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Competition

Competitive neutrality in competition policy

 

It is a fundamental principle of competition law and policy that firms should compete on the merits and should not benefit from undue advantages for example due to their ownership or nationality.

Government actions can sometimes prevent, restrict or distort competition within a market. They can set procurement/tax rules or regulatory regimes putting private companies at a disadvantage compared to state-controlled or supported firms, or yet, they can assign market regulatory functions to firms that currently or potentially compete on the same markets. Ensuring a level playing field is therefore key to enable competition to work properly and deliver benefits to consumers and the wider economy.

Throughout the years, the OECD Competition Committee has taken different initiatives to analyse the topic from different angles.

Visual for the text of the recommendation on competitive neutrality

31/05/21 - OECD Council approves recommendation on competitive neutrality 

Chronology of OECD Competition work

In 2004, a first in-depth discussion was held on the role of the state in the market and the potential distortion of competition arising from the advantages granted to state entities. Advantages could take the form of tax benefits, lower cost financing opportunities, direct subsidies, lax procurement rules and exemption from competition law.

In 2009, a second roundtable discussion looked more closely at the challenges of enforcing competition rules against state-owned enterprises.  It acknowledged, however, that in addition to competition law, other legislative and administrative frameworks (e.g. bankruptcy and tax rules) should contribute to achieving competitive neutrality between publicly- and privately-owned competitors.

In 2012, the Competition Committee engaged in a joint project with the OECD’s Working Party on State Ownership and Privatisation Practices to map national practices and policies that address the issue of public-private competition. Building around eight priority areas to be addressed by national authorities, it compiled a compendiumof OECD Recommendations, Guidelines and best practices that may have implications for competitive neutrality. The eight priority areas include the operational form of government business, cost identification, rate of return requirements, public service obligations, tax neutrality, debt neutrality, regulatory neutrality, and public procurement practices.

In 2015 the OECD gathered competition experts and representatives of other policy communities (investment, trade, tax, regulated industries and regulatory governance) to discuss challenges arising from state interventions in the market and what competition authorities could do to address the distortions that such interventions can create. A separate discussion brought to light a variety of best practices and useful laws and instruments available around the world to address competition distortions. The exchange produced two documents:

  • A Note on Competition Policy & Competitive Neutrality aimed primarily at policy fields other than competition, laying down the fundamental principles and scope of application of competition law and how it can level the competitive field and enhance neutrality. 

  • An Inventory of Competitive Neutrality Distortions and Measures categorising the various types of distortions identified during the discussions, the rules and tools available in various jurisdictions as well as OECD related instruments. 
    The full set of documents issued for the 2015 discussions can be found below.

In addition to the above-mentioned discussions and material, the OECD also conducted in-country projects to assess competitive neutrality.

In 2018, the project Fostering Competition in ASEAN started and included a component reviewing competitive neutrality in the sector of small-package delivery services in each of the ASEAN member countries. The project is currently ongoing but outputs can already be accessed in this page Towards a Level Playing Field between SOEs and Private Entities in ASEAN.

In 2019, the OECD Working Party No.2 of the Competition Committee held a session with presentations by delegations on the tool that they use to address competitive neutrality issues in their markets. The presentations can be found below.

In 2021, building upon the significant experience acquired throughout the discussions over the years and benefiting from consultations with different OECD bodies the OECD Council adopted the 2021 Recommendation on Competitive Neutrality. The Recommendation establishes a set of principles ensuring that governments’ actions are competitively neutral and that all enterprises face a level playing field, irrespective of factors such as the enterprises’ ownership, location or legal form. It recommends adopting and maintaining neutral market rules, so that adhering governments ensure that the legal framework is neutral and that competition is not unduly prevented, restricted or distorted. It also recommends avoiding selective advantages and measures that may unduly enhance an enterprise’s market performance and distort competition.

Access the full text of the 2021 Recommendation on Competitive Neutrality

Video

Competitive neutrality explained in 6 minutes
(also available in Russian)

 

Documents and links

Overview of OECD work on competitive neutrality

Maintaining competitive neutrality: Voluntary transparency and disclosure standard for internationally active state-owned enterprises and their owners, 2021

Towards a Level Playing Field between SOEs and Private Entities in ASEAN

The size and sectoral distribution of state-owned entreprises, September 2017

For globalisation to work for all, you have to level the playing field first, 30 May 2017

Business and Finance Outlook, 2017

State-owned enterprises as global competitors: A challenge or an opportunity?, 2016

Note on competition and competitive neutrality for other policy areas, 2015

Inventory of competitive neutrality distortions and measures, 2015

Competitive Neutrality: Maintaining a level playing field between public and private business, 2012

National Practices concerning competitive neutrality, 2012

Compendium of OECD Recommendations, Guidelines and best practices bearing on competitive neutrality, 2012

Competitive Neutrality and State-Owned Enterprises, Corporate Governance Working Papers, No. 1, 2011

State-Owned Enterprises and the Principle of Competitive Neutrality, 2009

Regulating Market Activities by the Public Sector, 2004

Access the full list of Competition Policy Roundtables

2019 PRESENTATIONS ON TOOLS FOR ADDRESSING COMPETITIVE NEUTRALITY

Note by Mexico

Note by Romania

Presentations by Australia

Denmark

Italy

Spain

Norway

Sweden

2015 HEARING ON HORIZONTAL CHALLENGES IN COMPETITIVE NEUTRALITY

Detailed summary • Compte rendu detaillé

Agenda & Speakers bios 

Download the Presentations

2015 ROUNDTABLE ON COMPETITIVE NEUTRALITY IN COMPETITION POLICY 

Panellists, papers and presentations

Key points from the discussion Points clefs de la discussion

Detailed summary Compte rendu detaillé 

Paper by the Secretariat • Note du Secrétariat

Download the Presentations

Pierre BUIGUES  Bio
Université de Toulouse, France
presenting Challenges arising from state interventions in the market: effectiveness and distortions of competition

 

Thomas CHENG Bio
University of Hong Kong, China
presenting Competitive Neutrality from an Asian Perspective

 

Nicolas PETIT Bio
University of Liege, Belgium
presenting Implications of Competitive Neutrality for Competition Agencies: A Process Perspective

Contributions from participants

Australia

Belgium

Brazil

Bulgaria

Chile

Chinese Taipei

Costa Rica

EU

Finland

Germany

Indonesia

Italy

 

Japan

Latvia

Lithuania

Netherlands

Norway

Peru

Russian Federation

Spain

Sweden

Ukraine

United States

 

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