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THE RELEVANCE OF REGIONAL INTEGRATION, INTERNATIONAL COOPERATION AND

THE CONTRIBUTION OF COMPETITION POLICYTO DEVELOPMENT IN COMESA COUNTRIES

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The views expressed in this volume are those of the authors and do not neces-sarily reflect the views of the UNCTAD secretariat.

The designations employed and the presentation of the material do not imply theexpression of any opinion whatsoever on the part of the United Nations secretariat con-cerning the legal status of any country, territory, city or area, or of its authorities, orconcerning the delimitation of its frontiers or boundaries.

Material in this publication may be freely quoted or reprinted, but acknowledge-ment is requested, together with a reference to the document number. A copy of thepublication containing the quotation or reprint should be sent to the UNCTAD secre-tariat.

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A. SUBSTANTIVE CONTRIBUTIONS ............................................... 3

A. 1. Trade and competition policy in the framework of Afri-A. 1. can countries

A. 1. %DFNJURXQG�SDSHU��(&$ ................................................. 3

A. 2. Integrating competition policy in the COMESA regionalA. 1. economic cooperation and integration process

A. 1. '�6��0SDPED .................................................................. 19

A. 3. Economic and market structures in COMESA: a busi-A. 1. ness perspective

A. 1. 0HEHOR�.��1��0XWXNZD ................................................... 23

A. 4. Impact of legal reforms to enhance productive capacityA. 1. and competitiveness in LDCs: competition policy inA. 1. Zambia

A. 1. 2OLYHU�6��6DDVD................................................................ 25

A. 5. Ensuring consumer benefits from competition in glob-A. 1. alizing markets and creating a competition cultureA. 1. supportive of development

A. 1. *HUDOGLQH�)RVWHU............................................................. 37

A. 6. Elimination of trade measures in a customs union andA. 1. their relevance to regional integration

A. 1. -DPHV�0DWKLV .................................................................. 47

A. 7. Competition policy and small open economies: invest-A. 1. ment, trade and competition policy in developing coun-A. 1. tries and some implications for COMESA

A. 1. 0DUN�:DUQHU................................................................... 51

A. 8. Trade and competition policy in the framework of Afri-A. 1. can countries

A. 1. &RUQHOLXV�0ZDOZDQGD .................................................... 73

A. 9. Practical risks and opportunities for countries creatingA. 1. new competition laws and enforcement agencies

A. 1. 'RQDOG�,��%DNHU............................................................... 77

B. CONCLUSIONS AND RECOMMENDATIONS ................................. 83

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A. SUBSTANTIVE CONTRIBUTIONS ............................................... 87

A. 1. The role of competition law and policy in development:A. 1. the experience of Zambia

A. 1. 1LFKRODV�.ZHQGDNZHQD .................................................. 87

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A. 2. The development of competition law and policy inA. 1. Zambia

A. 1. *HRUJH�.��/LSLPLOH ......................................................... 89

A. 3. Treatment of mergers and takeovers, including regionalA. 1. and international measures

A. 1. -DPHV�0DWKLV .................................................................. 95

A. 4. Towards a positive agenda for multilateral negotiationsA. 1. on competition policy: interests of developing countries

-DPHV�0DWKLV.................................................................. 99

A. 5. Regional competition policy for COMESA countriesA. 1. and implications of an FTA in 2000

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The globalization and liberalization of the worldeconomy have brought to the forefront the debate on theissues of fair competition in international trade. The open-ing up of economies and markets to inward foreign direct(FDI) and other forms of participation by transnationalcorporations (TNCs) can contribute directly towards in-creasing the of host country markets in that these marketscan now be entered by firms from other countries by es-tablishing affiliates that produce goods and services forsale within the host country and thereby compete with do-mestic firms1. Furthermore, TNCs may be better able thandomestic firms in a host country to overcome some of thecost-related barriers to entry that limit the number of firmsin some industries and thereby result in the collapse of thedomestic based industries.

The liberalization of foreign direct investment regimescan lead to contestability of national markets for goodsand services, since it means that foreign firms are nowfree to establish operations in the host country and com-pete at a level playing field with domestic firms. The entryof TNCs can therefore influence the structure of hostcountry markets that evolve for the products in which theyoperate. The rise of transnational corporations in interna-tional production and trade has given rise to fears of pos-sible concentration of market power in the hands of theseentities and also the possibility of formation of “international cartels.” Furthermore, the globalization and libealization of world trade has also given rise to a new prolem for developing countries: that of dumping exceoutputs of subsidized products produced in the develocountries on the markets of developing countries. This velopment threatens to kill basic manufacturing in devoping countries.

Foreign direct investment into developing countrieand transitional economies has usually had extensivefects in either increasing or reducing competition, as was in increasing efficiency, in those product markewhere it concentrates. The need, therefore, to control “strictive business practices” is generally acknowledgeCountries have often adopted competition laws in orde

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avoid the development of concentrated market structuand to promote consumer welfare. Nonetheless, it is anowledged that while adhering to universally valid principles, competition policy should be applied with flexibiity in the light of specific circumstances of individuacountries, and taking into account the need to bala“consumer welfare” and “efficiency considerations” awell as the need to win the confidence of the public athe business community.

There is growing realization that anti-competitivpractices can have a negative influence on internatiotrade. The challenge faced by developed and developcountries alike is to introduce national policies that wpromote competition. A firm’s competitiveness is essetially a function of the domestic economic environmentwhich it operates. However, the deepening structural ingration of the world economy and the burgeoning of aance capitalism are widening the geographical scopecreating or augmenting firm-specific competencies alearning experiences2 Several case studies from both dveloped and developing countries indicate that trade copetition is the prime motivation for enterprises to cwaste, improve production parameters through reseaand development (R&D) and innovation, and allocate sources more efficiently in response to market oppornities or threats. The other market structures that mayist in a country include: monopoly, monopolisticompetition and oligopoly.3

The basic premise for a country adopting competitipolicy and law is that it will give rise to a more efficienallocation and utilization of resources and promote cosumer welfare through “competitive price” for goods anservices. In a “perfectly competitive market structurthere are many, many buyers and sellers and each produces a good that is identical to that produced by otfirms (Alan Hochstein, 1993). The conditions needed f

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2 John H. Dunning, the Geographical Sources of the Competitive-ness of Firms; TNC, December 1996.

3 A monopoly market structure is one in which there are many,many buyers, but only firm selling the product that has very few closesubsidies; an oligopolistic market structure is one in which there aremany, many buyers, but only a few sellers and if the firms in the indus-try produces a standardized (homogenous) product the market is called“pure oligopoly” and if their product is more heterogeneous, it called a “ differentiated oligopoly”. See Alan Hochstein: Microeconomics, An Advanced Introduction, Thomposon Educational Publising Inc., 1993. It is the desire by countries to minimize monopolisand oligopolistic market structures that provides the impetus for adoing competition policy and law.

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such a market structure to prevail include: the existence ofa market price that is charged by all firms in the market;every buyer has to be perfectly knowledgeable as to theproducts produced by each firm and the selling price ofeach firm’s output; entry and exit from the market shouldnot be restricted; and any firm considering entry can do soand should be able to sell as much as it can at the goingmarket price. This is indeed, the ideal situation that wouldensure that “competitive prices” prevail.

In order to improve competitiveness of their econmies, many African countries have embarked on econoic reforms, and in many cases this has entailed a shiftwards a “market eocnomy”. These reforms have often only involved decontrol of prices, but also liberalizatioof foreign exchange markets and movement towards mket determined exchange rates and interest rates, privzation of state owned enterprises, and reduced govment intervention in private sector economic activity.

The need for African countries to improve competiveness of their economies in order to effectively partipate in a globalizing and liberalizing world economy now fully recognized. However, over-facile assumptiothat deregulation, particularly trade liberalization, will aways lead to more competition should be avoided. Traliberalization does indeed often lead to greater comption, but not always because products in some sectors not be tradeable (particularly, services). The reasosome commodities may not be tradeable may incluhigh -transport costs, shortage of foreign exchange, foclosure of distribution channels, and anti-competitivpractices by foreign exporters.

The aim of competition policy should be to ensure ththe benefits of the removal of governmental restrictioare not reduced by private restriction upon competition

Countries can promote competitiveness of their natioal economics by ensuring that firms do not indulge in “rstrictive business practices”, public enterprises do ncrowd out the private sector, and government policiesnot bestow monopolistic or oligopolistic powers on cetain firms and also do not reward rent-seeking enterpriat the expense of productive investment. Governmpolicies which may contribute to anti-competitive behaiour by firms may include: restrictive entry to certain industries; bestowing monopoly rights to certain firmselective allocation of foreign exchange and credit ratioing; multiple exchange rates and interest rates; andstrictive marketing arrangements for certain products ainputs, especially through the creation of marketinboards.

African countries have made significant progress liberalize their economies and improve competitiveneof these economies. Many have eliminated and/or duced price controls on a range of products and inputs,cept in some cases for strategic commodities such as fA number have also liberalized their foreign exchanmarkets and moved to remove exchange controls for crent account transactions and shifted to market-basedchange rate regimes. Credit rationing and allocation halso been eliminated in a number of countries and soAfrican countries have moved to market-determininterest rates.

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A number of African countries have also made signicant efforts in the more difficult areas of “privatization opublic enterprises” and in dismantling monopoly powof “marketing boards” in the purchase and marketingagricultural products and inputs. The belief of many Afcan countries at the advent of independence was that plic enterprises were an important channel for AfricaGovernments to “carve a stake” in African economies ato ensure some form of ownership of their economies. Acordingly, these enterprises were designed to play a potal role in the development process of African countriExperience has shown that these good intentions havebeen satisfactorily fulfilled as public enterprises becamserious burden on budgets of many African Governmeand were crowding-out the private sector. Instead of ctributing to development, many became centers of ccentration of market power, with disastrous effects competitiveness—of African economies. Privatization public enterprises in Africa is therefore designed not onto improve efficiency of operation of these entities, bmore importantly to unleash market forces which wresult in a more efficient allocation and utilization oresources.

African countries in deciding on their competitiopolicy and law ought to avoid over-emphasis on dereglation as a panacea to all the problems of African ecomies. It is essential also to emphasize “regulatory form.” African governments need indeed to disengafrom direct intervention in economic activity and. fromdistorting competition, through the granting of exclusivrights, etc. Nonetheless, disengaging from direct intvention in economic activity does not absorb the govement from its responsibility to act as the referee to ensliberalized markets work properly and to assist entprises through, information, training, and infrastructurdevelopment. Competition policy itself is a form of regulation.

The purpose of this paper is to contribute to the ogoing debate on competition policy and law, with partiular focus on African economies. Section II will deal witthe “conceptual framework of competition policy.” Section III will highlight the 1mportance and the role of competition policy”. Section IV will review both, the “evolu-tion of competition policy and law” as it has emerged the nation region and multilateral levels and “some Afcan country experiences”. Section V will deal with th“constraints on competition in Africa” and Section Vcontains “concluding remarks”.

A better understanding of existing competition policand law in African countries will not only assist Africacountries to be better informed of the discussions takplace at the multilateral level, such as within the framwork of UNCTAD and the WTO, but more importantlyassist those countries that are in the process of adopcompetition policy and law. The study is also intendedassist African countries in appreciating the importancedeveloping “open market structures” and avoiding “ancompetitive practices”, elements essential for the devopment of a dynamic private sector.

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Competition in a market refers to rivalry among sellersand among buyers of goods or services; the sellers andbuyers that can enter the contest constitute the market.The extent and nature of market competition is consideredimportant in determining the performance of economicsystems and under “static conditions” performancejudged in terms of efficiency which has two elementechnical efficiency which exists when the production adistribution of goods take place with minimum inputgiven technological constraints; and allocative efficiencwhich exists when resources are allocated in the optimmanner.4 The great majority of real world situations fabetween “perfect competition” and “monopoly” aninvolve imperfect, but workable competition.5

Competition policy seeks to promote competitiothrough the liberalization of governmental policies anmeasures where they unduly distort competition. Comtition policy is also concerned with the enforcement rules of the game to ensure that enterprises do not untake restrictive business practices and many Governmhave attempted to ensure incumbent firms do not takevantage of liberalization to “privatize” governmental restraints and bloc market entry.6 Competition allows themarket to reward good performance and penalize pperformance by producers. It encourages entrepreneuactivity, stimulates efficiency and market entry by nefirms, and encourages production of a greater varietyproducts of good quality. Many governments have takinto account to ensure that the principles of competitipolicy are taken into account when developing and impmenting other governmental policies.

Confusion may exist between “trade policy” an“competition policy”, although competition policy mayaim at making trade policy work better in a framework which the principles of competition policy are adhered Competition policy authorities may have an advocarole vis-à-vis trade authorities. This does not nonetheleimply that the two policies are the same. Competitipolicy can make a substantial contribution to improvtrading environment. In Africa, a major handicap for thdevelopment of African economies has been the poorfrastructure which has heightened the cost of both impoand exports. An inevitable solution to this problem is try and find ways of reducing these transport costs. A psible solution would be to inject some form of competitiveness in this sector, through granting of concsions or selling off to the private sector ports, constructof roads, utilities, etc. Competition policy can help work out what would be the best method of going abothis, and also ensure that the private firms do not sub

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Discussions on Competition Policy and Law havtended to center on: identifying “common ground” in thapproaches followed on different competition questioby Governments; exchange of views in areas wh“identification of common ground” is more difficult, suchas the role competition policy should play in the strengening and improvement of economies of developicountries and countries in transition. The discussionsthis regard have focused on, the development of the bness community in those countries; identification aadoption of appropriate measures to help those countthat might be hampered by restrictive business practi(RBPs); the interface between competition policy, tecnological innovation and efficiency, the competitiopolicy treatment of vertical restraints and abuses of doinant position; the competition policy treatment of execise of intellectual property rights and of licenses of intlectual property rights and know-how. Furthermore, fochas also centred on analysis of differences in the scopcompetition laws in individual sectors, in the light of thprocess of economic globalization and liberalization; aanalysis of the effectiveness of enforcement of competion laws, including enforcement in cases of RBPs haveffects in more than one country.7

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Competition policy can be analyzed at two levels: tcountry level (firm competitiveness) and, at internationlevel (cross-country competitiveness). Issues that addressed in this paper are drawn from the notion of innational competitiveness. As defined by the AmericCommission on Industrial Competitiveness, a countrycompetitiveness is the ability to produce goods and seices that meet the test of international markets asimultaneously to maintain and expand the real incomeits citizens (Tyson 1992; Ostry 1991).8

From the above definition, a country’s competitivenemust be judged not only against its performance in world market but also in terms of its capacity to sustaeconomic growth over a period of time. This is the reaswhy such countries as Germany, Japan, Korea, and seal other East Asian economies appear as strong comptors.9At firm level, a firm is considered competitive if it isable to sustain earnings over time and can be viewed strong competitor if it is able to increase both its markshare and. its earnings.10

Although to a large extent firm performance in thmarket place is what determines a country’s overall enomic strength, nonetheless, it also appears that cernational characteristics, such as: how human capitaused, the technical skills of the labour force, manage

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4 United Nations Conference on Trade and Development(UNCTAD): Transnational Corporations, Market Structure and Com-petition, 1997.

5 The 2 extremes of Perfect Competition and Monopolistic marketsare respectively explained in para. 5 footnote 3.

6 United Nations Conference on Trade and Development(UNCTAD): op cit.

se-7 UNCTAD: “Review of All Aspects of the Set of Multilaterally

Agreed Equitable Principles and Rules for the Control of RestirctBusness Practices: Strengthening the Implementation of the Sdocument TD/RBP/CONF.4/2, May 1995.

8 The World Bank, Trade, Technology and Competitiveness, (IDEDevelopment Studies).

9 The World Bank, Trade, Technology and Competitiveness.10 The World Bank, op. cit.


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practices and government policies, do influence firmability to compete.11

In any given market, enterprises have a natural tendcy to compete with each other. Under the incentive competition, firms will be obliged to perform the besthey can, in order to satisfy consumer needs. They wconstantly try to guess those needs of the consumthrough R&D and innovation. However, the preferresituation of any supplier in any market is to have a mnopoly in order to maximize profits, using RBPs. Accoringly, through competition policy and competition lawgovernments; can ensure that these monopolistic tendcies do not translate into actual situations that retard copetition in an economy.

Monopoly can exist for a number of reasons. It marise as a result of investments requiring large outlasuch those in electricity, water and telecommunicatioThese investments often huge investment resources cannot be mobilized by require average individuals. Acordingly, in these sectors monopolies have often pvailed, although in recent years the private sector has ballowed to play a role. In other cases, monopolies haveten emerged as a result of the State regulating entry such sectors, the reasons often cited are strategic imtance and security. However, by so doing, the State tended to reduce or eliminate competition in such secto

Competitiveness should not simply be viewed ascountry’s ability to export or generate trade surpluses,this can be brought about at least temporarily by meanartificially lowering the exchange rate and/or compresing domestic expenditures. Nor does it arise out of abdant cheap labour or natural resources. In summary,simple definition of competitiveness would suffice. It alsdoes not seem to depend on the level of productivCompetitiveness is in fact, a multidimensional concethat embraces the ability to export, efficient use of factoof production and natural resources, and increasing pductivity that ensures rising living standards of a nation

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As traditional trade barriers are reduced and globalition progresses, markets tend to become more integrand competition stiffer. The conclusion of the UruguaRound (UR) trade negotiation reflects a willingness to ajust the multilateral trading system to these new realitof doing business globally. African countries are nocompelled to face these realities and develop urgentsponses to the great challenges posed by current gldevelopments. The central feature of Africa’s responmust be the strengthening of national policies fincreased international competitiveness and improvattractiveness to foreign direct investment (FDI).

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The aim of a law concerning Competition is to promoeconomic efficiency and to protect freedom of competion and the competitive process. In a monopoly marthe quantity of a good or service supplied will be less ththat available in a market governed by freedom of comtition and the competitive process, and the price charmay be higher than in a competitive market, or same for product of inferior quality. In addition, since the leveof production is lower than that observed where competion prevails, adverse effects on the level of employmeensue. From this standpoint monopolies are inefficieand detract from social well-being.12

The international trade system is nowadays conceras much with domestic policies and measures of countas with border measures. The effective application competition policy would put African countries in a betteposition to fulfil their trading obligations under varioubilateral and multilateral agreements, such as thoseGeneral Agreement on Tariffs and Trade (GATT) and tWorld Trade Organization (WTO). However, a word ocaution is necessary as regards adoption of competipolicy and law by African countries. Wisdom would havit that African countries should opt for “JUDGXDOLVP” be-cause of the “uncertainty” surrounding the possible impact implementation of “competition policy” at an international level would have on African economies. Theconcerns pertain to: the possibility that although tracompetition could certainly lead to industrial restructuing and efficiency, there is also the possibility that could wipe out domestic industry in some African coutries; and concerns that advanced countries may not nessarily be following the logic of competition, as has bethe case of the Common Agricultural Policy of the Eurpean Union.

The importance of international trade and competitiin the world market has progressively come to be aknowledged. There is hardly a country today that does seek to be more closely integrated into the global ecomy, where the mobility of goods, services and capital hincreased to a point unforeseen only two decades aHowever, it is also becoming clear that the ability to compete in the world market differs widely-across countrieindustrial as well as developing. Notwithstanding thvarious disagreements, the competitiveness debate had one important outcome: there is now a much greappreciation of the critical role innovation and technoloical improvements play in the relative economic perfomance of countries.13

Competition policy encompasses the area commoknown as anti-trust or anti-monopoly law and practicewell as various micro-industrial policies affecting makets. Competition laws address essentially two areas:conduct of business and the structure of economic mkets (The World Bank, 1994). Competition policy prohibits conduct that either unfairly diminishes trade, reduccompetition, or abuses a market-dominating positio

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12 UNCTAD, Review of All Aspects of the Set of MultilaterallyAgreed Equitable Principles for the Control of Restrictive BusinessPractices, TD/RBP/CONF.4/3, June 1995.

13 The World Bank, Trade, Technology and Competitiveness.


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Competition laws are essentially intended to counter bothconduct policies, structural policies, and performancepolicies.

As for conduct policies, Competition law is intended tocounter a number of elements, including:

ii(i) Horizontal restraints: That is, unilateral or collec-tive actions weakening or restraining competitionamong firms in the same market;

i(ii) Vertical restraints: That is, provisions in contractsbetween suppliers and their distributors (and re-tailers);

(iii) Enforcement standards. The existence of law isnecessary, but not sufficient, to achieve the objec-tives of competition policy.

As regards, structural policies, competition laws aim toprevent transactions that would reduce the interdepend-ence of competing suppliers (vertical integration) and in-crease concentration in market (horizontal integration). Itdeals specifically with:

ii(i) Merger control regulation: selectively prohibitingmergers that would substantially increase concen-tration in the market or restrain trade among sup-pliers;

i(ii) Pre-merger notification: allows authorities to re-view proposed mergers prior to actualization,thereby making merger control administrationmore efficient;

(iii) Enforcement and remedial measures under merg-er control: designed to preventing the negativeincreased concentration effects of the merger.

Performance policies, which include basically admin-istrative pricing by anti-trust authority, whereby the statecompensates for lack of competition by dictating prices oroutput.This is usually applied to sectors that display sig-nificant natural monopoly characteristics.

Competition policy can also help to ensure that priva-tization of state-owned enterprises or government pro-curement are conducted in a pro-competitive manner, thatgranting of exclusive rights or subsidies are subjected tocompetition criteria, that intellectual property rights arenot abused, and that the effects of trade liberalization arenot reduced by foreclosure of distribution channels. Thebasic objective of competition policy in Africa should beto inculcate enterprises and the general public with adynamic “competition culture.”

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Although there is broad consensus on the generalrection institutional and policy reforms should take. Thpoor economic recovery in many Africa countries hasa large extent been attributed to “poor macroeconomic vironment”, including the environment in which firms operate. Accordingly, calls have been made for Africacountries to intensify macroeconomic reforms in order

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In most of the East Asian economies that are part of “East Asian Miracle” (Hong Kong, Indonesia, Japan, tRepublic of Korea, Malaysia, Singapore, Taiwan-Chinand Thailand) government undertook a package of meures designed to promote economic growth. The EAsian countries success was based on a combinatiofactors, particularly the high saving rate, interacting wihigh levels of human capital accumulation, in a stabmarket-oriented environment—but one with active goernment intervention—that was conducive to the transof technology (Joseph E. Stiglitz, 1996). The combintions of these policies, led those countries to accompthree functions of growth: accumulation, efficient alloction, and rapid technological catch-up (Joseph E. Stigl1996).

The general aim from various country competition leislation is to control or eliminate restrictive agreementsarrangements among enterprises, or acquisition anabuse of dominant positions of market power, which limaccess to markets or otherwise unduly restrain comption, adversely affecting domestic or international tradeeconomic development.

In most countries restrictive trade practices, on the ohand, generally refers to cooperation agreements betwenterprises, monopolies and concentrations, mergerstakeovers, collusive tendering, and abuses of dominawhich are the practices set out in section C and D of United Nations Restrictive Business Practices Set. Agrments fixing prices is among the most common formsrestrictive business practices, and irrespective of whetit involves goods or services, imports 1 or exports, is cosidered as RXWULJKW� SURKLELWLRQ in many countries.15 Onthe other hand, certain cooperation agreements betwenterprises can be authorized under particular circustances. This apply particularly where such arrangemare designed to promote overall economic efficiency aor the competitiveness of such enterprises vis-à-vis laenterprises, or to promote consumer welfare. In any evit would be up to the Competition Authority to decide othe basis of an evaluation of agreements or arrangemeThis is the case in Algeria (Article 9), Gabon (Article 10Morocco (Article 7) and Kenya (Part II.5).

Competition issues are closely inter-related to the ptection of consumer interests. Restrictive business prtices affect the consumer either by way of higher priceslimitations on availability or choice of goods or serviceIn Africa most countries recognise the close interrelatioship between competition policy and consumer protectand in some cases include sections covering unfair trpractices within their competition policy legislation.16

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14 The World Bank, The East Asian miracle, 1993.15 This is the case of Algeria, Kenya, Gabon, Côte d’Ivoir

Morocco, South Africa and Tunisia.16 See for example Competition Policies of Côte d’Ivoire, Gab

and the Competition Framework in Malawi.


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sive guidelines on this issue were adopted and distributedto appropriate bodies of individual States.17

In Gabon, for instance, competition law lays downmeasures devoted to the promotion and protection of con-sumed economic interest, along with standards for thesafety and quality of consumer goods and services, distri-bution facilities for essential consumer goods and ser-vices.18

Entry of foreign firms as a consequence of the overalleconomic reform policy can inject competition into a hostcountry market, particularly if the market has a limitednumber of domestic suppliers relative to its size prior tothe foreign firm’s entry. In such a situation, the processcompetition could involve lower prices (especially if thforeign firm is more cost-efficient than local firms) or, ais more likely, product differentiation and advertising.19

This could in turn involve the introduction of new products based on innovatory activity by the foreign firm involved. Entry of foreign firms can then be expected to improve the performance of the concerned industry aincrease consumer welfare by lowering prices, improviproduct quality, increasing variety and introducing neproducts, and ultimately provide the development of tcountry, provided that the overall local market continuefunction efficiently.

Foreign investment and ownership regimes are aimportant complement to trade policy and an elementthe import competition framework. Import competitio(free trade) provides for market access while foreign vestment and ownership provides for market prese(foreign-owned domestic production). Indeed both icrease competition. Direct market participation from foeign entities can be a powerful competition devise. Thit adds heterogeneity, brings newer technologies andsion, and it limits domestic advantages based on transtation and border related transactions costs and non-table factors. In addition, direct foreign investment allowthe home country to retain most of the benefits of traliberalization. Clear legislation, opening domestic markto foreign participation, recovery of foreign investmenand the absence of ownership restrictions, are all essefor an effective competition policy.20 The objective is tofacilitate the development of technological infrastructuand access to, and transfer of, foreign technology andfoster innovation.

In a broad sense, all the provisions of the UruguRound Agreements have a bearing upon competitsince the encouragement of international competitionthe basic rationale of trade liberalization. Since its birth1947 the General Agreement on Tariffs and Tra(GATT) has sought to liberalise world trade and provida secure world trading system by preventing countradopting protectionist policies as was the case during

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inter-war period. This were achieved over the yeathrough a series of rounds of complex negotiations aimat strengthening the rules of international trade, lowertrade barriers, and expanding the sectoral coverage ofGATT's rules. The success of the GATT in lowering trabarriers and hence, increasing world trade can be sfrom the fact that on the one hand, world trade (both port and imports) grew at an annual average rate of 6.5cent in the 1950s, 9.2 per cent in the 1960s, and reacphenomenal growth (expanding by over 20 per ceduring the 1970s.21 The basic causes were a general ecnomic upsurge as a result of the lowering of tariffs by tdeveloped countries either unilaterally or through mullateral trade negotiations (MTNs) carried out under tauspices of the GATT.

On the other hand, the growth of trade decelerated nificantly during the 1980s (6.0 per cent per annum) dto the so-called “new protectionism” in the developecountries. This was due to the slow down in economgrowth and raise in unemployment since the mid-197This gave rise to new forms of discriminatory trade pratices, which often fell outside of the regular boundariesthe GATT. Important examples of this discriminatortrade practices are the non-tariff barriers (NTBs), whiare not transparent in nature, the Multifibre Arrangeme(MFA) which exclude textile and clothing from the gamuof the GATT, the evasion of the most-favoured-natio(MFN) treatment by formation of regional trading blocand the unilateral granting of preferences by the OECcountries to the developing countries. These practiundermined GATT's basic objectives. Even worse, tsystem of “tariffs escalation” adopted by the developcountries according to the degree and the stage of procing (referred to as phenomenon of “cascading”) has bharmful for the developing countries trying to diversiftheir exports.22

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African countries have made significant strides to lieralize their trade regimes, although much still needs todone in order for their economies to be effectively intgrated into the global economy. The dilemma that cotinues to face these countries is to respond to the inheinequities of the world trading system which basicalarise from an asymmetrical distribution of econompower between the developed and developing countri

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There is no common rule for the elements of competion law that a country should adopt. The different com

17 General Assembly resolution 39/248 of 9 April 1985 on Consum-er Protection.

18 Règlement de la Concurrence au Gabon, Loi no. 5/89 du 6 juil1989, Titre III, Articles 12-15.

19 UNCTAD, World Investment Report 1997.20 The World Bank, The Interface of Trade, Investment and Com

tition Policies, Policy Research Working Paper no. 1393, Decem1994.

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21 The World Bank, the Interface of Trade, Investment and Compe-tition Policies, Policy Research Working Paper No. 1393, December1994.

22 The World Bank, op. cit.


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petition laws enacted by African countries generally re-flect the objectives such competition law is intended toachieve as well as the legal traditions of the countries con-cerned. Furthermore, such laws come under various titlessuch as: “Ordinance on Competition” in Algeria; “ThRestrictive Trade Practices, Monopolies and Price Cotrol Act” in Kenya, “Maintenance and Promotion of Competition Act” in South Africa, “Decree on the Regulatioand Control of Prices and Merchandise Supply and Sein Morocco, “The Competition and Fair Trading Act” inZambia, “Law on Consumer Protection” in Tunisia, “Lawon Competition” in Côte d’Ivoire and “CompetitionRegulation” in Gabon.

Nonetheless, the “main objectives” of competitiopolicy and law in African countries appear to be similaalthough stated differently. In Algeria, the objectives this law have been stated as: to organize and promoteand fear markets; to promote economic efficiency, maximize consumer welfare; and to encourage transpency in trade practices. In Kenya, they have been staas: to encourage competition; prohibiting restrictive trapractices; controlling/regulating the activities of monoplies; controlling the concentration of economic powecontrolling of prices of some commodities believed to essential to the economic development and the welfarlow income consumers. In South�Africa, the objectives ofcompetition policy and law have been stated as: to pvide for the maintenance and promotion of competitionthe economy; to prevent or control restrictive practiceacquisitions and monopoly situations, and for matteconnected therewith (see Annex).

The “main elements and focus” of competition policand law in African countries relate to: restrictive businepractices; monopolies and concentration of econompower; mergers and takeovers; enforcement machineand extra-territorial coverage. As regards “restrictibusiness practices”�competition policy and law has tended to focus on issues of limitation of access to markelimitations to free pricing; market allocation; collusivtendering; customer discrimination; discriminatory dicounting; vertical price collusion; horizontal collusion oconditions of supply; and horizontal collusion on marksharing. (see Annex). In respect of “monopolies and ccentration of economic power” the competition laws eacted in African countries have focused on: unjustifiactions to sell; customer discrimination; tied purchasiconditions; resale price maintenance; abusing dominmarket position; and unwarranted concentration of enomic power.

On the issue of “mergers and takeovers”, in Côd’Ivoire mergers and takeovers require prior consultatiwith the Competition Authority and in Kenya and SouAfrica. such mergers/takeovers are regulated/controlon a case-by-case basis. In Zambia, mergers betweenor more independent enterprises engaged in manufacing or distribution require approval. As regards “enforcment mechanisms” for non-compliance with competitiopolicy and law, a number of African countries introduceinto this legislation ways of exacting penalties for defauers. Type of punitive measures include: fine, in proportito gravity and clear-cut illegality of offence or in relatioto the illicit gain achieved by the challenged activity; imprisonment, in cases of major violations involving fla

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grant and intentional breach of the law, or of an enforcment decree, by a natural person; restitution to injurconsumer; and suspension and/or termination, in regarcertain mergers, acquisitions or restrictive contract.23 Asregards “extra-territorial coverage” of these laws, innumber of African countries these relate to restrictibusiness practices committed in the country concernHowever, in Côte d'Ivoire, the law has taken into accouthe impact of globalization of the world economy as weas regional arrangements on the behaviour of firms.

Since the mid 1980s, most of the African economihave been undertaking trade liberalization initiatives order to benefit from the rapidly globalizing market. Thwave of liberalization represents an effective shift in dvelopment strategy from an inward-oriented, import-sustituting, framework designed strategically to reduce dpendence on the outer world, to an outward-orientexport-promoting framework designed to create a virous cycle of higher, integration and faster growth with epanded opportunities. Before 1985, trade regimes sub-Saharan Africa were characterized by the severityquantitative restrictions covering virtually all categorieof commodities and by high tariff rates. Most countrieincluding Ghana, Nigeria and Tanzania, initiated their lieralization by attempting to reform the foreign exchanmarkets to correct highly overvalued currencies, as mafested in high black market premia. These countries complished sustained real devaluation of their currencby the mid 1980s (see e. g., World Bank, 1996) and bthe rate of improvement in price distortions and the ratetrade integration were positive. CFA members, howevfailed to devalue their currency during the 1980s or to cry out other trade reforms, only to realize the need fosubstantial devaluation in 1994.

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As part of the general trend towards the adoption orform of competition legislation, several African countrieincluding Algeria, Cameroon, Côte d’Ivoire, Gabon, Keya, Morocco, Senegal, South Africa, Tunisia, Zamband Zimbabwe have become relatively open trade gimes whereby introducing competition law and estalishing competition authority. In other countries such Ghana, Egypt and Malawi competition legislation are preparation.

In Kenya, the Restrictive Trade Practices, Monopoliand Price Control Act was introduced in 1988. This lawas introduced to curb unfair market prices, ensure tconsumer welfare is not violated and reduce�direct Gov-ernment controls and regulations in all economic actities within the country.24 The main objective of the Actis to, encourage competition in Kenyan economy by: phibiting Restrictive Trade Practices; controlling/regulaing the activities of monopolies controlling the concentrtion of economic power; controlling of prices of somcommodities believed to be essential to economic devopment and the welfare of low income consumers.

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24 Kenya, The Restrictive Trade Practices, Monopolies and PriceControl Act, 1988.

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In Malawi, the Government has adopted a CompetitionPolicy Framework. By this Framework, the Governmentis trying to adopt a competition policy and law aimed atfurther economic liberalisation, leading to greater com-petitiveness in domestic markets. The Government alsointends, by this law, to relinquish a number of means bywhich it previously influenced private sector operators,notably business licensing, price controls, and exchangecontrols on current account items. The major goals ofcompetition policy include the protection of consumer in-terests and the promotion of economic efficiency. TheGovernment envisages to achieve these goals essentiallythrough lowering barriers to entry and eliminating restric-tive business practices. Three primary areas have beentargeted including business behaviour calculated to elim-inate or reduce competition; market structure which per-mit abuse by an entity in a position of market power; andgovernment legislation, both existing and proposed,which may impact on the operation of the free market inthe country. In addition, a Competition Policy Tribunal isexpected to be established to resolve contentious issues incertain specific fields. The major components of econom-ic liberalisation which are expected to contribute toincreased competitiveness in the economy are:

ii(i) the removal of regulatory controls and business li-censing legislation which inhibited entry of newfirms into the market;

i(ii) the liberalisation of the financial sector throughintroduction of market-based interest and ex-change rates and foreign exchange allocations.Barriers to entry into the banking system havebeen relaxed so as to increase competition in theprovision of financial services;

(iii) the removal of import licensing and the rationali-sation of the custom tariff as well as the removalof domestic price controls;

(iv) the review of investment incentives to encouragenew market entrants; and

i(v) the privatisation of public enterprises with amongother, the objectives of promoting economic effi-

ciency, the encouragement of competition and thereduction of monopoly power.

In the Republic of Zambia, the Competition and FairTrading Act (Act No. 18 of 1994), is the only legislationin Zambia giving the courts jurisdiction to review a codeof conduct which is “anti-competitive” or “unfair”. TheAct considers anti-competitive trade practices as “acategory of agreements, decisions and practices whhave as their object the prevention, restriction or disttion of competition to an appreciable extent in ZambiaPart II of the Act establishes an enforcement machineThe Zambian Competition Commission. This Commision is responsible for monitoring; controlling and prohibiting acts or behaviour which are likely to adversely afect competition and fair trading in the country. ThCommission has power to carry out, on its own initiativor at the request any person investigations in relationthe conduct proscribed by the Act.

The Commission has an Executive Director who hpowers to seek from a court a warrant granting: authoto enter any premises; and access to or production of books, accounts or other documents relating to the tror business of any person and the taking of copies of such books account or other documents.25

The Republic of South Africa has a long history oCompetition Legislation going as far back as 1949. Whconsumer protection is not a facet of the current (19competition law, however, other Acts (e.g. The HarmfBusiness Practices Act, 1988) supply a framework simiin scope and application to the current Competition Actaddress consumer related business practices. The mobjectives of the current competition legislation are: provide for the maintenance and promotion of competion in the economy for the prevention or control of rstrictive practices, acquisitions and monopoly situationand for matters connected therewith.26

25 Zambia, The Competition and Fair Trading Act, 1994: Part IV,14 (1)

26 South Africa, Maintenance and Promotion of Competition ActNo. 96 of 1979

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ECONOMIC LIBERALIZATION IN EGYPT

Prior to the Uruguay Round (UR), Egypt embarked on a comprehensiveshift away from a centralized state toward a market-based, outward-orientedeconomy, under the guidance of the High Ministerial Economic Reform Com-mittee. These reforms focused essentially on the following area, macroeconomicstabilization, trade liberalization, deregulation of price controls and other admin-istrative practices, reorganization of public enterprises and privatization, and thecreation of a Social Fund for Development.

As a main exporter of cotton, rice, citrus fruits, onions and potatoes, a strategyfor agriculture was also worked out together with the government, the FAO, theUNDP, UNEP and the WFP. The main objectives of the strategy includes to:

• further deepen the liberalization and privatization of the agricultural sector;

• take into consideration the local, regional and international environment;

• conserve, improve and develop resources with optimal utilization;

achieve efficiency, equity combined wit environmental awareness;

• expand exports where there is a comparative advantage and import products• where there is no comparative advantage;

• improve opportunities for gainful employment in the agricultural sector.

At the time of the finalization of Uruguay Round negotiations, Egypt committedto bind tariff rates on all items and tariff non-tariff measures on agricultural prod-ucts according to the terms of the UR, with a compensation mechanism. Egypthas also undertaken tremendous effort to strengthen and modernize legislation inthe intellectual property rights area. A new law has been drafted to amend the oldpaten law of 1954 to conform to the terms of the TRIPs agreement, in particularto ensure protection for rights holders. Progresses are also been made in improv-ing copyright protection. Importantly, computer programs are now considered asliterary works with a period of protection of 50 years. This conforms to the URagreement.

Source: CIDA, Africa and the Uruguay Round, January 1996

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Responding to the challenges posed by globalizationand liberalization requires major adjustments in economicpolicies, resource allocation and production structure inAfrican countries. The world economy is increasingly be-ing shaped by the processes of globalization and liberali-zation. These are interrelated and multifaceted processesencompassing the growth of international trade in goodsand services and capital flows, the global integration ofproduction processes, the dominance of market-orientedeconomic policies throughout the world, and a significantdegree of institutional harmonization�between countriesin respect of trade, investment and other policies mediatedthrough multilateral and regional institutions. Globaliza-tion and liberalization are processes that are unlikely to bereversed in the foreseeable future and have profound im-plications for developing countries, including Africancountries, in terms of their in the world economy, theirdevelopment prospects and the nature of their economic

policies (Onitiri, 1995). With the new trends towards glo-balization and liberalization, many developing countriesrisk being marginalized unless they can adapt and adjustto the new competitive international environment.

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Africa’s participation at Multilateral Trade Negotiations (MTNs) that have constituted the landmark of intenational trade relations has been marginal��Africa's par-ticipation in the Uruguay Round of negotiations leadinup to the establishment of the World Trade Organizatwas peripheral. Many African countries have as yetjoin the World Trade Organization (only thirty-two countries had joined by the beginning of 1997). Furthermoeven those that have joined very few maintain delegatiat the Headquarters of the GATT/WTO in Geneva to able to effectively follow the discussions held on a dabasis within the framework of the WTO. As a consquence very few sub-Saharan African countries partpated in the Uruguay Round of Multilateral Trade Neg


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tiations (UR), or paid attention to the formal negotiatingprocess. The bargaining power of the African countries asa group was therefore not strong.27

For many African countries, the concepts of competi-tion are not only new, but also very complex. Introductionmechanisms for enforcement of competition policy, legis-lation and Competition Authority, has associated costs,which cannot be born by many African countries particu-larly at this stage of budgetary austerity and implementa-tion of public sector reforms by many of these countries.

The correct application of such new and complex con-cepts needs some time. First, a learning process with re-spect to business and consumer behaviour is essential.Second, training to change mentalities and to create a“culture of competition” is also necessary. Moreover, tlegislative process itself is, by definition, an. evolutionaone, therefore African countries need to go through evolutionary process of amending and improving thlegislation in general and their competition laws, in paticular.

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African countries, in parallel with the liberalization otheir trade regimes� under structural adjustment programmes, are faced with the difficult and challenging taof institutionalizing and upgrading their trade legislatioaimed at implementing the WTO Agreements, and devoping a regulatory framework that will ensure evolutioof market-based economies. In addition, national laand regulations in several African countries may not yhave been synchronized with basic provisions of tWTO Agreements.

African countries have been implementing reform prgrammes with a view to liberalizing their economies ain order to integrate these economies into the woeconomy. Many of these countries hope to benefit frothe strengthening of the multilateral trading system aexpansion of world trade. A number of these countries now in the process of trying to bring their trade policiesline with demands of a globalizing and liberalizing woreconomy. Nevertheless, translating trade rights and ogations under multilateral agreements into concrete tradvantages requires coordinated actions at the counsub-regional and regional levels between African govements, the private sector and business community as as regional organizations.

It can be observed that in industrialized and some vanced developing countries preparations for internatioal trade negotiations is an interactive process betwgovernment, the private sector�� intergovernmental andnon-governmental institutions as well as specialized search institutions. This is done in order to arrive at cosensus on the issues to be discussed and more importto arrive at a country position.

In many African countries, this culture and processconsultation in advance of important international negtiations has still to develop and lack of resources also

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poses constraints on developing appropriate institutiomechanisms needed to advance the process. Manthese countries find themselves poorly equipped in terof human and financial resources to enable them to equately prepare technical background studies and eslish peer working Groups needed to prepare them international trade negotiations.28

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In most economies, there is a set of monopolies thave emerged as result of economies of scale and the sunk-in costs needed to operate in such industries. Inrican countries such monopolies, often called “natumonopolies” are prevalent and concentrated in a numof important sectors. There is a grouping of “strategic dustries” for which arguments are made for the needrect or indirect state intervention. This category often cludes water supply, the electricity power, primary heacare, primary education, postal service, etc. Technolocal change and the advance of the private sector haveduced the irrelevancy of the arguments for governmintervention in what are called “natural monopolies”. Thprivate sector has been found to operate as efficientlythe public sector in some of the sectors, and in some ceven better. However, political patronage that controlpublic enterprises gives to governments in power hproven a major stumbling bloc to privatization of publenterprises in Africa as well as to the elimination of naral monopolies.

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The globalization and liberalization of the worleconomy, in terms of production processes, marketand distribution as we’d as technological advances, not only opened up opportunities but also brought alotremendous challenges in terms of ensuring “fair comtition” in such liberalized markets. Furthermore, the eof the cold war and the shift to market-oriented type economic structures, not only in the formerly centrplanned economies, but also in many others, has aheightened the debate on the possibility of “state monolies” giving way to “private monopolies” as many governments reduce their direct intervention in economic tivity in the context of “economic reforms.”

The challenges that face the global economy is howensure that globalization and liberalization produces“Pareto optimal” situation in terms of increasing globwelfare. In such a situation promoting competition and“level playing field” in international production and tradbecomes an imperative. Reducing restrictive businpractices, ensuring that mergers and takeovers do nosult in undue concentration of economic power, aminimizing dumping practices are some of the objectivand targets of competition policy and law.

