8. Competition policy (Dimension 5)

There have been few changes to the scores for the competition policy dimension since the 2018 Competitiveness Outlook (CO) assessment (Figure 8.1).

The remit of competition authorities covers two pillars: enforcement and advocacy. Competition enforcement in the WB6 economies is still limited, despite an increase in the score for infringement decisions in Albania and Serbia, and some promising recent signs in other competition authorities. WB6 competition authorities are endeavouring to progress on the second pillar of competition advocacy to urge policy makers and regulators to remove competition restrictions and ensure a level playing field for firms.

Competition authorities are still limited by professional and financial resources. Officials are usually skilled and motivated, but their number is insufficient to perform all the activities of a well-functioning competition authority.

Progress on implementing the policy recommendations made in the Competitiveness Outlook 2018 has been modest overall (Table 8.1), although there are differences in implementation across economies. Moderate advances have been made in providing stakeholders with guidance on competition authorities’ practices and in removing or preventing restrictions to competition in laws and regulations. There have been limited improvements in the competition law enforcement record and in the amount of financial and human resources available to competition authorities.

Competition policy is at the top of the agenda in most jurisdictions in the world as it provides firms with the right conditions and incentives to perform efficiently and to innovate, which ultimately benefits consumers and the economy. A competitive economic environment helps boost economic growth and increase living standards, thereby also helping to reduce inequality. Competition policy stimulates competitiveness by giving businesses incentives to lower their costs and reduce their prices, to better respond to customers’ needs and to be more innovative. Furthermore, it motivates firms to supply internationally competitive products and services and to upgrade in global value chains.

Competition authorities tackle unlawful agreements between competitors to raise prices, as well as abusive practices by dominant firms to exclude smaller, innovative or more efficient companies from the market. At the same time, competition authorities promote a level playing field in open markets by advocating for the removal of restrictions in laws and regulations, and by prohibiting restrictive mergers.

For economies of limited size such as the WB6 economies, competition policy also plays a key role in fostering access to domestic markets by foreign and international firms, leading to increased allocative efficiency. By contributing to well-functioning markets and competitive neutrality between private firms and state-owned enterprises, as well as between domestic and foreign companies, competition policy drives productivity, encourages innovation and supports economic growth (Ospina, 2010[1]; Gutmann, 2014[2]).

Competition policy has significant interplay with other policy areas. Level playing fields and transparency attract international investors and help reduce unnecessary barriers to trade in laws and regulations. The fight against bid rigging in public procurement also contributes to corruption prevention.

In light of the above, this chapter has links to the following chapters:

  • Chapter 4. Investment policy and promotion will benefit from the competent and predictable implementation of competition rules that apply to foreign and domestic investors alike. Competition laws that are aligned with international standards and applied according to best practices will create legal security that benefits investment decisions.

  • Chapter 5. Trade policy and facilitation and competition policy can and should be mutually supportive. In general, trade and competition policies share the ultimate objective of achieving the efficient allocation of resources and promoting economic growth. In particular, trade liberalisation can generate competitive pressure by encouraging more domestic and foreign direct investment (Bartók and Miroudot, 2008[3]). Competitive markets also create opportunities for trade and investment and enhance the gains from trade and investment liberalisation. However, potential tensions or inconsistencies may arise when markets are not contestable, when there are barriers to entry or exit, and when important sunk costs or other market imperfections prevent foreign products or companies from reaching domestic markets.

  • Chapter 9. State-owned enterprises. Competition policy can help ensure that state-owned enterprises (SOEs) compete on a level playing field with private companies, thus establishing a robust competition environment. Competition authorities can promote competitive neutrality by discouraging the public authority from granting selective aid to SOEs and resisting political pressure to adopt a more lenient approach when investigating SOE conduct.

  • Chapter 12. Science, technology and innovation are facilitated by competitive environments. However, the relationship is not simple as the empirical evidence shows that moderately competitive markets innovate the most, while both monopoly and highly competitive markets show lower levels of innovation. Competition policy focuses not on making moderately competitive markets hyper-competitive, but on introducing or strengthening competition in markets where it does not work well. The inference is therefore that competition policy serves to promote innovation (Aghion, 2005[4]).

  • Chapter 19. Anti-corruption policy and competition both focus to a large extent on public procurement markets. Competitive bidding in public procurement markets will be encouraged if the risk of corruption is low. Research generally finds an inverse relationship between competition and corruption: low levels of competition correlate with high levels of corruption (OECD, 2010[5]). Cartels favour corruption and benefit from co-conspirators among public procurement officials. A successful anti-corruption policy will also lead to more competitive and cost-effective tender results.

