by Pornchai Wisuttisak

 

The international conference on competition provides great opportunities for knowledge sharing and networking on anticompetitive issues, competition law, and development of competition authority globally. The conference is during 15-17 March 2017.

 

Workshop for Young Competition Authorities 15 March 2017

In the afternoon of 15 March 2017, the workshop for Young Competition Authorities was held at the Federal Ministry for Economic Affairs and Energy (BMWi). In the workshop, speakers pointed out that in relation to the progress of globalization, competition authorities should look beyond their country jurisdiction and aim to cooperate in dealing with anticompetitive issues affecting the market economy. The sharing of business, company and economic information can enhance effective enforcement of competition regulations. The German Bundeskartellamt and competition agencies in EU would therefore like to promote the work of young competition authorities under the Twinning Partnership Approach.

The advocacy work of competition authorities is important in creating a wider understanding and awareness on competition and competition law. A good example is Mexico, where a competition agency promotes advocacy programs to all business sectors and to universities. This helps bring understanding and awareness on competition law to them. However, in the Philippines where the competition law has just been passed, there is a need to develop training programs, capacity building and advocacy programs on competition law. The Philippines competition authority aims to cooperate with OECD and GIZ on the development of competition law. Philippines competition authority has initiated its work with sectoral regulators with an aim to build better competition awareness in all important sectors in the Philippines.

In Ukraine, competition authorities focused their work on advocacy and capacity building during its initial establishment. 24 years on, they still work on advocacy with priority given to enforcement. This advocacy creates credibility for the authorities and prioritization contributes to effective enforcement of competition law. Furthermore, peer reviews under the OECD competition program promote understanding on competition authority. These reviews also stimulate an improvement in competition authority.

The work of competition authorities is complex and involves interaction with various sectors in the economy. Sometime politicians may not listen to opinions from competition authorities, thus advocacy work is important to building political recognition for competition law. It is important to shape the political economy of competition law in order to accomplish the missions established by competition authorities. Public awareness of competition law is therefore needed.

When working on competition law, doing a market study is cornerstone to effective enforcement. Market studies translate to better understanding of market situations and firmer enforcement. A good example is the UK competition authorities’ aviation market study which uncovered the issue of monopoly in airports. The study contributed to the restructuring and privatization of airports, with the increase of airport competition in UK. Nevertheless, market studies require funding, human resource, and time. The study may span 1-2 years and therefore lead to outdated market information. Thus, competition authories should prioritize conduction market studies.

In building effective competition law, competition authorities have to consider their decision making and judgment of cases. They have to consider whether their interventions will translate into results. They also have to consider alternative actions that help improve competitiveness of market competition.

From the workshop, it can be summarized that competition authorities, in order to achieve effective implementation of competition law and policy should;

  • Build its capacity so as to ensure institutional endowment of competition law
  • Conduct Advocacy programs aimed at businesses and consumers.
  • Coordinate with other government agencies to initiate an awareness on competition policy
  • Cooperate with international authorities and international organizations so as to keep on track with changing business environments and globalization trends.

 

18th Conference on competition 16-17 March 2017

The speaker’s presentation and discussion focused on the innovation and digitization of the economy. The German Bundeskartellamt is willing to cooperate with international organizations and competition authorities in global digitization. Businesses are transforming their business activities onto the Internet, e-business platforms, and e-transaction, and e-information providers. Digitization is a significant move and competition authorities must keep on with the move. For example, there is a merge of dominant e-commerce companies and this may lead to a control on digital businesses. Competition authorities therefore have to be prepared for the ever-increasing anticompetitive practices in the digitized world.

Current competition laws may not be suitable for the digital world and would have to be reformed. For instance, the 9th amendment of the German competition law stipulates that competition law can apply to free services in the case of free services creating problems to market competition. For example, Google and Facebook provide free services which lead to the obtaining of essential information which can attract consumers’ interests. The large scores of information collection are then used to build a platform to control various businesses.  The competition authorities thus have to keep on the changing market situation of the digital economy.

It is also important that competition authorities promote start-up business and help raise innovation standards. The issue of the digital era is that big tech companies may aim to buy out start-ups. Also government agencies are at the edge to help promote small businesses to adapt and prepare themselves for changes in the digital world. This may require smart regulation that can be flexible to stimulate market competition and innovation.

The surge of algorithms in the digital world can contribute to more sophisticated anticompetitive practices among businesses.[1]  For example, Google may use algorithms to give leverage to dominant businesses. This may also lead to complex cartels where prices can be fixed by algorithms. With the digitalization of businesses, algorithms would lead to more cartels that affect consumers’ interest. Competition authorities have to further their work on the digitalization of businesses to make sure that anticompetitive businesses are not able to hide behind the back of their computer systems. In digital businesses, offers to get involved in cartels via the Internet can be of great concern. Businesses should make sure that they reject cartel offers as silence is not sufficient in solving the problem of cartel involvements.

Additionally, in the digital world, competition can lead to an increase in innovation. Innovation in businesses can boost the efficiency of the economy. For example, N26 which has its main business in Fintech, an efficiency improvement and cost-effective solutions to financial and banking consumers. N26 creates Internet financial systems that enable consumers to control their financial activities on the Internet though mobile applications, which cuts the cost of banking transactions. N26 obtains licenses from financial providers throughout EU countries. The emergence of N26 marks a new chapter of competition in financial and banking sectors that are predominantly controlled by banking institutions. Thus, competition authorities are at the forefront in promoting competition and innovation by preventing the dominance of bigger firms on smaller start-up digital businesses through anticompetitive practices and barriers.

Furthermore, competition authorities have to consider a leniency program as a vital mechanism for competition law enforcement.  In the global and digital world, anticompetitive practices are more complicated to investigate. Authorities should resort to a leniency program in order to make their enforcement easier. An example is from the Japan Fair Trade Commission (JFTC) which employs a leniency program and successfully enforces their antimonopoly law against anticompetitive conducts in Japan. Many businesses apply to JFTC’s leniency program and they assist JFCT in investigations leading to issuance of fines to cartel businesses.  Thus, it is important to develop a leniency program. While competition laws in various jurisdictions have been passed to protect market competition, there has been an increase in cartel misconduct. A leniency program would be an important mechanism to counter the increase of cartels in digital and global businesses.

In summary, the conference yielded significant insights:

  • Global and digital businesses bring significant challenges to competition law. Competition law and competition authorities must pay attention to more sophisticated digital businesses.
  • Competition law and policy must be a mechanism to protect and promote competition and innovation in the digital economy. However, competition law and policy must not intervene innovative processes of market competition.
  • A leniency program is an important resort for competition law enforcement in the digital and global economy. By having businesses assisting competition authorities investigate cartel cases, the leniency program is a significant strategy in achieving effective enforcement of competition laws.

[1] See further in “Algorithms no excuse for cartel behavior”, https://www.theregister.co.uk/2017/03/16/algorithms_no_excuse_for_cartel_behaviour_says_european_commish/

 

Pornchai Wisuttisak is the Head of the Legal Training Centre of the Faculty of Law at Chiang Mai University

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