NEW YORK UNIVERSITY SCHOOL OF LAW.
COLLOQUIUM: ANTITRUST LAW AND ECONOMICS.
PROFESSOR LAWRENCE J. WHITE.
A GENERAL ANTITRUST FRAMEWORK FOR
EMERGING MARKET ECONOMIES.
BY: JOSÉ MIGUEL AZPÚRUA ALFONZO (LL.M 2005).
A GENERAL ANTITRUST FRAMEWORK FOR EMERGING MARKET ECONOMIES.
By: José Miguel Azpúrua Alfonzo.
Executive Summary:
The movement for a multilateral competition policy has been the menu a la carte
of most academic and governmental institutions, thereby supporting the idea of
harmonizing trade liberalization and competition policies under a common scheme,
which has been subject to important debates in the international fora. But one of the
major drawbacks in such process has been the disparity between the ideological and
structural elements of the different economies, and the gap that result from the mismatch
between the public economic policies of nations.
The present study examines the process that developing countries have to go
through as a precondition for being able to actively participate in the development of a
multilateral framework of trade and competition: the adoption of competition policy as a
prerequisite for a multilateral competition framework. Thus, the main argument presented
herein is that the mere adoption of a competition law is not sufficient for developing
countries to carry upon a coherent market-based competition policy, and that there are a
multiplicity of elements that also need to be created and further implemented in order for
a competition policy to be successful, so that it can constitute the proper foundation for
multilateral integration. In light of the above, the paper examines the process of adopting
a competition policy from its first starting point, up to its structural organization and
ulterior implementation: it analyzes the creation of an antitrust framework from the scope
of emerging market economies.
2
A GENERAL ANTITRUST FRAMEWORK FOR EMERGING MARKET ECONOMIES.
José Miguel Azpúrua Alfonzo.1
1. INTRODUCTION: COMPETITION POLICY
AS A
PRECONDITION
FOR
TRADE
LIBERALIZATION.
The adoption of competition laws has often been regarded as “one of the
cornerstones of the liberalization and pro-market reforms that have swept many
developing countries.”2 But as these countries have become increasingly aware of the
implications of globalization and “the usefulness of controlling global markets” 3, an
ulterior challenge arises, which is addressing the disparity between trade and competition
under the scope of global markets.4
While trade liberalization on an international scope may expand the territorial
consumer reach of firms and thereby imply more competition, it also “entails short or
medium term adjustment costs and raises political difficulties.”5 But it may as well
increase the need for competition law in developing countries, as trade liberalization has
adversely affected small and medium competitors, and has provided the grounds for
1
Abogado (2004), UCAB (Caracas, Venezuela). LL.M Candidate (2005), New York University School of
Law. APCBL Candidate (2005), New York University Stern School of Business.
2
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
3
Frederic Jenny, Globalization, Competition and Trade Policy: Convergence, Divergence and
Cooperation, Address before the Conference on Competition Policy in the Global Trading System:
Perspectives from Japan, the United States and the European Union (June 13, 2000).
4
The term “developing countries” is used broadly, including the least-developed countries.
5
Id.
3
market dominance of few firms, either unilaterally or collusively. 6 Nonetheless, policy
makers in developing countries may have the idea that antitrust enforcement can “harm
the creation of a technological infrastructure that would enable firms in developing
countries to achieve dynamic efficiency and compete in the future in global markets, and
that it would strengthen distributive justice concerns.”7
Thus, there is one essential preliminary phase for convergence of trade and
competition, which is the requirement that developing countries not only adopt antitrust
laws, but that they are willing and able of implementing them effectively, a process that
faces many obstacles from different sorts along the way.
In this sense, many are the developing countries that have recently undertaken
economic reforms that involve “greater reliance of markets and less emphasis on state
intervention.”8 These reforms include the underlying aspect of a renewed confidence
“that market forces and the individual decisions of consumers and privately owned
business[es] can make a greater contribution to economic and social development than
an inward-looking centralized economic system”9
6
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
7
Id.
8
Lucian Cernat and Peter Holmes, COMPETITION, COMPETITIVENESS AND DEVELOPMENT: LESSONS FROM
DEVELOPING COUNTRIES: INTRODUCTION [UNCTAD/DITC/CLP/2004/1 (2004)].
9
Id.
