Volume 9, No. 3/2008

Inside this Issue

Computing Consumer Benefits ........ 4

Indonesian CommissionerArrested on Bribery Charges ............ 5

Focus on Consumer Goods .................. 8

Rationalising SoEs ................................. 10

Greening Wal-Mart? ............................... 11

China�s Double Investments ............ 12

Privatisation and China ..................... 13

MPs Demand Tough Regulation .... 14

CUTS Centre for Competition, Investment & Economic Regula tion

A Quarterly NewsletterA Quarterly NewsletterA Quarterly NewsletterA Quarterly NewsletterA Quarterly NewsletterREGULETTER

Special Articles

Competition Policy andPromotion of Investment,Economic Growth andPoverty Alleviation in LeastDeveloped Countries– R S Khemani ......................... 15

Market Liberalisation andCompetition Law in Nigeria– Leonard Ugbajah &Ken Ukaoha, Esq. .................... 16

Changes to FrenchCompetition Rules– Andres Font Galarza &Guillaume Chiras .................... 17

IntroductionMarket competition is

vital for the health of anyeconomic system. It isso, especially for theconsumer as it ensuresthat goods are providedto the latter at the price,quantity and qualitywarranted by the freeplay of forces of demandand supply. This freemovement in aneconomy, gets restricted,however, when incidents of collusion and cartelisation among firms, oftenabetted by corruption from official parties, take place.

Cartels constitute a very potent restriction on the free play of market forcesand are, termed as ‘the supreme evil of antitrust’, and considered illegal byantitrust authorities around the world.

Here, we explore the various types of cartels that have been observed innational and international economies, provide case studies of such cartels,present an estimate of losses from cartelisation that have been researchedby scholars and suggest remedies.

Collusion and Cartels: A TypologyA cartel refers to “a combination of independent business organisations

formed to regulate production, pricing, and marketing of goods by the members”.Cartelisation takes place through illegitimate collusion by firms to maximiseprofit by limiting competition. A cartel operates through practices, such asprice fixing, bid-rigging, allocation of territories/customers, etc.

Price fixing refers to the practice of firms agreeing to charge a commonprice, through implicit or explicit agreements, which is higher than thecompetitive price level. This is harmful to the consumer in terms of higherprices and lower quantities. It is usually carried out for products with inelasticdemand.

In the case of bid-rigging, competing firms decide to collude on bids/tenders,share the contracts at prices which are higher than what would have beenobtained if the bidding was fair and competitive. Thus, the effort by purchasersto ensure competitive prices in tenders is often frustrated by collusion amongfirms supposedly competing for multiple contracts; firms often collude tomaintain high and non-competitive prices by sharing knowledge about eachother’s bids and entering into agreements through which each firm gets anequal opportunity to become the ‘lowest bidder’. As is true of the othermentioned cases of collusion, consumers lose out through higher prices and

Corruption in Market Competition:Collusion and Cartels

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lower quantities consumed. Sometimes, there is evena compromise on quality of goods or services obtained.

Cartels: Some Case StudiesThis section looks at case studies of two of the

three major types of cartels illustrated above: bid riggingand price-fixing, which also serve to illustrate theinterface between competition and corruption.

In a major case of alleged bid rigging an American-Romanian businessman, Philip H. Bloom was chargedof paying officials of the Coalition Provision Authorityof Iraq, a US led agency, “bribes, kickbacks andgratuities, amounting to at least US$200,000 per month”to obtain reconstruction contracts through a bid-riggingscam. It was alleged that government officials actuallyconnived in rigging bids for which they werecompensated handsomely through gifts of cash,jewellery and real estate.

For an example of price fixing, consider the Baikonurcase in Kazakhstan, where large-scale embezzlementof funds allegedly took place in 2004. In this case,Russia provided the Kazakhstan state railways creditof US$65mn to purchase equipment. The state railwayssubsequently awarded the tender for equipment to twoRussian companies, and these companies inflated theprice for the railway equipment by US$46mn (from anoriginal price of US$19mn).

Harm Caused by Cartels � Economic and SocialCartels, by their tendency to promote an unnatural

condition in the economy and society have been seento cause immense harm at the economic as well associal level. This has been corroborated as a fact bythe Organisation for Economic Cooperation andDevelopment (OECD) and various American andEuropean Union (EU) antitrust/competition authorities.

Even though the harm caused is extremelydisadvantageous to all nations, yet its effect ondeveloping nations is even worse. This can be evidencedby data from six cartels in the vitamins, citric acid,bromine, seamless steel tubes, graphite electrodes andlysine industries, which resulted in overcharges ofUS$1.71bn, US$67mn, US$8mn, US$1.19bn,US$975mn and US$43mn, respectively from developingcountries.

Moreover, it is seen that the negative effects ofcartelisation are the worst for developing nations in theirhealth and welfare sector. This has revealed possiblefraud and corruption in the procurement ofpharmaceuticals in the World Bank suppor tedReproductive and Child Health Programme. Similarly,in the livelihood sector, price fixing cartels deprive thepoverty stricken sections of the population access tobasic food items.

Tools for Effective EnforcementSoft laws

Transparency International is promoting the adoptionof the Integrity Pact by different companies worldwide

through pressure exerted by different nationalgovernments; the objective is to eradicate bribery andhelp governments, businesses and civil society fightcorruption in the field of public contracting.

In a different form of blacklisting the NorwegianCompetition Authority has taken the initiative to removecompanies convicted of violating competitionregulations from listings on ethical investment indicesand funds.

Given that the importance of these ethical fundsand indices has increased because of increasingawareness of investors about ethical issues, suchblacklisting is being used to send out a strong messageabout the unacceptability of anti-competitive crime.

Criminal penaltiesStrong antitrust sanctions against companies are

not as efficient a deterrent as criminal sanctions againstindividuals. Severe criminal sanctions, especiallyincarceration, serve as a powerful deterrent for whitecollar criminals considering entry into a cartelagreement.

However, cartel conduct constitutes a crimepunishable by imprisonment and/or by criminal fines inonly a few countries (US, Brazil, EU, UK, Australia,etc.). More, such as South Africa, are now adoptingsuch a provision.

LeniencyLeniency is a generic term to describe a system of

partial or total exoneration from penalties that wouldotherwise apply to a cartel participant for reporting suchcartel participation to a competition enforcementagency. For example, the Office of Fair Trading, UK isoffering whistleblowers US$148,910 for providinginformation on cartels.

Sometimes, where a cartel is suspected andleniency is still available, but no leniency applicantcomes forward to report the conduct, the agencyproactively approaches one of the suspectedcompanies and clearly sets out the benefits that anapplication for leniency would provide.

ConclusionThus, from the above, it can easily be gauged that

cartels in most cases cause immense damage to theeconomic fabric of a nation/society, and, that this harmspills over into social sectors such as health andeducation as well.

Moreover, it is found that the harm caused by thisinter-linkage among collusion, cartelisation andcorruption is greater in developing nations as comparedto developed nations due to the fact that the formeroften lack effective competition regimes. At the sametime, to counter this trend various direct measures suchas soft laws, criminal penalties and leniency can beadopted which also create awareness about the same.

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The Israel Antitrust Authority (IAA) distributed a bill (the Proposed Law) toamend the Restrictive Trade Practices Law, which is intended to deal with

oligopolies on June 19, 2008. The Proposed Law is the result of the ExpertsCommittee for a Re-examination of the Law, chaired by Professor Zohar Goshen,which was appointed by the Minister of Trade, Commerce and Labour in Marchof 2005.

The Committee’s work included examination of the Law’s provisions dealingwith oligopolies, and the committee concluded that there was a clear need tomake a substantial change regarding the handling of the oligopolies in theLaw’s framework, in order to respond to the competition problems resultingfrom the existence of oligopolies in the Israeli economy.

The Israeli market is limited in size, in comparison to other developedeconomies, inter alia, due to the small local demand and the existence of variousbarriers to trade, such as geographic isolation, political barriers and languagebarriers. These characteristics occasionally limit the number of players who canoperate efficiently in a wide variety of industries. Therefore, in many Israeliindustries there are only a few actors, and the level of competition betweensome of them is often unsatisfactory. The Proposed law is important because itwill allow the IAA to deal with competitive failures that prevails in the marketswith few competitors – a type of market which is relatively common in Israel.

The draft bill, which is supported by the Committee’s conclusions, is animportant breakthrough for consumers and for competition in Israel, with far-reaching significance for the Israeli economy. (IAA, 04.07.08)

Israel to Deal with OligopoliesThe Proposed Law provides

new tools for dealing witholigopolies. These are establishedthrough two main amendmentsthat address the deficiencies in thecurrent statutory language:l An amendment of the

definition of an oligopoly: Thisdefinition is very problematic,as the level of competitioncannot be measured in anempirical quantitative manner.

l Distinction between amonopoly and an oligopolyand the manner in which theLaw regulates them: The Law,in its current form, imposes thesame obligations on amonopoly as it does on anoligopoly, in the context of thechapter dealing withmonopolies.

Expanding Antitrust EnforcementGlobal law firms are adopting a

variety of methods to help expand anddeepen their antitrust practices beforeimplementation of changes to antitrustrules and enforcement across the regionthat are expected to have far-reachingconsequences for foreign companies.

Law firms expect a sharp rise inrequests from multinational corporationseager to navigate the region’s evolvingantitrust landscape, with China, Indiaand Hong Kong either introducing orrevising competition law and mergerpolicy.

Planned changes to competitionlaw and enforcement in China and Indiaare seen by lawyers as the mostsignificant developments in the regionin many years, and come as the strongeconomic growth in each country isattracting record levels of inwardinvestments. (FT, 21.07.08)

Decisive Action on ShippersIn a communiqué, Asian Shippers’

Council (ASC) has expressed the viewthat the Governments in Asia shouldtake ‘decisive action’ to stop anti-competitive behaviour of containerslines.

The communiqué points out that thecontainer lines like OOCL, Wan Hai,Evergreen, RCL, TS Lines, KanwayShipping, Cheng Lie Navigation andYang Ming separately announced theimposition of the same surcharge ofUS$56.8 from July 01, 2008 to becollected from the consignees in HongKong and South China.

The ASC has always maintainedthat bunker surcharge like is an integralpart of the freight and thereforecharging emergency bunker surchargegoes against normal internationalshipping practice. (BL,14.07.08)

Single Competition AuthorityThe French Government has

adopted reforms to the law on themodernisation of the economy, pavingway for the creation of a singlecompetition authority.

The reforms aim at strengtheningthe country’s competition framework bycreating a single independent competitionenforcer by replacing France’s currenttwin regime – in which competitionenforcement is divided between theGeneral Directorate for Competition,Consumer Protection and Frauds(DGCCRF) and the Competition Council.

