Competition law - a victim of politics
19 December, 2013
Competition law - a victim of politics
The long expected competition law and the Anti-Trust Agency will become effective no later than this coming spring, the Georgian government promised recently. But a year ago it similarly promised that that would take place in spring 2013. Besides, a bill of amendments on competition law implying creation of a separate anti-trust body is still pending in parliament, leaving the market in the hands of monopolies. Sector pundits believe the competition law is a victim of political struggles caused by
cohabitation, but now that that has ended with the presidential elections this past October, analysts hope that this time the promise will be kept.
The heavy monopolization of the market was a stumbling block for economists during the eight years the former government was in office; it canceled an anti-trust law together with the regulatory body in 2005, and restored both only in 2010 when the EU required proper competition regulation as one of the four major preconditions to start negotiations on a Deep and Comprehensive Free Trade Agreement (DCFTA) with Georgia. However, the new Competition Agency was amalgamated with the State Procurement early in 2012, which posed many questions about the independence and effectiveness of the regulatory body. The EU also questioned the effectiveness of the competition law itself, and was reluctant to start negotiation on free trade unless both it and the regulatory body became effective. Therefore the adoption of fair market rules was among the key pre-election promises of Georgian Dream.
Shortly after Georgian Dream gained power authorities trumpeted that a bill amending the competition law would enter Parliament, and a separate Anti-Trust Agency would be set up as soon as the bill was approved (by this spring at the latest). However, the bill has languished up to this day, and the economy suffers.
The lack of fair competition is one of the key reasons the Georgian economy slowed this year by more than 50%, Ditrikh Muller, an analyst with Georgian Investment Group +, believes. Privileged market players, who enjoyed the former government’s patronage and preferences during state procurement tenders, or looser control, still retain their old positions and spoil the market.
Muller elaborated: “Let’s take banks for example. Banks have a monopoly in the market after they have been allowed to expand their shares in non-profile businesses. They enter almost all sectors and finance only their own businesses [by preferential credits], while withholding credits to competitors. As a result they spoil the market because the bank affiliated enterprises who have guaranteed financial resources are not effective. They do not need to bother to improve management skills to get a credit, whereas their competitors cannot get credits and develop, even if they have better business plans. If there was a proper competition law restricting banks to financing their own businesses, the Georgian economy would have been growing much faster, by all means.”
But since the competition law has languished for so long, Muller wonders if there is the political will to foster better competition, or even if the new parliament is incompetent.
Demur Giorkhelidze, an economic analyst, thinks that there are underlying struggles between the interested groups which hamper the competition law.
“There are fights behind the scenes both inside and outside the parliament. The old interest groups who used privileges during the former government, and new groups who want to enjoy privileges, now create setbacks to competition law,” he said.

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