Competition (Including State Aid)

Competition policy generally aims to make individual goods and services markets work better for their users, which may include businesses as well as personal consumers.  Economic principles predict that markets work best for their users when there is effective competition, which generally comprises actual competition among existing providers in a market, potential competition from new entrants to the market and countervailing buyer power by users.

In practice, the sources and extent of competition differ from market to market and in some cases it be may be possible that the strength of any one of actual competition, potential competition or countervailing buyer power may be sufficient to deliver effective competition.  For example, the principle of a ‘contestable market’ has had an important impact on how economists and national competition authorities (like the Competition and Consumer Protection Commission (CCPC) in Ireland) think about competition in relevant markets for the purposes of merger control cases.  Effectively competitive markets imply lower prices, better choice and/or higher quality through innovation, and as a result the overall economy performs better in the long-run.  That is why competition policy is important for the performance of national economies: competition supports productivity and innovation, and in turn the competitiveness of countries, and in the long-run sustainable economic growth.

Competition policy/competition law fundamentally aims to safeguard competition in individual goods and services markets across the economy.  It does not seek to protect businesses (large or small etc.).

The competition policy landscape has changed significantly in Ireland over the past few decades and today, in common with the UK, the environment is basically one where ‘undertakings’ caught by competition law are required to familiarise themselves with competition law, which was significantly amended via the Competition (Amendment) Act 2022.  In practice, this means that all businesses and business representative groups, chambers of commerce etc. should familiarise themselves with at least the main provisions of the new legislation (including merger control which is relevant in the buying or selling of businesses).

The key areas of competition work (which encompasses both law and economics, with the economic element often provided to clients through their legal representatives) include (but are not limited to) the following:

  • Restrictive practices – horizontal and vertical.
  • Mergers and acquisitions – to assess whether a proposed transaction would likely lead to a substantial lessening of competition in a relevant market in the State (SLC is the substantive test for merger control in Ireland).
  • Dominance assessment – is there a dominant position and, if so, has an abuse of dominance occurred (dominance assessment tends to entail much more than looking at market shares in a relevant market and a finding of dominance per se does not offend against competition law – the law recognises that firms may wish to become dominant in their relevant markets but what the law really cares about is abuse of a dominant position).
  • Cartel investigations (which include firms agreeing (overtly or covertly) to fix prices, share markets according to customer types or geographically or engage in bidding rigging).
  • Market studies – for example, where the CCPC initiates a study of a particular market to establish the extent of competition and identify possible practices that might be restrictive of competition (the need for the CCPC to carry out a market study may come about on foot of complaints an NCA has received from users or competitor firms in the market, for example recent entrants).
  • State aid – State aid studies arise in the context of the EU State aid rules, which are designed to support the functioning of the EU internal market.  State aid cases arise where public money is provided to undertakings that may confer an advantage, distort or threaten to distort competition in a relevant market or markets and affect trade between Member States of the European Union.
  • Competition compliance – where an undertaking (for example, a firm or a business representative organisation) wishes to procure training in competition policy/law with the objective of complying with the legislation.  Such competition training to undertakings may be provided by a specialist economist or law firm or both.

Crucial to all aspects of competition work is the fundamental requirement to define the relevant market, which generally speaking comprises the relevant product market (goods and/or services) and the relevant geographic market (whether local, regional, national or international) (there might also be a time element to the relevant market, such as relating to the ‘night-time’ economy or ‘seasonal effects’ may be present at certain times of the year).

In regard to the economic aspects of competition work, it is important that the economist has a firm grounding in IO (industrial organisation) economics, is knowledgeable about relevant data sources that may be required (in addition to information provided by undertakings through their legal representatives) and is skilled in statistical and econometric analysis (which have developed significantly in recent years).