Competition Impact Assessment

The objectives of competition impact assessment are:

• increased competition among both suppliers and buyers;
• maximizing social welfare ;
• restriction of state intervention in the economy;
• reduction of excess government regulation.

According to economic theory, in the process of competition, suppliers challenge each other to “win consumers by offering them more favorable conditions, for example, by lowering prices, improving the quality or bringing their offers closer to the wishes of consumers, which provides consumers with significant benefits” (Economics of Regulation and Antitrust, 2007).

Both suppliers and consumers benefit from competitive rivalry, while achieving maximum social welfare, and there are no market distortions that occur, for example, with state subsidies to individual firms or creating an exclusive position for them. In a competitive market situation, suppliers are forced to take a number of actions, such as advertising their products, investing in new and better production facilities, providing discounts to attract consumers and developing new, more advanced and diverse products in the R&D process, which helps expand specific markets and economic growth in general.

Competition Impact Assessment can be used by government for [OECD, 2007]:

1. general assessment of existing regulatory legal acts (in the economy as a whole or in specific industries);
2. evaluation of draft new regulatory legal acts (for example, in the framework of regulatory impact assessment);
3. developing, reviewing, changing competition policies by government agencies, such as ministries that draft laws, policies, or competition agencies, that evaluate their impact on competition.

Currently, a unified methodology for assessing the impact on competition has not yet developed. In different countries, the assessment differs according to the subject of the assessment (who conducts the assessment: the ministry, agency, commission, involved appraisers, etc.), the subject of the assessment (what is assessed: national, regional, local legislative acts, new or existing regulations and etc.), the timing of the assessment , the degree of mandatory assessment for legislative acts, the depth of assessment, etc. At the same time, international competition impact assessment standards are being developed, which offer unified methodologies for assessing the impact of government policies on the competitive environment (OECD, 2007).

Despite the existing country differences in the methods for assessing the impact on competition, several general stages of the assessment can be distinguished. First of all, to assess the direct and indirect impact on the competitive environment, it is necessary to find out to which markets (specific goods or services) the estimated norms of state regulation are related. When markets are defined, it is necessary to assess the possible impact of regulatory standards on the level of competition in a given market.

For conducting such assessments, for example, in the United Kingdom , a special guide has been developed for the assessment of the impact on competition (Completing competition assessment in Impact Assessments). It proposes to answer 4 questions, based on the content of the assessed regulatory standards:

1. Do new regulations lead to direct restrictions on the number of suppliers? , i.e. ....

• whether exclusive rights are granted for individual manufacturers;
• procurement for state and municipal needs from a single supplier;
• creating a licensing system for entering the market;
• limitation of the number of suppliers in the market.

2. Are there any indirect restrictions on the number of suppliers? , namely...

• a significant increase in costs of newcomers compared to long-established firms in the market;
• a significant increase in the costs of entering and exiting the market;
• limited presence in the small business market.

3. Are there any restrictions on the ability of market participants to compete with each other? , namely...

• establishing control over the prices of goods and services;
• establishing requirements for the characteristics of goods and services (for example, a minimum quality standard);
• restrictions on the scope of innovation for the development and production of new goods and services;
• determination of geographical boundaries for suppliers and channels for the sale of goods and services;
• significant restrictions on product advertising;
• imposing restrictions on the production process itself or on the choice of the organizational structure of the enterprise.

4. Are incentives for active competition between market participants reduced? This situation is possible if:

• industries or individual firms are excluded from the regulation of the general competition law;
• a support regime for copyright and intellectual property rights is established;
• a requirement is established for the exchange of information between market participants or the publication of data on prices, costs, production and sales;
• Consumer costs for changing suppliers increase.

If you answer yes to any of the questions at the stage of preliminary assessment of the impact on competition, the regulatory standards under consideration should be subjected to a deeper assessment, to which it is recommended that experts be involved.

An in-depth competition impact assessment should include the following elements:

• clear identification of tasks and political measures;
• the formulation of alternative regulatory standards to achieve the same result;
• assessment of the competitive consequences of each alternative;
• matching alternatives.

If the results of the study indicate the possibility of weakening competitive rivalry in the market of goods (services) under consideration, the developers of regulatory standards should look for the least anticompetitive alternative that can achieve the same goals as the estimated regulatory standards.

1. Economics of Regulation and Antitrust, 4th Edition / ed. by W. Kip Viscusi, Joseph E. Harrington and John M. Vernon, 2007.
2. Competition Assessment Toolkit OECD (Russian version), 2007 .
3. Avdasheva S.B., Alimova T.A., Popovskaya E.V. “Statistics of production concentration: new opportunities for analyzing competition in Russian markets // Statistics Issues, 2005, No. 5. P. 18-26.
4. Avdasheva S.B., Alimova T.A., Lukovnikova E.V., Popovskaya E.V. The order of analysis and assessment of the competitive environment in commodity markets: the possibility of using statistical data // Statistics Issues, 2005, No. 5. P. 3-8.
5. "Procedure for the analysis and assessment of the competitive environment in the commodity market" (approved by order of the Federal Antimonopoly Service of Russia of April 25, 2006 N 108).
6. Shkardun V.D., Akhtyamov T.M. Methods of researching competition in the market // Marketing in Russia and abroad, 2000, No. 4.
7. Public competition assessments (Australian Competition and Consumer Commission)
8. Presentation of the "Toolkit for assessing the impact on competition" in the FAS (inaccessible link) (December 2007).
9. Completing competition assessments in Impact Assessments: Guidance of Office of Fair Trade, UK, 2006 .