27 The World Bank, the Impact of the Uruguay Round on Africa,Discussion Papers no. 311.
28 The World Bank, Trade, Technology and Competitiveness.


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Competition in a market refers to rivalry among sellersand among buyers of goods or services. It also refers to afirm’s ability to produce goods and services that meet test of international markets and simultaneously increaits earnings and market share over time. Competition be analyzed at national and international levels.

At national level (firm competitiveness), competitiodeals mainly with such government actions as: adoptof competition policy and law and/or its improvement, efective enforcement of appropriate legislation, and timplementation of judicial and administrative procedurfor the control of Restrictive Business Practices (RBPThis involves basically issues of monopolies and conctration of economic power; acquisitions, mergers atakeover, the enforcement mechanism and extra-terrrial coverage.

At international level, competition is related to a codof conduct designed to promote competitiveness in vaous markets: the set of multilaterally agreed principles the control of RBPs. This calls basically for the establisment of consultation procedures whereby a State mayquest consultation with other States in regard to issconcerning the control of RBPs. The main issues of copetition policy and law at international level and withithe framework of GATT/WTO are related to: safeguaragreements, subsidies, antidumping, antitrust, trade-reed aspects of intellectual property rights (TRIPS), atrade-related investment measures (TRIMS).

Lessons derived from available African country castudies suggest that as of 31 December 1996, only 17cent of African countries had adopted Competition Poliand Law.29 The main stated objectives of these Competion Policies and Laws are basically similar, although thare stated differently. In most of these legislations, extterritorial approach is not properly reflected and virtualall of them do not include such aspects as antidumpiantitrust, subsidies on production, and non-tariff barrieto competition and trade. These are indeed some of thsues that are likely to be at the center of the debate opossible multilateral agreement on competition poliand law. Furthermore, all these aspects affect considably prices of traded and non-traded goods and therthe competitiveness of products.

It has been noted that many of the competition poliand laws enacted by African countries tend to emphascompetition on product markets (goods and services)

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not on factor markets (labour, technology, capitaFurthermore, issues of competition in the context of pvatization of state-owned enterprises which is currentaking place in the framework of “economic reforms” hanot been given due consideration, and its implicationseconomic concentration.

Given the current stage of development of trade in Arica, the challenges of adopting an appropriate comption policy and law are indeed formidable because of dangers inherent in opening up economies which hahitherto been relatively closed. The need for Africaeconomies to be integrated into the world economy is any more an issue. However, the pace at which this shobe done is. Some have called for African countries adopt a gradualistic approach in the implementationCompetition Policy and Law. The choice for each counwill be dictated by the state and structure of developmof the economy, the institutional infrastructure availabas well as the administrative machinery for enforcemeof the legislation enacted to promote competition.

In the context of developing a multilateral agreemeon competition policy and law, the extent to which the nal agreement will reflect African countries views on thissue will to a large extent depend on their active partpation in the WTO activities. This is essential if Africa to benefit from the strengthening of the WTO. This rquires constant involvement by these countries in work of WTO councils, committees, and working groupas well as in the day-to-day negotiations that take placesome of these issues. This, in turn, requires more sources being allocated by African countries to follow-uon WTO issues, professional back-up and improved codination between different governmental agencies.

This study has tried to provide African countries wisome understanding of the issues of Competition Poand Law within the framework of the international debacurrently taking place. More� importantly, the study hasbeen undertaken to assist those countries that are inprocess of adopting competition policy and law wisome insights and lessons that can be derived from oAfrican countries. Furthermore, as the debate on the isof how to promote competition in the world economwithin the framework of the increased momentum twards globalization and liberalization intensifies, Africacountries need to be abreast of the issues that are likeoccupy center stage in this debate. Indeed these iswill include: safeguards agreements, subsidies, antiduming, antitrust, trade-related aspects of intellectual propefights (TRIPS), and trade-related investment measu(TRIMS).

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29 Algeria, Cameroon, Côte d’Ivoire, Gabon, Kenya, MoroccSenegal, South Africa, Runisia and Zambia.

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Main features of African competition Policy and Law

Algeria Côte d’Ivoire Gabon Kenya South Africa Zambia

1. Main objectives of com-petition law and policy

—To organize and promotefree and fear competitionexercise;

—To maximize consumerwelfare;

—To encourage transpar-ency in trade practices.

—To improve enterprise’sinstitutional environment;

—To encourage and pro-mote free trade and trans-parency;

—To create conditions forthe development ofnational enterprises.

—To provide for the mainte-nance and promotion ofcompetition in the econ-omy;

—To prevent or controlrestrictive practices,acquisitions and monop-oly situations, and formatters connected there-with.

—To encourage competitionin the economy by pro-hibiting anticompetitivetrade practices:

—To regulate monopoliesand concentrations ofeconomic power;

—To protect consumer wel-fare;

—To strengthen the effi-ciency of production anddistribution of goods andservices;

—To secure the best possi-ble conditions for thefreedom of trade;

—To expand the base ofenterpreneurship;

—To provide for mattersconnected with or inci-dental to the foregoing.

2. Main elements of thecompetition

2.1 Restrictive BusinessPractices

—Limitation of access tomarkets;

—Limition and/or control ofproducers, suppliers orinvestors;

—Market allocation;—Limitations on free pric-

ing

—Coordinated activitiesamong economic entitieswhich restrict or impedecompetition;

—Collusive tendering;—Refusal or discrimination

in supply;—Limiting or restricting the

terms and conditions ofsale or supply of goodsand services

—Limitation of access tomarket of restrictions onfee competition;

—Market or customer allo-cation agreement;

—Limitations of free pric-ing;

—Limitations or controlsof suppliers or investors

—Price cooperation or col-lusion;

—Resale price maintenance;—Refusal to sell/deal;—Discriminatory discoun-

tring;—Customer discrimination;—Market allocation

—Resale price maintenance;—Vertical price collusion;—Horizontal price collu-

sion;—Horizontal collusion on

conditions of supply;—Horizontal collusion on

market sharing

—Trade agreement fixingprices;

—Collusive tendering;—Market customer alloca-

tion;—Collective actions to

enforce agreements;—Concerted refusal to sup-

ply goods and services topotential purchasers.

2.2 Monopolies and con-cerntration of economicpower

—Unjustified action to sell;—Customer discrimination—Tied-purchasing condi-

tion;—Resale price maintenance.

—Abusing dominant posi-tion;

—Concentration of eco-nomic power;

—Limitations of access tomarket or restrictions onfree competition.

No clear definition, but thelaw refers to “Any agree-ment, arrangement, explicitor implicit understanding ormethod of trading which:—limits access to the mar-

ket or restricts competi-tion;

—Unwarranted concentra-tion of economic power

No specified No specified.

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Main Features of African Competition Policy and Law (continued)


—Encourages market shar-ing or supply distribution;

—Limits free pricing;—Limits of controls suppli-

ers of investors”.

2.3 Merges and takeovers —No specified —Prior consultation withthe competition authorityis required

—No specified —Regulated/controlled on acase-by-case basis

—Handled on case-by-casebasis

—Merger between two ormore independent enter-prises engaged manufac-turing or distributing sub-stantially similar goods orproviding substantiallysimilar services;

—Take over of one or moresuch enterprises byanother enterprise, or bya person who controlsanother such enterprise.

3. Enforcement machineryfor competition policyand law

3.1 Enforcement authority Conseil de la Concurrence(Art. 16)

—Commission de la Con-currence (Art. 6)

—Commission de la Con-currence (Art. 2)

—Monopolies and PricesCommission (Part I, 3 (1))

—Competition Board (Art.3 (1))

—Zambia CompetitionCommission (Art. 4)

3.2 Penalties for non-com-plicance

—Violation of the law: (1)price collusion: a finefrom DA 5.000 to DA500.000; (2) refusal toissue invoices: a fine fromDA 5.000m to DA1.000.000; or imprison-ment from 1 month to 1year, or any of the two.

—Refusal to comply withdecisions or orders of thecompetition authority; afine from DA 5.000 toDA 100.000; imprison-ment form 2 months to 2years, or any of the two.

—Violation of the act andother regulations for itsimplementation: a finebetween CFA 200.000 toCFA 5.000.000.

Violation of RBPs: (1) abus-ing economic power,coordinated activitieswhich restrict or impedecompetition, collusion,refusal to sell/deal;imprisonment from 3months to 3 years and/or afine from CFA 50.000 toCFA 90.000.000 and apenalty of CFA 5.000 pereach day after the time-limits; (2) price collusion:imprisonment form 1 to 6months and/or a fine fromCFA to 30.000 to CFA30.000.000.

Violation of RBPs: losses ofincome or any damage: afine of two times thevalue of the losses ordamage: restitution toinjured consumer;

—Merger/Takeover: impris-onment for a term up tofive years or a fine up twohundred thousand shil-lingts or to both

—Violation of RBPs: acqui-sitions, and monopoly sit-uations: suspension and/or termination of themembership of a memberin regard to certain merg-ers acquisition of restric-tive contract.

—Violation of the Act, anyregulation made hereun-der or any directive: a fineup to ten million kuachaor imprisonment for termup to five years of to both.

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IULFDMain Features of African Competition Policy and law (concluded)


—Failure to supply informa-tion or documentsrequired by the competi-tion authority: imprison-ment from 3 months to 3years and/or a fine fromCFA 50.000 to CFA90.000 and a penalty ofCFA 5.000 per each dayafter the time-limits

4. Extra-territorial coverage —No indicated —Competition policy andlaw takes into account theconcept of globalizationof the world economy andthe country’s membershipof the UEMOA.

—No indicated —Restrictive trade practicescommitted within thecountry

—No indicated —The anticompetitive tradepractices provisions applyto all practices, acts orbehaviour whether or notthose are embodies in anagreement so long as theirobject i s to discouragecompetition in Zambia.

Source : ECA compilation.


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$OJHULD, Ordinance No. 95-06 du 25 janvier 1995 relative à la concurrence;

&{WH�G¶,YRLUH, Loi No. 91-999 du 27 décembre 1991 relative à la concurrence;

*DERQ, Règlement de la concurrence au Gabon (Loi No. 5/89 du 6 juillet 1989);

.HQ\D, The Restrictive Trade Practices, Monopolies and Price Control Act, 1988;

0DODZL, Ministry of Commerce and Industry, Competition Policy Framework Malawi, November 1996;

0LFKDHO�(��3RUWHU, the Competitive Advantage of Nations, Macmillan Inc. 1990;

0RURFFR, Décret No. 2-71-580 du 23 décembre 1971 sur la réglementation et le codes prix et les conditions de détention et de vente des produits et marchandises;

2&'(, L’accès au Marché après le Cycle d’Uruguay, 1996

3DXO�.UXJPDQ, POP Internationalism, the MIT Press, 1994;

3HWHU�)��'UXFNHU, Innovation and Entrepreneurship, Practice and Principles, HarpRow Publishers, 1984

6RXWK�$IULFD, Maintenance and Promotion of Competition Act, 1979;

7KH�:RUOG�%DQN, Competition, Competition Policy and the GATT, December 1993;

7KH�:RUOG�%DQN, International Competitiveness: Interaction of the Public and the vate Sectors, May 1991;

7KH�:RUOG� %DQN, the Impact of the Uruguay Round on Africa, Discussion PapNo. 311.

7XQLVLD, Loi No. 91-64 du 29 juillet relative à la concurrence et aux prix,

81�(6&$3, Asian and Pacific Developing Economies and the First WTO MinisteConference ISSN 1020-3516;

81&7$', Continued Work on the Elaboration of a Model Law on Laws on RestricBusiness Practices, TD/B/RBP/81/Rev.4;

81&7$', Intergovernmental Group of Experts on Restrictive Business Practices: Cpetition Policy and Restrictive Business Practices, 29 January 1996;

81&7$', Intergovernmental Group of Experts on Restrictive Business Practices: Cpetition Policy and Legislation, 8 March 1996;

81&7$', Participation of Developing Countries in World Trade: Overview of MaTrends and Underlying Factors, WT/COMTD/W/15;

81&7$', Preparations for a Handbook on Restrictive Business Practices LegislaTD/B/RBP/58, Add.1;

81&7$', Strengthening the Participation of Developing Countries in World Tradethe Multilateral Trading System, Geneva, 1996;

81&7$', The Role of Competition Policy in Economic Reforms in Developing aother countries, Geneva 13 November 1995;

81&7$', World Investment Report 1997, Sales No. E. 97. II.D.10;

:72 Ministerial Conference: Issues of Concern, ST/ESCAP/1705.

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The implementation of competition policy has con-tinued to be not an easy matter in the majority of develop-ing countries. Until about a decade ago, well developedcompetition law systems were largely limited to devel-oped countries. In recent years, however, a large and in-creasing number of developing countries and economiesin transition have adopted new or substantially improvedcompetition legislation as part of a drive to establishhealthy market economies.

In general, the increasing importance of competitionpolicy in developing countries and economies in transi-tion reflects a growing appreciation of the relationship be-tween the objectives of competition policy and those ofmarket-oriented reforms, including both internal reformsand trade liberalisation. In particular, reforms adopted inthe COMESA member states in recent years have thebroad objective of improving the functioning of product,capital and factor markets domestically, while also facili-tating adaptation to international competition. Competi-tion policy is a tool that reinforces the beneficial effects ofsuch are passed on to consumers, while also facilitatingsuccessful adaptation to international competition.

It is gratifying that today we witness the beginning ofthe long awaited process of employing competition policyas an instrument of regional economic integration. Therehave been requests from member states, especially thosewith established competition authorities, calling for co-operation in the implementation of competition policy inCOMESA member states. Some have gone to the extentof calling for the establishment of a harmonized competi-tion regime in the southern and eastern African regionsunder the auspices of COMESA. I am informed that thisSeminar will among other topics explore this matter inmuch detail.

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As you are aware, the COMESA region is moving to-wards the zero tariff structure in the year 2000. As thecommon market approaches, businesses throughout theCOMESA region have to gear themselves up to face newchallenges and grasp new opportunities. A transformationis already taking place as companies adapt to new condi-tions and to the emerging reality of a common market ofover 300 million consumers. Further impetus to this evo-

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lution has occurred with the member states of COMESAunanimously agreeing to the “zero tariff” regime by thyear 2000. These initiatives give the COMESA countrithe framework and direction for the 21st century.

The “zero tariff” regime sets out the completion of thcommon market by the year 2000. This will launch an abitious programme for the abolition of the remaining bariers to the free movement of goods, services and capin the COMESA region. The process of adaptation to tis now already well under way and is essential to tconvergence of the various economies of COMEScountries.

A zero tariff structure for COMESA countries meanthat goods and services will freely be moved between bders without customs duties being levied on them unlotherwise justified as provided for under the treaty’s saguards in case of felt injury on the importing country.

Further the zero-tariff position to be obtained in thyear 2000 will affect the regional governments directly terms of loss of customs duty revenues. The busincommunity in the respective countries will have to witstand intense and sometimes devastating competitiontheir market offerings vis-à-vis suppliers from otheCOMESA countries. These two likely consequences seemingly bitter pills to swallow by individual membestates. This is because you do not go into something in turn hurts you. While these fears may be genuine, it been empirically established that the government revelosses are not significant (ranging from 0.1% to 11%national budgets) and that in most cases they can be oby revenue collections from the broadened domestic base due to the rising levels of tradable goods and servon the domestic markets.

In this situation both the local and COMESA suppliewill be subjected to the same domestic sales and exduties. As regards the concerns of local suppliers, ihere assumed that anti-dumping policies in the exportmember states will be in force and the aggrieved impoing countries would have recourse to article 51 of tTreaty which also provides for the levying of anti-dumping duties.

On the whole, intense competition amongst suppliein the region is what we need to enhance efficiency aconsumer welfare. Given the enlarged market, the supers will be able to achieve economies of scale. This wenable them compete efficiently in the common marke


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Allow me to comment briefly on those factors whichlead us in eastern and southern Africa, especially those ofus who are members of COMESA, to the belief that in-creased regional cooperation is essential—even inetable—in the coming years. Without pre-empting yodeliberations in the next two days, I would like to mentiothat two main factors have nurtured the belief that creased regional cooperation is essential in the new trorder. The first is increased globalisation. The secondstemming directly from this increased globalisation—the inevitability of increasing overlap, and thus contabetween the activities of national competition authoritie

Globalisaiton is no longer a trend, but a reality whicis changing our lives. We are all familiar with the work oCOMESA and the resulting reduction in tariffs which haled to a boom in regional trade—from about US$ 1.6 blion in the early 1993 to over US$ 4.2 billion in 1998. Aincreasing part of this is represented by “vertical tradin which stages in the production chain are completby companies and sometimes by the same companydifferent countries.

With the increasing influence of new technologies thprocess will continue to accelerate in the coming years

In particular the “telecommunication revolution”which has only just got under way, is certain to have a dmatic impact. Another consequence of globalisationthat regulatory measures adopted in one country mhave a positive or negative impact in other countries. Tis clearly true of the environment, but the same cansaid about fiscal and monetary policies, securities regutions, standards, certification procedures and many otfields of government activity. Similarly the way compettion policies are enforced has an inevitable impact ocountry's trading partners. In this regard, we can identwo different problems. First, in a region where state imposed trade barriers are disappearing, especially in wake of complying with the zero—tariff structure, antcompetitive practices are becoming more prominentdetermining the development of cross border trade. This a risk that public trade barriers may be replaced bystrictive business practices, undermining years of efforliberalise trade. We continue to witness the phenomenwithin the common market. Even after agreeing to tzero tariff market structure, we are still seeing businestrying to convince their respective governments to ttake steps to protect their traditional “national markets

It is because of this emerging factors that even after attainment of zero tariff in the region, countries still neto develop new ways of safeguarding their domestic mkets against the likely effects of anti-competitive pratices among firms such as anti-dumping and counterving duties.

Thus it becomes imperative to have an effective copetition policy in the region that will fill this vacuum.

Along with other provisions for the elimination of restrictions to trade, the implementation of an effective auniform competition policy in COMESA member state

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Secondly, even if competition law were enforced wiequal determination by all the world's main trading paners, closer cooperation among competition authoritwould still be necessary because more and more comption problems transcend national boundaries. Internatial cartels, mergers or abuses of market power are ralimited to just one country. It is not surprising, that natioal authorities face increasing difficulties in dealing witsuch cross-border practices. Crucial evidence may becated outside their jurisdiction. Other agencies lookingthe same case, might adopt a different approach or difent remedies. Consultation and some exchange of inmation and/or coordination of enforcement action maythe only way to apply the competition rules effectively.

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However, I have to warn the participants that there some deep rooted impediments to closer cooperation, I wish to call upon this Seminar to discuss these impements thoroughly and come-up with workable solution

Given the face of globalisation, the increasing inteconnection and inter-dependence of national economand the increasingly international nature of commerwhich has resulted from these trends, the need for operation in the implementation of competition policamong COMESA countries has become paramouHowever, you should be wary to the fact that competitipolicy is influenced by political change and a developiunderstanding of economics. Above all, policy muadapt to the rapid evolution of the industries and markthat are its focus of attention.

Another obstacle to cooperation among competitiauthority, Mr. Chairman, stems from the very nature competition policy. This will be better understood wheduring your deliberations you compare competition pocy with trade policy.

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I think it would be unfair if I closed my speech withoumaking a brief reference to the existing models of coperation. I know you will be able at the end of this Seinar to make far reaching recommendations in relationthis matter. What I would like to suggest is for the parcipants to take advantage of the presence of the varexperts and find out more about experiences of the sevbilateral agreements that have been concluded in thisrection.

I am informed that two international organisationUNCTAD and OECD, have already made efforts to dvelop principles of cooperation. The UNCTAD “set orules” which is one of the topics you will be discussinprovides an interesting model for possible future commbasic rules on competition. This is important, especiafor those countries which have not established a comption authority as yet. Turning to Europe, it may be fairstated that the world's most sophisticated mechanism


regional cooperation in competition law and policy is thatdeveloped by the European union. I hope the participantsof this Seminar will draw a lot of experiences from thesemodels.

The important starting point, should be the need for allcountries in the region to have adequate domestic compe-tition laws coupled with adequate enforcement instru-ments.

In light of what I have said, COMESA’s efforts andachievements on the subject of regional competition lawand policy can be put in context and be encouraged. Atthis juncture, I wish to acknowledge the position that theCOMESA trade and customs committee, which met inApril this year, took in terms of Article 55 of the Treatywhich calls for fair business practices and competitionamong member states. The committee recommended forthe establishment of a COMESA competition policy anda study is to be undertaken to that effect with the co-operation of member states. It is gratifying to note that infact the terms of reference for the study have already beendrawn and approved by the Committee. This is a step inthe right direction and the study should be expedited.

I wish to finally urge all the distinguished delegates totake active participation during the deliberations of theSeminar. As at the end of this Seminar, you will be ex-pected to play a vital role in advising your respective gov-ernments on matters pertaining to the implementation ofcompetition law and policy.

I note that international experts have been brought in toassist us think and discuss through various issues towardsa regional competition policy. I wish to thank them sin-cerely for responding positively and at short notice. Weneed you in executing this mammoth task.

The organisers of this Seminar have informed me thatthis workshop has been made possible through the finan-cial assistance provided by UNCTAD and UNDP. Iwould like on behalf of all the countries represented hereto sincerely thank the two institutions for the good ges-ture. I urge all of you to please find time to visit some in-teresting sights of our beautiful city of Lusaka and to visitour country-side. I hope you will enjoy and like what yousee.

It is now my sincere honour and pleasure to declare thisregional competition law and policy Seminar officiallyopen. I wish you successful deliberations.

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It is humbling to be in such esteemed company and Ishall attempt to avoid being intimidated by the collectionof degrees and certificates flooding this venue. I submitthe observations of a business community that can some-times be accused of being inadequately engaged in the un-folding evolution of COMESA, a consequence of theheavy political tilt of the original framers of the Treaties,and the continuing sequence of decision—making aoperations that commences with Heads of State actinthe apex decision-making body in the form of the Authoity, supported by the Council of Ministers, which ovesees the Inter-Governmental Commission, all servicedthe Secretariat.

This is reasonably consistent with other regional ecnomic groupings but does not make formal provision fthe input and participation of the business communiWe seek a more consistent, permanent, and formalirole in COMESA’s march towards creating a united ecnomic bloc.

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The onset of globalisation and the consolidation Economic Groupings in Asia, North and South AmericEurope, and West Africa, necessitates a concomitantsponse in Eastern, Central and Southern Africa to avbeing swamped by better organized groupings and mimportantly, to create a wider common market to attrapooled investment and to strengthen the groups negoing position.

The concerted, though uneven, reduction of tariffs the expanding COMESA region has confounded the nsayers and we have become converts/worshippers toaltar of free regional trade.

The business community has, generally, been anxiabout the implications of enhanced competition in the gion, with particular concern relating to the business enties in more developed economies within COMESA.

Competition has been exacerbated during the past years, though the greatest� impact has been the competition faced by a non-COMESA member, the Republic South Africa. The other anticipated benefit of the ecnomic integration of the region, i.e. increased foreign rect investment inflows designed to take advantage of expanded common market, has yet to materialise, and

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imperative that COMESA Member States harmonise coditions and their national marketing strategies, as dcussed later, to make the common market attractivethose still situating their projects in Botswana or SouAfrica, or to take further steps at integration of all SADeconomies into one body.

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Intra-COMESA trade has increased and the tariff vaable is now forming an important component of decisioon where to import from, and even where to situatewarehousing or manufacturing facility to exploit the competitive advantage.

The countries in the region have erected, or more acrately, not dismantled their uneven and sometimes incsistent Tax Regimes and Investment Codes, divergRegulatory Environments (such as having CompetitiCommissions and Privatisation Agencies), phytosanitand licensing differences between states, and a treatrove of non tariff barriers to trade. The situation is improving but remains a retardant to the growth COMESA conglomerates straddling the region.

Domination from the South remains the equivalent the lunatic uncle in the spare bedroom, with everyone,cluding the neighbours, aware of his existence, but fully acknowledging his presence. The SADC questineeds to be urgently addressed, though some could athat RSA is an economic bloc on its own, begging tquestion that the relaxation of tariffs with RSA may rquire an independent time-table, that allow s COMESproducts into RSA on preferential terms (not negotiatby individual countries) with the tariffs on South Africagoods being reduced at a slower rate, to allow for evenfree trade after 7-10 years.

The old adage, 'Familiarity breeds contempt' is appcable in much of our region. We, brothers and sisters, tto assume that the quality of intra-COMESA goods, svices and investment are inferior to those of the Westthe South.

The fragmented assistance and advice received byvate business in COMESA is interesting to considFrom Bulawayo to Cairo, we have been advised to grroses for export. The hectarage under greenhouses hapanded accordingly, seeking sales on the same aucfloors in Holland, and constraining prices by introducinexcessive competition.

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Individual chauvinism must be expunged to improvethe region’s ability to attract investment and to enhanceintra-COMESA trade. This involves the enhancement ofan opportunities database that scans and disseminates in-formation on the comparative advantages of COMESAcountries, their resources, the broader market with its at-tendant demand, and a legal framework and implement-ing institutions straddling the region.

The COMESA Secretariat, in conjunction with the In-vestment Promotion Agencies of COMESA memberstates, should coordinate “Invest in COMESA” Confeences highlighting opportunities in the region, for traand investment, in Europe, Asia, the Americas, Austraand South Africa to attract investment that can realEconomies of Scale, and create employment in the reg

Over time, there will be no option but to harmonisTax Regimes, particularly in relation to Value AddeTax, Withholding Taxes on Dividends (consider develoing Tax Treaties that exempt companies from tax on didends if the dividend is remitted to another COMEScountry) and Corporate Tax. The current maze of taxand licensing laws are an unbearable expense for bness.

COMESA is potentially a powerful, prosperous Economic Bloc that should be negotiating outward with othregional groupings and neighbouring countries (reSouth Africa), and to reinforce positions relating to WorTrade Treaties.

A major hindrance to the growth of business relatioamongst COMESA companies is the diversity of Currecies, most of which Exporters would prefer not to toucand which are crowded out by United States Dollars. Till-fated UAPTA was a noble effort to address the currecy problem, though it appears that the 'familiarity' argment, and the lack of faith in the underlying strength 1 set reinforcing the UAPTA. Regional trade remaindollar-based, and credit provision, both short and loterm, remains dollar indexed and companies are copelled to demonstrate that they will always have accesforeign currency reserves, and it is simply considered good enough to earn Zim$ or KShillings, regardless of volume or margins. No mention shall be made of tKwacha. We suggest that Foreign Currency Guarantbe provided to underwrite COMESA currency transations. This is, apparently, in progress.

Cross-Border Listings are a dream of many COMESbusiness houses, which aspire to access Capital Markinstitutional savings, and venture capital in the regiowith a view to creating regional companies and acknowedging the narrow scope and funding of individual StoMarkets in the region.

The consideration of a Regional Airline requires futher attention, as we continue to be compelled to travel of the region to visit another part of the region because

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the absence of direct flights. Equally, there is a tendento use foreign carriers to transport produce froCOMESA to other regions, and there are opportunities improved pooling of produce to obtain minimal cargrates.

The Governments of the region are assessing the fincial impact of a Free Trade Area on their individual budets and it will be imperative that clarity is provided regarding the division/ allocation of Border Tariffscollected at the relevant Ports of Entry. An allocation thfavours the least developed COMESA members woserve to reduce the anxiety of the weaker COMESA mebers and those in landlocked positions, who could be main losers in a free trade area.

The COMESA Court of Justice offers a critical postive step in handling legal issues under COMESA, buremains imperative that a fast track Arbitration systeacceptable and legitimate to all, stretches across region, and protects business entities.

We as businesspeople in COMESA do not know eaother very well, and we do not have sufficient intelligenor credit data to make informed decisions, particulawhere Suppliers’ Credit or Joint Venture Investmentsconcerned. The question of Credit Reference Bureauxa Database of defaulters may need to be housed inappropriate institution.

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Several areas of concern for the business communitthe past have been addressed by the Authority andSecretariat over the past half decade, and it is hearteto note the plans of COMESA announced or reiteratedcently in relation to Investment Guarantees, continuitrade liberalisation, the increased capitalisation of tPTA Bank, the creation of a regional communication nwork, market research, and the improvement of the trainformation network.

Should the Competition Commissions in COMESA bregional or only analyse 1 supervise an individual counif we expand the size of the market and the free trade investment zone ?

I would like to close by recommending that the busness community take a more aggressive, leading rolebreaking the barriers to business in COMESA, and pmoting intra-COMESA trade, as well as collaborating penetrate external markets, by creating a COMESA Buness Network, that should operate under a centraliSecretariat that would record and incorporate the persptives and priorities of business leaders from the brorange of COMESA states. The exchange of informatiwill enhance the development of this noble objective, awill assist in drawing the views of those, the businecommunity, who are expected to lead the implementatof the COMESA objectives.

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A number of policy fundamentals ought to be appreci-ated. Liberalisation entails that the period of governmentcontrol has to end, something that the Zambian govern-ment has accepted in principle and, to a large measure, inpractice. It is increasingly being recognised world-widethat monopolistic public providers of infrastructure, so-cial services, let alone business ventures, are unlikely tosucceed in their responsibilities. This means that careful-ly-designed strategy of private sector entry should be en-couraged as it enhances the growth of markets.

The central focus of Zambia’s policy of liberalisatiosince 1991 has been the switch from the system of cenplanning or control of the economy to the use of markforces as the means of resource allocation. It is anticipathat the free play of supply and demand would, in the lorun, determine market prices throughout the economy,lowing productive resources to be allocated in an efficiemanner. The country’s structural adjustment program(SAP) has been adopted to include market-oriented forms, particularly in the areas of price deregulation, cluding the reduction or elimination of subsidies; admiistrative allocation of key product inputs; privatisation opublic enterprises; and the liberalisation of trade and vestment regimes. The main assumption behind the libalisation policy in Zambia is that, by providing enterpriswith more freedom and stronger incentives, this woustimulate entrepreneurial activity, business efficiencproductive investment and economic growth. It is also epected to enhance consumer welfare through improvquantity and quality of goods and services at prices demined by the market rather than administrative decisas was the case before.

Equally important, the government also recognisthat the benefits of market-oriented reforms are likely be fully realised only if enterprises acted under the spucompetition, so that consumer preferences are reflectemarket responses. It is further recognised that a counthat has undertaken trade liberalisation measures every interest in ensuring that the welfare and efficienarising from such measures are not lost due to anti-copetitive practices by firms. A well functioning markemechanism is seen as essential in this respect. For exple, price liberalisation in the market that is dominated

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monopolies in the form of parastatal companies, unlespecific efforts are made to ensure the existence of copetition, almost always ends up in monopolistic price res without corresponding competitive price equilibriumThis was exactly what obtained in Zambia prior to thpolicy of liberalisation.

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In the context of its policy of economic liberalisatiothat benefited from the support of the IMF and the WoBank, the Zambian government recognised that an accompetition policy remains a key guarantor to economefficiency and consumer welfare and contributes to greer availability to the consumer of a broad range of proucts and services at lower prices. An open competitive vironment has also been recognised to fosters innovaand efficiency, thereby contributing to overall competiveness of producers. By promoting optimal allocation resources, competition policy is seen to contribute to enomic growth and development and supports other objtives of macro economic policies.

Against the above background and mindful of the neto legislate against monopoly formation, the governmepassed the Competition and Fair Trading Act in 1994. Util the enactment of this piece of legislation, there hbeen no formal enforcement of competition rules apolicy by any institution in Zambia. This Act enabled thestablishment of the Zambia Competition Commissi(ZCC) that is empowered to enforce the competition ruin various ways.

The Competition and Fair Trading Act states its objetives as follows:

• To encourage competition in the economy by prhibiting anti-competitive trade practices;

• To regulate monopolies and concentration of ecnomic power;

• To protect consumer welfare;

• To strengthen the efficiency of production and distbution of goods and services;

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• To secure the best possible conditions for the fredom of trade; and

• To expand the base of entrepreneurship.

The Zambian competition law as provided for undthe Act focuses on four principal elements of potentabuse by producers and/or traders. These are (a) horital agreements; (b) mergers/takeovers; (c) vertical marrestraints; and (d) abuse of dominant position. They briefly elaborated upon below.

+RUL]RQWDO�$JUHHPHQWV��These refer to cartel arrangements between firms competing with similar products the same market and is effected through, for exampagreements to fix prices, reduce output, share the maramongst themselves, or allocate customers to individsuppliers in a market. Such an arrangement is consideunfair to other operators in the market and is being phibited by the Zambian competition law.

0HUJHUV�� To the extent that mergers tend to lesscompetition and minimise opportunities for innovatiothe competition law in Zambia discourages their formtion. However, the law empowers the Competition Commission to assess the degree to which a planned mewould compromise competition and, if this is found to bthe case, prohibit its consummation.

9HUWLFDO�0DUNHW�5HVWUDLQWV� This refers to agreementsbetween operators at different stages of production amarketing chain and include exclusive dealing (restrtions on a firm’s choice of buyers or suppliers), exclusiterritories (restriction on a firm’s choice of location), lying arrangements (restriction on the source of suppliesparticular inputs used by firms), and resale price mainnance (restrictions on the price to be charged by dowstream firms). The Zambian competition law deals wthese restraints as possible instances of abuse of dompositions and are covered under Section 7(2) of the Copetition and fair Trading Act.

$EXVH�RI�'RPLQDQW�3RVLWLRQ��The Act makes a distinc-tion between agreements among firms, on the one haand, on the other, the abuse of dominant position throuexclusive dealing, tied selling, price discrimination, maket foreclosure through vertical integration, etc. Firmsthis superior position, due to their market dominance afinancial weight, often tend to determine prices, contrproduction and/or distribution in a manner that disregathe market interests of their competitors and, hence, Zambian competition law prohibits this behaviour.

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The impact of the 1994 Competition and Fair TradinAct on economic efficiency and social welfare is yet to seen given the newness of the enforcing Commission,Zambia Competition Commission (ZCC), which becamoperational only in 1997. A number of generalisatiocan, nevertheless, be made, mainly derived from the perience of the liberalisation policy under which comptition law finds legitimacy. Competition policy vis-à-viscompetitiveness is typically assessed in terms of ‘HFR�

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QRPLF�HIILFLHQF\’ that entails the combination of productive, allocative, and dynamic efficiency. Market Forceare evidently the best way to promote economic efficiecy to the extent that competitive markets provide stroincentives for realising this. Competition law enhanceconomic efficiency in that it preserves market procesby preventing a firm engaging in activities which undemine rather than enhance overall economic efficiencydoes this by establishing the regulatory framework withwhich competition and market processes operate. In respect, the ultimate objective of competition law is tpromotion of economic efficiency and the assessmenits impact must focus primarily on this aspect.

In the Zambian case where the state dominated enomic activity and the development of the private secremained under check, an important precondition to copetition is the transfer of state-owned assets to privhands (i.e. privatisation). The VXFFHVV of the privatisationpolicy, in turn, should be measured not so much in terof its speed or how many companies have been privatisRather, an important tool for measuring success oughbe related to the rationale for privatisation, namely, tneed to enhance efficiency, productivity, and competiveness, aspects that have been absent when the pstatals were predominant in Zambia. It is at this levwhere strategic importance of competition finds expresion: when the policy of privatisation is coached in termof the need to enhance productivity and efficiency, it is ten not appreciated that one of the most important facthat significantly influence enterprise performance, irrspective of who owns it (private or public), is FRPSHWLWLRQ.The history of British privatisation suggests that raththan who RZQV the company, it is the competitive environment within which a firm conducts business thweighs more as the most crucial factor in its performanIt can, thus, be deduced that the efficiency of an enprise—public or private—tends to be highest when profitability is enhanced in a competitive market; undmanagers that are given sufficient autonomy and with pacity and motivation to respond positively and prompto competition-induced market signals; and when thocompanies that are not able to withstand competition allowed to go bankrupt rather than sheltered with prefences and subsidies.

The above argument does not in any way ignore characteristic institutional weakness of state-owned arun enterprises and, thus, the importance of privatisatand liberalisation. Neither does it imply that privatisatioof state enterprises has no positive correlation with hanced efficiency and productivity. Rather, the argumemerely cautions against the often popular view that privtisation of ailing state enterprises would necessarily leto a miracle transformation of an enterprise from losmaking to a high output record. The crucial point to apreciate is that it is the presence of FRPSHWLWLRQ that makesthe difference. Indeed, it can be argued that, all thinequal, giving a private firm monopoly control over a paticular product or service is less likely to improve effciency than a public enterprise that is opened up to copetition. The putting in place of legislative and regulatoregime that safeguards competition in a privatisieconomy is, therefore, an important step in the enhanment of market efficiency and productivity. This realitunderscores the importance of the existence in a libera


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ing developing country like Zambia of a coherent and en-forceable competition law. It also underlines the need toentrust the competition authority/commission with therequisite powers, authority and resources (human, finan-cial, and technical) to effectively enforce the relevantpieces of legislation that are meant to secure competitive-ness.

The Zambian case is a clear demonstration of how un-due political control over the activities of parastatals (D)de-motivated managers to levels that adversely affectedproductivity; (E) placed non-economic and commercialconsiderations above business principles and interests; (F)allowed subsidies cover up for bad business decisions; (G)resulted in suppressed private sector development; and,consequently, (H) resulted in low productivity/profitabil-ity and economic inefficiency. Almost all the state-runand owned enterprises were operating at a loss and mostof them remained in operation as a result of governmentsubsidies. A closer examination of the country’s econoic performance is made below to demonstrate that theriod before competition was introduced recorded, at bevery insignificant positive growth.

It is noteworthy, furthermore, that before the majpolicy reforms of the mid-1980s when a comprehensStructural Adjustment Programme (SAP) was attemptthe Zambian economy’s state-dominated and uncomptive productive sector was characterised by a lop-sidstructure that was dominated by consumer goods wvery few industries in the capital and intermediate goocategory. Equally revealing, the productive sector Zambia has retained the pre-liberalisation legacy of iport-intensity at both the raw materials and machinelevels. In a number of more specialised areas, even labhas to be imported. Largely due to foreign exchanshortages that placed a strain on the importation of thequired spares, components and raw materials, Zambindustry has suffered from idle capacity long before tpolicy of liberalisation was put in place. Much of thesproblems were attributable to faulty government policie

A wide range of policy instruments were employed implement the anti-competition and anti-private sectpolicies. Firstly, the Zambian government sought to cotrol and influence private investment through a systemindustrial licensing. Secondly, since the country’s majsocialist reforms of 1968 and 1969, the governmeplaced the parastatal sector as the principal actor in economy in order to limit what was perceived as foreieconomic dominance. In line with this policy, parastacompanies received considerable preference in the ising of manufacturing and import licenses and foreign echange allocations. Consequently, by 1980, approximaly 50 percent of the manufacturing sector’s output waccounted for by parastatals.

Secondly, while, on the one hand, the Zambian govement extended protection to domestic industry during 1970s and early 1980s, on the other, it imposed conton the prices of a number of manufactured goods pduced by both the parastatals and private sector, a pnomenon that demonstrated the state reluctance to athe competition-induced market forces to determine price of goods and services. The Prices and IncomCommission was specifically established for this purpo

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Thirdly, in the pre-SAP controlled regime in Zambia, faily high nominal tariff rates were set for consumer goodparticularly those classified as ‘luxury’ ones. At the samtime, low tariff rates were set for industrial inputs. For eample, intermediate and capital goods carried very loweven zero rates of duty. Consequently, a very high rateeffective protection emerged for the sectors that werevolved in the production of consumer goods. During tmid-1970s, for example, non-food consumer goodsZambia attracted as much as 342 percent tariff protecwhile consumer durables were awarded 473 percent dprotection. Low tariff levels were levied on heavy intemediate goods (30 percent); capital goods (60 perceand zero/negative rates for what were classified as ‘esstial commodities’ such as edible oil, grain mills and ferliser.

The high degree of protection and the resultant abseof competition, later reinforced by decreasing capacutilisation, had led to decreased efficiency and evidenescalated costs. In the parastatal sector, this poor picwas reinforced by weak management and conflicting ojectives of profitability, on the one hand, and employmecreation and the artificial promotion of low consumeprices, on the other. Overall, an industrial sector emergin Zambia that was largely composed of firms that weinternationally uncompetitive. They were not only unabto compete in the export market but also with incomiimports had the tariffs and other protective barriers belowered. This adversely distorted the price structure in country.

Fourthly, one of the noteworthy macro-econompolicy in the pre-SAP Zambian economy was the systof import licensing and foreign exchange allocation. Aft1975 and mainly due to foreign exchange shortfalls, government placed quantitative restrictions on impoand put in place an elaborate system of import licensand administrative allocation of foreign exchange. Tquantitative restrictions imposed by the import-licensinand foreign exchange allocation systems, in fact, toover the function of protecting domestic industry anthus, made redundant the role of tariffs in this regard.

Lastly, Zambia’s exchange rate policy during the prreforms period is worth noting. The country’s relativehigh inflation growth rate at the time led to the Zambiacurrency (the Kwacha) becoming highly over-valueConsequently, there emerged a flourishing parallel mket where the unofficial exchange rate was several timhigher than the official one. The various controls and oer instruments mentioned above combined to distort buness priorities severely. For the average business pein Zambia, there were huge profits gained in merely curing import licenses and foreign exchange allocatioFor the most part, it was these things that many bunesspersons chased instead of attending to genuine ductive activities. In a situation of commodity scarcitieprofit margins multiplied such that some industries maaged to make net profits even with extremely low leveof investment and capacity utilisation. Under the abocircumstances, competition and market forces were kat bay in business and investment decisions of the pdominant state-owned sector.


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What did the above main macro-economic policies en-tail in general terms? Perhaps the most damaging aspectof the policy of nationalisation in Zambia was the absenceof competition in the economy. Although it could be ar-gued that the pre-nationalisation privately-owned importsubstitution sector had also been characterised by a highdegree of monopoly, this was mainly because of the rela-tively smaller size of the Zambian market then rather thana product of state policy. In short, the policy of expropri-ation of private enterprises by the state and the subsequentstate dominance of economic activity accentuated themagnitude of monopoly in the economy. Additionally,the overly centralised state holding companies (i.e., thosethat served as umbrella bodies for the nationalised enter-prises) were generally unable to provide positive incen-tives to their companies to improve their efficiency, re-duce costs, and enhance profitability, let alone upgradethe quality of their products.

Similarly, the policy of price control was particularlydamaging to enterprise performance and profitability. Inso far as price control had a high propensity to reduce cor-porate profitability, this inhibited both new investmentsand the ability (and willingness) to finance plant mainte-nance. From the point of view of the manufacturing sec-tor, price controls in Zambia and the resultant enterpriseinefficiency had tended to place supply at a much lowerlevel than effective demand. Consequently, the most ob-vious effect of the pre-liberalisation protective regime inZambia was the poor output record that it generatedwhich, in turn, increased the cost of living due to escalat-ed prices.

Lastly, another policy aspect that has had far reachingconsequences refers to the country’s import intensWhile this phenomenon did not pose any serious effectthe productive sector’s performance during the period fore 1975 (as export receipts were considerable), the ture changed after that. With the high level of import dpendence, the country became extremely vulnerableexternal shocks which came in quick successions, firsin 1973 when the price of oil quadrupled and then in 19when the first major decline of copper price was regtered on the world market (in a country where this comodity accounted for more than 90 percent of the coutry’s export earnings. As the Zambian economy failedadjust positively to cushion itself from those externshocks, the country’s foreign reserves declined sharply1975. An escalation in the balance of payments and buet deficit followed immediately which necessitated yanother shock, namely, very high and unsustainable lels of domestic and international debt.

