An example of the effectiveness of the leniency policy is a cartel fined in 2001 is a Vitamin Cartel, The European Union fined eight companies (among which was Hoffman La-Roche) for their participation in cartels designed to eliminate competition in the vitamin sector. Vitamins are used in a wide variety of products such as cereals, drinks, pharmaceuticals and cosmetics. This was reflected in the fine of more than 800 million Euros.
In the competition affairs there are particular agreements other than cartels which are particularly harmful to the market and its consumers. Agreements in which competitors agree to fix price, limit production or share markets or customers between them. Agreements between a producer and its distributors may also be prohibited.
The European Commission applies and enforces EU law. It can require companies to provide information and, if necessary, carry out surprise inspections in the offices of companies and, with a court order, in the homes of company personnel. If the European Commission finds evidence of illegal business practices which restrict competition, it can act to prohibit such behaviour. It can also fine companies up to 10 % of their annual turnover if the companies have, for example, participated in a cartel that fixed prices or agreed how to share out the market between them.
Competition Policy
The leniency policy encourages companies to hand over inside evidence of cartels to the European Commission. The first company in any cartel to do so will not have to pay a fine. This results in the cartel being destabilised. The policy has been very successful since its introduction in the EU. The heavy fines which are imposed on companies found guilty of a cartel have been fined from 0.5 up to 1 billion Euros. These fines go into the community budget, help finance the EU and save taxpayers money. The large fines helps deters companies from setting up a cartel.
Main features of the Competition Policy
The main features and objectives of the common competition policy is to harmonize the rules governing competition among members to ensure unification of the European market for the benefit of all – producers, traders, consumers and the economy in general. The common competition rules seek to prevent enterprises and governments from distorting trade by using their market power and postulate what action will be taken against anti-competitive practices which are incompatible with the common market.
Industrial Affairs
Industrial policy is largely a national responsibility of the member states The EU industry has been seriously affected by the recent economic crisis, revealing a number of structural weaknesses. Industries, together with public authorities, have to undertake the necessary structural adjustments in a politically and socially acceptable way. The EUs role is to ensure that the single market operates in accordance with the rules of an open and competitive system. The EUs industrial strategy consists of policies aimed at improving the business environment and the legal framework necessary for speeding up the structural adjustment and the competitiveness of the European industry under free international trade conditions.
The countries joining the EU means membership in a common market implies acceptance of the consequences of reallocation of production. This also means that many industries which in the past were cushioned by interventionist policies will be exposed to increasing competition in the enlarged market, and in the process some of them will perish. Under circumstances it is likely that governments may attempt to protect threatened industries and jobs and to enlarge their country’s share of high-return industries. This may induce for more intervention by national industrial policy which operates against integration and could even lead to trade war between member states. In the EU a common industrial policy is also needed if the community industry is to take advantage of the opportunities for rationalization, specialization and growth offered by the enlarged market.
Instruments of industrial policy
The treaty provisions is one the policies with the TEU, which in 1992 for the first time gave the EU explicit competence in industrial policy. The community’s industrial policy does not replace that of the member states which shall consult each other in liaison with the commission and, where necessary, shall coordinate action. But strengthening of the competitiveness of community industry and promotion of research and technological development are among the activities which the community will undertake in the course of pursuing its objectives. The commission may take initiatives to promote the competitiveness of European countries whenever it is threatened. The common industrial policy will be market oriented and pro-competition and will be aimed at
- Speeding up the adjustment of industry to structural changes;
- Encouraging an environment favourable to initiative and development of undertakings throughout the community, particularly small and medium sized undertakings;
- Encouraging an environment favourable to cooperation between undertakings;
- Fostering better exploitation of the industrial potential of policies of innovation, research and technological development.
EU industrial policy will also stress access to raw materials, the clustering of businesses, the removal of obstacles hindering the development of new markets, the analysis of the impact of services on industrial competitiveness and the use of standards to speed up innovation.
Conclusion
To conclude my research, it shows that the EUs competitive and industrial affairs are merely related and both policies are similar and in relation in to preventing a shock in economies of Europe. These policies are encouraging massive growth and unity between each country and its businesses. To prevent issues of market failure and the general preference for industries, for market forces to provide inadequate incentives to invest in sectors essential for economic growth, such as high risk new technology industries. And high-tech industries, which are often characterized by economies of scale and imperfect competition, are to engage in activities which require a large expenditure on research and development (R&D) for pioneering and improving technology. An overall as to why the competitive and industrial affairs need a policy is to prevent unequal treatment between each country and to allow those without the resources and the capacity to compete with other larger competitors.
References
European Union economics (Fifth Edition Theo Hitiris)
Economics of EU page 122-130
Economics for Business (John sloman)
European Union (Atiris M J, 2009)
Word Count – 1500
Horatio Williams
09043699
