“In a competitive environment, the most efficient companies are the ones that survive,” said Luciana Macedo, an economist, during the conference titled “Roles and Actions of the Commission for the Promotion and Defense of Competition.”
The event was part of the “Let’s Talk with the Professors” series, organized by the Department of Economics at Universidad ORT Uruguay took place on Thursday, October 29, 2015.
Macedo is a commissioner with the Commission for the Promotion and Defense of Competition in Uruguay, a decentralized agency of the Ministry of Economy and Finance. Previously, she served as an advisor to the Regulatory Unit for Energy and Water Services (URSEA) and was responsible for the Regulations, Prices, and Rates Division of the Committee for State Reform within the Office of Planning and Budget, among other activities.
The conference featured Dr. Flavia Roldán, a faculty member in the Department of Economics and a researcher.
A Necessary Policy
“What is antitrust policy? Why is it necessary? What does it entail?” These were some of the questions that Flavia Roldán, who was tasked with introducing the topic, posed to the audience.
Roldán defined antitrust policy as a “set of rules that ensure market competition is not restricted in a way that harms competition.” He noted that its goal is to preserve social welfare, which, in this context, refers to the economic well-being of businesses and consumers.
The expert believes that if there are market failures, it is beneficial to have rules in place to preserve competition. Market forces—current and potential competitors, as well as consumers—can discipline firms in their strategic decisions, prompting them to lower prices and improve welfare.
“Even in these contexts, where markets might function well, companies still have incentives to adopt strategies that reduce competition and potentially harm well-being,” he explained. He then noted that while competition is desirable, companies fare better when there is less competition, as they can enjoy higher profits.
For the professor, antitrust policy is not synonymous with regulation. The former is applied in sectors and industries where market conditions are structurally conducive to normal functioning, while the latter is necessary in sectors where it would be unreasonable to expect market forces to function effectively.
Roldán said that another distinction lies in the timing: regulation is generally an intervention that takes place before a particular behavior occurs. In antitrust policy, action is taken after an action, strategy, or act has occurred; it does not require continuous intervention, but rather a one-time intervention once it is determined that there may be anticompetitive effects.
Commission for the Promotion and Protection of Competition
Economist Luciana Macedo has been a member of the Commission for the Promotion and Defense of Competition since its creation in 2009. This decentralized body of the Ministry of Economy and Finance consists of a three-member tribunal, which currently has economists and a lawyer.
The commission adjudicates cases involving anticompetitive conduct, and its goal is to foster and promote a more competitive environment. It also seeks to protect markets from abuses by companies that hold market power or a dominant position.
Macedo explained that its primary mission is to investigate and sanction alleged anti-competitive practices. It also advises individuals, the executive branch, and other regulatory bodies; monitors mergers; regulates through the issuance of general and specific rules; and promotes competitive values.
Why is it important to promote competition? Macedo said that “competition among companies” creates incentives to reduce costs, innovate, and increase productivity, as well as competitiveness and efficiency. This results in benefits for consumers: lower prices and higher quality and variety in both products and services.
“What we’re defending isn’t the companies themselves, but rather competition in the market,” he clarified. He then noted that some companies lose out while others succeed, but that, in the long run, in a competitive environment, the most efficient ones are the ones that survive.
The economist also presented cases investigated by the commission and explained the proceedings in each case and the measures taken. In addition, she gave a brief presentation on the Law on the Promotion and Protection of Competition.
Some facts
During the Commission’s six years of operation, 56 complaints regarding anticompetitive practices were filed, and five ex officio investigations were conducted. Fourteen investigations confirmed the existence of anticompetitive practices: fines were imposed in six cases, warnings were issued in five, and recommendations were made in three others.
Macedo clarified that the recommendations were directed at public agencies, as they do not impose fines but rather issue warnings. He also noted that when an anti-competitive practice is detected, the Commission orders the cessation of such conduct.
The speaker noted that penalties may then be imposed in the form of a warning or a fine, the amount of which varies depending on the size of the company, its track record, the nature of the conduct, and the extent of its cooperation during the investigation.