Distortion Of Competition Research Articles

EU legislators approve the electricity market reform

The European electricity market is on the brink of transformative regulatory changes designed to reshape its landscape fundamentally. These changes encompass measures aimed at ensuring market stability, enhancing efficiency, promoting investment in clean energy, and safeguarding stakeholders from energy crises. Central to these reforms is the promotion of Power Purchase Agreements (PPAs) and Contracts for Difference (CFDs) to stabilize markets. Considering that existing barriers are impeding PPAs widespread adoption, the new design of the electricity market prompts regulatory adjustments to streamline access while maintaining fair competition. Concurrently, the design of CFDs must navigate competition distortions and ensure long-term viability, posing challenges for the European Commission in aligning them with State aid rules. Efforts to boost market efficiency include the reduction of intraday gate closure times, effective January 2026, and the establishment of minimum bid sizes to optimize resource allocation and pricing mechanisms. Moreover, the regulatory framework prioritizes incentivizing investments in clean energy, underscoring Europe’s commitment to sustainability. Member states will wield the power to implement non-fossil flexibility support schemes, offering payments for available non-fossil flexibility capacity, thereby fostering the transition towards cleaner energy sources. Lastly, protective measures are being instituted to shield consumers and undertakings from energy crises, emphasizing the need for resilience and stability in the sector. As these reforms unfold, policymakers must delicately balance fostering innovation, ensuring competitiveness, and safeguarding stakeholders’ interests. This article delves into the complexities of these reforms, offering insights into their implications and challenges.

CO2-Bepreisung und Industriepolitik

Abstract Carbon pricing is a central instrument of a market-based climate policy. However, the different international price levels vary greatly, thereby creating new distortions of competition. To compensate for this, state aid for transformation efforts becomes relevant. Industrial policy therefore has a new and difficult role to play in the transformation.

Climate true‐cost analysis of industrial goods and its regulatory implications on value chains and global competition

AbstractClimate change and its damaging consequences for ecology and humanity is advancing. Industry and its metals sector are responsible for most greenhouse gas emissions. Current costs of industrial goods do not reflect the true costs caused by the externalized climate damages of its production and thus offer no competitive incentive to decarbonize. Additionally, regional climate regulation can lead to competitive distortion. We therefore aim to investigate the impact of climate cost internalization on the metals industry. Using true‐cost analysis for an exemplary and widely used metal product, the effects of climate true costs depending on production region, technology, and energy mix, CO2e taxation and value chain are examined. Based hereon, the impact of internalizing climate true costs together with the introduction of a carbon‐border tax on the carbon leakage problem, climate protection, and the cost situation for companies in global competition are investigated. The results of the study show that steel and wire production is responsible for most CO2e emissions showing significant decarbonization effects by steel recycling whereas production location and logistics play a minor role. On a competitive level, cost internalization has hardly any effect on the product costs because of the currently low CO2e‐taxation rates. Thus, almost no incentive to produce or consume in a climate‐protective way is generated, incentivizing production in pollution havens versus highly climate regulated regions. Instead, to realize emission efficiency gains and innovations leading to a competitive advantage of decarbonized products and value chains, a significant increase of CO2e‐taxation rates together with a carbon‐border tax is necessary.

Economic and legal aspects of consumer rights protection

The article is devoted to the study of the construction "protection of consumer rights as a component of the economic legal order". The sustainable development of our country can be solved in the context of ensuring the rights of consumers, since the development of the economy is not possible without the reliable functioning of the consumer market. Only a protected and confident consumer is able to create conditions for the sustainable development of the enterprise even in adverse conditions of large-scale military aggression. It is the consumer at the microeconomic level who decides on the direction of his money, thereby exerting a kind of economic influence on business entities. Therefore, the protection of consumer rights cannot be reduced only to the restoration of already violated rights, since this does not allow to prevent their repetition.
 It was concluded that the prevention of violations of consumer rights requires the state to implement a preventive approach to prevent and prevent such violations, which is possible within the limits of ensuring compliance with the economic legal order. For this, the state must ensure compliance with the requirements of legitimate economic activity, in particular, the rules on fair competition and prevent the abuse of a monopoly position and other types of distortion of competition, as well as manifestations of unfair competition in areas of economic activity related to the consumer sphere. These tasks can be solved only under the condition of the introduction of the appropriate state economic policy. In order to ensure the interests and rights of consumers, there should be a consolidated influence of state bodies, local self-government bodies, as well as self-regulatory organizations of business and consumers, which will ensure compliance with high standards of conducting business activities that take place in organizational and economic relations. Also, ensuring the observance of consumer rights should be carried out in the organic interconnection of economic-production and intra-economic rela­tions, as this allows for the creation of a system of compliance with the quality standards of goods, works and services sold to consumers.

