Public Disclosure Authorized Transforming Markets through competition Public Disclosure Authorized New developments and recent trends in Competition Advocacy Public Disclosure Authorized Public Disclosure Authorized Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy Tanja Goodwin Martha Martinez Licetti © 2016 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data provided in the country’s submissions to the Advocacy Contest. 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Contents Contents 3 Message from the Senior Director AT THE WORLD BANK GROUP 4 Message from the Chair of the International Competition Network 5 Acknowledgments 6 Chapter 1: Introduction 8 Chapter 2: New developments and recent trends in competition advocacy 18 Chapter 3: The contest 21 Winners 39 Honorable Mentions 48 Chapter 4: Key lessons learned 52 Bibliography Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 1 2 Transforming Markets through competition Message Message from the Senior Director at The World Bank Group This publication showcases the results of the 2014–2015 Competition Advocacy Contest, the result of a fruitful collaboration between the World Bank Group’s Trade & Competitiveness Global Practice and the International Competition Network (ICN). The awardees for this, the second round of the contest, have been recognized under the theme of “inclusive growth for shared prosperity.” The winning entries submitted by competition authorities in countries around the world differ, but they all touch upon a unifying theme. It is that successful experiences in competition advocacy go beyond the mission profile or legal mandate of a single competition authority; the best results come from an integrated and coordinated strategy to infuse competition principles in all government interventions in the economy. The initiative got its start when the Bank Group’s Competition Policy practice launched a Global Competition Advocacy Contest to formally recognize countries for their efforts in conducting competition advocacy. Competition authorities play a key role in shaping market outcomes and increasing the effectiveness of broader public policies aimed at promoting robust competition in various business sectors. Competition authorities do more than enforce laws against anti-competitive practices. They also advocate against public and private sector actions that tolerate or even promote such practices. When government interventions facilitate cartels, favor specific firms, or allow incumbent firms to control markets, or where professional associations assist in coordination among competitors, competition authorities can identify and advise on the downsides of such policies and present options that strengthen competition. Advocacy initiatives lay the foundation for a pro-competition vision of Central Banks, Ministries and Sector Regulators. In Israel, a focused study on a financial services segment led the central bank and cabinet to implement more effective measures to increase sector performance. In Mexico, analysis of the effects on competition of draft laws and regulations gradually trained ministries and regulators to consider effects of policies on markets. Through advocacy in Moldova, public officials now more consistently embed non-discrimination criteria in public aids. In El Salvador, working with limited resources, the government was able to generate substantial citizen engagement in competition policy. As past contest winners have demonstrated, successful competition advocacy delivers tangible economic benefits. Preventing an association of healthcare providers in Kenya from increasing charges saved consumers around $1.7 million a year. Prices for domestic flights came down by 70 percent in Indonesia following removal of restrictive air fare regulation. Twenty-two percent more Colombians use mobile internet since a 4G spectrum auction allowed for entry of additional operators. Mexican authorities were able to spend $185 million more on public health thanks to changes in the procurement process that improved competition conditions. This publication is intended to be useful as well as celebratory. It shares broader lessons-learned on effective advocacy tools and strategies, and discusses innovative ways of adapting to new competition challenges. Whether reacting to disruptive technologies, focusing on subnational entities, or combining advocacy with enforcement measures, competition advocacy can be the seed to better understanding of market features and competition dynamics all across the government and generates momentum for a comprehensive national competition policy. The Competition Advocacy Contest has become a public good for sharing knowledge and practical experience among countries. As the Bank Group continues its collaboration with the ICN, I am confident that the emerging success will positively influence public policymaking for the benefit of consumers and businesses everywhere. Sincerely, Anabel González Senior Director Trade & Competitiveness Global Practice World Bank Group Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 3 Message from the Chair of the International Competition Network Competition advocacy is nowadays considered, together with enforcement, a core business of an antitrust authority and plays a key role in promoting a competitive environment, to the benefit of consumers and the economy overall. This is why competition agencies around the world devote constant efforts to build public support for competitive markets and address disproportionate or unnecessary public restrictions that may undermine the benefits of competition, by providing inputs to government and legislators on proposed or existing legislation, regulations, or policies. In many jurisdictions, competition advocacy appears to be the only way to address the challenges of their negative economic climate and foster growth. Recognizing its crucial importance, the International Competition Network (ICN) — a project-oriented, consensus-based, virtual network of antitrust agencies – focused on competition advocacy since its foundation in 2001, when it was formed by officials of 14 jurisdictions. Today, with more than 130 member jurisdictions, ICN provides for competition authorities a platform to share their experiences, the advocacy tools and strategies used in various contexts, for example during an economic recession, or a liberalization process, or in the contest of emerging economies. It is no surprise that as ICN chair I was delighted by the invitation of the World Bank Group to jointly launch a Competition Advocacy Contest in 2014/15 after the successful first round of the Advocacy Contest carried out by the World Bank in 2013/14. The idea of a contest to showcase successful advocacy stories was also well received within ICN as an innovative way to share experiences and learn from each other. The general theme of the 2014/15 Contest, “Inclusive growth for shared prosperity,” reflects the concerns of the wide membership of these two international organizations and the winning stories proved to be so inspiring that the Advocacy Working Group of ICN decided to present them in more detail to its members in an ICN teleseminar in November 2015. The reader will be also impressed by the stories and actions of the winning agencies reported in this publication. Building on this fruitful experience, the joint work proceeds with the organization of the 2015/16 edition of the Contest which is focused on “How to Build a Culture of Competition for Private Sector Development and Economic Growth.” I am confident that the close cooperation between ICN and World Bank will entail further opportunities for joint initiatives in the near future. The best is yet to come. Sincerely, Andreas Mundt Chair International Competition Network 4 Transforming Markets through competition Acknowledgments Acknowledgments This project was made possible through financial support from of International Affairs (COFECE); Moldova: Luminita Arama, the Facility for Investment Climate Advisory Services (FIAS) and Head of External Relations and European Integration Unit programmatic support from the United Kingdom’s Department (CCRM), Viorica Carare, President (CCRM); New Zealand: for International Development (DfID). Nicky Beechey, Chief Adviser (NZCC); Portugal: Cristina Camacho, Head of the International Relations Unit (PCA) and The World Bank Group’s Trade and Competitiveness Global Maria João Melícias, Member of the Board (PCA); Russia: Practice (T&CGP) wishes to thank the competition authorities Anna Pozdnyakova, Consultant (FAS); Singapore: Lim Wei of participating governments for their entries in the Competition Lu, Assistant Director (CCS) and Ng Ming Jie, Senior Assistant Policy Advocacy Awards Competition. Among the honoree Director (CCS); and South Africa: Donnavan-John Linley, countries, we would particularly wish to acknowledge the Economist (CCSA) and Tembinkosi Bonakele, Commissioner, contributions of officials working in the competition policy field: (CCSA). El Salvador: Karla Chinchilla, Communication Director (SC), Cesar Azmitia, Digital Manager (SC) and Regina Vargas, Head This book was prepared by Tanja Goodwin (WBG) and Martha of Competition Advocacy (SC); Finland: Teem Karttunnen, Martinez Licetti (WBG). It has benefited greatly from comments, Senior Research Officer (FCCA); Greece: Dimitris Loukas, inputs and technical discussions with Lucía Villarán (WBG) Vice-President (HCC) and Lila Katsereli, Head of Competition and peer reviewers Álvaro Quijandría (WBG) and Tony Gooch Advocacy Unit (HCC); Iceland: Páll Gunnar, Director General (Senior Competition Expert). The suggestions of the peer (ICA) and Hilmar Thordarson, Director of Administration (ICA); reviewer Alessandra Tonazzi (AGCM) and the support by the Indonesia: Wahry Retno, Senior Investigator (KPPU); Israel: ICN Advocacy Working Group are gratefully acknowledged. Noa Zvi-Oliver, Director of International Affairs (IAA) and Research assistance was provided by Guilherme de Aguiar Dana Heller, Head of Competition Division and Deputy Chief Falco (WBG). Writing and editing support was provided by Kim Economist (IAA); Kenya: Lilian Mukoronia, Senior Advocacy Murrell. Design and layout of the publication were undertaken by Officer (CAK) and Maryanne Nduati, Policy & Research Analyst Corporate Visions, Inc. (CAK); Malawi: Lewis Kulisewa, Director of Consumer Welfare and Education (CFTC), Charlotte Wezi, Executive Director The preparation of the publication was carried out under the (CFTC); Mexico: Carolina Garayzar, Deputy Director General guidance of Anabel González and Jose Guilherme Reis at the WBG. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 5 Chapter 1 Introduction Over recent years in the face of persistently low growth of the other small businesses. In Kenya, poverty could fall by 2 percent world economy, competition — the process of rivalry between if competition was more intense in the maize and sugar markets firms seeking to win customers’ business — has been more widely while in South Africa, WBG estimations suggest that around recognized to be a critical driver of performance and innovation in a 200,000 people stood to be lifted out of poverty (equivalent to a national economy and consequently therefore of economic growth 0.4 p.p. fall in the poverty rate) just by tackling cartels in only four and consumer welfare. This recognition has particularly gained basic products (maize, wheat, poultry, and pharmaceuticals).4 ground in many developing economies where the low growth environment is putting progress and shared prosperity at risk. In Effective competition policy aims at achieving open, contestable Latin America and the Caribbean, growth-driven social progress and competitive markets. Therefore, competition policy does not is stalling, in Middle Eastern and Northern African economies, the only imply solid enforcement of competition laws, but also proper transition towards market economies and inclusive institutions are design and implementation of government intervention in markets.5 threatened by the persistent lack of good job opportunities while These interventions are most effective when — while maintain- other more fragile economies in East Asia Pacific and Sub-Saharan ing their regulatory objective — they enable rather than unduly Africa will suffer from the investment crunch. restrict competition. Competition authorities play an active role in promoting and advocating for sector-regulation that is conducive In this environment, internal growth drivers such as domestic to competition, broader public policies that embed competition market competition have consequently been receiving high-level at- principles, rules for State-Owned Enterprises that guarantee their tention. Competition policy is a set of policies and laws that ensure competitive neutrality, and mechanisms that ensure that state aid competition in the marketplace is not restricted in such a way as to does not distort the level playing field.6 Competition advocacy reduce economic welfare and thereby promotes economic growth embraces all these activities conducted by a competition agency and shared prosperity in two ways: related to the promotion of a competitive environment by means of non-enforcement mechanisms, mainly through its relationships with Firstly, as several World Bank Group (WBG) and other publications other governmental agencies and by increasing public awareness have shown, competition in the marketplace matters for economic of the benefits of competition.7 Competition advocacy is therefore a growth as it fosters more productive firms and industries,1 allowing core function of competition authorities and highly complementary domestic firms to become more competitive abroad leading to to competition law enforcement. Together, competition advocacy higher levels of exports.2 Substantially increasing competition in and enforcement can ensure that citizens benefits from vibrant, Tunisia has been estimated to boost labor productivity growth by competitive and contestable domestic markets. 5 percent in one year. In Brazil, Kenya, Peru and South Africa improving regulations of services sectors that are currently restrict- This publication provides an assessment of new developments ing competition could add between 0.1 and 0.5 percentage points and recent trends on competition advocacy based on an innovative to GDP growth.3 and comprehensive conceptual framework that builds on practical implementation by authorities across jurisdictions. The following Secondly, competition policy ensures that the benefits of vibrant chapter systematically reviews different objectives of advocacy, economic activity accrue also to consumers on the lower end of the tools that authorities have been employing to these ends, the the income scale, namely the poorest 40 percent of each country’s population. A lack of competition in food product markets and retail, as a result of anti-competitive practices or regulations that 4 Argent and Begazo (2015). restrict or prevent competition, affect the poorest households more 5 Following the World Bank Group’s Markets and Competition Policy Assessment Tool (MCPAT), government interventions include direct than better-off households while competition in input markets government participation in markets as a supplier or buyer of foods and and reduced buyer power have positive effects on farmers and services as well as indirect participation in markets through government policies, regulations, rules, procedures and actions of government of- ficials that affect decisions made by market players regarding economic matters. 1 See Kitzmuller and Licetti (2012). 6 This also includes self-regulation schemes established by professional 2 Goodwin and Pierola (2015). and business associations that affect incentives of market players to 3 Purfield et al. (2016), Vostroknutova et al. (2015), World Bank compete in a particular market. (forthcoming). 7 As defined by the International Competition Network (ICN). 6 Transforming Markets through competition Chapter 1 scope of legal mandates on the basis of which authorities develop Advocacy Contest for 2014/15. The final chapter extracts the key these tools and the strategies with which authorities achieve lessons learned from successful competition advocacy initiatives, tangible impacts for consumers and the broader economy. Against drawing on the results from all awarded stories under the Annual this background, the third chapter of this book further presents Competition Advocacy Contest and the experience of the World the individual results of advocacy initiatives awarded at the World Bank Group in implementing competition policy projects and pro- Bank Group’s and International Competition Network’s Competition viding support to competition advocacy in 40 countries worldwide. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 7 Chapter 2 New developments and recent trends in competition advocacy This chapter provides an innovative and comprehensive (b) the various areas of analysis on which advocacy initiatives are conceptual framework of competition advocacy tools and based; (c) examples of tools employed to implement advocacy strategies implemented and developed recently by competition (further detailed in Figure 2) to achieve the initial objectives; (d) the authorities across the world. Special emphasis is given to newly sets of mandates that competition authorities hold across the globe emerging developments and trends that have proven to be with varying degree of specificity and compulsion in their terms; effective in developing countries. The framework is based on the and finally (e) the advocacy strategies that make a difference in ICN Advocacy Toolkit, the WBG Markets and Competition Policy whether or not a tool or mandate is well implemented to achieve Assessment Tool (MCPAT) as well as the project experience of the initial objective. the WBG’s Competition Policy Cluster in over 40 countries. Most of the examples provided for illustration purposes are drawn from the set of awarded initiatives under the WBG’s Annual Competition Objectives of advocacy initiatives Advocacy Contest. Competition advocacy initiatives generally have at least one of the following rationales: The why and how of competition 1. Advocating for a change in the way that governments advocacy intervene in the markets, which may imply: (a) Modifying a (proposed or existing) regulation or economic While competition advocacy has a common and clear ultimate policy that (i) reinforces dominance or limits entry, (ii) goal of promoting competition and achieving better market is conducive to collusive outcomes or increases costs outcomes, the means to attain this goal are multi-faceted. to compete in the market, and/or (iii) discriminates and Figure 1 summarizes and visualizes the overarching framework for protects vested interests; advocacy initiatives: (a) the objectives of competition advocacy; Figure 1. Framework for advocacy initiatives Advocacy objectives General areas of analysis Advocacy tools Advocacy mandate Advocacy strategies for advocacy (Examples) Advocating for a change in the Regulatory reform and Competition impact assessment Explicit mandate to issue opinions Technological solutions way that governments economic policies of regulations and government intervene in the markets policies Binding opinions Compulsory power of opinion Investment Incentives and Early engagement / Anticipation public aid Assessment of potential effects Provision obliging public body to justify of privatization itself and/or deviation from opinion design of privatization conditions Take advantage of country’s Deregulation or proposals for Non-binding opinion economic/political trends Conducting activities that regulation increase knowledge of key Subsidiarity/competitive Non-binding opinion (only on existing Limiting the scope of market to stakeholders about the neutrality analysis prior to regulation) be addressed rationale and benefits of Privatization, SOEs and change in SOE mandate competition policy competitive neutrality Explicit mandate to conduct market studies Focus on reform feasibility Guidelines for trade, or sector inquiries Competition policy in regulated professional and business sectors associations Explicit mandate to prior opinion in decisions Independent panel to receive and administrative procedures regarding and evaluate the information Advocating for a change in privatization, price control, public aid, (de-) private companies’ behavior in Compliance … regulation, SOE-mandates; concessions, the market and compliance Inter-agency cooperation (both public and private sector) (see full list in Fig. 2) licenses and tenders in regulated sectors 8 Transforming Markets through competition Chapter 2 (b) Minimizing distortions caused by selective industrial policies Malawi’s Competition and Fair Trading Commission (CFTC) investment incentives and public aid; was successful in removing the restrictions on how wholesale distributors’ could procure sugar, so that they would operate (c) Supporting decisions on when competition conditions call under the same terms as the wholesalers linked to the national