law and policy reform at the asian development …

16–17 May 2006 • New Delhi, India

Competition Lawand Policy Roundtable

Report and Proceedings from the

LAW AND POLICY REFORMAT THE ASIAN DEVELOPMENT BANK

07-0103Law&PolicyPrelim.pmd 17/05/2007, 1:23 PM1

ii Law and Policy Reform at the Asian Development Bank

This volume was edited by V.S. Rekha and Christine V. Laoof the Office of the General Counsel, Asian Development Bank

© 2006 Asian Development Bank

All rights reserved. Published 2006

Printed in the Philippines

Cataloging-in-Publication Data Available

ISBN No: 978-971-561-621-8

Publication Stock No: 031407

Asian Development Bank. Report and Proceedings from the Competition Law and PolicyRoundtable. 1. Asian Development Bank. 2. Competition Law and Policy

The views expressed in this paper are those of the authors and do not necessarily reflect theviews or policies of the Asian Development Bank or its Board of Governors or the governmentsthey represent.

The Asian Development Bank does not guarantee the accuracy of the data included in thispublication and accepts no responsibility for any consequence of their use.

Use of the term “country” does not imply any judgment by the authors or the Asian DevelopmentBank as to the legal or other status of any territorial entity.


Preface iii

Preface

Competition and CompetitivenessV.S. REKHASenior Counsel,Asian Development Bank

It is commonly believed that competition law and policy relate to matters of competitionand competitiveness; with the result, among others, that goods and services are sold atcompetitive prices and that consumers have a choice as to the products they wish topurchase. But that would not be all. Competition would also be a matter of largerapplication—that of overall governance and development of economies, that of better

regional and global balances in trade and development. The International Institute ofManagement Development (IMD), which ranks countries according to competitiveness, assessesa country’s competitiveness by considering not only its economic performance, governmentand business efficiency and infrastructure but also factors spanning various sectors includingeducation, technology, health, and social services. IMD’s most recent report is indicative thatsome Asian economies have moved up in their competitiveness ranking by considerablenotches; India, for instance, moved up by 10 notches and the People’s Republic of China by 12notches.1

From deliberations at the Roundtable, it is clear that different countries have different policyconcerns and needs. In other words, it appears there is no one-standard approach in determiningthe type of competition laws or policies that may prove beneficial to all countries. It may wellbe that one rule may not fit all given the ground realities and different stages of economicdevelopment in different countries.

Accordingly, some basic principles that could be generally applicable to each country,notwithstanding variances in the existing regimes, are relevant. Such principles need to berelevant from the vantage point of competition agencies and regulators. After all, it is therepresentatives of competition agencies and regulatory agencies, who implement competitionlaw and policies; who also would thus better understand the policy debates waged on theground, and are sensitive to local realities.

Debates exist even in the most basic areas of defining key concepts and tools inimplementing competition law and policies. For example, there are many views on whatconstitutes “market power.” Countries may consider different factors in determining whethermarket power exists; such as market shares, barriers to entry and expansion, barriers to exit,buyer power, etc. However, it may well be argued that reality does not present clear cut situationswhere market shares alone can be determinative of market power; where one can clearlyidentify what constitute barriers to entry and expansion, or barriers to exit. It may very wellillustrate that in a country specific context, buyer power may not always be undesirable as faras promoting competition is concerned, but arguments to the contrary would also hold good.

It was useful to observe and learn from the roundtable deliberations on the various aspectsof competition matters. These deliberations not only enriched the discussions, but also allowed

1 The Financial Express. 2006. India moves up 10 notches in competition. (12 May).

V.S. RekhaSenior Counsel,AsianDevelopment Bank

“Different

countries have

different policy

concerns and

needs. There

is no one-

standard

approach in

determining

the type of

competition

laws or policies

that may prove

beneficial to all

countries.”


iv Law and Policy Reform at the Asian Development Bank

articulation of relevant issues, needs and concerns, as also helped identify possible best practiceson competition matters. I do hope that the Roundtable deliberations were potentially useful toparticipating countries and agencies in identifying and implementing solutions and policiesthat take into consideration existing development in the local, regional and perhaps even globalcontext.

I would like to thank the Government of India for supporting the roundtable held in NewDelhi, and its participation in the roundtable deliberations. I also express my gratitude to theresource speakers, panelists, facilitators, and participants from over 13 countries, for theirpresence and the wisdom they have shared at the roundtable.

I am grateful to the Asian Development Bank’s (ADB’s) General Counsel Mr. Arthur M.Mitchell, and Deputy General Counsel Ms. Eveline Fischer, for their guidance and active supportfor this roundtable. I also thank Mr. Tadashi Kondo, ADB’s Country Director for India, and ADB’sIndia Resident Mission, for fully supporting this endeavor. Finally, I extend my sincere appreciationto my team for putting in long hours in organizing this roundtable: Ms. Christine Lao, Ms. AmabelleAsuncion, Ms. Mary Jane David from ADB headquarters; and Mr. C.T. Abraham, Ms. MeenuLalit, Mr. Rupes Dalai, and Mr. Sudhir Nair from ADB’s India Resident Mission office.


Contributors v

Philippe Brusick heads the UnitedNations Conference on Trade andDevelopment (UNCTAD)’s Competition andConsumer Policies Branch and, as such, isresponsible for UNCTAD’s technicalassistance, advisory, and training programs inthis field. Mr. Brusick graduated with a degreein Economics from Geneva University, andjoined the United Nations EconomicCommission for Europe in 1971. A staffmember of the UNCTAD since 1976, he activelyparticipated in that organization during thenegotiations that led to the adoption of the UNSet of Principles and Rules on RestrictiveBusiness Practices in 1980.

Ashok Chawla was appointed asAdditional Secretary (Economic Affairs),Department of Economic Affairs, Ministry ofFinance, Government of India, in April 2005.Concurrently, Mr. Chawla is the Chairman andManaging Director, Security Printing andMinting Corporation of India Ltd.; Director ofthe Oil and Natural Gas Corporation Ltd.; andMember, Insurance Regulatory andDevelopment Authority. Mr. Chawla has twoMaster of Arts degrees, in English Literatureand Economics. He also has a diploma inMicro-level Planning. He joined the State Bankof India as Probationary Officer in 1972, andthe Indian Administrative Service (GujaratCadre) in 1973.

Vinod Dhall is the only Member of theCompetition Commission of India. Previously,he was Secretary to the Government of India.During his tenure in the Indian AdministrativeService, he held several important positionsin the Central and State Governments. Hespecialized in the areas of industrialdevelopment, foreign investment, financialsector management and reforms, corporategovernance, and competition law and policy.

Allan Fels, AO, is a well-respectedacademician and competition law expert. He

Contributors

is the Dean of the Australia and New ZealandSchool of Government, a new institutionestablished by the Governments of Australia,New Zealand, Victoria, New South Wales,Queensland, and Western Australia, and 12universities and business schools (TheUniversity of Melbourne, Monash, MelbourneBusiness School, Australian National University,Canberra, Queensland, Griffith, Sydney, NewSouth Wales, and the Victorian University ofWellington, Curtin University of Technology,and University of Western Australia) for high-level public sector managers. Professor Felswas also Dean of the Graduate School ofManagement of Monash University where hehas been an Honorary Professor in the Facultyof Economics and Business since 1996. He isalso a Professorial Fellow in the Departmentof Political Science at the University ofMelbourne. Professor Fels has extensiveexperience in competition policy formulationand implementation, having been Chairpersonof the Prices Surveillance Authority from 1989to 1992, Chairperson of the Trade PracticesCommission from 1991 to 1995, andChairperson of the Australian Competition andConsumer Commission from 1995 to 2003.

Eveline N. Fischer, a Dutch national, is agraduate of the University of Leyden (theNetherlands) Faculty of Law. She holds aMaster of Laws degree, with a major in CivilLaw and electives in Economics, EuropeanLaw, and Industrial Property Law. Shepracticed law for 12 years in Amsterdam, theNetherlands, with the Dutch firm Loeff & Vander Ploeg. She has been with the Office of theGeneral Counsel at the Asian DevelopmentBank (ADB) since 1988, handling various legaltechnical assistance projects in Viet Nam andCambodia. She was also involved in thepreparation of a legal needs analysis and along-term framework for development of thelegal system of Viet Nam. She is the DeputyGeneral Counsel in charge of, among otherthings, the Law and Policy Reform Unit.


vi Law and Policy Reform at the Asian Development Bank

Anurag Goel assumed charge as theSecretary, Ministry of Company Affairs of theGovernment of India on 1 May 2006. Prior tothis, he held charge as Additional Secretary,Department of Expenditure, Ministr y ofFinance, Government of India. He hasconsiderable experience in financialmanagement; the aviation industry; andregulatory administration. As Joint Secretaryof the Ministry of Civil Aviation, he received theNational Citizens’ Award for outstandingcontribution to the field of civil aviation. Earlier,he held assignments in the Ministries of HomeAffairs and Defense, and in the Governmentof Uttar Pradesh. Mr. Goel joined the IndianAdministrative Service (Uttar Pradesh Cadre)in 1972.

Prem Chand Gupta is the Minister,Company Affairs, Government of India. Aftercompleting his initial studies in Bhiwani, hegraduated with a degree in Economics. He wasfirst elected to the Rajya Sabha in 1996. Duringhis tenure at the Rajya Sabha, he served insome very important positions. He wasreelected to the Rajya Sabha in 2002, and wasNational General Secretary of the RashtriyaJanata Dal in 2000–2001. In his presentassignment, he spearheads manytransformation initiatives that aim to helpevolve business-friendly ecosystems whilecreating an investor-protection climate in India.Among the initiatives that he is championingfor the Ministry are the enterprise-wideinitiative, MCA 21; the largest e-governanceprogram of the Government of India; and theinitiation of a comprehensive revision of theCompanies Act 1956.

Anwarul Hoda is Member, PlanningCommission, Government of India. He joinedthe Indian Administrative Service in 1962. As acivil servant, he worked mainly on assignmentsrelating to International trade and economicrelations. From 1974 to 1981, and from 1985 to1993, Mr. Hoda worked in the Ministry ofCommerce. Prior to his current appointment,he was Special Secretary of the Ministry ofCommerce and was mainly involved inmultilateral trade negotiations under theGeneral Agreement on Tariffs and Trade(GATT). He was the Chief Policy Coordinatorof the Government of India during the UruguayRound. In 1993, he was appointed as DeputyDirector General of the ICITO/GATT; and in1995, he assumed the position of Deputy

Director General, World Trade Organization(WTO). Upon completing his tenure in 1999,he was appointed Special Adviser to theDirector General of WTO for the MinisterialConference in Seattle, Washington. Beforejoining the Planning Commission in July 2004,he was a Professor at the Indian Council forResearch on International EconomicRelations, New Delhi, India.

Tadashi Kondo is the Country Director ofthe India Resident Mission (INRM) of ADB. Mr.Kondo was previously Director of ADB’sTransport and Communications Division of theSouth Asia Department. He has completedalmost 20 years of service at ADB and hasextensive and diversified experience in thedevelopment field, particularly with regard toADB operations, and project design andimplementation.

V. Krishnamurthy is currently Chairman,National Manufacturing CompetitivenessCouncil, Government of India. Concurrently,he is Member of the National Advisory Council,the Prime Minister’s Council on Trade andIndustry, the Prime Minister ’s Trade andEconomics Relations Committee, and thePrime Minister ’s Energy CoordinationCommittee. Dr. Krishnamurthy held severalassignments in the Government of India thatinclude Member, Planning Commission, andChairman: BHEL, SAIL, Maruti Udyog, etc. Hehas also been Chairman: IIMs (Bangalore,Ahemdabad), IIT, Delhi, and others. Conferredwith several awards—Padma Shri and PadmaBhushan—by the President of India, Dr.Krishnamurthy, who is a chartered engineer(FIE), obtained his doctorate in economicsfrom the Soviet Academy of Sciences. He alsoholds a Doctor of Sciences (Honoris Causa)from Banaras Hindu University, as well as aDoctor of Letters (Honoris Causa) from CentralUniversity, Pondicherry.

Dong-kyu Lee is the Director General ofHeadquarters for Competition Policy of theKorea Fair Trade Commission (KFTC). Hegraduated with a bachelor ’s degree inEconomics from the Seoul National Universityand obtained his master’s degree from theKorea National Defense University. From 1979to 1982, he worked with the Office of CustomsService and then transferred to the EconomicPlanning Board. In 1994, he began his careerat KFTC, serving as director of various


Contributors vii

departments, namely the Assistant GeneralCounsel Division, Contract Terms ScreeningDivision, Competition and RegulationDivision, Unfair Trade Practice RegulationDivision, Subcontract Planning Division,Regulation Reform Division, Antitrust PolicyDivision, and Subcontract Planning BureauAntitrust Policy Bureau. He was DirectorGeneral of the Antitrust Bureau and theCompetition Policy Bureau before he wasappointed to his current position.

Arvind Mayaram is Joint Secretary,Department of Economic Affairs, Ministry ofFinance, Government of India. He isresponsible for economic policies relating toinfrastructure, the Asian Development Bank,the energy sector and coins and currency. Mr.Mayaram, joined the Indian AdministrativeService in 1978. His earlier positions heldinclude in Government of India: DeputySecretar y, Foreign Trade and ForeignInvestment, Department of Economic Affairs,Ministry of Finance; and in Government ofRajasthan: Commissioner (Investment andNRI), Secretar y, Planning, InstitutionalFinance and Externally-Aided Projects,Secretary, Industries, Public Enterprises andInformation Technology, and Secretary,Tourism, Art and Culture.

Arthur M. Mitchell holds a Bachelor ofArts degree from the University of California atBerkeley (1970) and a Juris Doctor degree fromthe Harvard Law School (1973). He is one ofthe leading American lawyers specializing intrade, investment, and financing transactionsin Asia. He has dealt with matters related toJapan for more than 35 years and served inNew York as head of the Japan Practice Groupat Coudert Brothers, an international law firm.As a young lawyer, he studied Japanese politicsat the International Christian University andJapanese law at Kyoto University, under aJapanese Ministry of Education grant. Also, heonce served as a private secretary to JapanesePrime Minister Masayoshi Ohira. A frequentcommentator on legal and regulatory issuesaffecting trade, investment, and finance, Mr.Mitchell writes regularly in The Asian WallStreet Journal, Nihon Keizai Shimbun, andother publications. He has taught Japanese lawat Columbia University’s Parker School ofInternational and Comparative Law and is anactive participant in major internationalconferences relating to law and finance. Mr.

Mitchell formerly served as Secretary of TheJapan Society in New York and as Secretary ofthe Asian Affairs Committee of the Associationof the Bar of the City of New York, and is amember of the Council on Foreign Relations.As the current General Counsel of ADB, Mr.Mitchell is actively engaged in the promotionof the rule of law as a key development toolfor Asian countries.

Toshiyuki Nanbu is the Director of theJapan Fair Trade Commission (JFTC)International Affairs Division. He earned hislaw degree from the Tokyo University Facultyof Law. He joined the JFTC in 1982 and hassince held various positions includingdirectorship of the JFTC Investigation Bureau,Economic Affairs Bureau, and Trade PracticesDepartment. He was also First Secretary of thepermanent delegation of Japan to theOrganisation for Economic Co-operation andDevelopment in 1992. He is also Convenor ofthe Asia Pacific Economic Cooperation/Competition Policy and Deregulation Group.

Annetje Ottow is the advisor to theboard of directors of the Post andTelecommunications Authority (OPTA), thetelecommunications and post regulator of TheNetherlands. She has two Master of Lawsdegrees—one from Leiden University (1988)and the other from the Queen Mary Collegein London (1990). After completing her studies,she interned at the European Commission.From 1997–2007, she practiced with theRegulatory & Competition section and theTelecoms & Cable Group of Houthoff BurumaLaw Firm. Ms. Ottow specializes incompetition and telecommunications law. Sheis the editor of the Dutch journal Mediaforum(Journal of Media and Communication Law)and regularly publishes articles in legaljournals. She also teaches competition andtelecommunications law at the University ofAmsterdam and the postgraduate college,Grotius Academy of the Netherlands. Shefinished a thesis on TelecommunicationsRegulators for her doctorate degree.

Bernard J. Phillips holds a bachelor’sdegree in Economics from the University ofMichigan and a Juris Doctor degree from theStanford University Law School. He wasadmitted to the California bar and the Districtof Columbia bar. From 1974 to 1985, heworked at the United States Federal Trade


viii Law and Policy Reform at the Asian Development Bank

Commission, handling various areas ofcompetition and consumer policy. Since 1985,he has been working for OECD in Paris andhas, since 1989, been the Head of theCompetition Division and responsible for theCompetition Committee. Mr. Phillips hashelped OECD develop and manage programsto promote regulatory reform and strengthencompetition institutions in developing andtransition countries. He is also the editor of theOECD Journal of Competition Law and Policy.Mr. Phillips’ contribution to this volume wascoauthored by Sean Ennis, a SeniorEconomist at OECD’s Competition Division.

V.S. Rekha is Senior Counsel in the Officeof General Counsel, Asian Development Bank(ADB). Ms. Rekha is posted in the IndiaResident Mission office of the ADB since 2005and advises on a broad portfolio of legalmatters within ADB’s major functional areasrelated to operations, policies, structure,administration, and organization. With agraduate degree in law from Delhi Law Faculty,a masters in law from the Harvard Law School(1989), and extensive work experience in thelegal field, Ms. Rekha joined ADB’s Office ofGeneral Counsel in 1998. She has theexperience working in several South Asiancountries in areas of energy, surface transport,urban development, emergency assistance,irrigation, governance, and legal reforms. Ascountry counsel for India, she in particularassists in ADB’s India operations.

T.K. Viswanathan is Law Secretary to theGovernment of India, since April 2006. Hejoined the Ministry of Law in 1988 and hadserved as Additional Secretary (LegislativeDepartment) since June 1998. He wasMember-Secretary, Law Commission of Indiauntil September 2003. He was appointedSecretary, Ministr y of Law and Justice(Legislative Department) from 2003–2006. Heholds a master’s degree in Jurisprudence fromMadras University. Mr. Viswanathan practicedas an advocate (1972–1976) and served as aprofessor at Madras Law College. He attendedthe Institute of Advanced Legal Studies at theUniversity of London where he underwent theGovernment Legal Advisers’ Course inLegislative Drafting, Constitutional andAdministrative Law, International CommercialTransactions, International Law, and TreatyDrafting.

Richard Whish has been a professor oflaw at King’s College, London since January1991. Prior to that, he taught at the Universityof Bristol. He is also a professor at the Collegeof Europe (Bruges). He is a qualified solicitorand was a partner at Watson, Farley andWilliams from 1989 to 1998. He acts as aconsultant to a variety of companies andregulatory agencies, and is a nonexecutivedirector of the Office of Fair Trading. He is alsoa member of the Board of the SingaporeanEnergy Market Authority.


Executive Summary ix

Table of ContentsPreface iii

Contributors v

Executive Summary xi

Inaugural Session 1

Welcome Remarks, Arthur M. Mitchell 2

Inaugural Address, Prem Chand Gupta 5

Keynote Address, V. Krishnamurthy 7

Address, Anurag Goel 10

Address, Ashok Chawla 11

Vote of Thanks, Tadashi Kondo 13

Session I: Competition, Competitiveness, and Sustainable Growth 15

Competition Regimes: Analyzing Their Nature and Effect,Professor Allan Fels, AO 15

Address, Vinod Dhall 29

Address, Arvind Mayaram 31

Session II: Competition Regimes Across the Region and Interfacewith Regulatory Regimes 33

Approaches and Challenges in Implementing Competition Law 33

and Policy, Toshiyuki Nanbu

Interface with Regulatory Regimes, Bernard J. Phillips and Sean Ennis 44

Competition Agencies and Their Interface with Regulatory Agencies, 54

Annetje Ottow

Closing Session - Day 1 61

Summary of the Day, Eveline N. Fischer 61

Session III: Competition Law and Society 64

Competition Culture, Advocacy and Civil Society: Korea’s Experiences

and Cases for Spreading Competition Culture, Dong-kyu Lee 64

Address, T.K. Viswanathan 69

Session IV: Harmonization and Convergence of Competition LawsAcross the Region 72

Bilateral/ Multilateral Agreements and Competition Law, 72

Philippe Brusick

Closing Session - Day 2 77

The Road Ahead, Arthur M. Mitchell 77

Valedictory Remarks, Anwarul Hoda 78

Vote of Thanks, V. S. Rekha 79

Appendices 81

Participants 81

Agenda 84


x Law and Policy Reform at the Asian Development Bank


Executive Summary xi

Executive Summary

I. Inaugural Session

At this session, Mr. Arthur M. Mitchell,General Counsel of the AsianDevelopment Bank (ADB)welcomed the participants. This was

followed by addresses to the audience bysenior officials of the Government of India—Mr. Ashok Chawla, Additional Secretary,Department of Economic Affairs, Ministry ofFinance, Government of India; and Mr. AnuragGoel, Secretary, Ministry of Company Affairs,Government of India. Sh. Prem Chand Gupta,Honorable Minister, Company Affairs of theGovernment of India, formally inaugurated theroundtable and Dr. V. Krishnamurthy,Chairman, National ManufacturingCompetitiveness Council of the Governmentof India, delivered the keynote address. Thesession was concluded by a vote of thanksdelivered by Mr. Tadashi Kondo, CountryDirector, India Resident Mission, ADB. A briefsummary of the session is provided below.

Mr. Arthur Mitchell welcomed all resourcepersons and participants to the CompetitionLaw and Policy Roundtable. He mentioned thatADB’s interest in competition law and policysprings from its recognition that competitionis necessary for developing countries to obtainthe benefits promised by trade liberalizationand privatization. Competition laws andpolicies aim to level the investment playingfield. A level playing field, together with theincreased business opportunities broughtabout by privatization, makes an economy anattractive investment destination in the globalmarket. Setting up a competition frameworkwill allow developing economies to protectthemselves from the threat of multinationalcompanies’ anticompetitive practices—whichincreasingly have cross-border effects—instead of employing protectionist regulationsthat often restrict the flow of foreign directinvestment (FDI) to these economies.

Mr. Mitchell invited the audience toconsider building consensus regarding aregional competition framework. A regional

competition framework may help provide acoordinated response to concerns that enablethe countries in the region to liberalize theireconomies and expand their markets while,at the same time, mitigating risks inherent inglobalization. He said it will help build strongereconomic integration in the region, and canlead to the coordination and harmonization oflaws concerned with the proper regulation ofFDI in the region. Despite differences indomestic legal and institutional structures, hebelieved that such a regional framework couldbe formed, given that there is growinginternational consensus regarding thefundamentals of competition law and policy.Moreover, the benefits of convergingcompetition regimes are easily apparent todeveloping countries, which are bent onattracting foreign investment. They will provideinvestors with more certainty and greaterpredictability in determining the scope ofacceptable competitive behavior, and this willmake the country, as well as the region, a moreattractive investment destination.

Mr. Ashok Chawla stressed theimportance of competition law in checkingpersons inclined to manipulate the market,and in addressing market distortions andbarriers to free trade. These distortions andbarriers may be caused by geographicallimitations, natural monopolies, and weakdistribution networks; cartels, entry barriers,predatory pricing, and oligopolies. He said thatcompetition policy should be an integral partof a country’s economic development plan,as this will benefit consumers who will paylower prices for better quality goods. He notedthat since the Government of India introducedreforms aimed at liberalizing its economy,certain regulated sectors—notably,telecommunications—have been able toachieve successes in promoting competition.However, there remain sectors—particularlythose with a large number of state-ownedenterprises (SOEs) and a low level of private


xii Law and Policy Reform at the Asian Development Bank

investment—where competition is weak.Finally, he enumerated three challengesregarding competition policy in India: (1)ensuring that the Competition Commission ofIndia (CCI), which was established pursuantto the Competition Act (2002) but whoseexistence was being challenged in court at thetime the roundtable was held, will be able tobecome fully effective and exerciseadjudicatory powers; (2) addressing theoverlap between the jurisdictions ofcompetition and sector regulators; and (3)encouraging private entry in naturalmonopolies.

Mr. Anurag Goel said that the Governmentof India, like other governments around theworld, recognizes that competition plays a keyrole in ensuring the efficient functioning ofmarkets. He said that increased privatizationand private sector participation in sectorsconventionally dominated by the public sectorhave ushered in a new economic environmentin India. This new environment will functioneffectively and efficiently if the market canfunction without distortions. Although certainprovisions of the 2002 Competition Act wereunder review and the CCI (which was createdto ensure the enforcement of the competitionframework established by the Act) was notfully operational, CCI had already begunplaying an advocate’s role in promotingcompetition. An advocate should initiate aninformed debate on the issues relating tocompetition. Such a debate would awakenpublic interest and educate the public onrelevant competition issues. Mr. Goel also saidthat CCI is building capacity to perform all itsfunctions when it is fully constituted.International cooperation is important tocapacity building, as different countries havehad different experiences in addressingcompetition-related issues, and theseexperiences can inform developing countriesthat wish to adopt a competition framework.However, a developing country shouldremember to consider its special needs whenit adopts its competition policy framework.Finally, Mr. Goel said that countries withcompetition authorities and sector regulatorsshould ensure that competition laws andregulations should avoid overlap withregulators’ procedures to avoid confusion,duplication of efforts, and conflict.

Dr. V. Krishnamurthy’s address revolvedaround the interrelated concepts ofcompetition and competitiveness. According

to Dr. Krishnamurthy, competition is “the mostacceptable mode of making goods andservices available in abundance in acceptablequality and at affordable prices.” On the otherhand, competitiveness is “obtained by theoptimal use of resources, efficiency inproduction through continuous innovation,improvement in processes, better quality ofgoods and services, and lower cost andprices.” He observed that—until the end of the1980s—the Indian political economy did notactively promote competition and that this,together with other factors, caused India’s lossof competitiveness in the international market.The reason for this is that markets, whicheveryone acknowledges, are the engine ofeconomic growth, operate best whencompetition between businesses isencouraged. He emphasized that competitionlaw, competition policy, and competitivenessare all interconnected. Competition lawstrigger competitiveness; they provide theframework necessary to achievingcompetitiveness.

To achieve competitiveness, theGovernment of India has strategically identifiedthe manufacturing sector as the key to ensuringthe return of India’s competitiveness. It hasformed the National ManufacturingCompetitiveness Council and has introduceda National Strategy for Manufacturing as wellas a National Competitiveness Program.According to Dr. Krishnamurthy, thesestrategies have emphasized that themanufacturing industry must develop withoutsubsidies or the use of protectionist measures.Instead, competition laws and regulations thatencourage competition must be set up andenforced. Such a competition framework willcreate a market environment that will benefitconsumers. He noted that wherever Indiaaltered the regulatory framework to promotecompetition, prices have come down. Otherbenefits that a country may enjoy includeaccelerated growth, lasting social benefit, apopulation that is gainfully employed, and thedevelopment of a business environment thatpromotes sustainable competitiveness andincreased productivity on regional and globallevels.

Dr. Krishnamurthy also noted that anystrategy to improve a country’s competitive-ness needed competition advocacy and clearrules and regulations delineating the functionsof sector and competition regulators. Compe-tition advocacy involves the active promotion


Executive Summary xiii

of good competitive practices in the market-place. Competition advocacy is a function thatneeds to be carried out both by competitionauthorities as well as sector regulators. Dr.Krishnamurthy said that he has observed situ-ations when competition authorities and sec-tor regulators appear to cancel out each other’seffectiveness. Such situations occur when lawsdelineating the functions of each are unclear.He further emphasized that countries mustadopt competition laws and regulations thatencourage the development of a fair businessenvironment. Exempting a particular businessfrom the operation of competition laws dis-torts the market and should be avoided. Thecost of overcoming such market distortions iscostly and outweighs any perceived benefitderived from exempting the business. As re-gards sector regulations, proposed regulationsmust be tested to ensure that the measuresto be introduced will not produceanticompetitive effects.

Finally, Dr. Krishnamurthy emphasizedthat competition laws should not aim atestablishing perfect competition that can leadto fragmentation of industries. Perfectcompetition may also hinder a country frombuilding economies of scale, which arenecessary to encourage innovation and capitalformation. Competition is not an end in itselfbut is a means to attain competitiveness. Toattain competitiveness, laws that introducecompetition should suit the local context andconsider public welfare concerns. Such lawsneed to be periodically revisited to take intoaccount changes that will take place bothdomestically and internationally. In a fast-globalizing world, the increased integration ofeconomies likewise increases the cross-border effects of local anticompetitivepractices. In this context, the development ofintegrated competition policy frameworks willprove to be important in the coming years. Dr.Krishnamurthy suggested that a mechanismthat will help competition authoritiesperiodically exchange views, ideas, andinformation regarding competition-relatedissues might be helpful in developing such anintegrated framework.

Hon. Minister Prem Chand Gupta said thatwhile competition is recognized as an efficientmarket system’s foundation and an importantprecondition for economically optimal andsocially fair results, there is a need to examinehow competition policies have worked indiverse economies. This will help governments

become better informed about the policyimplications of enforcing particular kinds ofcompetition laws and regulations that theymight be considering. He noted that countrieshave adopted different competition laws andvaried ways of enforcing such laws. For certaindeveloping countries—particularly those withimmature markets and vulnerable populationsthat are barely able to access such markets—trusting market forces to ensure economicgrowth may not be wise. Some of thesecountries have resorted to initiating state actionin strategic industries.

He noted that India initially adopted astrategy of ceding control over industries tothe state to develop a broad industrial baseand achieve self-reliance in critical industries,economic growth, and social justice. At thetime India adopted this strategy, its industrialand capital base was weak and the countrywas faced with widespread poverty. Duringthis period of state-led industrial development,India enacted its first antitrust law—theMonopolies and Restrictive Trade PracticesAct (1969), which focused on preventing theover-concentration of economic powers in anentity.

Today, however, the Indian economyenjoys consistent improvement in its growthrates and is poised to play a meaningful rolein the world economy. A liberalized economicregime has been introduced, and this hascontributed to the realization that the antitrustregime falls short of a modern competitiveeconomy’s requirements. Consequently, theCompetition Act (2002) was enacted toaddress three kinds of anticompetitivepractices: (1) anticompetitive agreements, (2)abuse of dominant position, and (3)combinations in restraint of trade. It alsoprovided the establishment of the CCI, whichis intended to prevent practices having adverseeffects on competition; promote and sustaincompetition in Indian markets; protectconsumers’ interests; ensure freedom of tradein Indian markets; and act as an advocate withrespect to competition issues and concerns.He noted that the Competition Act wasundergoing certain amendments at the timethe roundtable was taking place to addresssome legal issues relating to some provisionsof the Competition Act, 2002. Until the lawbecomes fully operational, CCI will continueworking in the areas of capacity building andcompetition advocacy. It will attempt to createawareness about the law so as to increase


xiv Law and Policy Reform at the Asian Development Bank

voluntary compliance with minimal stateintervention and, in doing so, build a healthycompetition culture in the country.

The Honorable Minister stated that withglobal integration of economic forces, it isimportant that all countries have a commonunderstanding of competition issues.Competition laws should operate fairly,recognizing the special needs of developingcountries and emerging markets. Recognitionof this imperative would help in the evolutionof competition frameworks, which are moresustainable in the long run in the internationalarena.

Mr. Tadashi Kondo expressed gratitude tothe distinguished inaugural speakers forsharing their thought-provoking insights oncompetition. He also thanked ADB’s Office ofthe General Counsel for organizing theroundtable, as well as the audience(composed of competition authorities andregulatory agencies, international agencies inAsia and elsewhere, as well as representativesfrom Indian government offices, and civilsociety). He said it was encouraging thatcompetition authorities and regulatoryagencies are actively seeking ways to ensurethat competition laws and policies areenforced. Enforcement of competition lawsand policies is important to creating a healthyand modern economy. The establishment oflegal and regulatory frameworks that promotecompetitive market structures—where suchframeworks do not exist—as well as strategiesto enforce these laws and regulations, islikewise important.

II. Technical Session I:Competition, Competitiveness,and SustainableEconomic Growth

This session featured the presentation ofresource speaker Professor Allan Fels, Dean,Australia-New Zealand School ofGovernment. Professor Fels presented apaper entitled, Competition Regimes:Analyzing Their Nature and Effect. This wasfollowed by presentations and remarks of thepanelists. The panelists included Mr. VinodDhall, Member, Competition Commission ofIndia, and Mr. Arvind Mayaram, JointSecretary, Department of Economic Affairs,Ministry of Finance, Government of India. Thesession concluded with a 1-hour discussion

among participants on the floor. A briefsummary of this session is described below.

Professor Allan Fels delivered apresentation that identified core elements ofa comprehensive national competition regime;examined questions relating to competitionand foreign investment, public-privatepartnerships (PPPs), and sustainabledevelopment; provided a model andframework for analyzing the operation ofcompetition authorities; and identified the linkbetween competition policy and economicperformance.

In discussing the core elements of acomprehensive national competition regime,he differentiated between competition lawand competition policy. Competition lawcomprises general and specific prohibitionsadministered and applied by an independentregulator, the violations of which would subjectthe violator to credible, adequate sanctions.On the other hand, competition policyencompasses a much wider scope andaddresses all government policies that affectcompetition. Competition policy is establishedbecause various government laws andregulations (including those on foreign anddomestic investment; intellectual property;taxation; public and private ownership; smallbusiness policy; licensing; monopolyfranchises; laws and regulations governingcertain sectors such as agriculture, mining,construction, manufacturing, health,education, and social security services) canaffect competition in many areas. Acomprehensive national competition policyregime involves the review of laws that restrictcompetition and analysis of conduct withanticompetitive potential according toappropriate and transparent assessmentprocesses. It ensures that no participants in themarket should be able to engage inanticompetitive conduct against publicinterest. In addition, universal rules of marketconduct should be uniformly applied to allmarket participants.

While FDI often promotes competition,certain circumstances may generate little oreven reduced competition—such as whenmergers with established domestic enterprisesmay be at the expense of direct pro-competitive entry, or where a foreign firm mayquickly acquire monopoly power, engage inpredatory pricing, or participate in globalcartels. A comprehensive competition policymay remove anticompetitive and unnecessary


Executive Summary xv

regulation. It may operate against the grantingof anticompetitive concessions to new entrantsand signal the government’s willingness tohave a level playing field.

Competition-related issues are also linkedto reforms that promote PPPs. The move toprivatize the public sector in developingeconomies assumes that privately ownedenterprises operate under competitive marketconditions that would replace virtual statemonopolies. This assumption is not alwayssound, since the private sector can put, andoften puts in, monopoly arrangements tomaximize revenue—to the detriment of thepublic. Traditional competition law can preventor at least mitigate the foregoing risks.

Professor Fels introduced a model thatcompetition and sector regulators may findrelevant with respect to important detailsconcerning the workings of such agencies. Themodel identifies three key variables that areimportant in analyzing competition authorities’or regulators’ work: (1) their value added tothe public; (2) operating capability; and (3) the“authorizing environment”—or the politicalenvironment that gives rise to law, regulations,and values that govern their work. This“Competition Policy Strategy Model”highlighted some very important issues thatare often overlooked in law and policy reformefforts. Misalignments in the three variableswill result in failure to bring about an effectivecompetition policy that can be sustained in thelong run. Professor Fels also emphasized thata “one size fits all” approach does not workand that the “authorizing environment” islikely to differ not only between countries butalso in each country depending upon thestage of a country’s economic developmentat a given time. With regard to “operatingcapability,” Professor Fels emphasized thatregulatory institutions as well as the judiciaryneed capacity building and internationaltechnical assistance can play an importantrole in this regard.

As regards the link between competitionand economic benefits, the adoption ofcompetition laws and a national competi-tion policy alone will not result in econom-ic benefits. Economic benefits from morecompetitive markets will result, providedthat the laws and regulations adopted areeffectively implemented.

Mr. Vinod Dhall noted that increasing tradeglobalization is generating economic compe-tition between countries. The enforcement of

competition laws encourages continual im-provement and innovation that can increasethe competitiveness of a country’s industries.But competition policy needs to be temperedby broader considerations of social equity,social welfare, and public interest.

Mr. Dhall suggested that the structure ofdeveloping countries’ markets wassignificantly different from that of industrializedcountries and possessed specialcharacteristics that might demand theadoption of competition policies or lawsdifferent from the dominant models ofcompetition frameworks employed by theUnited States (US) and the European Union(EU). Aside from addressing local needs, acompetition framework for developingcountries must consider the followingquestions: (1) Should the law seek to protectdomestic competitors from powerfulmultinational corporations? (2) To what extentmust law accommodate arrangements bysmall-scale or cottage industries to coordinatetheir activities with a view to providingmeaningful competition to larger enterprises?(3) Should there be exemptions fromcompetition laws in developing countries? and(4) Should the law frown on incentives forgrowth of disadvantaged regions?

Although there is no clear consensus yetas to how the architecture of competition lawin developing countries should differ from USand EU models, development-friendlycompetition policies need to be specific to thestage of a country’s economic and industrialdevelopment, as well as its institutional andgovernance capacities.

Mr. Arvind Mayaram affirmed that a strongcompetition framework is important fordeveloping economies. It promises consumersbetter services at lower prices. In sectors whereprices are regulated, such as water or power,popular resistance against price increaseshave successfully kept prices artificially low.The public resists price increases because theservice provided by public utilities is very poor.But insufficient tariffs on the other hand impacton the quality of services provided by theutilities. This vicious cycle impacts the poormost. For example in case of water supply,well-to-do communities enjoy water at lowprices. However, since the providers do nothave adequate capital to maintain necessaryinfrastructure to deliver services to the poorestcommunities in far flung areas, private tankerssupply water to the slums at high rates.


xvi Law and Policy Reform at the Asian Development Bank

Mr. Mayaram also pointed out that PPPshave been identified as a means of obtainingthe capital to fund and upgrade infrastructureprojects. A strong competition framework thatgenuinely levels the playing field the betweenthe private and public sectors would assist inincreased private sector participation in thepublic sector.

Mr. Mayaram stated that while privatesector monopolies are worse than publicmonopolies particularly in infrastructureservices, a competition framework canregulate PPPs in order that they do not stiflecompetition from other private sector groupsthat invest in the sector where they operate.Mr. Mayaram also emphasized that that thedesire to attain perfect competition should bebalanced out by the need to avoid the creationof redundancies; the loss of economies ofscale; and the collapse of services on accountof excessive competition. A fine balance needsto be struck between these competing policyconcerns, and proper solutions can be arrivedat only by going through a learning curve andexperiences.

During the discussion, participants askedwhether developing countries could carve outexemptions and exceptions from theenforcement of competition law and policy forpublic policy and public interest reasons.Professor Fels was of the view that competitionlaw should admit of no exceptions, and shouldbe strictly enforced. The underlying assumptionfor such a position is that competition is for thepublic good. However, he believed that therecan and should be public interest exceptions(e.g., when dealing with public safety laws orhealth laws) in enforcing competition policy(i.e., broad restrictions on competition). Heemphasized that the proponent of the exceptionhad the burden of proof to show that suchexception was warranted, and insisted that thegrounds for the exception should be proventransparently and publicly.

Professor Fels noted that priorities ofcompetition policy could be refocused tocontribute to other state priorities, such asattainment of Millennium Development Goals(MDGs), which are a priority in developingcountries. In Africa, for example, practicesinvolving intellectual property such as parallelimport restrictions, which are anticompetitive,have hindered treatment for AIDS. Competitionauthorities may focus on enforcingcompetition laws in this area to aid in theachievement of MDGs.

Participants also took special interest inmergers as a possible exception to the en-forcement of competition law. The businesssector often argues that mergers should notbe identified as being potentially anticompet-itive because mergers can improve economicdevelopment and are good for efficiency. Buta bare claim that merger is good for econom-ic development is often used as an excuse formounting a merger with anticompetitive ef-fects. It should be noted that while manymergers have delivered benefits as far as effi-ciency is concerned, contrary effects havealso resulted in other cases. Professor Fels ex-plained that laws that identify mergers asanticompetitive have their origins in the earlysuccess of anti-cartel legislation. When theselaws took effect, cartel parties decided tomerge, and this neutralized anti-cartel laws.He suggested that competition authorities andregulators approach mergers in the followingmanner: (1) Ask whether or not the businesscan achieve efficiency through normal mar-ket processes instead of mergers; and (2) If amerger’s effect is that it may result in the con-centration of market power in one player thatwill slowly wipe out other entities, then themerger should be declared anticompetitive.

