Effects of anticompetitive practices on trade in developing countries

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A global market allows producers to expand their horizons beyond their national borders and an increase in trade tends to lead to an increase in competition making the interplay between international trade and international competition of ever-increasing importance. Economic liberalization has resulted in a higher degree of economic interdependence which has led to the formation of multilateral, bilateral and trade co-operation agreements aiming at facilitating the cross-border exchange of goods and services. The spillover effects that trade and competition bring along (innovation, lower prices, better quality and variety of goods and services, etc.) are well known. Accordingly, an effective trade and competition framework is crucial for the development of a country and that is why many developing economies have recently adopted competition laws. Restrictive competition practices affect both developing and developed economies yet in developing economies consumers are arguably impacted to a greater extent. In countries with limited resources or in the process of development, it is important that the purchasing power of consumers is not further diminished through anti-competitive practices. The question that then follows is whether current mechanisms are prepared to properly address these kinds of situations. A significant number of developing countries have simply mirrored competition policies of other economies such as the US and the EU without taking into consideration their institutional and market particularities. The market structure of developing economies poses a certain set of challenges, as most of these economies are fragmented and deal with political pressure, corruption and poverty. [ Fox, Eleanor M. (2020). Making markets work for Africa: markets, development, and competition law in Sub-Saharan... Africa. Oxford University press us. Pg. 160-180 ] As evidence shows, the former has resulted in a mismatch between `transposed¿ competition policies and their effective implementation in those countries. This is further exacerbated in cases where there is a cross-border dimension as the current regulatory framework does not offer an adequate solution when addressing transnational anti-competitive practices. Restrictive trade practices continue to be dealt with mostly domestically despite the ever-increasing cross-border dimension of trade flows. In this regard, international institutions such as OECD, UNCTAD, WTO and ICN have stressed the importance of implementing strong competition laws during the past decade. When a transnational violation of competition law takes place, it causes significant harm. Transnational anti-competitive conduct can take the form of price-fixing among foreign producers, abuse of dominant position or mergers between foreign firms. In this regard, the embracement of extraterritoriality in competition law has been a gradual process. The former refers to the extent to which jurisdictions are permitted to apply their domestic laws to conducts that occur outside their jurisdictions but have effects within their borders. Among developing economies, the earliest adopters of extraterritoriality in competition law were Brazil, Costa Rica, and Turkey, in 1994. The proliferation of competition culture has added external pressure on small and young competition authorities, which often experience many difficulties in addressing these challenges due to, among other factors, a lack of proper resources, limitations arising from regulatory gaps or loopholes, etc. The investigation intends to focus on two main issues: (i) How transnational anticompetitive practices impact trade in developing economies and (ii) the need to have a strong international cooperation mechanism to deal with transnational competition cases. For the purpose of analyzing the above-mentioned issues, the investigation establishes a correlation between trade and competition. The investigation further assesses the drafting of competition laws within developing economies, as most young economies have faced difficulties in implementing their competition policies (especially with regard to extraterritoriality). The dangerous precedent of transposing policies directly from experienced competition regimes such as the EU and the USA has not always proven to be a success story as no economy is the same. The investigation showcases the former through the analysis of the experience in jurisdictions such as Algeria, China, Egypt, Indonesia, India, Malaysia, Morocco, Mozambique, Nigeria, and Trinidad and Tobago, among others. For a smooth implementation and enforcement of competition law in developing economies the investigation proposes a set of changes that, if implemented with the help of international institutions such as OECD or UNCTAD, can facilitate a more optimal solution for small and young economies. Thus, the objective of the investigation is to provide a multi-jurisdictional analysis focusing on small and young economies and their adaptation to the global competition culture and conducts. The ultimate goal is to provide an idea of how anti-competitive practices are impacting trade in these economies and lay out some proposals of reform. METHODOLOGY International damages arising from anti-competitive practices have, at some point, to be narrowed or determined on a territorial basis. Transnational violation of competition law causes immense harm, not only in a given jurisdiction but to its trading partners. Accordingly, the answer to the former question requires a two-tier approach: (i) an analysis of the international instruments currently in place and (ii) a study of different jurisdictions. The thesis is divided into four parts: i. Cross-border analysis on competition regimes First, for the purpose of the investigation, competition regimes of different jurisdictions have been analyzed. This