Our view of the importance of competition varies, depending on the perspective. A consumer feels the impact of competition in their wallet, a manager of a start-up company understands how important it is not to be hindered by competitors, and a manager of a dominant company often feels that competition law hinders its continued growth.
However, it is often forgotten that competition has wider economic significance. Competition leads to increased efficiency in companies and increases the likelihood of new competitors entering the market and providing stiff competition to those who are less efficient. Competition also fosters innovation, which creates new job opportunities.
This digestive system of the economy in turn leads to increased productivity and economic progress. At the same time, the consumer enjoys better prices, quality and choice.
Competition also accelerates the recovery of the business sector after economic shocks. The Competition Authority's actions after the crash have specifically aimed to use competition law to speed up the recovery. The Authority has addressed this in detail in its decisions and reports. Furthermore, the Authority has regularly assessed the state of the recovery, see the Authority's reports. No. 2/2011, 3/2012 and 3/2013.
Now, as time passes since the collapse, the Competition Authority has sought to refocus its priorities in light of the economic developments. In that work, the authority has sought input from a wide range of sources, including academia and stakeholders. The conclusion of this review is that the focus should be on opening up markets and increasing productivity in the domestic services sector. It is worth elaborating on this a little further:
Comparative figures suggest that productivity in the domestic service sector is much lower than in the other Nordic countries. The service sector is here defined broadly and includes services and production sold domestically.
At the same time, the composition of the population is changing, and proportionally fewer people are engaged in value creation. If our welfare system is to be competitive, we must increase productivity in the economy.
As was argued at the outset, active competition is the most effective remedy for this type of digestive disorder. The opening up of markets plays a key role in this. Opening up markets means, amongst other things, facilitating competition from abroad by reducing the protection of domestic services and production, which most often results in nothing but a less efficient economy.
Market opening also involves the public sector opening up competition in areas it has hitherto run itself. For the government to use competitive incentives to improve and develop public services.
Here, many can have a positive impact: the government, consumers and the business community. The following can be mentioned in this regard:
Since 2009, the Competition Authority has recommended that the government here in the country adopts so-called competition assessment. Competition assessment is a simple, standardised process used when preparing or reviewing laws, regulations or other government directives. The aim of a competition assessment is to identify competition barriers contained within laws and regulations. If such barriers are identified, the option that is least likely to harm competition should be chosen.
Competitive assessment of this kind is one method of opening up markets. This approach is also ideal for keeping the regulatory burden on business in check. Excessive regulatory burden on business is, in fact, usually an unnecessary barrier to competition, including a barrier for new or smaller companies to enter the market.
This approach also leads to the government utilising the forces of competition in more areas of public administration, such as healthcare and education.
Companies and their associations also play a key role if success is to be achieved, as they can promote improved competitive conduct within their ranks. For example, companies can adopt so-called competition compliance programmes and their associations can support such work in various ways.
In this regard, it should be noted that the Chamber of Commerce of Iceland, the stock exchange and the Business Council of Iceland issue guidelines on corporate governance. It would be useful to address the competitive conduct of companies in these guidelines in greater detail than is currently the case. Other parties that influence the competitive environment, such as pension funds, could also consider this.
Well-informed consumers can have a great impact, as they can provide companies with much-needed discipline. It is therefore important to consider consumer education, not least at a school level. This can foster a culture where consumers make informed decisions and companies have to pull out all the stops to win their favour.
It is therefore necessary for organisations and associations that champion consumer interests to promote increased education and consumer awareness.
It is therefore incumbent upon the Competition Authority to stop breaches of competition law and remove barriers to competition. Research shows that the societal benefit of stopping illegal collusion or the abuse of a dominant market position can be enormous.
Based on recent OECD benchmarks on this, it is conservative to estimate that the Competition Authority's intervention in consultation and abuse cases between 2005 and 2013 has yielded the Icelandic economy a total of around 10 billion króna, adjusted for prices as of May 2014. That amounts to an average of around 0.6 per cent of GDP per year.
It is therefore clear that the consistent enforcement of competition law is of great importance to the economy. It is also important that the Competition Authority advocates for the objectives of competition law and advises businesses and the government, in order to prevent barriers to competition before any harm is done. Part of this work is engaging in constructive dialogue with the business community, government and consumers regarding the priorities outlined above.
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