Market integration and economic efficiency : two conflicting goals in EC competition law?

Abstract

This thesis deals with two of the fundamental goals of EC competition law, namely market integration and economic efficiency. The introduction to the thesis draws the distinction between direct and ultimate o~jectives, and concludes that the goal of market integration is both an ultimate and direct objective. Chapter 1 provides a definition of the two goals, concluding that though they are coterminus in the long-run, in the short-run there is the potential of conflict arising between them. Use is made of economic theory to explain the concepts of allocative, productive and dynamic efficiency, as well as that of consumer welfare, and their relation to economic efficiency is highlighted. The four freedoms are also discussed from an economic perspective. Chapter 2 discusses areas of EC competition law where conflict between the two goals in the context of Article 81 EC may arise. The concept of 'a restriction of competition' is discussed, as well as the manner in which Article 81(3) has been used as a tool to promote integration. The effects that the modernisation of the enforcement of Articles 81 and 82 may have on such a use of Article 81 (3) are discussed briefly. The treatment of vertical agreements is then examined, including the concepts of market power, parallel imports, export/import bans, and active/passive sales. The efficiency generating character of vertical agreements is examined, and it is concluded that the severe treatment of restrictions of intra-brand competition, which is motivated by market integration, may have the effect of diminishing efficiency and of actually hindering integration. The block exemption regulation for vertical agreements is also discussed. Horizontal agreements, and possible conflicts between the two goals, are then discussed briefly. Reference to US antitrust law is made to highlight differences in approach. Chapter 3 discusses areas of EC competition law where conflicts may arise between the two goals in the context of Article 82 EC. A distinction is drawn between exclusionary and exploitative practices, and the concept of competition 'on the merits' is discussed. Efforts to block imports/exports by dominant firms are then examined and it is concluded that no conflict exists between the two goals in this area of EC competition law. Geographic price discrimination is then discussed in detail with extensive reference to the approach taken in two of the main cases involving such a practice. The ambiguous effects on consumer welfare are then referred to, and the positive effects that such a practice can have on economic efficiency are discussed. It is concluded that a more nuanced approach is required, to avoid harm being caused to economic efficiency. Chapter 4 discusses Rule 14 of the Schedule to the Competition Act of Malta. This Rule is compared to its counterpart in the UK Competition Act, and the conclusion is drawn that the Commission for Fair Trading and the Office for Fair Competition must be cautious in their application of EC competition law principles to ensure that use is not made of principles which are inspired entirely by market integration and which have harmfol effects on economic efficiency. Legal notices issued under the Competition Act of Malta are also discussed, and it is concluded that EC regulations should be adapted to reflect the fact that the Maltese market is already integrated. The conclusion examines future prospects and derives the main conclusions that flow from the previous chapters.