for regulation/de-regulation; sugar monopoly. This contributed significantly to the process (d) Providing mechanisms to establish a level playing field opening up the sugar sector. In Kenya, the intervention of the between competing private and State Owned Enterprises competition authority against a coordinated prices increase set (SOEs); up through self-regulatory measures in the private health sector (e) Guaranteeing competitive conditions for auctions and public was a key case that stimulated a “special compliance process.” private partnerships and/or privatizations; Associations in the agricultural and financial sectors have been given a grace period of eight months in which to dismantle anti- (f) Clarifying and delineating the reach of respective legal competitive agreements, failing which they face the full criminal mandates of competition authorities and sector regulators and administrative sanctions per the Competition Act. Indonesia’s as well as other agencies regarding the promotion of competition authority overturned anti-competitive pricing rules competition principles, and collaborating across these set up by the Air Carrier Association which was critical for more institutions to implement competition policies in regulated affordable air fares in this archipelago. In Moldova, as in many sectors; countries with developing market economies, enterprises can be at (g) Embedding competition principles in broader economic a competitive disadvantage in a market when rival firms receive aid policies (trade, business environment and regulatory selectively from the State. Moldova’s Competition Council (CCM) reform, sectoral policies, incentives and investment policy, has introduced an on-line State Aid Register for the reporting and among others). monitoring of all state aid disbursed by all agencies throughout the country. This will provide full transparency and enable the 2. Conducting activities that increase knowledge of detection, investigation and elimination of anti-competitive forms of key stakeholders about the rationale and benefits of state aid. competition policy (e.g., civil society, media, judges and policy makers), which may include: Fomenting knowledge about the rationale and benefits of com- (a) Increasing awareness of the ways that incorporating petition policy can mobilize civil society to counterbalance an competition principles in regulatory and broader economic adverse political economy. Portugal’s government-backed “Fair policies can promote and protect the consumer benefits Play — with Competition Everybody Wins” campaign targeted a associated with vigorous competition; lack of awareness among the business community that competition was a key structural factor in the country’s economic recovery. The (b) Providing technical expertise regarding particular industries campaign was well-received by business representatives; a citizen or markets to other policy makers; survey suggested that 90 percent of the Portuguese population (c) Increasing awareness of the impact of competition enforce- agrees that competition allows for better prices for consumers ment on citizens and business. compared with less than 80 percent in several EU countries.8 3. Advocating for a change in private companies’ behavior in Clarifying the scope of competition laws promotes transpar- the market and compliance, which may include: ent enforcement and better compliance with the law. In New (a) Clarifying applicability of competition law to conduct or Zealand, the Commerce Commission (NZCC), foreseeing a self-regulation under Trade and Business Associations; high risk of anti-competitive behavior in the re-building of areas devastated by the 2010/11 earthquakes, launched a successful (b) Promoting compliance with the law and/or voluntary cease advocacy campaign aimed at firms in the construction sector to of anti-competitive practices through special programs with educate and guide them on how and why to comply with competi- grace periods; tion and consumer protection laws. The campaign succeeded in (c) Promoting compliance in public procurement through heightening awareness among suppliers of goods and services in certificates of Independent Bid Determination. the construction sector of the competition and consumer protec- tions laws and the risks of not complying with them. Advocating for governments’ pro-competitive role in markets as regulator and direct market participant is critical to opening key markets and promoting a level playing field. For example, 8 http://ec.europa.eu/competition/publications/reports/survey2014/citizen_ summary_en.pdf Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 9 Advocacy tools intervention or private firm behavior. In this sense, competition authorities have developed different ways in which they interact Competition authorities have developed a variety of tools with public authorities that introduce price controls, public aid to implement advocacy and address potential or existing schemes and investment incentives to promote that competition obstacles to effective competition in the market. Figure 2 principles are adhered to. Competition authorities have helped lists the advocacy tools that have been applied by Competition shape privatization processes to avoid undue reinforcement of Authorities in the ICN-WBG Advocacy Contest and in WBG dominant positions, facilitation of collusion or market foreclosure, projects. The graph further maps the tools to their general area of and have worked to ensure that government participation in the competition analysis (such as regulatory reform), the element that market meets competitive neutrality criteria. Competition authorities it addresses (such as a particular regulation that inhibits competi- have also been called upon to assess competition conditions prior tion) and the timing of when the advocacy tool is used (when the to a decision to regulate the market. Finally, advocacy tools can measure is under discussion, i.e., ex-ante, or already in place, i.e., consist in general guidelines to orient public officials or private ex-post). Not only can several tools be used simultaneously and in market players on how to comply with the law and not unduly limit a complementary fashion, they may address several issues in the competition. market and be ex-post (with respect to the existing framework) and ex-ante (of the proposed new framework) at the same time. Most of the time, these advocacy tools result in specific opinions or recommendations. They are transmitted in formal For example, several competition authorities regularly assess ways through official publications or in informal ways through the potential impact on competition that a particular regulation bilateral conversations and knowledge-sharing. Recommendations or policy may have on a particular market. Mexico’s Federal and opinions can be binding or non-binding, though by and large, Economic Competition Commission (COFECE) successfully when an advocacy tool is used upon request by another authority, worked with the Federal Commission for Regulatory Improvement the opinions are of a more binding nature. (COFEMER) to ensure that competition issues are taken into account while new regulations are being drafted. As a result of their joint advocacy effort, competition impact assessments are now part of the mandatory system for the clearance of all federal regulations Role of a formal advocacy mandate before they are issued. A worldwide comparison of explicit mandates for advocacy tools described above reveals that these vary greatly across In many cases, a competition authority is not expressly income levels and regions. Among economies with competition requested to review the impact on competition, but proac- laws in place, competition authorities have an explicit mandate to tively decides to undertake this assessment and propose issue opinions in 94 percent of lower-middle-income economies, recommendations. For instance, the Competition Commission of while in low-income economies only 27 percent of authorities Singapore engaged early on with the Land Transport Authority to have explicit powers (see Figure 3). Meanwhile, across all income share their views on the potential regulatory design of new actors groups, between half and three-quarters of all authorities have an in the taxi market. This opened the door for a continuous dialogue explicit mandate to conduct market studies or sector inquiries. on the draft regulation until it was adopted. There is no clear relationship between the scope and ef- Many competition authorities also review existing sector- fectiveness of advocacy initiatives and registering a more specific regulations for potential barriers to competition and explicit advocacy mandate. It is also not evident that authorities issue ex-post opinions on competition effects of regulations in higher income countries tend to gain more explicit mandates. already in place. In a special initiative, Greece’s Competition Further analysis reveals that registering an explicit mandate and Commission undertook a comprehensive competition assessment conducting effective advocacy are related to separate factors. First, in numerous sectors simultaneously in order to provide the developing economies typically enacted their competition legal government with a substantial reform agenda, and reactivate framework more recently and typically include explicit mandates competition and economic activity in key markets. for all responsibilities of a modern competition authority (see Figure 4). Second, although competition frameworks in high- As described above, the objectives of advocacy involve not income economies were originally developed with more narrow only modifications of regulation that may inhibit competition mandates and competition authorities then gradually extended their but more broadly addressing any cause for lack of com- scope of activities, the original legal frameworks are less frequently petition, including endemic market features, government 10 Transforming Markets through competition Chapter 2 Figure 2. Advocacy tools General areas of analysis The ex ante advocacy tools The element that affects the market The ex post advocacy tools Regulatory reform and Ex ante competition impact assessment of regulations and Government policies, regulations and rules that inhibit Competition assessment of regulations and economic policies gov’ policies, by request (e.g., during a RIA) or by own initiative competition gov’ policies already in place Investment incentives and Prior review of specific public aid scheme Selective and discriminatory public aid Effect-assessment of granted public aid public aid Public Aid Inventory and Online Portal Deregulation or proposals Prior review/approval of price controls Price controls in markets where competition is viable Analysis of effect and potential for removal for regulation Assessment of competition conditions prior to decision Analysis of changes in competition and potential Absence of market competition to regulate for deregulation Privatization, SOEs and Assessment of potential effects of privatization itself and/or Potential for strengthening dominant position, Assessment of competition safeguards if competitive neutrality design of privatization conditions facilitating collusion or market foreclosure included in privatization schemes Subsidiarity/competitive neutrality analysis prior to Preferential treatment towards SOEs (distortive effects of direct government participation) Competitive neutrality analysis change in SOE mandate Competition policy Analysis of anticompetitive effects of: in regulated sectors • Transfers of license in regulated sectors Potential for strengthening dominant position, • Tender/ auctions facilitating collusion or market foreclosure Analysis of harm and removal to align • Renewals of concession contracts government actions or private sector Advocacy for compliance Guidelines for public officials (e.g., in public procurement) Unintended distortive actions of government officials self-regulations/internal guidelines with (both public and private sector) Guidelines for Trade, Professional and Business Associations competition framework Private market player behavior Tools that inform and complement Market studies and sector inquiries ex ante and ex post advocacy tools Multiple activities (workshops, trainings, roundtables, PPDs, guidelines) Figure 3. Scope of explicit advocacy mandate, across income categories 100% 80% 60% Explicit mandate to issue opinions on regulation Explicit mandate to conduct market studies 40% or sector inquiries 20% 0% Low-income Lower-middle- Upper-middle- High-income Contest economies income income OECD winners economies economies economies Source: WBG analysis based on publicly available legislative frameworks and secondary reports or questionnaires. WBG income classification: Low-income economies: Burkina Faso, Burundi, Ethiopia, Gambia, Malawi, Mali, Mozambique, Rwanda, Tanzania, Togo, Zimbabwe; Lower-middle-income economies: Armenia, Cameroon, Côte d’Ivore, Egypt, El Salvador, Honduras, India, Indonesia, Kenya, Moldova, Morocco, Pakistan, Philippines, Senegal, Swaziland, Vietnam, Zambia; Upper-middle-income economies: Algeria, Botswana, Brazil, Colombia, Dominican Republic, Equator, Gabon, Jordan, Kazakhstan, Mau- ritius, Mexico, Namibia, Peru, Romania, Russia, Serbia, South Africa, Tunisia; High-income economies, OECD Members: Australia, Canada, Chile, Finland, France, Germany, Greece, Iceland, Israel, Italy, Japan, New Zealand, Norway, Portugal, Singapore, Sweden, Switzerland, The Netherlands, United Kingdom, United States; Contest winners: El Salvador, Finland, Greece, Iceland, Indonesia, Israel, Kenya, Malawi, Mexico, Moldova, New Zealand, Portugal, Russia, Singapore and South Africa. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 11 Figure 4. Average year of enactment of the competition policy law High-income OECD economies Developed countries Winners Upper-middle-income economies Developing countries Lower-middle-income economies Low-income economies 1970 1975 1980 1985 1990 1995 2000 2005 Source: ibid. updated than in developing economies9 — in part because their only have explicit mandates to review and provide opinions that are implicit mandate is often strong enough to effectively implement already in place and in none of these cases are recommendations these functions. Third, there are regions where explicit advocacy binding. Most of the recommendations by Contest Winners were mandates are more commonly included in the competition either non-binding and were still implemented thanks to effective framework than in others (see Figure 5, e.g., Eastern Europe and strategies. Central Asia (ECA) and Latin America and the Caribbean (LAC) versus Sub-Saharan Africa (SSA)), and yet, this is not reflected in In sum, the scope and explicitness of the mandate for under- systematic differences in advocacy-effectiveness across regions. taking advocacy varies and over time, even without explicit Most notably, authorities with successful advocacy initiatives that mandate, authorities have been able to build effective track have won the Competition Advocacy Contest have not necessarily records on advocacy based on their more general mandate. had more explicit mandates. While competition laws enacted more recently typically include a more specific mandate for a particular advocacy tool (such as Regardless of income level and geographical location, in the opinions or market studies), this has not shown to be a guarantee great majority of economies that have an explicit mandate to for impact on markets. To the contrary, gaining explicit mandates issue opinions, they are non-binding and have often proven to before the necessary institutional capacity is in place can turn be effective nonetheless. Nevertheless, in upper-middle-income formal competition advocacy procedures into a burden for effective and high-income countries it is common for other public bodies to regulatory policy. Moreover, individual country examples show how justify any deviation from the official recommendation by a competi- competition authorities have developed successful and impactful tion authority. In lower-middle-income and low-income economies, advocacy prior to gaining more specific advocacy mandates. it is most common for antitrust authorities to issue recommenda- tions ex-ante or ex-post that have no binding nature at all and do not require an official response from the respective public body Advocacy strategies addressed (see Figure 6). Finally, there are a few countries that Successful competition authorities are increasingly aware of political economy challenges to achieving pro-competition 9 For example, even though competition laws in countries such as the US, changes in regulation or market behavior, and are therefore Germany and Sweden do not have formal provisions for opinions on creative in the practical implementation of advocacy tools. competition assessment or regulatory review, their competition authori- ties regularly engage in formal or informal exchange with other public bodies on approaches to minimizing undue negative impact of regula- tions on competition dynamics. 12 Transforming Markets through competition Chapter 2 Figure 5. Scope of explicit advocacy mandate, across regions 100% 90% 80% Explicit mandate to issue opinions 70% on regulation 60% Explicit mandate to conduct market studies or sector inquiries 50% CA mandated to publish its advocacy opinions 40% CA requests feedback to industry/public about market studies 30% 20% 10% 0% Developed ECA (6) LAC (9) MENA (5) SSA (22) Contest countries (19) winners (15) Source: WBG analysis based on publicly available legislative frameworks and secondary reports or questionnaires. WBG geographical classification. Eastern Europe and Central Asia (ECA); Latin America and the Caribbean (LAC); Middle East and Northern Africa (MENA); Sub-Saharan Africa (SSA). For East- Asia Pacific (EAP) and South Asia (SA), the sample-size was less than 5; Contest winners: El Salvador, Finland, Greece, Iceland, Indonesia, Israel, Kenya, Malawi, Mexico, Moldova, New Zealand, Portugal, Russia, Singapore and South Africa. Figure 6. Compulsiveness of opinions issued in advocacy initiatives 100% 90% 80% 70% They are non-binding and public bodies do not need to justify when ignoring them 60% They are non-binding and can only be issued 50% with respect to regulation already in place Public bodies must justify if they deviate 40% from them 30% They are binding 20% 10% 0% Low-income Lower-middle-income Upper-middle-income High-income OECD Contest economies economies economies economies winners Source: WBG, idem, figure 3. