State-owned enterprises and the de facto protection by antitrust agencies

 

Here’s the fifth video of my mini-series dealing with the article entitled “Antitrust Without Romance” (to be downloaded over).

This post discusses the independence of antitrust agencies. A lot has been written on the subject, showing that they are, maybe, not ‘so’ independent, because, among other things, they are tied to the parliaments & governments which are funding them. The work of Bill Kovacic in this matter is terrific.

What I wanted to do with this paper is to study, in practice, the extent to which their policies are effectively influenced by governments, and for that, I had a look at their advising role as well as their enforcement activities against state-owned enterprises (“SOEs”). Differently put, I wanted to study if antitrust agencies are captured by governments, and not only by private companies. And indeed, several forms of retaliation can be put in place by governments if antitrust authorities are reluctant to protect SOEs or to behave how the government is expecting them to behave, including budget reduction, reorganization, withdrawal of certain powers, new nomination or even the creation of another agency.

Concerning the control of distortive legislation, one could expect antitrust agencies to work on identifying regulations that favor SOEs, but they are particularly lenient in this regard. For instance, none of the 23 authorities that contributed to the OECD Roundtable on Competitive Neutrality in Competition Policy in 2015 mentioned the issue of legislation favoring State-owned enterprises. Yet, the OECD stresses that such distortive legislations exist, and as a consequence, in the absence of antitrust authorities taking an active role in scrutinizing them, international bodies such as the OECD and the ICN are forced to launch initiatives aiming to identify them, such as the Competition Assessment Toolkit.

Regarding their enforcement activities against SOEs, the OECD stresses the risk that they may mostly open investigations against private companies and, in practice, give a free pass to SOEs. Here, the OECD underlines that the number of decisions sanctioning SOEs is increasing. This rise seems logical considering the fact that, in recent years, SOEs have become increasingly important global players. So… to quantify this trend, I have carried out a study on all the decisions published on the European Commission’s website during the period from 1 January 2011 to 1 April 2019 and I have found that only 16% of them concerns SOEs. As for the period going from 1 January 2016 to 1 April 2019, only four decisions concern SOEs, which represent 12% of them.

Result: the trend is downward, and it is expected to decline even more because the current Competition Commissioner, as of April 1, 2019, has not opened a single investigation against SOEs since she took office in 2014. Meanwhile, the FTC did not sanction any SOEs for “nonmerger” antitrust cases from January in the last ten years, and the same is true for DOJ.

In short, OECD predictions are inaccurate with regards to the three authorities studied in this Article, and this data shows that antitrust authorities may protect SOEs. They do not show great signs of independence in this regard…

Download “Antitrust Without Romance” over here for more on that subject