A Deregulated Economy without Competition law Free Market or Free Jungle?

Third Business Law Conference of the Nigerian Bar Association25-28 March, 2008 Abuja, Nigeria

Dr Philip MarsdenDirector and Senior Research FellowCompetition Law Forum

Why not to have a competition law

The skeptics

• Trade liberalisation is enough: foreign entry

• Domestic de-regulation is enough: local competition

• Higher priorities; opportunity costs

• Fears of mis-enforcement

• … and the usual self-serving business points

Response to the skeptics

• Trade and other liberalisation is not enough (HK, Singapore)

• Competition policy bolsters and polices liberalising markets

• Higher priorities – once you have a market, you need a referee

• Benefits outweigh costs• Mis-enforcement unlikely if law implemented

properly

The real benefits

• Catalyst for market reforms

• Counterweight to entrenched business and

regulatory interests

• Preserves benefits of privatisation

• Prevents private fiefdoms

• Better than the alternative: direct regulation

When is a country ripe for a competition law?

• Increasing economic development, industrialization and size of an economy

• Stronger reliance on market forces; less state-dominated economic activity; less state aid, less subsidies

• Increasing openness to trade and dependence on FDI

• Support of international organizations

• Increased membership in regional trade agreements

• Less corruption

Desert v. Jungle

• Desert: under-developed economy: few resources, little economic activity…much more important things to worry about

• Jungle: Rich in resources, growing economy, increasing development, predators lurking: time to preserve and build on economic gains

Transplant

Transplanting a market framework law

• Legal landscape is already jungle-like; tangle of laws; over-regulation; private enterprise can’t breathe

• Market even more so: predators kill each other off

• Competition law - to provide order out of chaos: what order, evolutionary?

– To make overlapping laws coherent and efficient

– To prevent predation, abuse of dominance, cartels

Transplant

• Will the sapling survive?• Support of both government and business to put

down roots • Rule of law and legal certainty: to battle winds of

change• Enforce in daylight: avoid the fungus of

corruption - transparency, publicity• Needs a constant gardener: The Bar The Bench Research organizations

Transplant

• Can it adapt to local conditions?

• The test: can it achieve its goals?

• Proponents: the gardeners

• Opposition: the protectionists

• Apathy

• Communication is crucial

What to focus on?

• Market studies; research

• Educating media, departments, business

• Build collateral institutions

• Government restraints – especially barriers to

entry by entrepreneurs

• Bid rigging and cartels

The law itself

• Cautious: first of all, do no harm

• Basic law or comprehensive law implemented in stages

• Support private actions

• Compulsory process powers

• Independent staff

• Judicial deference to the agency

• Regional cooperation

The draft bill

• Multiple goals - some conflicting; have a policy to handle conflicts: i.e. small enterprise, but low prices for consumers

• Commission will be responsible for competition, consumers and unfair trade: excellent idea, unique

• Antidumping provisions - price-raising powers…thus need to use a predation test

The draft bill

• Clear threshold for dominance - predictable…may be under- or overinclusive…consider economic analysis

• Mix of tests: ULC and SLC…defined?

• Can you handle all the complaints?

Building Capacity

• Independent agency

• Independent officials - one job to do and do it

well

• Economists

• Due process and firm but well-reasoned

decisions

Enforcement stance

• Government restraints on entry

• Ban cartels, esp bid-rigging in government

procurement contracts

• Build recognition and acceptance via media

• Go easy on joint ventures and distribution

agreements

A Deregulated Economy without Competition law Free Market or Free Jungle?

Third Business Law Conference of the Nigerian Bar Association25-28 March, 2008 Abuja, Nigeria

Dr Philip MarsdenDirector and Senior Research FellowCompetition Law Forum