4
Most of emerging market economies that have gone through the threshold of
abandoning a system of State-paternalistic and highly regulated economy (which leaves
little or no ground for the implementation of competition policies, due to the fact that
market forces are not in control of essential factors for competition, such as price) have to
use Antitrust advocacy powers in order to counteract the institutional bias of government
institutions in order for markets to blossom, as it has been the case of Costa Rica and
Panama.10
Moreover, since competition policies are often devised to have long run benefits
and are generally applied, they may well encounter political obstacles. Also, a proper
structural and institutional framework is required for the effective implementation of
antitrust, and this may well not fit the agenda of governments that are more interested in
investing to achieve short and medium term benefits, ignoring the importance of
continuity regardless of the transition of governments.
Despite these obstacles, effective antitrust implementation in developing countries
is indeed a precondition for the development of international trade liberalization. The
Doha 2001 Ministerial Declaration acknowledges this issue and provides that the World
Trade Organization and UNCTAD shall assist developing countries in building the
necessary capabilities in order for them to actively participate in the process of devising a
multilateral framework for the convergence of competition and trade.11
10
Ignacio De Leon, A Market Process Analysis of Competition Policy in Latin America, at
http://ssrn.com/abstract=258959
11
Doha WTO Ministerial Declaration (Par.24), WT/MIN(01)/DEC/1 (2001).
5
In the present study we intend to address the manner in which developing
countries and others that have progressively opened themselves to global markets, such
as China, should adopt competition policies. We will analyze the series of factors
involved in such process, basing our study in two main assumptions: First we assume as
Professor Gal, that “competition policy is an optimal tool for promoting the economic
and social objectives of developing countries.”12 The experience in developed countries
has shown very clearly that Competition policy is of the essence for the economic
development. “By successfully implementing competition policy, developed nations have
significantly reduced inefficiencies in their economies and firms in those countries have
invested billions of dollars in research and development, innovation and human resource
development.”
13
Thus, it is of utmost interest to determine the degree in which
developing countries can learn from the experience of developed countries. For that
matter, the present study takes another assumption into account, which is that competition
policies have to be developed on a casuistic fashion, thereby taking into account the
unique characteristics of each country and the present factors that may not be universally
common to other countries. In that sense, this study will aim to extract general guidelines
that should rule the creation of an antitrust framework that present a certain range of
adaptability to the conditions of each market, aiming towards their effective subsequent
implementation.
12
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
13
Menzi Zimelane, Competition Policies in Developing Countries: Dealing with the Challenges, at
http://www.compcom.co.za/events/conferences/14%20&%2015%20March%202002%20Conference%20S
peeches/Adv.Simelanecomp_law_&_policy_in_a_Dev.coun.htm
6
Since adopting an efficient competition policy does not solely rest in the letter of
the law, the present research will also analyze the possible difficulties in implementing
competition laws based on the experience in some countries in order to extract important
elements to consider when devising it.
2. JUSTIFYING COMPETITION POLICY IN DEVELOPING COUNTRIES.
The notion of competition policy refers to a set of government actions oriented to
the protection and promotion of competition in a given market. As Richardson stated:
“Competition policy comprises measures and instruments used by government[s] to
influence ‘conditions of competition’ that reign in the markets.”14 It should be noted that
adopting competition law is only one aspect of competition policy, since the latter
“covers a whole range of executive policies and approaches, while the [former] is a piece
of legislative enactment enforceable in a court of law.”15 In this sense, Adhikari defines
competition policy as “[the] ensemble of government actions aimed at protecting and
promoting competition in the market[,] [which includes] well-motivated articulation of
competition issues in industrial policy, trade policy, investment policy, service policy and
consumer policy as well as enactment of competition law.”16
As there is an increasing trend of implementing market-based economic policies
David J. Richardson, “Multilateralising Coventions”, in Brookings Trade Forum (R. Lawrence ed.,
1998).
14
15
Ratnakar
Adhikari,
Competition
http://www.eldis.org/static/DOC13012.htm
16
Policy
Id.
7
in
Small
Economies,
available
at
undertaken by many countries, there is the subsequent expectation that markets will be
increasingly efficient in aiming their efforts towards consumer satisfaction and
successfully redirecting their limited resources in order to meet the demands of
consumers.17 “As part of this policy change, countries generally establish competition
policies. A shift toward market-based policies does little to improve economic growth and
efficiency if monopolies are allowed to develop in the newly established markets.”18
One of the pillars of competition policy is the effective implementation of
competition laws. As one of the regulatory tools that compose the palette of a competition
policy, it aims to limit the competitors’ activities in order to catalyze the resulting
anticompetitive effects of private trade barriers, and thereby “ensure that the benefits of
competition are not frustrated.”19
Thus, competition laws are part of a broader framework, and cannot be enacted in
a manner that isolates them from the other factors that form part of competition policy.
