The launch of the Single Market of the European Union has become a remarkable milestone in providing a basis for economic integration and harmonizing regulations amongst member countries. This paper looks at the main reasons leading to the establishment of this single market, including freedom of the movement of goods, services, capital, and labor. It addresses principles of the competitive framework of the EU, prohibitions, and how to identify the scope of abuse of market power. Furthermore, the paper considers a regulatory proposal of the commission to restrict short-haul flights, elucidating the legitimacy of it and the challenges that can be encountered. This exploration reveals the complexity and subtle interactions between economic integration, competition law, environmental issues, and trade relations under the EU’s regulatory framework.
Creation of a Single Market
The creation of the European Single Market was motivated by the interaction of several economic, political, and legal issues that the member states had to face in order to advance deeper integration among themselves. At the heart was the core goal of eliminating all types of market restrictions on goods, services, capital, and labor mobility across national borders. This objective was jotted down on the founding charters of the European Communities, the Treaty of Rome in 1957 paving the way for the Single Market’s creation in the long term.
One of the factors that ensured the creation of the EU was the gradual harmonization of national legal and regulatory systems in different areas of interest. With the Single European Act coming into force in 1986, there was an unambiguous legal framework and a clear strategy to be realized by 1992 without the Inner Market. It included the approximation of laws and common standards and regulations enacted by the community to eliminate the regulatory obstacles that inhibited cross-border economic activities.
This process was greatly aided by the application of antitrust policy and the rule of no distortion of the market. The EU’s competition rules have been embodied in Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), which aimed for a fair and equal market where the existing anti-competitive agreements and practices are prohibited and the abuse of dominant market position by the Article. It was aimed at preserving the balance of the market and the prevention of the conditions where participants would close themselves into separate areas.
The other key factor for the success of the integration policy was the political determination and commitment of the member states, who significantly influenced the dynamics of the process as well. The Single Market was considered to be an economic development tool, competitiveness promoter, and population welfare advocate due to increasing trade and investment. Solid economic cooperation, which has been one of the major driving forces of the FTA, and the removal of trade barriers between members have been the major contributing factors.
Abuse of Market Power
According to the Treaty on the Functioning of the European Union (TFEU), the abuse of a dominant market position is prohibited. Market-power abuse is when a firm that enjoys market dominance in a particular market takes advantage of its considerable market strength to implement practices that are against consumer interests and that ultimately hinder competition. The situation is that even having a dominant position is not a violation in itself, but only abusive behavior based on dominance can be regarded as something forbidden by EU competition law.
Two examples of behaviors that abuse market power are excessive pricing and predatory pricing. Excessive pricing occurs when a dominant player in the market charges very high prices with no economic value in relation to them. Predatory pricing, on the other hand, is a practice of selling products below the manufacturing cost or marginal cost to drive competitors out of the market, with the intention of recovering the losses by raising the prices once the competition is eradicated. Good examples are a refusal by a leader (that is not justified) to supply competitors (new or existing) with essential inputs or services, forcing customers to purchase additional products or services as a condition for receiving the product or service they want (tying or bundling), the imposition of legal restrictions that prohibit customers or suppliers of engaging in trade with rival companies (exclusive dealing arrangements) and applying unequal conditions to equivalent transactions with trading parties.
The ban on abusing market power under the competition law of the EU aims to fulfill fundamental legal and economic objectives. It legally requires that the principles of fair competition are protected, the interests of consumers are safeguarded, and the inner market is working correctly. It is targeted from an economic viewpoint to prevent market power abuse by dominating firms, which causes harm to consumer welfare, slows down innovation, and reduces productivity. Through the restriction of abusive market practices, the EU competition policy tries to achieve a functioning level playing field and increase the chance of consumers and economic development via effective competition. At the same time, a balance must be maintained between the integration of economic blocs and the prevention of market distortions.
Prohibiting Abuse of Market Power.
The prohibition of the abuse of market power by dominant companies exists as a part of EU competition law, fulfilling both legal and economic objectives. From an administrative point of view, it is the cornerstone of justice in terms of the union law principles and the basic consumer and competition law provisions. Through the adherence to the principle of dominance, which prohibits dominant players in the market from misusing the situation to engage in anti-competitive practices, the market integrity is protected, and the playing field where all market players are successful is created.
