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Competitive Neutrality
 
 
Competitive neutrality
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Background

Competitive neutrality is the recognition that significant government business activities which are in competition with the private sector should not have a competitive advantage or disadvantage simply by virtue of government ownership and control. Competitive neutrality policy involves analysis and implementation of steps to ensure that this advantage does not occur.

Competition law prevents overt anticompetitive conduct but does not ensure a level playing field for competition between state-owned enterprises (SOEs) and other government businesses and private enterprises.

"Competitive neutrality [is a] regulatory framework (i) within which public and private enterprises face the same set of rules and (ii) where no contact with the state brings competitive advantage to any market participant" {OECD 2009]

Competitive neutrality is not appropriate in all cases where it hampers the achievement of important societal goals but where such claims are made they should be subject to objective determination.

Methods of ensuring that government bodies do not obtain an advantage over private enterprises include privatisation, effective governance, improving independence, accountability and disclosure. Ex post laws such as EU Art 86 can assist.

Ex ante, the implementation of a competitive neutrality framework is an effective means of addressing the issue. Australia introduced such a framework in the late 1990s and it has implemented significant reforms in the area (see attached Healey paper for summary of Australian developments).

Objectives

The objectives of this project is to seek answers to the following questions by examining each of them for the jurisdictions of China, India, Malaysia and Paraguay; and come up with suggestions on how to ensure competitive neutrality:

  • What is the nature of SOEs/ government bodies in the jurisdiction?
  • Are they caught by competition law?
  • Is competitive neutrality addressed at all? If so, what is the framework for competitive neutrality: corporatisation, governance etc.?
  • Which bodies should be subject to competitive neutrality?
  • What are the advantages/disadvantages of government ownership?
  • How can we determine net competitive advantages?
  • What kind of mechanisms could be established to ensure competitive neutrality as well as to deal with complaints in this regard?

Project Plan

Phase 1: Examination of each of the above-mentioned questions by jurisdictions of China, India, Malaysia and Paraguay.
Phase 2: Review of developments in other countries to assist with the development of suggested options.
Phase 3: Conclusions and recommendations: Formulation of recommendations on how and through which mechanisms to ensure competitive neutrality based on the observations on the selected jurisdictions and others reviewed within Phase 2.

Current Phase of Implementation

The project has been completed.

Contact Information

Deborah Healey
Senior Lecturer, Faculty of Law
University of New South Wales, Australia
E-mail: d.healey@unsw.edu.au

Mr. Graham Mott
Economic Affairs Officer
Competition and Consumer Policies Branch (CCPB)
UNCTAD
E-mail: Graham.Mott@unctad.org


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