1. Competition Law & Policy for Public Officials 22 April 2013 Richard Whish Professor of Law King’s College London

2. Competition Law & Policy for Public Officials Note that there are now more than 120 systems of competition law in the world Competition law will be found in large, small, developed, developing, industrial and agricultural societies In the last few years competition law systems have been introduced in India, China and (of course) Malaysia, bringing potential benefits to literally billions of consumers Richard Whish King's College London 2Kuala Lumpur - 22 April 2013

3. Competition Law & Policy for Public Officials US competition law dates back to 1890; EU law to 1957 The decisional practice and jurisprudence of these systems are influential, though not determinative, of how any particular law should be applied in practice There is a wealth of useful material on competition law and policy and guidance available from organisations such as the ICN, OECD, UNCTAD and ASEAN Richard Whish King's College London 3Kuala Lumpur - 22 April 2013

4. Competition Law & Policy for Public Officials The focus of modern competition law and policy is on the positive benefits that competition produces for consumer welfare Competition law and policy assume that consumers will derive benefits from competitive markets Richard Whish King's College London Kuala Lumpur - 22 April 20134

5. Competition Law & Policy for Public Officials What do we mean by a competitive market? That market participants are subject to competitive constraints (actual competitors; potential competitors; buyer power) That market participants do not have individual or collective market power Because market participants lack market power they cannot profitably raise prices at the expense of consumers, restrict output or limit choice Richard Whish King's College London Kuala Lumpur - 22 April 20135

6. Competition Law & Policy for Public Officials Why do we believe that competitive markets are a good thing? Competition leads to lower prices Competition leads to the development of better products and services Competition gives consumers choice Richard Whish King's College London 6Kuala Lumpur - 22 April 2013

7. Competition Law & Policy for Public Officials Why else do we believe that competitive markets are a good thing? Competition promotes economic efficiency, which manifests itself in various ways – Allocative efficiency – Productive efficiency – Dynamic efficiency Richard Whish King's College London 7Kuala Lumpur - 22 April 2013

8. Competition Law & Policy for Public Officials Why else do we believe that competitive markets are a good thing? Clearly this is of considerable relevance to the importance of competitiveness Note Malaysia’s Economic Transformation Programme, which sees competition law as a key component for its goal of improved competitivness Richard Whish King's College London Kuala Lumpur - 22 April 20138

9. Competition Law & Policy for Public Officials Typical provisions of competition law Prohibition of anti-competitive agreements Prohibition of abusive behaviour by dominant firms Control of mergers Provision for ‘advocacy’, in particular by competition authorities, of the benefits of competition Richard Whish King's College London 9Kuala Lumpur - 22 April 2013

10. Competition Law & Policy for Public Officials Malaysian Competition Act 2010 Anti-competitive agreements: Chapter I of the Competition Act Abuse of dominance: Chapter II of the Competition Act Advocacy: section 16 of the Competition Commission Act Mergers: no provisions at the moment Richard Whish King's College London 10Kuala Lumpur - 22 April 2013

11. Competition Law & Policy for Public Officials Examples of markets in south-east Asia that have benefitted from the emergence of competition – Vietnamese mobile telephony – Indonesian SMS market – Singaporean ticketing services – Indonesian airlines (see the Guidelines on Developing Core Competencies in Competition Policy and Law for ASEAN, December 2012 (‘the ASEAN Guidelines’)) Richard Whish King's College London Kuala Lumpur - 22 April 201311

12. Competition Law & Policy for Public Officials Why might markets in a particular country be uncompetitive? Because of the existence of cartels or abusive behaviour by dominant firms Because there is inadequate control of anti- competitive mergers These matters should be dealt with under the conventional provisions of competition law Richard Whish King's College London 12Kuala Lumpur - 22 April 2013

13. Competition Law & Policy for Public Officials Why might markets in a particular country be uncompetitive? (continued) Economic reasons – There may be natural monopoly where competition is not possible – There will often be high levels of concentration where competition is muted – High levels of concentration in a local market may be unlikely to be eroded by competitive entry from within the market: therefore it is important to maintain an open economy with foreign competition Richard Whish King's College London 13Kuala Lumpur - 22 April 2013

14. Competition Law & Policy for Public Officials Why might markets in a particular country be uncompetitive? (continued) There are often powerful business elites within economies which wish to preserve their privileged position Business elites may exercise considerable influence over politicians and the local media, which perpetuates the problem Hence the need for independent competition authorities Richard Whish King's College London 14Kuala Lumpur - 22 April 2013

15. Competition Law & Policy for Public Officials Why might markets in a particular country be uncompetitive? In many economies there is a lack of a competition culture and a need to educate citizens as to the benefits of competition and of their rights as consumers Note the mission of the MyCC: ‘To ensure a conducive competition culture in line with international best practices. We shall nurture and drive such a culture through the education of stakeholders and the effective application of the law...’ Richard Whish King's College London 15Kuala Lumpur - 22 April 2013

16. Competition Law & Policy for Public Officials Why might markets in a particular country be uncompetitive? A well-resourced consumers’ organisation is an important feature of a successful competition culture Its functions include the representation of ill- informed or disempowered consumers Richard Whish King's College London Kuala Lumpur - 22 April 201316

