Europe Shouldn’t Relax Its Antitrust Rules

The European Union’s governments are encouraging the European Commission to weaken its antitrust standards to promote “continental champions.” Europe, they say, needs larger companies to compete on an equal footing with U.S. and Chinese giants. This idea is a mistake, and it rests on an economic fallacy. Big firms aren’t necessarily more efficient than smaller ones, especially when they’re big because of state support. An effective antitrust policy is actually a source of strength.

The EU antitrust regime has long been a cornerstone of the European single market. To ensure that companies compete freely and fairly across the union, the Commission polices support from their respective governments and any abuse of their market power. Lately, though, Brussels hasn’t been as effective in this as it used to be. A recent study has shown that the mark-up that European businesses charge over their marginal cost rose from roughly zero in 1980 to more than 60 percent in 2016. The rise could be due to globalization and technology as well as to a softer approach to antitrust, but it’s disturbing nonetheless — and it’s bigger than in the United States.