In addition, exploiting the dominance of a dominant firm is consistent with the EU’s broader goals of protecting consumer welfare and promoting economic effectiveness. Economically, indefinite abuse of a dominated market can result in prices peaking, output reduction, and diminished incentives for innovation, which will ultimately be to the detriment of customers. The EU competition framework restricts excessive practices. A favorable setting for businesses is produced; this encourages them to innovate, be more efficient, and become more responsive to consumers’ demands.
Above all, the application of control power is essential in order to dampen the misuse of monopoly and to avoid the establishment of monopolistic or duopolistic market conditions. Then, it eases market entry, which leads to consumer choice, and this ultimately creates dynamic and vibrant markets that are the fundamental requirements for sustainable economic growth and social well-being.
Part 2
Justifying the Choice of Article 114 TFEU
In justifying the choice of Article 114 TFEU as the legal basis for its legislative proposal to ban international short-haul flights within the EU, the commission can present the following arguments:
- Harmonization of laws: Article 114 TFEU gives grounds to the measures that are taken within the European internal market and are directed at the creation and maintenance of legislative unification through the approximation of national laws. The commission may claim that including such a ban on short-haul flights in its future legislation is the only way to achieve the uniformity of the rules pertaining to air transport within the EU and, hence, to the EU internal market’s proper functioning.
- Environmental protection and sustainable transport: The very objective of Article 114 TFEU, which intends the establishment and functioning of the internal market, the commission can be in a position to demonstrate that the proposed measure deals with the environmental issue and creates sustainable types of transportation which are inherent to the broad goal of ensuring the efficient working of the internal market. The ban is likely to be perceived as one of the needful things to do in order to ensure that the market is not distorted or disrupted on unjust grounds due to operations that are not ecologically friendly.
Challenging Legislative Proposal
In case Austria brought before the Court of Justice of the European Union (CJEU) a legal challenge against the commission’s legislation banning short-haul flights from EU countries, the CJEU would not be expected to return a judgment in favor of Austria due to the precedent set by previous rulings. Austria argues that the competence provided by Article 191(2) TFEU, containing environmental policy, would be a more appropriate legal basis than Article 114 TFEU, comprising an approximation of laws for the establishment and functioning of the internal market.
Nevertheless, it has been established that the CJEU enunciated principles for the applicable legal basis in a given situation when multiple legal bases could be proper. In Case C-155/91, Commission v. Council, the CJEU enunciated the concept of “center of gravity” or “main objective” as the test to differentiate between the activities of the Union and its Member States. Under this principle, the proper legal basis should be applied depending on the measure, which is more detailed as to the purpose, meaning, and content of the measure taken. In the joined cases C-211/01, commission v Council, the CJEU went further to define the criterion in selecting the legal basis, which included two primary objective factors that were unambiguous and able to be subjected to judicial review, namely, the motive and content of the measure.
By making use of these principles in this matter, the commission’s overall objectives regarding environmental preservation and the promotion of sustainable transport are all highly relevant. However, they are still second to the primary purpose and content of the proposed measure, which is to harmonize the regulations governing air transport within the internal market. The ban on short-haul flights, which is adverse for air transport, hinders the movement of goods and services within the EU countries and affects the free movement since it is part of the internal market.
Consequently, it is possible that the CJEU would confirm the commission’s decision to base the measure on Article 114 TFEU because the former is more related to the primary purpose and the content of what is proposed. Environmental protection, although an important goal, will still be considered as the second objective coming after the primary goal of the measure.
Similarly, the CJEU opined that when an act has a dual aim and one of those aims is the primary or predominant purpose, such an act would be authorized with a legal basis corresponding to that of the dominant purpose or component (Case C-137/12, Commission v. Council).
Therefore, unless Austria can convincingly demonstrate that environmental protection is the predominant purpose of the proposed ban, it is unlikely to succeed in challenging the choice of legal basis before the CJEU.
Conclusion
This paper has explored key aspects of the European Union’s regulatory landscape, including the factors contributing to the establishment of the Single Market, the concept of abuse of market power within the EU competition framework, the legal basis for legislative proposals, and the nature of “new generation” trade agreements. Through a comprehensive analysis, it has shed light on the intricate interplay between economic integration, competition policy, environmental considerations, and trade relations within the EU. The insights provided offer a deeper understanding of the complex regulatory mechanisms and decision-making processes that shape the EU’s internal market, competition dynamics, and external trade relations.
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