Index Definitions

Total Index Score

The total index score is simply the sum of the scores for each category (i.e., the sum of scope, remedies, private enforcement, etc.). Defenses and pro-defendant elements do not contribute to the scores within each category or the total index score. The minimum possible total index score is 0 and the maximum is 30.

Scope

Scope has a minimum score of 0 and a maximum score of 1.

Extraterritoriality

The applicable law or act applies to foreign companies and citizens as long as the activity has some effect in the particular country.

Comments

• The language of the statute must be very specific. Text extending the scope merely to "all economic entities" is insufficient for the purposes of this report. Instead the text must be closer to, "foreign economic entities whose effects reach this country."

Example

• “This Act shall also apply to all economic activities of [foreign companies], if their actions have a substantial effect on the market of Bosnia and Herzegovina . . . .”

Remedies

Remedies has a minimum score of 0 and a maximum score of 3.

Fines

The law allows fines for violations of the applicable act.

Comments

• There are three situations where statutes may allow fines:

1. For violating prohibitions of the law;
2. For violating an order of the commission to stop a prohibited activity; and
3. For violating rules of procedure (e.g., defendant doesn't cooperate with proceedings, doesn't hand over evidence, perjures self, etc.).

• Situation (1) is the easy case where fines are clearly allowed for violations of the applicable act. Situation (2) represents a gray area, however for the purposes of this report, such a prohibition is sufficient to receive a coding of allowing fines. Situation (3) is insufficient to receive a coding of allowing fines.

Example

• Situation (1): "A violator of the provisions of Article 8 of this Law shall be punishable by a fine of not less than two hundred (200) Dinars and not exceeding twenty thousand (20[,]000) Dinars.”

Prison Sentences

The law includes criminal violations which are punishable by imprisonment.

Comments

• There are three situations where statutes may allow imprisonment:

1. For violating prohibitions of the law;
2. For violating an order of the commission to stop a prohibited activity; and
3. For violating rules of procedure (i.e. defendant doesn't cooperate with proceedings, doesn't hand-over evidence, perjures self, etc.).

• Situation (1) is the easy case where imprisonment is clearly allowed for violations of the applicable Act. Situation (2) represents a gray area, however for the purposes of this report, such a prohibition is sufficient to receive a coding of allowing imprisonment. Situation (3) is insufficient to receive a coding of allowing imprisonment.

Example

• Situation (1): "Any person who [in violation of the provisions of Article 3, has effected private monopolization or unreasonable restraint of trade] shall be punished by imprisonment with work for not more than three years . . . ."

Divestitures

The law allows the selling of assets or division of the company in response to certain violations, or the law allows divestiture specifically in the merger context. In the latter case, the law must allow a merger to be conditioned on certain acts and must allow the agency to force those acts to occur if the firm does not.

Comments

• There are two situations where statutes may allow divestitures:

1. Divestiture for some particular violation.
2. Divestiture in the merger context.

• Situation (1) is the purest version of divestiture and is counted. Situation (2) must include some language in the law that gives the commission the power to unwind or split up a firm that fails to satisfy conditions set out by a merger authorization. This power must be more than just a power to fine or imprison, it must be the power to compel the selling of assets or the structural break-up of a firm. When the divestiture only exists in the merger context, a coder should include a comment to this effect.

Example

• Situation (1): “[T]he [competition council] may require . . . the separation or divestiture of the merged undertakings or assets . . . in order to restore effective competition.”

Private Enforcement

Private enforcement has a minimum score of 0 and a maximum score of 3.

Third Party Initiation

Third parties (usually those damaged by the violations) can file private lawsuits or initiate an investigation or hearing by the applicable commission or council.

Comments

• The statute must allow for more than merely a "tip-line" to the competition commission. Instead, there must be a formal process for third parties to initiate a compulsory investigation or hearing, even if the commission retains the discretion to proceed with the investigation or hearing.

Example

• “Any person who is aggrieved in consequence of any [prohibited practice] shall have a right of action under this subsection for relief . . . .”

Remedies Available to Third Parties

Remedies for damaged third parties are provided for in the act.

Comments

• Remedies may include either money damages or injunctions.
• This also includes situations where the statute says a third party may seek compensation from a party in violation of the statute.
• This counts even if the private compensation suit comes after a formal government suit.

Example

• "A market participant who deliberately or by carelessness violates the provisions . . . of this Law shall cover the losses which . . . have been caused to another market participant or party to a contract.”

Third Party Rights in Proceedings

Third parties have access to evidence and/or can testify or otherwise participate in proceedings.

