New Anti-Trust Law Predefined To Be Ineffective
12 January, 2012

New anti-trust law draft project been under parliamentary procedures at the moment is predefined to be ineffective for it is immature and includes loopholes enabling monopolists to tailor the law to their interests, non-governmental experts worry. On the other hand the upcoming anti-trust law scares business by unclearly stipulated terms of regulation that may lead to misinterpretation and troubles, Tax Ombudsman warns. Government calms down that the questioned law will be streamlined gradually in compliance with the practice.


The draft law on new anti-trust regulation has already passed the first parliamentary hearing and committee hearings for the second session that means that the content of the new law is basically approved and any breakthrough changes can scarcely be available. The draft project tentatively is supposed to be approved and enter into the effect by this coming March that makes business alert to new troubles.


According to Giorgi Pertaia, Tax Ombudsman of Georgia, the draft law is immature and most probably will be ineffective for it does not provide with clear picture how the Agency for Free Trade and Competition (AFTC) will work.
“The anti-trust law should certainly exist to restrict and prevent monopoly. On the other hand we move toward the EU that requires of countries that want to be integrated with the EU and have free trade to play similar rules accepted at the EU market. But this here draft project is not ready for approval for business was not involved in discussions. We have just sent the draft project to business associations and will start discussions after the New Year,” Pertaia told Georgian Journal on the eve of the New Year.


He worries that even discussions with the business can bring no tangible results for the draft law lacks detailed description of regulation procedures and no secondary legislation that generally provides with detailed information is worked out as yet. The absence of clear picture how the new regulation will be enforced makes business nervous. Entrepreneurs  have an apprehension that a new regulatory body looms in prospect. The point is that based on the draft project the AFTC is empowered to enter in the company and check-out all papers. Moreover, not all business is covered by the anti-trust regulation but only the ones with more than 40% of market share while the draft law does not stipulate terms under which the Agency is allowed to probe company. Neither the method of the market share calculation is described.


According to Vakhtang Lezhava, Head of the Advisors' Group of the Prime Minister of Georgia for Management and Economic Affairs, each case will be researched independently based on peculiarities of the matter.
Pertaia fears the upcoming law is discriminating for it does not cover all businesses equally but only priority sectors that will be defined by government that enables Agency to ignore claims from non-priority sectors. Moreover, the draft law lays ground to corrupted deals between businesses. The point is that if a reported company acknowledges its infringement and agrees with the complaining business to remove its claim, it is at the Agency’s discretion whether or not to pass the case to court, whilst no criteria are built in the law when the Agency can pass the case to court and when not.


“This may instigate business to strike deals between themselves,” Pertaia presumes adding that another bigger problem will be the court. Even western judiciary systems can hardly handle with the anti-trust affairs while Georgian court with no experience and backgrounds in handling with economic crimes seems predefined to failure. Pertaia thinks the issue requires a much more complex and systemized work rather than just training judges as promised by government.
Non-governmental watchdogs think the restoration of the anti-trust regulation in Georgia was made under the EU pressure and looks malefaction as everything done reluctantly.


Rose-revolution government undertaking liberal economic course in 2005 revoked the anti-trust law and the service accordingly and introduced AFTC instead, however the Agency turned out ineffective giving carte blanche to monopolists. And only after Georgia stepped on the way of concluding free trade with the EU in 2008, government had to think of restoration of the anti-trust regulation for it was set by the EU as one of the four  key preconditions to start negotiations on Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU. Georgian government has long been lingering with the issue however the EU did not change its strong recommendation to introduce an effective anti-trust service in the country. And Georgian government yielded at last but contrived to work out such a law that complies with the EU regulation by word building but creates loose loopholes to monopolists, Shota Murgulia, an economic analyst with the Center for Strategic Research and Development, said. 
According to him, the new anti-trust law completely depends on government and the role of the anti-trust agency will be quite restricted: Prime minister assigns and dismisses the head of the Agency, government defines priority sectors to be regulated by the law, government, not the Agency decides penalty rates that by the way are inadequate to be effective as far as they are by 5-10 times less than in the EU.  Penalty rates for non-provision information to the Agency is fined by GEL1-3 thousand that is a ridiculous sum for big business with several millions of turnover that may prefer to pay penalties and go ahead with the violation of market rules.


“Non-provision of the information is fined by 1% of company’s turnover in the EU. Penalties should be adequate to be effective,” Murgulia said.
This is just an incomplete rap sheet of the upcoming anti-trust law, experts say, however the EU ticked the requirement on effective anti-trust regulation as implemented and opened the way to start negotiation on DCFTA by Spring.