ANATOLY GOLOMOLZIN: ABOUT IMPORTANCE OF COMBINATION OF THE STATE AND BUSINESS EFFORTS

During the VI BRICS Competition Conference, Deputy Head of FASchaired a meeting on state participation in the economy

The event was attended by representatives of foreign antimonopoly bodies and organizations, OECD Competition Committee and the Antimonopoly Experts Association.

Opening the session, its moderator Anatoly Golomolzin emphasized that state influence on entrepreneurship is demonstrated in various forms. The limits for state intervention as a regulator and controller of market processes continues being in the focus of discussions between regulators and stakeholders. The session participants were asked to consider the role of the state in general and antimonopoly bodies in particular, in strengthening market economy; the main issues related to antimonopoly regulation of competitive markets as well as natural monopolies and state-run companies; tariff regulation and deregulation; and use of competitive neutrality in the government competition policy.

Fiving the floor to the first speaker, Anatoly Golomolzin pointed out that efficient performance of judiciary in market economy is essential, especially in the economic field. “According to a renowned American economist J. Commons, the Supreme Court is the main Chair of political economy”, said Anatoly Golomolzin.

The moderator asked President of the Supreme Federal Courtof Brazil, João Otávio de Noronha, to describe, in particular, how the judiciary encourages dynamic development of Brazil economy. Mr. de Noronha stated that competition protection is a Constitutional norm in Brazil. Under the neutrality principle, the antimonopoly standards apply evenly to state and private companies. There are 134 state-run companies in Brazil, and the number is gradually decreasing.

Anatoly Golomolzin reminded that according to an informational leaflet of the Competition Commission of India antimonopoly norms had existed in India far back in the III century B.C. and were mentioned in Kautilya’s Arthashtra.

What challenges are facing the competition policy in the modern India in the XXI century? What is the role of the state in developing and protecting competition? Samir Rajan Gandhi, a representative of “AZB & Partners” gave answers to these questions. He underlined that in 1947 the monopolies act had not covered state-run companies. Now the norms of the antimonopoly law apply to both public and private companies. Today with developing market economy, state-run companies account for around 16% of the economy. Mr. Gandhi believes that there cannot be competitive neutrality between state-run and private enterprises. The reasons is that the goal of state-run enterprises is not to maximize profit, as it is often the case for private business, but in fulfilling social or public objectives.

Commenting the Indian presenter, Anatoly Golomolzin stressed:

"FAS initiates exit of state and municipal enterprises from the competitive sector. They can operate in the field of natural monopolies or to fulfill the state objectives”.

Anatoly Golomolzin emphasized:

"Goal-setting is important in order to understand the essence of the issues discussed at the session. For instance, in Chinese antimonopoly law these goals are determined as developing “socialist market economy”. Another important fact is the economic changes in China are accompanied by pro-competitive institutional changes”.

Chjan Chenin, an associate professor at Tsinghua University, the People’s Republic of China, asked the moderator to draw attention to this aspect. She talked about the changing role of the state in the course of intensifying market relations since 1987. In China the priorities of competition policy are formalized at the supreme level of state administration. The goals of competition and the goals of sustainable economic development are interrelated.

“The invisible market hand and the visible hand of the government should shake each other. Therefore, it is necessary to jointly develop methods of regulation and economic development. The government should adapt to the changing economic environment, remove administrative barriers for market entry. Providing equal conditions for operation of state-run and private companies stems from the norms of the Chinese antimonopoly law", explained Mrs. Chenin.

Before calling on Čedomir Radojčić, a Council Member, Serbia’s Competition Authority, the moderator - Anatoly Golomolzin said that FAS works in close cooperation with both the competition body and tariff regulators from Serbia. At the same time, Serbia has experience of interacting with many countries in the West and East due to historic and geographic factors. Answering a moderator’s question whether this situation had an impact upon state competition policy, Mr. Radojčić responded that they do not see big cultural factors for  differences in the competition policies of different countries, particularly, with which Serbia’s Competition Authority has Agreements on Cooperation, including  the EU, Russia, South Korea, Japan and China. Developing competition culture is important in competition policy. Serbian agency has succeeded in this area, and the International Competition Network has praised the experience of Serbia’s Competition Authority in competition advocacy already several times as one of the best among competition bodies of other countries. Čedomir Radojčić pointed out that the antimonopoly law is based on the principles of competitive neutrality, and the agency has cases against both companies with state participation and private companies.

