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 due to their ownership or nationality.

Governments can affect the way markets function sometimes to the detriment of free competition. 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 participate in a market by providing services directly or through state-owned/controlled firms. Ensuring a level playing field is therefore key to enable competition to work properly.

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

Chronology of OECD Competition work

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

In 2009, a second roundtable discussion looked more closely at the challenges of enforcing competition rules against state-owned enterprises and at the broader policy landscape that can help government 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 and compiled a compendium of OECD Recommendations, Guidelines and best practices bearing on competitive neutrality which reviews existing OECD sources that address aspects or elements of competitive neutrality.

In 2015 the OECD gathered competition experts and representatives of other policy communities (investment, trade, tax, regulated industries and regulatory governance) to discuss in a hearing format 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 in a roundtable format 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 held and inventories relevant competitive neutrality tools found in various jurisdictions and OECD instruments.
The full set of documents issued for the 2015 discussions can be found below.

In 2018, the project Fostering Competition in ASEAN started with a component that will review 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 documentation of the 2019 presentations can be found below.

Documents and links

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

Overview of OECD work on competitive neutrality

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