Competition%20Policy%20and%20Law:%20Lessons%20from%20Other%20Countries

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Competition Policy and Law Lessons from Other
Countries

• Presented by Dr. Selim Raihan

Presented at the Workshop on Competition Policy
Law CUTS International Central Institute for
Economic Management (CIEM), Vietnam April 27 and
28, 2006
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In this session we will discuss..

• Competition policy in different countries.
• Some case studies What are the evidences of
  competition policy helping consumers in other
  countries?
• Lessons that Vietnam can derive from cross
  country experiences

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• Competition Policy
• in Different Countries

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• Australia
• Malaysia
• India
• Bangladesh

• South Africa
• Chile
• Venezuela

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Competition Policy in Australia

• Australian competition policy dates from 1906
  when the first Federal law dealing with
  restrictive practices was enacted.
• Contemporary Australian competition policy stems
  from the 1965 Trade Practices Act.
• Liberalisation of the economy in the mid 1970s
  and the 1980s (tariff cuts of 1973, floating of
  the dollar, and the elimination of foreign
  exchange controls).
• The Competition Policy Reform Act was enacted in
  1995.

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The NCP's Institutional Framework

• The Australian Competition and Consumer
  Commission (ACCC) An independent statutory
  authority
• The National Competition Council An independent
  advisory body
• The Australian Competition Tribunal A
  quasi-judicial review body

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For details please see..

• Global Competition Forum Website
  www.globalcompetitionforum.org
• Parliament of Australia Parliament Library
  http//www.aph.gov.au/library/intguide/econ/ncp_eb
  rief.htm

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Competition Policy in Malaysia

• No national competition policy and law.
• Sectoral approach to competition and regulation.
• Policies of deregulation and liberalisation of
  the economy since the 1980s
• There are about 30 laws to regulate certain
  activities of enterprises and to protect consumer
  interests.
• Under these laws a consumer or trader may seek
  redress through the appropriate Ministry, public
  agency or via the Civil Courts.
• No administrative authority for determining
  appropriate business ethics and trade practices.

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For details please see

• Global Competition Forum Website
  www.globalcompetitionforum.org
• Lee, Cassey (2004) Competition Policy in
  Malaysia, CRC Working Paper 68.

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Competition Policy in India

• India had a competition law since 1969 by the
  name of Monopolies and Restrictive Trade
  Practices Act.
• That law became redundant for several reasons.
  Therefore a new law has been drafted.
• India has consumer protection act and corporation
  working for securing consumer rights against any
  anti-competitive practices of firms.
• The Consumer Protection Act is known as COPRA
  (1986). It recognizes the rights such as safety,
  information, choice, representation, redress, and
  consumer education to the consumers.

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For details please see

• Global Competition Forum Website
  www.globalcompetitionforum.org
• CUTS Centre For Consumer Action Research And
  Training (CART) Consumer Rights And Its
  Expansion Rights And Responsibilities

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Competition Policy in Bangladesh

• No formal competition policy and law.
• No formal competition authority.
• Different governmental policies Trade policy,
  Industrial policy, Exchange rate policy, FDI
  policy, Privatisation policy, Labour Policy, etc.
  
• The Monopolies and Restrictive Trade Practices
  (Control and Prevention) Ordinance Promulgated in
  1970 is still in force in Bangladesh, which
  provides for taking action against any unfair
  competition or concentration of economic power,
  or illegal trade practices.

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For details please see

• Global Competition Forum Website
  www.globalcompetitionforum.org
• BEI (2005), Competition Scenario in Bangladesh,
  Prepared for CUTS-International Within the
  framework of the 7Up2 Project Advocacy and
  Capacity Building on Competition Policy and Law
  in Asia

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Competition policy in South Africa

• The Competition Commission plays a pivotal role
  in creating environment for efficient business
  sector and in ensuring competitive prices and
  greater product choice for consumers.
• The Competition Act (Act. No.89 of 1998) was
  passed by Parliament in September 1998.
• The enforcement agencies are the Competition
  Commission, the Competition Tribunal and the
  Competition Appeal Court.

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For details please see

• Global Competition Forum Website
  www.globalcompetitionforum.org
• Comparative Study of Sectoral Regulation in
  Developing Countries Lessons for policy,
  Governance and Implementation -A Case Study of
  South Africa.

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Competition policy in Latin American Countries

• The Chilean system of protection of Competition
  in markets is integrated by The Tribunal for the
  Defence of Free Competition and The Economic
  National Prosecutor's Office. The Decree-Law 211
  of 1973 is the legal framework of this system.
• The free competition regime in Venezuela started
  in 1992 when the government settled a group of
  new policies in order to prepare the country to
  face globalisation process, including to the Law
  to Promote and Protect the Exercise of Free
  Competition.

