A bi-monthly, internationally circulated e-newsletter of the CUTS-Centre for International Trade, Economics & Environment (CUTS-CITEE), which has been designed to disseminate information about the “7 UP Project”, in addition to reporting interesting newsitems, which have been reported across the globe on competition and other related issues.
The 7-Up Project is a 2 year research and advocacy programme being conducted by the Centre with the support of DFID, UK for a comparative study of competition regimes of seven developing countries of the Commonwealth.
Editor’s Note
The 7-Up project is now entering a crucial phase, in which the partners have started work vis-à-vis the first phase of the project. The project involves comparative study of the competition regimes of seven developing countries: India, Pakistan, Sri Lanka, Kenya, South Africa, Tanzania and Zambia, with the goal of learning from each other and promoting a healthy competition culture. The last two months have essentially been for the preparation of the first phase, which involves a stocktaking of the competition regime. This phase would require intensive fieldwork on the part of the partners. For instance, interviews, formation of National Reference Group comprising all possible stakeholders etc. The draft country reports for the first phase will be completed over the next two months. A questionnaire has been developed to enable researchers to carry out interviews and collect the requisite information from all sources, including the competition authorities.
The last couple of months have also seen competition issues taking the centre-stage at national level in a number of countries as well as at the international level. South Africa is witnessing court battle that the world’s biggest pharmaceuticals companies have launched against the Government making it difficult for them to provide life saving AIDS drugs to people at affordable prices. The pharmaceutical industry in the west needs to justify why their prices are so high, when others can provide it at one-twentieth of their prices, and why their patents should be so religiously protected when millions of people are dying.
On the other hand, in India there is a raging debate concerning the proposed new Indian competition law. A section of the industry as well as intelligentsia is opposed to the proposed law, particularly the merger review provision. In this conundrum, several other provisions, necessary for safeguarding the interests of the common people are taking a backseat. Against this backdrop, CUTS has started its advocacy for the proposed competition law, which is a vital instrument for industrial democracy and thus good governance.
Another important development is internationalisation of issues relating ed to competition policy. The pronouncement by Mario Monti, the European Union’s Competition Commissioner, favouring a global competition forum was followed by a meeting at Ditchley Park in England, . The meeting was organised by the International Bar Association, which also emphasised the need for a global competition forum. In view of the recent spurt in anti-competitive practices at the international level, there appears to be a near consensus that a multilateral competition framework is necessary whatever be its institutional arrangement and the level of commitment by countries.
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Project Progress
The project titled “Comparative Study of Competition Regimes in Select Developing Countries of the Commonwealth” is heading towards its third quarter now. The project, popularly known as 7-Up, is being implemented by CUTS, Jaipur with the support of the Department for International Development (DFID), UK. The purpose of the Project is to do a comparative study of competition regimes in seven developing countries of the Commonwealth. The countries, which have been chosen for the study, are India, Pakistan, Sri Lanka, Kenya, South Africa, Tanzania and Zambia.
In its second quarter, the Project witnessed some major developments. For instance, the formal launch of the Project, finalisation of the plan of action and research methodology of the Project and formal beginning of the first phase of the project. The earlier two issues of “7-UpDate” carry a brief description of the progress of the Project during the months September-December 2000, including a brief of the proceedings of the Launch meeting of the Project held on December 20-21, 2000, in Jaipur, India.
The following developments took place in the project during the months of January and February 2001:
Revision of Preliminary Country Papers
During the first quarter of the project, i.e. September-November 2000, the partners prepared a preliminary country paper on the respective countries, on the basis of the annotated agenda, which was sent to them in advance. The researchers then revised these country papers on the basis of the comments received from the Project Advisory Committee.
These papers were presented by the country researchers at the time of the Launch Meeting and were deliberated upon. On the basis of the suggestions, which came out at the Meeting, a list of desirable components of the preliminary country papers was prepared. This list lays down the elements, which need to be added in the country papers. This has been communicated to all the partners and they are in the process of revising the preliminary country papers. It is also proposed to publish these revised preliminary country papers in the form of a document.
