Competition Law and Policy
Competition law provides a regulatory framework to maintain and improve efficiency in markets, promote competitive pricing practices, and restrain price rises in markets where competition is affected by anti-competitive business practices (including horizontal and vertical restraints such as collusive price-fixing, input/output allocation, and bid rigging; abuse of dominant position such as exclusion, discrimination, and predation; and certain mergers and acquisitions). Competition law by itself does not create competition but, when effectively applied, can counteract the dangers of private anti-competitive behavior. For example, cartels may deliberately create artificial shortages, which results in some consumers being able to obtain the product whereas other consumers pay an inflated or monopoly price. Dominant firms may abuse their market power, for example by tying two products without a legitimate business purpose. Entry to new participants may be blocked by firms with market power that erect protectionist barriers.
In addition to private conduct, competition law can be used to counteract inefficient government regulation and to promote efficiency within the public sector. Competition authorities can use the competition law to perform a comprehensive review of existing and proposed laws and regulations, providing suggestions and advice on government policies and measures that promote anti-competitive practices or inefficiencies. Activities can include reviewing possible sources of public restraints on competition in trade policies (tariff and non-tariff barriers, anti-dumping duties, and discriminatory export practices), investment policies (exclusionary lists, ownership restrictions, licensing requirements), and sectoral regulation (power, transportation, telecommunications, natural monopolies).
Recognizing these and other benefits, the Government of El Salvador (GOES) recently engaged in significant efforts to adopt a competition law. Since initial efforts began 10 years ago, seven initiatives have been submitted to the Legislative Assembly without enactment. Past resistance appears to have been prompted by the power of select special interest groups and weak or little understanding of competition law among assembly members. This year, however, GOES engaged in more active educational outreach and consensus building for a new draft competition law, which was prepared in the first half of 2004 and passed in November 2004.
This section provides a brief assessment of competition law and policy in El Salvador, identifying the degree of development, the status, and the need for competition law reform. Four dimensions of legal and institutional reform were examined as a conceptual framework for comparison, including the framework laws (i.e., the basic legal documents that define and regulate the substantive rights, duties, and obligations of affected parties and provide the organizational mandate for implementing institutions), the implementing institution (i.e., the governmental, quasi-governmental, or private institutions in which primary legal mandate to implement, administer, interpret, or enforce framework law(s) is vested), the supporting institutions (i.e., governmental, quasi-governmental, or private institutions that either support or facilitate the implementation, administration, interpretation, or enforcement of framework laws), and the market for reform (the opportunity or need for reform). These subsections are followed by a short conclusion and, finally, recommendations for further reform.