3. FACTORS THAT INFLUENCE THE DEVISE OF AN ANTITRUST FRAMEWORK IN THE
CONTEXT OF DEVELOPING COUNTRIES.
Many are the problems that one can find common to developing countries:
inefficient governmental bureaucracy and institutional structure, excessive State
17
David Smith and Su Sun, Introducing Competition Policy into Developing Economies: A summary of the
Lessons Learned, PERSPECTIVES, Vol. 2, No. 4.
18
Id.
19
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
8
regulation and interventionism (and a subsequent lack of competition culture), corruption
and little economic development are, among others, the conditions that are initially faced
when embracing a free-market system and its ulterior competition policy. In that sense,
“the experience of many emerging competition authorities underlines the importance of
identifying the specific challenges developing countries face in adopting and enforcing
competition law as part of an overall public policy mix in pursuit of economic
development.”20
But despite the above, at this point of the analysis it is important to note that there
are some inherent risks in adopting competition policies, as expressed by by Khemani
and Dutz: "We examine and reject the view that the administration and enforcement of
competition law itself must inevitably become a source of intervention in the market,
corruption, misuse of bureaucratic power, or cause of market distortions. All of these
risks can be dealt with through institutions that incorporate accountability, transparency,
checks and balances, and clear rules and procedures. The design and implementation of
competition law, and the mix of policy instruments and enforcement priorities must,
however, reflect the institutional endowments and technical capacity of countries at
different stages of economic development."21
The benefits of a shift towards a market-based economy will not be efficiently
20
Id.
21
R. Khemani and M. Dutz, "The Instruments of Competition Policy and their Relevance for Economic
Development", in REGULATORY POLICIES AND REFORM: A COMPARATIVE PERSPECTIVE, (Claudio R.
Frischtak ed., 1995).
9
realized unless the competitors are prevented from posing ulterior restrictions in
competition. As it is the case of deregulation processes and the so-called monopolies:
“Deregulation of previously regulated sectors, including state-controlled monopolies
such as utilities and ‘network industries’, for a long time considered for the most part to
be ‘natural monopolies’, need to be subject to competition review by competition
authorities or sectoral watchdogs to ensure that these firms do not abuse their dominant
position in the market. It is now considered likely that competition is possible in markets
once thought of as naturally monopolistic, especially telecommunications, but experience
worldwide shows us that incumbent monopolists often have tricks up their sleeves to
inhibit this.”22
In light of the above, the present study now turns to the analysis of the different
phases that developing countries face in adopting and implementing an efficient antitrust
framework.
3.1. Preconditions for Adopting a Competition Law.
Competition culture determines the degree of success (or failure) of a competition
law.23 By examining the experience of some Latin American countries, one can note that
it was a common feature in their past to have interventionist industrial policies destined to
regulate the essential aspects of the economy, which certainly posed an important barrier
22
Lucian Cernat and Peter Holmes, Competition, Competitiveness and Development: Lessons from
Developing Countries [UNCTAD/DITC/CLP/2004/1 (2004)].
23
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
10
to the development of a competition policy.
Thus, if competition laws are inconsistent with the existing socioeconomic
ideology of a country, that is to say, if there is no competition culture, the governmental
enforcers will lack the necessary incentives to carry upon their effective enforcement.
Moreover, this also explains why some countries with competition laws where not
able to enforce them accurately during their first years (even decades) of their existence.
This was the case of Israel, where not until the government adopted a “pro-market
orientation” the legislation began to have a significant impact on the Israeli economy.24
Also, some countries in Latin America had enacted competition laws for many decades
(it is noteworthy that Argentina issued its competition law in 1919), but despite their
history of competition legislation, the enforcement of competition laws had been
inefficient due to the prevailing of government controls and protectionism.25
The cultural values of the region have traditionally been inconsistent with the
ideals of a free market based economy, and find their roots in the remote era of
colonization.26 Disparity in wealth and the conformation of elites that exercise “rent
seeking activities” rather than entrepreneurial goals led to the association of economic
24
Id.
