Western balkans and the design of effective competition law: The role of economic, institutional and cultural characteristics

Abstract

In recent years, a vast number of countries worldwide have adopted competition laws, including antitrust provisions and merger control. This phenomenon is linked to the belief that competition is beneficial for economic welfare, and that competition law is capable of protecting competition in the marketplace. Literature shows that the effectiveness of competition law in a given country may depend on the economic, institutional and cultural characteristics of the country itself. This paper contributes to this literature by assessing what should be the optimal design of competition law in Western Balkan countries. First, we identify the “policy choice set”, the essential variables that define a competition policy regime. Second, we review the economic, institutional and cultural characteristics that should shape the optimal policy design. Finally, we examine the Western Balkan economies to describe where they stand, in terms of these characteristics, and derive policy implications on how their competition policy should be designed and implemented. Several conclusions emerge from our analysis. The existence of high barriers to entry and poor institutional quality points to the importance of an institutional set-up where the independence and transparency of the competition authorities is maximised within the context of an administrative model; also, no sector or enterprise, including SOEs, should be excluded from competition law enforcement, and competition law provisions should ensure that the voice of the competition authority is heard whenever new legislation that potentially affects competition is introduced. In terms of enforcement, while the role of advocacy emerges as crucial, along with the prosecution of entry-foreclosing abuses, a more lenient approach to merger control can be suggested, in the form of high notification thresholds.