Public Companies and Competition Law: The Launching of an ICN Project

CPI ICN Column edited by Maria Coppola (U.S. Federal Trade Commission)

Public Companies and Competition Law: The Launching of an ICN Project – Eleanor M. Fox (Professor, New York University School of Law)

Public (or state-owned) companies present a conundrum. On the one hand, they were established by the state presumably to carry out special responsibilities¹ and they may be burdened by extra duties. On the other hand, public enterprises are market participants. They may be favored market players, recipients of special privileges such as subsidies, rights to scarce inputs, and exclusive rights to markets. Many are dominant firms. They often have incentives to harm market competition and they often do so, using the levers of privilege to preempt rivals and raise price. Recent evidence shows that, especially in developing countries, state-related acts and measures including acts of SOEs are principal culprits in strangling opportunities for meritorious competition by people and firms without power or privilege.

How, then, should public enterprises be treated under competition laws? How distinguish the bad without chilling the incentives for the good? Should public enterprises be exempt from competition law? Should they be included but with broad derogations? Should they be included but with narrow derogations? Where public enterprises exist in regulated sectors, should policing be left to the sector regulator? Should rules be tailored specially for en