Comments

• There are three situations dealing with third party rights:

1. A third party has a right to initiate proceedings, but no right to participate in it.
2. A third party has a right to initiate proceedings and has a right to participate in it.
3. A third party has no right to initiate proceedings, but once it starts, has a right to participate in it.

• Situation (1) does not receive a coding. Situations (2) and (3) would receive a coding.

Examples

• Situation (2) or (3): “Persons who participate in a case shall have the right: to familiarize themselves with the materials of the case . . . to provide evidence, to submit applications, verbal and written explanations . . . .”
• Situation (2) or (3): "7(2) The Commission may hear orally any person who, in its opinion, will be affected by an investigation under this Act, and shall so hear the person if the person has made a written request for a hearing, showing that he is an interested party likely to be affected by the result of the investigation or that there are particular reasons why he should be heard orally."

Merger Notification

Merger notification has a minimum score of 0 and a maximum score of 5.

Comments

• The scoring in this area breaks from a basic dummy variable scheme in order to preserve the accurate ordering of the relative severity of different Merger Notification regimes. Under this scoring scheme, a Mandatory Pre-Merger regime receives a 5, a Mandatory Post-Merger regime receives a 4, a Voluntary Pre-Merger regime receives a 3, a Voluntary Post-Merger regime receives a 2, a Voluntary regime that makes no mention of a time requirement receives a 1, and a regime that makes no mention of a notification requirement receives a 0.

A note on mergers and the European Union

• Mergers in the European Union are often subject to two sets of regulations: (1) regulations of individual member states, and (2) regulations of the European Union when the mergers affect multiple member countries. EU merger regulations are addressed in the European Commission page and member countries' regulations are addressed in each country's national and EU page.

Voluntary

Companies are encouraged, but not required, to notify the applicable commission or council of an intended merger.

Comments

• If notification is voluntary, then post-merger is automatically marked by a coder.

Example

• Statutes will generally exclude firm deadlines for filing, or will state that notification be made after the merger occurs.

Mandatory

Companies fitting particular criteria are required to notify the applicable commission or council of an intended merger. This gets a score of 3 if fulfilled in order to represent the comparative severity of a mandatory distinction as compared with a voluntary scheme.

Comments

Example

• "Where an enterprise . . . is desirous of effecting a merger, it shall apply to the Commission for permission to effect the merger."

Pre-Merger

The applicable commission must be notified before the merger occurs (includes countries where the notification happens somewhat simultaneously with the merger). This gets a score of 2 if fulfilled.

Comments

Example

• "Firms involved in merger operations or firms desiring to acquire assets, proprietary rights, usufructs or shares, which causes them to be in a dominating position, shall notify the Council in writing at least sixty days prior to completion of the same."

Post-Merger

The commission is notified after the merger.

Comments

• If the firm has the option of not notifying the competition authority at all (i.e., notification is voluntary), then code this as a 1.

Example

• This provision grants the merging firm the right to notify after the merger: "The acts dealt with in the main section of this article shall be submitted to SDE — duly accompanied by three counterparts of the corresponding documentation — in advance or no later than fifteen business days after the occurrence thereof, and SDE shall promptly forward one such counterpart to CADE and another to SEAE."

Merger Assessment

Merger assessment has a minimum score of 0 and a maximum score of 4.

Dominance

The commission or council takes into consideration the dominant position and market share that the company will obtain if the merger occurs.

Comments

• This is an assessment of the sheer size of the resulting firm, not whether or not the firm will engage in abusive acts.

Example

• "The accomplishment of economic concentration operations impacting the level of competition in the market by causing or enforcing a Dominant Position shall depend upon receiving the approval of the Minister in writing, if the total share of the Enterprise or Enterprises concerned in the economic concentration operation exceeds 40% of the total transactions in the market."

Restriction of Competition

The commission or council considers the merger in light of maintaining effective competition, the potential effects on the structure of the market, and the possible barriers to entry.

Comments

• This is an umbrella term and its definition is intentionally general.
• This would include any barrier to entry.

Examples

• In a two firm market, one firm buys the second firm.
• The Minister may "[a]pprove the economic concentration operation if it does not negatively impact competition . . . ."

Public Interest (Pro D)

The commission or council considers whether an otherwise impermissible merger may be allowed because it is in the public interest. Public interest is linked to social welfare, and not to market efficiency. For example, this would include international competitiveness, national champions, employment markets, and promoting minority ownership.

Comments

• This definition covers benefits to the public or overall welfare.
• Lowering prices usually counts as efficiency under merger assessment.
• This definition is for things that increase public welfare but have less to do with the market.
• These externalities are good for people (e.g., increasing minority ownership, improving employment benefits and the environment, etc.).
• Environmental benefits count here as well.
• National champions exceptions fall under this category.