17. Competition Law & Policy for Public Officials Why might markets in a particular country be uncompetitive? In many economies there are severe Governmental restrictions of competition: these may be termed ‘public restrictions’ Hence the need for public officials to understand what competition policy is trying to achieve and to avoid, where possible, unnecessary restrictions of competition Richard Whish King's College London 17Kuala Lumpur - 22 April 2013

18. Competition Law & Policy for Public Officials Why might markets in a particular country be uncompetitive? An important principle to keep in mind is the desirability of ‘competition neutrality’ between the state and private-sector operators: see the OFT’s Competition in Mixed Markets: Competitive Neutrality (OFT 1242, July 2010) It is because of public restrictions of competition that there is a need for ‘competition advocacy’ on the part of competition authorities Richard Whish King's College London Kuala Lumpur - 22 April 201318

19. Competition Law & Policy for Public Officials Competition advocacy Competition advocacy can be defined as ‘the range of non-enforcement activities which promote a competitive environment’ (see the ASEAN Guidelines) For useful discussion of competition advocacy see, eg, the work of the ICN, OECD and the ASEAN Guidelines Richard Whish King's College London Kuala Lumpur - 22 April 201319

20. Competition Law & Policy for Public Officials Public restrictions of competition: examples Price regulation – It is for markets to ‘regulate’ the price of goods and services – State regulation of prices seriously distorts the competitive process – However price regulation may be needed for natural monopolies Richard Whish King's College London Kuala Lumpur - 22 April 201320

21. Competition Law & Policy for Public Officials Public restrictions of competition: examples (continued) Claims by particular interest groups to be excluded or exempted from the scope of competition law – Lawyers? – Professional services generally? – State-owned enterprises? – Small and medium-sized enterprises? – Transport? Richard Whish King's College London 21Kuala Lumpur - 22 April 2013

22. Competition Law & Policy for Public Officials Public restrictions of competition: examples (continued) Limited number of licences/authorisations – Fixed telephony – Mobile telephony – Taxis – Pharmacies Richard Whish King's College London 22Kuala Lumpur - 22 April 2013

23. Competition Law & Policy for Public Officials Public restrictions of competition: examples (continued) Restrictions in the retail sector – Restrictive planning laws – Restrictions on the size of retail premises – Shop opening hours Richard Whish King's College London Kuala Lumpur - 22 April 201323

24. Competition Law & Policy for Public Officials Public restrictions of competition: examples (continued) Import duties; anti-dumping duties – These may be appealing as a way of protecting local businesses – But what effect do they have on consumer welfare?! Richard Whish King's College London 24Kuala Lumpur - 22 April 2013

25. Competition Law & Policy for Public Officials Public restrictions of competition: examples (continued) Restrictive rules on switching and portability – Banks – Telephony – Liquefied petroleum gas Richard Whish King's College London Kuala Lumpur - 22 April 201325

26. Competition Law & Policy for Public Officials Public restrictions of competition: examples (continued) State aids and subsidies Favourable treatment of particular firms Note the scope for taxation generally to distort the competitive process Richard Whish King's College London Kuala Lumpur - 22 April 201326

27. Competition Law & Policy for Public Officials Competition Impact Assessments It is desirable to assess the impact that Government initiatives may have on competition This process should be started as early in the policy- generating cycle as possible All possible policy options should be considered, with a view to identifying the one that is the least restrictive of competition Where competition is to be restricted, consider the use of a ‘sunset clause’ Richard Whish King's College London Kuala Lumpur - 22 April 201327

28. Competition Law & Policy for Public Officials The problem of bid-rigging What is bid-rigging? – An anti-competitive response by suppliers to the procurement of goods or services by purchasers – Public procurement by Government represents a significant percentage of GDP throughout the world: at least 15%, and in many countries more than this – It follows that bid-rigging in the public sector can cause serious economic harm to society at large Richard Whish King's College London 28Kuala Lumpur - 22 April 2013

29. Competition Law & Policy for Public Officials The problem of bid-rigging (continued) Types of bid-rigging – Level tendering – Bid rotation – Bid suppression – Cover pricing – Market division Richard Whish King's College London Kuala Lumpur - 22 April 201329

30. Competition Law & Policy for Public Officials The problem of bid-rigging (continued) Bid-rigging in the public sector may be combined with corruption on the part of Government officials Many competition authorities have been trying to confront bid-rigging in recent years: for example in the UK, Netherlands, Indonesia, Japan, France Richard Whish King's College London Kuala Lumpur - 22 April 201330

31. Competition Law & Policy for Public Officials The problem of bid-rigging (continued) The Malaysian Competition Act states specifically that bid-rigging is unlawful (section 4(2)(d)) The MyCC has specifically targeted bid- rigging as a priority area for enforcement of the Competition Act Richard Whish King's College London Kuala Lumpur - 22 April 201331

32. Competition Law & Policy for Public Officials The problem of bid-rigging (continued) What can public officials do about bid- rigging? See the OECD’s Guidelines for Fighting Bid Rigging in Public Procurement – Checklist for designing the procurement process – Checklist for detecting bid-rigging in public procurement Richard Whish King's College London Kuala Lumpur - 22 April 201332

33. Competition Law & Policy for Public Officials Thank you for your attention! Richard Whish King's College London Kuala Lumpur - 22 April 201333