The important of eliminating energy market distortions: The perspective of industrial green productivity

The elimination of energy market distortions (EMDs) is a key objective of energy marketization reform and plays a crucial role in advancing green industrial development. This study, based on the provincial panel data from 2008 to 2018 in China, first measured the EMDs from the perspective of competition and non-competition distortions, and then investigated the effect and mechanism of EMDs on industrial green total factor productivity (GTFP). The results indicate a declining trend in EMDs from 2008 to 2018, with a hierarchical distribution from high to low across the western, central, and eastern regions. Particularly, competitive distortions of EMDs inhibit industrial GTFP by negatively affecting green technological innovation. Moreover, the inhibitory effect is more pronounced in the eastern region. Additionally, the inhibitory effect amplifies as local governments face increasing pressures related to economic growth and fiscal demands.

Digital Transformation of EU Customs: eCommerce VAT Legislation and a Proposed Customs Clearance Application

In the digital world, borders between countries are fading, and many people keep making more and more online purchases, often from offshore vendors. Cross-border e-commerce is a game-changer for international trade but poses serious challenges for traditional customs procedures. As the number of parcels continues to grow rapidly, customs authorities around the world strive to balance between effective revenue collection, trade facilitation, and proper safety controls. At the EU level, significant revenue losses and competition distortion have led to changes in VAT rules with a key policy objective to fight tax fraud in e-commerce and reduce the administrative burden of VAT collection. The VAT e-commerce package that came into force on July 1, 2021, includes measures on imports of low-value goods from third countries. The adopted solution imposes liability on digital platforms that play a crucial role in the rise of B2C internet sales. This article provides an overview of e-commerce global trends and challenges, international organizations’ initiatives, emerging technology pilots, as well as best practices. It also offers a critical description of the new EU VAT provisions that have a severe effect on customs. Moreover, it describes the design, functional, and interoperability specifications of a proposed web-based application that enables buyers to lodge customs declarations themselves, aiming for improved transparency on import-related charges and more effective e-government at a more general level through the digital transformation of customs clearance. Doi: 10.28991/ESJ-2024-08-01-024 Full Text: PDF

Integration of legislation on countering tax crimes in the EU: opportunities and limitations

The subject. The article examines the norms of the current tax and criminal legislation of the EU, the experience of which in the future may be in demand in the process of integrating the legal regulation systems of the EAEU states when developing issues of countering tax crimes. The subject of the article is to analyze the problems of: methodology of tax crime research in the EU and data sampling criteria; integration of national tax systems; definition of tax crime in the EU; spread of VAT fraud.Modern law enforcement practice is analyzed using the system-logical method, which indicates the complication of forms of tax evasion and concealment of actual financial and economic transactions.The main results. It is noted that the need for effective law enforcement to ensure the financial stability of states, to counteract distortions of competition resulting from tax evasion is due to the organized and highly structured nature of a significant part of tax crimes, the expansion of the scale of cross-border tax crimes involving foreign elements. The European legislation does not contain a definition of a tax offense as such, but contains a list of types of behavior with specific descriptions of prohibited behavior. It seems that national legislators deliberately preserve a certain amount of ambiguity between prohibited and permitted tax evasion, offering a broad definition of tax evasion, since narrow specifics in the definition of such offenses can lead to undesirable impunity, exclude a flexible approach in responding to changes in this area of legal relations.As a result of the application of the formal legal approach and comparative analysis, conclusions were obtained that, subject to careful preliminary research and practical verification, successful decisions in the field of combating tax evasion and tax fraud adopted in some jurisdictions can be used to improve the legislative provisions of other states.

