The overall aim of the Forum to which this study is contributing is to explore the various options available for effective implementation of competition and regulatory laws in developing countries.

Authors are requested to provide a paper proposal (2-3 pages) addressing the points outlined below:

1. An abstract of no more than 500 words with some methodological details.

2. The name(s) of author(s), affiliation(s), and email address(es).

3. The index of the paper-stating list of proposed sections in the paper.

4. A detailed account of the likely substance of the paper:

   1. Purpose – sentence stating the purpose of study

   2. For defining the scope of your paper major research question or questions should be addressed in the paper. Secondary research questions should also be listed.

   3. Importance of the research question and its potential relevance to policymakers should be described briefly.

   4. List the hypotheses that the paper will examine.

   5. Describe the method of analysis to be employed. The methods used could include legal analysis, econometric analysis, interview techniques, research of primary sources—all of which have shortcomings that require thought. Studies should use the methodology that is appropriate. In order to ensure that wide range of readers understand the paper, it is required that when econometric methods are used, the results are presented in simple tabular or graphic form. Also mention the drawbacks of the methods used and the steps you will be taking to address them.

   6. Where empirical analyses are envisaged, a detailed account of the likely data sources, dependent and independent variables, and estimation techniques should be given.

   7. An account of the potential findings of the paper. What matters or debates will your paper shed light on? What can policymakers learn from the possible findings of your study? We recognise that you cannot know with certainty what the findings of your paper will be—but before commencing the analysis it should be possible to think through what the different possible conclusions will be.

   8. Describe which audiences are likely to find your potential findings of interest. The audience could include national policymakers (in which agencies or ministries?), officials in international organisations (name of such organisations?), participants in discussions in international forum (which participants? which forum?), the private bar, corporate interests, and last but not least civil society (including consumer organisations and journalists.)

   9. Describe the likely caveats to your approach and likely findings.

Research Areas

The theme for the second research cycle of CDRF is “Institutional Issues covering Political Economy and Governance Constraints in Implementing Competition and Regulatory Regimes in the Developing World”. Following research areas have been identified under this theme. The authors may select one or a combination of the research areas for their papers.

1. Do conflicting objectives of stakeholders act as hindrance to effective implementation of Competition and Regulatory Regimes

A dynamic and competitive environment, underpinned by sound competition law and policy, is essential characteristics of a successful market economy. Effective enforcement of competition law and active competition advocacy can also be powerful catalysts for successful economic restructuring. Although, the field of competition law and policy is evolving rapidly and includes very different viewpoints on issues, recognition is growing that effective competition law is important in shaping business culture and that its proper implementation needs to allow for the education of the business people, politicians and the consumers.

Attempts to take into account multiple objectives in the administration of competition and regulatory policy may give rise to conflicts and inconsistent results. Various stakeholders (Politicians, Business and Consumer) perceive ‘competition’ with different objectives and these objectives are of conflicting nature. However, the role of regulatory authorities may not be well understood and there may be lack of competition culture, which may constrain both adoption and implementation of competition and regulatory regimes in developing countries.

The government’s commitment to growth as a political objective, political maturity and overall political climate in developing countries may matter much more than developed countries. In this situation, it might be important to properly align the Competition policy outcomes and incentives for politicians and businesses so that adoption of competition/regulatory law can get a political and business buy-in. If competition law and policy is to yield all the envisaged benefits, political will and consensus for reform amongst different stakeholders may be very important. Adopting or strengthening an existing law by itself may not help.

Further, Competition Law in developing countries are expected to serve the certain objectives of different stakeholders other than promoting efficient markets. Here it would be important to consider whether certain (even legitimate) objectives of stakeholders are best served by government policies other than Competition Policy and Law. This is the argument used by many Competition Law experts in developed countries who are baffled by the desire of many developing countries to use Competition Law to attain objectives other than promoting efficiency. Here it is also important to address that whether every government priority manifest itself in the objectives of each government agency. When this does not seem to happen for central banks then why should it happen for Competition agency?

Key Research Question

• Whether objectives of various stakeholders are best served by government policies and rules other than Competition Law?

• Why is an efficiency-only perspective as the objectives of Competition Law so unacceptable in developing countries?

• In what ways the conflicting objectives of various stakeholders( politicians, business and the consumers ) can be aligned?

• What are the experiences of educating various stakeholders about the benefits of implementing Competition and Regulatory Regime in developing countries?

• Does government’s commitment to growth as a political objective and overall political climate in a country matter for the success of competition and regulatory regimes?

• Is it important to align ‘competition policy outcomes’ and ‘incentives for politicians’, so that adoption of competition/regulatory law gets a political buy-in? If yes, then how it can be achieved?

• If at all, the interest of consumers and new businesses that are expected to benefit from open markets and competition can be protected?

2. Resolving Conflict between Competition and Regulatory Authorities

There are several dimensions to any discussion of the relationship between competition and regulatory authorities. First, there is the question of relationship between competition policy and regulation in the most general sense, which refers to governments, laws and regulation. Second there is a question of competition and regulated industries i.e. public utilities.

