A Quest for Justice. BRICS Countries Set Trends in Global Antimonopoly Policy: Alexey Ivanov for Rossiyskaya Gazeta

A Quest for Justice. BRICS Countries Set Trends in Global Antimonopoly Policy: Alexey Ivanov for Rossiyskaya Gazeta
24.01.2022 848

At the end of December 2021, the Higher School of Economics hosted a meeting of the BRICS Competition Law and Policy Working Groups on the Development of Competition in the Food and Pharmaceutical Markets. Why is the BRICS becoming a new driver for the development of competition policy on a global scale, and what is the role of the BRICS Competition Centre, working at the National Research University Higher School of Economics? Alexey Ivanov, director of the centre, explained in an interview with “RG”.

On monopolization in global markets

Mr Ivanov, what is the role of competition in the development of global markets? 

Alexey Ivanov: Without healthy competition, the market economy fizzles out — loses energy. And this happens, as a rule, because of the concentration of market power "in the same hands" — be it the result of collusion or other monopolization of markets. This power allows privileged market participants to act no longer in a competitive but in a monopolistic logic, parasitizing on consumers and other participants in economic relations. Monopolism is a frequent disease of the capitalist system. It causes the signal system of the market and its mechanisms responsible for increasing the efficiency of production and distribution of goods to stall and slow down. This means that it works worse with limited resources, satisfying people's needs and desires worse. The paradox is that monopolies are also a natural, though unwanted, result of the work of the capitalist system — it generates them constantly and, one might say, inevitably. This was well understood in the key capitalist countries as early as the beginning of the 20th century, during the period of active industrialization and the rapid economic growth it caused. As a cure for the development of monopolism, they began to adopt special laws and build multifaceted legal protection of competition — a kind of immunity from market monopolization.

Do these "protective" laws work? 

Alexey Ivanov: Antitrust laws have performed very well in the countries of the "capitalist core" and have become an integral part of the design of market institutions worldwide. Since the beginning of the 1990s the number of countries which passed antitrust laws increased more than fivefold: it's no longer acceptable to develop a market economy without proper immunization against monopolistic practices.

However, a crucial part of the global capitalist system has paradoxically fallen outside this immune protection. Despite the widespread proliferation of antitrust laws around the world over the past 30 years, the world remains without antitrust protection at the global market level. Neither the United Nations nor the World Trade Organization (WTO) has established effective legal mechanisms to protect competition on a global scale. This makes the legal regime for competition law very different from, for example, the global regimes for intellectual property or free trade and investment promotion, which are supported by binding international treaties underpinning the same WTO, the World Intellectual Property Organization, etc.

It can be said that the liberalization of world trade and the globalization of the economy in general in recent decades has proceeded anomalously without proper immunization against manifestations of monopolism. Perhaps this is one of the reasons why the global economy is unbalanced today. According to recent reports by UNCTAD and a number of other reputable organizations, the global economy has reached its highest level of concentration of capital since the Great Depression of the 1920s. And we remember well the social disasters that led to such imbalances in those years, but we do little to balance the global economy until it is too late.

Don't the organizations that regulate the world economy know this? 

Alexey Ivanov: No, we can not say that the architects of the modern world economy regulation system do not understand this. The original design of the WTO included a universal agreement to protect competition in the global economy similar to the TRIPS Agreement which introduced uniform standards of intellectual property protection for all WTO member countries. Such uniform standards for the protection of competition at the global level could have balanced the processes of globalization, just as industrial growth in the United States in the early 20th century was balanced by antitrust legislation. However, during the Uruguay Round of trade negotiations in 1994, this agreement was excluded from the WTO architecture. By the way, the prototype of the WTO — the International Trade Organization (ITO), established in 1948 as part of the UN, contained in its charter a detailed regulation of various forms of monopolistic activities, which were prohibited at the global level. Unfortunately, the WTO did not work due to the beginning of the Cold War and the aggravation of relations between economic blocs.

The absence of an international legal regime to protect competition opens up great room for monopolism precisely at the global level. Many countries, including the U.S., still often overlook the monopolistic activities of their companies at the global level. This creates certain distortions in the global economy, when blatantly unsightly practices, banned at the national level, become the norm in international trade.