The DGCCRF deals with phase Iinvestigations and the CompetitionCouncil conducts phase IIinvestigations before passing on itsrecommendations to the DGCCRF,which makes the final decision. Underthe new law, the DGCCRF will transferall its merger control powers to the newauthority. (GCR, 24.07.08)

Changes in Patent LawsProposed changes in China’s

patent laws require foreign companiesentering the country to file for a patentin China to avoid losing legal protectionto their intellectual property.

Another proposed change in thelaw involves the adoption of an‘absolute novelty’ standard that willmake it hard to get a Chinese patent forinventions that are already in useoverseas, thus making it morechallenging for foreign companiesinventing in China.

However, the new law would alsomake it easier to challenge rogueChinese patents. If the revisions areadopted, foreign companies would alsohave to draft patents in Chinese forinventions made in the country.

(FT, 03.07.08)

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Copyright Hits BroadcastersIn a move that would reshape the

treatment of music copyright acrossEurope, the European Commission (EC)has barred the agreements betweencopyright collecting societies thatrestrict nationally-based societies fromoffering their services to authors andcommercial users outside their domesticterritories.

This move is expected to break thesocieties’ domestic monopolies overbroadcast material and make it easierfor composers and lyricists to chooseand manage their copyright.

This decision is sought to benefitcultural diversity by encouragingcollecting societies to offer composersand lyricists a better deal in terms ofcollecting the money to which they areentitled. The Commission would extendthe copyright term for recordedperformances from 50 to 95 years.

(FT, 17.07.08)

Dealing with Predatory PricingPredatory pricing complaints in

Canada will now to be examined underabuse of dominance provisions, withcriminal enforcement reserved for“egregious” predatory conduct.

Average avoidable cost will be usedas the primary economic tool in price-cost analysis; price matching will alsobe viewed to meet competition as areasonable justification for below-costpricing.

The new guidelines are envisagedto give companies and competition

Computing Consumer BenefitsThe UK�s Office of Fair Trading (OFT)

has published its annual report, inwhich it claims it has saved consumersUS$483mn per year. According to thisreport, the office�s merger workproduces benefits of US$171mn per year,while market investigations and reviewsof undertakings produce benefits ofUS$181mn.

Competition enforcement results in an average saving of US$114mn peryear. A further US$17.8mn is saved each year by the office�s actions againstillegal scams. The savings represent six times the value of the office�s annualbudget, ahead of a government target that requires it to achieve five times itsbudget in annual benefits.

OFT has enjoyed several high-profile successes in 2008, including reachingearly settlement agreements totalling US$196.2mn with six companies thatpleaded guilty to fixing the price of tobacco products in the UK. (GCR, 22.07.08)

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specialists a clear view as to whatconstitutes anti-competitive predatorypricing in Canada. (GCR, 22.07.08)

Fixing Freight RatesThe shipping lines active in Europe

will stop fixing freight rates together ormanaging capacity, thanks to the EU’sdecision to repeal the block exemptionto liner conferences on trade routes toand from Europe.

The European shippers can takecredit for it. Since 1994, the EU has beenvoicing concern over collective rate-setting practices, the aim being todismantle price fixing cartels andincrease competition, a mission thathas long been cheered on by theEuropean Shippers Council (ESC) andother shipper bodies around the world.

ESC waged a long campaignagainst abuse of anti-trust immunityprivileges enjoyed by the conferencesand finally won a decisive victory afterhaving succeeded in consolidating itspolitical power in Brussels. (BL, 29.09.08)

Amendments Cause ConcernSouth Africa’s Competition

Commission and Competition Tribunalhave made a joint submission to theGovernment, raising concerns aboutthe criminalisation of cartel behaviourand the lack of clarity in the proposedamendments to the country’scompetition laws, which could leavethem facing constitutional challengesthat would detract from effective cartelenforcement.

Under the draft law, guiltyindividuals would face penalties of upto US$49,112 and 10 years in prison.By criminalising anti-competitivebehaviour and making individualspersonally liable, company directorswould be far less willing to reachconsent agreements with competitionauthorities. (GCR, 30.07.08)

Strict MeasuresTo contain rampant Inflation,

Vietnam has resorted to strict measureswherein companies passing on highercommodity costs to consumerswithout proper justification will eitherbe prosecuted or their license will berevoked.

Inflation accelerated to 27 percentin July 2008, and measures are taken tocontrol cost of food which accountsfor two-fifths of Vietnam’s consumerprice Index. The Ministry of Planningand Investment unveiled curbs on theconstruction of golf courses, whichhave been encroaching on agriculturalland.

While the Government couldimpose sever sanctions on companiesthat push up their prices because ofhigher costs, it has been trying to cutits ballooning subsidy bill by raisingretail fuel prices. (FT, 05.08.08)

Multi-tiered EnforcementThree agencies and a governing

anti-monopoly commission willcomprise China’s competitionenforcement regime when the country’slong-awaited anti-monopoly law takeseffect. The enforcement duties will besplit between the Ministry ofCommerce, the National Developmentand Reform Commission and the StateAdministration for Industry andCommerce.

The Commerce Ministry wouldbecome home to the country’s mergercontrol unit. The other two agencieswould handle behavioural issues,including pricing and non-pricing-related abuse of dominance cases,respectively.

The structure would be the resultof a compromise between the threeagencies, as all three were rumoured tobe jockeying for position duringdiscussions of how to implement thelaw. (GCR, 18.07.08)

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Competition Reforms ChallengedHungarian

P r e s i d e n tLaszlo Sólyomhas challengedamendments to thecountry’s Competition Act, which werepassed by the Parliament in 2008. Thereforms have now been put on ice.

The reforms, passed on June 02,2008 include new provisions for cartel-busting and the introduction of aleniency policy. They also improveclaimants’ rights to obtain damagesfrom cartelists and were scheduled totake effect on September 01, 2008.

But President Sólyom haschallenged the constitutionality of thebill, thereby freezing the amendments.Sólyom objects to a proceduralprovision, which bars individual cartelringleaders from holding managerialpositions at other companies within thesector for a period of two yearsfollowing an indictment.

Although the scope of thechallenge is very narrow, it has frozenthe bill entirely. The Constitutional

Court is reviewing the challenge, andsays that new legislative amendmentswill probably be required.

(GCR, 17.07.08)

Recommendation for Break-upThe UK’s Competition Commission

will recommend the break-up of theUK’s largest airport manager, BritishAirports Authority (BAA), calling forit to divest at least one of its properties.

The Commission has beeninvestigating competitiveness amongthe UK’s seven BAA airports sinceMarch 2007 and found no competitionbetween BAA’s three London airports,and only very limited competition fromnon-BAA airports. Most BAA airportssuffered from a lack of capacity, and aperceived unwillingness to expand tomeet airlines’ demand.

Concerns have been raised overBAA’s alleged “lack of responsiveness”to the differing needs of its airlinecustomers, as well as the level andquality of its investments and services.The BAA develops one airport at theexpense of developing another, which

would not happen with separateownership. (GCR,11.08.08)

EC Proposal RejectedThe European Parliament has

rejected a proposal by the EC to forceenergy companies to either unbundletheir gas supply and gas transmissionnetworks, or to hand over the operationof transmission networks toindependent system operators.

An alternative known as the‘independent transmission operator’model was endorsed by EuropeanCouncil, which would allow companiesto retain the ownership of pipelines, butcompel them to abide by rules and astructure to ensure operationalindependence.

The Parliament also introduced aseries of safeguards to the legislationto ensure the proposals are properlyimplemented, including complianceprogrammes to safeguard against“discriminatory conduct” and theappointment of an independent trusteeto oversee the transmission systemoperator. (GCR, 10.07.08)

Indonesian Commissioner Arrested on Bribery ChargesIndonesia’s war on corruption has taken a leap forward

with the arrest of a national competition commissioner onbribery charges.

The move throws into disarray an eight-year-old attemptat creating business transparency in the country and someof the Commission’s more controversial decisions are nowbeing called into question.

Competition Commission member Muhammad Iqbal wasarrested at a central Jakarta hotel after allegedly accepting aUS$66,275 bribe from the director of a major televisionnetwork.

The Commission ruled the Direct Vision network notguilty of monopoly practice in broadcasting the EnglishPremier League on its pay-TV channel Astro Nusantara.Direct Vision is owned by the Lippo Group, one ofIndonesia’s biggest conglomerates.

The monopoly case against Direct Vision was broughtby a group of competing networks. A senior executive ofthe company that owns Direct Vision, Billy Sundoro, wasalso arrested in the raid after an anonymous tip-off to thepowerful Corruption Eradication Commission.

Sundoro is alleged to have handed Iqbal the cash in ablack briefcase in a hotel elevator, as the two headed for atraditional fast-breaking ceremony – the high point of theday for Muslims during the holy month of Ramadan.

Competition Commission chief Syamsul Ma’arif said thatcommissioners were “certainly often given envelopes (ofmoney) but these are always returned”.

Ma’arif said that if anti-c o r r u p t i o nprosecutorsb e l i e v e dthere wasanyone elsein breach ofthe law at hisoffice, which has only existed for eight years, they werewelcome to conduct further raids.

Recent major rulings by the Competition Commissioninclude a finding that Singapore state investment companyTemasek was in breach of anti-monopoly provisions byowning stakes in Indonesia’s two biggesttelecommunications companies, Telkomsel and Indosat.

Temasek lost its Supreme Court appeal against that ruling,was ordered to sell one of the stakes and was also finedUS$1.19mn. Singapore Telecom, in which Temasek holds a54 percent stake, and Temasek’s wholly owned subsidiarySingapore Technologies Telemedia were also each finedUS$1.19mn.

That case was widely thought to be without greatsubstance and has cast doubt on Indonesia’s sincerity intrying to attract foreign investment.

National Parliamentarian Djoko Susilo, a member of thehouse’s standing commission for communications, called forthe corruption commission to go further in investigating thecompetition body. (TA, 19.09.08)

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Price Fixing In Namibia�s Agronomic Industry

Maize, millet (mahangu) and wheat are the main staple food of Namibia,oftern referred to as ‘controlled products’. The Northern Communal Areas

(NCA) considers the “Marketing Agreement” through which the price (floorprice) is set, to be greatly unfair towards consumers as it clearly favours producersand millers at their expense. Not only does the Namibian agronomic industry gettogether to determine the price, but also charge consumers a premium as theindustry believes its products (maize & mahangu) are free from GeneticallyModified Organism (GMO).

