The document summarizes the benefits of competition policy and improving regulatory and procurement frameworks. It discusses how competition assessments using the OECD toolkit have helped identify restrictive regulations in countries like Mexico and Greece. For public procurement, guidelines help detect bid rigging and recommendations have improved practices at Mexico's IMSS, resulting in lower prices, increased participation, and estimated savings of $600-700 million from 2009-2016.

1. Benefits of Competition Policy
for a National Economy
Improving Procurement and
Regulatory Frameworks
Mexico City – 23 July 2019
Antonio Capobianco
Acting Head of Division
Competition Division, OECD
Antonio.Capobianco@oecd.org

2. • Benefits of competition
• Improving Regulatory Frameworks
• Improving Public Procurement
Frameworks
Outline of presentation

3. BENEFITS OF COMPETITION

4. Why We Care About Competition?
4
Productivity
+ 12 – 15 %
InequalityEmployment
Growth
Competition
Source: OECD 2014

5. • Aggregate economic benefits:
– Short-term for consumers, and other buyers
including public sector
– Longer term: innovation and growth
• Distributional benefits
– Inequality
– Poverty reduction
– Employment
• Social benefits
– Fighting corruption
Benefits of competition policy for the
national economy
5

6. Consumer benefits
…from lower prices
Source: Estudio de la OEDE sobre telecomunicaciones y radiodifusion en Mexico (2017) 6

7. Consumer benefits
…from better access to services
Source: Estudio de la OEDE sobre telecomunicaciones y radiodifusion en Mexico (2017) 7

8. Productivity and growth
Mechanisms
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9. Productivity and growth
Economic studies: Australia
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-1.0
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Australia OECD average
Australian growth has been higher than the OECD since the
Hilmer Reforms
Hilmer reforms

10. Distributional outcomes
Competition reduces poverty and increases
prosperity
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11. Distributional outcomes
The poor suffer most from price-fixing
11

12. …and it’s not just economic outcomes
Monopolies corrupt the political process
12

13. IMPROVING REGULATORY FRAMEWORKS
13

14. OECD Competition Assessment Toolkit
• Competition Assessment Toolkit (CAT), 2011
 http://www.oecd.org/daf/competition/assessment-toolkit.htm
14

15. Using the toolkit all over the world
OECD competition assessments in the past:
– Romania (2016)
– Greece (2013, 2016 and 2017)
– Portugal (2018)
– Mexico (2018, 2019)
Ongoing competition assessments:
– Iceland
– Tunisia
– 10 ASEAN countries
15

16. Using the toolkit all over the world
16

17. • Competition assessment is:
– The assessment of whether regulations restrict
competitive conditions; and
– The development and evaluation of alternatives to
achieve the policy maker’s objectives
• It is designed for government officials in
decision-making roles and staff who will conduct
the assessments
• The Toolkit is constructed around a two-step
assessment process
OECD Competition Assessment
Methodology
17

18. Step One: Initial Evaluation - A competition
assessment checklist
– Initial screening of relevant legislation
– Competition Checklist: Does the Law or Regulation:
A. Limit the number or range of suppliers?
B. Limit the ability of suppliers to compete?
C. Reduce the incentive of suppliers to compete
vigorously?
D. Restrict consumer choice?
Legal provisions identified potentially restrict competition
18
Competition assessment methodology:
Step one

19. • Some of the problematic categories include
– Regulations that distort market prices
– Regulations that limit advertising and marketing
– Regulations that create entry and mobility barriers
– Granting or extending exclusive rights
– Restrictions on flow of goods, services and capital
– Exempting specific businesses from competition laws
– Rules that set standards and content
– Grandfather clauses
• The CAT “Guidance” volume contains details on each
Problematic regulation
19

20. Step Two: Full evaluation - Detailed review
A ‘yes’ answer to any of the key questions will warrant a more
thorough review of the rule or regulation under consideration.
 Identify the underlying policy objectives;
 Meetings with industry stakeholders, consumer associations
and government experts
 Evaluate the harm to the economy from the restriction;
 Collect economic data and case studies
 Assess the benefits from removing the harmful regulation;
 State alternative regulations;
 Compare the alternatives.
Where such alternatives cannot be identified, a rigorous
assessment of the proposal’s impact must be made
20
Competition assessment methodology
Step two

21. The detailed evaluation would focus on the specific intervention and
potential quantification of whether the rule or regulation might
– Impose barriers to entry of new businesses
– Force certain types of businesses to exit
– Increase the prices of goods and services
– Reduce product or process innovation
– Significantly increase concentration in the relevant market
Also:
– How will the new regulation or standard affect different types of firms?
– What will be the nature of grandfathering clauses?
– How else could the policy goal be reached?
If upstream or downstream markets are affected:
– Evaluate effects on the related markets
– Initial review
– Detailed review
Competition assessment methodology
Step two – The detailed review
21

22. • Important to understand the policy
rationale
• There are important and valid policy
objectives other than competition
– and we can only advise on costs and benefits:
nobody elected us
• Every expert with an interest in the status
quo will say “this sector is different”…
– and occasionally they will be right.
Getting results: understand the reasons
22

23.  Data commonly subject to measurement include
consumer benefits, costs, employment, output,
productivity and profitability
 Intangible measures of consumer benefits can be both
important and difficult to assess
• For example, a rule that raises the price or restricts
access to hearing aids will affect the hearing of many
people, their social, family and professional
interactions will be affected
• Placing a value on the losses from fewer interactions is
inherently difficult
23
What is measured?