This edition of the Competitiveness Outlook is based on the same four qualitative policy areas used in the past editions and a new quantitative policy area on implementation.

The four qualitative policy areas explored in the past editions of the Competitiveness Outlook focus on the foundations of a competition policy regime: scope of action, anti-competitive behaviour, probity of investigation and advocacy. They are meant to verify whether the de jure characteristics of the WB6 economies are appropriate to support well-functioning and effective competition policy.

The questionnaire used for the past edition (see below) has been maintained to enable the monitoring over time of evolutions in the key policy areas:

  1. 1. Policy area 5.1: Scope of action explores whether the competition authority is invested by law with the power to investigate and sanction anti-competitive practices, as well as to investigate, remedy or block anti-competitive mergers. It also assesses whether the authority’s budget and number of staff are adequate.

  2. 2. Policy area 5.2: Anti-competitive behaviour focuses on how competition policy prevents and prosecutes exclusionary vertical and horizontal agreements and anti-competitive mergers. It assesses which factors are considered when ascertaining if anti-competitive practices have taken place.

  3. 3. Policy area 5.3: Probity of investigation focuses on the independence and accountability of the institutions that enforce competition law. It also addresses the transparency and fairness of their procedures.

  4. 4. Policy area 5.4: Advocacy focuses on activities other than enforcement of competition law used to further promote a competitive environment. It explores whether market studies and reviews of new laws and regulations are conducted to highlight and prevent a distortionary impact on competition.

Unlike the other chapters, where indicators are allocated a score from one to five, the assessment of the four qualitative policy areas in the competition policy chapter is based on yes/no (coded as 1/0) answers to the 71 questions in the questionnaire listed in Annex 8.A. Competition Questionnaire. Where a response to a question is yes (coded as 1), this is referred to as an adopted criterion. Each of the five policy areas has a different number of possible criteria that can be stated as having been adopted (Table 8.2). Each policy area is assessed through data collected from the questionnaire indicators and by measuring the number of criteria adopted.

As discussed, the analytical framework for Competition Policy for this edition of the Competitiveness Outlook is broader than the framework applied in 2018, with a new policy area added. The new policy area investigates the actual implementation of competition rules by competition authorities in terms of infringement decisions and advocacy initiatives. The complementary set of questions enables a quantitative assessment of the extent to which competition authorities have been able to translate legal and institutional competition frameworks into actual enforcement and advocacy activity.

The new set of quantitative data has enabled meaningful comparisons and benchmarking with other jurisdictions. The questionnaire mirrors the data collected by the OECD through the General Competition Statistics (CompStats) database, which scrutinises competition agencies in 56 OECD and non-OECD jurisdictions (Box 8.1). The resulting database enables a comparison of the activity of competition authorities with similar characteristics and at an equivalent stage of development to assess the effectiveness of their programmes of work and their tools, and to monitor improvements. Over the years it will also be possible to use the evidence from past scrutiny to assess the development of enforcement and advocacy records, and it will be easier to assess the effectiveness of strategies and prioritisation choices. Competition agencies could use this tool to enhance their transparency and accountability polices.

The legislative frameworks for competition in the WB6 economies are in line with international good practice. Competition rules reflect EU provisions on restrictive agreements and the abuse of dominant position (Articles 101 and 102 of the Treaty on the Functioning of the European Union) and include the ex ante control of mergers, following the principles of the EU Merger Regulation.

The competition authorities of the six jurisdictions have appropriate powers to investigate and to sanction possible anti-trust infringements, such as restrictive horizontal and vertical agreements and exclusionary or exploitative practices by dominant firms. Moreover, their institutional setting appears good in terms of independence, accountability and procedural fairness. However, they lack adequate financial and human resources to express their full potential and implement their enforcement powers. Among the WB6, Albania is the closest to full alignment, followed by Serbia and North Macedonia. Albania, Montenegro and Serbia are fully aligned regarding the scope of action. The only economies that are fully aligned with anti-competitive behaviour and probity of investigation are Albania and Serbia (Figure 8.2).

The actual implementation of the rules through competition enforcement is generally poor. The competition authorities particularly need to strengthen their enforcement record, focusing especially on cartels as they are the most serious and harmful competition infringement. Cartel investigations require valid detection tools and the wide use of unannounced inspections. Albania and Serbia are leading the way in this area, with recent promising signs in the other jurisdictions, but the number of infringement decisions and related sanctions are still low in the region. Severe sanctions are crucial to ensure deterrence and to enhance the effectiveness of other key competition tools, such as leniency programmes and settlements. Targeting bid rigging in public procurement could be a promising area for expanding competition authorities’ activity regarding cartels, particularly given the increased role played by public authorities in response to the COVID-19 crisis.