A genetically modified organism refers to organisms (e.g. plants) whosegenetic materials have been altered using genetic engineering techniques;consumption of these products can be a health risk. Some countries have actuallybanned trade and consumption of GMO products, while others require GMOproducts to be clearly labeled so that consumers can choose whether to buyGMO products or not. A few countries have adopted such products due to theadvantages; for example in the case of maize it increases yield while reducingproduction cost and the use of pesticides.

This is said to have been demonstrated in South Africa as well. The NCA,however, considers this premium unnecessary and exploitative as consumers inany case have a right to GMO free food and should not be subjected to such apenalty. It has also come to the NCA’s attention that some producers haveplanted GMO maize in Namibia.

Regardless of the significance of the quantity and of the millers (grainprocessors) assurance that this produce will be isolated, the NCA is convincedthat consumers in Namibia have a right to know about this incident (planting ofGMO maize without any stakeholder consultation or safeguards).

While the NCA has no intention to cause unnecessary alarm, it would fail inits duty to protect consumers if it keeps quiet about this kind of prematureoptimism on the part of some producers. It is also well known that Namibia’sdomestic production does not meet the local demand and that maize and mahanguhave to be imported to meet such demand. In this regard, it is acknowledged bythe industry that it is not certain that such imports are free of GMO as no testsare done at the borders.

There is still debate on the international arena with regard to the benefitsprovided by genetically modified food items. Proponents of GMO believe thatproducts derived from them are safe for consumption as there is so far no evidenceof adverse effects on consumers in countries where these products have beenconsumed.

Since Namibia is signatory to the Cartagena Protocol on Biosafety and thatthere is a Biosafety Act of 2006 (although not implemented yet), these instrumentsshould enable Namibia to act in a sovereign manner and not accept GMO productssimply because other countries have accepted it. The NCA, would therefore, liketo appeal to the Government of the Republic of Namibia that this matter betreated with great caution until such time that first class agricultural researchconvinces the Namibian society that risk to human health is minimal from GMOproducts. If GMO products are allowed in Namibia these should clearly be labelledso that consumers’ rights can be respected.

In conclusion, while the NCA appreciates the need for food security, it herewithreminds the agronomic industry of the country that it is the poorest of the poorwho are their loyal customers and that a lack/limited competition in the industrywould not help reduce poverty. Therefore, the NCA can only appeal to theconscience of the industry to seriously consider doing away with the “MarketingAgreement” (even if the arrangement is not illegal). There must be competitionamong the industry players like in many other industries which will not onlybenefit consumers, but will make the industry more efficient.

– Press Release issued by Namibia Consumers Association, Namibia, August 2008

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The NCA deemed this opinionpiece necessary due to thegenerally accepted consumerrights in a market system,which are;1. The right to safety – this

entails protection againstproducts that may bedangerous or detrimentalto life or health.

2. The right to be informed –this entails that objectiveinformation be available toenable the consumer tomake rational choices.

3. The right to freedom ofchoice – this entails givingthe consumer access tocompetitive products orsubstitutes (protectionagainst monopolies).

4. The right to be heard –this entails thatconsumers be given theassurance that theirinterest will receiveattention fromgovernment and otherstakeholders.

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offered Slovak Telekom’s products andalso closed the market for potentialrivals intending to act in newly openedmarkets”.

The office stressed the seriousnessof such behaviour and its detrimentalimpact on an information society.Slovak Telekom is entitled to appealwithin 15 days of the notice.

(Reuters & AFP, 20.08.08)

was granted conditional immunity on asixth charge involving two otherproducers, Parmalat and Woodlands.

The case against the major milkproducers has not been stopped as wasintended by Clover and Ladismith. TheCommission will proceed with its caseagainst them to show they wereinvolved in anti-competitive practices.

(M&G, 19.09.08)

Clean Chit in Price RiggingHome grown pharma major Ranbaxy

Laboratories Ltd. got a clean chit fromEnglish Crown Court in a case relatingto allegation of price rigging ofpencillin-based antibiotics, includingamoxicillin, ampicillin and flucloxacillin,that were supplied to the UK’s NationalHealth Services (NHS) between 1996-2000.

The court has also declined anapplication by the UK Serious FraudOffice (SFO) for permission to appealto the English Court of Appeal. TheSFO, however, retains a right to appealto the Court of Appeal directly.

Welcoming the decision of thecourt, the company said: “Ranbaxy is aresponsible company committed toproviding high quality genericmedicines at affordable prices to itscustomers and patients”. (ToI, 22.07.08)

Cleared of a ConspiracyFive companies, including

Goldshield Group, KentPharmaceuticals, Norton Healthcare,Generics (UK), and Ranbaxy (UK) havebeen cleared of an alleged conspiracyto defraud the National Health Service(NHS) by fixing prices of some commondrugs, penicillin-based antibiotics, andthe blood-thinning drug warfarin, aftermore than six years of investigation bythe Serious Fraud Office (SFO), UK.

Because the allegations refer to theperiod 1996-2001, they pre-date theEnterprise Act 2002, which makes pricefixing a specific offence. The chargeswere instead brought under the commonlaw offence of conspiracy to defraud.

SFO’s lawyers had accused thecompanies and individuals of “costingthe taxpayer millions of pounds”, butthe judge ruled that the SFO brought aprosecution on the basis of a defectiveand misconceived assumption.

(BL, 12.07.08)

Highest Cartel FineAn EU court upheld one of the EU’s

highest cartel fines, confirming thatLafarge SA must pay US$248mn by2002 for trying to fix the price ofplasterboard.

The European Court of FirstInstance said it backed the EuropeanCommission’s 2002 decision to demandthe French construction materialsgroup pay the fifth highest penaltyimposed by EU regulators in a cartelcase.

But it gave a 10 percent reductionto Britain’s BPB PLC –world leader inthe supply of plasterboard – because itsaid regulators had undervalued thecompany’s co-operation. (BL, 08.07.08)

Under Mounting PressureGazprom is under mounting

pressure ever since its shares fell 7.9percent to their lowest after a keyRussian regulator said the state-controlled gas export monopoly wouldbe fined for restricting access for anindependent gas producer to itspipeline network.

The Russian federal anti-monopolywas pressing ahead with the fine for‘violations’ of antitrust rules regardingdenying pipeline access to Transnafta,an independent producer in theTatarstan region.

Amid fears that Gazprom might notbe able to meet rising domestic demand,the Russian Government has chargedthe regulator with drafting amendmentsto a pipeline law that would forceGazprom to open access to independentproducers. The Government is due tomake a decision on the law bySeptember 2008. (FT, 10.09.08)

Fine for Abusing DominanceThe antimonopoly office of the

Slovak Republic imposed its heaviestfine ever, an amount of US$37.1m onSlovak Telekom for an abuse of adominant position for refusingcompetitors access to local lines.

The office said that by its behaviour“the vertically integrated companyseriously damaged its rivals acting inthe retail markets. It restricted theirpossibility to apply the most moderntechnologies independently on already

Airlines ChargedNew Zealand’s fair trade watchdog

had charged three carriers, includingCathay Pacific and Singapore airlines,with failing to provide information to acargo price-fixing probe.

The Commerce Commission hadfiled criminal charges against the twofirms and Aeroloneas Argentinas overthe investigation into the US$262mn aircargo market.

The Commission said the chargesrelated to a failure to comply withstatutory notices requiring the airlinesto provide documents and informationrequested for the ongoing price-fixingprobe.

The Airlines could be fined up toUS$19,661 if they are found guilty. TheCommission is investigating allegationsthat certain carriers have colluded onsetting cargo rates, including fuelsurcharges on international flights toand from New Zealand. (BL, 16.07.08)

Avoiding Hearing?The Competition Appeal Court in

South Africa has rejected a bid by dairyproducers Clover and LadismithCheese to avoid a price-fixing hearing.This ruling is considered to be a majorplus for the public benefit.

Clover faces four charges, includingprice-fixing, abuse of dominance andfixing trading conditions. Ladismithfaces one charge of price-fixing. Clover

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Entry BlockedBharti Airtel, which plans to launch

mobile services in Sri Lanka byDecember 2008 has accused theexisting mobile players there of ‘notproviding interconnection to it on thesame terms as they practice amongstthemselves’.

When Airtel requested otheroperators to provide aninterconnection with their networks,the operators wanted the company topay for interconnection at Rs 1.50 perminute, whereas they themselves werepracticing a free call system amongstthemselves.

However, Sri Lanka’s four mobileoperators have rejected claims by Airteland they were anti-competitive andblocking new players. Sanjay Kapoor,President, Mobility, Bharti Airtel saidthat the island nation should have a‘friendly interconnection charge’ asthis could help down bring tariffcharges. (ET, 08.09.08)

Raid Against CollusionThe Japan’s Fair Trade Commission

(JFTC) raided four companiessuspected of colluding to increase theprice of polyethylene sheet, used ininsulation materials for the constructionindustry during 2004-2006.

The companies – Toray Industries,Furukawa Electric, Hitachi Chemicaland Sekisui Chemical – could facefines of up to 10 percent of theirturnover on the products over theduration of the offences if found guilty.

The JFTC alleges that thecompanies formed a cartel to help thempass on price increases in crude oil,which is used in the manufacture ofpolyethylene to downstreamcustomers. (GCR, 24.07.08)

Focus on Consumer GoodsThe Russian Government will

investigate suspected cartels in thefood, fertiliser and fuel sectors, in aneffort to curb rising inflation in thecountry.

The Prosecutor General’s Office willcoordinate their investigations withRussia’s Federal Anti-MonopolyService, as well as the Federal CustomsService, the Federal Service for

in June 2005, which took three years ofthorough investigation, data collectionand debates with renownedeconomists and legal scholars beforeissuing a final decision. (ANA, July 2008)

Antitrust Review of IBMEuropean regulators are to push

ahead with antitrust inquiry into IBM’sdominance of the computer mainframemarket. Platform Solutions Inc (PSI), aSilicon Valley start-up had beenpursuing an antitrust suit against IBMin the US and had complained toEuropean competition regulators. Itwithdrew the objection just before IBMdeal, for an unnamed sum wasdisclosed.

According to sources, Brusselsconfirmed that the Commission wouldcontinue to investigate issues that PSIhad raised. Although IBM’s ownmainframes, in which its hardware andsoftware are tightly integrated,continued to dominate the market, thelicensing requirements allowed somerivals to carve out smaller niches, forinstance in selling mainframes to smallercompanies.

IBM in turn counter-sued, accusingPSI of breaching its intellectualproperty rights (IPRs). (FT, 04.07.08)

Probe into MicrosoftTaiwan’s Fair Trade Commission

(TFTC) has launched a probe intoMicrosoft following a complaint filedby the Consumers’ Foundation that itis forcing customers to buy itsWindows Vista operating system.