Given the generally poor performance of the Zambieconomy during the pre-SAP period as demonstraabove, the capacity of the formal sector to absorb labhad been seriously affected long EHIRUH SAP was intro-

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duced in a comprehensive way in 1991. The level of eployment had declined considerably since 1975 but pticularly during the period of adjustment. In 1988, threindustrial sub-sectors registered employment lossnamely, construction; mining; and restaurants/hotels. Tmain explanatory factors behind wage employment losduring this period was the declining industrial outprecord largely due to the factors discussed above. In geral, the industrial sector during this period possessedbuilt structural rigidities that worked against expandand sustainable output, a phenomenon that works agalabour retention. The import-intensive nature of the avage industrial enterprises; the dominance of the state tor; price controls; and low output all worked against temergence of a dynamic productive sector that fuutilises labour.

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As a consequence of the above poor economic recZambia moved from the 39th position in a list of countriin per capita GDP ascending order to the 15th position1987. Zambia, with per capita income declining to lowest at $250, was reclassified from a low-middle tolow-income country. Figure 1 gives the average GDgrowth rate from 1965 to 1991 when the mew governmembarked upon the policy of liberalisation.

The generally poor economic performance of Zambia’s Third National Development Plan (TNDP) that coered the 1980-84 period reflected the above structuragidities of the Zambian economy. The TNDP actugrowth rate of only 0.06 percent was well below the aticipated annual rate of 4.8 percent. Much of this decliwas explained by, LQWHU�DOLD, the severe decline in investment levels and volume of imports as a result of foreiexchange scarcity. The actual aggregate investment sat only 15 percent as opposed to the planned target opercent of GDP over the Plan period. Furthermore, o62 percent of the planned import level was realised maly covering the raw materials needed by the state-donated manufacturing sector.

Perhaps the worst effect of declining government reenue was felt at the level of capital expenditure who1985 share in total government budget (in terms of GDhad declined to approximately 9 percent. In real terms, 1987 government expenditure on capital investments wmore than 70 percent ORZHU than that for 1974. The abovepicture tells a lot about the quality and cost of living Zambia during this period. From being one of the mopromising economies in Africa during the 1960s an1970s, Zambia now ranks as one of the poorest. Figugives figures on government expenditure and revenue fiscal deficit during the 1984-89 period. Real 198expenditure was actually lower than the 1980 level.


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Agriculture 2.5 0.5 8.3 -2.1

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Investment/GDP 47.3 21.1 13.4 17.6

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The above developments in Zambia marked the begin-ning of a major crisis as the economy declined consider-ably. It was this state of affairs that the government react-ed to in its effort to manage the situation and the decisionto embark on the IMF and World Bank-supported struc-tural adjustment programme (SAP), in general, and theenhancement of competition, in particular, should be seenagainst this background.

The first couple of years after 1991 when the new gov-ernment took over and consolidated the policy of liber-alisation registered a declining economic trend as the pri-vate sector was still adjusting to the new policy regime.The value of the manufacturing output declined by 10 per-cent in 1991 as opposed to the 7.8 percent increase theprevious year. All indicators attribute this poor perfor-mance record to the sector’s under-utilisation of its stalled capacities, principally a function of a number factors that included

• Foreign exchange scarcity and SAP’s fiscal stringecy;

• Reduced ability by most investors to import the rquired raw materials and equipment in a countwhose productive sector has been import-intensfor close to 30 years;

• Slow progress in the rehabilitation of machinery anplants;

• Liquidity problems faced by producers emanatinmainly from low profit margins and restrictive escalated interest rates on commercial loans; and

• Uncertainty among parastatal firms regarding tprivatisation process.

The above poor industrial performance has hadnegative impact on the country’s export performancPersistent unfavourable balance of payments had conued. For example, accounted in US dollar terms, expreceipts declined considerably in 1992 while imports hrisen. Thus, whereas Zambia’s trade surplus in 1991 westimated at $357.3 million, this declined by 60 percenonly $146.3 million in 1992. Considering that the invesment income and non-factor services were in deficit 1992, a deficit of $315.7 million was recorded for the curent account of the balance of payment. This was equlent to 14 percent of the country’s GDP in that year. Aditionally, Zambia’s export earnings declined from$1,103.3 million in 1991 to $965.9 million in 1992, a significant 12.5 percent fall. For the non-traditional exposector (i.e., non-copper exports), export receipts declinfrom $68.1 million in 1992 against $116.8 million for thprevious year. At the same time, the value of Zambiimports grew to $819.6 million in 1992, a 9.8 percent icrease over the 1991 figure. This trend continued i1993. Thus, several years into SAP, economic recovwas still illusive.

Another important development worth noting durinthe 1991-93 period has been the continuation of the cline in the level of formal sector employment. BetweeMarch and December 1992, for example, retrenchmclaimed 34,000 jobs out of which 15,000 was accounfor by those from the central and local government secThe trend has continued into 1993 when the governm

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launched the Public Service Reform Programme in Nvember 1993 that includes plans for major reductionspublic sector employment. For the parastatal sector, wthe policy of liberalisation took hold, many of them had be liquidated (rather than privatised) since their equment was obsolete due to many years of poor maintenaand under-capitalisation.

The above analysis attempted to demonstrate thatperiod of controls and limited market openness (the mindicators of the absence of competition) revealed a vpoor economic performance record in Zambia. While ittrue that not all the problems catalogued above are prinpally explained by the absence of competition, it is equly true that market openness would have brought in requisite competitiveness that is generally acknowledgto be so vital for economic efficiency and productivity ehancement. Indeed, the Zambian case shows that aftervatisation was initiated and most of the state companwere privatised and/or liquidated, several positive devopments have been registered: (D) the contribution of theprivate sector to GDP has been increasing; and the ecomy’s overall productivity has improved, albeit sluggisdue to several factors that include the high inflatiogrowth rate and a severe foreign exchange scarcity inimport-intensive economy. By 1998, the investment the private sector increased to 10 per cent of GDP, copared to only 5.5 per cent prior to reforms in 1991.

More private sector-led positive changes have beregistered. The liberalisation of the financial sector sthe emergence of over 20 commercial banks that areerational; and several non-bank financial institutions suas insurance companies pension funds, the Lusaka SExchange (LuSE), and the Securities and Exchange Cmission (SEC) were established to provide the needednancial intermediation and investment security. The libalisation of access to foreign exchange added a furtstimulus to the private sector entry as well as the signcant reduction in non-tariff barriers to trade. Furthermothe opening up the economy to competition has remothe inefficiencies and distortions that were associawith the former protectionist economic regime. The plaing field is also sought to be levelled for all competitordomestic and foreign and, in this process, the casualwould be all those firms which were hitherto earning hurents simply by obtaining import licenses and foreign echange allocations and receiving implicit ‘subsidies’ froZambian consumers by charging internationally uncopetitive prices.

The introduction of competition in the foreign exchange market further brought significant improvemenin the country’s foreign trade sector. External trade pformance in Zambia has been closely linked to the cotry’s exchange rate policies. The experience of the cotry over the years confirms the strong correlation betweexport volumes and the real exchange rate. The econodividends derived from competition enhancement Zambia is perhaps best revealed in the non-traditional (non-copper) export sector. Under the liberalised and copetitive economic climate of the post-1992 period, notraditional exports, principally contributed by the privasector, have been growing considerably. Figure 3 shothe overall healthy performance of non-traditionexports.


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The stronger than forecast export performance since1995, thanks to the policy of liberalisation and competi-tion enhancement, principally explains the sharp contrac-tion in the country’s current account balance-of-paymedeficit that declined to US$104 million in 1997, its lowesince 1993. The positive private sector response to libalisation has also been witnessed in the agricultural stor. The impact of the policy of market liberalisation habeen quite significant. To start with, private traders’ eninto marketing was almost immediate following the policshift although this introduced some transitional difficultieAs an earlier evaluation noted,

Private traders emerged in response to market libersation; 47.3 per cent of all produce by the small-scfarmers in 1994/95 was sold to private traders, copared to 10 per cent sold to the co-operatives… Pvate-led contract farming under which credit is givein-kind to smallholders by private firms has emergeto replace government-sponsored credit.1

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How does competitiveness, in general, and ZambiCompetition and Fair Trading Act, in particular, affecsmall- and medium-scale enterprises (SMEs)? There several positive points. Firstly, to the extent that competion enhances productive and allocative efficiency, ORQJ�WHUP benefits are expected to maximise economand social welfare. In particular, structural adjustmeprocesses, in general, and competition in a liberaliseconomic regime, in particular, has the potential, in tlong-term, to facilitate the opening up of new productioopportunities for SMEs especially when looked upoagainst the background of Zambia’s past restrictions domestic and external trade and price controls. In Zambian case, the highly regulatory economic policithat were adopted during the pre-1991 period principaexplained the low productivity of the economic sectorincluding SMEs. Hence, a shift from government regution of the economy to a more market-based and co

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petitive policy regime would necessarily create the musought out enabling environment that would ultimatefree productive resources to respond competitively market signals. A more market-based policy climashould, thus, be seen as essential for the developmeproductive enterprises, including SMEs.

In theory, deregulation-cum-competition contributeto the development of SMEs at two levels: (D) productivegains through improved efficiency; and (E) lateral expan-sion due to the enabling environment created for the tablishment of SMEs. These two benefits are derivfrom such liberalisation policies as the relaxation of prtracted investment approval procedures; price decontrand freeing of labour market regulations. Similarly, thopen competitive trading system has resulted in the avability of, and/or easier access to, better quality inpwhich should allow SMEs in Zambia to improve and dversify their areas of activities, thus, creating new prodution opportunities for the sector. This would also allow feasier adjustment to changed market conditions.

Notwithstanding the above advantages that are assated with competition, there are still a number of oustanding challenges and/or costs. Firstly, at the macro el and in the transitional, short-term, a number of factoand elements must be in place in Zambia, as in otLDCs, to facilitate the anticipated economic efficiencgains emanating from competition enhancement. Theyclude the following:

• The existent of a fairly developed market (as oposed to ‘LPSHUIHFW�PDUNHW’);

• The presence of a well-developed private sector wentrepreneurs that have the capacity to respopromptly to market signals;

• The existence of regulatory and legislative atmophere, including enforcement capacity, that providthe needed regulations; and

• Economic stabilisation that induces relatively effcient operation of the privatised enterprises.

1 INESOR (1996), Zambia: Agricultural Sector PerformanceAnalysis, Lusaka, MAFF, August, pp. 10-11.


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In the Zambian case, the above pre-requisites to themaximisation of benefits from competition are hardly de-veloped and the expected responses to free market-in-duced changes are often not forthcoming. In this country,entrepreneur development is still in its infancy; the mar-kets are often imperfect in important respects; the legaland regulatory infrastructure that safeguards competitive-ness (e.g. ZCC) is still undergoing the process of develop-ment and refinement amidst institutional and human re-source capacity limitations; and economic stabilisationstill remains illusive despite externally-supported struc-tural adjustment.

Secondly, there still are weaknesses in the competitionlaw that compromise the development and consolidationof SMEs. Perhaps the most immediate challenge is thatthe Competition and Fair Trading Act does not make adistinction between the different sizes of enterprises, aphenomenon that seems to suggest that all enterprises,large and small, local or foreign, productive or trade-ori-ented, are treated the same under assumed perfect marketconditions. And yet, given the initial conditions and cir-cumstances prior to liberalisation as earlier discussed andunder which SMEs operate, the country’s competitipolicy needs to acknowledge the existing distortions soto address positively the adverse distribution effectsmarket liberalisation. Some form of discrimination in favour of SMEs would seem to be justified to enable theattain a certain degree of competence and efficiency der a liberalised market. The conditions under whiSMEs operate in Zambia today demand that the legal regulatory regime has to recognise their peculiar circustances and offer some preferences if their productivepacity is to be enhanced, in the short-term, so that theycome competitive, in the medium- to long-term. The macharacteristic inhibitions that presently compromiSMEs in Zambia to fully get into the liberalised markelet alone to become competitive, include the following:

• Lack of capital and access to credit;

• Limited technical and managerial skills;

• Inadequate business premises and infrastructure;

• Lack of diversified markets and market information

• Lack of technology and access to relevant technoloical information;

• Unfavourable policy environment, including legarestrictions; and

• Inadequate institutional framework.

Under the above state of affairs, one observes thatthough the long-term benefits of the policy of liberalistion are clear, the short-term adverse effects of a comphensive SSE exposure to full-scale competition (thincludes competition with in-coming imports) have remained a major challenge for Zambia. In the light of threalisation, there is growing recognition that the proceof creating a fully-fledged competitive market in Zambwould take time especially under conditions where pvate sector development, particularly as it relates SMEs, has been held hostage to a legacy of past inhotable state-market relations. One crucial considerat

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here is that, in the short-term, market liberation tendsbe disruptive particularly in countries where the policy rgime for a long time disregarded market considerationsthe determination of prices for inputs and outputs. SMEincome levels have generally remained low and manythem are actually closing down due to the fact that libalisation in Zambia has entailed sudden increase in inexpenditure almost across the board following govement withdrawal from the provision of inputs and credfacilities. This is not to say that government withdrawala bad thing. Rather, this merely recognises that the wdrawal, if not properly sequenced and when its speednot aligned to the capacity of the domestic private secto fill up the void left open by the retracting state, serioshort-term adverse effects on the productivity and geneperformance of SMEs ensue. Although, for example, tZambian government’s withdrawal from the delivery ocredit2 is understandable in a country that is passing thresponsibilities to the private sector, this has led to a crespecially given the slow response from the still buddiprivate operators to take over this responsibility from tstate, a development that has resulted in the cost esction of vital inputs for SMEs. This seems to suggest timportance of adopting a phases and properly sequenapproach in the integration of SMEs in the all-encompaing competition policy.

Under the above conditions, the main national chlenge at the policy level is to work out how best to heSMEs improve their productivity and competitivenesthrough institutional, regulatory, and legislative mechnisms but in a manner the recognises their intrinsic disvantages relative to the larger size competitors on market, including direct foreign investors, particularly thmore market-dominant transnational corporations that ten stifle free competition. From the above analysis, itclear that, presently, the conditions are evidently unctain regarding the degree to which purely market forcand the enhancement of competition, at least during transition, would alone automatically improve SMEproductivity.

The third challenge is Zambia’s introduction of extenal trade liberalisation (as opposed to domestic comption policy) with little consideration of the speed and dgree to which the country’s main regional trading partneare doing the same. This last point is particularly impotant for Zambia. Although FRPSHWLWLRQ�ODZ relates princi-pally to regulation of producers and traders in the domtic market (as opposed to WUDGH�ODZ that mainly regulatesexternal trade policy), the nature of the ‘land-locked’ aimport-intensive Zambian economy and how it has inteacted with the regional economies is such that the tlaws are so intertwined that it would be superficial to adress their concerns independently. This challenge, comes closer to a cost of competition, has to do with extent to which the government’s elimination of trade rstrictions and liberalisation of financial markets may haresulted in the clouding out of the domestic market wcompeting imports, a phenomenon that is generally sumed to threaten the survival of local industries, inclu

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2 For example, the state has withdrawn from the provision of agricul-tural credit following the closure of the Lima Bank. The credit facilityunder the Small Enterprises Development Board (formerly SmallIndustry Development Organisation) has also ceased.


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ing SMEs. Many producers in the country today complainthat they are being unduly exposed to ‘XQOHYHOOHG�SOD\LQJILHOG¶ in their intra-regional trade interaction, particularlwith South Africa and Zimbabwe that have not yet openup their trade regimes (including exchange controls)the same degree. Hence, it is generally argued that Zbian producers/exporters are being subjected to XQIDLUFRPSHWLWLRQ�(see next section).

Notwithstanding the validity of the above concerns,closer examination suggests that the ‘clouding out’ argment ought to be taken with caution when the effectstrade liberalisation are examined with respect to SMEFirst, since the devaluation of the Zambian currency hmade imports dear, this must have reduced the ‘exterthreat from incoming imports, especially considering tfact that the products of SMEs appeal more to the lowcome groups that can least afford expensive imports.3 In-deed, what is likely to happen is that the short-term dmand contraction that has resulted from the structuadjustment’s cost recovery measures would overshadthe current worries, thus, limit the anticipated violefluctuations in the demand for SME products.

Similarly, while competing imports may be harmful toSMEs in the short-term, the Zambian experience so fsuggests that this is more so only for particular sectoThe clothing and textile sector, dominated by numeroSMEs, is perhaps the worst hit by the immediate effecttrade liberalisation. Cheaper imported textiles and ga

ments, including second-hand clothing, have so far resed in a very high rate of factory and retail outlet closure�

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The above analysis of competition enhancement visvis SMEs suggests that the speed of liberalising markought to be guarded and aligned to the country’s capato manage the needed regulations. In the financial atrade sectors, for example, a word of counsel from World Bank’s most resent annual report, *OREDO�(FRQRP�LF�3URVSHFWV�DQG�WKH�'HYHORSLQJ�&RXQWULHV�� is in-structive in this regard for countries like Zambia that hcompletely removed all foreign exchange controls.4 TheReport warms that the poor countries are in for theirwotime since the 1980s debt crisis and recommends cauin liberalising financial markets. “Excessive zeal in dregulation” in countries lacking strong institutions anpolicies to manage private capital flows was largely blame for the financial crises that began in Asia in 19and spread to Russia and Latin America, says the Rep

‘Excessive zeal’ in Zambia’s liberalisation is evident the level of tariff reduction relative to its regional tradinpartners. Despite the policy of liberalisation analysed elier, most of the trade and investment problems still psist. Most manufacturing firms, particularly those in thsmall- and medium-scale categories continue to facequidity problems and lack of funds for investment whitrading has become more attractive than before. What

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caused these problems appears to be the speed and ner of policy implementation. Trade liberalisation is onprominent example where adequate attention was paid to the policy trade-offs. In 1991, the government duced the number of tariff rates from eleven to six and new minimum and maximum tariff rates were set at percent and 50 percent, respectively. There were onfew exceptions in the form of a small number of luxugoods which were subject to 100 percent duty. The objtive of these measures was to simplify the tariff structuto allow for freer trade and better revenue collections.year later, further simplifications followed. By 1995, thsystem carried only three tariff rates with 40 percent aplied on finished import products and 30 percent or percent applied on intermediate products or raw mateals. Also, many goods were zero-rated. The 1996 govement budget set the tariff bands at 0, 5, 15, and 25 percThere is a standing commitment to reduce these furthethe future. It is clear that these big changes in the tastructure, much as they are commendable particularlythe context of the missions of such regional integratischemes as the Common Market of Eastern and SouthAfrican States (COMESA) and the Southern African Dvelopment Community (SADC), as well as in the conteof the ideals of WTO, they seem to have been implemeed with too much swiftness especially in the light of whtakes place in the county’s major regional trading paners.

It is the above speed of the trade liberalisation that caused concern to Zambian manufacturers who hcomplained of the rapid opening up of the Zambian mket to foreign imports especially from the COMESA region and South Africa and have maintained that it has rdered the playing field ‘unlevelled’. In particular, thecomplaints have been directed at South Africa which fered for a long time export subsidies of up to 20 percand at Zimbabwe which has placed a number of burecratic non-tariff barriers making it difficult for Zambianproducts to enter its markets. The validity of these coplaints is partially borne out by the statistics that indicaa growing negative balance of trade with Zimbabwe aSouth Africa. For example, in 1993, South African eports to Zambia were of the order of $360 million whiZambian exports to South Africa were valued at a mea$15 million.

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In the light of the above-discussed challenges acontradictions, the actual implementation of Zambiacompetition law poses major difficulties at the level both policy-cum-strategy and institutional capacity. Aditionally, the constraints faced by the Zambia Competion Commission should also be looked at in the light historical events and the change in the structure of Zambian economy. The adoption of the structural adjument program entailed a number of changes in the podomain pertaining to, LQWHU�DOLD, privatisation, investmentand competition policies. However, from the abovanalysis, it is clear that the pace of the privatisation polin Zambia has not matched that in areas of (D) competitionand fair trade policy and (E) investment policy. The prob-lem seems to have stemmed from the failure of the gernment system to implement these policies on a para

3 Note that 70 percent of the Zambian population is classified as‘poor’.

4 By. January, 1994, the government had completely liberalised thefinancial markets. The suspension of the Exchange Control Act in thatyear completed the liberalisation process in this field.


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basis (rather than sequentially as has generally been thecase). Buyers of firms that were sold through the privati-sation process and who had incentives to form monopo-lies were initially not subjected to fair trade and competi-tion regulations. They could form strategic alliances withthe end objective of transferring assets to each other andultimately forming monopolies. In the setting of a paralleland somewhat disjointed development of privatisationand competition policy, such hidden motives can be miti-gated by the enforcement of legislation on the part ofZCC. There are many restrictive trade agreements espe-cially between dominant companies in the supply ofgoods and services e.g. exclusive distribution agreements,territory exclusivity agreements, price maintenanceagreements, and price fixing agreements. The Commis-sion is currently going through a review of these to ensurethat they are aligned to the anti-monopoly legislation, aprocess that could have been forestalled had the sequenc-ing of legal reforms to enhance competitiveness beenappropriate in the first place.

It is equally noteworthy that competition policy was anew issue in the Zambian environment, thus, partially ex-plaining the apparent sequencing difficulties. The settingup of ZCC revealed existing gaps in human resource ca-pacity to enforce and manage such a policy and these gapsstill persist. Support from government has been mild dueto the apparent inability to relate competition policy tooverall developmental goals. This also largely explainsthe delay in the setting up of ZCC. Although the Compe-tition and Fair Trading Act was enacted in early May,1994, it only came into force in February, 1995. TheCommission itself was not established until April, 1997.In the meantime, considerable level of investments andprivatisation was on-going following the passing of thePrivatisation Act in July, 1992 and the subsequent estab-lishment of the Zambia Privatisation Agency. The Invest-ment Centre was established shortly after the passing ofthe Investment Act as early as 1991, later revised in 1993to facilitate equal treatment of local and foreign investors.By January, 1996, over a year EHIRUH the Commission wasestablished, 102 companies had already been privatised;the assets of 10 non-performing parastatals had been sold;and 100 companies had been restructured to facilitatetheir privatisation.5

It is evident that the Zambia Competition Commissionshould have commenced its operations at the same time asthe Zambia Privatisation Agency (ZPA) in 1992. Theproblems of competition were actually foreseen duringthe enactment of the Privatisation Act in which it is clear-ly specified that during the privatisation of state ownedcompanies, ZPA shall ensure that monopolies are not cre-ated in the process of privatisation. Indeed, it was ack-nowledged during the privatisation process that if the saleof the state owned enterprises was not carefully planned,the whole privatisation exercise may end up transformingthe state monopoly into a private monopoly. Despite thisrecognition much earlier in the process of privatisation, itwas clear that the enabling legislation to safeguard thiswas not put in place.

Because of the ‘after-thought’ character of the formtion of ZCC, the rather belated expectation for comp

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ance from the business community has not been wellceived and there is little sign that private entrepreneappreciate the role of regulatory bodies such as the Cmission as evidenced by minimal representation madeit on issues of fair trade and competition policy.

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So far, there is no major incoherence with respectthe Zambian competition policy and law. There arnevertheless, a few areas that call for some reflectiSpecifically with respect to the Zambian competition laone observes that, if mishandled, some provisions of Competition and Fair Trading Act would unduly restricfirms’ ability to freely compete. Part III, Section 7 of thAct, for example, prohibits “…mergers, takeovers, joiventures or other acquisitions of control whether of hozontal, vertical or conglomerate nature…” Under a nomal competitive environment, takeovers and joiventures are normal and unless something sinisteestablished, a blanket prohibition of this in a liberaliseconomy seems inappropriate.

It is worth observing that, under specified circumstances, the Act provides for exemptions to the law. Athough Part III of the Act prohibits conduct that comprmises competition, exemptions are given on the grouthat full competition does not necessarily/always delivthe desired outcomes. The Act’s adjudication (Authoristion and Notification) procedures give authority to ZCto grant immunity from legal proceedings for conducthat may breach the Act. Such authorisation is possiblthe Commission, after investigations and consultatioconcludes that the public benefit from an otherwise phibited behaviour exceeds the anti-competitive effect.

The lack of clarity over the issue of which merger takeover is allowable and which one is not raises the qution of policy coherence as the final decision is left to tcapacity, integrity and competence of ZCC to investigaand interpret the special circumstances of each case. Csidering the newness of the Commission; the limited nancial, information, and human resources at its dispoand the powerful and influential attributes of some of tfirms it has to deal with (especially multinational corporations), it would seem inappropriate under the Zambcircumstances to leave the final decision on whethernot to allow a merger to the sole interpretation of tCommission. To preserve its coherence and integrity, competition law should guide the Commission, in a moprecise manner than is the case in the current legislatregarding the types or forms of mergers or takeovers tare not permitted. This is particularly important as megers per se are not intrinsically bad especially since, ineconomy that is still consolidating its private sector, thcould be one means of achieving efficiencies, particulawhere increased exposure to global markets is placpressure on generally weak and smaller domestic firmreduce costs; improve quality and service; take advantof economies of scale; and innovate in order to becomore competitive in those markets.

Lastly, the coherence of the competition policy rforms is, to an overbearing degree, dependent on thepacity of the government to enforce its competition laThis, in turn, is dependent on the capacity of the la
5 GRZ, 1996 Budget Speech, Lusaka, 1996.


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enforcement institutions, particularly ZCC in this case, toaccess the requisite financial, human, and technical re-sources that would allow them to secure the businesscommunity’s adherence to the provisions of the law competition and fair trading. At the financial level, thCommission requires sufficient resources to enable it iplement its mandate. Presently, fiscal stringency acrthe Zambian public sector has crippled the realisationmany policy ideals. If ZCC would have to stand anchance of facilitating the provision of legal and regulatoinfrastructure that is necessary for productive capacand competitiveness, the government needs to providerequisite finance.

At the level of human resources, ZCC presently hastaff of only 18 professionals.6 One of the most importantaspects of institutional capacity regards the role of humresources in management. Presently, with the slownesthe implementation of the Public Service Reform Prgramme, the government has generally been unable tocruit and retain the needed well-trained and skilled mapower. The public sector’s low salaries; poor conditioof service, particularly for professionals; and a largely ucompetitive working environment have all workeagainst the creation and consolidation of the required pfessionalism in strategic sectors. There has also beetremendous erosion of real wages over the years. Unthese conditions, one hopes that special incentives sbe created for ZCC professionals to enable them provthe needed facilitation of a hospitable competitive buness environment. Capacity is required, for example,effectively review the existing trade agreements withview to aligning them to the provisions of the Competion and Fair Trading Act. This is because there are smany restrictive trade agreements especially by domincompanies in the supply of goods and services.

Against the above background, ZCC faces a formdable task in building its own capacity to undertake a calogue of responsibilities as well as raise awareness support for competition policy among the general puband the business community. The existence of a ‘comtition culture’ within the country is vital to the success the Commission’s work and ultimately to the effectiveness of the competition law. There is recognition thcompetition enforcement can only be effective if the buness community and the people at large are supportivethis regard, the Commission’s current areas of concention include the following:

• Providing as much information as possible to thpublic about the activities of ZCC (mainly througworkshops);

• Educating the consumer and the business commuty about competition law and how it is enforced;

• Developing public support for enforcement, by demonstrating how consumers benefit from an effecticompetition policy; and

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A number of lessons can be derived from the Zambcase regarding the capacity of competition policy and lated legal reforms to enhance productivity and competiveness in developing countries. Firstly, it is evident thliberalisation does stimulate entrepreneurial activitbusiness efficiency, productive investment and economgrowth which, collectively, result in the enhancement consumer welfare through improved quantity and qualof goods and services at market-determined prices. Sondly, competition also fosters innovation and efficienin a manner that promotes the competitiveness of proders. Thirdly, it is also a truism that competition enhancment is best realised when the private sector, rather tthe state, is allowed to dominate production activitiethus, underlining the importance of privatisation in andeveloping country that aspires to implement competion-enhancing policy measures.

In the light of the above, it is important to ensure ththe welfare and efficiency gains from liberalisation anot lost through anti-competitive and monopolistic pratices by firms. Legal reforms that focus on competitiolaw are, therefore, crucial for economic efficiency to thextent that, if well enforced, they preserve competitimarket processes by checking anti-competition practiin the interest of overall economic efficiency. In this regard, the ultimate goal of competition law should be tpromotion of economic efficiency.

Specifically with respect to SMEs, a number of recommendations are noteworthy. Firstly, notwithstanding tmerits of the above conclusions, it is important to reconise that not all countries are at the same stage of privsector development and that they face different chlenges in their quest for economic efficiency and produtivity. This means that the pattern and speed of liberalition and competition promotion ought to be aligned to tpeculiar circumstances in the country prior to the needreforms. The relative competitiveness of SMEs in a libealising economy, for example, is conditioned, to an ovbearing degree, by their peculiar constraints and marposition relative to the more established firms, particully foreign direct investors. In countries similar to Zambia further challenge is brought about by the crippling efects of in-coming imports under conditions that are nalways favourable to SMEs, a phenomenon that gives ther credence to the importance of ensuring that the spand sequencing of market liberalisation are in tune wwhat obtains in the country’s major trading countries, pticularly at the regional level. A phased approach to libalisation in the implementation of competition policy itherefore, recommended under these conditions.

Secondly, considering the fact that the dominant potion of large-scale local and foreign firms checks thsmooth entry of SMEs into the marketplace in a competive manner, it is recommended that some form of dcrimination in favour of the latter is made to enable theattain a certain degree of competence and efficien

6 ZCC has 10 economists, 5 accountants and administrators, and 2 le-gal officers. Unless the Commission has sufficient resources to sub-contract out some of their tasks as provided in the enabling legislation,the core staff of only 18 seems to be inadequate.


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under a liberalised market if their productive capacity isto be promoted, in the short-term, so that they becomecompetitive, in the medium- to long-term. This shouldhelp in addressing positively the adverse distribution ef-fects on SMEs of unregulated competition.

An equally important lesson learnt from the Zambiancase is that the promotion of competition through institu-tional and legal reforms entailed a number of changes inthe policy domain pertaining to, among other things, SUL�YDWLVDWLRQ��LQYHVWPHQW�DQG�FRPSHWLWLRQ policies. Becauseof the multi-faceted nature of the challenges, it is recom-mended that the pace of FRPSHWLWLRQ and fair trade policyin LDCs must be aligned to, and concurrently managedwith the policies regarding SULYDWLVDWLRQ, and LQYHVWPHQW.In this regard, it is recommended LDCs should implementthese policies in parallel to each other rather than sequen-tially. The timing of the enactment of the competitionpolicy and legislation should also recognise the interrela-tionship between these elements.

Another important consideration relates to the coher-ence of the competition-enhancing legal reforms, in gen-eral, and what is provided for in the enabling pieces oflegislation, in particular. In order to ensure that the provi-sions of competition law do not unduly restrict firms
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ability to freely compete and that their enforcement donot leave too much to the interpretation and discretionthe overseeing authority, the law should be expliciclear on what is allowable/exempted and under what cumstances. This is particularly important for most LDCconsidering the newness/inexperience of the institutiotasked with the responsibility of competition enforcment; the limited financial, information, and human rsources at their disposal; and the power and influencesome of the firms (particularly transnationals) whoactivities they have to monitor and regulate.

The above recommendation calls LDCs to address pacity building aspects of law enforcement. Apart frothe need for the existence of a conducive regulatory alegislative atmosphere, the capacity of LDC governmeto enforce the competition policy and laws is quite fundmental in translating the legal reforms into positive ecnomic change. In this regard, the legal and regulatoryfrastructure/institutions that safeguard competitiveneneed to be developed and consolidated by attending toLQ�WHU�DOLD, their human, financial and technical capacity limitations. Governments should, thus, allocate more sources to the institutions that are charged with tmandate of competition policy enforcement.

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Over the past twenty (20) years, the world has wit-nessed a trend towards economic liberalization. Many de-veloped and developing countries have begun to empha-size decentralized competition rather than centralizedstate direction as a means of determining the productionand distribution of goods and services.

It has become widely accepted that the adoption of afree market system holds the best prospect for Jamaica’seconomic development and improvement in the welfareof its citizens. This recognition led the Jamaican govern-ment to introduce a number of policy measures popularlyassociated with such terms as liberalization, deregulation,divestment etc. A similar outlook may have precipitatedthe move to formulate competition legislation in yourvarious territories.

What the government of Jamaica hopes to achieve isthe promotion of a free market economy with the attend-ant benefits, namely, (D) the efficiency which results fromcompeting firms; (E) lower prices and more choices forthe consumer; (F) better products and services; and (G) in-creasing opportunities for existing and new businesses.

It has also been recognized that the gains from the op-eration of a free market can be subverted if care is not tak-en to ensure that certain controls are put in place. Thepassing of the Fair Competition Act in 1993 and the estab-lishment of its administrative body, the Fair TradingCommission, demonstrate a clear understanding of thisreality.

The Fair Competition Act was put in place to ensurecompetition in the conduct of business in Jamaica. All le-gitimate business enterprises must have an equal opportu-nity to participate in the Jamaican economy. Additionally,the consumer ought to have the benefit of adequate andrelevant information, and be afforded meaningful choice.

In Jamaica, benefits have clearly been recognized.More importantly, however, those involved in the en-forcement of the Fair Trading Act have seen first-handthat in a developing economy, certain complaints pre-dominate, hence rendering particular provisions in thelaw more applicable than others. This paper will attemptto address, LQWHU�DOLD:

(D) The complaints in question and the provisionswhich render them actionable; and

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(E) the approach which should be taken by developednations towards small island economies in a multilateraltrading context in light of certain economic realities.

However, to ensure a proper understanding of the is-sues, it would be useful to discuss the Act itself and thefunctions of its administrative agency, the Fair TradingCommission.

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The Fair Competition Act (FCA) was enacted onMarch 9, 1993 and came into effect on September 9,1993. The legislation establishes an agency known as theFair Trading Commission (FTC or Commission) that isempowered to enforce the provisions of the Act. The Act’sprimary objective is to provide for the maintenance andencouragement of competition in the conduct of trade,business and in the supply of services in Jamaica with aview to providing consumers with competitive prices andproduct choices.

The FCA applies to all activity in relation to the con-duct of business in Jamaica. However, there are certainexceptions. These many be itemized as follows:

(D) collective bargaining;

(E) patents/ trademarks;

(F) conduct authorized by the Commission;

(G) activities expressly approved or required underany treaty or agreement to which Jamaica is a party; and

H) any activity exempted by the Minister and thereafter ratified by Parliament.

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ten and there is no requirement that the person making therepresentation intend to mislead. This breach appearsmost frequently in matters relating to advertising.

'RXEOH�7LFNHWLQJ—a person shall not supply any article at a price that exceeds the lowest of two or more priclearly expressed by him on the article.

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&RQVSLUDF\—any practice whereby one person combines, agrees or arranges with another to limit unduly manufacture, transport or supply of any goods or servior to enhance the price of same or to restrain or injcompetition unduly.

([FOXVLYH�'HDOLQJ—any practice whereby a supplieof goods requires that his customers interact exclusivwith him as a condition precedent to the supply of tgoods, which in effect protects the supplier from his copetitors.

7LHG�6HOOLQJ—any practice whereby the supplier of aarticle as a condition of supplying the article requires hcustomer to, at the same time, purchase any other item

0DUNHW�5HVWULFWLRQ—any practice whereby the supplieof goods requires that his customer supplies goods onla defined market or extracts a penalty of any kind from customer if he supplies any goods outside the definmarket.

However, please note that anti-competitive businepractices may be authorized if the Commission is satisfthat the particular practice provides some overwhelmisocial benefit.

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One of the critical aspects of competition law worldwide is how the competition legislation purports to dewith economic concentrations namely, mergers, acqutions, joint ventures and the like. Jurisdictions must maa policy decision as to whether their economy is such tthey would wish to prohibit certain economic concentrtions as opposed to focusing on the behaviour of existentities. This has been known as the structure versus duct dilemma. For example in the United States whethere is present a huge economy of first world proptions, stress is placed on prohibiting conduct prior to practice.

Jamaica has chosen the opposite approach. Its legtion is activated only after a business engages in prohied conduct. Economic concentrations are analyzed unthe FCA in terms of dominance. In other words, thisconduct-based legislation. The FCA defines a domincompany as one which “occupies such a position strength in the market as will enable it to operate in tmarket without effective constraints from its competitoor potential competitors.”

However, it is important to point out that simply beindominant does not constitute a breach of the Act. An terprise must be found to have abused its dominant p

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tion and that such abuse has had or is likely to have thefect of lessening competition substantially in thmarketplace.

The Act states that the enterprise “abuses its dominposition if it impedes the maintenance or developmenteffective competition in a market.” It goes on to outlinspecifically, conduct which would be considered evdence of an enterprise's abuse of its dominant positThe list in the Act is illustrative only.

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The FTC is comprised of two distinct arms: the quajudicial arm represented by the four (4) appointed Comissioners, and the investigative arm, of Commissionstaff, headed by the Executive Director, who directs thlawyers, two economists, two research officers and a caccountant.

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The Commission may carry out, at its own initiative at the request of any person, such investigations in rtion to the conduct of business in Jamaica as well enait to determine whether any enterprise in engaging in buness practices in contravention of the Act and the extof such practices.

The Commission has a duty to advise the Minister such matters relating to the operation of the Act, asthinks fit or as may be requested by the Minister. TCommission also has a responsibility to inform and edcate the public with respect to their rights and obligatiounder the Act, to undertake studies and to publish repregarding matters affecting the interests of consumers to co-operate with and assist any body or persons in veloping and promoting the observance of standardsconduct for the purpose of ensuring compliance with tprovisions of the Act.

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The Commission may summon and examine wnesses, call for and examine documents and in certainstances, issue directions to a company that it believebe in breach. Specifically with respect to an enterprisabuse of its dominant position, the Commission may taany action it considers necessary. The Commissionersempowered to make “findings” in certain cases, those ces being abuse of dominance, exclusive dealing marestriction and tied selling. In this regard they behave vmuch like judges. In other matters, the Commission whave to take the entity charged to court.

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The FTC is a law enforcement agency. In practicterms, this means that the Commission is not the adjucator of individual disputes but rather it seeks to addrmatters of national interest.


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A complaint is received by the Commission and is in-vestigated or an investigation may be initiated internally.If the investigation reveals to the Commission’s staff thata breach of the FCA has occurred, then the staff will usu-ally recommend certain remedial action to the Companyin an effort to resolve the matter in a non-adversarial man-ner. If, however, the company is reluctant to co-operatewith the Commission’s staff, it may be served with a No-tice of Examination to appear before the Commissioners.Acting in their quasi-judicial capacity, the Commission-ers will then meet with the company to determine thecause of the lack of co-operation and inform the companyof the Commission’s expectations with a view to settlingthe matter. If settlement seems unlikely, the staff requeststhe Commissioners’ approval to take the matter to Courtso that the issues may be adjudicated.

Not all matters are handled in the first instance by thecourt. Breaches of section 20 (abuse of dominance) andsection 33 (market restriction, tied selling and exclusivedealing) of WKH�$FW�are determined firstly by the Commis-sioners who sit as judges at a public hearing and makefindings based on the evidence presented by both sides.Should the Commissioners find in the staff ’s favour, thmay issue any directions to the company they deappropriate to correct the breach.

If the Commissioners acting in their judicial capacifind a breach of section 20 and/or 33 of the Act, the copany has up to fifteen days from the date of the findingappeal to a Supreme Court Judge in Chambers. The Juhas the discretion to up hold the Commissioners' findinmodify it or reverse it completely.

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In general, the FCA and its enforcement body, the Fhas received a positive reception from the Jamaican plic. The FTC is seen as a pro-active agency with a repution for effectiveness and efficiency. This is due in partthe provisions of the Act, which permit the agency to sestiff penalties for failure to co-operate with the Commision. Although the Commission's focus is the nationlarge, that all-encompassing term can be divided inthree categories: the business community, consumersthe professional sector.

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The Commission's experience with this sector has bmixed. It is human nature to resist change. However, Commission has been successful in implementing policies where it has been able to show that its recommdations are beneficial to the business, as well as consumer.

The primary issue that surfaces with regard to this stor is the matter of disclosure, which is addressed by stion 37 of the Act which speaks to Misleading Advertiing. Businesses have been required to provide mcomplete disclosure regarding their products and svices, methods of payment, etc. to enable the consumemake informed decisions.

The business benefits as the rights and obligationsits consumers are clearly outlined prior to the completi

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Initially, the Commission's focus was that of a consuer protector. This proved to be useful as it helped Commission to earn public support and effectively communicated to the average person those aspects of thislaw which would directly impact their day-to-day exisence. The Commission was seen as the saviour for ebeleaguered consumer who had purchased a malfuncting appliance or was duped by slick advertising.

More recently, the F17C has shifted its focus to soextent so as to deal with the more sophisticated issuecompetition law. The agency now primarily addresses issues, which affect a significant cross-section of the comunity. If the complaint is particularly egregious and/oraises issues for the public at large or if the complaintsceived reveal a pattern of anti-competitive conduct, ththe will consider intervention.

It is not the case however, that consumers have bleft to fend for themselves. The government recognizthe need for an agency which focuses on the right of individual and has therefore set up the Consumer AffaCommission (CAC) with significant funding. That bodhandles individual disputes and is not bounded by strictures of any particular statute.

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The legal community has, in some instances, beeparticularly harsh critic. However, the Commission is udaunted and works diligently in an effort to educate tBar as to our role and function. The Commission accethat the adversarial stance of the lawyers may simplyvigorous representation of their clients, as well as a defsive reaction to an extremely pro-active statutory bodAdditionally, research has shown that there is indeedifference between the common law principles and denitions and those of competition law, in that competitiolaw has its own unique nuances and concepts, and thdifferences have not been readily accepted by the lecommunity.

The Commission believes that its on-going educatioprogramme will go a far way in helping to woo this relutant group.

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Section 54 of the FCA states, LQWHU�DOLD, that “this Actbinds the Crown”. However the Commission has intepreted this to mean that its power does not extend to gernment when the latter acts in its executive capacConversely, the Commission holds the view that govement is regulated to the extent that it engages in trade

For the most part, the Commission has enjoyed acable working relationships with other statutory organistions. However, there have been instances where soregulatory bodies resist the Commission's intervention


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it is viewed as an encroachment on their turf. This will bemore fully discussed, infra.

By way of example, however, the following have beenfound to be co-operative:

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The staff of the Commission involved itself in exten-sive discussions with the OUR regarding formulatingtheir draft legislation. Specifically, the OUR sought theFTC’s input so as to ensure that the regulatory framewof the proposed legislation takes into account competitpolicy and objectives.n

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The staff of the Commission, along with senior reprsentatives of the Customs Department, the Ministry of nance, the Revenue Protection Division and the CustoBrokers' Association of Jamaica, discussed the mandause of the services of customs brokers by consumersgoods valued at US$ 1,000 and upwards. The staff of FTC, after a thorough consideration of the competitiimplications, and following discussions with the abovorganisations, was able to provide the relevant govemental body with an advisory position and recommendtions. In sum, the staff recommended that the thresholdraised US$ 3,000, so that these would be less hardshipthe consumer while protecting the government's rightcollect revenue and protect its borders. This body hagreed to take the FTC’s position into account, (notwistanding its autonomy to regulate the area of revenue lection), when drafting legislation for the aforementionearea.

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The Commission investigated this state monopoly wa view to determining whether the company was abusits dominant position by passing off its inefficiencies the consumers in the form of increased rates. After plonged studies and economic analysis, the staff fouevidence of abuse. In a meeting wherein the Commsion’s staff discussed its findings, the company agreedco-operate with the staff whereby the Commission woucontinue to monitor the company�� and the companywould, in turn, provide the Commission with ongoing sttus reports regarding the implementation and progresscertain programmes in the areas of weaknesses thatbeen identified.

