Early developments of competition policy. The Georgian parliament adopted the first competition framework law (Law on Monopolistic Activity and Competition) in 1996. The law was not in compliance with international standards, as it prohibited monopoly (instead of prohibiting abuse of dominant positions) and was oriented towards price control. This first law was thus more an anti-monopoly regulation than a competition law. The responsible authority was the Anti- monopoly Agency, which was empowered to carry out only documentary investigations. The Agency did not have the power to conduct onsite investigations or dawn raids.
In 2005, a new Law on Free Trade and Competition was adopted, replacing the previous one. It formed part of wider reform efforts notably seeking to reduce corruption, and in this case the reportedly widespread corruption in the enforcement of the 1996 law. Its scope was mainly focused on state aids, and therefore was not a framework law for competition policy overall. It lacked key definitions of the abuse of dominant position, concentrations, cartels, etc. While the 2005 law had created the Competition and Free Trade Agency, it lacked independence and investigative powers, and had no powers in the area of anti-trust.
Recent developments and EU practice. As already mentioned, the competition policy chapter of the Association Agreement includes no specific references to EU laws for approximation by Georgia. This means that the relevant Georgian authorities have a considerable degree of discretion on how to define and operate competition policy. The evolution of Georgian competition policy, however, is heavily influenced by EU law and practice. In particular, the new 2012 Law on Free Trade and Competition was elaborated in close cooperation with
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experts from the Swedish Competition Authority, and drafted in line with EU practice.
In the new 2012 law, the following topics were added: provisions on state aids, abuse of dominant position, ex post regulation of concentrations (prior notification was not required), cartels, relevant market, fines and sanctions. Yet some sectors remained under special competition regulations: energy, communications and financial services. In common international practice, these sectors are referred to as ‘non-liberalised sectors’ because the risk of concentration and abuse of dominant position are rather high, and thus they are regulated by special laws and sector regulators.
The Competition and State Procurement Agency was created as an independent body accountable to the government. The Agency was given investigative powers.
Further amendments to the law were made in 2014,63 covering the following areas:
antitrust provisions, which address abuse of dominant position, ex ante regulation of mergers and acquisitions, restrictive agreements, concerted practices, decisions by undertakings, terms of relevant market, principles of block exemptions, leniency programmes, fines and sanctions. The law is in line with the Arts 101 and 102 of the EU Treaty on the Functioning of the European Union;
state aid provisions, covering general rules on procedures for granting state aid, de minimis state aid; and
institutional provisions on further institutional independence, investigative powers and decision-making powers.
The Competition and State Procurement Agency was divided into two independent state authorities: the Competition Agency and the State Procurement Agency. Accordingly, the Competition Agency is now responsible only for competition policy issues, and no longer for state procurement. The Competition Agency is an independent regulatory body, subordinated to the prime minister and responsible for the implementation of competition legislation. It has a wide range of powers: to investigate the abuse of dominant positions, cartels and any infringement of competition legislation (including ex officio investigations and onsite inspections); to impose sanctions or fines for
63 The legislation that governs competition policy consists of the competition law and secondary legislation (six regulations on competition and one regulation on state aid).
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competition legislation infringements; to spin off companies; and to prohibit or control mergers and acquisitions.
The Competition Agency has already undertaken a number of activities involving its consent or investigation of mergers and acquisitions (two cases), the abuse of a dominant position (one case), restrictive agreements and concerted practices (one case) and infringement of state aid provisions (two cases).
Nevertheless, as a result of changes in 2014, the Competition Law still has some important shortcomings. A dominant position is negatively (nominally) defined, which provides that a dominant position per se restricts competition. According to best practices, a dominant position by itself is not something negative by definition and is not prohibited. Only abuse of a dominant position is prohibited by EU and international regulations. Subsequent to recent changes, the current law provides a legal basis for price regulation, and as a result the Competition Agency can act as a price inspectorate, which restricts market competition.
Strict ex ante regulation of mergers and acquisitions is envisaged by the new legislation. It defines strict procedures for notification of mergers and acquisitions (for example, economic agents who want to undertake a merger should provide a relevant market analysis themselves). Georgia has a small economy, in which nearly 98% of enterprises are either small or medium-sized. To increase export potential, it is vital for many companies to merge or acquire shares in other companies. For instance, Luxembourg has only ex post regulation of mergers and concentrations, which is in line with EU regulations.
Implementing the new competition legislation will involve overcoming the following main challenges:
lack of knowledge of competition legislation and experience in dealing with competition cases on the part of the responsible judges (at the Tbilisi City Court and Tbilisi Appeal Court);
insufficient capacity building for the development of the Competition Agency;
lack of awareness by the private and public sectors and by civil society; and
lack of efficient coordination among the key regulatory agencies, which diminishes the capacity of the Competition Agency to implement the antitrust policy in an effective manner.
Overall, Georgian legislation is now largely compliant with the key principles of the EU competition acquis. There remains the issue of
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the extent to which competition legislation designed for the large EU internal market is suitable for Georgia, a country whose market size is around 100 times smaller and is still in transition. This issue can only be assessed properly after the Competition Agency has acquired more experience of competition enforcement.
Competition policy at a glance
The provisions in the DCFTA for competition policy are very limited and do not require approximation with EU competition rules and policies. Nevertheless, Georgia recently aligned its competition legislation largely with the key principles of EU competition law.
The Competition Agency is independent and has investigative and decision- making powers.
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13.STATISTICS
A modern and internationally comparable statistical system is indispensable for informed policy- making and for the work of the business sector and civil society. All the post- Soviet states have had to face the same challenges of radical reform to their statistical systems, notably the move from systems that essentially served the needs of the state to systems that serve the private sector and society as a whole and, more technically, to a greater use of sampling methods rather than exhaustive data collection.
Provisions of the Agreement
The EU has engaged all six Eastern Partnership (EaP) states and the Central Asian states in extensive cooperation programmes to assist this long and complex process. Many of the projects listed below are ‘group activities’ for the whole EaP and, in some cases, also with the Central Asian states.
For Ukraine, Moldova and Georgia this is enhanced by collaboration and by the explicit commitments made in the Association Agreements to align their statistical systems to that of the EU: Eurostat, which sets out a huge number of legal regulations in the Statistical Requirements Compendium. This is a highly ambitious programme. The time horizon for compliance with EU regulations is not specified, however, but experience from the accession of the new member states of the EU would indicate that this is a long-term process. For a realistic perspective, it took around 15 years for other new EU members to complete the transition, with much more support from the EU than Ukraine, Moldova or Georgia will be receiving.
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Cooperation between Eurostat and partner states is structured as follows:
three-day seminars on statistical strategies, once a year;
training courses on current issues and recent developments in statistical systems, about five to six times over a two-year cycle;
collection of selected data series, about 300 in number (i.e. a selection of key series, though fewer than what the EU member states comply with), in which the partner states submit data in accordance with Eurostat questionnaires, allowing Eurostat to publish comparable data series;
in-depth assessment of the statistical systems of Ukraine, Moldova and Georgia (called Global Assessments), see below; and
activities of the EaP multilateral platform and panel on statistical systems. This consists of conferences held in EaP capitals at a rate of about two per year, each taking up a particular theme in depth (such as the labour market and migration).