Competition policy definition and scope
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Competition Policy: Definition and Scope. Presented by Dr. M. A. Razzaque. We are going to have discussions on:. What is Competition? What is Competition Policy? What it Covers? What is the need for Competition Policy?. What is competition?. Competition.

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Competition Policy: Definition and Scope

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Competition policy definition and scope

Competition Policy: Definition and Scope

Presented by

Dr. M. A. Razzaque


We are going to have discussions on

We are going to have discussions on:

  • What is Competition?

  • What is Competition Policy?

  • What it Covers?

  • What is the need for Competition Policy?


What is competition

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


Fair and unfair competition

Fair and Unfair Competition


Types of competition

Types of competition

Non-price Competition

Price Competition

Competition to win customers not by lowering price but by advertising, offering after-sales-service, using sales-promotion tools, etc.

Competition among suppliers to win customers by offering lower price. May not be an appropriate strategy for those loyal to a particular brand.


Forms of market competition

Forms of Market Competition


Competition policy definition and scope

For detailed information please consult

  • Competition Policy and Law Made Easy: Monographs on Investment and Competition Policy, #8 ;CUTS (Pages 1-4)


Oligopoly market competition among the few

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.


Competition policy definition and scope

Detail on Oligopolistic market structure

  • Making Sense of Competition Policy, by Frank Fishwick (1993) (Pages 47-62)


Competition policy law

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.


Competition policy definition and scope

Competition Policy

Government Policies

Competition Law

Components of competition policy

Private Actions

Deregulation

and

Privatization

Industrial

Policy

Consumer

Policy

Trade Policy

Regulations Governing

Capital and FDI

Other

Policies


Competition law national

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


Competition policy definition and scope

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.


Competition policy definition and scope

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)


Need for a competition policy

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.


Competition policy definition and scope

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


Competition policy definition and scope

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


Competition policy definition and scope

Globalization and the need for Competition Policy

Therefore, we need competition policy to monitor, prevent and control anti-competitive practices.

Globalization and Competition

threat to

Outcome of

Concentration of Market Power


Competition policy definition and scope

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)


Arguments against competition

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.


Thank you

Thank you.


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