How can this situation be changed, and is it possible now?

Alexey Ivanov: The ideal solution would be to adopt an international agreement to protect competition, as conceived by the ITO and done in relation to intellectual property protection, for example. But the likelihood of such developments is low, firstly, because of the low functionality of the key international organizations today - neither in the UN nor in the WTO it is impossible to reach consensus on more acute problems, and secondly, because of the lack of U.S. interest in transferring regulatory powers in this area to international organizations. The U.S. simply does not benefit from this, especially in the technological sphere.

Another possible solution to the problem is to develop rules to protect competition in global markets that would not be universal, but would cover a significant range of countries, thereby forming a critical mass of support for appropriate rules of conduct for global business and thereby making them the standard of good economic practice at the international level de facto. But the U.S. and the EU have already established appropriate mechanisms of cooperation — primarily within the Organization for Economic Cooperation and Development (OECD), which grew out of the so-called "Marshall Plan" for the postwar reconstruction of Europe, as well as various forms of bilateral cooperation. And the countries outside this "capitalist core" are generally excluded from these cooperation formats or participate in them only as observers. As a result, the development of fair competition rules for global business rarely takes into account the interests of countries outside the close community of developed economies. The lack of more inclusive formats for developing and negotiating competition rules at the global level is obvious. That is why it is difficult to overestimate the importance of cooperation between the BRICS countries in the antitrust sphere.

BRICS plays an increasingly important role in antitrust regulation

How effectively can the BRICS countries defend their economic interest? 

Alexey Ivanov: The BRICS countries are an interesting group of economies united by the fact that they are not members of the "closed clubs" of the "capitalist core" countries for several reasons. They are in many ways strangers to the still dominant international affairs of the United States, the EU and their closest allies. And each country is alien to this tight group for different reasons and to different degrees, but this does not change the basic problem of their low involvement in the development of the rules of the game in the global economy, which took shape during the "Washington Consensus" years of the 1990s and early 2000s. Due to their differences — economic, social, geopolitical — the BRICS countries are hardly capable of forming a unified agenda for world development by analogy with the "Washington Consensus" that has already lost its force. However, it is precisely because of their differences that the BRICS countries can agree on what kind of world economy they would not like to see. And the key word that already virtually unites them on this issue is "multipolarity" — in other words, the diversity of formats, ways and means of organizing economic life. What the BRICS countries lack is diversity in global economic life. There are too many rigid forms imposed by the dominant group — either that or nothing, or, as the Americans say, "take it or leave it”. For example, either protect the patents of multinational companies under the terms of TRIPS Plus, or cut yourself off from global value chains. There is no third option, as they say. But this approach is nothing but a manifestation of monopoly in the organization of the world economic system.

Do the BRICS countries have a different approach to this problem? 

Alexey Ivanov: The BRICS countries, be it China, Russia or South Africa, are vitally interested in a greater variety of global models of economic life so that financial and technological standards, digital platforms and pharmaceutical solutions are not dominated by one point of view, one approach. It is not just a matter of resentment that we have not been "called in" to design financial markets or determine the rules of global digital platforms, but it is also a matter of sustainability and balance in the global economy. The crisis of 2008 clearly demonstrated how fragile the current mono-regime of global economic governance is. Just as monocultures in agriculture lead to unsustainable ecosystems, so monomodels in the organization of the global economy lead to imbalances. Biodiversity is the basis for the sustainability of any ecosystem in nature.The diversity of formats for organizing and organizing world markets is the basis for sustainable development of the world economy. Maintaining this socio-economic diversity is the essence of a healthy pro-competitive policy. In a deep sense, the protection of competition is the protection of socio-economic diversity, the prevention of monopolization of the processes taking place in the economy. The dominant actors do not benefit much from this struggle for diversity, because it reduces their monopolistic rents. But a more diverse, multi-format system of organization of the world economy seems important for countries which are already able to compete on a global level, but which are in a less advantageous position due to such a monopolistic structure of the world economic system.

Is such a model possible today, and under what conditions? 