The impact of recapitalisations and bank competition on Greek bank net interest margins

PurposeThis study investigates the reasons behind the very high net interest margins in the Greek banking industry compared to the euro-area, focussing on the association between bank competition and recapitalisations.Design/methodology/approachThe author conducts a dynamic panel analysis covering the period from the early 2000s to 2021, that controls for possible endogeneity and treats for heterogeneity. The author also employs local projections impulse response functions that control for structural changes in Greek banking.FindingsThe author finds that low bank competition has contributed to high net interest margins in Greece. Interestingly, the impact of recapitalisations conditional to low bank competition has had a significant further impact on increasing net interest margins, which is a noteworthy case due to several Greek bank recapitalisations in the last ten years. The author’s findings are supported by local projections impulse response functions.Originality/valueTo mitigate distortions in bank competition, the author argues to accelerate steps toward the direction of the banking union and a common bank regulation framework in the euro-area.

Reconciling Environmental VAT Differentiations With EU State Aid Law

Differentiations in value added tax (VAT) rates and VAT exemptions are used to pursue environmental policy goals, among other things. This article analyses the compatibility of such environmental VAT measures with European Union (EU) state aid law. It is found that the criteria for the granting of a fiscal advantage to (certain) undertakings and the liability to (threaten to) distort competition and affect intra-Union trade are typically fulfilled in these situations. Conversely, the qualification of the relevant advantage as ‘state’ aid (as opposed to Union aid) essentially depends on the (voluntary or mandatory) character of the advantage according to the EU VAT Directive. In any case, one could argue that aligning the VAT legal framework with the European Green Deal is now an additional objective of EU VAT law. Such a reading would speak against the selectivity of these environmental measures pursuant to the Court of Justice of the European Union’s (CJEU’s) established three-stage assessment. Value added tax (VAT), rate reductions, rate differentiation, exemptions, state aid, Union aid, selectivity, distortion of competition, environmental policy, European Green Deal.

The hidden costs of electricity

The price of electricity must take into account all the costs, both direct and induced, which are often hidden. This is true when calculating the average production cost per kWh at the power station. It is also true in the context of the operation of the wholesale electricity market based on the merit order, which leads to power stations being called on the basis of the marginal cost per kWh. Ignoring these hidden costs leads to distortions of competition and sub-optimal choices.

Regulating Digital Platform Ecosystems through Data-Sharing and Data-Siloing: Consequences for Innovation and Welfare

Digital platform ecosystems thrive on their ability to acquire and leverage user data across multiple data-driven services. This enables dominant platforms to harness insights obtained from their primary markets, where user data is collected, thus gaining a competitive advantage in secondary markets, where they exploit this data. While data cross-use brings about efficiencies, policymakers worldwide express concerns about the economic power and potential distortion of competition and innovation incentives associated with it. To address these concerns, two distinct and targeted policy interventions have been suggested: data-siloing, which restricts the cross-use of data within platform ecosystems, and mandated data-sharing with competitors. Using an analytical model that examines data cross-use in digital platform ecosystems, we analyze the impact of data-siloing and data-sharing obligations, and their interaction on competition, innovation, consumer welfare, and overall social welfare. Our findings indicate that an optimal policy involves data-sharing without data-siloing, whereas the EU’s Digital Markets Act currently mandates both types of data cross-use regulation.

The Foreign Subsidies Regulation of the European Union: A New Instrument Levelling the Playing Field?