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Case Studies
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The Indian Case Study

• A gas supplier in India was forcing the buyers to
  buy hot plates with fresh gas connection.
• The Competition Authority held such a practice.
• The Authority directed that the gas agency should
  make it clear on the invoice that the hot plates
  were purchased voluntarily.
• Further a notice board should be prominently
  displayed in the agencys premises that the
  customers were free to purchase hot plate either
  from Ghoten Gas agency or from any other source.
• Source CUTS Competition Policy and Law Made
  Easy

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The Malaysian Case Study

• Prior to 2002, MAS was a monopoly operator in the
  domestic airline market.
• With the entry of AirAsia the domestic airline
  market became more competitive.
• AirAsia offers no-frills domestic flights at low
  fares.
• MAS responded by offering 50 percent discounts
  for ten seats in every flight.
• AirAsia also responded to MASs pricing strategy
  by offering lower fares.
• Despite MASs plea for government intervention to
  resolve the perceived price war, the government
  has maintained that the competition between the
  two firms as healthy competition.

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The Spanish Case Study

• Four Sugar producers in Spain were engaged in
  market allocation agreement that restricted sugar
  supply to the level at which maximum monopoly
  profits could be earned.
• As a result. Spanish sugar prices, for many
  years, were 5 to 9 percent higher than those in
  the rest of Europe.
• The Spanish Service for the Defence of
  Competition uncovered the cartel and slapped 8.7
  million euros fine on the four producers.
• Source Report of the Ministerial level meeting
  of the OECD, 2000

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The Kenyan Case Study

• South Africa Bottling Company Pty (SABCO)
  proposed of taking over all the other bottling
  companies and consolidating them into one entity.
  
• The Kenyan competition authority decided that
  such a plan would lead to both horizontal and
  vertical concentration of market power and the
  likely abuse of dominance, and accordingly
  stopped the process from going further.
• Thus, the Kenyan authority, dealing with a huge
  global company, applied the competition law to
  foreclose likely anticompetitive practices in the
  market.
• See pages 14,15 of UNCTAD, April 2002 Recent
  Important Competition Cases in Developing
  Countries

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The Argentinean Case Study

• Four foreign companies active in Argentina as
  suppliers of medical oxygen to public and private
  hospitals were fined 70.3 million pesos (US 24
  million) for operating a price cartel for medical
  oxygen.
• See page 4 of UNCTAD, September,2005 Recent
  Important Cases Involving More Than One Country

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The Brazilian Case Study

• Three chemical or pharmaceutical firms (Roche,
  BASF and Aventis Animal Nutrition, the latter
  formed through the merger of Rhône-Poulenc and
  Hoescht) fixed the prices and allocated market
  shares of bulk vitamins in Brazil as an extension
  of their participation in an international
  vitamins cartel which was prosecuted in the
  United States.
• See pages 5,6 of UNCTAD, April 2002 Recent
  Important Competition Cases in Developing
  Countries

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• Lessons for Vietnam

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• Components of competition policy

Competition Policy
Government Policies
Competition Law
Private Actions
Deregulation and Privatization
Industrial Policy
Consumer Policy
Trade Policy
Regulations Governing Capital and FDI
Other Policies
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Competition Law (National)
Anti-Competitive Agreements Between Firms (
Collusion) e.g.
Regulation of Mergers to Prevent Tactics to Gain
Excessive Dominance in a Market
Abuse of a Dominant Market Position e.g.

• Import cartels
• Price fixing
• Market sharing
• Bid rigging
• Limiting production or investment
• Refusal to buy or supply
• Tie-in arrangements
• Exclusive-dealing arrangement
• Resale price maintenance
• Territorial allocation between supplier and dealer

• Predatory pricing
• Price discrimination
• Excessive pricing
• Exclusionary vertical restrictions
• Abuse of intellectual property monopoly

Applies to

• Total unification of the companies involved
• Buying of sufficient shares in a company so as to
  have a say in policy formulation

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Need for a Competition Policy

• Benefits of to Consumers
• Ensures a fair deal in the market place with-
• The best possible choice of quality,
• The lowest possible prices, and
• Adequate supplies of commodities.

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Benefits for efficient producers

• A safeguard against practices that could drive
  companies out of business.
• Lower entry barriers in the market promote
  entrepreneurship and growth of small and medium
  enterprises.
• Efficient allocation and utilization of resources
  ensures more output and employment (although in
  the short run there can be some job losses, which
  should be covered by some safety-net programs).
• Control of international competition, such as
  international cartels, that may adversely affect
  a countrys trade and development.

On the whole, a competition policy maintains and
promotes the competitive spirit and culture in
the market.
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Globalization and the need for Competition Policy
Globalization and Competition
threat to
Outcome of
Concentration of Market Power

• Therefore, we need competition policy to monitor,
  prevent and control anti-competitive practices.

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Concluding Observations

• Competition policy and law and consumer
  protection policy can take different forms for
  different countries.
• There are verities of anti-competitive practices
  and consumer abuses, so the regulatory authority
  should be innovative in nature.
• For developing countries, resource constraint is
  one of the major problem in establishing
  competition authority.
• It is very important that the reports on
  anti-competitive practices be published in the
  media to raise the awareness of the consumers.

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• Thank you!!