Index Definitions

Total Index Score

The total index score is simply the sum of the scores for each category (e.g. scope, remedies, private enforcement, etc). Defenses and pro-defendant elements do not contribute to the scores within each category, and likewise do not contribute to 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 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."

Examples

• “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;
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 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.

Examples

• “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 (20000) 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;
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.

Examples

• 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

• Two situations

1. Divestiture for some particular violation. This is the purest version of divestiture and is counted.
2. Divestiture in the merger context is a harder issue. There must be 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.

Examples

• 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 3rd parties to initiate a compulsory investigation or hearing, even if the commission retains the discretion to proceed with the investigation or hearing.

Examples

• “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 3rd 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.

Examples

• "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.

Examples

• “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 . . . .”

Merger Notification

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

Voluntary

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

Mandatory

Companies fitting particular criteria are required to notify the applicable Commission or Council of any 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.

Pre-Merger

The 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.

Post-Merger

The Commission is notified after the merger (and then often has the power to invalidate the completed merger).

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 or market share that the company will have if the merger occurs.

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 possible barriers to entry.

Public Interest (Pro D)

The Commission or Council considers whether an otherwise impermissible merger may be allowed because it is in the public interest and/or will have benefits or advantages to the consumers.

Public Interest (Pro Authority)

The Commission or Council has the power to prohibit a merger if they are concerned it runs contrary to public interests such as national security.

Other

The Commission or Council considers other issues such as international competitiveness, effects on employment markets, and promoting minority ownership.

Efficiency Defense

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

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 competitors.

Abusive Acts

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

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.

Discriminatory Pricing

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

Predatory Pricing

Insert definition from a statute

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.

Obstacles to Entry

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.

Efficiency Defense

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

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.

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.

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.

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.

Market Sharing

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

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.

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.

Supply Refusal

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

Efficiency Defense

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