Government intervention in the market, legitimate or not?!

Government intervention in the market, legitimate or not?!

Government intervention in the market affected by the pandemic crisis and the price crisis is necessary and legitimate, but to ensure a strong recovery. However, the government needs to plan market intervention to avoid selective assistance to businesses that were failing or had significant structural problems before the crisis.

In fact, it seems that effective competition in the market will have to be restored after too much time has passed in the future. Therefore, in this great evil that is affecting the chaotic Albanian market, short-term measures are needed to support the necessary businesses, but also to stimulate the recovery economy in a way that guarantees that it is also more resilient, inclusive and more friendly with business and assisting increase of well-being.

To achieve these legitimate policy goals, government must evaluate the various alternatives available and credible to the market and the consumer. This means that the government must undertake a cost-benefit analysis and choose a policy option that minimizes restrictions and distortions of competition.

All of this requires a broad reflection on an intelligent policy that can help reallocate resources to some key sectors of the economy, which at the same time does not distort competition between businesses and can help create the ground for a resilient economy, long-term and sustainable.

Restoring effective competition should serve as the main motivation for the policies that the government is undertaking and plans to undertake and beyond. This approach is very important to ensure that the recovery is also fast and consistent, ensuring vibrant economic activity.

Past crises show that competition policy and enforcement have a fundamental role to play in strengthening market resilience and supporting an economy’s rapid recovery from a crisis. These lessons come from the harmful effects of lack of competition by increasing inequality and in some cases affecting the criminalization of certain economic segments, as they lose their sense of proportion and their role in the market.

Therefore, strong enforcement of competition can play an important role in government responses to the economic crisis. It must continue to support the resource competition authority and seek their unique expertise, but also special technical expertise to ensure that the market functions well even after the crisis and that lessons can be learned that can support economic growth.

Government interference in business decision-making for consumer protection purposes, through the establishment of Transparency Boards may have problems with the law “On protection of competition” having perhaps for the first time a conflict with it[1].

In this effort to make transparency, in fact, we have an effort to advocate with the effect of consuming the regulatory role by serving also in the future as a “legalization” of negative financial results by justifying market limitation through “assigning,” directly or indirectly, of purchase or sale prices…”

Efforts to implement and advocate for anti-competitive policies should have been more valuable if they had focused mainly on those sectors of the economy that may have been most affected by the past and present crisis (e.g. agriculture, tourism).

At the moment, the functioning of the Boards created in the first days of March 2022 is not the most valuable, because it would have a more effective impact if the efforts go support those initiatives that can help accelerate the recovery of the economy from the crisis ( promoting effective cooperation between businesses for change based on risk analysis).

The government, obviously, while seeking the assistance of the competition authority, could communicate with citizens not only through public appearances and visits in businesses premises, but mostly through the regulation of procedures and the implementation of priority instruments related to the crisis of transparency.

Meanwhile it is the Competition Authority and many institutions that interact with it, (missing here the institution that protects the consumer) those who must continue to uphold the principles of competition to protect a level playing field and avoid market distortions by helping the government to draft answers for public to the crisis based, where possible, on clear, general and objective principles applicable to all businesses in the economy.

The government should already be prepared to inform us on the development of the exit strategy from market abuse and informality, which will enable the return of market mechanisms after the crisis. This will help markets remain competitive after the crisis, which will be crucial to economic recovery.

This may include coercive action against anti-competitive price increases, as well as the use of temporary precautionary measures based on risk analysis to stop abusive behavior where it is located, in order not to prejudice sectors and bend names that may have no direct responsibility.

The Competition Authority should coordinate closely with the various organizations working on a specific market-specific expertise, or rely on consumer protection powers (if any) to protect consumers from unfair pricing practices.

If the Albanian businesses that have started raising prices will be assisted and analyzed to understand if we are really in a situation of a “naïve” cartel situation[2], or an oligopolistic market, in fact, a great service would be done in dialogue with the consumer, explaining to them that a large part of businesses are raising prices:

  • due to unfair competition from informal activities, which are not yet a minority in the market;
  • due to the increase in the cost of corruption, which directly affects the decision-making of businesses;
  • due to government interventions with unstudied as well as insufficient legal and sub-legal packages, leaving its regulatory role in bad position;
  • due to political patronage in the economy, which continuously creates a distortion of the market and competition;
  • due to non-timely closure of reforms that create undesirable side effects for businesses;
  • due to the political cronyism, which has replaced meritocracy and increased the cost of doing business, as well as
  • due to persistent patterns of social exclusion and the creation of a selfish elite, which bases development on political and economic polarization while actually increasing inequality.

In conclusion, it can be said that the implications of authoritarian positions, which threaten market competition can be seen more carefully, especially in the case of abuse of dominant position of some businesses, which have as objective or effect the removal of competitors from the market by not relying on efficiency but on the contrary of it.

[1] Article 4 of the Law
[2] “Naïve cartels” are cartels whose members do not try to hide their activity, either because they are not aware that their behavior is illegal, or because they are not sophisticated enough to do so.

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