As regards the capacity of competitionauthorities to fulfill their mandates,participants identified the competitionauthorities’ possession of independence asparticularly important. The following featuresof an optimal structure for such authority’sindependence in developing countries wereidentified: (1) fiscal independence andautonomy, such as when its funds are madeby law to be an automatic charge on thebudget instead of a discretionary amount fromgovernment; (2) security of tenure formembers of the competition authority; (3) thepower to issue directives and exemptionsfrom the enforcement of competition laws;and (4) strong accountability features thatensure its own independence, such as havingrepresentatives from outside the jurisdiction(competition experts) or nongovernmentorganizations (NGOs) (as in Jordan andZambia) or consumer groups (as in Australia)sitting as members of the competitionauthority. Of particular interest was thepractice in the United Kingdom (UK) ofdesignating a consumer association as a“super complainant” which, when it files acomplaint with the competition authority,obliges the competition authority to


Executive Summary xvii

investigate the complaint and decide thematter within 90 days.

Participants also discussed usefulstrategies to build the capacity of competitionauthorities. In designing capacity-buildingstrategies, competition authorities shouldremember to develop a culture of lawenforcement. Sometimes, competitionauthorities find themselves parties tocountersuits on substantive law issues. Theyneed to be prepared for these actions while,at the same time, build capacity to quickly actupon complaints involving anticompetitivepractices.

Capacity-building strategies should alsoinclude training in prioritization of cases andcase management. In the UK, the Office of FairTrading (OFT) has created a preliminaryinvestigation unit to identify which complaintsshould be prioritized and pursuedimmediately among the hundreds that arefiled with the office. Cases that would havegreat impact on competition law and policyenforcement are prioritized.

III. Technical Session II:Competition Regimes Acrossthe Region: Approaches andChallenges in ImplementingCompetition Law and Policyand Interface with RegulatoryAuthorities

This session featured papers on (i)Competition Regimes Across the Region:Approaches and Challenges in ImplementingCompetition Law and Policy (presented by Mr.Toshiyuki Nanbu, Convenor, Asia-PacificEconomic Cooperation [APEC]/CompetitionPolicy and Deregulation Group, and Director,International Affairs Division of the Japan FairTrade Commission [JFTC]); and (ii)Competition Regimes Across the Region:Interface with Regulatory Authorities (twopapers presented by Mr. Bernard J. Phillips,Head, Competition Division, OECD, and by Ms.Annetje Ottow, Associated Member of theCommission of Onafhankelijke Post enTelecommunicatie Autoriteit [OPTA,Netherlands]). The presentations werefollowed by discussions. A brief summary ofthis session follows below.

Mr. Toshiyuki Nanbu provided a brief historyof the oldest competition agency in Asia, JFTC.Founded in 1947, JFTC encountered different

challenges to enforcing competition policyduring each of Japan’s eras of economic growthand development. His presentation illustratedthe point made by Professor Fels on the needfor an “authorizing environment” to ensureeffective implementation of competition policy.When Japan’s competition law was adoptedin 1947, Japanese society was not ready for theconcept of competition, and therefore, JFTChad to face an uphill battle. Mr. Nanbu alsoemphasized how different economic cyclesmay influence the government’s willingness topromote competition. The experience in Japanshowed that in times of economic depression,business lobbies were able to push forexemptions from certain prohibitions.

Mr. Nanbu underlined the importanceplayed by the establishment of an independentcompetition authority in Japan; the more ac-tive role that courts are called to play today forcompetition law to be enforced; and the needto get the business sector to understand theimportance of competition policy. Mr. Nanbusummarized his presentation on JFTC withthree key lessons: (1) government, industrial,and development policies suitable to eachstage of economic development all need tobe taken into consideration in the enforcementof competition laws; (2) governments need toconsider minimizing the introduction ofexemptions from competition laws’ applica-tion; and (3) ultimately, competition policy andthe government’s industrial and developmentpolicies need not be mutually exclusive andcould, in fact, be complementary. Mr. Nanbuthen turned his attention to the developmentof competition policy in the APEC region andthe promotion of international cooperation andcompetition networks impacting on the region.He emphasized that the formation of a region-al network is important to enable countrieswithin the region to cooperate and enforcecompetition policy.

Mr. Bernard J. Phillips noted that althoughcompetition authorities and sector regulatorshave often disagreed over regulatoryapproaches, there are actually many areaswhere they should cooperate. He stressed theimportance of cooperation and coordinationbetween sector regulators and competitionauthorities to achieve pro-competitiveregulations. In this regard, he mentionedpractical suggestions for cooperation ofcompetition authorities and regulators, such as:(1) giving statutory powers to competitionauthorities for some aspects of regulatory


xviii Law and Policy Reform at the Asian Development Bank

review; (2) providing competition authoritieswith standing to submit public comments thatrequire written response by the regulator priorto the adoption of a final decision; and (3)placing senior officials of competitionauthorities on oversight boards of sectorregulators, and vice versa. Even exchanges at alower level will lead to informal exchanges ofknowledge and improve mutual understanding.

Mr. Phillips also identified the followingmechanisms as helpful in ensuring domesticconsistency in the application of competitionrules: (1) a common appeal route must becreated so that competition cases filed withmultiple agencies with competition oversightfunctions are governed by common standards;(2) competition objectives should be taken intoaccount by regulators in regulatory impactassessments; and (3) competition authoritiesshould be given the right to intervene withrespect to existing and proposed regulationsthat are potentially harmful to competition.

Ms. Ottow shared the perspective of a sectorregulator (of the post and telecommunicationssector) in a maturing competition environment(the Netherlands). She emphasized theimportance of good coordination and interfacebetween competition authorities and sectorspecific regulatory authorities to avoidunnecessary conflict, because the complexregulatory framework in Europe maysometimes interfere with implementation ofgeneral competition law.

It appears that in the Netherlands, both thecompetition authority and the sector regulator(for the telecommunications sector in hercase) are willing to consult each other. Thereis a protocol between the competition andtelecommunications authorities to ensureconsistent application of concepts. In theory,the regulator can disregard the competitionauthority’s advice but in practice there is muchformal and informal coordination between thetwo bodies. As a result, competition andregulatory authorities succeed in avoidingunnecessary conflict.

The discussions that followed thepresentations centered around five questions:

1. When should there be a sector-specificregulator (SSR)?

An SSR agency was determined as usefulif a natural monopoly exists in a particularindustry. The existence of a natural monopolyrequires ongoing regulation and specialized

knowledge of the industry to identify theexistence of anticompetitive practices orpractices with anticompetitive effectsaccurately.

SSRs may also be particularly useful insectors characterized by the existence of state-owned enterprises (SOEs). SSRs may assiststates transitioning from controlling dominantfirms to a more competition-oriented economicstructure. In the early part of the transition, theregulator may closely regulate the transitioningSOEs. There is a view (e.g., in the PRC) thatadministrative monopoly issues—meaning,those involving SOEs—should be settled byreforms in administrative law (involvingregulators) and not competition law.

Some participants noted that thetransition from an SOE framework to a morecompetitive one does not necessarily resultin the abolition of a sector regulator even aftera competition authority is established. In theUK, the telecom and broadcasting regulatorshave integrated, instead of having thefunctions of the telecom regulatordisappearing into the Office of Fair Trading.Even in jurisdictions such as the Netherlandswhere there is a “sunset clause” for regulatorsin the Telecommunications Act that impliesthat eventually all activities of the sectorregulator, OPTA, will be taken over by acompetition authority that will act inaccordance with the competition law—theregulatory agency has not been stripped of itspowers because specific market behaviorneeds to be controlled by the regulator.

2. What is the optimal “divide” in thejurisdictions of competition authori-ties and regulatory agencies?

Panelists agreed that there should be noconflict between the mandates of competitionauthorities and regulatory agencies. What isimportant is that there are clear laws andregulations defining the jurisdiction ofcompetition and regulatory authorities. Alsoimportant are a common understanding of theinterrelated functions of these two classes ofauthorities and a common desire to cooperatewith each other. Panelists discussed howconflict has been avoided in their respectivejurisdictions.

In Japan, government line ministries arein charge of utilities regulators. The ministriesinvolved supervise all activities relating to thoseindustries, and it is these ministries that deal


Executive Summary xix

with regulation of the industries involved, eventhose regulations involving competition withinthe industry. However, JFTC has power overthese industries to the extent that it can dealwith anticompetitive practices within thoseindustries. Recently, regulators and JFTC haveentered into cooperative arrangements toissue joint guidelines for uniformity of practiceand policy.

In the Netherlands, there is a formalagreement (protocol) between thecompetition and telecommunicationsauthorities. Although in theory the regulatorcan disregard the competition authority’sadvice, there is much formal and informalcoordination between the two bodies so thatconflict is routinely avoided. The only criticismagainst the practice is that there is a lack oftransparency with regard to their informalcoordination practices.

3. Should competition authorities begiven a role in SSR and, if so, whatshould this role be?

Competition authorities should be givensome roles in SSR. Among the types of rolesplayed by competition authorities around theworld in the context of SSR are the following:a. In some jurisdictions such as Mexico, the

competition authority was given a limitedrole to play in certain sectors before theregulator could take certain actions suchas price regulation. For example, thecompetition authority would need tomake a finding, following an investigationin a specific sector, that an entity haddominant market power that justifiedprice regulation.

b. In some jurisdictions such as theNetherlands, the regulator consults thecompetition authority on a competition-related issue that arises in the regulatedsector and the competition authority actson the regulator’s request.

c. Certain jurisdictions have competitionauthorities that play a role in grantinglicenses or in allowing privatizationof government assets. Competitionauthorities may disqualify potentialbidders on the ground that the bidders’acquisition of a license or concession isanticompetitive. A similar practice is a pre-merger review where the competitionauthority can disqualify potential biddersfor the same reason.

Much discussion was devoted to the rolethat competition authorities and regulatorsneed to play in making regulatory impactassessments (RIAs). It was emphasized thatRIAs should go beyond just a cost-benefitanalysis of new regulations. Some participantsnoted that competition authorities may nothave sufficient knowledge of the regulatedsector to make a fair assessment. Othersnoted that regulators may not have sufficientknowledge of competition issues and end upmaking only cost-benefit analyses. Likewise,line ministries from the national governmentmay not have the capacity or knowledge toundertake RIAs.

The role that competition authoritiesshould play in a RIA is to identify any law thatis anticompetitive at every sector and at everylevel. Who then undertakes the RIA itself? InAustralia, the national government set up afund that would finance RIAs. Localgovernment bodies would then initiate thereviews. Local governments would be able toaccess the national government’s fund on thecondition that the reviews were done properlyand transparently. Consequently, localgovernments in Australia are now veryaggressive in asking for reviews and ensuringthat such reviews are properly done. It maybe appropriate for a national government topromote competition by providing incentivesfor other interested entities to do the RIA.

4. What role do courts play in theenforcement of competition lawand policy?

This appears to be an issue that will meritmore attention in the EU in the coming years.Asian countries would do well to examinethis issue as well. In the past, disputesregarding telecommunications issues in theNetherlands were heard by the regulator andthe latter’s decision may be appealed to thecourts. It was usually rare for parties to go tothe court directly. Today, however, in line withthe EU 2002 Regulatory Framework imposingmember states to introduce effective appealsmechanisms, important decisions of thesector regulator, such as on significantmarket power (SMP) designation andimposition of obligations following marketanalyses, can be directly appealed to thehighest administrative court.


xx Law and Policy Reform at the Asian Development Bank

5. Is there benefit in creating a ministe-rial position for competition so thatcompetition concerns may be betterrepresented at the Cabinet level?

A ministerial position for competition wassuggested in Australia some time ago but wasnot realized. One view was that there belimited use for the position as it would be afairly minor position in the Cabinet (sinceCabinets are driven by important ministriessuch as Finance and the Treasury) andconsequently, budget for the office wouldlikewise be limited.

IV. Technical Session III:Competition Law and Society

In this session, Mr. Dong-kyu Lee, DirectorGeneral of Headquarters for CompetitionPolicy of the Korea Fair Trade Commission(KFTC), presented a paper on CompetitionCulture, Advocacy and Civil Society: Korea’sExperiences and Cases for SpreadingCompetition Culture. The presentation wasfollowed by an address delivered by Mr. T.K.Viswanathan, Law Secretary, Government ofIndia. The session closed with a discussionamong the participants. A brief summary ofthis session follows.

Mr. Dong-kyu Lee, drawing from theexperience of the KFTC, discussed how acompetition authority can assist in thedevelopment of a “competition culture”—thatis, market participants’ “attitudes or ways ofthinking, to put into practice theirunderstanding about competition laws andpolicies, and usefulness of competition in theirdaily lives.” Mr. Lee categorized KFTC’scompetition advocacy activities into threetypes: (1) improving anticompetitive laws andregulations; (2) education and public relationscampaigns on competition laws and policies;and (3) other innovative programs that fostercompetition culture.

Mr. Lee said that KFTC is in a uniqueposition to improve anticompetitive laws andregulations because the Monopoly Regulationand Fair Trade Act obliges heads ofadministrative bodies to consult KFTC prior toenforcing laws or policies that may haveanticompetitive effects. In addition, KFTC’schairperson and vice-chairperson regularlyattend the Cabinet Meeting and Vice-Ministers’Meeting, respectively. Consequently, if a

government body does not adopt therecommendations of KFTC during priorconsultations, KFTC still has the opportunityto rediscuss the issue at the Cabinet and Vice-Ministers’ Meeting. The KFTC chairperson isalso an ex-officio member of the RegulatoryReform Committee, which has control over allregulatory reforms. In this capacity, thechairperson is able to influence the regulatoryreform process in Korea.

KFTC’s education and public relationsprograms include training opportunities forstudents and company representatives toimprove their understanding aboutcompetition laws and commitment tovoluntary compliance with competition laws.Major KFTC policies and achievements havebeen published on newspapers, TV, radio, andother media. KFTC is operating an electronic“Policy Customer Relationship Management”facility that delivers KFTC newsletters andinformation on competition policies tailoredto subscribers’ respective needs. It is also usedto collect public opinions on competitionpolicies and measure the level of theirsatisfaction with such policies.

KFTC has adopted some innovativeprograms to develop a competition culturesuch as the Compliance Program thatpromotes companies’ voluntary compliancewith competition laws. KFTC benchmarkedthe experience of developed countries withregard to introducing voluntary complianceschemes to the private sector. Companies thathave adopted the KFTC Compliance Programhave their own in-house team that monitorsand regulates their activities to ensurecompliance with competition laws. KFTC hasalso introduced a business review system thatenables businesses to request KFTC to reviewpotential business activities to see if thesewould violate competition laws. KFTC deliversits opinion to the applicant within 30 days. If abusiness activity is determined to belegitimate, it will not be subsequentlyreexamined for violating competition laws.Finally, KFTC has staged a “Mock Court Contestfor University Students” where students debateon hypothetical cases of competition lawviolations.

Mr. Lee emphasized that competitionculture cannot take root by competitionauthorities’ efforts alone. Aside from thecompetition authority’s strict law enforcementand competition advocacy, it requirescompanies’ voluntary compliance with


Executive Summary xxi

competition laws and their managers’commitment to compliance. Civil societygroups and consumers that actively monitorthe market, and courts and prosecutors thataggressively crack down on anticompetitiveactivities all contribute to the development ofa competition culture.

Mr. T.K. Viswanathan viewed the subjectof competition law and society in the contextof globalization and emerging knowledgeeconomy. Once a dominant economic player,the state is now withdrawing from theexpanded role it had assumed in running acountry’s economy. As liberal markets and freeenterprise emerge around the world,competition is no longer confined within theboundaries of a state. Countries must competeon a global playing field. In such a setting, stateborders and regulations are less relevant, ascapital flows to places where returns oninvestment are more likely. In such a context,competition laws and competition authoritieswould play a more dominant role in regulatingeconomies, activities, and lives. For a countryto compete globally, it must understand thebasics of competition law and how marketsand market actors operate. A country’s lawsmust keep pace with the social changes,including increased competition acrossborders, that globalization brings about.Lawyers cannot afford to ignore the field ofcompetition law, which, besides principles ofcontract law, requires some knowledge ofmicroeconomics (price theory) and industrialorganization (specifically, knowledge relatingto how firms behave in the market).

Mr. Viswanathan described the character-istics of competition law. Competition lawsprohibit the deliberate exploitation of a firm’sdominant market position, any agreement,arrangement or understanding between enter-prises that has the effect of substantially less-ening or limiting access to the market. Thisprohibition applies not only to written but tooral and informal agreements as well. Inher-ently anticompetitive agreements are deemed“per se” offenses that are always illegal, regard-less of the parties’ intent or their actual effecton competition. Examples include price fixing,fixing of output by a cartel, collusive tender-ing, and market sharing. On the other hand,competition law sometimes provides excep-tions to certain prohibited practices so as toenhance economic efficiency. Competitionauthorities may also provide exemptions afterthey have weighed the anticipated gain in effi-

ciency vis-à-vis adverse effects on competition.On a case-to-case basis, this may assume theform of a block exemption. Mr. Viswanathanalso briefly discussed the concept of unlawfulmonopolization, which is an offense charac-terized by the following elements: (a) posses-sion of market power in the relevant market;and (b) willful acquisition or maintenance ofthat power, as distinguished from growth or de-velopment as a consequence of a superiorproduct, business acumen, or historic accident.

Finally, Mr. Viswanathan emphasized thatcompetition law must protect citizens andconsumers in the same manner as theconstitution limits a government’s power bypreventing the arbitrary exercise thereof.

In the discussions that followed,participants considered what it meant to havea “competition culture” and its importance toa country. The development of competitionculture involves the development of morepeople who know how competition policyoperates in general, and in specific sectors. Toidentify what is anticompetitive, one needs tohave industry-specific knowledge. Otherwise,one will not be able to apply competition lawto specific industries.

Developing competition culture includeseducating central ministries (such as theMinistry of Finance), legislators, and regulators,who often have a limited understanding of themarket environment and competition issues.For example, in Australia, a policy of free andfair interstate competition on gas and energywas adopted. All impediments to competitionin the sector were removed. The Governmentwas persuaded to give a 1-year transitionperiod, such that the new gas and energy lawapplied to new contracts drawn up after thetransition period. While this was in principleharmless, players in the gas sector knew thatcontracts involving gas were long-termcontracts (25 years), and they amendedexisting contracts or entered into new long-term contracts within the transition period.Thus, the new regime was made virtuallyineffectual.

In the United States, competition cultureis often equated with consumer advocacy.Consumer advocates try to be heard by thestate regulator. They let the regulator knowhow they think the regulator should carry outits tasks; or they try to be heard by the stategovernment and lobby for the passage ofcertain laws. Consumer advocates aregenerally not represented when critical


xxii Law and Policy Reform at the Asian Development Bank

decisions are being made by lawmakers andregulators, but contribute to the developmentof competition culture by raising consumerawareness of the issues involved. While someparticipants viewed this concept of “consumeradvocacy” as weaker than the kind practicedin Korea, it was generally agreed that this typeof consumer advocacy was still helpful indeveloping a competition culture.

Participants identified the followinginstitutional mechanisms and innovativepractices as helpful in developing acompetition culture:

1. Competition authority’s or regulator’saccess to all cabinet papers being putforward

In Korea, the competition authority is part ofthe Cabinet, where decisions are made. Someparticipants asked whether the KFTC’s inde-pendence was compromised by the fact thatits head was part of the Cabinet. Mr. Leereplied that KFTC’s independence is safe-guarded by the fact that competition lawexpressly provides that KFTC works indepen-dently. To strengthen its independence, KFTCwas also separated from the Ministry of Eco-nomic Planning.

It was noted that in Europe, theCommissioner on Competition sits on theEuropean Commission. In principle, anyproposal going to the Commission from anyDirectorate may be examined by theCompetition Commissioner, and the latter canintervene in any such matter.

2. Institutional mechanisms allowingcompetition authority to review allanticompetitive laws and practices inboth national and local levels ofgovernment (such as in Australia)

In Australia, the competition authority hasreviewed local government practices involvingallocation or reservation of jobs that do not gothrough competitive bidding. Competitionissues have also arisen in national ministriessuch as the defense department, with regardto procurement and supply arrangements.

Participants showed great interest in thestrategies employed by KFTC to develop acompetition culture. Participants asked if KFTCwas consulted by administrative agencies onall legislative proposals or only on competition-specific legislation (i.e., fair trade). Mr. Lee

clarified that KFTC would need to be consultedabout any law, provided that the law wouldpotentially restrict competition in some way(i.e., through the creation of a monopoly, thesetting of a minimum price; the requirementof limited entry, etc.). Once consulted, KFTCwould need to give its opinion on the matter.Participants also asked whether the businessreview system burdens the KFTC. Mr. Leereplied that as of its introduction, 38applications have been filed, and 35 have beenreviewed—implying that KFTC had sufficientcapacity to carry out the review system.

Participants also exchanged viewsregarding private actions againstanticompetitive practices. In addition tosuccessful public enforcement of competitionlaw (which a competition authority orregulator undertakes), the successful privateenforcement of competition law—throughfiling private actions against anticompetitivepractice—will be useful in propagating acompetition culture. However, for privateenforcement to succeed, judges and courtsmust understand competition issues. At present,it is not very common for courts to enforcecompetition laws at the initiative of privateparties. Furthermore, private enforcement ofanticompetitive practice is not widespread.There are, however, notable exceptions. Mr. Leementioned a leading Korean case relevant tothe issue of private enforcement actions. Thecase involved 3,500 Korean parents who filed acivil action for damages against a manufacturerof school uniforms that had engaged inanticompetitive practices. The civil court upheldtheir claim against the manufacturer. Prior tothe parents’ filing of the aforementioned case,KFTC had issued a cease and desist orderagainst the manufacturer. The manufacturerfiled a case in court asking the court to orderKFTC to withdraw its order. The court ruledagainst the manufacturer.

V. Technical Session IV:Convergence and Harmonizationof Competition Laws Across theRegion: Bilateral/MultilateralAgreements and CompetitionLaw

This short session featured a presentation byMr. Philippe Brusick, Head, UNCTAD’sCompetition and Consumer Policies Branch,which was followed by discussions among


Executive Summary xxiii

participants on the floor. A brief summary ofthe session is provided below.

Mr. Philippe Brusick said that countrieshave begun to feel the need to adoptcompetition laws and harmonize with thecompetition laws of other countries becauseof four phenomena promoting convergence:(1) the transition of centrally-plannedeconomies or economies with industrialpolicies into market-oriented economies;(2) deregulation and privatization; (3) tradeliberalization and the proliferation of regionaltrade agreements (RTAs); and (4) FDIliberalization. Other factors that have causedcountries to adopt competition laws have beena desire to protect its intellectual property fromunfair competition and infringement, and thedesire to protect consumers from monopolyinterests. Mr. Brusick suggested that thesefactors promoting the adoption of competitionlaw in various countries have led toconvergence and harmonization of such laws.He said that the text of the law in variousjurisdictions, broadly read, is similar. Forexample, competition and antitrust legislationin different countries all refer to the prohibitionof cartels, collusive tendering or bid rigging,and prohibition of abuse of dominant position.He also noted that many jurisdictions have alsoadopted merger control. Most, if not all,countries have accepted that meaningfulapplication of competition laws requires theestablishment of a competition authority.

Mr. Brusick noted that it is in the applicationof the laws that divergence, instead ofconvergence, occurs. He said that differenttypes of countries at different levels ofdevelopment and with varied social needsrequire different ways in which to enforcecompetition policy. Countries also differ in themanner in which they sequence reforms thatintroduce competition law and policy. Somefavor an abrupt and immediate transition;others, a more gradual approach that beginswith prohibitions against cartels, then lateraddresses anticompetitive mergers, abuse ofdominant position, and other anticompetitivepractices. Another key area of difference incompetition laws is that of scope—for example,some competition laws exclude SOEs from theirapplication. Others exempt regulated sectors.Certain divergence in practice also occurs inthe type of prohibitions under the law—somelaws provide general prohibitions with possibleexemptions, others, per se prohibitions.

There is some variance with respect to

the manner in which competition laws areenforced. In many countries, violations ofcompetition laws are enforced by the com-petition authority whose decision may beappealed to the courts. In other jurisdictions,such as the US, violations are brought by thecompetition authority or relevant administra-tive office directly to the courts. Some coun-tries apply administrative sanctions (fines)only, while others apply criminal sanctionsfor cartels and bid-rigging. He also noted thatwhile many countries have accepted that acompetition authority is necessary for the ef-fective enforcement of competition law,there are differences in the extent to whichcompetition authorities are independentfrom the government. In some jurisdictions,a minister may overrule the recommenda-tion of a competition authority while, in turn,the minister’s decision may be appealed tothe courts.

Mr. Brusick emphasized that internationalcooperation in enforcing competition laws isessential. Globalization has causedanticompetitive practices in most jurisdictionsto have cross-border effects. Countries haveattempted to cooperate through “purecompetition agreements” (bilateral cooperationbetween competition authorities) andprovisions on competition included in freetrade agreements (FTAs). The first type ofagreement contains a notification procedurefor enforcement, technical cooperationarrangements, arrangements for periodicmeetings and consultation procedures.Dispute settlement or conciliation proceduresmay be included in this agreement. Provisionsin the second type of arrangement usuallycontain a commitment for parties to the FTAto adopt and enforce competition legislation.Sometimes they provide technical assistancein competition. They also require exchange ofinformation on competition issues but in allcases, such exchange is subject toconfidentiality rules. RTAs sometimes adoptregional competition rules; they usuallycontain prohibitions against cross-bordercartels, control of abuses of dominant position,and merger control. In regions where there isa regional competition authority, such authoritytakes the lead with respect to enforcing theforegoing prohibitions.

Finally, Mr. Brusick identified internationalorganizations that are working in the field ofbuilding convergence and harmonization ofcompetition laws around the world. Notable


xxiv Law and Policy Reform at the Asian Development Bank

among these are UNCTAD, OECD, and theInternational Competition Network (ICN).

The discussions that followed emphasizedthat, while competition laws can be written indifferent ways, it matters less that the laws arenot identical. What matters is that competitionauthorities have similar views on competitionpolicy enforcement. In this regard, networkssuch as OECD, UNCTAD, and ICN are useful,as they provide venuew for practitioners to sitdown and discuss cases. They encourageintellectual exchange and cooperation in theenforcement of competition policy.

Similarly, it is unnecessary to have bilateralagreements for cooperation in competitionenforcement to take place. Competitionprovisions included in FTAs have not beenactively used according to an OECD survey.Some believe that these provisions, which aredrafted by trade officials, are of limited use forcompetition policy enforcers. What is moreimportant is the competition authority ’scapacity to network with other agencies andform alliances to cooperate (through repeatedinteractions) with each others’ requests. Butwhile bilateral agreements are not necessaryfor cooperation to take place, if the law of acountry prevents sharing of certain confidentialinformation, this may discourage bilateralcooperation in competition policyenforcement. For example, much informationinvolved in cartel cases are confidential—theyare collected in the course of investigation orare given by an applicant in exchange forpromise of less punishment. To address this,one strategy has been to file anti-cartel casesin multiple jurisdictions. OECD has identifiedadequate conditions for legislation facilitatingsharing of information.

VI. Technical Session V:Presentation of the Draft ADBCompetition Law Toolkit

Professor Richard Whish presented the draftADB Competition Law Toolkit and facilitatedthe technical session. The draft toolkit wasprepared to provide countries with tools thatcan be used to implement and assess policiesthat will increase competition, and thereby, thecompetitiveness of their economies as awhole. The finalized toolkit will be a web-based document that is easily accessible tocompetition and regulatory agencies andother government offices, as well as the gen-

eral public—including students and NGOs,researchers, and members of the develop-ment community.1

The idea is for the toolkit to present basicprinciples in competition law and directreaders to materials that tackle these basicprinciples in greater depth. Links to existingglossaries of terms relevant to competition laware also provided. The toolkit also provides abrief chapter on countries that have adoptedcompetition laws, as well as links to websitescontaining further information about thesecompetition regimes.

To ensure accessibility for everyone, andnot just lawyers and economists or experts inthe field, it is composed of chapters thatemploy short and simple language,summarizing key ideas, concepts, and issuesthat anyone interested in competition law andpolicy would find relevant.

The toolkit provides chapters on thepractices that competition law aims to control.The practices identified as harmful to theprocess of competition, and whichcompetition law is concerned with, are:• Anticompetitive agreements, which have,

as their object or effect, the restriction ofcompetition;

• Abusive behavior by a monopolist, or by adominant firm with substantial marketpower, which enables it to behave as if itwere a monopolist;

• Mergers between independent firms thatcould be harmful to the competitiveprocess, such as, if one competitor wereto acquire its main competitor; and

• Public restrictions of competition such aslaws, regulations, licensing rules, or theprovisions of subsidies, which may distortthe process of competition.

There is a need to be clear on whatcompetition law seeks to regulate because theterm “competition law” is often used quiteloosely to refer to legislation on economicwelfare, consumer law, laws relating to foreigninvestment, and even rules designed to protectminority shareholders from abuse by majorityshareholders. Popular misconceptions of whatcompetition laws seek to regulate get in theway of making correct policy choices that canhelp increase a country’s competitiveness.

1 The finalized Toolkit on Competition Law is available at:www.adb.org/Document/Others/OGC-toolkit/Competition-law/default.asp


Executive Summary xxv

The toolkit also provides a chapteroutlining the key concepts in competition law.Its ultimate focus is the concept of marketpower; it identifies certain factors thatcountries may wish to consider in determiningwhether market power exists—such as marketshares, barriers to entry and expansion,barriers to exit, and buyer power. It is commonto equate market power simply with marketdefinition which, in turn, is defined by marketshares. It has been observed that this approachcan be problematic. For example, it may wellbe argued that reality does not present clear-cut situations where market share alone canbe determinative of market power; where onecan clearly identify what constitute barriers toentry and expansion, or barriers to exit.

A chapter discusses how competitionpromotes allocative and productive efficiency,leads to lower prices for consumers, promotesinnovation and the availability of betterproducts in the market, and providesconsumers with choices as to the productsthey buy. Another chapter is devoted todiscussing the importance of competition lawand policy in emerging economies. Thechapter provides arguments to support theposition that the effect of anticompetitiveactivities on the poor is proportionally greaterin developing countries as compared to theirdeveloped counterparts. The chapter alsodiscusses issues relating to the adoption ofcompetition laws in a specific country contextand provides a comparative analysis of thestrengths and weaknesses of differentcompetition regimes, which can serve as a toolfor identifying best practices in the field. Theinterface between competition and regulatoryregimes is discussed in the toolkit in thecontext of specific sectors—public utilities,infrastructure, and banking and finance.

The toolkit also provides a review ofenforcement mechanisms that are essentialfor effective application of competition laws.It is not enough to adopt competition laws. Itis important to ensure that these laws areenforced. The chapter on enforcementmechanisms outlines what one needs toconsider when establishing a competitionregime. The design of independent,accountable, and transparent competitionauthorities; powers and procedures of suchauthority; sanctions and remedies foranticompetitive practices; complianceprograms; administrative guidance; andprocedures for appeals and judicial review are

all discussed under this chapter. Referencesto relevant laws, administrative guidance,policy statements, academic literature andother sources are provided in the toolkit.

The toolkit was generally well-received.Delegates of the roundtable activelyparticipated in the discussions on the toolkit.They pointed out that to be useful todeveloping countries, the toolkit shouldaddress more specifically the concerns ofdeveloping countries with respect tocompetition law. Examples of enforcementmechanisms employed in developingcountries and cases involving anticompetitivebehavior in such countries were referred toduring the discussions.

VII. Closing Session

This session was commenced by Mr. ArthurM. Mitchell, ADB General Counsel, who offeredhis views on the road ahead for ADB and theparticipants of the roundtable. Mr. AnwarulHoda, Member, Planning Commission,Government of India, delivered the valedictory,and Ms. V.S. Rekha, Senior Counsel, ADB,delivered the vote of thanks. A brief summaryof the session is provided below.

Mr. Arthur M. Mitchell said that theroundtable had been useful in bringing to lightthe nexus between competition and povertyreduction, which is ADB’s overarching goal.That the participants recognized the close linkbetween competition and poverty reductionwas evident in their questions—particularlythose relating to whether or not basiccompetition principles should be approachedfrom a developing country ‘s perspective. Manyparticipants opined that developing countries’special concerns and local circumstancesneed to be taken account when adopting andenforcing competition laws and policies, orwhen undertaking or sequencing relatedreforms. Mr. Mitchell then requested theparticipants to provide feedback regardinghow useful the roundtable has been to them.He said that such feedback would inform ADBwhat types of activities and knowledge itsmembers find useful. He also expressed thehope that the roundtable participants wouldform a network of competition authorities andregulators in the region, which could meet andexchange views on a regular basis.

Mr. Anwarul Hoda summarized andcommented on the presentations deliveredduring the roundtable. He believed that the


xxvi Law and Policy Reform at the Asian Development Bank

roundtable had exposed the participants todifferent perspectives on competition law andpolicy. In his view, the experiences of Australiaand Korea, where competition law and policyoccupy an important position on the nationalagenda, were particularly useful. Australiabenefited considerably from the adoption ofcompetition policy. The importance Koreaattaches to competition law and policy isapparent from the fact that the KFTCchairperson sits in the Cabinet. Mr. Hoda alsomentioned the postwar Japanese experienceas being an interesting case of a governmentthat gave increasing importance tocompetition law and policy as their economicsituation improved. Mr. Hoda said that thepresentations on competition law regimesacross region and interface with regulatoryregimes offered the following two conclusions:(1) economic growth is enhanced by pro-competitive regulation; and (2) competitionauthorities and regulators share commonobjectives. He emphasized the importance ofcompetition authorities and regulators, sayingthat without these institutions, commercialenterprises would be unable to resist thetemptation to increase profits by means ofanticompetitive practice.

As regards the discussion on competitionand society, Mr. Hoda offered his own viewson the subject. He said that while no onedoubts the benefits of competition, the debatein some developing countries has revolvedaround the right time to seriously startaddressing competition issues given the manychallenges that developing countries face.Nevertheless, Mr. Hoda said he believed that

many countries now realize that competitionlaw and policy reforms must be introducedsooner rather than later. Moreover, countriesare beginning to see the necessity forinternational cooperation and the need forconverging competition policies. In thisregard, the presentation on convergence andharmonization of competition laws wasenlightening. Mr. Hoda pointed out thatconvergence did not necessarily refer to theestablishment of a uniform competitionframework across countries. Indeed, anumber of countries had eschewed theadoption of a national competition law, yethad adopted competition practice andprinciples that were enforced by sectorregulators. Mr. Hoda pointed out that theadoption of competition law was not enough.The culture of competition had to seep intosensibilities of the private sector for itsobjectives to be fully realized.

Ms. V.S. Rekha concluded the roundtablewith a vote of thanks. She said it was usefulto observe and learn from the deliberationson the various aspects of competition mattersduring the course of the roundtable. Thesedeliberations not only enriched thediscussions but also allowed the articulationof relevant issues, needs, and concerns, aswell as helped discuss on possible bestpractices on competition matters. She thenthanked the resource persons, panelists,representatives of the Government of India,the audience, and ADB staff at the Office ofthe General Counsel and India ResidentMission for contributing their time and talentto the roundtable.


Executive Summary xxvii

InauguralSession

Welcome Remarks, Arthur M. Mitchell, General Counsel,Asian Development BankInaugural Address, Prem Chand Gupta, Honorable Minister,Company Affairs, Government of IndiaKeynote Address, V. Krishnamurthy, Chairman, NationalManufacturing Competitiveness Council, Government of IndiaAddress, Anurag Goel, Secretary, Ministry of Company Affairs,Government of IndiaAddress, Ashok Chawla, Additional Secretary, Department ofEconomic Affairs, Ministry of Finance, Government of IndiaVote of Thanks, Tadashi Kondo, Country Director, India ResidentMission, Asian Development Bank

“Competition

is necessary

for developing

countries to

obtain the

benefits

promised

by trade

liberalization

and

privatization.”

Arthur M. Mitchell,General CounselAsian DevelopmentBank


Welcome RemarksToward an Asian Regional Competition FrameworkARTHUR M. MITCHELLGeneral Counsel,Asian Development Bank

As early as 1995, ADB recognized, in its Governance Policy, the importance that competitionplayed in ensuring sustainable economic growth in its developing member countries.1

ADB saw then, as it does now, that competition is necessary for developing countries toobtain the benefits promised by trade liberalization and privatization. For while trade liberalizationand privatizing the public sector have increased business opportunities in the internationalmarket, they do not, by themselves, level the investment playing field or make an economy anattractive investment destination.

Privatization, regulation, competition

In the last decade, many developing countries have sought to privatize public sector monopolies.But experience in many countries such as the United Kingdom (UK) shows that without acorresponding increase in competition, privatizing the utilities sectors has not maximized sectorefficiency or led to lower prices for the consumer. Competition thus emerges as the mostsignificant factor in this regard.2

Without the appropriate safeguards to ensure competition, privatizing the public sectormay lead to a substitution of public sector monopolies with private monopolies, and thus,decrease social welfare.

Historically, many of ADB’s developing member countries have responded to increasedprivatization by creating regulatory regimes or undertaking regulatory reforms to safeguardconsumer welfare and ensure competition. In some regimes, competition laws and policiescontinue to be enforced primarily by sector regulators. Much can be learned from the specializedknowledge and experience of these sector regulators.

In recent years, competition agencies and commissions have been formed alongsideexisting sector regulators. It is important that appropriate regulatory and competition policyframeworks be put in place to ensure improved economic performance. What are theingredients of the right relationship between the competition authority and sector regulators?How does one resolve jurisdictional overlaps between competition authorities and sectorregulators? How does each contribute to enforcement of competition law and the developmentof competition policy? These are some of the issues we hope will be discussed during theroundtable.

Competition, market liberalization, regional cooperation

Competition laws are rapidly being adopted in many developing countries, in all continents,and in all types of economies. There are at least 100 systems of competition law worldwide,and more are being contemplated.3 Of course, enacting competition laws is not enough; weneed to learn how to implement these new laws effectively.

Among the many challenges facing agencies tasked with enforcing competition laws ishow to enable developing countries to use their competition laws to protect them from cross-

1 ADB. 1995. Governance: Sound Development Management. Manila. 39.2 Pollitt, M. 1999. DAE Working Paper, No. 9901: A Survey of the Liberalisation of Public Enterprises in the UK since 1979. Cambridge:

University of Cambridge.3 Whish, R. 2006.Competition Law Toolkit for the Asian Development Bank. Draft presented for review at the Competition Law

and Policy Roundtable. New Delhi, India, 17 May.

Arthur M. MitchellGeneral Counsel,Asian DevelopmentBank

“A regional

competition

framework may

help build

stronger

economic

integration in

the region.

Despite their

differences, the

region’s many

markets do

share common

issues and

concerns.”

2 Law and Policy Reform at the Asian Development Bank


border anticompetitive behavior. A large and growing part of foreign direct investment (FDI) inemerging economies has come from cross-border takeovers.4 Such takeovers sometimes allowlarge multinationals to increase their market power, and increase the risk of abuse of marketpower. Abuse of a dominant position has an adverse impact not only on domestic economiesbut also on international trade. Other anticompetitive practices such as running hard-core cartelsengaged in price-fixing or bid rigging likewise pose threats to domestic and global economies.The cross-border implications of these anticompetitive practices will likely be the subject ofgreater regional attention as the volume of international trade rises.5

Conventionally, the Asian response to the threats posed by large multinationals has been toemploy a screening process and impose pre-entry requirements on all foreign investors. Theyhave imposed limitations on foreign equity and ownership and divestment requirements andother protectionist regulations, which prevent foreign investors and firms from becomingdominant forces in the economy. 6 However, such regulations also restrict the flow of foreigninvestments into the region. And since such restrictive investment laws and regulations focuson protecting national industries from foreign investors, they do not prevent local firms fromestablishing oligopolies in specific sectors by merging with or acquiring other local or foreignfirms. Such arrangements are incompatible with fair competition. They distort prices and restrictthe scope of consumers’ choices.