Questionnaire
In the second quarter of the project, the research methodology and strategies for the implementation of the project were also decided upon, up to a certain extent. A questionnaire has been developed in order to enable the researchers to carry out interview and collect all the relevant data and requisite information from the competition authorities and other sources.
The questionnaire includes questions on issues related to institutional framework for enforcing the competition laws in project countries. On the basis of the comments and suggestions that surfaced at the Launch Meeting, a draft of the said questionnaire was prepared. This questionnaire was then sent to members of the Project Advisory Committee and the project partners for their comments. These comments and suggestions have been incorporated in the draft questionnaire and the final version of the same would be sent to the project partners.
National Reference Group
One of the important components of the project is the formation of a National Reference Group (NRG) in each of the project countries. NRG would be formed to deliberate on the inputs prepared in each country and create a base that would be used for launching advocacy for a healthy competition culture. The NRG would comprise of representatives of the following category of organisations/persons:
- Consumer organisation, where existing and having the capacity
- Other civil society organisations with demonstrated interest in economic issues
- Research institutions, academia, experts (economists and lawyers)
- Chambers of Commerce
- Media
- Competition Authority
- External Trade Department
- Internal Trade and/or Consumer Affairs Departments
- Politicians and/or Parliamentarians
- Regulatory Authorities
A preliminary list of proposed members of NRG has been prepared for India and has been circulated to all the partners as some sort of a model. This list would enable the partners to prepare a preliminary list for their respective country. The partners would send the preliminary list of members to CUTS, which in turn would help them in sorting out the names and preparing the final list of the same.
Major News & Views
1. Monti foresees global forum for antitrust watchdogs to work together
A global competition forum that would provide a framework for managing co-operation between antitrust authorities worldwide may be established as early as July, said Mario Monti, the EU’s Competition Commissioner, yesterday, reports Guy de Jonquieres in Davos.
Mr. Monti said, the forum would be an informal body that enables the roughly 80 countries that have competition laws to co-ordinate their policies more closely and conduct a dialogue on antitrust matters. It would also carry out analytical work.
He said the forum would not seek to become a global regulator or to harmonise competition laws but to strengthen co-operation between the rapidly growing numbers of national watchdogs. The plan is to be discussed by experts at a meeting in Britain next weekend organised by the International Bar Association.
Creation of the forum, which would be broadly similar to an initiative proposed by the US last year, was recently backed by the International Chamber of Commerce, many of whose members complain about the complexity of dealing with multiple competition jurisdictions.
Mr. Monti said the forum was not an alternative to an EU proposal for negotiations in the World Trade Organisation on a framework agreement that would establish core principles for domestic competition policy and international co-operation mechanisms.
The proposals have faced resistance from the US and many poor countries. To make them more acceptable, the European Commission has recently suggested that all WTO members should not be obliged to subscribe to an agreement immediately.
2. Antitrust Forum must treat developing countries with care
From Mr. R. Shyam Khemani
Sir, the suggestion by Mario Monti, the European Union Competition Commissioner, of establishing a global forum to foster co-operation and dialogue among antitrust authorities in the growing number of countries with competition laws is a welcome initiative (report, January 30).
While this idea has been percolating for some time, for example in the US attorney general’s international competition policy advisory committee, the Asia-Pacific Economic Co-operation, the Organisation for Economic Co-operation and Development and the World Trade Organisation, great care needs to be taken in formulating the objectives, composition and governance structure of such a forum, especially from the viewpoint of developing countries. (The Industrial economies such as Canada, the EU and the US have well-established bilateral arrangements in this regard.)
My experience in advising and fostering competition policy in more than two dozen developing countries during the last decade indicates that the policymakers in these countries harbour many concerns that need to be sensitively addressed. Among these concerns are: that global initiatives on competition policy (which includes not only antitrust but also privatisation, economic regulation and trade liberalisation) are driven more by ideology than by an understanding of the socio-economic-political constraints countries face; that there is less genuine interest in promoting economic development than providing market access in the interests of multinational companies; and that open markets and that increased global competition will result in economic disruption, erosion of domestic company capabilities and the fire sale of their assets. Also, there exists a “double standard” among the antitrust agencies in industralised countries that give exemptions to export cartels and silently stand by when anti dumping suits are launched by companies to limit import competition, mainly from developing economies.