section explains the concept of developing economies based on the World Bank and IMF criteria. This section also provides an in-depth analysis of the relevant market concept in various jurisdictions and further explains different types of anti-competitive conduct. The resources for conducting the aforementioned analysis are, inter alia, competition and trade laws, reports from international institutions at the forefront of international competition law matters and conference papers where these issues are discussed and debated among leading authorities in the respective fields. ii. Relation between trade and competitions law This section combines the study of the theoretical and economic relation between trade and competition laws. For the purpose of the investigation, this section is divided into two parts: (i) the analysis of the role of trade and competition in development and (ii) the co-relation and interaction between trade and competition law. The resources for conducting the analysis include authoritative academic doctrine and literature, and in-depth empirical research on international trade, competition and on international institutions. The section also discusses competition provisions in Free Trade Agreements (FTAs) and applicable cases from jurisdictions such as Chile, Egypt, Latin America, the Middle East, Philippines have been dealt with. iii. Anti-competitive practices in developing countries. This part of the investigation focuses on anti-competitive practices in developing countries. This section deals with the extra-territorial scope of competition law and investigates three main conducts: (i) international cartels, (ii) cross-border abuse of dominant position, and (iii) merger control regimes in developing economies. This section analyses cases across several jurisdictions and, how certain jurisdictions apply extra-territorial scope in cross-border cases. The cases chosen for the purpose of investigation shed light on how various competition regimes respond to cases with similar characteristics. Different competition regimes respond differently to such cases as it depends on their economic development and market structure. To determine such impact, a comparative review of competition laws in various jurisdictions is conducted. Other useful research materials include competition acts, publications, enforcement policies and regulations, guidelines, reports, etc. It also includes thorough research on how international organizations such as the WTO, the ICN, OECD, or the UN Conference on Trade and Development together with regional competition and trade agreements that are contributing to the enforcement of competition policies for cases have affected more than one jurisdiction. iv. Global competition rules. The last part of the thesis investigates the global competition regulatory framework. This section is divided into five subsections: (i) international institutions and competition law, (ii) drafting of competition law for the developing economies, (iii) in-depth analysis of the WTO¿s working group on the interaction between trade and competition policy (WGTCP), (iv) are trade agreements enough for competition related policies? and (v) if there is a need for stronger international cooperation in competition enforcement. For the purpose of investigation, a diversity of materials has been included from international intuitions (WTO, OECD, UNCTAD; ICN), WGTCP papers, the international cooperation agreements, capacity building and training programs. For the chapter on drafting competition law for developing economies, several competition regimes, and guidelines from different jurisdictions have been analyzed such as Algeria, Egypt, EU, Indonesia, Jordan, Morocco, Tunisia etc. To examine various stance taken by countries on the need for a multilateral competition agreement and the challenges they can face; a thorough analysis of more than 30 WGTCP papers are accumulated and examined. To analyze the need for strong cooperation agreements, the help of several surveys conducted by the OECD and ICN have been included. The last part of this chapter is investigated with the help of capacity building and training programs conducted by international institutions and governments in several young and small jurisdictions. Even though the present investigation covers several developing economies to provide a clear picture of how these countries are affected by trade-restrictive conduct, the investigation is not exhaustive. The investigation has tried to accumulate information on many developing economies, however, there are certain limitations due to the lack of available information in some cases. Further, the investigation suggests two recommendations that, if implemented by regional and international institutions, can facilitate the implementation of a competition regime in the economies that are more vulnerable to being harmed by restrictive trade practices. CONCLUSION After a thorough analysis of several jurisdictions, competition provisions across several free trade agreements, international institutional agreements, governmental documents, etc, it can be seen that in many countries which have recently adopted competition laws, they face difficulties while implementing and enforcing such laws; especially in cases where there is a transnational dimension. Countries having limited resources, with a scattered legal system and bureaucratic burdens, feel heavy competition strain. Initially, the focus of competition laws of countries, especially that of developing economies, was to cater to the needs of the domestic market. However, the rapid increase in internationalization has made it necessary for these economies to address the change and accommodate international competition issues into their legal systems. The current investigation examines an array of developing economies and, as it can be seen, the market structure of these economies is very diverse. Some economies discussed, such as