Antitrust Law: Market Structures and EU Single Market

Antitrust Law: Article 101 and 102

Antitrust law, also known as competition law, addresses anticompetitive behavior through Article 101, which prohibits anticompetitive agreements, and Article 102, which prohibits the abuse of a dominant position.

Market Structures

Monopoly: Characterized by a single agent, heterogeneous products, and significant barriers to entry, which can be legal, natural, or artificial.

Oligopoly: Involves a few agents with substantial market power, heterogeneous products, and barriers to entry that are either artificial or natural.

Monopolistic Competition: Features many agents offering differentiated products.

Perfect Competition: Consists of a large number of agents, homogeneous products, no barriers to entry, and no individual agent holds market power. This structure is considered optimal as it promotes competition and enhances consumer welfare.

Market Characteristics

• Product: Products can be homogeneous (indifferent) or heterogeneous (differentiated by trademarks, branding, etc.).
• Barriers to Entry: Barriers can be natural (e.g., high costs) or legal (e.g., regulations). Significant barriers include government licenses, economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms to discourage or destroy new firms. Government regulations often favor existing firms, making it difficult for new firms to enter the market.
• Knowledge: Firms may have perfect knowledge of their own cost and demand functions, but their inter-firm information may be incomplete. Buyers often have imperfect knowledge regarding price, cost, and product quality.
• Competition: Firms may engage in non-price competition, such as loyalty schemes, advertisement, and product differentiation.
• Number of Firms: In an oligopoly, there are so few firms that the actions of one firm can influence the actions of the others, leading to interdependence.

The EEA Agreement and the Single Market

The European Economic Area (EEA) Agreement:

• Provides for the inclusion of EU legislation in all policy areas of the single market.
• Covers the four freedoms: the free movement of goods, services, persons, and capital.
• Encompasses competition and state aid rules.
• Includes horizontal policies such as consumer protection, company law, environment, social policy, and statistics.
• Facilitates cooperation in flanking policies like employment, tourism, and culture.
• Guarantees equal rights and obligations within the single market for citizens and economic operators in the EEA.
• Aims to create a homogeneous European Economic Area.

Antitrust Cases

Antitrust cases typically involve:

1. Abuse of a dominant position.
2. Agreements between companies that restrict competition.
3. Mergers that result in market concentration.