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 13 The advance of technological solutions is not only a challenge for platforms, but not on private car-hire companies such as Uber. In competition authorities in regulating the market, but also an op- the decision of which sectors to choose, reform feasibility as well portunity for their own operations. Benefits of competition are vast as relevance to consumer welfare are often taken into account. in sum, but often dispersed, while barriers to competition typically Israel’s Antitrust Authority saw the largest disparity between benefit a small number of well-connected actors. Social media internationally common market features and realities in Israel in and other digital platforms have been instrumental in engaging the immediate debit card payment segment. The reforms did not with a multitude of stakeholders that gain from competition while require an overhaul of the entire payment system or even payment operating under scarce resources. card market and were highly impactful at the same time. Malawi’s Competition and Fair Trading Commission first focused on an acute Several of the winning or commended entries have employed complaint by business owners on the access conditions to sugar in digital means to spread a culture of competition: a unique on-line the wholesale segment, before later on engaging on discussions portal in Moldova now tracks and monitors state aids; a digital, about the broader policy for the sugar market. interactive app to raise public awareness of competition problems has been widely used and cited in El Salvador; and finally digital This contrasts particularly with the experience in several countries aids supported the “Fair Play” advocacy campaign in Portugal where authorities — including some recently established — during the financial crisis. embarked on a number of market studies that at the end did not lead to tangible changes and results in the market. This highlights Digital platforms for communicating and also administering the importance of using market studies wisely and selectively. interinstitutional coordination are cost-effective and transparent, but must be tailored to the level of IT skills and familiarity of Some authorities have chosen an independent panel to receive the targeted population. In the case of tools with non-standard and evaluate the information in order to gather the best first-hand interfaces (such as a dedicated state aid portal) these must be and untainted information about the market. South Africa’s accompanied by tutorial sessions and capacity-building. Competition Commission set-up an independent and balanced panel to receive written submissions and conduct public hearings. It is easier to prevent an anti-competitive regulation or public policy In some cases, it may even be advisable to allow for anonymous than try to reform it when vested interests have already begun to and confidential information-gathering. New Zealand’s Commerce form, so anticipation is essential for many successful interven- Commission hired an independent group to study practices in the tions. For example, New Zealand’s Commerce Commission construction sector and gave the firms interviewed assurances that reacted quickly in the aftermath of the earthquake, Singapore’s no enforcement action would be taken as a result of any revela- Competition Commission reached out to Transport Regulator early tions arising from the interviews. The research revealed important on, and Iceland’s Competition Commission predicted competition information on common practices in the sector that would be challenges and suggested competition impact assessments prior elementary to designing the advocacy campaign. to refinancing decisions. However, this proactive or rapid-response style works best when the authority has a long-standing relation- Several awards went to competition authorities that have worked ship with the regulators and industry. closely with other agencies and have balanced competition goals with other public interests. CCS built on an established relationship Competition authorities’ advocacy programs have shown to be with the Land Transport Authority to secure the preservation of more likely to succeed when addressing a pressing national prior- competition principles in the regulation of third party taxi-booking ity. Several entries were in tune with their country’s political cycles apps. It did so while acknowledging that there were legitimate and economic trends. The financial and economic crisis in Europe safety and other public policy issues that needed to be taken into was a major setback to many markets but was also an opportunity account. In Malawi, for example, the collaboration of the Ministry for agencies such as those in Greece, Portugal and Iceland to put of Industry and Trade was pivotal in securing the success of the forward market-oriented policies and effective competition as tool advocacy effort and in stimulating further moves to open up the for much needed productivity boosts. sugar market. In South Africa, so as to achieve implementation of 28 recommendations from the banking enquiry, the Competition For very specific objectives, competition authorities have fared well Commission conducted a wide-ranging program of advocacy to when clearly delineating the market or sector targeted. Even in a engage with the key stakeholders, including government agencies sector enquiry as broad as the one in the banking sector in South that would be responsible for acting on the recommendations. Africa, the authority consciously decided to exclude the lending market and interest rates. Singapore’s Competition Commission (CCS) has so far only issued a position on third-party booking 14 Transforming Markets through competition Chapter 2 New frontiers in competition consistent application of procedures for licensing or public support measures. The competition agencies in both countries advocacy engaged with municipalities and other local bodies that were Several competition advocacy initiatives in recent years stand often ill-equipped and acting within a legal framework that was not out for tackling new competition challenges and devising sufficiently watertight to avoid discretionary implementation. This is innovative advocacy programs that push the frontier of how to key especially for federal nations where subnational entities have influence competition dynamics for the benefit of citizens. considerable autonomy, but also for highly centralized nations in which the implementation capacity at the local level can be poor. 1. Advocacy strategies are becoming even more anticipatory: several competition authorities are beginning to intercede at the The efforts by the contest winners and honorees have reinforced advent of disruptive technologies and other innovations. the lessons from last year’s winners that enforcement and 2. Objectives of advocacy are becoming more targeted, as advocacy work in concert. Advocacy campaigns focusing on authorities are beginning to engage more closely with compliance work well where the authorities, as in New Zealand, subnational entities in order to ensure healthy competition have a strong reputation not only for understanding markets but dynamics in local markets. also for competition law enforcement. It is a far greater challenge for competition authorities in developing countries to convince 3. The use of advocacy strategies and tools is more closely business leaders that competition law will be enforced effectively. linked to specific objectives and therefore content-driven. The initial indifference of the business community to competition Young agencies, for example, are combining more “lenient” principles and to the threat of punitive action against non- enforcement measures with more forceful advocacy compliance is particularly marked in countries with a relatively new activities in order to achieve rapid changes of market behavior. competition regime. 4. Through advocacy, competition authorities play an essential role in developing and sharing market-specific knowledge Entries this year further showed that not only do advocacy pro- and expertise across the entire government. grams benefit from a credible enforcement threat but that advocacy can also ensure higher effectiveness of enforcement actions. When 5. Advocacy-initiatives have more and more concrete spill-over non-compliance goes unpunished (due to court appeals or public effects in policy areas that matter for economic develop- pressure on the Authority to revoke the ruling), even a cease and ment, including direct state participation in the market. desist order will not bring about the desired change in market behavior. Innovative advocacy measures can help to shape public Disruptive innovations call for frontier solutions by the authori- opinion in favor of the authority’s mandate, raise awareness of ties: In Israel and South Africa, authorities engaged in thorough those affected by continuous non-compliance and achieve results market enquiries in specific banking and financial services markets in the market more quickly. to understand the needs for regulatory intervention and the potential benefits of easing restrictions whenever not indispens- In Malawi, industry calls for a reversal of the competition authority’s able for public policy objectives. This brought questions to light cease and desist order for sugar distributors prompted the authority on whether certain upstream charges in payment systems need to mount an advocacy campaign to educate industry participants to be regulated, or when and how non-traditional banks should about the Competition and Fair Trading Act and the consequence be allowed to participate in the payment systems. In Singapore, of non-compliance. This succeeded in changing entrenched CCS’s assessment of the new taxi-booking platforms operating attitudes in the industry. The Kenyan competition authority on smartphones similarly confronted the authority with questions engaged in an awareness campaign soon after the introduction of such as whether private car-hire and car-sharing providers should competition law, considering this preferable to immediately taking be allowed, and if so, regulated under the same standards. In resource-intensive prosecutorial action when a breach of the Act each case, the authorities successfully engaged with regulatory is suspected. As well as reducing short-term regulatory costs for bodies in explaining the market and its competition dynamics and the competition authority, such campaigns can ensure buy-in to advocated for appropriate regulatory measures. competition laws from firms and encourage them to voluntarily comply in the future, so avoiding subsequent regulatory costs and The level playing field among competitors in local markets can allowing a competition authority to use its resources optimally. be distorted if subnational authorities enforce the national legal framework or regulations in different and potentially discriminatory Enforcement can lead to effective advocacy for changes in ways. The entries from Moldova and Finland illustrate that sector-specific government interventions, too, for example when subnational entities play a big role in ensuring a coherent and the enforcement case made evident which government intervention Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 15 was facilitating the practice. There are risks, however, when SOEs in key markets including energy subsidies provided through advocacy (based on sector-specific studies in which private parties SOEs which has broader consequences for climate change and participated and shared information) is followed by enforcement fiscal stability. actions, since there are several aspects of procedural fairness that are being raised by parties. Ultimately, regardless of the advocacy areas, the tools utilized and the political economy challenge, a solid grounding in Effective advocacy goes beyond general awareness raising understanding the market is the one common element for and is increasingly data-driven. This implies that competition success. A key ingredient to being able to choose a sector authorities assume a leading role in generating and communicating in which competition will make the difference, the right tool to specific knowledge on how different policy options may affect a convey the key messages to stakeholders in charge and the particular market. In Singapore, the insight into market dynamics practical implementation technique is a solid understanding of the of taxi networks did not just inform the competition authority’s economic characteristics and incentives of all actors in the market. recommendations but also served as a basis for regulatory deci- Iceland’s competition agency was able to catch the potential risk sions by the sector-regulator. In Israel, the empirical findings from to competition that the bail out policy by state-funded banks posed the report in the payment services industry laid the groundwork for for the heavily affected markets. It did this by rigorously studying targeted advocacy by the competition authority but also triggered past experiences of financial crises on competition dynamics further analysis by other public authorities on where regulatory in certain sectors. Mexico’s competition authority was given an intervention was needed. In sum, the understanding of market ample mandate to review draft regulation after establishing a track dynamics that competition authorities provide can help balance record in judging the need for regulatory intervention to achieve competition with other regulatory objectives. policy objectives in very specific market segments. The Greek competition authority’s task of deciding over licensing requirements Competition advocacy has concrete spillover effects in policy for professional services required a case-by-case analysis of each areas that matter for economic development. In public procure- individual trade. In sum, wherever authorities have long-standing ment, competition authorities no longer only address specific engagements with the industry and regulatory counterparts, they factors that facilitate anti-competitive practices, but competition are better able to react swiftly and with sound recommendations. In agencies in South Africa and Mexico actively work with public the years ahead, knowledge of market and competition dynamics procurement authorities to more broadly improve tender design. will be increasingly important to conduct sound microeconomic The Russian competition authority supported effective imple- policies. Ultimately, this knowledge is essential for competition, mentation of trade commitments and allowed more gains from an tax policy (transfer pricing in particular), regulatory reform, specific open economy to accrue to domestic producers and consumers. sector regulations and active industrial policies. How and where Moldovan authorities have improved sector-specific or regional to place this capacity within the State structure and how to make development policies by ensuring that related incentives and state information flow effectively for the different uses will become even aid measures do not work against effective market dynamics. A more relevant and — if endowed with the right resources and new area where competition authorities are beginning to advocate capacity — competition authorities could play an important central more forcefully for competition principles and will need to further advisory role. develop effective advocacy strategies relates to the participation of 16 Transforming Markets through competition Chapter 2 Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 17 Chapter 3 The Contest In 2013, the World Bank Group started an initiative for a global successful; (iii) overcoming political economy difficulties; and (iv) platform to share lessons learned on how to promote competition specific impact of the results. policy — specifically through competition advocacy initiatives. The general topic of the 2014/15 contest was “Inclusive growth Competition advocacy embraces all those activities conducted by for shared prosperity.” Contestant agencies were judged on their a competition agency related to the promotion of a competitive performances in three thematic areas, with winning agencies and environment by means of non-enforcement mechanisms, mainly honorable mentions announced in early 2015. The themes and through its relationships with other governmental agencies and by winners are listed below. increasing public awareness of the benefits of competition.10 This “soft” approach seeks to address fundamental barriers to effective competition, such as anti-competitive regulation or economic activi- Theme 1: Promoting procompetitive reforms that ties by the public sector, in favor of a business culture supportive foster growth and reduce inequality: Winners: Kenya of free and open competition and a set of rules structured and and Malawi; Honorable mentions: Finland, Indonesia and implemented so that anti-competitive behavior is less viable or Russia. profitable. The proceedings of the First World Bank Group’s Competition Theme 2: Promoting awareness of benefits of Advocacy Contest in 2014 highlighted the extent to which develop- competition in a time of crisis: Winners: El Salvador and ing economies were not yet yielding innovative, low-cost solutions New Zealand; Honorable mentions: Greece, Iceland and for consumers and businesses due to lack of effective competition. Portugal. On the one hand, it found that competition authorities most com- monly had a mandate to investigate and sanction anti-competitive behavior by private market players, yet their mandates were more Theme 3: Promoting cooperation with relevant public limited when it came to removing barriers stemming from direct bodies to balance competition goals with other public or indirect government intervention in the market. The Contest interests: Winners: Moldova and Singapore; Honorable brought together striking examples of how competition authorities mentions: Israel, Mexico and South Africa. in developing economies have had remarkable success in opening markets and ensuring that all firms in the market have the capaci- ties and incentives to compete on a level playing field. The winners and honorable mentions come from a wide range of This second edition of the WBG’s Competition Advocacy Contest countries from across all regions and tackle diverse challenges in was held in collaboration with the Advocacy Working Group (AWG) key markets. Some countries are moving towards an open market of the International Competition Network (ICN). Applications were 11 economy, including developing countries Kenya and Malawi, and open to Bank Group client countries with competition agencies former centrally-run economies Moldova and Russia. Others are and, for the first time, to agencies from other advanced economies. advanced economies in Europe and Asia-Pacific, such as Finland, All regions and sector-specific topics were eligible. The stories Singapore and New Zealand. Some of the highlighted cases were reviewed by experts from different Global Practices at the concern a single economic sector such as banking in South Africa, WBG, including the Trade and Competitiveness Practice and the civil aviation in Indonesia and sugar distribution in Malawi. Other Poverty Practice, as well as independent non-governmental advi- entries involve an economy-wide approach, such as the Icelandic sors (NGAs) appointed by the ICN. The criteria used for selecting competition authority’s program to deal with the country’s unprec- winners were: (i) collaboration with other agencies/organizations edented financial collapse in 2008. and stakeholders; (ii) results achieved — if intervention was 10 As defined by the International Competition Network (ICN). 11 See the ICN AWG Work Plan, 2015-18: http://www. internationalcompetitionnetwork.org/uploads/library/doc1038.pdf 18 Transforming Markets through competition Chapter 3 The winning and commended entries showcase the rich variety of challenges that competition advocacy tools can address. In World Bank Group and ICN El Salvador, the Competition Superintendence’s advocacy cam- activities on competition policy paign targeted judicial delays in appeals against its decisions which The World Bank Group advises client governments in more than were hamstringing competition law enforcement. In Malawi, the 40 countries on competition policy. Through analytical reports, Competition and Fair Trading Commission tackled anti-competitive technical advice and lending operations, the WBG develops and practices in the sugar market through an advocacy campaign. helps implement best practices and innovative tools to identify and Finally, in Moldova, the Competition Council used advocacy better tackle anti-competitive regulations and practices. Successful tools to support a fairer distribution of state aids. In other cases, advocacy for pro-competition policies and regulations are generat- advocacy efforts aimed to inculcate an awareness of competition ing specific reforms and positive economic impact across regions issues among the general public (as in Portugal) or among specific and countries, including Armenia, the East African Community, industry players (for example, the construction sector in New Honduras, Kazakhstan, Kenya, Mexico, Moldova, Peru, and the Zealand). Philippines. The narratives in this book explain how the winning and com- The ICN’s Advocacy Working Group (AWG) undertakes projects, mended agencies went about tackling these competition issues develops practical tools and guidance, and facilitates experience- through the use of advocacy. They record the impacts the sharing among ICN member agencies, in order to improve the advocacy campaigns have made, not only on markets but on effectiveness of ICN members in advocating for the dissemination consumers, businesses, and other stakeholders who participate in of competition principles and to promote the development of a those markets. The submissions from the winning and commended competition culture within society. The AWG has 63 ICN member agencies showed that they are putting increasing weight on calcu- agencies from 61 jurisdictions and 64 NGAs. It is co-chaired by lating the economic and other impacts of their activities. This has the Italian Competition Authority, the Mexican Federal Economic helped to improve the focus and direction of their advocacy efforts. Competition Commission and the Swedish Competition Authority. Singapore’s Competition Commission notably follows an advocacy strategy strictly based on “3Ps” — being Proactive, Purposeful and Together the World Bank Group and the ICN will continue to Practical. highlight valuable competition advocacy initiatives around the world. Both institutions recognize that in the long run, the ensuing results in the markets will help untangle some of the knots that limit the potential for economies to grow, to become more productive and more inclusive. