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Competition law and state-owned enterprises – HEALY – November 2018 OECD GFC

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This presentation by Deborah Healy, Professor, Faculty of Law, University of New South Wales, was made during the discussion on “Competition law and state-owned enterprises”, held during the 17th OECD Global Forum on Competition on 30 November 2018. More documents and presentations on this topic can be found at oe.cd/csoes.

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Competition law and state-owned enterprises – HEALY – November 2018 OECD GFC

  1. 1. UNSW Law Professor Deborah Healey Competition Law and SOEs: Enforcement OECD Paris 30 November 2018
  2. 2. Summary of Presentation • Current position • Competition law coverage • Why are SOEs different? • Cartels • Abuse of dominance • Other legal issues raised by SOEs 1
  3. 3. The current position? ‘When the history of competition policy of the present era comes to be written, the great failure will be seen to be the failure of competition policy to adequately tackle government restrictions on competition’ (Professor Allan Fels, International Competition Network Conference, New Delhi, 2018) • OECD Background Paper suggests that SOEs can be just as anti-competitive as private companies • But their conduct is likely to be more entrenched and lasting so it can be argued that they are more anti-competitive
  4. 4. Current position • SOEs are an important component of domestic markets • Growing force in international markets • Level playing field with private companies essential to foster competitive markets which create efficiencies and also lead to open international trade and investment climate
  5. 5. Competition Law and SOES • SOEs in most jurisdictions are subject to competition laws if engaged in commercial activity • But there are a number of exclusions and exemptions which may apply depending upon the jurisdiction • These generally depend upon the approach of individual jurisdictions to the role of SOEs
  6. 6. Competition Law: exclusions • China: strategic sectors excluded although they still must not impair consumer interests • Malaysia, Singapore, Hong Kong • Art 106 (2) TFEU- narrow exemption for services of general economic interest to the extent that application of the law would obstruct the performance in law or fact of assigned tasks
  7. 7. Issues raised by SOEs • Nothing intrinsically wrong with SOEs BUT distinct from other market participants • May not be completely reformed as market participants e.g. may have continuing regulatory roles • May accrue advantages just because they are owned by government: issues of competitive neutrality raised • May not have a true profit motive but other strategic objectives • May retain market position and power which they had prior to corporatisation • China: multiple strong SOE players in same industry- relationship issues in competing overseas
  8. 8. Enforcement: abuse of dominance • Arguably most relevant provision: “because of their weight, their resources, their legal status and their relationship with the State” (ICN Special Project of Moroccan Conseil de la Concurrence, 2014) • South Africa active • Delivery of mail and related services; telecommunications are over-represented in examples • China • Singapore
  9. 9. Enforcement: cartels • SOE/SOE conduct or SOE/ private corporation conduct • Spain • China- trade associations and “orderly markets” • Iceland- municipalities and waste management • Australia- international airlines • Again, are SOEs related entities?
  10. 10. Enforcement: mergers • SOE mergers with other SOEs or private corporations • Mergers and “reorganisations” • Exemptions for all or some- are mergers notified? • China • Relationships between SOEs- single economic entities
  11. 11. Single economic entities: important issues • Issues of control relevant to both procedural and substantive questions • Relevant to horizontal mergers: can SOEs collude? • Abuse of dominance: issues of market power • Mergers: turnover thresholds for notification; issues of market power; turnover for fines • Detailed EU considerations outline approach
  12. 12. State action defences • Vitamin C case • Australian airline cartel
  13. 13. Enforcement challenges • Practical limits of power to enforce • Standards for assessment • Differing goals of individual jurisdictions
  14. 14. Conclusions • Enforcement against SOEs is a very important element of dealing with government distortions in the market • Part of a mature competition policy along with dealing with issues in relation to making of laws regulations and policies, and initiatives aimed at addressing competitive neutrality • Much is being done but there is still much more to do

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