ANNEXURE C
7-Up Mid Term Review
Meeting
Brief Report of the
Proceedings
The mid term review meeting of the Project was held on 16th
December 2001 at The Trident, Jaipur, India. The purpose of the
meeting was to take stock of the work progress vis-à-vis the
activities of the 7-Up Project and to plan the methodology of
Phase-II of the Project. The following persons were present at the
meeting:
Ms. Malathy John, Law & Trust Society, Sri Lanka
Mr. David Ong’olo, Spellman & Walker Company Ltd., Kenya
Mr. R. S. Khemani, Law & Economic Consulting Group, Paris
Mr. Roger M. Nellist, Department for International Fund, London
Mr. Choolwe G. Mudenda, Consultant, CUTS ARC, Zambia
Mr. Pradeep Srivastava, National Council of Applied Economic Research,
India
Mr. Rakesh Basant, Indian Institute of Management, India
Mr. Pradeep S. Mehta, Consumer Unity & Trust Society, India
Mr. Nitya Nanda, Consumer Unity & Trust Society, India
Mr. K. S. Sajeev, Consumer Unity & Trust Society, India
Ms. Anjali Bansal, Consumer Unity & Trust Society, India
Ms. Olivia Jensen, Consumer Unity & Trust Society, India
Mr. R. D. Mathur, Consumer Unity & Trust Society, India
I.
The
meeting started with a round of introduction of the participants
and then Prof. Rakesh Basant presented the Synthesis
Report of Phase-I. The report has been revised after its
presentation in Goa at the Phase-I Culmination Meeting. It
incorporates the information that was collected on the phase-I
questionnaires and quite a few comparative tables have been made
on the basis of this information. The highlights of his
presentation were as follows:
·
The
report now emphasises the scope, coverage and enforcement of
competition law in the project countries and not on the links
between competition law, public policies and levels of
development.
Discussion:
Shyam Khemani intervened that there are two broad approaches to
the objectives of competition law. One is the public interest
approach and the other is the consumer welfare approach, which is
a subset of the first. These are two general issues and not
specific to the 7-Up countries. It needs to be carefully analysed
whether these objectives should be dealt with by the competition
authority or by separate agencies or institutions. In the case of
7-Up countries, there seems to be a wide gap in theory and
implementation of competition law.
Rakesh
mentioned that there is not much information available on these
issues. But in general, both kinds of objectives have been taken
into account and in the implementation of the law, the development
objectives have not come in the way. In Zambia, it was said that
the takeover of the Northern Brewery by the Zambian Brewery, a
monopoly, was allowed after considering the efficiency criterion.
Pradeep
Mehta said that there are two approaches to public interest: one
as an objective of competition law and the other as an exemption
or exception for deciding any case. It is the second approach that
is more important in the WTO context. Also, the scope of
competition law over anti competitive practices should be
reflected in the respective country reports. For instance, in
India, unfair trade practices are now proposed to be transferred
to the Consumer Protection Act.
Malathy
John said that in Sri Lanka, the law does not define“public
interest” clearly.
·
Scope
of the competition law: the reports generally state that the law
should cover all entities/activities. Privatisation initiatives
need to be brought within the purview of CA. In Zambia, the Zambia
Competition Commission became active only after the bulk of
privatisation had been done.
·
More
details are required on exemptions in each country.
·
There
is a need to incorporate “effects doctrine” in Kenya and
Tanzania.
·
It
is the abuse of dominance that is important and not dominance per
se. This has been reflected in all country reports.
·
How
to define thresholds for dominance is still unresolved. Size of
the “relevant market” needs to be considered. The focus should
be shifted from “structure” to “conduct”.
Shyam said that threshold should be high in case of
developing countries and there should be complaint driven
implementation of law.
·
There
is a general consensus that the Restrictive Trade Practices and
Unfair Trade Practices should be separated in order to enable the
CA to function more efficiently.
