Ramirez: Learn from US; do not mix industrial policy and antitrust

Global Competition Review, November 21, 2013

TTackling industrial policy objectives through competition enforcement risks undermining the aims of antitrust law, says Edith Ramirez, chairwoman of the US Federal Trade Commission. Katy Oglethorpe in New Delhi

Speaking at the 3rd BRICS International Competition Conference in New Delhi today, Ramirez said the “proper goals” of competition law were best solved when a competition authority is focused on competition effects and consumer welfare, and when its analysis is not “interrupted to meet social and political goals”.

Ramirez said this has not always been the case in US policy; competition has been “relegated to the sidelines” on several occasions since the Sherman Act was adopted, most notably during the 1930s in actions that “likely prolonged” the Great Depression.

“There is no substitute for a competitive market, particularly in times of economic distress,” she said.

Ramirez cited South Africa’s handling of the Walmart/Massmart merger, which met with several public interest conditions, as an example of attaching non-competition considerations to a merger. Decisions such as this, she said “undermine[d] the goal of clear and predictable standards”.

Moreover, once agencies began to consider issues beyond price, output and innovation, politicians started involving themselves in competition decisions, despite the fact that “the give and take” of the political process is “not the best mechanism of establishing competition effects”, Ramirez said.

Mark Pearson, deputy chief executive at the Australian Competition and Consumer Commission, agreed that it is “destructive” to link sector policy to competition enforcement. Public policy arguments, he said, were “often misused and abused”.

Speaking in a panel which asked what lessons established jurisdictions could offer the BRICS countries (Brazil, Russia, India, China and South Africa), Pearson said he would not necessarily recommend that countries followed the Australian model, as the ACCC’s institutional structure “fitted the circumstances” in which it was established. But he said there were “fundamental principles”, such as independence, which should be universally applied.

Legislation itself was of secondary importance, said Pearson, as you could have a “poor law, [but] a good agency and good outcomes”. What was vital was the integrity, leadership and resources of the agency.

In Australia, said Pearson, competition law has been essential in helping the country’s economic development. “In 1995 we were a basket case,” he said. “Productivity tanked, the economy was going downhill and the government was going bankrupt. The National Competition Policy was one of the factors that helped us come out of this.”

But Pearson said outsiders often took the “mistaken view” that mature agencies have solved all issues of independence. This was not always the case. At present, for example, the ACCC is involved in a “low grade battle” with energy companies who are trying to extract the energy regulatory role from the ACCC.

Pointing out that Canada is home to the world’s first competition law, John Pecman, commissioner of the country’s Competition Bureau, said the authority had gone through many transformations since it was first created.

Each major change to the law, said Pecman, had been followed by a period of increased enforcement. This was critical, he said, as it builds case law and staff experience and sends a message to the business community.

Meanwhile, the impact of advocacy cannot be overstated, he said, as this has “as much if not more effect” than enforcement. Many competition authorities “struggle to achieve the right balance between the two,” he said.

Europe’s competition commissioner Joaquín Almunia said it is “extremely important” that competition enforcers keep channels of communication open. Both developed and emerging markets share the same common goals of open and fair markets, he said.

Only a few years ago the European’s dialogue was limited to a few authorities in the developed world, he said. “Things look very different now,” said Almunia. “We have more and more relations with countries such as the BRICS members.”

“Nowadays the largest cases we are investigating are worldwide,” he said. “It is critical to coordinate.”

The conference concludes tomorrow.

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