Alexey Ivanov: For a long time the antimonopoly sphere has not been a priority for BRICS cooperation for a number of reasons. One of them, of course, was the perception of the antitrust law in its so-called "Chicago version", i.e. in the form of a set of formally defined rules of conduct in the market, developed and actively promoted in the 1980s and 1990s in the United States and Western countries as a whole by a group of economists, lawyers and politicians, who are commonly called the Chicago School of antitrust law.This group, actively supported by the neoliberal governments of Reagan, Thatcher, and others, did much to weed out antitrust law's original political function of balancing distortions in the functioning of the market economy. Until recently, this gave developing countries the impression that antitrust law could only be applied in one way, as it was interpreted by the OECD under the influence of the Chicago School. Monopoly in the marketplace of ideas has also affected antitrust law itself. However, both the "Washington Consensus" in organizing the world economy and the "Chicago Consensus" in antitrust law have finally collapsed. 

Moreover, they collapsed first and foremost in the Western countries, which was greatly contributed to by the financial crisis of 2008. From the mid-2010s, a process of active rethinking of the principles of antitrust regulation began, which has especially accelerated in the last two years. In the U.S. and Europe, antitrust law has been increasingly talked about as an essential tool for balancing the digital economy and generally dealing with the socio-economic risks of technological and related social transformation. A return to the original meaning of antitrust law, heavily distorted by subsequent interpretations of the Chicago School, has become the leitmotif of antitrust discussions worldwide. And it is in this capacity that antitrust law turned out to be especially attractive for the BRICS countries. Its original meaning as a tool for increasing the diversity of forms of economic life and counteracting the socio-economic excesses of technological revolutions corresponds to the meaning of cooperation between the BRICS countries as a whole.

How do the BRICS countries interpret cooperation in this sphere? 

Alexey Ivanov: Cooperation in the antimonopoly sphere can be situational. Common shared principles do not mean that the BRICS countries are obliged to act strictly according to a certain scheme in all circumstances. Competition law is in itself a more flexible tool for managing economic processes than other legal institutions. The nature of antitrust regulation is to combat abuses and distortions, and they can take the most unexpected forms. Much depends on socio-economic conditions, and consequently, the role of the healthy discretion of the regulator is high. The competition authorities of the BRICS countries should, in a good way, have an appetite for joint action to protect competition in global markets. And it comes, as you know, during meals.

Specific examples of cooperation: food markets

What are the formats of cooperation possible at this stage? 

Alexey Ivanov: The first common case that the antimonopoly authorities of the BRICS countries considered in close cooperation, discussing not only the problems of their national markets, but more general issues of organizing the world economy, concerned the food sector. In 2015, during the Russian BRICS Presidency, the first working group of the antimonopoly authorities of our countries was created — it was devoted to the study of competition problems in global food markets. The activity of this working group consisted not only in the exchange of experience but above all in identifying the problems of global agri-food markets. This has required competition authorities to take a fresh look at the state of competition in their countries through the lens of global agri-food value chains. In this case, for the first time, a working format was tested in which the BRICS academia came together to help antitrust agencies. Scientific and expert support for the working group of BRICS antitrust agencies on food markets has been coordinated since 2015 by the HSE-Skolkovo Institute for Law and Development, but included scientists involved in antitrust law and regulation of agrifood markets from all BRICS countries. In close cooperation with the antimonopoly authorities of our countries they prepared an extensive report on the competition problems in the global agrifood markets and the ways to solve them. We presented the report at the BRICS antimonopoly conference in Brazil on November 7, 2017 — coincidentally, on the centennial of the Russian Revolution. The report, which was recently published in abridged form as a book by Cambridge University Press, significantly changed the way BRICS antitrust agencies analyze agri-food markets. But most importantly, this work has brought concrete practical results for the antimonopoly cooperation of our countries.

In what way did it manifest itself? 