The European Union (‘EU’) has adopted a Foreign Subsidies Regulation (‘FSR’) to address potential distortions of competition in EU markets caused by subsidies granted to companies by non-EU governments. The FSR aims to level the playing field for all companies active within the EU and to close a regulatory gap left by existing frameworks (such as the EU’s State aid and merger control regimes or trade defense instruments). This article provides a comprehensive overview of the FSR and the accompanying Implementing Regulation and reflects upon their practical implications for companies engaging in economic activity in EU markets. Has a simple idea (i.e., extending the controls already applicable to government support by EU Member States also to support by non-EU governments) morphed into a bureaucratic monster burdening companies with needless red tape? Will the FSR achieve its goals effectively or will it put too much strain on the European Commission’s resources? Is the FSR about fair competition or is it simply protectionist? European Union, subsidies, mergers, acquisitions, M&A, public procurement, government contracts, State aid, competition, trade defense, Foreign Subsidies Regulation, FSR

Zaštita konkurencije na tržištu digitalnih usluga

The article analyzes the rules contained in the EU Regulation 2022/1925, which seek to provide business users and end users with core platform services and ensure appropriate regulatory safeguards against unfair practices of service providers, who have the status of gatekeepers. When core services are provided by gatekeepers, as persons who exercise significant market influence, the risk of distortion of market competition increases significantly. That is why the Regulation defines a series of measures with the aim of achieving, first of all, ex ante effects on the possibility of unlimited market competition and fairness in the digital sector. With the aim of preventive protection of the digital service marketplace, the Regulation prescribes what the providers of core platform services must not do, or what they are obliged to do and the powers of the Commission in terms of market research. After the conducted research, the Commission can issue an implementing act ordering gatekeeper to stop non-compliant behavior within a reasonable period of time, as well as impose sanctions in the form of fines and periodic penalty payments.

Foreign subsidies and financial contributions: much fine-tuning ahead

The Foreign Subsidies Regulation, which came into force on 12 January 2023, constitutes the missing piece to protecting the internal market from the distortive effects of public intervention and bridges a glaring regulatory gap. However, although tackling distortions of competition caused by non-EU countries’ public intervention has always been widely recognized as a worthy objective, the complexities and administrative burden deriving from Commission-designed tools have been broadly and harshly criticized. Even though more conceptually interesting topics are on the table, the present contribution focuses on the issue that seems to be the most controversial in the current phase: the quantity and type of information required in the notification process with regard to foreign subsidies/financial contributions received by the notifying undertaking in the previous three years. Indeed, the Commission requires all foreign financial contributions to be listed (with few exceptions) in the context of concentrations and public procurement procedures. Therefore, after a brief overview of the Foreign Subsidies Regulation, the contribution analyses the rationale and related risks of the Commission’s choice to require the notification of foreign financial contributions rather than foreign subsidies, it evaluates the possible alternative paths proposed during the public consultation and it concludes by proposing a reasonably balanced solution.

CARTELS IN THE DIGITAL ERA: CHALLENGES AND OBSTACLES

Cartels agreements are contracted between market participants with the aim of hindering, restricting or distorting competition. The paper first provides a definition of cartel agreements and their categorization, with reference to the most common types of cartel agreements. The author elaborates on the price algorithm, as one of the most prevalent forms of competitors' collusion in the digital domain. Given that the digital age provides infinite opportunities for contracting illegal agreements and competition distortion, the author presents the challenges and obstacles enountered by national competition authorities in various countries, and describes how they established effective mechanisms to combat cartels. In particular, the author refers to the amended German Act against Restraints of Competition, by means of which Germany became the first country in Europe to introduce radical measures in the battle against technological giants, whose economic power frequently exceeds the power of states. Finally, the author underscores the need for the states to work together to combat digital cartels.