Pradeep Mehta suggested that in small economies, it is better
to have consumer protection provisions in the competition law and
administered by a separate unit in the CA. Else it would require
increased resources and hence mean an increase in costs. He gave
the example of Bhutan, where CUTS has drafted its Consumer
Protection Act, which includes competition provisions aslo. Shyam
endorsed this and quoted the example of the Australian Competition
& Consumer Commission and Indecopi in Peru. He also said that
if the CAs deal with consumer protection, it improves their public
face and helps them in getting a better outreach.
·
Dealing with Combinations: In Pakistan, Sri Lanka, Kenya and
Tanzania, pre notification and approval of all M&As is
mandatory. In Zambia, only horizontal M&As need pre
notification. In India, there is no pre notification/approval
requisition. However, the South Africa approach seems to be more
sensible. It requires pre notification and approval above a
threshold of horizontal combinations.
·
Adverse publicity has been considered a good deterrent for
large companies and MNCs.
·
There are overlapping jurisdictions between CAs & Sector
Specific Regulatory Authorities (SSRAs). In Zambia, the CA’s
representatives are on the Boards of SSRAs. It was opined that
such representation might lead to a loss of the time of the CA
representatives and overburden them but since SSRAs have to deal
with some competition issues as well, this becomes important.
·
The investigative and judicial functions of the CA need to be
separated, which has already been done in South Africa and it is
desirable in Kenya, Tanzania and Zambia.
·
No competition authority, except that of South Africa and
Zambia, is independent from any government department.
·
The budgets are very low and no fees are charged by the
competition authorities except in Zambia and South Africa.
·
Except for Kenya, Sri Lanka and Tanzania, the orders of the
CA are binding. Apart from the separation of functions and the
binding nature of CA’s decisions, the autonomy of the
competition authority is dependent on whether the government
interferes in its functioning, and the availability of financial,
human and other resources.
·
Many 7-Up countries have little experience or jurisprudence
in the regulation and arbitration of competition matters.
Moreover, the kind of databases and information that is available
with the CAs is inadequate to undertake proper analysis of
M&As and other types of firm behaviour.
·
Staff turnover in the CAs has been high presumably due to low
salaries as compared to what the corporate sector offers. CAs
still find it difficult to match the resources and skills
available to large conglomerates. Only South Africa seems to be
significantly better equipped in every regard. Except in South
Africa and Zambia, the salaries paid to the employees of CA are
lower than those of the private sector. In Sri Lanka, the salaries
are even lower than those of the public sector. The efficiency of
the CA in South Africa is quite high partly due to the
computerised Case Management and Tracking System.
·
As bulk of the budget is spent on salaries and establishment,
there are limited resources for outreach and advocacy in each of
these countries except in South Africa.
·
Training facilities for the staff of the CA are also
inadequate except in South Africa.
·
There is a strong need to highlight the importance of the
process that is used to evolve a competition policy.
Significantly, in most project countries, there was no
participation of stakeholders in the formulation of competition
policy.
Conclusion/Actions:
·
It was suggested that the Synthesis Report should focus more
on the scope, coverage and enforcement aspects of competition law
and the development aspects should flow from there. These can be
incorporated wherever relevant and important.
·
Shyam Khemani would go through the synthesis and send
detailed comments by early January 2002.
·
All partners to carefully go through the synthesis report
especially their part and give comments and suggestions by the
last week of December 2001.
·
The Synthesis Report to be finalised by 15th
January 2002.
II. Final Phase-I Country Report:
Stock was taken of the country reports received till now.
Zambia:
The revised report has been received but would be further revised
by the researcher and sent by the end of December 2001.
Tanzania:
Revised report has been received. Rakesh to go through the same
and give his comments by 25th December.
Kenya: Revised report has been received
and does not need any further revision
South
Africa:
Revised report has been received. Rakesh to go through the same
and give his comments by 25th December.
Pakistan:
The report has been partially revised (Only sections 6 & 7 of
the format have been revised. The additional information collected
on Phase-I questionnaires needs to be incorporated). Rakesh to go
through the same and give his comments.
