Institutional Foundations for Economic Legal Reform Transition Economies : The Case of Competition Policy and Antitrust Enforcement

Since the 1970’s, there has been a progression toward market processes in nations once committed to comprehensive central economic planning. Multinational donors and individual Western countries have expended substantial resources to advise these nations about legal reforms designed to promote this progression. Despite enormous uncertainty and upheaval in the transition from planning to markets, economic liberalization remains the strategy of choice for boosting growth. Competition policy laws prohibiting various restraints of trade and creating public or private rights of action to enforce such prohibitions are common elements in the transition environment. This article examines questions about the proper scope of form of competition policy in transitional markets and about the design of legal reforms in emerging markets generally. While the proper approach to economic development in emerging markets requires analysis of a number of issues, such as identifying priorities in conditions of scarcity, developing supporting institutions, performing a careful initial assessment of existing condition, and determining the rate of change, the first issue to consider is whether competition policy — which encompasses the policy instruments by which a nation can promote business rivalry — deserves a high priority. This requires defining “competition policy.” Most agree that transition economies should take affirmative measures to increase business rivalry as a tool for promoting growth and that the creation of an institution to advocate pro-market solutions, including antitrust enforcement, is appropriate. However, there is disagreement over whether competition policy in emerging markets should involve the full panoply of antitrust commands found in mature competition policy systems. Careful pre-reform analysis of existing conditions in the host country and rigorous attention to how the host country will implement nominal competition policy commands is necessary for competition policy law reform to be effective. Where statutes in transition countries dictate enforcement of mature competition policy systems, there is a significant mismatch between national implementation capabilities and the demands of new competition laws. This mismatch must be confronted to decide about the correct measure of completeness and complexity in transition economy competition policy systems. Emphasis on institutional capability has significant implications for technical assistance. The successful development of competition policy institutions in transition environments requires close attention to enhancing the capacity of a wide variety of institutions, such as universities, research institutions, professional societies, and courts. Extensive, sustained contributions from foreign governments in the form of human and physical capital is the key to setting the proper institutional foundation and encouraging sensible application of new laws