Political economy constraints in implementing competition law regimes in developing countries

Political economy constraints in implementing competition law regimes in developing countries Maher M. Dabbah DirectorInterdisciplinary Centre for Competition Law and Policy (ICC) Queen Mary, University of London 7Up4 Project CUTS International The Gambia 30 July 2009

1. Introduction • The unique circumstances of developing countries: political, economic, social and cultural • The constraints: • Political constraints • Influence of foreign countries and firms • The role of the government in the economy • Institutional parameters within the regime • Scope of the law • Lack of awareness of the concept of competition and its importance

2. Political constraints • Governments which are made of coalitions • Ideological disagreements are likely to arise • Achieving political compromises and consensus • The problem of short-lived governments and short tours of politicians in ministerial positions

3. Influence of foreign countries and firms • A developing country may not necessarily be 100% in control of its own political and more relevantly its economic affairs • Dilemmas are very likely over the extent and effectiveness of competition enforcement when foreign firms are involved • Bargaining power of foreign firms may be particularly strong and they may enjoy the backing of their own governments. • And of course there is the serious phenomenon of lobbying, especially by special interests

4. Role of the government in the economy • The need for government control is the subject of heated debate • Governments: protecting the greater good of citizens and upholding the principle of social responsibility are supreme because people prefer and feel safe with public control • Non-government voices: no real evidence of this!

Role of the government in the economy . . Cont./ • Heavy government involvement is problematic • Local private firms may be excluded: one example is the construction sector and the need to secure loans • The government may operate a market sharing, price-fixing agreement in partially privatised markets

5. Fixing institutional parameters • The Questions • Who should have responsibility for enforcing the law? • Should the relevant competition body in question be independent or part of the executive branch? • Should courts have a role to play in the enforcement of the law and if yes, what should that be? • What resources (including human and financial resources as well as expertise) are needed and how can these be secured? • In case where more than one actor is involved in the operation of the regime how can one ensure that bureaucracy of the regime would not derail enforcement actions?

Fixing institutional parameters . . Cont./ • Two specific issues of particular importance and deserve attention: • FIRST: Structure, composition and powers of the relevant competition authority • Lack of independence • Political intervention and pressure: statutory and non-statutory based • ‘Doubling’ of officials • SECONDLY: Lack of expertise • Difficulty in attracting talent and expertise to new competition authorities

6. Scope of the law • Narrowing down the meaning of key terms such as ‘entities’, ‘undertakings’, ‘persons’, ‘companies’ etc. to EXCLUDE public bodies • Limiting the definition of terms such as ‘collusion’ to ‘written’ contracts and agreements and not mentioning ‘conspiracies’, ‘concerted practices’ etc. • Use of exemptions and exclusions

Scope of the law . . Cont./ • Role of non-competition considerations: • Employment; general economic development etc. • Existence of political pressure • Bundling competition and non-competition elements in the Law: • Trade policy; unfair competition; anti-dumping; and price control

7. Lack of sufficient awareness of the concept of competition • This is very evident • The mentality of ‘defeating’ competitors through dishonest and fraudulent practices • Undermining private forces deliberately by public forces to ensure superiority of public sector

8. Role of international organisations • Important contribution made by different international organisations must be acknowledged especially in relation to: • Enacting competition legislation • Capacity building and technical assistance • Reviewing competition regimes for improvement etc. • Concerns of developing countries: • Need to avoid a top-down approach at all cost • Need to have a dialogue

Thank you! Maher M. Dabbah Email: m.dabbah@qmul.ac.uk

Political economy constraints in implementing competition law regimes in developing countries