Implementing competition law and policy in the region may be a better way of dealingwith the risks brought about by liberalizing one’s economy. Competition laws normally apply toall firms operating in the national and regional territory, whether in the areas of domestic sales,imports, or FDIs. Countries will find that adherence to a widely understood and regionallyaccepted competition framework will enable them to use widely accepted standards inassessing the competitive impact of foreign firms at the time of entry and thereafter. Suchadherence will help a country, in tandem with its neighbors, to monitor the competitive behaviorof global firms in host countries to ensure that these do not engage in anticompetitive practices.In this way, converging competition law and cooperation in the enforcement of competitionlaw in Asian countries can help regulate and control cross-border mergers and acquisitionsthat may give rise to an abuse of dominant market positions in the region.

Toward a regional competition framework

Today, we have the opportunity to build consensus regarding a regional competition framework.Discussions currently taking place domestically with regard to the formation of competitionagencies and establishing or amending competition law also need to be conducted on a regionalscale. Regional integration in Asia has increased—and continues to increase—even after theAsian Financial Crisis, which demonstrated how inextricably linked Asian economies alreadyare.

A regional competition framework may help build stronger economic integration in theregion. Despite their differences, the region’s many markets do share common issues andconcerns. A coordinated response to those concerns will enable the countries in the region toliberalize their economies and expand their markets, while at the same time mitigating someof the risks inherent in globalization. Moreover, discussions regarding a regional competitionframework may help coordinate and harmonize laws that are concerned with the properregulation of FDI in the region.

But can such a framework be developed in Asia? Some have contended that theharmonization of competition laws may prove to be a challenge in the region, given the diversityof competition laws and enforcement practices—all of which are said to follow the variancesin the markets that they regulate.

4 United Nations Conference on Trade and Development (UNCTAD). 1999. Trade and Development Report,1999. New York andGeneva: United Nations.

5 “Global exports of goods and services rose by an annual average of 5.8% in real terms and 10.3% in nominal terms from 1970to 2004. Exports increased from 11.6% of output in 1970 to more than 27.2% in 2004.” Brooks, D. 2005. Competition policy,international trade, and foreign direct investment. In Competition Policy and Development in Asia, edited Brooks, D. and S.Evenett. United Kingdom: Palgrave Macmillan, 27.

6 Thanadsillapakul, L.The Harmonisation of ASEAN Competition laws and Policy from an Economic Integration Perspective.Available: www.thailawforum.com/articles/theharmonisation.html.

Inaugural Session 3


7 World Bank. 2002. World Development Report: Building Institutions for Markets. Washington DC and New York: World Bankand Oxford University Press.

However, it should be noted that significant variances in competition law exist not onlywithin Asia but also around the world. A 2002 World Bank survey of competition laws in 50countries has identified differences in three important areas: (a) definition of dominance, (b)treatment of cartels, and (c) enforcement.7 Notwithstanding this diversity, many have undertakenefforts to build frameworks within which core principles in competition law and policy may beenforced.

Despite differences in domestic legal and institutional structures, there is growinginternational consensus regarding the fundamentals of competition law and policy. Thisconsensus relates to core competition principles such as transparency and accountability,nondiscrimination, due process, and procedural fairness. Without insisting on outrightharmonization, countries may consider negotiating the acceptance of these binding coreprinciples as part of domestic competition laws.

Converging competition regimes provide investors with less uncertainty in sifting throughconflicting definitions of key concepts in competition laws. As a result, investors will have greaterpredictability in determining the scope of acceptable competitive behavior—and this shouldmake the region a more attractive investment destination.

Conclusion

Competition is a public good that can potentially spur economic efficiency and growth, notonly within a country but also within the Asian region. But the right legal infrastructure to supportcompetitive practices both domestically and regionally must be constructed. While appropriatelaws are necessary, equally important is how the legal infrastructure is implemented.

Further developments in competition law regime and capacity building within countriesand in the region—these are what lie ahead. None of these will develop effective and efficientmarket economies overnight, but all are key to lasting development. Surely, the magnitude ofwhat lies ahead will not discourage you who are at the forefront of competition law and policyreforms in your respective jurisdictions. We look forward to learning lessons from all of you—lessons that are so urgently needed by the developing world.



Inaugural AddressPREM CHAND GUPTAHonorable Minister, Company Affairs,Government of India

I extend a very warm welcome to all the distinguished participants and delegates to thisCompetition Law and Policy Roundtable organized by the Asian Development Bank. I thankyou all for coming to New Delhi during this hot summer to participate in this exercise. Yourpresence here is an indication of the importance of the issue of competition in today’s economicenvironment. I also compliment the Asian Development Bank (ADB) for organizing a meetingthat will foster a better understanding of the common principles applied across countries ingoverning competition. Such interaction will be a learning experience for all of us.

Competition is recognized as the foundation of an efficient market system. It is the importantprecondition for economically optimal and socially fair and desirable market results. Severalstudies have indicated the stimulating effects of competition on overall growth and prosperity.I understand that healthy competition policies have resulted in net real increase in householdincomes in some countries and have also helped in increasing employment. There is a need toclosely examine these issues in diverse economies so that policy implications with respect tocompetition and the associated legal framework will emerge in sharper focus. Workshops willbe useful in achieving a better understanding of these issues.

While competition as a concept has coexisted with the markets in the world economy, it isreally only in the last quarter of the previous century that the issue came to occupy an importantplace in international discourse. I am informed that there are more than a hundred countriesthat have competition laws in place today. However, nations differ markedly not only in termsof the nature of competition laws, but also in terms of the extent to which they have enforcedsuch laws. This calls for a greater understanding of the state of markets and the nature ofcompetition processes in various countries. This is more relevant for the developing countriesthat are still faced with problems of uneven economic development and deprivation affectinglarge numbers of their population. In such countries, resorting to market forces as a means ofaddressing the problems and ensuring economic growth may not be the sole credibledevelopment option. There would also be a need for state action in certain areas. Thus, whilethe goal of achieving functioning markets could be considered a desirable objective, it standsto reason that various countries would be at different levels in their achievements of suchobjectives. It would be appropriate to learn from each other and more particularly, from thosewho have had a head start in the process of setting up effective competition regimes.

India too, after achieving independence in 1947, initially followed economic policies basedon the “control regime” with the objective of developing a broad industrial base to achieveeconomic growth and self-reliance in critical areas and social justice. This was the requirementof the times, when the industrial and capital base of the country was weak and the country wasfaced with widespread poverty.

However, in recent times, the Indian economy has been in a state of transition. The overallgrowth rates have shown consistent improvement over the last two decades and today, India ispoised to play a meaningful role in the world economy. The Indian industrial and corporatesector has achieved levels of efficiency and capabilities that would allow it to competeinternationally. Appreciable gains have been made in the services and knowledge-based sectors,with Indians contributing significantly to global trade and industry.

The need to curb monopolistic practices that would lead to unhealthy accumulation ofeconomic power was felt long ago and India enacted its first antitrust law in the form of theMonopolies and Restrictive Trade Practices Act in 1969. The thrust of this law, however, was onthe prevention of concentration of economic power and of monopolistic, restrictive and unfairtrade practices.

Prem Chand GuptaHonorable Minister,Company Affairs,Government ofIndia

“With global

integration of

economic

forces, it is

important that

all the countries

have a common

understanding

on competition

issues. ”

Inaugural Session 5


However, the economic reforms of the last two decades have enabled a liberalizedeconomic regime, and this has resulted in a sea-change in the competitive environment in thecountry. Considerable changes have taken place in policies dealing with, among other things,trade, industry, and investments. It is now recognized that the existing antitrust regime fallsshort of the requirements of a modern competitive economy. Hence, the need for a newcompetition law—as well as the creation of a competition regulatory body—was felt. Recognizingthis need, the Government started the process of enacting a modern competition law in 1999.This eventually led to the enactment of the Competition Act in 2002, with the objective ofproviding for the establishment of a Competition Commission that would:

• prevent practices having adverse effect on competition;• promote and sustain competition in markets in India;• protect the interests of consumers; and• ensure freedom of trade, carried on by participants in markets in India.

The Competition Act seeks to address three kinds of anticompetitive practices:anticompetitive agreements; abuse of dominant position; and anticompetitive combinations.In addition, the Competition Commission of India was also entrusted with the task of advocacywith all the stakeholders in economic progress. However, the new law faced some legalchallenges in the process of initial implementation, and as of this writing, it is being amendedso as to address the issues arising from these challenges.

Until the Competition Act becomes fully operational, the Competition Commission of Indiawill be working in the areas of competition advocacy and capacity building. Its aim would beto create awareness about the law so as to increase voluntary compliance with minimalintervention and contribute in building a healthy competition culture in the country, whichwill help India become an economic superpower as predicted by many economists aroundthe world.

The Government of India is committed to fully operationalize the Competition Commissionas early as possible. I am sure that a few months hence, when you meet in other conferencesand roundtables, India would have had considerable experience to share with you all onimplementation of a modern competition regime. Meanwhile, we would like to learn fromyour experience so as to ensure that we avoid the pitfalls and build on successes based oninternational best practices.

Friends, nations of the world are engaged today in devising an equitable world trade regimethat would operate on commonly accepted, principles to the benefit of all. With global integrationof economic forces, it is important that all the countries have a common understanding oncompetition issues. Competition laws should operate fairly, recognizing the special needs ofdeveloping countries and emerging markets. Recognition of this imperative would help in theevolution of competition frameworks, which are more sustainable in the long run in theinternational arena.

I am happy to note that this roundtable aims to enhance Asian competition authorities’understanding of competition law and policies and help them strengthen their capacities. I amconfident that the deliberations over the coming two days would help the participating countriesin chalking-out appropriate strategies for the coming years.

With these words, I wish the roundtable all the success in their endeavors.Thank you and Jai Hind.

“Competition

laws should

operate fairly,

recognizing the

special needs of

developing

countries and

emerging

markets.”

V. KrishnamurthyPrem Chand Gupta,Honorable Minister,Company Affairs,Government ofIndia



V. KrishnamurthyChairman,NationalManufacturingCompetitivenessCouncil,Governmentof India

“Competition

policies,

competition

laws, and

competitiveness

are all

interconnected.

While

competition

laws provide

the necessary

framework,

competitiveness

is the final

effect. ”

Keynote AddressV. KRISHNAMURTHYChairman, National Manufacturing Competitiveness Council,Government of India

I must compliment the Office of the General Counsel of the Asian Development Bank (ADB) forhaving invited so many representatives and experts from other parts of the world to discusscompetition, a subject that is relevant to my own country, India, particularly in the context of itscurrent efforts to improve its competitiveness of the Indian economy and in the framing ofappropriate competition laws. While the Honorable Minister for Company Affairs is in a betterposition to put across the Indian point of view, walking through certain stages in the Indianpolitical economy and development will highlight importance of promoting competition andneed to address this subject with greater diligence.

A brief history of Indian political economy

India is a large country with reasonable endowment of natural resources. It is a nation withlarge domestic market and talented people. Its human resources are its greatest asset, whichits founding fathers have exerted great efforts to further develop. Despite these advantages,India’s role in the international market place is limited. It has not grown at all, has remainedstatic, and in some areas, was even better off 30 to 40 years ago. Problems of unemploymentand rural poverty persist despite the best efforts of its political leaders.

India’s founding fathers attempted to provide a strong foundation for a strong resurgentIndia. The first 15 years (1950–1965), saw the establishment of numerous centers of higherlearning, engineering and scientific teaching institutions, and enterprises. This period witnessedthe establishment of a large number of research laboratories in order to cultivate innovationand the talents of the Indian youth. The following 15 years (1965–1980) involved the framing ofseveral policies that lay greater emphasis on self-reliance and import substitution. The last 10years, starting from 1980, went into de-licensing since by this time, the economy was seen assufficiently strong.

India and the quest for competitiveness

Until the end of the 1980s, India did not actively promote competition, and we may have had aprice to pay. But beginning 1991, a series of steps were taken to initiate liberalization, allowingthe free entry of people into any line of business. In the last 5 to 6 years, intensified liberalization,as well as globalization, have increased competition not only among Indian companies, butamong Indian and international entities that have gained entry into the country.

Although India has enjoyed economic growth of about 6% in the last 10 years, this growthhas unfortunately been imbalanced. We prematurely migrated to services; whereas growth ofthe manufacturing and industry sectors, which should form the backbone of any large economyand which have the potential of providing employment opportunities for most of India’s workingpopulation, has remained stagnant. The contribution of the gross domestic product throughindustry has remained at 25 to 26%, which is lower than the desirable rate of 40%. Growth ofthe manufacturing sector in India has remained at 16 to 17%, far less than the 30 to 35% growthrate in other countries.

Competitiveness, the industrial manufacturing sector, and the National ManufacturingCompetitiveness Council (NMCC)

Imbalanced growth has prevented rural areas and needy sections of society from sharing thebenefits of India’s advancement and economic growth. It does not provide sufficient gainful

Inaugural Session 7


employment for the population. The Government is concerned not only with accelerating theeconomy’s growth but also with providing employment to 8–10 million boys and girls enteringthe employment market every year—especially for those in and from the rural areas and this isthe genesis for setting up the National Manufacturing Competitiveness Council (NMCC) forimproving the competitiveness of the manufacturing industry and bringing these to the fore.

Some may view that we lost our competitiveness because competition was not activelyencouraged. Unless its competitiveness is increased, India will not be able to increase thegrowth of the industrial manufacturing sector to a level that would address substantially theunemployment problem. The growth rate of the manufacturing sector is presently at 7% asagainst the targeted growth rate of 14%, one that would address unemployment. This can beachieved only if we are going to be competitive not only domestically but also globally. For thisreason, the NMCC—comprising representatives from the industry, academia, and government—has been discussing how to make the Indian industry, as well as the Indian economy morecompetitive. Last month, India evolved a national strategy for manufacturing under which thePrime Minister of India announced a national competitiveness program.

In formulating the national strategy, NMCC identified several issues that must be addressedto improve competitiveness, and formulated its recommendations responsive to these issuesranging from taxation to innovation. One important recommendation is that the country needsto provide the right market framework and regulatory environment; that while competition isthe key to success, competitiveness should be arrived at without having to protect the Indianindustry, without having to provide subsidy for any sector.

The national strategy stresses the need for a proper environment to buildcompetitiveness. A market framework, a set of competition laws and proper administrationof these rules and procedures that encourage competition—these have been our principalrecommendations in the national strategy. Competitiveness is the prime role of all countriesin today’s world, and there is a need to urgently improve the competitiveness of the Indianeconomy if we are to play our role in the global market. The setting up of NMCC is a directresult of this particular desire of the present Government. However, enhancing, and moreimportantly, sustaining competitiveness is a formidable challenge that all entrepreneurs,industries, and states, must overcome.

Competitiveness, competition policies, and competition laws

Competition policies, competition laws, and competitiveness are all interconnected.Competitiveness and competition are complementary. Competitiveness is obtained by optimaluse of resources, efficiency in production through continuous innovation, improvement in theprocesses, better quality, and lower cost and prices. Competition is the most acceptable modeof making goods and services available in abundance, in acceptable quality, and at affordableprices. While competition laws provide the necessary framework, competitiveness is the finaleffect. The market, which generates growth, operates best when the environment encouragescompetition among businesses.

I have noticed that whenever India adopts a regulatory framework to promote competition—as the fundamental goal of every regulation is the promotion of healthy competition—pricescome down, and customers enjoy better deals.

The mutually reinforcing benefits of competitiveness are accelerated growth, lasting socialbenefits, a population that is gainfully employed, and the development of a business environment.A properly managed environment helps businesses flourish, promotes and sustainscompetitiveness, increases productivity, accelerates growth, and assists in the country’s globaland regional trade. All competition authorities face the challenge of promoting such anenvironment. This roundtable provides competition authorities to share knowledge andexperience in this area, and will be valuable to everyone present.



Building an environment that enables competitiveness:Strategies to promote competition

Any strategy to promote competition has two important policy standards: competition advocacy,and clear rules and regulations that delineate the functions of sector and competition regulators.Competition advocacy involves the active promotion of good competitive practices in themarketplace. Here the relationship between the sector wise market regulators and competitionauthority should be clearly defined and balanced. Only clear laws and rules can ensure thatthey act in a synergetic manner and ensure genuine competition in the interest of all stakeholders.On the other hand if the rules are unclear or vague, this can then become a zero-sum game.One needs to be careful in ensuring that this does not happen.

In the world of competition, prevention of any distortion is far better than cure. It must alsobe ensured that rules themselves are the right ones for a fair and comprehensive businessenvironment. The governing regulations should be well targeted, and should include tests toensure that the measures proposed do not bring unintended side effects that would hold backcompetition.

Bad laws must be avoided at all times. Defective laws can make life miserable, doubly soif they are badly implemented. On the subject of competition, it may well be that competitionin its purest form, i.e., what we call a perfect competition, may not or does not exist; and that itmay not even be in the best interest and may not always be helpful. Competition laws shouldnot lead to fragmentation that is against economies of scale, a scale necessary to encourageinnovation and capital formation. An appropriate competition policy that is enacted into lawmust not only enhance competition, but enable efficiency, growth, and innovation to flourish.The law should be simple enough for an ordinary person to understand. It should be easily andeffectively implemented.

Each country enacts a competition law that suits local conditions. Each country mustconsider public welfare concerns when adopting a competition law best suited to its needs.Competition laws and regulations cannot also remain static and need to be periodically revisitedto take into account the changes taking place both domestically and internationally. For instance,when the rules of the game between countries change, when countries adopt new tradeagreements, domestic competition rules may need to be revised.

Global or regional integration, whether in trade, investment or financial sector, would haveits impact on competition in the local economy. Public and private monopolies in one countrymay impact on another country’s level of competition. To develop coherent competition policieswithin the region, a roundtable of this type is essential. There may even be a need for a moreformal mechanism that will facilitate the periodic exchange of views, ideas and informationamong competition authorities in Asia.

Once again I wish the roundtable all success. Thank you, ladies and gentlemen, for givingme this opportunity.

Inaugural Session 9


AddressANURAG GOELSecretary, Ministry of Company Affairs,Government of India

It is a privilege to address this roundtable on competition law and policy organized by the AsianDevelopment Bank (ADB). ADB deserves to be complimented for organizing this conferenceand bringing together experts from all over the world, representing a number of countries andinternational organizations. I extend a warm welcome to the distinguished participants. I amsure the exchange of views and experiences in this roundtable would contribute to betterunderstanding of the need and impact of competition on consumer welfare, economicefficiency, and economic growth in a fast integrating world.

There is increasing recognition of the impact of competition on efficient functioning of markets,broad international economic trends point to market forces guiding the future development ofvarious economies including our own. The Indian economy has undergone considerable changesince 1991 with progressive liberalization, private sector participation, emergence of functioningmarkets in a number of sectors and reduction of trade barriers leading to a new economicenvironment. The need for markets to function without distortions assumes further significancein such a situation. It was indeed a realization of these imperatives that led the Government to theenactment of Competition Act 2002 with the establishment of the Competition Commission ofIndia (CCI) in October 2003. Unfortunately, there were some legal challenges; and because ofthese challenges, the Commission has not yet become fully functional. While these issues arebeing tackled separately, the Commission currently focuses on advocacy and capacity-buildingfunctions. In the meantime, a bill has been introduced in the Parliament to amend the said Act.The bill addresses the legal issues that are under consideration by the Parliament. The ultimateobjective is to usher in an informed debate on the issues relating to competition, a process thatwe all recognize is essential to the development of a competition culture. It is important that CCIis fully equipped to take up the task of capacity building.

We, of course, have the advantage in India of a vast number of institutes of excellence. Allover the world, Indian institutes of technology are well-known, Indian institutes of management,Delhi School of Economics, National Law School, etc. In the approach to capacity building ofthe Commission, a large number of people from these institutes are also proposed to besensitized, so that a reservoir of personnel to whom recourse could be made whenever requiredis ensured, as a resource not only for India but for other countries in the region too.

Different countries have had different experience on competition regulation, whether insetting up regulatory structures or in ushering public policy on the subject. While someeconomies have been exposed for a long time to application of competition laws, others arestill in the process of setting up modern competition regimes. In this context, the role ofinternational cooperation is very important. The special needs of the developing countries alsoneed to be understood and met. Roundtables such as this organized by ADB provide theseinteractions.

Further, while organizations like United Nations Conference on Trade and Development(UNCTAD), Organisation for Economic Co-operation and Development (OECD), or InternationalCooperation Network (ICN) provide a platform for exchange of views and deliberations onbest practices; the requirement is of a more sustained cooperation and forging of workablearrangements that bring about positive value addition to the respective jurisdictions. I am surethat this roundtable will be able to dwell on the subject and throw up some practical solutionsin this regard.

Another general area that needs closer look is the manner in which the competition regulatorwould coordinate its work with that of other sectors specific regulators. The basic principlesand guidelines of their functioning, the areas of possible overlaps must be carefully addressedand avoided. Everyone concerned must be very clear on their respective roles, there should beno forum shopping, there should be no possibility of confusion, and there should be no possibilityof turf battles and related matters.

I would only say that I have no doubt that the participants will immensely benefit from thisroundtable that would deliberate on several issues including those that I have raised. I alsohope to benefit and look forward to the recommendations that are arrived at. Moreover, I wouldlike to congratulate ADB once again for organizing this roundtable.

Anurag GoelSecretary,Ministry ofCompany Affairs,Government ofIndia

“The ultimate

objective is

to usher in

an informed

debate on the

issues relating

to competition,

a process that

we all

recognize is

essential to the

development of

a competition

culture.”



AddressASHOK CHAWLAAdditional Secretary, Department of Economic Affairs,Ministry of Finance, Government of India

Allow me to begin by recalling and congratulating ADB for its recent and eminently successfulAnnual Meeting. We were privileged to play host once again, after 15 years or so, to this majorevent. As always, ADB with its constructive and forward-looking perspective brought centerstage the idea of “financial integration” in Asia. I am sure this is a theme that will generate a lotof interest in the years ahead.

A brief word about ADB in India. We are one of the founding members of ADB and also oneof its largest borrowers. The annual borrowing has been in the region of $1.2 to $1.5 billion. Thisis expected to double in the next few years. An aspect that merits mention is that ADB’s focusand lending—on infrastructure sectors such as energy, transport, and urban bodies—coincideswith the approach of the Government of India. ADB also provides technical assistance, whichwe have found valuable in our transition to a more open economy.

ADB deserves to be complimented for organizing this roundtable on competition law. Thediscussion is not only timely but also extremely relevant. Given the stage of economicdevelopment and the changes taking place in many sectors of the economy, there is a felt needfor capacity building. There is equally a need for learning from regional and international bestpractices in the field. Hence, my congratulations to ADB for hosting this 2-day roundtable, whichbrings together a wide spectrum of stakeholders on competition law and policy.

Why is there so much focus on competition? One opinion is that the dynamics of themarketplace would be adequate to address competition-related concerns and that no specificintervention through competition laws is necessary. However, like all opinions at the extreme,this line of thinking does not address distortions. We know that there are sectors in whichgoods and services are not tradeable. There are barriers to free trade such as geographicallimitations, natural monopolies, stranglehold of distribution network, etc. Consequently, cartels,entry barriers, predatory pricing, and other undesirable consequences of oligopolistic tendenciescan emerge. Competition laws are, therefore, necessary to keep a check on the market playerswho may be inclined to manipulate the system.

A good competition policy should ideally be an integral part of the overall economicdevelopment plan of the country. In such a scenario, the competition policy will bring aboutnot only reasonable prices and adherence to quality but also help in optimal allocation ofresources. There is evidence to show that competitive pressure is the most important factoraccounting for positive variation in productivity of businesses. It has further been estimated ina World Bank Policy Research paper that anticompetitive practices can reduce private growthrates by as much as 10 percentage points over 3 years.1

What has been the evolution of competition law internationally? Canada was the first countryto enact such a law more than 100 years ago. Several states of the United States (US) alsoenacted competition laws around the same time. Today, more than 90 countries have enactedcompetition laws.

In the Indian context, we enacted the Monopolies and Restrictive Trade Practices Act along time back. However, the right competition environment could not grow; our industrialpolicy had a plethora of licensing requirements such as restrictions on capacities, on foreigntechnology tie-ups, on industrial location, and so on. Similarly, trade policy was characterizedby high tariff barriers, quantitative restrictions, and investment controls. The parastatalorganizations were insulated from market forces and benefited due to entry barriers and

1 Hellman, J., G. Jones, and D. Kaufman, 2000. WBI Policy Research Working Paper 2444: Seize the State, Seize the Day: StateCapture, Corruption and Influence in Transition. World Bank. Washington, DC.

Ashok ChawlaAdditionalSecretary,Department ofEconomic Affairs,Ministry of Finance,Government ofIndia

“ A good

competition

policy should

ideally be an

integral part

of the overall

economic

development

plan of the

country. ”

Inaugural Session 11


subsidies. Things changed with the process of economic liberalization that began in 1991. Hence,the need for an effective competition law in tune with the post reforms era; India thus got itsproper competition law about 3 years ago. This led to the setting up of the CompetitionCommission of India.

Different sectors of the economy, depending on the historical baggage and the speed withwhich economic liberalization has unfolded, have responded differently in their contributionto competition. For instance, the telecom sector is widely recognized as a success story. Thesame is not true of, say, the energy or the ports sectors where there are a large number of stateorganizations and low levels of private investment.

The challenges in regard to competition policy in India are essentially threefold: (i) to ensurethat the competition commission becomes fully effective and gets down to work without furtherdelay; (ii) the overlap between competition law and the concerns of regulation in variousinfrastructure sectors needs to be seamless; and (iii) the “natural monopoly” syndrome has tobe curbed by encouraging private entry. Monopoly, whether state or private sector, has its ownundesirable consequences.

Let me conclude by wishing the roundtable 2 days of interesting and fruitful discussions.We look forward to the conclusions which, no doubt, will serve as valuable inputs for theGovernment of India.



Tadashi KondoCountry Director,India ResidentMission,Asian DevelopmentBank

“Enforcement

of competition

law and policy

is key to

creating a

healthy and

modern

economy. ”

Vote of ThanksTADASHI KONDOCountry Director,India Resident Mission,Asian Development Bank

I am very pleased to have the opportunity to close the inaugural session of the Asian DevelopmentBank (ADB) Competition Law and Policy Roundtable with a vote of thanks.

On behalf of ADB’s India Resident Mission, let me begin by expressing gratitude to ourdistinguished speakers: the Honorable Minister, Prem Chand Gupta, Ministry of Company Affairs;Chairman, National Manufacturing Competitive Council, Dr. Krishnamurthy; Secretary, Ministryof Company Affairs, Shri Anurag Goel; and Additional Secretary, Department of Economic Affairs,Shri Ashok Chawla. Their thought-provoking insights on competition matters reflect theGovernment of India’s growing interest in the area. They also provide an inspiring beginning tothe roundtable.

My gratitude likewise extends to Mr. Arthur Mitchell and his staff at the Office of the GeneralCounsel, for organizing the roundtable. In his remarks, Mr. Mitchell had summarized ADB’svarious interventions in the area of competition law and policy reform—all of which have beenin response to growing demand in the region. His remarks reflect the growing consensus withinthe Asian region that competition is necessary to economic growth and efficiency, and thatcountries are interested in establishing the right legal infrastructure to support competitivepractices both domestically and regionally. This roundtable, then, comes at an extremelyopportune time for Asian competition and regulatory authorities to exchange views and learnfrom each other.

Finally, I wish to thank all of you present today at the inauguration of the roundtable. Noless than 14 competition authorities, relevant agencies and stakeholders from countries acrossthe region are here today, to exchange views about issues confronting competition authoritiesin various jurisdictions within the region, and how these issues have, or could be addressed. Itis indeed generous of you to share your thoughts and experiences with ADB, and yourcounterparts within the region.

I find it encouraging that competition authorities and relevant regulatory agencies are activelyseeking ways to ensure that such laws and policies are enforced. Enforcement of competitionlaw and policy is key to creating a healthy and modern economy. This realization needs to befollowed by the establishment of legal and regulatory frameworks that promote competitivemarket structures, where such frameworks do not exist; as well as strategies to enforce lawsand regulations promoting competition.

I leave you with these thoughts, and hope, as representatives of your countries’ respectivecompetition agencies or relevant regulators, you would share and enhance on your knowledgein the deliberations of these two days. Like Mr. Mitchell, I hope this roundtable will be only thebeginning of greater cooperative efforts on this issue going further.

Inaugural Session 13


“Countries are

interested in

establishing the

right legal

infrastructure to

support

competitive

practices both

domestically

and regionally.”

Tadashi Kondo,Country Director,India ResidentMission,Asian DevelopmentBank



Session 1 “Competition law

and policy has had

profound effects

in many countries.

It is being

implemented

more seriously

than ever in most

countries.”

Allan Fels, AODean,Australianand New ZealandSchool of Government

Competition, Competitivenessand Sustainable Growth(Including the impact of competition regimes oneconomic growth, foreign investments, trade)

Competition Regimes: Analyzing Their Nature and Effect, Allan Fels, AO,Dean, Australian and New Zealand School of GovernmentAddress, Vinod Dhall, Member, Competition Commission of IndiaAddress, Arvind Mayaram, Joint Secretary, Department of EconomicAffairs, Ministry of Finance, Government of India

CompetitionRegimes: AnalyzingTheir Natureand EffectALLAN FELS, AODean, Australian and New Zealand Schoolof Government

Part I – The elements of competi-tion law and policy –A review

This section of the paper reviews the keyelements of a comprehensive competitionregime.

Such a regime has two components:

1. A conventional “competition” or “antitrust”or “trade practices” law.

2. A policy for dealing with governmentactions – whether laws, regulations,policies – that affect competition.

(1) Competition law

Competition law applies to businesses (usu-ally including publicly owned ones) and is de-signed to break up cartels, anticompetitivemergers, the abuse of market power (or domi-nance) and in some countries misleading anddeceptive conduct. It takes the form of statu-tory prohibition of certain kinds of businessbehavior. The prohibitions can be of:

a) a general nature e.g. a prohibition on allarrangements between businesses whichsubstantially lessen competition; and

b) a specific nature e.g. price fixingarrangements between competitors areautomatically prohibited, irrespective ofwhether they affect competition. Thereason for automatic prohibition is thatthe arrangements are assumed nearlyalways to be harmful to the economy andrarely or ever offset by any benefits to theeconomy. Accordingly, it is consideredbest to ban them automatically ratherthan consider the effects of eacharrangement individually before banningthem. Resale price maintenance istreated similarly.

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Competition law is administered andapplied by an independent regulator, whichhas powers to investigate behavior it believesmay be unlawful.

In North America and Australia, suchregulators play a prosecutorial role: theycollect evidence, seek to prove their case incourt, and obtain court orders. In Europe, theregulator itself may have power to makeorders, including fines (although appeals mayusually be made to a court).

Competition law can only work effectivelyif there are credible, adequate sanctions.Courts can impose injunctions, fines, dam-ages, and other orders.

The penalties most often take the form offines and sometimes damages can be addedon. But are fines sufficient in all situations?There is the possibility of jail sentences forcollusion on prices, market sharing, and bidrigging because fines alone may be aninsufficient deterrent.

In North America and Australia is that it isalso possible for individuals including individualbusinesses to take action themselves. They cansue for damages and injunctions (but not fines)in a court. This is an important and powerfulbackup to competition law that usually workswell and is likely to be adopted moresubstantially in Europe before long.

Some features of competition law are:• Most often, the direct beneficiaries of

enforcement action under the law arebusinesses (especially small businesses)rather than consumers. On balance, mostbusinesses gain from competition law.

• In some areas, there is a fine line be-tween competitive and anticompetitivebehavior. An example is when a monopo-list reduces prices in response to entryby a new competitor.

• In other areas, there may be a trade offbetween competition and efficiency e.g.some mergers may enable theachievement of scale economies at theexpense of competition.

• The treatment of monopoly has some spe-cial features. Monopoly itself is not unlaw-ful. Monopoly may, after all, result from afirm being more efficient then any othercompetitor or potential competitor andthereby eliminating them.

• In some countries, there is no power tobreak up monopolies. In other countries(e.g. the United States), the law goes a stepfurther. There is court power to break upa monopoly where it has actually actedanticompetitively in breach of competitionlaw. There is, however, usually no powerto break up a monopoly without therehaving been some anticompetitivebehavior.

• In competition law, there is normally noprohibition on the prices which amonopoly charges even if they areconsidered excessive.

• The law applies to all or nearly all formsof business. However, the millions of smallbusinesses are generally unaffected by thelaw and/or are exempt when there issome possibility that a technicality mightcatch them.

• Of greater importance, however, is thefact that there is pressure from nearlyevery sector to gain exemptions fromthe law on the grounds that their circum-stances are special. In Australia, there isan interesting way of dealing with claimsfor exemption. If someone believes thatthe law should not apply to them theymay apply in public to the independentregulator who holds a public hearing be-fore deciding whether they should haveso called “authorization” to continue toengage in anticompetitive behavior. Thisis an alarming sounding exception to thecompetition law but, in practice, the Aus-tralian regulator has been strict and doesnot grant many authorizations.

• Anticompetitive behavior can occur on aglobal scale but there is no globalcompetition law or regulator. When aglobal cartel is detected, however, it isusually possible to obtain fines anddamages at national levels: this is a reasonwhy a domestic competition law isdesirable. If the US, for example, uncovers

“Competition law and policycan have a substantial economiceffect if seriously implementedbut should not be equated withgenerating fully competitivemarkets in every sector.”Allan Fels

Dean, Australian andNew Zealand Schoolof Government

Larry Ram

os

07-0103Law&Policy.pmd 17/05/2007, 1:20 PM16

Competition, Competitiveness and Sustainable Growth 17

a global cartel, a local regulator can oftenpiggyback on its actions to obtain fines anddamages where local harm has occurredproviding there is a local law.

• A considerable administrative and legalapparatus is needed to apply competitionlaw. It can take years to build up.

• The law may not have much relevance tosome important state-owned utilities inareas such as telecommunications, pub-lic transport, energy, and water. Very of-ten, these are monopolies protected bystatute from entry by competitors. Beinga monopoly, there is no competition tocollude with, to take over, or to take mo-nopolization action against. But having aprotected monopoly can be economicallyharmful. To deal with it requires more thanthe application of competition law.

• Competition law regulates anticompetitivebehavior by businesses. It may apply toanticompetitive behavior to government-owned businesses. It does not apply to noroverride the many laws, regulations orother actions of governments that limitcompetition.

(2) Comprehensive national competitionpolicy

A wide range of government policies can af-fect competition, either positively or negatively.Competition policy has traditionally beenequated with antitrust, competition or tradepractices law. A comprehensive competitionpolicy, however, must address all governmentpolicies that affect competition. A comprehen-sive competition policy therefore involves:• prohibition of anticompetitive conduct

through traditional antitrust and competi-tion laws;

• liberal policies regarding internationaltrade and the free movement of all factorsof production, including labor and capital,across international borders;

• liberal policies regarding free trade and thefree movement of all factors of productionacross internal borders;

• repeal of laws and removal of governmentregulation that unjustifiably limits compe-tition, such as legislation creating entrybarriers of all kinds, including profession-al licenses, minimum price laws, restric-tions on advertising;

• reform of inappropriate monopolystructures, especially those created bygovernments;

• appropriate access to essential facilitieswhere they are monopolies;

• removal of unjustified state aids;• ‘competitive neutrality’ for government

businesses, such that they do not trade atan artificial net competitive advantageover private sector competitors by virtueof being government owned;

• separation of industry regulation fromindustry operations (for example, domi-nant firms should not set technical stan-dards for new entrants); and

• a level playing field for all participants.

The need for a comprehensive competi-tion policy arises because government lawsand regulations can affect competition in nu-merous areas. Some of the areas include leg-islation and regulation about the legal system,foreign and domestic investment, intellectualproperty, taxation, public and private owner-ship, small business policy, licensing, contractout and bidding for monopoly franchises. Thepolicies extend across all sectors, includingagriculture, mining, construction, manufactur-ing, and all forms of services, including health,education, and social security. They apply atall levels of government: supranational, nation-al, state, regional, and local.

The laws affecting competition can takemany forms. They may be embodied inconstitutions, statutes, and/or regulations. Theymay be general laws affecting all businesses,such as taxation laws, or industry specific, suchas telecommunications laws, or they mayrange across a number of markets, such aslaws limiting shopping hours, licensing lawsand so on.

Legislation affecting competition may directlyor indirectly:• govern the entry and exit of firms or

individuals into or out of markets;• control prices or production levels;• restrict the quality, level or location of

goods and services available;• restrict advertising and promotional

activities;• restrict price or type of inputs used in the

production process; and• provide advantages to some firms over

others by, for example, sheltering someactivities from the pressures of com-petition.

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Principles of a comprehensive national com-petition policy as adopted in Australia are:• no participants in the market should be

able to engage in anticompetitive conductagainst the public interest;

• as far as possible, universal rules of marketconduct should be uniformly applied to allmarket participants, regardless of the formof business ownership;

• conduct with anticompetitive potentialsaid to be in the public interest should beanalysed by an appropriate, transparentassessment process, with provision forreview, to demonstrate the nature andincidence of public costs and benefitsclaimed;

• changes in the coverage or nature ofcompetition policy should be consistentwith, and support, the general thrust ofreforms:

- an open, integrated domesticmarket for goods and servicesshould be developed byremoving unnecessarybarriers to trade andcompetition; and

- in recognition of the increas-inglynational operation of markets,complexity and administrativeduplication should be re-duced.

Australia therefore has a comprehensivecompetition law with the following mainelements:• a competition law applicable to all

businesses;• promotion of interstate and international

competition;• reviews and potential removal of all

national, state and local laws andgovernment actions that inhibitcompetition unjustifiably;

• reviews of structures of publicly ownedindustries to consider whether they couldbe structured less anticompetitively;

• an access regime; and• price regulation of monopoly.

Implementation includes:• accepting the principle that any restriction

on competition must be clearlydemonstrated to be in the public interest;

• subjecting new regulatory proposals to

increased scrutiny, with the requirementthat any significant restrictions oncompetition lapse within a period of sayno more than five years unless reenactedafter further scrutiny through a publicreview process;

• subjecting existing regulations that imposea significant restriction on competition tosystematic review to determine whetherthey conform with the first principle, andrequiring them to lapse within say fiveyears, unless reenacted after scrutinythrough a further review process; and

• reviewing regulations taking an economywide perspective, to the extent practi-cable.

Part II: Foreign investment, public-private partnerships, andsustainable developmentand their relationship tocompetition policy

I have been requested to discuss three topicalsubjects:• Foreign investment,• Public-private partnerships (PPPs), and• Sustainable economic development.

Each is a large topic which raises ques-tions that go beyond the scope of competitionpolicy. I shall mainly concentrate on competi-tion-related issues.

(1) Foreign investment

Foreign direct Investment (FDI) refers tofinancial investment by a foreigner that allowsits significant direct influence on the policydecisions of an enterprise e.g. the acquisitionof more than 10% of the equity of a firm.

FDI takes two forms:• real investment (e.g. establishing a new

plant or business); and• financial investment (e.g. total or partial

acquisition of existing assets )

As we note later, the former is more likelyto be pro-competitive than the latter but muchdepends on circumstances.

However, before discussing competitionquestions, some general aspects of FDI needbrief consideration.

FDI has benefits but may have some costsfor the country in which it is occurring.

07-0103Law&Policy.pmd 17/05/2007, 1:20 PM18


Benefits may include:• increased supply of capital;• technology transfer;• better management;• job creation;• increased demand for local inputs or local

production;• increased export growth;• increased diversification of the economy;• possible improved access to international

markets and integration into the worldeconomy;

• an improvement in the balance ofpayments; and

• stability in foreign inflows of funds (asopposed to portfolio investments).

Concerns about FDI can be dealt with, forthe purposes of this paper, under twoheadings. The first is a set of broad concernsabout possible harm to the environment,exploitation of labor and loss of sovereignty. Ishall not debate these issues.

