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'A few mega firms may end up controlling global markets'

Constantly on the lookout for achieving new economies of scale, a handful of mega firms might end up controlling world markets either by colluding among themselves or by turning into world monopolies, according to United Nations Conference on Trade and Development, or UNCTAD, expert Philippe Brusick.

"Some sectors like civil aviation, aeronautics and space have almost reached that stage, while others like automobiles, telecommunications, banking and financial institutions, to cite a few examples, are rapidly consolidating," he said.

Brusick, who heads the UNCTAD's competition, law and policy and consumer protection section, made these observations in a paper presented at a seminar in Jaipur.

"Not a day passes without one reading about a still larger merger or acquisition, whereas, in the face of such formidable processes of change at the global level, action to set up and implement competition rules is broadly limited by the borders of the nation-states," he added.

Bursick said big trading powers like the United States and the European Union, or EU, apply these rules when anti-competitive practices affect their markets.

However, restrictive business practices, or RBPs, do not affect all markets alike, Brusick said in his paper 'Globalisation: Enhancing competition or creating monopolies?'

The paper was presented at the three day Asia-Pacific countries seminar on 'Competition law and policy' jointly organised by the UNCTAD, Monopolies and Restrictive Trade Practices Commission, or MRTPC, India and the Jaipur-based Consumer Unity and Trust Society, or CUTS.

Brusick said, "An international merger might well be authorised in a large country where sufficient competition exists after a merger takes place between two multinational firms, while in a smaller country the same merger might result in an unacceptable dominance or in pure monopoly of their combined subsidiaries."

"An international cartel might avoid including certain countries or regions where anti-trust rules are tightly implemented, while controlling markets where such rules are non-existent or ineffective," he pointed out.

He outlined some measures to enable the smaller trading partner -- possibly a developing country -- to take effective action under these circumstances.

First of all, it should have a domestic competition law and control authority. This authority should have the means to secure its findings and implement its decisions, not always an easy task in the absence of any binding international arrangement.

About the global world in the new millennium, Brusick said, "The rapid pace of the innovation and restructuring which is taking place in the so-called 'old' and 'new high-tech' economies makes certain facts clear."

"At the dawn of the new millennium, the new economy will be quite different from the relatively static, old economy we have experienced in the half century or so since the end of the World War-II," he said.

"On the one hand we have formidable technological innovations such as e-commerce and telecom in general which accelerate the pace of the globalisation and, hence, encourage direct rivalry or competition among diverse types of suppliers in very distant -- and initially different -- markets, which in time will tend to uniformise.''

"On the other hand, we have a formidable effort by existing firms to adapt to changing structures, by competing fiercely to satisfy their constituencies. They also strive to satisfy their shareholders, themselves composed of large institutional investors," Brusick said.

"This leads them to accelerate the pace of mergers and acquisitions and constitution of global alliances in an effort to constantly improve their returns on investment and to increase their 'shareholder value', he said.

Thus, large firms become even larger through repetitive concentrations and this substantially reduces the number of main operators in each sector of the economic activity.

The UNCTAD is well placed to contribute to the creation of a new world economic architecture based on efficiency considerations resulting from the impetus of competition," he added.

In this respect, UNCTAD is now engaged in its preparation for the fourth United Nations conference, to review all aspects of the set of multilaterally agreed equitable principles and rules for the control of restrictive business practices, scheduled at Geneva from September 25 to 29, he stated.

This conference will contribute to the efforts of the international community by studying and further clarifying the nexus between competition, competitiveness and development.

It will also assist developing countries in their search for a multilateral trading system aimed at the making globalisation more efficient and equitable, he said.

UNI

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