Alexey Ivanov: Our work has coincided with a series of global deals of economic concentration in the agri-food sector. Over several years, the number of companies involved in the world's key crop breeding and related agrochemical business has declined dramatically, as these markets steadily moved from a competitive to a close oligopoly state. As we found out, this process was caused by a change in approaches to patent protection for biotechnological inventions in the United States and the EU, as well as by a dramatic technological change in the industry itself. The dramatic acceleration of breeding work, and the emergence of the ability even in conventional breeding programs, which do not involve transgenic technology, to quickly and efficiently achieve given properties in plants, made this market interesting for big capital. Add digitalization, which allows you to build an effective "last mile" of seed and agrochemical sales, and you have a winning combination of powerful network effects and scalable, advanced technology solutions that is interesting to any multinational company. Naturally, when global capital enters an area, it sets its own rules of the game and strives for global dominance. This is what has begun to happen along the entire length of global food chains. In 2015-2018, the working group focused on the primary sector of the value chain in the agro-industrial complex — the markets for seeds and agrochemicals. This allowed it to take a proactive stance on a number of global economic concentration deals that were taking place in the world at the time. The most effective both in terms of demonstrating the possibilities of antitrust cooperation between the BRICS countries and real economic effects for our countries was the deal to coordinate the merger of two global agro-technology giants — Bayer and Monsanto. The new global conglomerate combines the latest technology platforms for breeding and agrochemical work and the most powerful digital platform for precision farming. Due to the consolidation of technologies, big data and platform solutions, the combined company could have an excessive impact on the state of competition both in the entire global market and in the markets of the BRICS countries separately.

Has the work of the BRICS  Working Group On Food Markets influenced national law enforcement? 

Alexey Ivanov: Our antitrust regulators have to act within their national boundaries, but the global view of the problem and understanding of how global agri-food markets are structured and how they are transformed has made national enforcement much more effective. And the consensus among BRICS antitrust agencies within this working group has dramatically increased the bargaining power of our antitrust agencies in dealing with global corporations. In the absence of an international competition regime, many multinational companies either ignore the antitrust requirements of smaller countries or behave in ways that make it as difficult as possible for non-key jurisdictions to make tough antitrust decisions. There are many strategies for doing this, including restricting the provision of information, manipulating procedural rules, etc. It is precisely the cooperation of antitrust agencies that can reduce the effectiveness of such strategies by global companies. In the Bayer-Monsanto case, for the first time we managed to build communication between BRICS antitrust agencies and global corporations in such a way that the negotiations on the terms of the deal were conducted in a more or less consolidated way, taking into account the interests of all BRICS countries and the developing world as a whole. A direct result of this work was the application of such measures of antimonopoly response to the increasing economic concentration in the global agro-food sphere, which made it possible to significantly reduce the negative consequences of this transaction. In particular, at the request of the FAS of Russia and similar requirements of other BRICS regulators, the united company Bayer-Monsanto provided a whole package of unique technological solutions to our breeders, and also undertook to adhere to fairly strict non-discriminatory requirements in the operation of its digital platform, which excluded the rapid monopolization of the Russian market of solutions for the digitalization of the AIC. This decision of FAS Russia, made in close cooperation with the antimonopoly agencies of the BRICS countries and based on the deep scientific expertise provided within the working group by experts from BRICS universities, became a precedent for effective cooperation in the antimonopoly sphere for the benefit of the development of our economies.

What kind of follow-up did this have in the future? 

Alexey Ivanov: The precedent showed the antimonopoly authorities the prospects and potential for possible cooperation in the format of such working groups and their close interaction with the scientific community. After this case, one can definitely say that the antimonopoly authorities of the BRICS countries began to think more actively about closer cooperation. It was precisely for its expansion and deepening on the basis of the HSE-Skolkovo Institute for Law and Development that the BRICS Competition Centre was created in 2018, designed to become a point of crystallization, on the one hand, of the academic circles of our countries, and on the other, scientific support for joint projects of the antimonopoly authorities of the BRICS countries.

Digital markets: in search of new approaches

How does the BRICS Antitrust Track solve the problems of the digital economy? 

Alexey Ivanov: The next big project for the BRICS Competition Centre after the analysis of food markets was the study of the challenges to antimonopoly regulation posed by the digitalization of the world economy. The digital economy inherently represents a new economic structure that changes many aspects of business and its interaction with consumers.

