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Governance

OECD Competition Assessment Toolkit

Protocols

Governments are charged with establishing and enforcing laws and regulations that promote and protect fair public policies. These obligations can be fulfilled by several means and policy options including laws and regulations that increase competition.  This increased competition can benefit a country's - or industry's - economy through overall economic performance, which leads to new business opportunities, and reduces the cost of goods and services to consumers.

The Organization for Economic Co-operation and Development (OECD), - an excellent source of governance related guidance documents, toolkits or other resources- created the  OECD's Competition Assessment Toolkit to assist governments in fulfilling their charge of promoting and protecting fair public policies .

The toolkit is designed to help governments identify unnecessary regulatory restraints and develop less restrictive alternatives that achieve given objectives without limiting constructive competition. It can be used to evaluate existing or new laws and regulations - across a country's economy or in a sector such as the cotton industry.

A full competition assessment includes: 1) clearly identifying policy objectives, 2) identifying alternative regulations that would achieve the same objectives, 3) evaluating the competitive effects of each alternative, and 4) comparing the impacts of each alternative. Within the toolkit there is also a Competition Checklist that serves as a strong starting place as it helps entities to screen for laws and regulations that have the potential to restrain competition so they can focus on areas of most concern. The checklist and toolkit focus on identifying laws or regulations that could potentially have one of the following three effects: 

1.     Limit the number of suppliers by:

  • Granting exclusive rights to a supplier
  • Establishing license, permit or authorization processes that are stricter than necessary for consumer protection
  • Limiting the ability of certain types of suppliers to engage in the business, often due to geographic relevance or supplier size
  • Creating high entry costs thus limiting entry of small or medium sized companies
  • Creating geographic barriers for suppliers to provide goods or services, invest capital or supply labor such as limiting the flow of goods or services across jurisdictions

 

2.     Limit the ability of suppliers to compete by:

  • Controlling or significantly influencing the prices for goods or services - minimum prices prevent low-cost suppliers from providing better value to consumers while maximum prices can reduce incentives for suppliers to innovate or improve quality
  • Limiting freedom of suppliers to advertise or market themselves that can lead to false or misleading advertising or are so broad they unduly restrict competition
  • Setting quality standards above what consumers require and that advantage certain suppliers such as requiring specific technologies that are only available or affordable to certain suppliers
  • Raising costs of production for some suppliers relative to others such as "grandfather clauses" that exempt existing suppliers from certain regulatory or technology requirements

 

3.     Reduce the incentive of suppliers to compete vigorously by:

  • Creating a system of self-regulation or co-regulation as this can often result in the creation of anti-competitive impacts
  • Requiring information on supplier outputs, prices, sales or costs to be published which could be improperly used by large suppliers to monitor - and possibly undercut - competitors' market behavior
  • Exempting the activities of a particular group of suppliers from general competition law
  • Reducing mobility of customers between suppliers through "switching costs"

While this toolkit is intended for governments' use, it can be applied by other entities that have a vested interest in government trade policies, such as the cotton industry or some of its members. Alternatively, industry members that feel they are disadvantaged by conditions of anti-competition, especially in OECD countries, can use the toolkit as a framework to work with a government to address their concerns.

Question

Is the toolkit useful in the context of the cotton industry? If so, should its use be encouraged?

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