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 19 Theme 1: Promoting procompetitive reforms that foster growth and reduce inequality Winners: Kenya and Malawi Honorable mentions: Finland, Indonesia and Russia Chapter 3 Winners Kenya: yy CAK’s scrutiny of the PHP Consortium rules helped stimulate an inquiry (the “special compliance process”) into the rules, Using advocacy and building practices and procedures of other trade associations. credibility to achieve compliance with competition law The competition issue The CAK faced an underlying issue, often encountered in countries In the face of plans announced by the private with newly developed competition regimes, that the private healthcare providers’ trade association to apply healthcare providers lacked an understanding of the full implica- a hefty increase in private healthcare charges, tions of the Competition Act — at that time in force only since the Kenya’s Competition Authority (CAK) mounted a previous year. successful advocacy campaign to raise awareness The decision to raise charges by 20 percent in 2012, in response and understanding of the new competition law — (it was claimed) to increased labor costs, had been coordinated which outlawed coordinated pricing decisions by between the Association of Kenya Insurers (AKI) and the PHP a trade association — and to remove any doubts Consortium at the first meeting of its kind between the two that the Authority would duly enforce the law if organizations. It had been announced in a Letter of Intent from the PHP Consortium. It was unarguably illegal under the terms of necessary. the Competition Act. Section 22 of the Act, specifically covering restrictive trade practices applicable to trade associations, makes it illegal for a representative trade body to recommend to members a percentage by which charges may be revised. Adjusting prices in Key points response to prevailing market trends is not outlawed but any price yy An announcement by the Private Health Care Providers’ (PHP) review must be undertaken by the individual firms. Consortium in Kenya of a 20 percent rise for its members’ services breached competition rules for trade associations and Section 37 of the Act empowers the CAK to issue a written order “to reflected both a general ignorance about the provisions of the stop and desist from engaging” in conduct prohibited under the Act. new Competition Act and CAK’s enforcement powers. The price-setting overtly set out in the letter of intent showed that yy The impact on consumer welfare from the illegal increase both the PHP and the AKI had taken no account of the provisions would have been substantial, particularly for Kenya’s most vul- of the Competition Act or had not taken seriously the risks of nerable people, many of whom depend on private healthcare. non-compliance. yy The CAK’s recourse to implementing the Law through a lengthy The CAK also considered the public interest issues an illegal, investigation and sanctioning process would have been costly non-market driven increase in private healthcare charges would and slow, whereas the rise in private healthcare charges was imminent. yy The CAK therefore moved quickly in issuing a Stop and Healthcare in Kenya Desist Order and simultaneously embarking on an advocacy Kenya currently has a ratio of just 1.8 doctors per 10,000 resi- campaign to raise awareness among the private healthcare dents, below the average for the Sub-Saharan Africa region. providers of the provisions and market benefits of the Act, Moreover, only half of Kenya’s 40 million people have physical and to convince them of the CAK’s readiness to act to enforce access to healthcare facilities, and the private sector provides compliance if necessary. half of all healthcare services in the country. yy In response to the advocacy campaign, and faced with Healthcare services are central to the social goals of Kenya’s the alternative of a formal sanctioning process, the private Vision 2030 which is concerned with the creation of social healthcare providers rescinded the proposed price increase. safety nets to protect the chronically poor and to mitigate the yy The success of its advocacy campaign did much to raise risks and vulnerabilities associated with ill health.a awareness of the CAK throughout the country and to establish a reputation of being transparent, effective, cost-conscious and a www.vision2030.go.ke balanced in its approach to competition problems. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 21 a breach of the Act is suspected. As well as reducing short-term Consumer savings regulatory costs for the competition authority, such campaigns can “We intervened in this sector because we had the ensure buy-in to competition laws from firms and encourage them to voluntarily comply in the future, allowing a competition authority legal basis to focus on it, and we knew we could to use its resources optimally. have a positive impact. We took action against a 20 percent price increase in a country where 50 The PHP and AKI trade associations and their members will have no incentive in future to ignore the competition law and to discount percent of the population spends 12 percent of the threat that it will be enforced. Moreover, awareness of the their disposable income on healthcare…we saved Competition Act and the CAK’s mandate has been spread widely consumers around US$1.7 million annually.” to other sectors of trade and industry as a result of the advocacy — Francis Kariuki campaign. Director General, CAK Special compliance process The CAK has estimated that its intervention to prevent a 20 The PHP case was one of the key cases that stimulated an inquiry percent rise in private healthcare charges saved patients 162 by the CAK, known as the “special compliance process”, into million Kenyan Shillings annually (around US$1.7 million). levels of compliance with the Act by trade associations. The inquiry initially involves associations in the agricultural and finance sectors and grants these groups an eight-month window to transparently dismantle cartels that fix prices and limit competition. Following this raise. In particular, it would exacerbate the problems for healthcare grace period, potential penalties for violations against the competi- provision in Kenya and, since the private sector provided half of tion law may include a five year prison sentence or a fine of up to all healthcare services in the country, it would be a direct threat to US$10,000. This program is being rolled out through meetings and the Government’s “Vision 2030” goal of affordable and equitable round-table discussions between the CAK and the associations, healthcare for all Kenyan citizens. while the associations are meanwhile reporting back to the CAK on the degree of compliance of their rules, practices and procedures. The response of the competition authority The CAK took up the complementary challenges of spreading Milestones knowledge and understanding about competition law and of 1 August 2011: The Competition Act no 12, 2010, comes into demonstrating its readiness and ability to implement it. force It devoted time and resources to (i) educating the contravening June 2012: Meeting of PHP Consortium and AKI agrees parties about the provisions of the Act, and (ii) reviewing the that charges for private healthcare services Consortium’s rules to evaluate whether these were in compliance should be raised by 20 percent. with the Act. The review culminated in a “stop and desist” order by July 2012: PHP Consortium issues Letter of Intent CAK on the coordination by the PHP Consortium of pricing changes announcing the prospective price rise. by their members and further a strong recommendation that the associations withdraw the letter of intent and announce to the public August 2012: CAK launches advocacy campaign. media that they have done so. The associations complied. CAK issues recommendation to PHP Consortium to abandon the proposed price increase or face a Stop and Desist Order under Impact and lessons section 37 of the Competition Act. The compliance effects of the advocacy initiative were immediate September 2012: PHP Consortium withdraws the earlier circular and protected consumers from a 20 percent increase in cost for that announced the increase in private health- certain private healthcare providers. care charges. Compliance was secured at a relatively low financial cost. In the 26 June 2015: Announcement of the “Special Compliance CAK’s view, mounting awareness campaigns for firms and associa- Process” inquiring into compliance levels tions soon after the introduction of competition laws is preferable with relevant sections of the Act by trade to immediately taking resource-intensive enforcement action when associations in the financial sector. 22 Transforming Markets through competition Chapter 3 Malawi: The competition issue The competition issue prompting the CFTC’s intervention arose Aligning established business from the vertical relationship between Illovo Sugar (Malawi) Ltd, (a practices with competition law publicly-listed company that is Malawi’s sole sugar producer and the country’s largest private sector employer) and companies that In Malawi, the Competition and Fair Trading had the dual function of transporting processed sugar from Illovo’s Commission (CFTC) secured the collaboration mills to designated regional distribution centers serving specified of the responsible Ministry to take action against local areas, and also of administering the warehouses at the centers. anti-competitive practices in the downstream sugar market. Advocacy among industry stakeholders The on-selling of sugar from the distribution centers was supposed has ensured increased availability of this to be reserved to Illovo. However, under the terms of their contracts essential product for poor consumers and laid the with Illovo, the transport/warehouse management companies were able to sell sugar to some wholesalers. This provision gave them groundwork for a further opening up of the country’s the opportunity to run affiliated wholesale operations and offer sugar market, one of Malawi’s leading export competition to other wholesalers. commodities. Allegations of anti-competitive practices among some Illovo warehouse managers were brought to the attention of the Commission in early 2013, triggering an investigation to determine Key points if the warehouse managers and Illovo were acting in contravention yy Malawi’s Competition and Fair Trading Commission (CFTC) of the Competition and Fair Trade Act of 2000. uncovered restrictive business practices by companies The CFTC concluded that a conflict of interest arose when contracted to transport processed sugar from the country’s sole warehouse administrators doubled as wholesalers. Their access sugar producer to designated distribution centers, at which the to inside information about availability and pricing of Illovo’s sugar transporters also managed the warehousing of the product. gave them the means to foreclose the wholesale distribution yy The transport/warehouse management companies were found market (and in effect the entire distribution market, given their by the CFTC to be acting also as wholesalers, either directly or relationship with Illovo), preventing other, in particular smaller through affiliates, and to be foreclosing the wholesale distribu- wholesalers from buying sugar directly from Illovo and limiting such tion market to other wholesalers through the use of various access to the warehouse companies’ affiliated enterprises. The stratagems. This was hurting consumers by pushing up retail Commission believed that this had led to a higher retail price for prices for sugar. sugar than would otherwise be expected. yy The CFTC enforced its findings by issuing a Cease and Desist Order to the principal transport/warehouse management company involved. Strategies to exclude competing wholesalers yy In addition, facing a risk of public push-back, a successful In a statement the Commission said that “various tricks” appeal against the Order or simply non-compliance, the were used, including non-disclosure of information to CFTC conducted a competition advocacy campaign aimed at other wholesalers about procedures for paying for sugar providing sugar industry participants with a full understanding orders and in some cases provision of false information of competition laws and thus stimulating compliance. about sugar non-availability at the distribution center. yy The coordination throughout the process with the Ministry of (Malawi Nyasa Times, 5 June 2013) Industry and Trade was crucial and the campaign achieved considerable success. It led directly to effective opening-up of the sugar distribution system and indirectly helped lead to other measures that are on track to liberalize the sugar market more generally. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 23 The response of the competition authority Impact and lessons The CFTC construed these practices to fall within the term “preda- Removal of anti-competitive trade practices tory behavior” which is prohibited by the Competition and Fair Trading Act of 2000 (section 32(2)(a)). The transport/warehouse management company at the center of the complaint was issued Illovo’s new distribution system an Order to cease and desist these practices. yy The intervention of the Commission led to changes in Illovo’s sugar distribution system. However, the CFTC perceived the possibility that affected interest groups would lobby against the Order, or that the Courts would not yy Transporters are contracted by Illovo just for the distri- uphold the Order in case of an appeal by Illovo and the warehouse bution from the sugar mills to the distribution centers. management company, or possibly that the transport companies yy Illovo now directly runs the warehouses at the distribu- would simply not comply. Industry representatives called publicly tion centers and sells sugar directly to the wholesalers for withdrawal of the decision. CFTC saw a need to underpin such at factory prices. The wholesale distribution is thus fully enforcement action by advocacy efforts to clarify the rationale for competitive and open to new entrants. its decision, change entrenched attitudes among sugar market yy The CFTC supervises the distribution points quarterly to participants and so help maintain the momentum for liberalization ensure compliance. of the sector. The CFTC therefore engaged with influential stakeholders in the sugar industry in a vigorous advocacy campaign to convey to Wider liberalization moves industry participants a full understanding of the implications of The Commission’s success in implementing the competition law the Competition and Fair Trading Act and the consequences of and mounting an advocacy campaign has contributed significantly non-compliance. This was achieved through a series of face-to- to a further opening up of the sugar sector. face meetings, joint events and press conferences and through the distribution of brochures and copies of the Act. More widely, the advocacy campaign has given many state and non-state institutions a greater understanding of the competition Enlisting the Ministry of Industry and Trade to help defend competi- law, the need for compliance and the benefits of competition. tion in the face of vested interests was crucial to the success of As Charlotte Wezi Malonda, the CFTC’s Executive Director, has the advocacy campaign. Competition policy and enforcement commented: “Government policy needs to become better aligned of competition law are relatively new in Malawi and competition with competition law,” and the CFTC’s advocacy has contributed issues have not generally been high on the radar of Government significantly towards achieving this goal and generating a momen- institutions. However, the Ministry of Industry and Trade had come tum for further pro-competition reforms in Malawi. to recognize that enhanced competition within the sugar industry would be important in achieving its wider policy goals. To have this impact, the close involvement of the Ministry of Industry and Trade in the advocacy campaign was vital and demonstrated the value for a competition authority, faced with deep-rooted, anti-competitive business practices, to win the Ministry of Industry and Trade policy goals for the support of a governmental ally in any push for the pro-competitive sugar industry regulation of a market. A Working Group within the Ministry is looking for ways to promote new investment in the sugar cane sector and for the establishment of a SCP (Sugar Cane Products) Regulatory Framework. “Once finalized, it is envisaged that the Regulatory Framework will facilitate the governance of the sector which is at the moment non-existent.” Ministry of Industry and Trade, Malawi, website: http://moit.gov.mw/index.php/2014-12-03-14-08-05/ sugarcane-products 24 Transforming Markets through competition Chapter 3 Milestones Early 2013: Allegations of anti-competitive trade practices by certain warehouse administrators are brought to the attention of the Commission by a business association in Northern region of Malawi. January 2013: A notice of investigation is issued by the Commission. March 2013: A meeting is held between the Commission and the warehouse administrators and Illovo Sugar Ltd. April 2013: The CFTC Board determines that warehouse administrators had engaged in anti-competitive trade practices contrary to the Competition and Fair Trading Act and are ordered to cease and desist from the practice. May 2013: Illovo and the warehouse administrators (SIMAMA) go to Court and obtain an injunction stopping the Commission from enforcing the Order it had issued. The injunction is granted suspending the enforcement of orders of the CFTC. An Appeals process commenced, brought by both Illovo and the warehouse administrators against the order itself. Later, Illovo opts for an out of court settlement with the Commission, but the warehouse administrators’ case proceeds to full trial. The courts rule in favor of the Commission, agreeing that the conduct and the warehouse management system had resulted in anti-competitive effect. July 2014: A new system for the distribution of Illovo sugar comes into effect. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 25 Theme 2: Promoting awareness of benefits of competition in a time of crisis Winners: El Salvador and New Zealand Honorable mentions: Greece, Iceland and Portugal 26 Transforming Markets through competition Chapter 3 El Salvador: Administrative Chamber of the Supreme Court (Sala de lo Contencioso Administrativo). Currently, 60 percent of the fines Galvanizing citizen engagement to imposed by the Competition Superintendence have been ap- pealed in court. The delays in the processes at the Administrative support competition regime reforms Contentious Tribunal generally last various years; some up to 7 El Salvador’s Competition Superintendence years. Only 37 of the 71 fines imposed by the Salvadoran competi- tion authority during its 10 years of existence have been paid, (CS) has pioneered a digital, interactive app to which monetarily speaking represents 19.6 percent of all the fines raise awareness among the general public of the applied. Meanwhile, pending settlement of their cases, some firms serious judicial delays that are creating a crisis have persisted with anti-competitive behavior. for competition law enforcement in the country, There is a widespread lack of awareness generally in El Salvador and hence for the development of a competitive of the role competition plays as a catalyst for economic develop- economy. In this way the CS is working to galvanize ment and the near impossibility of imposing sanctions on anti- public support for changes to the judicial appeal competitive conduct raises a further impediment to developing a procedures for competition law offences. competition culture within the country. The response of the competition authority Key points The CS recognized that the meetings and training sessions, such yy Judicial delays to appeals against CS decisions are hobbling as workshops, that it may arrange with legal practitioners have the administration and enforcement of competition laws in El limited practical impact on efforts to remove judicial bottlenecks. Salvador. There is no specialized competition appeals tribunal and many legal practitioners seem to take the view that competition law yy In El Salvador’s current economic and social situation, lobbying infringements are minor and victimless offences. the judiciary and organizing training sessions for lawyers can have only limited effect. The Superintendence therefore took the innovative step of creating yy The CS has developed a digital, interactive app, called AppSC, AppSC, in all likelihood the world’s first such App created to pro- to bring the delays in the judicial process to the consciousness mote and defend competition. It was launched in December 2013 of members of the general public, business leaders, the judi- with a series of outreach events and media presentations involving ciary and government officials, and so help generate a popular influential businessmen and economists. During its first phase, the groundswell in support of a more effective competition regime. yy Competition advocacy has long been accorded a high priority Awareness of the competition issue by the CS and the App will be further developed to make other aspects of the CS’s work transparent to the public. “These judicial delays undermine the authority of yy The CS’s digitally-based advocacy strategy has been the CS and so we felt we had to do something… cost-effective and would be particularly well suited to other There is now greater awareness of what competition authorities with tightly limited budgets. competition is, and of the role of the