Many of the World Bank Group’s client countries face a difficult challenge – and the White House recently put this issue at the top of the agenda, too: How can policymakers increase competition to support continued growth of the economy? In a global low-growth environment, developing and advanced economies alike are looking for new ways to boost productivity and innovation. A global panel of Ministers agreed at a recent Spring Meetings event that market competition is pivotal in finding a solution.
When firms collude to fix prices or divide markets, thus harming consumers and reducing competitiveness in their sector and the broader economy, independent competition authorities can fine and therefore deter such illegal conduct. When governments set up rules that reinforce the market power of a dominant firm or that allow such illegal conduct, then competition authorities can rarely demand that those rules be changed – even though the effects on prices, service quality or the availability of products can be just as severe. If champions of competition seek to promote more pro-competition government interventions in markets, they must rely on competition advocacy.
Last Thursday in Singapore, Klaus Tilmes, Director of the Trade and Competitiveness (T&C) Global Practice of the World Bank Group, and Andreas Mundt, Chair of the International Competition Network (ICN), presented awards to the winners of the 2015-2016 Competition Advocacy Contest – a joint WBG and ICN initiative – at the ICN Annual Conference.
A new World Bank Group publication, launched by T&C on April 15, showcases the results of the 2014-2015 Competition Advocacy Contest, sharing the lessons that have been learned about effective advocacy and discussing innovative ways of adapting to new competition challenges. Previous rounds of the contest have shown how the notable impact of competition advocacy can change mindsets.
Our newest publication highlights the tools that competition authorities have developed to overcome the practical challenges, political-economy constraints and emerging trends that affect competition advocacy.
Competition advocacy is both challenging and rewarding, as illustrated by 42 stories from around the world:
- Changing the rules of how to allocate spectrum in Colombia required careful market analysis and continuous dialogue with the regulatory authority. This change allowed for one additional telecom operator and gave 22 percent more Colombians access to mobile internet.
- Removing the restrictions set up by the national sugar monopoly on how wholesale distributors can obtain sugar in Malawi required securing buy-in from various stakeholders, including the Ministry of Industry and Trade. The new distribution system has led to increased access to this key commodity for the food-processing industry.
- In Kenya, pro-actively preventing an association of healthcare providers from increasing charges saved consumers about $1.7 million a year.
- Prices for domestic airplane flights came down by 70 percent in Indonesia following the removal of restrictive air-fare regulation.
- Israel’s advocacy for changes in the immediate area of debit-card payments will help reduce inefficiencies in the payment market that cost the economy an estimated US$100 million a year.
The new publication describes recent trends and developments:
- Competition authorities are more actively anticipating challenges and opportunities for competition, such as the advent of technologies and other innovations that affect industries. In Israel and South Africa, authorities pro-actively assessed potential competition issues in specific banking and financial-services markets to understand the need for regulatory intervention and the potential benefits of easing restrictions (whenever those limits are not indispensable for broader public-policy objectives). This brought to light the way that certain upstream charges in payment systems needed to be regulated so that more providers could offer final payment services to consumers and businesses.
- Through advocacy, competition authorities play an essential role in developing and sharing market-specific knowledge and expertise across the entire government. In Singapore, the insight into the potential benefits for taxi drivers from linking taxi networks through third-party booking platforms did not just inform the competition authority’s recommendations: It also served as a basis for regulatory decisions by the sector’s regulator. Other authorities are beginning to engage more closely with sub-national entities like municipalities or local licensing agencies rather than operating only at the national level, and this helps ensure that healthy competition dynamics will energize local markets.
- Advocacy initiatives are having more and more concrete impact in other areas of a country’s economy. Authorities in Moldova have improved sector-specific or regional development policies by ensuring that related incentives and state-aid measures do not grant any competitor an undue advantage in the market. That allows for the better use of taxpayers’ money.
- How advocacy tools are used is more important than whether they are explicitly included in the legal framework.
- Changes to market and regulatory environments are occurring faster than ever, and so long-term engagements with regulators and industry are important.
- Measuring what advocacy strategies can achieve and have achieved makes efforts tangible and makes any mandate more credible.
The publication traces how each of the stories has delivered tangible impact, as well as showing how it has contributed to broader economic growth and consumer welfare – a factor that especially benefits those in the greatest need. That demonstrates how competition ultimately advances such priorities as public health and financial inclusion, and how it allows industries and economies become more competitive and thus create more and better jobs.