REGIMES DE QUALIDADE DOS PRODUTOS AGRO-ALIMENTARES

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Future challenges for competition enforcement in
Europe a proposal for a multi-level approach
Conferência em Defesa da Concorrência e Defesa
Comercial Brasília 21-22 de Maio de 2009
Aurelio La Torre Prime Minister Office Department
for Legal and Juridical Affairs RIA Office
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Let me introduce myself

• ? Director within the Presidency of the Italian
  Council of Ministers c/o the Department of legal
  affairs (Head of RIA Unit).
• ? Degrees cum laude in both Law and Political
  Sciences (with thesis in competition) and two
  postgraduate degrees in European affairs.
• ? Overall experience of almost 18 years in
  competition policy, legal drafting, European
  affairs and public administration.
• ? Competition official within the Italian
  Competition Authority for more than 4 years.
• ? Responsible for the competition component in
  three different PHARE Twinning Projects in
  Romania designed to help Romanias accession to
  the UE (2006-2008, 2003-2005 and 2001-2002).

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Content of the presentation

• Introduction
• Common difficulties in competition enforcement
• Conclusion need for a multi-level approach

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Common difficulties in enforcement of competition

1. Frequent lack of a well-defined priority strategy
   for enforcement with little use of ex officio
   investigations
2. Need to better design a strategy in order to
   foster competition in the area of public
   procurements
3. Need to deepen the synergies between competition
   policy and anti corruption strategies
4. Various problems in antitrust enforcement caused
   by legislation
5. Need to strengthen administrative capacity and/or
   internal organisation and/or adequate HR
   management within the National Competition
   Authorities

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1. Frequent lack of a well-defined priority
strategy for enforcement with little use of ex
officio investigations

• Competition authorities around the world tend to
  be more reactive than pro-active in their
  fight against anticompetitive practices.
• Indeed, investigations are normally opened
  following a complaint or where companies blow
  the whistle on a cartel to benefit from
  leniency.
• The percentage of investigations opened
  ex-officio is generally low.

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What are the benefits of a pro-active
investigative policy? (1/2)

• A reactive investigative policy (as opposed to
  a pro-active investigative policy) may have
  several important shortfalls
• It may force the authoritys resources to focus
  on cases having a small impact on the national
  economy and fail to achieve tough competition in
  some economic sectors which are fundamental for
  the national economy
• It may detect anticompetitive practices long
  after they have been in place, causing lasting
  damages to the structure of the market (e.g. RTE
  practices against Magill Microsoft practices
  against Netscape)
• It is unlikely to reach anticompetitive practices
  targeting consumers directly (e.g. excessive
  prices charged by a monopolist), who are not
  sufficiently organised to complain against such
  practices

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What are the benefits of a pro-active
investigative policy? (2/2)

1. It may receive scarce media coverage and reduce
   the authoritys visibility and reputation
   complaints, due also to their confidential
   character, are unlikely to attract the attention
   of the media
2. It reduces the ability of the competition
   authority to gather evidence of the infringement,
   since in the majority of cases the alleged
   infringer has been warned of or is likely to
   guess the other partys intention to lodge a
   complaint
3. It may have scarce deterrent effect, since a
   non-interventionist authority - especially in
   markets which are unlikely to be the object of a
   complaint - is unlikely to be perceived by
   companies as a threat to their ability to
   conclude anticompetitive practises
4. It may fail to attract new entrants in the
   market(s) where anticompetitive practises (for
   instance, cartel agreements or exclusionary
   practises implemented by dominant companies)
   represent a disincentive for new entrants.

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What criteria for ex-officio investigations?

• Decisions to open ex-officio investigations need
  to follow a pre-determined policy by drafting
  specific guidelines.
• Priority should be given to investigations
  concerning hardcore restrictions of competition
  having an effect at national level (as opposed to
  local level) and relating to sectors essential
  for the national economy.

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Antitrust enforcement overcome the spider-web
paradox
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(No Transcript)
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Key sectors for enforcement (e. g. Romania 2005-7)

• Public Procurement
• Media ( )
• Energy ( )
• Communication and Information Technology ( )
• Transport ( )
• Banking ( )
• Insurance ( )
• Construction
• Pharmaceuticals
• Steel Industry
• Postal services ( )
• Real Estate Transactions
• Mechanical Engineering
• Tourism
• Area including network industries
• Area including sector(s) under competence of
  a Regulation Authority

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3. Need to better design a strategy in order to
foster competition in the area of public
procurements

• Advantages
• ensuring transparency in Public Administration
• fighting corruption
• maintaining in place a functioning free market
  economy

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The main competition problems in public
procurement procedures

• Award directly a contract without organising a
  public tender
• Requirements tailored to the advantage of one
  specific bidder
• Discrimination among potential bidders (e.g.
  unjustified high turnover thresholds that can
  discriminate SMEs and/or many years of experience
  in the field of activity to block the access of
  the newcomers)
• Lack of transparency
• Tight deadlines insufficient visibility and
  inadequate time for submitting bids
• Bid rigging (i.e. illegal co-ordination between
  firms aimed at affect the outcome of any sale or
  purchasing process in which bids are submitted)
• Corruption related practices - these are
  instances where a representative of the
  contracting authority agrees with one or more
  bidders to false the tendering process.