CS.” — Francisco Diaz Rodriguez Competition Superintendent The competition issue A critical issue for the competition regime in El Salvador is that firms have little incentive to refrain from anti-competitive conduct “We needed to prove we were efficient and able because any sanctions imposed on them by the CS can in practice to deal with issues… By making the work the CS take years to bring into effect. does more transparent and bringing citizens into the process, we hope to raise awareness of judicial While the CS has the necessary mandate to suspend the activi- ties of a firm or impose fines if it finds the firm to have engaged delays and break the judicial silence.” in anti-competitive conduct, its orders can be appealed to the — César Azmitia CS Digital Manager and Communications Strategist Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 27 App’s aim is to make the public aware of the many pending appeal Impact and lessons cases, to convey the seriousness of these cases and to show how yy AppSC has empowered El Salvador’s citizens. By informing toothless CS enforcement actions become when cases languish in citizens and providing a digital platform, AppSC enables users the court and fines remain unpaid. to participate in discussions about competition. Up to May 2015 The AppSC allows users to track, share and comment on those the App had registered 6,100 hits and comments. To reach this cases that interest them. To do so, the user locates a card with the many using traditional educational advocacy methods, such as case´s most relevant information; the current status of the fine workshops and town meetings, the cost would have been some imposed [paid, not paid, or temporarily suspended]; a brief US$65,000 (or 65 percent higher). summary of the case; the key number; public comments made on yy It has raised public awareness of how the judicial appeals social networks and a chronology of the case. Through the App process thwarts the resolution of competition cases, citizens are thus able to add their voices to calls for reforms of the yy It is making the work of the CS transparent, increasing the judicial process and for greater competition in the economy. The understanding of the role it plays in fostering competition. App can be downloaded from the Competition Superintendence website: www.sc.gob.sv. yy In the longer term, the AppSC will help heighten awareness in the country of the extent, frequency and damage of anti- competitive conduct. yy The greater transparency of the CS’s activities and accountability will progressively help it exercise its mandate. This will strengthen the case for extending its mandate and remedy-making powers so as to deter firms from engaging in anti-competitive conduct. Lessons for other competition authorities to be drawn from the impact of AppSC are that: yy More can be done with less. Competition authorities do not need to invest a lot of money to promote competition. With constrained budgets, it is essential to leverage the “earned media” through social networking. yy A digital strategy is key. The act of embracing a digital strategy changes the thinking within the authority. A CS representative has commented: “We came to understand that what we were doing was for the public.” yy Small is beautiful. Even a small country like El Salvador (popu- The CS’s development of the AppSC, with its interactive features, lation 6.34 million) — which moreover has endured a decade of takes forward a long-running advocacy strategy the CS has political polarization, constitutional battles within the Supreme been pursuing. Recognizing the widespread lack of awareness Court and tepid economic growth — can come up with great in El Salvador of the role competition plays in the economy, the products and ideas to advocate for competition. CS has for some time put strong emphasis on interacting with the public in a variety of ways so as to increase the public’s under- standing of competition policy and to build support for its agenda. Milestones To this end it devotes approximately 40 percent of its budget to competition advocacy (OECD 2008). November 2013: 54% of the cases sanctioned by the Competition Superintendence are pending final decision at A second phase of AppSC, launched in November 2015, shares the Supreme Court of Justice information on market studies. December 2013: First phase of AppSC (“Online Cases”) is The AppSC is a low-cost vehicle for competition advocacy. The launched to focus on outstanding court cases only external costs have been for the hire of a supplier, which cost November 2015 : Second phase of AppSC is launched to include US$3,955 for the first phase and US$2,260 for the second phase. Market Studies. 28 Transforming Markets through competition Chapter 3 New Zealand: New Zealand’s construction industry — which generates more than NZD30 billion14 a year in revenue, accounts for 6.3 percent Promoting fair business practices of nominal GDP (2010)15 and employs over 170,000 or close to 8 percent of the workforce — would be given a tremendous boost during post-disaster rebuilding by the need for reconstruction in the areas devastated by the Following the earthquakes in Christchurch and the earthquakes. The temptation for firms to collude would likely be particularly strong during this period of high and urgent demand surrounding Canterbury Region of New Zealand in for their services to rebuild a wide range of projects, with fewer 2010 and 2011, the competition authority, the New safeguards operating than in normal times. The business environ- Zealand Commerce Commission (NZCC), foresaw ment, as well as consumers, would be likely to suffer. a high risk of anti-competitive behavior when the rebuilding of devastated areas got underway. To The response of the competition authority forestall this it launched a “one-stop” shop microsite The NZCC had identified the construction sector as a priority to educate and guide firms in the construction area for advocacy before the Christchurch earthquake. Initially, sector on how and why to comply with competition independent research had been conducted with commercial firms and consumer protection laws. in the industry on a confidential basis. The NZCC had given the firms interviewed assurances that no enforcement action would be taken as a result of any revelations arising from the interviews. The research not only revealed low levels of knowledge about anti- Key points competitive practices prohibited by New Zealand’s competition and yy The NZCC considered that the incentives for companies in consumer laws, but also showed that cover pricing was occurring. the construction sector to respect New Zealand’s competition and consumer protection laws would be lessened during an Following the earthquakes, the case became stronger for an urgency-driven construction boom in earthquake-devastated immediate national educational program to raise awareness in areas. the industry about the laws. It was important that public resources devoted to any advocacy initiative reach as many people as yy The heightened risk of anti-competitive conduct by construction sector firms called for a pre-emptive advocacy effort. yy The construction microsite fulfilled this purpose and has heightened understanding within the construction sector of The Canterbury Earthquakes competition and consumer protection laws. In February 2011, a magnitude 6.3 earthquake struck Canterbury Region, killing 185 people and displacing many yy Its success shows the benefit for a competition authority of from their homes. The natural disaster caused an estimated building relationships with a target audience so as to deliver a NZD40 billion worth of damage. In the central business district specific advocacy campaign when needed. of Christchurch alone over 100,000 homes and 50 percent of buildings were damaged or destroyed. The quakes also caused The competition issue major disruption to the area’s water, sewage, electrical and The NZCC has publicly stated that the construction sector through- transport infrastructure. out the world is generally held to be open to collusion, particularly The New Zealand government has made the rebuilding of the to forming cartels.12 Other anti-competitive practices often alleged Canterbury Region one of its four priorities and is committed against the industry include market-sharing and bid-rigging, to spending NZD14.9 billion on the rebuild effort. This will be a particularly cover pricing — a situation where one or more bidders significant driver of economic growth in this area over the next collude with a competitor during a tender process to obtain a price decade. that is intended to be too high to win the contract.13 14 http://www.mbie.govt.nz/what-we-do/business-growth-agenda/sectors- 12 NZCC news release, 7 May 2014. reports-series/pdf-document-library/construction-report.pdf, pg. 23. 13 See, for example, “OECD Policy Roundtables: Construction Industry,” 15 http://www.mbie.govt.nz/what-we-do/business-growth-agenda/sectors- 2008; http://www.oecd.org/regreform/sectors/41765075.pdf reports-series/pdf-document-library/construction-report.pdf, pg. 10. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 29 possible and thus help ensure that reconstruction contracts were efficiently managed and fulfilled. Through discussions and meetings with government departments, construction trade associations and individual construction and insurance companies, the NZCC con- cluded that the most effective advocacy tool would be an accessible user friendly guide tailored to suppliers of goods and services in the construction sector. This included trades people, building professionals and builders’ merchants. The resultant “one-stop shop” microsite is a straightforward guide to the three pieces of legislation the Commerce Commission enforces: the Commerce, Fair Trading, Credit Contracts and Consumer Finance Acts. So as to cater to the different interests and attention-spans of users, guidance on the website was broken down into several layers of detail, moving from high-level summaries at the first level and progressively more detailed information at the second and third levels. The website incorporated feedback from test-users to make sure it was easily navigable, successfully used everyday language to explain difficult legal concepts and was user–friendly in layout and design. (Later in 2014 it was selected as a finalist in a national Plain English competition.)The website was rolled out in May 2014 at two separate launch events and was promoted through workshops, webinars, industry newslet- ters, publications and stories. Snapshot of website http://construction.comcom.govt.nz 30 Transforming Markets through competition Chapter 3 Enforcement actions Milestones The NZCC recognizes that no competition authority can rely solely on advocacy but must also show a readiness to enforce 2010: Independent research firm commissioned by competition laws if it is to establish credibility among business NZCC to carry out interviews with construction communities. During 2014 it completed two substantive investiga- sector firms on a confidential basis. tions in the construction sector, one resulting in a heavy fine for the September 2010 non-complying company. and February 2011: Two major earthquakes hit the Canterbury Region. Impact and lessons 2011, The website has achieved: first half 2012: NZCC contacts the government department yy Heightened awareness among suppliers of goods and services responsible for the building sector, the in the construction sector of the competition and consumer Department of Building and Housing (now protection laws and the risks of not complying with them. The part of a larger ministry); presentations to high volume of visitors to the site since its launch (over 19,000 construction trade associations in the major city page views), as well as feedback from an industry association, centers. indicate that it is reaching its audience. Second half 2012 yy Continuing engagement with the construction industry. and early 2013: The rebuild of Christchurch gets underway; The NZCC regularly receives requests for workshops and NZCC presentations to main insurance compa- presentations to discuss competition law issues. nies and Christchurch procurement agencies for the post-earthquake rebuild. yy Fewer instances of cover pricing, according to an industry association survey of its members. May 2014: NZCC Construction website goes live, with two separate launch events in Auckland and On a broader front: Christchurch. yy The mandate of the NZCC has been strengthened by its January 2016: The construction website had received 19,758 successful “carrot and stick” (i.e., advocacy and enforcement) page views and over 8,000 visitors. approach to dealing with the construction industry. yy Competition law has been shown to promote a fair business environment for the benefit of local markets and consumers. Kate Morrison, Competition General Manager of the NZCC sum- marizes the key lessons: “The most important aspects contributing to the success of this advocacy tool was the fact that we already had existing relationships with the construction sector from which we could leverage. This was vital in helping us to understand what kind of information this audience needed, and in what format, in order to raise awareness and compliance. It was also a major factor in helping us to successfully disseminate the website to the target audience after it was launched. We did this by using our industry contacts with whom we had already built up good relation- ships and goodwill.” Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 31 Theme 3: Promoting cooperation with relevant public bodies to balance competition goals with other public interests Winners: Moldova and Singapore Honorable mentions: Israel, Mexico and South Africa 32 Transforming Markets through competition Chapter 3 Moldova: Most of Moldova’s state aid schemes are meant to target a broad number of beneficiaries, but lack of transparency has resulted in Leveling the playing field for state aid benefiting only a few market players. Moreover, around 90 percent of state aid is given in the form of tax exemptions competing enterprises and subsidies, which is susceptible to benefitting just a few enterprises.16 The level of state aid is put officially at around 8 A unique on-line portal to track and monitor percent of government spending and around 4 percent of GDP, but state aids is levelling the playing field for all in practice it is likely to be higher. enterprises in Moldova by helping to remove the unfair advantage some have been receiving The selective granting of state aid is a familiar competitive feature of economies moving towards a market economy. In Moldova, it is through aid from government agencies. among several legacies of the country’s former centrally-controlled The portal is serving as an advocacy tool to economic system. Monopolies still dominate a significant part spread awareness of competition principles of the manufactured goods market, prices remain regulated for and practices among public agencies and some “socially-important” domestic products, and state-owned to strengthen inter-agency cooperation. enterprises (SOEs) account for some 19 percent of GDP. It will take time for people throughout the country to absorb the mentality and for civil servants to apply the practices needed to manage a competitive market economy. Key points yy In many countries with developing market economies, such as Moldova, some enterprises have been disadvantaged in com- The response of the competition authority peting in a market because some rivals have been receiving Faced with the anti-competitive effects of the state aid provided financial and non-financial support selectively from the State. and the little awareness of such effect among many of its adminis- yy Moldova’s Competition Council (CCRM) has tackled this trators, the CCRM perceived that both an effective register of state problem by introducing the innovative on-line Moldova State aid and an advocacy campaign to instill competition principles in its Aid Register (SIRASM) for the reporting and monitoring of all administration were needed. A paper-based system of monitoring state aid disbursed by all agencies throughout the country. state aid would be burdensome, inefficient and open to discretion- ary behavior, and merely a series of training events on state aids yy The full transparency provided by the portal enables the detec- would be a lengthy form of advocacy with little effectiveness. tion, investigation and elimination of anti-competitive forms of state aid and so creates a level playing field for all enterprises. The innovative idea for developing an online register for state aid yy Equally importantly in the long term, the portal also plays an (SIRASM) was developed with the help of the World Bank Group. advocacy role among a population not yet fully attuned to all SIRASM provides an automatic procedure for the notification and aspects of a market economy to spread the growing culture of reporting of state aid granted at both national and regional levels competition, particularly within public authorities. by all central and local state agencies in the country. Registration of users, who are given individual passwords to access the system, began in January 2015. The competition issue After some initial training difficulties, mainly related to stakeholders’ The playing field for all competing enterprises in Moldova has inexperience with IT and resistance to change, and after a period of not been level because considerable volumes of government training sessions and presentations, stakeholders have embraced aid of various kinds have been provided selectively only to few SIRASM. All central authorities and 60 percent of local authorities enterprises. Non-recipients of state aid have been disadvantaged — over 170 agencies in all — are inputting data to the platform. and competition in many markets has been distorted, with SIRASM has attracted interest from several competition authorities, negative consequences for enterprises in terms of efficiency and including the European Commission. productivity. 16 http://www-wds.worldbank.org/external/default/WDSContentServer/ WDSP/IB/2014/10/08/000442464_20141008154059/Rendered/PDF/911 820BRI0COLL0a0Competition0Policy.pdf Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 33 State Aid and Competition Laws Eliminating Competition-Distorting State Aid In the situation prevailing in Moldova and in many other coun- If the CCRM determines that State Aid is not compatible with tries with emerging and even advanced market economies, the a competitive environment, the agency administering the aid way to deal with anti-competitive state aid is not to ban all state must cease or adjust the aid and get repayment of the aid aid. Some types of State aid — for example, general measures already paid out. It may take the agency concerned to court if it open to all enterprises or aid to correct market failures — can fails to follow a CCRM directive (Law on State Aid, Article 13). bring positive economic benefits and enhance the competitive- ness of an economy. The Law on State Aid, adopted in June 2012 provides for the Snapshot of state aid portal of Moldova competition authority to regulate the procedures for authoriz- ing, granting, monitoring and reporting state aid in Moldova.a It covers all forms of state aid in all sectors of the economy and requires local and state authorities to provide information to a central inventory about the state aid they dispense, and requires that the competition authority to create and maintain a State Aid Register (section 19). The provisions of the Law are aligned to the rules on state aid of the EU, with which Moldova has negotiated an association agreement. A comprehensive Competition Law was adopted in September 2012 and also mirrors the relevant provisions of the EU treaties and secondary legislation.b It is applied in parallel with the state aid law. a See http://www.lawyer-moldova.com/2012/10/law-on-state-aid.html b See https://www.energy-community.org/portal/page/portal/ ENC_HOME/DOCS/3286024/Competition_Law_nr__183_from_11- 07-2012_(2).pdf Large stakeholder response “The key element that resonated with state aid Impact and lessons providers was the opportunity to participate in a yy SIRASM has made the state aid system transparent to all unique online platform. There was a certain pride concerned in its administration. that Moldova had developed something original yy The detection and investigation of state aid that may be distort- and admired even by European counterparts.” ing competition are rapidly improving. A level playing field for all — Luminita Arama, CCRM competing enterprises is in this way being created. Following the introduction of SIRASM, five new alleged state aid schemes to private and public beneficiaries in energy, agriculture and provision of public service have been notified by the CCRM to ensure compliance with state aid criteria. Aid schemes in airports, PPPs and SEZs have already been analyzed and modified. 