Evolution of Competition

Policy & Law in the world

Pradeep S Mehta

Secretary General, CUTS International2011.09.05

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Outline

1. Introduction

2. Definition of competition

3. Competition Policy vis-à-vis Competition Law

4. Need for competition policy and law

5. Benefits of competition

6. Can competition kill competition?

7. History

8. Evolution of competition law in India

9. Scenario across the world

10. Other issues

11. Challenges in Developing Countries

12. Conclusions

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Introduction

• Why do we need competition?

• Impetus to promote competition

• Trade and economic liberalisation have aided competition in

the market, though with limitations

• Anti-competitive practices negate the gains of liberalisation

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Defining Competition

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Defining Competition

Definition of Competition

•Fair Competition

•Unfair competition

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Competition Policy vis-à-vis

Competition Law

FDI Policy

Trade Policy

Industrial Policy

Disinvestment Policy

Fiscal Policy

IPR Policy

Labour Policy

Procurement Policy

… others …

Need for Competition Law & Policy

• Competition Law: To protect the competition process, and not

competitors. Broad need for the law:

Deal with anti-competitive practices

Take care of unfair means

Maintain and promote the competitive spirit

Promote economic democracy & consumer welfare

Enable good governance

• Competition Policy: To address the policy-induced

competition distortions

Australia is a classic case 7

Benefits of Competition

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Benefits of Competition

• For Firms: Efficiency, allocation of resources, product

innovation

• For Consumers: Lower prices, better quality, more choices

• For Society: Economic democracy, good governance

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Can Competition kill Competition ?

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Can Competition kill Competition ?

Why the adage ?

Definition of competition in this context:

“a situation which ensures that markets always remain open to

potential new entrants and that enterprises operate under the

pressure of competition”.

Competition fosters competitiveness

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History

• In India, Chanakya’s Arthashatra speaks about cartels (400 BC)

• Eastern Roman Empire recognised cartels (483 AD)

• In France, the initial foundations of a competition law were laid in the Chapelier Law of 1791

• Finland’s court judgment in 1837 on forest producers

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History

• Canada first country to adopt the law in 1889

• US was the second country to adopt the law in 1890

• In 1995, only about 35 countries with a competition law, today the number is nearly 120 countries and counting

• CUTS has worked in/working in over 30 developing countries on competition law, including India

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Evolution of Competition

Law in India

• 1956 Public sector commanding heights of the mixed economy

• 1965 Monopolistic and restrictive trade practices rampant, Bill

for regulating it was drafted

• 1969 Enactment of the MRTP Act: more of a licencing law

• 1991 Reforms adopted: deregulation and liberalisation

• 1995 Globalisation spurred by establishment of WTO

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Evolution of National Competition

Policy and Law in India

• 1999 Raghavan Committee examines MRTP Act and proposes

a new law

• 2002 Competition Act adopted by Parliament

• 2007 Competition Amendment Act adopted

• 2007 National Development Council recommends adoption of

National Competition Policy (11th Five Year Plan)

• 2011 Govt of India Committee on Competition Policy

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Competition Law in India

Size to conduct

Not dominance, but abuse of dominance

Gradual approach in implementation:

Advocacy

Anticompetitive practices

Merger control

One central law, but Constitution permits states to also have

competition laws, like in USA, Australia, China etc

Consumer Protection Act, 1986 also provides for some

anticompetitive practices

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Scenario Across the World - Drivers

• Most Constitutions provide for promotion of competition and

check on concentration (Article 39 in India)

• Concentration and resultant abuses in case of US, Canada,

India, Pakistan….

• Commitment under free trade agreements, both WTO and

PTAs

• Structural adjustments by African countries under pressure of

MDBs

• Curbing state monopolies in case of former (Soviet bloc) and

current (China and Vietnam) communist countries 17

Scenario Across the World - Approaches

• Regulation before deregulation is a necessary prescription

• Implementing regulatory reforms after opening up the

economy– India a typical example

• Empowering competition authority – Chile as an example

• Peruvian competition authority deals with IPRs, antidumping,

insolvency etc

• European Union provides a model of federal nature

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Scenario Across the World – Bad

Examples

• Some bad practices of dilution of the law exist like Sri Lanka,

Georgia

• Poor progress by some major countries such as Nigeria,

Ghana, Philippines

• Public monopolies turning into private monopolies, various

examples exist like Sri Lanka, Malawi, Senegal

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Other issues

• Hybrid agency with or without hybrid laws

• Interaction with other regulatory bodies

• Sequencing Policy followed by a law:

– Botswana

– Mozambique

– Malawi

– Bhutan, etc

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Challenges in Developing Countries

• Resources

• Capacity

• Knowledge

• Political economy problems

• Willingness to learn

• Stamina

• Continuity

Keys for success: Political Will and Champions

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Conclusions

• Competition policy is not a luxury for the rich, it is a

necessity for the poor: Joseph Stiglitz

• Liberalisation motivating adoption of competition and

regulatory laws

• Effective role of NGOs

• Marathon, not a sprint

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Thank you

psm@cuts.org

www.cuts-ccier.org

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