The competition authorities of the WB6 economies have performed well in the fourth policy area, competition advocacy. In particular, most are committed to removing or preventing restrictions to competition in laws and regulations, as well as to increasing public awareness and understanding of the benefits of competition.

Proving competition infringements and drafting solid decisions requires in-depth and thorough investigations, particularly for cartels. Competition authorities should be able to collect evidence of unlawful contact between the parties and have a clear understanding of the characteristics and dynamics of the markets at stake, as well as of the effects of the alleged practices. Competition authorities are therefore usually equipped with strong powers to conduct unannounced inspections, request information and hold hearings. At the end of the investigation they need to be able to impose severe sanctions to discourage anti-competitive conduct by others. Deterrence is more effective if private enforcement enables individuals, firms and public entities harmed by an anti-trust infringement to seek compensation before the civil courts.

Competition provisions should apply to any undertakings that engage in economic activities, be they public or private, domestic or foreign, in order to guarantee competitive neutrality and equal opportunities to all market players. Competition authorities should also be able to rely on adequate and stable professional and financial resources to perform their duties.

The scope of action policy area addresses these issues by exploring the competencies of the competition authorities in terms of the scope of application of competition rules (public/private, domestic/foreign firms); their financial and human resources; their statutory powers to investigate and to sanction/remedy competition law infringements and anti-competitive mergers; and the provisions allowing private enforcement, i.e. civil action by individuals, firms or groups of consumers seeking compensation for financial damage incurred as a result of competition law violations.

Albania, Montenegro and Serbia achieved full alignment for the scope of action policy area. Moreover, all WB6 economies except Bosnia and Herzegovina are fully aligned with the competences and private enforcement policy areas (Figure 8.3).

The domestic competition laws of the WB6 economies ensure competitive neutrality, in that the competences of the competition authorities encompass any domestic or foreign undertakings (and associations of undertakings) that have or may influence domestic markets, including public undertakings and undertakings entrusted with services of general economic interest.

Competition authorities have appropriate powers to investigate and powers to sanction anti-trust infringements, as well as to review mergers and acquisitions. During an investigation, all competition authorities in the WB6 economies can compel investigated firms and third parties to provide relevant information and can perform unannounced inspections of their premises. The final decision is based on a thorough scrutiny of the collected evidence, which may include an economic analysis of the competitive effects. If anti-trust infringements are found the authorities can impose cease and desist orders and remedies and sanctions on the firms concerned. In particular, the authorities have the power to directly impose significant fines, which can be up to 10% of the aggregate turnover of the undertaking, in line with EU provisions. The only exception is Montenegro, where investigations fall under the remit of the Agency for Protection of Competition and the imposition of fines under the Misdemeanour Courts, which can conduct the relevant procedure and determine the amount of the fines.

The competition authorities can also adopt interim measures ex officio and based on preliminary evidence (prima facie) if the alleged competition breach poses a risk of serious and irreparable damage. They may also order behavioural and structural measures to eliminate harmful effects on competition, or accept and make binding commitments offered by the parties to address the competition concerns.

All domestic legal regimes also provide for leniency programmes, which grant total or partial immunity from sanctions to firms that report the existence of the agreement and submit appropriate evidence to the competition authority.

With the exception of Bosnia and Herzegovina, all WB6 competition authorities can enter into settlements with the parties under investigation for alleged anti-trust infringements, and thus close the investigations.

Regarding merger reviews, domestic competition laws provide for ex ante control, following the principles of the EU Merger Regulation. The competition authorities must prohibit concentrations that significantly restrict effective competition, in particular as a result of the creation or strengthening of a dominant position. They can authorise the transaction subject to structural and/or behavioural remedies – i.e. divestiture of assets and/or obligations to act or refrain from acting in a certain way – suitable to address the competition concerns.

The assessment of notified mergers must follow thorough scrutiny of the evidence, which includes an economic analysis of the restrictive effects and of possible efficiencies stemming from the concentration. For merger reviews, the competition authorities of the WB6 economies can compel merging firms and third parties to provide relevant information and may perform unannounced inspections on the premises of the parties.

To enforce competition law effectively, competition authorities need adequate financial and human resources, which is not the case for most WB6 competition authorities. According to the CompStats database, except for Albania and Serbia, the number of staff in WB6 competition authorities is lower than in other OECD and non-OECD economies (Figure 8.4). In 2019 the average total staff of the 15 competition authorities in small economies (with a population below 7.5 million) was 114, of whom 43 were working on competition (benchmark economies in Figure 8.4) (OECD, 2020[7]).