25
Ana Julia Jatar, Implementing Competition Policy in Recently Liberalized Economies: The Case of
Venezuela 80 (Antitrust in a Global Economy, Fordham University Law School, Corporate Law Institute.)
(Barry Hawk ed., 1993).
26
Ignacio De Leon, A Market Process Analysis of Competition Policy in Latin America, at
http://ssrn.com/abstract=258959
11
development with government intervention, which was carried upon “through an
unpredictable awkward combination of social forces”27, that implied the clash between
elites aiming for an institutional modernization and “private groups exercising rent
seeking behaviour.”28 This led to the outcome of highly concentrated market structures in
the domestic markets. “Only in the 1990s has there been a revival of antitrust interest in
the region, coinciding with the economic reforms implemented to reduce government
direct control and to build a market economy.”29
Thus, one can conclude that as minimum ground for the enactment of an effective
competition legislation, the government of the country will have to employ a free market
based economic policy, which would progressively allow the market forces to control
essential factors such as price and also to recognize consumer sovereignty thereby aiming
for a better resource allocation that would allow consumer satisfaction as an ultimate
goal. Nonetheless, “a competition law should not imply the adoption of competitiveness
or economic efficiency as a stand-alone goal”30, since it requires the government to adopt
a policy of ultima ratio for regulating of competition, that is, only when such regulatory
measures are oriented to the accomplishment of other social objectives that are deemed
more important after doing a balancing analysis of the procompetitive versus
27
Id.
28
Id.
29
Ana Julia Jatar, Implementing Competition Policy in Recently Liberalized Economies: The Case of
Venezuela 80 (Antitrust in a Global Economy, Fordham University Law School, Corporate Law Institute.)
(Barry Hawk ed., 1993).
30
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
12
anticompetitive effects that may derive from such policies.31
3.2. Enacting a Competition Law for a Developing Country.
Although countries do not have identical market conditions (“what is appropriate
for one economy might not be for another”), there is a set of similarities that provide
grounds for a comparative analysis that may allow one country enacting a competition
law to learn from the mistakes of their predecessors.32
Despite the above, there has been a tendency to use the antitrust laws of the
United States as a model/reference when enacting a competition law, which has led to a
subsequent failure in the enforcement stage. Moreover, while enacting a competition law,
the legislators should aim to eliminate informal rules that favor the misappropriation of
social resources by opportunistic free riders33, thereby guaranteeing a set of conditions
under which firms find incentives to compete.
Nonetheless, it is evident that there are certain guidelines as to what standards
should govern the legality of certain anticompetitive conducts. For example, it is obvious
that horizontal collusions oriented to fix prices are plainly anticompetitive and should be
subject to strict enforcement. Thus, a per se standard could serve to deal with the
31
Id.
32
David Smith and Su Sun, Introducing Competition Policy into Developing Economies: A summary of the
Lessons Learned, PERSPECTIVES, Vol. 2, No. 4.
33
Ignacio De Leon, A Market Process Analysis of Competition Policy in Latin America, at
http://ssrn.com/abstract=258959
13
illegality of horizontal restraints such as price fixing or bid rigging.34
However, there are other conducts that do not evidently fall into the realm of plain
anticompetitiveness due to the potential procompetitive benefits that may derive from
them. This is the case of vertical restraints, which has received a diverse legal treatment
in different jurisdictions.
While some jurisdictions have adopted analyses that tend to weigh the
procompetitive and anticompetitive effects in a casuistic fashion in order to determine the
legality of a vertical restraint (such as it is the case of the United States and Europe),
there are other legal systems that have adopted general prohibitions for vertical restraints.
In this sense, the Brazilian Antitrust Law35 contains a prohibition for distribution
restraints as one of many that compose the lists of violations to the economic order that
the said law so condemns. In that sense, it is pertinent to examine article 20 which has a
general prohibition:
“Article 20. Notwithstanding malicious intent, any act in any way intended or otherwise
able to produce the effects listed below, even if any such effects are not achieved, shall be
deemed a violation of the economic order:
I - to limit, restrain or in any way injure open competition or free enterprise; (…)”
Thus, Brazilian Antitrust authorities are bound to the statutory rigidity that such a
34
David Smith and Su Sun, Introducing Competition Policy into Developing Economies: A summary of the
Lessons Learned, PERSPECTIVES, Vol. 2, No. 4.