Any global initiative on competition policy first needs to establish credibility by being a self-standard, independent organisation composed of representatives of industrialised and developing countries, donor agencies and private sector companies on a equal footing. The objective of the forum should be to assist countries in promoting competition in their own domestic markets so as to provide greater opportunities for the population to participate in their economy and reap the benefits that flow from competitive markets. After some reasonable period, such economies will be better positioned to integrate into the global economic system. Also, the forum could act as a vehicle for the co-ordination and delivery of various technical assistance programmes to build appropriate institutional capacity. These and other steps can make the forum an important catalyst for change.
3. Ditchley Park Meeting Sets the Stage for New Global Competition Forum
43 senior competition officials and professionals in an individual capacity gathered at Ditchley Park in England to discuss the design and set the stage for what has become known as the Global Competition Forum (GCF). The participants represented 23 countries, 20 competition authorities and nine other international institutions.
The meeting, which ran between 2-4 February 2001, was convened and hosted by the International Bar Association, with support from the American Bar Association’s Antitrust Section and the Fordham University Corporate Law Institute.
The idea for a new GCF was first mooted a year ago in a report prepared by an advisory committee to the US Attorney General and the head of the Antitrust Division of the US Department of Justice (DoJ) – the International Competition Policy Advisory Committee (ICPAC). The proposal gained impetus at the EC Merger Control 10th Anniversary Conference in September 2000 when the then Assistant Attorney General of the DoJ’s Antitrust Division, Joel Klein, provided public support from the United States for the first time. EC Commissioner, Mario Monti, in speeches at Fordham University and the European University Institute in October 2000, strongly endorsed this approach.
The Ditchley Meeting considered three key issues:
- Merger control in the 21st Century;
- Competition Policy and competition advocacy in developing countries; and
- Structural and process issues which face a new global initiative.
The Participants stressed the need to add practical value to the work of existing institutions and make a particular effort to address the needs of developing countries and those with fledgling competition law regimes. The delegates agreed that the proliferation of merger laws and differing processes worldwide have increased the cost to business, lead to new challenges to competition authorities, and in some cases, had an adverse effect on business opportunities. Also, while much is already being done to facilitate dialogue between competition authorities from developed countries, many of those who participated in the meeting felt that the Global Initiative had a vital role to play in deepening the involvement of developing countries into those discussions, with the combination of participants representing a unique feature of the Forum.
The participants concluded that the new “virtual” organisation would ultimately need to put in place a Steering Committee to oversee its formal birth and ongoing management. In the meantime, an informal planning group has been formed to assist with interim planning and to identify potential Steering Committee candidates. A formal launch of the Global Competition Initiative is expected as early as the end of the year.
Overview of Competition in Zimbabwe
Need for Competition in Zimbabwe
Competition is often considered as the engine that makes market economies work – it is an essential element in the efficient working of markets. Competition forces firms to become efficient and to offer a greater choice of products and services at lower prices. Competition also plays a very important resource allocative function.
In view of its importance to economic development, competition policy is viewed as the fourth cornerstone of most governments’ economic framework policies along with monetary, fiscal and trade/industrial policies.
In Zimbabwe the need for competition policy became paramount when the country adopted economic reforms in 1990. The economic reforms program incorporated the major elements of trade liberalisation, de-regulation, and public enterprise reform. There was however growing concern in both Government and business community that despite the economic reforms introduced, there was lack of competition in Zimbabwe domestically and its industries were internationally not competitive. The full benefits of the economic reforms were therefore felt to be better realised under the conditions of fair competition which stimulate consumer awareness, and reward those enterprises that are more efficient while sanctioning those that perform poorly.
The Competition Authority
The Competition Authority in Zimbabwe is the Industry and Trade Competition Commission, an independent statutory body established by the Competition Act, 1996 (No.7 of 1996). The functions of the Commission are, inter alia to:
encourage and promote competition in all sectors of the economy;
reduce barriers to entry into any sector of the economy or to any form of economic activity;
investigate, discourage and prevent restrictive practices; and
study trends towards increased economic concentration, with a view to investigate monopoly situations, where they are contrary to the public interest.
