Final Report - World Trade Organization

competition law doesn’t frown so much on market
power in the ‘traditional’ sense, but rather on
‘personal’ or ‘family’ market power. 92 The existence
of ‘traditional’ market power is also prohibited, but
the law provides that such power is justified if it
contributes substantially to efficiency, or technological
progress or the growth of exports. 93 The question is
whether this approach still adequately reflects the
needs of Pakistan or the current economic reality.
Dominance
As stated above, all of the other countries take a
two-step analysis in assessing abuse of dominance.
First, they have to establish that a position of dominant
market power actually exists. In order to do this the
competition authorities must first define the ‘market’.
This market is not simply the entire world-market
for all products. The authorities must determine what
is the ‘relevant’ market. The relevant market has,
mainly, two dimensions: a ‘geographical’ dimension
and a ‘product’ dimension. 94
The geographical market could generally be the entire
territory of a country or any part thereof. For some
purposes it could even extend beyond the territory
of a country. 95 In Sri Lanka, however, in order to
determine market power (the existence of a
monopoly) the supply of goods or services by one or
the same person has to be of a prescribed percentage
of all those goods supplied in Sri Lanka. 96
To define the ‘product’ dimension the FTC Act takes
a similar approach. The products and services have
to be identified and gazetted by the Government to
fall under the purview of the law’s monopoly rules. 97
If a product is not detailed in the Gazette the Fair
Trading Commission cannot intervene. In such cases
the Commission does not even get around to applying
the second step. This test requires that the
Commission has to prove that the monopoly is against
the ‘public interest’. 98
The laws of the other countries (Kenya, India, South
Africa, Tanzania and Zambia) do not have such clear
description of the ‘relevant’ market. India’s new
Competition Act is the only competition law (although
not yet in force) that provides the competition
authority with specifications as to which factors to
take into consideration when determining the relevant
market. 99 In other 7-Up countries these factors will
simply have to evolve on a case-by-case basis in
order to do justice to both the flexibility needs of their
economies and the need for reliability of the law for
the enterprises.
After the relevant market (both geographical and
product) is determined, the next step is of course to
find out whether or not a dominant position of market
power exists. All these project countries have adopted
a ‘behavioural’ approach 100 towards dealing with
monopolies or dominant enterprises. Nevertheless,
in analysing the existence of dominance they still rely
heavily on the ‘structural’ approach, since the major
factor to take into consideration is the size of an
enterprise’s market share.
The South African law stipulates that a firm is
considered to be dominant if its market share is at
least 45 percent. If the firm’s market share is between
35 and 45 percent there is a presumption of
dominance that is to be rebutted by the enterprise in
question. The law provides that an enterprise can
still be dominant if its market share is lower than 35
percent, but in that case the onus is on the competition
92 For establishing the existence of such power the MRTPO sets a threshold that considers an undue concentration of economic power
to exist if the assets of an undertaking amounts to or exceeds 300 million Pakistani rupees. Public companies are excluded from this
threshold. See CUTS, 2002, Competition Regime in Pakistan - Waiting for a Shake-Up, section 4.2.3 for more on this.
93 CUTS, 2002, Competition Regime in Pakistan - Waiting for a Shake-Up, section 4.2.4.
94 The relevant market can also have a ‘functional’ and ‘temporal’ dimension, but since none of the 7-Up countries include these in
their analysis, these dimensions are not dealt with here.
95 See infra section 4.3.3 on mergers and acquisitions and section 4.3.4 on extra-territorial jurisdiction.
96 This ‘prescribed’ percentage is set by the Minister for Internal and International Trade and Food and is considered a rather arbitrary
cut off point that varies between 40 and 50 percent. Also see CUTS, 2002, Towards a New Competition Law in Sri Lanka, chapter
4 for more on this. The Sri Lankan FTCA also covers monopsonies since a monopoly is also deemed to exist if a prescribed
percentage of all supplied goods or services are supplied to one and the same person. FTCA, Clause 12.
97 Currently there are 47 identified and gazetted products and services with prescribed percentages applicable to section 12 of the FTCA.
98 See CUTS, 2002, Towards a New Competition Law in Sri Lanka, section 4.1.1 for more on this.
99 Indian Competition Act, 2003, Clause 19 (6) and (7).
100 Under this approach monopolies or dominant positions are not prohibited per se, but should refrain from certain business practices
that renders them against the public interest.
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