35
Brazilian Antitrust Law (Law Nº 8.884/94), as amended by Law Nº 10.149/2000.
14
prohibition implies, leaving little, or even no room for an economic analysis.
36
Ideally,
vertical restraints should require additional proof of anticompetitive effects beyond
merely declaring the illegality of their existence, since there may well be resulting
procompetitive efficiencies that justify them.
Another important element when enacting a competition law should be choice of
penalties, which has to be individually adopted by countries in accordance to their
cultural values. For example, a civil law-based jurisdiction that has institutionally placed
competition policy under the legal scrutiny of Administrative Courts would find
difficulty in enforcing criminal antitrust sanctions. This have been the case of many Latin
American Countries which do contemplate criminal sanctions in their competition
statutes, but that rarely impose them. Thus, in developing countries of this sort, the
importance of accurately determining proper civil penalties is paramount.
As Smith and Sun propose, the probabilities of detection and conviction must be
taken into account when establishing the penalties, and thus, “the expected value of the
penalty shall exceed the expected value of the illegally obtained profit.”
37
Hence,
assuming the certainty of an illegally obtained profit, if there is a small probability of
detection and conviction, then the penalties would need to be greater than the value of
such illegal profit. As the referred authors illustrate: Where “X” represents the amount of
36
José Miguel Azpúrua Alfonzo, A Global Perspective on Vertical Distribution Restraints and Other Unfair
Competition Practices: The Carbonated Soft Drink Industry (2005) (unpublished seminar paper, New York
University School of Law) (on file with author).
37
David Smith and Su Sun, Introducing Competition Policy into Developing Economies: A summary of the
Lessons Learned, PERSPECTIVES, Vol. 2, No. 4.
15
the profit illegally gained, “if the probability of detection and conviction were 50 percent,
the fine would need to be greater than $2X to make the expected value of the penalty
greater than the expected gain.”38
3.2.1. Merger Policy in Developing Countries: Justification and Devise.
Highly concentrated markets imply an increasing possibility of collusion between
firms, and this in itself justifies merger control in developing countries. Nonetheless, lack
of competition advocacy has led to some least developed countries to deem merger
control unnecessary by believing that it “impedes the restructuring of firms trying to
obtain the ‘critical mass’ necessary to compete in world markets, and that having a
‘national champion’ even abusing a monopoly position on the domestic market allows it
to be competitive in foreign markets.”
39
Other developing countries simply lack the
necessary resources to carry upon the activities that lead to effective merger control.
Moreover, there are countries with such small economies lacking industrial infrastructure
that it has been argued that they do not require merger control.40
Despite the above, it is evident that “the need for merger-control provisions is
greater than the convenience of their absence.”41 It could be the case that the absence of
a merger control provision would deprive a country from having the legal grounds to
38
Id.
George K. Lipimile, “Competition as a Stimulus for Enterprise Development”, in COMPETITION,
COMPETITIVENESS
AND
DEVELOPMENT:
LESSONS
FROM
DEVELOPING
COUNTRIES
183
[UNCTAD/DITC/CLP/2004/1 (2004)].
39
40
ID.
41
ID.
16
tackle anticompetitive transactions of either national or global scale, therefore having a
detrimental impact on the national and global competitiveness of its export-oriented
companies, including their so-called “national champions.” Thus, “through mergercontrol regulations, developing countries are able to verify if the efficiencies produced by
a merger are sufficient to compensate for the harm to competition.”42
However, all of the above evidences the importance of adopting provisions that
allow an analysis of a multiplicity of factors surrounding the transaction, and not just
mere structural considerations based on the concentration of the market. In particular,
efficiency considerations should be included in the merger analysis, since they contribute
to accurately determining whether a specific merger can have a beneficial impact on the
investment and employment.
Further, in the case of developing countries that have experienced privatization
processes, such as Venezuela, Zambia, Colombia, Zimbabwe and Malawi among others,
where in some cases there has been a shift from public to private monopolies, there is the
risk of takeovers done by foreign firms who deal in the same line of business, thereby
leading to the creation of stronger private monopolies, which leads to subsequent market
foreclosure. Thus, “the merger-control provisions under national competition law guard
against the stifling of enterprise development through anti-competitive mergers.”43
42
Id.
43
Id.
17
An example of the above is the case of the African countries that are members of
the COMESA region, in which cross-border transactions have had a tremendous impact
in their economies, and therefore merger-control has been justified in monitoring them.