24. IMPROVING PUBLIC PROCUREMENT
FRAMEWORKS
24

25. 2009: OECD Guidelines for Fighting Bid Rigging
in Public Procurement
Translated in 24
languages
25

26. The Guidelines for Fighting Bid Rigging
help to identify …
Markets in which bid rigging is more likely to occur
Methods that maximise the number of bids
Best practices for tender specifications, requirements
and award criteria
Procedures that inhibit communication among bidders
Suspicious pricing patterns, statements, documents and
behaviour by firms
26

27. 2012 Recommendation
Governments should
assess public
procurement laws and
practices at all levels of
government in order to
promote more effective
procurement and reduce
the risk of bid rigging in
public tenders.
Guidelines become an
integral part of
Recommendation.
2012: OECD Council Recommendation for
Fighting Bid Rigging in Public Procurement
27

28. OECD Bid Rigging Work
Global reach
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29. › Mexico – 2011 to 2018
› Colombia – 2014
› Argentina – 2018
› Brazil, Ukraine and Peru - Forthcoming
Main components:
• Recommendations for changes in procurement regulations
and practices
• Training and capacity building
• Manuals and train-the-trainers
OECD fighting bid rigging projects…
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30. … from 2011 to today
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31. • Several OECD projects in Mexico:
› IMSS – 2011
› State of Mexico (GEM) – 2012
› ISSSTE – 2013
› CFE – 2015
› PEMEX – 2016
› CFE – 2018
› IMSS – 2018
OECD bid rigging studies
Mexico
31

32. • Market studies are critical for competitive tenders
• Consolidation of tenders can reduce collusion but
watch out for supply concentration
• Limitations on bidders by regions or nationality
reduce competition and may facilitate collusion
• Transparency rules may facilitate collusion
• Joint awards, splitting contracts and sub-
contracting may facilitate collusion
Common issues affecting competition in
tenders
32

33. • Remove provisions that discriminate against certain
suppliers
• Limit the use of non competitive procurement procedures
• Eliminate the requirements to hold clarification meetings
and to publish a reference price
• Ensure disclosure requirements are not excessive
• Require suppliers to submit signed certificates of non-
collusion
• Check legal framework regarding guarantees and
penalties, which may make it difficult for SMEs to bid
OECD recommendations about legislation
33

34. • Successful collaborations require high-level
commitment, sufficient resources and a willingness
to change
• Training of public procurement officials is necessary
and pays immediate dividends
• Procurement officials demonstrate an eagerness to
be a part of the solution
• Recommendations in procurement reports must be
tailored to the specific department/agency and
commitments must be long-term
• Implementation plans are critical
Lessons learned
34

35. • 2011: OECD review of IMSS internal procurement
regulations and practices  20 recommendations to
IMSS on how to improve procurement procedures to
avoid bid rigging
• 2016-2018:OECD assessment of the status and
implementation of the 2011 recommendations  The
majority have been – fully or partly – implemented
• Report (2018) identifies new actions that IMSS can
follow to improve its procurement practices
IMSS (Mexican social security institute)
35

36. • IMSS saved costs through wider use of competitive
procurement processes and opening up
participation.
• Central and consolidated tenders have generally led
to more favourable supply terms.
• Significant positive spillover: the terms agreed at
central level were often replicated in similar locally
awarded IMSS contracts.
• Overall positive impact of the OECD
recommendations on tender design
Results of the 2011 OECD
recommendations
36

37. • The use of a public tender results in prices 11.2%
to 11.9% lower than the prices of direct awards or
restricted invitations
• Opening up participation to foreign suppliers in
tenders has a 1.3% to 2.1% impact on prices
• Savings produced by centralisation of purchases
(inside IMSS): Savings for IMSS are estimated
between 7.4% and 8.8% for the period 2009-2016,
which translates in savings of approximately USD
600 to 700 million for the same period
Results: some figures
37

38. • Savings produced by consolidation of purchases
(with other government entities):
– Consolidated tenders generally achieve price
outcomes that are between 8.2% and 11.2% lower
than those of standard tenders
– IMSS realised savings of around USD 300 million
over the period 2013-2016, which corresponds to
5.3-5.8% of its spending on those products
Results: some figures
38

39. Mexico City – 23 Juy 2019
Antonio Capobianco
Acting Head of Division
Competition Division, OECD
Antonio.Capobianco@oecd.org
Thank you
for your attention