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Regulating a free market

CAIRO: Egypt s competition law was first drafted in 1995. Ten years later, after numerous revisions and modifications, the law was finally passed by parliament in February of last year. Mona Yassine, who has been charged with establishing and heading up the new authority that will implement the law, discusses her progress and plans for …


CAIRO: Egypt s competition law was first drafted in 1995. Ten years later, after numerous revisions and modifications, the law was finally passed by parliament in February of last year. Mona Yassine, who has been charged with establishing and heading up the new authority that will implement the law, discusses her progress and plans for the authority.

Yassine is the chairwoman of the Competition Authority, an independent organization under the umbrella of the Ministry of Trade and Industry, governed by a board of 15 representatives from the public and private sectors as well as civil societies, trade associations and academia. The background [of board members] is different, representing different activities in the market, says Yassine.

The authority is essentially the regulator of the rules outlined in the competition law. These rules, Yassine explains, are necessary to support the transition to a more open economy. During this transition, the government extricates itself from the investment and running of companies and acts instead as a regulator of private-sector activity.

The law defines three infringements: cartels, abuse of dominance and actions that prevent new market entrants or push competitors out of the market. A company is considered dominant if it controls at least 25 percent of the market for a particular product or service. The violations generally relate to controlling prices or production quantities and bullying smaller players.

Competition laws have a historic international precedent and have already been implemented in over 100 countries. This competition law has been in other countries for over 50 years; it s a long-term exercise, says Yassine. The idea is that [the law] has been done before – the study of the market, the evidence for abuse of dominance or position – all that is not new, so we re not starting in the dark.

Laws in many countries have been further refined in recent years to increase the independence and power of competition authorities. Some authorities themselves enforce the law through their own tribunals. In Egypt, however, the Competition Authority relies on the court system for enforcement.

A case is prompted by complaints from businesses, enquiries from the government or findings from within the authority. If the authority decides to proceed with the investigation, a case on the economic and legal aspects of the violation is prepared and presented to the board along with a proposed remedial action. The board decides by a majority vote whether to proceed and, if positive, the remedial action is suggested to the accused company.

The accused company, however, is not obligated by law to accept the remedial action. If it refuses, then the Prime Minister or the relevant minister in charge will decide whether the case should proceed to court.

The duration of a case depends on its complexity and on the availability of information. Yassine explains that the process takes up to two years in other countries, but thoroughness in research and preparation is important because of the side-effect any action can have on the market. At the end of the day, your decision certainly will have an economic impact, says Yassine.

Objectivity in assessing infringements is critical to the authority s credibility. While Yassine says that the law clearly defines violations, a well-trained team is necessary to research and analyze the market. First, you have to identify the market share, Yassine explains. You have to identify the number of players in the market. And you have to have the evidence of this abuse of dominance.

The research and preparation of a case requires a team of experts with different backgrounds, including economists, lawyers and accountants; in addition to administrative staff, the authority currently has 10 technical experts. Based on the experience of other countries, Yassine expects that authority will grow to 70 to 80 employees in the long run, of which 75 percent will be technical experts.

The allotment of experts varies amongst countries and must reflect the nature of the market. If you look at different countries, they have different applications, says Yassine. For example, in the U.K., you have more economists than lawyers. In Switzerland, you have more lawyers than economists. In some countries, they re equal.

Since there is no consistent formula to determine the number of experts in each field, Yassine plans to begin with a small team which will grow based on demand. What I m trying to do is have a very lean organization, says Yassine, and it will develop around the market requirements.

The organizational structure of the technical team should also reflect the market. For example, the technical team may be grouped around sectors or based on the type of violation. I can t have this division done from the start, Yassine explains, but eventually we will create the sectors as we go. This is what I learned; I can t put an organization today that will fit the future, but you have to make it in such a way that it can develop as we go.

The authority currently has a specialist from the United States Agency for International Development visiting for three months who assists with determining the organizational structure and training staff. Other donor agencies have also supported training and Yassine plans to send some staff abroad to experience other competition authorities.

The staff will ultimately determine the success of the authority. The organization will be as good as the people it hires, says Yassine, and the emphasis is on the people it hires. It has to be fulfilling the targets or the job that we have. You don t hire numbers, but you hire quality.

The new body also relies on other branches of the government to fulfill its mandate. Since anti-trust cases are complex and require a technical understanding of economic issues, training will therefore be provided to judges on the competition law and its economic rationale. The authority will also work closely with other regulators including the Telecommunications Regulatory Authority and the Electric Utility and Consumer Protection Regulatory Agency.

The primary day-to-day activity of the new authority will be to handle complaints. It will also advise the government on price controls and may, through its own research, identify industries in which competition is waning and recommend corrective measures to the government.

The authority is in the process of writing the procedures for receiving and handling complaints, and hiring and training are underway. Yassine hopes that the authority will be fully-functional and begin handling complaints by May, although the final date of operation will be determined by the board. The decision will be of the board once they feel comfortable that we have the right organization to handle the cases, says Yassine.

Yassine has visited the U.S. and several countries in Europe to prepare for her new job. She brings with her many years of experience in banking; Yassine was formerly the Vice Chairwoman of Banque du Caire.

Topics: FJP

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https://www.dailynewsegypt.com/2006/02/08/regulating-a-free-market/
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