preferential conditions for the use of certain services and consequently the performance competition in the common market would be distorted by Member State aids instead of tariffs and non-tariff trade barriers Controls absolutely necessary.
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