Competitive Neutrality
The European Commission (EC) Competition Directorate has published a discussion document titled: Discussion on Corporate Governance and the Principle of Competitive Neutrality for State-owned enterprises. The document was submitted to the Organisation for Economic Co-operation and Development (OECD) Directorate for Financial and Enterprises Affairs Competition Committee Working Party 3 on Co-operation and Enforcement meeting held in Paris on the 20th October 2009.
The document states in the Introduction:
“1. Competitive neutrality may be defined as policies undertaken by a competition enforcer and/or regulator to remove any unfair competitive advantages or disadvantages that public undertakings, which are involved in commercial activities, may experience over their privately-owned competitors, simply as a result of government ownership or involvement. The main rationale behind implementing competitive neutrality measures is to allow privately-owned businesses and government-owned businesses to compete on an equal footing. It is believed that the accompanying increase in competition would bring about greater efficiencies and better quality products and services at lower prices, leading to an increase in consumer welfare. Greater efficiencies in the public sector also mean a more effective use of taxpayers’ resources. In essence, competitive neutrality thus involves the application to public enterprises of the incentives and regulations faced by private businesses.
2. The EU system is characterised by the fact that the principle of competitive neutrality between public and private enterprises is recognised in the Treaty establishing the European Community1 (hereinafter the “EC Treaty”) and that the Commission has operational tools to implement this principle.”
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