UNCTAD Competition Law and Policy for Practitioners The Rationale For Introducing Competition Law and Policy By Michael Adam, Competition law and Consumer Policies Branch, Division on International Trade in Goods, Services and Commodities, UNCTAD

T RAIN F OR T RADE : Competition Law and Policy UNCTAD WELCOME TO THE UNCTAD TRAINING COURSE ON COMPETITION LAW AND POLICY FOR PRACTIONERS

T RAIN F OR T RADE : Competition Law and Policy UNCTAD AIM OF THE COURSE To enable participantes to understand the issues arising as to: Coherently designing, Coherently designing, Effectively implementing, and Effectively implementing, and Justly enforcing Justly enforcing COMPETITION LAW AND POLICY

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Objectives of Module 1: The Rationale for Introducing Competition Law and Policy Upon concluding this module, participants should be able to: Define the term “competition policy” Define the term “competition policy” Explain the recent evolution of competition law in developed and developing countries Explain the recent evolution of competition law in developed and developing countries Specify the objectives and benefits of competition law Specify the objectives and benefits of competition law

T RAIN F OR T RADE : Competition Law and Policy UNCTAD What does Competition Policy Cover? Broad definition covering: Broad definition covering: The full array of government policy measures that influence competition in domestic markets (e.g. tariff protection) Narrow definition limited to: Narrow definition limited to: The design, effective implementation and enforcement of competition law

T RAIN F OR T RADE : Competition Law and Policy UNCTAD The Intention of Competition Law To eleminate or curtail restrictive business practices which hinder or prevent firms from competing freely with one another in the market

T RAIN F OR T RADE : Competition Law and Policy UNCTAD The Three Main Categories of PROHIBITED RESTRICTIVE PRACTICES Collusive arrangements, agreements or understandings Collusive arrangements, agreements or understandings Abuse of dominant market power Abuse of dominant market power Mergers, acquisitions or takeovers Mergers, acquisitions or takeovers

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Two Approaches to RESTRICTIVE PRACTICES Per se offences Per se offences No defence once proved Rule of reason Rule of reason Adverse effects of restriction on competition weighed against possible public benefits

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Economic reform >>> greater reliance on markets Lowering of tariff barriers, Lowering of tariff barriers, Removal of most quantitative import restrictions, Removal of most quantitative import restrictions, Reduction of subsidies to domestic producers, Reduction of subsidies to domestic producers, Privatisation of government businesses, Privatisation of government businesses, Encouragement of foreign direct investment. Encouragement of foreign direct investment.

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Some benefits of competition 1) Pressure to produce and distribute products/services at lowest possible cost, 2) Ensures prices are kept down or reduced in step with cost reductions, 3) Facilitates the introduction of new products/processes and entry to new markets

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Principal Objectives of Competition Law and Policy To improve economic efficiency To improve economic efficiency To contribute to economic development To contribute to economic development

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Secondary Objectives of Competition Law and Policy Limit further increases in the concentration of economic power, Limit further increases in the concentration of economic power, Protect small and medium-sized companies, Protect small and medium-sized companies, Provision of state assistance on a non- discriminatory basis. Provision of state assistance on a non- discriminatory basis.

T RAIN F OR T RADE : Competition Law and Policy UNCTAD Some Limitations of Competition Law 1) Doesn’t seek to change the structure of the market, 2) Monopolies may continue to earn monopoly profits, 3) Applies to domestic markets only, not to overseas markets, 4) Must not contradict other economic policies affecting competition.