Microsoft is accused of violatingTaiwan’s Fair Trade Act by ending salesof its Windows XP operating system inmost computers from June 2008.

If found guilty, Microsoft couldface a fine of up to US$99,000 and beordered to stop the abusive conduct.

(AFP, 18.08.08)

ABUSE OF DOMINANCE

CARTELS Financial Markets, the TransportationMinistry and the Agriculture Ministry.

Focus is on basic commoditysectors, all of which have a directinfluence on consumer products inRussia. Rising food and fuel prices sawRussia’s inflation rate reach 15.1percent in June 2008 – the highest ratefor six years.

Building materials and real estatemarkets, together with metals andmobile phones, are other sectors inwhich cartels are likely to occur inRussia. (GCR, 23.07.08)

Corporate Leniency PolicyThe Competition Commission of

South Africa received a CorporateLeniency Policy application pursuantto the raids it conducted at Cape TownIron and Steel Works, Highveld and theSouth African Iron and Steel Institute(SAISI) on 19 June 2008.

The raids were conducted as partof an investigation into allegations ofprice fixing and exclusive dealing in thesteel industry. The applicant confirmsthe existence of a cartel amongcompetitors for products likeReinforcing bar, Wire rods, Roofingbolts and Fencing products.

Discussion between the parties leadto agreements to fix prices, exchangeprice lists and fix discounts.

(BD, 18.07.08)

Abuse of Market DominanceThe Korea Fair Trade Commission

(KFTC) has imposed a corrective orderand a punitive surcharge on IntelCorporation, Intel SemiconductorLimited and Intel Korea for abuse ofmarket dominance.

It was found that Intel wasleveraging its dominant market positionin the CPU market by providing a royaltyinducing financial arrangement toSamsung Electronics and SamboComputer, putting a condition on themto not purchase CPUs from their rivalAMD.

This act is in violation of Article 3-2(1)5 preceding paragraph of theMonopoly Regulation and Fair TradeAct (MRFTA) dealing with “exclusionof competing enterprise”. KFTClaunched investigation into this case

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Pursuing AllianceBritish Airways (BA) and American

Airlines (AA) have applied toregulators in the US and Europe forantitrust immunity that would permitthem to combine their route networks,pricing, sales, marketing andpurchasing power. Iberia, Finnair andRoyal Jordanian are included in thesubmission but are secondary players.

This is the third attempt by BA andAA to join forces. The previous efforts,in 1997 and 2001, failed becauseregulators insisted on the pair givingup Heathrow landing slots to reducetheir dominance at the world’s busiestinternational airport.

Willie Walsh, the Chief Executive ofBA, said this would no longer be anissue because of the US-EU open-skiesagreement that began in 2008, wherebyany airline, in theory, can operate fromHeathrow. (FT, 15.08.08)

Global M&As PlummetFacing continued uncertainty in the

global credit markets and a steep declinein stock markets around the globe, thevolume of worldwide mergers andacquisitions (M&As) totalled US$1.6trin announced deals during the first halfof 2008, a decrease of 36 percent overthe record-breaking first half of 2007,according to “Mergers & AcquisitionsReview”.

With just US$152.4bn in announceddeals, the volume of financial sponsor-backed transactions reached its lowestlevels since 2005.

Financial sponsors accounted forfor just over 9 percent of announcedtransactions during the first six monthsof 2008 compared to 25 percent duringthe first half of 2007. (FE, 03.07.08)

New ApproachThe appetite of drug companies for

large acquisitions has not changed, butwith fewer pickings available globally,acquisition targets are getting sharplydefined, observe pharma industryrepresentatives.

As M&A strategies of Indiancompanies gain sophistication, they aremaking acquisitions for very specificobjectives like entering a sub-segment,acquiring patents, acquiring a brand orits distribution.

Big acquisitions will not go out offashion, but companies will find easy-to-digest, focused transactionsvaluable and may not always look atacquisitions in a conventional mannerof biting big. (BL, 13.07.08)

Consortium to Claim StakeA consortium led by Japan’s

Marubeni and France’s GDF Suez is setto buy Singapore’s biggest power stationin a US$2.8bn deal. Marubeni and GDFSuez each hold a 30 percent stake in thewinning consortium that includesJapan’s Kansai Electric Power andKyushu Electric Power, as well as theJapan Bank for International Co-operation.

The consortium, which was one offive final bidders, will pay US$2.40bnand assume US$211bn of Senoko’sdebt. GDF Suez is expected to supplyliquefied natural gas to power theSenoko plant. Senoko, with 3,300 MWof capacity, supplies a third ofSingapore’s electricity.

In March 2008, Temasek sold thefirst of the three stations – Tuas, the

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smallest and most efficient inSingapore – to China’s Huanenggroup for US$2.74bn. (FT, 06.09.08)

Coke Eyes China DealCoca-Cola has offered US$2.4bn

to buy China Huiyuan Juice Group, inwhat would be the biggest takeoverby a foreign company in China. Thedeal will help the US-based companyexpand in the world’s most populousnation and allow it to diversify itsdrinks portfolio at a time when growthin the carbonated drinks market inChina is slowing.

Coke’s efforts to expand beyondcarbonated drinks have includedbuying Multon, Russia’s secondlargest juice company, three years ago,and its US$4.1bn acquisition ofGlacéau, maker of Vitaminwater, in2007.

China’s fruit and vegetable juicemarket was worth US$10.6bn in 2007and was growing at an annual rate of18 percent. (FT, 04.09.08)

Merger Talks MatureCommerzbank and Dresdner bank

are on the point of a potential mergerthat could create a bigger domesticrival to Deutsche Bank in Germany’sfragmented banking sector. The twodiscussed a joint bid for DeutschePostbank, Germany’s former postoffice savings bank that DeutschePost, the majority owner, may sell.

The deal would not be basedsolely on subsequent bid forPostbank, which is considered difficultand would heighten risks involved inintegrating the institutions.

Dresdner Kleinwort, Dresdner’sinvestment banking arm which madeheavy writedowns because of itssubprime exposure could be a potentialobstacle to this deal. (FT, 02.07.08)

European antitrust regulators are scrutinisingthe proposed alliance between Google and

Yahoo over entering the advertising pact to see if itcontravened European competition law.

An international association that representsnewspaper trade groups in many parts of the worldhas also voiced its own opposition, claiming thatthe pact would leave Google with �unwarrantedmarket power over important segments of onlineadvertising�.

Google-Yahoo Pact Could Hit ProbeUnder the non-exclusive

partnership, Yahoo will let Googlesupply some advertisementsreturned when users search theYahoo properties, with the two splitting the revenues.

Google and Yahoo are the two leading suppliers of contentads and syndicated search ads to online news sites, and theycompete intensely for that business. The proposed deal is saidto fatally weaken Yahoo as a competitor for these deals.

(FT, 16.09.08)

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Infosys to Buy Axon GroupIndian outsourcing giant Infosys

plans to buy British consultancy AxonGroup for US$753.1mn in a bid toexpand its business advisory footprint.The deal is expected to be completedby November 2008.

Chief Executive KrisGopalakrishnan said the deal wouldboost the company’s ability to provide“business transformational services”to firms globally. The acquisition comesas India’s flagship outsourcingindustry, which has seen profits comeunder pressure in the internationaleconomic downturn, seeks to diversifyits activities and look for new businessmodels.

Infosys believes that theacquisition will accelerate theachievement of some of Infosys’current strategic corporate objectivesincluding the continued expansion ofits consulting capabilities

(FT, 26.08.08 & AFP, 25.08.08)

Rationalising SoEsChina will speed up restructuring

of its state-owned enterprises in thesecond half of 2008, forcing mergers oflarge conglomerates and acceleratingsales of non-strategic assets across awide range of sectors.

China intends to reduce thenumber of giant state enterprises undercentral government control from 150 toas few as 80 by 2010. Wang Huisheng,President and Chief Executive of thelargest state-owned industrial holding

company, said the Government will nowbegin driving the process.

In the shipping sector, Wuhan-based China Yangtze TransportationGroup, the country’s biggest rivershipping company, and Beijing-basedSinotrans Group, a logistics group areset to merge at the urging of the State-owned Assets Supervision andAdministration Commission (SASAC).

(FT, 21.08.08)

Roche to Buy GenentechSwiss drugmaker Roche Holding

AG has offered to acquire alloutstanding shares in its US partnerGenentech Inc. for US$43.7bn in cashto reinforce its position in cancermedicines.

Roche would gain control of allrevenues for big-selling Genentechcancer drugs Avastin and Herceptin,as well as absorbing an attractiveportfolio of new medicines.

The Genentech bid is the latest in astring of acquisitions of promisingbiotech assets as large pharmaceuticalcompanies snap up new drugs to fillsparse new product pipelines.

(ET, 22.07.08)

Public Takeover OfferBASF, the world’s biggest

chemicals group, launched a bid toacquire Swiss specialty chemicalscompany Ciba in an agreed cash dealworth US$2.9bn to strengthen itsposition in the specialty chemicalsbusiness.

BASF and Ciba have reached atransaction agreement in which theBoard of Directors of Ciba supportsBASF’s attractive offer and recommendsits acceptance to Ciba’s shareholders.

The offer corresponds to a premiumof 32 percent above the closing pricefor Ciba’s shares and a premium of 60percent above the volume-weightedaverage share price for Ciba shares inthe 30 days prior to announcement ofthe public takeover offer. (BL, 15.09.08)

Virgin to Sell StakesVirgin Atlantic is in talks to sell its

49 percent stake in Virgin Nigeria,following an increasingly acrimoniousdispute with the Nigerian Governmentover the location of the loss-makingwest African carrier ’s domesticoperations.

Virgin Nigeria was hailed as asymbol of investor confidence inNigeria when it was set up in 2005 byVirgin Atlantic and Nigerianinstitutional investors, in part to meetdemand for a reliable carrier given thecountry’s poor record for air safety.

Virgin Atlantic claims that theGovernment reneged on a deal signedunder Olusegun Obasanjo, theprevious president that let it use theinternational terminal for all services.

(FT, 20.08.08)

Forming Metals GroupKazakhmys, the UK-listed Kazakh

copper producer and Metalloinvest, theRussian iron ore and steel group, haveheld early stage talks about combiningto form a metals group that could beworth more than US$40bn.

Shares in Kazakhmys closed up 6.2percent after the group confirmed it wasin very preliminary discussions abouta possible combination of its businesswith a third party, which according topeople was Metalloinvest, a metalsconglomerate controlled by billionaireAlisher Usmanov.

