Monday, October 31, 2011

Regional Agreements of Developing Jurisdictions: Unleashing the Potential

Posted by D. Daniel Sokol

Michal S. Gal, University of Haifa - Faculty of Law and Inbal Faibish, University of Haifa - Faculty of Law address Regional Agreements of Developing Jurisdictions: Unleashing the Potential.

ABSTRACT: Regional competition agreements (RCAs) hold great potential for overcoming the major enforcement problems of developing jurisdictions. Indeed, it is no coincidence that the past two decades have seen an unprecedented upsurge in the number and scope of such agreements, especially in the developing world. Yet, as the experiences analyzed throughout this book clearly demonstrate, the accumulated experience of almost all of these newly sprung RCAs is that thus far they have not significantly enhanced competition law enforcement in their regions, or have encountered serious difficulties in doing so. This empirical finding applies regardless of the region and the special characteristics of the jurisdictions within it. This creates a paradox: why do so many countries invest in adopting such agreements in the first place, if the obstacles to their successful operation are high.

This chapter attempts to offer some answers to this paradox by analyzing the obstacles that stand in the way of realizing the potential benefits of RCAs. Our purpose is to identify and analyze at least some of the variables that affect their adoption and operation in the real world. Such an analysis can hopefully provide better tools to understand and predict when an RCA is likely to succeed or to fail, and what can be done to increase its chances of success. To do so, we combine the empirical observations on how RCAs operate in practice with a theoretical analysis. The analysis builds, inter alia, on studies of the collective action problem, including studies of successful collaborations in environments which face relatively similar obstacles to a successful joint collaboration. Such an analysis can also assist us in determining whether the current failure is mainly rooted in the regional aspect of the RCAs or rather in the fact that they involve competition law, the application of which would have encountered serious difficulties in the relevant jurisdictions regardless of its regional aspect.

Accordingly, the chapter is divided into three parts. The first explores the potential benefits that can accrue from a successful RCA. The second, which is the heart of this chapter, analyzes some of the obstacles to realizing such benefits that emerge from the case studies of the different RCAs and places them in a wider theoretical context. The third part offers some potential solutions for overcoming such problems.

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