Double-Function Competition Agency Breeds Interest Conflict Fears
26 January, 2012
Double-Function Competition Agency Breeds Interest Conflict Fears

Merger of the Agency for Trade and Competition with the State Procurement Agency is not the best solution  for Georgia; it eases life for the business but it is permeated with the fears of the conflict of interests.

The official argument for merger of two controlling agencies was the pretext that both had supervising functions - SPA for controlling state procurements in order to prevent self-governing bodies to infringe the procurement law, and trade and competition agency was responsible for controlling

that the market competition is not violated. To avoid duplication of functions and make the new anti-trust body more flexible, the government decided to integrate these two controlling bodies into one unit.

But since the law on anti-trust regulation is still under parliamentary procedures and supposed to be approved by this spring tentatively, the Agency that started operation as a merged body since January 1st, 2012 works mainly at the procurement end at the moment. Meantime the balance of personnel, whose one-third is made up by procurement experts [about 40 people work for procurement division and 9-for the competition] and the fact that the head of the SPA took over the status of the Head of the new Agency inclines analysts to think that the Agency perhaps will be more procurement-oriented.

Business hopes it will be pro-business just like the procurement agency used to be before the merger.  The single thing that business liked in the upcoming anti-trust regulation as yet is this here merger of two controlling bodies the State Procurement Agency (SPA) and Agency for Trade and Competition (ATC) into one establishment renamed as the Competition and State Procurement Agency (CSPA).

“Business likes that the new anti-trust agency incorporates the SPA for it is quite transparent and modern organization, it has own dispute council and we hope the new body will be similarly pro-business,” Giorgi Pertaia, Tax Ombudsman of Georgia, told Georgian Journal. “Based on our practice if we leave such new [anti-trust] agency as separate bodies it will become tax service number 2.”

However what eases life to business may complicate monitoring things.

Such merger practice does exist in few European countries although, according to non-governmental watchdogs, this is not the best solution to Georgia. The point is that if before reforms the procurement agency has been just monitoring the bidding procedures, now after reforms when bidding became electronic the procurement agency is providing by technical assistance and all biddings are implemented through the electronic site of the procurement agency that means that the agency is a part of the bidding process by today. But the law does not cover the issue how its technical support will be supervised.

“Actually procurement agency controlled that the competition during the state procurement bidding was not violated and partially really implemented anti-trust function for procurements, but after reforms it provides by technical base for organizing bidding and the law does not regulate how this technical point will be monitored. Therefore it was desirable that these two agencies would have remained separately,” Shota Murgulia, an economic analyst with the Center for Strategic Research and Development, said.

Transparency International Georgia (TI Georgia) spots the interest conflict. It acknowledges that in compliance with the Comprehensive Strategy for Competition Policy, a new competition agency’s responsibilities include monitoring of the state procurement process that actually led to the merger idea. But the role of supervision competition rules and organizing procurement process differ from each other that lays ground to presumptions that this merger will not be an efficient mechanism.

“The new agency will both participate in the state procurement process and monitor it. It is noteworthy that roles such as supervising the enforcement of competition legislation, organizing the state procurement process and monitoring it are essentially different from one another. For this reason, merging these roles in a single agency will promote neither efficient enforcement of competition policy, nor efficient supervision of state procurement,” TI Georgia recommendations read.

Another point the TI Georgia accentuates is that the EU has a two-tier legislation in the field of competition: the EU-level regulations and the legislation of the member states. If, in the case of some European countries (Sweden, Czech Republic, Denmark), merging the competition and state procurement agencies at the country level alone can be regarded as an acceptable decision, this kind of a setup cannot be considered the best possible solution for Georgia.



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