“Mergers and other forms of acquisition have accounted for more than 80 percent of
direct foreign investment in the Southern African states. The merger-control provision
has offered developing countries a facility to monitor and check the entry into the
national market of undesirable business [behavior]. This allows domestic firms not to be
subjected to anti-competitive business practices which may lead to their demise.”44
Thus, the desirability of including merger-control provisions in developing
countries is evident. Nonetheless, merger provisions demand effective implementation of
a merger analysis that transcends from mere structural considerations based on sole
market concentration, since it would not give accurate results on all the situations. Thus,
the need for casuistically analyzing other factors such as resulting efficiencies requires
certain capabilities from the enforcement agent in order for the implementation of the
provisions to be successful.
3.3. Institutional Considerations: The Enforcement Agency.
There is a set of structural factors that are determinant in the development of a
successful competition policy. The institutional conditions under which the enforcement
body operates will dictate in the degree in which anticompetitive conducts will be
effectively sanctioned.
44
Id.
18
The common conditions in developing countries of lack of resources and the
inefficient allocation of the scarcely-existing ones, along with corruption, exaggerated
bureaucratic organization, lack of advocacy and the functional collapse of the judicial
systems, are indeed factors that need to be taken into account when determining the
ontological conception of the enforcement body.
In this sense, one important task that policymakers in developing countries face is
whether to include the antitrust enforcing body within their judicial system, or to create
an independent body. Doing so presents the advantage of not having to devise a new
institutional framework, and also it allows policymakers to use the existing procedures.
This is generally the case of civil law based jurisdictions, in which competition laws are
regarded as a subfield of administrative law, and therefore they are included in this
jurisdictional (and “competential”) scheme.
Nonetheless, it can be concluded that independence of the enforcement body is
inversely proportional to the level of competition advocacy of its agents. It is noteworthy
that judges may not have the required expertise to properly decide competition law cases,
and while it may be argued that procedurally a judge may seek aids on experts, it is
important that the enforcer itself has a background that allows him to apply an economic
analysis that transcend from the mere mechanical application of the laws.
Also, the judicial systems in most developing countries lack credibility from the
19
population, and this may have and adverse impact in the implementation of competition
policy. Moreover, the inefficiency of the judicial systems in some jurisdictions of
developing countries would make the proper enforcement of competition laws even more
difficult. If courts are already saturated with a volume of cases that they are not capable
to follow under the timeframes set forth by procedural laws, one can conclude a fortiori
that “squeezing-in” the enforcement of competition laws under the existing judicial
system in developing countries could be detrimental for the ulterior success of
competition policy as a whole.
On the other hand, having an independent enforcement body would give the
opportunity of having a staff with the proper expertise to carry upon its activities
efficiently. However, this evidently presents significant costs, as in the case of
developing countries there is a scarcity of the financial resources that are required to
support a creation of an enforcement agency capable of efficiently enforce antitrust. But
it is evident that having an independent agency presents more benefits than problems in
the long run. If the proper capabilities and powers are created and well defined, the
enforcement agency could carry upon investigations and solve the collective action
problem of disperse consumers and the lack of institutional competence of the judiciary.
3.1.1. The Staff of the Enforcement Agency.
It is further important to note the required expertise that the staff of the
enforcement body should have. But there are two main obstacles to this matter, which are
(i) the lack of proper education systems and human capital in some developing countries,
20
and (ii) the disparity between private and public sector salaries.
It is a common situation in some developing countries to have low standards of
literacy and poor public education systems. Most of the professional education is carried
upon by private institutions, therefore constituting an obstacle for the lower classes to be
able to get a professional education, since public universities are scarce and they lack the
acquisitive power to pay for an education in a private institution.
Moreover, professionals in developing countries tend to seek jobs in private firms
due to the disparity in salaries between the public and private sectors. In a country like
Venezuela, wages in the private sector even tend to duplicate the ones for the public
sector. Also, there is the so-called “brain drain”, which can be described as the tendency
for professionals in these countries to migrate into developed nations in the search for
better job opportunities and a better quality of life. Also, internet access has facilitated a
form of “brain drain” by which professionals work from their home countries for foreign
firms and therefore get the benefits of been paid relatively high salaries while still
“enjoying” the low costs of life in their home country.
