May 2, 2010

The Competition remains

The CCP has been at the forefront of measures to also provide a boost to

competition in the South Asian region

By Pradeep S Mehta, Rijit Sengupta, and Dr Siddhartha Mitra

The re-promulgation of the Competition Commission of Pakistan (CCP), in quick response to the March 26 nullification of the Competition Ordinance 2009, which could not be turned into a law, is a major step in the right direction.

It might also be remembered as a major landmark in the strengthening of democracy in Pakistan as through this step support has been expressed for an institution which has remained neutral, active, and pro-people in the most trying of situations. The CCP has promoted and warded off threats to competition — freedom for all firms to enter and exit markets and compete for market shares through price decreases brought about by efficiency increases as well as quality improvements — from the government as well as private forces by enforcing the law with great √©lan and effectiveness.

In this context, a retrospective look at some of the recent achievements of the CCP would be in order. In February this year, the CCP fined the state owned Pakistan Steel Mills Rs25 million for abusing its dominant position in the low carbon steel market by refusing to deal with some customers from the private sector. In levying the fine, the CCP investigators took into account the general nature of the infringement as well as the specific circumstances surrounding it. Its efforts to ensure competition, even when the might of a state enterprise was involved, were lauded by the media as well as elements in the private sector.

In addition to punishing violators and inducing corrective action, the CCP has conducted significant advocacy to promote the culture of competition in Pakistan. Towards this end it has formed the Competition Consultative Group (CCG) which provides a platform for seeking advice and suggestions for such promotion.

To supplement various actions taken to promote and protect competition within Pakistan’s economy, the CCP has been at the forefront of measures to also provide a boost to competition in the South Asian region. It has been in touch with competition authorities in the SAARC region to set up a South Asian Competition Network (SACN). The aim of this network would be to take into account the ground realities and peculiarities of the South Asia region in making recommendations for global standards regarding competition enforcement.

In regard to the evolution of competition authorities there is some parallel between Indian and Pakistani history without much similarity in outcomes. India, a country with much more established democratic traditions has also been witness to similar uncertainty facing the Competition Commission of India (CCI) due to certain weaknesses in the Competition Act, 2002, which imbued the Commission with the unacceptable combination of legislative, executive as well as judicial powers. These weaknesses had to be subsequently remedied by the Parliament.

It took a very long period of five years for the necessary amendment to be made. In this period a toothless and ill-staffed and equipped CCI functioned but the constraints facing it did not enable it to do much of note. In 2009, a full-fledged authority finally came into being and generated great hope. It has been there for over one year, but is yet to hit the track on full steam — right now it has around 30 cases, of which 6 are in an advanced stage of dispensation, but there is no order as yet.

While the political environment in India is not as difficult as that in Pakistan, the discussion above identifies two areas in which Pakistan has scored over India in the promotion of the spirit of competition in the national economy which is crucial for fostering the economic dimensions of democracy — the alacrity with which measures have been taken to ensure that the competition commission remains active and effective; and the ability of the Competition Commission itself to use the powers at its disposal.

But this seeming paradox of a country outshining another with far stronger democratic traditions has a reasonably simple explanation: in contrast to Pakistan, the political will to promote competition in the Indian economy has waned; and the CCP unlike the CCI has managed to hire, retain, and effectively employ specialised staff with the ability and inclination to enforce the competition law.

However, the CCP is not the only example of an effective young competition agency. Exactly six months after its establishment, the Competition Commission of Mauritius (CCM) launched its first investigation in December 2009. The Competition Act 2007 was a second attempt by the island state. The agency is on a sound growth trajectory, not only in terms of developing its own fleet of enforcement officials, but also in terms of selecting the right cases, which when decided would provide even wider stakeholder support to the authority. Further, while many young competition agencies are often circumspect to present details of their investigative actions, the CCM is an exception.

Like the CCM, The Egyptian Competition Agency (ECA) has made its intentions clear to operators in markets. Not only has ECA developed a formidable internal team of experts and practitioners to enforce the competition law it has also established effective lines of communication with big business houses, sensitising them of the value of competition compliance. All of this has also been facilitated by a strong commitment from the highest level within the Egyptian government towards strengthening the agency and evolving a healthy competition culture in the country.

Strong leadership seems to be a common thread among all these ‘young’ competition agencies. Evidence from across the globe indicates that strong leadership stands out as an essential attribute that has facilitated emergence of effective competition regulators. Early signs are very promising as these young agencies move from strength to strength and take up the challenge to prove themselves as the best among equals in the international competition circuit.

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