The second set of concerns relate to howin particular circumstances FDI, rather thanbringing benefits, may do little good or actualharm. Examples might include:• there may be no contribution to real

investment if a foreign enterprise merelyacquires a local business;

• there may be no or negative contributionto net investment if foreign investmentmerely replaces domestic investment e.g.by domestic firms that are driven out ofbusiness;

• transfer pricing, tax avoidance and evasionand other practices may greatly limit thebenefit of the foreign investment;

• imported technology and skills may beinappropriate for local conditions;

• there may also be job loss e.g. if a capitalintense foreign firm drives out laborintensive firms;

• it may not encourage exports if the focusis on domestic investments or if themultinational owner does not wish toencourage exports from the country inwhich it is investing; and

• in some circumstances FDI maycontribute to financial instability.

One broad conclusion from this brieflisting of pros and cons is that FDI can havemixed effects, both positive and negative. Myview is that on the whole in most countriesthe benefits of FDI considerably outweigh the

costs. Nevertheless an aim of policy should beto maximize its benefits and minimize itsnegative effects. As we shall see belowcompetition policy has a role to play inmaximizing the benefits.

In the context of a discussion ofcompetition policy it is also important to notethat there are a number of obstacles to FDI.

These include:• direct restrictions on some or all foreign

investments (e.g. India has somerestrictions on FDI in retailing);

• overregulation, red tape and bad gover-nance may prevent or deter investment;

• inadequate infrastructure may prevent ordeter foreign investment; and

• a lack of protection from anticompetitivebehaviour by incumbent monopolists thatmay deter entry. This can be especiallyimportant in utility areas such astelecommunications, energy, andtransport.

(2) Competition issues

FDI may promote competition. It may:• introduce new players into an industry;• make it more efficient and more competi-

tive, even if a foreign firm only acquiresan established business;

• be a factor that causes a new entrant notto cooperate with established collusion orgeneral anticompetitive practices; and

• bring about competition when there is nocompetition law or no serious competitionlaw (a foreign entrant may be especiallyimportant in bringing competition in thissituation).

On the other hand FDI may generate little oreven reduced competition:• acquisition or merger with an established

domestic enterprise may be at theexpense of direct pro competitive entry;

• a foreign firm may enter a local marketon the basis of being granted an anticom-petitive concession;

• foreign firms may quickly acquiremonopoly power (or shared monopolypower); under some conditions this maybe more harmful to consumers than thestatus quo;

• a foreign firm may engage in predatorypricing or other forms of abuse ofdominance thereby harming competition;

07-0103Law&Policy.pmd 17/05/2007, 1:20 PM19


• foreign local firms may become involvedin cross border mergers and acquisitionsthat may lead to reductions in competitionin domestic markets; and

• a similar point applies in relation to theparticipation of foreign local firms in globalcartels where the anticompetitiveagreements are implemented in the localmarket.

Against this background we may considerthe role of competition policy. First, traditionalcompetition law can prevent some of the detri-mental effects identified above. Competitionlaw can prevent anticompetitive mergers andacquisitions, cartels, abuse of dominance andother restrictive practices. It may also reduceuncertainty about the future nature of competi-tion law. A comprehensive competition policymay remove much of the anticompetitive andunnecessary regulation that prevents, limits, ordeters foreign entry. It may also be a force op-erating against the granting of anticompetitiveconcessions to new entrants. At a more gen-eral level, the adoption by governments of com-petition laws and policy may constitute a signalconcerning the willingness of governments tohave a level playing field.

An important element in competitionpolicy in most countries is its neutrality withrespect to ownership—that is, it does notdiscriminate against foreign firms. Indeed, itmay be seen as helping foreign firms in somecases – if local firms with large shares of localmarkets are prohibited from merging, it cancreate the opportunity for foreign acquisitionby a new foreign entrant.

CUTS has provided some interesting casesin this regard. In reviewing the soft drinksmarket in India, it concluded that the absenceof a competition law meant that foreigndominance of the market had occurred. Onthe other hand in the cement industry, entryby foreign firms had shaken up competition.1

Can competition law and policy deterforeign entry? Would that be harmful? Mostoften, competition policy helps foreign entry.It could prevent or deter foreign entry if it werebadly applied or applied in a way thatdiscriminates against foreign players.

To sum up:• FDI brings benefits and may bring costs;• FDI may promote competition but in some

circumstances it can be anticompetitive;and

• FDI may be encouraged and its benefitsmaximised by the application of competi-tion foreign policy

There is therefore a strong case for linkingthe two policies to ensure the best possiblebenefits from FDI.

(3) Public-private partnerships

The term “public-private partnership” isapplied in a number of ways.

PPPs are, according to the World Bank,collaborations between public bodies, such aslocal authorities or central governments andprivate companies in a variety of areas, includ-ing health care, education, infrastructure, andimproving the general environment. PPPs cantake numerous forms and have varying levelsof responsibility and authority.2

The UK government also defines PPPs in verybroad terms, including:• the introduction of full or part private

sector ownership into state ownedbusinesses;

• arrangements where the public sectorcontracts to purchase services or infra-structure or both on a long term basis soas to take advantage of private sectormanagement skills incentivized by havingprivate finance at risk (This includescases when the private sector partnertakes on the responsibility for providing apublic service, including maintainingenhancing or constructing the necessaryinfrastructure); and

• selling government services in widermarkets and other partnership arrange-ments where private sector expertise infinance is used to exploit the commercialpotential of government assets.3

1 Pandey, P.R. 2005. CUTS Centre for Investment andEconomic Regulation. Briefing Paper No.2/2005: Agriculturein the July Package: An Assessment of Implications for LeastDeveloped Countries. Available: www.cuts-international.org/pdf/No.2-AgricultureinJuly%20Package.pdf. See alsoGraham, E.M. 2000. Fighting the Wrong Enemy: AntiglobalActivists and Multinational Enterprises. Washington D.C.:Institute for International Economics.

2 World Bank. Frequently Asked Questions. Private SectorDevelopment. Available: http://vu.worldbank.org.

3 H.M. Treasury. 2000. Public-Private Partnerships: TheGovernment’s Approach. United Kingdom. Available:www.hm-treasury.gov.uk/media/B54/D8/80.pdf.

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The IMF/OECD definition is:• “PPPs refer to the private sector financing,

designing, building, maintaining, andoperating infrastructure assets traditionallyprovided by the public sector.”4

I shall adopt the last definition in this pa-per. I shall proceed on the basis that a PPPinvolves a contract between the governmentand a private supplier that integrates the initialprovision of capital assets (public infrastruc-ture) and subsequent operations and mainte-nance of these assets into one contract. Thisis to be distinguished from conventional pro-curement where contracts for provision ofcapital assets (public infrastructure) are sepa-rated from contracts for operation and main-tenance of the assets.

Some of the advantages of the PPPs are:• in an era when there is a gap between

infrastructure needs and public sectorfunding capabilities, private sector capitalcan be harnessed to fill the gap;

• PPPs enable infrastructure building andthe provision of services that would nototherwise occur;

• PPPs are an attempt to overcome themany problems of traditional publicprocurement and operation;

• PPP places the responsibility for supply-ing, maintaining and operating infrastruc-ture on the same supplier, regulated in onelong term contract; this integration ofresponsibility gives the private supplier anincentive to obtain an overall cost effec-tiveness of the production—from the pro-vision of infrastructure to its maintenanceand operations;

• PPPs may provide better value for money:private sector operators may be moreefficient and innovative and quicker todeliver;

• PPPs provide the possibilities of betterallocation of risk between the public andprivate sector;

• PPPs often lead to a transfer of industrialrelations policies from political to privatesector control;

• PPPs avoid large scale government debt(or at least the transparency of such debt);

• the allocation of projects can be thesubject of competition with the possibilityof lower costs and greater efficiency;

• PPPs can relieve governments of playinginappropriate roles and free them toconcentrate on core business; and

• Governments value cooperating with theprivate sector almost for its own sake.

There are, of course, disadvantages inparticular cases which largely mirror the aboveadvantages. They include:• hiding the true long term cost of projects

from the public;• PPPs provide a tempting possibility to

bypass budget constraints;• PPPs may not provide value for money

because the public sector pays too much;• PPPs may involve an inappropriate

allocation of risk between the public andprivate sector;

• PPPs may involve increased capital costs:government borrowing is cheaper thanprivate financing;

• PPPs may involve anticompetitive arrange-ments (see below);

• PPPs may inappropriately or incompletelyspecify the contractual requirements andthereby generate poor outcomes;

• PPPs often involve contractual complexi-ty—there is a demanding task to regulatepotential future outcomes; and

• There is strategic vulnerability: thegovernment is tied to a private monopolistat future negotiations of the contract.

It is not the purpose of this paper to debatethe pros and cons of PPPs, but to considersome competition questions.

Do PPPs enlarge the scope for using pri-vate suppliers of public goods? The answer ispossibly, but not necessarily. Conventional pro-curement can well be based on separately con-tracting out supply, operation and maintenanceof capital assets (e.g. by separate public ten-ders). PPPs may actually reduce competitionas the government enters into one long-termcontract instead of separate short-term con-tracts. However, if the government relies on atraditional approach, it may still involve a mo-nopoly at all stages. On the other hand, PPPsprovide an alternative to conventional procure-ment and contracting out. Competition may notwork so well if there is a limited market of sup-pliers. It is important to build up and foster com-petition in the market of PPP providers.

4 Baltzersen, M. 2006. Public-Private Partnerships. Presentationat the 6th Annual OECD Public Sector Accrual Symposium.6–7 March. Available: www.oecd.org/dataoecd/58/52/36319347.ppt#260,2,Definition.

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Most often PPPs do not themselves raisequestions of competition. There may, however,be a few instances where they require thescrutiny of competition regulators (e.g. if thepartnership prevents competition that mightotherwise have occurred between a publicsector business and a private sector business,or between two or more private sectorbusinesses which the government linkstogether in a partnership). There is atemptation to put in private monopolyarrangements to maximize revenue foreveryone (however, the same may apply withpublic ownership). The important point is toensure that competition regulators have thepower to scrutinize such deals.

I cannot leave this topic without pointingout that while there are many obvious benefitsfrom PPPs, there are dangers. The dangersarise from chronic weaknesses on thegovernment side, especially the fact thatgovernments are often outmaneuvered bysuperior bargaining skills of the private sector.

These superior skills arise in essence from

(a) the simple clear objectives of the privatesector—profit—compared with the publicsector, which typically has multiple,conflicting, confused, nonquantifiableand ever changing objectives;

(b) the greater industry specific knowledgeand commercial savvy of the privatesector players; and

(c) the reality that in practice, governmenttends to have the objective of supportingthe private sector for its own sake, therebysomewhat weakening the public interestfocus.

These dangers can include occasionalharm to competition as private sector playersjockey for an anticompetitive arrangement tobe part of the deal.

(4) Sustainable development

This refers to the fact that in today’s world welook to the balanced achievement of

(a) economic growth;(b) social justice, and the avoidance of

poverty; and(c) an absence of environmental harm.

Competition law mainly contributes tothe first of these components. In some cases,it directly contributes to the second byeliminating monopoly profits – which are oftenunfair – and by preventing monopolies fromsuppressing the business opportunities ofsmall players. But competition sometimesseems unfair – a new foreign entrant that isboth big and efficient crushes small localbusiness people. Competition policy, for betteror worse, is, in the end, about getting goodeconomic results rather than specific fairness.

As to the environment, this is not a mattereasily addressed by competition policy. It isbest addressed by specific environmentalpolicies.

Accordingly competition policy has animportant role to play in achieving sustainableeconomic development but mainly becauseof its contribution to economic growth, and tothe general resulting reduction of poverty.

Part III – A CompetitionRegime Model

Having discussed some general issues aboutcompetition policy, I would now like to openup the subject of the operational side ofcompetition law and policy. As this is the firstpaper of the roundtable, I wish to set out ageneral, but in my view useful, frameworkwithin which some of the later papers at theconference can be viewed.

The third part of this paper thereforeprovides a short introduction to a frameworkor model which is useful for regulators andofficials concerned with regulation in analyzingthe work which they perform. The frameworkis also useful for officials in governmentdepartments who may have to oversee thelegislation and its general application byindependent regulators, courts and others.

This framework is especially relevant todiscussions of the organization and functionof competition agencies. There is a very widerange of questions which arise in analyzing andplanning the organization and function ofcompetition agencies. This part of the paperthen seeks to provide a general frameworkwithin which the important details concerningthe working of competition agencies areconsidered. It sets out a method of analysiswhich tries to keep the important generalquestions which arise in every detailed issueunder consideration.

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There are typically three key questions fora regulator or official in any country, developedor developing:• What should be done (i.e. what would be

of public value to the nation?);• What may be done (i.e. what does the

legislation permit or require to be done?);and

• What can be done (i.e. what is adminis-tratively possible, given the resources andpowers available to the regulator?)

These days, there usually is a fourthimportant question to be considered in mostgovernment agencies, including regulatorybodies. This concerns whether the outcomesthat the regulator seeks to achieve require (orare hindered by) the actions of others. A keyquestion is then: What cooperation is requiredfrom others to achieve the goals of theregulator? For example, cooperation of businessis required to achieve compliance with the law.The cooperation of other parts of governmentis also required and so on. I shall in this papertouch on the issue of analyzing “coproducer”contributions in a limited way even though thisis a very large question in itself.

The framework or model is based onstrategy models first developed in businessschools but now applicable, with adaptation,to the work of regulators, and public officialsgenerally. I then draw especially on theframework which has been developed byProfessor Mark Moore,5 Professor of Harvard’sKennedy School of Government, and Fellowof the Australia and New Zealand School ofGovernment (ANZSOG), for extending thismodel to the public sector.

(1) A Competition Policy Strategy Model

The key variables are:

• the value added to the public (publicvalue)

• the operating capability. This includes thepowers and resources of the regulator.

• the “authorizing environment” i.e. thepolitical environment which gives rise tolegislation, regulation, and other politicalrequirements and values which governthe work of the competition policy.

This model is shown in Figure 1.

In this part of the paper, we discuss thenature of each variable briefly. It is contendedthat each variable is a useful focus in itself forregulators and administrators.

(2) Public value added

• Public value is a concept which refers tothe collective value created for the publicof a country by government throughservices, laws, regulation, and otheraction.6 Public value refers to anythingwhich is of value to the public. Citizensthemselves ultimately define it. Valuetends to fall into three categories:outcomes, services, and trust. It should benoted that public value can be positive ornegative or nil. Public value can also beachieved by the private sector through itsprovision of goods and services that thepublic demands. But this is outside thescope of this paper.

Public value may be compared withprivate sector output or value added butthere are some substantial differences.Broadly speaking the private sector isjudged by its output (as valued by themarket). In the public sector thecontribution of a public agency is judged

Figure 1CompetitionPolicy StrategyModel

authorizingenvironment

publicvalue

operatingcapability

5 See Moore, M. 1995. Creating Public Value: StrategicManagement in Government. Cambridge, Massachusetts:Harvard University Press. I have also drawn from work bytwo other teachers—Professor John Alford of the Australia-New Zealand School of Government and Professor HermanLeonard of the John F. Kennedy School of Government,Harvard University.

6 Kelly, G., G. Mulgan and S. Muers, United Kingdom CabinetOffice, Strategy Unit. 2004. Creating Public Value: Ananalytical framework for public service reform, 4. Available:www.strategy.gov.uk/downloads/files/ public_value2.pdf.

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by its contribution to social outcomes orvarious social outcomes. This may or maynot be measured by reference to a single,simple “output” or set of “outputs.” Forexample, a competition regulator wouldbe seen as contributing to the outcome ofa competitive, more efficient economywith lower prices and better goods andservices. This may, in practice, bemeasured (somewhat controversially) bysome indicator of its output e.g. thenumber of successful court cases.

• Unlike in the private sector value does notstop here, however. Public value does notnormally rest just on some notion ofoutput. Under most public sector activitiesthere are a number of additional featureswhich can add to public value. Theseinclude fairness in process and perhapsfairness in outcome, or fairness inopportunity. Figure 2 suggests somedimensions of public value.

• The term “public value added” refers tothe addition to or subtraction from thecollective welfare of a country that resultsfrom a particular public policy or publicinstitution. The term “value added” drawsattention to the fact that value added canbe increased by decreasing the amountof input per unit of output (e.g. byconserving resources) or by increasing thequantity or quality of output with a givenamount of input. Some discussions ofregulatory strategy neglect one or other ofthe dimensions of value added. They mayemphasize the value achievable byreducing inputs for a given output or theymay overstate the public value of anactivity by stressing the value of outputs,ignoring the input costs. Some regulatorsmay be locked into increasing value byreducing inputs ignoring that they can addvalue by increasing output quantity or

quality; or they focus on increasing outputwithout regard to input cost.

• There is much discussion and controversyconcerning what constitutes public valuein competition law and policy. There arediscussions about the objectives andoutcomes of the application ofcompetition law and the conclusions maydiffer according to the stage ofdevelopment of the economy. Theconclusions that are drawn in thesecontroversies may be embodied in theframework set out in this paper.

• Even though the term “public valueadded” is difficult to reach agreement onand to specify, it is nevertheless a usefuldevice for focusing discussions aboutcompetition law and policy. If a policydoes not add to public value, it is notjustified.

(3) The “authorizing environment”

• The “authorizing environment” refers tothe laws and regulations (and otherexplicit or implicit values) and budgetaryresource allocations which authorize thenature and scope of the public valuewhich a competition policy strategy seeksto achieve.

• An analysis of the authorizing environmentrequires some analysis of interest grouppressures, the media, social attitudes,political parties, the courts and so on.Some of the influences are shown inFigure 3.

• Even though those implementing policyare bound at any moment to comply withits instructions, nevertheless it is unwisein any strategy analysis to ignore thefactors which drive that environment andwhich cause it to be unstable orchanging, or to be the source ofambiguity, conflicting or ambiguousdirectives and so on. It is these factorswhich can give rise to sudden changesin the mandate of a regulator. Suchpossible changes may need to berecognized in strategy planning.

There is no time here to pursue a fullanalysis of the many factors affecting theauthorizing environment. However, somegeneral points may be made about it:• An important characteristic of competition

law is that it encounters somewhat seem-

Figure 2Public Value

PROPER USE OFGOVERNMENTPOWER

ETHICAL BEHAVIORAND TRUST INGOVERNMENT

FAIROPPORTUNITY

A FAIRSOCIETY

PUBLICVALUE

SUCCESSFULPROSECUTIONS

COMPETITIVEECONOMY

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Figure 3The AuthorizingEnvironment

ingly contradictory attitudes by those af-fected by it. Most people and most busi-nesses want their suppliers, customers,and sometimes their competitors to besubject to the stringent application of com-petition law. This is for their benefit. How-ever, when the law is applied to them, theydo not welcome it. It is usually harmful totheir interests, which they put ahead of anyacceptance that there might be public in-terest considerations. In any case, theyoften fail to see the public interest consid-erations that may be involved in casesaffecting their own immediate interests.

This inevitably leads to strong pressuresagainst competition law. The losers fromcompetition are most often a powerful lobbywhile the winners are a weak one. Moreover,the size of the property rights involved incompetition law is very large and thisexacerbates the tensions. In just about everycountry, there is quite strong opposition by bigbusiness lobbies to the vigorous application ofcompetition law. They seek to water it down.They may support its general application butseek special exemptions and special deals,and since the amounts of money involved canbe very large, they press vigorously to weakencompetition law.

• Competition law normally involvessubstantial government intervention toachieve competitive markets, so-called“free competitive markets.” This is insome respects a paradox and it can createunusual constituencies which either favoror oppose competition law. Some pro-market-minded persons opposecompetition law because too muchintervention is needed to achieve goodmarket outcomes. Other persons whotemperamentally do not enthuse about theworking of markets or who have somekind of anti-market attitude often supportthat competition policy is applied becauseit is seen as striking at big business, aworthy target at all times in their view.

• The authorizing environment is likely todiffer from one country to another. Inparticular, the authorizing environment ina country with a newly establishedcompetition policy is likely to differ fromthat in a country with a well-establishedcompetition policy. Likewise, theenvironment will differ depending upon

GOVERNMENT ECONOMICPOLICY NEEDSPOLITICAL PARTIESSOCIAL ATTITUDESBUSINESS INTEREST GROUPSMEDIACOURTSADVOCACY

RESOURCEALLOCA-

TIONS

VALUES LAWSREGULATIONS

COURTDECISIONS

AUTHORIZINGENVIRONMENT

the stage of economic development. Todevelop this point further one would needto make a more systematic analysis ofthe many factors affecting the authorizingenvironment and to consider itsimplications for legislation or the exerciseof regulatory authority. Simply, this meansthat some laws are unacceptable in somecountries, even though acceptable inothers.

• It is clear from this discussion that the roleof advocacy is likely to be especiallyimportant unless one has a passiveattitude to the authorizing environment.Fuller analysis of this model would digmore deeply into the role and nature ofadvocacy particularly having regard to thelikelihood of a mismatch discussed laterin this paper between public value andoperating capability on the one hand andthe authorizing environment on the otherhand. Advocacy may change thatrelationship by altering the authorizingenvironment.

(4) Operating capability

• Operating capability refers to the legalauthority; physical, human and financialresources; the powers of investigation andresearch; culture; and organizationalstructure and arrangements employed tocarry out the tasks of the regulatoryauthority or government agency.

• Competition policy requires very detailedenforcement and administration. It differsfrom some other policies where, once thelaw has been enacted, there is relativelylittle for the government to do. A tax ratechange or an import tariff rate change,once enacted, requires relatively little

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implementation by the government. Thelaw is changed at the stroke of a pen andnothing remains but for the market to getto work to reallocate resources. Competi-tion law is quite different. Once the lawhas been enacted, a plethora of activitiesmust occur: the undertaking of investiga-tions; decision making in the light of in-vestigations; judicial processes includingappeals; educational activities; and so on.

• Substantial regulatory institutions need tobe set up. They need to develop appropri-ate economic and legal skills. In develop-ing countries, they can benefit from tech-nical assistance and other help withcapacity building. Sometimes regulatoryinstitutions are in a weak position at theoutset of the policy process and thismeans in turn that the law must be lim-ited in its ambitions.

• In most countries, the courts have a keyrole. They may or may not have good pro-cesses. They often have difficulty witheconomics. They are in many countriesaccepted as legitimate fora for the reso-lution of important disputes over prop-erty rights. In all countries, but perhapsespecially in developing countries, theyneed education in this area of the law.

(5) The interrelationship of the variables

The next step is to relate the three circles toone another to determine if they are inalignment. If they are, this is not necessarilycause for complacency (e.g., the authorizingenvironment may set a low public value onan important activity). However, even moreinteresting is a misalignment (e.g. the publicvalue is less than or greater than that desiredby the authorizing environment). Suchmisalignments tend to be unstable.

Consider some of the possiblerelationships. First, public value may bemisaligned with the authorizing environment.

(See Figure 6) The vigor of the regulator inenforcing the law and achieving public valuemay upset interest groups that are importantpolitically. This may have consequences: Thegovernment may weaken the law, reduce theresources of the regulator, and alter itsmembership. Or the regulator may pull backon its activity. On the other hand, throughadvocacy, it may bring the authorizingenvironment into line with its expandedpublic value. If the regulator is independent,it has more ability to survive political tensionscompared to otherwise.

Second, another misalignment may bebetween public value and operating

Figure 5A Competition Policy Strategy Model:Interrelationships


publicvalue

operatingcapability

Figure 4OperatingCapability

LEGAL POWERSRESOURCES

peoplemoneyskillsculture

INTERNATIONALASSISTANCE

OPERATINGCAPABILITY

Figure 6Misalignment


publicvalue

operatingcapability

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capability. (See Figure 7). There may be greatpublic value in having a full-scale competitionlaw with all the bells and whistles of anadvanced economy but if there is noadministrative capacity to implement it, valuemay not be achieved. Another possibleinstance of mismatch would be where thereis a global cartel which harms a countrywhich has no capacity to prosecute it. Publicvalue can only be achieved by establishingoperating capability.

(6) Coproducers

It is sometimes useful to extend the model tocover instances where those implementing thestrategy need to receive help (or may receivehindrance sometimes) from others inachieving desired outcomes. Coproducersinclude business, the legal profession, thecourts, etc.7 Of great importance to developingcountries is foreign assistance.

In the simple case, coproducers can beseen as entities which can be harnessed to addto the operating capability of the regulator toachieve greater public value. If the regulatorcan persuade business to comply with the lawthen that increases the operating capability ofthe regulator and there is a higher public valuethrough greater compliance with the law.

7 Depending on one’s perspective, the courts could belong toany one of several circles. For the regulator, they may be ineither the authorizing environment or the coproducer circle.For the government official overseeing competition policyas a whole, they would be in the operating capability circle.

(7) The use of the framework

Each circle is important in itself. But itsrelationship with the other circles is of greatimportance since each depends upon and isinfluenced by the others.

A great deal of analysis of regulatory issues– whether by regulators, academics, lawyers,advisers, etc – tends to locate itself in one circleand to disregard the others despite theirrelevance.

Much discussion at seminars andconferences is about the public value of aparticular action or policy (e.g., there wouldbe high value from merger law). This mayoverlook that there is no mandate for such alaw from the authorizing environment, or thatthere is no administrative capability ofimplementing such a law, or that there wouldbe noncooperation from business or otherparts of the system.

As has been mentioned, there is also atendency to emphasize only the input or outputside of value added, and to focus on narrowaspects of public value (e.g. on outputmeasure).

Some discussions within regulatorybodies may focus entirely on what theauthorizing environment will permit (whetherthis refers to the political environment or tothe courts as well). Such discussions wouldoften benefit from a greater focus on publicvalue.

Yet other discussions within regulatorybodies focus entirely on operating capability,on what is possible, without considering publicvalue or the authorizing environment. Thefocus may be on maximizing the output giventhe operating capability. It may neglect, forexample, that the authorizing environment

Figure 7Misalignment


publicvalue

operatingcapability

Figure 8A CompetitionPolicy StrategyModel: Coproducers


publicvalue

operatingcapability

co-producers

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could be well disposed to increasing theoperating capability with changed laws ormore resources if it was persuaded of publicvalue.

Finally, some problems are seen asbeyond the capability of an organization byvirtue of ignoring the role of the coproducers.

Part IV – The effect of competitionregimes

In this part of the paper, I shall avoid the usualand well-known remarks about the manybenefits of competition and competition lawand policy – even though there are many.Instead, I will focus on some aspects of theissue of the translation of competition policyin practice into real economic benefits. I willonly deal with a few aspects of the question.

Instead of asserting that competition is adesirable property of an economy and thenassuming that competition law (and policy)will bring out desirable effects by mere virtueof its adoption, I would like to unpack the ideathat there is a total correspondence betweencompetition policy and competition.

I believe that the foregoing parts of thepaper provide a framework helpful forassessing some aspects of the effects ofcompetition regimes. There is a tendency oftento assume that the mere adoption of acompetition law will have a substantial effecton competition and the overall performanceof an economy. Nothing could be further fromthe truth. There is a massive implementationchallenge and where the policy is not seriouslyimplemented, it will have no effect.

Even if a competition law is seriouslyimplemented, it should not be assumed that itwould bring about competitive markets.Competition law essentially tries to stopunlawful anticompetitive behavior—which isan important thing to do—but to use a cliché,it is a bit like leading a horse to water: Thehorse will not necessarily drink it. Breaking upillegal cartels does not, by itself, positivelygenerate competition: It may make com-petition more likely but it does not guaranteeit. Likewise, the law does not prohibitmonopoly; it merely prohibits monopolization.Antimonopoly law does not mean there areno monopolies. This is true with regard tocompetition law. In principle, acomprehensive competition law goes a lot

further (e.g. by tackling anticompetitivestructures) but in practice such policies areusually not very seriously implemented.Competition law and policy, if seriouslyimplemented, makes markets morecompetitive, rather than fully competitive.

In addition, the stated public valueobjectives of competition policy maypotentially give rise to good economic effectsif implemented. But to some extent, the effectsof the policy are limited by the requirementsconcerning the proper use of governmentpower and sometimes, fairness. In short,process requirements limit results.

Moreover, the operating capability of thecompetition agency may be very limited. Thelaw itself may also be a weak instrumentlacking adequate powers of investigation,adequate sanctions, and so on. In addition, theskills and resources of the regulatory body maybe limited.

Also, every law depends to some extenton the cooperation of various coproducers,most notably business. Again, this may belacking in practice.

Finally, the authorizing environment mayblock the optimal development of competitionlaw.

Accordingly, one cannot say that theadoption of a competition law and/or anational competition policy will necessarilygenerate economic benefits. It depends onwhat kind of public value is sought. How muchpublic value is achieved in turn depends uponthe authorizing environment, the operatingcapability of the regulator, and the degree ofcooperation from coproducers. In short, itdepends upon effective implementation.

I do not wish to end this part of the paperon a gloomy note. Competition law and policyhas had profound effects in many countries. Itis being implemented more seriously than everin most countries. Implementation in any onecase can have big demonstration effects: Ifbusinesses see the regulator seriously applyingthe law in one case, they will sit up and takenotice that they could be next. The generaldeterrence effects of individual cases can belarge.

So we conclude that competition law andpolicy can have a substantial economic effectif seriously implemented but should not beequated with generating fully competitivemarkets in every sector.

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Part V – Conclusion

This paper has discussed the characteristicsof an ideal competition policy. The ingredientsinclude both traditional competition law andpolicies to deal with laws, regulations, andgovernment actions that limit competition.

The paper has drawn attention to thefrequent but not invariable competitivebenefits of foreign investment, but has endedon a note of caution concerning PPPs.

This paper has also sought to present auseful framework for analyzing how acompetition regime model works.

A key point is that in making regulatorydecisions, all relevant factors— the authoriz-ing environment, operating capabilities of theregulator, process requirements, and regula-tor’s need for cooperation by other parties—should be taken into account. Failure to do soleads to poor decision making.

Finally, the paper has stressed that theadoption of a competition policy does notautomatically bring about competition inevery market.

AddressVINOD DHALLMember, Competition Commission of India

Competition is the preeminentdynamic force in a marketeconomy. It maximizes effi-ciency, both static and dynamic,as it provides an incentive for

innovation and invention. It also generatesconsumer welfare and brings wider choice,lower prices, and improved services to thecommon person. Increasing globalization oftrade is erasing national boundaries ineconomic activity, and leading to greatermovement of goods and services across theworld. Competitive rivalry between enterprisesis a critical factor for increasing nationalcompetitiveness.1 A number of recent studieshave tried to gather empirical evidence abouthow competition has worked to improvemarkets and economic growth.2

The economic gains from competition areunderscored both by economic theory and byempirical studies. A word of caution:Competition is not a panacea for all illnessesor a solution to all economic problems.

1 A World Bank research project (published 2000) found thateffectiveness “of antitrust and competition policyenforcement is positively associated with long-termgrowth.” Dutz, M.A. and A. Hayri.2000. World Bank PolicyResearch Working Paper No. 2320: Does More IntenseCompetition Lead to Higher Growth? World Bank. Available:www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2000/05/25/000094946_00050405325137/Rendered/PDF/multi_page.pdf.

The McKinsey Global Institute analyzed the performanceof selected industries in a representative group of 13countries and compared it with performance of the sameindustries in a handful of other countries. The researchrevealed that “Economic progress depends on increasingproductivity, which depends on undistorted competition.When Government policies limit competition, evenunintentionally, companies that are more efficient cannotreplace less efficient ones. Economic growth slows andnations remain poor.” Lewis, W. 2004. The Power ofProductivity: Wealth, Poverty, and the Threat to GlobalStability. Quoted in Innovations Magazine. 2004.Competition trumps education. 21 April. Available: http: //innovations.eu.com/FishWrap/April-2004/21.htm.

2 In a contemporaneous review of deregulation of naturalgas, long-distance telecommunication, airlines, trucking,and rail industry in the United States, it was reported thatwithin 10 years of deregulation in those industries, realprices dropped by at least 25% and sometimes close to50%. The annual value of consumer benefit from suchderegulation was estimated in billions of dollars in each ofthese industries. See Crampton, P. 2003. Competition andEfficiency as Organizing Principles for All Economic andRegulatory Policymaking at 3. Available: www.oecd.org/dataoecd/43/26/2490195.pdf. A study by the AustralianProductivity Commission, quoted by OECD, estimates thatAustralian households’ “annual incomes are on averagearound A$7,000 higher as a result of competition policy.OECD. 2005. DAF/COMP/GF(2005)2: The Relationshipbetween Competition Authorities and Sectoral Regulators.Issues paper presented at the Global Forum onCompetition, Paris, 17–18 February.

Competition policy may have to be temperedby broader considerations of social equity,social welfare, and public interest. The theoryof perfect competition has its limitations sincethe assumptions underlying the theory do notprevail in reality. Competition is notnecessarily the best solution in all situations,as in the case of natural monopolies,industries with network effects, or in servicessuch as primary health care and basiceducation. But broadly there is agreementthat competition is generally beneficial, andthe debate between a competitive marketeconomy and the state-controlled economyis for all purposes settled now in favor of theformer. Countries around the globe arerestructuring their economies through market-oriented reforms with competition as one ofthe central organizing principles.

The structure of markets in developingcountries can be significantly different from themarkets of industrialized countries. There isgreater pervasiveness of poverty and wide dis-parity in incomes. There are higher barriers toentry, some of which arise from governmentrestrictions. Generally, such markets are more

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concentrated and display greater instancesof dominance, particularly by previous pub-lic sector monopolies. Developing marketsare often segmented into smaller markets,with high prevalence of small-scale and cot-tage enterprises providing livelihoods to largenumbers of people. There is also the problemof missing economies of scale. There is evi-dence that developing countries are no lessvulnerable to anticompetitive practices byprivate enterprises. For example, the materialcollected by The Organisation for EconomicCo-operation and Development (OECD) Glo-bal Forum on Competition in 2001 contains alist of 26 cartel and bid-rigging cases in 12developing countries.3 These collusive activi-ties were suspected to be operating in diversesectors of the economy—transportation,phone cards, gasification, engineering, con-struction, milk products, aviation, courierservices, drugs, and electrical energy.

A question that persistently arises iswhether the special characteristics ofdeveloping markets and developmentalconcerns of poorer countries demand adifferent competition law. For example, shouldthe law seek to protect domestic competitorsfrom being overwhelmed by more powerfulmultinational corporations? To what extentmust the law accommodate arrangements bythe small-scale or cottage industries tocoordinate their activities with the view toprovide meaningful competition to largerenterprises? Governments in developingcountries provide incentives for the growth ofdisadvantaged regions: Should competitionlaw frown on such incentives? Competitionlaw allows exemptions. Should there be moreexemptions in developing countries?

Some thinkers believe that competitionlaw in developing countries should be basedon a different model.4 No law can isolate itselffrom the surrounding economic realities and

political goals. A proper intellectualframework of analysis needs to beestablished for this purpose. Moreover, aweak tradition of competition in developingcountries can make the evolution of aneffective competition policy a challenge. Inaddition, there are genuine political andsocial compulsions. As a result, many sectorsof the economy are still subject tounnecessary or excessive control andregulation. Clearly, more work is to be doneto learn the distinct features of competitionlaw for developing countries.

Public-private partnership is a new mantrain reform, particularly in infrastructure services.This involves awarding of concessions to privateenterprises for a long period for providing suchservices. Examples include concessions forroads, airports, electricity distribution, and portterminals. A number of competition issues arisein granting, designing, and regulating suchconcessions. Poor handling of these issues hasled to unsatisfactory experiences in manycountries resulting in high prices and poorservices for the consumers.5

Inconsistencies or deviations fromcompetition principles indicate a need forevolving a coherent national competitionpolicy that would lay down certain basicprinciples of competition to serve asguidelines for government, sector regulators,and other stakeholders, thereby promotingconsistency and coherence in sectoralpolicies and a healthier competition outlookwithin government. Some basic principles ofcompetition, for example, would be strong

3 OECD. 2001. CCNM/GF/COMP(2001)4: Draft Report on theNature and Impact of Hard Core Cartels and the Sanctionsunder National Competition Laws. Note by the Secretariatfor Discussion of the Global Forum on Competition, Paris,17 October. Available: www.oecd.org/dataoecd/41/31/2491373.doc.

4 Ajit Singh has suggested that development-friendly com-petition policies need to be specific to the stage of coun-try’s economic and industrial development as well as itsinstitutional and governance capacities. See UNCTAD. 2002.UNCTAD/GDS/MDPB/G24/18: Competition and CompetitionPolicy in Emerging Markets: International and Developmen-tal Dimensions. G-24 Discussion Paper No. 18, September.Available: www.unctad.org/en/docs/gdsmdpbg2418_en.pdf.

5 For example, a document contributed to the OECD GlobalForum on Concessions Roundtable points out that in 17 Lat-in American and Caribbean countries, 63% of the peoplefeel that privatization of state companies has not been ben-eficial. About 30% of the concessions were renegotiated injust over 2 years after the award of the concession. In therenegotiations, the concessionaires gained while the userslost. Heimler, A., Lead Discussant, Global Forum on Compe-tition. 2006 DAF/COMP/GF/WD (2006)35: Contribution toRoundtable on Concessions. Document for discussion at theGlobal Forum on Competition, Paris, 8–9 February, at 6. Avail-able: www.oecd.org/dataoecd/3/25/36049205.pdf.

“A question that persistentlyarises is whether the specialcharacteristics of developingmarkets and developmentalconcerns of poorer countriesdemand a different competitionlaw.”

Vinod DhallMember, CompetitionCommission of India

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enforcement of the competition law; neutralityof treatment between private and publicenterprises; separation of policy making,operation, and regulation functions; assuredautonomy of regulators; third-party access toessential facilities; and competition audit andimpact assessment of existing and new lawsand policies. Some economic studies haveshown that overall the Australian economybenefited substantially from adopting acoherent national competition policy that wasbased on substantial political consensus. Inthe United Kingdom, government requires thatthere be a regulatory impact assessment priorto the enactment of new laws or theannouncement of a new policy. The AsianDevelopment Bank (ADB) may wish toconsider how it could assist in this area.

The growing globalization of trade hasbrought into focus the question of internationalcooperation in competition law. Increasingly,competition cases involve more than onejurisdiction. Global cartels, cross-bordermergers, and abuse of dominance bymultinational corporations all have increasingcross-border effects. A competition authority

AddressARVIND MAYARAMJoint Secretary, Department of Economic Affairs,Ministry of Finance, Government of India

Competition law and policy pro-motes transparency and predict-ability of rules, and thereby sup-ports good governance. In the In-dian context, a strong competi-

tion framework is important for the followingreasons:

First, competition addresses the concernsof people who, even as they need to competefor scarce resources, are unfairly subjected tothe inconvenience of receiving poor servicesand overpriced products of low quality on adaily basis.

Second, competition allows us to breakaway from the practice of keeping the price ofutilities artificially low through administrativefiat, which contributes to utilities’ providers’inability to conduct proper maintenance orprovide better services. In sectors where pricesare regulated—such as the water and powersectors—popular resistance against price

“The desire to attain perfectcompetition should be balancedout by the need to avoid thecreation of redundancies, the lossof economies of scale, and thecollapse of services on account ofexcessive competition. A finebalance needs to be struckbetween these competing policyconcerns.”

Arvind MayaramJoint Secretary,Department of EconomicAffairs, Ministry of Finance,Government of India

increases have successfully kept pricesartificially low. The decision to avoid collectingthe correct price for the utilities providedresults in the public utility companies’ sufferinglosses. Because insufficient tariffs arecollected, the companies are unable tomaintain public utilities properly or to providebetter services. Poor services lead people tocontinue resisting proposals to increase tariffs.The poor suffer most from this vicious cycle.For example, while well-to-do communities

may find itself unable to tackle a market failurethat arises out of the actions of firms overseas,or it may risk taking action against such firms,that could ultimately impact on interests ofother countries. This underlines the need forcooperation among competition authorities.Asia is a rising economic powerhouse andtrade between its countries is multiplyingrapidly. Anticompetitive activities in any onecountry can adversely impact markets in oneor more other Asian countries, disrupt theireconomic activity, and harm their consumers.Furthermore, any related conflicts anddisputes can undermine the potential benefitsthat can be derived from the expanding tradein the region.

