By Enrico Bravo, 89 London
Competition law has a key role in the European integration process. Perhaps the most important goal of the European Union (EU) is to integrate member states economies to create a single European market. This process involves transformation. From fragmentation of the European economies to a single unified European market. The European Commission (Commission) is the institution in charge of ‘promoting the general interest of the EU’ and it is also the EU’s competition enforcer. Competition is a tool for both the Commission and the Court of Justice of the European Union (CJEU) to achieve negative integration, which means striking down barriers that limit trade or competition within the EU’s single market.
The scope of EU competition enforcement as a rationale for negative integration is divided in 2 different areas. Firstly, eliminating private barriers to trade. Private actors may generate contractual barriers to restrict competition in a particular geographic location or, to put it broadly, to limit the circulation of goods and services. For example, pharmaceutical companies have incentives to establish a price floor to certain products depending on the geographic area where these will be sold. Pharmaceutical prices vary across different member states and this provides a lucrative opportunity to keep prices high in certain jurisdictions. The Commission has consistently held that these restrictions to trade are a violation of competition as they create geographic divisions within the EU’s single market. Secondly, removing barriers to trade created by member states. Governments have proved reluctant to surrender power in certain industries traditionally in charge of a State-owned monopoly such as telecommunications, gas and electricity. In this case, competition has again proved to be a malleable tool to reduce the scope of power of monopolies and introduce competition into these markets. In some cases, the Commission has negotiated settlements agreements to break-up energy companies. This to allow the entry of new market players into the market, increase consumer choice and eventually reduce prices.
It could be argued that negative integration (i.e. striking down barriers to trade) could lack democratic legitimacy if compared to positive integration (i.e. regulation). The latter requires a legislative proposal put forward by the Commission to the European Parliament and the European Council of ministers. Thus, involving a longer political process. On the other hand, negative integration is achieved directly by the Commission enforcing the EU treaties. For example, by pursuing competition infringements across the EU. Claims that negative integration lack democratic credentials could be rebuffed as the Commission is in principle acting within the scope of powers to achieve market integration, a wider EU policy goal.
Negative integration is disliked by member states as they lose power in certain ‘strategic industries’ without their express consent. Whereas private actors may also suffer uncertainty as economic arguments – traditionally linked to competition in support of commercial practices – may be disregarded to achieve market integration, a political goal. Neofunctionalism, one of the European integration theories, could explain the rationale supporting the enforcement of competition as a tool for market integration. According to this theory, European integration will be achieved by the ‘spill over’ effect. Integrating one sector of the economy will lead – by necessity – to expand integration to other sectors. For example, it would not make sense to integrate telecoms if gas and electricity are excluded. Thus, this has ultimately led to a complex and interconnected network called the EU single market.
Economic integration is an essential element of the European integration process. It is not surprising that the Commission is pushing forward to achieve this goal. In fact, the Commission was created for it.