The budgets of competition authorities in the WB6 economies are extremely low compared to international averages. The competition authorities of Albania, Bosnia and Herzegovina, Kosovo, North Macedonia and Montenegro rely on annual budgets of between EUR 347 000 (North Macedonia) and EUR 820 000 (Montenegro), which is significantly below the average financial resources of the 15 competition authorities in small economies that participated in the OECD CompStats database (EUR 5.4 million in 2019). Only the Serbian competition authority approaches this figure (Figure 8.5).

The reasons behind the limited financial and human resources could include the low gross domestic product, the small size of the populations, the low cost of living and the young age of the institution. Nevertheless, a competition authority needs a minimum level of qualified officials to be able to fulfil its tasks, which include monitoring all sectors of the economy, conducting complex investigations, and analysing existing and draft legislation to advocate the removal of competition restrictions. Similarly, adequate economic resources are necessary to attract skilled officials and retain them over time. Many authorities are confronted with a high staff turnover, with many qualified officials trained by the authority eventually recruited by the private sector. At the same time, effective enforcement increasingly requires the use of costly digital devices, which are often indispensable for collecting and analysing evidence. Italy has developed a way of achieving financial independence for its competition authority, which is worth considering (Box 8.2).

All WB6 economies except Bosnia and Herzegovina allow private enforcement, meaning that individuals, firms and consumers – either collectively or through consumer associations – can bring legal action to seek damages from firms that have committed anti-trust infringements.

  • Provide competition authorities with adequate and predictable financial and professional resources. The current competition budget and the number of specialised staff appear insufficient for them to perform their duties effectively. A substantial increase in the budget of WB6 competition authorities seems necessary to align them with other comparable competition authorities. Additional financial resources would enable the authorities to recruit additional officials with appropriate competition skills, while motivating and retaining existing staff, and thus develop their potential in terms of competition enforcement and advocacy (see example in Box 8.2).

  • Co-operate internationally and carry out targeted training initiatives to successfully address the fast-moving economic environment. Given the increasing complexity of anti-trust issues, and the frequent cross-border nature of competition infringements, the management and staff of WB6 competition authorities should have frequent opportunities to meet and share good practices with international competition experts and colleagues from other jurisdictions. International organisations such as the OECD, the International Competition Network and the United Nations Conference on Trade and Development (UNCTAD) offer valuable opportunities for this, including the OECD-GVH Regional Centre for Competition in Budapest (Box 8.3). The WB6 competition authorities are already regular participants in the centre’s events and would benefit from actively continuing.

An appropriate legal and institutional competition framework is not enough to promote competition policy; competition authorities must make full use of their powers and engage in competition enforcement by detecting, investigating and punishing infringements. The implementation of the legal framework is necessary to address breaches and to deter possible future anti-competitive behaviour by conveying a credible message that such behaviour will be identified and severely sanctioned by the competition authority.

The Anti-competitive behaviour and Implementation policy areas together gauge the use of powers and resources in terms of decisions adopted and fines imposed for horizontal agreements, vertical agreements and exclusionary conduct. They also explore the actual activity of the competition authority on reviewing mergers.

Policy area 5.2, Anti-competitive behaviour, is a qualitative analysis that verifies to what extent competition authorities are aligned with best practices when conducting enforcement actions and using their anti-trust toolkit and powers. Figure 8.6 shows that the WB6 economies perform relatively well in terms of the number of adopted criteria. The new policy area 5.5, Implementation, is a quantitative analysis that explores how many competition decisions have been adopted by the competition authorities. The WB6 economies perform less well in this area (Figure 8.7), although there have been some recent positive signs.

Despite a comprehensive legal and institutional competition framework in the six economies, the actual implementation of competition rules through enforcement is still limited (Figure 8.7). The number of enforcement decisions adopted by the competition authorities of the WB6 economies between 2015 and 2019 was generally lower than the 15 benchmark competition authorities in the small economies that participate in the OECD CompStat database (Box 8.1). Over the same period, they adopted on average 16 decisions on horizontal agreements, 4 on vertical agreements and 20 on exclusionary conduct. Only Albania stands out, with a higher number of infringement decisions than the benchmark. Bosnia and Herzegovina’s figures appear high too, but most of them do not refer to actual competition enforcement, being simple decisions to reject requests by complainants.

The Albanian Competition Authority has an appreciable record of formal proceedings tackling horizontal and vertical agreements, including bid rigging in public procurement. However, the total amount of fines imposed on participants in anti-competitive agreements over the last five years was EUR 2.2 million, vs. EUR 13.5 million levied by the 15 competition authorities in smaller jurisdictions that participated in CompStats in the same period (OECD, 2020[7]).