Sri
Lanka:
Revised report has been received. Rakesh to go through the same
and give his comments by 25th December. CUTS comments
have already been sent to them.
India: The report needs to be revised on
the basis of the additional information collected on Phase-I
questionnaires. This needs to be done by 7th January
2002.
III. Case
Studies for Phase II: The action plan of Phase-II mentioned
three case studies to be taken up during phase-II of the project.
The first one is the international merger of Coca Cola- Cadbury
Schweppes; the second is the study of the cement sector and the
third is case study of any sector to be decided by the partners.
Kenya: They would do the Coca Cola and
Cadbury Schweppes as the first case study. The second would be on
cement and the third on Banking.
Sri
Lanka:
They would take up Glaxo SmithKline Beecham as the first case
study. The analysis of the case would be done because the CA has
not analysed the case. Cement and Shipping would be the second and
the third case studies respectively.
India: Coca Cola and Cadbury Schweppes
would be the first case study. However, there are no merger
control provisions in the existing competition law of India.
Therefore, an analysis would be done of the case that existed in
India and implications would be drawn from the experiences of
other countries. Cement would be second case study and the third
case study would be decided at the 2nd NRG meeting.
Zambia:
Coca Cola and Cadbury Schweppes would be the first case study.
Cement would be the second and Beer industry would be the third
case study.
South
Africa, Tanzania and Pakistan:
Since no one from these countries was present at the meeting, the
final decision on their case studies could not be known. They need
to communicate the case studies to be taken up by them during
Phase-II.
IV. Phase-II Questionniares:
These have been received from India, Tanzania and Sri Lanka. The
other partners need to send the filled up questionnaires
(soft/hard copies). A brief analysis of these questionnaires
should also be done to find out the general level of awareness in
these countries on competition issues.
V. Report on the process of 7-Up:
It was decided at the Goa meeting and was revisited in Geneva that
a report on the process part of the project, giving details of the
methodology adopted for research, problems faced, solutions found,
etc., should be prepared by all project partners. This was
discussed again at this meeting and it was thought that it would
be a very useful document for future work. South Africa has
already done such a report and comments and suggestions are
invited from other partners.
VI. Time Schedule for December 2001 to September 2002:
1.
Publishing of Phase-I Country Reports
31st January 2002
2.
Phase-II Country Reports (3 case studies)
31st March 2002
3.
Phase-II NRG Meetings
April 2002
4.
End of Phase-II
June 2002
5.
Phase-II Synthesis Report
End of June 2002
6.
Phase-II Culmination Meeting
First week of July 2002
7.
Final Report of the Project
August 2002
8.
Final Meeting in Geneva
September 2002
VII.
Doha Declaration:
Towards the end of the meeting, the Doha Declaration was also
discussed briefly. Mehta mentioned what does the Doha text specify
in regard to competition and what it doesn’t. He said that the
text specifies:
Core Principles:
·
Transparency
·
Non-discrimination
·
Procedural
fairness
·
Hard-core
cartels, Voluntary cooperation
·
Support
for progressive reinforcement of competition institutions in
developing countries
·
Needs
of development and LDCs – appropriate flexibility
It does not specify:
·
Export
cartels
·
Home
country M & A
·
Cross
border issues
·
Licensing
Arrangements
·
Special
& Differential Treatment
·
Public
interest
·
Consumer
welfare/ interest
Rakesh Basant opined that the Phase-II of the 7-Up Project
could provide inputs for discussions at the WTO since it deals
mainly with cross border competition issues. The Phase-II NRG
meetings should discuss the WTO/Doha concerns and report them in
detail. The analysis of these reports would then help in providing
necessary inputs.
Roger
Nellist said that the next meeting of the WTO Working Group on
Competition is scheduled to be held on 14-15th March
2002. For this purpose, it would be significant if a brief report
on the progress of the 7-Up or any other important document
related to 7-Up could be presented. Rakesh Basant has been
requested to prepare a synthesis or summary of the project
progress in the light of the WTO framework.
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