34 Transforming Markets through competition Chapter 3 yy 170 central and decentralized public authorities are exposed to Milestones competition principles, getting them to appreciate the impor- tance of balancing competition goals with other public interests SIRASM and of working with the competition and regulatory authorities to ensure that balance is struck. November 2013: Agreement signed with the International Finance Corporation (IFC) on the provision yy Businesses are more exposed to the growing competition of technical support for the development culture. As a result of the CCRM’s scrutiny of state aid, of SIRASM; development project started in businesses receiving state aid are learning about competition December 2013. principles. Those businesses not in receipt of state aid are finding out about it and may be in line to benefit from it. July 2014: SIRASM presented to the public. yy The general public is becoming better informed about state aid. Late 2014: System training and testing conducted. The CCRM issues annual reports on its work in this area. 30 January 2015: First user of SIRASM registered. yy Public resources and funds are being saved. The alternative Ongoing: Meetings and seminars with local and central paper-based system of reporting state aid is burdensome, inef- state authorities on the competition and state ficient are more open to discretionary practices. Cost savings in aid laws and on SIRASM. the civil service wage bill amounted to almost 25 percent in the first year of implementation of SIRASM. Legislation Electronic solutions, especially for countries in transition to a 15 June 2012: New State Aid Act adopted (Act No. 139) market economy… 14 September 2012: yy …require cooperation from all participants, efficient planning New Competition Act adopted (Act No, 183) and deployment of resources to increase IT skills. 27 June 2014: Moldova and EU sign an Association Agreement yy … help control state spending by lowering costs, increasing (ratified by Moldova on 2 July 2014 and transparency, reducing the risks of discretional behavior provisionally applied from 1 September 2014). and improving the interactions between the government and business sector. yy … help balance competing goals — but in this respect electronic solutions need to be complemented by strong administrative and enforcement capacity, a comprehensive development strategy and continuous communication between all stakeholders. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 35 Singapore: The competition issue Singapore’s larger licensed taxi companies have had their own Preserving the pro-competition benefits taxi booking apps for some time which allows customers to book of a disruptive technology in new vehicles via the companies’ own call centers. Under the licensing regulatory rules rules, taxi companies are required to provide call centers; custom- ers do not have direct contact with taxi drivers when booking taxis. A timely and well-rounded competition advocacy This system of booking taxis through a company’s own network campaign by the Competition Commission of (or call center) has not been sufficiently effective in alleviating the Singapore (CCS) ensured that a disruptive longstanding mismatch between the number of customers seeking and controversial technology which stimulated taxis and the availability of vehicles, particularly during peak competition — third-party taxi booking apps — periods. Yet the resulting network effect can operate as a barrier to the entry of new companies and the expansion of existing ones: was legalized within the regulated public transport Customers tend to favor the networks with the largest numbers of market. taxis and other customers which gives an advantage to established market incumbents over new entrants. In transport markets the solution to such network effects has often Key points been to introduce a multi-operator booking system, linking all yy The regulations for taxi operators in Singapore stipulated that a customers to all competitors, for example flight search engines in licensed taxi company must run a call center to take bookings the aviation sector. Third-party taxi-booking apps, through which (recently accessible through the apps the companies devel- customers communicate directly with licensed taxi drivers, brought oped for their own business). multi-operator schemes to Singapore in late 2013. However, these yy These established booking networks have not addressed the apps were controversial in Singapore as elsewhere in the world issue of insufficient supply of taxis, particularly during peak and were seen as a disruptive technology impacting a sector periods, and they inhibit expansion of smaller taxi companies. regulated by the LTA, the public transport regulator. (This sector excludes private car hire, such as the service provided by Uber, yy Third-party taxi booking apps, through which customers book which is currently not regulated.) journeys directly with drivers working for any of the licensed taxi operators, have recently entered Singapore’s market and started to be actively used by customers. Response of the competition authority yy The CCS found that these apps benefitted both customers, Given the tightly regulated nature of the public transport sector, through access to a larger pool of drivers, and taxi-drivers, regulation of third-party booking apps by the LTA was inevitable through an enlarged potential customer base. and posed a challenge to their continued existence, or at least to yy The third-party apps were not regulated although they operated the way in which they were being utilized. The CCS determined exclusively with licensed taxi drivers. Regulation of the apps therefore, that it would be beneficial to engage with the LTA on the by the Land Transport Authority (LTA) was expected and the drafting of booking app regulations. The CCS was well-placed in CCS saw the need for a structured advocacy campaign aimed this regard as it had established a close relationship with the LTA at preserving as many of the apps’ competitive features as over several years. possible. The CCS’s campaign followed a ‘3Ps’ advocacy strategy. yy The new regulations balance the goals of promoting competi- tion in the taxi market while at the same time recognizing the interests of taxi companies and the safety of taxi users. The tenets of the CCS’s ‘3Ps’ Advocacy Strategy 1. Proactive 2. Purposeful 3. Practical 36 Transforming Markets through competition Chapter 3 1. Proactive: Following the entry of these third-party app Impact and lessons providers into Singapore, the CCS conducted a limited study of their potential benefits and possible barriers to market entry in Greater competition early 2014. The preliminary findings, based on discussions with yy Competition among taxi companies and third-party app provid- taxi drivers and passengers, showed that the apps provided ers for bookings of taxi services has intensified. additional choice and more competitive booking fees (set and yy Taxi booking apps — both those run by the taxi companies and retained by the app providers) for commuters, and enabled taxi third-party apps — are being developed with more consumer- drivers to get additional bookings from sources other than their friendly features. One third party app provider has opened a own companies. research and development center. The CCS’s study of the taxi industry provided insights which yy Increased competition benefits taxi drivers, who can utilize enabled it to engage authoritatively with the LTA. It began an third-party apps to pick up fares that would otherwise be advocacy campaign in June 2014 with CCS’s top managers missed. sharing the findings and recommendations of the study with yy Customers benefit from the use of a single platform to access their LTA counterparts. taxi drivers employed by different operators. Since third-party 2. Purposeful: The advocacy had a clear objective: to build a apps began operating, the utilization rate of taxis has risen from compelling argument that pro-competitive policies bring the 65 percent in 2012 to 69 percent as of late 2014, indicating an most benefit in the long run, and to do so quickly so that the improvement in the demand and supply of taxis. The taxi- LTA had sufficient time to take CCS’s input into consideration in operating companies, through the National Taxi Association, drafting regulations. have publicly acknowledged this effect, which is helping them meet taxi-availability requirements. CCS’s arguments to the LTA yy Now that the app providers — at least four are currently in operation — are formally legalized, new providers can enter yy Entry of third-party taxi apps would benefit consum- the bookings market. By reducing the network effect, third-party ers, taxi drivers and even some taxi companies; apps could facilitate entry and expansion in the taxi operating yy To facilitate entry, these apps should be able to market. operate in Singapore with regulatory certainty; yy Call booking standards of taxis companies should Acceptance of disruptive technologies be reviewed to mitigate the taxi companies’ yy By providing information about the benefits of these third-party concerns that they would not be able to meet the apps to LTA, the regulators were able consider all the facts and standards set by the LTA (in terms of calls served) eventually to adopt a light touch approach in regulating them. if their drivers were diverted to serve bookings through third-party apps; Lessons The CCS has stressed that its advocacy success with the LTA yy Third-party apps should be allowed to grow organi- shows that is important to: cally based on market forces. yy Do the groundwork. The CCS’s rapid market study enabled it to build a compelling case for competition to present to the LTA. 3. Practical: The booking apps raised important public policy and yy Build trust with regulators. The timely advocacy intervention consumer safety issues for the LTA. In August 2014, the LTA was made possible by the relationship the CCS had estab- sought CCS’s advice on the draft regulations. CCS recognized lished with the LTA over several years. Ming Jie, the CCS’s that a practical and balanced approach was needed if different Senior Assistant Director of the Policy and Markets Division, viewpoints were to be reconciled. In particular, the CCS has said that relationship management is the key to success in considered that price regulation of the apps could restrict their any advocacy strategy. The CCS has set up a division to work commercial flexibility but it accepted the LTA’s case for it.17 The with other government departments and agencies to build trust new regulations on third-party apps came into force in May and develop similar long-term relationships. 2015. yy Leverage a good reputation. A competition authority needs a strong reputation, not only for understanding markets but also 17 The regulation contains certain fare-related safeguards for commuters. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 37 for competition law enforcement to establish the credibility to run an effective advocacy campaign. Milestones Late 2013: Third-party apps are introduced in Singapore. January– May 2014: CCS undertakes limited study of third-party apps; it finds that they have positive competitive impact on the taxi-booking market. June 2014: CCS’s top management engage LTA’s top management to share CCS’s findings. Extensive staff-level discussions and senior management exchanges follow. August 2014: LTA produces draft regulations and invites CCS to advice on them. November 2014: LTA publishes the new regulations for third-party taxi booking apps. These require all third- party taxi booking services with more than 20 participating taxis to register every three years with the LTA. May 2015: The regulations come into force. 38 Transforming Markets through competition Chapter 3 Honorable Mentions Theme 1: Promoting procompetitive reforms that foster growth and reduce inequality Honorable mentions: Finland, Indonesia and Russia Finland: Leveling the playing field in local A report on the investigation was published in April 2014. It confirmed that discretionary practices by authorities had anti- markets through consistent application of competitive effects. Market success could be driven by a com- regulatory procedures pany’s ability to interpret regulations rather than by a company’s success as an efficient supplier. The report acknowledged that Lack of uniformity in how authorities applied rules to license the unpredictability of official decisions was a deterrent to invest- and supervise commercial activities hindered businesses, ment decisions, whenever business models were not regulated especially small companies, from getting started or consistently and could lead to additional and unnecessary costs for expanding in a specific market. While examples are companies which would be passed on to consumers. generally small-scale, taken together they were found to impact local market dynamics. To address this the Finnish Competition and Consumer Authority (FCCA) launched Results and impact a nationwide advocacy campaign and reforms to reduce The FCCA’s report succeeded in its aim of sparking a public discretionary practices and provide higher predictability for discussion. During this advocacy process, several reasons for the competitors in the market. lack of coherence in supervisory practices emerged and remedies were proposed: The FCCA had received company complaints about non-uniformity yy Legislation was open to various interpretations and was insuf- in practices and decision-making by authorities across municipali- ficiently watertight; fuller and frequent clarification of legislation ties. In a 2013 business survey, 40 percent of respondents said would help remedy this; that discrepancies in official interpretations of regulations had hurt their businesses. Local health inspectors’ requirements for equip- yy Regulatory processes varied; legislation should be clearer ment in bakeries, for example, would vary from town to town. about processes and practices; yy Too many non-binding recommendations and unofficial guide- In response to these complaints the Advocacy Unit of the FCCA lines at different levels were issued; these should be pruned; launched the country’s first investigation into the licensing and supervisory practices of authorities in the summer of 2013. The aim yy Agencies were insufficiently resourced; they should receive was to identify possible hindrances to competition caused by the more funding and officials should receive continuous training; practices and to explore ways to eliminate them. The investigation yy Agencies were fragmented; some should be centralized; mainly focused on those sectors in which companies needed yy Regulatory Impact Analysis of regulations should be more licenses from local authorities to operate, including taxi, restaurant, rigorous; construction, social welfare and health care services as well as the convenience goods and energy sectors. yy Better electronic databases and shared registers of decisions should be maintained. The FCCA looked for market distortions flowing from discretionary or other actions taken by the authorities in interpreting regula- Licensing authorities have launched joint projects to enhance the tions (without apportioning blame to officials). Particular attention uniformity of authorities’ practices. One important example of the was paid to regional differences. The FCCA intentionally did not trend to standardize regulations across regions is the comprehen- consider any distortions directly caused by legislation nor whether sive liberalization of store opening hours in December 2015. This licensing arrangements were appropriate in particular case. has eliminated the discretionary treatment in applications for shop opening hours that was hitherto found across regions. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 39 Indonesia: Promoting market reforms yy To advise the Government against setting price floors in the sector. (The Indonesian Government sets both floor and ceiling in the domestic aviation sector prices for the domestic airline industry. Airlines, depending on Indonesia’s Commission for the Supervision of Business the levels of service they provide, may set prices at specified levels in relation to the ceiling price.) In particular, KPPU Competition (KPPU-RI) has been a consistent advocate argues that it is misguided to invoke safety considerations of the opening of the market for the country’s domestic in the setting of floor prices; Indonesia, like other countries, air services. A successful advocacy campaign in the early requires all airlines to meet the same safety standards and the 2000s helped the market grow and brought down airfares, Government should ensure that these standards are met rather and KPPU’s efforts to push for further reforms continue. than intervene in commercial matters. Government should intervene in the market only where there has been a market Anti-competitive regulation of the air transport sector in Indonesia failure. has restricted the full development of domestic aviation with consequent effects on the interests of the economy, the airline yy To lobby against unfair business practices, in particular relating industry and passengers. The KPPU campaigns strongly for open- to the levying of fuel surcharges, KPPU argued that a standard ing this market, emphasizing that airline connectivity is essential formula to calculate the fuel surcharge should be set by the for economic development in such a vast archipelago, that the Government so as to prevent consumer exploitation through an numbers and reputations of airlines grow when an aviation market excessive surcharge. is open, and that competitive prices for economy service domestic The KPPU’s recommendations have been partially implemented flights benefit both consumers and the airlines. by the Government: In particular, as a result of KPPU advocacy, The KPPU continues to run a pro-competition advocacy campaign INACA’s right to set prices was revoked in 200. directed at the Ministry of Transportation, business associations, mainly the Indonesian National Air Carriers Association (INACA) and the airline companies, and the mass media. It is conducted Results and impact through dialogue and headings with stakeholders, official advice Following the revocation of INACA’s price-fixing privilege in 2001: and letters to stakeholders and media coverage. yy The number of airline companies operating on domestic routes increased significantly — from 7 in 1997 to 27 in 2004. The main points emphasized during the campaign were: yy Ticket prices came down considerably. They were around 70 yy Successfully to oppose the ability of INACA, under an percent lower in 2004 than in 2001. agreement with the Government in 1997, to fix domestic airline prices in Indonesia. KPPU maintained that INACA’s price fixing yy Consumers benefited substantially. KPPU has calculated that agreement should be revoked on the grounds that: people living on six major routes were approximately 22 trillion Rupiah (US$2 billion) better off as a result of reduced airfares. –– The price fixing agreement contravened Law No.5 of 1999 prohibiting monopolistic practices and unfair business competition; –– Business associations should not act as regulators. 