1. Competition Policy: Definition and Scope
Presented by
Dr. M. A. Razzaque

2. We are going to have discussions on:
What is Competition?
What is Competition Policy?
What it Covers?
What is the need for Competition Policy?

3. What is competition? Competition
Literary meaning: a contestable situation where people fight for superiority.
In market economy, competition is a process whereby firms fight against each other for securing consumers for their products

4. Fair and Unfair Competition
Producing quality goods
Becoming cost-efficient
Optimizing the use of resources
Adopting the best available technology
Investing in research and development, etc.
Fixing prices with the rivals
Setting a price which is lower than cost in order to throw out competitors from the market
Advertising that belittles others’ product, etc.

5. Non-price Competition Price Competition
Types of competition
Non-price Competition
Price Competition
Competition among suppliers to win customers by offering lower price. May not be an appropriate strategy for those loyal to a particular brand.
Competition to win customers not by lowering price but by advertising, offering after-sales-service, using sales-promotion tools, etc.

6. Forms of Market Competition
Models of
Competition
Number of
buyers
sellers
Nature of
products
Barriers to
entry and
exit
Perfect
competition
Very large
Identical
None
Monopoly
One
Single
product
Monopolistic
Large
Minimum
differences
Oligopoly
Very few

7. For detailed information please consult
Competition Policy and Law Made Easy: Monographs on Investment and Competition Policy, #8 ;CUTS (Pages 1-4)

8. Oligopoly Market : Competition Among the Few
Key Features:
Interdependence between firms in performance and strategy
Aggressive action followed by defensive reaction
Price competition and price war
(Recent packages offered by Mobile Phone companies)
Intense non-price (promotional publicity) competition, which may result in wasteful expenditures.

9. Detail on Oligopolistic market structure
Making Sense of Competition Policy, by Frank Fishwick (1993) (Pages 47-62)

10. Competition Policy /Law
Competition policy => government measures directly affecting both Firm Behavior and Industrial structure.
A competition policy should include both:
i) Economic policies adopted by Government, that enhance competition in local and national markets, and
ii) Competition law designed to stop anti-competitive business practices.

11. Components of competition policy
Competition Law
Government Policies
Private Actions
Deregulation
and
Privatization
Industrial
Policy
Consumer
Policy
Trade Policy
Regulations Governing
Capital and FDI
Other
Policies

12. Competition Law (National)
Anti-Competitive Agreements Between Firms
( Collusion)
Regulation of Mergers to Prevent Tactics to Gain Excessive Dominance in a Market
Abuse of a Dominant Market Position
Applies to:
Import cartels
Price fixing
Market sharing
Bid rigging
Limiting production
Refusal to buy or supply
Tie-in arrangements
Exclusive-dealing
Resale price maintenance
Territorial allocation
Predatory pricing
Price discrimination
Excessive pricing
Abuse of intellectual property monopoly
Total unification of the companies involved
Buying of sufficient shares in a company so as to have a say in policy formulation

13. The three stages of provisions that a competition law constitutes are:
The behavior and structure of firms in the market
Institutional and enforcement design with a competition authority, and
Competition advocacy.

14. For details on competition policy and law:
Competition Policy and Law Made Easy: Monographs on Investment and Competition Policy, #8 ;CUTS (Pages 23-26)
UNTCAD: Trade and development Board: Intergovernmental Group of Experts on Competition Law and Policy; sixth session, Geneva, 8-10 November 2004 : Communication Submitted by the People’s Republic of Bangladesh (Pages 2-4)

15. Need for a Competition Policy
Benefits to Consumers
A fair deal in the market place with:
The best possible choice of quality
The lowest possible prices, and
Adequate supplies of commodities.

16. Benefits to Efficient Producers
A safeguard against practices that could drive companies out of business.
Lower entry barriers to promote entrepreneurship and growth of SMEs.
Efficient allocation and utilization of resources ensures more output and employment.
Control of international unfair competition and restrictive business practices, such as international cartels

17. On the whole, a competition policy maintains and promotes the competitive spirit and culture in the market.

18. Globalization and the need for Competition Policy
Globalization and Competition
Outcome of
threat to
Concentration of Market Power
Therefore, we need competition policy to monitor, prevent and control anti-competitive practices.

19. For details on globalization and competition:
UNTCAD: Trade and development Board: Intergovernmental Group of Experts on Competition Law and Policy; forth session, Geneva, 3-5 July 2002 : The relationship between competition, competitiveness and development. (Pages 3-6)

20. Arguments Against Competition
Preventing formation of large firms may reduce efficiency. The situation arises when there exists significant economies of scale:
Examples : Natural Monopolies, like,
Infrastructure, Power and Railway .
An obsession with competition might be counterproductive leading to inefficiency especially when goods and services tend to be homogenous.
Policy actions against highly profitable firms could work against the development of dynamic and thriving firms.
Over-regulation could increase firms’ cost of operations and generates inefficiencies.

21. Thank you.