The Focus of Competition Policy in Developing Countries

By Francisco Beneke*

This subject has attracted a significant amount of attention and many policy recommendations have been issued. One strong current influenced by the Chicago School of Antitrust advocates for a focus on cartel prosecution and the abolition of legal barriers to entry.

One common argument we hear in pro of this position is that in abuse of dominance cases there is a great risk of punishing what could otherwise be an efficient conduct by a monopolist. The reason is that it is less clear, even in the presence of hard evidence of the conduct, if the effects of the behavior will be to reduce consumer welfare. In the case of predatory pricing there is the issue of what should be the appropriate measure of costs, and since there is no clear consensus many authorities hesitate because no one wants to send signals that aggressive competition could be punishable. In tying cases, sometimes it is not clear whether the practice does indeed constitute an exclusionary tie or if a new functionality has been added to a product. In sum, there are greater uncertainties that surround the efficiency considerations as opposed to price-fixing or other equivalent hard-core cartel conducts.

In addition, in the academic world it is disputed what should be the attitude of the state towards monopoly. Some academics that advocate for ideas close to those of Schumpeter argue that economic growth is achieved by a succession of monopolies and therefore state interference with this process can lead to societal harm. In other words, being a monopoly is the carrot and an aggressive policy against abuse of dominance or monopolization means that the state makes the carrot look less delicious to the horse that pulls the carriage that carries the national economy.

In addition, proponents of this focus argue for the great benefits of tearing down barriers to entry created by laws and other public policy instruments. Experts point fingers at the state as the biggest distorter of markets and, therefore, the main perpetrator of market failure.

I believe these are the main arguments but please feel free to comment below if I forget an important one.

There are also advocates that urge antitrust authorities to not turn away from prosecution of abuse of dominance conduct. To keep this already long post short, I will only present an argument that I haven’t heard so much.

While it is true that there are potentially great benefits that can be achieved from successful advocacy efforts, no one will want to hear what the antitrust authority has to say unless it gains some political standing. And how could it come to have such a privileged position? By searching for, finding and punishing the most harmful and entrenched cartels and abusive dominant firms. This, accompanied by a good PR strategy, will help the authority to gain the support of the general public. Only this way it will have more leverage to pursue its own advocacy agenda and not one subject to conditions on alignment with the central government and other institutions.

So, what do you think? We look forward to reading your comments regarding what should be the focus of antitrust authorities in the developing world.

*Co-editor, Developing World Antitrust


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