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Role of competition Authority in public
procurement

• analyse PP legislation
• address recommendation to Government and
  Parliament (advocacy)
• draft guidelines for all tenders organisers
• draft internal instructions and checklist
• internal training and referee
• bilateral cooperation with PP Agency

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4. Need to deepen the synergies between
competition policy and anti corruption
strategies

• The higher is the corruption, the higher is the
  alteration in the business environment,
  especially in the strategic and high
  remunerative markets

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Role of competition Authority

• analyse anti-corruption legislation
• set up or increase cooperation with
  Anti-corruption Authority
• identify field of inter-relation (e.g. public
  procurement)
• promote studies on influence of non ethical
  behaviours on the functioning of market economy
  (CFR. Current financial crisis)

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5. Problems in antitrust enforcement caused by
legislation

• Many competition distortions originate from
  legislation.
• Competition agencies are generally entrusted with
  advocacy powers.
• Nevertheless, these powers are not binding and
  are implemented ex post.
• When did this become a crucial problem?

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• Is legislation encouraging or distorting free
  competition?
• The Bosses of the Senate," Lithography, 1889

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The Bosses of the Senate," Lithography, 1889

• Huge figures stand behind rows of Senate desks.
  The four figures in top hats, with big bellies,
  are the Iron Trust, Standard Oil Trust, Copper
  Trust, Steel Beam Trust, all with dollar signs on
  their stomachs.
• The sign at top reads "This is a Senate for the
  Monopolists, By the Monopolists and of the
  Monopolists!" Some Senators look up at them.

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(No Transcript)
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Examples of legislative measures that may have an
anticompetitive impact include

• public tenders applying unfair or discriminatory
  terms
• measures fixing prices or tariffs
• measures granting exclusive rights
• measures discouraging market entry by increasing
  standards or introducing new administrative
  barriers (licences, authorisations etc.)
• measures obstructing import or export of
  products/services
• measures granting state aid or otherwise
  favouring domestic over foreign companies

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The Structure of the Italian RIA model (2008)

• 1. Context and objectives.
• 2. Procedures of consultation.
• 3. Assessment of the non-intervention option
• (zero option).
• 4. Assessment of the alternative options of
  regulatory intervention.
• 5. Justification of the proposed regulatory
  option.
• 6. Impact on the correct competitive market
  functioning and on the Country competitiveness.
• 7. Implementing modalities of the regulatory
  intervention.

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Basic competition RIA filter test (Italy 2008)

• Does regulation
• Limit the number or type of providers?
• Limit the competition possibilities of providers?
• Reduce the incentives for providers to compete?
• N.B. Italy is preparing specific guidelines and a
  more detailed checklist

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To what regulation should we apply the
competition filter test?

• Must be submitted to RIA legal provisions that
  have business or competition impacts.
• Business impacts arise in the case that proposed
  regulations
• (1) govern the entry or exit into or out of
  market
• (2) control prices or production levels
• (3) restrict the quality, level, or location of
  goods and services available
• (4) restrict advertising and promotional
  activities
• (5) restrict price or type of inputs used in the
  production process
• (6) are likely to confer significant costs on
  business, or may provide advantages to some firms
  over others.

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6. Need to strengthen administrative capacity,
internal organisation, HR management within the
National Competition Authorities
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Enhancing the administrative capacity of
Competition Agencies some issues

• personnel selection procedures
• carrier and status
• internal promotion system
• training on
• public speaking
• lobbying and negotiating skills
• leadership
• team building

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Conclusions

1. Adopt a well-defined priority strategy for
   enforcement with adequate use of ex officio
   investigations
2. Verify your strategy in order to foster
   competition in the area of public procurements
3. Consider to study the synergies between
   competition policy and anti corruption strategies
4. Consider to adopt RIA in order to face
   competition distortions caused by legislation
5. Pay attention to the human factor

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Obrigado! Aurelio La Torre
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• www.planejamento.gov.br/gestao/dialogos
• dialogos.setoriais_at_planejamento.gov.br
• Departamento de Cooperação Internacional
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