All of these factors are detrimental to the human capital of a nation, and therefore
make it more difficult to have a proper skilled staff in public institutions. In light of
these, gathering professionals to work at an antitrust agency is indeed very difficult.
21
3.1.1.1. Staff Training.
While some authors have praised the virtues of creating a good reputation for the
enforcement agency as an effective tool for overcoming the aforementioned problems45,
it seems that developing countries when devising the institutional framework of their
competition policies need to tackle this human resource constraints with a more practical
short-term approach, that is, with training.
In this sense, Gal expresses: “In the short run, staff training programs in
procedural, methodological and substantive matters are key mechanism for overcoming
human resource constraints. Such training can be provided internally, but often there is
an important role for external training. Internships, or seconded staff from more mature
authorities should be arranged to guide staff while gaining practical experience.” 46
Thus, cooperation between agencies and other institutions is an essential activity
that provides means for overcoming lack of expertise and thereby developing a wellprepared staff in the antitrust enforcement agency. The experience in Latin America
proves the importance of such cooperation, at least on the early stages of the institutional
installment: “In their first years, Latin American competition agencies benefited from the
international links with antitrust agencies from abroad, and technical support of
specialized agencies, such as the UNCTAD, the World Bank and the Trade Unit of the
Organisation of American States. This international support consolidated a esprit de
45
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
46
Id.
22
corps among these young agencies, without which the consolidation of the policy would
have been far more difficult.” 47
Moreover, assuring that academic institutions get involved in the training process
may entail the long-term benefits of having a continuous formation of staff, thereby
generating a virtuous cycle. They can do so by assuring that the right courses are offered
in their institutions48, and by jointly promoting events with the enforcement agency
aiming to the creation and development of a forum that promotes competition advocacy.
4. Conclusion.
The creation of a coherent competition policy presupposes the will of the
policymakers to place a relevant amount of trust in the market forces, by assuming that
free competition would incentive firms to reduce costs and improve the quality of their
products, and also generates the pressure for competitors not to be forced out of the
market.
Thus, one can conclude that for a competition policy to be effective it has to
avoid excessive interventionism, and this should be a premise under which policymakers
in developing countries should devise their policy agenda.
Moreover, a coherent competition policy demands more than just the letter of the
law. Policymakers should devise a policy agenda in a tailor-made fashion, having other
47
Ignacio De Leon, A Market Process Analysis of Competition Policy in Latin America, at
http://ssrn.com/abstract=258959
48
Michal Gal, The Ecology of Antitrust Preconditions for Competition Law Enforcement in Developing
Countries, at http://lsr.nellco.org/nyu/lewp/papers/10
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jurisdictions as a reference to the extent that some of their characteristics are analog to
them, but avoiding the copy/paste of provisions that don’t necessary fit into the reality of
the economy in hand. Further, the process of enacting a competition law should reflect
the policy goals set forth: the law should be the materialization of the policy.
In this track of thoughts, devising an agenda and issuing a competition law are
merely the foundational steps of having a competition policy, since policymakers also
have to create the organizational/institutional framework that would provide the
necessary structural capabilities for the effective implementation of the competition
policy.
Thus, the competition agency of a developing country should aim to have the
necessary advocacy powers and independence to be able to challenge anticompetitive
practices emanating from both the private and the public sector. The agency staff needs to
have the necessary skills to enforce the policy proactively, and also to carry upon a
constant analysis of the economic effects of the conducts reviewed on each case. This
evidences that the process of devising a competition policy is in itself costly, and thus it
needs to be well funded. Although this is a major problem in developing countries, it
should be a preliminary consideration that policymakers ought to take into account. In
this sense, proper budgeting and funding from the initial steps will prove to be an
essential factor that would determine the proper implementation of the policy at the long
run.
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At last, the enforcement agency should aim to promote the competition policy in a
way that would cause a social impact enough to educate the competitors and consumers
of the virtues of free competition. Credibility in the agency is indeed a precondition for
the success of the competition policy.
Thus, until developing countries have the proper grounds for the effective
sustainability of a free market economy, the idea of a multilateral framework of
competition and trade seems distant. Competition policy, more than a mere competition
law, is the essential precondition for that process to happen, and developed countries
should commit to assisting developed countries in this preliminary process. The work of
institutions like the ICN, the OECD and UNCTAD has not only contributed to raise
awareness of this necessary preliminary work, but have also served as fora for the
integration and cooperation among participants.
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