Therefore, we need to consider how wecan best cooperate on competition matters,including on anticompetitive practices withcross-border effects, training, capacitybuilding, and experience sharing. In thisregard, acceptable approaches on the form,content, and levels of cooperation should besuch as are best suited to specific situations.Possibly, ADB could study these issues andsee how best these can be further explored.

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enjoy water at a very low price, providers donot have the capital to maintain theinfrastructure necessary to deliver water to thepoorest communities, which often live in far-flung areas. Instead, private tankers supplywater to the slums at high rates.

Third, India’s current resource needsrequire competition, which levels the businessplaying field and encourages private sectorparticipation in public sector projects.According to India’s Planning Commission,India will require, up to 2012, an estimated$320 billion dollars to fund infrastructureprojects and upgrade existing infrastructure.Public-private partnerships have beenidentified as a means of obtaining the capitalrequired to get things done. If we are toincrease private sector participation in publicsector projects, we will need to build a strongercompetition framework that genuinely levelsthe playing field between the private andpublic sectors. The private sector’s confidencein the public sector needs to grow. For sometime, there was a perception that, in publicsectors that were opened to private sectorparticipation such as telecommunications, theprivate participants competing against theestablished public company were subject todiscrimination.

Fourth, just as competition protects theprivate sector against potentially unfairbusiness practices of the public sector, itlikewise protects the consumer from the riskof potentially unfair business practices of theprivate sector. Private sector monopolies areworse than public monopolies, particularly ininfrastructure services, which are generally anatural monopoly. Public-private partnerships(PPPs) could also result in creation ofmonopolies in the absence of competition. Acompetition framework can regulate PPPsin order that they do not stifle competition

from other private sector groups that investin the sector where they operate.

Fifth, competition attracts foreign directinvestment (FDI). India recognizes FDI’simportance to its economy. It expects FDI toadd to its available domestic resources and fuelits continuing economic growth. In the past,India adopted a very restrictive foreigninvestment policy. In the 1960s, its stance was:We prefer to buy technology rather than receiveforeign investment. Its position gradually shiftedto: We will receive foreign investment, but onlywith technology. Later, the position became: wewill receive FDI, but in certain sectors only.Today, we admit that we need FDI in mostsectors. Because of this gradual shift in policy,many foreign investors have remained reluctantto view India as a viable investment destination.A strong competition policy that ensures“national treatment” to foreign investors, wouldbe immensely valuable in persuading foreigninvestors that things have changed for the better.

Competition policy and law, as well as astrong competition authority, are important ifwe are to address these issues seriously. Thecompetition authority—in India’s case, theCompetition Commission of India—isexpected to assume the role of leveler of theplaying field.

However, as pointed out in this roundtable,we must remember that there are serious limitsto competition law as regards its ability toprovide a perfect fit for all countries. The desireto attain perfect competition should bebalanced out by the need to avoid the creationof redundancies, the loss of economies ofscale, and the collapse of services on accountof excessive competition. A fine balance needsto be struck between these competing policyconcerns—and we will arrive at the propersolutions only by going through a learningcurve, and learning from our own experiences.

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Session 2 “Business can

acquire

sustainable

competitiveness,

compete with, and

win against

foreign business

only through

active

competition in a

domestic market.”

Toshiyuki NanbuDirector, InternationalAffairs Division,Japan Fair TradeCommission, andConvenor, CompetitionPolicy andDeregulation Group

Competition Regimes Acrossthe Region and Interface withRegulatory Regimes

Approaches and Challenges in Implementing Competition Law andPolicy, Toshiyuki Nanbu, Director, International Affairs Division, JapanFair Trade Commission, and Convenor, APEC Competition Policy andDeregulation GroupInterface with Regulatory Regimes, Bernard J. Phillips, HeadCompetition Division OECD; and Sean Ennis, Senior Economist,Competition Division, OECDCompetition Agencies and Their Interface with Regulatory Agencies,Annetje Ottow, Associated Member and Advisor to the Commission ofOPTA (Post and Telecommunications Authority), The Netherlands

Approaches andChallenges inImplementingCompetition Lawand PolicyTOSHIYUKI NANBUDirector, International Affairs Division,Japan Fair Trade Commission,and Convenor , APEC Competition Policyand Deregulation Group

Introduction

It is a great honor for me to have theopportunity to speak at Competition Lawand Policy roundtable here in New Delhi,India.

We have observed a global trend ofintroducing and developing competition lawsover the past 10 years or so. This trend is theresult of the end of the Cold War between theEast and the West and the birth of many freeeconomies and nations. This also results fromthe general progress of globalization, tradeliberalization, and rapid economic growth.

However, the levels of development atwhich different countries have adopted com-petition laws are different. Some economies

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have rather long histories of implementingtheir competition laws. Others have onlyrecently introduced comprehensive compe-tition laws. Some other economies are nowplanning to introduce a comprehensive com-petition law.

Mr. Takeshima, Chairman of the Japan FairTrade Commission (JFTC), the Japanesecompetition authority, usually likes to say,“There is no growth without competition.” Thismeans that business can acquire sustainablecompetitiveness, compete with, and winagainst foreign business only through activecompetition in a domestic market. TheOrganisation for Economic Co-operation andDevelopment (OECD), whose slogan is,“Competition brings prosperity,” espouses asimilar philosophy. From these, you can seethat the significance of competition policy isuniversal.

In this paper, I would like to discuss threethings: First, how competition policy and lawwere developed in Japan and what kind oflessons learned are relevant to othereconomies that are trying to develop theircompetition policy and law; second, howcompetition policy and industrial/developmentpolicy are interrelated, and what rolecompetition policy plays in structural reforms;and third, how competition policy and lawdeveloped in the Asia-Pacific EconomicCooperation (APEC) region and how bilateraland multilateral cooperation in the field ofcompetition law and policy has beendeveloped in this region.

Experience of Japanesecompetition law and policy

(1) 1945–1955: Introduction of brand-newpolicy of competition

In 1947, the Antimonopoly Act of Japan (AMA)was enacted modeled after the antitrust lawsof the United States of America as a part of theoccupational policy of the allied powers. At thesame time, JFTC was established as anindependent commission whose idea was alsotaken from the Federal Trade Commission ofthe United States. However, when AMA wasenacted, Japanese society believed in theprimacy of harmonious cooperation amongbusinesses over competition. Therefore, theoriginal AMA was deemed to haveincorporated too many ideal concepts incompetition law and was likewise deemed

incompatible with Japanese society, whichbelieved in harmonious cooperation. It wasalso deemed incompatible with thegovernment policy at that time, which focusedon fostering and strengthening domesticindustries to achieve economic recovery andindependence. As a result, the AMA could noteasily take root in the Japanese society.

(2) 1955–1970: High economic growth andthe Dark Age of AMA

“Harmonization culture”—or the culture ofharmonious cooperation among business-es—dominated the business community formany years, probably up to the 1970s.1 Theresult was considerable retrogression interms of both systems and implementationof competition policy. We call this period inJFTC history as the “Dark Ages of the Anti-monopoly Act.”

From 1955 to 1970, the Japaneseeconomy achieved substantial growth andenjoyed a yearly average growth of approxi-mately 10% over 15 years. This was an out-standing level of economic growth. It canbe gleaned from the Japanese experienceduring this period that active competitionbetween enterprises can take place even ifcompetition law enforcement is dull, dur-ing a period when economic growth invitesfurther growth. During this period of eco-nomic growth, it was difficult for people tounderstand that: (1) the maintenance ofcompetition in a market is essential for thesustainable growth of the economy; and(2) a policy of government interference andsuppression of competition causes sub-stantial harm.

When one looks back at competitionpolicy during these periods of high economicgrowth, it is interesting to note that the “DarkAges of the AMA” corresponded with the timewhen Japan enjoyed high economic growth.

(3) 1970s–1990s: Slowdown of the growthrate and long-term stagnation

After 1970, a significant slowdown in thegrowth rate was observed. After it experiencedthe effects of the bubble economy that existedduring the latter half of the 1980s, Japanexperienced long-term stagnation in the

1 The “harmonization culture” is explained in detail in section(5) below.

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Competition Regimes Across the Region and Interface with Regulatory Regimes 35

“Enterprises can acquiresustainable competitivenessonly through marketcompetition—competition willlead to economic growth.”

Toshiyuki NanbuConvenor, APECCompetition Policyand Deregulation Groupand Director,International AffairsDivision, Japan Fair TradeCommission

1990s. This period of serious economicstagnation, also called the “lost decade,”arose from long-term deflation. Westerneconomies in the 1980s focused onimplementing regulator y reforms andeconomic policies based on free marketprinciples, and actively enforced theircompetition laws. On the other hand Japantook a long time escaping from excessivegovernmental intervention and heavyregulation—the so-called “convoy fleetapproach.”

Only after the bubble economy burst andthe effects of long-lasting economic stagnationwere felt that general support for a mixedapproach of deregulation and competitionpolicy developed. The mixed approach, whichaimed to activate market functions, wasunderstood to be the only way for Japan toachieve economic recovery. The strengtheningof the AMA enforcement system was alsopushed forward rapidly in the 1990s. As well,many exemption systems granted by individualindustrial laws were abolished. Likewiseabolished were the rationalization cartel andrecession cartel systems in the AMA.

(4) The present conditions of AMA andchallenges

Thereafter, the Japanese economy has beenin the process of modest recovery and looksas if it has overcome the severe conditions thattook place after the collapse of the bubbleeconomy.

Although the long-functioning sector-focused policy led Japan to be the secondlargest economy in the world, globalization haschanged the economic environmentdrastically and some fundamentals of theJapanese economy have lost their capabilityto adapt to the rapidly changing globaleconomy. To cope with such changes properly,businesses should depart from collusivepractices, make good use of marketmechanisms, and gain efficiency by beingsubject to competitive pressure. JFTC shouldpromote the competitive environment throughstrict enforcement of AMA.

JFTC has advocated voluntary compliancewith AMA, by persuading executives of privatebusinesses that complying with AMA will resultin profits in the long run. Fortunately, theseexecutives’ understanding of competitionpolicy has improved and is now far better thanbefore. However, it is still not enough.

Companies, including listed ones, continueto engage in repeated violations of AMA.

Due to JFTC’s recognition that potentialoffenders were not deterred by the sanctionsunder AMA, the law was amended to increasethe rate of monetary surcharges againstviolations. At the same time, the amendedlaw introduced a leniency program—astrategy that has been recognizedinternationally for effectively encouragingcompliance. The amended act took effect on4 January 2006.

(5) Struggle against the harmonizationculture

Japanese business culture gives greatimportance to Wa (harmony) and does notgenerally find it acceptable for only onebusiness or enterprise to prosper. This is thebasis for the so-called “harmonization culture”discussed in section (2) above. The“harmonization culture” was a factor thatconstrained the establishment of competitionpolicy in Japan.

The Japanese Government had longadopted the view that cartels could sometimesbe useful tools of industrial policy. During theperiod when harmonization culture dominatedJapanese business thinking, there existedextensive systems of cartel exemptions fromthe application of AMA. As mentioned above,not until Japan experienced a seriouseconomic downturn in the 1990s did theJapanese business community at large start toappreciate competition policy. The JapaneseGovernment unequivocally abandoned theso-called “convoy fleet system” in mid-1990and since then has implemented drasticreform measures in many sectors of theJapanese economy.

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Because of the huge economic problemsthat Japan faced at the time, many businesspeople seemed to agree with the JFTCslogan, “No growth without competition.”Almost all of them understood that oureconomy faced huge structural problemsand that what used to be effective in the pastcould no longer be so. Almost all of themaccepted that the Japanese economy neededstructural reforms based on free marketprinciples. It made sense to support theenhancement of competition policy, to ensurethat the Japanese market would perform well.But 10 years later, competition culture has notyet taken root in the Japanese businesscommunity. In some domestic sectors, theinfluence exerted by harmonization culture isstill very strong. The memory of the Japaneseeconomy’s past success prevents many fromaccepting competition culture. Most stillharbor a strong belief that a business culturethat favored harmonization among thebusiness community was what allowed theJapanese economy to grow into the secondlargest in the world.

Unfortunately, a wall exists betweensociety’s understanding of the structuralproblems that beset our economy and itsacceptance of competition culture. This isone of the factors that seem to have causedmuch difficulty for JFTC to move forwardand enforce AMA.

(6) Lessons from the experience of JFTC

Lessons from JFTC’s experience, which maybe relevant to other economies trying todevelop their competition policy and lawenforcement, are as follows:

a. The role of competition policy in a periodof high growth

As previously mentioned, when theeconomy is in a cycle where growth invitesfurther growth, it seems possible that theeconomy can grow without seriousenforcement of competition law by authorities.However, this does not mean that competitionauthorities are unnecessary during this period.

In Japan, competition policy remaineddormant and competition law enforcementwas weak during the period of rapid economicgrowth. Only after Japan entered into a lowgrowth period did competition policyenforcement grow stronger. Japan suffered

the low growth period for such a long timeafter the period of high growth. In hindsight,we know this is partly because thecompetition policy did not match with theneeds of the economy during the highgrowth period.

To summarize, sustained growth of theeconomy is difficult to achieve without ef-fective utilization of market mechanisms, anda national economy cannot develop withoutcompetition. However, many pressures mayinterfere with or decrease competition in amarket. For example:

• In Japan, the Government is expected totake various policy measures to alleviatecompetitive pressures in a marketbecause excessive competition is believedto have a harmful influence on the nationaleconomy. Therefore, as the economygrows, many ask for the introduction ofnew regulations that protect slow growingsectors and relax competitive pressure.Many likewise demand a transfer ofresources from high growth sectors to lowgrowth sectors—but if taken to theextreme, this would obstruct the sounddevelopment of the economy, as it wouldprotect non-efficient sectors, or thosecharacterized by low productivity.

• The clamor for recession cartels, whichcame from those who insisted that arecession would have harmful conse-quences on people’s jobs, was based onthe idea that to temporarily halt competi-tion by allowing a cartel in a depressedsector was justifiable.

• Sometimes, when there is popular sup-port for measures that decrease com-petitive pressure, such measures arepursued in the name of achieving otherpolicy objectives (e.g., the balanced de-velopment of the regional economies orthe needs to secure jobs).

During the period of high growth, peoplefound it difficult to understand that the above-mentioned exceptions to competition causedsubstantial harm to the sustainable growth ofthe economy in the long run.

Therefore, an important task for a com-petition authority is to coordinate competitionpolicy with other policy objectives in a waythat puts a brake on those attempts that tryto limit, relax, or provide an exception tocompetition (which are described above), or

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to allow such attempts to succeed only atthe lowest levels so that it does not hinderthe growth potential of the economy in thelong run.

b. The importance of establishing anindependent competition authority

Fortunately, JFTC was established as acompetition authority that, since the beginningof AMA’s existence, was allowed to performindependently and maintain a secretariatwhose staff consisted of individuals who werepermanently appointed thereto. These wereextremely important because the people’sunderstanding of competition policy was nothigh during Japan’s early stages of economicdevelopment, the existence of a competitionauthority that could independently pursue theimplementation of competition policy basedon a long-term outlook was necessary.

Although JFTC has experienced ups anddowns in the course of Japan’s economicdevelopment, JFTC and its Secretariat carriedout their core role—establishing competitionpolicy in Japan—even during the Dark Age ofAMA. JFTC also contributed largely to buildingthe capability of competition policy officials.Japan’s lifetime employment system allowsnew graduates to enter each ministry orgovernment agency, accumulate experience,and develop their skills through in-housetraining in the course of their career. JFTC hasconsistently played a key role in helpingJapanese society assimilate competitivepractices, and this played a big role in buildinga core group of experts in competition policy,which was weak in Japan. A competitionauthority inevitably needs to build staffcompetence and imbue its staff with a firmsense of mission.

AMA clearly provides for the indepen-dence of JFTC with regard to its perfor-mance of duties. Therefore, governmentagencies and politicians must not intervenein JFTC’s enforcement of AMA. However, in-tervention has not been avoidable due tothe Government’s or politician’s pursuit ofother state policies. JFTC has faced manydifficulties in coordinating competitionpolicy with other policies. In drafting the lat-est bill to amend AMA, JFTC encountereddifficulties in coordinating with industriesand politicians.

In some economies, there may be nocompetition authority responsible for the

steady implementation of a competition lawthat the country had adopted or acompetition authority is created under theauspices of a specific government ministrythat oversees a certain industry or sectorand this prevents the competition authorityfrom exercising its duties independently.Sometimes, interference in a competitionauthority ’s enforcement of competitionlaws is justified in pursuit of other policyobjectives (e.g. protection of sensitiveindustries and security of tenure foremployees). It is important to rememberthat a sustainable and independentcompetition authority is indispensable inpromoting competition policy and theeffective implementation of competitionlaw. This does not mean that all competitionauthorities should be completelyindependent in terms of its organizationalstructure; it means that every competitionauthority should endeavor to establishmechanisms that would allow it to be freefrom external pressures exerted bypoliticians, or necessitated by the pursuitof other state policies. It must takenecessary measures to ensure that it canimplement competition policy and enforcecompetition law, regardless of itsorganizational structure and its place in theoverall organizational structure ofgovernment.

c. Increased importance of judicialproceedings

When appreciation for competitionpolicy was low, it was customary for JFTCto avoid cases moving to the administrativehearing stage, or from appealing cases tothe Tokyo High Court. AMA violations werefrequently remedied by JFTC’s dispensationof administrative guidance. It cannot bedenied that the prevailing attitude broughtabout the unhappy result of makingJapanese competition law enforcementless powerful. It delayed the accumulationof relevant case law on competition.Accumulation of case law throughfrequently resorting to judicial proceedingscould bring about transparency andobjectivity in resolving competition issues.It is an important step to establishcompetition policy firmly, and wouldincrease the number of lawyers and judgeswho are familiar with competition law.

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d. Importance of business sector ’sappreciation of competition law

Enhancement of the public’sappreciation of competition policy (inparticular, the appreciation of competitionlaw by business people) is indispensablefrom a long-term point of view. The Japaneseexperience suggests that a people’sunderstanding of competition policy cannotdeepen without any effort to improve suchunderstanding. Business culture plays animportant role, too. In economies with abusiness culture that favors the avoidanceof disputes and solving business troublesthrough informal discussions, special effortis required to establish competition policy.Japanese businesses’ tendency to avoidjudicial solutions of business troubles is saidto delay the establishment of competitionpolicy in Japan. Business culture is animportant consideration when one is tryingto establish competition policy.

Competition policy has two wheels—onemaintains or promotes competition in a mar-ket through the enforcement of competitionlaws. The other promotes the business sector’scompliance with competition laws by makingthem understand that competition wouldbenefit business in the long run. The latter isparticularly important when promoting sustain-able development of the economy. Competi-tion authorities should have a leading role inthis endeavor.

JFTC recognized from the very beginningthat the public’s understanding of competitionpolicy was very low. Thus, it has been engagingin public relation activities for many years toenhance public understanding of competitionpolicy. JFTC has engaged in activities such asholding a roundtable conference composedby well-informed persons from various fields(after 1968); holding a seminar or conferencewith well-informed persons in local districts(after 1972); appointing well-informed personsas “anti-monopoly cooperation members”(after 1999); and teaching classes oncompetition policy at junior high schools (after2002). JFTC prepared and distributed manypamphlets and videotapes to support theseactivities.

In 2001, the Cabinet Office of Japanconducted a public opinion poll on faircompetition. Seventy-three percent of therespondents attached positive values tocompetition in economic activities, while 15%

viewed this negatively. More than half of therespondents thought that the competitionauthority should strengthen its enforcementof AMA against cartels and proponents of bidrigging. If we conducted a similar surveytoday, more people must assess competitionpolicy positively. Competition policy provesto be effective only in the long run and it isimportant to continue the efforts to enhancecompetition policy by helping peopleunderstand this concept better.

Interrelation between competitionpolicy and industrial anddevelopment policies, and the roleof competition policy in structuralreform

Today, it is widely accepted that competitionpolicy in Japan conflicted with its industrialpolicies. I would like to touch on the industrialand development policies that the Japaneseeconomy had adopted and present threelessons from Japan’s experience with theinteraction between competition policy andindustrial and development policies.Thereafter, I would like to mention the role ofcompetition policy in structural reform.

(1) Industrial and development policiesand their effects on competition policy

The government policy of Japan during thedeveloping stage of its economy was mainlyfocused on fostering and strengthening spe-cific domestic industries like heavy industries,as this was expected to boost Japan’s foreignexchange reserves. The government and theprivate sector collaborated in rationalizing anddeveloping targeted industries. In accordancewith those objectives, subsidies, favored loans,and tax systems that accorded special treat-ment to certain sectors were introduced.These policy measures, which were appliedto promote target industries, were applied notonly to growing industries but also to stagger-ing industries, and worse, to declining indus-tries that had lost their competitiveness to for-eign industries.

Enforcement of the original AMA waslargely relaxed, and a number of laws wereintroduced in a wide range of industries, whichexempted certain types of collaborativeactivities from the application of AMA. Inresponse to a strong demand from businesscircles, which believed that economic

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depression would be harmful toemployment, an exemption of recessioncartels and rationalization cartels was alsointroduced to exempt these arrangementsfrom AMA application. Those were majorsteps backward insofar as competitionlegislation was concerned.

In the field of enforcement,administrative measures that inducedanticompetitive business activities wereimplemented in many industries, particularlythose that exhibited inefficient performanceand low profit levels. These wereimplemented at every stage of the recessionunder the guise of preventing excessivecompetition, or stabilizing the market.

The investigation activities themselvesthat JFTC undertook under AMA showedsubstantial stagnation. Even though JFTCpaid efforts to tackle timely issues (such asprice hike cartels of consumer goods underthe restriction of budget and human re-sources), it stopped short of curbing theseanticompetitive administrative measures.

(2) Three lessons from the Japaneseexperience

First, it is not possible that a country’s eco-nomic growth will always be on the upswing.Rather, economic growth is cyclical—a coun-try may experience an early stage of develop-ment, transition into a high growth stage, andthen to a stage of economic depression. Also,it is not possible to achieve economic devel-opment and maintain the balance of develop-ment among each domestic sector. The needto adopt industrial and development policiesthat are suitable to each stage of economicdevelopment cannot be denied. However, asmentioned above, a sustainable growth of theeconomy cannot materialize without activemarket competition. At every stage of devel-opment, competition policy should ensureactive market competition by accommodatingindustrial and development policies that maypromote competition.

Second, the introduction of exemptionsfrom the application of competition law orother policy measures that hinder effectiveapplication of the competition law should beminimized—even if these are introduced toadvance an industrial policy to developcertain business activities,. In Japan, manylegislative measures were employed toexempt anticompetitive collective activities

from the application of AMA, and suchmeasures were deemed emergency safetynets to ward off economic depression and/or to rationalize an industry. Even if there werelegitimate reasons behind the introductionof these safety nets, their introduction wasnot beneficial in the long run. It proved to bevery difficult to abolish the exemption systemafterwards. The system caused an industry’sbusiness conduct to become averse tocompetition. Companies in such industriestended to exercise collusive activities even ifsuch conduct did not meet the original policyobjectives for which the exemptions weregranted. Getting the competition authorityinvolved in determining whether or not anapplicant for an exemption should begranted the exemption was found advisable.If the introduction of an exemption isunavoidable, the application for theexemption should at least be subject to theapproval of the competition authority. It mayalso be useful to introduce time-boundexemptions (e.g., the exemption would beabolished automatically after a certain period,as provided in a sunset clause).

Third, competition policy and industrialand development policies can and should becompatible. Since business can acquiresustainable competitiveness only throughactive market competition, it is difficult toachieve sustainable economic developmentby suppressing competition and fosteringspecific enterprises. Further, when taking intoaccount the current state of world trade—markets have become more open—a policyto foster domestic industry by prohibitingforeign entry into the domestic market cannotbe maintained over a long period. Rather,economic development can be accelerated byopening the market and introducing foreigndirect investment (FDI).

Japan’s approach at the developing stagewas to delay opening the domestic market toallow domestic industries mature quickly. Thisapproach was used in the development of theJapanese automobile industry, among others.One key factor that facilitated the developmentof this industry was that the domestic marketsize was big enough to ensure aggressivecompetition among domestic automobilemanufacturers and increase competitivenesseven without foreign entrants at that earlystage. The phrase, “competing at home towin abroad” is appropriate. Domesticcompetition is vital in order that a country

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may compete with and win against foreigncompetitors. There may be various types ofindustrial and development policies duringthe developing stages of an economy, but anindustrial policy that is not compatible withcompetition policy will not bring sustainableeconomic growth.

(3) The role of competition policy instructural reform

The government under Prime MinisterJunichiro Koizumi has been dedicated to astructural reform policy up to the present.Promotion of market competition is the coreof the structural reform. JFTC has alsodedicated itself to the structural reformthrough the promotion of competition policy.Reforming the social and economic system,which is characterized by consensus-orientedand regulation-driven management systemsthat are widespread in the Japanese economy,is not an easy task. You may have heardrecently that the Japanese economy is showingsigns of recovery from deflation and economicstagnation. Without regard to whether thecurrent economic recovery is real one or not,the need for structural reform persists.

a. The necessity of structural reform

In the midst of socioeconomictransformations taking place on a global scale,the Japanese economy faced huge problemsthat did not result merely from the cyclicalchanges expected in an economy. Theseproblems were due to structural issuesinherent in the economic system itself. TheJapanese economy was suffering from long-term deflation and had lost its power to grow.

To overcome such huge economicproblems and to reestablish a Japaneseeconomy that is ready for steadydevelopment (e.g., development that is notmeasured by the level of government budgetspending but is based on the creation of anappropriate economic structure), PrimeMinister Koizumi has struggled withimplementing a bold structural reformprogram under the slogans of “No growthwithout structural reform”; “Leave to theprivate sector what the private sector cando”; and “Leave to the municipal governmentwhat the municipal government can do.” Thestructural reform involves, among otherthings, regulatory reform; tax reform; social

security reform; reform of the relationbetween central and local governments; arestructuring program for the industry andfinancial sector; and the promotion ofemployment.

b. Role of competition policy

Enhancement of competition policy isthe core of Prime Minister Koizumi’sstructural reform. Competition is the vital partof an economic strategy that aims to achievethe sustainable recovery of the Japaneseeconomy through structural reforms. Aprogram integrating competition policy andregulatory reform constitutes an essentialand indispensable component of structuralreform. At JFTC, we use slogans such as, “Nogrowth without competition” or “Noinnovation without competition” to persuadethe business community of the importanceof competition policy initiatives in Japan.

Development of competition policyin the APEC region

The APEC Forum was established in 1989 tocapitalize on the growing interdependence ofthe Asian and Pacific economies. By facilitatingeconomic growth, intensifying economic andtechnical cooperation, and enhancing a senseof community, APEC aims to create greaterprosperity in the region.

In the last 10 years or so, we have observedcountries in the APEC region introducecompetition laws. This is consistent with thegeneral progress of globalization, tradeliberalization, and rapid economic growth inthis area. However, countries are at differentlevels in the development and enforcement ofcompetition laws. Some economies have arather long history of implementing theircompetition laws. Others have only recentlyintroduced comprehensive competition laws.Some economies are planning to introduce acomprehensive competition law.

Economies planning to introducecomprehensive competition laws face variousobstacles in drafting and introducing the law(e.g. lack of resources and political leadershipto introduce a new competition law,insufficient understanding of stakeholdersabout competition policy, tensions betweenregulatory authorities and competitionrelated authority, etc.) Even economies thatalready have competition laws are still

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struggling to enforce their laws effectively. Inresponse to the above-mentioned situation,the number of technical assistance activitieson competition has grown remarkably.Although some technical assistance projectswere launched in the early 1990s, many of theprojects started around 2000. Canada, theUnited States, Japan, Australia, Korea, andTaipei,China are the main technical assistancedonors in the APEC region. Establishing acompetition policy cooperation networkwithin the APEC region has proven to beimportant and useful in building a competitiveenvironment in this region.

(1) Overview of Competition Laws in theAPEC region

The level of development of competition lawand policy in the APEC region is varied.

Among 21 member economies, 16economies have introduced a comprehensivecompetition law and have establishedcompetition authorities. Among these 16economies, 4 economies are in the North andthe South America, 3 economies are in thePacific; and the rest are in the RussianFederation and East Asia.

Five economies which have notintroduced a comprehensive competition laware in East Asia. Among these five economies,three are in the process of draftingcomprehensive competition laws, while twoeconomies have not yet decided to introducecompetition law and policy. Some reasonsthey are not considering the introduction ofcompetition policy and law may be: (1) theyare prioritizing an aggressive developmentpolicy; the existence of strong state-ownedcompanies; and the openness and smallnessof their economy, which enables them to enjoyeconomic progress through free trade andinvestment in its own market.

(2) Technical assistance activities in theAPEC region and promotion of its effi-ciency and effectiveness

To assist developing economies introducecomprehensive competition laws or ensuretheir effective enforcement, developedeconomies have been involved in a numberof technical assistance activities. Though thecontent of technical assistance programsthat each donor provides may be different,they usually take any of the following forms:

a. Resident advisor

One type of technical assistance placesa resident advisor in the competition authorityof a recipient economy. The resident advisorprovides lectures and suggestions upondemand. A resident advisor is a very effectivetechnique of providing technical assistanceto newly established competition authorities.It should be noted that dispatching anappropriate advisor to a certain economy fora short period is rather burdensome for thedonor, from a budgetary and personnel/administration point of view.

b. Short-term mission

A short-term mission dispatchescompetition policy experts to developingeconomies for a specifically targeted missionfor a short period of time.

c. Regional conference or seminar

Regional conferences and seminars areheld and will be held in various economies atvarious occasions during the year. Organizedby various economies or organizations, theseconferences and seminars focus on variousissues and are conducted in a variety of ways.

d. Internship

Internship is a type of technicalassistance activity that allows foreignpersonnel to join a competition authority ofdonor economies for a certain period. Itprovides them the chance to learn how thecompetition authorities should do theirwork and how to implement competitionlaw in practice. However, because ofconfidentiality regulations in donorcountries, many documents, testimonies,interviews, and other sources of relevantdata are protected from disclosure topersons other than the competitionauthority ’s staff. Therefore, the expectedoutcome—wide dissemination ofknowledge—is not necessarily feasible. Itshould be noted that internships are ratherexpensive because of travel and lodgingexpenses, and per diem costs. Moreover,their effect may be limited unless the internsdisseminate what they learned to other staffafter they go back to their own competitionauthorities.

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e. Study visit

A study visit is a type of technicalassistance activity that entails the attendanceof a group of foreign personnel at a lectureon competition policy and law. It is providedby the staff of a donor country’s competitionauthority and by other experts invited by thedonor economies. A study visit is alsoexpensive and, in most cases, it is funded bythe donor country’s official development aidprogram.

It should be noted that the effectivenessand efficiency of study visit are greatlydependent on the selection of the propertrainees. Moreover, if the trainees’ level ofknowledge, experience, and needs are moreor less the same, the study visit may beexpected to be effective.

f. Fund donation

A fund donation is a contribution to thebudget of newly established competitionauthorities, which may be used for thecompetition authority’s self-initiated capacity-building activities.

g. Provision of information

Provision of information refers to providingrecipient economies with: (1) generalinformation that the donor considers useful,or(2) specific information that the recipientrequested.

Technical assistance activities are veryimportant for the development of competitionlaw and policy. Since the number ofdeveloping economies that have introduced acompetition law has increased, the demandfor technical assistance from developingeconomies has grown. However, developedeconomies’ budget and human resources fortechnical assistance activities are limited.Some technical assistance activities mayoverlap because most technical assistanceactivities are carried out without cooperationor coordination among the donors.

I believe that the time has come for donorsand recipients to consider strategies for bettercooperation and coordination. This wouldresult in greater efficiency and effectivenessof technical assistance activities. Whilecooperation and coordination on a globalscale are required, it may be useful to

consider starting such strategies at theregional level. Regional action can beexpected to be more feasible and yieldprobable success.

Last year, the Top Level Officials’ Meetingon Competition Policy, a forum for top-levelofficials of competition and competition-related authorities in East Asia, wasestablished. It initiated a discussion on theefficiency and effectiveness of technicalassistance activities. Therefore, the Top LevelOfficials’ Meeting will provide a goodframework for discussing the establishmentof an efficient and effective technicalassistance regime in East Asia. The followingissues should be discussed at subsequentTop Level Officials’ Meeting: (1) exchange ofinformation among donors on their technicalassistance programs in the past and futureand endeavor to coordinate their technicalassistance programs in East Asia region, and(2) cooperation among donors andrecipients toward effective and efficientimplementation of technical assistanceactivities in East Asia.

Since the globalization of business hashighlighted the importance of competitionissues, enhancement of the competitiveenvironment of the region has become one ofAPEC’s objectives. The Competition Policy andDeregulation Group (CPDG), a sub-forum ofthe Committee on Trade and Investment, aimsto enhance the region’s competitiveenvironment and works toward thedevelopment and understanding of regionalcompetition laws and policies. It examines theimpact of competition on trade andinvestment flows and identifies areas fortechnical cooperation among membereconomies. I believe that the efficiency andeffectiveness of technical assistance in theAPEC region should be one of the main issuesto be dealt with at the next CPDG meeting,and the results of the discussions in East Asiashould be presented for information andconsideration at the CPDG meeting.

(3) Promotion of international coopera-tion and competition network

a. Trade liberalization and competition

The World Trade Organization (WTO)regime (multilateral) and free trade agree-ments/economic partnership agreements

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(FTAs/EPAs) (bilateral) have brought abouttrade liberalization and the elimination of tar-iff and nontariff barriers.

In this connection, APEC has formulatedits objectives thus:• to promote sustainable economic growth;• to develop and strengthen the

multilateral trading system and; and• to increase the interdependence and

prosperity of Member Economies.

It is also committed to the “Bogor Goals”2

of free and open trade in the region. As theglobalization of economies progresses, cross-border anticompetitive activities such as inter-national cartels have been observed to be onthe rise. These may harm free and open trade.Thanks to the development of informationtechnology, business can be easily conductedacross borders, and communication relatingto the international anticompetitive activitiesmay take place without difficulty. However,competition law enforcement cannot easilycross borders because of problems posed bysovereignty and jurisdiction. Therefore, coop-eration among competition authorities asregards enforcement of competition laws hasbecome important, and is essential in order totake necessary measures against anticompet-itive activities. At the same time, cooperationhelps avoid conflicts that may arise from theextraterritorial application of law, amongother things.

b. Bilateral cooperation agreements incompetition law enforcement

Japan has bilateral cooperationagreements with the United States (1999) andCanada (2005). We have also starteddiscussions on the conclusion of a similarcooperation agreement with Australia. Theseagreements, particularly the Japan–UnitedStates agreement, set out the manner in whichthe competition authority of each partycooperates in the enforcement activities of theother. Parties are obliged to:

i) notify the other of enforcement activitieswhich may affect the important interestsof that country;

ii) coordinate enforcement activities withregard to related matters;

iii) provide the other competition authoritywith any significant information in itspossession about relevant anticompetitiveactivities,

iv) request the other competition authority toinitiate appropriate enforcement activitieswithin its territory when the importantinterest of the requesting country isharmed by foreign anticompetitiveactivities (positive comity); and

v) give careful consideration to the importantinterests of the other country during theconduct of all enforcement activities toavoid conflict in the application ofcompetition laws (negative comity).

Such cooperation is expected to give riseto the efficient enforcement of competitionlaws and is a powerful countermeasureagainst international anticompetitive activities.

c. Cooperation in competition policy underEPAs and FTAs

EPAs and FTAs seek liberalization and thefacilitation of movement of natural persons, aswell as trade and investment, by eliminatingtariff and other trade barriers between specificpartner economies. EPAs seek to achieve theforegoing objectives not only by eliminatingtariff and other trade barriers but also byharmonizing immigration regulation andeconomic systems.

Competition policy is an inevitableelement in the EPAs and FTAs, both of whichensure the free flow of goods and servicesresulting from the liberalization of trade andinvestment. International anticompetitiveactivities cannot be fully controlled by traderemedy tools such as antidumping measures.It is expected that the mutual assurance to takeappropriate measures against anticompetitiveactivities will lead to the promotion of tradeand investment.

Japan concluded bilateral EPAs that havechapters stipulating cooperation between itscompetition authority and that of Singaporeand Mexico. The Japan–Mexico EPA was thefirst occasion when JFTC established anenforcement cooperation mechanism

2 APEC adopted the “Bogor Goals” in 1994 at a summit heldin Bogor, West Java, Indonesia. The Bogor Goals are aimedat establishing free and open trade and investments byreducing tariff barriers in the Asia-Pacific area to a level ofzero to 5% for industrialized economies by 2010, and fordeveloping economies by 2020.

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under the framework of an EPA. Thesubstantial elements of the competitionchapter of the Japan–Mexico EPA are similarto those in the Japan–US cooperationagreement.

In other EPAs between Japan anddeveloping economies, enforcementcooperation is more flexible and technicalassistance cooperation should be includedconsidering the development levels of thelatter’s competition law and policy. Threemajor elements that need to be incorporatedin the competition chapter of EPAs are:• a declaration to take appropriate

measures that address anticompetitiveactivities within a country’s applicablelaws and regulations;

• a declaration to ensure consistency withthe core principles of nondiscrimination,transparency, and procedural fairness inimplementing measures that addressanticompetitive activities; and

• cooperation in the field of controllinganticompetitive activities as warrantedby the level of competition policydevelopment.

Conclusion

Competition policy is not necessarily a pana-cea for all economic problems but its impor-tance is universal. During the developing stageof their economies, some countries haveemphasized the importance of economicdevelopment rather than competition. How-ever, it would be good to remember that bothobjectives are, and should be, compatible.

In my presentation, I shared the experi-ence of Japan as related to its introductionand enforcement of AMA. Japan struggledfor a long time in enhancing AMA. Now thatwe are in the era of economic globalization,you need not take 50 years to strengthen yourcompetition law.

I believe that JFTC’s accumulated expe-riences on competition policy are relevantto, and need to be shared with competitionauthorities of other economies. Enterprisescan acquire sustainable competitivenessonly through market competition—compe-tition will lead to economic growth. JFTC iswilling to strive with you in fostering a com-petition environment throughout the APECregion. I hope my presentation contributesto your understanding of competition lawand policy.

Interface withRegulatory RegimesBERNARD J. PHILLIPSHead, Competition Division, OECD

SEAN ENNIS1

Senior Economist, Competition Division, OECD

Introduction

In the past, relationships between competition authorities and sector regulatorshave at times involved disagreementsover regulatory approaches, with relatively poor mechanisms for ensuring that

both regulators’ and competition authorities’views are taken into account. On the one hand,regulators have sometimes been felt to actmore in the interests of the firm(s) they regu-late than in the interests of consumers or pro-moting competition. On the other hand, com-petition authorities have sometimes been feltto ignore broader social objectives apart fromincreasing competition and to lack adequatetechnical knowledge about highly complexsectors.

Fractious relationships are not inevitable.Competition authorities and sector regulatorsshould be on the same side because:• Economic growth is enhanced by pro-

competitive regulation, as recent researchby the Organisation for Economic Co-operation and Development (OECD) andothers have suggested.

• Many of the objectives of competitionauthorities and regulators are in fact verysimilar. For example, regulators oftenfocus on preventing “excessive pricing”,ensuring access to essential facilities, andensuring that barriers to entry are reduced.These objectives are shared bycompetition authorities in most OECDjurisdictions.

1 Mr. Phillips delivered a presentation at the Competition Lawand Policy Roundtable based on this note, which hecoauthored with Mr. Ennis. The note draws on the materialsprepared for the 2005 meeting of the Global Forum onCompetition. See www.oecd.org/document/ 55/0,2340,en_2649_37463_34255159_1_1_1_37463,00.html. Thecontribution of Peter Ormosi to this note is gratefullyacknowledged. Any remaining errors are those of theauthors. The views presented herein are those of theauthors and not necessarily those of the OECD or anymember government.

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The ideal relationship between compe-tition authorities and regulators is driven bya central government that promotes broadreview of existing regulations with a pro-com-petitive lens, ensuring that a “competitionculture” encompasses both sector regulatorsand competition authorities.

In practice, not many countries have yetachieved this ideal. To the extent the ideal hasnot been reached, there are nonetheless anumber of practical measures thatgovernments can take to enhance pro-competitive regulation and improve therelationship between competition authoritiesand sector regulators.2 This note outlines anumber of these approaches.

