LAW AGAINST MONOPOLIES

The basis of any market economy is free access to the market. In the course of economic growth, separate monopolies inevitably arise, which leads to negative consequences for the market. And one of the roles of the state is to regulate monopolies and prevent their influence on the free market. 

For Azerbaijan, the issue of monopolies is also highly relevant in the light of the increase in consumer prices after the two devaluations of the manat. 

In this regard, one of the main instructions of Azerbaijani President Ilham Aliyev voiced in recent years is the fight against monopolies both inside the country and in the importation of goods. 

"I do not know what kind of psychology it is when they believe that if I make this product, no one else should make it. We need to give an opportunity to others to ensure competition. Without competition, there will be no development or high-quality products ... Also, we should not allow monopolies linked with imports. I repeat, we are pursuing a policy of open market economy," Ilham Aliyev said at a government meeting in October 2015. 

Ultimately, the development of a competitive environment helps curb the growth of consumer prices at a time of national currency devaluation. But in order to take effective and long-term measures and ensure long-term price regulation in the country, there is a need for appropriate laws that will define the measures taken by government departments and ministries. 

The main weapon in the fight against monopolies in the country is the adoption of the "Code of Competition". 

This code has been prepared for about 10 years and is intended to replace the currently valid law "On antimonopoly activities" adopted in 1993. Although the law was repeatedly amended, it can no longer cope with the regulatory mission of creating conditions for free competition in the changing circumstances. 

Meanwhile, the "Code of Competition" cannot overcome the barrier of the third final reading in the parliament, despite the fact that it is regularly included in the agenda of the legislative activity of the Milli Majlis. According to unofficial data, the main obstacle to the adoption of the code is domestic companies that fear a negative impact on their activities. 

But the adoption of the code would help lower prices on the consumer market, which is very important in the current situation. 

The devaluation affected the rise in prices for local products, as production in the country is in many cases highly dependent on imported raw materials and packaging materials. 

As an example, we can cite the almost double rise in prices of eggs observed since the devaluation of 21 December. Only after inspections and intervention by the State Service for Antimonopoly Policy and Consumer Protection under the Ministry of Economy, as well as the General Directorate for Combating Corruption under the Prosecutor General's Office, which revealed an unjustified price hike on the part of a number of poultry farms, were the prices lowered. 

But it should be noted that the situation is difficult for poultry farms themselves - in light of the recent rise in prices for imported food and medicines. 

We get almost a vicious circle, which is once again linked to imports. 

And to some extent, prices can be affected by the elimination of monopolies in the import of goods, of which the president of Azerbaijan is constantly talking. The decision of the State Customs Committee to eliminate the system of customs brokers and digitize the customs clearance of goods should be considered in the same spirit. 

The fight against monopolies in the country remains a solution to issues of eliminating monopolies on import. And the main help here is the "Code of Competition". 

Currently, there is a tendency towards so-called cartel collusion in Azerbaijan. According to a competent source, after the devaluation, several companies in the service sector raised prices almost to the same level. At the same time, none of them had a 35-per-cent stake in the industry to be officially considered a monopoly under the current legislation, which would allow government agencies to influence them.

Of course, you cannot blame companies that are trying to increase their market share and maximize profits. But the end result should be achieved by increasing the number of services and improving their quality, not by establishing a monopolistic price in cartel collusion.

Now the condition for the development of business in the country is the need for structural reforms. And, at first glance, steps have already been taken to eliminate a number of licences and reduce prices. However, the Azerbaijani market is very small in its volume and virtually any medium-sized company can become a monopoly in its industry as long as there is no effective institution to control the consumer market.

Within the framework of structural reforms, we can also think about merging the State Service for Antimonopoly Policy and Consumer Protection and the Tariff Council into a single entity. Russia has already taken this path, merging the Federal Antimonopoly Service and the Federal Tariff Service.

The united entity could operate under the Ministry of Economy of Azerbaijan. Employees of the new service should be able to get the real picture of market prices, prevent companies from using monopoly or cartel surcharges on the price of goods and services, as well as monitor the prices of goods and services regulated by the government.

In any case, all variations of reforms in this sector go through the adoption of the "Code of Competition", which could be a major help in the creation of a real competitive environment in Azerbaijan.