Regarding Bosnia and Herzegovina, as noted above most decisions adopted by the economy’s Competition Council have related to the non-opening of formal proceedings, with the result that the impact of competition enforcement is limited and fines are negligible. No significant fines have been imposed over the last five years for prohibited agreements. One relevant fine was imposed in 2018 for an abuse of dominance in the delivery of heating energy.

Despite a limited number of decisions, the Serbian Commission for the Protection of Competition has performed well over the last few years. It took only one decision concerning horizontal anti-competitive agreements in 2019, but in the previous four years there were nine cartel decisions, which included some cases of bid rigging in public procurement. In 2020 the commission issued five infringement decisions and imposed fines on the parties: one case related to horizontal price fixing, one to bid rigging, two cases concerned resale price maintenance and one an abuse of dominant position. The total amount of fines imposed on parties involved in anti-competitive agreements reached a peak of EUR 3.8 million in 2018, but decreased to EUR 857 000 in 2019.

In North Macedonia, the number of decisions tackling horizontal agreements has been low, particularly in recent years. The Commission for the Protection of Competition has primarily invested its investigative resources in vertical agreements. Sanctions on cartels were negligible until 2019, when the commission imposed a fine of EUR 1.7 million on two pharmaceutical companies.

In Montenegro, the Agency for Protection of Competition adopted only four cartel decisions between 2015 and 2019, as well as two decisions on vertical agreements and three decisions on abuse of dominance. In 2019, the agency opened two vertical investigations concerning resale price maintenance violations, which is a hardcore restriction in Montenegrin competition law. As said, in Montenegro investigations fall under the remit of the Agency for Protection of Competition and the imposition of fines under the Misdemeanour Courts. The fines imposed by Misdemeanour Courts were particularly low, less than EUR 100 000 per year. The highest fines imposed were not for cartel cases, but for abuse of dominance.

In the same period, the Kosovo Competition Authority investigated a very limited number of cartels, vertical agreements and abuses of dominant position, and imposed no fines. It either found no infringements or accepted commitments and closed the cases, often noting the limited awareness of competition rules in domestic firms. However, in 2020 the authority concluded a major investigation into a horizontal agreement on prices by 13 oil companies and imposed overall sanctions of more than EUR 1 million.

Several advanced competition authorities around the world use leniency applications as a key way of detecting cartels (Figure 8.8). Leniency programmes have been introduced in all WB6 economies, but have proven ineffective. Only the Serbian Commission for the Protection of Competition has received a leniency application so far, in 2018. This problem is common in most young and even some experienced competition agencies around the world. Nevertheless, the poor performance in the region is not surprising given that a pre-requisite for the effectiveness of a leniency programme is the threat of sanctions that leads cartelists to come forward and report the existence of an agreement to the competition authority. Considering the low sanctions imposed in the WB6 economies, cartelists have no real incentives to submit an application.

The use of unannounced inspections varies across the region. Unannounced inspections (also called dawn raids) of premises are a crucial investigative tool to substantiate allegations so that robust decisions can be adopted, particularly in the case of cartels. Both the Albanian Competition Authority and the Serbian Commission for the Protection of Competition make frequent use of this power. However, the other competition authorities in the region seem to be reluctant to do so, although some have recently begun. For example, the Commission for the Protection of Competition of North Macedonia carried out three dawn raids in 2019, compared to one in the previous years. The Montenegrin Agency for Protection of Competition began performing unannounced inspections for agreement cases in 2019 in the context of anti-trust proceedings on resale price maintenance. The Bosnian Competition Council and the Kosovo Competition Authority have not yet performed any dawn raids.

Regarding mergers, the number of Phase II investigations – i.e. the in depth analysis of a transaction that might raise competition concerns – has been insignificant or non-existent. The exception is Serbia, where the Commission for the Protection of Competition carried out eight Phase II investigations and one “gun jumping” case (failure to notify the competition authority of a merger or the implementation of all/part of the merger during mandatory waiting periods) in 2018 and 2019. The commission did not prohibit any transaction but cleared three cases by imposing remedies. Three additional Phase II merger reviews and two gun-jumping cases were also conducted in 2020. In North Macedonia, one concentration was blocked in 2017 and two were approved with remedies over the last five years. In Albania, only one concentration was investigated in-depth and eventually approved with remedies, in 2019. Another transaction was cleared with conditions and obligations in 2020. In the other jurisdictions, all mergers were unconditionally cleared in Phase I, i.e. without the need for a Phase II in-depth review.

The reason for the low activity on merger reviews in the WB6 economies, which again is not specific to the region, could be the unproblematic nature of most transactions, as many of the notified mergers concerned extra-territorial transactions that had little or no impact on the economy.