Key elements for increasing pro-competitive regulation include:• The central government actively supports

pro-competitive regulation.• The central government requires that

ministries and regulatory bodies reviewtheir laws and regulations for unnecessaryrestraints of competition.

• Both competition authorities andregulators implement instruments forcooperation.

• Overall principles of competition lawenforcement are common across differentsectors.

Broad government efforts topromote competition benefit theeconomy

The development of pro-competitiveregulation and the lowering of regulatorybarriers are of vital economic importance bothfor ensuring that the benefits of competitionwill accrue to domestic consumers and forensuring that domestic companies will havecost structures that enable them to succeedin international trade. Sector regulation

affects the cost and quality of many keyinputs of production, such astelecommunications, energy, and transport.Pro-competitive regulation enhances theability of firms within a regulated sector toadapt to changed technology, choose low-cost means of production, adapt toconsumer preferences, and set prices thatmore closely reflect the variable costs ofproduction. As a result, governments canbenefit their economies by encouraging pro-competitive regulation.

Australia provides a good example of whatcan happen when a government as a wholeseeks to promote competition and makeregulations more pro-competitive. Nearly 2decades of economic stagnation and declinerelative to other OECD economies led Australiato embark on an ambitious reform program,including reform of financial and labor marketsand of competition policy. Since the mid-1990s,the implementation of the competitioncomponent, Australia’s ambitious andcomprehensive National Competition Policy,has made a substantial contribution to therecent improvement in Australian labor andmultifactor productivity and economic growth.Australia’s Productivity Commission estimatesthat Australian households’ annual incomesare on average around A$7,000 higher as aresult of competition policy. Recent OECDreviews of Australia show that the Australianeconomy is still benefiting from the programof widespread and deep reforms that startedin the 1980s and was especially intensive inthe 1990s. These reforms made it easier to setmacro policies in a stability-oriented medium-term framework. The combination resulted ina 13 year-long economic expansion periodaccompanied by low inflation, high resilienceto external and domestic shocks, and veryhealthy public finances.

Pro-competitive regulation has beenshown to enhance employment, increase

“Increasingly, policy-makersrecognize that regulationsshould be designed tominimize their harmful effectson competition.” Bernard J. Phillips

Head, Competition Division,OECD

2 OECD. 1999. Relationship between regulators andcompetition authorities. No. 22 in the series on Roundtablesin Competition Policy, 1999. OECD: Paris. Available:www.oecd.org/dataoecd/35/37/1920556.pdf.OECD: Paris.The relationships have been examined in many previouscompetition law and policy peer reviews, such as OECD.Mexico: Progress in Implementing Regulatory Reform.OECD: Paris including through the OECD Regulatory ReformReview program, as well as in recent reviews of Norway(OECD. 2003. Regulatory reform in Norway: Modernisingregulators and supervisory agencies. OECD: Paris) andMexico (OECD. 2004. Competition law and policy in Mexico:an OECD peer review.) OECD: Paris.

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productivity growth, and promoteinvestment.• Employment. Nicoletti and Scarpetta find

that product-market regulation has animpact on employment.3 They estimatethat pro-competition policy developmentsin New Zealand and the United Kingdomhave added around 2.5 percentage pointsto their employment rate over 1978–1998.Countries with more modest reforms,such as Greece, Italy, and Spain have onlyadded between 0.5 and 1% to theemployment rates through such reforms.

• Productivity growth. Nicoletti andScarpetta find that “reforms promotingprivate governance (i.e., privatization) andcompetition … tend to boost productivity.In manufacturing the gains to be expectedfrom lower entry barriers are greater thefurther a given country is from thetechnology leader. Thus, regulationlimiting entry may hinder the adoption ofexisting technologies, possibly by reducingcompetitive pressures, technologyspillovers, or the entry of new high-techfirms. At the same time, both privatizationand entry liberalization are estimated tohave a positive impact on productivity inall sectors…. These results … point to thepotential benefits of regulatory reformsand privatization, especially in thosecountries with large technology gaps andstrict regulatory settings that curbincentives to adopt new technologies.”4

• Investment. Alesina, Ardagna, Nicoletti,and Schiantarelli find that “tight regulationof the product markets has had a largenegative effect on investment. The data forsectors that have experienced significantchanges in the regulatory environment

suggest that deregulation leads to greaterinvestment in the long run,” and “[t]heimplications … are clear: regulatoryreforms, especially those that liberalizeentry, are very likely to spur investment.”5

Primary government tasks inregulated sectors

The primary potential government tasksfaced in regulated sectors are among thosebelow:6

• Technical regulation: setting andmonitoring standards, managing license,and implementing sanctions to assurecompatibility and to address privacy,safety, reliability, financial stability andenvironmental protection concerns;

• Wholesale regulation: ensuring nondis-criminatory access to necessary core fa-cilities, especially network infrastructure.By regulating the way in which naturalmonopolists provide access to their facili-ties, it is possible for governments to im-prove economic welfare by promotinglower access prices and greater supply;

• Retail regulation: measures to mitigatemonopoly pricing or behaviour at the retaillevel;

• Public service regulation: measures toensure that all consumers, regardless ofsocial status, income or geographicallocation, have access to goods that aredeemed of special social value, as withuniversal service obligations;

• Resolution of disputes: quasi-judicialpowers may result in faster resolution ofdisputes than could be provided by anonspecialized court; and

• Competition oversight: controlling anti-competitive conduct and mergers. Com-petition regulation has a number of goals,one of the most important beingefficient operation of markets. It seeks toprevent abuses of market power thatresult in unduly high prices, less innova-tion, lower choice, and lower quality.

Increasingly, policy-makers recognize thatregulations should be designed to minimizetheir harmful effects on competition. Forexample, public service regulations designedto ensure universal access to services havefrequently overstepped their original purposeand have served as a basis for preventingcompetition by protecting incumbents from

3 Nicoletti, G. and S.Scarpetta. 2001. Interactions betweenproduct and labor market regulations: do they affectemployment? Evidence from OECD countries. OECDEconomics department working papers.

4 Nicoletti, G. and S.Scarpetta. 2003. Regulation, Productivity,and Growth: OECD Evidence. World Bank Policy ResearchWorking Paper No. 2944. January 2003.

5 Alesina, A., S. Ardagna, G. Nicoletti, and F. Schiantarelli.2003. National Bureau of Economic Research. WorkingPaper No. 9560: Regulation and Investment. Available:www.nber.org/papers/w9560.pdf.

6 This note does not discuss the issue of broader structuralchanges in governance, such as structural separationbetween competitive and non-competitive businesses orprivatization, as these changes often involve more parts ofgovernment than competition authorities and sectorregulators. Such changes are discussed in the note,“Bringing competition into regulated sectors.” OECD. 2005b.DAF/COMP/GF (2005): Bringing competition into regulatedsectors. 25 January. 1. Available: www.oecd.org/dataoecd/11/24/34339715.pdf.

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entry. These entry prohibitions ensured thatthe incumbent would be able to crosssubsidize from high profit products to lowprofit or money-losing products. In fact, suchrestrictions on competition are often notnecessary because universal serviceobligations can be met in the presence ofcompetition.7

Competition authorities andregulators have different corecompetencies

Competition authorities and sector regulatorshave different core competencies. These corecompetencies influence the types of tasks bestaccomplished by each.

(1) Sector regulators

Sector regulators frequently oversee sectoralregulation. Sector regulators typically haveextensive, ongoing knowledge of the technicalaspects of the products and services that areregulated. Sector regulators are likely bettersuited to technical regulation than competitionauthorities.

For example, in telecommunications,when adjacent spectrum is operated by twoentities, there is a technical possibility thatsignals of one entity may interfere with thoseof the other. While some would suggest that acommon law system could resolve anydisputes related to interference,8 policy makershave generally preferred to create anadministrative body with oversight ofinterference issues. Sector regulators are wellsuited to setting rules that will reduceinterference or for overseeing parties’ claimsof undue interference from neighboringspectrum. At times, though, even technicalregulations can affect the conditions ofcompetition, so competition policy issues canarise even with technical regulation. Forexample, rules on interference limit thenumber of potential competitors within aspectrum band. When technical regulationsimpact conditions of competition, there may

be reason to involve competition authoritiesin design and oversight of such regulations.

Historically, regulators have often beenclosely related to ministries that manage ormanaged incumbent firm(s). Perhaps as aresult, regulatory agencies are sometimesperceived as taking actions that appear toserve the interests of the firm(s) beingregulated. Greater independence both frompolitical power and the regulated sector arecrucial for avoiding these perceptions. In manycountries, regulatory institutions have indeedincreased their levels of independence.

Enforcement by sector regulators may bebetter suited when:• Fast, definitive resolutions are needed;• Ex post enforcement creates excessive

uncertainty;• Scientific and technical expertise is

required to assess the merits of arguments;• The standards of proof required for

competition law cases would not be metfor achieving the socially desiredregulatory outcomes; and

• Structurally similar situations are repeatedand consistent basic rules are desired.

(2) Competition authorities

Competition laws are frequently broadlyoverseen by competition authorities. The skillsnecessary for delineating relevant markets,assessing likelihood of harm to competition,assessing entry conditions, and assessingsignificant market power are particularly wellsuited to the expertise of competitionauthorities. While regulators may have skillsin these areas, competition authorities usuallyhave a greater breadth of experience incompetition law oversight and are adept atapplying the competition law to differentproducts and services. Competition authoritiesare best suited to competition law oversight.

In applying competition laws in regulatedsectors, competition authorities can oftenbenefit from the technical expertise of sectorregulators and should seek to cooperate withsector regulators to benefit from this expertise.

Competition laws frequently includeabuse of dominance provisions that apply to“excessive” prices. In jurisdictions with suchlaws, abuse of dominance may be construedto limit monopoly pricing, a topic also ofconcern to regulators.9

Enforcement by competition authoritiesmay be better suited when:

7 OECD. 2004. Non-commercial service obligations andliberalisation. No. 45 in the series on Roundtables inCompetition Policy. OECD: Paris. Available: www.oecd.org/dataoecd/43/35/33691140.pdf.

8 See, for example, Coase, R. 1959. The Federal Communi-cations Commission. Journal of Law and Economics 2:1–40.

9 See OECD. 2005a. DAF/COMP/GF (2005): Abuse ofdominance in regulated sectors. 3.

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• Defining markets for regulatorypurposes is necessary;

• Ex ante regulatory enforcement risksdistort market outcomes, stifle newproducts, and more generally createcostly errors;

• Markets will not require ongoing oversight;and

• Products of interest are subject to strategicmanipulation that cannot be foreseenthrough regulation.

As for wholesale regulation, retailregulation, public service regulation, anddispute resolution, the ideal role ofcompetition authorities and regulators is lessclear. In certain countries, such as Australiaand the Netherlands, competition authoritieshave more direct roles in some of these areasof regulation. In absence of sector regulators,especially in non-OECD countries, competitionlaws are often invoked to govern unregulatedsectors.

(3) Competition authorities can providevaluable input for those tasks forwhich they are not primary enforcers

Even when competition authorities are not thebest qualified institution to make determina-tions related to topics such as ongoing price,revenue, technical or other regulation, com-petition authorities do nonetheless have skillsthat are useful for some parts of regulation andthat should be used as part of the regulatoryprocess in key economic sectors. For example,many economic regulations are predicated onthe idea that one or more firms in a productmarket have the ability to profitably raiseprices. Regulators have not always madereasoned determinations of market power,while competition authorities are skilled in thereasoning related to product market definition.In the European Union, a recent electroniccommunications package was adopted inFebruary 2002, including Directive 2002/21/EC.10 This package identifies a three-step ap-proach of:• Identification of relevant markets;• Determination of operators considered to

hold significant market power; and• The possibility of imposing ex ante

obligations on specific operatorsconsidered to be dominant within the pre-defined markets.Recommendation C(2003)497 on relevant

product and service markets susceptible toex ante regulation identifies 18 potentiallyregulated markets.11 The national regulatoryauthorities are responsible for determiningthe geographic scope of these markets. Thenational regulatory authorities are thenresponsible for making determination ofoperators considered to hold significantmarket power or “dominance.” Findings ofsignificant market power will then be aprecondition for ex ante obligations, as definedin the Access Directive.12 The package wouldhelp focus regulation on products and servicesthat are not fully competitive. Unnecessaryregulations are expected to be reduced. Thenational regulatory authority determinationsare subject to review and comment by theEuropean Commission; both in thedevelopment of the package and in reviewingdeterminations, the Competition Directorate-General13 plays a significant role.

Instruments of cooperation thatmerit consideration

While broad government programs are notalways possible, improved cooperationbetween competition authorities and sectorregulators is more easily implemented thanbroad government programs and is valuablefor ensuring both that regulatory agencies takeappropriate account of competition concernsand that competition authorities takeappropriate account of technical and otherregulatory concerns. At times, cooperationmay occur naturally without any institutional

10 European Parliament and the Council (2002) Directive 2002/21/EC of the European Parliament and of the Council on acommon regulatory framework for electroniccommunications networks and services (FrameworkDirective). 7 March 2002, 2002/21/EC. Available: http://europa.eu. in t /eur - lex /pr i /en/o j /dat /2002/ l_108/l_10820020424en00330050.pdf.

11 European Commission. 2003. Commission Recommenda-tion on relevant product and service markets within theelectronic communications sector susceptible to ex anteregulation in accordance with Directive 2002/21/EC of theEuropean Parliament and of the Council on a common reg-ulatory framework for electronic communication networksand services. 11 February. C (2003)497. Available: http://europa.eu.int/information_society/topics/telecoms/ regula-tor y/publ iconsult /documents/relevant_markets/l_11420030508en00450049.pdf.

12 Directive 2002/19/EC of the European Parliament and of theCouncil of 7 March 2002 on Access to and Interconnectionof Electronic Communications Networks and AssociatedFacilities (the “Access Directive”). 2002 O.J. (L 108) 7.Available: http://europa.eu.int/eur-lex/pri/en/oj/dat/2002/l_108/l_10820020424en00070020.pdf.

13 Information about the Competition Directorate General isavailable: http://ec.europa.eu/comm/dgs/competition/index_en.htm

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support. Even so, cooperation can usuallybe enhanced to the benefit of regulatorydecision making. A variety of instrumentsexist for encouraging cooperation betweencompetition authorities and sectorregulators. No OECD country has in place allthe options listed below. However, adoptinga mixture of some of these instruments canbe valuable for improving the process andoutcomes of cooperation. These include:

(((((1) Giving statutory powers to the com-petition agency for some aspects ofsector regulation

At times, regulations may continue to apply toproducts and companies even after the needfor regulation has passed. However, forreasons of institutional inertia and survival,regulatory agencies may not relinquishoutdated regulatory powers or institute newpowers in response to changed marketconditions. A number of laws and regulationstherefore predicate the applicability ofregulation on the existence of substantialmarket power.

An example of this can be found in thelaws and regulations of Mexico.Determinations of substantial market powerare made by the Competition Commission,not the sector regulator, for sectors stated bythe Seaport Law of 1993; the Law on Roads,Bridges and Road Transport of 1993; theNavigation Law of 1994; the Railroad ServicesLaw of 1995; the Federal CommunicationsLaw of 1995; the Civil Aviation Law of 1995;and the Airport Law of 1995; and theRegulations of Natural Gas of 1995 and ofpension funds of 1996. The MexicanCompetition Commission is responsible forassessing whether entities, such asincumbent telecom operator Telmex, havesubstantial market power over a product orservice. Such a finding is needed prior toregulation of the company’s product orservice. The telecom regulator then has theability to regulate operators declared to holdmarket power. However, should thecompetition authority in the future alter itsruling in response to changed marketconditions and assess that a firm thatformerly had substantial market power for aproduct no longer does, the regulator thenhas no further right to regulate the firm inthat product. Besides assessments of marketpower, a second area in which the

Competition Commission plays a role is inmaking determinations to authorizeeconomic agents to participate inprivatizations or in public auctions forconcessions, licenses, and permits.14

(2) Competition authorities and regulatorscan be given concurrent powers ofenforcement of the national competitionlaw

One way to ensure that both technicalexpertise and competition law expertise canexpress their views is to provide concurrentjurisdiction, in which both sector regulatorsand a competition authority have the right tobring cases under the national competitionlaw. The United Kingdom (UK)’s CompetitionAct of 1998, for example, providesconcurrent powers for sector regulators inelectricity, gas, telecommunications, waterand railways, among other areas. TheUK’s implementing regulation StatutoryInstrument 2000 No. 260 does not permit theexercise of functions by an authority whilethe same functions are being carried out byanother authority, avoiding double jeopardy.It requires that when one authority has ormay have concurrent jurisdiction, thatauthority shall notify other authorities withjurisdiction in advance of taking action. Therelevant authorities are then to decide amongthemselves who shall exercise powers inrelation to a given case. In case agreement isnot reached, the Director General of FairTrading shall inform the Secretary of State inwriting. Authorities may makerepresentations to the Secretary of State andthe Secretary of State determines whichauthority shall exercise powers in relation toa given case. The Statutory Instrument alsopermits the transfer of functions to anotherauthority from the one who initially exercisesfunctions and permits the staff of oneauthority to act as staff of the authority withdecision power for a given case.15

14 OECD. 1999. Relationship between regulators andcompetition authorities. No. 22 in the series on Roundtablesin Competition Policy, 1999. OECD: Paris. 182. Available:www.oecd.org/dataoecd/35/37/1920556.pdf; and OECD.2004. Competition law and policy in Mexico: an OECD peerreview. OECD: Paris. 16–17.

15 Her Majesty ’s Stationery Office (HMSO). 2000. TheCompetition Act 1998 Concurrency Regulations 2000Statutory Instrument 2000 No. 260. HMSO: London.Available: www.hmso.gov.uk/si/si2000/20000260.htm.

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(3) Placing senior official of competitionagency on oversight board for sectorregulator and vice versa

Placing senior officials from regulators inboard positions for a competition authorityor senior competition authority officials inboard positions can be an effective tool forensuring that institutions take account ofeach other ’s interests. The AustralianCompetition and Consumer Commission(ACCC) has associate commissioners inaddition to the five permanent commissioners.Associate commissioners can includeappointees from Commonwealth and Stateregulatory agencies. For example, associatecommissioners have come from institutions,such as the Australian Broadcasting Authority,the New South Wales Independent Pricingand Regulatory Tribunal, and the VictorianOffice of the Regulator General. At the sametime, certain members of the ACCC havebeen appointed associate members of theAustralian Communications Authority.16

(4) Providing competition authorities withthe standing to submit public com-ments on the application of regula-tions that require written response bythe regulator prior to final decisions

Ensuring that competition authorities have anopportunity to air their views and thatregulatory agencies must respond to theseviews can provide an important avenue forpromoting competition. In Italy, most sectorsare subject to the national competition law(Law No. 286 of 10 October 1990) as enforcedby the Antitrust Authority (Autorità garantedella concerrenza e del mercato). Theexception is that in the banking sector, thesector regulator, the Bank of Italy, has theresponsibility for enforcing the nationalcompetition law for agreements, abuses ofdominant position and mergers. Thecompetition authority nonetheless has theability to submit its views on bank regulatorymatters. After such a submission, the bankregulator must respond and cannot permitanticompetitive actions unless there are specialcircumstances (notably, system stability is atrisk) and the competition authority agrees.17

(5) Establishing a written framework thatgoverns cooperation between sectorregulators and competition authorities

One way to enhance cooperation over thelong-term is to establish formal cooperationagreements. The Competition Authority ofIreland has instituted such formalagreements in accordance with theCompetition Act of 2002, section 34(1).According to the Act, the purpose of enablingsuch agreements is to facilitate cooperation,avoid duplication of activities, and ensureconsistency between decisions related tocompetition issues. The act requires thatagreements contain:• “a provision enabling each party to furnish

to another party information in itspossession if the information is requiredby that other party for the purpose of theperformance by it of any of its functions,”

• “a provision enabling each party to forbearto perform any of its functions in relationto a matter in circumstances where it issatisfied that another party is performingthe functions in relation to that matter,”and

• “a provision requiring each party to consultwith any other party before performing anyfunctions in circumstances where therespective exercise by each party of thefunctions concerned involves thedetermination of issues of competitionbetween undertakings….”. (CompetitionAct 2002, Section 34(3))

A number of cooperation agreementshave been established in Ireland. The Com-petition Authority has agreements with theBroadcasting Commission of Ireland,18 Com-mission for Aviation Regulation,19 Commis-sion for Communications Regulation,20 Com-mission for Energy Regulation,21 and Office

16 OECD. 1999. Relationship between regulators and competitionauthorities. No. 22 in the series on Roundtables in CompetitionPolicy, 1999. OECD: Paris. 107. Available: www.oecd.org/dataoecd/35/37/1920556.pdf.

17 OECD. 1999. Relationship between regulators and competitionauthorities. No. 22 in the series on Roundtables in CompetitionPolicy, 1999. OECD: Paris. 165. Available: www.oecd.org/dataoecd/35/37/1920556.pdf.

18 The Competition Authority (TCA), Ireland. 2002. Cooperationagreement between the Competition Authority and theBroadcasting Commission of Ireland. 19 December. Available:www.tca.ie/ca_agreements/bci.pdf.

19 TCA. 2002. Cooperation agreement between the CompetitionAuthority and the Commission for Aviation Regulation. 19December. Available: www.tca.ie/ca_agreements/car.pdf.

20 TCA. 2002. Cooperation agreement between the CompetitionAuthority and the Commission for Communications Regulation.16 December. Available: www.comreg.ie/_fileupload/publications/comreg0306.pdf.

21 TCA. 2002. Cooperation agreement between the CompetitionAuthority and the Commission for Energy Regulation. 13December. Available: ww.tca.ie/ca_agreements/cer.pdf.

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of the Director of Consumer Affairs.22 Thesecooperation agreements to ensure that theprotection of confidentiality provided by onebody are assured when that information isshared with another body and that informa-tion cannot be used for any purpose besidesthat for which it has been shared.

Even when an explicit, bilateral writtenagreement does not exist, cooperation can beenabled by legislation. In France, thetelecommunications law and the energy lawenable cooperation between the regulators andcompetition authority. The telecommunicationslaw enables consultation between the Autoritéde Régulation de Télécommunications and theConseil de la Concurrence. Similarly, theenergy law suggests that conduct related toabuse of dominance or restrictive agreementswill be referred by the energy regulator, theCommission de Régulation de l’Energie (CRE)to the Conseil de la Concurrence. The law alsopromotes consultation between the CRE andthe Conseil de la Concurrence.23

(6) Encouraging personnel transfers orexchanges between sector regulatorand competition authority

Staff transfers between a competition authorityand a regulator, whether unilateral or bilateral,can significantly improve the process ofcommunication between a regulator andcompetition authorities. Staff transfers haveoccurred both at senior management level andnormal staff level. For example, in the UnitedStates, the Chief of Staff of the AntitrustDivision of the United States Department ofJustice was appointed commissioner in thetelecommunications regulator, the FederalCommunications Commission (FCC), andthen became the chairperson of the FCC. InFinland, staff from the competition authorityhave found positions in regulators, such as thetelecommunications authority. The transfersdescribed above have occurred at the seniorlevels. But transfers or exchanges can alsohappen at the staff level and can encourageimproved communications at the staff level.Transfers or exchanges tend to work betterwhen staff who are well-known in aninstitution transfer to the other. In the United

States, an exchange of economics staffbetween the United States Department ofJustice’s Antitrust Division and the FCCenhanced knowledge, communication, andunderstanding between economic staff of theinstitutions.

(7) Exchanging information informally be-tween sector regulator and competitionauthority

When a competition agency seeks tocomment on the activities of a regulator, it canoften be valuable to contact the regulatorbefore making any official comments to findthe right people to whom comments shouldbe addressed and to better understand reasonsfor regulations or proposed regulatory actions.At times, informal comments may be moreeffective than formal comments.

(8) Head of competition authority can begiven a cabinet level standing

Giving the chairperson of a competitionauthority a high-level status within topgovernment hierarchy can be beneficial whenindependent regulators do not exist or whenministries retain many regulatory functions andmaintain final decision powers. For example,in Korea, the Chairman of the Korean FairTrade Commission has cabinet level standingin the government. Such standing can helpensure that the competition authority is ableto appeal directly to high-level government forinternal government dispute resolution andthat competition authorities are not outrankedby sector regulators.

(9) Regulator and competition authoritycan be unified, ensuring internal con-sistency with respect to competitiondecisions

One way to ensure consistency in theapproach to competition law enforcement ofa sector regulator and a competition authorityis to merge the regulator with the competitionauthority. One example of merging a regulatorwith a competition authority occurs in theNetherlands, where the Government hascreated chambers in the National CompetitionAuthority (NMa) for sector regulation. Theenergy regulator in the Netherlands, theOffice of Energy Regulation (DTe), is placedunder the oversight of the competition

22 TCA. 2003. Cooperation agreement between the CompetitionAuthority and the Director of Consumer Affairs. 11 April.Available: www.tca.ie/ca_agreements/odca.pdf.

23 OECD. 2004. Regulatory reform in France. OECD: Paris.

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authority, the NMa. DTe is responsible for theimplementation and supervision of theElectricity Act of 1998 and the Gas Act of 2000.In 2004, the Office of Transport Regulationwas set up as another chamber in the NMa.The chamber model allows highly specializedknowledge related to sectors to exist withinthe structure of a competition authorityfocused on broad issues of improvingcompetition.

Ensuring consistency in theapplication of competition lawsand policies

Ensuring consistency in the application ofcompetition law and policy across differentsectors is an important goal. Whencompetition authorities are responsible forcompetition law application in some areas andsector regulators are responsible in others,ensuring such consistency can be difficult.Consistency at the national level can helpensure that international convergence ofantitrust standards can occur, which isparticularly important for ensuring thatcomplex international transactions do not facea tangle of different rules that can weigh downtransactions with excessive remedies. The UKhas been one of the leading OECD jurisdictionsin ensuring consistency.

(1) Appeals route for competition deci-sions should converge

One practical and highly desirable method forensuring such consistency is setting up acommon appeals path, so that one court hasultimate oversight of competition law cases,whatever their origin. This is particularlyimportant in the UK, with concurrentjurisdiction between many sector regulatorsand the Office of Fair Trading (OFT), but is alsoimportant where sector specific laws may havecompetition impacts. In the UK, theCompetition Appeals Tribunal is the commonappellate body for decisions by theCompetition Commission and by regulatorswith respect to application of competition law.In Poland, the Court for Competition andConsumer Protection has jurisdiction both overcompetition authority cases and over appealsof regulation. “The broader jurisdictionpromises to ensure that policies are appliedconsistently in competition cases and insectoral regulation. Originally, the Court only

reviewed Antimonopoly Office decisions. In1997, it was given the power to hear appealsfrom the new Energy Regulatory Authority.The telecoms regulator was added in 2000and the railway regulator in 2001.”24 InFrance, the path of appellate review ofdecision by the Conseil de la Concurrenceand both the telecom and energy regulatorsis through a common court, the Cour d’Appelde Paris.

(2) Regulatory impact assessment shouldtake into account competition objec-tives, among other goals

Increasingly, central governments engage inregulatory impact assessments to ensure thatnew regulations are necessary and that theirbenefits exceed their costs, and that otheralternative regulations would not succeedequally well. One portion of these assessmentsshould include the impact on competition. TheUnited Kingdom has developed this approachwith a significant role held by the OFT.According to the Cabinet Office’s RegulatoryImpact Unit, all regulatory impact assessments“must include a competition assessment,except where the proposal solely affects thepublic services. The Cabinet Office describesa competition assessment as one to “providean assessment of the competition impacts foreach option (talk to OFT).”25 The OFT haspublished its own “Guidelines for CompetitionAssessment.26 Alternatively, the Cabinet Officereleases a quick summary of key features of acompetition assessment. The test proceeds intwo stages: first, assessing whether there arepotentially significant competitive effects froma regulation, and second, if there are,performing an in depth analysis. With respectto a detailed analysis, the Cabinet Office statesthat “Carrying out this assessment can becomplex and requires an understanding ofcompetition issues. You will need the help ofyour departmental economists and shouldalso consult the Regulatory Review Team at

24 OECD. 2002. Regulatory reform in Poland: The role ofcompetition policy in regulatory reform. Available:www.oecd.org/dataoecd/3/2/27067452.pdf. OECD: Paris. 26.

25 United Kingdom (UK) Cabinet Office. 2005. UK Checklist:Regulatory Impact Assessment Checklist. Available:www.cabinetoffice.gov.uk/regulation/ria-guidance/content/ukchecklist/index.asp.27 January.

26 Office of Fair Trading (OFT). 2002. Guidelines for policymakers completing Regulatory Impact Assessments.London: OFT. Available: www.oft.gov.uk/NR/rdonlyres/A7138977-6FE2-45DE-BE32-3AB6E767664A/0/oft355.pdf.

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the OFT who will provide help with thecompetition analysis, as well as with draftingthe assessment.”27

Better still, central governments shouldrequire that all economically significant lawsand regulations, whether existing orproposed, should be reviewed forunnecessary restraints on competition. TheOECD is currently preparing a methodologythat will enable officials in line ministries whoare not competition experts to perform suchreviews. The draft methodology should bepublished in early 2007 and field tested in2007–2008.

(3) Competition authorities should be giventhe right to intervene with respect toexisting and proposed regulations thatare potentially harmful to competition

At the stage of preparing new regulations orreviewing existing regulations, giving thecompetition authority the right to intervenehelps promote pro-competitive regulation. Inthe UK, the OFT can study both proposed andexisting regulations. It can then issue a publicreport stating its views about what problemsmay exist in the regulation(s). Once this reporthas been issued, the Government undertakesto respond publicly within 90 days. Note thatthis right to intervene is not the same as arequirement that the competition authoritysubmit opinions on all new regulations. Mostcompetition authorities do not have theresources to review all new regulations.

Conclusion

One of the most powerful mechanisms forachieving pro-competitive regulation is toimprove the cooperation and coordinationbetween sector regulators and competitionauthorities. Central government support forpro-competitive regulation is justified toenhance growth and develop an economythat is better able to resist economic shocks.

• Central government should encouragepro-competitive regulation, by takingactions such as:

Including pro-competitiveregulation as part of a sectorregulator’s mandate;Requiring regulatory bodiesto review their laws andregulations for unnecessaryrestraints of competition;Appointing regulators with aproven interest incompetition; andGiving competition oversightfunctions to the competitionagency, with technicalbackup from the sectorregulator.

• Instruments of cooperation between sec-tor regulators and competition authoritiesshould be adopted. These include:

Giving statutory powers to thecompetition agency for someaspects of regulatory reviews;Placing senior official ofcompetition agency onoversight board for sectorregulator and vice versa; andProviding competitionauthorities with the standingto submit public commentsthat require written responseby the regulator prior to finaldecisions.

• Mechanisms for ensuring domesticconsistency in competition rules shouldbe applied.

To the extent that multipleagencies have competitionoversight functions, acommon appeal routeshould be created so thatcompetition cases aregoverned by a commonstandard;Regulatory impactassessment should take intoaccount competitionobjectives, among othergoals; and

• Competition authoritiesshould be given the right tointervene with respect toexisting and proposedregulations that arepotentially harmful tocompetition.

27 UK Cabinet Office. 2005. Competition assessment. January 27.Available: www.cabinetoffice.gov.uk/regulation/ria-guidance/content/competition/index.asp.

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CompetitionAgencies andTheir Interfacewith RegulatoryAgenciesANNETJE OTTOWAssociated Member and Advisor to the Commissionof OPTA (Post and Telecommunications Authority),The Netherlands

About OPTA

The Onafhankelijke Post enTelecommunicatie Autoriteit(OPTA) was established in 1997.Although it started out with only ahandful of people, 150 people

now work for OPTA. Compared to othernational regulatory authorities (NRAs) inEurope, and given OPTA’s workload, OPTA canbe considered a lean and mean regulator.

The “O” in OPTA stands for the Dutchword for “independent.” OPTA is an inde-pendent executive body that enforces thelaws and rules adopted by the legislators.Political responsibility for OPTA resides withthe Minister of Economic Affairs, but OPTAmakes its decisions independently and apartfrom political or business interests. The Min-ister of Economic Affairs can give generaldirections but he cannot intervene in indi-vidual cases. OPTA and the Dutch NationalCompetition Authority (NCA) are separatebodies. They cooperate where required, butact independently.

Tasks and activities

OPTA supervises compliance with legislationand regulations in markets for post and elec-tronic communications. Another importantresponsibility of OPTA is to protect consum-ers. In addition, OPTA has a number of othertasks, which include dispute resolution, regis-tration of providers of electronic communi-cation networks and/or services, and issuanceof numbers.

This paper focuses on OPTA’s activities inthe field of electronic communications. OPTA

closely monitors markets and the develop-ments therein, and intervenes when neces-sary. A power of OPTA that is closely related tocompetition law is its function of analyzingmarkets and imposing certain obligations ona provider that holds an excessively strongmarket position (significant market power orSMP). OPTA takes action if competition issuesoccur in these markets, and can impose obli-gations on market parties to stimulate sustain-able competition or protect the interests of endusers. OPTA always applies the premise of“mild regulation where possible, and strictregulation where necessary.” Thus, OPTAfocuses on deregulation, and emphasizes theprinciples of customization and mildness.

The European context

(1) European administrative stakeholders

As far as competition is concerned, the keyadministrative players in the electroniccommunications market at the Europeanlevel are the European Commission (with theDirectorates General Information Society andCompetition), the European RegulatorsGroup and the Independent RegulatorsGroup, and the NCAs and NRAs.

The European Commission1 leads thedrafting of the regulatory package, which hasto be adopted by the European Parliament andthe Council before entering into force. Further,the European Commission should ensurecompliance of member states with Europeanlaw. Next to member states, the European Com-mission should also ensure implementation ofEuropean law, as well as a common regulatoryapproach. For the electronic communicationssector, the most relevant directorates are theCommission’s Directorates on General Infor-mation Society2 and on Competition.3

The other actors are the NRAs and theNCAs. The NRAs are combining their powersin the European Regulators’ Group (ERG)4 andthe Independent Regulators’ Group (IRG).5

1 For more information on the European Commission, pleasevisit its website, http://europa.eu.int/comm/ index_en.htm.

2 For more information on the European Commission’sDirectorate on General Information Society, please visit itswebsite, http://europa.eu.int/pol/infso/index_en.htm.

3 For more information on the European Commission’sDirectorate on Competition, please visit its website. Available:http://europa.eu.int/comm/competition/index_en.html .

4 For more information on the European Regulators’ Group,please visit its website, www.erg.eu.int/ index_en.htm.

5 For more information on the Independent Regulators’ Group,please visit its website, http://irgis.icp.pt/ site/en/irg.asp.

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(2) Regulatory framework: sector specificregulation

In the European Union, sector-specific regula-tion aimed at the electronic communicationsmarkets are in place. In 2002, the EuropeanRegulatory Framework (ERF) was adopted.This framework comprises a series of direc-tives and associated measures. Its goals are toencourage competition in the electronic com-munications markets, to improve the function-ing of the internal market, and to guaranteebasic user interests that would not be guaran-teed by market forces…6

The ERF provides a set of rules that aim tobe simple, technology- neutral, and sufficientlyflexible to deal with fast-changing markets inthe electronic communications sector. Asregards the interface between competitionauthorities and regulatory agencies, the mostimportant directives are the FrameworkDirective7 and the Access and InterconnectionDirective.8 Given the ERF’s objective of movingtoward truly competitive markets andenhanced cross-border competition, one of themain principles that we should keep in mind isthat when markets become competitive andsuch competitiveness becomes sustainable,

sector-specific regulation that controls themarket power of dominant companies can andshould be rolled back.

Sector-specific regulations wereintroduced because telecommunicationsmarkets were initially organized asmonopolies. The Regulatory Package of 1998,which consists of a number of directives andwhich was the predecessor of the current ERF,was the last piece of a European liberalizationprogram that aimed to foster the emergenceof a single European telecommunicationsmarket. This regulatory package listed arestricted number of markets, and indicatedthat a provider with a market share of 25% hadSMP and would thus have to comply with anumber of remedies that were determinedupfront in the regulatory package.

As markets in the European Union movedtoward a more competitive situation, a moreflexible regulatory regime was required.However, markets were not ready for a fulltransition to competition law. There was still aneed for ex ante obligations in certaincircumstances to ensure the development ofa competitive market. This stipulates the majordifference between sector-specific regulationand competition law. In the latter case, it wouldbe determined ex post whether abuse of adominant position has taken place; but sector-specific regulation aimed to prevent suchbehavior by imposing obligations in advanceon dominant providers. It will come as nosurprise that given the influence of competitionlaw in the ERF, coordination between NRAsand NCAs became essential to ensureconsistent application of similar concepts.

The European Regulatory Framework of2002 integrates sector-specific regulationwith components of competition law. Theexistence of SMP and the consequential

“Good coordination iskey in the interface ofcompetition law withregulatory regimes. ”

Annetje OttowAssociated Memberand Advisor to theCommission of OPTA(Post and TelecommunicationsAuthority), The Netherlands

Figure 1EuropeanAdministrativeStakeholders

EUROPEAN REGULATORSGROUP (ERG)

NATIONAL REGULATORYAUTHORITIES (NRAs)

NATIONAL COMPETITIONAUTORITIES (NCAs)

6 Requiring a minimum level of availability and affordabilityof basic electronic communications services andguaranteeing a set of basic rights for users and consumersof electronic communications services.

7 Directive 2002/21/EC of the European Parliament and of theCouncil of 7 March 2002 on a Common RegulatoryFramework for Electronic Communications Networks andServices (the “Framework Directive”). 2002 O.J. (L 108) 33.Available: http://europa.eu.int/eur-lex/pri/en/oj/dat/2002/l_108/l_10820020424en00330050.pdf.

8 Directive 2002/19/EC of the European Parliament and of theCouncil of 7 March 2002 on Access to and Interconnectionof Electronic Communications Networks and AssociatedFacilities (the “Access Directive”). 2002 O.J. (L 108) 7.Available: http://europa.eu.int/eur-lex/pri/en/oj/dat/2002/l_108/l_10820020424en00070020.pdf.

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applicability of a standard set of remedies areno longer listed upfront in the directives.Likewise, restricted markets are no longerlisted in the directives. NRAs now need toanalyze markets in accordance withcompetition law. This means that NRAs needto define relevant markets. NRAs need toidentify providers with SMP in the definedmarkets. In connection with competition law,the sector-specific term SMP is nowequivalent to the concept of dominance. IfNRAs find that a provider has SMP, they haveto impose on the provider obligations thatwould remedy its potentially abusivebehavior. The obligations imposed by theNRA must be appropriate and must not beoverbroad so as to create effects that gobeyond the objective behind the imposition ofsuch obligations—that is, the stimulation ofcompetition and protection of end-userinterests where necessary. The premise is thatproviders must have as much room andfreedom as possible to align with the marketdynamics and new technological possibilities.

The ERF obliges the European Commis-sion to review the Framework in 2006. TheIRG/ERG, as well as numerous market parties,has provided inputs for the review, inresponse to the Commission’s call for suchinput. Issues that are related to the interfacebetween sector-specific regulation and gen-eral competition law are hot topics for thereview, especially in the light of certain discus-sions calling for the replacement of sector-specific regulation with general competitionregulation when it is shown that market com-petitiveness has become sustainable.

(3) Control mechanisms

The European Union operates on the principleof the rule of law. This means that everythingthat it does is derived from treaties that allmember states voluntarily and democraticallyadopted. The European Union is not a stateintended to replace existing states. Given thesovereignty of member states, in principle,European regulation first needs to beimplemented in national legislation—that is,transposed into national law—before itbecomes effective. This transposition byindividual member states leaves room fornational interpretation of the regulation. Thisprinciple applies also to the ERF for theelectronic communications sector. Thecomplexity of the implementation process is

compounded by the fact that the ERF is not astrict set of rules, but leaves room for nationalinterpretation. This can lead to disharmonyand result in contrary interpretations. TheEuropean Commission has powers to ensurecompliance with the EFF. It may do so with itsstandard powers as the guardian of theEuropean Treaty, as well as with its new andfar-reaching powers under the ERF and its roleas an antitrust authority.

