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Competition markets and anti-trust policy

2007

The target of this research is the market structure in the Russian economy and anti-trust regulation.

The purpose of the work is to: 

  • Characterize the changes in the structure of the industrial markets during last ten years .
  • To show the expected impact of changes in the anti-trust laws on the efficiency of the anti-trust policy and evolution of markets. 

This research work is the first to characterize the areas and scale of changes in industrial concentration and to analyze determinants of the industrial concentration  in the Russian manufacturing.

The following conclusions were drawn regarding the trends in the developments of the Russian market structure.

1. Distribution of industrial production hasn’t changed significantly over the reform period; this can be seen by the stability of company concentration indicators for different manufacturing sectors. Concentration in separate markets was influenced by two opposite effects. On the one hand, concentration was increased due to  mergers. On the other hand, companies increased diversification of ouput, which resulted in lower concentration at the level of separate products and markets.

2. Data about the changes in concentration support our hypothesis about convergence of concentration indexes in Russian manufacturing. On the one hand, there is trend of convergence between concentration indicators in the Russian Federation and the US. On the other hand, the concentration indicators average out: highly concentrated sectors show a decrease in concentration, while low concentration sectors have seen an increase in concentration.

3. The main influence on integration or disintegration trends in regional markets is exerted inter-regional trade. Conversely, intensity of inter-regional trade depends on the key market participants. The analysis of the wheat market as an example of intermediate consumption, and the flour market as an example of consumer item. The former demonstrated growth in inter-regional trade and leveling between goods prices in different regions throughout the second half of 1990s and the beginning of 2000s. It didn’t seem to matter whether the inter-regional trade expanded between two specific regions. At the same time, for the market of wheat (the same processing chain, but closer to the end-consumer) these trends are rare. This sector is characterized by a growth in centrifugal trends: difference in prices among various regions is widening.

4. Competition in Russia’s deregulated sectors faces serious challenges. Analysis of the heating and water-supply sectors shows that some of these problems are related to the external problems of sector reforms, including considerable sunk costs and difficulties in organizing competition. Another part is attributed to unjustified decisions of the authorities. One of the reasons is a disregard of promoting competition as the aim of the reforms to create stimuli for investments.

We have come to the following conclusions regarding potential areas for boosting the efficiency of anti-trust legislation.

1. Effectiveness of anti-trust  as a predominantly protective area of competition policy may be considerably improved by supplementing it with measures of pro-active competition policy: first and foremost, sector-wise policy, conducted by specialized anti-trust regulation bodies. The need for this policy is even more acute since the Russian economy is undergoing a stage of reform and competition promotion in a number of regulated sectors, first and foremost, utilities, telecommunication and municipal services.

2. To improve the efficiency of anti-trust law enforcement, it is necessary to specify the norms, which may occur in the context of accumulating and understanding of law enforcement practices. Primarily, we see the need for comments in  special guidelines devoted to leniency program application and  abuse of collective dominance.