– Phuong D. Nguyen (LLB Law, Newcastle University) firstname.lastname@example.org
Undoubtedly, competition law is moulded to assure the process of competition in terms of consumer welfare maximisation and the efficiency of the market. Accordingly, on the process of achieving a perfectly competitive market, firms are required to properly compete with concentrations on price, quality, and innovation of products and services. However, there has been no subsistence of ‘perfect competition’ in several developing countries due to the failures of the market. Firms ‘in concentrated industries’ or firms ‘protected by barriers to market entry’ have a proclivity to exploit their market power to arbitrarily constrain the productivity, raise the price, or reduce the quality of products to pursue their monopoly profits. Evidently, such conduct happens in different geographical markets and jeopardises the stability of the market, and consequentially, consumers’ benefit. Developing economies are the most susceptive subjects. Hence, in resistance to anti-competitive conduct and forestall in its detrimental impacts, the adoption of a robust competition law regime in the realms of both developing and developed countries has been proposed. Nonetheless, in practice, it is apparently difficult to implement a general competition law regime due to a vast array of disparities between developing and developed countries. Unfortunately, in this essence, some challenges would be inevitably engendered towards developing countries
The embryonic development – whether the convergence emanated from the actual desideratum of developing world?
Recently, there have been a large number of issues derived from microeconomic conducts triggering repercussions towards domestic markets and the global market. Thereby, such behaviours nowadays have not been the ‘prerogatives of sovereign nation states’ but viewed as ‘legitimate objects of attention by the international community’. Accordingly, there is an extraordinary spread of competition law witnessed in developing countries adopting, or attempting to adopt, competition policy to ameliorate the adverse impacts that stemmed from the explosion of ‘monopolisation’ and ‘international cartels’ in the 1990s. In the previous period, the preciousness of competition and competition policy had not been the pivotal concentration of the developing world. However, nowadays, due to the propensity of economic transformation, many developing countries have modified their economies based on the economic theories of comparative advantage and liberalisation, replacing ‘centrally planned economies’. Correspondingly, competition has taken into account the need of progressing competition policy with appropriate facilitation.
Nonetheless, this trend has been criticised as immature and ‘simply a response to international pressure’. The beginning of the developing world’s conversion into the developed world mainly arises from the requisite of counteracting devastating effects generated by microeconomic conducts of local individuals, households and firms. Thereby, the pressing of globalisation has persuaded policy makers of developing countries to enact competition laws, rather than the competition laws themselves being inherently formed on the basis of the real growth of developing economies.
Divergences between developed and developing world causing obscurities in achieving a general competition law regime.
There is a plausible existence of a convergence between developing countries and developed countries reflected by the International Competition Network (ICN) in its report on the Objectives of Unilateral Conduct Laws. According to the report, both developed and developing states ‘are common to the competition regime as a whole’ to systemise an ‘effective competitive process, enhancing efficiency and protecting consumer welfare’. However, it is stated that ‘Spokespeople for developing countries often express the need for an antitrust paradigm different from that of the developed world. Spokespeople for the developed world tend to argue for universal norms, which may apply differently when facts are different.’ Thereby, in spite of attaining ‘basic’ goals of competition law, it is still a huge challenge for developing countries to reflect the aims and targets of competition law equivalent to those of developed countries. Since the developing world and the advanced world are not regarded as being on ‘equal footing’ in the level of development. The competition law system of the developed world has been entirely fashioned and progressed pursuant to competition-specific considerations and patterns in the line with international agreements and general growth of international economy whereas the developing world arrives at the urgency of globalisation through international commitments.
