The Negative Effects of National and International Anticompetitive Practices on Developing Countries

1
The Negative Effects of National and
International Anti-competitive Practices on
Developing Countries and Competitiveness

• Simon J. Evenett
• Said Business School, Oxford University
• United Kingdom
• simon.evenett_at_sbs.ox.ac.uk

2
Agenda for this presentation

• Motivation competition, poverty, competitiveness
  and development
• National anti-competitive practices
• Cross-border anti-competitive practices
• Example of hard core cartels
• Implications for policymaking
• Summary

3
Why do we care about anti-competitive corporate
practices?

• Because of their effects on poverty alleviation
  and public health
• Raise prices of goods and services to consumers
• Chicken cartel in Perudirect effect on the poor
  and poverty
• Raise cost of state investment projects (through
  bid rigging)
• Medical equipment sales to the General Hospital
  of Mexico

4
Why do we care about anti-competitive corporate
practices?

• Because these practices distort resource
  allocation (creating waste) and reduce the
  engines of growth, such as competitiveness
• Raise cost of private sector investment
• Cost of imported machinery
• Raise costs of materials, parts, and components
  for exporting firms
• Directly affects current competitiveness
• Restrict access to new technologies and limit
  technology transfer
• Compromises long term competitiveness

5
Types of corporate practices that can have
anti-competitive effects

• Hard core cartels (horizontal agreements)
• Mergers and acquisitions
• Vertical restraints
• Abuse of a dominant position (exercise of
  monopoly power)
• Predatory pricing
• Note Economics of each practice is different. In
  some cases price raising effects are offset by
  cost efficiencies etc.

6
Potential anti-competitive effects of corporate
practices
7
Cross-border anti-competitive practices Cartels
detected in the 1990s

• Prevalence 39 cartels
• Diverse membership 31 economies (including 8
  developing economies).
• Duration 24 cartels lasted at least 4 years.
• Overcharges on imports are not just the only
  adverse effect on developing economies.
• Exports are reduced too.
• Technology transfer slowed down also.

8
(No Transcript)
9
The international vitamins cartel

• Worldwide cartel, 1989-1999
• US Federal authorities took action in 1999
• US fines exceeded 900 million EU fines of a
  similar magnitude
• What effects on developing countries?

10
Vitamins cartel targeted nations without active
cartel enforcement
11
Attacking anti-competitive practicesfirst steps

• When thinking about strategies, policymakers
  should distinguish between
• state-led practices eg. Public utility
• state-fostered practices eg. Tariff walls
• private-orchestrated practices
• Seek out allies someone gets hurt by these
  practices
• Seek out expertize, facts, and data
• Prioritization is inevitableyou cant do
  everything

12
Summary

• There are many ways in which anti-competitive
  practices affect poverty, competitiveness, and
  development
• Practices can be undertaken by state firms as
  well as private firms
• Fighting anti-competitive practices is not
  necessarily anti-private sector
• At the beginning, prioritization is inevitable.
  Pick battles very carefully, win them, and be
  seen to win.