Transcript Introduction to Competition Policy and Law

Introduction to Competition
Policy & Law
Rijit Sengupta
Role of Trade Unions in Promoting
Competition in Zambia
13th February 2012, Kitwe, Zambia
What is Competition?
• The process of rivalry between firms striving to gain sales
and make profits
• Motive: self-interest; outcome mostly beneficial for society
(producers and consumers)
• Competition is not just an event, but a process
• It is not automatic – needs to be nurtured
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Benefits from Competition
• Producer benefits
 Market predictability (policy and practice)
 Efficiency (resource allocation)
 Innovation (productivity gains)
 Easy entry and exit (no barriers)
• Consumer welfare
 Lower prices
 Better quality
 More choice
 Easy access
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What is Competitiveness?
• It is a comparative concept
• Ability and performance of a firm, sub-sector or country
to sell and supply goods and/or services in a given market
• Firm competitiveness: compares a firm with its rivals in
terms of quality and ability to supply goods
• National competitiveness: awareness/preparedness of a
country to challenges posed by global competition
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Impediments to Competition?
• Government Policy
 Difficult entry/exit conditions
 Absence of competitive neutrality (Favourtism)
 Non-transparent public procurement
 Implications of other policies
• Anti-competitive Practices
 Restrictive Business Practices (Horizontal & Vertical)
 Unfair Trade Practices (misleading advert, bait & switch,
false claims, etc.)
• Lack of awareness and understanding
 Lack of buy-in among policymakers
 Lack of awareness, low public demand/support
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Competition Reforms
Promoting
Competition
COMPETITION
POLICY
COMPETITION
REFORMS
COMPETITION
LAW
Curbing
Anti-competitive
Practices (ACP)
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Competition Policy
• National Competition Policy Statement
 Govt. commitment to promote competition in all sectors
 Refinement of policies (trade policy, industrial policy,
investment policy, procurement policy) for competition
 Ideally, a precursor to a competition law (sequence not
followed)
• Very few countries have a national competition policy (e.g.,
Australia, Botswana, Malawi, Mozambique, etc.)
• Some countries are in the process of developing one (e.g.,
India, Uganda, Ghana, etc.)
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Competition Law
• Aims to protect process of competition and not competitors
• Consist of a set of rules to curb ACPs
• Competition Authority (CA) to implement the law
• Over 130 countries have adopted a Competition Law
• National and Regional Competition Law (EAC, COMESA,
ECOWAS)
• Often Competition Policy and Competition Law used
interchangeably – NOT CORRECT
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Provisions under a Competition Law
• Anti-competitive practices of following types are prohibited:
 Anticompetitive agreements (collusion, cartels, etc.)
 Abuse of Dominance (exploitative or exclusionary)
 Anticompetitive Mergers
• Competition Authority (CA) established with certain Powers
& Functions
• Linkage of CA with line Ministry and other Govt departments
• Competition Advocacy (CA carries out activities to promote
competition – SH sensitisation, policy reforms, public
awareness, etc.)
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Competition Authority
• Agency created as per the provisions of the Competition Law
• Main functions – investigative (Competition Commission)
and sometimes adjudicative (Competition Tribunal)
• Maintain functional autonomy, and be accountable
• Public support is critical for its actions
• Undertakes competition advocacy (through stakeholder
engagements)
• Cooperate actions with other regulatory agencies
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Anti-Competitive Practices (ACPs)
• Two types: Horizontal agreements and Vertical
agreements
 Horizontal agreements - firms in same business
(competitors) agreeing not to compete
- Bid rigging
- Output restrictions
- Price fixing
- Market allocation
 Vertical agreements involve firms in a suppliercustomer relationship
- Exclusive supply/purchase agreements
- Tie-ins
- Resale price maintenance
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Abuse of Dominance (AoD)
• A firm in a dominant position abusing its position
• Two ways: Exploitative and Exclusionary practices
• Exploitative practices exploit customers of a dominant firm
- Excessive pricing
- Discrimination
- Tied selling
o Exclusionary practices aimed at driving competitors out of
business
- Predatory pricing
- Refusal to deal
- Hoarding (raw materials)
- Exclusive dealing
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Anticompetitive Mergers & Acquisition
• Firms often try to avoid competition through Mergers
• Three types of Mergers: Horizontal, Vertical and
Conglomerate
• Horizontal mergers involve reduce the number of players
• Vertical mergers include firms in a supplier-customer
relationship and can result in foreclosure
• Conglomerate mergers involve firms in different lines of
business, which could lead to considerable market power
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Concluding Points
• Effective competition enforcement results in both consumer
welfare and producer benefits
• SH need to understand their role in promoting competition
• CAs need to strengthen SH communication/engagement
• Policymakers need to prioritise competition reforms
• Business should realise benefits of competition
• Development partners/donors need to support the process
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ZIKOMO!
NATOTELA!
Thank You
[email protected], [email protected]
www.cuts-international.org/ARC
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