The deal was being structured as areverse takeover of Kazakhmys thatcould leave billionaire Usmanov as thebiggest shareholder in the combinedgroup. Kazakhmys, in which founderand chairman Vladimir Kim owns 45percent and the Kazakh Government15 percent, has a market valuation ofabout US$12.9bn. (FT, 15.07.08)

Teva to Acquire BarrTeva Pharmaceutical Industries, the

world�s largest generic drugcompany would buy rival BarrPharmaceuticals Inc for US$7.46bn toexpand its leadership in the US marketand fortify its presence in Europe.

The deal is the largest in a wave ofconsolidation in the generic drug sectorthat some analysts suspect will result in a handful of major global players.Israel-based Teva, the world�s largest generic drug company, plans to buy NewJersey-based Barr for US$66.50 per share in cash and stock.

The combined company would be a generic powerhouse employing about37,000 people globally and operating directly in more than 60 countries.Together, Barr and Teva had revenue of about US$11.9bn in 2007.

By acquiring Barr, Teva would move closer to its stated goal of boosting itsUS market share to 30 percent of generic prescriptions by 2012, from about 20percent. (ET, 20.07.08)

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Starbucks to Close 600 StoresAfter a rigorous evaluation of its

store portfolio, Starbucks Corporation,the premier roaster and retailer ofspecialty coffee in the world, hasannounced its decision to closeapproximately 600 underperformingcompany-operated stores in the USmarket.

Both full-time and part-time retailpositions will be eliminated, howeverthe company expects to place many ofthe affected partners (employees) intoavailable positions at nearbyStarbucks stores.

Several criteria are used to identifystores for closure, including locationsthat were not profitable at the storelevel and not projected to provideacceptable returns in the foreseeablefuture. (Reuters, 02.07.08)

Largest Tractor Manufacturer?Mahindra & Mahindra (M&M) Ltd

is inching closer to becoming thelargest tractor manufacturer globally.

After a joint venture (JV) withChina’s third largest tractor makerJiangsu Yueda Yancheng TractorManufacturing Company Ltd, theMahindra Group, will be able toachieve its aspiration in a much betterfashion.

M&M will hold 51 percent(US$26mn) stake in the Chinese JVthrough its subsidiary, MahindraOverseas Investment Company(Mauritius) Ltd. The value of the netassets transferred to the JV will bearound US$50mn. (FE, 18.08.08)

Banking on SustainabilityBanks are increasingly being

recognised as the fulcrum of financing,and thus a key lever for achievingsustainability. Now, banking practiceis shifting from minimising negativeimpacts to advancing positive change.

On the environmental side, PiraeusBank is opening the first green bankingbranch in Athens. The move fits intothe broader context of the bank’senvironmental initiatives, whichfollows the Global Reporting InitiativeG 3 guidelines.

The Union Bank of CaliforniaFoundation fuses promotion of greenbuilding with support for low-income

families by contributing US$5,000 to thefirst green home project for theRiverside, California chapter of Habitatfor Humanity. (CSRwire.com, 05.08.08)

For Human Rights PolicyAround 167 companies around the

world have adopted a formal policystatement explicitly referring to humanrights, according to the Business &Human Rights Resource Centre(BHRRC.)

Harvard Professor John Ruggie, UNSpecial Representative on Business andHuman Rights, opined that “companiesneed to adopt a human rights policy”in his latest report to the UN.

It also underlined the importance ofHuman Rights Impact Assessments(HRIAs), a process pioneered for aproactive way to support human rights.

(CSRwire.com, 26.08.08)

Microsoft under ScannerMicrosoft’s Indian arm has come

under the scanner of the service taxdepartment. It has been alleged thatMicrosoft India’s Gurgaon unit carriedout certain marketing activities for theIndian operations and not for theSingapore arm of the company. Thecompany has not paid tax for theseservices, claiming them to be exports.

As per Rule 3(2) of the exports andservices rules of 2005, services rendered

by the company do not fall underexports category, since the serviceswere consumed in India and not outsideIndia.

The service tax department hasconfirmed a tax demand of Rs 128 croreand imposed a penalty of Rs 128 croreon the company for alleged evasionunder Section 78 of the Finance Act,1994. (ET, 24.09.08)

Ranbaxy Faces AllegationsThe US Government has levelled

serious allegations against India’slargest drugmaker, RanbaxyLaboratories.

The US Department of Justice (DoJ)has evidence suggesting use of activepharmaceutical ingredients (API) fromunapproved sources blended withapproved API. It is also alleged thatRanbaxy manufactures products atother plants contrary to the stipulationof manufacturers using approved sites.

Specific allegations underinvestigation include the Indian drugmaker fabricating bioequivalence andstability data to support AbbreviatedNew Drug Applications (ANDA) forgeneric drugs to be sold in the US andalso for anti-retroviral drugs (ARVs)paid for by the President’s EmergencyPlan for AIDS Relief (PEPFAR) anddistributed to foreign countries.

(ET, 14.07.08)

Greening Wal-Mart?In line with its ambitious goals of

all renewable energy, zero waste,and sustainable products, Wal-Martunveiled a new jewellery line, thefirst to be completely traceable frommine to store.

Wal-Mart�s inherentlyunsustainable business model exposesits environmental initiatives asgreenwash. Wal-Mart currently operatesin a context that is more than 90 percentunsustainable.

Wal-Mart has clearly anticipated this solution, and is aligning its operationswith models acknowledged for their more inherent sustainability. For example,Wal-Mart is the largest seller of organic produce in the world, and also becomethe nation�s largest purchaser of local produce. However, one questions howWal-Mart defines �local�.

Shareholder activist Conrad MacKerron similarly questions the supply chainimplications of Wal-Mart�s greening � especially for workers. As with its usualpractice, Wal-Mart is primarily passing along costs � including the cost ofgreening � to its suppliers. (CSRwire.com, 15.07.08)

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Economic Rationalism on RiseThe European Trade Commissioner

Peter Mandelson strongly criticised therestrictions faced by foreigncompanies investing in the country bysaying that economic nationalism is onthe rise in China.

He said that investment byEuropean companies in China isactually falling in spite of the country’sgrowth and the EU might take up someof the obstacles to investment at theWTO.

The obstacles facing Europeancompanies were not only theft ofintellectual property, but also an“unpredictable” policy for M&As andbarriers to market entry includingcapital requirements, licensing andforced joint ventures. (FT, 26.09.08)

Gates OpenThe gradual process of opening the

Saudi stockmarket to foreign investorshas taken a significant step forwardwith the announcement that non-residents will be entitled to trade inlocal stocks through Saudiintermediaries.

The news prompted an immediaterally in the market – which has lostground so far in the year 2008 – inapparent anticipation of a surge inforeign interest.

That optimism is well-founded, asthere is plenty of value to be found onthe Saudi bourse, which is by far thelargest in the Middle East by marketcapitalisation, and most of the bignames in global equity investmenthave a presence in Riyadh.

(TE, 27.08.08)

Hanoi to Boost BanksHSBC and Standard Chartered are

gearing up to expand their operationsin Vietnam after securing approval tobe the first overseas banks toincorporate their local operations in thefast-growing economy.

The State Bank of Vietnam hasawarded each bank a licence to applyto open wholly-owned units in thecountry, honouring a pledge made toopen the sector when it joined theWTO in 2007.

Some 40 foreign banks account forless than 15 percent of total lending inVietnam and local incorporation will

give HSBC and Standard Chartered ahead start on foreign rivals to expandtheir branch networks and productofferings. (FT, 10.09.08)

Egypt Halts New PlantEgypt is being pressed by a

Canadian company Agrium forcompensation after construction of aUS$1.4bn fertiliser plant on thecountry’s Mediterranean coast washalted in a case closely followed byforeign investors.

Agrium has already investedUS$500m in the project and now plansto “aggressively” pursue full recovery

of its costs, equity contribution andlost profits. Egyptian Parliamentrecommended that the plant be movedto another location in response to localprotests triggered by concerns aboutpotential damage to health and theenvironment.

Ahmed Nazif, Prime Minister, Egyptcited Agrium’s inability to forge a localconsensus on the safety of its projectas the main reason for halting it

(FT, 25.07.08)

Out of CambodiaAcleda, a Cambodian

microfinancer became the firstCambodian bank to make a forayabroad, after obtaining a bankinglicence from neighbouring Laos. Thebank is eyeing China and Vietnamnext.

Acleda began 15 years ago as amicrofinance programme backed bythe UN and has since established itselfas one of Asia’s leading providers ofmicrocredit. It has also developed afull-fledged retail business, with 214branches across Cambodia.

With inflation recently soaring inCambodia, In Channy, Chief Executive,Acleada insisted that Acleda couldweather any serious economicdownturn, noting that its rate of non-performing loans was 0.02 percent in2007, compared with an average of 5.2percent for the country’s bankingsector. (FT, 10.08.08)

Privatise Power AssetsA plan to privatise US$6.6bn worth

of Australian power assets collapsedafter the State Government of NewSouth Wales (NSW) abandoned aparliamentary vote at the 11th hour afterfailing to secure enough support.

This move could damage thestate’s standing in the eyes of theinternational investment community.The sale of the assets was an importantfactor under pinning the AAA ratingbecause it provided flexibility tomanage infrastructure priorities tomaintain state competitiveness.

Sale of assets could have generatedfrom US$6.6bn to US$7.9bn for theNSW Government, which now facedan opportunity cost of US$9.9bnneeded to upgrade existing powerassets. (FT, 29.08.08)

China�s DoubleInvestments

China�s overseas investmentmore than doubled in the first

half of 2008, as the energy-hungrynation sought to secure resourcesglobally to fuel its economic boom.

Non-financial direct outwardinvestment hit US$25.7bn in thefirst six months of 2008, 2.3 timesthe level recorded in the sameperiod in 2007. The figure for thefirst six months was already biggerthan for all of 2007, when totalChinese investment overseasreached US$18.7bn.

Analysts opine that a key factorbehind the dramatic surge wasrising international commoditiesprices, giving Chinese companiesan incentive to go directly to thesource for raw materials.

With forex reserves of US$1.8trand growing, China is lookingabroad to acquire resources to fuelan economy that has maintaineddouble-digit growth in fiveconsecutive years. (DT, 25.07.08)

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India-US Investment PactIndia and US have decided

to launch formalnegotiations for bilateralinvestment promotionagreements (BIPA) bydeveloping a formalframework. India has astandard model for a BIPA,which is slightly conservative.

The US bilateralinvestment treaty, on theother hand, is very ambitiousunder which US investors get national treatment or most-favoured-nationtreatment when they initiate investment, and throughout the life of theinvestment.

According to sources, India would be willing to upgrade the investmentagreement and incorporate certain provisions the US agreements seek toput in a treaty.

