UNCTAD Competition Law and Policy for Practitioners The Rationale For Introducing Competition Law...

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CompetitionCompetition Law and PolicyLaw and Policyfor Practitionersfor Practitioners

The Rationale For Introducing The Rationale For Introducing Competition Law and PolicyCompetition Law and Policy

ByBy

Michael Adam, Competition law and Consumer Policies Michael Adam, Competition law and Consumer Policies Branch, Branch, Division on International Trade in Goods, Division on International Trade in Goods,

Services and Commodities,Services and Commodities, UNCTAD UNCTAD

TRAINFORTRADE : Competition Law and Policy

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WELCOMEWELCOMETO THETO THE

UNCTAD TRAINING COURSEUNCTAD TRAINING COURSEONON

COMPETITION LAW AND POLICY COMPETITION LAW AND POLICY FOR PRACTIONERSFOR PRACTIONERS


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AIM OF THE COURSEAIM OF THE COURSETo enable participantes to understand To enable participantes to understand

the issues arising as to:the issues arising as to:

• Coherently designing,Coherently designing,• Effectively implementing, andEffectively implementing, and• Justly enforcingJustly enforcing

COMPETITION LAW AND POLICYCOMPETITION LAW AND POLICY


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Objectives of Module 1: The Rationale for Objectives of Module 1: The Rationale for Introducing Competition Law and PolicyIntroducing Competition Law and Policy

Upon concluding this module, Upon concluding this module, participants should be able to:participants should be able to:

• Define the term Define the term “competition policy”“competition policy”• Explain the recent evolution of Explain the recent evolution of

competition law in developed and competition law in developed and developing countriesdeveloping countries

• Specify the objectives and benefits of Specify the objectives and benefits of competition lawcompetition law


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What does Competition Policy Cover?What does Competition Policy Cover?

• Broad definition covering:Broad definition covering:The full array of government policy The full array of government policy measures that influence competition in measures that influence competition in domestic markets (e.g. tariff domestic markets (e.g. tariff protection)protection)

• Narrow definition limited to:Narrow definition limited to:The design, effective implementation The design, effective implementation and enforcement of competition lawand enforcement of competition law


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The Intention of Competition LawThe Intention of Competition Law

To eleminate or curtail restrictive To eleminate or curtail restrictive business practices which hinder business practices which hinder or prevent firms from competing or prevent firms from competing freely with one another in the freely with one another in the marketmarket


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The Three Main Categories ofThe Three Main Categories ofPROHIBITED RESTRICTIVE PRACTICESPROHIBITED RESTRICTIVE PRACTICES

•Collusive arrangements, Collusive arrangements, agreements or understandingsagreements or understandings

•Abuse of dominant market powerAbuse of dominant market power•Mergers, acquisitions or Mergers, acquisitions or

takeoverstakeovers


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Two Approaches toTwo Approaches toRESTRICTIVE PRACTICESRESTRICTIVE PRACTICES

• Per se offencesPer se offencesNo defence once provedNo defence once proved

• Rule of reasonRule of reasonAdverse effects of restriction on Adverse effects of restriction on competition weighed against possible competition weighed against possible public benefitspublic benefits


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Economic reform >>> greater reliance Economic reform >>> greater reliance on marketson markets

• Lowering of tariff barriers,Lowering of tariff barriers,• Removal of most quantitative import Removal of most quantitative import

restrictions,restrictions,• Reduction of subsidies to domestic Reduction of subsidies to domestic

producers,producers,• Privatisation of government businesses,Privatisation of government businesses,• Encouragement of foreign direct Encouragement of foreign direct

investment.investment.


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Some benefits of competitionSome benefits of competition

1)1) Pressure to produce and distribute Pressure to produce and distribute products/services at lowest possible products/services at lowest possible cost,cost,

2)2) Ensures prices are kept down or Ensures prices are kept down or reduced in step with cost reductions,reduced in step with cost reductions,

3)3) Facilitates the introduction of new Facilitates the introduction of new products/processes and entry to new products/processes and entry to new marketsmarkets


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Principal Objectives of Principal Objectives of Competition Law and PolicyCompetition Law and Policy

•To improve economic efficiencyTo improve economic efficiency

•To contribute to economic To contribute to economic developmentdevelopment


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Secondary Objectives of Secondary Objectives of Competition Law and PolicyCompetition Law and Policy

• Limit further increases in the Limit further increases in the concentration of economic power,concentration of economic power,

• Protect small and medium-sized Protect small and medium-sized companies,companies,

• Provision of state assistance on a Provision of state assistance on a non-discriminatory basis.non-discriminatory basis.


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Some Limitations of Competition LawSome Limitations of Competition Law

1)1) Doesn’t seek to change the structure of Doesn’t seek to change the structure of the market,the market,

2)2) Monopolies may continue to earn Monopolies may continue to earn monopoly profits,monopoly profits,

3)3) Applies to domestic markets only, not to Applies to domestic markets only, not to overseas markets,overseas markets,

4)4) Must not contradict other economic Must not contradict other economic policies affecting competition.policies affecting competition.

UNCTAD Competition Law and Policy for Practitioners The Rationale For Introducing Competition Law...

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