In The Wealth of Nations, Adam Smith said the following about competition: "In general, if any branch of trade, or any division of labour, be advantageous to the public and more general the competition, it will always be the more so. [And] Consumption is the sole end and purpose of all productions; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer".
It is most fundamental and universal fact that we reap what we sow. Even if we sow good seeds, weeds will still grow. We, therefore, need tools to uproot weeds before they take over the garden or up around the house. There is a common misconception that antitrust or competition laws are anti-economic or anti-business legislation or they are in contradiction of the basic principles of free economy, enterprising and liberty. However, this is not the case. All laws have their blind spots. Nevertheless, well-crafted competition laws act as antidotes for economic disruptions caused by economic actors in a free market system. Therefore, governments are generally pro-business, however, in the interest of businesses themselves and consumers, they ought to intervene with policies and statutory instruments.
The United States is the most popular champion of laissez-faire. A closer look at the US economy suggests that its economic system is a fusion of best features of a free market and those of a planned or command economy. At the heart of US economic system or its core economic value is "free competition". The country has a deeply held independent belief that in the longer run "free competition" brings real value for business and welfare for the consumers and overall progression of the social fabric and economic system.
In pursuit of the aforesaid objectives, the US Congress passed the Sherman Antitrust Act in 1890.This was the first codified instrument which declared cartels and abuse of monopoly power or any other combination in restraint of trade as a felony (a crime). Subsequently, the law was supplemented with other legislations and policies developed by the US Department of Justice (the DOJ) and the Federal Trade Commission (an antitrust arm of the DOJ charged with enforcement advocacy of antitrust or competition laws).
Over a century, the DOJ, the US judiciary and market economists have kept the regime up. Even a cursory look at the evolution of the US antitrust enforcement regime would suggest that the law has played a key role in the development of every sector of the economy and market competition through discouraging anti-competitive conducts. Today, it can safely be said that antitrust lawyers and market economists love competition as it is an empirical fact that monopolies and other kinds of anticompetitive behaviours are the antithesis of competition, enterprising, innovation, and liberty.
"Market competition is a situation in which [businesses] or sellers independently strive for buyers' patronage in order to achieve a particular business objective, for example, profit, sales, market share," according to the World Bank (1999). And competition law protects those interest on both ends of the spectrum: producers and consumers. Hence, competition laws are pro-business and pro-consumer legislation. In essence, competition laws pursue and advocate: let the market forces decide the winners and losers. As long as a firm's growth is based on its independent decision making, smart business plans, and superior efficiencies, it may grow as big as it can, specifically with regard to its market share, high profits, and consumers' loyalty. On the contrary, when businesses collude or abuse their market power, the government (through autonomous and independent competition law enforcement agencies) must interfere and restore the market situation.
Competition laws are based on "prohibitions" providing for "what not to do" instead of "what to do". The major prohibitions include a prohibition on abuse of dominance or market power, cartelisation and other anticompetitive activities in the market. Anticompetitive practices by businesses are like weeds in any free, fair and competitive economy. Governments need tools and technicians to uproot them in a timely manner, not in a clandestine fashion. Bill Gates, the co-founder of Microsoft Corporation (one of the most prosecuted companies for its monopolistic practices) said: "antitrust (or competition law) is the way that the government promotes markets when there are market failures". Earlier before, in Spectrum Sports, Inc. v. McQuillan (1993), the US Supreme Court observed that "The purpose of the Sherman Act is to not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against the conduct which unfairly tends to destroy competition itself".
The competition regulation, is, therefore, a form of government intervention or an instrument of promoting "competition on merit" in the interest of businesses, the welfare of the consumers and the overall economy. Competition laws and policy are a reflection of the governments' commitment to its citizens, which, in turn, result in economic prosperity and other social stability.
The concept of "competition on merit" as stated in a report by the OECD is "to distinguish conduct that harms competition from conduct that advances it" and "to protect competition, not competitors". Therefore, competition agencies around the world have one common and clear mission: "to protect competition", which yields in fostering of a competitive market structure, better protection of customers' interest in the form of lesser prices, more choices, innovative products and services, and stronger democratic system by disbursement (instead of concentration) of economic power. It is important to understand that in the design of competition law, customers could be other business entities doing business with others as well as the end-consumers.
In Pakistan, the notion of free-market competition finds its genesis in Article 18 of the Constitution of Pakistan 1973. Article 18 provides that it is the fundamental right of every citizen to engage in any lawful profession or occupation and to conduct any lawful trade or business. However, since no right is absolute, Article 18(2) provides that (a) the government may regulate any trade or profession by a licensing system and (b) regulate any trade, commerce or industry in the interest of free competition. To ensure freedom of trade, commerce and industry the government has enacted several laws, chiefly in the areas of telecommunication, oil, and gas, electricity, electronic broadcast, etc. To strengthen free competition and consumer protection, the government has promulgated the Competition Act of 2010 which mandates the Competition Commission of Pakistan to ensure free competition in all spheres of commercial and economic activity and to enhance economic efficiency and to protect consumers from anticompetitive behaviours. It is a pro-business and pro-consumer legislation pursuing long-term objectives of enhanced economic efficiency by preventing anticompetitive practices in the market. It is the fundamental right of every citizen to benefit from free market enterprising and competitive market system.
Competition law is a great combination of well-established legal and modern economic principles. Its legislative scheme, which is more or less the same around the world (save certain procedural differences), is dynamic in nature and is capable of adopting the changes in market condition without compromising on its settled objective i.e. protection of competition and consumer welfare. The ongoing phenomenon of globalization, free trade, and boundless internet economy has reinforced the importance of having a sound competition policy to compete in the in the comity of nations.
To conclude, competition law and free market system are the two sides of the coin. It is empirically proven fact that market competition is the backbone of the economy and one of the best tools available to protect the interest of consumers, be it a business or end-consumers. Protecting consumers and promoting free enterprising is an important job assigned to the competition enforcement agencies.
DISCLAIMER: I would like to note that every case has a different story to tell. Therefore, a note of caution is necessary. The above observations about competition regulation are strictly personal.
(The writer is former Member (Legal, Cartel, Trade Abuse Competition Policy & Research) at the Competition Commission of Pakistan and currently Partner at Irfan & Irfan, Attorneys at Law)