The Politics of Competition and Institutional Change in European Union: The First Fifty Years

Competition causes suppliers of goods and services to lower prices, raise quality, and innovate. It is crucial for maximizing social welfare in a market economy. Ironically, however, the market by itself does not guarantee competition, unless one makes heroic assumptions about the costlessness of market entry (North 1981; Neumann 2001: 5ff.). As Adam Smith famously warned, ‘people of the same trade seldom meet together . . . but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices’. Yet it is not just monopolies, cartels, and mergers that can inhibit competition. Government subsidies and special privileges may also distort the market—within a country and even abroad through trade. Competition thus is an inherently political issue, as well as an economic one. Safeguarding competition, whose economic importance is explicitly acknowledged in Article 3(1)g of the Treaty of Rome, is one of the most prominent governance functions of the European Commission for the EU Common Market. The Commission exercises real, supranational power in this realm.2 In sometimes dramatic ‘dawn raids’, the antitrust experts of the Directorate-General Competition (DG Comp) have discovered and broken up illegal market-sharing, pricefixing, and other competition-impeding agreements from sugar and steel pipes to vitamins, video game consoles, and cars. When Volkswagen, for instance, was