Competition limits power, safeguards freedom and creates prosperity. It is the regulatory force upon which our social market economy is based and upon which our democratic order is built. For competition to have this effect, it requires reliable rules and independent institutions.
Competition limits power
Competition makes it more difficult for companies to exploit positions of market power, for example by foreclosing markets or forcing other market participants into a position of dependency. Where economic power is highly concentrated, there is a growing risk that it will gain political influence. Open and well-regulated markets therefore help to disperse power and maintain a balance between economic strength, political decision-making and societal interests.
Competition safeguards freedom
Competition creates choice for consumers. It opens up opportunities for new businesses and keeps markets open to better ideas, new business models and entrepreneurial initiative. Freedom in the social market economy also means that economic success is achieved through competition. Market positions based solely on size, market foreclosure or entrenched structures run counter to this principle.
Competition creates prosperity
Competition provides incentives for innovation, renewal and improved performance. Companies must strive to respond to changing needs and further develop their offerings. This fosters dynamism and adaptability. Particularly in times of transformation, technological change and economic uncertainty, competition is a vital foundation for growth, sustainability and widespread prosperity in our society.
Competition needs rules
Competition does not work by itself. It requires a legal framework that prevents cartels, limits the abuse of market power and prohibits mergers where they threaten effective competition. In some areas, sector-specific regulation is also required — for example, where market structures hinder competition and specific rules are needed to enable it in the first place. Antitrust law and sector-specific regulation together form the foundation of the competition framework. They safeguard the openness of markets and enhance the prospects for performance and innovation to prevail.
Competition requires independence
To ensure that competition is effectively protected, reliable institutions and independent analysis are required. Economic power and short-term political interests can distort competition. Both must be recognised and put into perspective. An independent institution such as the Monopolies Commission monitors developments, identifies undesirable trends and highlights the need for reform. It regards competition as an ongoing regulatory task.
