Competition Policy:
Definition and Scope
Presented by
Dr. M. A. Razzaque
We are going to have discussions on:
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What is Competition?
What is Competition Policy?
What it Covers?
What is the need for Competition Policy?
What is competition?
Competition
Literary meaning: a contestable situation where
people fight for superiority.
In market economy, competition is a process
whereby firms fight against each other for
securing consumers for their products
Fair and Unfair Competition
Fair Competition
Producing quality goods
 Becoming cost-efficient
 Optimizing the use of
resources
 Adopting the best
available technology
 Investing in research and
development, etc.

Unfair Competition
Fixing prices with the
rivals
 Setting a price which is
lower than cost in order to
throw out competitors from
the market
 Advertising that belittles
others’ product, etc.

Types of competition
Price Competition
Competition among suppliers
to win customers by offering
lower price. May not be an
appropriate strategy for those
loyal to a particular brand.
Non-price Competition
Competition
to
win
customers not by lowering
price but by advertising,
offering after-sales-service,
using sales-promotion tools,
etc.
Forms of Market Competition
Models of
Competition
Number of
buyers
Number of
sellers
Nature of
products
Barriers to
entry and
exit
Perfect
competition
Very large
Very large
Identical
products
None
One
Single
product
Very large
Monopolistic
Very large
competition
Large
Minimum
differences
None
Oligopoly
Very few
Large
differences
Large
Monopoly
Very large
Very large
For detailed information please consult

Competition Policy and Law Made Easy:
Monographs on Investment and Competition
Policy, #8 ;CUTS (Pages 1-4)
Oligopoly Market : Competition Among the Few
Key Features:

Interdependence between firms in performance and strategy
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Aggressive action followed by defensive reaction
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Price competition and price war
(Recent packages offered by Mobile Phone companies)
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Intense non-price (promotional publicity) competition, which
may result in wasteful expenditures.
Detail on Oligopolistic market structure

Making Sense of Competition Policy, by Frank Fishwick
(1993) (Pages 47-62)
Competition Policy /Law
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Competition policy => government measures directly
affecting both Firm Behavior and Industrial structure.
A competition policy should include both:
i)
Economic policies adopted by Government, that
enhance competition in local and national markets, and
ii) Competition law designed to stop anti-competitive
business practices.
Components of competition policy
Competition Policy
Government Policies
Competition Law
Private Actions
Deregulation
and
Privatization
Trade Policy
Industrial
Policy
Consumer
Policy
Regulations Governing
Capital and FDI
Other
Policies
Competition Law (National)
Anti-Competitive
Agreements Between
Firms
( Collusion)
•Import cartels
•Price fixing
•Market sharing
•Bid rigging
•Limiting production
•Refusal to buy or
supply
•Tie-in arrangements
•Exclusive-dealing
•Resale price
maintenance
•Territorial allocation
Abuse of a
Dominant
Market Position
• Predatory pricing
• Price
discrimination
• Excessive pricing
• Abuse of
intellectual property
monopoly
Regulation of Mergers to
Prevent Tactics to Gain
Excessive Dominance in a
Market
Applies to:
•Total unification
of the companies
involved
•Buying of
sufficient shares in
a company so as to
have a say in
policy formulation
The three stages of provisions that a
competition law constitutes are:

The behavior and structure of firms in the market
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Institutional and enforcement design with a competition
authority, and

Competition advocacy.
For details on competition policy and law:

Competition Policy and Law Made Easy: Monographs on Investment
and Competition Policy, #8 ;CUTS (Pages 23-26)

UNTCAD: Trade and development Board: Intergovernmental Group
of Experts on Competition Law and Policy; sixth session, Geneva, 8-
10 November 2004 : Communication Submitted by the People’s
Republic of Bangladesh (Pages 2-4)
Need for a Competition Policy
Benefits to Consumers

A fair deal in the market place with:
 The
best possible choice of quality
 The
lowest possible prices, and
 Adequate
supplies of commodities.
Benefits to Efficient Producers
A
safeguard against practices that could drive
companies out of business.
 Lower
entry barriers to promote entrepreneurship and
growth of SMEs.
 Efficient
allocation and utilization of resources
ensures more output and employment.
 Control
of international unfair competition and
restrictive business practices, such as international cartels
On the whole, a competition policy maintains and
promotes the competitive spirit and culture in the
market.
Globalization and the need for Competition Policy
Globalization and Competition
Outcome of
threat to
Concentration of Market Power
Therefore, we need competition policy to monitor, prevent
and control anti-competitive practices.
For details on globalization and competition:

UNTCAD: Trade and development Board:
Intergovernmental Group of Experts on Competition
Law and Policy; forth session, Geneva, 3-5 July 2002 :
The relationship between competition, competitiveness
and development. (Pages 3-6)
Arguments Against Competition
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Preventing formation of large firms may reduce efficiency. The
situation arises when there exists significant economies of scale:
Examples : Natural Monopolies, like,
Infrastructure, Power and Railway .
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An obsession with competition might be counterproductive
leading to inefficiency especially when goods and services tend to
be homogenous.
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Policy actions against highly profitable firms could work against the
development of dynamic and thriving firms.
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Over-regulation could increase firms’ cost of operations and
generates inefficiencies.
Thank you.