Page 44 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

If the enterprise would not have a dominant position, the agency

should not oppose the proposed transaction. However, if the enterprise
would be dominant, the agency should consider requiring (or

recommending, if its powers to intervene directly are limited) measures
to eliminate the dominant position. The simplest remedy is to encourage

new entry by lowering entry barriers, including trade barriers.

Sometimes a partial divestiture from the dominant firm of an essential
facility or important proprietary technology might be sufficient. The

most drastic remedy is a complete restructuring of the enterprise into two
or more entities before privatization. Such a restructuring may be

possible if there is one or only a few state-owned monopolists operating

many plants or facilities, but it is likely to be difficult, both practically
and politically. Care must be taken that the assets of the newly created

entities are viable, that the firms can operate on an efficient scale, and
that they have access to necessary inputs and distribution facilities.

Finally, privatization can be an intensely political exercise. The
competition agency should intervene in privatization proceedings

judiciously and in a nonbureaucratic manner. The agency should be well

informed and take fully into account the positions of the enterprise and
the privatization agency. It must seek to reach a result that is both

procompetitive and feasible. And given the political nature of the pri-
vatization process, it must convince all participating parties and the

public at large of the correctness of its position.

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