Example

• The Minister may "[a]pprove the economic concentration operation if it . . . has positive economic benefits that outweigh any negative impact on competition, such as leading to a lowering of the price of services or products, or providing employment opportunities, or encouraging exports or attracting investment, or supporting the ability of national Enterprises to compete internationally."

Public Interest (Pro Authority)

The commission or council has the power to prohibit a merger if they are concerned that the merger runs contrary to public interests.

Comments

• This covers otherwise acceptable mergers that are prohibited for some governmental interest (e.g., national security concerns).

Examples

• "The Commission may prohibit otherwise acceptable mergers if it is determined that prohibition is in the interests of national security."

Other

The commission or council considers other issues.

Comments

• As of now, this only includes business failure, or when two firms are allowed to merge in order to save one of the merging firms from insolvency.
• Although business failure is a subset of restriction of competition assessment, a coder is to treat these two as mutually exclusive for the purpose of coding.
• This category is open for suggestions as to other inclusions.

Examples

• "Commission may not prohibit concentrations where one of the undertakings risks seriously a failure, there is no less anticompetitive alternative to the concentration, when: a) this undertaking is in such a situation that without the concentration it would exit the market in the near future . . . ."

Efficiency Defense

The commission or council may allow an otherwise impermissible merger if it will contribute sufficiently to economic efficiency.

Comments

• This includes anything that will increase product supply, lower prices, increases the value of a product, etc.
• This includes benefits to the market, not to people or overall welfare.

Examples

• The competition authority may weigh "any benefits likely to be derived from the proposed merger relating to research and development, technical efficiency, increased production, efficient distribution of goods or provision of services and access to markets."

Dominance

Dominance has a minimum score of 0 and a maximum score of 6.

Limits Access

A single dominant firm may not limit the supply of goods to the market or in other ways restrict access to the market by consumers or purchasers.

Comments

• This is limiting access to downstream purchasers or consumers to artificially keep prices high.
• Look for quota language or output limits.

Examples

• "This article prohibits any concerted action, agreement, alliance or arrangement, express or tacit, which has the purpose of or may have the effect of hampering or limiting free competition, in particular when the action tends to . . . [l]imit access to a market or free competition among enterprises . . . ."

Abusive Acts

The act lists or otherwise indicates acts that would constitute an impermissible abuse of a dominant position.

Comments

• This is not to be marked as a "1" when any abuse is enumerated. Rather, it is to be marked when the statute ...
  • says that its list of abuses is not exhaustive
  • OR, uses the phrase "abusive acts" (or something similar) as an umbrella term for actions not explicitly listed in the text

Examples

• This statute implies that it is not presenting an exhaustive listing of abusive acts, and therefore counts: "An Enterprise with a Dominant Position in the local market or a significant part thereof is prohibited from abusing this Dominant Position in order to prevent, limit or weaken competition including the following ..."

Price Setting

It is impermissible for a single firm to arbitrarily or unfairly set the price of a good by taking advantage of its dominant position.

Comments

• These are cases where the price is being set too high. This is to distinguish price setting from predatory pricing, in which a firm will lower its prices to eliminate competitors, become a dominant firm, and then raise prices to recoup previous losses.

Examples

• "[The following abusive acts are prohibited:] Fixing or setting prices or conditions of resale of products or services."

Discriminatory Pricing

A single dominant firm may not impose different prices for the same goods or services for different customers.

Comments

Examples

• "[The following abusive acts are prohibited:] Discrimination between customers in similar contracts with regard to price of products or services or conditions of sale or purchase."

Predatory Pricing

The statute prohibits firms from lowering prices to eliminate competitors, only to raise prices to recoup after achieving a dominant position in the market.

Comments

• This activity requires that second step in the process. In other words, the newly dominant firm must raise prices in order to recoup its losses from previous price-cuts.

Examples

• Statute prohibits "fixing a price of the product or service below the production costs with the view to eliminate the competitors."

Resale Price Maintenance

The Act does not allow single firms to set the price at which its customers will ultimately sell their product to consumers (retailers).

Comments

Examples

• "A producer, importer, wholesaler or service provider may not ... Set a minimum resale price for a product or service whether directly or indirectly."

Obstacles to Entry / Eliminating Competitors

A dominant firm is prohibited from imposing various restrictions or coercive practices that make it very difficult for competitors to enter the market or increase their market share. This category also includes prohibitions against a dominant firm from eliminating competitors: the law prohibits acts by a firm that have the purpose and/or effect of reducing the amount of competition in the market.