Presenting Märt Ots, the moderator highlighted that along with being Director General of a multifunctional competition and tariff authority of Estonia he also chairs the Energy Regulators Regional Association comprising around 40 countries of Europe, Asia and Africa. Anatoly Golomolzin prompted that the session participants are interested not only in the functions-combining experience but also in exchanging the international experience in reforms.

According to Märt Ots, Estonia regulates only gas transportation and the electric power industry, prices for gas and electric power are not regulated.

"Estonia is a country with relatively cold climate, here considerable attention is paid to district heating, and the state regulates the prices of heating suppliers. District water supply is also regulated”, informed Märt Ots.

He mentioned that in spite of similar climate conditions with the Baltic States, the Nordic countries regulate neither district heating, not district water supply.

In his comments Anatoly Golomolzin stressed that:

“Pro-competitive tariff regulation is an essential element of the state competition policy in Russia. Tariff regulation is necessary in those sectors where there are no conditions for competition and tariffs are deregulated in the sectors where competition is present”.

Chairman of No.2 Working Group of OECD Competition Committee, Alberto Heimler, underlined that state participation and influence in the economy has complex, direct and indirect forms and consequences. For example, refusal of state-run companies to apply the profit maximizing principle does not mean that there are incentives to reduce their costs. He also emphasized the need for the state to timely react to the changes on the markets by changing the law. According to the example given by Alberto Heimler, at the initial stage the law on pharmacists in Italy helped new accomplished entities enter the markets, but not changing the norms of the antimonopoly law for 100 years has become a setback for developing competition in this field. The speaker described OECD Toolkit for competition assessment that enables country reviews not only of the state of competition on the relevant markets but also to what extent the general institutional framework is conducive to competition.

“The economy used to be dominated by sectors with incremental and inertial development. Cardinal changes in the modern world have become some of the main, inherent market characteristics. In the global world of digital technologies, antimonopoly bodies should “keep up with the fashion” and be able to react adequately. If a violation is committed, it happens not only in a particular country but all over the world, and violations can develop like an avalanche”, said the moderator, Anatoly Golomolzin, in follow up of the theme and gave the microphone to Head of FAS Department, Elena Zaeva.

Head of FAS Department for Regulating Communications and Information Technologies, Elena Zaeva, described the Russian practice of antimonopoly enforcement on global markets. As examples, she outlined the experience of investigating cases against Google and Microsoft. The speaker characterised the specifics of analyzing multi-sided markets built on digital platforms, pools of intellectual property rights, big data and digital algorithms, and explained how violations in the global economy are eliminated through cases at the national level, and how antimonopoly bodies can cooperate on the bilateral and multilateral bases to counter violations committed by transnational corporations.

Making comments on the presentation, Anatoly Golomolzin underlined that many FAS cases in the digital field became precedent in the world practice. He said that in 2019 FAS roaming case was recognized the best practice of antimonopoly authorities in an international contest organized by the International Competition Network (comprising all antimonopoly authorities in the world) and the World Bank.

Inviting an “MTS” representative and Chairman of the Antimonopoly Experts Association, Andrey Pego, to speak, the moderator asked him to express his vision of the impact of the state in general and the antimonopoly authority, in particular, upon business, and the market trends; and what business can offer to the state, can the state “listen to” the business in order to improve the market environment.

Andrey Pego said that for already a quarter of a century private business has facilitated successful development of the communications and information technologies sector. He specified, however, that the prevailing recent vector towards single suppliers in the most important national projects deteriorates the state of competition. At the same time, even limited employment of competitive procedures leads to maintaining competition and considerable budgetary savings.

Commenting the speech, the moderator noted that the Government of the Russian Federation had made a binding decision to ensure compliance with the competition protection rules in the course of executing the measures of the National Economic Development Plan; the priority of competition protection is set in the National Competition Development Plan.

Anatoly Golomolzin added:

"Business can, together with FAS, under the frame of the Antimonopoly Experts Association, the Expert Councils, not only make the authorities aware of their concerns but also be involved in devising the rules of the game. Among successful examples, one can mention implementing the technological neutrality principle in sectoral laws, and jointly adopting the basic “network neutrality” principles by the interested authorities and the market participants. In fact, this work is an example of applying the competitive neutrality principles in state competition policy".

Finally, Anatoly Golomolzin thanked the participants for substantive and challenging contributions, and summed up the discussion:

“States all over the world exercise significant influence upon economic relations. Combining the efforts of the state, business and the society, it is possible to develop competition, achieve success in economic development, at the same time maintaining the national specifics, and enabling successful international cooperation. The BRICS Conference in general and the discussions at the “State participation in the economy” session confirm this conclusion”.