Competition Law and Policy
Fair competition in the provision of goods and services is the cornerstone of the free market. Creating an environment in which such competition could flourish was one of the primary challenges facing the CEE/NIS in their programs of economic and legal reform. In the transition from the former state monopoly system, the passage of anti-monopoly laws became the focus of many legal reform efforts. In fact, foreign donors and client governments have often treated the passage of a new antimonopoly law as the chief benchmark of progress in law reform, and have commonly viewed implementation and institutional development as an afterthought. Detailed understanding of institutional constraints to implementation has been lacking. Our approach to the competition policy analysis will examine these constraints paying particular attention to supporting institutions, enforcement strategy, competition advocacy programs, and the problem of over-regulation.
Supporting institutions are critical to proper development of a regulatory and enforcement regime for competition policy. To cite just a few key linkages, skilled lawyers or consumer groups may be needed to identify and bring to the attention of antimonopoly authorities various antitrust violations; academics on law, business, and economics faculties may be helpful in advancing the state of understanding of local markets and the application of law; trained judges are needed to rule on antimonopoly cases; compulsory process is necessary to obtain business records; business records must be kept in a format consistent with modern accounting methods; and so on. While development of none of these institutions is as critical to implementation as internal development of an antimonopoly agency’s capabilities, their evolution is ultimately of great significance to the establishment of the rule of law and must be tracked in some detail to present an accurate picture of the complexity of a functional enforcement regime.
A phased, targeted enforcement strategy ensures that an antimonopoly agency—especially one lacking in certain resources—does not attempt to assume more responsibilities than it can handle. It also ensures that it attacks some of the most important, yet politically attainable, problems first, thereby boosting its credibility and gaining public trust. An enforcement portfolio needs to include both critical actions against government restraints on competition as well as a handful of politically more palatable, yet less helpful, cases (e.g., antimonopoly cases, if they fall within the agency’s purview). It also needs to include voluntary compliance programs and public education efforts that lay the groundwork for an enforcement program that is perceived as fair, justified, and sensitive to business community views.
A competition advocacy program is often overlooked in the midst of client government and donor preoccupation with high-profile enforcement actions. Yet this kind of education, publicity, and policy advocacy program is arguably the most critical type of activity that an antimonopoly agency can take in a transition economy. The reason is simple: most of the post-Soviet world suffers from excessive regulation and government-directed restraints on trade that impede easy market entry (e.g., exclusive licensing arrangements). Perhaps the highest-priority and most effective steps that an antimonopoly agency can take are to lobby assiduously for the elimination of over-regulation generally and removal of particular restraints. Such activities will not only have a beneficial effect on competition, but will also tend to stem some of the worst corruption problems stemming from exclusive dealing arrangements brokered by ENI governments.
Finally, a trenchant inquiry into competition policy implementation must examine whether antimonopoly authorities are reflexively exercising regulatory powers—e.g., industrial policies that tend to affect price and output—that are precisely contrary to the central objectives of a competition policy agency. In many transition economies, antimonopoly agencies are often pressured by domestic business fear of foreign competition or by consumer outrage over high prices to engage in result-oriented manipulation of market structures. Often, donors are unaware of such interventions or fail to appreciate its political or cumulative economic, impact. It is therefore critical to ascertain the degree to which this is occurring in order to critically assess overall implementation of competition policy.
Antimonopoly laws encompass one part of the legal framework that is an essential element in any free market economy. Competition increases market efficiency by leading to lower prices, reduced inflation, improved technology, a broader array of product offerings, and a reasonable supply of goods. Markets remain open through a combination of open international trade, and domestic laws and international treaties that limit monopoly behavior. Domestic legislation typically includes laws that assure market information transparency, public regulation of so-called natural monopolies such as electric utilities, the deregulation of prices, and the supervision of markets by government bodies to assure competition.
The effective implementation of the Competition Law and its subsidiary regulations requires reasonable legislation, effective implementing agencies with adequate resources and staffing, a receptive society, and competent management. Romania has reasonable legislation and the management of both the Council and CO are insightful and capable. They have achieved a great deal based on recent data on the first reporting period for these organizations. Between February 1, 1997 and December 31, 1997, the first reporting period, 72 anti-competition cases were registered. Fifty-three of these were resolved during this term and 19 cases involve on-going examinations. Council-initiated complaints have been sustained in court, and significant sanctions applied to both private companies and government bodies. Ministries and the private sector now know that anti-competitive behavior is being scrutinized and that penalties will be applied. But, significant hurdles remain. Structural improvements need to be made in the CO. Technical assistance and training will not resolve fundamental problems associated with inadequate remuneration. Further, better co-ordination is needed between the Council and CO to ensure that there is effective and consistent enforcement of the Competition Law and related legislation. This requires that there be agreement between the two organisations with respect to which one will play the lead role. Cross-training and shared technical assistance programs would also reduce costs and facilitate cooperation.
