Following the devastation of World War II, six European countries founded the European Union in 1957 to advance peace and democracy on the continent. An integral part of the union was a common market ensuring fair competition.
The EU’s founders established rules and appointed a commissioner of competition to enforce them, so companies would compete based on price, quality, service and innovation, and no foul play. Without such rules for competition, businesses are tempted to gain an unfair competitive advantage over one another.
They may become greedy or deem competition “inconvenient” because it means that even if they’re thriving, they have no guarantee of future success.
Recently, the European Commission broke up seven cartels that were controlling the production of car parts. By colluding with each other to fix prices, these companies escalated car prices for consumers. Similarly, governments can undermine fair competition by providing subsidies to only select companies.
For example, several European governments have provided special tax benefits to Fiat, Starbucks and Apple. These types of subsidies, which taxpayers finance, give companies an unfair competitive advantage over rivals that could potentially offer consumers a superior service or price.
Lack of fair competition can erode people’s trust, not just in the market, but in society at large. People who perceive inflated prices for electricity or the medicine they depend on may soon come to conclude that “ the world isn’t really fair.”
The market should serve all, but overly steep prices make it seem “more like the private property of a few powerful companies.” Equal treatment helps people trust one another, and society runs on trust. People need to have confidence in the products they consume and the services they require which is why regulation matters. Especially in an age of rapid technological transformation, people need to feel sure that the search engine they use isn’t hindering market competition, that online businesses aren’t sharing consumers’ personal information and that the software behind self-driving cars is safe.
As society grows, trust becomes simultaneously more needed and harder to foster. Regulation and competition rules level the playing field for private businesses, encourage innovation and send a message of fairness to citizens that reinforces their trust in society.