The possibility of simultaneous intervention of the sectoral regulators and the Competition Authority has been publicly discussed mainly in legal terms and in relation to the expertise and to the nature of instruments available to each authority. The typical argument is: The Competition Authority acts as a monitoring entity. It verifies ex post whether or not firms have adopted anti-competitive conduct. On the other hand, sectoral regulatory authorities intervene ex ante, enacting regulatory measures aimed at avoiding the exercise of monopoly power in regulated markets, for example the setting of high prices or inefficient investment decisions. Alternatively, one could imagine that both authorities are on an equal footing, and each investigates where it sees a need to intervene.

Government in most developing countries have not put in place a mechanism to synchronise regulatory activities. The multiplicity of regulations and concurrent jurisdiction could lead to forum shopping. Where a case comes under the purview of both the sector regulatory law and competition legislation, parties to the case might have to approach both the regulators for clearance, thereby increasing transaction costs. The lack of coordination often leads to policy discrepancy and creates regulatory uncertainty for stakeholders concerned.

But, the clash between regulators and competition agencies is often a function of the objectives of the former, which in turn, vary a lot across sectors. The objectives of sectoral regulators vary according to the nature and requirement of different sectors and at the same time the there are variations across developing countries at different stages of development. Thus, there are three dimensions of this problem that is; ex-ante design versus ex-post coping strategy, variations across sectoral regulators objectives, and variation across developing countries.

The solution to the overlapping jurisdiction could be to legislate clear mandates for regulators and the competition authority. It is best to leave the determination of behavioural issues to competition authorities, and structural issues to the regulatory authorities. Across sectors, some basic principles of competition must prevail.

Key Research Questions

• Developing countries face the problem of conflict between different regulatory laws/agencies. In what ways we can ensure regulatory coherence among these agencies?

• In case of concurrent jurisdiction( which generally happens in developing countries) between competition authority and sector regulators, what is the right thing to do?

• The clash between regulators and competition agencies is often a function of the objectives of the former, which in turn, vary a lot across sectors. In what ways the problem of ex-ante design versus ex-post coping strategies can be minimised in developing countries?

• In what ways the model of entrusting ex-ante regulation to sector regulators and ex-post to competition authority is workable in developing countries? What have been the experiences of developing countries in implementing this model?

• How to align between the varying objectives of different sectoral regulators in developing countries specially, when there are variations across these countries also?

• Are there specific instances in developing countries which highlight the dilemmas, trade offs and policy choices in this area?

• What factors determine convergence/divergence in decisions of competition authority and sectoral regulators with respect to competition issues in regulated industries

3. Protection of Public Interest vis-à-vis Promotion of Efficient Market

According to Several scholars States should play a limited role in the enforcement competition in the market, especially in the matters of national or global importance. Microsoft case illustrates the costs of State intervention in competition matters. These scholars further express that States often focus on certain short term interests rather than broader concerns for efficiency and equity.

The public interest theory of competition policy emphasises that the Competition Law attempt to improve market performance by regulating market structure, behaviour and by protecting and promoting competition crucial to the success of a market economy in promoting efficiency and delivering the ensuring benefits to consumers. While, the government claims that it interfere in the market to serve the public interest but this interference may be susceptible to the influence of some interest groups as is any other government policy.

Public interest is an important policy objective for governments in developing countries generally having a large informal sector and high unemployment. But as experience of developing countries shows that if public interest are dominated by vested interest and these dominate political power, they might limit growth dynamics and can curtail economic opportunities for poor consumer.

It appears to be a matter of ‘Common Practice’ that a regulator is made to consider public interest in its decision making process. The inherent conflict between the objectives of efficient markets and public interest can lead to situations of trade-off, which may be politically quite sensitive. Moreover, regulatory authorities may not be able to do much in situations that call for change in government policy/rules. In such a politico-economic system, it may be difficult for competition/regulatory authority to follow the objective of promoting efficient markets.

This situation can also be seen in developed country like USA where the federal antitrust agencies seek to pursue efficiency related objectives while many State antitrust agencies pursue a broader ‘public interest’ criteria. This has caused some divergences in view about the effects of certain proposed mergers in USA. The public interest standards were very hard to cleanly implement in practice in USA and that trying to do so had come at the expense of transparency and hurt business planning. According to Prof Paul Joskow there should be different agencies to review each distinct major objective that State may have that is, if a State wants national security as well as efficiency considerations to be taken into account in merger reviews then there should be two distinct bodies to undertake these reviews.

Key Research Questions

• In what ways we can best align government’s objective of promoting public interest and regulatory authority’s objective of promoting efficient markets?

• If at all, how to balance the trade-offs between efficiency and public interest objectives, which may not be specifically mentioned in the law?

• Should there be different agencies to review each distinct major public interest objective that State may have? Or do we need better quality institutions and tools to deal with the issues of public interest?

• Are there any lessons from US experience concerning the appropriate choice of standards?