US on its part is ready to pare its ambitions to certain extent. India,however, may not agree to inclusion of labour or environment standards inthe agreement. (ET, 09.07.08)

Guiding Investment PracticesGlobal sovereign wealth funds

have reached a preliminary agreementon a set of voluntary principles to guidetheir investment practices.

The International Working Group(IWG) of Sovereign Wealth Funds(SWFs), which consists of 26 of thewealthy state-owned funds, wouldpresent the guidelines to theInternational Monetary Fund’s (IMF)policy-setting committee.

These principles and practices aimto promote a clearer understanding ofthe institutional framework,governance, and investmentoperations of SWFs, thereby fosteringtrust and confidence in theinternational financial system.

The guidelines include a set of 24principles that cover legal, institutional,governance, investment policies andrisk management structures of thefunds. (HT, 03.09.08)

New Opportunities!To capitalise on international

investing, Dimensional Fund Advisors(DFA) LP has launched aninternational-equity fund despitecomparatively stronger US stockmarket performance.

The International Vector EquityPortfolio invests in small-capitalisationcompanies with attractive valuationsthat trade internationally and are locatedin developed markets. The mutual fundrelies on quantitative strategies tomake investment decisions.

While the US stock market recentlybegan to outperform the global stockmarket for the first time in 10 years,advisers do not think the timing of thelaunch will dampen interest in the fund.

The basis for offering the fund isnot to exploit a hot sector but toidentify long-term opportunities.

(IN, 01.09.08)

Privatisation and ChinaChina has a large untapped source

of further growth: its vast state-ownedassets, including enterprises, resourcesand land. Privatising these assetswould unleash the wealth effect andboost domestic consumption.

This reform would transformChina’s growth model from beinginvestment and export-driven to being

led by domestic consumption. It wouldreduce its over-dependence onindustry and stimulate its servicesector. At a time of a global slowdown,such reform is timely.

When reform started in 1978, almostall productive assets were state-ownedin China. But reforms since then havenot included privatisation. Today theGovernment owns more than 70 percentof China’s productive wealth.

To the Government’s credit, theinitial ‘marketisation-without-privatisation’ approach has paid off. Arobust infrastructure has emerged andChina is an industrialised economy.

(FT, 07.08.08)

Rising Costs Hit FDIEuropean companies have slashed

investments in China amid rising labourand transport costs at the same time asthey expand in eastern Europe andRussia.

Foreign direct investment (FDI)from the European Union (EU) intoChina fell in 2007 from US$7bn in 2006to US$2.7bn. In Russia, it soared fromUS$13.6bn to US$22bn.

Companies from many Europeancountries such as Samas, a Frenchmaker of office equipment, andSennheiser, a German headphone maker,have moved production out of Chinabecause of difficulties from intellectual

property to rising labour and transportcosts.

Part of the weakness in the EUinvestment figures in China can beexplained by negative flows by Dutchand UK companies, which suggestgroups from those countries haveclosed plants, taken dividends out of aChinese subsidiary or called in an intra-company loan. (FT, 11.08.08)

Investment Called-offThe Tata Group has decided to call

off its proposed US$3bn investmentsin Bangladesh. The move wasprompted by a failure to get assuredsupplies of natural gas to the proposedprojects.

The group had proposed to set upfour large projects in Bangladesh in2004 with an investment of US$3bn,which included a 2.4-million tonne steelplant, in addition to a 1-million tonneurea plant and a 1,000-MW power plantand a 6-million tonne coal miningproject.

“However, it is clear that theBangladesh Government will not be ina position in the foreseeable future togrant the projects the natural gascommitment they would require.Consequently, there is no prospect oftaking these projects further”, the TataGroup said. (ET, 01.08.08)

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Telcos Under PressureBig European telecoms groups, such

as Deutsche Telekom could be forcedby regulators to open further theirnetworks to boost competition,legislators have decided.

A European Parliament backed plansto allow national telecom authorities inthe EU to divide dominant operators’networks and services businesses intoseparate units.

Viviane Reding, the EU telecomchief who brought the move, arguesthat so-called ‘functional separation’has served markets, such as the UKwell, increasing competition, especiallyin broadband. However, this plan isonly to be used as an exceptionalmeasure. (FT, 09.07.08)

Overseas Drug PrescriptionIn April 2008, Takeda, the country’s

largest pharmaceutical group, agreedto pay US$8.5bn to take overMillennium Pharmaceuticals of the US,after buying full control of TAP, its USjoint venture with Abbott establishedin 1977.

In December 2008, Eisai said itwould acquire MGI Pharma forUS$3.9bn. And Daiichi-Sankyo has justcompleted a US$5bn acquisition of amajority stake in Ranbaxy, the Indiangenerics manufacturer. The flurry ofdeals highlights how conditions in theirhome markets are pushing Japan’sdrugmakers to establish a significantstandalone presence beyond their ownborders.

Japan remains the world’s secondlargest market for prescriptionmedicines but growth has slowed asthe government has made regularofficial price cuts on patented drugs toease rising healthcare costs.

(FT, 08.09.08)

New Consumer LawThe Ministerial Council on

Consumer Affairs has released acommuniqué with proposals for far-reaching consumer policy reform it willrecommend to the Council ofAustralian Governments.

One of the main recommendationsis for the introduction of a new nationalconsumer law to be based on thecurrent consumer protectionprovisions of the Trade Practices Act1974 plus appropriate amendmentsreflecting best practice in state andterritory legislation.

Relevantly for consumer credit, thecommuniqué states that constitutionalissues may mean that the financialservices sector may need to retain adistinct legislative framework. Theother major recommendation is thatlaws dealing with unfair contract termsshould form part of the national law –but limited to standard form contracts.

(www.claytonutz.com, 15.08.08)

Solution to Financial CrisisThe International Monetary Fund

(IMF) Managing Director DominiqueStrauss-Kahn called for a globalsolution to the US financial crisis,

SECTORAL REGULASECTORAL REGULASECTORAL REGULASECTORAL REGULASECTORAL REGULATION: NEWS DIGESTTION: NEWS DIGESTTION: NEWS DIGESTTION: NEWS DIGESTTION: NEWS DIGEST

saying coordination of the reform effort“is a job for the IMF”.

He said a proposed US$700bnbailout plan should be a first steptoward reform of the global financialsystem, and called for greater regulationof financial institutions and markets.

“The US plan is welcome becauseit is comprehensive. But it has to bethe first step of international politicalaction”, said Strauss-Kahn, a formerFrench finance minister who took overas IMF head. (IMF, 29.09.08)

Fixing the SystemWith the sector teetering on the

brink of financial distress, investors areagain asking if the recently re-electedFernandez administration now has thepolitical will and conviction to fix thesystem.

The stand-by agreement with theIMF, which provided a framework forthe sector to reach financial self-sustainability while providing a moreefficient, reliable and cost consciouselectric service, expired January 2008and has yet to be renewed.Unfortunately, little was achieved duringthe period the agreement was in place.

So far, the re-elected governmentseems to be taking an approach that islikely to perpetuate the sector ’sinstability, rather than to eliminatemarket distortions and enforce the newelectricity law. (BW, 04.08.08)

Etisalat in AfghanistanThe United Arab Emirates’ (UAE)

leading telecom services providerEtisalat is concentrating its efforts ondeveloping the telecom industry inAfghanistan. A meeting was heldbetween a visiting high-level Afghangovernment delegation and Etisalatchairman Mohammad Hassan Omran.

The two sides discussed areas ofcooperation between Etisalat and itssubsidiary in Afghanistan and differentservices introduced in Afghanistansince Etisalat won the fourth mobilelicence in that country.

The Abu Dhabi-headquarteredEtisalat is one of the largesttelecommunications companiesglobally and the largest operator in theArab world. It has over 64 millionsubscribers across 16 countries.

(ET, 08.09.08)

MPs Demand Tough RegulationMembers of the European Parliament demand

EU regulation of the crisis-struck financialsector, targetting hedge funds in particular forrestrictions.

EU lawmakers adopted a report by a broadmajority calling on the European Commission todraft proposals by year-end covering �all relevantactors and financial market participants,including hedge funds and private equity.�

Among its main recommendations, thereport urges mandatory capital requirements forall financial institutions, full transparency aboutexecutive compensation, disclosure of leverageand identification of major shareholders. Thereport targetted hedge funds and private equityfunds but included the sector as a whole in light of the recent turmoil andunder pressure from conservative lawmakers. (www.eubusiness.com, 23.09.08)

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15No.3, 2008

EGULETTERR

IntroductionCompetition is a fundamentalcharacteristic of a flexible,dynamic market economywhere competing businessesare spurred to reduce costs,increase productivity, makeinvestments, adopt newtechnologies andorganisational methods toinnovate in processes andproducts.

The process of competitionis impaired in developingnations. Firstly, it is notautomatic. Secondly, vestedinterest groups, incumbentlarge monopolistic firms, andother stakeholders can dampen,distort, or capture the benefitsof market-oriented economicreforms such as trade andinvestment liberalisation,privatisation and deregulation.

There are also widespread misconceptions about thebeneficiaries of competition, on which vested interestgroups capitalise by marshalling fears of unemployment andneed for supporting “national champions”.

During the past two decades, more than 100 countrieshave enacted or significantly revised and strengthened theircompetition legislation – including many developingnations. However, there has been considerable variationwith regards the enforcement of these legislations. Thispaper recommends various actions to be performed jointlyby national governments, inter-governmental organisationsand civil society to effectively enforce competition laws inleast developed countries.

Recommendations:

Policy and Diagnostics Projects

Extend policy advisory and diagnostics projects aimedprimarily at reducing public policy-based barriers to entry-exit, regulatory costs and delays, licensing, etc. to also coverrestrictive business practices engaged in by private sectorfirms, business associations, and those emanating fromclosed, opaque government-business relations.

Industry/Market StudiesConduct industry/market-specific competition

assessments and regulatory impact analysis to identify the

Competition Policy and Promotion of Investment, EconomicGrowth and Poverty Alleviation in Least Developed Countries

– R S Khemani

– Abridged from the Executive Summary of a Discussion Paper , ‘Competition Policy and Promotion of Investment, Economic Growth andPoverty Alleviation in Least Developed Countries’ written by R S Khemani, FIAS, October 2007 (available at: http://www.fias.net/ifcext/fias.nsf/Content/FIAS_OccasionalPapers).

principal public policy andprivate sector created barriersto competition as well as“winners and losers”, andexplore alternative, lessinterventionist policyapproaches to promote broad-based competitive investmentand growth. Priority should begiven to sectors that:• have direct impacts on thepoor;• provide products and basicservices that serve multipleupstream or downstreameconomic activity;• could help reduce corruption;and• attract investment andtechnology transfer.

