Subsidies, competition and trade – OECD SECRETARIAT – December 2022 OECD discussion
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This presentation by Wouter Meester (Competition Expert, OECD) was made during a discussion on Subsidies, competition and trade at the 21st meeting of the OECD Global Forum on Competition on 1 December 2022. More papers and presentations on the topic can be found out at https://oe.cd/sctr. This presentation was uploaded with the author’s consent.
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Subsidies, competition and trade – OECD SECRETARIAT – December 2022 OECD discussion
- 1. SUBSIDIES, COMPETITION AND TRADE Presentation of the OECD Background paper Wouter Meester OECD Competition Division GFC Session II – 1 December 2022
- 2. • Subsidies: more relevant than ever • Different instruments exist – Multilateral rules – FTAs and trade blocs – Competitive neutrality / State Aid control – Competition enforcement – New legal instruments Relevance of subsidies 2
- 3. • Financial power (“deep pockets”) that: 1. may create, maintain, or enhance dominance 2. may facilitate harmful conduct (predatory pricing) • Subsidies can: affect cost/revenue structure, strategic decisions provide economies of scale Enable international/foreign expansion • Relevance for mergers and abuse of dominance Theory: competition concerns 3
- 4. • Subsidies have played a modest role to date • Subsidy offense / defense • Ability and incentive to engage in predatory pricing Ability – financial indicators, cost structure Incentive – history of law violations, ownership structure, recoupment • Financial strength has been a contributing, rather than a decisive factor to potential dominance Practice: existing case law (mergers) 4
- 5. • Again, cases have been rare • Mostly related to cross-subsidization • Use of government financing for a public service obligation (PSO) to expand its competitive activities • Overcompensation by the government becomes a de facto subsidy • Example: postal sector Practice: existing case law (abuse) 5
- 6. • Establishing the existence of subsidies is not straightforward • Acquisitions by subsidised SOEs can create specific issues with regards to merger control • Subsidies complicate the determination of the relevant cost-measure to establish predatory pricing • Recoupment not always relevant Some challenges 6
- 7. Thank you For more information: https://oe.cd/sctr 7