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UNCTAD work on COMPETITION POLICY WITH A DEVELOPMENT APPROACH CHALLENGES FOR SMALL ECONOMIES IN THE CURRENT FINANCIAL CRISIS. Ana María Alvarez Competition and Consumer Policies Branch DITC/UNCTAD 13 May 2009 Presentation at the Visit of the University of West Indies
Ana María Alvarez
Competition and Consumer Policies Branch
13 May 2009
Presentation at the Visit of the University of
Palais des Nations, Geneva
the Caribbean: national and regional context
Bolivia (Decreto Ley, 2008)
- Brazil (1960)
- Chile (1973, rev. 1980)
- Colombia (1992)
- Costa Rica (1992)
Domiinican Republic (2008)
El Salvador (2005)
- Jamaica (1993)
- Mexico (1992)
- Nicaragua (2007)
- Panama (1990)
Trinidad &Tobago (2007)
- Guatemala *
- Paraguay *
* Projects in preparationStatus of competition law and policiesin the LAC region
a) Bilateral (formal) and Agency to Agency agreements
• Arrange Comparable economies
• Imbalance of interest if large with small economy
• Risk of inconsistencies and heavy burden in case of
proliferation of bilateral agreements
b) Regional Integration
Negotiations in many regions; some involve common competition rules as a longer-term objective
(e.g. CARICOM, COMESA, Andean Community)
National Competition Laws
Latin America and the Caribbean
*The Caribbean Community is in the process of operationalizing a regional competition authority, the CARICOM Competition Commission. Jamaica, Barbados, Guyana, St Vincent and the Grenadines and Trinidad and Tobago have competition laws in place, but Jamaica was the only country with significant enforcement practice. Other members of Caricom need to set up national competition regimes to be in compliance with the 1973 CARICOM Treaty. The Dominican Republic Competition Law entered into force in January 2008 (see UNCTAD. Investment Policy Review. Dominican Republic. UN, 2009.
Why did CARIFORUM initial a comprehensive rather than an interim or partial agreement?
Avoid that a number of products would have been subject to tariffs.
The types of anti-competitive conduct by companies that are prohibited (art. 126) are:
Mergers and State Aid are not covered. In the light of the very different development level between the
EU and Cariforum, it was considered that such inclusion was not necessary at this stage.
Provisions on public enterprises and so-called "enterprises with special rights" 3 (art. 129). Such
enterprises are of course not prohibited
The agreement expressly states that parties have the right to design or maintain public or private
monopolies. However, such enterprises must respect competition laws to the extent that the
application of these laws does not obstruct the execution of the special task assigned to them.
Following the request of the Cariforum countries, certain specific sectors are exempted from this provision
on public enterprises (art. 129.3).
in some other EU agreements, thus recognising the specific situation in the region
etc… (Art. 130).
international scale, such as hard-core cartels (Art. 128).
See ECLAC also Competition Provisions in Regional Trade Agreements, www.unctad.org/competition/competition
Competition policy should strike the optimal balance between structural efficiency and competitive vigor so that firms may operate at efficient scales and transfer benefits to consumers
See also M. Gal: Competition Policy for Small Market Economies. 2003.
Vulnerable to trade openness
Face the proliferation of informal enterprises
Face anticompetitive practices from both, domestic and multinational enterprises
In a competition environnment, only competitive enterprises surviveCompetition Law and Policy and competitivieness of SMEs
CLP contributes to ensure a level playing field
• Havana (1946)
• U.N. Code on TNCs (1970’s)
• UNCTAD Code on TOT (1970’s)
• UNCTAD Set of Principles & Rules on
Restrictive Business Practices (RBP’s, (adopted in 1980 by UN G.A.)
• WTO Working Group on Trade and Competition
The UN Set
Recommends countries to adopt and fully implement competition legislation
Non-binding voluntary code: recommendations to States and enterprises including TNCs
First attempt to raise cooperation with a DEVELOPMENT DIMENSION, in particular
Special and Differential treatment
Useful direction and inspiration for cooperation agreements
UNCTAD elaborated a Model Law
A technical assistance tool to respond to developing countries and economies in transition technical assistance requests
Implementation in full cooperation with national States and international organisations experienced in competition (OECD, World Bank, EU and WTO)
Adopted by the General Assembly in 1985 and reproduced in UNCTAD series on issues in the field of Competition Law and Policy
Internationally agreed statement of laws necessary for consumer protection
Promote consumer rights - for example, through education and the provision of consumer information.
Emphasise the need for consumers to be protected: safety, freedom from exploitation, redress, and access to basic goods and services.
Promote competition through:
-Enhancing production and consumption patterns responsive to the needs and desires of consumers
- Curbing abusive business practices which adversely affect consumers
- Promoting the development of market conditions which provide consumers with greater choice at lower prices.
UNITED NATIONS GUIDELINES
FOR CONSUMER PROTECTION
Strengthening Institutions and Capacities in the area of Competition and Consumer Protection Policies in Latin America :
Bolivia, Colombia, Costa Rica, El Salvador, Nicaragua, Peru
See also competition.unctad.org/competition and http://compal.unctad.org
Some elements to appreciate the graduality and flexibility in the implementation of Competition Law and Policy
Cooperation on competition
Cooperation on case solving
Enforcement of sanctions and remedies
Law enforcement: investigations, analysis, data collection
Flexibility in the implementation/ case by case analysis
Training officers in charge of implementing the Law
Design of the institution in charge of implementing the Law
Competition Bill: consensus, consultations with the Legislative Authority, civil society, adoption of the Law. Advocacy
Demand-driven technical assistance
Sensitizing at the level of economic actors (Competition culture). Inventory of the Laws. Assessment of the socio-economic situation in each country
Source: Global Forum on Competition. OECD. Feb. 2009
The crisis could atract anti-competitive conduct.
Cartels or monopolies may try to take advantage of the environment of economic distress.
Suppliers that normally have no market power may gain substantial market power during periods of market crisis. Even a firm with a small market share has market power – the ability to raise price for a substantial period – when its rivals are capacity constrained or cannot react.
Demand for staple foods and fuel is likely to be highly inelastic in the short run, so withholding only a small quantity from the market can result in large price increases
Responses could be contradictory.
Competition policy given lower priority by government alongside other policy goals?
Pressure to circumvent or soften competition rules?
Greater direct government involvement in markets
Reduced confidence in markets and market outcomes among policymakers and consumers
Turn the current situation into opportunities
Ana María Alvarez