(4) Role of the European Commission

To better understand the regulation of the elec-tronic communications markets, it is impor-tant to note that the European Commission isnot a European communications regulator.Member states were not willing to give fullpowers to the European Commission, andthis left the appreciation of national circum-stances uncertain. The fact that the EuropeanCommission is not a European regulator isimportant to note, considering that, as regardscompetition law, the European Commissionmay intervene as an antitrust authority. It hascompetition law powers with which it cancontrol telecom private and public operatorsas well as member states.

Although it is not a European regulator,the European Commission assumes animportant role because it has far-reachingpowers under the ERF particularly withrespect to SMPs. These powers includesuggesting the soft law to be drafted by theCommission, directing market analysis inrelation to NRAs’ obligation to define andassess SMP, overseeing the nationalregulatory measures by way of introducingnotification, at both national and Europeanlevels, and vetoing draft measures.

The soft law is embodied by theRecommendation on Relevant Products andService Markets9 and the Guidelines onMarket Analysis and SMP Assessment.10

9 Commission of the European Communities. 2003. CommissionRecommendation of 11 February 2003 on Relevant Product andService Markets within the Electronic Communications SectorSusceptible to Ex Ante Regulation in Accordance with Directive2002/21/EC of the European Parliament and of the Council on aCommon Regulatory Framework for Electronic CommunicationNetworks and Services. 2003 O.J. (L 114) 45. Available: http://europa.eu.int/ information_society/topics/telecoms/regulatory/maindocs/documents/recomen.pdf].

10 Commission Guidelines on Market Analysis and the Assessmentof Significant Market Power Under the Community RegulatoryFramework for Electronic Communications Networks andServices. 2002 O.J. (C 165) 03. Available: http://europa.eu.int/eur-lex/pri/en/oj/dat/2002/c_165/c_16520020711en00060031.pdf.

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The Recommendation lists markets thatare defined in accordance with the principlesof competition law. By virtue of its power toissue the Recommendation, the EuropeanCommission can influence the scope of actualregulation and can focus the activities of theNRAs on the markets listed in the Recommen-dation. Ex ante regulation of these markets isjustified by the European Commission’s selec-tion. If NRAs would like to adopt markets thatare not listed or if they would like to deviatefrom the listed markets, NRAs need to passthree criteria developed by the European Com-mission. In practice, this test has appeared tobe a giant hurdle.

The Guidelines set out the principles foruse by NRAs in their analysis of markets andeffective competition under the new regula-tory framework for electronic communica-tions networks and services. These guidelinesare intended to guide NRAs in the exercise oftheir new responsibilities of defining marketsand assessing SMP. By virtue of the Guidelines,the Commission can direct market analysis.

The ERF provides the European Commis-sion powers to oversee national regulatorymeasures by introducing notification at bothnational and European levels, and introducingprocedures that promote transparency. In cer-tain cases, the European Commission has vetopowers that accompany these powers.

Aside from these powers, the EuropeanCommission can ensure compliance with theERF through the exercise of its standardpowers as the guardian of the European Treaty.The European Commission then exerts itspowers to member states. If a member statedoes not correctly implement the EuropeanRegulatory Framework, the EuropeanCommission can open a formal infringementprocedure, which can be compared to whatis known in marketing terms as a “push,”against that member state.

(5) Harmonization through notification

Bearing in mind the powers of the EuropeanCommission to defend the field of the SMPregime, we are able to understand that har-monization plays a key role. In implementingthe ERF, NRAs must contribute to the develop-ment of the internal market by cooperatingwith each other and with the Commission in atransparent manner to ensure the consistentapplication in all member states of the provi-sions of the ERF.

The national consultation procedurerequires NRAs to consult the market aboutregulatory measures they intend to take (e.g.,definition and analysis of relevant markets andthe proposed imposition or removal ofregulation on undertakings providingelectronic communications networks orservices) prior to their adoption.

To ensure that decisions at the nationallevel do not have an adverse effect on thesingle market or other European Union Treatyobjectives, NRAs should also notify theCommission and other NRAs of certain draftdecisions to enable them to influence themarket analysis process and give them theopportunity to comment. It is appropriate forNRAs to consult interested parties on all draftmeasures which have an effect on tradebetween member states. Ultimately, theEuropean Commission may require an NRA towithdraw a draft decision concerning thedefinition of relevant markets or thedesignation or non-designation ofundertakings with SMP, } where such decisionwould create a barrier to the single market orwould be incompatible with Community law—which are the policy objectives that NRAsshould follow.

Harmonization can result in less attentionbeing given to national circumstances.Harmonization of the process is a legitimateobjective but harmonization of the outcomeis not desirable, given the diversity of services,current situations, and the pace ofdevelopment in the European Union. TheEuropean Commission should be aware thatthere is “no single jacket that fits all,” and thatspecific attention should be drawn to nationalcircumstances. This point is explicitlymentioned by NRAs in their response to theEuropean Commission’s call for input on thereview of the ERF.11

(6) Notification process in detail

The process starts with a draft decision ofthe NRA. This draft decision is sent forcomment to both the European Commissionand other NRAs. The notifying NRA shall take

11 European Regulators Group and Independent RegulatorsGroup Response to CALL FOR INPUT On the forthcomingreview of the EU regulatory Framework for electronic com-munications and services, including review of theRecommendation on relevant markets. Available: http://www.erg.eu.int/doc/whatsnew/irgerg_call_for_input_final_pdf.

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account of the comments. It becomes moreinteresting if the European Commissionsignals that a draft measure would create abarrier to the single market or would beincompatible with Community law. In thatcase, a 2-month period commences whenthe European Commission and the NRA areable to communicate and resolve theEuropean Commission’s concerns. Thisperiod is called “Phase II.” During this period,the draft decision is not executed.

OPTA had some interesting experiencewith the Phase II process. The experience in-volved a cable case. In 2005, OPTA defined aretail broadcasting market. As the retail broad-casting market was not listed in the Recom-mendation, OPTA had to apply the three crite-ria test developed by the European Commis-sion, following the Framework Directive andthe recitals of the Recommendation. If this testfailed, no retail broadcasting market shouldbe identified by OPTA. The three criteria testyielded the following findings:

• The presence of high and non-transitoryentry barriers (criterion 1);

• The structure of the market does not tendtoward effective competition within therelevant time horizon (criterion 2); and

• The application of competition law alonewould not adequately address the marketfailure (criterion 3).

OPTA reviewed these criteria and con-cluded in its decision that all three criteriawere fulfilled; therefore, OPTA could definethe retail broadcasting market. Following therequired formal procedures, OPTA notifiedthe European Commission of its draft deci-sion, which it sent the Commission for com-ment. The European Commission appeared

to be not very keen on deviating from its listof markets in the Recommendation. Initially,the European Commission argued that thethree criteria were not fulfilled and thereforeOPTA’s draft decision was incompatible withCommunity law. It appeared that the Euro-pean Commission did not agree with OPTA’sassessment that potential competition wouldemerge within the relevant time frame.

The retail broadcasting market in theNetherlands is unique compared to othermember states. In the Netherlands cable,networks constitute a very importanttransmission infrastructure, given theextremely high cable network coverage(approximately 95%) and the fact that a veryhigh percentage of households (more than90%) are currently subscribers to cablenetworks. In its analysis, OPTA consideredpotential competition from other infrastructureplatforms, in particular, satellites, analogueterrestrial television, digital terrestrial television(hereafter: DVB-T), and Internet Protocol TV(IP-TV). OPTA concluded that barriersrestricting switching to these other platformswere in place. This conclusion was supportedby a number of facts. For example, in respectof satellites, 30–40% of all households cannotinstall a dish due to line of sight restrictions.Moreover, there are additional costs ofconnecting an extra TV set which do notaccrue in the case of a cable television. DVB-Toffers fewer channels than cable and anincrease of channels is unlikely due to capacity(spectrum) constraints. The extra TV set issuealso applies to DBV-T. Switching to analogueterrestrial television will no longer be an optionas the Dutch Parliament decided that analogueterrestrial television will be turned off this year.With respect to IP-TV, OPTA considered thatthere is no IP-TV product that is comparableto cable RTV. Furthermore, the coverage of IP-TV will be limited to 60% of all householdswithin the relevant time frame.

Supported by a report of a number of otherNRAs that independently reviewed OPTA’sanalysis, OPTA resubmitted its finding to theEuropean Commission. The EuropeanCommission no longer had any objections; thethree criteria were deemed to have been met.OPTA was to reconsider the duration of theproposed remedies and would no longerimpose retail tariff obligations. This demandof the European Commission is remarkable,as the European Commission had no vetopower in respect of remedies.

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This Dutch cable case very well shows theinterface between ex ante and ex post regula-tion, as sector-specific communications reg-ulation and competition law appear to beclosely linked. It also indicates that the Rec-ommendation can be a straightjacket thatdoes not leave much room for deviation.

(7) Interface with IRG/ERG

To counterbalance the far-reaching powers ofthe European Commission and to cooperatewith the European Commission, NRAs havecombined their powers in two bodies.

The ERG for electronic communicationsnetworks and services has been set up by theCommission12 to provide a suitable mecha-nism for encouraging cooperation andcoordination between national regulatoryauthorities and the Commission. The mainmission of ERG is to promote the developmentof the internal market for electronic commu-nications networks and services and to seekand achieve consistent application in all mem-ber states, of the provisions set out in theDirectives of the Regulatory Framework. Com-posed of the heads of the relevant nationalauthorities, ERG acts as an interface betweennational authorities and the Commission.

The IRG is an initiative of NRAs. Other thanERG, there is no formal basis for the IRG in theERF. The European Commission is not a mem-ber of IRG. Within the IRG, NRAs can exchangeviews and ideas without intervention of theEuropean Commission. The IRG have set up anumber of working groups with differentscopes, such as market analysis, roaming, andthe review of the ERF.

(8) Dutch administrative stakeholders

The key administrative stakeholders in theDutch context are the Ministry of EconomicAffairs, the NRA OPTA, and the NCA NMa.

Two powers come together. First,national and European laws—with theMinistry of Economic Affairs being the Dutchpolicy maker; second, sector-specific andgeneral competition laws—with OPTA andthe NMa. What happens when these powerscome together? How do OPTA and NMa work

together? How does the Dutch policy makerbalance European law and national interests?

(9) Interface with the Dutch policy maker:Ministry of Economic Affairs

The Dutch policy maker is the Ministry of Eco-nomic Affairs. The Ministry of Economic Affairsdrafts legislation for approval by the Dutch Par-liament. This legislation is based on the ERFas this has been adapted to the Dutch situa-tion. If the Dutch parliament approves newlegislation, OPTA enforces the new legislation.Since OPTA implements the legislation, OPTAalso advises the Ministry of Economic Affairswith regard to policy. OPTA informs the Minis-try of Economic Affairs of its experiences withexisting laws and developments in the elec-tronic communications sector. OPTA meets ona regular basis with representatives of the Min-istry of Economic Affairs. It does this inworking-level meetings, as well as in meetingswith the Minister.

(10) Interface with the National Competi-tion Authority: NMa

At the national level, sector-specific regulationand competition law are linked. Like theEuropean Commission, NMa, the DutchCompetition Authority, can use its competitionlaw powers in the electronic communicationsmarkets and control telecom private operators.On the other hand, OPTA applies principlesoriginating from competition law under thesector-specific electronic communicationsregulation. Coordination between OPTA andNMa is required to ensure consistentapplication of concepts. In the Netherlands,this cooperation is formalized in a cooperationprotocol between OPTA and NMa.

Cooperation between OPTA and NMa inexercising their powers strengthens both au-thorities’ effective and efficient implementa-tion and enforcement of the law. The protocolis intended to help OPTA and NMa coordinatethe exercise of powers when making deci-sions, to prevent forum shopping. It is alsointended to help them apply the same inter-pretations of terms used in the law on com-petition and telecommunications and toestablish consistent policy rules.

Given the interaction between ex postfinding of abuse of a dominant position andex ante market analysis, it is important thatNRAs and NCAs consult when defining

12 Commission Decision 2002/627/EC. 2002. Establishing theEuropean Regulators Group for Electronic CommunicationsNetworks and Services. 29 July O.J. (L 200) 38. Available:http://europa.eu.int/eur lex/pri/en/oj/dat/ 2002/l_200/l_20020020730en00380040.pdf.

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relevant markets and analyzing effectivecompetition. This is recognized in theCooperation Protocol. A consequencearising from this obligation is that OPTA andNMa apply the concepts of SMP anddominance and the concept of effectivecompetition in a consistent manner.

If an application is submitted to NMa foraction against an abuse of a dominant posi-tion in the telecommunications sector, or ifthere are grounds for ex officio action againstabuse of a dominant position in the telecom-munications sector, the NMa shall notifyOPTA accordingly. The same obligation ap-plies to OPTA if it intends to use its powers inthe electronic communications markets.

If an application is submitted to bothNMa and OPTA and concurrence arises ormay arise, the authorities shall consult eachother with regard to the application and shallcoordinate the processing methods. Ifaction by OPTA on the basis of its powerswill have as a result that there will no longerbe abuse of a dominant position, OPTA’sactions will prevail.

If powers concur, in general, OPTA is inthe lead. This means that NMa shall not applycompetition law to conduct that may giverise to abuse of a dominant position in thetelecommunications sector or a part thereof,provided that a number of conditions are met.These conditions relate to the adequacy andeffectiveness of OPTA’s action.

Concluding remarks

This paper gives an insight on thecomplexity of the regulatory framework inEurope. On the one hand, the frameworkpromotes harmonization within the EuropeanUnion as it requires coordination betweenNRAs and the European Commission. On theother hand, the framework tries to movetoward the adoption of a general competitionlaw, from ex ante to ex post, which requirescoordination between NRA, NCA, and theEuropean Commission. Since these goalsinterfere and sometimes conflict with eachother, good coordination is key in the interfaceof competition law with regulatory regimes.

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Closing Session, Day1. 61

“Sound policy,

legal and

regulatory

frameworks

are key to

development.”

Eveline N. FischerDeputy GeneralCounsel, AsianDevelopment Bank

In this last session of the day, I will brieflyreflect on some key points made todayand look ahead at tomorrow’sdiscussions. But first, let me say a fewwords about the Asian Development

Bank (ADB) law and policy reform (LPR)program and how the subject of thisroundtable fits into this program.

I am not saying anything new when I statethat sound policy, legal, and regulatoryframeworks are key to development. ADB isinvolved in a wide range of activities to assistits developing member countries in improvingtheir policy and legal frameworks. This is byno means limited to assistance in preparinglaws; it also covers assistance to ensure thatthe laws are supported by appropriateimplementing regulations, that the partiesresponsible for implementation are familiarwith the rules and ready to implement them,and finally that the persons affected by therules are aware of them and will both complywith the rules and insist on compliance byothers. Whether ADB will assist in all theseareas, or pick just one or two, depends on theneeds of our member countries and supportthat others are providing. And so, in some

ClosingSessionDay 1

Summary of the Day, Eveline N. Fischer, Deputy General Counsel,Asian Development Bank*

instances, we have provided assistance indrafting laws and regulations; at other timesour focus is on training government agenciesor judges, or on developing public awarenessprograms, and sometimes our assistancecovers all these aspects.

ADB’s LPR program covers matters asdiverse as anti-money laundering on the onehand and the right of marginalized people tolegal identity through birth registration on theother hand. And yes, competition law and policyis another area where our member countriesare asking for support. As Mr. Mitchell indicatedthis morning, we are currently supporting thePeople’s Republic of China in developing theiranti-monopoly law and amendments to the lawagainst unfair competition. This work, whichis undertaken in close cooperation withOrganisation for Economic Co-operation and

* In addition to the Summary of the Day presented by EvelineN. Fischer, Ms. Fischer and V.S. Rekha of the AsianDevelopment Bank’s Office of the General Counsel (OGC)introduced, at this session, a Competition Law Toolkit beingdeveloped by OGC. A draft of the Toolkit was presented byProfessor Richard Whish on the second day of the CompetitionLaw and Policy Roundtable. The Competition Law Toolkit isavailable at: www.adb.org/Documents/Others/OGC-Toolkits/Competition-Law/default.asp

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Development (OECD), entails several work-shops to discuss the pros and cons of theproposals through their respective iterations. Infact, a workshop is planned in China at the endof this week where the final drafts will besubjected to what is intended to be the finalround of comments by experts from inside andoutside the Government.

And that brings me to the idea behind thisroundtable and the competition law and policytoolkit that Professor Whish has developed andwill present tomorrow. The purpose of thetoolkit is to provide a practical guide to policymakers into the numerous issues to beconsidered when developing competition lawand policy. I should immediately add here that,given the complexity of the matter, there is noquick fix, and in that sense, the word “toolkit”is perhaps a misnomer. However, the idea isto provide a starting point by briefly explainingthe technical concepts and the advantages anddisadvantages of possible approaches.Numerous links to relevant websites includedin the draft toolkit will enable those who wantto know more to access quickly further sourcesof information.

At this point, let me turn to some pointsmade in today’s presentations. Professor Fels’Competition Policy Strategy Model highlightedsome very important issues that are often over-looked in law and policy reform efforts. He putit to us that misalignments in the three vari-ables—public value, authorizing environment,and operating capability—will result in failureto bring about an effective competition policythat can be sustained in the long run. Andindeed, this model illustrates the challengesin law and policy reform in basically any sub-ject matter. If there is insufficient buy-in froman important lobby with access to the deci-sion makers, chances are that a policy or a lawwill not be vigorously implemented. In this con-nection, Professor Fels also underlined that a

“one size fits all” approach does not work andthat the “authorizing environment” is likely todiffer not only between countries but also ineach country depending upon the stage of acountry’s economic development at a givenpoint in time.

As regards “operating capability,” this isalmost by definition a problem for developingcountries. Professor Fels correctly pointed tothe need for capacity building for regulatoryinstitutions and the judiciary and the role forinternational technical assistance in thisregard. Let me add to this that for a developingcountry at a low stage of development, it is notan easy choice where to apply its scarce humanresources. Put more concretely, should acountry with a very limited arsenal ofeducated judges use these judges to form aseparate court division for competitionmatters, or is it more important at that stage ofdevelopment of a country that its judges honetheir skills in application of general contractlaw or criminal law? This goes to the thirdvariable, that of public value. What is morevaluable at a given time—enforcement ofcompetition rules or providing justice toindividuals who seek resolution of a privatedispute? These are difficult questions, to whichthere is no clear and easy answer. Perhaps oneoption to consider, when dealing with severelack of operating capacity in enforcingcompetition law, is to build such capacity firstat the regional level. At the very least, acapacity-building function should beestablished at the regional level. This willresult in national systems being developedand implemented based on a mutualunderstanding across the region. Mr. Nanbualso stressed the importance of a regionalnetwork to cooperate on competition policy.His remark was made in the context ofdiscussing the APEC region. For the SouthAsia region, SAARC would appear to be agood forum for networking, as wouldAssociation of Southeast Asian Nations(ASEAN) or the Greater Mekong Subregionbe for Southeast Asia.

Mr. Nanbu’s presentation gave a perfect il-lustration of the point that Professor Fels madeon the need for an “authorizing environment”to ensure effective implementation of a com-petition policy. As Mr. Nanbu mentioned, whenthe law was adopted in Japan in 1947, themindset in Japanese society was not ready forthe concept of competition and, therefore, theJapan Fair Trade Commission (JFTC) had to

“Perhaps one option to consider,when dealing with severe lackof operating capacity in enforcingcompetition law, is to build suchcapacity first at the regionallevel.”

Eveline N. FischerDeputy General Counsel,Asian Development Bank

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face an uphill battle. Mr. Nanbu’s presentationalso underlined how different economic cyclesmay influence the Government’s willingnessto promote competition—thus, the experiencein Japan showed that in times of economicdepression, business lobbies were able topush for exemptions from certain prohibitions.

Mr. Bernard Phillips stressed theimportance of cooperation and coordinationbetween sector regulators and competitionauthorities to achieve pro-competitiveregulations. In this regard, he made a numberof practical suggestions for cooperation ofcompetition authorities and regulators. Toname just one, placement of senior officialsfrom a competition agency on the oversightboard for a sector regulator and vice versa oreven exchanges at a lower level will lead toinformal exchanges of knowledge andimprove mutual understanding.

Finally, Ms. Annetje Ottow shared with usthe perspective of a sector regulator in amature competition environment. She tooemphasized the importance of goodcoordination and interface between

competition authorities and regulatory regimesto avoid unnecessary conflict. It appears thatin the Netherlands there is a willingness on theside of both the competition authority and thesector regulator (for the telecommunicationssector in her case) to consult. I think animportant conclusion for today is that formaland informal systems should be consideredto ensure that the implementers of acompetition regime are aware of each other’srole and support each other’s work.

Building upon today ’s discussions,tomorrow’s sessions will begin by focusingon the impact of competition policy on soci-ety, and how society can contribute to further-ing enforcement of competition policy. Thiswill be followed by a technical session on har-monization and convergence of competitionrules. We will then proceed to discuss theCompetition Law Toolkit that ADB, togetherwith Professor Richard Whish, is developing.1

1 A summary of the session where the Toolkit was discussedis found on pages xxii-xxv of this publication.

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Session 3Competition Law and Society

Competition Culture, Advocacy and Civil Society: Korea’s Experiencesand Cases for Spreading Competition Culture, Dong-kyu Lee, DirectorGeneral of Headquarters for Competition Policy, Korea Fair TradeCommissionAddress, T.K. Viswanathan, Law Secretary, Government of India

Competition Culture,Advocacy andCivil Society:Korea’s Experiencesand Cases forSpreadingCompetitionCultureDONG-KYU LEEDirector General of Headquartersfor Competition Policy,Korea Fair Trade Commission

Competition culture refers tomarket participants’ attitudes orways of thinking, as well as themanner in which they put intopractice their understanding

about competition laws and polices and howit operates in, and becomes useful to, theirdaily lives. Such attitudes and ways of thinkingserve as the foundation on which goals ofcompetition policies can be achievedefficiently. In order that the two major goals ofcompetition policies (enhancing companies’

competitiveness and maximizing consumerbenefits) are achieved through marketmechanisms, competition culture should befirmly established in the mind of all marketparticipants first.

Competition advocacy and competitionlaw enforcement are the two most importantactivities needed to establish and strengthencompetition culture. Competition advocacy isof primary importance to developing andtransition countries with fledgling competitioncultures. Aside from enforcing competitionlaws, competition authorities around the worldhave promoted competition by helping marketplayers understand the benefits that can bederived from fair and free competition in themarket.

This presentation introduces the KoreaFair Trade Commission (KFTC), itscompetition advocacy activities, and what ithas achieved in this area. I hope it will giveyou ideas of how to spread competitionculture across the world.

Prerequisites for success inspreading competition culture

The recent diffusion of competition culturearound the world is mostly attributable tomarket participants’ belief that the benefitsderived from competition and compliancewith competition laws far outweigh their costs.This belief is reinforced by efforts to strengthencompetition law enforcement, as well ascompetition advocacy.

“Competition

advocacy and

competition law

enforcement are

the two most

important

activities needed

to establish and

strengthen

competition

culture.”

Dong-kyu Lee,Director General ofHeadquarters forCompetition Policy,Korea Fair TradeCommission

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Competition Law and Society 65

Many national competition authorities(NCAs) have recently strengthened compe-tition law enforcement. As regards cartelcases, the United States (US) has increasedthe ceiling on fines from $10 million to $100million, while Japan increased the surchargerate from a maximum 6% of the relevant turn-over to 10%.

Competition advocacy has been alsopursued in varying forms and intensity in manycountries. What NCAs have in common asregards competition advocacy is theirprovision of opinions to other regulatory bodiesor government agencies regarding theircompetition laws and regulations.

In Korea, the business community hasrecently adopted competition complianceprograms (CP). Some companies have set upcompliance teams that have exclusiveresponsibility to ensure their organizations’compliance with competition laws and ethicalstandards in corporate management. All thesechanges were brought about by thewidespread perception that there is too muchto lose when competition laws are violated,and that compliance with competition laws isessential in promoting the value andcompetitiveness of companies.

As can be gleaned from the foregoingdiscussion, competition culture cannot takeroot by competition authorities’ efforts only. Itrequires companies’ voluntary compliancewith competition laws and their top managers’commitment to compliance, consumers andcivil groups’ active monitoring of the market,and courts and prosecutors’ aggressiveactivities to crack down on competitionrestricting activities. Only when these activitiesare closely linked together and operatedcomplementarily each other, there can besynergy among them.

Legal frameworks and other systemsshould be in place to spread competitionculture. Competition authorities should workto let the public know how and for what pur-poses such frameworks and systems work.Furthermore, it is important to benchmarkother countries’ best practices and experi-ences and then to tailor them to meet eachreceiving country’s own needs and situations.The government’s active role is indispensableto ensure this endeavor’s success.

Korea’s experiences and cases

In the past, competition laws and policies wereconsidered part of Korean economic laws.

Today, they are considered an independentdiscipline. Many universities and graduateschools have opened competition lawclasses. Various forums and seminars oncompetition laws are frequently held thesedays. All these show that interest incompetition laws in Korea has increasedsignificantly.

KFTC’s competition advocacy is largelyresponsible in spreading competition culturein Korean society. Its competition advocacyactivities can be categorized into three types:(1) Improving competition laws andregulations by providing its opinions to orpersuading other government agencies;(2) Creating a consensus among marketparticipants about benefits from competitionthrough education programs or public relationson competition laws and policies; and(3) Spreading competition culture across civilsociety through various means.

(1) Competition advocacy through read-justment of competition laws andregulations

a. Prior statute consultation system (Article63, Monopoly Regulation and Fair TradeAct [MRFTA])

Article 63 of the MRFTA obliges the headof each administrative body that is consideringthe establishment of laws or enforcement ofpolicies that may have anticompetitive effectsto consult the KFTC prior to the establishmentand enforcement of such laws or policies.Once enacted, it is difficult to make ex-postfacto modifications to such laws or policies.

KFTC’s role is to check whether or not theproposal will have the effect of restrictingcompetition or frustrating competition in themarket. It also examines fundamental issues,including the legitimacy of government

“Compliance withcompetition laws is essentialin promoting the value andcompetitiveness ofcompanies.”

Dong-kyu LeeDirector General of Headquartersfor Competition Policy, Korea FairTrade Commission

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intervention, in certain cases. From 1991 to2005, KFTC received 4,578 consultations.KFTC suggested the rejection or revision ofregulations in 835 cases (18.2%). Of these,622 suggestions (74.5%) were accepted.

b. Participation in cabinet meetings and vice-ministers’ meetings

Cabinet meetings and vice-ministers’meetings are where official governmentpositions on various statutes and policies aredecided. After KFTC became an independentadministrative institution in 1994, its chairmanand vice-chairman were given the right toattend Cabinet meetings and vice-ministers’meetings respectively. At these meetings,KFTC was able to assert its opinions moreeffectively and have these opinions reflectedin government-proposed statutes or policies.Thus, even if a government body does notadopt KFTC’s recommendation during theprior consultation stage, KFTC still has theopportunity to reopen the issue during thecabinet and vice-minister meetings.

c. Competition advocacy through regula-tory reform

Since its establishment, regulatoryreform has formed an essential part of KFTC’smission. KFTC was the first governmentagency to emphasize the need for reducingregulations. In 1999, the Omnibus CartelRepeal Act was passed. It abolished 20cartels that 18 laws had previously allowed.The passage of that law changed theperception that the formation andmaintenance of cartels were acceptablebusiness practices. It also introducedcompetition in a genuine sense to the Koreaneconomy.

In 1998, the Regulatory ReformCommittee gained control over allregulatory reforms. KFTC’s chairman servedas ex-officio member of the Committee inorder that KFTC’s perspectives may bereflected in the regulatory reform process.

In 2004, KFTC identified 113 regulationsthat were potentially anticompetitive. Ofthese, 56 regulations were abolished oramended. In 2005, KFTC identified 101regulations that restricted competition, and51 regulations were either abolished oramended.

(2) Competition advocacy through educa-tion and public relations

To promote free competition in the mar-ket, prevent competition law violation, andenhance the public’s awareness of com-petition polices, the KFTC has continuous-ly provided businesses, consumers, andstudents with education programs andpublic relations campaigns on competitionpolicies and the KFTC’s achievements.

In 2005, KFTC conducted 11 educationprograms on competition laws and policies.A total of 1,056 staff from 698 companiesparticipated in them. Participants had theopportunity to enhance their understandingof competition laws and commit themselvesto voluntarily comply with competition laws.Six hundred seventeen students from threehigh schools were invited to educationprograms that taught how a marketeconomy works and what attitudereasonable consumers should have.

Public relations programs can be aneffective vehicle in broadening the public’sawareness of the MRFTA and othercompetition laws, and in helping societyreach a consensus on competition issues.The KFTC has published its major policiesand achievements in newspapers orthrough television and radio spots, as wellas through other media.

Since April 2004, KFTC has beenoperating the Policy Customer RelationshipManagement (PRCM) system. PCRMsubscribers receive via email KFTCnewsletters and information on competitionpolices which are tailored to their respectiveneeds. The system is also used in collectingthe public’s opinions on competition policiesand measuring the level of their satisfactionwith such policies. As of May 2006, the totalnumber of the subscribers to the systemexceeded 100,000. Five thousand individualsapplied for a subscription through KFTC’swebsite. Among its subscribers are majorcorporations, consumer associations, legalexperts, political parties, media companies,other policy makers, stakeholders, and policyenforcement agencies.

(3) Innovative methods of spreading com-petition culture

a. Compliance program : In-house smallfair trade commission

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In January 2001, KFTC benchmarkedadvanced countries’ experience inintroducing a compliance program to theprivate sector. The CP’s goal is to promotecompanies’ voluntary compliance withcompetition laws. KFTC-crafted CPs involvethe declaration of the commitment by acompany’s executives; appointment ofcompliance officer; formulation anddissemination of a compliance manual;operation of education programs;establishment of a monitoring system;providing sanctions to be meted toindividuals who violate competition-relatedlaws; and the establishment of documentmanagement system.

CP was introduced because conventionalways of law enforcement meet with limitedsuccess if the private sector does notvoluntarily comply with competition laws andregulations. Investigations require a hugeamount of administrative resources. On theother hand, companies have to pay enormouscosts for being involved in investigations.Officers of these companies risk punishmentfor violations. Offending companies will belevied surcharges and will need to incur legalcosts. There are also intangible consequencessuch as a tarnished corporate image. Onlywhen CP successfully takes root can anenvironment where companies voluntarilyabide by competition laws be created. Socialcosts generated from law enforcement canthen be minimized.

Companies that adopt CP have their ownin-house team that monitors and regulatestheir activities to make sure that they complywith competition laws. At first, only companiesthat wanted to avoid management risksadopted the program. However, CP is nowconsidered as a vital factor in improvingethical management. KFTC has also workedto support such efforts and to encouragecompanies to place the program at the centerof their management activities. To this end, theKFTC has provided incentives, such asmitigation of or exemption from punishmentto companies that have adopted CP.

KFTC has tried to make CP moreeffective. By the end of 2005, there were 257companies with CP, but it was difficult toreasonably assess whether or not CP hadattained its objective. CP Assessment Modelswere developed last year. A CP GradeAssessment System will be implementedwithin this year on a pilot basis. This is to

prevent companies from abusing theprogram by enjoying its incentives withoutfulfilling their CP responsibilities. A CPoperation assessment team consisting ofexperts in competition policies, laws,accounting and business management,among other things, is required. The teamwill assess and classify CP operatingcompanies. Different incentives will beprovided, with better-performingcompanies enjoying more incentives.

b. Business review system and mock courtcontest

In December 2004, KFTC adopted aBusiness Review System. Before one evenconducts business activities, he or she mayrequest the KFTC to review the intendedactivities to check whether they would violatecompetition laws. The KFTC delivers itsopinion within 30 days. Competitionauthorities in the US, Canada, France,Australia, Japan and other advancedcountries have been engaged in similaractivities. If a business activity is judged tobe legitimate, the activity will no longer beexamined to determine whether it hadviolated competition laws or not. Thiseliminates uncertainty in business activitiesand also prevents distraction to managementattention. Small and medium-sizedbusinesses that can’t afford to spend for legalconsultations find the BRS particularly useful.Use of BRS is likely to decrease violations thatare committed because of ignorance ofcompetition laws. As companies utilizing thissystem naturally come to have more interestin competition laws and strengthen theirdetermination to keep these laws, faircompetition and transaction practices areestablished by voluntary participation ofbusinesses themselves. As of the end of 2005,38 applications were made and of these, 35have been reviewed.

Since May 2002, university students havebeen invited to participate in a “Mock CourtContest for University Students.” Every yearheated debates are waged on hypotheticalcases of competition law violations. Thecontest is designed to enhance students’understanding of competition laws andpolicies, encourages their interest in thesubject, and helps them realize thatcompetition laws and policies are actuallypart of daily life. Last year, 300 students from

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10 teams took part in the competition andtackled issues such as abuse of marketdominance, cartels, and anticompetitivemergers.

c. Measures under consideration foradoption

KFTC is considering the passage of a lawthat would allow consumers or businessowners who had suffered damages fromcompetition law violations to file a claim fordamages. This right of private enforcementwould constitute an exception to current civillaw rules. KFTC is also currently considering arevision to the MRFTA, the Korean antitrust law,which would grant the court the power to issuean injunction against violators of the MRFTA.In a case involving a Korean internet serviceprovider, Daum Communication, which hadasked a court to ban Microsoft from tie-in salesof Windows XP and Instant Messenger, thecourt ruled that, even as it recognized theKorean company’s entitlement to injunctiverelief against the MRFTA violation complainedof, and even as many other jurisdictionsrecognized such right, it could not grantinjunctive relief, as the right is not recognizedin Korea, and there was no legal provisionauthorizing the grant of such right.

Some view the introduction of private en-forcement negatively, and argue that thiswould decrease the role of the competitionauthority in competition-related matters. ButI personally believe that adopting andstrengthening private enforcement is neces-sary. We need a paradigm shift in competi-tion law enforcement. The competitionauthority should move away from its exclu-sive jurisdiction over competition cases andbegin to work with the judiciary. Increasingprivate actions will definitely improve aware-ness about competition culture and compe-tition laws among market participantsincluding consumers. Moreover, with privateenforcement, competition authorities will beable to focus their law enforcement capacityon major cases that have significant impacton consumers and markets.

In addition to the foregoing, KFTC isconsidering a revision to the MRFTA, whichwould set up a public entity called the “KoreaFair Trade Promotion Agency (KFTPA).” Theentity would promote competition culture andimplement competition laws and regulationsmore effectively The amendment will be

submitted to the National Assembly in June2006. The KFTPA will be carrying out tasks suchas: education on the MRFTA and other relevantlaws and regulations; publishing materials onthe law and relevant regulations; and wagingpublic campaigns to promote competitionculture, CP, and business practices that fostercompetition in the market.

Lastly, KFTC is examining the draft revi-sion of the Consumer Protection Act, whichis currently being reviewed by the NationalAssembly. Possible amendments include pro-visions that would transfer the authority to sup-port the Consumer Protection Board andconsumer groups to KFTC. Once the bill ispassed and goes into effect, KFTC’s competi-tion policies will be more closely linked to con-sumer policies. This will help establishcompetition culture more efficiently.

Conclusion

Establishing and spreading competition cultureand competition is essential, but it is far frombeing an easy task. Some governmentagencies that monitor and regulate companiesor industries find competition policiesannoying and they sometimes oppose NCA’scompetition advocacy activities.

Competition authorities need tocontinuously remind decision makers in thegovernment agencies and business thatanticompetitive laws or practices will havemore costs than benefits. Competition protectsconsumers and enhances corporate value,companies’ competitiveness and ultimatelythe nation’s competitiveness.

In my experience, competition authoritiesare lonely organizations. They have had toand will continue to perform their missionin spite of criticisms from regulatedcompanies or other government agenciesthat want to modify or abolish competitionlaws and regulations. However, competitionauthorities are not alone in their mission.Civil society’s activities and their support forcompetition authorities have contributedgreatly to establishing competition culture.Fortunately, the public’s awareness for theneed for competition culture is higher thanever and is expanding to reach every cornerof the society.

This April, the US Fair Trade Commissionchairperson, Ms. Deborah Platt Majoras,delivered a speech at the KFTC. One of thelines in her speech made an impression on

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me. She said: “Living with competition ishard. Living without competition would beharder.” This line reminds us of theimportance of competition. As competitionrequires changes and innovation, manycompanies find it vexing and make attemptsto avoid it. Even government agencies’regulations can potentially harm competition.However, there is no doubt about the fact that,without competition, there will be nodevelopment for companies, no increase inconsumer welfare, and no economic growth.

Competition is wearisome, but inevitable.Only when market participants thoroughlyunderstand the benefits from competitionand a social consensus is formed on the needfor it, will competition culture be able to takeroot firmly throughout the society.

AddressT.K. VISWANATHANLaw Secretary, Government of India

I would like to begin by sharing some ofmy insights into the drafting of India’sCompetition Act 2002. I was assigned theresponsibility of drafting the CompetitionBill when I was at the Law Commission

as Member Secretary. The draft bill underwentmany changes as we were attempting totranslate into law-specific competitionpolicies. After the bill had been drafted, it wasposted on the Ministry of Company Affairs’website, and comments from the public weresolicited. In fact, the Competition Act is one ofthe few laws that had been adopted followingan extensive public consultation process.

Relevance of competition law

I believe that competition law is more relevanttoday than it was at any other time in the historyof mankind. As forces of liberalization set in,the state, as an institution of governance,started shedding its welfare role which it hadassumed during the 19th and 20th centuries, thusexposing the citizens to the challenges whichthe state hitherto addressed. It is in thiscontext that competition law acquiresimportance.

I am a law teacher and often reflect on,and ask my students to think about, the nature,and role of law. Kathleen M. Sullivan, Dean ofthe Stanford Law School, said something

about how the concept of law and legalscholarship has changed over the years:

In the beginning, there was only law, thencame law and society, then law and history,then law and economics, and so on. Thesedevelopments have transformed the vocationof the legal scholar from that of a priest to thatof a theologian.1

This statement emphasizes that the lawtoday cannot be confined to Hans Kelsen’s“pure law.”2 It is difficult to divorce the lawfrom other fields such as sociology and eco-nomics. In fact, the interface between law andeconomics is one of the most fascinating fieldsof legal study today. Building upon Marxisttheory, the Austrian jurist Karl Renner main-tained in his book, Institutions of Private Lawand their Social Function,3 that to expound ona legal concept, one has to penetrate its eco-nomic base. He believed that the socialfunction of legal concepts such as property andcontract transform despite the stability of theseconcepts in statute books.4 Despite the useful-ness of employing economic analysis topenetrate legal concepts, traditional legal con-cepts remained in the statute books, and wereinterpreted by lawyers and jurists alike in amanner free from any analysis (economic orotherwise) other than legal. Consequently, lawhas been perennially criticized as failing tokeep up with social changes. This notwith-standing, the economic analysis of legalconcepts has assumed greater importance.

Globalization, knowledge economy,and competition law

Traditionally, the state made and enforced thelaw, and as such, was the dominant player in

1 Sullivan, K. 2002. Foreword: Interdisciplinarity. 100 MICH. L. REV.1217.

2 In his Pure Theory of Law (1934), Kelsen theorized that allelements extraneous to law had to be split off, to leave only theremnant of material that is essentially legal.

3 Renner, K. 1904. The Institutions of Private Law and their SocialFunctions.

4 An example of such a transformation is in one of the firstinterdisciplinary study employing law and economics frameworkof analysis. The study, which was conducted by Adolf Berle andGardiner Means in 1932, found that one peculiar feature resultingfrom the emergence of stock markets and shareholding was thedivorce of ownership from control. While ownership of acorporation would be spread among a large number ofshareholders, control over the corporation itself was left tomanagers who owned little equity themselves. This caused afundamental change in the concept of legal ownership itself, aspersons with less voting rights could nevertheless control acompany’s major resources. See Berle, A, and G. Means. 1932.The Modern Corporation and Private Property.