Technical Assistance andInstitution Building

Increase capabilities andresponsiveness to requests by least-developed countries(LDCs) for technical assistance for:• drafting new or revising existing competition legislation

and regulatory policies, administrative and interpretationguidelines, and related materials for effective policyimplementation;

• providing advice and capacity development in skillssuch as case management, investigative techniques,compliance programmes, regulatory interventions,industry/market competition assessments and regulatoryimpact analysis, and competition advocacy;

• promoting greater inter-governmental cooperation andcoordination, and coherency and consistency in theapplication and formulation of economic and regulatorypolicies to be least restrictive of competition; and

• facilitating cooperation and exchange programs, sharingof information, and expertise with peer competitionauthorities in other countries.

Information Dissemination/Building Coalitions• Work with consumer associations, non-governmental

organisations, private sector business organisations andtrade associations, academic research and policyinstitutions, and legislators to foster greaterunderstanding and appreciation of the benefits ofcompetition and encourage grassroots ownership anddemand for pro-competition policies.

SPECIAL ARTICLESPECIAL ARTICLESPECIAL ARTICLESPECIAL ARTICLESPECIAL ARTICLE

The sustainability and benefits that accrue fromthe competitive process are not solely dependenton the business conduct of enterprises but also

depend on the business environment orinvestment climate in which they operate,

including the legal and regulatory framework,barriers to entry and exit, and prevailing

conditions in markets for labour, land, finance,infrastructure services, and other productive

inputs.

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16No.3, 2008

EGULETTERR

OPINIONOPINIONOPINIONOPINIONOPINION

The need for a competition law in Nigeria was not lost tothe architects of the current economic reform agenda

but what seem to have been missing up until this momentis the political will to carry through the process to realisation.In 2000, the Nigerian Government though the NationalCouncil on Privatisation (NCP) set up a Competition andAntitrust Reform Steering Committee to look into the needsfor competition antitrust policy and reform.

The Committee with support from some foreign donoragencies did quite some work in terms of consultationsworkshops/seminars etc., with technical inputs from foreignand local consultants. This culminated in the productionof the Draft policy earlier referred to, and the Bill called theFederal Competition Bill which was presented to the NationalAssembly in 2002. Unfortunately, the Bill was not passedduring the tenure of the last National Assembly becauseboth Chambers (Senate and House of Representatives)could not reconcile their views.

In the preamble to the Draft competition policy, it wasobserved that the committee was abundantly aware thatcompetition legislation should have been promulgatedbefore the major public enterprises and utilities areprivatised so that the new owners of such privatisedcompanies have the ground rules from the onset (NCP2001). Even though the draft policy conceded to the needto go ahead with the privatisation process in spite of theabsence of a competition legislation, it however, sought touse the policy, if approved as a “guidance and a statementon the intent of government”.

In the immediate past tenure of the National Assembly,different versions of the Bill were reportedly passed by theSenate and House of Representatives and efforts toreconcile these different versions failed, hence the Bill wastruncated. The Bill is tiled, ‘Trade and Commerce (ProtectionAgainst Restraints and Monopoly) Bill, 2001’. It says: “thisbill seeks to prohibit restraints in trade and commerce inany part of the Federation and between a state and a foreign

nation”. This Bill also seeks to protect stakeholders in tradeand commerce from deceptive practices prevalent amongtraders by providing a level playing ground and equal tradetreatment to persons engaged in trade and commerce.

This Bill was a good attempt at least for the first time toenact such a law in Nigeria and the efforts of its architects iscommendable. However, it is the opinion of the writers thatthe scope and content of the Bill is limited in the light ofcontemporary global economic trends. The House ofRepresentatives version is essentially fashioned after theAmerican Sherman Act of 1890 which was in fact thebeginning of Antitrust Legislation in the US. However,competition policies and laws in the US have been modifiedand expanded ever since by the introduction of furtherlegislations targeted at specific conducts.

The Senate’s version which is actually the version fromthe National Council on Privatisation and titled: ‘The FederalCompetition Bill’ is more contemporary and comprehensive.With very minor modifications, this version of the Bill shouldbe passed by both Chambers as a matter of urgency.

Both Chambers of the National Assembly would haveworked for over five years on different versions of a Bill onthe same issue, only to realise that the versions wereirreconcilable, after expending enormous resources in theprocess. Be that as it may, the point is that further delay inthis regard is counter productive for the country and itscitizens.

In order for the stakeholders to appreciate the relevanceof the competition policy/law in the post-liberalisationenvironment, it is imperative to examine market structures,conducts, and performances relating to various componentsof the Nigerian economy.

There is equally a need to ensure that the benefits ofeconomics of scale are preserved. This entails a process ofpolicy engineering to know when to allow or disallowcollective actions by firms and outright industryconcentration.

Market Liberalisation and Competition Law in Nigeria

* Head, Legal and Legislative Unit, National Association of Nigerian Traders (NANTS)** President, NANTS

Abridged from an article that appeared in the Trade Policy Monitor, NANTS, Volume 1, Issue 3, May 2008.

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The challenge before the competition

legislation in Nigeria is to set the standards of

acceptable market conduct for firms with the

view of ensuring that competition and

competitiveness are not jeopardised.

Leonard Ugbajah* & Ken Ukaoha, Esq.**

17No.3, 2008

EGULETTERR

VIEWPOINTVIEWPOINTVIEWPOINTVIEWPOINTVIEWPOINT

The main changes of thecompetition regulation brought

by the Law on the Modernisation ofthe Economy are:• The establishment of a single

competition authority: theCompetition Authority (Autoritéde la concurrence) which willhave full jurisdiction to reviewmergers;

• The Minister for the Economyretains some important powersin merger control: the right to re-examine a case and make analternative decision;

• The calculation of the delay ofnotification in working days andthe introduction of a “stop the clock” mechanism duringthe merger control procedure;

• Some new rules of notification affecting the retail sectorand French overseas territories; and

• An increase in the protection of enterprises within theretail sector from an abuse of economic dependence orof dominant position.

A New Single Competition AuthorityA new competition enforcement agency, the Competition

Authority would be established instead of the Council onCompetition (Conseil de la concurrence). The new entity,which is an independent administrative agency, would beinstitutional transformation of the Competition Council andhave increased powers, which empower the President tobring a case in front of the Courts.

Jurisdiction Over Merger ControlPresently, the dual French system of merger control

involves both the Directorate General for Competition,Consumer Protection and Fraud Control (DGCCRF) and theCouncil on Competition. With the new Law coming into effect,the Competition Authority will have complete jurisdictionconcerning merger control issues.

Changes to French Competition Rules Andres Font Galarza* & Guillaume Chiras**

* Antitrust and Competition Lawyer** Antitrust and Competition Lawyer

The article appeared in the Mondaq, August 27, 2008.

The Law No. 2008-776 on the Modernisation of the Economy which was passed on August 04,

2008 brings significant changes in French competition law. The most notable changes are the

transfer of decision-making power with regard to merger control from the Minister of the

Economy to a new Competition Authority which will replace the Competition Council and the

abolishment of the per se prohibition of price discrimination in supplier-customer relations.

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As per the new law, the Ministerfor the Economy holds certainimportant powers. Firstly, he mayrequest an in-depth investigationwithout giving any justification.Secondly, he may re-examine analready cleared case and make analternative decision on the groundsof general interest such as, mostnotably, industrial development,competitiveness of the enterprises orciting employment and socialobligations.

�Stop the Clock� MechanismThe Law on the Modernisation of

the Economy has changed the current timetable. Now thetime for the Competition Authority to clear a merger wouldbe 25 working days instead of 5 weeks previously.

New Rules of NotificationWhere two or more companies are involved or where

one of the parties operate in a French overseas territory, theconcentration has to be notified when the following criteriaare met:i) the combined aggregate turnover (exclusive of tax) of

all the companies involved in the merger is greater than75 million euros;

ii) the combined aggregate turnover (exclusive of taxachieved in France by at least two of the companies) isgreater than 15 million euros; and

iii) the operation does not come within the scope of theEC merger regulation.

Some Specific ProvisionsThe Law on the Modernisation of the Economy has given

an important power to mayors. A mayor may, in the event ofthe abuse of a dominant position, call on the competitionagency to take necessary actions.

18No.3, 2008

EGULETTERR

SPECIAL COLUMNSPECIAL COLUMNSPECIAL COLUMNSPECIAL COLUMNSPECIAL COLUMN

China Sets Up Anti-monopoly CommissionChina’s first anti-monopoly law, which was proposed 15

years ago and was not passed until 2007, has takeneffect from August 01, 2008.

The law, seen by some as the “constitution for the marketeconomy” because of its importance in promoting anenvironment of fair competition, is regarded by investorsand legal experts as a landmark law in China’s transition tomarket economy and further opening up.

The new anti-monopoly law establishes a basicframework to build up a fair, uniform and national competitionlaw system that benefits consumers byrecognising and preserving incentives tocompete.

After the law takes effect, thedecision-making process will becomemore transparent and will help reduceinvestment risks. Despite this progressand positive signs, experts think it is alaw in transition and that much work needsto be done to enforce itefficiently.

Shi Jianzhong, a legalexpert who participated indrafting the law, said it isprobably the shortest anti-trust law in the worldsince it only lays outcertain principles. He saidthat since China does nothave much experience inanti-monopoly cases, itwould be difficult toevaluate its influence onthe market after it is putinto practice if there arespecific requirements atthe very beginning.

The enforcement partof the law is still unclear,and that is anotherconcern for investors.When passed in 2007, thelaw mentioned an anti-monopoly committee directly underthe State Council but did not say who would enforce it.

According to sources, three government bodies – theMinistry of Commerce, the National Development and ReformCommission and the State Administration for Industry andCommerce – will enforce the law.

The new commission is responsible for anti-monopolypolicy research, monitoring market performance andcoordination in law enforcement to create a level playingfield for all enterprises by preventing dominating companiesfrom abusing their superior market positions.

EU Competition Commissioner Neelie Kroes said theimplementation of a transparent and non-discriminatory

competition framework will be a challenging task and sheexpressed that the EU stands ready to strengthen bilateralcooperation in this important area.

The anti-monopoly commission may coordinateenforcement but it is not a professional law enforcementbody, according to Huang Yong, a professor of Universityof International Business and Economics.