  • Prioritise boosting cartel enforcement and imposing high fines. Cartels are the most clear-cut and undisputedly harmful competition infringements and affect every economy. The efforts of the competition authorities of the WB6 economies should be focused on detecting cartels and imposing heavy fines on infringers to deliver a strong message that firms engaging in collusion risk being severely punished. If the amount of fines sufficiently exceeds illicit gains, offences can be deterred even when the probability of paying a fine is low. The concern about fines is also a key driver of leniency applications. Increased cartel sanctions would foster the effectiveness of the leniency programme – which has been unproductive in the region so far – and further boost detection. Consistent with the changes introduced in other jurisdictions in Eastern Europe, the Agency for Protection of Competition of Montenegro could be empowered to impose fines directly. The competition authorities of the WB6 economies should also make full use of their powers to perform unannounced inspections to collect evidence, which are key for the adoption of solid decisions, particularly in the case of cartels.

  • Pay specific attention to public procurement, particularly during the COVID-19 crisis. The competition authorities of the WB6 economies should expand their detection skills, for example by further strengthening the fight against bid rigging. Public procurement is a key sphere of action both for cartel enforcement and for competition advocacy. Bid rigging results in significant harm to the public budget and taxpayers, dampening innovation and creating inefficiencies. The WB6 competition authorities should extend their co-operation with the domestic agencies for public procurement and other procurement bodies to carefully design the procurement process so that it reduces the risks of bid rigging and detects bid-rigging conspiracies. The extensive activities carried out by the OECD in this respect will be helpful (see Box 8.4 and Figure 8.9 below).

  • Continue to participate in the OECD CompStats database. The new additional questionnaire filled out by the WB6 economies for Policy area 5.5, Implementation, mirrors the data collected by the OECD through the CompStats database (see Box 8.1 above). This has enabled a thorough quantitative analysis of the actual enforcement activity of the WB6 competition authorities, as well as providing a benchmark for the findings against other competition authorities that share similar characteristics. The competition authorities of the WB6 economies would benefit greatly from continuing to participate in the OECD CompStats database and completing future related questionnaires.

Probity of investigation plays an essential role in fair and effective law enforcement.

Companies must be safe in the knowledge that their practices conform to the applicable laws in the economies where they operate. They must also be able to interpret legal procedures correctly and to know and understand the workings of the statutory authority (or other body) that oversees them. Should they have to mount a defence in court, they need to be fully informed of the allegations against them and in good time (OECD, 2012[12]). Freedom from political influence is a prerequisite for fair and equal competition law enforcement as it helps ensure that cases are brought or dropped only on their merit (OECD, 2016[13]).

The probity of investigation policy area gauges the fairness of competition law enforcement and the degree to which competition authorities are independent and accountable. It involves three qualitative indicators: 1) independence; 2) procedural fairness; and 3) accountability (Figure 8.10). Together, these indicators assess the absence of government interference in investigations or decisions in anti-trust infringements and mergers, the rights of companies under investigation, and the transparency of the authority’s actions and activities, as well as its accountability in court.

The competition authorities of the WB6 economies are independent state bodies, which means they are autonomous in their work and decision-making processes within the competencies provided by the competition law. This is consistent with good practices at international level. However, their independence does not exclude possible political influence on their effectiveness.

For example, in Kosovo the competition authority did not function between 2013 and 2016 because the members of the commission, whom are proposed by the government and approved by the parliament, had not been appointed. Kosovo’s case shows that political action or lack of action can have a strong impact on competition policy.

In Bosnia and Herzegovina, the appointment and decision-making process of the members of the Competition Council are influenced by ethnic-based procedures, which risks introducing other consideimage13rations into decisions that should solely rely on a technical assessment.

The competition authorities must submit an activity report to parliament each year, except the Competition Council of Bosnia and Herzegovina, which submits its annual report to the Council of Ministers. The Agency for Protection of Competition of Montenegro submits its annual report for approval both to the government and to parliament.

The competition authorities of the WB6 economies must give notice of their decision to open formal proceedings and state the purpose of the investigation and the parties concerned, while encouraging interested third parties to come forward if they wish to take part. All final decisions regarding alleged competition infringements and mergers are published.

Prior to the adoption of a final anti-trust decision, the competition authorities must inform the parties of the relevant facts, evidence and other elements on which the decision is based, and enable them to submit a defence. The parties have the right to be heard before the board takes a final decision. At every stage of the proceedings, the parties may consult with the case team.

Likewise, if the competition authorities intend to prohibit a merger transaction, they must inform the merging parties about the evidence and conclusions on which the decision will be based and enable them to submit their remarks and possible remedies. The parties can participate in the process that leads to the determination of conditions and obligations, and can consult with the competition authority during the entire procedure.

