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TFEU competition policy – are we forgetting something?

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In a regime in which welfare surplus is maximised through a competitive nature routing in merely microeconomic analysis, it stimulates questions to the feasibility of this when considering the diversity across EU. The integrated market ideal may enhance economic freedom within the region opening the possibility to spread resources across borders to address scarcity. Competition policy acts as a catalyst for shaping the rules of the game for this to happen in a prosperous manner. However, considering that, the integrated market at this point is nor homogeneous nor particularly heterogeneous, the principles of competition policy for which countries largely are to comply to seem to neglect political contribution.

Whereas microeconomic principles make sense in a firm strategic perspective, it is clearly a more compound analysis when considering competition policy in terms of welfare across nations. The argument here is that, equilibrium motivated principles increasingly deviate from the theoretical outcome if the variables involved include values of countries with fragmented approaches. EU is in its essence not a politically integrated system. Yet, the functional competitiveness has increasingly shifted to a comprehensive equilibrium economic fixated ideal, in which it filters variables that are embedded in varieties of capitalism. It has in that sense evolved to a point where limited consideration is given to the broader scope for which competition policy sits within.

Three factors limit the feasibility of the present construct of competition policy in EU. Firstly, the expansion of membership to the union creates more differences than similarities in structures within socio-economic systems across member states. In its own nature, this demands more leniency as it consequently increases participants and political variety adhering to the guidelines of competition policy. Secondly, the scope of competition policy undermines some comparative advantages of nations in EU as the increasing short-term economic reasoning lessens institutional complementarities of members. Institutional complementarities lie within different countries for which their system over decades have established to fit the form of its own structural initiatives. Thirdly, the shift to rely on the business community to asses for itself whether a transaction infringes on the law or not, tends to make companies focus on short term non-risky investments for which they do not end up in litigation. Moreover, many companies in different countries do simply not have expertise on this matter. This increases costs associated to litigation process and essentially decreases the efficiency of companies’ activities having a deterring effect on welfare.

Finding the maximum efficiency with merely microeconomic application based on available information may be a theoretical necessity in order to make sense of options. However, it is a simplification of reality. It underestimates deviations in social marginal rate of substitution and accordingly the institutional complementarities, which together with enforcement process deserves more attention and space than is currently given.

References:

Chugh, S. (2014) ‘Economic efficiency’. Ch. 18. [Internet] Available from: http://skchugh.com/images/Chapter18.pdf. :  [Accessed March 2014]

Hansen, B. and Wigger, A. (2010) ‘Revisiting 50 years of market-making. The neoliberal transformation of European competition policy’. Review of International Political Economy, 17. 1, pp, 20-44.

Hall, P. and Soskice, D. (2001) ‘An Introduction to Varieties of Capitalism’ in Hall and Soskice (eds) Varieties of Capitalism, Oxford: Oxford University Press, pp. 1-66.

Wigger, A. and Nölke, A. (2007) ‘Enhanced Roles of Private Actors in EU Business Regulation and the erosion of Rhenish Capitalism: the Case of Antitrust Enforcement’. JCMS 2007 Volume 45. No 2. Pp. 487-513

Alan Brejnholt, #381 

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Author: studentnovasbe

Master student in Nova Sbe

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