Federica Maiorano of the OECD Directorate for Financial and Enterprise Affairs looks at the tangible contributions that competition assessment reviews are making to reforms underway in Greece.
Many laws and regulations set the rules for how businesses enter, operate and exit a market. Good regulations contribute to achieving desired public policy objectives in areas such as consumer protection and public health. Competition assessments help to ensure that regulations are not overly or inadvertently restrictive for businesses and consumers. Without relaxing all regulations, they try help policy makers achieve their objectives in the least distortive way possible.
The OECD’s latest competition assessment of Greece targeted the wholesale trade, construction, media and e-commerce sectors, along with pharmaceuticals, chemicals and other manufacturing sectors. A total of 1,288 pieces of legislation were assessed, leading to more than 350 recommendations for changing or repealing specific legal provisions. A large number of these recommendations have already been implemented by the Greek administration over the past 12 months.
Competition limiting regulations can take many forms.
Regulations designed with larger businesses in mind. For example, truck drivers working freelance – a very common business model in Greece – were required to prove their financial standing under stricter requirements than those imposed on limited liability companies. This regulation had the undesirable outcome of increasing the cost of entry for micro and small enterprises.
Changes in markets and technology. For example, content developers in the media sector could not directly approach potential investors, such as broadcasters or film studios, to get their audio-visual works produced. The rules required them to go through an intermediary registered as a professional. In the age of social media and user-generated content, this was an anachronism that might well have been restricting development in the creative sector.
Outdated regulations. For example, the state had exclusive rights for setting up wholesale central markets of fruit and vegetables in the wholesale trade sector. This regulation dated back several decades to a time when the state wanted to regulate and rationalise the supply of food to large cities, while imposing minimum hygiene standards. Today, several alternative channels ensure the supply of food and central markets now account for no more than 20% of the distribution network. Lifting this restriction allows wholesalers, producers and related businesses, such as logistics and packaging, to set up new markets and possibly reduce production costs.
Unintended consequences: Rules do not always achieve the objective they are designed for. For example, lack of consumer confidence in e-commerce is one of the main factors holding back this sector in Greece. The complexity of consumer protection legislation does not help. This legislation also had the unintended consequence of burdening Greek sellers with additional obligations, such as commercial guarantees on C2C sales on e-commerce platforms, compared with their competitors abroad. The share of Greek businesses making online sales is about 30% that of their counterparts in the European Union.
Obsolete legislation: More generally, many old pieces of legislation were still in force. Some overlapped with more recent legislation and others were simply outdated. One example was a law stipulating the minimum height of warehouses for dried figs and raisins. About 30% of the recommendations made in the competition assessments fell into this category. By repealing obsolete legislation, market participants and potential entrants face a more transparent, less complex and more predictable business environment. Regulations are often scattered across many different pieces of legislation and streamlining and codifying the legislation is beneficial to businesses. This applies, in particular, to new entrants and smaller businesses who are often faced with compliance costs that are relatively higher than those of larger companies.
Restrictive regulation is not an isolated phenomenon that concerns only Greece. Many other countries actively screen new or existing legislation to help develop alternative policies which are less harmful to competition, while achieving the same policy objectives. Competition assessment helps reform economies in targeted sectors and makes a significant contribution towards better regulation overall.