The authorities’ decisions can be appealed before administrative courts in the first instance and eventually before the high courts. In Bosnia and Herzegovina there is only one level of judicial review.

Most WB6 competition authorities have adopted and published several regulations and guidelines, including on the investigative procedure, the procedure for concentrations of undertakings, the assessment of horizontal and vertical agreements, and the calculation of fines. Bosnia and Herzegovina and Montenegro still have room for improvement.

  • Shelter competition authorities from political influence and preserve their independence. The OECD Competition Committee has found that ensuring the requisite levels of independence, transparency and appropriate resourcing for competition agencies is an ongoing challenge. Even well-established regimes can deviate from these standards, with detrimental consequences for the quality of competition enforcement, law and policy. It is of the utmost importance that such standards are maintained.

Competition may be inhibited by public policies, laws and regulations that create barriers to entry or distort incentives for firms. Some distortions are unnecessary and can be eliminated without affecting public authority policy objectives. The mandate of a competition authority should therefore extend beyond merely enforcing competition law to addressing the additional obstacles to competition. It should also participate in formulating public policies to ensure they do not adversely affect competitive market structures, business conduct or economic performance. Accordingly, the competition authority should be able to advocate for competition and contribute to public policy discussions by assessing policies against barriers to competition and flagging potential threats for competition.

The advocacy policy area considers the capacity of competition authorities to advocate for a more competitive environment at the different government levels. Such advocacy can involve reviewing new and existing regulations to identify any unnecessary distortions to competition and performing market studies that may lead to policy recommendations on how to foster competition and make the regulatory environment more pro-competition.

All the competition authorities of the WB6 can formulate opinions and recommendations regarding economy-level or local laws or regulations that affect or may affect competition. They can also assess possible barriers to competition in economic and administrative regulations that are aimed at pursuing general economic interests. In performing this duty, they usually co-operate with the government and regulatory institutions, including public procurement agencies.

The competition authorities can conduct market studies, i.e. general inquiries in any sector of the economy, on their own initiative or following a request by parliament or other regulators, if price patterns or other circumstances suggest that competition might be restricted or distorted. The only exception is the Competition Council of Bosnia and Herzegovina, which does not have the legal power to conduct market studies.

All WB6 economies except Bosnia and Herzegovina and North Macedonia are close to be fully align in the advocacy policy area. With a score of 7.5, Albania is the closest economy followed by Montenegro and Serbia (Figure 8.11).

Competition authorities can help governments eliminate barriers to competition by identifying unnecessary restraints on market activities and developing alternative, less restrictive measures that still achieve government policy objectives. Competition advocacy can establish a competition mindset and culture within an economy and strengthen the competition authority’s standing and reputation.

Market studies can assess how competition in a sector or industry is functioning, detect the source of any competition problems and identify potential solutions. Competition problems include regulatory barriers to competition and demand-side factors that impair market functioning. Market studies can improve the quality and credibility of advocacy initiatives, while boosting and better orienting competition enforcement. Given that they are a versatile tool that allow the examination of a broader set of issues than simply competition enforcement, their use is growing in most jurisdictions.

The Albanian competition authority issued 25 formal opinions in 2019, which represents a substantial increase from 17 in 2018 and even lower figures in previous years. The sectors addressed by recommendations on draft regulations include water, energy, media and telecommunications. In the period 2015-2019, the Albanian competition authority concluded on average four general inquiries per year, addressing key sectors such as higher education, banking, health care and liberal professions. In 2020, the authority adopted the Competition Advocacy and Communication Strategy, which aims to increase its advocacy role.

The Competition Council of Bosnia and Herzegovina did not issue formal opinions to the government nor parliament on draft or existing laws or regulations in the period 2015-2019. However, it co-operated with public institutions on competition matters and expressed its view on industry practices that may restrict competition. Upon request by the Agency for Public Procurement, it also analysed the rules on public tenders.

The Kosovo Competition Authority has actively engaged in competition advocacy in several sectors, particularly in the last few years. It has issued opinions and recommendations to the Central Bank of Kosovo on insurance companies, to the Ministry of Health on price regulation for medicinal products and equipment, and to the Tax Administration of Kosovo on the provision of cash register equipment. In 2019, it published two market studies, one on the telecommunications sector and one on the energy sector. In 2019, it signed memoranda of understanding with several sector regulators.

The Agency for Protection of Competition of Montenegro has issued a limited number of opinions over the last five years. The main interventions have concerned the Law on Free Access to Information in 2016 and the Draft Law on Audio-visual Services in 2019. The agency signed a co-operation agreement with the Public Procurement Administration in 2015. It did not conduct any market studies.

