ECONOMIC CONCENTRATION IS THE FOCUS OF INTERNATIONAL COMPETITION POLICY
Evaluating them enables FAS to implement the risk-oriented approach in its control-and-supervision work
On 12 December 2017 Brussels (Belgium) hosted an Annual Competition Conference on “Economic development and competition policy”. One of the main items on the agenda was approaches of competition authorities to evaluating economic concentration in a broad sense, including market analysis and decisions on mergers and acquisitions in view of the basic trends of economic development and the characteristics of the modern markets.
Deputy Head of FAS Andrey Tsyganov was the key speaker at the plenary session on “Competition and consumer well-being – the position of new competition authorities”.
He gave expert data on the general level of economic concentration in different sectors of Russian economy, pointing out significant non-uniformity of concentration indices (the share of the three largest companies) and business dynamics (leader rotation coefficient) by sectors as well as contradictory trends with those indices in the past five years, that not always can be explained by the traditional economic theory. The same is relevant about the public share of various sectors of the economy. “Interestingly, in the most concentrated segments where HHI index exceeds 2000 (non-ferrous metals, transport, housing & utilities sector, telecommunications, oil and gas), in the past years HHI is decreasing. Although it seems that under the economic sanctions, low economic growth rates and rather active influence of the state upon the economy precisely the opposite trends could have prevailed. In Russian economy completely private sectors such as metallurgy, the chemical industry, mobile telecommunications coexists with sectors where the share of the state remains high or even increases (oil and gas, banking)”, stated Andrey Tsyganov.
In the opinion of the representative of Russian competition authority, analyses of markets and economic concentration in industry markets help Russian antimonopoly body to implement the risk-oriented approach in its control-and-supervision efforts, focus on those sectors of the economy, the structure of which creates opportunities for violating the law on competition. FAS approaches to market analysis and exposing violations of the law on competition were illustrated with the examples of cases against “Google” and “Microsoft” as well as “Bayer-Monsanto” merger.
Andrey Tsyganov emphasized the importance of multifunctional approach to solving economic issues related to economic concentration and conduct of the largest market players. “FAS not only exercises control over compliance with the antimonopoly law, as well as the functions of tariff regulation, public procurement control, advertising, and unfair competition. It enables to choose the most efficient method of influencing a market situation on a case-by-case basis. Direct possibility of Russian antimonopoly body to influence the economic and industrial policy through the mechanism of investigating cases against the facts of restricting competition through actions of the authorities, devising and implementing sectoral programmes and the regional standards for developing competition also is of enormous importance”, pointed out the speaker. As an example, he gave a radical changing of the situation with violations of the antimonopoly law on the market of oil and oil products, where serious results have been achieved applying a set of measures including antimonopoly control, customs, tariffs and technical regulation, development of exchange trade.
Answering a moderator’s question regarding the most substantial challenges facing competition authorities in the “new” economies with a high level of economic concentration, Deputy Head of FAS underlined a considerable acceleration and complication of all economic processes, which require similarly prompt and adequate reaction from regulators. “The level of concentration in the sectors of the economy by itself does not belong to the factors that are of primary concern for customers. For them the acceptable price level for goods and services is much more important. FAS always sticks to a simple rule in this field, especially in the regulated sector – the tariff growth should not exceed the inflation level. All of consumer groups understand and accept this position of the regulator”, emphasized Andrey Tsyganov.