Bangladesh, Ghana, Guinea, Nigeria, Pakistan, Seychelles or Togo have very limited experience when it comes to competition law enforcement. In other cases, such as Angola, Ethiopia, Egypt, Indonesia, or Malaysia, the competition law enforcement is on the verge of development and still needs a push from other experienced competition authorities. In the case of competition authorities from Argentina, Brazil, India, and South Africa, they have overcome several challenges, especially in cases dealing with transnational practices having anticompetitive effects; and have learned from their past experiences. The market structure of these economies makes them clearly vulnerable to restrictive trade practices. Many developing countries may have a small domestic market, so there is a limit as to how much competition they can handle at a given time. The minimum efficiency scale dictates how few selected firms within the domestic market can operate efficiently. Other reasons which make them prone to such harm are weak legal structures, lack of infrastructure, poverty, corruption, and political pressure; all these factors play an important role in the market. The limited capacity of handling trade restrictive practices due to the lack of competition in law enforcement and implementation has led to an increase in the prices of goods and services, thus harming the consumer and the economy. According to the COMESA commission, retail prices of key products such as rice, white sugar, chicken, bread, milk, etc., have seen a hike of 24 percent in African countries above other economies around the world. Trading malpractices have led to an increase in the prices of goods and services in general by between 25 percent to 30 percent. On an international level, efforts have been made by institutions such as WTO, OECD, UNCTAD and ICN to strengthen international competition rules, regulations and guidelines. These efforts have proved to be useful for many economies, such as Brazil, Egypt, sub-Saharan Africa, the Philippines, etc. Apart from such guidelines, there are several training programs to help developing countries. This has been discussed in the chapter on mentoring programs, in an in-depth analysis of these training programs. It seems clear that these programs work in a scattered manner, so to obtain more benefits, these kinds of initiatives must be coordinated and brought under a uniform institutional umbrella. The thesis has explained and analyzed the effects of transposing competition law and drafting competition law for developing economies. After analyzing the experiences of several economies, it can be seen that transposing competition policies work for some economies while drafting a competition framework ad hoc system works for other economies. In any case, however, what is really crucial for the success and material effect of any competition rules is an efficient enforcement mechanism and infrastructure. Thus, in any given legal system it is equally important to have well and efficiently drafted laws and regulations but at the same time, proper enforcement capabilities. The enforcement and implementation of these competition laws, especially in cases of transnational practices or repercussions, has proved to be difficult, as it can be seen in the Potash cartel case and the Soda Ash cartel cases. Thus, this thesis proposes two recommendations to combat issues faced by developing countries in terms of developing, implementing, and enhancing their competition rules, and regulations, and strengthening their competition authorities in accordance with the current global needs and also their domestic market needs. First, there is clearly a need for strong international cooperation for competition enforcement. This has been shown in practice by the transnational effects of restrictive trade practices. At a regional level, a second-generation agreement with this purpose is required, as it will help enhance and enforce competition laws, thus giving such cooperation mechanisms a more binding effect among the regional countries. This will in turn help increase trade and balance it with healthy competition. The second recommendation made and analyzed in this thesis is a mentoring program. In this program, experienced competition authorities will help train and provide useful resources to countries and economies with younger competition authorities. The mentoring program will be a transparent space, i.e., all jurisdictions will be aware of which agency is helping the other and the younger authorities can publish their achievements and how a particular agency has helped them throughout the mentorship program. There are several examples of how this strategy may benefit developing countries, which have been discussed in the chapter; for instance, the Philippines has greatly benefited from the training, seminars, and aid provided by the Japanese competition authority. It is obvious that every economy requires strong competition law enforcement and implementation mechanisms. However, it is upon every economy to prioritize strengthening its own competition laws and regulations. Current reality provides strong evidence of the fact that this goal can be much better achieved with support from international institutions, and through cooperation between national competition authorities. This is particularly true for developing countries and their economies, as they are highly exposed to the effects of practices and conducts taking place beyond their borders, and they can clearly benefit from the knowledge and experience accrued by competition authorities of developed countries. The key to flourishing trade and benefiting the economy, consumers, corporations and business is to have a healthy relationship between trade and competition laws. International trade has impacted all economies and governmental agencies across the globe are trying to implement laws to meet these ever-changing needs.
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