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See version in english The Limits of Competition Policy: The Shortcomings of Antitrust in Developing and Reforming Economies, A. E. RODRIGUEZ et Ashok MENON

RODRIGUEZ A. E. et MENON Ashok, Wolters Kluwer, 2010, 199 p.

The Limits of Competition Policy : The Shortcomings of Antitrust in Developing and Reforming Economies, A. E. RODRIGUEZ et Ashok MENON

A. E. Rodriguez, Ashok Menon

Nowadays, many, if not all, nations have adopted an antitrust policy and created an enforcement agency. While, according to the authors [1], effective competition legislation should reflect a country’s legal culture, as much as its political structures and economic realities, « Antitrust has the potential and the ability to inflict serious damage in developing economies. It does so by imposing costs on society. And these are costs that can jeopardize the growth and development of fragile market economies ».

Indeed, for the authors, the mere presence of « market power », which is a key concept in competition law [2], does not necessarily suggest that antitrust is the appropriate remedy. Quite the contrary, they underline the difficulty to translate this concept from theory to practice and the fact that this difficulty could be at the origin of competition policy’s observed poor performance. Besides, the authors believe that « in rooting out instances of market power, antitrust is more likely to disrupt or damage more of the incipient market economy that it is likely to protect. Entrepreneurs will opt out, or prevaricate, for fear of treading on the competition agency ». Besides, the antitrust project would ultimately « be rendered yet another inconsequential Western policy program ».

In this book, largely based on their own experience, the authors wish to address the question of the effectiveness of competition policy in developing countries and reforming economies by comparison with Western nations, and of the existence of alternatives to achieve the same objectives as antitrust.

In this respect, they explain the emergence of competition policy regimes since the mid-1980s, prior to commenting the error-cost framework which is the process used to assess the performance of antitrust in developing countries and reforming economies. This analysis allows them to illustrate both the difficulties in detecting anticompetitive behavior inherent in the practice of competition and the potential chilling effects antitrust enforcement may have.

Then the authors analyze the performance gap between developing and reforming economies on the one hand, and Western economies on the other hand, and discuss the question of a better monitoring of competition agencies.

In the following chapter, the authors layout the elements of a definition of « a » competition law emphasizing that antitrust laws all share similar economic foundations. Besides, they discuss the institutional difficulties inherent to developing and reforming economies that limit the implementation of antitrust legislation in these countries.

The authors then analyze certain difficulties in the practice of antitrust showing that « the competition laws are wholesome and cognizable copies of Western competition laws, and so is their enforcement, for the most part. Yet the observed cross-country performance outcomes have been unimpressive, a failure that is especially grating when contrasted to what was originally promised ».

Further to that, they try to demonstrate why history, institutions and economies in developing and reforming economies embedded structural features of firm behavior. For the authors, « changes in economic policies, especially the dramatic transformation from a protected to a deregulated economy, from a closed to a liberalized economy, generate substantial private transition costs » which would tend to be distributed unevenly across producers.

The authors then explain why « the likely results - and unattended consequence - of increasing antitrust enforcement will be to increase lobbying and influence peddling [...] onto a society that is already predisposed to these practices » and discuss the efforts of harmonization and internationalization of antitrust prosecution, whose the benefits are, according to them, expected to be slight.

Finally, they point out the limits of competition advocacy whose success in achieving meaningful reforms ultimately would depend on « the ability of the competition agency to not only get the microeconomics right, but perhaps more importantly, on its ability to marshal support for its positions, confront, persuade or cajole interests naturally opposed to the initiative ».

Notes

[1A. E. Rodriguez is an associate professor in the department of economics and finance of the University of New Haven, Connecticut, United States ; prior to that, he was an advisor on antitrust matters for public authorities. Ashok Menon is a principal associate at Nathan Associates Inc., an economic consulting firm based in the United States ; prior to that, he also worked for public institutions in the field of competition.

[2The so-called « market power » is exercised by firms which are capable of setting prices above those prices that would prevail under perfect competition.

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Author

  • Lallemand & Legros (Brussels)

Quotation

Audrey Blot, The Limits of Competition Policy: The Shortcomings of Antitrust in Developing and Reforming Economies, A. E. RODRIGUEZ et Ashok MENON, February 2011, Concurrences Review N° 1-2011, Art. N° 34074, pp. 245-246

Editor Kluwer Law International

Date 1 April 2010

Number of pages 232

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