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“Free University”: Functions of the Competition Agency Contradict the Norms of the EU

An interview with Chancellor of the Free University Vakhtang Lezhava

The Competition Agency was recently established in Georgia, but so far it is practically inactive. How does the creation of this structure corresponds to the recommendations of the EU? 

An attitude to the regulations should always be differentiated. Sometimes they serve no useful purpose and can help individual business groups to deal with competitors and take advantage of the market. Therefore, any new regulation should be carefully studied.

With regard to the anti-monopoly legislation, as it is known, the  Antimonopoly Service operated in Georgia in 90s and  eventually turned into a source of corruption. Then it was canceled, and a few years ago this topic again became urgent due to the signing of the Association Agreement with the EU – the anti-monopoly legislation is one of the terms of the agreement.

By 2012, the previous government had almost prepared a draft law on competition  agreed with the EU, and the Competition Service was in one structure with  the public procurement service.

After coming to power, “Georgian Dream” began to take some strange actions in terms of the competition law instead of  going this route  and made the changes that have nothing to do with the EU requirements.

Moreover, the new legislation is often contrary to the norms of the EU – for example, the Competition Agency has the right to control prices.

Representatives of the Ministry of Economy say that the monopoly itself is not a crime if it is not achieved by the use of unlawful means, and if the company does not use its dominant position in the market for illegal purposes. What do you say about this? 

There are two approaches to this issue in the world – the first is when there are antitrust laws, but it is not contrary to the interests of business – mostly in developed countries, where there are  traditions and strong state institutions.

The second approach is when the antitrust laws turn into a bureaucratic barrier and a source of corruption  mostly in the backward and economically weak countries.

That’s why every decision on  monopolies requires careful analysis.

At the same time, the Competition Agency will not have  resources  to deal with all the issues at the same time, the government must set priorities and resources available to the agency.

Emphasis should be placed on these priority areas.

The fact that currently the Agency has the right to fine the company without a court order is very negative for the business.

How is it possible to study the situation of monopoly in the sectors, such as banks, grainfarming, where there is a serious risk of the existence of monopolies?

Banking sector  is a separate issue with its  regulator represented by the National Bank.

The main problem in all other sectors  is that the Competition Agency  has not yet decided on how the market environment is formed.

For example, if you have a building where a restaurant is located, theoretically it can be considered a monopoly. The same can be said, for example, about grain production. Someone brings wheat but there are products that can replace wheat – other kinds of grain, corn, etc. Then the problem is very different.

Therefore, the Agency must first determine its  approach to the formation of the market. Otherwise, it will not be able to calculate the percentage of dominance.

Can we consider  the creation of the  Competition Agency as another barrier for  investors established by the Government?

Of course, many of the decisions of the current government hinder  the development of the market, which is why the Competition Agency  should be independent from the  government.