The working group of the antimonopoly authorities of the BRICS countries on the digital economy began its work immediately after the completion of the food project and in the fall of 2019 at the BRICS antimonopoly conference, which was held in Moscow. The working group presented a detailed report on the key challenges and problems that the processes of digital transformation of the global economy represent for the antimonopoly authorities.In 2019, many experts still insisted that the growth of digital monopoly power was a temporary phenomenon, and that the same antitrust tools as for industrial economy markets could be limited to curbing it. In our report we pointed out the incorrectness of such an approach - the digital economy has a number of features in the organization of interaction between market participants, methods of accumulation and retention of market power, etc. The classical law of supply and demand does not work in the digital economy. The most successful players in the digital economy are those who were able to subdue consumer demand. Pricing as a market signaling system also ceases to work with the widespread adoption of price algorithms and price control in digital ecosystems, in which a good half of the entire global economy is now immersed. Is it possible to say that on the digital platform of a particular cab aggregator, for example, there is a free association of supply and demand? The role of the organizers of digital platforms and ecosystems is somewhat reminiscent of the role of the State Planning Committee in a planned economy.These digital plans substitute for market relations, extending their influence to all new areas of economic life. This raises the question for competition authorities: "How to regulate relations within such digital ecosystems?" In our report, we tried to outline possible ways to transform antimonopoly regulation in the digital economy. And, to our satisfaction, we hit on many trends that have become fully apparent as early as 2020 and 2021. We anticipated many of the new mechanisms of antitrust regulation that have now taken shape in the form of draft laws in the US, Europe, and China in that report.

How has digital transformation affected the antitrust practices of the BRICS member countries? 

Alexey Ivanov: For China, for example, the digital economy has caused a systematic review of its entire antimonopoly agenda. If until 2020 the antimonopoly policy in China was very restrained and tailored according to the Chicago model traditional for industrial countries, then, faced with the challenges of the digital economy, the Chinese regulator took a systematically different position - proactive, dynamic, involved. Recent antitrust cases against Alibaba, Tencent, Meituan, DiDi and other leaders in the Chinese digital economy could grace the portfolio of any leading antitrust agency in the world. China quickly moved in the antitrust sphere from the role of a diligent student to the role of a trendsetter.

By the way, it should be noted that many of the discussions that we had with our Chinese colleagues in 2017-2020 were vividly reflected in the antimonopoly policy of this key BRICS participant. The head of the The State Anti-Monopoly Bureau of China, Ms Gan Lin, was in Moscow in the autumn of 2019 at the presentation of a report on the digital economy prepared by the BRICS Competition Centre, and also participated in a number of joint consultations and discussions on BRICS antimonopoly cooperation. "I believe that the BRICS Competition Centre has great potential to help deepen cooperation between our agencies, define a common agenda for BRICS antitrust authorities, and organize ongoing consultations on all relevant issues," she said at a recent meeting of our countries' antimonopoly heads. Such support from our Chinese colleagues cannot but inspire hope in the prospects of antimonopoly cooperation between the BRICS countries. 

Last November, China hosted the 7th BRICS International Competition Conference, where a draft report on possible approaches to the antimonopoly regulation of digital ecosystems was presented. Tell us more about it.

Alexey Ivanov: The basis of this approach is the understanding that ecosystems are a special type of organization of market relations and bear greater resemblance to complex living systems than to industrial organizations. Antimonopoly regulation of such complex living systems should be built based on a number of features — taking into account the great importance of "weak ties", high flexibility, variability and adaptability of such systems. In ecology and biology, a great deal of experience has already been gained in studying and working with complex living systems. We are implementing the project together with the International Institute for Applied Systems Analysis (IIASA), which has rich experience in studying and mathematical modeling of complex systems. In our opinion, it is time to transfer this experience to the antitrust sphere. In my presentation at the recent BRICS Antitrust Conference, I drew attention to the cyclical nature of the development of living systems, that ecosystems are always in flux, and that within them there is dynamic interaction of different origins. These ideas, according to our Chinese colleagues, resonate with traditional Chinese ideas about the cyclical development of all living things according to Wu-Xing, the five-element matrix of the evolution of living systems. Wu-Xing is actively used in Chinese medicine not just to cure, but to prevent diseases, because that should be the task of an ideal doctor, according to Chinese healers. It would be good if anti-monopoly regulation in the digital economy were also aimed at preventing such distortions in the development of the market system, which are already too late or too dangerous to correct. The synthesis of the latest ecological knowledge and the millennia-old Chinese tradition, in our view, can give an important impetus to the transformation of antimonopoly regulation in the era of digital ecosystems.