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The staff of the Commission has held continuing dcussions with authorities for the air and sea ports of theland. Specifically, the staff has informed these authoritof the competition implications which impact on the curent deregulation exercise being conducted by both eties. The Airports Authority has actively sought the FTCinput in this area. With respect to the sea ports, the Comission's staff has consulted with the relevant Ministand the Port Authority, with a view to dealing with the isue of ensuring equal access to the ports for all playerthe tourism transport market. This Authority has now rferred the body responsible for this deregulation exerc

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The staff has conducted intensive reviews of the coplaints received against this state monopoly. These coplaints relate to pricing, meter reading, and selective tdering of contracts. 1 n some instances, it has been fothat the FTC does not have jurisdiction, and thus the mters are referred to the Ombudsman for Public UtilitieHowever this does not alter the fact that the JPSCo. dengage in trade and is therefore subject to the FTC's judiction.

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A deregulated economy has resulted in a wider variof items offered for sale in the market. These items wpreviously not available for purchase by consumeHowever, arising from this situation is an increase in tnumber of substandard goods entering the Jamaican mketplace, since some importers choose low unit price oacceptable quality. The above-mentioned scenario brought the FTC and the JBS into a very close working lationship. In fact, the FTC's mandate of consumer prottion and the JBS's responsibility of ensuring that goooffered for sale comply with basic international standarappear to converge at this point. The FTC has, from tito time, called upon the expertise of the JBS in arewhere the Commission requires a determination basedtechnical analysis and assessment. One common areco-operation is that of the JBS performing standards teing in the laboratory and giving its opinion and/or repoin matters relating to electronic appliances.

The co-operation between both agencies has also sthe passing of information from one agency to the othFor example, the FTC, on the basis of numerous coplaints received concerning a particular product, may quest the intervention of the JBS which will then undetake an empirical investigation and make a decisiregarding that item in question. Very often, the decisiresults in the banning of that particular product.

The JBS, for its part, informs the FTC of any discoveof substandard products which have been imported are being offered for sale in the market. The FTC thmay recommend that individuals who have been injurbe offered some form of redress.

Additionally, other statutory departments and agecies, such as the Broadcasting Commission and the Mistry of Construction, have sought the FTC's assistancegarding their tendering process and practices in an efto ensure that the laws regarding competition are breached.

It can therefore be said, that in exercising its mandto regulate competition in a new liberalized economy ato ensure the observance of the provisions of the FCA,Commission has had to build close relationships with oer statutory agencies, the actions of which impact on operation of the free market economy. In many instancthose agencies are now actively seeking the FTC's inin shaping their own policy.


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As noted initially, the Commission has met with resist-ance from some statutory bodies. Where such conflict hasnot been resolved, both statutory entities have guardedtheir turf jealously and in one instance, the issue of juris-diction has been adjudicated. Specifically, there is thecase of the *HQHUDO�/HJDO�&RXQFLO�v�� WKH�)DLU�7UDGLQJ&RPPLVVLRQ�

The General Legal Council (GLC) established underthe Legal Profession Act (LPA) sought to determinewhether the FTC could exercise its jurisdiction over thatbody. The Supreme Court held that the GLC is not ame-nable or subject to the jurisdiction of the FTC. (Please seediscussion, infra, of this decision).

It is the Commission’s position that the Court oustedthe jurisdiction of the FTC, because there was specificlegislation which governed particular practices.

With respect to other professional bodies, such as themedical profession etc, the Commission has taken the po-sition that generally it can exercise concurrent jurisdic-tion. However, it has no right to intervene where there isparticular legislation that requires these bodies to act in acertain manner.

The Commission is currently seeking to amend theFCA, so that all professional services fall within its juris-diction, notwithstanding the existence of specific legisla-tion. However, the Commission does not intend to disturbany profession’s authority to regulate standards of compe-tence.

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In another matter currently before the Courts, the -D�PDLFD�6WRFN�([FKDQJH�Y��WKH�)DLU�7UDGLQJ�&RPPLVVLRQ�the JSE is seeking to have determined the question of ju-risdiction. The JSE believes it should only be regulated bythe 6HFXULWLHV�&RPPLVVLRQ�(SC), established under the6HFXULWLHV�$FW��6$� in 1993. For its part, the FTC claimsconcurrent jurisdiction with the SC (Please see furtherdetails, infra).

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The above discussion raises core issues as to the extentto which the FTC can exercise jurisdiction vis-à-vis aother regulatory body. In other jurisdictions, a competion tribunal may have concurrent jurisdiction with anoter regulatory body. Ultimately it is a matter of statutointerpretation as to whether there is room for both bodto play a regulatory role, or whether only one regulatoagency has jurisdiction.

One possible solution is that the problem should be dressed by Parliament. In other words, Parliament in acting legislation, should specifically state whether or na particular area should be exempt from competition leislation, thus avoiding ambiguities as to the scope of Commission's jurisdiction.

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The FTC has been the beneficiary of a significaamount of assistance, primarily from the United StaAgency for International Development (USAID) and thBritish High Commission, among others.

By virtue of a Memorandum of Understanding between the Government of Jamaica and the USAID, USAID has provided funds to facilitate public educatiotechnical assistance, computer administration and nwork linkages and the procurement of reference mateals.

The FTC has received technical assistance from USAID in the form of internship programmes and misions organized in conjunction with the US DepartmentJustice (DOJ) and the United States Federal Trade Cmission (USFTC). Through the internships, the FW sthas been exposed to the procedures and investigatitechniques employed by these agencies. Through short-term missions, US attorneys, economists and coputer specialists provide consultancy services, condin-house training of FTC staff and also participate in pulic education seminars. Additionally, the internships amissions have served to cement working relationships tween personnel of the FTC, DOJ and the UK's OfficeFair Trading, allowing the FTC to continue to benefrom the expertise of agency staff of the listed bodieeven after the participants return to their countries origin.

Specifically with regard to the British High Commission, it has provided technical assistance in the formfunding internships for FTC staff to visit, observe anlearn from their British counterparts at the Office of FaTrading (OFT) and the Monopolies and Mergers Commission (MMC). The British High Commission has alsfunded the Commission's Executive Director's particiption in an international seminar on Competition Law London.

The FTC staff’s initial problem concerned die acquistion of reference materials to assist with investigatioand to inform it on the status of competition law in othstates. However, that problem has been addressed throthe USAID which has facilitated the acquisition of thLexis/Nexis system and the Internet in May 1996. The stallation of these computer linkages has gone a far wtowards allowing the FTC staff access to materials to sport investigations and in some cases, litigation. USAhas provided the initial subscription fees for these svices. Hopefully, by the time the funding has expired, tCommission would have amassed a body of informatsufficient to aid its work in the area of competition laand practices.

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The success of any competition legislation is intricaly linked to the provision of adequate information to prmote an understanding of such legislation. Public edu


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tion has therefore, become the vehicle by which suchinformation is disseminated.

The FTC has, since its inception, embarked on an ag-gressive education programme aimed at inflorining bothbusinesses and consumers of the provisions of the law andhow they may be affected by same.

In order to effectively propagate the information pro-duced by the FTC, the Commission has utilized a varietyof channels to achieve this objective. To this end, the FTChas promulgated press releases, advisory opinions andpolicy papers on several industries operating within theJamaican marketplace. The automobile, insurance, bank-ing, real estate industries are among those reviewed. TheCommission also produces an annual report outlining thework carried out by the Commission for that year. Thesereports are sent to a number of institutions. Copies arealso readily available at the offices of the Commission.

The FTC has also utilized the electronic media to trans-mit its education programme by appearing on various talkshows and granting interviews. Not to be outdone arepresentations made at various types of gatherings, for ex-ample, at corporate meetings, citizens’ associations, sem-inars, exhibitions, and lectures at educational institutions.

The on-going education programme of the Commis-sion has seen a marked change in the responses and atti-tude of target groups and indeed, the general psyche of theJamaican marketplace.

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The Commission’s achievements have undoubtedlyemanated from its active and continuing educational pro-gramme, its resolve to enforce the law, its willingness toprovide guidance in terms or how businesses should oper-ate within a free market system, and its facilitation of re-dress for the injured parties.

Since its inception, the FTC, as the regulator of busi-ness practices and conduct within the free market, has cre-ated a more sensitized and enquiring business communi-ty. This is evidenced by the numerous opinions andadvice sought by businesses operating in the Jamaicanmarketplace.

The F.TC has been particularly successful in educatingbusinesses that the provision of material information con-cerning purchases is vital to consumer’s ultimate purchas-ing decision. As a result of this, businesses have taken thetime to convey information by way of clearly wordedsigns placed at conspicuous points in stores as well as ontheir sales receipt.

The consumers have also become more vigilant and areat this point demanding information relevant to purchas-es, refusing to purchase from stores where they are riotadequately informed, and notifying the FX if they believethe practices of these entities run afoul of the law.

Perhaps the major accomplishment of the FTC lies inthe area of complaint resolution by way of settlements orthrough legal proceedings. Statistics for the period Sep-tember 1993 to December 1995 indicate that of a total ofone thousand five hundred and forty-seven (1,547) com-

plaints, one thousand two hundred and thirty (1,230) havebeen resolved. This represents a resolution of 80% of allcomplaints lodged for that period. Some of the more cel-ebrated cases are FTC vs Air Jamaica, FTC vs CaribbeanCement Company, FTC vs Telecommunications of Ja-maica, FTC vs John Crook. The details of these casesamong other will be cited in the section titled “Summaof Complaints brought before the FTC”.

The FTC has also forged a successful working relatioship with a variety or interest groups. Of note is the Comission's continued dialogue with Courts Jamaica Limed (the island's largest retailer in the furniture aappliances) and the Petroleum Marketing CompaniThe relationships have in fact contributed ultimately tomore healthy business environment through constant dlogue and co-operation.

A similar relationship has been forged with consumgroups. The Commission provides assistance by wayadvice, policy papers and guidelines with regard to mters complained of and those likely to be complained This liaison has seen an increase in consumer vigilaand a deepening of the recognition of their rights and sponsibilities and the recourse available to them underFCA.

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Following negotiations between the TOJ and the FTan agreement was reached whereby TOJ's residential tomers were allowed to connect certain compatible equment to the TOJ network for a reasonable price. Priorthe FTC's intervention, this had not been the case. consumer was required to purchase all equipment frTOJ and if TOJ did not have the item in stock thereby ncessitating its purchasing elsewhere, the customer still required to pay a rental charge to TOJ The FTC tothe position that TOJ’s conduct constituted an abusedominant position in the market for telecommunicatioservices. TOJ agreed to interconnection without admting liability.

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A complaint was made against CCC charging that practice of constantly raising prices was an abuse ofdominant position. The Commission retained an outsconsultant to examine the company's business practin order to ascertain whether or not the price increaresulted from inefficiency or were otherwise justifiable

The Consultant opined that there was an under-utilition of assets and that the company was not taking advtage of modern technology available in the marketplawhich could substantially increase its efficiency, He futher advised that major capital expenditure would he quired to effectuate improved productivity which woulhopefully lower cost in the long run. The upshot would a lower price to the consumer.


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The company did not completely agree with the con-sultant’s findings but overall was amenable to reviewingits operations. Given that undertaking, the Commissiondecided to suspend its investigation but would continue tomonitor the company’s operations. So far, the companyhas reduced its prices twice in the last six months.

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Subsequent to the FTC’s filing a complaint against theJSE for abuse of dominance, the JSE filed its own suitclaiming, LQWHU�DOLD, the Commission lacked jurisdiction.As noted earlier, it is the JSE’s contention that it shouldonly be regulated by the Securities Commission. For itspart, the FUC claims concurrent jurisdiction with the SC.The trial commenced June 3, 1996. It has been adjournedand is expected to reconvene later this year (1996).

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As observed earlier, the FTC’s staff investigated thisstate corporation seeking to determine whether the com-pany was abusing its dominant position by passing on itsinefficiencies to the consumers in the form of’ increasedrates. Evidence of abuse was found by the staff.

Eventually, the staff and the company arrived at anAgreement, wherein the company agreed to tile continu-ous monitoring of the company. Additionally, the Com-pany assumed the duty of providing the Commission withquarterly reports regarding the implementation andprogress of certain programmes in the many areas ofweakness that were identified, namely –

—Meter replacement,

—Leak detection and repair,

—Revenue enhancement,

—Collections,

—Operational strategies: including the billing cycland standpipes,

—Preventative maintenance and plant improvemeand

—Cost reduction strategies

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The Commission initiated an investigation, sua sponto determine whether the industry members were engain price fixing. While investigations revealed no concreevidence of concerted action, it was somewhat disturbto note that prices tended to be uniform. One explanatis our country's history. In other words, against the badrop of Jamaica having been subject to a centraplanned economy for most of its history, most manufaturers set their prices by simply taking the prices that industry leaders charge and simply follow suit. This phnomenon is known as price leadership. The Commissdetermined that periodic review of this industry is necesary because although there is no direct evidence of cspiracy, the Commission would like to encourage me

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This state monopoly was investigated because it walleged that the company was engaged in unfair priciThe Commission's investigation revealed, however, talthough the company was indeed a monopoly (it bethe only oil refinery in the country) it was not dominant athat term is defined by the FCA, given that potential copetition from existing marketing companies constrains conduct. In other words, the present company is mindthat if prices are raised beyond a certain level, others wenter the market. That forces them to keep their own pes competitive.

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7KH�*HQHUDO�/HJDO�&RXQFLO�Y��)DLU�7UDGLQJ�&RPPLV�VLRQ case is one of the matters which has been adjudicain the Supreme Court since the enactment of the FCA, has already been discussed, supra. The facts, howevenow more fully set forth.

In July 1995, the GLC took the FUC to court. It wantethe court to determine whether or not the LPA has berepealed by the FCA. The court declared that in perforing its statutory functions and duties under the LPA, tGLC is not amenable or subject to the jurisdiction of tFTC established under the FCA. Additionally, that thLegal Profession (Canons of Professional Ethics) Rulbeing subsidiary legislation and/or statutory rules maunder the LPA are riot governed by tile FCA. The coualso declared that the provisions of the LPA and the LeProfession (Canons of Professional Ethics) Rules mathereunder are not repealed, amended, nor modifiedthe provisions of the later enacted, FCA.

As noted above, an amendment of the FCA is besought so that all professional services fall for regulatio

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The FTC arrived at an agreement with the Bankers Asociation of Jamaica. This agreement was brokered aresult of allegations that documents often signed by ents are not written in “reader-friendly language” so ththe average consumer does not understand what he ohas signed. The agreement sought to cover the areas

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It was agreed that a fact sheet in layman's languwould be attached to the face sheet of all loan doments for individual consumers. The fact shewould contain information that the average perswould consider material. The sheet would detail,the very least, the effective interest rate, whethernot there are prepayment penalties and the toamount of the loan.

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The banks would indicate whether or not these rawere opening rates only. In other words, the co


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sumer should be put on notice if the rate stated couldvary throughout the day. If that indication is not giv-en, the consumer is entitled to assume that the rategiven is the set rate and should be given foreign ex-change at that rate.

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Where “add-on” rates are used, they will be desnated as such. However, it was generally agreed it would be more useful to state the effective rate interest when advertising as the add-on rate is dectively lower. This will minimize confusion and theaverage consumer will be better able to comparates among banks.

The JBA and the FTC plan to continue dialogue there are other issues which need to be addressed. Tissues involve the use of panels of professionals and arrangements which are allegedly the practice of mbanks. The FTC and the JBA will notify the public as the outcome of its discussions on those matters.

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The staff of the FTC and the Media Association of Jmaica have reached a settlement concerning that Assation's Recognition Agreement. Prior to the advent of tFCA, media houses by means of the so-called Recnition Agreement, would pay a fixed commission anextend credit to only “recognized” agents.

To be “recognized” an agent had to apply to the MAand satisfy it as to certain billing and other structural cpabilities. Having been duly satisfied, the MAJ wouthen pay a fixed commission of 18% to that agency in adition to extending it a credit period for advertisemenplace in the various media. Should the agency fail to pits bills timely to even one media house, all media houwould deny that agency credit.

It was the view of the staff of the FTC that the FCmade those specific portions of the agreement illegal. Tgetting-together of the media houses to fix the amounthe commission, in the view of the staff, constituted boa conspiracy to restrain competition and price-fixing. Aditionally, it was felt that media houses which act in cocert against an agency are behaving in a cartel-like faion which also constituted a conspiracy againcompetition and thus disfavoured in a free market syste

The unequal treatment of the unrecognized agents ainvited scrutiny of the staff, for while the MAJ can cetainly put in place reasonable standards for recognitionis anti-competitive to penalize media houses who choto extend credit and pay commissions to those agents happen not to meet those standards. Commercial entmust not be deprived of their ability to engage in indpendent decisions-making vis-à-vis trading partners.

In light of the effect of the staff s views, the MAJ entered into negotiations with a view to arriving at a form Agreement which would not offend the terms of the FCThe parties developed a Recognition Agreement whconforms to the terms and spirit of the FCA.

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The MAJ has agreed, as part of the settlement with FTC’s staff', that it would institute a 90-day period for thprocession of applications for recognition and, shouldapplication be denied, that denial may be appealed tthree-person panel who are unconnected to the media

Additionally, there is also the possibility of provisionarecognition where an agency, new to the marketplamay nonetheless be afforded the legal benefits of a recnized agency. Provisional recognition automatically epires at the end of one (1) year, at which point the agemay apply for full recognition.

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Acting on complaints, which in sum alleged that JohCrook sold 1989 Ladas to the public as 1993 vehicles, 1993 Subaru Justys as 1994 models, the FTC was abbroker a settlement in favour of the complainants. Tsettlement package arrived at saw the company payout approximately four million dollars ($4,000,000.00) tindividual complainants who had purchased the autombiles in question.

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Several individuals complained to the FTC regardiwhat they alleged as Air Jamaica's nondisclosure of adtional charges for its “Love-A-Fare” package. A particular fare was advertised, yet when the consumer arrivepurchase their ticket, they were then made aware of adtional charges. The Commission viewed that practicemisleading advertising. In the settlement, arrived at wthe company, it was agreed that passengers who coprove that they traveled within the particular period (Feruary 14—March 10, 1995) would be given special ugrades. The offer remained open until July 31, 1996.

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A newly formed competition agency should developclose relationship with other domestic and internationbodies which can provide assistance with the gatheringnecessary information. As discussed, supra, staff partpation in the various internship and externship prgrammes offered by international competition agencmay facilitate (lie development of greater technical exptise in this specialized field. It will also, expand basic iformation concerning particular industries.

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The drafters of the Jamaican FCA extracted portionsexisting legislation from Commonwealth jurisdictionsprimarily New Zealand, Australia and the European Uion. This was necessary as it allowed thein to considevariety of styles and approaches to the enforcemencompetition law. The Jamaican experience however, shown that is can be dangerous to adopt legislation opiece-meal basis. The section of the Act which prohiba company's abuse of its dominant position in the markplace, for example, suffers from certain philosophicinconsistencies which have come about because that


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ticular section is an amalgamation of sections of the NewZealand Commerce Act, the Article 86 of the EuropeanUnion’s Treaty of Rome.

The United States of America has been engaged incompetition law since the late nineteenth century and hasearned the reputation of being an expert in this field. TheJamaican FTC has, quite understandably, used the exper-tise, policies and internal procedures of the United States,in formulating its own. Notwithstanding the shared com-mon law jurisprudence of the Commonwealth andAmerican jurisdictions, it may be difficult to reconcile thewritten legislation of Commonwealth jurisdictions withthe American policy perspective. There is a basic differ-ence in U.S. administrative law and that of Common-wealth countries.

Additionally, in light of the FTC’s approach in playingdifferent roles (to be discussed in more detail below), thedrafters would be well advised to define carefully theroles of the Commissioners vis-à-vis the staff, and to esure the consistent use of the terminology throughtheir competition legislation. This will facilitate the effi-cient application of the Act.

One should also consider the role that Parliamewants competition law to play in one's economy. Thcannot be decided without considering the state of a cotry's economic development and its plans for futugrowth. Perhaps one of the most important questions should be asked and answered before the statute is acly drafted, is whether the legislation should form the baof the country's economic constitution? This will forcParliament and the public to give due consideration the principles and policies which are intended to underthe legislation itself. For this very reason, it is essentiaproperly document each stage of the Parliamentary drafting process. This will provide generations to comwith information on the genesis of the law and its intened application.

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The Commission was established to administer and force the provisions of the FCA. To enable the exercisethis function, the FX has been empowered by section 5of the FCA, to -

“carry out at its own initiative or at the request of anperson such investigations in relations to the condof business in Jamaica as will enable it to determwhether any enterprise is engaging in practices in ctravention of this Act….”, LQWHU�DOLD�

In carrying out its statutory functions, the Commissioas a law enforcement agency, performs the multiple, distinct roles of complainant, investigator and adjudictor, thus wearing many hats, so to speak. Therefore three separate and seemingly conflicting functions of vestigation, prosecution and decision-making, are fustogether in one entity, with combined functions requirinseparate procedures, thereby creating what one Courtdescribed as statutory schizophrenia.1

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While this may appear to be inherently inconsisteother jurisdictions with similar competition tribunals havfound that this does not violate the principles of natujustice.2

While it is also this Commission’s view that this fusioof multiple roles does not impair the principles of fainess, it is aware of the possible perceptions of injustand has put in place procedural safeguards. Some of tare outlined below:

1. On those occasions when the Commissioners in a judicial capacity the Executive Director neveparticipates as a Commissioner, although the Eecutive Director is identified as an “ex officioCommissioner” in the FCA; and

2. Once a complaint has been laid before the Comissioners, there can be no ex parte communitions with them by the staff. With respect to item1 & 2, it should be noted that under section 52 the FCA, the FTC may, with the approval of thMinister, make Regulations prescribing the procdure to be followed in carrying out the provisionof the Act.

To date, the FTC has not promulgated regulatioHowever, procedural guidelines have been formulawhich are comprehensive in scope, and exhibits the servance of the principles of natural justice. Briefly, theprocedures cover the following areas: the ExaminationWitnesses, the Production of Documents, Applicatiofor Authorization, Commencement of Proceedings whethe Commission is authorized to make a Finding, Phearing Procedures, and the Procedures for Appeal ofStaff Findings.

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Although competition agencies are primarily concerned with the enforcement of competition legislatiothis task is not exclusively legal in nature. As stated heinabove, the role of economics is of supreme importanThus careful consideration should he given to the needboth departments.

It is also advisable that economic guidelines be formlated at the outset as these guidelines would creatstandard procedure for the assessment of various breaunder the Act. The Jamaican FTC has formulated suguidelines and those are available to all who wish them

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Small island economies face certain realities whicannot be ignored. Creative solutions, therefore, mustfound so that, in the long run, the inherent harshnessantitrust philosophy is not a legislative cross to be borand despised, but a challenge to which they can rise

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1 Fisher & Paykel Ltd. v. Commerce Commission & Ors (1990) 3NZBLC, 101,660, wherein it was noted that amendments to New Zea-land’s competition legislation led to the combining of investigative aadjudicative functions.

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2 FTC v. Cinderella Carrer & Finishing Schools, 404 F2d 1308(D.C. Cir. 1968, wherein it was held that for the Federal Trade Comission to consider recommendation of subordinates, issue a compand a press release and later to decide the case, does not violateprocess; See too, Sharpe v. The Jamaica Racing Commission (1974) 12JLR, 1319, discussing how bodies that serve combined functions doviolate natural justice principles in so doing.


eventually an aid in helping them to take their placealongside their global counterparts.

Small island economies which have a history of beingstate-controlled, have to be educated as to the differenceswhich obtain in a free market economy. In is therefore im-portant to educated the public at large and also focus oncertain groupings within the economy so that they mayknow how to adjust their conduct accordingly.

Disclosure is a key element in a liberalized regime.Given the selective unsophisticated nature of consumersin developing countries, businesses used in their advertis-

ing and any ambiguities should be resolved in favour ofthe consumer.

It is important the antitrust agency be aggressive at theoutset. The market place must be made aware of its pres-ence. The legislation therefore should allow the agency toset on its own initiative and not simply react to com-plaints.

Internationally, developed countries should willing toexercise patience. Time must be given for the changing ofthe psyche of the marketplace.

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The selection of a legal form for regional trade group-ings will be made on the basis of a number of factors, butone major factors would be the degree of unified externalrepresentation the group wishes to achieve in internation-al trade. Members seeking to speak together as a singleterritory will consider a customs union formation ratherthan a free-trade area where each member retains its indi-vidual commercial policies as to third party goods. Forcustoms union members, although a leading motive forformation may be external or representational, many ofthe consequences of making this choice are decidedly LQ�WHUQDO to the grouping, especially as to those aspects relat-ing to how goods are circulated within a completed terri-tory. For customs unions, the primary internalconsideration is to establish the legal basis for free circu-lation for goods whereby third party goods admitted to theunion circulate on the same basis as member state goods.This requires the condition of uniformity in the externaltariff. Upon this development, deviations in treatment forimports are eliminated and the need to establish the coun-try origin of goods in LQWUD�union trade is no longer neces-sary in order to confer the preference for local goods.

The establishment of external uniformity for tradepolicy and the provision for free internal circulation alsosuggests that member states should forego the legal abili-ty to apply trade policy instruments to the goods of othermember states, especially contingent trade measures suchas safeguards and anti-dumping. This is effected by estab-lishing a prohibition against the use of such measures. Atthis point a regional competition policy becomes relevantas it is able to provide an alternative remedy for anti-dumping. The appropriate competition policy to considertherefore is that policy which can insure that private re-straints will not frustrate the re-exportation of dumpedgoods between the member states. It follows that a corecompetition policy element in the determination to form acustoms union is a policy able to address verticalrestraints.

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Since a (completed) customs union is also a customsterritory, member states should forego their individual ex-ternal commercial policies to whatever extent is neces-sary to present a common external tariff as to third-party

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goods for substantially all of the trade. Some type of com-mon commercial policy is designated to operate the deci-sion-making aspects of this uniform tariff and for both im-port and export measures. This may not require anindependent institution, but whether it is formal or infor-mal, some assurance of uniformity in the tariffs applica-tion by each member state is required in order to maintainthe external legal structure of the entity as a separate cus-toms territory.

There is a strong link between the ability to establishand maintain a uniform external tariff and the ability forthe union to provide for the internal free circulation ofgoods, as the first is a precondition to the second. As forthe case of a single national territory, once duties are paidand compliance with other customs formalities is com-pleted, goods are then admitted for sale and will circulatewithin the territory on the identical basis as those goodsproduced by a member. Under this condition, there is noneed to assess the origin of goods as they across internalnational borders, since this all applicable trade measureshave already been assessed by the union on the point ofinitial entry. Although internal controls for inspection andcertification may persist where members have not harmo-nised health and safety requirements, these operations,while requiring frontier controls, are not trade policy in-struments and do not require certificates of origin. Inspec-tions are made on third-party goods in the same measureas they are performed on member state goods.

In order to summarise, consider the case where uni-formity of entry conditions is not attained by the union.Where the import treatment for third party goods variesfrom one entry point to another and for whatever reason,then free internal circulation for those goods will also fail.The member state imposing the higher entry requirementwill seek to impose internal customs control as necessaryto avoid trade deflection as third party goods are routedvia the lower tariff member state. In re-establishing na-tional commercial policy, origin verification will also berequired to be re-established, since some goods of thirdparty origin will be assessed for the adjusting measure andmember state goods will not.

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Once free circulation is committed to be achieved, theretention by a member of the power to impose antidump-

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ing measures on the goods of another also appears incon-sistent with the concept of a single territory. If internaltrade measures are permitted to be imposed by memberstates, then (non preferential) origin rules must also be re-called LQWHUQDOO\ in order to determine which goods shallbe subject to dumping duties and which goods shall not.Therefore, just as in the case where disparities in externalapplication of the tariff will result in the imposition of na-tional internal measures to avoid trade deflection, nationalinternal trade measures imposed between members willproduce the similar result. In both cases free internal cir-culation will fail to be achieved as an aspect of the cus-toms union formation. As a practical matter, this result isalso paradoxical where goods produced within the terri-tory can be subjected to treatment that is worse than thatto be applied to third-party goods.

Based upon these considerations, the choice of form-ing a customs union should also be accompanied by a pro-hibition of internal antidumping measures, to be madeeffective not later than the end of the transition period.

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Once member states are pledged to the elimination ofinternal measures, it is then possible, if not necessary, tocontemplate an appropriate competition policy responseat a regional level which will permit this prohibition to se-curely function in practice. In this sense, it can be arguedthat the appropriate regional competition policy is onewhich will support the prohibition made against trademeasures, i.e., a decision to prohibit anti-dumping inter-nally should act to define the minimum competition poli-cy required to validate a customs union formation. This isdistinct from the policy options presented in a free-tradearea where member states choose to retain the power toapply trade measures in regard to the goods of other mem-ber states.

Although other aspects of competition policy shouldalso be considered in the equation of customs territoryformation, the essential formulation of competition policyin this regional context is to provide for the legal means toguarantee that traders in the territory will be secured intheir ability to re-export any dumped goods back to themember state of origin. This is understood to provide amarket-driven or self-corrective mechanism which willact to undermine the benefits anticipated from dumping,at least to the extent that the price difference betweenmarkets does not exceed the cost of re-transport, adminis-trative costs, plus profit. Where it is provided, this guar-antee of re-exportation will eliminate market strategiesbased upon price discriminatory predatory behaviour.

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If we understand that territory formation has providedfor the elimination of public barriers in the form of tariffsand quotas, traders will then only be frustrated in re-ex-portation by the use of private restraints which act to pre-vent goods from entering the distribution channels of thehome market. Thus, it appears that the competition policyelement essential to customs union completion in this

context is that which provides a legal redress for verticalrestraints imposed in the member state of origin.

The elements which can be designated to this policyinclude the following:

— A definition of legal regional territory jurisdictionwhich is directed to the elimination of distortion ttrade EHWZHHQ the member states;

— A basis for complaint and prompt redress on behof firms and individuals seeking to re-export; and

-— A guarantee of uniformity for the interpretation othe competition policy principle as it is to be appliethroughout the customs territory.

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As demonstrated by the EC experience, these elemcan be provided in a centralised agency which functioindependently at the regional level. For the EC, thmeans a requirement for undertakings to notify verticrestraints to a single regional agency (European Commsion, DG-IV), and then by providing that exemptions pemitting pro-competitive restraints can only be granted this central regional authority. Undertakings may complain directly to the Commission, but may also direcomplaints to member state authorities, which are encoaged to make determinations and engage in enforcemHowever, in the EC system a member state authority cnot grant an exemption. Certain de-centralised aspectsalso provided. By Court of Justice rulings, the regionprohibitions for anti-competitive practices are given drect effect in the Community legal order. Undertakingmay initiate actions against other undertakings in the tional courts of the member states national courts whare bound to apply Community law. The Treaty provida procedure for preliminary opinions by these nationcourts to the EC Court of Justice. Points of law are intpreted by the regional court, published, and then appby all national courts as applicable law.

Although the existence of member state authorities now understood to be a vital aspect of making this poleffective, the existence of national authorities is not a gal pre-requisite to the implementation of a regional copetition policy. Likewise, although the EC relies uponcentralised agency at the centre of the policy, it cannoconcluded that the provision of such an agency is a apre-requisite to giving a treaty prohibition legal effect.

In the case of COMESA, the existing prohibitioagainst restrictive business practices which distort trabetween the member states should suffice as a legal bto enunciate a regional competition policy for these pposes. The national courts of the member states can areceivers of complaints and then apply the regional probitions to particular cases. A preliminary opinion procedure or appeal procedure can guarantee uniformityinterpretation by the COMESA regional court. ThCOMESA secretariat can play a supporting administtive and research role for the Court, and can be respsible for effecting the policy by education efforts througout the market. The question of centralised agenformation can be left open.


For member states with national authorities, an addi-tional element can be suggested by reference to positivecomity co-operation. This would provide that where amember state believes distortion in trade has occurred ei-ther in regard to its exports, that the authority of the sub-ject member state will be obligated to investigate the mat-ter and act to secure a competition policy remedy for thedesignated practice.

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There are other competition policy considerationswhich may distinctly flow from the determination to forma customs union. For the purposes of simplification, thisessay has chosen to focus on one fundamental policy in-herent to customs union formations, that being the goal ofproviding for free internal circulation and the eliminationof contingent trade measures between members states. Bydoing so, it is hoped to illustrate that the choice of a legalform selected for a regional grouping has implications forthe creation of additional policies which may be neces-sary to give this decision legal effect. For customs unions,competition policy may be viewed as the mechanismwhich drives the process of integration forward to thecompletion of a customs territory.

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Holmes, Peter, and Mathis, James, (1997) (XURSH$JUHHPHQW�&RPSHWLWLRQ�3ROLF\�IRU�WKH�/RQJ�7HUP��DQ�$F�FHVVLRQ�2ULHQWHG�$Sproach, in Rules of Competition andEast-West Integration, Fritsch M., and Hansen H., (eds.)Kluwer Academic Publishers, Dordrecht.

Marceau, Gabrielle (1995), 7KH� )XOO� 3RWHQWLDO� RIWKH (XURSH�$JUHHPHQWV��7UDGH�DQG�&RPSHWLWLRQ�,VVXHV�WKH�&DVH� RI�3RODQG, World Competition, V. 19, No. 2,pp. 35-69.

Mathis, J. H., (1996��,QWHUQDWLRQDO�$QWLWUXVW�5XOHV�DQGWKH Role of National Trade Measures, in van Mourik, A.,(ed)., Developments in European Competition Policy,European Institute of Public Adminstration (EIPA),Maastricht.

Nicolaides, Phedon, and Mathis, James, (1996), (XUR�SHDQ� &RPPXQLW\� &RPSHWLWLRQ� 5XOHV� LQ� WKH� $VVRFLDWHG&RXQWULHV�RI�&HQWUDO�DQG�(DVWHUQ�(XURSH��+RZ�WR�(QVXUH(IIHFWLYH� (QIRUFHPHQW, Aussenwirtschaft, V. 51:4,pp. 485-512.

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This study discusses the relationship between compe-tition policy development in small open economies. Theaim of the study is to identify and analyze the main issuesand options for small open economies to undertake poli-cies to strengthen competition in the context of develop-ment and regional integration in the Common Market forEastern and Southern African Countries (“COMESA”).

The first section makes the point that the relevancecompetition policy issues is not related to the size of economy but to certain characteristics of its markets, sas entry barriers, market power and asymmetrical infmation. A key conclusion of this section is that thstrengthening of competition within an economy may oten enhance welfare and reduce barriers to trade in seconomies. One question that requires further work, hoever, is whether a horizontal competition law of broad aplication is essential to fostering competition, or whethother policy measures which emphasize competition prciples can establish competition within small opeeconomies.

The second section surveys how small countries happroached competition law in various regional tradiarrangements in Europe, Asia and Africa. Several poiemerge from that review. First, in the European Unicontext small economies have had to participate to sodegree in the implementation of competition law anpolicy whether they be actual or prospective Membersthe EU, or Members of free trade agreements with the EThis has assured that from the point of view of trade this some degree of a level playing field among economagents acting within the economic space. Notwithstaning this fact, these rules have had more of the charactea “floor” rather than a “ceiling” such small economies ahave not been required to have extensive national laalthough some have chosen to implement them of thown choice.

In the Tasman context, the survey shows that somegree of competition policy convergence and integratiwas essential to the integration of the smaller New Zland economy with Australia. It is too early to determinclear trends from Asia and Africa. Some relatively smeconomies have implemented competition laws, but mhave not yet done so. However, as discussion and negation of economic integration progressed so too has prominence given to competition policy both at nationlevel and within regional trading arrangements. There pears to be increasing awareness that open liberal ec

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mies cannot forestall all of the effects of anticompetitipractices, and thus competition policy of some form cserve as a useful complement.

Drawing on the first two sections of the paper, the cocluding section of the paper sets out briefly a templateelements that might be included in a competition law fsmall economies on their own, or within the framework a regional economic integration agreement. It is wostressing at the outset that this study is at this stage is sly one of a conceptual nature. No attempt has been mat this stage to translate this analysis to particular legistive or policy directions for future COMESA negotiations.

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There is no D�SULRUL reason to believe that competitiolaw and policy is only relevant to relatively large open closed economies. Competition law and policy are cocerned principally two things. One concern is with collsion between or among competitors who agree to, infect, set price or quantity in a particular market such thconsumers pay more for goods and services than woulthe as in the absence of such agreements.

Another concern of competition law and policy is witexclusion by a firm or, perhaps firms acting together,exclude competitors from a particular market such thprices to consumers are increased. Competition law dresses this problem by prohibiting a firm from wilfullobtaining or attempting to obtain a monopoly by anmeans other than a superior skill, foresight and indusViewed in this way, the size of a firm is not problematin and of itself, rather the issue is what a firm does withsize and how it obtains its size. Accordingly, competitiolaw tends to deal with dominance and monopolisationfocusing on abusive or exclusionary conduct. The prolem for policy is balancing the desire to urge a competito compete, and punishing it for competing successful

A related concern of competition policy is with megers that can sometimes produce market structures ware anti-competitive in the sense of making it easier fogroup of firms to cartelise a market, or enabling thmerged entity to act more like a monopolist. That is, whthere are fewer firms in the market, it becomes easierthem to compete less vigorously and even collude. Alif the merged entity gains market power, the conce

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about exclusion, monopolization and abuse of dominancecome to the fore.

That being said, there is a debate about the incentivesto engage in successful collusion or exclusion in openeconomies. In an open economy, a certain proportion ofgoods and services are tradable, and a certain proportionare non-tradable. The distinction between the closedeconomy and the open economy is less relevant for non-tradable goods and services because foreign imports donot compete with local goods and services to disciplineprices. However, in an open economy tradable goods andservices face some degree of competition from foreignsources. The degree of competition will vary to some ex-tent with the nature of the good and service in question,transportation and distribution costs etc.

However, where foreign goods and services provideactual or potential competition, then collusion should beless likely because a price rise above the competitive levelshould induce a foreign supply response. Of course, thecolluding domestic firms could try to make the collusionsuccessful by incorporating the foreign firms into thescheme. The likelihood of such successful internationalcollusion would be limited over time because the incen-tives for cheating and defection among members wouldincrease as the numbers increase, and alternatively statedthe costs of policing and monitoring such agreementswould increase as the number of participating firms in-creased. However, in the interim, consumers would sufferbe harmed from higher prices and reduced choices.Furthermore, it should be stressed that obstacles to com-petition are not always the result of the strategic behav-iour by firms, but are often the result of inconsistent do-mestic policies, such as regulatory and trade policies. Insuch cases, collusion that would not be successful in anopen economy, might otherwise succeed.

With respect to exclusion, the analysis of the closedeconomy is similar to the analysis of collusion above. Afirm in the closed economy will, by definition, not be sub-ject to competition from foreign sources that might renderthe exclusion strategies unprofitable. However, an openeconomy context is not a guarantee that exclusion strat-egies cannot be successful. Consider an example where adominant firm producing widgets, attempts to exclude acompetitor (foreign or domestic) by having all the localdistributors agree only to sell its widgets. In that case, thedominant firm could raise the costs of entering the marketby requiring both foreign and domestic entrants to estab-lish or develop their own alternate distribution channels.In such a case, an open economy would not be a guaranteethat exclusion strategies would be unprofitable. Again, itshould be stressed that this problem is not dependent sole-ly on the strategic behaviour of a firm. Rather, firmsmight profit from existing regulatory entry barriers thatfacilitate their own exclusionary actions or intentions.

The example above also shows that the size of theeconomy might also influence the successfulness of thepredation strategy. The foreign entrant might judge thatthe relative costs of setting up the alternate distributionnetwork to be too high relative to the potential profits tobe gained from serving that economy. In that case, the ab-sence of economies of scale and scope in the small open

economy could render the domestic exclusion strategyprofitable to the detriment of the local consumers.

Thus far the analysis in this section of the paper has fo-cussed on why competition policy might be beneficial tosmall open and closed economies having regard princi-pally to domestic anticompetitive practices. It is also truethat certain anti-competitive practices may originate inother countries may affect competition in the country,such as international cartels that rig bids, fix prices or di-vide or allocate markets, anticompetitive internationalmergers and acquisitions and exclusionary practices en-gaged in by foreign or multinational firms with regionalor global dominant positions in particular relevant prod-uct markets.

In such cases, a domestic competition policy might bea useful tool to address these challenges to competitionthat harm consumers, and certain producers in the case ofanticompetitive exclusion, in the domestic economy.However, it may also be the case that a small economyacting alone would not necessarily have effective rem-edies to these anticompetitive practices that originate out-side of their borders. Accordingly, such economies mightopt to “free ride” on the enforcement initiatives of largeeconomies, however that will not work in situationwhere the anticompetitive effects occur in the smeconomy, but not in other larger economies. Similarremedies crafted in other larger countries will not alwaaddress the particular anticompetitive effects occurringthe smaller economy. Alternatively, the smaller econommay opt for some form of international enforcement coperation, however having a credible domestic competion law in effect may be a precondition for any successenforcement cooperation.

What this analysis demonstrates, therefore, is tcompetition policy directed at collusion and exclusion the small open economy may serve a useful purpose. question that remains is whether a horizontal competitlaw is necessary to insure that competition is maintainin the local markets. With respect to exclusion, answerthis question involves an analysis of the structure of local market that might give rise to successful predatostrategies. It may be the case, that at the root of the plem are barriers to entry that are regulatory in nature, athat if these barriers are removed then the likelihoodsuccessful exclusion could be reduced. Similarly, with spect to collusion, it may be that asymmetries betweeninformation available to firms and consumers, permits tcollusion among firms to go undetected. Accordingly, itworth considering whether there are not other meansaddressing such informational asymmetries withocreating a horizontal competition law.

Given the limited resources available to small econmy, there must be some principled way of engaging incost/benefit analysis of a horizontal competition law opposed to competition principles that inform the whopanoply of government policy measures. It may be tcase, that in the small economy, problems of excluscan be dealt with adequately by a combination of optrade and liberal regulatory policies. It may also be tcase that in the small economy, issues of collusion more difficult to address simply by open trade and liberegulatory policies. That does not, however, mean tha


the case of collusion, a horizontal competition law is DSULRUL the optimal policy instrument given resource con-straints. It is worth considering whether other laws of gen-eral application such as criminal laws directed at cons-piracies or fraud, or consumer protection laws might alsobe effective.

This section has demonstrated that competition can of-ten be welfare improving to the small economy, and oftenhelp to reduce barriers to trade. Thus laws and policiesthat promote competition are often in the interests of thesmall economy whether those policies are pursuedthrough a horizontal competition law, or through a rangeof policies that are designed bearing in mind competitionprinciples.

That being said, it is worth stating that competition lawand policy tends to focus on consumer welfare. It is gen-erally assumed in this analysis that when consumer wel-fare is enhanced then total welfare is implicitly enhanced.However, most competition laws do recognize that overtime, consumers are better off if competitors can agreeamongst themselves in respect of innovation, or researchand development. Accordingly, many competition lawsare less hostile to some agreements among competitors, orjoint ventures, or some dominant firm practices where dy-namic efficiencies can be clearly proved. Another way ofstating this proposition is that, competition law some-times give greater weight to producer welfare in the shortterm where the concern is with achieving dynamic effi-ciency objectives over the long term as opposed to staticallocative or productive efficiency objectives.1

However, a focus on dynamic efficiency is not incon-sistent with consumer welfare. The exception discussedabove is employed with a view to providing lower pricesand greater choices to consumers over time. However, itis unlikely that an economy that focussed exclusively onproducer welfare, rather than competition, would achievethe same measure of lower prices and product choices forconsumers over time. Accordingly, some laws that pro-mote competition would be important even for a smalleconomy that chose to pursue an innovation-basedapproach to economic development.

