Competiton Law Case "Needles"

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The European Commission's decision in the competition policy case “38388 Needles”. Maastricht University School of Business and Economics Maastricht, 3 December 2011 Dethleff, F. ID number: i6032825 Study: Economics Course code: EBC1010 Group number: 15 Tutor name: EG. Dow Writing Assignment: Main paper 1 On 26 October 2004, the European Comission fined three companies, namely William Prym GmbH & Co. KG and Prym Consumer GmbH & Co. KG (from now on known as Prym), Coats Holdings Ltd and J & P Coats Ltd (from now on known as Coats), Entaco Ltd and Entaco Group Ltd (Entaco) a total amount of 67.5 million Euros. The latter firms entered into a series of written, formally bilateral, agreements between September 1994 and December 1999, amounting in practice to a tripartite agreement under which these undertakings shared or contributed to sharing product markets (European market for hard haberdashery products) and geographic markets (European market for ne edles). The mentioned agreements satisfy the common definition of a cartel as a formal organization of producers and manufacturers that agree to fix prices, marketing, and production (Sheffrin, 2003). This paper evaluates the decision of the European Comis sion from an economic point of view, especially with respect to the underlying theory of cartels, monopolies, welfare effects and consequences for the consumer. First the theory of perfect competition is discussed to clarify the goals of EU competition policy and why they took action in this case, followed by an overview on the infringements this companies were involved in. The case at hand accompanies the theoretical approach with examples and illustrations to create a link between the reason of the EU Co mission and economic forces at work. A short introduction to monopoly theory helps to understand how the formation of cartels

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