Page 43 - Azerbaijan State University of Economics

THE ROLE OF COMPETITION ADVOCACY IN TRANSITION AND DEVELOPING ECONOMIES

assets and need for the creation of efficiency-enhancing, competitive

markets. Investors frequently are hostile to competition and are willing
to pay more for assets that enjoy a position of market dominance. Thus

there is an important role for the competition agency-to ensure that state
monopolies are not simply transformed into private ones. The task is not

an easy one, however. Privatization is a core element of market-oriented

reform. Hence, the competition agency must not create unnecessary
obstacles to the process. There may be both legal and political

constraints on direct intervention by the agency in the privatization
process, but within such limitations the agency's mandate is to seek the

creation of markets in which competition can flourish.

In most transition and developing economies a separate agency is
created to conduct privatization. However, in many countries the laws

also provide for formal participation by the competition agency. Ideally,
the competition agency would be notified of significant privatization

cases. The agency might have the power to intervene directly in a given
privatization case, or it could proceed under the merger control provi-

sions of the competition law. The agency should have the power to

require the parties to submit relevant evidence, including information on
the assets, operations, and revenues of the enterprise to be privatized and

actual and potential competitors. The agency's inquiry should focus on
the traditional issues associated with identification of dominance,

including proper definition of product and geographic markets, market
structure, entry barriers, and other aspects of the market relating to the

ability of the privatized enterprise to exercise market power, including

particularly the likelihood that imports could discipline such
anticompetitive conduct.

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