On the other hand, regarding the ICN report, ‘ensuring an effective competition process’ can be regarded ‘either as a goal as such or as a means to achieve other goals such as consumer welfare and efficiency’ as it has been recognised by 32 out of 33 agencies from both developed and developing countries as ‘a stand-alone’ to ‘achieve different and related competition law goals.’ Hence, the aspirations of ‘ensuring an effective competition process’ might be variedly discerned in developed and developing countries. In addition, with regard to conceivable vindications of convergence, it might be argued that the onset of competition law in developing countries is merely ‘the cut and paste’ strategy or legal transplant’ from developed countries to developing countries. The competition policies of the developing world have a Western-approach but they have different purposes in the context of competition. For instance, the competition policy of South Africa is on the far side of economic objectives when pondering non-economic objectives with the aims of ‘correcting social inequalities resulting from its history, promoting employment, advancing social and economic welfare, ensuring to SMEs an equitable opportunity to participate in the economy and increasing the economic opportunities of historically disadvantaged persons’. Another example is the Chinese Anti – Monopoly Law (AML), setting up benchmarks to focus on ‘national economic development’ with an uncertainty of how this ‘open criteria’ shall be interpreted. Accordingly, this has resulted in the issue of overriding nationalist protection of China in some cases, typically, in Coca Cola/Huiyuan; Mofcom, the Chinese merger control agency had blocked the merger between Coca Cola and Huiyuan with the core concern of consolidating domestic beverage manufacturers. Nonetheless, this decision has received heavy denunciation regarding its substance and the absence of translucency as argued in The Economist ‘The most benign interpretation of the rejection…is that it reflects a political response to critical comments by America’s new administration. The more worrying interpretation is that, even as China publicly urges other countries to commit to open their markets to Chinese investment and trade, it is imposing yet another barrier to outsiders.’
On the other hand, there has been an inclination of several developed economies demanding that developing countries adopt competition policy as a prerequisite for entering into bilateral free trade agreements. Thus, this might put the developing world in an exigent situation with more harm than good. The first obstruction for developing countries lies inherently in the role of government in the economy. Some developing countries’ governments may go beyond and extend their interference such as in cases of expropriation – stringent trade barriers, which might potentially pose risks towards the economy – instead of leaving economic affairs to be operated by private corporations according to principles of the market. Typically, the lack of credibility of commitments in both ‘vertical’ and ‘horizontal’ has entailed market failures, low standards of equilibria and output. Additionally, the reaction of major developing governments is trying to reduce by ‘self-help’ remedies which are superficially anti-competitive when the government’s capability of administration is circumscribed as its judges and regulators are prone to pressure and corruption.
In respect of governance, the lack of independence of competition authorities subsisting as ‘investigating’ authorities has been mirrored in several segments of the developing world. In particular, those organs in some developing countries have short-time proliferation and have insufficient powers to efficaciously exercise their duties to reach legally binding decisions. A good example is Conselbo Administrativo Defensa Economica (CADE), the competition agency of Brasil, which is accountable to investigate cases of cartel and abuses of dominance. Albeit the advent of the Competition Act, the Law 8884/94 demonstrated the conception of autarquia federal to dictate that CADE was dependent, some provisions of the law have sabotaged the independence of CADE. Specifically, its existence was merely two years, ostensibly short, which accordingly pressed it to seek political support in terms of re-designation. Additionally, CADE also received assistance from Economic Law Office (SDE), part of the Ministry of Justice, and a Secretariat of Economic Surveillance (SEAE), part of the Ministry Finance. Thereby, it is readily understood that member of the authorities like CADE are politically assigned, and obviously have standard duties falling outside the field of competition law.
In addition, the significant peculiarity of convergence in competition law is indicated by the extraterritorial assertion of jurisdiction with plentiful vindications of this appeared in the major parts of the advanced world such as EU and the American regimes. Notwithstanding, there are inherent difficulties derived from the heterogeneous enforcement, externally-based information gathering and the refusal and none of cooperation from foreign firms and foreign competition authorities. For instance, in the case of Genco/Lonhro, two South African undertakings were proscribed by the Commission for their dereliction of dominant duopoly (collective dominance) in the markets of platinum and rhodium. However, in Gencor v. Commission, Gencor alleged that the regulation of the Commission could not applicable to economic activity conducted in a non-member country and granted by the government of South Africa in addition to the contravention of the fundamental principle of territoriality pursuant to international law. In addition, the Commission did not have jurisdiction under the EU Merger Regulation to prohibit activities in South Africa which, furthermore, the Government there had approved. Moreover, even in the developed segments such as EU and the USA, a contradiction in decisions by the competition agencies is unavoidable. A good example is the case of Boeing/McDonnell Douglas merger which represents a conflict in the co-operation agreements in practice. More specifically, in this case, the FTC reached a majority in deciding not to oppose the merger between the two undertakings, while the European Commission seemed likely, at one point, to prohibit it in its entirety.
It is necessary that with the growth of ample transnational transactions, the desideratum of a general competition law is demanding. However, on the basis of mentioned analysis and evaluations, when adopting such a competition regime, the developing world as the latter is evidently confronting with hindrances in comparison to the former, the developed world. Hence, this still seemingly surrenders and impedes the adoption of a sturdy competition policy mechanism in the both advanced and developing countries.