For certain small and micro economies, the apparentexceptions from the norm of competition may not bebased solely on dynamic efficiency concerns. It might bethe case that the minimum efficient scale for productionor distribution in some relevant markets is such that onlyone producer or distributor could function profitably, orthat several producers and distributors could functionprofitably only in some form of cooperative or collabora-tive joint venture. It is important to note, however, thatthis is not necessarily an argument against competitionper se. Rather, what is important is that those markets

remain contestable, in the sense that the incumbent firmhas to make its pricing and output decisions having regardto potential entry. In other words, there may still be a rolefor competition law and policy in ensuring that strategicand regulatory entry barriers are minimized or eliminatedsuch that the incumbent firm does indeed face certaincompetitive pressures.

The problem of minimum efficient scale in small andmicro economies, however, may not always be resolvedby relying on contestable markets. In some instances, theapparent need of a firm to have a near monopoly in the lo-cal market in order to function a minimum efficient scale,may indicate that the production or distribution should beachieved instead by importing goods or by another modeof supplying the service other than a local presence. Ofcourse, this will at times, require governments to makevery sensitive and strategic decisions that go to the heartof their concerns over sovereignty. For instance, feweconomies would likely be prepared to do away with a lo-cal monopoly for policing and public order simply be-cause some foreign security firm could provide the serv-ice more efficiently and at less cost. Similarly, someindustrial and manufacturing sectors might be seen ashaving some inherent strategic importance, or some im-portance as infrastructure that supports other importantsectors of the economy that are indeed subject to compe-tition. The important point to note, is that competition lawand policy can help shape the analysis in these situationsso that the choices made by governments are not based onprivate rent seeking and corruption.

This problem can also be posed differently. For in-stance, it my be the case that some foreign producer ordistributor of a good or service is engaging in collusivemarket division and allocation schemes, or using anti-comptitive exclusionary vertical agreements in order toservice the local market in the small or micro economy. Insuch cases, the local consumers may be adversely affectedby prices above competitive levels. A country with a com-petition law and policy may be better positioned to coun-ter arguments from such firms that such practices are nec-essary in order to achieve the scale economies needed toservice the small and micro economies.

Finally, it should be added that when small and microeconomies enter into regional free trade agreements, thegains from trade from such arrangements are unlikely tobe fully realized in those economies if a significantnumber of sectors are exempted from competition.

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This Section of the paper discusses the different policyoptions countries may adopt, at the national or sub-re-gional level, to enhance competition in their economies,taking into account the different sizes of their economiesand the relative burden that establishing competition leg-islation and institutions would imply. At the outset itshould be stated that there is more evidence to be gainedfrom the approaches to competition policy in relativelylarge developed economies. However, it is possible tolearn from the experience of the adoption of competitionpolicy among developed countries of varying sizes. Sim-ilarly, it is possible to draw out some implications of

1 Allocative efficiency is concerned with ensuring that economic re-sources are distributed to those who put the greatest value on them. Thisis efficiency in exchange. Productive efficiency is concerned with as-suring that a given level of output is achieved at the lowest cost. In com-petitive markets, both allocative and productive efficiency are achievedat the same point. While allocative and productive efficiency are staticconcepts, dynamic efficiency is concerned with the process of discov-ering the best technologies, processes and products for meeting chang-ing consumer tastes and incorporating them efficiently into the eco-nomic system.


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adopting competition policy among developing countriesof varying sizes. Nonetheless, in terms of SHU�FDSLWD in-comes some of these small, and even micro, economiesare similar to other countries that have developed, nation-al and regional approaches to the adoption of competitionlaw. Accordingly, this section of the paper will discuss theapproaches that have been taken to the adoption of com-petition laws and polices in a range of developed anddeveloping countries.

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The competition rules applicable to undertakings in theEU are found principally in Article 85 (general prohibi-tion against anti-competitive practices), Article 86 (abuseof dominant position) and Article 902 (public undertak-ings) of the EC Treaty or the Treaty of Rome and in rel-evant secondary legislation such as the Merger ControlRegulation and various Notices and Block Exemptions.Article 85 and 86 have direct effect in the 15 Memberstates through the national courts. The coherence of thesystem is assured by the existence of common EU legis-lative institutions, the European Council and the Euro-pean Parliament, a common administrative institution inthe form of the European Commission (“EC”), and common courts, the Court of First Instance which reviews Edecisions (“CFI”) and the European Court of Justi(“ECJ”) which hears appeals coming from the CFI annational courts.

In order for Articles 85 and 86 to be directly applicabby national competition authorities, national legislatiomust expressly provide for that eventuality. Nonethelethere is an increasing trend for the EC to cooperate wnational authorities in handling cases under their own tional laws, but also in implementing Articles 85 and 8where authority is allocated to them by the EC in accoance with the principle of “subsidiarity” (e.g. EU decsions should be taken as closely as possible to citizen3

The smallest Member of the European Union is Luembourg, and it provides a good example of how the competition system applies to small economies. Luxebourg is subject to EC competition law through the direapplication of Articles 85 and 86 in its national courts, athrough the actions of the EC, CFI and CFJ where a cinvolving Luxembourg has a Community dimensionHowever, Articles 85 and 86 are not directly applicabby the Luxembourg national competition authoritieLuxembourg also has had its own national competitilaw since 1970, however the law is not administered byindependent authority, and has not been vary actively forced, although there are some recent indications tthis might be beginning to change. The philosophy of eforcement was reflected in a 1997 OECD Annual Repon Competition Law Developments in Luxembourwhere, Luxembourg stated that it was:

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“in the process of redefining its position, in light of itparticular economic structure and geographic positioAs Luxembourg is not a major manufacturing countrit has to import most of its consumer goods. Furthemore its fabric consists essentially of small enterpriswhich find it difficult to compete individually with for-eign firms. For this reason, the objectives of competion policy cannot be the same as in neighbouricountries.”4

Ireland, Denmark, Finland, Austria and the Nethelands may also be considered to be smaller economwithin the EU in terms of relative population size and pcapita GDP. As with Luxembourg, Articles 85 and 86 adirectly applicable by their national courts, but not thenational competition authorities. Unlike Luxembourghowever, each of these countries has its own independcompetition authority and its own national competitiolaw.

Several conclusions can be drawn from this brief svey of EC competition rules. First, small and large EMembers are bound together by certain core principlescompetition policy that must apply to transactions of thcitizens with citizens from other Members, and betweand among their own citizens. However, beyond th“floor” Members reserve the right to apply their own lawtailored to their own legal, historical and socio-economcircumstances. At the centre, the administrative instition, the EC, focuses on the effects of particular practicon trade between and among the Members. In doing sis increasingly relying on national authorities to take ations at the national level to remedy matters which havCommunity dimension, but a mainly national effect. Athough just over half of the Members permit their nationauthorities to apply Articles 85 and 86 directly, to aincreasing extent national competition laws are beirevised to be made consistent with Articles 85 and 86.

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Iceland, Liechtenstein and Norway are contracting pties to the Agreement on the European Economic A(“EEA Agreement”) along with the European Communty and its individual member states.5 Under the EEAAgreement, the three countries are obliged to incorporthe competition rules in the Agreement into domestic leislation The objective of the EEA Agreement is “to promote a continuous and balanced strengthening of trand economic relations between the contracting parwith equal conditions of competition, and the respectthe same rules, with a view to creating a homogeneEuropean Economic Area”. Two important means for taining these objectives are the implementation of prosions corresponding to the EC provisions regarding free movement of goods, persons, services and capand EC competition legislation.

2 Corresponding to Articles 53, 54 and 59 respectively, of the EEAAgreement.

3 EC Notice on Cooperation Between National CompetitionAuthorities and the Commission in Handling Cases Falling Within theScope of Articles 85 and 86 of the EC Treaty OJ 262, (October 10,1996). See also EC Notice on Cooperation Between National Courtsand the Commission in Applying Articles 85 and 86 of the EEC TreatyOJ 39 (February 13, 1993).

4 OECD Annual Report on Competition Policy in the Grand-Duchyof Luxembourg DAFFE/CLP(97)11/13.

5 These three countries are the remaining members of the EuropeanFree Trade Area (EFTA) that signed the EEA Agreement. Switzerlandwas also an EFTA member, but it did not agree to participate in theEEA.


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The competition rules applicable to undertakings in theEEA Agreement, correspond to Article 85, Article 86 andArticle 906 of the EC Treaty and to the relevant secondarylegislation. The regime for merger control under the Trea-ty also applies under the EEA Agreement. Under this re-gime the European Commission or the European FreeTrade Area (“EFTA”) Surveillance Authority has the exclusive authority to take decisions on merger cases abspecific thresholds

The EFTA states which are contracting parties to tEEA Agreement have established a separate institutiosystem for decision-making and supervision. The EFTSurveillance Authority, located in Brussels, Belgium, anthe EFTA Court, situated in Luxembourg, were estalished by an agreement between the EFTA countrie7

These two bodies are in charge of surveillance and jucial control with regard to the EFTA countries' fulfilmenof their obligations under the EEA Agreement, and wiregard to the competition rules applicable to undertaings. The EFTA Surveillance Authority is a parallel bodto the European Commission in the field of competitioand the EFTA Court is a parallel body to the EuropeCourt of Justice.

The EEA Agreement contains provisions on the atribution of cases between the EFTA Surveillance Athority and the Commission in the fields of competitioThe guiding principle is the “one stop shop”, which is intended to avoid the parallel handling of cases. This methat a decision by one of the authorities should be resped by the other authority. Thus, the agreement contaspecific provisions governing the close cooperation btween the two bodies.

Under the EEA Agreement undertakings from eachthe three countries has to comply with both the natioregime and the EEA regime insofar as the practice at hhas an appreciable effect on trade. For transactions thanot implicate trade with the European Union, or betwethe EFTA countries themselves, each country retains right to determine whether or not to enforce a nationcompetition law.

Of the three EFTA countries, the largest, Norway, hthe most expansive national competition law which based on two principles: a prohibition against horizonpractices generally considered to be anti-competitive alegal power to intervene in individual cases against otanti-competitive practices. The Norwegian competitioauthority review mergers, but does not require prior nofication of mergers. The competition authority has statutory right to give its views on competition implications of regulatory and legislative initiatives. On the othend of the spectrum are the smaller of the three countLiechtenstein and Iceland which do not have a natiocompetition law.

Before leaving this section, it is worth considering thcase of Switzerland, the one EFTA country that did njoin the EEA Agreement. Swiss competition law was su

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stantially revised in 1995, and in many respects it is nbroadly similar to EC law. Prior to 1995, Switzerland dnot distinguish between agreements among competiand dominant positions. The revised law adopts the dtinction along the lines of Articles 85 and 86 of the Treaof Rome, however unlike the prohibition and exemptiosystem for cartels in Article 85, the Swiss law requires cartels to be notified and authorized. However, the lcontains broad guidance as to the types of cartels that not be authorized so the distinction may not be as greait first appears. The Swiss law also adopts a pre-mernotification system, and the substantive analysis of mgers is very similar to that under the EC Merger Regution.

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The competition rules prevailing between the Eurpean Union and the Associated Countries of Central aEastern Europe are contained in bilateral agreemeThey are part of the so-called “Europe Agreementwhich concern a broader set of policies. In the period tween 1991 and 1996, the European Union has conclusuch agreements with Poland, Hungary, the Czech public, Slovakia, Estonia, Lithuania, Latvia, SloveniRomania, and Bulgaria. The Europe Agreements tacknumber of competition issues directly through explicprovisions, but they also go further than that by containg a clause on approximation of legislation. These twaspects clearly illustrate the idea that liberalization trade goes in parallel with adopting regulations in the fieof competition. More generally, it fits into the philosophthat governments are required to enforce competitrules in their countries as a condition for being admittas players in a globalized economy.

• Agreements that are deemed to be incompatible wthe proper functioning of the Europe Agreements,so far as they distort trade with the EU are:

• All agreements between undertakings, decisionsassociations of undertakings and concerted practibetween undertakings which have as their objecteffect the prevention, restriction or distortion ocompetition. (Article 85)

• An abuse by one or more undertakings of a dominposition in the EU or the other associated count(Article 86)

• Any public aid which distorts or threatens to distocompetition by favouring certain undertakings or thproduction of certain goods. (Article 92)

In addition, the Europe Agreements require that undtakings with special or exclusive rights be subject to ruthat are consistent with Article 90 of the EC TreatSimilarly, state monopolies of a commercial character to be treated as under Article 37 of the EC Treaty such tthere is no discrimination in government procurement.

These agreements carry with them an obligation for aspirant to “approximate” the EU competition law, ancreates some common institutions for ensuring that thepirant’s competition authorities do so in fact. No similaapproximation requirement was ever made explicitly pof a process of an EC enlargement exercise before wh

6 Corresponding to Articles 53, 54 and 59 respectively, of the EEAAgreement.

7 The Agreement between the EFTA States on Establishing a Sur-veillance Authority and a Court of Justice.


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in part explains why only 8 of the 15 member states di-rectly apply Articles 85 and 86. Further, it is worth notingthat antidumping remedies are still applicable to tradefrom countries subject to Europe agreements despite theapproximation process. Interestingly, the Council and theCommission have signalled first in respect of trade nego-tiations with South Africa, and subsequently in its negoti-ation strategy for the next renewal of Lomé IV in 200competition policy enforcement will be a requireelement.

It is interesting to note that as the EU continues to epand, the principle of “subsidiarity”—i.e. decisionshould be taken at the national level wherever possibltakes on greater importance. Over the last few yeagreater reliance has been put on national courts andtional competition authorities within existing EU members. More recently, the Commission has propossweeping changes to Article 85 and 86 that will resultfurther authority being exercised at the national levThis is due in large part to the accession of new MemStates in the foreseeable future which is becoming an emore real prospect. In March 1998, negotiations for acession were initiated with a first group of six candidacountries (Poland, the Czech Republic, Hungary, EstonSlovenia, and Cyprus). A further five countries (RomanBulgaria, Slovakia, Latvia, Lithuania) are continuintheir preparations with a view to opening accession netiations at a later stage. Thus, a European Union wmore than twenty-five Member States is on the horizoThe EU thus faces three main challenges: how to bridthe enormous economic gap between old and new Meber States; how to avoid market distortions between vanced free-market countries and those completing thtransition to a market economy; and how to adapt thestitutional and procedural laws, which were designed a much smaller Community in order to keep the systworkable and to allow the integration process to contin

An interesting element of the “approximation” proceis that the parties to the Europe Agreements were requto approximate to EC law as it existed even in cases sas with respect to vertical agreements where the balaof academic opinion has found that law to be overly rstrictive. The irony that resulted is that once these cotries having approximated their laws, the EC began process of fundamentally reforming its approach to vecal restraints to be far less restrictive. Similarly, as maof these economies were moving from state-owned enprises and centralized regulatory regimes, many wanto apply more stringent rules for abuse of dominance thexisted under EC law. In this case, however, the Eseemed to require its own law as a floor rather than a cing thus permitting the transition economies to enastronger laws on abuse o dominance.

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The Tasman experience with trade and competitipolicy rule making is also of interest. In 1983, Australand New Zealand entered into the Closer Economic Retions Agreement (“CER”) to provide for free trade igoods, but not services, over a seven year period. In 19the two countries entered into the Australia New ZealaCloser Economic Relations Trade Agreeme(“ANZCERTA”) in 1988 to expedite the process of liber

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alizing trade in goods. The ANZCERTA also abolisheantidumping remedies for intra-Tasman trade much asTreaty of Rome had done from its inception for tradamong the member states of the European Union.

Instead both countries agreed to apply their respeccompetition law provisions to abuses of market powerdeal with cross-border issues of predatory pricing. Tagreement was facilitated in large measure by the gradreform of New Zealand competition law, culminating istatutory amendments in 1986, to conform to Australiprecedent. Interestingly, in 1986 New Zealand did ncopy the Australian provisions on price discriminatioand Australia itself abolished these provisions in 1996

To be clear, differences remain in each countries copetition laws with respect to market power thresholds, ficiency exceptions and public benefits tests. For stance, with respect to mergers, Australia applies concept of market power, while New Zealand applies tconcept of dominance. While these are similar concepthe former is a narrower concept linked to the ability ofirm to impose a significant non-transitory price increasbut the latter is a broader concept that asks whether a is able to choose its conduct without taking accounteventual reactions of competitors and suppliers.

Nonetheless, there have been few government invegations, no reported government decisions using thcross-border provisions, and only one private case twas dismissed on largely procedural grounds. Interestily, since the abolition of anti-dumping remedies for intrTasman trade, anti-dumping remedies have increased matically against non-Tasman countries.

The Tasman approach to anti-dumping places it ahybrid between the European and North American moels. In particular, it is worth noting that there has beenattempt to move towards a complete harmonization of tional laws or centralization of Tasman competition eforcement. While there are interesting provisions facitating cross-border investigations in these cases, provisions for judges from one country to become ivolved in decisions in another, in all other respects Tman competition policy enforcement is governed by1994 Co-operation and Coordination Agreement betwethe Australian Trade Practices Commission and the NZealand Commerce Commission, and mutual legal assance legislation in both countries relation to busineregulation and criminal matters. One especially intereing feature, however, is the explicit provision for the reular exchange of staff every six months. This represencautious nod in the direction of further convergence.

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The Asia-Pacific Economic Cooperation Counc(“APEC”) was formed in 1989. It is neither a formalizefree trade agreement, nor as developed a policy and cussion institution as the Organization for Economic Coperation and Development (“OECD”). In Osaka in 199the APEC Economic Leaders adopted an “Action Plan”15 specific areas – competition policy was one such aand deregulation was another. (In 1996, a decision wtaken to fold the work on competition and deregulation gether.) APEC Members have developed both “Colle


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tive Action Plans” and “Individual Action Plans” in eacof these areas.

With respect to competition policy, the CollectivAction Plan establishes the objective of enhancing:

“The competitive environment in the Asia-Pacific region by introducing or maintaining effective and adequate competition policy and/or laws and associaenforcement policies, ensuring the transparency of above, and promoting cooperation among APEeconomies, thereby maximizing, inter-alia, the effcient operation of markets, competition among produers and traders, and consumer benefits.”

To achieve this objective, each APEC economy agreto follow three guidelines:

• Review its respective competition policy and/or lawand the enforcement thereof in terms of transparcy;

• Implement as appropriate technical assistance ingard to policy development, legislative drafting, anthe constitution, powers and functions of appropriaenforcement agencies; and

• Establish appropriate cooperation arrangemeamong APEC economies.

With respect to the Collective Action Plans, the APEeconomies agreed to:

1. Gather information and promote dialogue on astudy on:

• The objectives, necessity, role and operation of eaAPEC economy's competition policy and/or lawand administrative procedures, thereby establisha database on competition policy;

• Competition policy issues that impact on trade ainvestment flows in the Asia-Pacific region;

• Areas for technical assistance and the modalitthereof, including exchange and training programmes for officials in charge of competition polcy, taking into account the availability of resourceand

• The inter-relationship between competition policand/or laws and other policies related to trade ainvestment;

2. Deepen competition policy dialogue betweeAPEC economies and relevant international organiztions;

3. Continue to develop understanding in the APEbusiness community of competition policy and/or lawand administrative procedures;

4. Encourage cooperation among the competition thorities of APEC economies with regard to informatioexchange, notification and consultation;

5. Contribute to the use of trade and competitilaws, policies and measures that promote free and otrade, investment and competition; and

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6. Consider developing non-binding principles ocompetition policy and/or laws in APEC.

With respect to deregulation, the Collective ActioPlan establishes the objectives of promoting the transpency of their respective regulatory regimes; and elimining trade and investment distortion arising from domesregulations which not only impede free and open traand investment in the Asia-Pacific region but also amore trade and/or investment restricting than necessarfulfil a legitimate objective.

The Collective Action Plan with respect to deregultion provided that the APEC economies, taking inaccount work done in other areas of APEC would:

• Publish annual reports detailing actions taken APEC economies to deregulate their domestic reglatory regimes; and

• Develop further actions taking into account thabove reports, including;

• Policy dialogue on APEC economies’ experiencesregard to best practices in deregulation, includithe use of individual case studies to assist in the sign and implementation of deregulatory measurand consideration of further options for a work program which may include:

• Identification of common priority areas and sectofor deregulation;

• Provision of technical assistance in designing aimplementing deregulation measures; and

• Examination of the possibility of establishing APEguidelines on domestic deregulation; and

• Regular dialogue with the business community, icluding a possible symposium.

It may be useful to examine the Individual ActioPlans for competition policy for a number of APEC Members to see how different economies conceive of comption policy in the process of economic integration.

Hong Kong, a country without a competition law, indcated that it:

“Subscribes to the basic economic philosophy of mimum government intervention in market forces and fully committed to the promotion of free trade and competition. Where necessary, appropriate and pragmmeasures will be taken to rectify any unfair business prtices, safeguard competition and protect consumer inests.”

And with respect to deregulation, Hong Kong stated

“Hong Kong believes in market forces and adoptshands-off approach to economic management. Its regtory regimes are established to provide prudential supvision, ensure safety, protect consumer interests, anencourage investment. Most of the public utilities are pvately owned.”

Other than that, Hong Kong committed to open competition in the telecommunications and energy sectors with respect to certain professional services, and to st


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whether any further administrative and legislative meas-ures are required to improve the competitive conditions inHong Kong. Hong Kong did not make any commitmentsbeyond 2000.

Another clear expression of the Hong Kong approachto competition policy can be found in a 1997 submissionto the WTO Working Group on the Interaction betweenTrade and Competition Policy. There, Hong Kong statedthat:

“It is committed to the promotion of competition. Thiis the means to enhance economic efficiency, whichthe ultimate, shared objective of HKC's competitioand trade policies. A fundamental test of whether copetition exists is whether the market is accessible acontestable.

Although competition thrives best on the free force the market, some degree of government involvemensometimes called for. It is necessary, for instance, the Government to put in place a package of legislatto outlaw deceptive trade practices and protect the fdamental rights of consumers. There may also be cumstances where a very high level of investment isvolved (as in the broadcasting business), wheprudential supervision or regulatory efficiency is neeed (as in the banking and financial services sectors)where the longer term interest of consumers is at st(as in the provision of utility services). In such circumstances, the HKSARG will ensure that the monopoltic or oligopolistic situation that is allowed to exisdoes not unduly compromise, amongst other thinthe quality of services and the price that consumhave to pay.

The needs, requirements and characteristics of indivual sectors vary. Accordingly, HKC adopts a setor-specific approach to safeguard competition. TGovernment also reviews these regulatory measuperiodically to ensure they still meet the needs of pvailing circumstances. Where possible, it will undetake liberalization initiatives to promote competition ithese sectors. . . .

Whilst promoting competition is important, it is ameans rather than an end in itself. The HKSARG hto strike a delicate balance between the promotioncompetition and other government policies and weithese against what is best for the economy aswhole.”8

Singapore noted that it “does not maintain competitilaws but depends on its free and open market to ensucompetitive environment in the domestic economy.” further noted that for services which the Government htraditionally been the sole provider, the Singapore Goernment has commenced a programme of corporatizaand privatization to subject the provision of such servicto competition and market discipline. Examples includbroadcasting, telecommunications and maritime and pservices. Singapore made very limited further commments from 1997-2010 to: continue to maintain its frand open market to ensure a competitive environmen

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the domestic economy;for services which the Govement has traditionally provided, continue to review aintroduce competition through privatization where apprpriate; and continue to participate in competition policdialogues among APEC economies to enhance muunderstanding of competition policy and laws.

Similarly, with respect to deregulation Singapore staed that it:

“believes in the discipline of market forces and has,the past few years, embarked on a programme to corptize/privatize the provision of major public serviceThese include electricity, gas, telecommunications, lotransport (including train, bus and taxi services), broacasting and postal services.

Regulation, where applied, is to provide prudentsupervision (for example, in the financial services sectoensure public safety, protect consumer interests, pronational security interests and ensure that the Singapmarket is not over-supplied.”

The Singapore statement is particularly interesting bcause it seems to go right to the heart of the merits of copetition policy. As discussed in the first section, competion policy normally promotes consumer welfare bpromoting competition such that prices to consumers bid down. However, Singapore, expressly provides regulation to prevent “over-supply” which might bthought of as a mechanism for reducing prices to consuers.

Singapore and Hong Kong are both dynamic relativedeveloped developing countries with a strong manufturing base and active service economy. Thereforemight be useful to also have regard to smaller, less deoped APEC Members. Brunei Darussalam is a small wealthy oil producing state undertook to publish amake available any competition laws enacted in the ture; participate in dialogues/workshops/seminars competition policy; facilitate the establishment of national consumer protection body.

By contrast, Papua New Guinea, a lower middle icome developing country actually undertook to Formlate a consumer protection law, introduction of businepractices act, national competition policy and appropriatechnical assistance and policy development, legislatdrafting powers and functions of appropriate enforcinagencies. It also committed to deregulate price conmechanisms and to review existing contractual agrments the state has entered with investors.

The APEC Individual Action Plans for the much largeAPEC members with a substantial manufacturing badeveloped service sector but which are lower middle aupper middle income countries respectively in terms per capita GNP, Indonesia and Malaysia are also of inest. Malaysia indicated a short to medium term intentito enact a law to address “unethical trade measures abuse of market power”. Indonesia, however, indicatthat it already had laws “to protect consumers and buness from unfair competition in business activities., aaccordingly it undertook to promote transparency and regulation in the short to medium term. Both of these dividual Action Plans have been superseded by the Fin

8 WTO, Submission from Hong Kong, China WT/WGTCP/W/53(4 December 1997).


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cial Crisis which prompted Indonesia to pass acomprehensive competition law in March 1999, whileMalaysia continues drafting a law at present.

The new Indonesian Law Prohibiting Monopoly Prac-tices and Unhealthy Business Competition reflects theturmoil in which it was drafted. Accordingly, while itprobably should not serve as a model competition lawin its particulars, it does broadly reflect the concerns out-lined in the first section of this paper. It containsprovisions in conspiracies and cartels, monopolies anddominant positions. It provides for merger review, butnot pre-merger notification. It also includes rather com-plex provisions on interlocking directorates and share-holding that reflect local market structure concerns. Thelaw also establishes an independent Business Competi-tion Commission with the power to investigate and to im-pose fines and administrative remedies. The law includesexemptions for export cartels, research and developmentagreements and some small scale businesses.

Notwithstanding the disparate positions of the APECMembers on the importance of competition policy to de-velopment and economic integration, APEC Ministersagreed in Kuala Lumpur in 1998 that APEC would exam-ine the possibility of APEC principles for competitionpolicy and deregulation in 1999. Work is now underwaytowards developing a set of core APEC competition andregulatory principles in for discussion at the next Minis-terial meeting in Fall 1999.

Much of the work on developing those principles hasbeen conducted under the auspices of the Pacific Eco-nomic Cooperation Council (“PECC”) a grouping that includes representatives from business, government andacademic communities. The PECC Competition Prinples have not been approved by APEC, but have beco“an important reference document” for the work of thAPEC Working Group on Competition Policy. The PECCompetition Principles consist of four “First-Level CorPrinciples” for the application of competition policy—comprehensiveness transparency, accountability and ndiscrimination. The “Second Level Principles relate government interventions, rules for business codex, acooperation between international competition agenciThey include the following items:

• Review of existing and new government intervetions with a view to identifying distortions to thecompetitive process

• Progressive elimination of efficiency-reducing regulatory barriers and other interventions

• Minimize the risk of ‘re-regulation’ via anti-competitive business conduct—by effective enforcement appropriate competition disciplines

• Where a general competition law is considerappropriate, its characteristics to include:

—Focused objective (promoting competition anefficiency)

—Prohibitions of specific business practices onwhere these are unambiguously harmful to efciency and welfare

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—Rule of reason approach

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—Effective and accountable enforcement

—Access by complainants to relevant authorities

—Cooperation between national competition agecies/authorities especially for avoiding/managinjurisdictional conflict

—Robust protection of confidential business infomation

The APEC Ministers adopted the PECC First LevCore Principles in Auckland, New Zealand on Septemb13, 1999.9

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It is also instructive to examine the Treaty Establishithe Common Market for Eastern and Southern Africa10

The 21 Members are: Angola, Burundi, Comoros, Demcratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mzambique, Namibia, Rwanda, Seychelles, SudSwaziland, Tanzania, Uganda, Zambia and ZimbabwCOMESA’s mandate is to promote “outward-orientedregional integration through trade and investment11

COMESA has agreed to establish a free trade areaOctober 2000, as a prelude to establishing a customs uin 2004.

Perhaps, the most interesting provision of this treatyits embrace of competition policy in Article 5:

“1. The Member States agree that any practice whnegates the objective of free and liberalised trade shalprohibited. To this end, the Member States agree to phibit any agreement between undertakings or concerpractice which has as its objective or effect the prevetion, restriction or distortion of competition within theCommon Market.

2. The Council may declare the provisions of pargraph 1 of this Article inapplicable in the case of:

(D) any agreement or category thereof between undtakings;

(E) any decision by association of undertakings;

(F) any concerted practice or category thereof;

which improves production or distribution of goods opromotes technical or economic progress and has effect of enabling consumers a fair share of the benefi

Provided that the agreement, decision or practice dnot impose on the undertaking restrictions inconsist

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9 See: APEC Economic Leaders’ Declaration, http://www.apec.govt.nz/n/index.htm.

10 33 I.L.M. 1067; (1994) (signed November 5, 1993).11 M.J. Musonda, “A Regional Competition Policy for COMESA

Countries and Implications of an FTA in 2000” A Paper Presentedthe National Seminar on Competition Law and Policy, Lusaka (M31- June 2, 1999) at 2-3.


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with the attainment of the objectives of this Treaty or hasthe effect of eliminating competition.

3. The Council shall make regulations to regulate com-petition within the Member States.”

What makes this provision all the more interestingthat of the 21 COMESA Members, only five, Egypt, Kenya, Malawi, Zambia and Zimbabwe have relatively rcently enacted competition laws, and a sixth MembMauritius is in the process of drafting a competition lawAccordingly, COMESA Members are now actively discussing how best to give effect to Article 5 of the TreaThere are, at present, considerable differences overdegree to which either a common competition law or stitution should be established, or whether individuMembers should be required to have some law that phibits anticompetitive agreements or practices that dtorts trade and competition within COMESA. What evthe form of competition law eventually agreed to withCOMESA, the enforcement of the provisions will benefrom the existing COMESA Court of justice that has thpower to interpret provisions of the treaty, and to adjucate disputes that arise between COMESA Membabout its interpretation and application.

There are two other Southern African trading arrangments that are potentially relevant: the Southern AfricCustoms Union (“SACU”) and the Southern African Development Community (“SADC”). SACU consists oBotswana, Lesotho, Namibia, South Africa and Swaland. Of these five countries, so far only South Africa ha competition law, although Botswana may be in the pcess of drafting one. SADC consists of 14 countries: Agola, Botswana, Democratic Republic of Congo, LesothMalawi, Mauritius, Mozambique, Namibia, SeychelleSouth Africa, Swaziland, Tanzania, Zambia and Zimbbwe. Of these only three countries, South Africa, Zamband Zimbabwe have competition laws, and Mauritius isthe process of drafting a law.

These three agreements highlight potential probleassociated with introducing competition policy into regional free trade agreements. First, the countries involvmay be subject to conflicting requirements in terms competition law if they are members of several regiontrading arrangements.

Second, within both SACU and SADC, the fact thSouth Africa, the regional economic power has a comtition law, and has recently concluded a free trade agrment with the European Union has put pressure on other Members of these arrangements to consider ading a competition law. The issue is most acute for SACMembers because of their customs union with South Arica which implies the need for a level playing field acroa range of regulatory policies. SACU Members are cosidering whether they need individually to adopt a comptition law, and if so whether the law should be modellon the new South African law, or whether some regioncompetition law arrangement should be created. Simconcerns are arising within SADC, and increasing discsion is being given to whether SADC should establishCompetition Law Protocol, and if so whether it should modelled on the South African law. However, the latt

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option is not without controversy as Zambia and Zimbbwe also have competition laws of their own.

Third, while there is no clear consensus among SADor SACU members about future directions for competion law at the national or regional level, many are begning to express concerns of the need to be able to reathe large South African firms that are investing or sellininto the region at a tremendous pace. One topical examof the concerns expressed relates to South African band mining concerns which are acquiring incumbent loproducers throughout the region, and attaining regiodominant positions in these markets.

Before concluding this section, it might be useful briefly examine the kind of provisions that are found the competition laws of South Africa, Zambia and Zimbbwe. South Africa has by far the most complex law wiprovisions prohibiting and exempting certain anticompeitive horizontal agreements similar to Article 85 of thTreaty of Rome. The South African law also deals wiabuse of dominance, anticompetitive mergers and has tain presumptions about interlocking directorates. Tmerger provisions demonstrate how the law is tailoredthe particular history of South Africa. There is a public iterest test in evaluating the effects of a merger, howethe factors to be considered are set out in the statute,include a narrow provision relating to the ability of smabusinesses, or firmV controlled or owned by historicallydisadvantaged persons, to become competitive. TSouth African law also creates an independent Comption Commission, and provides for effective rights of apeal against its decisions. The Commission has a staturight to participate in regulatory proceedings, and to avise the government on the effects on competition of goernment legislation and policy.

The Zimbabwean law contains provisions prohibitinand authorizing certain anticompetitive horizontal agrements, monopolies and anticompetitive mergers. The creates an independent Industry and Trade CompetiCommission, and establishes rights of appeal againsdecisions. The Commission has the authority to advisegovernment generally on all aspects of competition in formulation and implementation of government policy.

The Zambian competition law is broadly similar tboth the South African and Zimbabwe competition law

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I think that several other interesting insights can bedrawn from the North American model of competitiopolicy enforcement which is characterized by both formand informal enforcement cooperation in respect of ciand criminal maters between competition officials Canada and the United States.12

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12 Mark A. A. Warner, International Aspects of Competition Policy—Possible Directions for the FTAA 22 World Competition 1 (1999).


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In Chapter 15 of the North American Free TradeAgreement (“NAFTA”), the parties agreed to adopt maintain measures to proscribe anticompetitive businconduct and to consult periodically about the effectivness of measures undertaken by each party. Furthermthe parties agreed to cooperate on issues of competlaw enforcement with respect to: mutual legal assistannotification; consultation and exchange of information rlating to enforcement. However, the competition provsions are not subject to the dispute settlement provisiof NAFTA.

In 1990, the Canada-United States Treaty on MutLegal Assistance in Criminal Matters, which was signin 1985 came into force.13 Article II sets forth the scopeof application such that the Parties shall provide, in acordance with the provisions of this Treaty, mutual legassistance in all matters relating to the investigation, precution and suppression of offences. Assistance includexamining objects and sites; exchanging information aobjects; locating or identifying persons; serving docments; taking the evidence of persons; providing docments and records; transferring persons in custody; ecuting requests for searches and seizures. Assistamust be provided without regard to whether the condunder investigation or prosecution in the requesting stconstitutes an offence or may be prosecuted by thequested state. This Treaty is intended solely for mutualgal assistance between the Parties and does not giveto a right on the of a private party. Article V limits compliance where: the request is not made in conformity wthe provisions of this Treaty; or execution of the requeis contrary to its public interest, as determined by its Cetral Authority. The requested state may postpone assance if execution of the request would interfere with ongoing investigation or prosecution in the requeststate.

Article I provides for certain limitations on the use oinformation obtained pursuant o the Treaty such that: Central Authority of the requested state may require, aconsultation with the Central Authority of the requestinstate, that information or evidence furnished be kept cfidential or be disclosed or used only subject to terms aconditions it may specify; the requesting state must disclose or use information or evidence furnished for pposes other than those stated in the request withoutprior consent of the Central Authority of the requeststate. However, information or evidence made publicthe requesting state may be used for any purpose.

In August 1995, Canada and the United States updaand broadened the 1994 MOU by signing, $�&RRSHUDWLYH(QIRUFHPHQW� $JUHHPHQW� 5HJDUGLQJ� WKH� $SSOLFDWLRQ� RI7KHLU� &RPSHWLWLRQ� DQG� 'HFHSWLYH� 0DUNHWLQJ� 3UDFWLFHV/DZV (“1995 Cooperative Agreement”).14 The stated pur-pose of the 1995 Cooperative Agreement is to promcooperation and coordination between the competitauthorities of the Parties, to avoid conflicts arising frothe application of the Parties’ competition laws and minimize the impact of differences on their respective im

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portant interests, and, in addition, to establish a framwork for cooperation and coordination with respect to eforcement of deceptive marketing practices laws.

Article II sets forth when notification of enforcemenactivities is required. Each party must, subject to Arcle X(1), notify the other party in the manner provided bthis Article and Article XII with respect to its enforcemenactivities that may affect important interests of the othparty. Enforcement activities that may affect the impotant interests of the other party and therefore ordinarily quire notification include those that:

(D) Are relevant to enforcement activities of the othparty;

(E) Involve anticompetitive activities, other thanmergers or acquisitions, carried out in whole or in partthe territory of the other party, except where the activitoccurring in the territory of the other party are insubstatial;

(F) Involve mergers or acquisitions in which—one omore of the parties to the transaction, or—a company ctrolling one or more of the parties to the transaction, icompany incorporated or organized under the laws of other party or of one of its provinces or states;

(G) Involve conduct believed to have been requireencouraged or approved by the other party;

(H) Involve remedies that expressly require or prohibconduct in the territory of the other party or are otherwdirected at conduct in the territory of the other party; o

(I) Involve the seeking of information located in thterritory of the other party, whether by personal visit bofficials of a party to the territory of the other party ootherwise.

Notification pursuant to this Article must ordinarily bgiven as soon as a party's competition authorities becoaware that notifiable circumstances are present, and wcertain enumerated events occur.

In Article III, the Parties acknowledge that it is in thecommon interest to cooperate in the detection of anticopetitive activities and the enforcement of their competion laws to the extent compatible with their respectilaws and important interests, and within their reasonaavailable resources. The Parties further acknowledge it is in their common interest to share information whicwill facilitate the effective application of their competition laws and promote better understanding of each oer's enforcement policies and activities. The Parties wconsider adopting such further arrangements as mayfeasible and desirable to enhance cooperation in theforcement of their competition laws. Each party's comptition authorities will, to the extent compatible with thaparty's laws, enforcement policies and other importantterests:

(D) Assist the other party's competition authoritieupon request, in locating and securing evidence and wnesses, and in securing voluntary compliance with quests for information, in the requested party's territor

13 See 24 International Legal Materials 1092 (1986) and 29 Interna-tional Legal Materials 1576 (1990).

14 See:http://www.usdoj.gov/atr/public/international/docs/uscan721.txt.


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(E) Inform the other party’s competition authoritieswith respect to enforcement activities involving conductthat may also have an adverse effect on competition with-in the territory of the other party;

(F) Provide to the other party’s competition author-ities, upon request, such information within its possessionas the requesting party’s competition authorities mayspecify that is relevant to the requesting party’s enforce-ment activities; and

(G) Provide the other party’s competition authoritieswith any significant information that comes to their atten-tion about anticompetitive activities that may be relevantto, or may warrant, enforcement activity by the other par-ty’s competition authorities.

Article IV provides for coordination with regard to related matters. Where both Parties' competition authoritare pursuing enforcement activities with regard to relamatters, they will consider coordination of their enforcment activities. In such matters, the Parties may invosuch mutual assistance arrangements as may be in ffrom time to time. In considering whether particular eforcement activities should be coordinated, either whole or in part, the Parties' competition authorities shtake into account the following factors, among others:

(D) The effect of such coordination on the ability oboth Parties to achieve their respective enforcemobjectives;

(E) The relative abilities of the Parties' competitioauthorities to obtain information necessary to conduct enforcement activities;

(F) The extent to which either party's competitioauthorities can secure effective relief against the anticopetitive activities involved;

(G) the possible reduction of cost to the Parties andthe persons subject to enforcement activities; and

(H) the potential advantages of coordinated remedto the Parties and to the persons subject to the enfoment activities.

In any coordination arrangement, each party’s comptition authorities agree to seek to conduct their enforment activities consistently with the enforcement objetives of the other party’s competition authorities. In thcase of concurrent or coordinated enforcement activitithe competition authorities of each party must considupon request by the competition authorities of the othparty and where consistent with the requested party’s forcement interests, ascertaining whether persons have provided confidential information in connectiowith those enforcement activities will consent to the shing of such information between the Parties’ competitiauthorities. However, either party’s competition authoities may at any time notify the other party’s competitioauthorities that they intend to limit or terminate coordinaed enforcement and pursue their enforcement activiindependently and subject to the other provisions of tAgreement.

Article V provides for cooperation regarding anticompetitive activities in one party that adversely affect the

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terests of the other party. The Parties note that anticopetitive activities may occur within the territory of onparty that, in addition to violating that party’s competitiolaws, adversely affect important interests of the other pty. The Parties agree that it is in their common interesseek relief against anticompetitive activities of this nture. If a party believes that anticompetitive activities caried out in the territory of the other party adversely affeits important interests, the first party may request that other party's competition authorities initiate appropriaenforcement activities.

The request must be as specific as possible aboutnature of the anticompetitive activities and their effects the interests of the party, and must include an offersuch further information and other cooperation as the questing party’s competition authorities are able to pvide. The requested party’s competition authorities agto carefully consider whether to initiate enforcement ativities, or to expand ongoing enforcement activities, wirespect to the anticompetitive activities identified in threquest. The requested party’s competition authoritmust promptly inform the requesting party of its decisioIf enforcement activities are initiated, the requested pty's competition authorities agree to advise the requesparty of their outcome and, to the extent possible, of snificant interim developments. Nothing in this Articlelimits the discretion of the requested party’s competitiauthorities under its competition laws and enforcemepolicies as to whether to undertake enforcement activitwith respect to the anticompetitive activities identified a request, or precludes the requesting party’s competiauthorities from undertaking enforcement activities wirespect to such anticompetitive activities.

Article VI sets forth principles for the avoidance oconflicts. Within the framework of its own laws and to thextent compatible with its important interests, each paagree to, having regard to the purpose of this, give careconsideration to the other party’s important interesthroughout all phases of its enforcement activities, incluing decisions regarding the initiation of an investigatioor proceeding, the scope of an investigation or proceedand the nature of the remedies or penalties sought in ecase. When a party informs the other that a specific forcement activity may affect the first party’s importaninterests, the second party shall provide timely noticedevelopments of significance to those interests.

While an important interest of a party may exist in thabsence of official involvement by the party with the ativity in question, it is recognized that such interest wounormally be reflected in antecedent laws, decisionsstatements of policy by its competent authorities. A pty’s important interests may be affected at any stage offorcement activity by the other party. The Parties reconize the desirability of minimizing any adverse effects their enforcement activities on each other's important terests, particularly in the choice of remedies. Typicalthe potential for adverse impact on one party’s importainterests arising from enforcement activity by the othparty is less at the investigative stage and greater atstage at which conduct is prohibited or penalized, orwhich other forms of remedial orders are imposed. Whit appears that one party’s enforcement activities may versely affect the important interests of the other par


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each party must consider all appropriate factors, whichmay include but are not limited to:

viii(i) The relative significance to the anticompetitiveactivities involved of conduct occurring withinone party’s territory as compared to conduct oc-curring within that of the other;

vi(ii) The relative significance and foreseeability ofthe effects of the anticompetitive activities onone party’s important interests as compared tothe effects on the other party’s important inter-ests;

v(iii) The presence or absence of a purpose on the partof those engaged in the anticompetitive activi-ties to affect consumers, suppliers or competi-tors within the enforcing party’s territory;

ii(iv) The degree of conflict or consistency betweenthe first party’s enforcement activities (includingremedies) and the other party’s laws or other im-portant interests;

iii(v) Whether private persons, either natural or legal,will be placed under conflicting requirements byboth Parties;

ii(vi) The existence or absence of reasonable expecta-tions that would be furthered or defeated by theenforcement activities;

i(vii) The location of relevant assets;

(viii) The degree to which a remedy, in order to be ef-fective, must be carried out within the other par-ty’s territory; and

i(ix) The extent to which enforcement activities of theother party with respect to the same persons, in-cluding judgments or undertakings resultingfrom such activities, would be affected.