Comments

Examples

• "[The following abusive acts are prohibited:] An activity or action which leads to setting barriers of entry of other Enterprises to the market, or their elimination therefrom, or their exposure to gross losses including loss selling."
• "[The following abusive acts are prohibited:] refusing to deal with another firm without justification in order to restrict its entry into the market."

Efficiency Defense

An otherwise impermissible act is excused if it substantially contributes to economic efficiency or to the public good.

Comments

Examples

• "[Firms are prohibited from engaging] in any of the following exclusionary acts, unless the firm concerned can show technological, efficiency or other pro-competitive gains which outweigh the anti-competitive effect of its act ..."

Restrictive Trade Practices

Restrictive trade practices has a minimum score of 0 and a maximum score of 8.

Price Fixing

A cartel or group of companies is not allowed to attempt to set the price for their product in the market.

Comments

Examples

• "Practices, alliances and agreements, explicit or implicit, that prejudice, contravene, limit or prevent competition, shall be prohibited, especially those whose subject or aim is to ... Fix the prices of products, services or conditions of sale, and the like."

Tying

A group of companies is not allowed to condition contracts on buying additional products that are not directly connected to the product that is the subject of the contract.

Comments

• Prohibitions against tying by a dominant firm are coded as a restrictive trade practice prohibition against tying.

Examples

• "An Enterprise with a Dominant Position in the local market or a significant part thereof is prohibited from abusing this Dominant Position in order to prevent, limit or weaken competition including the following ... Tying the sale of a product or the provision of a service to the purchase of another or others or the purchase of a limited amount or a request for the provision of another service."

Market Division

A group of companies cannot agree to divide or allocate the market by a particular geographic, demographic, price-defined, or otherwise-defined characteristic.

Comments

• This is the scenario where there is rigid division of a market.
• The division must be exhaustive (i.e. when new customers enter the market, they will not be competed over)

Examples

• "Firm A will take the East side, Firm B will take the West side."
• "Practices, alliances and agreements, explicit or implicit, that prejudice, contravene, limit or prevent competition, shall be prohibited, especially those whose subject or aim is to ... Share the market on the basis of geographical regions or quantities of sales or purchases or customers or any other basis that negatively affects competition."

Output Restraint

A group of companies is not allowed to agree to limit the overall rate of production or amount of products made available to the market.

Comments

• This covers output quotas.
• Firms cannot agree to stop selling to a single market.
  • Example: "We aren't going to sell to the West side."

Examples

• "[Firms cannot agree to] limit or control the production, markets, technical development or investment."

Market Sharing

A group of companies cannot agree to share a certain market by not competing with each other for business or customers.

Comments

• An agreement between firms not to compete with each other in a certain market.
• Distinguished from "Market Division" because no formal division takes place, however firms just agree not to compete with each other in the market.

Examples

• "Two firms agree to stay in the same market, but just not compete with each other."
• "[Firms cannot agree to] share markets or sources of supply."

Obstacles to Entry / Eliminating Competitors

A dominant firm is prohibited from imposing various restrictions or coercive practices that make it very difficult for competitors to enter the market or increase their market share. This category also includes prohibitions against a dominant firm from eliminating competitors: the law prohibits acts by a group of companies that have the purpose and/or effect of reducing the amount of competition in the market.

Comments

Examples

• "Practices, alliances and agreements, explicit or implicit, that prejudice, contravene, limit or prevent competition, shall be prohibited, especially those whose subject or aim is to ... Set barriers to entry of Enterprises into the market or eliminate them therefrom."

Collusive Tendering/Bid-Rigging

It is illegal for a group of firms to agree not to bid at market price for a certain product in order to manipulate the market price of that product.

Comments

Examples

• "Collusion in tenders or bids is prohibited."

Supply Refusal

A group of companies cannot agree not to sell their products to certain other companies or groups of companies for arbitrary reasons.

Comments

• Boycotts are the most common type of supply refusals.
• This is exclusive of output restraint.

Examples

• Common case: Your rival needs a component you produce to make their own product and you refuse to sell to them.

Efficiency Defense

An otherwise impermissible practice may be allowed if it contributes significantly to economic efficiency or to the public good.

Comments

• We are looking for benefits to the people or overall welfare

Examples

• "The Council of Ministers may, by way of a regulation, exempt from the prohibition stipulated in Article 5 [Restrictive Trade Practices], agreements which contribute to improvement of the production, distribution of products or to technical or economic progress and ensure to the buyer or user fair share of benefits resulting thereof ..."

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