Chinese Government has also launched a high-levelAntimonopoly Commission under this law to overseeenforcement of its new antitrust legislation, which is already

facing a test from Coca-Cola Co’s pursuit of whatwould be the largest-ever foreign takeover of

a Chinese company.The Antimonopoly Commission of

the State Council had “recently” held itsfirst meeting, where it agreed on someground rules and decided to research thecompetitive situation in various domesticmarkets. The Commission’s main job is

to coordinate the work ofthe three governmentbodies responsible forcarrying out antitrustpolicy.

The Commission is, aswidely expected, headedby Vice Premier WangQishan, who alsosupervises China’s tradeand financial policy.

The Commission facesa difficult task of jugglingthe conflicting priorities ithas been handed. On thedomestic front, theCommission will “ensurethe control of stateenterprises in importantindustries and key sectors”while “preventingcompanies from abusing aposition of market

dominance to violate the rights and interests of otheroperators and the majority of consumers,” the Xinhua reportsaid. The meeting also agreed that enforcement of the lawwill provide “equal protection for all the legitimate rightsand interests of foreign investors” but “prevent maliciousforeign takeovers and protect national economic security”.

Such ambiguity is one reason the Government’s reactionto the recent bid by Coca-Cola to buy China Huiyuan JuiceGroup Ltd. for about US$2.4bn is being monitored so closely.Foreign companies have said they are watching to seewhether China will permit a major foreign takeover whenChinese companies are themselves increasingly active inacquiring businesses in other countries.

(WSJ, 15.09.08 & CD, 31.07.08)

To Make the Law More EffectiveFirst, under the established framework and system of the

Anti-Monopoly Law, the country should lay down somecorresponding administrative stipulations, department rulesand official guidelines in a more detailed manner. These shouldenrich and perfect the content and system that the law badlyneeds to fulfill its objectives.

Second, more analyses of more cases should be applied inits implementation. This has also become a trend in manycountries while practicing the Anti-Monopoly Law.

Third, the country should attach enough importance tothe cultivation of professional anti-monopoly law talents andto forming teams of such people.

Other tasks include attaching importance to theappointment and training of law-enforcers, judges, lawyers,and relevant economists, as well as the installment andoperation of the executive commission of experts. Interactionsamong these legal teams will decide the effect of the law�simplementation and will push the Anti-Monopoly Law forwardto a maximum.

19No.3, 2008

EGULETTERR

ABOUT A COMPETITION LAABOUT A COMPETITION LAABOUT A COMPETITION LAABOUT A COMPETITION LAABOUT A COMPETITION LAWWWWW

* Extracted from ‘Competition Regimes in the World – A Civil Society Report’, www.competitionregimes.com

EconomyIn January 1994, Senegal undertook a bold and ambitious

economic reform programme, with the support of theinternational donor community which began with a 50 percentdevaluation of Senegal’s currency, the CFA franc, which waslinked at a fixed rate to the French franc.

After seeing its economy contract by 2.1 percent in 1993,Senegal made an important turnaround, with real growth inGDP averaging 5 percent annually, during 1995-2003. As amember of the West African Economic and Monetary Union(WAEMU), Senegal is working towards greater regionalintegration, with a unified external tariff.

Competition Environment and LegislationSince 1965, Senegal has had competition laws governing

most sectors of its economy, which include state-ownedbusiness enterprises within their general scope. As part ofthe Structural Adjustment Programme (SAP) in 1994, Senegalembarked upon economic reforms under the World Bankinitiative, and these reforms included the revision ofcompetition law. The rationale behind these reforms was tocreate a favourable business environment to attract foreigninvestment and to integrate the country into the worldeconomy.

Senegal’s competition law revision was aimed primarilyat raising awareness and based on the independence of thecompetition authority. The main changes introduced since1994 concerned the creation of a group of specialisedinvestigators, and measures to enhance the powers of theCompetition Commission. The principal responsibility of theCommission is to monitor anti-competitive practices.Senegal’s competition legislation appears to be modelled onFrench competition law.

Sectoral Regulation and Anti-competitive PracticesFinancial sector

The banking sector in Senegal is regulated by the CentralBank of West African States (BCEAO), which keeps tightcontrol of monetary policy. There are no state-ownedcommercial banks in Senegal. However, three banks dominatethe market with nearly two thirds of all deposits. There areeight commercial banks currently operating in Senegal.Foreign exchange payments are directly executed bySenegal’s commercial banks.

As a protection measure, the Government requires thatall goods and merchandise, directly imported for trade orindustrial purpose, must be insured, either thoughrepresentatives approved by the Minister in charge ofFinance, or through brokers established in Senegal.

Senegal is located in West Africa, bordering the North Atlantic Ocean, between Guinea-Bissau and Mauritania. Senegal obtained its Independence on April 04, 1960, from France.Though the country is smaller in comparison to its neighbours, economically, Senegal ismuch stronger with its well-developed physical and social infrastructure, and relatively well-diversified industrial base.

About a Competition Law � Senegal*

Telecommunications SectorThe Telecommunication sector in Senegal is regulated

by the Regulatory Agency for Telecommunications (RAT),which is in charge of regulating the industry and promotingthe development of the New Information and CommunicationTechnologies.

On December 14, 2003, Senegal’s Parliament passed anupdated telecommunications law that should lead to furtherliberalisation of Senegal’s telecommunications sector. Thenew Telecommunication Act supersedes the 1996telecommunication law; further liberalises the market for anumber of services; and removes some monopoly benefitsheld by Sonatel, which retained a monopoly in basictelephone services until the end of 2003. The law could leadto more investment in the sector. With this development,more competition is likely in the telecom market, with newplayers entering and more business opportunities arising.

Energy SectorSenegal is one of the leading developing nations with a

strong renewable energy policy. Senegal’s current renewableenergy policy encourages citizens to get involved in theimplementation, financing, and management of solar projects.

The liberalisation of the electricity sector in Senegalnecessitated the creation of the Electricity Regulation Bodyby the Government. The responsibility of the RegulationBody is to monitor prices, prepare tenders and approve anyinflux of investment into the sector.

Consumer ProtectionThe Association for the Protection of Water, Electricity,

Telecommunication and Service Users and the SenegaleseAssociation for the Protection of the Environment andConsumers are the two consumer organisations in Senegal.

As a way of protecting consumers against unsafe foods,the Government has enacted rules and regulations that guideimporters and food manufacturers, as a requirement for theemployment of food handlers. With such laws and regulationsin place, the Government requires the labelling of canned andpreserved food products applicable to both domestic andimported goods, and for both human and animal consumption.

Future ScenarioDespite its political stability, Senegal is amongst the

world’s poorest LDCs and faces numerous challenges, suchas poverty, and external debt totalling approximatelyUS$3.7bn. Considering Senegal’s comparative advantages,coupled with strong political will, the country has thepotential to be an economic force in Africa. Additionally, itis hoped that the country will recover, economically.

Published by: CUTS Centre for Competition, Investment & Economic RegulationD-217, Bhaskar Marg, Bani Park, Jaipur 302 016, India, Ph: +91.141.228 2821, Fax: +91.141.228 2485,Email: c-cier@cuts.org, Web site: www.cuts-ccier.org

Printed by: Jaipur Printers P. Ltd., M.I. Road, Jaipur 302 001, India.

Annual Subscription Rs. 150/US$30Pub

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The news/stories in this Newsletter are compressed from several newspapers. The sources given are to beused as a reference for further information and do not indicate the literal transcript of a particular news/story.

Publications

Comparative Study of Regulatory Framework inInfrastructure Sector: Lessons for India

Analyses and compares the regulatory framework in sevencountries in respect to institutional and governance aspects,and identifies lessons for India.

http://www.cuts-international.org/pdf/CCIER-9-2008.pdf

Competition and Regulation inIndian Retail Sector

Describes the structure of the retail sector in the country,including its diverse components. It looks at the mainchallenges faced by the retail sector, and analyses the nuancesof regulation and competition for the sector.

http://www.cuts-international.org/pdf/2-2008Comp_Reg_in_Indian_Retail.pdf

National Competition Policy for IndiaQuestions type of platforms that Competition Policy Council(CPC) can create to coordinate with all relevant stakeholdersin implementing the National Competition Policy (NCP) andthe best ways providing incentives to state and sub-stategovernments to encourage them to carry out pro-competitionreforms keeping in mind the principles of the NCP?

http://www.cuts-international.org/pdf/3-2008National_Comp_Policy_In_India.pdf

The July-September (2008) issue of the CUTS newsletter PolicyWatch encapsulates the need fora �National Competition Policy for India� in its cover story, which puts forward the reasons for

such a policy for India.Special article by Rana Kapoor emphasises to develop a long-tem strategy that would reduce

the vulnerability of the framing community and accelerate agricultural growth, while Nitin Desai�sarticle focuses on how the Finance Ministry�s tenancy rights to the RBI governorship distortspolicy and regulation. The newsletter presents an interview with the Adviser to the Deputy Chairmanof the Planning Commission on investment scenario for infrastructure development in the country.It also contains a very good article on governance as well as regulator�s neutrality to ensure levelfield in the economy. Another special article lays stress on to improve and make relations morecordial between India and Pakistan through a series of confidence building measures.

Besides, it carries regular sections on Infrastructure, Trade & Economics, Governance &Reforms, E-governance, Corporate Governance, Expert Corner, Report Desk, Good practices,Corporate Governance etc.

To access the newsletter online please click on the following link:www.cuts-international.org/pw-index.htm

Using Competition Policy to RegulateMNC Behaviour in Namibia

Seeks to explore ways in which the Namibiancompetition law can be effective in controllingunfavourable behaviours of multinational corporations(MNCs) operating in Namibia.

http://www.cuts-ccier.org/7up3/pdf/BriefingPaper04-2008.pdf

Privatisation Initiative in Botswana:Any Bearing on Competition?

Examines the relationship between privatisation andcompetition, highlighting implementation of theprivatisation policy in Botswana and its likely impacton competition in the market.

http://www.cuts-ccier.org/7up3/pdf/PolicyBrief6.pdf

Competition Law and IntellectualProperty Rights: Controlling Abuse or

Abusing Control?Examines the interface between competition issuesand the protection of Intellectual Property Rights(IPRs): both complementarities and conflicts.

http://www.cuts-international.org/pdf/CompetitionLaw_IPR.pdf

SourcesAFP: Agence France Presse; ANA: Antitrust News Alert; BD: Business Day; BL: The Hindu Business Line; BW: BusinessWire; DT: Daily Times;ET: Economic Times; FE: Financial Express; FT: Financial Times; GCR: Global Competition Review; HT: Herald Tribune; IAA: Israeli AntitrustAuthority; IMF: International Monetary Fund; IN: Investment News; M&G: Mail and Guardian; TA: The Australian; TE: The Economist; ToI: Times ofIndia; WSJ: Wall Street Journal