Competition is the most important design element of the market economy. It ensures that the factors of production in the national economy are put to the best possible use and thus for the best possible supply of goods in the national economy (control function).

Competition is also the motor for technical progress, for new high-quality products and for companies’ efforts to produce as cheaply as possible (driving function). Competition also brings about a fair distribution of profits by ensuring that only those companies that produce competitively can survive on the market in the long term.

However it is important to have strict regulation on competition. In Germany, the Act against Unfair Competition sets the basis for a free but secure competition:

Section 1
Purpose of the Act

This Act shall serve the purpose of protecting competitors, consumers and other market participants against unfair commercial practices. At the same time, it shall protect the interests of the public in undistorted competition.

Section 2
Definitions

(1) Within the meaning of this Act the following definitions shall apply:
1.  ‘Commercial practice’ shall mean any conduct by a person for the benefit of that person’s or a third party’s business before, during or after the conclusion of a business transaction, which conduct is objectively connected with promoting the sale or the procurement of goods or services, or with the conclusion or the performance of a contract concerning goods or services; ‘goods’ shall be deemed to include immovable property as well, and ‘services’ also rights and obligations;
2.  ‘Market participant’ shall mean, in addition to competitors and consumers, any person who supplies or demands goods or services;
3.  ‘Competitor’ shall mean any person who has a concrete competitive relationship with one or more entrepreneurs supplying or demanding goods or services;
4.  ‘Communication’ shall mean any information which is exchanged or passed on among a finite number of participants via a publicly accessible electronic communications service; this shall not include information which is passed on to the public as part of a broadcasting service via an electronic communications network, so far as such information cannot be linked with an identifiable participant or user receiving it;

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Why is competition so important?
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