The members of the Commission (the Commissioners) are appointed by the President of the Republic of Zimbabwe for their ability and experience in industry, commerce, administration or their professional qualifications. A Director heads the professional and administrative staff of the Commission.
Unfair Trade Practices prohibited under the Competition Act
Under the Competition Act, unfair trade practices include restrictive practices. The Act defines a restrictive practice or method that restricts competition in that the action:
- restricts the production or distribution of any commodity or service;
- enhances or maintains the price of any commodity or service;
- prevents the production or distribution of any commodity or service by the most efficient or economical means;
- prevents or retards the development or introduction of technical improvements in regard to any commodity or service;
- prevents or restricts the entry into any market of persons producing or distributing any commodity or service for the development of new markets, therefore.
Unfair trade practices prohibited under the Act fall into two prohibition classifications – the rule of reason and the per se prohibitions.
Restrictive practices are considered under the rule of reason approach where an attempt is made to evaluate the pro-competitive features of the restrictive practice against its anti competitive effects in order to decide whether or not the practice should be prohibited.
The opposite of the rule of reason approach is to declare certain business practices illegal per se. Under this approach it only requires proof that the practice was engaged into declare it illegal and prohibited – no analysis of the competitive effect is required. Under the Competition Act, certain specified unfair trade practices such as (a) misleading advertising, (b) false bargains, (c) distribution of commodities or services above advertised price, (d) undue refusal to distribute commodities or services, (e) bid rigging, and (f) collusive arrangements between competitors are per se prohibited.
Enforcement of Competition Law
In enforcing competition law the Competition Commission has powers to issue orders prohibiting or terminating any identified anti-competitive practices. It also has powers to order regulation of prices of commodities or services, if such prices are essential for maintenance of any identified restrictive price. The Commission’s orders have the same effect as a High Court or Magistrate Court judgement and may therefore be used to sue for damages by any aggrieved party.
The Act also provides for penalties in the form of fines and/or imprisonment for contravention of its provisions.
Authorisations
The Act also provides for authorisation of certain restrictive practices, mergers and other anti-competitive conduct in the form of exemptions and waivers to its provisions. Any person who proposes to engage in any practice or conduct, which he considers may be prohibited, restricted or otherwise affected by the Act, may apply to the Commission for authorisation of such a practice or conduct.
Applications for authorisations are considered using the rule of reason approach, i.e., the pro-competitive features of the practice or conduct are evaluated against its anti-competitive effects in order to decide whether or not the practice or conduct should be authorised.
Event
Inauguration of CUTS Africa Resource Centre
On 20th February 2001, Honourable William Harrington, Zambia’s Acting Minister for Commerce, Trade and Industry, inaugurated CUTS Africa Resource Centre, Lusaka, Zambia. Noted persons such as Shri. Ashok K Attri, The Indian High Commissioner to Zambia, Dr. Nicholas Kwendakwema, Chairman, Zambia Competition Commission and Mr. George Lipimile, The Executive Director of Zambia Competition Commission attended the ceremony as special guests.
The Centre has been set-up for the purposes of effective project management and for facilitating project- implementation in the select African countries. Lusaka seemed to be the most advantageous place for various reasons such as lower costs, friendly attitude of the government and location of the headquarters of COMESA. A project on competition policy for all the 20 member countries of COMESA in collaboration with UNCTAD and funded by the EU is proposed to be implemented. The Secretariat has already indicated a willingness to seek CUTS’ help in implementing the Project. Thus the overall goals of the Project will be buttressed through a collaboration and location at Lusaka.
In short, the Lusaka office would provide a cost-effective way of providing assistance to the governments in the region, in cooperation with COMESA, to promote consistency of laws and policies. This in turn would assist in the establishment of Free Trade Area and reducing regional trade barriers. At the same time it is expected to minimise the risk of duplication or wastage of technical assistance efforts by donor countries/agencies.
CONTACT US
CUTS Centre For International Trade, Economics & Environment (CITEE)
D–217, Bhaskar Marg, Bani Park,
Jaipur 302 016, India,
Ph: 91.141.2282821
Fax: 91.141.2282485
Email: cuts@cuts.org