The Commission for the Protection of Competition of North Macedonia issued seven formal opinions in 2019, including on the Law on Public Procurement and the Law on Misdemeanour. The suggestions made were implemented. In December 2014 the commission issued guidelines for detecting bid rigging in public procurement, in co-operation with the Bureau for Public Procurement. It has not conducted market studies over the last few years.

The Serbian Commission for Protection of Competition has engaged in a wide range of initiatives aimed at promoting compliance with competition principles in laws and regulations, with the number of formal opinions addressed to the government or courts more than doubling over the last few years. The initiatives include an opinion on the regulation of road hailing services and an opinion on regulatory impact assessment, both in 2018. In 2019, the commission signed a memorandum of understanding with the Public Policy Secretariat to improve the competition assessment of legislation, on the basis of the OECD’s Competition Assessment Toolkit (OECD, 2019[14]). It has also conducted outreach activities to promote co-operation with other public authorities, including public procurement officials. It has performed at least three market studies per year over the last four years.

It should be highlighted that the state has a dual role as policy maker/sector regulator and supplier or purchaser of goods and services. Consequently, in markets open to competition the state also acts as a market participant and interacts with private businesses, most often indirectly, through SOEs. Governments may be tempted to grant undue advantages to SOEs or to certain domestic companies, such as a privileged market position, soft loans, outright subsidies, regulatory exemptions or tax benefits. Given the importance of SOEs in the WB6 economies, and the increased role of the state in the economy that will likely result from the COVID-19 crisis, competition authorities can make a decisive contribution to promoting competitive neutrality, which occurs when no entity operating in an economic market is subject to undue competitive advantages or disadvantages, irrespective of their ownership (state-owned or privately owned) or nationality (domestic or foreign). WB6 competition authorities have also organised a number of events aimed at developing a competition culture. For example, they have conducted workshops, training initiatives, and events for consumers, companies and public officials. They have also published educational materials through their websites or social media accounts. This activity is important to increase the standing and credibility of competition authorities and to increase awareness about the role and benefit of competition policy.

  • Continue to advocate against competition restrictions in laws and regulations, using the OECD Competition Assessment Toolkit as a basis. The OECD’s Competition Assessment Toolkit is a practical methodology that supports competition authorities in this task. Where a detrimental impact is discovered, the toolkit helps to develop alternative ways to achieve the same objectives, with minimal harm to competition. The WB6 economies should use this toolkit to support their efforts on competition advocacy.

  • Advocate strongly for competitive neutrality to ensure that all enterprises face the same set of rules, irrespective of their ownership or nationality. Competition authorities should discourage the government from granting selective aid to SOEs or domestic companies and resist political pressure to adopt a more lenient approach when investigating SOE conduct.

  • Use market studies to gain a better understanding of competition in key sectors and make recommendations more informed and credible. Bosnia and Herzegovina should empower its Competition Council to conduct market studies. The Competition Council of Bosnia and Herzegovina should have the power to conduct market studies, as is the case in the other WB6 competition authorities and in most competition authorities around the world. OECD country projects can help competition authorities perform key market studies (Box 8.5).

  • Continue to conduct dedicated events to promote a competition culture. Competition authorities need to strengthen their standing and reputation and inform policy makers and the business community about the key role played by competition in supporting economic growth and consumer welfare. Effective tools to increase competition awareness include tailor-made conferences in co-operation with other public authorities, training events and seminars addressed to the legal and business community or the judiciary, and educational materials for the general public.

The competition authorities of the WB6 economies can support economic growth and a quick recovery after the COVID-19 crisis. To this end, they must establish themselves as strong, influential entities by tackling anti-trust infringements and advocating for the removal of competition restrictions in laws and regulations.

Competition enforcement is still limited, despite a positive number of infringement decisions in Albania and Serbia, and promising activities in other jurisdictions. Notably, the number of uncovered cartels is still small, and sanctions are not sufficient to ensure deterrence.

WB6 competition authorities are progressing on competition advocacy through urging policy makers and regulators to remove competition restrictions, promoting co-operation with domestic institutions, and engaging in spreading a competition culture in the business community and among the public.

Despite an appropriate competition framework, competition authorities still lack the necessary professional and financial resources to perform all their activities.

Two areas of action seem particularly promising for the near future: 1) co-operation with procurement bodies to enhance the prevention and detection of bid rigging; and 2) market studies to improve the quality and credibility of advocacy initiatives, while boosting and better orienting competition enforcement.

In the face of increasingly complex and supranational competition infringements, regional and international co-operation, as well as constant training, appear necessary to respond effectively to future challenges.

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