Equitable Access to Medicines: The Role of Antitrust Regulation

In the fall of 2020, the BRICS Competition Centre, which worked on the basis of the HSE-Skolkovo Institute for Law and Development, was transformed and became an independent division of the Higher School of Economics. What are the tasks set for it? 

Alexey Ivanov: The centre was given the status of a key research and expert organization for securing cooperation between the BRICS countries in the antimonopoly sphere by a decree of the Russian government of September 24, 2020. With the onset of the pandemic, issues of drug provision and control of the new coronavirus infection also came to the fore. These topics were the subject of discussions in another BRICS Antitrust Working Group on Pharmaceutical Markets. Two BRICS countries, India and South Africa, initiated the critical issue of temporarily removing patent protection from coronavirus vaccines at the WTO in order to increase their production worldwide. This approach was also supported by China and Russia.

In this regard, Russian President Vladimir Putin noted: "There is an idea that, in my opinion, deserves attention, namely, to remove patent protection from vaccines against COVID-19 altogether. And this not only does not contradict but, as far as I understand, corresponds to certain rules of the World Trade Organization, which provides for the removal of such patent protection in extraordinary circumstances. A pandemic is an emergency situation. Of course, Russia would support such an approach". According to a number of experts, the removal of patent protection from vaccines would greatly accelerate the pace of vaccination in developing countries, which are now the main sources of new strains of coronavirus precisely because of the low level of immunization of the population. It is not for nothing that the coronavirus's most dangerous and infectious mutations, the delta and omicron strains, came from India and South Africa. If the BRICS proposals to remove patent protection were not blocked in the WTO by the EU countries, primarily Germany, then now, probably, the level of human immunity would be significantly higher.

How did this topic develop further at the BRICS level? 

Alexey Ivanov: The problems of unbalanced patent protection of medicines, which harm both public health and innovative development in the pharmaceutical industry, have become the subject of active discussions within the BRICS antimonopoly working group on pharmaceutical markets. The BRICS Competition Centre also provided active scientific and methodological assistance to this work. One of its direct results was a change of approach to the mechanisms of compulsory licensing in pharmaceuticals in our country. These mechanisms are a civilized way of balancing patent rights when they conflict with important public interests. As with real property, intellectual property in all countries of the world is subject to balancing mechanisms, often arising from antitrust requirements. Almost all developed jurisdictions have used and continue to use compulsory licensing mechanisms in one way or another, especially for the healthcare sector. The WTO calls for this in the 2011 Doha Declaration on TRIPS Agreement and Public Health. In Russia these mechanisms were not used until the end of last year, which drastically reduced our negotiating power in relations with global pharmaceutical companies and the possibility of developing the national pharmaceutical industry.

What decisions were made in a practical sense, and did they lead to? 

Alexey Ivanov: The decision was made to issue the first compulsory license in the history of modern Russia for a drug for the treatment of coronavirus infection, owned by the American company Gilead. It finally changed the anomalous practice of refusing to protect our own interests in the development of the national healthcare system and proactively stimulate competition in our country's pharmaceutical industry. The decision was challenged in May 2021 in Russia's Supreme Court but it held up. The BRICS Competition Centre assisted the FAS and the Russian government in this issue's scientific and methodological study, involving a wide network of international experts. The BRICS countries are very close to each other in understanding that the current patent protection regime, which evolved in the world in the 1990s and cemented within the WTO, is often harmful to both social development and innovation. This consensus of the BRICS countries can become the basis for a systematic revision of the intellectual property protection regime in the world in order to reduce the share of rental income in the global economy and increase the competitive dynamics. The initiative of India and South Africa to remove patent protection from vaccines is the first consolidated approach of the BRICS countries to this topic, albeit not a successful one. The development of this area will be one of the priorities for the BRICS Competition Centre for 2022.

Source: Rossiyskaya Gazeta

digital markets  pharmaceutical markets  food markets 

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