Final Report - World Trade Organization

promulgated in 1988 had ‘control and display’ of
prices as one of the key areas. This was
subsequently dropped. The case was similar in Sri
Lanka. In Zambia, reduction of inflation levels
remains one of the objectives of competition law. In
countries like India where price control was not
explicitly mentioned as an objective in the competition
law, other laws and regulations have been created to
perform this task in different sectors like
pharmaceuticals, food and a variety of packaged
commodities etc. Such institutions exist(ed) in other
countries as well.
Apart from price control, several other developmental
needs get reflected in the objectives of competition
laws in the 7-Up countries. Zambia, for example,
hopes to encourage innovation, ensure fair distribution
of income and reduce unemployment through the
competition law. The criteria, provided in the
Tanzanian Act for evaluating mergers, explicitly state
that the impact of mergers on employment (capital
vs. labour intensive production), competitiveness in
export markets and ability to face import competition
needs to be considered.
The adoption of competition policy and law is often
a response to existing market realities. One of the
effects of the liberalisation process that the 7-Up
countries have embarked upon has been an increase
in the competitive pressures faced by their domestic
firms. In the pre-liberalisation days many of these
economies had seen significant unrelated
diversification by large firms. The inefficiencies
resulting from such diversification could only be
sustained due to protection. Once the competitive
pressures increased there was a need for corporate
restructuring.
As stated above, in India, South Africa and to an
extent Kenya, this has led to some kind of
consolidation with firms opting out of unrelated areas
and focusing on certain core activities, as well as to
an increase in the number of mergers and acquisitions.
One of the objectives of competition policy and law
could therefore be to properly regulate this process.
The structure of the market has evolved in such a
way that there is a need to redress this by
strengthening the proper functioning of market forces.
In Pakistan, for instance, it was the history of its
corporate sector’s growth during the 1960’s that made
competition policy interventions essential. The
problem was that growth led to the concentration of
wealth in the hands of twenty-two families. Therefore,
the main objective of the competition law that came
into force in 1971 was to prevent the undue
‘concentration of economic power’. 59
A similar situation prevailed in South Africa, where
the five main (white owned) conglomerate groupings
accounted for 83.7 percent of the Johannesburg Stock
Exchange’s (JSE) market capitalisation in 1994. 60
One of the objectives of the new South African
Competition Act that was passed in 1998 and came
into force in 1999, was to further the increase in the
spread of ownership, especially amongst historically
disadvantaged persons. In fact the South African law
makes the most striking statement of development
needs as objectives of competition policy:
a) To promote the efficiency, adaptability and
development of the economy;
b) To provide consumers with competitive prices
and product choices;
c) To promote employment and advance the social
and economic welfare of South Africans;
d) To expand opportunities for South African
participation in world markets and to recognise
the role of foreign competition in the Republic;
e) To ensure that small and medium-sized
enterprises have an equitable opportunity to
participate in the economy; and
f) To promote a greater spread of ownership, in
particular to increase the ownership stakes of
historically disadvantaged persons. 61
59 CUTS, 2002, Competition Regime in Pakistan - Waiting for a Shake-Up, page 19.
60 1994 witnessed the first democratic election in South Africa and is therefore taken as a benchmark. The ANC-led government has
since undertaken a broad legislative programme to address the legacy of apartheid. The top five’s share in JSE market capitalisation
has dropped to 54.7 percent in 1998. See CUTS, 2002, Competition Policy & Law in South Africa - A Key Component in New
Economic Governance, chapter 2, for more on this.
61 Section 2 of No. 89 of 1998: Competition Act, 1998, published in the Government Gazette of the Republic of South Africa, Vol. 400,
Cape Town, 30 October 1998.
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