PULLINGPULLING UPUP OUROUR SOCKSSOCKS - A STUDY OF COMPETITION REGIMES OF SEVEN DEVELOPING COUNTRIES OF AFRICA AND ASIA: THE 7-UP PROJECT #0303 PULLING UP OUR SOCKS -A Study of Competition Regimes of Seven Developing Countries of Africa and Asia under the 7-Up Project PULLING UP OUR SOCKS -A Study of Competition Regimes of Seven Developing Countries of Africa and Asia under the 7-Up Project Published by: CUTS Centre for Competition, Investment & Economic Regulation D-217, Bhaskar Marg, Bani Park, Jaipur 302 016, India Ph.: 91-141-220 7482, Fax: 91-141-220 7486 Email: [email protected], Website: www.cuts.org In Partnership with: National Council of Applied Economic Research India Institute of Economic Affairs Kenya Sustainable Development Policy Institute Pakistan The Network for Consumer Protection Pakistan Institute for Global Dialogue South Africa Law & Society Trust Sri Lanka Institute of Policy Studies Sri Lanka Economic and Social Research Foundation Tanzania Zambia Consumers Association Zambia CUTS - ARC AFRICA RESOURCE CENTRE Zambia This report has been published as a part of the 7-Up Project, which is supported by: DFID Department for International Development, UK Printed by: Jaipur Printers P. Ltd., Jaipur 302 001 ISBN 81-87222-74-3 © CUTS, 2003 ACKNOWLEDGEMENTS During the implementation of the Project, significant contributions were made by country researchers, partner organisations, members of the Project Advisory Committee, CUTS staff and many other outside experts. It may be difficult to list all of them but some need special mention. PROJECT ADVISORY COMMITTEE Robert Anderson, WTO, Geneva George Lipimile, Zambia Competition Allan Asher, Consumers Association, London Commission, Lusaka Philippe Brusick, UNCTAD, Geneva Gesner Oliveira, Fundacao Getulio Vargas, Phil Evans, Consumers Association, London Sao Paulo Peter Holmes, University of Sussex, Brighton Cezley Sampson, Oxford Policy Management, Merit Janow, Columbia University, New York London R S Khemani, World Bank, Washington, DC Taimoon Stewart, University of West Indies, Republic of Trinidad & Tobago PARTNERS’ STAFF & RESEARCHERS India South Africa Tanzania Suman Bery Vani Chetty H. K. R. Amani Sanjib Pohit Trudi Hartzenberg Monica Kimaro Pradeep Srivastava Shibe Lebello Wilfred Mbowe Garth le Pere Flora Musonda Kenya Simon Roberts Faye Sampson Betty Maina Samuel Wangwe David Ongolo Sri Lanka Kwame Owino Avanthi Gunatilake Zambia Malathy Knight-John Muyunda Ililonga Pakistan Saman Kelegama Mwamba Makasa Sajid Kazmi P. P. A.Wasantha G. C. Mudenda Shahrukh Khan Pubudini Wickramaratne Inyambo Mwanawina Saba Gul Khattak Damaris Wickremesekera K. S. Sajeev Zafar Mirza Thushari de Zoysa Hafiz Aziz-ur-Rehman Mahvash Saeed Qureshi OTHER EXPERTS Rakesh Basant, IIM, Ahmedabad Rajan Dhanjee, UNCTAD, Geneva Beatriz Boza, CAD, Peru Simon Evenett, World Trade Institute, Berne Paul Crampton, OECD, Paris Bernard Joe Phillips, OECD, Paris Russell W. Damtoft, FTC, Washington, DC CUTS STAFF Manish Agarwal Sanjay Jain Nupur Mehta Disha Ailani Olivia Jensen Pradeep S. Mehta Deborah Akoth Anju Jethwani Nitya Nanda Anjali Bansal Srinivas Krishnaswamy Raghav Narsalay Bipul Chatterjee Ujjwal Kumar Mukesh Tyagi Tamara Holmes Swati Mathur Ralf van de Beek The core group which has prepared this report comprises: Ralf van de Beek, Pradeep S. Mehta and Nitya Nanda with assistance from Manleen Dugal and Anjali Bansal. C O N T E N T S LIST OF TABLES......................................................................................................................... i LIST OF FIGURES ...................................................................................................................... ii LIST OF BOXES ......................................................................................................................... ii FOREWORD................................................................................................................................ iii PREFACE ...................................................................................................................................... v EXECUTIVE SUMMARY ........................................................................................................ vii Chapter-1 Introduction: The 7-Up Project ................................................................................................ 17 1.1 The Project: Objectives and Process .................................................................................... 17 1.2 This Report: A Synthesis ....................................................................................................... 18 Chapter-2 Socio-Economic Context of the 7-Up Countries ................................................................... 19 2.1 Socio-Economic Indicators .................................................................................................... 19 2.2 Economic Structure and Growth of the Economies .............................................................. 20 2.3 Role of FDI and Cross-border Mergers................................................................................ 21 2.4 Importance of the Public Sector............................................................................................ 22 2.5 Levels of Market Concentration ........................................................................................... 23 Chapter-3 Background and Objectives: the Public Policy Context ...................................................... 25 3.1 Background and Public Policy Context ................................................................................. 25 3.2 Background and Objectives .................................................................................................. 29 3.2.1 Background ................................................................................................................ 29 3.2.2 Objectives ................................................................................................................... 30 Chapter-4 Scope and Coverage................................................................................................................... 33 4.1 Introduction ........................................................................................................................... 33 4.2 Substantive Provisions ........................................................................................................... 34 4.2.1 Restrictive trade practices ........................................................................................ 34 4.2.2 Control of monopoly power or the abuse of dominance ....................................... 36 4.2.3 Control of mergers & acquisitions ........................................................................... 40 4.3 Cross-Border Issues.............................................................................................................. 42 4.3.1 Concept of jurisdiction ............................................................................................. 42 4.3.2 Extra-territorial jurisdiction..................................................................................... 43 4.3.3 7-Up countries’ approaches..................................................................................... 44 4.4 Exemptions ............................................................................................................................ 44 4.4.1 Types of exemptions................................................................................................... 45 4.4.2 Importance of exemptions ......................................................................................... 47 4.5 Remedies and Penalties ........................................................................................................ 48 4.6 Consumer Protection ............................................................................................................. 49 Chapter-5 The Competition Authorities: Powers and Capabilities....................................................... 51 5.1 Powers and Institutional Framework .................................................................................... 51 5.2 Independence ........................................................................................................................ 53 5.3 Resource Availability ............................................................................................................. 54 5.3.1 Infrastructure and financial resources .................................................................... 54 5.3.2 Human resources ....................................................................................................... 56 5.4 Capabilities and Efficiency .................................................................................................... 59 5.5 Cooperation with Other Competition Authorities .................................................................. 60 5.6 Sectoral Regulators: Cooperation or Obstruction .................................................................. 61 Chapter-6 Competition Authorities: Dealing With Cases ...................................................................... 65 6.1 Adequacy of Legal Provisions .............................................................................................. 65 6.2 Research & Investigation Capacity ...................................................................................... 67 6.3 Autonomy, External Influence and