The Promotion of Competitive Neutrality by Competition Authorities

Building on the 2021 OECD Recommendation on Competitive Neutrality, this paper describes the main types of distortive measures jurisdictions may adopt and the tools available to competition authorities in order to address them. Section 2 of the paper focuses on how competitive neutrality may be distorted in six fields: the competition law framework, which may include exclusions that benefit certain companies and may be enforced in a discriminatory manner; the regulatory framework, which may grant some market players preferential market access or special terms for operating in the market; public procurement legislation and processes, which may favour SOEs, domestic bidders or incumbents (and, in some cases, SMEs); public support, which may grant unfair financial advantages to selected companies; exclusive and special rights – usually granted for the provision of public services – which may create undue advantages in the way beneficiaries are selected, the rights and privileges that are attached to the public services, and the compensation paid; and state activism, in particular, the creation or favouring of national champions. Section 3 of the paper focuses on the tools that competition authorities have to address competitive neutrality violations in these fields. In essence, authorities have three sets of tools. The first set of tools are those aimed to stop legislative and administrative acts that distort competitive neutrality. The extent of competition authorities’ powers varies across jurisdictions. Competition authorities may act as direct enforcers (directly removing the anti-competitive act) or they may challenge the act before a court (which can then remove it). The second set of tools allows competition authorities to review legislation and provide advice to government on potential competition implications of legislation and reform initiatives. This is typically done in one of three ways: mandatory regulatory impact assessments, in which the assessment is conducted as part of the policy making process; ad hoc assessments of laws and regulations, in which an analysis is carried out on a case-by-case basis, in relation to both proposed and existing laws and regulations; and market studies or sector inquiries, which are large scale resource-intensive exercises in which competition authorities only engage if there is some prima-facie case for concern. The third set of tools are those dealing with the control of public support measures. Most competition law regimes around the world do not contain specific provisions to address public support measures and so most competition authorities have a limited role in enforcement. Still, some authorities may rely on more general powers allowing them to intervene against anti-competitive state interventions. In addition, some competition authorities have specific advocacy roles in relation to subsidies, set out in legislation. Finally, competition authorities may support governments by drafting guidelines for public bodies, issuing opinions, and taking on a monitoring function.