Final Report - World Trade Organization

In most of the 7-Up countries the levels of market
concentration were very high in many industries when
the competition law was introduced. In Pakistan,
for example, a few families controlled a significant
chunk of industrial assets and the average four-firm
concentration ratio was found to be around 70 per
cent for 82 industry groups. The situation was similar
in India and South Africa where large conglomerates
with interlocking ownership structures, cross-holdings
etc. made the distribution of industrial assets very
unequal. These ‘initial conditions’ may have tilted
the balance in favour of the ‘structural’ focus.
Overall, the working of the competition authorities in
the 7-Up countries is based on the ‘structural’
understanding of ‘competition’ efficiency, market
power etc; the behavioural aspects though considered
are not accorded primacy. With the emerging focus
on ‘conduct’ in most developed countries, the
competition authorities in developing countries may
also need to change their criteria of assessment or
use the gateways more often. 124 However, a
movement from ‘structure’ to ‘conduct’ in the
implementation of competition policy will require a
significant increase in the capacity of the competition
authority. This, however, is lacking in most developing
countries, including the 7-Up countries, and will
remain a challenge for developing countries with
limited resources.
4.3 Cross-Border Issues
With the progressive opening up of their trade regimes
developing countries as well as developed countries
are now required to deal more and more with the
influence of actions that take place or originate
outside their borders. Their ability to deal with these
cross-border competition concerns is therefore of
vital importance to the level of competition in their
domestic markets. As many other government
policies (such as trade and investment or
disinvestment policies) can influence the level of
competition in a market, the competition authorities
have to have adequate tools to deal with a wide array
of issues.
The most important tool the competition authorities
in the project countries have are the competition laws
that all seven countries have enacted. Broadly, these
laws deal with three main subject areas:
(i) restrictive trade (business) practices; 125
(ii) abuse of dominance or monopoly power; 126 and
(iii) mergers and acquisitions. 127
There is no difference whether these acts are
international or domestic; as a matter of subject the
law covers them. The problem—when it comes to
dealing with cross-border issues vis-à-vis domestic
competition concerns—lies in the realm of
‘jurisdiction’.
4.3.1 Concept of jurisdiction
The whole question of jurisdiction is complex.
Jurisdiction is a vital and indeed central feature of
state sovereignty, for it is an exercise of authority
which may alter or create or terminate legal
relationships and obligations. It may be achieved by
means of legislative action or by executive action or
by judicial action. In each case, the recognised
authorities of the state as determined by the legal
system of that state perform certain functions
permitted to them which affect the life around them
in various ways.
In most democracies, parliament passes binding
statutes, the courts make binding decisions and the
administrative machinery of the government has the
power and jurisdiction (or legal authority) to enforce
the rule of law. These differences, particularly
between the capacity to make law (the prescriptive
jurisdiction) and the capacity to ensure compliance
with such law (the enforcement jurisdiction), are basic
to an understanding of the legal competence of a
state. 128
It follows from the nature of the sovereignty of states
that while a state is supreme internally, that is within
its own territorial frontiers, it must not intervene in
the domestic affairs of another nation. International
law tries to set down rules dealing with the limits of
124 In Pakistan, for example, an acquisition was evaluated and found to constitute unreasonable monopoly power. But it was allowed
because the parties could justify the monopoly on the promise of increased efficiency, transfer of technology and increased exports.
125 Ibid, section 4.2.1.
126 Ibid, section 4.2.2.
127 Ibid, section 4.2.3.
128 Malcolm N. Shaw, International Law, fourth edition, Grotius Cambridge University Press 1999, p. 452.
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