Article VIII provides that either party may request con-sultations regarding any matter relating to this Agree-ment. Article IX further provides that Officials of the Par-ties’ competition authorities agree to meet at least twice ayear to: exchange information on their current enforce-ment efforts and priorities in relation to their competitionand deceptive marketing practices laws; exchange infor-mation on economic sectors of common interest; discusspolicy changes that they are considering; and discuss oth-er matters of mutual interest relating to the application oftheir competition and deceptive marketing practices lawsand the operation of this Agreement.

Article X addresses the issue of confidentiality of in-formation. Notwithstanding any other provision of thisAgreement, neither party is required to communicate in-formation to the other party if such communication is pro-hibited by the laws of the party possessing the informationor would be incompatible with that party’s important in-terests. Unless otherwise agreed by the Parties, each partyagrees to, to the fullest extent possible, maintain the con-fidentiality of any information communicated to it in con-fidence by the other party under this Agreement. Eachparty must oppose, to the fullest extent possible consistent

with that party’s laws, any application by a third party fordisclosure of such confidential information.

The degree to which either party communicates infor-mation to the other pursuant to this Agreement may besubject to and dependent upon the acceptability of the as-surances given by the other party with respect to confi-dentiality and with respect to the purposes for which theinformation will be used. Notifications, consultations andother communications between the Parties in relation tothe agreement are deemed to be confidential. A party maynot, without the consent of the other party, communicateto its state or provincial authorities information receivedfrom the other party pursuant to notifications or consulta-tions under this Agreement. The party providing the infor-mation must consider requests for consent sympathetical-ly, taking into account the other party’s reasons forseeking disclosure, the risk, if any, that disclosure wouldpose for its enforcement activities, and any other relevantconsiderations.

The notified party may, after the notifying party’competition authorities have advised a person who is subject of a notification of the enforcement activities rferred to in the notification, communicate the fact of thnotification to, and consult with that person concernithe subject of the notification. The notifying party agreto, upon request, promptly inform the notified party of thtime at which the person has, or will be, advised of tenforcement activities in question.

In general, information communicated in confidencby a party's competition authorities to the competitioauthorities of the other party in the context of enforcemecooperation or coordination must not be communicatedthird parties or to other agencies of the receiving comtition authorities’ government, without the consent of thcompetition authorities that provided the information. party’s competition authorities may, however, communcate such information to the party’s law enforcement ofcials for the purpose of competition law enforcemeSimilarly, information communicated in confidence by party’s competition authorities to the competition authoities of the other party in the context of enforcement coperation or coordination must not be used for purpoother than competition law enforcement, without the cosent of the competition authorities that provided the infomation. Furthermore, nothing in the Agreement requireparty to take any action, or to refrain from acting, inmanner that is inconsistent with its existing laws, require any change in the laws of the Parties or of threspective provinces or states.

The 1995 Cooperative Agreement was used in a cinvolving Canada Pipe Company Limited and U.S. Piand Foundry Company. Canada Pipe pleaded guiltyconspiring with U.S. Pipe to have the latter exit the Candian market for ductile iron pipe. The Director has statthat he received extensive cooperation from the U.S. Dpartment of Justice which enabled him to secure a rec$2.5 million fine. Another example of international cooperation pursuant to the 1995 Cooperative Agreeminvolves the thermal facsimile industry. In 1994, KanzaSpecialty Papers Inc., a U.S. company, pleaded guiltythe Federal Court of Canada to price fixing and was finCDN $950,000. Later that year, the court fined Mitsubis


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Corporation, of Japan, and its Canadian subsidiary,Mitsubishi Canada Limited, CDN $950,000 after they en-tered guilty pleas to price fixing. In 1995, RittenhouseRibbons & Rolls ltd. was fined CDN $98,000 following aguilty plea to price maintenance. In 1996, New Oji PaperCo. Ltd. pleaded guilty and was fined CDN $600,000 to aprice fixing conspiracy, and in 1997 Mitsubishi PaperMills Ltd. also pleaded guilty and was fined CDN$850,000. Concurrently, fines have also been imposed inthe United States. Total fines imposed in respect of thiscase in Canada were in excess of CDN $3.4 million, andin excess of U.S $ 10.2 million in the United States.15

It remains to be seen whether the legal instrument istruly the cause or the effect of a new Canadian dispositionto cooperate in competition law enforcement. The currentDirector of the Bureau, Konrad Von Finkenstein recentlynoted that cooperation has covered a wide range of en-forcement activities including: regular communications atall levels of the Canadian and U.S. competition author-ities; discussions of case theories and market definitions;and carrying out Internet sweeps together.16 Quaerewhether any of these examples actually require a formallegal instrument in order to be used. With respect to crim-inal matters, the Director has given the following exam-ples of cooperation: sharing evidence; coodinatingsearches; and condcting parallel coordinated investiga-tions together from start to finish.17 Again, unless confi-dential information is being shared, it is difficult to seewhy any of these examples of cooperation would requirea formal legal instrument in order to be used.

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From its earliest beginnings in the Treaty of Rome, theEuropean Community, now the European Union, repre-sented an attempt to bring together a number of sovereignstates for reasons that were more clearly political thaneconomic. Nonetheless, the early legal foundations of theTreaty of Rome included competition law principles. It isworth stating at the outset that in 1957 when the Treaty ofRome came into effect, Germany alone among the found-ing members had a competition law. In fact, Germany hada long tradition of competition policy dating back to theFryberg School which emphasized the need to prohibitcartels. In addition to this, the post-war U.S. backed gov-ernments were encouraged to aggressively apply the anti-cartel law because cartels were seen as providing supportfor the fascist Nazi government.

The European example then is one of largely uninte-grated markets that were glued together for reasons thatwere largely political. Lacking a common currency as aninstrument of price transparency and price intermedia-

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tion, and maintaining different regulatory frameworksand traditions—although mostly activist ones—competion policy soon became, arguably, the single most imptant instrument of market integration. This was accoplished in the main by a competition policy that wouhave been, in many respects, fairly consistent with post-war ebb of U.S. competition policy enforcement. Tthe antitrust cognoscenti, these were the heart of the 6\OYDQLD days of the 1970s and thereafter in the U.S. vertical restraints were aggressively prosecuted in name of market integration.

And it is only recently that the Commission has tenttively proposed that a more modern—more economicapproach to vertical restraints might be worth considing. And even these cautious steps are made with iron pronouncements that even with an emergent single crency there will be no relaxation of prohibitions on resaprice maintenance or territorial restrictions. This is so dspite the economic evidence cited in the Green Papeself suggesting that price cost differentials remain etraordinarily high in the markets for manufactureproducts among the members of the Union. Were this bad enough, the Commission’s only power to liberalizeenforcement of vertical restraints lies either in a findinthat a given agreement, or class of agreements, falls side the scope of Article 85, or by finding that while falls within the scope of Article 85 or 86, it may be eempted under Article 85(3). While the latter finding mabe binding on national authorities, the former clearwould not be binding on them. Further since, an agrment cannot be exempted under Article 85(3) unless ifirst found to be anticompetitive, in effect a liberal Commission policy to vertical restraints offers n protectioagainst a reactionary policy from national authorities national courts. Re-nationalization by any other namesimply not centralization.

Not surprisingly, therefore, the European model hbeen one of a powerful centralized European Commisstogether with first the European Court of Justice, and sond the Court of First Instance implementing competitipolicy from the European Community to the Single Maket. Unlike getting giddy at the thought of the Europemodel as a complete example of the virtues and pracability of centralization, it is worth recalling that it wanot until 1989 that the Council of Ministers could agreeCommunity-wide merger enforcement in the MergRegulation. Even so, the price of agreeing to merger view by the Commission was bought by an insistencevery high thresholds that ensure that only a very femega-mergers actually fall under the purview of the Comission. These high thresholds continue to impose htransaction costs on potential entrants and prospecmerger partners because in effect such parties may face duplicative and multiplicative filing requirements iseveral member states at once.

In 1996, the Commission issued a Green Paper seeto address this, however the major member states imbwith the currency of subsidiarity and in many casespanking new competition laws, nixed any attempt lower the thresholds to provide a true “one stop shop”. stead, they opted for a complex multijurisdictional thresold that does little to reduce transaction costs or createeffective “one-stop shop”.

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15 See Competition Bureau, Industry Canada, Annual Report Direc-tor of Investigation and Research for the Year ended March 31, 1997(http://strategis.ic.gc.ca/SSG/ct01190e.htm); U.S. Department of Jus-tice, “Justice Department’s Ongoing Probe Into the Fax Paper InduYields More Indictments” (December 13, 1995); and Joel Klei“Criminal Enforcement in a Globalized Economy” 3 (February 21997).

16 Von Finckenstein, Konrad, “Speech to the Annual Meeting OThe American Bar Association Antitrust Section”, http://straegis.ic.gc.ca/SSG/ct01297e.html (August 3, 1998).

17 Ibid.


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Obviously embarrassed by their own craven lack ofbravery, and driven by the desire not to be seen to be tofar out of step with the “business friendly” politically correct post-cold war culture, in September 1997 the mamembers—Germany, the United Kingdom and Francecreated their own common pre-merger notification forwithout the barest of nod or wink to the principles of cosultation or transparency. What is worse is that it appethat the new form increases not decreases transaccosts in each jurisdiction. For instance, in Germany whthe duty to notify mergers has always been wide, but duty to disclose information narrow, merging parties cross-border transactions have had their compliance craised in effect not by a statutory mandate, but ratheran intergovernmental agreement. In the U.K., multijurdictional merger parties seeking expedited review will aparently have to file both the traditional UK form and thnew common form.

And what of the Union? Well, even as the major members seek to cover their policy avarice and institutiongreed through a questionable common form, scant omonth late in October 1997 the Commission issued a nNotice on Cooperation Between national competitioauthorities and the Commission in Handling cases falliWithin the Scope of Articles 85 and 86. Having describthe serious re-nationalization problems that are emergin terms of vertical restraints policy and merger enforcment, it now remains to describe the twin attack on a ctralized model of European competition enforcemeThe new Notice decentralizes power to a great extentauthorizing national authorities to enforce the Europecompetition law where there are mainly local effects evthough clear European effects. At present only 8—Bgium, France, Germany, Greece, Italy, Portugal, Spand soon the U.K.—national authorities directly appArticles 85 and 86, whereas 7—Austria, Denmark, Fland, Ireland, Luxembourg, the Netherlands, and Swden—do not.

While proponents of this decentralization would proably argue that no matter how badly the national authities botch things up, there will still be a single Europecompetition policy despite the patchwork enforcemebecause the Court of first Instance and the EuropCourt of Justice will be there to remedy any problems. Aof that would be nice and sensible in a world of zero traaction costs, but we have yet to discover or create tworld. Of course, this is just a further development of ttrend embodied in an earlier notice where the Commsion sent power back to national courts; see the NoticeCooperation Between National Courts and the Commsion in applying Articles 85 and 86. It is evident that thCommission is under funded, however it seems a bit ofor those who deny it funding to use that as dispositiproof of the need to re-nationalize or de-centralize Eupean competition enforcement.

Against this backdrop, it is also worth noting the sinificant role that the Commission is playing in spreadinthe European model of competition policy around tworld. First, and foremost, this can be seen in the “EuroAgreements” or “Association Agreements” describeabove. No similar approximation requirement was evmade explicitly part of a process of an enlargement excise before which in part explains why only 8 of the 1

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member states directly apply Articles 85 and 86. Furthit is worth noting that antidumping remedies are still aplicable to trade from countries subject to Europe agrments despite the approximation process. Interestingthe Council and the Commission have signalled first in spect of trade negotiations with South Africa, and subquently in its negotiation strategy for the next renewalLomé IV in 2000, competition policy enforcement will ba required element. Thus, the EU, in addition to beingexample of the centralization or decentralization, is alsmodel of soft convergence, or perhaps, more approprialy, coerced harmonization. This trend also offers somuseful clues about future attempts to implement comption policy at a multilateral level. It is clear that convegence or harmonization of the growing competition lawof the world will be an essential pre-condition to anfuture progress on this score.

The recent trends towards re-nationalization and centralization of competition law enforcement within thEU are not interesting only because for many Europe always provided a clear example of a multilateral aproach to competition policy. It is all the more interestinbecause it also comes precisely at the moment whenEuropean voice has echoed out with singular clarityterms of the need or potential for a more global analyoff the multilateral option within the framework of theWTO.

About two things can be said. Where markets are ingrated by virtue of a “bottom-up” approach led by multnational corporations, the case for a bilateral or multileral model of enforcement becomes less compelling. Ocould argue that as the Single Market program progresthere is less need for a centralizing Commission than fore. This might be an attractive argument were it not the resilience of price-cost disparities among the mebers of the EU, and cited in both Council and Commissdocuments. One might conclude, therefore, that Eurostill needs a centralized competition policy enforcememodel within Europe of the kind that some of her mosenior statesmen call for on the global level. One ththat is clear, is that achieving a multilateral competitiopolicy within the framework of an international organization such as the WTO will not be simplified if a microphones are increasingly placed before the cacophonvoices represented by the national competition authoriand the national courts. And yes, politics still remain.may well be that the European example illustrates mubetter than her own statesmen have yet to publicly reaor admit, that the multilateralizing of competition policenforcement is at best a distant dream. Alas, even asdare to dream of conquering destructive sovereigntymay well be preparing to conquer us yet again.

Let me summarize several conclusions with respecthe two dominant models of integration- the Europeand North American cases. First, unlike the European perience, North American markets have been integrafrom the bottom-up by multinational corporations as evidenced by the substantial trade and investment liages, and in particular the substantial patterns of infirm and intra-industry trade. Second, given the size dferentials between the U.S. economy and that of Canand Mexico, and the substantial population differentiaalso, economic integration has been achieved in spite


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concerns about political integration not because of them.In this sense, Europe may well be evolving or convergingtowards the North American model prematurely as Euro-pean markets have simply not achieved the same degreeof economic integration. Nonetheless, this convergencemay offer some practical insights into the limits to the po-tential for multilateral rule-making in the competitionpolicy area. Third, the importance of convergence of na-tional law, and underlying economic understanding, wasan essential pre-requisite in moving North Americancompetition policy from a posture of contention to coop-eration. Here again, we can see important parallels to themovement towards having Article 85 and 86 of the Treatyof Rome apply directly in the member states, and in theapproximation process in progress in Central and EasternEurope, and emerging in Lomé.

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It is also worth considering what the European aNorth American experiences suggest for the developmof competition policy in the Andean Community (Venezuela, Columbia, Peru, Bolivia and Ecuador) and Mersur (Brazil, Argentina, Paraguay and Uruguay). First, though the Andean Community is often compared to tEuropean Union, with respect to competition policy theis a notable difference. At the time that the 7UHDW\�RI�5RPHwas created, and Articles 85 and 86 came into effect, oone country, Germany really had a tradition of competion policy enforcement. Second, coming out of the ashof World War II, the United States sought to have comptition policy enforced actively in Germany. Third, Germany remains arguably the most important single ecomy within the European Union. Accordingly, within thEuropean Union until very recently the centralization competition policy could work because there were no snificant competing power centers in the member statThis has permitted a degree of policy convergence to cur among the member states. In both the Andean Comunity and Mercosur, the national competition policiepreceded the multilateral or regional instrument, and thpolicy convergence and institutional coordination or cetralization are more difficult to achieve. Thus, the 199$QGHDQ�3DFW�'HFLVLRQ��FRQFHUQLQJ�1RUPV�IRU�3UHYHQ�WLRQ�RU�&RUUHFWLRQ�RI�'LVWRUWLRQV�LQ�&RPSHWLWLRQ�&DXVHGE\�3UDFWLFHV�WKDW�5HVWULFW�)UHH�&RPSHWLWLRQ has only rare-ly been invoked.18 Similarly, the ��0HUFRVXU�3URWRFRORI� WKH� 'HIHQVH� RI� &RPSHWLWLRQ� KDV� RQO\� UHFHQWO\� EHHQUDWLILHG�E\�DOO� WKH�PHPEHU�VWDWHV19 In addition, both theAndean Community and Mercosur lack a strong drivinforce—such as Germany with respect to the EU and United States with respect to NAFTA—with a long trad

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tion of competition policy enforcement. Accordinglyconvergence in these regional experiences must drawforces from outside the region such as U.S. and Europlegal and administrative precedent.

That being said, it is clear that while the South Amecan experience might be superficially closer to the Eupean politically driven integration process, with respectcompetition policy the political environment and legheritage has not supported that kind of process. Howeit is less clear that the South American experience travery closely the economic driven model of integratiopursued in NAFTA. Accordingly, it is not surprising thainformal cooperation, convergence and coordination halso not taken root in either the Andean Community orMercosur.

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In the Santiago Declaration in May 1998, the HeadsState and Government of the Americas directed thMinisters Responsible for Trade to begin negotiations the Free Trade Area of the Americas (“FTAA”), in accordance with the March 1998 Ministerial Declaration San José and reaffirmed their determination to concluthe negotiation of the FTAA no later than 2005, and make concrete progress by the end of the century. Tinstructed that the FTAA agreement would be balanccomprehensive, WTO-consistent and constitute a sinundertaking. In the San José Declaration from Mar1998, the Ministers of established nine negotiating grouon: market access; investment; services; government curement; dispute settlement; agriculture; intellectuproperty rights; subsidies, antidumping and countervaing duties; and competition policy.20

The Ministers acknowledged that work in differengroups may be interrelated, such as agriculture and mket access; services and investment; competition poand subsidies, antidumping and countervailing dutiamong others. Thus, they directed the Trade NegotiatGroup (the “TNC”) to identify linkages and outline appropriate procedures to ensure timely and effective codination, and agreed to give the mandate to the relevnegotiating groups to study issues relating to: the intertion between trade and competition policy, includinantidumping measures; market access and agricultureorder to identify any areas that may merit further conseration by the Ministers.

First, it is useful to recall the mandate of the Negotiaing Group on Competition Policy (“CP-NG”). The mandate as set forth in the San José Declaration provides

18 See generally: Jatar Ana Julia and L. Tineo “Competition Poliin the Andean Countries: The Ups and Downs of a policy in Searchits Place” 1 The Journal of Latin American Competition Policy (April1998). (http://www.jlacomp.org); and Taveres J. and L. Tineo, “Copetition Policy and Regional Trade: NAFTA, Andean CommunitMercosur and FTAA” (Unpublished paper presented to the Internatial Seminar on Competition Policy in Celebration of the V Anniversaof INDECOPI, Lima, Peru May 26-29, 1998).

19 See generally: Tavares J. and L. Tineo, “Harmonization of Copetition Policies Among Mercosur Countries” (OAS Trade UnAugust 1997).

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20 Among the general principles and objectives of these negotiationsidentified in the Santiago Declaration are: promoting prosperitythrough increased economic integration and free trade among the coun-tries of the hemisphere, which are key factors for raising standards ofliving, improving the working conditions of people in the Americas andbetter protecting the environment; establishing a Free Trade Area, inwhich barriers to trade in goods and services and investment will beprogressively eliminated, concluding negotiations no later than 2005and achieving concrete progress toward the attainment of this objectiveby the end of this century; and maximizing market openness throughhigh levels of disciplines through a balanced and comprehensive agree-ment.


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general objective—to guarantee that the benefits of FTAA liberalization process not be undermined by ancompetitive business practices. The Declaration alsoforth two specific objectives for the CP-NG. These ar(1) to advance towards the establishment of juridical ainstitutional coverage at the national, sub-regional or gional level, that proscribes the carrying out of anticompetitive business practices; and (2) to develop mecnisms that facilitate and promote the development competition policy and guarantee the enforcement regulations on free competition among and within coutries of the Hemisphere.

The June Work Program developed by the Vice-Miisters in Miami further indicates that the CP-NG, and phaps the should:

—Identify main principles and criteria of competition

—With respect to the principles and objectives sforth in the San Jose Declaration, guarantee that benefits of FTAA liberalization are not undermineby anticompetitive business;

—Develop mechanisms to promote cooperation aexchange of information between competitioauthorities; and

—Study the interaction between trade and competitpolicy, including antidumping measures.

Subsequently, in October 1998, antitrust authoritifrom 11 of the 12 nations of the Americas that have copetition laws (Argentina, Brazil, Canada, Colombia, Cota Rica, Jamaica, Mexico, Panama, Peru, Venezuela the United States) held a Summit an “Antitrust Summitthe Americas in Panama11 The governments agreed to:

—Promote a “competition culture” among market paticipants in their countries;

—Enforce “sound” competition laws, particularly incombating illegal price-fixing, bid-rigging, and market allocation;

—Cooperate in enforcement, and to disseminate “bpractices” for implementing competition laws withan emphasis on institutional transparency;

—Encourage small economies to develop competitilaws; and

—Advance these principles in the CP-NG.

It appears that the “Antitrust Summits of the Amercas” will run in parallel to the work of the CP-NG. It iworth noting that while so far national delegations to tCP-NG include competition, trade and foreign affairs oficials, by definition, if not just practice, the AntitrusSummits include only the competition law officials. Another difference is that while the CP-NG is open to governments in the FTAA negotiations, the AntitruSummits appears to distinguish between those that “ha

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competition laws, and those that are as of yet antitr“have nots”. Finally, while the Santiago Declaration prvided for the participation of the Tripartite Group of integovernmental organizations (the Inter-American Devopment Bank (IADB), the Organization of AmericaStates (OAS), and the United Nations Economic Comission for Latin America and the Caribbean(ECLAC)it appears that so far the Antitrust Summit has excludthe Tripartite Group. It is not clear yet why these distintions have been made, or what affect these differenwill have on the negotiations.

In the context of the mandate of the CP-NG, this setion of the paper briefly discusses some potential issfor consideration relating to the application of competion policy in the FTAA.

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This concluding section of the paper draws together insights from the first three sections in order to suggestemplate of elements that a small open might considerits own or in the context of a regional trading agreemeThe first section demonstrated how even an open smeconomy could be adversely affected by anticompetitpractices from outside of the country, as well as sofrom sources within the country too whether from govermental or private firm conduct. However, it was also sugested that there may be qualitatively different aspectsthe market structure or development requirementssmall economies that might require that competition labe tailored in its application to their specific needs.

The second section of the paper showed how the Eupean Union has adopted certain core principles and cmon institutions that apply to small and large economMembers or partners in preferential trading arrangemeThis architecture is designed to preserve and promotecoherence of the trade between the EU and its partnereliminating or reducing trade distortions. However, byond the floor of the core principles, the small economretain significant scope to decide how much competitipolicy to apply in the purely national context. It also apears that the deeper the extent of the economic intetion pursued, so too does the level of integration of copetition policy and its enforcement institutions. ThTasman experience is consistent with this observatalso.

From the Asian examples, great emphasis has bplaced on the application of competition principles many regulatory barriers without emphasizing competion policy to counteract private strategic anticompetitibehaviour. Notwithstanding this history, economic criseand increased discussions of economic integration initives have led several countries to now begin to thinkapplying a competition law to address private strateanticompetitive behaviour. This African experience consistent with this observation also.

Accordingly, the rough outlines of a competition laand policy for a small economy can be drawn from thsurvey. Possible elements might include:

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21 Chile has a competition law, but did not attend. See FTC Press Re-lease “FTC and DOJ Announce `Communiqué’ from First Antit`Summit of the Americas’ (October 20, 1998). [http://www.ftc.gov/o1998/9810/panama.htm].


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• Open markets and liberal trade and investment pocies.

• Laws to prohibit anticompetitive agreements amocompetitors, with exceptions for certain pro-competitive, efficiency-enhancing agreements.

• Laws to prohibit abusive or anticompetitive exclusionary practices by monopolies or dominant firm

• Laws and institutions to promote competition in thdesign and implementation of government regution and legislation.

• Laws that promote cooperative enforcement amonational authorities to effectively remedy anticompetitive practices having their root outside of thnational economy.

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In the context of a regional trading arrangement, aminimum these laws should apply to conduct that hasignificant impact on international trade. Countries couthen decide on their own to what extent they want to tathese policies further in the purely national context. Coutries could together also decide that given the nature ofintegration that they seek to achieve further common stitutions are necessary to eliminate the trade distortithat arise.

Again, this template is suggested at this stage for hristic purposes solely. It is worth stressing at the outthat this study is at this stage is solely one of a concepnature. No attempt has been made at this stage to tranthis analysis to particular legislative or policy directionfor the COMESA negotiations.

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Ukraine, And Zimbabwe Vol. ��'H3DXO�/��5HY� 1197(1995).

Kovacic, William, “Getting Started: Creating NewCompetition Policy Institutions in Transition Economies,” %URRNO\Q� -RXUQDO� RI� ,QWHUQDWLRQDO� /DZ Vol. 24,No.2 (1997).

Kovacic, William and Ben Slay, “Perilous BeginningsThe Establishment of Antimonopoly and Consumer Prtection Programs in the Republic of Georgia,” 7KH�$QWL�WUXVW�%XOOHWLQ (Spring 1998).

Kovacic, William E. and Ben Slay, “Perilous beginnings: the establishment of antimonopoly and consumprotection programs in the Republic of Georgia; Interntional Competition Policy” $QWLWUXVW� %XOOHWLQ (March1998).

Kovacic, William E., “Merger Enforcement In Transition: Antitrust Controls On Acquisitions In EmergingEconomies” Vol. 66 8��&LQ��/��5HY� 1075 (1998).

Mastalir, Roger, “Regulation of Competition in thNew Free Markets of Eastern Europe: A ComparatiStudy of Antitrust Laws in Poland, Hungary, Czech anSlovak Republics, and their Models, 1RUWK� &DUROLQD-RXUQDO�RI�,QWHUQDWLRQDO�/DZ�DQG�&RPPHUFLDO�5HJXODWLRQVolume 61 (1993).

McKoy, Derrick, “Antitrust Law in Jamaica: The FaiCompetition Act of 1993, -RXUQDO�RI�7UDQVQDWLRQDO�/DZDQG�3ROLF\ Volume 5 (1995).

Musonda, M.J. “A Regional Competition Policy foCOMESA Countries and Implications of an FTA i2000” A Paper Presented to the National Seminar Competition Law and Policy, Lusaka (May 31- June 1999)

Neven, Damien; and Thomas von Ungern-Sternbe“Competition policy in Switzerland” $QWLWUXVW� %XOOHWLQ(June 1998).

OECD &RPSHWLWLRQ�3ROLF\�LQ�D�*OREDO�(FRQRP\��$Q,QWHUSUHWLYH�6XPPDU\ (1998).

Pittman, Russell, “Competition law in Central anEastern Europe: five years later; Competition Policies Developing European Economies” $QWLWUXVW� %XOOHWLQ(March 1998).

Rodriguez, A.E. and Malcolm B. Coate, “The Effectiveness of Proposed Antitrust Programs for DevelopiCountries,” 1RUWK�&DUROLQD�-RXUQDO�RI�,QWHUQDWLRQDO�/DZDQG�&RPPHUFLDO�5HJXODWLRQ Volume 19 (1994).

Rodriguez, A.E. and Malcolm B. Coate, “Limits to Antitrust Policy for Reforming Economies,” +RXVWRQ�-RXU�QDO�RI�,QWHUQDWLRQDO�/DZ Volume 18 No.2 (1996).

Schaub, Alexander, “EU Competition System—Prposals for Reform” 22 )RUGKDP�,QWO�/�-� 853 (1999).

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Slay, Ben, and Vladimir Capelik, “Natural monopolregulation and competition policy in Russia; CompetitioPolicies for Developing European Economies” $QWLWUXVW%XOOHWLQ (March 1998).

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UNECA 7UDGH�DQG�&RPSHWLWLRQ�3ROLF\�LQ�WKH�)UDPH�ZRUN�RI�$IULFDQ�&RXQWULHV Working Paper Series, ECA/ESPD/WTO/97/11 (December 1997).

UNCTAD ��:RUOG� ,QYHVWPHQW� 5HSRUW�� 7UDQVQD�WLRQDO�&RUSRUDWLRQV��0DUNHW�6WUXFWXUH�DQG�&RPSHWLWLRQ3ROLF\ (1997).

Vautier, Kerrin M. and Peter J. Lloyd, ,QWHUQDWLRQDO7UDGH�DQG�&RPSHWLWLRQ�3ROLF\��&(5��$3(&�DQG�WKH�:72(1997).

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Economic and Social Policy DivisionEconomic Commission for Africa (ECA)

Let me start first by thanking COMESA and the UnitedNations Conference on Trade and Development(UNCTAD) for inviting the Economic Commission forAfrica to, participate in this very important Conferencewhich is taking place at the turn of the new millennium.Conferences, such as this one, offer a unique opportunityto share views and ideas on challenges that face our con-tinent in the context of the ongoing globalization and lib-eralization of the world economy. The topic of this Con-ference “Competition Policy, Regional Integration anDevelopment in COMESA” clearly reflects the chalenges that many of our, countries face as they try to adto the momentum of globalization of production and traand more importantly to the “competitive forces” of thworld economy.

The globalization and liberalization of the worleconomy has brought to the forefront the issues of fcompetition in international trade. The opening up of ecnomics and markets to foreign direct investment and otforms of participation by transnational corporations ccontribute directly towards contestability of host countmarkets in that these markets can now be entered by fifrom other countries by establishing affiliates that prduce goods and services within the host country athereby compete with domestic firms. Accordingly, thliberalization of foreign direct investment regimes calead to contestability of national markets, as both domtic and foreign firms are obliged to compete at a levplaying field.

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Competition policy is based on the idea that competion enhances economic efficiency. Composed of a senational rules, competition policy aims to prevent buness from acting to the detriment of the common goodreducing or eliminating competition as such practices creduce incentives for technical development and leadthe impairment of investment and of quality of goods aservices. To ensure that this does not happen, competauthorities investigate complaints arising from restrictibusiness practices and enforce their findings throulegal action.

It is generally believed that competitive markets amore�innovative and efficient than those where industrpower is too concentrated. However, it has also been served that in some circumstances monopolies can beimprove welfare than competitive structures, for examp

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for investments requiring large outlays. Furthermorgovernments may want to provide scope for flexibility implementation of Competition Policy laws in order to scure competitive advantage in international markets national industries of strategic interest.

Implementation of Competition Policy laws started earnest in the 1950s. Before then only the United Stahad adopted the first Competition Policy laws in 189However, since the early 1990s, a rapidly increasinumber of countries have passed CP laws. Nonethelwhile competition policy is, an increasingly accepted cocept at the international level, nations still have vedifferent levels of maturity in its development and implementation. National practices vary considerably accoing to the balance favoured by countries between pubinterest and economic efficiency, the nature of their lesystems, and their levels of economic and technologdevelopment.

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African countries have made significant strides to lieralise their trade regimes, although much still needs todone in order for their economics to be effectively intgrated into the global economy. The dilemma that cotinues to face these countries is how to respond to theherent inequalities of the world trading system whicbasically arise from an asymmetrical distribution of ecnomic power between the developed and developcountries.

There is no common rule for the elements of competion law that a country should adopt and the differecompetition laws that have been enacted by African cotries generally reflect the objectives as well as the letraditions of the countries concerned. The “main objetives” of competition policy and law in Africa appear tbe similar and relate to: the need to organize and promfree and fair markets; to promote economic efficiency;maximize consumer welfare; to encourage transparein trade practices. Furthermore, the main elements andcus of competition policy and law in African countries rlate to: restrictive business practices; monopolies aconcentrations of economic power; mergers and taovers; enforcement machinery; and extra-territorial coerage.

Several African countries have enacted and/or revislaws governing competition policy and include Algeria

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Cameroon, Côte d’Ivoire, Gabon, Kenya, Morocco, Seegal, South Africa, Tunisia, Zambia and ZimbabwMany of these countries have become relatively optrade regimes and have introduced competition law aestablished competition authorities to enforce the law.a number of other African countries, competition legisltion is in preparation and includes Malawi, Ghana aEgypt.

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Whether Competition Policy (CP) should be includein the next round of trade negotiations is the subject of bate in the preparatory process for the Seattle MinisteConference. Those arguing for inclusion of CompetitioPolicy in the next round state that the absence of glorules on enhancing competition sharply contrasts with global nature of business. In fact, an increasing numbecompetition cases have important international compnents and the adoption of competition rules at multilatelevel could serve as a balancing factor to globalisation-lated investment and mergers. Furthermore, competitpolicy could contribute to overall objectives of the WTOincluding the promotion of trade. As trade and investmeliberalisation increasingly reduces entry barriers, tcompetitive structure of markets becomes a more amore relevant issue for market access concerns.

Whatever, the case, WTO members agree that setup an international authority on Competition Policy, wiits own powers of investigation and enforcement is an ufeasible option. Nonetheless, where countries stand ondebate as to whether Competition Policy should be onethe new issues in the WTO depends on: their appreciaof the importance of the trade distortions provoked by tlimited co-operation at the international level; their opiion about the anticipated level of efficiency that such a of multilateral rules would achieve; the degree of flexibity that this common core of rules would provide for thpublic interest element of CP; and their overall stratefor the forthcoming trade negotiations.

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Privatization has been the central issue of the develment agenda since the mid-1980s as several Africcountries underwent structural adjustment programmHowever, because of institutional and. limited savings cpacity factors, local participation in privatization�has beensignificantly low. High political instability and economicuncertainty has discouraged firms and households frholding financial assets. Furthermore, many Africacountries have been concerned that with privatizatlarge private corporations would replace existing pubenterprises, with no significant change in the monopotic powers of such enterprises.

Accordingly, despite the expressed desire of many Arican governments to broaden ownership of indigenoinvestors, with very few exceptions, methods that broaen local participation have not been commonly useNevertheless, privatization has been on the rise andceptance of the need to reduce the size of public enterpes has grown.

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ECA has recently undertaken a study, which focuson review of the issue, the rationale and the problemssociated with the broadening local participation in privtization including the difficulty encountered in reconciing equity with corporate governance within the Africacontext. Selective methods that broaden local particition are concisely discussed. These include managemand employee buyouts, employee share participation,rected group ownership, public flotation and financiintermediaries. Moreover, because of the major linkabetween privatization and stock markets, a section of paper discusses the different stages and nature of devement of African stock markets.

Country specific efforts and outcomes in broadenilocal, participation are analysed. The countries and meods include Burkina Faso (consortium of local and foeign investors), Cape Verde (a participatory approacKenya (a politically acceptable ownership), Uganda (drected group ownership), Zambia (privatization trufund), and Zimbabwe (Unit trust). Many of these schemfor broadening local participation in privatization providvery illuminating examples of efforts to ensure wideownership of privatized public assets. Broadening locparticipation in privatization satisfies national aspirationPrivatization that results in some private ownership by digenous citizens appears to be more acceptable thanright sale to foreign investors.

Furthermore, some important lessons emerge from study. First, the study shows that in all the majprocedures in improving the process of privatizationamely, securing consensus, ensuring transparencyvesting more on design and preparation and ensuringpropriate institutional: blocks, the objective of broadeing local participation reinforce the whole privatizatioprocess. 6SHFLILFDOO\ EURDGHQLQJ� ORFDO� SDUWLFLSDWLRQ� LQSULYDWL]DWLRQ� VHFXUHV� FRQVHQVXV� RI� WKH JHQHUDO� SXEOLF�KHOSV�WR�GHSROLWLFL]H�DQG�VSHHG�XS�WKH�SURFHVV��LQGLFDWHV�DVWURQJ�FRPPLWPHQW�WR�WUDQVSDUHQF\�DQG�VHQGV�DQ�HQFRXU�DJLQJ�VLJQDO�WR�IRUHLJQ�LQYHVWRUV��Second, acknowledgingthe difficulty involved in designing and implementinmass privatization, through�voucher�schemes in Africa inthe short term, the study points out that with a strong comitment and planning, it could be achieved at least in long-term. Third, as a prerequisite for promoting invesment and acquiring credibility with both foreign and indigenous investors, continent-wide efforts are emphsized to ensure stability and to improve the investmenvironment.

In conclusion, while the study builds on the fact thprivatization and stock market development are inexcably linked and mutually reinforcing it recommends thonly as a long-term solution to broaden ownership. It arecommends the method of directed group ownershipone of the ‘best practice’ to be implemented as a mdium-term solution, concurrently with stock market dvelopment for an optimal path to broaden local particiption in privatization of public assets.

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“Pareto optimal” situation in terms of increasing globwelfare. In such a situation promoting competition and“level playing field” in international production and tradbecomes imperative. Reducing restrictive business prtices, ensuring that mergers and take-overs do not resuundue concentration of economic power, and minimisidumping practices are some of the objectives and targof competition policy.

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Given the current stage of development of trade in Arica, the challenges of adopting an appropriate comption policy and law are indeed formidable because of dangers inherent in opening up economies, which hithehave been relatively closed. The need for African econmies to be integrated in the world economy is no longan issue. However the pace at which this done, andeconomic and social costs associated with the procesan issue.

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Attorney and CounsellorBaker & Miller PLLC, Washington, D.C.

I am honored to be here—and am very excited abbeing in Africa for the first time in my life. We fromabroad have much to learn from you. I hope I have alrelearned some of it—inside this room and outside it, too

Your problems are not the same as our problems -Europe's either - and therefore you must be careful abjust following North American or European solutions icompetition law or elsewhere. (Last week in BangkoProfessor Bill Kovacic of George Washington Universiold a wonderful story about a big U.S. law firm being pato draft a new competition law for an African countryand the recipients were a little surprised to find buriedtheir new statute a provision that said their new Competion Commission “shall have its headquarters in tMexico City Federal District.”)

In creating your own solutions to your own circumstances, you still can and should learn from the mistathat others have made on North America, Europe, aelsewhere. An old friend of a famous American Civil WGeneral said when the General died: “He never admitthat he had made a mistake and he never repeated it.” (General was incidentally the brother of Senator JoSherman for whom our first and most famous competitilaw—the Sherman Act—was named.)

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Returning�to the question of mistakes, let me list a fethat recur in OECD countries:

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1. Creating a paper tiger—a nice sounding Competion Law that nobody is seriously enforcing. In practicterms, nothing has really changed from the prior era. Isimply “business as usual” for all concerned—the buness community, the politicians, and the supposed enfoers. (This was true in the U.S. for the first decade or soter passage of the Sherman Act and may have been truthe Canadian Combines Act for over half a century.)

2. 0DNLQJ�WKH�&RPSHWLWLRQ�/DZ�WRR�YDJXH²so thatno businessman, lawyer or judge can predict what is leor illegal. Beware of terms like “unduly,” “unfair,” or “re-strain,” if they are not explained in the statute or lack clemeaning! (This was clearly true of the U.S. Sherman Aand it took over two decades to get some YHU\�basic con-cepts sorted out by the Supreme Court.)

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3. 0DNLQJ�WKH�&RPSHWLWLRQ�/DZ�WRR�FRPSOLFDWHG²Vothat it is hard for the Competition Agency to figure ouwhat to do, or for private parties to figure out whicamong the many detailed provisions are likely to be eforced. It is also politically easier to hide special-intereloopholes and exemptions in a complex statute.

4. 3URYLGLQJ� WKH� &RPSHWLWLRQ� $JHQF\� ZLWK� LQDG�HTXDWH� WRROV� IRU� LQYHVWLJDWLRQ� If the Agency lacks thepower to compel evidence—and to punish those who to produce it—the Agency will not be able to effectiveinvestigate and prosecute a lot of the most important caespecially cartel cases. (The civil law tradition is seriousweaker on compulsory discovery than the common ltradition.) The power to make unannounced searchesdocuments (”dawn raids”) is particularly important wheother powers of compulsory production are not veeffective.

5. 8QGHUIXQGLQJ�WKH�&RPSHWLWLRQ�$JHQF\�in relationto its range of responsibilities. This is part of the “paptiger” problem: if highly visible competitive restraintsand abusive monopolies are not even seriously investiged, respect for the new Competition Law and enforcemprocess will be weakened; and, if only a very few invesgations are undertaken, the targets selected will arguethey are being singled out for political reasons or favorism of their competitors.

6. 5HTXLULQJ�WKDW�WRR�PXFK�URXWLQH�WUDVK�EH�VXEPLW�WHG� WR� WKH� &RPSHWLWLRQ� $JHQF\� for review or approval.Compulsory filings will swamp the Agency staff and prevent them from investigating more important thing(This is what the European Commission is admitting in recent White Paper on reform of the Article 85 notifiction system that now requires so many routine agreemebe reviewed by the Commission in order to be enforcable.) Compulsory filings are not a reasonable substitfor adequate investigational powers and funding for tCompetition Agency, when it comes to uncovering seous violations.

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7. %HLQJ�UDQGRP�DQG�XQGLVFLSOLQHG�LQ�VHOHFWLQJ�WDU�JHWV for investigation and/or prosecution. One varia(which might be called the “mailbag problem”) occurwhen the Agency allows its enforcement agenda to be tated by complaints. Stated simply, the Agency is likelylose stature and credibility if it comes to be perceivedsimply selecting cases on the basis of who complains

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how loud their voices are. The problem becomes evenworse if the complainants who have the most effectivevoices are perceived to be special friends of powerfulpoliticians or their families.

8. %HLQJ�YDJXH�LQ�H[SODLQLQJ�WKH�&RPSHWLWLRQ�$JHQ�F\V� HQIRUFHPHQW� DJHQGD��The purpose of rules, guide-lines’, and even speeches is to give due warning to thebusiness community and their professional advisers as towhat conduct is likely to attract enforcement attention.Once warned, many will choose to desist rather than riskenforcement action. A serious test of the Agency’s sucess is how much voluntary compliance is achievedvarious areas of recurring business conduct. Cartel mbers are probably different: they generally know whthey are doing is illegal and tend to be deterred only by high probability of being caught and punished.

9. )DLOLQJ�WR�IROORZ�WKURXJK�RQ�$JHQF\�SURQRXQFH�PHQWV� Once you say you are going to pursue certain typof anticompetitive conduct or abuse, then you have toit. Otherwise, those who followed the Agency guidanthe last time are unlikely to do so again - and the pro-copetitive benefits of the first pronouncement are dilutedlost. (This is just another aspect of the “paper tiger” prolem.)

10. )DLOLQJ�WR�VHFXUH�DGHTXDWH�UHPHGLHV�LQ�SDUWLFX�ODU�FDVHV²be they fines, penalties, injunctive order or dvestiture. It is nice to win a famous victory that law prfessors and Agency officials can lecture about - butmatters little in the market if the business community donot see Competition Agency victories LQ�ODZ as achievingvictories LQ�IDFW. The Competition Agency temptation tosettle is strong - to save staff resources and avoid the of losing—but, to get a good settlement, the Agency fquently has to be prepared to drag the defendant throa long, painful legal process. This requires determinatand staff resources.

Having offered all these warnings, I still think that it ia good idea for a COMESA Member State to have a Copetition Law—provided that it is VLPSOH� enough to beZRUNDEOH�and enforcement is funded sufficiently to makthe law FUHGLEOH�in the marketplace. Both simplicity andcredibility are important.

If these conditions are not met, it would be better have no law at all than to pretend you have a workalaw. (Even without a Competition Law, it is still possibleas Mark Warner said yesterday, for competition policito be written into other regulatory laws for particular setors, such as transportation or electric power.)

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This gets me to the political dynamics that surroucompetition law in most countries and how this relatestrade law. The political reality of competition law is verdifferent from trade law.

