Simon Taylor, Jul 14, 2011
Competitive neutrality describes the aim of a level playing field in mixed public/private markets, where state-owned or quasi-public bodies line up to compete with private sector companies. These markets tend to be distorted as a result of structural advantages enjoyed by public providers and a failure by public buyers to ensure fair process. A range of policy tools can be employed to achieve competitive neutrality.
The OECD paper, Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options, of May 2011 looks at this problem. It advocates full implementation of the 2005 OECD Guidelines on Corporate Governance of State-owned Enterprises. This recommends measures designed to mitigate the conflict of interest in the state being both regulator and provider.
In the United Kingdom, the Office of Fair Trading (“OFT”) published a working paper in July 2010, Competition in Mixed Markets: Ensuring Competitive Neutrality, which suggests a more uniform approach by government bodies, fairer procurement, and the full application of competition law to state-owned enterprises.
The European Commission published a Discussion on corporate governance and the principles of competitive neutrality for state owned enterprises” in September 2009. The Commission’s paper focuses on the European Union (“EU”) state aid rules and the exemption under Article 86(2) (now 106(2)) of the Treaty on the Functioning of the European Union (“TFEU”)) to the appli