Expected changes and innovations in the law “On Competition”

On November 30, 2022, at the Agency of Information and Mass Communications under the Administration of the President of the Republic of Uzbekistan, Antimonopoly Committee of the Republic of Uzbekistan held a press conference on “Expected changes and innovations in the law “On Competition””.

Antimonopoly Committee was reorganized in accordance with the Decree of the President of the Republic of Uzbekistan No. UP-5630 “On measures to fundamentally improve the system of managing State assets, antitrust regulation and the capital market” dated January 14, 2019.

On the effectiveness of reforms and measures implemented under the leadership of the Head of state in order to create a healthy competitive environment by reducing monopolies and state participation in the economy in recent years:

To reduce the participation of the state in the economy, the following mechanisms were introduced:

if there are 5 or more private sector entities operating in the commodity market, restrictions on the creation of enterprises with state participation were introduced in these areas;

state bodies and monopolies empowered to license, accredit and authorize were prohibited from establishing enterprises with their participation;

a mechanism for assessing the impact on competition and a procedure for obtaining the preliminary approval of the Antimonopoly Committee were introduced to setting up enterprises with state participation.

For example, only during 2021-2022, the Committee considered a total of 45 applications for the organization of enterprises with state participation, of which the organization was rejected in 33 percent of cases.

enterprises with state participation are prohibited from engaging in additional types of activities that are not typical for their main activities, and having a stake in other enterprises.

As a result, over the past two years, the number of enterprises with state participation has decreased from 3.0 thousand to 2.1 thousand, or by 30%.

In order to further develop competition in the commodity and financial markets, to ensure the free entry of new participants:

• 185 types of licenses and permit procedures for entrepreneurs have been reduced or simplified.
• as a result of the reforms, due to the liberalization of entrepreneurs’ access to 31 markets for goods and services, sufficient competition was formed and monopoly was eliminated, and the total number of monopoly enterprises over the past 5 years has decreased by 20% and today is 90.

Only in the current year, a decision was made to abolish existing exclusive rights in 13 markets for goods and services, and formation of competition began step by step.

For example, the private sector has been given the opportunity to work in areas such as the collection of used technical oils, the comparison of measuring instruments, the certification and projection of grain and cotton.

3) mandatory assessment of the impact of draft regulatory documents on competition was introduced.

To this day, the Committee has assessed the impact of more than 1.1 thousand draft regulations on competition, and 65 percent of them have anti-competitive norms.

4) various anti-competitive actions of monopolies were eliminated, including more than 6.7 thousand natural monopolies, as a result of which the interests of 42 thousand entrepreneurs were protected in the amount of 554 billion soums;

5) anti-competitive decisions of various state authorities, including more than 3.2 thousand local authorities, were canceled.

6) the transformation process has begun in such areas of natural monopolies as railways and airport services, and one of its main goals is to ensure free entry of new participants into these markets.

7) anti-monopoly compliance system was introduced in order to early detection and prevention of restriction of competition in state authorities and monopolies.

For information: implemented in 100 organizations (10 enterprises with state participation, 10 subjects of natural monopolies, 24 large monopolies, 33 local executive authorities, 22 public administration authorities and 1 corporate customer).

For today, a new version of draft law “On Competition” has been developed, which combines the Laws “On Competition” and “On Natural Monopolies”, and completely new criteria for creating and maintaining a competitive environment have been developed.

The draft law “On Competition” includes the following main new mechanisms:

The draft law consists of 9 chapters and 52 articles.

1. In order to reduce the existing administrative burden on small business entities, entrepreneurs with a turnover of less than 3 billion soums, are exempted from antimonopoly regulation.
2. Laws on competition and Natural monopolies were combined and transferred to the approach of defening natural monopolies based on specific criteria, the current principle of “setting the list of natural monopolies” was abandoned.

This helps to distinguish markets where competition can be developed from spheres of natural monopolies.

3. Criteria for determining a dominant position in the markets of goods and services are being revised.

In order to reduce the administrative burden, the mandatory submission of various reports and information by enterprises with a dominant position and natural monopoly subjects, which are market participants, is being abolished.

4. In order to reduce the administrative burden on small and medium-sized businesses, the cost of economic concentration transactions (mergers and acquisitions, obtaining shares, etc.), for which prior consent is required, increases 5 times (from the current 30 billion sums up to 150 billion sums), it is determined that the control will be applied only to large enterprises that can have a significant impact on competition.
5. New institutions are being introduced, such as bargaining power, anti-monopoly compliance;
6. It provides for the establishment of a dominant position of digital platforms and antimonopoly requirements in relation to them;
7. Taking into account the severity of losses and the consequences of “cartel agreements” for the economy and society, the principle applied in world practice “per se” is introduced, according to which such agreements themselves are prohibited by themselves.
8. Procedure for assessing the impact of regulatory documents and their projects on the competitive environment is determined;
9. Forms of state support in the form of benefits and preferences and antimonopoly requirements for their provision are determined.
10. In order to reduce the share of the state in the economy, clear criteria are established to prevent the state from doing business.
11. Law on Competition includes measures to stop actions to restrict competition not only in selection and bidding, but also in auctions and other types of commerce.
12. Financial penalties are established for violating the antimonopoly legislation and the current amount of administrative liability is increased (actually, this is 3-5 times the size of the RCV/BRV, the draft proposes to increase it to 10-20 times the size of the RCV/BRV), and liability for violation of competition law is established.
13. In order to improve the effectiveness of cartel detection, a framework is being created to facilitate accountability for anti-competitive agreements and coordinated actions.

The draft law is primarily aimed at effectively curbing the market dominance of large monopolies, ensuring free entry to the markets of entrepreneurs and new participants, as well as full protection of competition as an additional reserve for economic growth.

Ensuring a healthy competitive environment is an important “point of growth” of the economy, and reforms in this direction will be consistently continued.