Competition law is mostly about protecting FRQVXP�HUV²individual�consumers as well as enterprises that bintermediate goods and capital assets, and governmthat build highways and arm soldiers. Competition la

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Trade law is mostly about protecting GRPHVWLF�SURGXF�HUV�who face loss of business to imports. Trade lawabout XQIDLU FRPSHWLWLRQ²an�often subjective concept—that may be based on foreign government subsidies, pdiscrimination, law wages or other special cost advatages. Trade law generally favors incumbents versus osiders. It tends to be suspicious of innovators, price cutand other disrupters of the status quo. Some of what trlaw prohibits is clearly pro-competitive (e.g., dumpinthat disrupts a domestic monopoly or oligopoly).

Competition works automatically and is generally invisible—so that the consumers who benefit from it do neven know that the competitive market is providing thcritical incentives for lower prices and better serviceConsumers are notoriously poorly organized in mostcountries. There is simply no political constituency in fvor of competition or competition law on an ongoing bsis. The same is not true of the other side. Those who threatened by competition are generally well organizand politically determined not to give up the sweet frufrom a monopoly tree. These well organized beneficiarmay be producers, distributors, farmers, employedomestic monopolies, or less efficient service provider

Because the champions of competition law are adcates for a PDUNHW�SURFHVV�� they differ from their oppo-nents—who generally are advocates of SDUWLFXODU UHVXOWV(such as maintaining particular jobs and firms, barrinew entrants, or preserving special cross-subsidies bedded in monopoly rates). Frequently, those who oppcompetition opponents have as an ally some key burecracy—a Ministry of Finance, or Commerce, or Agricuture, or Transportation – which shares their commitmeto stability and other non-competitive outcomes.

All this can lead to a serious risk of a GHYLOV�EDUJDLQwhen a new Competition Law is proposed:

• The champions of competition (the economists, tpopulists, and the World Bank/IMF, etc.) are rewarded with enactment of an impressive soundiCompetition Law.

• Meanwhile, key opponents of competition are givesectoral loopholes and exemptions that save thout from the general Competition Act rules; and thmay also receive quiet assurance that the Comption Agency will be kept too small and weak to beserious threat to most enterprises.

Thus the competition champions can shout to the plic “we have won- a famous victory. Now we too havecompetition law and a competition agency in our coutry.” Meanwhile, the opponents can PXWWHU� TXLHWO\²“well ��we dodged that crazy bullet.” (In fact, in the UniteStates, when Congress enacted the famous Shermanin 1890, it also passed a Tariff Act that raised impo


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Let us assume political success rather than failure atthe legislation stage—and ask what the new CompetitAgency should do if given reasonable tools and resourcIt should think carefully and big. There are two importaroles:

(1) The traditional role of HQIRUFLQJ the FRPSHWLWLRQODZ�E\�LQYHVWLJDWLRQV��GHFLVLRQV��DQG�FDVHV��and

(2) The less-defined role of acting as� DGYRFDWH� IRUFRPSHWLWLRQ�within the government.

The two are related: what the Competition Agenlearns in investigating a suspected restraint or monopa case may be used to advocate a broader policy beforParliament or Cabinet, or a government committee regulatory agency.

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Here priority—in terms of resources and effort—should be give to:

• Investigation and prosecution of ORFDO�FDUWHO�DFWLYLW\²including�price fixing, bid rigging, market alloca-tion agreements among competitors.

• Investigating DEXVLYH�PRQRSRO\�FRQGXFW.

The Competition Agency need not (and should nojust confine itself to “big” or “national” cases. I believthat price fixes, bid rigs, and customer allocations amuch more prevalent than some may assume. Lobanks, local service companies, or local merchants ofagree on price floors or agree not to peach each othcustomers.

3ULFH�IL[LQJ�conspiracies are hard to discover and proecute. Thus it is important to try create incentives fthose who know about a conspiracy or have participain it to “blow the whistle” on everyone else involvedThere are several possible tools:

²$PQHVW\, LPPXQLW\ or SHQDOW\ UHGXFWLRQ� to� inform-ants in return for evidence (these devices are useNorth America and Europe).

²%RXQWLHV� for whistleblowers (we use this device ithe U. S. to deal with fraud on government contracbut not in antitrust investigations).

²,QWUXVLYH�LQYHVWLJDWLRQ²dawn raids, etc. to encourage participants to believe that they might be cauand therefore had better cooperate.

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0RQRSROLVWV�present a different problem. They are geerally clear, notorious, and have every incentive to drout any Competition Law enforcement proceeding. times, it may be more effective for the Competition Agecy to try to open up the monopolized local market to imports—rather than to battle the monopoly in an endleproceeding. In any event, “abuse of monopoly” proceeings tend to be resource intensive, because the evideon conduct is frequently ambiguous and it is necessarseparate HIILFLHQW�monopoly conduct from DEXVLYH�mo-nopoly conduct. The Competition Agency should nwant to punish “skill, foresight and industry” which haenabled a firm to become dominant - even if the firthereby makes life miserable for its competitors in tmarket. (Opening up the domestic market to importsstill an appropriate goal policy even with an HIILFLHQW�QRQ�DEXVLYH�domestic monopolist.)

0HUJHU�HQIRUFHPHQW� is another increasingly commonarea of competition law, but it can be resource intensand disruptive of other enforcement efforts becauseshort time deadlines and high visibility. No countrshould just embark on merger enforcement because of other countries are doing so. Any merger enforcemprogram for a new Competition Agency should probabbe limited to horizontal mergers in concentrated markand should only be undertaken if adequate staff is avable.2 Very limited and random merger enforcement likely to look politically motivated. “Why did they try toblock our merger when they let so many others go in evmore concentrated markets?” is an easy question to and may sometimes be a hard one for the CompetitAgency to answer. Merger enforcement based on vaideas of Industrial policy” seems an affirmatively baidea. I believe that Competition Agency enforcemeguidelines are particularly useful in the merger area (athis is supported by experience in the United States Canada). So are public explanations of decision notblock particular mergers (as in the EU).

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There is a serious difference in mission and policy btween (1) a Competition Agency on one hand and (2) stor-specific regulators or constituency-promoting minitries (“the Regulators”) on the other. The CompetitioAgency's task, broadly speaking, is to protect the intereof FRQVXPHUV�and HIILFLHQW�SURGXFHUV�in an effective mar-ket system. The Regulators frequently focus on particuenterprises or interest groups whose interests may sthreatened by competition �H�J��common carriers, farm-ers, employees, or domestic manufacturers). The tensis particularly clear in the international trade area—wiantidumping regulations being classic producer-protetion regulation that often runs counter to competitiopolicy when it causes consumers to pay higher pricesbe offered fewer goods than would otherwise be the ca

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1 I tried to outline the U.S. approach to traditional competition lawinvestigation and enforcement in a paper at a 1993 European Instituteconference at Leiden in the Netherlands. See “Investigation and Pof an Antitrust Violation in the United States: A Comparative Look”, P.G. Slot and A. McDonnell (eds.), Procedure and Enforcement in Eand U.S. Competition Law (Sweet & Maxwell 1993).

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2 See D. Baker “Antitrust Merger Review in an Era of Cross-BordTransaction and Effects” (at pp. 71-78) and R.S. Khemany “Intertional Merger Activity: Some Concerns of Emerging and DevelopiEconomics” (at pp. 103-108) in Policy Direction for Global MergeReview (Global Forum for Competition and Trade Policy 1999).

3 A good current example is found in A. Gunderson, J. Montiero,and G.C. Robertson, “Competition Bureau Advocacy in the CanadTelecoms Sector” (Global Competition Review June/July, 1999).


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Even in the context of an industry-specific or interestgroup-driven regulatory scheme (such as antidumping),there is substantial room for the Competition Agency tocause competition policy to be given a much wider rolethan the Regulators’ traditional constituents would prefer.This can sometimes be done by legal proceedings, or in-ternal advocacy within the government, or public lobby-ing for legislative reform.

Where the Competition Agency has limited staff re-sources (as is true in most countries), effective advocacyof pro-competition decision-making by the governmentmay pay bigger dividends for consumers than many clas-sic antitrust investigations.4 The two types of effort clear-ly can be made to be complementary (as when an antitrustinvestigation leads to insights and evidence that the Com-petition Agency can use in promoting a better generalpolicy).

Challenging well-established Regulators or protectedinterest groups can involve serious political risks for�theCompetition Agency. Therefore, careful selection of tar-gets, tactics, and timing is critical. Possibly relevantopportunities include:

1. 7UDGH ODZ enforcement proceedings where the do-mestic monopolists or oligopolists are treatingthemselves very well at the consumers’expense.

2. 3ULYDWL]DWLRQ of a state monopoly where compettion would clearly work in the market.

3� 5HJXODWLRQ� RI� a PRQRSRO\ by a sector-specificRegulator which is thwarting entry, maintaining cartel, or preventing disruptive innovations.

4. /LFHQVLQJ�SURFHHGLQJV�that are likely to result in anaward of a monopoly franchise to an alreaddominant and visible competitor.

Any of these may result in a political battle royal within the government. How successful the CompetitionAgency is may depend on how strong its legal tools ar

1. Does the Competition Agency have the IRUPDO�ULJKWWR LQWHUYHQH��as�in Canadian trade proceedings)?

2. Does the Competition Agency have the right IRUFH the Regulators to hold a hearing on anticompetitive practices before it can grant a license or aprove a transaction (as in the nuclear licensing stem in the U.S.)?

3. Does Competition Agency have ULJKW�WR�DSSHDO�andadverse decision by a Regulator (as is sometimtrue in the United States, producing cases with suamusing names as 8QLWHG�6WDWHV�v��,QWHUVWDWH�&RP�PHUFH�&RPPLVVLRQ�or even 8QLWHG�6WDWHV�v��8QLWHG6WDWHV�"

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5. Can the Competition Agency YHWR�a Regulator's de-cision (as under the U.S. privatization statute)?

It seems altogether appropriate for the CompetitiAgency to try to get some of these powers whenever alitical opportunity to do so comes along. When a nationparliament is creating a new Competition Agency may a more opportune time to do so, than later when the Copetition Agency has already made itself a nuisancesome politically-important interest groups and Regutors.

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This is a tough set of issues. Elevating competition lenforcement to the regional level does not make politgo away—indeed, it may make the problem worse. Steven if the Member States can agree on strong and cCompetition Law provisions, then it may well be a gooidea. (The European Community clearly offers an oustanding example of regional competition enforcemethat is more effective than that of most individual statesthe regional group.)

Having a separate COMESA competition law wounot necessarily require a special COMESA enforcemagency. So long as leading COMESA members haCompetition Agencies that can cooperate, these couldforce both their own national laws and the COMESA laas well.5 The members could still rely on the COMESAcourt to bring some reasonable level of harmonizationhow the COMESA law was interpreted.

It would probably be even more important to haveJRRG�FRRSHUDWLRQ�DJUHHPHQW�among national authoritiesthan to create a new COMESA Competition Agency this early stage. Such an agreement would allow the tional agencies to exchange fruits of investigations, ause them in domestic proceedings, either under COMESA law or the Member State law—than try to crate a COMESA agency.

It would be an affirmatively bad idea to try to createCOMESA Competition� Agency unless it would be astrong one politically. It has to be strong enough to baeffectively with the sector Regulators or governmentsthe Member States. (Europe shows how hard this is efor a strong Competition Agency.)

I recognize that smaller members might prefer to haa single Competition Law and Competition Agency at t

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4 We had some particularly favorable U.S. experience in the 1970s—when public frustration with inflation and effective advocacy by thAntitrust Division of the Justice Department helped to produce soenormous competitive results. These included airline and trucking regulation, the elimination of cartel commission rates on the stock changes, and ultimately the break-up of the telephone monopoly. (Antitrust Division, however, proved less effective when it tried to intevene in antidumping cases.)

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COMESA level (rather than for each to have a very smallnational agency). On the other hand, larger membersmight regard a proposed COMESA Competition Agencyas a potential hassle—and therefore oppose the idea least assure that the COMESA Competition Agencykept weak and understaffed.

If I am wrong—and larger Member States would seously support this regional approach—then creatingCOMESA Competition Agency would be a possibcourse. It could be more efficient, and could bring casin national courts. But such the “paper tiger” probledoes not go away at the regional level. A COMESA Copetition Agency would have to be strong—and adequa

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Those of you sitting around this room are embarkeda difficult and important task—of crating competitiolaws and agencies that UHDOO\�ZRUN�in environments wherethe idea of FRPSHWLWLRQ�HQIRUFHG�E\�ODZ�may seem strangeand disruptive to a lot of traditional interests. You desernot only our technical assistance—but our warm suport—as you go forward.

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The Group agreed that:

(D) Competition law and policy is an essential compo-nent of the policy measures required for the success ofeconomic reforms and trade liberalisation process put inplace by COMESA member States.

(E) Competition law and policy should be clear, trans-port and enforced effectively in a transport and non-dis-criminatory manner.

(F) Competition authorities should be autonomous andadopt a flexible approach to the enforcement of the law,and should also be a policy advocate and catalyst in creat-ing a “competitive culture” and keep a check and balanon government policies, regulatory agency decisions aprivatisation.

(G) The design of appropriate competition policy awell as subscribing its areas of applications to meet devopment objectives need to be flexible and effectiveimplemented.

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The group agreed:

(D) There is need for strong and effective cooperatiamong competition agencies in the exchange, of expences and expertise as well as non-sensitive informaand enforcement including positive and negative comi

(E) Cooperation between competition and regulatoagencies in various sectors along the lines of the referepaper on telecommunications.

(F) COMESA members should study the implicationof the current proposals for international cooperationthe area of competition policy including the EU proposthe OECD and UNCTAD on the development dimentioand regional integration efforts.

(G) The regional cooperation objectives and aims COMESA should be realistic and appropriate to the neeof its member countries.

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(D) That the conduct of enterprises and associationstrade can be detrimental to the flow of goods and serviparticularly through international cartels, abuse of markdominance, certain price-discrimination etc.

(E) That State monopolies and exclusive rights can fect market access and be harmful to the proper functiing of markets.

(F) That regional trade integration measures shouldconsistent with overall trade liberalisation commitmenof member countries. In this context coherent nationcompetition policies should be pursued.

(G) The growing flow of Foreign Direct Investmenprovides developing countries with opportunities to intgrate their economies into the world economy and expatheir economic base. To this end, it was agreed that cpetition policy is Primus inter pares among other polimeasures (Trade and Investment policies) that comaximise the benefits of such flows.

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(1) The Seminar recognised that Article 55 of thCOMESA Treaty provides an advanced regional polion competition, which should be sued as a starting pofor further developing the regional competition policy.

(2) The Seminar concluded that this regional Semnar was timely and effective in addressing the issuescompetition policy and regional integration withinCOMESA. The group having reviewed the terms of refeence for the study on COMESA Competition Policmade a number of recommendation for refocusing its jectives and scope which were incorporated in the t(see Annex). The group called upon UNCTAD to contiue to extend its technical and financial support to COMSA member States in formulating and enforcing nationcompetition laws. It also called upon UNCTAD to assithe COMESA Secretariat in carrying out the Study Competition Policy.

(3) COMESA should as much as possible developinstitutional framework for the regional competition polcy within the existing framework. In this respect the exising COMESA Court of Justice and the national Coucould be linchpins for giving legal interpretation to th“purpose” and “intention” of Article 55.

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Allow me to welcome all our foreign and local guestsparticipating as speakers and as audience in order to shareour pride to organize the first national and regional semi-nar in Zambia in the field of Competition Law and Policy.

The purpose of this National seminar is basically tofoster the development of competition expertise outsidethe Zambia Competition Commission. Consequently,present amongst us today are the leading experts from thelegal, educational, business and government departments.

It is my sincere hope that after the two days of intensediscussions on the economic foundations of competitionlaw, you will be able to participate effectively at the Re-gional seminar which commences on Wednesday, 3 June1999. The Regional seminar will offer you a unique fo-rum for exchange of ideas and cross-fertilization on the is-sues pertaining to the implementation and enforcement ofCompetition Law and Policy by the respective COMESAcountries. I hope all of us shall not miss this great regionaldebate on Competition Law and Policy.

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Towards the end of the last century, the first set ofcompetition (antitrust) laws were enacted among thewestern industrialized countries, namely by Canada(1889) and the United States (1890). It is interesting to ob-serve that 100 years later, several developing and transi-tion market economies are now embracing competitionlaws. Since 1990 alone, more than thirty-five such coun-tries have adopted new or have substantially revised theirexisting competition laws including virtually all of theformer communist centrally planned economies in Cen-tral and Eastern Europe, and the former Soviet Union.

Several other countries more especially in theCOMESA/SADC region are in the process of followingsuit. However, the underlying basis for the renewed inter-est in competition law differs from that a hundred yearsago. The concerns during the end of the last century cen-tered around preventing increased levels of industry andaggregate concentration which could give rise to the exer-cise of “market power” and undue economic-political influence. The competition laws were passed during a pod of unprecedented corporate merger and acquisiactivity, consolidations and formation of “trust”.

In contrast, competition laws in developing and trantion market countries are being adopted in an enviro

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ment where economic activity is already highly concetrated, mainly due to past government policies ainterventions. These laws are now seen as instrumenaccelerate the transformation process where economictivity is primarily determined by private ownership anmarket forces instead of state ownership and controls.though, during the past 100 years, the role and importaof competition law has varied across countries and ovtime, it has evolved as not only being an instrumentprevent anti-competitive business practices, but alsopro-actively strengthen market forces.

It is now a fact that the period since 1991 has witnesan unprecedented process of economic and social trformation in Zambia. The central theme of this procehas been the switch from the system of central planningcontrol of the economy to the use of market forces as means to allocate resources. It was anticipated that“free play” of supply and demand would, in the long rudetermine market prices throughout the economy, alloing productive resources to be allocated in an efficiemanner. Structural adjustment programs were adopthat included market oriented reforms notably in the areof deregulation of prices, including the reduction elimination of subsidies, administrative allocation of keproduct inputs, privatization of public enterprises or stacompanies, as well as the liberalization of trade poliand investment regimes.

The common aspiration underlying these reforms hbeen that the reduction of government's direct involvment or intervention in economic activity would, by providing enterprises with more freedom and stronger incetives, stimulate entrepreneurial activity, busineefficiency, productive investment and economic growtas well as enhance consumer welfare through improquantity and quality of goods and services at prices demined by the market rather than administrative decisio

However, it was also recognized that the benefitsmarket oriented reforms are likely to be fully realizeonly if enterprises acted under the spur of competition,that consumer wishes and opinions are reflected in maperformance. It was further recognized that, a country thas undertaken trade liberalization measures has everterest in ensuring that the welfare and efficiency benearising from such measures are not lost due to anti-copetitive practices by firms. A well functioning markemechanism is essential in this respect. For example, pliberalization in the market dominated by monopolies

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form of parastatal companies, unless specific efforts aremade to ensure the existence of competition, will end upin monopolistic price rises without corresponding com-petitive price equilibrium.

In recognition of the major role of competition law andpolicy for the success of the policy reforms, the govern-ment enacted the Competition and Fair Trading Act of1994. The act has generally two principal aims:

i(i) To prevent anti-competitive conduct thereby en-couraging competition and efficiency in business,resulting in greater choice for consumers in price,quality and service; and

(ii) To ensure the interests and welfare of consumersare adequately protected in their dealings withproducers and sellers.

Although the Competition and Fair Trading Act wasenacted in 1994, the act only came into force in February1995. The Zambia Competition Commission was estab-lished later in April 1997. It is evident that the Commis-sion was supposed to have commenced its operations atthe same time as the Zambia privatization agency com-menced its operations. Unfortunately this was not thecase. However, the problems of competition were fore-seen during the enactment of the privatization act. The actclearly specifies that during the privatization of stateowned companies, the privatization agency shall ensurethat monopolies are not created in the process of privati-zation. It was realized during the privatization processthat if the sale of state owned enterprises was not carefullyplanned, the whole privatization process may end uptransforming the state monopoly into a private “harcore” monopoly.

The existence of an effective competition policy esures that industries which are privatized or deregulacannot re-organize themselves as private monopolies.

Until the enactment of the competition law, there hbeen no formal enforcement of competition rules apolicy by any institution in Zambia. Consequently, thcreation of the Zambia Competition Commission is tfirst attempt by the government to enforce the competion rules in various ways and it is hoped that it will evetually lead to their uniform interpretation and applicatioin view of the different attitudes towards competitiorules by the business community.

The objective of the Zambia Competition Commissiois primarily to establish conditions of free and effectivcompetition in the economy, to ensure that the anti-copetitive practices do not create barriers to trade or otforms of protectionism. The competition rules set dowminimum standards and allow enterprises to penetrmarkets and establish themselves thereby facilitatinter-market trade.

Although an effective competition law is important, is also important to foster a “culture of competition” in theconomy. In this regard, the Zambia Competition Comission faces a formidable but highly important task building awareness and support for competition poliamong the general public and within the business comm

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nity. The existence of a “competition culture” within thcountry is vital to the success of the Commission's woand ultimately to the effectiveness of the competition laIt is important to bear in mind that the competition eforcement can only be more effective if there exists oside the Commission a community whose membeunderstand and support the concept of competition. Vfew of us up to now understand what competition law apolicy is all about. It is in this regard, that the first task the Commission this year was to promote competitipolicy. There are several ways of achieving this, butmay include the following:

—Providing as much information as possible to thpublic about the activities of the Zambia Comptition Commission;

—Educating the consumer and the business comunities about the law such as, the meaning apurpose of its provisions and the procedurthrough which the law is enforced;

—Developing public support for enforcement, bdemonstrating how consumers and the countrylarge benefit from an effective competition polcy; and

—Fostering the development of competition expetise outside the Zambia Competition Commissioi.e. to legal, educational, business and govement communities.

I am informed that the topics to be covered during bothe National and Regional seminars will cover or attemto answer several pertinent questions relating to Comption Law and Policy such as:-

—Do countries need a specific competition law complete their national economic developmepolicy framework?

—Are other policies that promote competition, sucas liberalization of international trade, privatization and regulation not sufficient?

—Is enacting of competition law not a low priorityworth considering only after other more urgepolicy measures have been introduced?

Finally, I want to assure you that the Commission wwork together with you as users of the system, in estlishing broad principles of competition that are designto preserve an unrestrained interaction of competitforces that will yield the best allocation of resources, tlowest prices and the highest quality products and svices for consumers.

I wish to urge you to discuss the Competition Policmatters and make a significant contribution to the succof the joint ZCC/UNCTAD/COMESA regional seminaon the theme Competition Policy, Trade and Develoment, which takes place later this week starting on 3 Jto 4 June, 1999.

It is now my rare honour and privilege to officiallyopen this national seminar on Competition Law aPolicy.

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The implementation of Competition Policy continuesto be not an easy matter in the majority of developingcountries. My presentation will limit itself to SouthernAfrica, particularly the countries constituting the Com-mon Market for Eastern and Southern Africa (COMESA).The countries in this region had not gone very far downthe competition policy path, thinking it was either unnec-essary or unimportant when the main suppliers of goodsand services in non-competing markets were in the publicsector and therefore under government. There was no sig-nificant private sector to talk about. The general structureof the markets in these countries were characterised by ahigh concentration of economic power in state owned en-terprises. In fact, certain government policies in some ofthese countries at the time encouraged monopolies bygranting exclusive rights to specific state enterprises to bethe sole producers in specific sub sectors of industries. Inaddition, there still existed various pieces of legislationwhich provided for arbitrary intervention of governmentin markets, and in some cases limit or control the entryinto certain markets.

The economic scenario in these countries began tochange in the last decade. The need for developing a com-prehensive competition law and policy was as a result ofeconomic changes in the whole region. With the majorityof developing countries abandoning socialist orientedeconomic principles, most countries chose to pursue Prac-tices (RBPs)�as well as work on the model law on Restric-tive Business Practices facilitated the enactment of com-petition legislation in these countries.

The importance attached to Competition law and poli-cy in the region varies from country to country. South Af-rica has just finished major amendments to its competi-tion law aimed at enhancing the operations of the nationalCompetition Authority. Kenya introduced the nationalCompetition Authority immediately it abandoned its pricecontrol system about nine years ago.

They are now carrying out a review of their competi-tion legislation to give more powers to the Authority andmake it autonomous. Tanzania, I am informed, has al-ready a competition legislation in place. However, the im-pact of the law continues not to be felt by industries as itsadministration has been left with a government division inthe Ministry of Trade and Industry. There may be need torevisit the law and make its enforcement more effective.Mauritius and Madagascar with the technical assistanceof UNCTAD has already passed legislation on Competi-tion Law. It is more interesting in the case of Zimbabwe

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and Malawi. Both these countries have recently enactedlegislation on competition law and policy. They have re-cently called for Technical Assistance from UNCTAD tohave Competition Authorities established in their respec-tive countries. The other countries which are set to estab-lish a Competition Authority are likely to be Botswana,Namibia and Ethiopia.

From the above, it is clearly evident that the list ofcountries in the region which now have CompetitionAuthorities is growing. These trends underline the in-creasing importance of Competition law and policy as ameans to ensure the efficient allocation of resources in aneconomy, resulting in he lowest prices and adequate sup-plies for customers. At the regional level, too, competitionpolicy is gaining increasing attention. There are alreadyrequests from member states leading to the establishmentof a harmonised competition regime in the Southern Afri-can states under the auspices of COMESA. Apparently,the COMESA Agreement has a provision on the compe-tition policy which calls for all member states “to prohibany agreement between undertakings or concerted ptice which has as its objective or effect the prevention, striction or distortion of competition within the commomarket”. However, the treaty exempts the applicationthis provision to any agreement, decision or concerpractice which improves production or distribution ogoods or promotes technical or economic progress has the effect of enabling consumers a fair share of benefits. Unfortunately for the region, no concrete effohas been made as yet by the organisation to promotimplement the competition policy in its member statesmay be now imperative for the organisation or its mebers states to come up with an administrative machinto implement and enforce competition policy at regionlevel. At international level, we should not lose track our legal obligations under the World Trade Organizati(WHO) Treaty. We are still required under this treaty enhance the competitive process in our national ecomies.

From the foregoing, it can also be argued that countrin this region are still reluctant to accept the need to pmote and implement the competition policy in their deveopment strategies. There is an argument to the effect those countries which have progressed to establish Cpetition Authorities appear, more importantly, to be doinso because it is one of the conditions laid down by IMF and the World Bank if they have to get financial suport. Otherwise there appears to be no full conviction the part of government policy makers, business comm


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Alternatively, the delay might be due to lack of the fi-nancial resources required to establish and enforce thecompetition law. Most developing countries have theirpriority in encouraging productive sectors and agriculturecapacities. The establishment of Competition Authoritiesis not as yet on the priority list. It is not my wish to com-ment any more on this argument as it is highly debatableand it cannot be easily applied to all the countries in theregion.

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Until recently, Zambia has been in a similar position tomany other developing countries in the region. About80% of the Industrial, transport and energy companieswere in the public sector and their policies were strictlycontrolled by government, often with social objectives inmind.

The so called private sector at the time was very smalland there were hardly any large companies in what wasdeemed the private sector. The parastatal sector underZIMCO was mistakably considered as the private sector.A competition policy at the time was obviously not appro-priate, as Zambia was not a market economy and in anycase, the likelihood of significant anti competitive behav-iour or practices in the private sector was low.

The advent of economic and political liberalisation inZambia dating from 1991, witnessed the adoption ofstructural adjustment programs involving the introductionof market oriented reforms. The central theme of thisprocess or reforms has been the move from the system ofcentral planning to the use of markets as the means to pro-mote economic efficiency. Thus, The necessary condi-tions in the markets were created that made a competitionpolicy a useful economic instrument.

The liberalisation process which the country embarkedon led to the rapid enactment of new laws and amend-ments of existing laws, especially in the field of businessand commercial related laws. This was in certain circum-stances accompanied by the establishment of new institu-tions to implement the newly enacted laws.

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I will now look briefly at the competition legislation inZambia by illustrating its main features. The Competitionand Fair Trading Act came into force in February, 1995.The Act was enacted in May 1994. The principal aims ofthe Act are:

—To encourage competition in the economy bprohibiting anti-competitive trade practices;

—To regulate monopolies and concentrations economic power; to protect consumer welfare;

—To strengthen the efficiency of productions andistribution of goods and services;

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The Act applies to all enterprises in relation to all thecommercial transactions regarding the supply of gooand services. The Act does not apply to certain activitiThere are explicit exemptions which are specified undthe Act. The notable one being that the Act shall not apto any activity i.e. a treaty or agreement to which the stis a party. It would appear the provision is meant to allogovernment not to be bogged down during its negottions as a result of the requirements under the competilaw. The other areas exempted from the application of Act are:

—Activities of employees for their own reasonabprotection as employees;

—Arrangements for collective bargaining on behaof employees for the purpose of fixing terms anconditions of employment;

—Agreements relating to the use of IntellectuProperty rights;

—Such business or activity as the Minister may, statutory instrument, specify.

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Ladies and Gentlemen, allow me now to briefly outlinan overview of the main elements of competition law they are found in the Act, while also reflecting on the ecnomic significance of these provisions.

The main elements of the Competition and Fair Traing Act generally cover the potential restrictions on competition relating to horizontal restraints, vertical restraints, abuses of dominant position and merger revcontrol. The Act as earlier stated defines anticompetittrade practices as any agreements, decisions and coned practices which have their object the prevention, striction or distortion of competition to an appreciable etent in Zambia or any substantial part of it. These aprohibited. The four main elements of competition law provided for under the Act are:-

—Mergers/takeovers;

—Horizontal agreements;

—Vertical market restraints; and

—Abuse of dominant position.

I will not dwell much on these concepts as they are ging to be ably covered by my colleagues from UNCTADMr. Qaqaya and Mr. Dhanjee after the coffee break. Csequently, I will be extremely brief. However, I will dwela bit longer on the merger/takeover regulation.

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The merger regulation is an important element of alaw aiming to preserve levels of competition. Mergers c

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lessen competition, potentially providing increased scopefor price rises or collusive behaviour and lessening dy-namic factors such as the rate of innovation. These pos-sible detriments provide the rationale for government in-tervention in the area of mergers or takeovers.

In considering whether to grant authorisation to a pro-posed merger, takeover or any other form of acquisition,the Commission’s main concern will be to ensure that themerger or takeover will not result in a substantial lessen-ing of competition in any market in Zambia or a substan-tial part of it. However, mergers may be one means ofachieving efficiencies, particularly where increased expo-sure to global markets is placing pressure on domesticfirms to reduce costs, improve quality and service and in-novate in order to become more competitive in those mar-kets. Efficiency issues are relevant both for assessing theimpact of a merger on competition and for assessing theoverall public benefit that would flow from a merger.

Further, when considering a proposed merger or take-over, the Commission will usually. approach it on the ba-sis of a consultative process with the parties and the rel-evant industry, in order to determine the potential marketplace effect of the merger. In most cases it will not be anadversarial process but one of consultation as no offencehas been committed and parties will often seek the Com-mission’s informal opinion well before proceeding with amerger or takeover proposal.

The Commission normally evaluate proposed mergers,takeovers and acquisitions in two circumstances, namely:

ii(i) Where it is believed that the object of the mergeror acquisition is to prevent, restrict or distortcompetition; or

i(ii) Where the merger or takeover could, through theabuse of market power, result in undue restrictionof competition or have an adverse effect on tradeor the economy.

In making a judgement, the Commission follows stepsin evaluating a merger or a takeover. A comprehensive as-sessment is undertaken which carefully examines amongother factors the following:-

ii(i) Defining the market;

i(ii) Market shares and concentration;

(iii) The extent of import competition;

(iv) Barriers to entry; etc

i(v) Countervailing power, etc.

One can distinguish between three fundamental typesof mergers, namely: horizontal, vertical and conglomeratemergers. This will be covered by the other speakers.

However, certain specific remedies are employed bythe Commission for the effective enforcement of themerger control law. The law on mergers requires advancenotification to the Zambia Competition Commission. Thepurpose of such a requirement is to permit the Commis-sion to prevent consummation of an anti-competitivemerger before it occurs, because it is extremely difficultto break apart a merger that has been consummated.

In addition to having the ability to issue an order pro-hibiting consummation of an anticompetitive merger, theCommission has power to permit the merger, subject tocertain requirements, including observing a remedial or-der or divesting some, but not all, of the assets of either ofthe merging enterprises.

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The Act prohibits all forms of horizontal arrangementswhich have the effect of restricting competition. These ar-rangements generally refer to agreements between firmscompeting with identical or similar products in the samemarket. These arrangements are outright prohibited underthe Act, they cannot be authorised by the CompetitionAuthority. The Act specifically prohibits the followingtrade agreements:

—Price fixing

—Collusive tendering

—Market or customer allocation

—Sales/production

—Refusal to supply

—Collective denials of access to an arrangemen

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The Act further goes to identify a number of specifpractices, more especially vertical agreements betwcompeting firms with identical or similar products in thsame market, which are outlawed to the extent that tlimit access or unduly restrain competition through abuse of market power. The Act makes express refereto the following practices:

—Predatory behaviour

—Discriminatory pricing

—Exclusive dealing

—Bundling and tying arrangements

—Resale price maintenance

Some of the practices mentioned and related to vertarrangements are widely used commercial practicThey may often be legal, provided that their use is not tended to restrict competition and does not represenabuse of market power. The Commission can authothe use of such commercial practices, following an appcation by the parties concerned, if it considers that twould be consistent with the objectives of the Act.

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The abuse of dominant position is one of the key ements of the Act. For the provision to apply, one or mopersons must substantially control a class of businthroughout Zambia or substantial part of it, and have egaged in or currently be engaging in a practice of ancompetitive acts that have the effect of preventing or leening competition substantially.


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The law, requires dominant firms not to be permitted touse their advantage to block challenges from existing orpotential competitors. The abuse of dominant provision isparticularly important in the context of a deregulated andprivatised business environment and can be instrumentalin assisting the transition from regulation to deregulation.Moreover, it helps to ensure that dominant firms do notpreclude the competition discipline promised by the re-moval of trade barriers and increased foreign competition.

It is important to note that the emphasis of the law isupon the activity of an enterprise rather than its status.Consequently, the holding of a dominant position is notprohibited, but the abuse of the dominant position.

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Unlike other Competition Authorities, in Zambia, theZambia Competition Commission (ZCC) has also the le-gal mandate to deal with matters pertaining to consumeraffairs. Firstly, you will observe that there is a largenumber of consumer organisations, both governmentaland non-governmental, business interests, enforcementbodies and other interested parties, which are active in thefield of Consumer Affairs. On the Board of the ZCC,there are two representatives from the national non-gov-ernmental consumer associations.

The ZCC has identified what work on consumer affairsit should engage in, and how it should allocate resourcesbetween different types of activities. It has also developeda strategy aimed at providing the various bodies withguidance on how they might be affected by the workundertaken by the ZCC.

The ZCC’s strategy has taken into account the needwork effectively with those other bodies. This strategy the Commission aims to help maximise consumer welfin the longer term, subject to protecting the interestsvulnerable consumers, by:

—Empowering consumers through information anredress;

—Protecting them by preventing abuse; and

—Promoting competitive and responsible supply.

The Commission recognises the fact that, in geneconsumers are the best judges of their own interests: csequently, it is for them to make choices for themselvbased on those interests and accordingly to their ovalues.

While direct intervention by the ZCC may be necesary when things go wrong, the main thrust should berected at empowering consumers to look after themselvThe main tool needed to enable them to do this is informtion. Consequently, the essential part of the Commissiowork is to promote the availability of information, eitheby encouraging others to provide it, or by doing do itse

It is always evident that where there is effective competition and sufficient information for consumers, dishoest traders cannot thrive. It is in this regard that becausimperfect markets, that regulation sometimes is necessto ensure that consumers are adequately protected.

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Part III of the Competition and Fair Trading Act ibased on the fundamental principle that any condwhich has the purpose of substantially lessening comption in the market should be prohibited, while recognisithat, in certain circumstances full competition may ndeliver the most desirable outcome.

The Act, however, recognises that some objectivesour society may not always be met by the operation of competitive markets. To secure such objectives, exemtions from the application of the Act are available. The ajudication (Authorisation and Notification) procedureunder the Act provide the exemptions. It is important note that the adjudication procedures apply only to speic parts of the Competition and Fair Trading Act. For eample, do not apply to any of the consumer protectprovisions of the Act.

To spare people the process of undergoing an invegation by the Commission or risking an action beinbrought on by a third party, the act provides a mechanfor authorisation by which the Commission may grant immunity from legal proceedings for certain arrangemeor conduct that may otherwise contravene the Act. Toutcome provides a greater degree of business certaimportant when a major investigation decision or othmarket initiatives are proposed.

Authorization of some types of anti-competitive behaviour is possible if the public benefit exceeds the dement to the competition.

The Commission may grant immunity on the publbenefit grounds from legal proceedings for some arranments or conduct that might otherwise breach the resttive trade practices provisions of the Act.

Authorization is a process whereby the Commissioin response to an application has the power to grant munity from court action for arrangements or conduwhich might otherwise be in breach of the Competitioand Fair Trading Act. To grant authorisation the Commsion must be satisfied that the public benefit stemmfrom the arrangements contact outweigh any anti-copetitive effect. To assist the Commission in its considetion of the application it would be helpful to have as wida range of views as possible concerning the public befits and anti-competitive effects of the arrangement conduct.

Certain types of conduct referred to under Section 9of the Act are inherently anti-competitive. The Commision is unlikely to grant immunity from prosecution in respect of such conduct. They types of restrictive businpractices mentioned in Section 7(2) of the Act may notanti-competitive depending on the precise circumstanof each case, and negative clearance for such conunder Section 13 is possible.


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A person or enterprise may seek immunity from thepossible prosecution under this section by notifying theCommission that it is undertaking or is proposing toundertake such conduct or acts which, it is inclined, willnot have an adverse eff ect on competition or trade or theeconomy in general.

In the light of the information provided by the appli-cant or others, the Commission may decide to take no ac-tion to stop the notified conduct thus providing the immu-nity sought (negative clearance). Alternatively, theCommission may determine that the conduct has or willhave an adverse effect on competition or the economy andissue a notice requiring the person or enterprise to ceasethe conduct or practice within a specified period from thedate of the issue of notice.

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Mr. Chairman, let me now look at the power of en-forcement available to the Commission. You will agreewith me that the effectiveness of the competition law inaddressing anti-competitive practices, depends on the ac-tual degree of enforcement action by the CompetitionAuthority and role of the courts or the judiciary in theenforcement of the competition law.

Vigorous, well targeted law enforcement goes hand inhand with advocacy. Competition law enforcement pre-vents economic agents in the market from distorting thecompetitive process either through agreements with othercompanies or through unilateral actions designed toexclude actual or potential competitors.

To help the Commission in its functions of exercisingstrict control over all forms of anti-competitive practices,the Act gives the Executive Director and other officers ofthe Commission, the rights to apply to Court for a warrantgranting them authority to enter any premises and seizerecords or other documents relating to the trade or busi-ness of any person, they feel are necessary to prove to theCommission of an offence under the Act.

Under the Zambian law, the Commission may opt toapply to the Director of Public Prosecution to allow themto have their own prosecutors to prosecute offendersunder the Act.

The law further stipulates offences and penalties forpersons who contravene or fail to comply with any provi-

sion of the Act or any regulations made thereunder, or anyperson who omits or refuses to furnish any information orto produce any document required by the Commission. Itis also an offence to knowingly furnish any false informa-tion to the Commission. Those found guilty are liable to afine or imprisonment or to both.

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Finally, I may ask, what is the way forward for theZambia Competition Law and Policy? Zambia like othercountries in the region still is facing teething problems inthe administration, enforcement and implementation ofcompetition law and policy. The same problems are appli-cable in different degrees to all the countries in the region.Although the enactment of the competition law was de-signed to remove the impediments in the market and cre-ate a level playing field for big, medium and small-scalebusiness organisations, the effectiveness of the law ishowever reduced by several factors:

—Weak capacity to review and decide on complaints concerning anti-competitive behaviour;

—Weak capacity to investigate predatory mergeand acquisitions;

—Weak capacity to co-ordinate with regulatorbodies to enhance “competition for the market” the provision of infrastructure services;

—Weak institutional capacity to develop procedures for alternative methods as well as usecourts for solving conflicts arising from anti-competitive behaviour;

—Low level understanding and awareness abocompetition law, procedures and remedies consumers, business community and parastata

The eliminating of these impediments is essential meaningful development of a competitive market systeThe Zambia Competition Commission is determined remove these impediments by designing a strategic acplan for identifying and developing options to remedy lgal and institutional constraints, capacity building and dveloping an operations manual. Above all, there is needestablish a working relationship with enterprises, buness people and trade associations. Thank you very mfor your time.

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One may ask why developing or transition economiesshould have any business discussing the adoption ofmerger control (MC) in either national system or regionalgroupings. Any reference to historical pattern wouldsimply indicate the developed countries, at least some ofthem, use merger control and that the consideration ofadopting MC has appeared to come late in the competitionpolicy scheme of evolution. The EC itself is a good exam-ple. Articles 85 and 86 were provided in the originalRome Treaty (1957) and given effect by Regulation 17 of1962. The regulation for control of concentrations in theEC did not arrive until 1989.

One may also note the some common advice given bydeveloped country experts on this subject. That is, smalland/or developing countries are not large enough eco-nomic players to give meaningful effect to merger controlon their territories. Their resources are limited and largeractors are not likely to be responsive to notification re-quirements, let alone investigative procedures. If the littleterritory attempts to assert MC in regard to a change inconcentration on the local market, what is more likely tooccur is that the larger actors will simply bypass invest-ment upon that territory altogether, and thus deny thatmarket whatever pro-competitive aspects the change incontrol might have been able to deliver to those consum-ers.

What is not so clear in this advice is whether it is in-tended to be applicable to all small countries, or just thepoorer of them. Holland has adopted merger control noti-fication in the recent past. It is however only a market ofabout 15 million people, notwithstanding that its econo-my is in the largest group of ten. Likewise, some develop-ing/transition economies are enormous in regard to thesize of the consumer base which may potentially beaffected by new concentrations.

More important, certain practical differences relatingto the particular problems of transformation economiesappear to raise the issue of merger control. This also ap-pears to occur an earlier stage of developments than hasbeen observed for developed countries with longerrecords of private enterprise culture and lower historicallevels of state intervention in the markets. For the newmarket economies, state ownership of primary economicsectors has been the rule rather than the exception. For thesmaller of them, markets are said to be too thin to supporta multitude of players. Since the process of market trans-

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formation is so closely associated with the process of pri-vatisation, the business of selling state monopoly assetsraises the prospect that assets once privatised are likely tobe dominant.

It is at this step that a case for MC can be made. Sincethe state will no longer “regulate” as owner, and is inteon reducing its role as regulator of new private enterpriit would seem reasonable to suggest that any analysithe market structure of prospective concentrations, athe manner in which they may likely behave on the mket, should be considered as an aspect of the decisiodivest. Thus, MC aspects could play a helpful rothroughout the process: to first determine the competitcomponents of a larger asset to be divested prior to dering; to obtain valuable market information from prospective buyers, which in many cases will serve as only available data base for the sector; to assist in framnegotiation goals so that related supply and distributaspects of the sale may be rendered more competitivelocal firms; and finally, to provide a point of reference folater investigations of traditional competition policy apects if the new concentration is later abusive or engain cartel activity.

