• June 30, 2015

June 30, 2015 Which nation took almost half a century to introduce a system of competition law Answer: the United States (from 1890 to the late 1930s).

If it took that long for the United States,imagine how much experimentation, assessment, and refinement is required to introduce such a system in countries like China ?making the transition from reliance on central planning and state ownership toward a market-based economic regime, said William E. Kovacic, a law professor at George Washington University.It can take decades to build the relevant institutions and the capacity of enforcement agencies to apply new competition laws effectively, said Kovacic, also a former chairman of the U.S. Federal Trade Commission, in prepared and impromptu remarks to Nathan Associates staff. He spoke as a participant in the firms monthly speakers series. The counsel to stand back and take the long view is relevant to many of Nathan Associates services. In addition to supporting private antitrust litigation in the United States and elsewhere, the firm works throughout the developing world to facilitate competition and innovation by building institutions and capacity a long-term approach to success. Kovacic also gave valuable insight into how to implement antitrust regimes and monitor progress toward a competitive system.

China, for instance, has made an impressive start in building a competitive system, the most ambitious startby any country to date, he said. And one surprising advance has been the emergence of antitrust complaints by private parties rather than agencies. Yet even though China adopted its antimonopoly law seven years ago, the country is still in the first stage of developing its antitrust regime, with much work ahead.

He said three steps are needed to put competitive system in place:

  • Awareness of the law and acceptance of market-based competition as the foundation for good economic performance are critical. Gaining acceptance is an immense challenge because of groups that remain wary of competition and desire to protect economic structures established during the era of planning and comprehensive state ownership.
  • New institutions need to be created and existing ones strengthened to carry out the law. These include courts and universities. If you don’t have an intellectual infrastructure, you are not going to be successful, he said.
  • A culture of public administration that emphasizes informative disclosure of decisions taken by the competition agency and the reasons for the agency’s actions must be built. Public officials should be available to discuss policy, and agencies should be accountable.

Antitrust systems should be reviewed every 5 to 10 years and upgraded as necessary, Kovacic said. Some strengthening measures to consider, using China as an example:

  • Establish a stand-alone enforcement body for competition\r\n(China has three enforcement agencies?in the United States, competition enforcement is spread across the states, the Justice Department, FTC, and sector regulators).
  • Ensure that agencies are autonomous and free of pressure for example, from government bodies that favor special interests.
  • Make agency activities, including analysis and procedures, more transparent; give agencies enough money and staff.
  • Enhance capacity for judicial review of agency actions.

A detailed analysis will appear in Kovacics article, China’s Competition Law in Context, to be published in the Journal of Antitrust Enforcement.

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