40 Transforming Markets through competition Chapter 3 Russia: Ensuring equal opportunities to The Russian Government instructed FAS, under its remit to prevent anti-monopolistic activity, to develop formal Recommendations access critical fertilizer component relating to non-discriminatory access to potassium chloride for Russia’s domestic market of potassium chloride is purchases on the domestic market. These Recommendations have the effect of a regulatory instrument which prescribes certain critical for the fertilizer industry and ultimately national features of market behavior but ensures firms that their practices food security. The commodity is currently supplied by a will not be questioned under anti-monopoly legislation. monopoly and the Federal Antimonopoly Service of the Russian Federation (FAS Russia) was given the task of Between 2010 and 2012, the FAS worked up the following developing guidelines for non-discriminatory access to the recommendations: product. The implementation of the guidelines ensure that yy Procedures, timelines and terms for purchases of potassium all producers of fertilizers can compete on a level playing chloride should be non-discriminatory, enable consumers of field. this commodity to compete fairly, and prevent any unjustified refusal to supply by the single producer of potassium chloride; The production of potassium chloride in Russia is currently and monopolized by a single supplier, JSC Uralkali, and the incumbent is protected by high economic entry barriers. As a raw material for yy Prices of the product for the domestic market should be based various fertilizer types, the terms by which producers of fertilizers on minimum export prices, so as to prevent high monopolistic access potassium chloride determines their ability to produce prices within Russia. and sell their fertilizers at competitive prices. JSC Uralkali is also FAS had collaborated with the relevant Ministries, and had also a major exporter, with 90 percent of output sold abroad, and a involved the largest industrial consumers and agricultural firms, in producer of fertilizer itself. Russia’s anti-monopoly authority, the developing the recommendations, as well as briefing the Russian FAS, has a long tradition of supervising the market and ensuring Government on progress and keeping the mass media informed. that the domestic market is adequately served. Following the Russian Government’s approval, the FAS recom- For five years, buyers of the raw material had been complaining mendations were disseminated among market participants. JSC about pricing and allocation of potassium chloride. In particular, Uralkali then developed its marketing policy for sales of potassium parties alleged that Uralkali had been imposing discriminatory con- chloride in the Russian domestic market and agreed on it with the ditions on certain market players in the fertilizer sector, undermin- FAS. ing the competitive dynamics. FAS’ efforts to resolve the individual cases were time- and resource-consuming. A new situation for the industry was created by Russia’s accession to the World Trade Results and impact Organization (WTO) in 2011. Membership required that domestic The explicit rules on non-discriminatory access to potassium prices for raw materials were not substantially different from prices chloride — a key input product for the fertilizer industry — are now in foreign markets so as to ensure that the market was open for enabling all market players in the fertilizer sector to compete on a global trade. This was an opportunity to start proactively averting level playing field and to offer agricultural producers better deals anti-competitive access conditions by the monopoly commodity for these agrochemicals. The FAS expects that this had further supplier. positive spill-over effects on the country’s food security. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 41 Theme 2: Promoting awareness of benefits of competition in a time of crisis Honorable mentions: Greece, Iceland and Portugal Greece: Revitalizing domestic markets yy Liberalizing prices of over-the-counter medicines; through multi-sector regulatory reform yy Relaxing regulations on shop promotions and discounts. Advocacy efforts by the Hellenic Competition Commission Following publication of the report, the Greek Government an- (HCC) in response to the financial crisis led to revisions of nounced its intention to adopt 80 percent of the recommendations. legislation and repeal of provisions that restrict competition. An initial estimate based on partial implementation of recom- mendations (66 out of 329) suggested net gains for the economy of approximately EUR5.2 billion. By mid-2014, 237 of the 320 recom- Enterprises in Greece have long faced a myriad of regulations mendations had been fully implemented and most enacted into law in important markets that have inhibited them from competing by parliament (Act No. L 4254/14) according to IMF estimates. freely with each other. In an effort to cut back on anti-competitive provisions in these regulations, the HCC launched a set of targeted A second assessment, conducted by the HCC alone, reviewed advocacy initiatives aimed at government agencies. It had seen existing laws and regulations in professional services during the need for these initiatives and in general for a more expanded 2011-2013, and led to the issuing of more than 20 formal opinions advocacy program as a result of the ongoing financial crisis which identifying various regulatory obstacles. The HCC’s work in this had exposed the structural rigidities and inefficiencies that thwart area was prompted by the adoption of a law on professional ser- the country’s economic recovery. vices (Law 3919/2011), which on the one hand required abolition of restrictions on fixed minimum fees, and replacement of licensing In its advocacy campaign to lower regulatory barriers to com- systems with new simple notification measures, and on the other petition, the HCC joined with the Organisation for Economic hand entrusted HCC with the evaluation of when to maintain or re- Co-operation and Development (OECD) in using the OECD introduce restrictions based on overriding public policy objectives. Competition Assessment Toolkit, which provides a method HCC carefully evaluated which restrictions would be proportional for identifying unnecessary restraints on market activities and to achieving the desired professional services standards. Following develops alternative measures to achieve the same government the adoption of HCC’s balanced recommendations, three-quarters policy objectives underlying the restraints. of nearly 350 regulated professions had been opened to competi- The first joint assessment in 2013 focused on four key sectors tion by 2013. (retail, food processing, construction materials and tourism) rep- resenting 21 percent of GDP and 25 percent of total employment. Using the Toolkit methodology, the team reviewed more than 1,000 Results and lessons pieces of legislation, identified 555 problematic regulations and According to Dimitrios Loukas, Vice-Chairman of the HCC, the made more than 320 recommendations on legal provisions to be most important factor in undertaking competition impact assess- amended or repealed. Some of the key recommendations included: ments is gathering timely economic sector data in order to conduct yy Abolishing the requirement to seek price approval or price rigorous economic analysis and demonstrate to businesses that notification; the gains from lifting restrictions are sizable. A well-structured com- munication strategy is also necessary to promote these findings yy Fully liberalizing Sunday shop opening hours; and manage the conflicting expectations of stakeholders. yy Lifting the five day restriction on the shelf life of milk; 42 Transforming Markets through competition Chapter 3 Iceland: Flexibly reacting to competition Results and lessons challenges in the wake of a financial crisis The key subjects of the advocacy strategy were: yy Incorporating competition concerns into public deci- During a major financial crisis, advocacy by the Icelandic sions. The ICA formally asked banks and public authorities to Competition Authority (ICA) of an innovative approach undertake a competition impact assessment when deciding to competition policy won Government support and was onto refinance business undertakings. central to official efforts to speed up economic recovery. yy New and unconventional merger rules. Notification of all Competition enforcement and promotion faced unprecedented mergers, where the combined turnover amounts to ISD 2 challenges in Iceland after the financial collapse of October 2008. billion (US$20 million) or more, is obligatory in Iceland and as Major banks had gone under and some other banks had been transitory measure, competitive effects of bank ownership on a taken over by the State. The economy was hit by a stock market commercial concern were evaluated in each merger investiga- crash and liquidity and currency crises. Most Icelandic firms were tion. This was introduced through a ruling by the Competition in serious financial difficulties. Many had come directly or indirectly Appeals Committee. Detailed conditions for the banks’ owner- under the ownership of their state bank creditors. Thereby, in prac- ship of specific companies were then imposed. The conditions tice certain banks held indirect control of two or more competitors were applied even if the horizontal mergers would usually be in the same markets. This posed challenges for effective competi- unlikely to lessen competition, but as a special consideration to tion but in such crises, calls grow strong for competition policy to the unprecedented circumstances in Iceland. be set aside. In a proactive way, the ICA rose to the challenges by yy The removal of entry barriers and the opening of markets. adopting innovative strategies and becoming the key advocate for Within a few weeks the ICA had analyzed 15 significant the use of competition-promoting measures to speed up economic markets, including food and transport, identified over 120 recovery. obstacles facing firms starting or expanding operations and proposed over 90 remedies (See Report No 2/2008). Special The advocacy program had been developed by the ICA, within a focus was placed on financial markets because the banks few weeks and with a staff of just 22, after a rapid analysis of other owned most firms and the currency crisis adversely affected countries’ financial crises and consultations with leading academics most businesses. in order to draw lessons about which policies worked and which didn’t. The conclusions were clear: setting aside competition policy yy Firm enforcement of competition rules. Enforcement is an in the midst of financial sector collapse prolonged and intensified integral part of the ICA’s advocacy policy since it shows the the crisis; the effect of removing barriers to market entry and open- Authority must be listened to. It made it clear that banks and ing up markets for new competition was to speed up economic businesses would not be allowed to transfer to consumers the recovery. costs arising from their bad management. Firm enforcement of competition law in Iceland, moreover has contributed to 0.6 The ICA’s advocacy strategy confronted both the growing con- percent to Iceland’s annual GDP since 2005. solidation of control among fewer market players and at the same time promoted the reduction of entry barriers to allow for potential Although the impact of its advocacy initiatives during the crisis has new market players to enter. This approach was successful and not yet been evaluated, the ICA believes that these played a critical competition policy became the cornerstone of broader government role in the relatively speedy recovery of the economy. “A time of policy. crisis is not the time to back away from promoting and enforcing competition,” the ICA’s Hilmar Thordarson, has said; without a clear competition strategy the Icelandic economy would have faced increased protectionist pressures. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 43 Portugal: Developing a competition culture of the economy, and the reinforcement of the competitiveness of the Portuguese economy after the crisis. to aid economic recovery “Fair Play” is the first initiative of its kind for the PCA. A team of The competition authority, with government endorsement, 25 was set up to develop an extensive set of advocacy materials affirms that competition is a key structural factor for the including a dedicated website, and an animated “Fair Play” film country’s economic recovery, but that many business produced to explain the benefits of competition and the prejudicial people are not aware of this. It therefore launched a major effects of anti-competitive behavior. Print and digital materials — competition advocacy campaign to promote the benefits for example a booklet on leniency for those confessing to cartel of competition, and the importance of compliance with activity — were developed internally by experienced staff and competition rules. distributed at roadshows and made available online. “Fair Play” sessions were held in eight cities in partnership with ten business The Portuguese Competition Authority (PCA) saw that a lack associations that provided the venues as well as support staff of awareness within the business community of the benefits of and marketing. The campaign was publicized nationally through competing fairly within a strong legal and regulatory system was television and print media and received endorsements from the holding back the development of a fully competitive economy and European Commissioner for Competition and from the Portuguese hampering the country’s recovery from its post-2010 economic Prime Minister. crisis. SMEs in particular failed to be aware of competition law and practices, mainly because many lacked the resources to employ legal advisers. Results and lessons The campaign reached its target audience: over 500 people As Maria João Melicias, Member of the Board of the PCA, said, registered to participate in the roadshow sessions, over 2,300 “... incentives to compete are not embedded in our culture, viewed the video and 35 news stories were published in national therefore we need to disseminate a competition culture and change and regional newspapers. mindsets.” The PCA accordingly launched a campaign entitled, “Fair Play – With Competition Everybody Wins,” to raise awareness According to the PCA, the recent Global Competitiveness Index of the benefits of competition, and the importance of compliance of 2015, published by the World Economic Forum, shows that the with competition rules. Additional goals for the PCA were to build perception on the effectiveness of competition policy in Portugal relationships with the business community, raise awareness of increased in 2014/2015. Portugal improved its position in the areas the role of the PCA in the Portuguese economy and reach out to a of the Index related to competition. The World Economic Forum wider range of stakeholders: the legal community, academics and highlights that Portugal made significant strides in bolstering consumers. competitiveness. The Portuguese Government lent its support to the PCA’s The PCA believes this is an indication that the country has advocacy program. This was crucial. Without the support of the embraced the competition message even if it can’t take full credit Government, it would have been more difficult to get across the for this development. message that competition is a key structural factor for the re-launch 44 Transforming Markets through competition Chapter 3 Theme 3: Promoting cooperation with relevant public bodies to balance competition goals with other public interests Honorable mentions: Israel, Mexico and South Africa Israel: Bringing about regulatory solutions cost of businesses and, according to Dr. Dana Heller of the IAA’s Competition Division, this helped to make stakeholders receptive to address lack of competition in electronic to the proposed remedies. The IAA published its final report on the payment services investigation in September 2014. Bringing about the wider use of debit transactions in the The IAA has been involved in the regulation of the payment card payment card sector required the Israeli Antitrust Authority industry for over a decade, including supervision of interchange (IAA) to collaborate closely with sector regulators and other fees (through court decision) and the operation of the single local stakeholders. Its advocacy strategy towards them resulted payment card switch. The policy recommendations in its final in the adoption by the Government of many of the IAA’s report called for action by other public entities, such as the Bank of recommendations and in thus tackling market inefficiencies Israel and the Committee to Examine Reducing the Use of Cash in that are costing Israel over US$100 million annually. Israel’s Economy. The IAA recommended: yy Setting a separate interchange fee rate for debit transactions; While the use of electronic payment means is prevalent in Israel, yy Instructing banks to offer “immediate” debit card payments; customers have been discouraged from using immediate debit transactions (as opposed to deferred debit transactions) when yy Prohibiting banks from charging customers a transaction-based buying goods and services in Israel because of structural peculiari- fee for immediate debit transactions (as opposed to a monthly ties in the payment card market. Merchants pay a relatively high fee); fee for accepting immediate debit payments, and customers pay yy Examining the possibility of performing debit transactions on a per-transaction fee on some forms of debit transactions. The the existing ATM switch and thereby enabling an alternative feature of debit card payments (immediate and deferred), whereby backbone infrastructure for payment services. funds are deposited in merchants’ accounts within a few days of the transaction, is common elsewhere but rare in Israel. The IAA considered that a wide use of immediate debit cards, as Results and impact commonly used in most other developed countries, would benefit The Bank of Israel, as well as an inter-ministerial team and the consumers as well as merchants, especially small merchants. As Israeli Cabinet, have adopted many of the IAA’s recommendations the IAA’s mandate became aligned with the government’s broader which are expected to enhance competition and consumer welfare economic mission, the IAA also considered the benefits in terms of through the use of more payment options — specifically a wider reducing the cost of living in Israel, reducing the use of cash and use of immediate debit cards. Merchants, particularly small busi- curbing the size of the shadow economy. nesses, will be able to compete more effectively thanks to lower cash-handling costs and reduced fees for accepting electronic It therefore undertook an extensive market investigation that payment means. identified barriers to competition in immediate debit card transac- tions. After an initial consultation paper, an advocacy campaign An IAA study concluded that the payment market has major was mounted to solicit comments from stakeholders in Israel, influence on the wider economy, and reducing market inefficien- including designated regulators, before reaching a set of agreed cies could provide a stimulus of over US$100 million annually. remedies. As part of this advocacy strategy, the IAA undertook a In addition, increasing debit transactions is expected to reduce comparative analysis of payment markets in other countries. The cash usage and will aid efforts to reduce the scope of the shadow report received a good deal of attention given the relevance for the economy. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 45 Mexico: Preventing rules that limit In 2013, the two supervisory bodies signed a formal agreement to include the competition assessment as a specific component competition in the first place of the ex-ante Regulatory Impact Analysis (RIA) regulators must Mexico’s Federal Economic Competition Commission use in the rule making process. The consideration of competition issues in a RIA now proceeds in three stages. First, government (COFECE) successfully worked with the Federal bodies preparing a regulation must complete a Checklist of Commission for Regulatory Improvement (COFEMER) Competition Impact. Secondly, if this indicates that the proposed to ensure that competition issues are taken into account regulation has any effect on competition, it is sent to COFECE for when new regulations are being drafted. As a result of their a competition assessment. Even if threats are not detected through joint advocacy effort competition assessments are now an the initial checklist, COFEMER may sometimes submit a draft to integral part of the mandatory system for the clearance of COFECE for an assessment. Thirdly, if a threat to competition is all federal regulations before they are issued. As one of confirmed, COFECE’s board makes non-binding recommendations the results, reforms in the energy sector in 2014 included to COFEMER within 7-20 working days for amendments to be pro-competition solutions. considered. Numerous regulatory barriers to competition — stemming from Key to ensuring that the initial checklist is accurately completed laws, regulations, and administrative practices — harm consumers and that any recommendations by COFECE are taken on board by and businesses in Mexico. According to a recent OECD report, the COFEMER was technical coherence and capacity-building. Jointly, country ranks 31 out of 33 OECD and BRICS economies in terms the institutions have trained 800 federal and state officials already of regulatory barriers to product markets. and COFEMER is conducting individual capacity building training with regulatory agencies. Promoting competition is a national priority as laid out in the National Development Plan 2013-2018. Yet until early 2013 there was no effective mechanism for reviewing draft regulations at the Results and impact federal level that threaten competition in specific markets. Since 2013 over 80 regulatory proposals have been submitted for Mexico’s competition watchdog, COFECE, recognized that it comment by COFECE under the approval mechanism. COFECE’s needed to develop a competition advocacy program aimed at the opinions include full explanations of the proposed regulation’s relevant regulatory bodies to promote the use of its expertise in effects on competition and are expressed in terms that other competition policy and practice in the analysis of a draft regulation government entities can readily understand and act upon. In before it became enacted. It worked closely with COFEMER — the the energy sector, for example, COFECE recommended not to Better Regulation Authority in charge of reviewing all draft regula- unduly limit the set of potential partners with State Enterprises tions proposed by federal agencies to ensure that their impact for hydrocarbon exploration and productions; to limit the use of in terms of social benefits outweighs their costs. This process of exclusivity rights on natural gas pipeline distribution permits and to analysis and approval by COFEMER is mandatory for all ministries ensure a competitive process in the Electric Power Industry. These and regulatory bodies. three recommendations set the basis for the new sector regulations enacted in 2014. 