Materials

Eleventh Meeting of the UNCTAD Research Partnership Platform

15.12.2020
54 views
On December 10, the first session 11th Meeting of the UNCTAD Research Partnership Platform took place via video conference: the distinguished experts discussed the role of competition policy, shared their views and exchanged opinions on whether and how competition policy could complement industrial policy and other economic recovery measures being taken. Under the global impact of COVID-19 pandemic, the governments and agencies of every country, including developing ones, have been trying to implement economic and health measures in order to protect their economies, businesses and consumers, and the RPP discussion was mainly dedicated to the role of competition policy in a fair and inclusive economic recovery.
The session was opened by Ms.Teresa Moreira, the Head of UNCTAD Competition and Consumer Policies Branch, who introduced the topic and brought up the questions of main interest. She mentioned that after 10 years of fruitful activity the UNCTAD Research Partnership Platform was seeking the ways of revitalizing mutual partnership, as well as reviewing and updating areas of work, keeping the UNCTAD focus on the digital economy and developing countries’ needs and challenges.
The discussion was moderated by Ms. Ebru Gokce Dessemond from UNCTAD Competition and Consumer Policies Branch. She briefly presented the current work of RPP, including its activity in the period of pandemic, and introduced some research papers, both recently completed and still being prepared.

The first panelist, Prof. Eleanor Fox, Walter J. Derenberg Professor of Trade Regulation in New York University School of Law, mostly focused on the impact of pandemic and the priorities of national competition agencies, which included dominance and monopoly, mergers, cartel and agreements. Ms Fox emphasized that agencies had to pinpoint what they could do to most help the people and to do their best to make more difference. In the times of crisis the agencies tried to provide goods to people, so they allowed many exemptions in the industries of high concentration risk, and there could be a setback in the fighting economic concentrations. Prof. Fox also pointed out that all countries should spend their resources wisely and not spend their time, only investigating mergers, but collaborate and work more on regional agreements. She expressed her concerns about the inequity of bargaining power, an exclusion of poor people and small businesses from global processes and encouraged everyone to promote common access and participation in the market, as the inclusiveness and fairness were widely recognized values.

Dr. Thando Vilakazi, the Executive Director of the Centre for Competition, Regulation and Economic Development (CCRED) in University of Johannesburg, addressed the importance of economic development and the ways to achieve better outcomes for regions and economies. He expressed that the success in development was not always in competition law, as not all markets that were efficient had good competition policy. Dr. Vilakazi’s main suggestion was to find the right balance between competition and industrial policies and to implement the last one effectively. COVID had a cleansing effect and pushed out inefficient forms of market, but it was also an external shock, so supporting policies were needed. Many business had to rebuild their capabilities, and the best way to do it, in Dr. Vilakazo’s point of view, was to support them through industrial policies, combined with fighting cartels by the means of competition law.

Prof. Alexey Ivanov from Moscow Higher School of Economics, the Director of BRICS Competition Law and Policy Center, emphasized the lack of global cooperation system and the shift in the nature of competition. To illustrate and prove his point, he used a showcase of vaccine and treatment development. In 70s the humanity suffered the impact of the Hong Kong virus, and the reaction was quite successful, thanks to the WHO-established Global Influenza Surveillance and Response System: 122 countries created data exchange mechanisms. But during the COVID-19 pandemic we saw the very different competitive dynamic, which indicated the negative effects of unilateralism: the world entered into a vaccine race. Mr Ivanov pointed out the key reasons of such unwillingness to cooperate: we became too much driven by national domestic issues; IPR played more important role today than in 70s, when in fight against flu both companies and countries had been more flexible in providing access to data and research; no international legal framework existed to contain the rivalry into acceptable limits. “We now face 115 million people below poverty line in 2020 versus $24 billion of expected profits for pharma companies in 2021,” Prof. Ivanov said. “We witness how in the pursue of profit the market power becomes a form of controlling population and development of species. The possible outcome is that we won’t be able to restrain the pandemic. It needs constant updates, sharing of analytics, data pooling. If the virus will mutate, it would be impossible for us to catch up on our own.” Dr. Ivanov advised that we reconsidered our approach to share competitive landscape in pharma sector: otherwise the pandemic would be not only a threat to inefficient businesses but also an existential threat to humanity. In the end of his speech, Alexey Ivanov announced the research paper on killer acquisitions, which would be released in the nearest future by the BRICS Competition Centre.
  
