Competition policy and MSMEs

The OECD106 finds that, in principle, competition policy is concerned with regulating the operation of all markets in a given jurisdiction. Every time a company makes a decision, it bases the decision on the existing market conditions and regulatory framework, including competition rules. It expects that competition rules will not substantially change and that the competition authority will apply the same rules to all parties without any preferential treatment. A lack of commitment by policymakers to competition law and policy can substantially affect all companies and, thereby, the functioning of all markets. Independence of competition authorities from political interests induces credibility, and the enforcement of competition rules in a stable and foreseeable manner contributes to the better functioning of markets. The majority of countries in the South-East Asia region, for example, have established independent competition authorities. However, Brunei Darussalam, Cambodia and Myanmar are still in the process of doing this. In Lao PDR, the Ministry of Industry and Commerce acts as a competition authority.

Whilst competition policy and competition law may appear to be synonymous. They are different. The former is the set of policies and laws adopted by a government to ensure that competition in a market is not restricted107. The latter is the specific law that prohibits certain anti-competitive behaviours and agreements.  Competition policy typically encompasses a particular competition law but also includes other measures.

The ASEAN Regional Guidelines on Competition Policy 2010 (Regional Guidelines), for example, broadly defines competition policy as:

“A government policy that promotes or maintains the level of competition in markets, and includes governmental measures that directly affect the behaviour of enterprises and the structure of industry and markets.” (ASEAN Secretariat, 2010, para 2.1.1).

The Regional Guidelines also recognise that there are two aspects to competition policy.  Firstly, there is a broad set of government policies that promote competition in local and national markets.  These include enhanced trade policies, eliminating restrictive trade practices, facilitating market entry and exit, reducing unnecessary government interventions, and greater reliance on market forces. The second element is the competition law which includes legislation, regulation, and judicial decisions. Competition law commonly prohibits anti-competitive agreements, abuse of dominance, anticompetitive mergers and acquisitions and, sometimes, laws on unfair trade practices108. Unfair trade practices may include prohibitions on misleading or deceptive conduct, false or misleading advertising and disclosing business secrets.

Competition agencies, with the responsibility for implementation and enforcement of competition law, often have significant input into the competition policy of a country. However, the government, not the competition agency, determines the overriding national competition policy.

Competition law usually comprises three prohibitions: a prohibition against anti-competitive agreements, a prohibition against abuse of dominant market position, and anti-competitive mergers and acquisitions. One or more competition agencies generally enforce the specific law, although sectoral regulators are also responsible for competition law.

To ensure that a ‘level playing field’ can be achieved, it is preferable for all entities conducting business in the country to be bound by competition law.  For example, state-owned enterprises and the government can potentially distort market competition and should be subject to the same rules as other businesses operating in the marketplace. Box 12 below illustrate an example from Fiji.
 

Box 12. Fijian Competition and Consumer Protection Policy Statement

The Fijian Competition and Consumer Protection Policy Statement was jointly drafted by the FCCC and the (then) Ministry for Industry, Trade and Tourism and came into effect in 2020.  The role of government, business, consumers and international markets all feature in the policy framework.  About the role of government, the Policy Statement sets out clear criteria for ensuring that government activities do not distort competition, including:

  • State-owned enterprises undergoing reform should not take advantage of any change in their status or supervision to engage in conduct that is anti-competitive; 
  • Unless there are compelling reasons to the contrary, enterprises that are connected with the public sector may not enjoy unique advantages relative to private sector enterprises;
  • A level playing field should exist between government business activities and private sector enterprises;
  • Government business activities that compete with private business should comply with competitive neutrality principles;
  • Government business activities should not enjoy a net competitive advantage in a market simply due to government ownership.
  • Price regulators of state-owned enterprises should be independent and make decisions based on transparent criteria.

Source: Available at https://www.mcttt.gov.fj/wp-content/uploads/2020/05/Annex-2-FCCP-Fijian-Competition-and-Consumer-Protection-Policy-Statement-Approved-ver-2.pdf (accessed 27 January 2021)

Resources

106OECD (2016), Independence of Competition Authorities  Background Paper by the Secretariat(*)

107 Corones, S. (2014) Competition law in Australia (7th edition). Sydney: Thomson Reuters

108 ASEAN Secretariat (2010) ASEAN Regional Guidelines on Competition Policy. Jakarta: ASEAN Secretariat.