25 November 2004

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Competition law: recent developments and the way forward

Competitiveness and Communications Minister Censu Galea addresses Monday’s conference on competition law organised by the Consumer and Competition Division

Malta has a free market economy. A market economy is one where businesses are free to operate on the market according to their own independent economic decisions in competition with one another without any government intervention. It is now almost universally accepted that optimal economic efficiency can only be achieved in a free market economy. Competition law and policy in Malta are an expression of the principles underlying a free market economy.
Competition law and policy aim to safeguard and to enhance competition in the market-place. As Minister for Competitiveness I certainly agree that genuine competition is the most effective way to induce companies to keep costs low, to be efficient and to innovate and hence to offer customers a good deal, the best product or service at the best price. The beneficiaries of effective competition are the traders themselves and the consumers.
It follows that competition law provides a legal order within which the interests of traders and consumers are protected. Thus, we find that competition law prohibits:

• cartels, i.e. agreements or concerted practices between competitors whereby a common strategy is adopted, for instance on price, in order to eliminate the risks of competition. Such agreements put other traders not party to the agreement at a significant disadvantage and they deprive consumers of the benefit of competition;
• abuse of dominance, whereby smaller traders and consumers find themselves at the mercy of powerful companies abusing of their strong position on the market, for example by charging excessive prices.

On the other hand, competition law promotes certain behaviour on the market which is beneficial in terms of economic efficiency and which is beneficial for the consumer. This includes for instance, co-operation agreements between competitors on research and development. Moreover, I stress that competition law does not put any constraints on efficient undertakings which strive to maintain or increase their market share through legitimate strategies, such as by offering high quality or a better after-sales service or fair prices.
I believe that Competition law has added legal certainty in the marketplace because it defines the parameters within which firms may lawfully conduct their business.
The Consumer and Competition division has developed substantially in its role in recent years. The Competition Act was enacted in 1994 as a result of which the Office for Fair Competition and the Commission for Fair Trading were set up to enforce the provisions of this legislation. At the time the OFC had only an investigatory role while the Commission for Fair Trading had a judiciary role. As a result of experience gained over the first few years, amendments were introduced in the legislation to enable the Office to intervene more efficiently in the market.
Today, the Office for Fair Competition can boast of a greater awareness of this legislation amongst the business community and with the public at large. Initially businesses may have been reluctant to appreciate the real benefits of competition law, but today we find that businesses are increasingly resorting to and seeking refuge under this legislation to protect their interests. This is evident in the increasing number of representations filed at the Office.
The Office has over the past years used its powers to shield smaller competitors against abuse by more powerful rivals. It has acted as a guardian for consumers by detecting and prohibiting restrictive commercial practices and has served as a guide for businesses to turn on to a legitimate track when adopting their business strategies. On the other hand the Commission for Fair Trading has over the years pronounced some very important decisions and thus established case law in the local field thus enabling the local businessmen to become more familiar with the provisions of the law and steer away from restrictive agreements or abuse of dominant position.
With Malta’s accession to the EU last May, the responsibilities of the OFC and of the Commission for Fair Trading have increased considerably. Subsequently the Office of Fair Competition has been designated as the local National Competition Authority. This means that this office is now responsible for investigating infringements of Articles 81 and 82 which relate to cartels and situations of abuse of a dominant position of the EC Treaty.
Over the years we have amended this legislation in the light of the experience gained and we have recently amended it again to enable the Office to assume its responsibilities as mentioned earlier on. I am conscious of the importance of this Office since it is responsible for enforcing five different sectors of legislation, four of which are consumer related whilst the other concerns competition. I am glad to say that in the very near future four new lawyers will be joining this Office to add to the present staff complement and this will help in increasing the efficiency of this Office both when dealing with infringements falling under the Competition Act as well as those falling under Articles 81 and 82.
I will be following with particular interest today’s conference since an effective competition policy has a direct impact on the daily life of consumers. This has clearly resulted when we liberalised the mobile telephony sector and I will be expecting that this will also take place in other sectors where we have done away with monopolies.
If one looks at the developments which took place recently in the EU as a result of the competition policy adopted by the Commission, one finds that there was a reduction in telephone charges and consumers benefited from a wider access to air transport. Now that Malta has joined the EU, we must ensure that even the local consumer can start enjoying the same benefits as consumers in other Member States.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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