Competition in/by the Public Sector 2009

"The Pros and Cons of Competition in/by the Public Sector" was the theme of the volume and the international seminar in Stockholm on the 13th November 2009. Eight invited speakers gave presentations on the topic.

The Swedish Competition Authority Director General Dan Sjöblom opened the seminar by referring to the new legislation that will be put in place in Sweden by January 2010.  The proposed amendment to the Swedish Competition Act will address competition issues that arise when the public sector competes with private undertakings. He stated that the Swedish Competition Authority will make the most of the preventive effect of the law and be clear on priorities. The moderator, Mattias Ganslandt of the Center for European Law and Economics continued by stressing that the topic of the seminar is important and difficult; it is not a trivial task to design rules.

The first speaker, Gianni De Fraja from University of Leicester and University of Rome "Tor Vergata", went through the economics of mixed oligopoly. He studied the interaction between private and public agents in three different kinds of markets. Traditional goods markets, banking and welfare state services. It turned out that the results are not always what one might have thought. The discussant, Knut Eggum Johansen of the Norwegian Competition Authority, called for examples from reality and gave some from Norway.

D. Daniel Sokol from University of Florida Levin College of Law made two key observations, the first being that good corporate governance for state-owned enterprises can minimize bad management. The second that competition policy can reduce distortions of state-owned enterprises. He noted however that we lack empirical studies in order to verify the observations, which is a challenge for academia. In his role of discussant, Preben Pettersson of the Danish Competition Authority talked about the European Union approach to state-owned enterprises when it comes to competition policy. Ownership is not an issue, what matters is market participation i.e. whether the undertaking conducts an economic activity or not.

The next speaker, Jakub Kałużny from ESMT Competition Analysis, conducted a thought experiment: applying European Union state aid rules on state-owned enterprises. In doing so he noted that the total welfare standard is used in state aid cases as opposed to the consumer welfare standard in competition law cases. This could lead to different conclusions when analyzing a case. Kate Collyer of the Cooperation and Competition Panel, UK, who commented on the presentation, noted that economic models of mixed oligopoly depend on assumptions on the objective function of the state-owned enterprise. In reality it can be hard to grasp what the objectives of the state-owned enterprise are. The question her authority poses in order to analyze the issues is: is the practice in question in the best interest of patients and taxpayers?

Michael Steinicke from University of Southern Denmark went out on a search for the correct market price under state aid rules. The market price is needed to assess what constitutes state aid. He suggested looking at the public procurement rules as a way to finding an answer. The discussant, Joseph Wilson of the Competition Commission of Pakistan, noted that observing an abnormally high price in a public procurement may not always constitute state aid. The real reason may be a cartel or corruption.

The contributors of the Pros and Cons 2009.
The contributors (back row, from the left): Joseph Wilson, Jakub Kałużny,  Arvid Fredenberg, D. Daniel Sokol, Mattias Ganslandt, Mikael Steineke, Gianni De Fraja, Knut Eggum Johansen, Preben Pettersson, Dan Sjöblom and Kate Collyer.

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