It is not enough for the authorities just simply impose fines on those who infringe competition laws, rather, they must make every effort to promote a culture of competition to meet competition law stipulations. By fulfilling this, they can make the most of competition advocacy.
Major strides need to be taken to ensure that the regulations issued by state agencies do not create unjustified barriers to market access. In this sense, the functions of the competition authorities should include prevention, oversight, and inter-institutional coordination measures.
This is particularly important in Latin America where corruption levels are elevated and threaten both economic development and citizen welfare.
In Colombia, competition advocacy was presented through Article 7 of Law 1340 / 2009, which empowered the Superintendence of Industry and Commerce (hereinafter “SIC”), which is the local authority responsible for overseeing free competition, to give forth its opinion on the regulations issued by administrative authorities that may harm or have a negative impact on free competition. That given, any entity responsible for regulatory operation are obliged to notify SIC about regulatory projects that may limit competition.
The effectiveness of this procedure could be improved by creating measures that reinforce coordination among the State entities that perform such regulatory functions.
Another aspect that should be considered is the possibility of including the authority’s mode of reviewing and issuing legal opinions on public procurement processes, especially with respect to the preparation of tendered documents, an area where most corruption acts take place, while keeping within the scope of competition advocacy.
This article aims to draw attention to competition advocacy as a means of facilitating inter-administrative coordination among state entities to ensure that competition policy becomes a legitimate state policy and a way to fight corruption in public procurement processes in developing countries such as Colombia.
Motions to improve the effectiveness of competition advocacy in Colombia
Pursuant to Article 7 of Law 1340 / 2009, the competition advocacy function assigned by law to the SIC is limited to the authority’s pronouncement on regulatory projects that may hinder free competition, though such pronouncements are not binding for the regulatory authorities.
This authority does not include the pronouncement and review of bidding terms, nor the coordination and promotion of the regulatory agendas of these entities, therefore, OECD’s proposal to broaden the scope of the competition advocacy powers to include inter-institutional coordination, public education on the importance of competition rules and involvement in the public procurement process is emphasized.
The incorporation of public procurement processes in the scope of competition advocacy
Competition advocacy could be used to improve the efficiency of the State, especially in public procurement processes, and is a recommendation that has been previously made by the OECD for developing countries.
According to this organization, competition authorities should actively advocate for procurement procedures to avoid collusion and corruption; this can be achieved through reforms to the structure of procurement procedures or through the participation of the competition authority therein.
Colombia has one of the highest levels of corruption according to the 2022 Corruption Perceptions Index, issued by Transparency International, and, in fact, it scored 38 out of a possible 100 points on this index.
All Latin American countries face this problem to a greater or lesser extent. In addition, according to OECD, our States qualify as inefficient in their procurement processes.
This reality requires that competition advocacy be proposed as a useful measure to mitigate problems and, specifically, that the authority be assigned the function of reviewing the bidding documents for procurement processes that exceed a certain amount to ensure that the bidding documents comply with the criteria of impartiality and objectivity, in addition to preventing their preparation based on measures for one or more bidders.
In addition to the significant efforts that have been made in Colombia to eliminate collusion in bidding processes, this alternative would allow the authority to conduct preventive measures to ensure free competition from the precontractual stage.
In this sense, competition advocacy can be useful to improve the perception of the public and the community about public procurement processes and the reduction of corruption.
Cooperation between different public entities
Another essential tool to make competition advocacy more effective is the cooperation between different public entities and the competition authority.
This can be achieved through the establishment of working groups made up of representatives of the competition authority and officials of the entities with regulatory functions, with a view to assessing the potential consequences for competition implementation or for amending a regulation.
This strategy should be implemented sensibly so it does not hinder the responsibilities of the regulatory agencies.
The importance of inter-institutional coordination lies in preventing the actions of authorities from neutralizing or affecting the policies and ensuring that they do not contradict. To summarize, inter-institutional coordination allows regulators to converge towards common objectives.
Similarly, UNCTAD affirms that entities should not only issue their own public policies, but that they must also be clear and consistent with the objectives pursued by the policies of other entities.
Promoting a culture of competition
Another essential factor in achieving competition policy objectives, especially in developing countries, is to plan a course that best promotes competition culture there, and to make the objectives clear, measurable, and long-lasting.
According to OECD and the World Bank, one of the greatest challenges that competition authorities face, especially in these countries, is to create awareness in society about the importance of competition policy. They argue that it is essential to make the public aware of the negative effects of collusion and to emphasise the need to promote transparency in decision making in government entities.
They point out that the majority of infringements in these countries arise from a lack of awareness of competition rules and because most consumers do not understand the harmful nature of anti-competitive behaviour.
Hence, the authorities need to espouse the education of competition, launch campaigns that showcase its importance to society, and the consequences for non-compliance. While SIC has already begun a programme that educates officials, authorities, and the public on this subject area, it is still falls short of its major aims. On the contrary, much more effort is needed to instil belief and normalise the culture of competition.
Published in the nº 23 of the Regional Centre for Competition Newsletter of the OECD