The social impact, limits and downside risks
of enacting a competition law and policy
within a society
Hanoi, 23-24 April 2004
Dr. Patrick Krauskopf, Vice-Director, Swiss Competition
Commission
Dr. Pascal Raess, Swiss Competition Commission
Structure of Presentation
1. Competition Law & Policy
2. Legal / Economic / Social / Cultural
Frameworks
3. Social Impact
4. Limits & Downside Risks
5. Conclusion
1. Competition Law & Policy
• Competition law encompasses
–
–
–
–
Horizontal agreements
Vertical restrictions
Abuse of dominance
Merger control
Competition Policy
• … is much broader than competition law:
– Deregulation
– Privatisation
– State-aids and subsidies
– Trade policy
– Investment policy
 Consistency problem
2. Environment for competition
Law & Policy
•
•
•
•
Legal framework
Economic framework
Social framework
Cultural framework
Legal Framework
•
•
•
•
•
Private property
Contract law
Transparent procedure rules
Intellectual property rights (IPR)
Etc.
Economic framework
• Markets should be opened to competition
(privatisation, deregulation)
• Private sector / public sector distortions
should be removed
• Subsidies / State-aids should be carefully
analysed
• National preference
Social framework
•
•
•
•
•
Labour mobility
Unemployment « insurance »
Regional policy
Education
Health
Cultural framework
• Profit as driving economic force
• Entrepreneurship
• Legal and economic training of the relevant
Government bodies / enforcement agencies
• Civil society awareness (consumers,
businesses, etc.)  Competition culture
3. Social Impact (I)
• Unemployment decreases in the long run
(although it might increase in the short run)
• Costly transition period (structural change)
• Sectoral prices might decrease (improved
competition, increased productivity)
Social Impact (II)
• Internal migration (e.g. rural  urban)
• Redistribution of wealth (e.g. via
privatisation)
• Environmental policy (e.g. pollution,
externalities on health)
• Land use policy
4. Limits & Downside risks (I)
• Potential contradictions with industrial policy (e.g.
building « national champions »)
• Potential waste of comparative advantages with
nations without Competition law (attracting FDIs
becomes more difficult)
• Advocates of « one shot » introduction of new
competition law vs. « phased » introduction of
new competition law (i.e. merger control and
abuse of dominance in a second phase)
Limits & Downside risks (II)
• « Unrealistic » business expectations: Competition
law aims at protecting competition (not
companies, notably SMEs)
• « Unrealistic » Consumer expectations
(« Deflation », sharp rise in purchasing power)
• Institutional design of authorities responsible for
competition law and policy enforcement (transparency, accountability, independence)
Limits & Downside risks (III)
• Lack of training & experience of new
competition authority
• Scope of competition law is too limited
• Application of « Per se » rules
5. Conclusion
• Competition law & policy is only one aspect of
economic policy / Consistency with other policy
goals
• The benefits more than compensate potential harms
• Risks of errors are limited with a « rule of reason »
approach
• Capacity building
• Long term cooperation