Strategies for Creating and Enhancing a Culture Favorable to Competition

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Sean Ennis, Aug 12, 2014

The enactment of a competition law and creation of a competition authority are important elements to ensuring successful operation of economic markets, with businesses vying for the patronage of purchasers through rivalry between their product and service offerings. But the mere existence of an enforced competition authority will not alone set the groundwork of economic competition needed for generating a successful market economy. What is needed is to establish a competition culture, which can be defined as a set of attitudes and beliefs, by the many economic actors that support market outcomes constrained by limits on market power.

The difficulty in establishing a competition culture is not only because of the practical difficulties of enforcing a law-for example, because detecting a violation is difficult or because the number of violations is much higher than the capacity to prosecute them. The challenge is much deeper and more fundamental, lying in standardized forms of interaction and beliefs that may create a culture of ambivalent or hostile attitudes and practices towards competition. In countries that have newly created competition authorities, the challenge of creating a culture in favor of competition can be substantial. While laws may change overnight, traditional behaviors by business operators are unlikely to change with the same speed. Even in countries with a long history of competition law enforcement, values supporting competition can be lacking-not only in the general public, but also among skeptical parliamentarians.

There are a variety of factors mitigating against competition culture, including select societal values, economic rewards, and habits pre-dating competition law. For example, with respect to societal values, from a young age children are taught the benefits of cooperation. For adults, the long-held positive mental associations for cooperation may easily be extended to cartel activity, which is simply one form of cooperation, however nefarious. Even childhood games may encourage anticompetitive behavior, with one notable example being the game Monopoly® in which the objective is to accumulate geographically local monopolies of hotels and the winner is often the one who has accumulated the most monopolies.

Economic rewards provide further reinforcement to the natural attractions of anticompetitive activities, by making anticompetitive behaviors profitable for the businesses involved. Habits that restrict competition, sometimes pre-dating the establishment of competition law, may also be difficult to change. Businesses and regulators may establish regimes that do not place pressure on businesses to compete aggressively and, even when competition law is understood by business operators, if fines and other penalties are too low, they will not effectively deter anticompetitive activity.

This paper presents a framework of how to promote a more pro-competitive culture by considering different constituencies, what their strengths are, and how to reach them. It is not intended as a complete or comprehensive guide, but as a framework by which key actors can organize strategies, by which useful tools can be identified for different groups, and by which examples of successful competition advocacy can be classified. Tools are identified that can be useful in furthering a pro-market attitude in different communities.

An underlying theme of this discussion is that communication, personal relationships, and quantitative estimates all have an important role to play. The paper concludes by noting that it would be useful to develop measures for the level of competition culture by constituency to help identify the level of competition culture in different countries.