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FP6

CPFTR — Result In Brief

Project ID: 502564
Funded under: FP6-POLICIES

How competition law can affect economic reform

A team of researchers has furthered our understanding of how competition law and related policy initiatives can influence the nature of international market interactions. The project's focus was on developing countries and their economies.
How competition law can affect economic reform
Policy initiatives in the field of competition law have proceeded well beyond the underlying empirical base. This holds for purely domestic matters as well as for interaction between competition law and important forms of economic regulation, such as policies related to investment, trade, state enterprise and privatisation, and price controls.

The EU-funded 'Competition policy foundations for trade reform, regulatory reform, and sustainable development' (CPFTR) project focused on developing and industrial economies. The team examined the relationships between competition policy and trade reform, domestic regulatory reform and sustainable development.

Project partners created a database (as exhaustive as possible) of post-1990 studies of economic reform episodes related to eastern Europe, Latin America and South and East Asia. Aiming to extend the scope of a standard literature review, they endeavoured to learn what scholars took into account regarding possible influences of market structures and anticompetitive practices on economic reforms and their evaluations.

The database was further used to determine which reforms were most likely to be eroded by anticompetitive business conduct and which sectors are most vulnerable. Researchers also examined which types of anticompetitive acts supposedly took place more frequently. The outcome was published in a paper comparing analyses from the academic studies database with the newspaper report database presenting alleged anticompetitive practices in the same regions and countries.

The CPFTR team also conducted an econometric analysis of the pricing power of European exporters of various products to four south-east Asian nations. This focus on the interaction between open trade policies and the exercise of market power in international markets raised the question of whether pricing power can survive in markets with relatively low trade barriers. This approach enabled comparisons across the destination countries, so researchers could investigate if European firms exercised market power more in national markets believed to have more relaxed competition law enforcement regimes.

Another project outcome addressed the definition, scope, rationale, form and potential effectiveness of competition advocacy. This was key in such a study, given the general belief that developing country competition agencies should concentrate on this activity, especially when their agencies are fairly inexperienced. The paper published in connection with this area of interest also examined what has been done in practice.

CPFTR research took a unique approach to enhancing our understanding of how competition policy-related initiatives can influence sustainable development. It also provided a base from which scholars, policymakers and even civil society can develop their discussions and work to strengthen the relevant research and policy environments.

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