46 Transforming Markets through competition Chapter 3 South Africa: Using stakeholder advocacy comparability of transaction fees and the ability of customers to switch bank accounts to promote banking reforms yy Interchange setting – the setting of ATM and card interchange Consumer and competition concerns in the banking sector rates (for debit, credit and hybrid cards), with a focus on led the Competition Commission of South Africa (CCSA) transparency and the governance of setting interchange rates to undertake an assessment of the industry which led yy Access to the national payments – this covered restrictive rules to the development of 28 recommendations to improve placed on non-deposit taking banks, access to payment sys- competition in the banking sector. The implementation of tems of non-banks, governance of the Payments Association of these recommendations required a substantial advocacy South Africa that controls access to national payment systems. campaign among stakeholders. A 2014 review found that not only had public authorities implemented many of the recommendations but the banks had also changed their Results and impact market behavior. In 2014 the CCSA undertook a review to assess the implementa- tion status of the recommendations. The review found that at In 2006-2008 the CCSA held a wider market enquiry18 into the least 10 recommendations were fully implemented and resulted in banking sector to identify consumer and competition concerns. tangible benefits for customers in South Africa. Regulatory inter- Customer concerns have focused on high banking fees, a lack of vention was not required in all cases and advocacy itself induced a transparency for different types of fees, and difficulties in switching change in behavior by market players. Important developments in accounts between banks. Competition concerns have focused the sector include: on governance-structures of card payment schemes and access yy Retail banks reduced charges on rejected debit orders to the national payment system which has allowed incumbents voluntarily and eliminated the no cash-back rule,19 switching of to hinder entry by new competitors. These factors have deterred accounts has been improved, and pricing of products has also further financial inclusion of consumers. This first CCSA study was become more transparent. devised following extensive consultations with stakeholders in South Africa as well as with the UK’s competition authorities, who yy The Central Bank now regulates interchange rates for ATMs have vast experience with payment systems competition issues. and payment cards. In a highly inclusive approach, CCSA set-up an independent and yy Financial inclusion grew from 51 percent in 2006 to 75 percent balanced panel to which submissions were presented in writing in 2013. and through public hearings. yy The price of monthly packaged bank accounts declined by 26 The Banking Enquiry resulted in 28 recommendations to improve percent to R52 (US$5). competition in the banking sector. The CCSA conducted a wide- yy The market share of small competitors increased from 8.1 ranging program of advocacy to engage with the key stakeholders percent in 2010 to 11.4 percent in 2012. that would be responsible for acting on the recommendations and yy Penalty fees on rejected debit orders by retail banks were moving them forward. These included the National Treasury, the dramatically lowered. South African Reserve Bank (SARB), the Department of Trade and Industry (DTI), card associations, regulators, and consumer and CCSA representatives say that the most notable lesson learned civil society organizations. An interdepartmental process with the from the market enquiry was the importance of proper consultation National Treasury as overseer was set up to expedite the imple- with relevant stakeholders, especially if the stakeholder is the mentation of the recommendations. regulator responsible for implementing the competition authority’s recommendations. Recommendations focused on three areas: yy Consumer related services and transaction fees – this included fees for rejected debit orders, the transparency and 18 An “enquiry” so-called because the CCSA did not have sufficient investi- 19 The cash-back rule means that shoppers can draw cash at point of sale gative powers at its outset to qualify as a “market inquiry,” which is now terminals at a cheaper rate than they would at ATMs. a formal process under the South African competition regime. Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 47 Chapter 4 Key Lessons Learned The systematic assessment of the recent trends and develop- Changes to market and regulatory environments are hap- ments in competition advocacy and the specific examples of pening faster, and this is where long-term engagements with this year’s Competition Advocacy Contest have brought to regulators and industry play out. Successful responses to a new light important lessons: service-model or a suddenly heightened risk to anti-competitive practices typically leverage previous knowledge of the sector and How advocacy tools are used is more important than whether its stakeholders. Knowing how construction companies compete they are explicitly included in the legal framework. Across the and collude helped authorities to put in place effective preventive globe a general mandate to promote competition has been a suffi- measures after an earthquake and a sudden peak in demand. cient basis to build a successful competition advocacy track record. Driving pro-competitive change in the taxi industry is best done While a more specific mandate for a particular advocacy tool (such on the basis of a long-standing collaborative relationship with the as opinions or market studies) can be helpful for young authorities, transport regulator. it is by no means sufficient to achieve impact on markets. Effective advocacy is targeted and content-driven. Authorities Market studies can be helpful but must be problem-oriented, now tend to combine awareness raising advocacy tools with narrow and actionable. While market studies are by now a stan- specific objectives, such as compliance. Chile showed how to dard task for many competition authorities, their effectiveness in implement an effective self-compliance mechanism that reduces promoting more competitive markets varies widely. Those that have opportunities for collusive behavior by issuing detailed guidelines transformed paper into action have built on a particular concern on the role of business associations and competition law. After (such as a complaint by businesses about access to wholesale enacting its competition law, Kenya’s awareness-raising campaign sugar markets), focused on a narrow segment of the sector (such was not designed as a general introduction to competition policy as immediate debit card payment), understood the dynamic but was focused on informing business associations about the relationship with the industry (by involving an independent panel to temporary program through which they could come forward receive submissions), and offered clear and feasible reform options voluntarily, align their internal statutes and rules with the new (such as regulation of third-party booking platforms). legal provision and therefore avoid substantial sanctions for anti-competitive behavior. With a clear message and a specific Measuring what advocacy strategies can achieve and have objective, Kenya’s authority effectively dismantled numerous achieved makes efforts tangible and any mandate more cartels in just eight months. credible. An opinion on a specific legislative instrument will only resound with policy makers when it is attached to a figure reflecting the gains to be made from following the opinion, in terms of invest- ment, savings, or growth. Authorities gain credibility and support Impact of competition advocacy when demonstrating the results after the reform. Competition initiatives effects are not only reflected in price changes, but often in access The most measureable impact of a successful advocacy to services (mobile subscribers) or increased connectivity to campaign can be the benefits to consumers and businesses. international markets. For consumers, competition advocacy initiatives that ensure firms Economic crises or disruptive innovations are challenges have the right incentives to provide more goods and services at and opportunities at the same time. A changing political or competitive prices directly increase their welfare. Such interven- economic environment often has major effects on markets and tions often have an additional distributional impact by improving brings a chance for competition authorities to influence discourse market outcomes of goods that are key for the consumption basket and decision-making. Authorities such as those in Iceland have of the poor. This is the case 16 percent of the time among the win- made a difference by presenting well-grounded and technically ners and honorable mentions of 2013/14 and 2014/15 Competition solid analysis of how market features and regulatory environments Advocacy Contest (see Figure 7). For example, the intervention interact and affect competition dynamics. in the healthcare market by the competition agency in Kenya to prevent a substantial increase in service charges saved consumers around US$1.7 million a year. For businesses, competition in input 48 Transforming Markets through competition Chapter 4 markets reduces costs improving competitiveness of downstream markets. Competition in input (upstream) markets — such as Figure 7. Distribution of competition advocacy stories transportation, financial services, and energy, telecommunications, by targeted sector and construction services — is a key driver of efficiency and Finance (c) 4% productivity growth in downstream markets.20 Domestic competition All sectors Health 16% in these sectors also fosters export competitiveness.21 Twenty (c) 12% percent of the advocacy stories awarded so far provide more practical evidence of these effects. Agriculture (b) 4% When advocacy initiatives target essential services sector, Retail then benefits often accrue to consumers and businesses at (b) 4% Transport the same time. In 64 percent of the cases, the advocacy initiatives 16% targeted sectors such as transport, telecom and construction where both consumers and businesses stand to gain from increased cov- Energy (b) 12% erage, reduced costs or simply open markets for key services for a modern economy, particularly linked to logistics and cross-sectoral Telecom Retail 8% services. For example, airline ticket prices for domestic flights (c and b) 4% came down by 70 percent in Indonesia following an advocacy Finance Construction campaign by Indonesia’s Commission for the Supervision of (c and b) 8% Agriculture 8% (c and b) 4% Business Competition, significantly benefiting people living and working on the major routes. Israel’s reform of the immediate debit Primary beneficiaries: b = businesses card payment segment will help reduce market inefficiencies in c = consumers the payment market estimated to be costing the economy US$100 Source: Author’s own calculation. million a year. The impact of advocacy initiatives staged by the commended authorities in the earlier 2013/14 contest have been documented increased business connectivity and benefits for consumers. in a previous publication. Since then, their efforts have continued 22 According to a 2015 SIC study, consumers should benefit consider- to transform key national markets. In Chile, an independent ably from price reductions with up to US$56 million savings on impact evaluation of the Guidelines for trade associations drawn mobile internet charges. Competition is not only about an effect on up under the advocacy program conducted by the National prices — in Colombia, increased output and market access were Economic Prosecutor’s Office (NEPO) found that 95 percent of other relevant benefits of more intense competition. In 2014, the respondents said that the Guidelines had succeeded in spreading overall number of mobile internet users increased by 22 percent a competition culture and that 84 percent of respondents belonging and the two new market entrants have gained increasing numbers to a trade association had amended their information exchange of subscribers. This is even more relevant since this facilitates policies to comply with competition law. NEPO’s work to promote business services for small and medium size entrepreneurs that a competition culture within business and particularly to get trade use telecommunications to connect with suppliers and customers, associations to comply with competition rules continues through a access market info and carry out transactions. Success like this combination of enforcement and advocacy actions, and has been one highlights the impact that lifting restrictions on competition adopted by several other competition agencies in the Americas. might have on competitiveness of particular industries, sectors, and even countries. The success of Colombia’s Superintendence of Industry and Commerce (SIC) in ensuring a level playing field in the auction Through advocacy, competition authorities have also of 4G spectrum for mobile communications, and so allowing new increased the quality of government interventions in markets entrants into the market, has stimulated significant market growth, and reduced its unintended distortive effects on markets. The Egyptian Competition Agency (ECA), following its global advocacy strategy to foster a more competitive market by limiting government intervention and spreading a competition culture, is 20 Kitzmuller and Licetti (2012). 21 Goodwin and Pierola (2015). playing an increasingly central role in supporting the country’s 22 The Competition Policy Advocacy Awards: Changing Mindsets to economic development. It has significantly influenced policy Transform Markets: Lessons Learned from the First Annual Awards on Competition Policy Advocacy, World Bank Group, 2014. making and practices in several economic sectors — key for both Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 49 competitiveness and social purposes — including electricity supply, recommendations in the market of liquid fuels to increase competi- tourism, shipping, raw leather and health care. Amendments in tion. In Mexico and South Africa, advocacy to fight bid-rigging 2014 to Egypt’s Competition Law have strengthened the ECA’s in public procurement tendering has produced palpable results. powers, amongst others mandating that it be consulted on any In Mexico, a consolidated purchasing program in the health draft laws and regulations likely to harm competition. The role of sector has saved around US$185 million. In South Africa, the competition in market reform was recognized by the inclusion of a Competition Commission has applied the Construction Fast Track competition pillar and related technical assistance and implementa- Settlement process over recent years, finalizing five settlement tion support in the multi-billion lending program negotiated between agreements in 2014-15 and referring non-cooperating firms to the the Egyptian Government and the World Bank Group. Competition Tribunal for prosecution. A key message of Turkey’s advocacy program — to raise the awareness by government The break-up of a price-fixing and market sharing cartel between officials engaged in the privatizations of State enterprises of the Pakistani and Saudi Arabian State-owned airlines was the vital need to ensure that the privatized market could not be significantly influenced by an advocacy initiative by the Pakistan monopolized — was reinforced by a 2015 report on the electric- Competition Commission directed at the Government Ministry ity wholesale and retail markets. Not only Colombia’s, but also overseeing civil aviation. The air services agreement between Moldova’s advocacy in partnership with the telecommunications Pakistan and Saudi Arabia had been amended to allow two new regulator was successful: Improving market transparency led within airlines from each country to enter the market and provide direct one year to a doubling of the internet traffic via mobile telephony services during the Hajj. Following these pro-competitive changes and a six-fold increase in 4G service users. to the agreement, in 2015 27 percent more citizens than in the previous year took advantage of air travel for their pilgrimage, over How do these individual benefits to consumers and busi- 18 percent of the pilgrim passengers were carried by the two new nesses transcend to broader development objectives? Table 1 market entrants and pilgrimage passengers enjoyed 10 percent concludes how each and every of the stories has not only shown lower fares in 2015 than in 2014. tangible impact but contributed to broader economic growth and consumer welfare, in particular of those more in need. This is how Among the honorable mentions, the Competition Superintendence competition ultimately improves public health, increases financial in El Salvador has continued to liaise with public offices to prevent inclusion, and how it allows industries and economies to become anti-competitive provisions, and most recently, has made specific more competitive to create more and better jobs. 50 Transforming Markets through competition Chapter 4 Table 1. Relation of competition advocacy initiatives and broader development goals How competition translates into economic How competition ensures that Contest growth through higher productivity and more benefits accrue to consumers and Year Country Observed impact on market competition competitiveness bottom 40% of the population US$56 million savings on mobile internet charges and 22% Digital dividends from mobile internet: 2013/2014 Colombia more mobile internet users Digital dividends from mobile internet: Higher Citizens with better access to jobs Mobile internet traffic doubled and 4-fold increase in 4G productivity of businesses and opportunities; benefit from better 2013/2014 Moldova government delivery of services users Consumer savings of around US$1.7m per year in health 2014/2015 Kenya services 2013/2014 Mexico Savings in health sector of $185m Improved public health Pro-competition regulatory reform, e.g. in electricity 2013/2014 Egypt supply, shipping, tourism and healthcare Higher firm-productivity through more competitive 2013/2014 El Salvador Pro-competition policies in liquid fuels inputs Pro-competition government intervention in electricity 2013/2014 Turkey sector Non-discriminatory access to essential commodity input for 2014/2015 Russia Better access to inputs for more competitive final Improved food security fertilizer products 2014/2015 Malawi Greater and non-discriminatory access to sugar Heightened competition in the banking sector reflected in 2014/2015 South Africa Improved access to finance lower prices for consumer products Increased financial inclusion Reduction of inefficiencies in payment services markets 2014/2015 Israel costing US$100 million per year Increase and more flexible access to 2014/2015 Finland Comprehensive liberalization of shop opening hours Higher productivity of retail markets basic goods EUR 5.2billion net gains for economy from regulatory 2014/2015 Greece reform, e.g. in retail sector 2013/2014 South Africa Anti-competitive practices tackled in construction sector Better value for money in public works 2014/2015 New Zealand Fewer instances of bid rigging in construction sector Greater efficiency in taxi matching rates and innovative 2014/2015 Singapore Greater mobility for workers and tourists customer services 27 % more travelers on pilgrimage route and 10% lower air 2013/2014 Pakistan fares for pilgrims 2014/2015 Indonesia Reduction of domestic air fares by 70 percent More efficiency ensuring that government intervention (incl. through SOEs) does not distort Heightened supervision to merger cases to avoid ownership the level playing field 2014/2015 Iceland concentration through (state) bank creditors 2014/2015 Moldova 170 public authorities reporting state aid through portal 2014/2015 El Salvador Civil society aware of judicial delays in competition cases Public opinion towards role of Competition Policy has 2014/2015 Portugal changed Economy-wide strengthening of competition policy promoting productivity in key markets Majority of trade associations changed information 2013/2014 Chile exchange policies Highlights from the first joint WBG and ICN Awards in Competition Policy Advocacy 51 Bibliography Argent, Jonathan, and Tania Begazo. “Competition in Kenyan markets and its impact on income and poverty: a case study on sugar and maize.” World Bank Policy Research Working Paper 7179 (2015). 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