Industrial Policy in the EAEU Countries: Challenges and Solutions for Kazakhstan in the Competition and Intellectual Property Law

The paper describes and examines the industrial policies of the Eurasian Economic Union member states. It shows the need to adjust the traditional type of industrial policy of the Eurasian Economic Union countries, which relies on leading industries. The purpose of this article is to identify the main challenges for the industrial policy in Kazakhstan, taking into account its participation in the EAEU and the risks associated with distortion of competition as a result of hostile mergers and acquisitions, and to propose solutions intended to ensure a balance between competition protection and industrial policy. The paper’s objectives are to review the problems arising at the intersection of trade, innovation, and intellectual property in the EAEU countries and to develop recommendations for industrial and innovation policy. The article considers two main issues in accordance with the purpose: the industrial policy problems in the EAEU countries; the use of intellectual property and competition law for the development and protection of innovations. It is shown that the industrial policy of Kazakhstan and other EAEU countries remains insufficiently effective and has a contradictory nature. Since 2000, the economic complexity index decreased in most EAEU countries, the intensity of industrialization remained low, and the share of medium and high-tech manufacturing diminished. There is a need to adjust the traditional type of industrial policy, to exclude selective advantages to specific firms, to focus on industry-wide industrial policy, the insufficient experience of EAEU member states in counteracting hostile and murderous takeovers, the complexity of innovation development system, protection of competition within the integration.

Third Time’s a Charm? Assessing the Impact of the Third Phase of the EU ETS on CO2 Emissions and Performance

The EU Emissions Trading System (ETS) is the largest cap-and-trade scheme for CO2 emissions globally. This study evaluates the impact on CO2-equivalents emission of the increased stringency of Phase 3, which marked a significant shift from the previous phases of the EU ETS and significantly reduced the number of emissions permits (EU Allowances—EUA) freely allocated. Our analysis reveals that the increase of purchased EUA had a statistically significant, substantial impact on emissions reduction from Phase 2 to Phase 3, with a decrease in emissions of approximately half a ton for each additional allowance bought. Our (conservative) estimate of the total reduction in emission is 422 MtCO2-eq, 22.5% of the average yearly EU ETS emissions or 4.3–3.0% of emissions in Phases 2 and 3, respectively. Under Article 10c of the ETS directive, lower-income Member States have been allowed to continue the free allocation of EUA to electricity-generating installations during Phase 3 to provide more time and resources for modernization. We show that such derogation had a sizeable and significant detrimental impact on the achievement of emission reduction targets, leading to an increase in emissions of about half a ton for each additional allowance bought; a result that highlights the need for increased efforts on support measures (e.g., the Modernization Fund). We also investigate the impact of the EU ETS on output, capital productivity, and labour productivity. Our analysis indicates that the performances were not negatively impacted by the tightening in regulation that occurred between Phases 2 and 3. We also find no evidence that the derogation status impacted performances, which further ameliorates the concerns about the potential intra-EU competitive distortions induced by the regulation. Our results cast a favourable light on the reduction of the free allocation of EUA and the tightening of the regulation implemented in Phase 4 of the EU ETS.

Editorial: Taxing Interest in the Debtor State as an Alternative to DEBRA

Basically, a company can be financed by debt or equity. The general national tax systems are that interest, the compensation paid for funds put at disposal by means of a loan, are deductible and that the compensation for funds put at disposal by means of equity is not. In this context, the question often arises of whether this different treatment is justified. Or should they be treated (more) the same? The European Commission has proposed a directive to tackle to debt-equity bias by introducing a notional allowance on equity, on the one hand, and a new limitation on interest deduction, on the other hand (DEBRA). This editorial raises the questions of whether the tax treatment of the remuneration paid on loans (interest) by companies and the remuneration on their equity (profits) as proposed in DEBRA is sufficiently based on principles to contribute to a sustainable tax system with regard to company financing, and if not, what an alternative would be that better complies with those principles. The author concludes that DEBRA is another stopgap for flaws in the current tax systems, which has the potential to further distort the capital markets. He suggests an alternative system based on the principle of origin to remove the debt-equity bias. debt-equity bias, capital markets, tax neutrality, ability-to-pay, direct benefit principle, principle of origin, territorial principle, territoriality principle, taxation of interest, distortion of competition, sustainability

Taxation, tax benefits and competition distortion in Brazil

Taxation, tax benefits and competition distortion in Brazil

Taxation, Tax Benefits and Competition Distortion in Brazil

Taxation, Tax Benefits and Competition Distortion in Brazil