Understanding Competition Policy: Goals, Theories, and Instruments, Slides of Competition Law and Policy

Download Understanding Competition Policy: Goals, Theories, and Instruments and more Slides Competition Law and Policy in PDF only on Docsity! COMPETITION POLICY What are the main theories underpinning the goals of competition policy? What are the main instruments to achieving competition policy? Docsity.com INTRODUCTION • The emergence of imperfect competitive markets such as monopolies and oligopolies (due to the existence of indivisibilities, presented, yet another case of market deficiency/failure and thus, yet again another case for government involvement. • As such, in the late 1800s and throughout the 1990s, we witnessed the establishment of laws which presented a framework for the formulation of competition policy. Docsity.com Examples of Acts: Cont. • US: 1. Sherman antitrust Act (1890) & Clayton Act (1914) • Sweden: Antimonopoly law (1925) • Anti cartelization laws of the late 1920s and early 1930s of Denmark, the Netherlands and Norway. • Jamaica Fair Competition Act (1993) Docsity.com Goals of Competition Policy • To encourage a more efficient allocation of resources so that the economy is ever closer to the ideal pareto optimal point, ie. The static equilibrium argument, • To encourage higher productivity, better quality and enhanced variety over time- associated with competition, • Equity consideration- encouraging a level playing ground for all players, • Harmonization-especially considering efforts at regional integration. Docsity.com Theories of Competition policy • There are two main theories that I came across; • 1. Neoclassical Approach • 2. Evolutionary Approach • 3. Structuralist Approach • 4. Chicago School Approach Docsity.com Evolutionary Approach • Proponents argued that this approach is a more realistic notion of competition. Profit is driven by innovation, R & D. Thus, monopoly power is obtained in the process of competitive rivalry. • Cook (2001:9) ‘this entails a shift from perceiving competition in terms of a state of equilibrium, characterized by different market structures, to competition as a process of change premised on the existence of the differential behaviour of firms..’ • Thus in designing competition policy, Cohen (2001:P23) ‘the arts of a successful government policy is to develop and apply a balance mixture of competition policy and technology policy. Docsity.com Difference between the two approaches • While the neoclassical approach is focused on the market structure in terms of the number of firms in the market and its effects on competition • The Evolutionary approach is concerned with the behaviour of the firm in terms of the process which is brought about new profit opportunities, thus competition (Paul Cook, P.10). Docsity.com Instruments to achieve competition Policy goals • Achievement through ensuring the following: (a) Competition Laws- is the sunset of competition policy and seeks to establish the rules and guidelines for market power and dominance. (b) Competition Authorities - Docsity.com Recommendations • A number of suggestions were put forward in the World Development Report (2002:P142) 1. competition authority should be completely I independent. 2. There needs to be adequate budgets and staff to perform their functions 3. In light of limited resources, such authorities in developing countries should concentrate more on other issues such as price discrimination. Docsity.com Conclusion • The view expressed in the World Development Report 2002: P. 133 that, ‘competition has long been acknowledged as an important force bringing abut economic development and growth’ is arguable. • Nonetheless, developing countries like the small states of the Caribbean must move, without delay, towards an efficient competition policy just as Jamaica did in 1993. At the very least, the unfolding Caribbean economic environment (CSME) along with the twin forces of globalization and trade liberalization make it incumbent upon our peoples and governments to do so. Docsity.com