For these items, it is not so clear that a local Mauthority need necessarily have the final power to bloinvestment decisions, or even where such power was vided, that authorities would then seek to blocinternational mergers which have greater effects upother markets. It is not even so sure that a system of ting privatisations between investment/competition agecies actually requires a separate notification provisionbe made by undertakings. Rather, what is suggestedconsideration is that any policy of promoting transformtion by privatisation should be acknowledged at the sponsible level to have a competition policy facet wiimplications for the quality of the resulting market. Sincthe purpose of the process is ostensibly to create “maeconomy”, then the characteristics of this resulting mket should be of concern for the parties undertaking sale of assets. From this it follows that the relationship tween agencies which sell assets and those which enfcompetition policy should be structured in a manner that the role of each may reinforce the role of the othe

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Although the point of this essay is not to provide andetailed descriptions, several definitional points a

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raised which illuminate the points made above. First, thedescriptive “merger” control is a misnomer. More accrately, the control of “concentrations” is the matter to considered, as this term contemplates any type of option or operations which bring about a lasting changethe structure of the undertakings concerned. In this spect, the concept of “control” is essential to understaing the role of MC, as it is a change in the control of undertaking(s) which is sought to be captured by a ccentration control procedure. This definitional point alows us to delineate merger control from other enforcment procedures directed to pre-existing dominapositions or to abuses of such positions in the markWhat is sought to be addressed by MC is the possibilitylikelihood that a change in control of the undertakinconcerned may act to effectively impede the quality competition on the territory market. Thus, MC may be dfined as a system or procedure for vetting or reviewiproposed concentrations which may result in the impeing of effective competition on the market.

Given this definition, other types of operations also fawithin a merger control system. Besides mergers betwindependent undertakings, acquisitions of one underting by another also qualify. Likewise, certain joint ventures are subject to the review. Under EC law for exaple, full-function Joint ventures, which are autonomoand do not operate to coordinate the partner undertakinare treated as concentrations for the purpose of MRegulation. Also addressed in the EC regulation are schanges control that are not effected by a change in thegal personality of the resulting undertaking, but rather sult from agreements between owners to vote stock icertain manner or to exchange stock in order to changecontrol of a single undertaking.

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Several institutional characteristics of MC are idenfied. First is the concept of MXULVGLFWLRQ which includes adefinition of a territory, the geographical area over whia national (or regional) authority exercises its legal powThis may appear obvious for countries, but is not obviofor regional merger control systems, a matter taken up low. Also within the concept of jurisdiction is a referencto size or “dimension” which specifies that changes control of undertakings below a certain size are not legly subject to the power of the MC authority. While the Eregional system applies a complex combination of factincluding size (turnover) of firms on the world, the Community and member state markets, more simple natiosystems are also evident which only specify a resultterritory market share as a basis for activating the Msystem.

A second element is that of QRWLILFDWLRQ, the legal bur-den placed upon undertakings to declare the impendchanges of control contemplated. The materials includin the notification disclosure provides the informationecessary for the authority to initiate an assessment ofresulting concentration. Common disclosures include undertaking’s description of the products and /or servicconcerned, the relevant product and geographic markthe nature of the legal transaction which is occurring, a

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This process of disclosure informs the third elemethat of LQYHVWLJDWLRQ�DQG�DVVHVVPHQW. Since most changesin control are pro-competitive, the distinction is drawhere between MC systems and traditional competitipolicy procedures. The authority must have the dedicaresources to determine with dispatch that pro-competitconcentrations are not likely to impede competition on tmarket. Otherwise, economic restructuring that wouotherwise be beneficial is simply frustrated. This conseration has led a number of territories to forego MC on basis that if they cannot apply sufficient resources to dwell, that it is better not to do it at all.

Finally, an element of HQIRUFHPHQW is evident wherethe authority has power to address the undertakingsadditional disclosure, to recommend or require modifictions in the structure of the resulting concentration, orfinally direct that the concentration shall not be permittto be effected on the market. A system may provide fines and penalties for failing to notify or for providingfalse or misleading information. Fines and penalties, cluding seizure of local assets, is provided in a numbesystems for the enacting of a concentration that has bordered to be blocked or modified by the authority. It the case that these remedies are rarely applied. MC revby nature tends to be negotiative with modificationoccurring by agreement early in the process.

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The elements described for MC can be incorporatedan aspect of the process of investment review. For nocation, competition policy information can be incorporaed into the process of disclosure which would accompathe tendering process for assets. The notice aspect in scases may even be established as an internal elemwhereby the investment authority reviews thresholds ainforms the competition authority. Where jurisdiction apparent, perhaps a second level of disclosure by untakings is attempted, either independently by the Mauthority, or by the investment authority acting in this rgard as an agent. Investigative inquiries and initial finings can also operate internally between competition ainvestment authorities which have a basis for continuicontact with the undertakings concerned, and also habasis to conduct negotiations which may affect the resing structure or its practices in the market. At the lowelevel of interference, even where the MC authority is ngiven power to intervene to either modify or block divesment, even the right to obtain quality product and marinformation and/or the right to review and report could valuable later in establishing abuse of dominance if prtices on the market warrant a later investigation.

For the difficult cases mandated by economic or budetary reality where the purchaser is being promised ctinued dominance by either suspension of national copetition policy or application of trade measures, there myet be room to manoeuvre if the MC authority is nlocked-out of the process. Even while horizontal protetion is visibly accorded, a competition authority is in thbest position to fight the case for eliminating vertical r


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straints which may be so necessary for the participation oflocal firms and future entrepreneurs. Likewise, if domi-nance is only promised for a period of time, the ability tomonitor from an original baseline understanding of themarket may assist in closing out measures which are nolonger required by the agreement of sale.

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It has been argued that the necessity of MC within a re-gional formation flows directly from the level of integra-tion actually being achieved on the region. At the pointwhere regional members contemplate a larger marketwithin which business will understand that it is doingbusiness across the overall market, or some significantpart of it, then a regional dimension can be said to haveemerged which justifies regional merger control. “Doinbusiness” should also be understood to relate to provisof services across borders, as investment is so closelylated to delivering services. It follows that the regionmarket exhibit free factor movements for capital and aprobably for labour. As in the EC example, the mergcontrol regulation of 4064/89 provides by its preambthat the completion of the internal market program prvides a justification for a regional jurisdiction where ecnomic actors make investment decisions which affect overall market.

There can be a case made for developing country mations to consider regional merger control prior to tlevel of integration outlined above. Besides the point expediency for business whereby firms can make a sinregional filing and thereby avoid a number of smaller Mauthority procedures, there is also the situation whernumber of national authorities operate without MC at aIf there is a reason to believe that the individual membcountry markets are likely to be subject to the samsources of inward bound acquisitions/investments whwill have similar effects on these markets, then the prpects of pooling resources to form a single operational tity may appear attractive.

The element of jurisdiction is less obvious in regionsystems as compared to nations. The legal form chofor the grouping may also have a bearing on the ggraphical territory element A customs union creates a ctoms territory which readily serves as a geographical pression of jurisdiction. Although a free-trade area donot create a separate customs territory, where a free-tarea does provide for a basis for regional (cumulativmixing of inputs or processes, then investment decisiomay also follow to take the overall market into consideation. Thus, regional MC should not be disregardedfree-trade area formulations solely because a customsritory is not created.

An advanced question is whether a centralised sysis required in order to effect a functional MC system, whether co-operation between national authorities canmade sufficient. For firms, the substitution of a single ntification at the regional level in place of separate nationfilings is seen as a significant benefit, at least as a lesof two evils. Where a territory dimension for concentrtions has been defined on a regional level, a single nocation for concentrations on this territory must be cons

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ered for its advantages. However, the resources provito assess regional notifications may not be sufficient fonumber of reasons. What may be suggested is that wa regional definition of territory and notification is provided, that initial assessment is made at the regional leby representatives of member national authorities coposed for this purpose. Where additional investigationdetermined to be required, then a number of possibilitpresent themselves by the use of referral to a compenational authority and perhaps by the application of potive comity for authorities with superior investigative access to examine the merger on behalf of the region. regional authority may retain the power to make a findecision, or as above, representatives of national authties acting together may hold this power. Thus, althouthe establishment of a regional system suggests centsation, after the elements of jurisdiction and notificatioare met, number of decentralising possibilities can be csidered.

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Although MC appears to occur somewhat later in tintegration process among countries in regional grouings, for individual countries engaged in significant ecnomic transformations, it is suggested here that Mshould be considered at an earlier juncture. Where a vatisation effort is being undertaken, the opportunity affect the quality of the resulting market is offered ononce, as an asset is divested only once. While any comtition authority consumes scarce resources, some ofbenefits of merger control may be realised by utilisinless than formalised procedures between agencies ressible for investment and for competition policy. Regionconsiderations are more complex in the manner in whthe elements of MC are applied, both as to the legal foof the subject grouping and in the degree that centralisystems are contemplated as necessary to provide fcredible regional response.

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Ehlermann, Claus-Dieter, (1994), 7KH� ,QWHUQDWLRQDO'LPHQVLRQ�RI�&RPSHWLWLRQ�3ROLF\, Fordham InternationalLaw Journal, V.17, N.4, pp.833-845.

Kines, Stephen, &RQILGHQWLDOLW\��&RQIOLFWV�DQG�&RPLW\,Netherlands International Law Review, V.43, No.pp.19-32.

Mathis, James, (1998) ,QVWLWXWLRQDO� $VSHFWV� RI5HJLRQDO�0HUJHU�&RQWURO, World Competition, V. 21:3,pp. 29-43.

Scherer, Frederic M. (1994), &RPSHWLWLRQ�3ROLFLHV�IRUDQ� ,QWHJUDWHG�:RUOG� (FRQRP\, Brookings, WashingtonD.C.

Starek III, Roscoe B., (1996), ,QWHUQDWLRQDO�$VSHFWV�RI$QWLWUXVW�(QIRUFHPHQW, World Competition, V.19, No. 3,p. 29-53.

Török, Adam, (1997), Competition Policy and MarkeRestructuring in the Hungarian Transition, in Rules Competition and East-West Integration, Fritsch M., aHansen H., (eds.) Kluwer Academic PublisherDordrecht.

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Many developing countries do not yet have competi-tion laws and many claim little or no interest in adoptingthem. It would seem to follow that they should likewise beindifferent to the issues regarding international/multilat-eral rules for anti-competitive (restrictive) business prac-tices. However, the interests of lesser-developed coun-tries in multilateral competition rules may be accentedbecause of their relatively weaker position in the globaleconomy and its trading system. This point follows if oneapplies a traditionally expressed goal for competitionrules, which is to provide assurance that the “game”contesting markets by private actors shall be enforcedinsure its continuation. This suggests that small as wellarge must retain some potential for having access to field of play in order to compete.

This view of competition policy conflicts with the narrower perception that national competition policies aanti-competitive in effect where they only serve to prmote the market-access opportunities of the larger gloenterprises. This perspective ignores the potential tinternational rules, and perhaps regional rules, may oto developing countries. Embedding the traditional copetition policy principles into an international frameworwould serve to extend the reach of local authorities. Twould assist them in insuring that newly-opened markremain actually contestable, first to insure that interntional players are in competition on the local market, asecond, to provide new tools to insure that there is spremaining on the local field of play for local enterprise also compete.

This essay will first elaborate on the position of deveoping countries in international competition rules ancontrast this view with that attributed to developed coutries. Then, the original International Trade Organisati(ITO, Havana Charter, 1947) provisions will be noted demonstrate how a complaint and reporting system wcontemplated for restrictive business practices which fected international trade. Finally some suggestions developing-country positions on question of internationrules are made, including the consideration of a non-Wapproach which would imitate the ITO features in an opand informal network between national authorities

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We start from the position that any set of rules whiact to restrain unilateral behaviour by territories will tento benefit the smaller parties. The capacity to exercunilateral behaviour in international trade is related to tability to discriminate between trading partners. The pmary instrument, though not the only one, to effect unileral and non-compensated discrimination is antidumpiWhile many smaller and developing countries hapassed antidumping laws in recent years, the potentialof these instruments as retaliatory is limited, as thethreat of foreclosure from a larger market will carry thgreater weight in any exchange between large and smThe ability to use trade threats depends upon which pwill be greater damaged by the cessation of trade.

Thus, to the extent that any formulation of internatioal rules regarding anti-competitive business practices mact by law or by practice to reduce the incidence of duming and/or antidumping in international trade, this devopment would benefit those territories which are lecapable of imposing trade threats in the first place.

A second aspect which relates to size and developmlevel refers to the home jurisdictions of internationfirms. As they operate across a large number of territorany restrictive agreements or practices undertakenthem will have their intended effects on third territorieeven while the evidence of agreements and decisimade will not be will not located in these territories. Athough any national competition law may provide for ouof-territory jurisdiction to investigate practices, the athority in the superior position to actually engage invesgations and to compel meaningful disclosures is thauthority located in the jurisdiction where agreements made. Therefore, any set of rules that can act to extendreach of local investigation powers by co-operation otherwise should be viewed as a favourable developmby smaller or developing country authorities.

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Although developing countries have long advocatinternational competition rules (UNCTAD, ‘The Set …1981) the re-emergence of this topic in the mid 1980s w


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led primarily by the interaction of developed countries,notably the United States in its ongoing trade issues withJapan. As Japan was bound at lower tariff levels after theTokyo Round (1979), US policy increasingly identifiednon-tariff barriers as an explanation for market-accessproblems. Through programs such as the strategic imped-iments initiative (SII), technical barriers were raised, aswell as a number of problems that could be loosely col-lected together as competition policy issues. Even recent-ly this market-access orientation has been analysed in aWTO trade dispute (Japan—photographic film, 1997Here, the US alleged a failure of Japan to enforce its mestic anti-trust laws with the effect that reasonable pectations of market access relating to tariff-bouproducts was not being realised. This market-accorientation for the use of national competition rules calso be found as providing a cause of action in various legislation addressing of unfair trading practices of othcountries, as well as in the EC unfair trade practices rulation.

The EC has taken something of a lead in setting foproposals for an international framework for competitiopolicy. Following the Uruguay Round (1994), the European Commission requested a group of experts to provreports on the question of international rules. Whemerged was a proposal for a plurilateral code for comtition rules to function within the multilateral trading system. The EC experts also demonstrated some sense oance in basing their recommendations not only upon EC’s problems of market access to other territories, also by forwarding proposals which were responsivethe interests of developing countries in the formulationinternational rules. Thus, while the report documentthat “outward bound” anti-competitive directed from thEC market were not prohibited, that the concept of intnational anti-trust should accommodate a prohibitioagreed upon by all parties, against certain “hard copractices, including export cartels and assumedly, cerinternational cartel activities.

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The 1948 Havana Charter for the ITO, which did ngo into legal effect, contained a chapter dealing with strictive business practices which affect internationtrade. These provisions also appear to recognise the inests which would naturally be accorded to developedwell as developing territories. Thus, the new ITO members would have been obliged to prevent,

“on the part of private or public commercial enteprises, business practices affecting international trawhich restrain competition, omit access to markeor foster monopolistic control.” (Havana Chartechapter V, Art. 46:1)

This chapter did not seek to create an international lice force for competition problems in international tradRather, like the early dispute settlement provisions genally, it provided that a member, on behalf of its nationfirms, would have a right to make a complaint to the ITand then receive an independent report. This report womake a finding as to whether or not the practice allegfell within a listed set of prohibitions (see addendu

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attached) that were stated in the chapter. If so, thespondent territory member was requested to take rememeasures in regard to firms located within its territorThis member could also be asked to re-appear beforeITO and indicate what remedial measures had actuabeen taken.

Although these provisions seem minimal comparedambitious proposals for international enforcement agecies, in point the complaint/reporting idea is an advancconcept with implications for trade relations between dveloped and developing countries. Retrospectively, treporting function might have documented the existenof trade restrictive aspects of restrictive business practieven if respondent territories chose to not take rememeasures. Reports might have cumulatively generatebody of legal interpretations as to how particular practicrelate to the ITO list of prohibitions. Over time, one caalso contemplate that a complaint and reporting featmight have evolved to be eventually assimilated into tformalised dispute settlement provisions, as now cotained in the WTO-DSU.

The reason for looking back on the ITO complaint/rporting procedure is to reflect upon what value such a pcedure would hold for today’s situation and to framesuggested direction which would respect the interestsdeveloping countries in international rules for anti-competitive practices. The suggestion is made here that aporting system, like that described in the ITO procedurcould be accommodated in the WTO, with a similar lincluded of prohibited practices which would form the bsis for making legal conclusions as based upon the facfindings of independent reports.

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Since all WTO members could have occasion to usuch a system, it is difficult at the outset to discern wany member would object to such a development. Hoever, country differences may also play a role here. Sithe largest international firms are based in just a few tritories, it is said that the largest number of complainwould be directed to the national authorities of those tritories. Thus, the mere provision of a reporting proceduwould tax even those large national authorities who ado not have the resources to respond to all of the inteanti-competitive practices in their markets, let alone thopractices engaged by local firms operating externally.

Three points are made in response. First, the ITO porting procedure does not necessarily compel a domenational authority response nor does it imply that a natioal competition authority is necessarily the appropriaparty to make a response. While effectiveness of invegation is diminished without the respondent’s particiption, a reporting agency can collect information from oter territories that are also claimed to be effected. Whthis may not generate a complete report, the result mabetter than no report. Related, a national authority hasrisdiction over the quality of competition on its nationmarket. It may be that external relations authorities dera better domestic legal basis to act as the respondent pSecond, whatever the appropriate agency to makesponse, developed authorities are already implemen


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bilateral positive comity procedures which assume re-sponsibility to investigate outward-bound practices.Thus, resources are being committed in this mannergradually, but only between particular authorities andtheir respective territories. It may be more work to con-template whether a particular cartel allegation affectsmore than one other territory, but as long as resourceshave been committed to investigate the activities anyway,then why not consider the broader territorial implications.Finally, as in the EC proposal, there is always the pre-emptive alternative to prohibit the same set of outward-bound activities that are already prohibited domestically.This option has the potential to relieve authorities of theburden where national courts can be engaged to handleforeign claims.

There is also an alternative for countries to obtain thebenefits of a complaint and reporting system for interna-tional anti-competitive practices affecting trade. Just asexisting bilateral co-operation agreements are outside theWTO framework and therefore are not required to extendtheir benefits by MFN to other authorities, any set of ter-ritories can establish communication and co-operation be-tween their existing competition authorities and on theirown initiative. Such a network need not be exclusive, butrather could be open to any territory. By utilising moderninformation networks, the sharing of complaints and thepassing of non confidential information that is wholly inthe public domain, like prices and disclosed marketshares, could also form the basis for initial report informa-tion. Perhaps such a network could be open for any na-tional authority willing to dedicate a representative to fa-cilitate its participation in the process of investigation andreporting and, while acting with others, the preparing andapproving of reports.

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The possibilities for engaging the competition policyissue in the WTO does not look particularly promising atthis juncture. Although a number of developing countriesare in favour of raising the item, this is also not a commonposition among the large and varied group of territories inthe WTO, developing or otherwise. One of the dividinglines that may be evident falls lies between developingcountries that remain relatively closed to imports and

therefore view competition rules generally as an undesir-able market-opening mechanism. In contrast, there areothers that have taken significant market opening meas-ures and see a need for competition rules as a market-enforcing policy which responds to inward investment inrespect to the formation of new dominant positions.

That there is no common position at this time should beviewed in context. Multilateral rules were offered bysome developing countries at the outset of the UruguayRound in 1986 without accommodation. Since then, theposition of developing countries in the trading system hasdramatically changed. Then, a great number of the lesserdeveloped were functioning as non-market economieswith high levels of state ownership. Few had nationalcompetition rules. In years since, all acknowledge that thedegree of transformation to market-based economies withprimary reliance upon private actors is an astoundingoccurrence.

Consideration of the territories engaging these trans-formations should cause a revaluation of the internationalcompetition policy issue, particularly as the requests bytransforming territories for international rules is so direct-ly related to the resulting quality of the competitive mar-kets commencing to take root upon their territories. Mar-ket competition is, after all, the point of the exerciseknown as market transformation. While the considerationof a complaint/ reporting requirement is not really so in-vasive to the interests of developed parties, it does offer abridge for the developing countries to answer the often-heard claim that “openness” means “dominance”. Frothis view, it may appear in the last analysis to be somwhat disingenuous on the part of the most developedrefuse developments which are consistent with a rulbased international trading system, eliminate recognidistortions to trade, and which promote the progress mhave made to foster the culture of competition in their tritories.

For them, the multilateral option of securing a complaint and report procedure should continue to be pressAt the same time, independent co-operative arrangemewhich commence the exercise between authorities outsthe WTO framework should also be explored with thgoal of evolving a process of documentation regarding suspected practices in a procedure dedicated to credand balanced reporting.

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“The practices referred to … are the following:

a. fixing prices, terms or conditions to be observed in dealing with others in thechase, sale or lease of any product;

b. excluding enterprises from, or allocating or dividing, any territorial market or fof business activity, or allocating customers, or fixing sales quotas or purchasetas;

c. discriminating against particular enterprises;

d. limiting production or fixing productions quotas;

e. preventing by agreement the development or application of technology or invewhether patented or unpatented;

f. extending the use of rights under patents, trade marks or copyrights granted bMember to matter which, according to its laws and regulations, are not wihtinscope of such grants, or to products or conditions of production, use of sale whilikewise not the subjects of such grants;

g. any similar practices which the Organization may declare, by a majority of two-thof the Members present and voting, to be restrictive business practices.”

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The Common Market for Eastern and Southern Africa(COMESA) is a regional integration grouping of 21 Afri-can sovereign states (Angola, Burundi, Comoros, Demo-cratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethio-pia, Kenya, Madagascar, Malawi, Mauritius, Namibia,Rwanda, Seychelles, Sudan, Swaziland, Tanzania, Ugan-da, Zambia and Zimbabwe) which have agreed to pro-mote regional integration through trade development andto develop their natural and human resources for themutual benefit of all their peoples.

COMESA was established in 1994 to replace the Pref-erential Trade Area for Eastern and Southern Africa(PTA), which had been in existence since 1981 within theframework of the OAU’s Lagos Plan of Action and the Fnal Act of Lagos. The PTA was established to take advtage of a larger market size, to share the region’s commheritage and destiny and to allow greater social and enomic co-operation, with the ultimate objective being create an economic community.

COMESA is one of the more successful regional ecnomic co-operation and integration groups in Africa. Suported by its financial specialised institutions, namely tTrade and Development Bank For Eastern and SouthAfrica, (PTA Bank) the Clearing House and the Re-insuance Company, COMESA, and before it, PTA, hasproven track record of achievements. Over the past foteen years, it has developed a large number of regioprogrammes which are assisting member States, ipositive way, to attain economic recovery and sustainaeconomic growth.

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In 1965, the United Nations Economic Commissiofor Africa (ECA) convened a ministerial meeting of ththen politically independent states of Eastern and Souern Africa to consider proposals for the establishmenta mechanism for the promotion of sub-regional economintegration. The meeting, which was held in LusakZambia, recommended the creation of an Economic Comunity of Eastern and Southern African States.

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An Interim Council of Ministers, assisted by an InterimEconomic Committee of officials, was subsequently sup to negotiate the treaty and initiate programmes on enomic co-operation, pending the completion of negottions on the treaty.

In 1978, at a meeting of Ministers of Trade, Finanand Planning in Lusaka, the creation of a sub-regioeconomic community was recommended, beginning wa sub-regional trade area which would be gradually ugraded over a ten-year period to a common market uthe community had been established. To this end, meeting adopted the “Lusaka Declaration of Intent aCommitment to the Establishment of a Preferential TraArea for Eastern and Southern Africa” and created Inter-governmental Negotiating Team on the Treaty fthe establishment of the PTA. The meeting also agreedan indicative time-table for the work of the Intergovermental Negotiating Team.

After the preparatory work had been completed a meing of Heads of State and Government was convenedLusaka on 21st December 1981 at which the Treaty estalishing the PTA was signed. The Treaty came into foron 30th September 1982 after it had been ratified by mothan seven signatory states as provided for in Article 50the Treaty.

The PTA Treaty envisaged its transformation intoCommon Market and, in conformity with this, the Treaestablishing COMESA was signed on 5 November 1993in Kampala, Uganda and was ratified a year later Lilongwe, Malawi on 8 December 1994.

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The COMESA Treaty, which sets the agenda fCOMESA, covers a large number of sectors and acities. However, the fulfilment of the complete COMESmandate is regarded as a long-term objective and, COMESA to become more effective as an institution,has defined its priorities within its mandate, over the ne3 to 5 years, as being 3URPRWLRQ�RI�5HJLRQDO�,QWHJUDWLRQWKURXJK�7UDGH�DQG�,QYHVWPHQW. The role of the COMESASecretariat is to take the lead in assisting its memStates to make the adjustments necessary for them tocome part of the global economy within the framework WTO regulations and other international agreemen

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This is to be done by promoting “outward-orientated” rgional integration. The aims and objectives of COMESas defined in the Treaty and its Protocols,1 is, therefore, tofacilitate the removal of the structural and institutionweaknesses of member States so that they are abattain collective and sustained development.

Among other things, COMESA member States haagreed on the need to create and maintain:

�D) A full free trade area guaranteeing the free movment of goods and services produced within COMESand the removal of all tariffs and non-tariff barriers;

(E) A customs union under which goods and servicimported from non-COMESA countries will attract aagreed single tariff in all COMESA states;

(F) Free movement of capital and investment suppoed by the adoption of common investment practices soto create a more favourable investment climate for COMESA region;

(G) A gradual establishment of a payment union bason the COMESA Clearing House and the eventual estlishment of a common monetary union with a commocurrency; and

(H) The adoption of common visa arrangements, cluding the right of establishment leading eventually the free movement of ERQD�ILGH persons.

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COMESA is made up of the following:

—The Authority of Heads of State and Government, the supreme Policy Organ of the CommMarket, responsible for general policy, directioand control of the performance of the executivfunctions of the Common Market and thachievement of its aims and objectives;

—Council of Ministers, which takes policy decisions on the programmes and activities COMESA, including the monitoring and reviewing of its financial and administrative management;

—Court of Justice which has been established to sure the proper interpretation and application the provisions of the Treaty and to adjudicate adisputes that may arise among the member Staregarding the interpretation and application of thprovisions of the Treaty;

—Committee of Governors of Central Banks whicmanages the COMESA Clearing House and e

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1 The following are the Protocols annexed to the Treaty:1) Protocol on Transit Trade and Transit Facilities.2) Protocol on Third Party Motor Vehicle Insurance Scheme.3) Protocol Relating to the Unique Situation of Lesotho,

Namibia and Swaziland.4) Protocol on the Rules of Origin for Products to be Traded

between COMESA Member States.

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—Intergovernmental Committee, a multi-disciplinary body composed of permanent secretarfrom the member States responsible for the devopment and management of programmes aaction plans in all the sectors of co-operatioexcept in the finance and monetary sector;

—Technical Committees, responsible for the vaous economic sectors and for administrative abudgetary matters;

—The Secretariat, to provide technical support aadvisory services to the member States in the iplementation of the Treaty; and

—The Consultative Committee of the BusinesCommunity and Other Interest Groups to provida link and facilitate dialogue between the businecommunity and other interest groups and orgaof the Common Market.

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There are a number of other regional organisationsoperation within the region also covered by COMESsuch as the East African Co-operation (EAC), Inter-Goernmental Authority on Development (IGAD), IndiaOcean Commission (IOC) and the Southern AfricaDevelopment Community (SADC).

COMESA has excellent working relations both fomally and informally with all of the regional organisations mentioned above. Memoranda of Understandhave been signed with EAC and IGAD such that thetwo organisations have agreed to adopt and implementCOMESA trade liberalisation and facilitation programme. A similar Memorandum of Understanding also being formalised with the IOC.

Although these organisations also include as their aithe promotion of regional co-operation and integratiothe COMESA Secretariat is neither in competition withese organisations nor wishing to duplicate the effortsother organisations. COMESA sees its contribution to process of regional integration and regional economic velopment as being able to work together, and to operate fully, with its member States, other regionbodies to which its member States are affiliated, adonors and financial institutions and build upon thachievements it has already made in its priority areas.

It is also true to say that the broad objectives of allthe regional organisations are similar and largely compmentary. They all endeavour to promote balanced enomic development among their member States among other things, harmonising their investment lawregulations and practices. All organisations aim to attFree Trade Areas among their membership and to libeise the movement of capital by abolishing exchange ctrols. They also all aim to liberalise, for example, movment of persons through relaxation of visa requiremeand restrictions. While development goals and ambitio


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are similar, strategies each sub-regional organisationemploy are different.

As is well known, the origins of SADC were in provi-sion of donor support to develop infrastructure in the re-gion which would allow the “front-line States” in theapartheid era to function economically without being dpendent upon South Africa. Owing to its origins, SADhas adopted a sectoral approach to its development ada. Member States have shared and assigned each economic sectors to co-ordinate. For example, Angola ordinates the Energy sector, Zambia the Mining SectZimbabwe Agriculture, Mozambique Telecommunications, Tanzania Commerce and Industry, and so on.generalise, SADC, therefore, has emphasised supply-interventions in its development approach, although can detect a different strategy being introduced, for exaple with the promotion of a free trade agenda.

COMESA, on the other hand, has traditionally placemphasis on demand-side measures. The philosophCOMESA is that the economic development of the suSaharan region will be largely dependent upon privasector investment into the region. If this investment isbe attracted into the region, the small countries of thegion must be able to offer a large single market. Theretherefore, an D�SULRUL need to liberalise the trade and investment environment in the region as a whole to attrthe investment needed to address the supply-side ofregion’s economy. Hence, the COMESA agenda placemphasis such issues as tariff reduction and eliminatof non-tariff barriers, streamlining documentation anmovement procedures for cargo and harmonising tradocumentation and enhancing the capacity of the privsector to take advantage of opportunities arising froregional as well as global integration.

It is apparent that though the conceptual approach mvary between SADC and COMESA, their goal is common. In recognition of this fact, the Secretariats of the torganisations are collaborating in the implementationvarious activities. Notable among these areas of collaration are a review of Rules of Origin; adoption of a common customs document, and common customs boguarantee scheme; expansion of the COMESA third pamotor insurance scheme (the Yellow Card) to inclunon-COMESA SADC members including South Africaand undertaking joint training programmes on WTO.

It is noteworthy that of the 14 SADC members, 10 aalso members of COMESA. This overlap in membershhas the advantage of co-ordinating the approaches oftwo organisations. For example, the various protocolsSADC draw heavily on the COMESA Treaty and its prtocols, which is neither controversial nor surprising. Tmajority of SADC member States have been through process of drawing up a trade protocol (for example) uder PTA/COMESA and would presumably not want to ether “re-invent the wheel” or contradict previous agrements they drew up together when drawing up a protoon trade for SADC.

The existence of the regional organisations COMESA and SADC can therefore be viewed as an tempt by the common membership of both organisatio

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The East African Co-operation (EAC), the IndiaOcean Commission (IOC) and the IntergovernmenAuthority on Development (IGAD) are regarded bCOMESA as fast-track integration paths for the regioAll their membership, except for Somalia under IGADare simultaneously members of COMESA. In a bid ease the movement of persons, the EAC has introduccommon East African passport for nationals of KenyUganda and Tanzania.

Similarly, 14 countries implementing liberalisatiomeasures under the Cross Border Initiative (CBI) areCOMESA member States2. These measures are agaseen as ‘fast-track’ integration mechanisms for Eastand Southern Africa.

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The COMESA aims to establish a Free Trade Ar(FTA) by October 2000 through an annual reduction intra-COMESA tariffs. The timeframe for achieving Free Trade Area is as set out below.

The trade liberalisation programme gained momentuand a higher leverage when PTA was transformed intoCommon Market for Eastern and Southern Afric(COMESA) in 1994. COMESA agreed to new tariff reduction timeframe and schedule. COMESA furthagreed a uniform tariff reduction base of 60% as at Ocber 1993—as a starting point.

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The programme of reducing intra-COMESA tariffs iwell advanced and is scheduled to be completed by year 2000. This will convert COMESA into a Free TradArea.

As at 31st May 1999, 3 countries had reduced tariffs b90%, 7 by 80%, 1 by 70% and 3 by 60%, bringing the tonumber of countries to have effected and published duced COMESA tariffs by not less than 60% to 13. A futher 2 countries have indicated that they will effect apublish reduced COMESA tariffs in the near future. Tw(2) other countries have derogations up to the year 20while another 2 are new members, having joined tgrouping in 1998. Only 2 countries have not publishenor announced the intention to publish in the near futuany tariff reductions according to the agreed timetable

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Rate of TariffReduction

60% 70% 80% 90% 100%


While average national and MFN tariffs as of end ofMay 1999, ranged from 8% to 60%, except for Egyptwhose average national tariff was higher, average tariffson COMESA-originating products ranged from 1% to23% on the basis on the above reductions, again exceptfor Egypt whose average COMESA rate was still a littlehigher. The overall average national tariff rate was in therange of 25% compared to an overall average COMESAtariff rate of less than 10%.

The effect on intra-regional trade of these tariff reduc-tions has been positive. The Table overleaf shows growth

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of trade in COMESA countries amongst themselves (in-tra-COMESA trade), with third countries and totalCOMESA trade.

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The effect on intra-regional trade of these tariff reduc-tions and reductions in non-tariff barriers has been posi-tive. In 1992, total intra-COMESA trade3 was estimated atUS$1.8 billion, trade with third countries at US$40.5 bil-lion and total COMESA trade at US$42.3 billion.

3 Trade was conducted under PTA preferences.

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Overall Intra-COMESA Trade

Of the US$42.3 billion, imports accounted forUS$26.2 billion and exports US$16.1 billion giving anegative trade balance for COMESA (then PTA) of38.5% of export receipts.

By 1996, though exports grew to US$22.0 billion, theimport bill had grown to just over US$35.2 billion, repre-senting a negative trade balance equivalent to 37.5% ofCOMESA exports. The small reduction in the relativetrade balance was partly due to the higher growth of ex-ports compared to imports. Between 1992 and 1996, ex-ports grew by an average of 7.2% per annum while im-ports grew by an average of 6.5% over the same period.

Intra-COMESA trade, on the other hand, grew by sub-stantially higher margins. Between 1992 and 1996, intra-COMESA trade grew by an average of 13.6% per annumwhile COMESA trade with third countries grew by an av-erage of 6.1%, and total COMESA trade (intra- plusextra-COMESA trade) grew by 6.5% per annum on aver-age over the same period.

From 1996 through to 1998, intra-COMESA tradegrew even faster. In 1997, intra-COMESA trade grew by8.45% while trade with third countries grew by only 2.3%and total trade by 2.8%. In 1998, total trade grew 6.2%while trade with third countries grew by 6%. Intra-COMESA trade, on the other hand went up by 10%. Thisphenomenal growth of intra-COMESA trade can be

attributed in large part to the trade liberalisation measuresbeing implemented by member States.

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The establishment of a FTA in COMESA by the year2000 is a prelude to the establishment of a CustomsUnion. The FTA is planned to operate for about 4 yearsduring which time all administrative, legal, institutional


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and logistical preparations for the operation of the Cus-toms Union are to be completed.

COMESA member States have already committedthemselves to the implementation of a Common ExternalTariff (CET) by the year 2004 of 0%, 5%, 15% and 30%on capital goods, raw materials, intermediate goods andfinal goods respectively.

Significant work has been undertaken, or is in the pro-cess of being implemented, on the design and implemen-tation of a CET, all with financial and technical supportcoming from the European Union. Notable among theseare:

• The COMESA Customs Document (COMESA-CD

• Common Statistical Rules

• Common Tariff Nomenclature

• Institutional and Administrative Framework of aCustoms Union

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In the area of trade facilitation the COMESA Secrtariat is implementing programmes to improve the tranport and communications systems of the region as welimproving information available to businessmen wishinto trade both within the region and overseas.

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The Road Transit Charges system was introduced1991 (currently being implemented by Burundi, EthiopiKenya, Malawi, Rwanda, Sudan, Uganda, Tanzani4

Zambia and Zimbabwe) and specifies that heavy gootrucks with more than 3 axles should pay a road chargUS$10 per 100km; trucks with up to 3 axles should pacharge of US$6 per 100km; and buses with a capacitymore than 25 passengers pay US$5 per 100km.

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The COMESA Carrier’s License allows commerciagoods vehicles to be licensed, with one license, whichvalid throughout the region so that the vehicles can opate in all member States. This means that vehicles pick up back-loads in other countries which makes moefficient use of the region’s transport fleet so reduces cost of trade. The license was introduced in 1991 andcurrently in operation in 9 mainland countries (BurundKenya, Malawi, Rwanda, Swaziland, Tanzania, UgandZambia and Zimbabwe).

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• Axle load limits are:

• Single steering axle = 8 tonnes

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• Tandem axle group = 16 tonnes

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The maximum vehicle dimensions approved by tCOMESA Authority (and currently implemented by Malawi, Namibia, Swaziland, Zambia and Zimbabwe) are

• 12.5m for a rigid chassis single vehicle or trailer;

• 17m for articulated trucks;

• 22m for truck and draw-bar trailer;

• 2.65 maximum width; and

• 4.60 maximum height.

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The COMESA Yellow Card is a vehicle insurancscheme which covers third-party liability and medical epenses, with a Yellow Card issued in one COMEScountry valid in all other countries participating in thscheme. At present the scheme is operational in 12 cotries (Burundi, DR Congo, Eritrea, Ethiopia, Kenya, Mlawi, Rwanda, Swaziland, Tanzania, Uganda, Zambia aZimbabwe). The insurance industries of South Africa aNamibia have expressed a wish to be part of the YellCard scheme and consultations are in progress. At preover 125 insurance companies are involved in the YellCard scheme. Annually, about 41,000 Yellow Cards aissued, a premium income of over US$2 million is colected and about 60 claims lodged. Within the last yeaYellow Card re-insurance pool has been set up and plare underway to expand the scheme to Botswana, Lesand Mozambique as well as the already mentioned cotries of South Africa and Namibia.

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COMESA has also introduced a Customs Bond Guantee Scheme, the objective of which is to eliminate avoidable administrative and financial costs that are asciated with the current practice of nationally executcustoms bond guarantees for transit traffic. It has not come into force but all member States have agreedratify the scheme as soon as possible to eliminate the nto open and close customs bond guarantees at each poentry. The introduction of the Bond Guarantee Schemeexpected to release over US$200 million held in bondsany one time.

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The Advance Cargo Information System (ACIS) iscomputer-based system, developed by UNCTAD. Tfull ACIS suite of programmes consist of PortTrackeRailTracker, RoadTracker and Lake Tracker. To daUNCTAD, the main contractor, has developed and stalled only RailTracker, which tracks cargo on the raway systems of Zambia Railways, Uganda RailwayTAZARA, Kenya Railways and Tanzanian Railways.


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A reliable, efficient and cost-effective regional tele-communications network would greatly facilitate eco-nomic integration in the region. It is recognised that theexisting network is not adequate to meet the needs of theusers and the current practice of routing regional telecomstraffic via countries outside the region (mainly in Europe)makes the implementation of competitive tariffs very dif-ficult. To address this problem, COMESA has initiatedthe establishment of a private, limited liability company(COMTEL) which will build an asynchronous transmis-sion mode (ATM) system which will link national sys-tems together. While gateway to gateway infrastructure isCOMTEL’s priority, the national infrastructures arequally important and there is a need for all countriesCOMESA to continue to develop and improve nationinfrastructures.

COMTEL is to have a strategic partner who will hol30 per cent of the equity of COMTEL, the rest beinowned by participating National Telecoms Operato(25% of the equity)and private sector investors (45equity stake). The estimated investment cost is US$3million.

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The COMESA Secretariat is making use of recent avances in information technology to fulfil its role of providing commercially valuable information to the businesector to enable them to take advantage of business optunities emerging in the region. Specifically, the COMESA Secretariat has established a website on the Inte(http://www.comesa.int) which is to be up-dated onregular basis and which is intended to be self-financi(after the initial pilot period) and so will have to meet thneeds of the users for them, or advertisers, to be willingpay for this information. The website provides information on a country as well as a sector basis. It uses infortion from a number of sources, such as the in-house NET and ASYCUDA databases (which have front-enattached to make them searchable) as well as informafrom member States themselves (including Central Baand relevant Ministries) and other international source

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In the financial sector, COMESA has an ambitious hamonisation programme which is intended to lead tomonetary union in the year 2025.

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COMESA countries in general have made gooprogress in simplifying and liberalising investment aproval processes and publishing of investment codes regulatory instruments. The Secretariat is in the procesup-dating a 1991 study it did on trade and investment lain COMESA countries. The objectives of the study areprovide information on trade and investment laws COMESA member States; create appropriate conditiofor the evaluation of a common approach to trade andvestment in the region; and serve as a basis for the harnisation of these laws. The study presents informationsix sections: Investment Laws; Taxation; Exchange Co

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COMESA is scheduled to become a Common Invement Area on the advent of the Free Trade Area in Ocber 2000.

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COMESA is scheduled to become a Free Trade AreaOctober 2000 and a Customs Union in 2004. The abseof tariff and non-tariff barriers in an FTA enhances anpromotes competition. In order to ensure fair competitiand transparency among economic operators in thegion, COMESA will formulate and implement a regionacompetition policy. The policy shall be consistent wiinternationally accepted practices and principles of copetition especially the principles of the World Trade Oganisation. Existing national competition policies shall harmonised and brought in line with the regional policyensure consistency in regional policies, avoid contradtions and provide a regionally predictable economic enronment.

The Treaty establishing COMESA provides, in Aticle 55, for fair competition within the region by prohibiting DQ\�DJUHHPHQW�EHWZHHQ�XQGHUWDNLQJV�RU�FRQFHUWHGSUDFWLFH�whose objective or effect is the SUHYHQWLRQ��UH�VWULFWLRQ�RU�GLVWRUWLRQ�RI�FRPSHWLWLRQ�ZLWKLQ�WKH�&RPPRQ0DUNHW�

The treaty adequately provides for anti-dumpincountervailing measures and safeguards in cases wnational economic development initiatives and prgrammes are in jeopardy. COMESA now working on esuring that the provisions of the Articles relating to thetrade measures (Article 51—Dumping, Articles 52—5Subsidies and Countervailing Duties, Article 55—Competition) are made operational. Article 51 paragraph 6, example, provides that a Member State may only institanti-dumping measures in conformity with regulations sby Council. These regulations will be formulated aCOMESA becomes a Free Trade Area.

With regard to the resolution of trade-related disputthe COMESA Court of Justice shall play an importarole in interpreting the provisions of, and ensuring compliance with, the regional competition policy.

The proposed study will have the following terms reference:

• To compile all competition laws, regulations anpolicies of each member State which aim at remoing or lessening the concentration of econompower into one firm or a group of firms;

• To catalogue all companies or businesses whundertake activities likely to promote unfair tradine.g. mergers, joint ventures, acquisitions, interlocing company directors for the purpose of gaininunfair market share;

• Examine trade agreements among businesses angovernments that may lead to price fixing, collusiotendering, dumping or the establishing of co


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• Document import and export business legislatioand practice to establish whether these promote concentration of economic power in a firm or a grouof firms;

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• Identify and assess institutional mechanisms member States that promote fair business practice

It is envisaged that study shall be completed by eanext year, and implementation to follow immediatethereafter.


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1 Angola 124.67 C0 24.67 17

2 Burundi 135.40 60 14.16 13

3 Comoros 125.00 80 15.00 C7

4 Congo, DR 114.00 C0 14.00 12

5 Djibouti 124.50 C0 24.50 16

6 Eritrea 160.00 80 12.00 11

7 Egypt 367.00 90 36.70 19

8 Ethiopia 123.50 C0 23.50 15

9 Kenya 118.00 90 C1.80 C3

10 Madagascar 116.00 90 C1.60 C1

11 Malawi 116.25 70 C4.88 C6

12 Mauritius 130.00 80 C6.00 C8

13 Namibia 128.66 C0 28.66 18

14 Rwanda 138.33 60 15.33 14

15 Seychelles - - - -

16 Sudan 142.00 80 18.57 10

17 Swaziland 128.66 C0 28.66 18

18 Tanzania 119.00 80 13.80 C4

19 Uganda 118.75 80 11.75 C2

20 Zambia 111.25 60 14.50 15

21 Zimbabwe 135.30 80 17.06 19