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The Competition Commission of Mauritius

All about me. British economist; specialist in competition and regulationTo 1994: Degrees in economics in UK, followed by teaching at University of Namibia1994 1999 Consulting Economist, Coopers

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The Competition Commission of Mauritius

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    1. The Competition Commission of Mauritius John Davies, Executive Director March 2009 Personal views, not to be attributed to the CCM

    2. All about me British economist; specialist in competition and regulation To 1994: Degrees in economics in UK, followed by teaching at University of Namibia 1994 – 1999 Consulting Economist, Coopers & Lybrand UK, then London Economics UK 1999 - 2003 Consulting Economist, Frontier Economics UK 2003 – 2008 UK Competition Commission: Deputy Chief Economist, then Chief Economist from 2005 2009 – 2011 Executive Director, Competition Commission of Mauritius

    3. Overview What is competition policy? The Competition Act 2007 The Competition Commission of Mauritius Guidelines – some tensions

    4. What is competition policy?

    5. Competition Policy Also called antitrust, with roots in the US Sherman Act of 1890 and Clayton Act 1914 Then in Europe 1945-1990 and since 1990 increasingly common world-wide. Legal arrangements differ but typically: Prohibition of cartels: price-fixing and bid-rigging Action against anti-competitive behaviour by monopolies Control of mergers to prevent emergence of monopoly Legalistic case-work not discretionary government ‘policy’

    6. Why competition policy? Free competition between private sector firms: good for consumer (lower prices, better quality, more choice) Strong evidence that competition enhances productivity, innovation, and thus economic growth Price fixing and abuse of monopoly (among many other things) limit free competition So we intervene - but we should not interfere with businesses’ commercial decisions lightly or arbitrarily Independent agency, operating under clear legal framework, with well-defined rights Protect competition (rivalry) not competitors!

    7. The Competition Act 2007

    8. The Competition Act 2007 Passed by Parliament 2007, partially proclaimed at present Defines restrictive practices Establishes Competition Commission Repeals Competition Act 2003 Simpler institutional structure Stronger measures Fewer exemptions

    9. Restrictive practices Collusive agreements (price-fixing, bid-rigging, resale price maintenance) Non-collusive agreements Abuse of monopoly Merger control

    10. Market shares and market definition Monopoly situation when one company has at least 30%, or three or fewer companies 70% 30% or 70% of what? “relevant market”: defined by substitution possibilities, not by any fixed product characteristics or geography Monopoly not a breach of the law – abuse is Percentages are safe harbours below which there can be no monopoly problem, they are not thresholds for intervention

    11. Predatory pricing Allegations of ‘predatory pricing’ involve prices being too low Harm to competition if (and only if): Temporary period of low prices drives out competitors In subsequent period, less competition leading to higher prices (exit must be irreversible) – outweighing the former effect Very hard to distinguish from normal ‘tough’ competition: competition authorities require very clear proof to intervene Businesses should never be deterred from competing on price by worries that this might be seen as predatory Strong presumption in favour of low prices and tough competition

    12. Key principles in the Act Effects-based judgment for all practices except cartels Independence and division of powers Transparency – public accountability Transparency – natural justice and fairness Right of appeal State subject to the Act

    13. The Competition Commission

    14. Competition Commission Chairman heads five part-time commissioners who decide all cases Executive Director (supported by 10-20 staff): Chooses cases to investigate Carries out investigation Reports to commissioners Writes and publishes final report

    15. Competition Commission: process Decide to launch investigation Investigations: Powers to require production of information Criminal offence to mislead the Commission Analytical expertise: economic, legal and accounting Hearings with the companies under investigation Right of appeal and duty to give reasons Also informal investigations and advice to government

    16. Some early tasks Commissioners to be appointed Appointment of senior staff: Lawyers Business specialists Economists Drafting three sets of Guidelines Competition Advocacy Open for business – want to hear about problems Launch first investigations!

    17. Guidelines: some tensions (for discussion)

    18. Legal and economic guidelines

    19. Procedural rules

    20. Procedural rules

    21. Procedural rules

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