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our lives. Today, the state is withdrawing fromthe expanded role it had assumed. In thisglobalizing world, the market is emerging asthe dominant player. Globalization hasincreased the size of the market, and this, inturn, has led to increased competition. Inaddition to market expansion, theglobalization of competition has been aidedby the Internet—which broke down bordersand the distance between buyers andsellers—and the telecommunicationsrevolution, which allows consumers to explorenew markets for better quality productsquickly and at little cost. A globalized economyis also a knowledge economy, and relationsin such an economy will be regulated bycontract rather than by public law.

In The World is Flat,5 Thomas Friedmanuses the metaphor of a “flat world” to describethe emergence of a global playing field wherebillions of players have entered and startedcompeting with each other. According tohim, the 10 “flatteners”6 gave rise to a tripleconvergence7 that has ultimately flattened theworld. In this world, business processes startedchanging as participants increased. Thegrowing insignificance of governments andphysical borders in the global playing field willrequire competition law and competitionauthorities to play a more predominant role.

Competition becomes a global phenom-enon in the global playing field. Capital flowsto that part of the globe where investmentswill receive the best returns. When competi-tion becomes global, laws that regulate com-petition also need to converge. Tounderstand the basics of competition law ina global economy, we need to have a goodidea about the actors in the market, and howthe market operates and affects our lives.Lawyers cannot afford to ignore global com-petition law, an emerging discipline that re-quires knowledge of microeconomics (pricetheory), industrial organization (specifically,

how to deal with firms’ behavior in the mar-ket), and principles of contract law. We needto move away from conceiving of competi-tion law—or any law for that matter—as in-dependent from relevant nonlegal fields.

The important role that competition lawswill play in a global economy is the same asthat identified by the United States SupremeCourt in 1972, when it ruled that “Antitrust lawsare the Magna Carta of free enterprise. Theyare so important to the preservation ofeconomic freedom as our free enterprisesystem, as the bill of rights is to the protectionof our fundamental and personal freedoms.”8

Salient features of competition law

Competition laws prohibit the deliberateexploitation of a firm’s dominant marketposition. They generally prohibit anyagreement, arrangement, or understandingbetween enterprises that has the effect ofsubstantially lessening or limiting access tothe market. This prohibition applies not onlyto written agreements but also to oral andinformal agreements. Certain inherentlyanticompetitive agreements are deemed “perse” offenses that are always illegal, regardlessof the parties’ intent or their actual effect oncompetition. Examples of per se offensesinclude price fixing, fixing of output by a cartel,collusive tendering, and market sharing. On theother hand, competition law sometimesprovides exceptions to certain prohibitedpractices because such exceptions mayenhance economic efficiency. Competitionauthorities may also provide exemptionsafter they have weighed the anticipated gainin efficiency vis-à-vis adverse effects oncompetition. Exemptions can be provided ona case-to-case basis or assume the form of ablock exemption.

5 Friedman, T. 2004. The World is Flat. New York: Farrar, Straus andGiroux.

6 According to Friedman, the 10 flatteners are: a. The Fall of theBerlin Wall; b. Emergence of the internet as a new medium ofcommunication; c. World-wide, real-time, flexible collabora-tion that allows more horizontal ways to provide value; d. Opensourcing; e. Outsourcing; f. Offshoring; g. Supply-chain man-agement; h. Insourcing; i. Informing (through the proliferationof information sources generally accessible to the public suchas Google and Wikipedia); and k. Steroids digital convergence(i.e., the use of devices such as the I-pod and Blackberry)

7 The triple convergence that has accelerated change are:Convergence 1 – World-wide, real-time, flexible collaborationthat allows more horizontal ways to provide value; Convergence2 – Companies learning how to use the new technologies tocreate new types of organizations, services and structures; andConvergence 3 – the entry of several billion new people intoglobal business competition .

8 See, e.g., United States v. Topco Associates, Inc., 405 US 596, 610(1972).

“Competition law must fill upthe void created by thedecreased predominance ofstate agencies whose actionsare subject to constitutionallimitations.”

T.K. ViswanathanLaw Secretary,Government of India

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9 Holmes, O. 1897. The Path of the Law. 10 Harv. L. Rev. 457.10 Friedman, T. 2004. The World is Flat. New York: Farrar, Straus

and Giroux. 114.

Unlawful monopolization is animportant area that competition lawaddresses. Unlawful monopolization ischaracterized by the following elements: (a)possession of market power in the relevantmarket; and (b) willful acquisition ormaintenance of that power, as distinguishedfrom growth or development, as aconsequence of a superior product,business acumen, or historic accident. Howdoes one go about measuring market powerand determining the excessive use or abuseof market power? Market power has beendefined as the power to control prices orexclude competition. It has been said that inmeasuring market power, market share isthe most important factor. As regards thewillful acquisition or maintenance of marketpower, courts have required proof ofanticompetitive or predatory conduct—efforts to exclude rivals on some basis otherthan efficiency. Some examples of theforegoing include below-cost pricing, filingbaseless litigation against competitors, anddenial of access to an essential facility.

Competition law – theadministrative law of the marketeconomy

Over a hundred years ago, Justice Holmes9

said that “for the rational study of the law,the black letter man may be the man of thepresent, but the man of the future is the manof statistics and the master of economics.”The development of competition laws in aglobalized economy will enable us to testwhether Justice Holmes was right.

As trade liberalization progresses and thestate gradually withdraws from the expandedrole it had assumed in the past, legal scholarshipmust shift away from its obsession with theconstitutional doctrines of limitations of stateaction and learn to apply legal limitations onmarket forces, where such limitations arewarranted. Contract law, which was strictlyprivate law until the end of the 19th century, hasceased to be purely private and betweenindividuals and may be said to have assumed“constitutional” dimensions. Competition lawmust fill up the void created by the decreasedpredominance of state agencies whose actionsare subject to constitutional limitations. Just aslawyers in India were quick to grapple with theprinciples of constitutional law when theConstitution of India was adopted, lawyerswho evince interest in, and familiarizethemselves with, the emerging field ofcompetition law will be rewarded abundantly.

The lion and the gazelle

I conclude with an anecdote cited byFriedman, which symbolizes what competitionmeans to human society in the modern world:

Every morning in Africa, a gazelle wakes up. Itknows it must run faster than the fastest lion or itwill be killed. Every morning, a lion wakes up. Itmust outrun the slowest gazelle or it will starveto death. It does not matter whether you are agazelle or a lion, when the sun comes up, youbetter start running.10

“We need to

move away

from conceiving

of competition

law—or any law

for that

matter—as

independent

from relevant

nonlegal fields.”

T.K. Viswanathan,Law Secretary,Government of India

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Session 4Harmonization andConvergence of CompetitionLaws Across the Region

Bilateral/ Multilateral Agreements and Competition Law, PhilippeBrusick, Head, Competition & Consumer Policies Branch, Division onInternational Trade, UNCTAD

Convergence andHarmonization ofCompetition LawsAcross the Region:Bilateral/MultilateralAgreements andCompetition LawPHILIPPE BRUSICKHead, Competition and Consumer Policies Branch,Division on International Trade, UNCTAD

I s there harmonization andconvergence of competition lawsacross the region? What forces areresponsible for convergence anddivergence? What role do bilateral,

regional, and multilateral internationalagreements play in building convergence incompetition? These are the key questions thatwill be explored in this presentation.

Factors promoting convergence ofcompetition laws

Around the world, countries have begun tofeel the need to adopt competition laws andharmonize with the competition laws ofother countries because of fourphenomena: (1) the transition of centrallyplanned economies or economies that hadadopted national industrial policies, towardmarket-oriented economies, (2)deregulation and privatization, (3) tradeliberalization and the proliferation of regionaltrade agreements (RTAs), and (4) foreigndirect investment (FDI) liberalization.Country-specific concerns also push countriesto adopt competition laws.

Most countries in the region, as well as inthe world, have undertaken the transition fromcentrally planned economies, or from econo-mies that have employed national industrialpolicies, to market-oriented economies. Evenso-called market economies, such as theUnited States (US) and Europe, undertook fur-ther market-oriented reforms. Market orientedreforms involve price liberalization, deregula-tion, often privatization, and trade and FDIliberalization. Centrally planned economies,which were based on major monopoliesneeded to introduce anti-monopoly—orcompetition—rules to avoid monopoliesfrom increasing prices ad infinitum after price

“Competition laws

are crucial to

ensuring the

successful

creation of a free

trade area.”

Philippe Brusick,Head, Competitionand Consumer PoliciesBranch, Division onInternational Trade,UNCTAD

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Harmonization and Convergence of Competition Laws Across the Region 73

liberalization. At the same time, it becamenecessary to open markets to competitionto get rid of existing monopolies. For so-callednatural monopolies, where utilities or othernetwork industries cannot operate other-wise, the monopoly had to be controlled bya sectoral regulator, who would ensure thatthe monopoly did not abuse its dominantpower to the detriment of users, individualconsumers, and the economy as a whole. Inmarket economies, deregulation took placeto open previously regulated economies andmonopolies to competitive forces.

Deregulation takes place because acountr y would like to open a formerlyregulated sector to competition, so thatconsumers may benefit from lower pricesand better services. This was the US’sobjective, for example, when it deregulatedits air transport industry in the 1980s. Today,the rest of the world seeks to obtain thebenefits that the US derived fromderegulating key industries.

Competition policy likewise plays a keyrole whenever privatization takes place, as itprovides a framework that will prevent the saleof a state-owned enterprise (SOE) (whichoccupies a monopoly position) to an entity thatwould only substitute the public monopoly witha private one. In theory, public monopolies wereestablished to respond to a social welfareobjective. But when an SOE is sold to a privateentity, the private entity cannot be expected tocontinue responding to the social objective thathad previously concerned the state. Privatefirms are motivated by the expectation ofprofits. The state needs to ensure that theprivate firm will not use the dominant positionof its state-owned predecessor to deny otherfirms the chance to compete with them. Thiswould result in a private monopoly, the effectsof which would be detrimental to publicwelfare. When privatization of SOEs takesplace without the advice of a competitionauthority, the government office in charge ofthe privatization may be tempted to obtain thehighest price for selling the SOE in exchangefor conditions that would allow the buyer toestablish and maintain a private monopoly formany years.

As regards trade liberalization, the WorldTrade Organization (WTO) is the biggest forceat the multilateral level that is working againstall sorts of trade barriers—both tariffs andnontariff barriers. Regional TradeAgreements (RTAs) likewise seek to liberalize

trade within particular regions. TheEuropean Community’s creation of a freetrade area involved the most well known ofthese agreements. Subsequently, RTAs inNorth America were entered to create theNorth American Free Trade Area and the AsianFree Trade Area.Today, there is a proliferationof RTAs. The creation of free trade areas isusually the first step toward deeper regionalintegration—for example, the adoption ofcommon tariffs. Creating a free trade areaentails trade liberalization among membercountries through the elimination of tariff orother barriers. Competition laws are actuallycrucial to ensuring the successful creationof a free trade area. If competition issues arenot addressed, enterprises within themember countries will be able to continuedistorting trade by creating market allocationcartels. The effect is that such enterprises caneliminate competition between the membercountries just when the latter are trying tocreate a free trade market. Governments aretaking competition issues seriously becausethey recognize that, particularly in the contextof trade liberalization and regional tradeagreements, it is in their interest to do so. RTAsalso make the consideration of competitionissues a condition.

Competition is also important in FDIliberalization. A foreign investor who will becompeting against local firms will ask aboutcompetition conditions. Are there local firmsthat are in a cartel and can effectively blockthe foreign investor from competing? Foreigninvestors often check whether a country hasa competition law. But a competition law canbenefit local enterprises as well. If a foreigninvestor is very powerful and few smaller localenterprises can compete with it, the foreigninvestor might wish to take over its localcompetitors to exclude them from the

“The text of competitionlaws across all countries isbroadly similar… It is inthe application of the lawswhere most of thedivergence, instead ofconvergence, occurs.”

Philippe BrusickHead, Competition and ConsumerPolicies Branch, Division onInternational Trade, UNCTAD

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market and create a monopoly. Acompetition law and a competition authoritycan prevent this from happening. Both willalso protect the domestic market fromforeign investors rigging the market in asecret international cartel. Such a cartel canpenetrate the local market and adverselyaffect the country’s economy.

Countries have adopted competitionlaws in response to issues specific to them.Korea, Indonesia, India, and Pakistan havebeen concerned with avoiding an excessiveconcentration of market power in the handsof a few entities, and this has been identifiedas a key objective in their respectivecompetition laws. The People’s Republic ofChina (PRC)’s 1993 Anti-monopoly Lawappears to be a mixture of intellectualproperty rights regulation and competitionregulation, probably because it wasconcerned about protecting itself againstunfair competition in the area of intellectualproperty. There is reason to believe thatcountries such as Costa Rica and Singaporeenacted their respective competition lawsbecause of the desire to enter into RTAs withcountries that required the enactment of acompetition law. Consumer protectionmotivates many countries to adoptcompetition laws but sometimes, as in SriLanka, may lead to the repeal of old lawsthat cover monopolies and mergers and theenactment of legislation focusing more onconsumer protection than competition.Although there is nothing wrong withfocusing on consumer protection, this maybe detrimental to consumers in the finalanalysis if there are no regulations tocontrol monopolies, prohibit companiesfrom abusing their dominant position orfrom enter into mergers that would haveanticompetitive effects,.

Convergence in the text of the law;divergence in the law’s application

The text of competition laws across all coun-tries is broadly similar. The laws generallyprohibit cartels and collusive tendering(which is called bid rigging), as well as theabuse of a dominant position. In many coun-tries, market dominance by itself is notprohibited. It is the abuse of such dominancethat is prohibited. It is widely accepted thatcompetition laws need to cover merger con-trol and establish a competition authority.However, some developing countries have

not adopted provisions regarding mergercontrol.

It is in the application of the laws wheremost of the divergence, instead of conver-gence, occurs. Countries at different levelsof development and with varied social needsrequire different ways of enforcing competi-tion policy. Another key area of difference incompetition laws is that of scope. For ex-ample, even as United Nations Conferenceon Trade and Development (UNCTAD)’smodel law prescribes otherwise, some com-petition laws exclude SOEs from theirapplication. Other laws exempt regulatedsectors from the law’s application. The Eu-ropean Union (EU) exempts the agriculturesector—and this is often the focus of muchdiscussion. Certain divergence in practicealso occurs in the manner in which prohibi-tions under the law are enforced. Forexample, even as hard-core cartels are con-sidered per se prohibitions in most countries,some legislations accept that cartels may beuseful and provide a possibility of exemptinga cartel from the application of the law pro-vided it meets certain conditions, such asproviding a substantial part of these benefitsto consumers. Countries also differ in themanner in which they sequence reforms thatintroduce competition law and policy. Somefavor an immediate transition, arguing thatthe enforcing authority must show that itmeans business; others, a more gradual ap-proach, which begins with prohibitionsagainst cartels, then later address abuse ofdominant position, anticompetitive mergers,and other anticompetitive practices. In somecountries, the emphasis is first on teachingand capacity building before the introduc-tion of fines and penalties to be imposed onviolators.

There is some variance regarding howcompetition laws are enforced. In manycountries, violations of competition laws areenforced by resort to the competitionauthority, whose decision may be appealedto the courts. In other jurisdictions, such asthe United States, the Fair Trade Commissionor Department of Justice brings violationsdirectly to the courts. While many countrieshave accepted that a competition authorityis necessary for the effective enforcement ofcompetition law, there are differences in theextent to which competition authorities areindependent from the government, and towhom the competition authority isanswerable. In some jurisdictions, the

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Harmonization and Convergence of Competition Laws Across the Region 75

competition authority is directly under thesupervision of the Ministry of Trade, and theminister may overrule the recommendationof a competition authority, even as his or herdecision may be appealed to the courts.

UNCTAD and capacity building incompetition law

UNCTAD provides capacity building andtechnical assistance relating to competitionissues. We collaborate with countries, as wellas organizations such as Organisation forEconomic Co-operation and Development(OECD), the World Bank, and theInternational Competition Network (ICN).UNCTAD consistently brings in competitionexperts both from developed and developingcountries to provide technical assistance.UNCTAD has also developed the UNCTADModel Law on Competition.

At present, UNCTAD is conductingcapacity-building workshops in many Asiancountries, including Viet Nam, Cambodia,Laos, and Bhutan. It is preparing joint meetingswith the Korea Fair Trade Commission, and isgearing up for a seminar that will take place inthe next few months. It is also preparing for ajoint KPPU/UNCTAD seminar for trainingjudges in competition law. A regionalworkshop on competition law and policy tobe held in Malaysia is also being planned.

Every year, UNCTAD holds the meeting ofits Intergovernmental Group of Experts onCompetition Law and Policy. Some of thesubjects to be discussed at this year’s meetinginclude control of hard-core cartels, disputesettlement in regional trade agreements, andtrade subsidies. Tunisia has volunteered tosubject its competition policies to peer review.The UEMOA – West African Economic andMonetary Union has likewise requested for avoluntary peer review of how its regionalsystem functions. The review will study onemember country which does not have acompetition law and another that does.

International cooperation incompetition law enforcement

International cooperation in enforcing compe-tition laws is essential. Globalization hascaused many anticompetitive practices in onejurisdiction to have effects in other jurisdic-tions. Countries have attempted to cooperatethrough direct cooperation agreements

between respective competition authorities(so-called “pure competition agreements”)and by having provisions on competition in-cluded in free trade agreements. Coopera-tion agreements usually comprise notifica-tion procedure for enforcement; technicalcooperation arrangements; arrangementsfor periodic meetings and consultation pro-cedures. Dispute settlement or conciliationprocedures may also be included. Competi-tion provisions in RTAs usually contain a com-mitment for the parties to the agreement toadopt and enforce competition legislation atthe national level. Sometimes they providefor technical assistance in competition. Theyalso require exchange of information on com-petition issues, and can be very useful in caseenforcement. Nevertheless, the extent of con-fidential information sharing can be limitedby confidentiality rules. FTAs that incorporateprovisions on competition have been the sub-ject of UNCTAD’s research. A book on the topicwas published last year by UNCTAD under thetitle: Competition Provisions in RTAs: How toAssure Development Gains.1

Some countries have entered into bilat-eral cooperation agreements regarding com-petition law enforcement. Usually, theseagreements are between similar-sized trad-ing partners such as the US and the EU, orare between close neighbors such as Aus-tralia and New Zealand. Although rare, bilat-eral cooperation agreements are beingentered between countries that do not sharecommon characteristics. For example,Canada and Costa Rica have entered intosuch an agreement. However, such agree-ments may be difficult to implement, be-cause the parties’ interests are not balanced.Bilateral cooperation agreements might notwork when one country has less interest inimplementing the agreement than the other.Moreover, a country whose competition au-thority has limited resources will find it diffi-cult to respond to requests for informationor assistance when they are already hard-pressed to perform their regular duties.

RTAs usually contain a provision that apartner country should adopt a domesticcompetition law that should be implementedin a manner that is compatible to the otherparty’s legislation. Such a provision can befound in the agreement between the EU and

1 UNCTAD/DITC/CLP/2005/1.

“Around the

world, countries

have begun to

feel the need to

adopt competi-

tion laws and

harmonize with

the competition

laws of other

countries.”

Philippe Brusick,Head, Competitionand ConsumerPolicies Branch,Division onInternational Trade,UNCTAD

07-0103Law&Policy.pmd 17/05/2007, 1:20 PM75


Mediterranean countries such as Egypt,Tunisia, Israel, and Turkey, as well as betweenthe EU and Eastern European countries. Theadoption of this provision was largelyresponsible for the diffusion of EUcompetition principles to other parts of theworld.

Apart from entering into agreements thatrequest one’s co-parties to adopt competitionrules that are compatible to one’s own, a RTAmay decide the adoption of common regionalrules on competition. Aside from the EU, theCommon Market for Eastern and SouthernAfrica (COMESA) in Africa has adoptedregional competition rules. I believe theAssociation of Southeast Asian Nations(ASEAN) is looking at the issue and is preparingsuch rules. Common regional rules thatcurrently exist prohibit cross-border cartels, orthose that affect more than one membercountry. A national competition authorityusually deals with national cartels—thosethat affect only one member. Where no suchauthority exists, the supranational regionalauthority may have some power to deal with

national cartels. As regards cases of abuse ofdominance and anticompetitive mergers theeffect of which are regional in scope, theregional competition authority usually has thepower to deal with such cases. Following theprinciple of subsidiarity, decisions taken at theregional level supersede decisions of nationalcompetition authorities.

Harmonization and convergence of com-petition laws and policies are being supportedby international organizations that haveadopted a number of nonbinding recommen-dations for the consideration of countries.OECD’s Hard Core Cartel Recommendationsis one example. Another is UNCTAD’s Set ofMultilaterally Agreed Equitable Principles andRules on Competition (adopted in 1980).

Harmonization of competition rules wasalso discussed at the WTO. The WTO WorkingGroup on Interaction between Trade andCompetition Policy was very active a fewyears ago, but since the Doha negotiationswere suspended, it is uncertain whethercompetition will be taken up at further WTOrounds.

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ClosingSessionDay 2

The Road Ahead, Arthur M. Mitchell, General Counsel,Asian Development BankValedictory Remarks, Anwarul Hoda, Member, Planning Commission,Government of IndiaVote of Thanks, V.S. Rekha, Senior Counsel, Asian Development Bank

The Road AheadARTHUR M. MITCHELLGeneral Counsel, Asian Development Bank

Aformer World Bank executive whorecently moved to a job with acommercial bank was asked howdifferent his work in the private

sector was from his work at the World Bank.He replied, “In the private sector, ourobjectives are very simple, but our instrumentsare very complex. In the public sector—wherethe World Bank operates—our instrumentswere very simple, but our objectives, verycomplex.”

I thought that he might have beenspeaking about the Asian Development Bank(ADB). ADB’s overarching objective is povertyreduction in the region. But poverty reductionis no simple business. It needs to take themany concerns of its developing membercountries into account when pursuing thisobjective. Consequently, ADB has reached outto the community, both regionally andworldwide, to develop ways and instruments

that will better help the region fight poverty.Competition law and policy reform is one ofthe areas that has been identified asimportant to sustainable economicdevelopment and poverty reduction bymany Asian countries.

Some people would be surprised thatcompetition laws and policies have somethingto do with poverty reduction. But during thepast 2 days, the link between competitionpolicies and poverty reduction was continuallydiscussed. Some of the most interestingquestions posed during the roundtable werewhether basic principles in competition lawwere universally applicable to all countries, orare there other models of adopting andenforcing competition laws and policies thatwould be more suitable to developingcountries? Regardless of the jurisdiction wherethey exist, competition-related problemsappear to be very similar. However, werecognize that approaching these problemsmay require different approaches that addressvariances in the local circumstancessurrounding these issues.

I myself found the roundtable particularlyenlightening. Thirty-five years ago, when I was

“Regardless of

the jurisdiction

where they exist,

competition-

related problems

appear to be

very similar. “

Arthur M. Mitchell,General Counsel,Asian DevelopmentBank

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studying law, I took a class on antitrust. But Ifind that in the past two days, I have learnedmore about competition law than I did then,thanks to the resource persons’ excellentinput and the high quality of the discussions.If, like me, you have found useful andimportant the proceedings and othercompetition-related initiatives that we havebeen doing, please let us know. We have torespond to the needs of our clients; yourfeedback is important to us.

Finally, all of you deal with the day-to-dayproblems of competition and regulation. I thinkyou will find it useful to know what yourcolleagues in developing and developedcountries are doing concerning competition.If the roundtable has been particularly usefulin obtaining such information, we mayconsider creating a network of regulators sothat this work can be continued on a regularbasis. We can use videoconferencingtechnology to stay in touch, exchange views,and move our agenda forward.

Thank you for the participation of ourresource speakers and the incisive suggestionsthat all of you have made to our toolkit.

ValedictoryANWARUL HODAMember, Planning Commission,Government of India

Thank you for inviting me to address you onthe subject. I do not intend to deliver a verylong address, only a few brief remarks. I haveglanced through some of the papers that havebeen presented, and I think the participantshave been given a good exposure to the viewson competition law and policy from variousperspectives. They have heard from speakers

from Australia and Korea, countries wherecompetition law and policies have occupieda high place on the national agenda. Australiais a country that has benefited considerablyfrom the adoption of right policies oncompetition. The importance attached byKorea to competition policy and law isapparent from the fact that the chairperson ofits competition commission has a seat in theCabinet. I found interesting, and I am sure theparticipants also found interesting, thedescription of the evolution of Japan’s postwarpolicies, which had a bearing on itscompetition policy, and the greater importancethat the Government of Japan attached tocompetition matters.

On the presentations on competitionregimes across the regions and their interfacewith regulatory regimes: The speaker from theOrganisation for Economic Co-operationand Development (OECD) Secretariatdemonstrated that economic growth isenhanced by pro-competitive regulation andthat many objectives of competition authoritiesand regulators are similar. These are points thatI saw coming out from that presentation.

Personally I feel that the debate in somedeveloping countries (a lot of them havedeveloped competition policies and laws) hasnot been whether competition law and policyare important but on when is the right time tostart seriously addressing the issue. In India too,for a long time after introduction of economicreforms, the overriding preoccupation of policymakers was with external and internalliberalization. They did not considerintroducing a modern competition lawstraightaway. No one has any doubts about thebenefits of competition. Indeed, liberalizationof the economy and privatization are all aimedat unleashing competition. The argument infavor of competition policy and law is thatliberalization and privatization cannot beexpected to contribute automatically toeconomic growth if competition policy and theinstitutional infrastructure for promotingcompetition are lacking in the absence of theseinstitutions. This is what has been pointed outalso in the Asian Development Outlook 2005.Commercial enterprises cannot resist thetemptation to increase their profits by meansof anticompetitive practices.

I think there is a dawning realizationamong developing countries that competitionlaws and policies must be introduced soonerrather than later. If they opposed a multilateral

“Competition law and policyreform is one of the areas thathas been identified asimportant to sustainableeconomic development andpoverty reduction by manyAsian countries.”

Arthur M. MitchellGeneral Counsel,Asian Development Bank

“No one has any

doubts about

the benefits of

competition.

Indeed,

liberalization

of the economy

and

privatization

are all aimed

at unleashing

competition.”

Anwarul Hoda,Member,PlanningCommission,Government of India

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agreement on trade and competition duringthe Doha Round of multilateral tradenegotiations, it was not because they werenot convinced that some action is neededon this front but because of their assessmentthat competition policy as well as the othersubject of investment had been introducedin the agenda of the negotiations by somedeveloped economies only to blur the focusof negotiations from agriculture which theywanted. This was the suspicion. Internationalaction is certainly possible on competitionpolicy through cooperation at various levels.Participants might have viewed the pre-sentation of the UNCTAD representative inthis light. We must only hope that the attemptsby some developed economies to bringcompetition policy on the agenda in themultilateral trade negotiations has not ordoes not constitute a setback to the processof promoting the adoption of competitionpolicy and law in those countries that do nothave it yet.

I would say that many countries—I knowthat Malaysia is one of them—do not have a

“The argument in favor ofcompetition policy and law is thatliberalization and privatizationcannot be expected to contributeautomatically to economic growthif competition policy and theinstitutional infrastructure forpromoting competition arelacking.”

Anwarul HodaMember, PlanningCommission, Governmentof India

comprehensive law, but they have at leastregulations in certain sectors that addresscompetition-related issues. Most countrieshave adopted competition laws, and otherslagging behind will also do so. But just adoptionof the law is not enough. The culture ofcompetition has to be spread; it has to seep inthe sensibilities of the private sector.Roundtables such as this one can prove to bevery helpful in accomplishing this.

Vote of ThanksV.S. REKHASenior Counsel, Asian Development Bank

As the Roundtable draws to a close, I ampleased to have the opportunity to makesome closing remarks on behalf of the AsianDevelopment Bank (ADB).

ADB thanks the Government of India forits active support in this endeavor inparticular the Department of EconomicAffairs in the Ministry of Finance, and theMinistry of Company Affairs. We are gratefulto India not only for welcoming ADB and allthe resource persons and participants at thisRoundtable, but also for being a proactivepartner of ADB not only at the roundtabledeliberations but even during the early stagesof planning the roundtable. I wish to thankthe Honorable Minister for Company Affairs,Shri Prem Chand Gupta; Chairman, NationalManufacturing Competitiveness Council, Dr.Krishnamurthy; Secretary, Ministry ofCompany Affairs, Shri Anurag Goel; andAdditional Secretary, Department ofEconomic Affairs, Ministry of Finance ShriAshok Chawla for their address during theinaugural session. I also wish to thank Law

Secretary, Shri Viswanathan; member,Competition Commission of India, Shri VinodDhall; and Joint Secretary, Department ofEconomic Affairs, Ministry of Finance, ShriArvind Mayaram, for being panelists duringthe technical sessions; and finally, ShriAnwarul Hoda, member, PlanningCommission, for his insightful address in thisclosing session.

I would also like to express my gratitudeto our resource speakers, other panelists andfacilitators. None of the Roundtablediscussions would have taken off, had it notbeen for the erudite contributions ofProfessors Allan Fels, AO, and Richard Whish;Messrs. Philippe Brusick, (UNCTAD),Toshiyuki Nanbu (APEC and JFTC), BernardPhillips (OECD), Dong-kyu Lee (Korea), andfinally Ms. Annetje Ottow (Netherlands). Theirjoining us at this gathering, notwithstandingtheir busy schedules, reflects their interestand dedication to competition matters. ADBis honored by their presence and the wisdomthey have so generously shared during theRoundtable.

We have hoped that the Roundtablewould enhance the understanding of issuesconcerning competition laws and policiesamong competition authorities’ and related

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agencies, to facilitate competition authoritiesto further identify their own capacitydevelopment needs; best practices andrelevant ADB knowledge tools and support inthis regard. We are grateful to the participantsfor their generosity during the discussions overlast two days.

I would also like to thank Mr. TadashiKondo, Country Director for India, for ADB,and the India Resident Mission for fullysupporting this endeavor. I also am gratefulfor the support of my seniors the GeneralCounsel Mr. Arthur M. Mitchell, and DeputyGeneral Counsel Ms. Eveline Fischer, for their

guidance and active support for thisroundtable.

Finally, let me extend my sincereappreciation to my team that put in long hoursin organizing this roundtable: Ms. Christine Lao,Ms. Amabelle Asuncion, Ms. Mary Jane Davidfrom our headquarters; and Mr. C.T. Abraham,Ms. Meenu Lalit, Mr. Rupes Dalai, and Mr.Sudhir Nair from our India Resident Missionoffice. I also thank the Taj Man Singh hotel stafffor working on all logistical arrangements.

On behalf of ADB I thank you all againfor coming and we wish you all safe journeysback.

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ParticipantsC. T. ABRAHAMIndia Resident MissionAsian Development Bank

ELVIN AFANDISenior Specialist, Center for Economic ReformsMinistry of Economic Development, Azerbaijan

PONNIAH BASKARASINGAMExecutive DirectorConsumer Affairs Authority of Sri Lanka

PHILIP H.M.BEAUREGARDSenior Counsel, The World Bank, New Delhi

G.R. BHATIAAdditional Director General, CCI, India

PHILIP BRUSICKHead, Competition and ConsumerPolicies Branch, UNCTAD

CAO HONGYINGDeputy Division DirectorFair Trade Bureau, State Administrationfor Industry and CommercePeople’s Republic of China

SUBASH CHANDRAJoint Director GeneralMinistry of Company Affairs,Government of India

M.K. CHAUDHARYAdditional Registrar, CCI, India

SHARMILA CHAVALYDirector (ADB)Ministry of Finance(Department of Economic Affairs)Government of India

ASHOK CHAWLAAdditional SecretaryMinistry of Finance(Department of Economic Affairs)Government of India

RUPES KUMAR DALAIAsian Development Bank

MR. ROBIN RATNAKAR DAVIDDua Associates Law Firm, New Delhi

VINOD DHALLMemberCompetition Commission of India

C.R. DUADua Associates Law Firm, New Delhi

ALLAN FELS, AODeanThe Australia and New ZealandSchool of Government

Appendices· Participants· Agenda

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EVELINE N. FISCHERDeputy General CounselAsian Development Bank

ABDUL GHAFFARMember (Research & Investigation)Monopoly Control Authority, Pakistan

MA. CORAZON GINESDirector IIIConsumer Affairs Services,Energy Regulatory Commission, Philippines

ANURAG GOELSecretaryMinistry of Company AffairsGovernment of India

MADHUMITA GUPTAUSAID, New Delhi

PREM CHAND GUPTAMinister of Company AffairsGovernment of India

YONG-HO HANDeputy DirectorKorea Fair Trade Commission

ANWARUL HODAMember, Planning Commission,Government of India

ABDULLAH HUSSAINLuthra & Luthra Law Offices, New Delhi

R.C. JHAMTANIAdviser (Industry)Planning Commission, Government of India

VYAS JISecretaryCompetition Commission of India

U.K. JINDALUnder SecretaryMinistry of Company AffairsGovernment of India

M. KANNANAdvisor (Economic)Telecom Regulatory Authority of India (TRAI)

MA.K. KAPOORMinistry of Company AffairsGovernment of India

JITESH KHOSLAJoint SecretaryMinistry of Company AffairsGovernment of India

TADASHI KONDOCountry DirectorIndia Resident MissionAsian Development Bank

V. KRISHNAMURTHYChairmanNational Manufacturing CompetitivenessCouncil Government of India

BAKHROM KUCHKAROVHeadDepartment of LawCabinet of Ministers, Uzbekistan

PRAVEEN KUMARDirectorMinistry of Company AffairsGovernment of India

MEENU LALITAsian Development Bank

CHRISTINE V. LAOLaw and Policy Reform ConsultantAsian Development Bank

ASHOK LAVASAResident CommissionerGovernment of Haryana

DONG-KYU LEEDirector General, Headquartersfor Competition PolicyKorea Fair Trade Commission

ONG BENG LEEChief ExecutiveCompetition Commission of Singapore

MR. RAJIV LUTHRALuthra & Luthra Law Offices, New Delhi

SYAMSUL MAARIFChairmanCommission for the Supervisionof Business CompetitionIndonesia

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Appendices 83

S. MAJUMDARDirector (Projects)Powergrid Corporation of India Ltd.

ARVIND MANGLIKPowergrid Corporation of India Ltd.

ARVIND MAYARAMJoint SecretaryMinistry of Finance(Department of Economic Affairs)Government of India

PRADEEP S. MEHTACUTS International

SUDHA MIDHAMinistry of Company Affairs,Government of India

ARTHUR M. MITCHELLGeneral CounselAsian Development Bank

PUSHPA NAIRHeadMonitoring and Enforcement DivisionMalaysian Communications andMultimedia Commission

SUDHIR NAIRAsian Development Bank

TOSHIYUKI NANBUDirectorInternational Affairs DivisionJapan Fair Trade Commission;Convenor, APEC Competition Policyand Deregulation Group

AJAY NATHDirector General (Investigation and Registration)Ministry of Company AffairsGovernment of India

JOY EE KIA NGDirector (Economics)Competition Commission of Singapore

AMITABH KUMARDirector General, CCI, India

SHRAWAN NIGAMAdviser(International Economics & Development Policy)Planning Commission, Government of India

ANNETJE OTTOWAssociated Member and Advisorto the Board of Directors of the Postand Telecommunications Authority (OPTA)Netherlands

ALICE PHAMCUTS International

TRAN LAN PHUONGSenior OfficerCompetition Administration DepartmentMinistry of Trade, Viet Nam

BERNARD J. PHILLIPSHeadCompetition Division, OECD

AUGUSTINE PETERMinistry of Company AffairsGovernment of India

V.S. REKHASenior CounselAsian Development Bank

A.K.SACHANSecretary, Central ElectricityRegulatory Commission, India

B.S. SALUJASecretary GeneralInternational Centre for AlternativeDispute Resolution (ICADR), New Delhi

S.K. SARKARDirector, Telecom Regulatory Studiesand Governance DivisionTERI

HOSSAIN ALI SIKDERVice PresidentDhaka Chamber of Commerce & Industry

RAJENDRA SINGHSecretaryTelecom Regulatory Authority of India (TRAI)

T.K. VISWANATHANLaw Secretary, Government of India

RICHARD WHISHProfessorKing’s College London

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DAY ONE

REGISTRATION

(8:30-9:30)

INAUGURATION

(9.30 – 11.00)

• Welcome Address: Arthur M. Mitchell, General Counsel, ADB

• Address: Ashok Chawla, Additional Secretary, Department of Economic Affairs,

Ministry of Finance, Government of India

• Address: Anurag Goel, Secretary, Ministry of Company Affairs, Government ofIndia

• Keynote Address: V. Krishnamurthy, Chairman, National ManufacturingCompetitiveness Council, Government of India

• Inauguration & Address: Prem Chand Gupta, Hon’ble Minister, Company Affairs,Government of India

• Vote of Thanks:Tadashi Kondo, Country Director, India Resident Mission, ADB

TEA BREAK(11:00-11:30)

TECHNICAL SESSION I

Competition, Competitiveness and Sustainable Growth (Including impact of competitionregimes on economic growth, foreign investments, trade)(11.30 – 1.45)

• Introduction, Richard Whish, Professor, King’s College London (Facilitator)

• PanelistsAllan Fels, AO, Dean, Australian and New Zealand School of Government(formerly Chairman of the Australian Competition and ConsumerCommission)

Vinod Dhall, Member, Competition Commission of India

Arvind Mayaram, Joint Secretary, Department of Economic Affairs,

Ministry of Finance, Government of India

• Discussions, conclusions (Facilitator)

AgendaASIAN DEVELOPMENT BANKCOMPETITION LAW AND POLICY ROUNDTABLE

16-17 May 2006Taj Man Singh HotelNew Delhi, India

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Appendices 85

LUNCH BREAK(1:45-2:30)

TECHNICAL SESSION II

Competition Regimes across the region and Interface with Regulatory Regimes(2.30 – 5:00)

• Introduction, V.S. Rekha, Senior Counsel, ADB (Facilitator)

• Panelists:

PART A: APPROACHES AND CHALLENGES IN IMPLEMENTING COMPETITION LAWAND POLICY

Toshiyuki Nanbu, Convenor, APEC/CPDG; Director, International AffairsDivision, Japan Fair Trade Commission (Resource Speaker)

PART B: INTERFACE WITH REGULATORY REGIMES

Bernard J. Phillips, Head, CompetitionDivision, OECD (Resource Speaker)

Annetje Ottow, Associated Member and Advisor to the Commission ofOPTA (Post and Telecommunications Authority), The Netherlands(Resource Speaker)


TEA BREAK(5:00 - 5:15)

CLOSING SESSION – DAY ONE

Summary of the Day and General introduction of ADB Toolkit(5:15 – 5:45)

PresentersEveline N. Fischer, Deputy General Counsel, ADB

V.S. Rekha, Senior Counsel, ADB

DAY TWO

TECHNICAL SESSION III

Competition law and society(10:00 – 12:00)

• Introduction, Allan Fels, AO, Dean, Australian and New Zealand School ofGovernment (formerly Chairman of the Australian Competition and ConsumerCommission) (Facilitator)

• PanelistsDong-kyu Lee, Director General of Headquarters for Competition Policy,Korea Fair Trade Commission (Resource Speaker)

T.K. Viswanathan, Law Secretary, Government of India


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TEA BREAK(12:00-12:15)

TECHNICAL SESSION IV

Harmonization and Convergence of Competition Laws across the Region: Bilateral/ MultilateralAgreements and Competition Law(12:15 –1:15)

• Introduction, Bernard J. Phillips, Head, Competition Division, OECD (Facilitator)

Speaker: Philippe Brusick, Head, Competition & Consumer Policies Branch,Division on International Trade, UNCTAD (Resource Speaker)


LUNCH BREAK(1:15- 2:15)

TECHNICAL SESSION V

ADB’s Competition Law Toolkit(2.15 – 4.30)

• Presenter, Moderator: Richard Whish, Professor, King’s College London

• Participants: Representatives, participating countries and international agencies

TEA BREAK(4:30-4:45)

CLOSING SESSION-DAY TWO

(4.45 Onwards)

• Road Ahead: Arthur M. Mitchell, General Counsel, ADB

• Valedictory Remarks: Anwarul Hoda, Member, Planning Commission, Governmentof India

• Vote of Thanks: V.S. Rekha, Senior Counsel, ADB

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