Mr. Thomas Cheng, the Associate Professor of Faculty of Law in University of Hong Kong, followed the content of his book “Industrial Policy and Economic Recovery after Covid-19” and introduced the concept of industrial policy. Based on his thorough analysis of international experience, his main conclusion was that the effectiveness of industrial policy was controversial, as it only tended to be beneficial if used offensively to pursue efficiencies – it did not work as a defensive tool to protect inefficient domestic firms and was very difficult to implement in most developing countries. It applied well to East Asian countries, where the government had a singular or even obsessive focus on the goal of economic growth and development. He introduced the East Asian Model: to successfully implement industrial policy Japan, Korea and Taiwan used some restrictive measures, such as strict selectivity and time limitation of government intervention, massive investment in infrastructure, centralization of strategic industrial decisions in competent authorities and a highly selective use of foreign direct investments. Thomas Cheng drew a distinction between horizontal (general, applicable across the borders and economy) and vertical (selective, sector- or even firm-specific) policies. In respect to the economic measures in light of COVID-19 Mr. Cheng stated that so far most policies were horizontal and did not conflicted significantly with competition laws but differential access to governments’ assistance still existed, sometimes mostly benefiting large firms and taking advantage of small firms. He noted that, when dealing with long-term consequences of Covid-19, governments risked to rationalize cartels, to allow mergers that involve failing firms or to protect national champions in certain industries, so these issues had to be watched out during economic recovery.

Prof. Paulo Furquim de Azevedo from the Center for Regulation and Democracy at Insper addressed to issue of successful recovery and stated that we needed cooperation instead of autonomous adaptation. He shared his personal concern that we may have COVID sequel in future. World suffered multiple shocks (demand, supply, inequality), businesses were uncertain about the duration of crisis, and, if adapted autonomously, markets did not adjust properly. The solution was not only about extending competition authority goals – it was also in the capability to promote cooperation, which concerned various branches of policy and not just competition law. Although the ICN declared to promote and to protect competition, some governments straightly intervened in prices in response to people’s need, which was ineffective in a short run and harmful in the long run. Prof. Paulo Furquim summarized the legacy of COVID-19, mentioning that in extreme conditions competitive markets might not adapt properly and urgent political answers were potentially harmful for future development. He described an industrial policy as an effective tool to coordinate supply and allocate essential goods but not to protect domestic firms. Mr. Paulo Furquim proposed to pay attention to transparency, accountability and participation of competition authorities in order to avoid the conventional risks of industrial policies.

While giving their final commentary, all the panelists came to a conclusion that fairness and inclusivity were crucially important, as the pandemic had exacerbated the existing problems. The competition law itself was not sufficient to overcome all economic challenges. COVID was a test to humanity and international organizations to find out, whether we were capable to handle the crisis and find mutual understanding and cooperate. The common long-term goal was less vulnerability to such shocks in future and creation of effective tools to achieve it.

In the end of the session Dr. Pierre Horna, the Legal Affairs Officer of UNCTAD presented his book “Fighting Cross-Border Cartels: The Perspective of the Young and Small Competition Authorities” (Hart Publishing, Oxford, 2020). The book was published in March, precisely when the pandemic started. Dr. Horna mentioned major myths about CBCs (younger agencies should prioritize domestic cartels etc), introduced the structure of the book and emphasized its significance for international cooperation in times of crisis and the additional possibilities for competition authorities from developing world to fight cross-border cartels. The book was already presented in July, during the webinar, organized by BRICS Competition Law and Policy Centre, the respective materials are available via the following links:
http://bricscompetition.org/materials/news/fighting-cross-border-cartels-through-international-coope...
http://bricscompetition.org/materials/events/fighting-cross-border-cartels-through-international-coo...