Competition Policy:
Definition and Scope
Presented by
Dr. M. A. Razzaque
We are going to have discussions on:
What is Competition?
What is Competition Policy?
What it Covers?
What is the need for Competition Policy?
What is competition?
Competition
Literary meaning: a contestable situation where
people fight for superiority.
In market economy, competition is a process
whereby firms fight against each other for
securing consumers for their products
Fair and Unfair Competition
Fair Competition Unfair Competition
Producing quality goods Fixing prices with the
Becoming cost-efficient rivals
Optimizing the use of Setting a price which is
resources lower than cost in order to
Adopting the best throw out competitors from
available technology the market
Advertising that belittles
Investing in research and
development, etc. others’ product, etc.
Types of competition
Price Competition Non-price Competition
Competition among suppliers Competition to win
to win customers by offering customers not by lowering
lower price. May not be an price but by advertising,
appropriate strategy for those offering after-sales-service,
loyal to a particular brand. using sales-promotion tools,
etc.
Forms of Market Competition
Barriers to
Models of Number of Number of Nature of
entry and
Competition buyers sellers products
exit
Perfect Identical
Very large Very large None
competition products
Single
Monopoly Very large One Very large
product
Monopolistic Minimum
Very large Large None
competition differences
Large
Oligopoly Very large Very few Large
differences
For detailed information please consult
Competition Policy and Law Made Easy:
Monographs on Investment and Competition
Policy, #8 ;CUTS (Pages 1-4)
Oligopoly Market : Competition Among the Few
Key Features:
Interdependence between firms in performance and strategy
Aggressive action followed by defensive reaction
Price competition and price war
(Recent packages offered by Mobile Phone companies)
Intense non-price (promotional publicity) competition, which
may result in wasteful expenditures.
Detail on Oligopolistic market structure
Making Sense of Competition Policy, by Frank Fishwick
(1993) (Pages 47-62)
Competition Policy /Law
Competition policy => government measures directly
affecting both Firm Behavior and Industrial structure.
A competition policy should include both:
i) Economic policies adopted by Government, that
enhance competition in local and national markets, and
ii) Competition law designed to stop anti-competitive
business practices.
Components of competition policy
Competition Policy
Competition Law
Government Policies
Private Actions
Deregulation Consumer
Industrial
and Policy
Policy
Privatization
Regulations Governing Other
Trade Policy
Capital and FDI Policies
Competition Law (National)
Anti-Competitive Regulation of Mergers to
Abuse of a Prevent Tactics to Gain
Agreements Between
Firms
Dominant Excessive Dominance in a
( Collusion) Market Position Market
•Import cartels Applies to:
• Predatory pricing
•Price fixing •Total unification
•Market sharing • Price of the companies
•Bid rigging discrimination involved
•Limiting production
•Refusal to buy or • Excessive pricing •Buying of
supply sufficient shares in
•Tie-in arrangements a company so as to
•Exclusive-dealing • Abuse of have a say in
•Resale price intellectual property policy formulation
maintenance monopoly
•Territorial allocation
The three stages of provisions that a
competition law constitutes are:
The behavior and structure of firms in the market
Institutional and enforcement design with a competition
authority, and
Competition advocacy.
For details on competition policy and law:
Competition Policy and Law Made Easy: Monographs on Investment
and Competition Policy, #8 ;CUTS (Pages 23-26)
UNTCAD: Trade and development Board: Intergovernmental Group
of Experts on Competition Law and Policy; sixth session, Geneva, 8-
10 November 2004 : Communication Submitted by the People’s
Republic of Bangladesh (Pages 2-4)
Need for a Competition Policy
Benefits to Consumers
A fair deal in the market place with:
The best possible choice of quality
The lowest possible prices, and
Adequate supplies of commodities.
Benefits to Efficient Producers
A safeguard against practices that could drive
companies out of business.
Lower entry barriers to promote entrepreneurship and
growth of SMEs.
Efficientallocation and utilization of resources
ensures more output and employment.
Control of international unfair competition and
restrictive business practices, such as international cartels
On the whole, a competition policy maintains and
promotes the competitive spirit and culture in the
market.
Globalization and the need for Competition Policy
Globalization and Competition
Outcome of threat to
Concentration of Market Power
Therefore, we need competition policy to monitor, prevent
and control anti-competitive practices.
For details on globalization and competition:
UNTCAD: Trade and development Board:
Intergovernmental Group of Experts on Competition
Law and Policy; forth session, Geneva, 3-5 July 2002 :
The relationship between competition, competitiveness
and development. (Pages 3-6)
Arguments Against Competition
Preventing formation of large firms may reduce efficiency. The
situation arises when there exists significant economies of scale:
Examples : Natural Monopolies, like,
Infrastructure, Power and Railway .
An obsession with competition might be counterproductive
leading to inefficiency especially when goods and services tend to
be homogenous.
Policy actions against highly profitable firms could work against
the development of dynamic and thriving firms.
Over-regulation could increase firms’ cost of operations and
generates inefficiencies.
Thank you.
