Economics Department

Economic Survey of Belgium 2009: Promoting competition to strengthen economic growth

 

Contents | Executive summary | How to obtain this publication 

Additional information | Back to main page | 

 

The following OECD assessment and recommendations summarise chapter 5 of the Economic Survey of Belgium published on 8 July 2009.

 

Contents

 

Competition policies are being strengthened which will improve consumer welfare and growth

The framework for competition policies was reformed in 2006, bringing the competition law in line with EU legislation and strengthening the competition authorities. These measures will increase competitive pressures in the economy, resulting in higher consumer welfare and productivity growth, through a reduction of the relatively high Belgian prices and more vigorous innovative activity. The effects of the new competition framework are encouraging as it has transferred resources towards anti-trust activities and away from less important merger control. Based on international experiences, however, further action is needed to achieve best practices. Although the independence of the Competition Authority has been strengthened, as it is now financed through a separate budget line, the Authority remains a Directorate General inside the Ministry of Economy and thus may appear as potentially subject to political pressures. Therefore, the situation should be monitored, in particular regarding the authority’s degree of independence and accountability. An effective competition authority needs adequate resources. The Belgian authority’s resources are relatively limited compared with other small economies, and they have not been sufficient to clear backlogs, deal with court appeals and assume a proactive role, such as undertaking market studies. Thus, resources may need to be reviewed and eventually increased to levels observed in other small economies with a proactive competition enforcement stance. Another aspect of an effective competition framework is to have sanctions that are sufficiently important to have a deterrent effect and to create incentives to participate in the leniency programme. As in other European countries, fines can reach 10% of turnover, but fines issued so far have been relatively small. However, the effectiveness of the Authority should be enhanced by expanding its panel of possible sanctions by introducing criminal sanctions, such as prison sentences, for hard-core cartels.


Competition in the retail sector is hindered by unusually extensive sector regulation

The retail sector is characterised by many small shops, a relatively small employment share, and very slow increases in productivity. The sector is also much more regulated than in other OECD countries, not only by regulations that exist in other countries (such as rules for large outlets, shop opening hours and prohibition of sales below costs) but also by Belgian specific regulation. The latter includes a ban on tied sales and announcements of price reductions within six weeks before the sales period (the so-called “black-out period”). Such regulation was intended to protect consumers, but the main effect has been to protect existing shops against entry by competitors with innovative business models and to reduce consumer welfare. Many of these regulations are currently being reviewed, particularly in the context of the EU Services Directive. Competition inhibiting regulation should be scrapped and zoning laws for large outlets should be restricted to evaluating spatial effects.


Regulation remains a burden to competition

1. No data for Greece, Ireland and Slovak Republic.
Source: OECD, PMR database.


The regulatory setup in network industries needs to be revised

The liberalisation of network sectors has not kept up with the reform of the general competition framework, despite the fact that prices in many network sectors are higher than in other countries. A common competition problem in many network sectors is the dominant position of the incumbent. The regulatory set-up varies across sectors, and there is no systematic or common approach to promote best practices. Some network sectors have regulators both at the federal and regional levels. Similar set-ups can be found in other OECD countries, but in the Belgian case, it is not easy to identify the economic benefits of such arrangements, particularly the comparative advantages of the sub-federal regulators. For example, the electricity market has effectively been divided into three sub-markets, where important network effects in terms of economies of scale and scope are lost. In the energy sectors, the complicated regulatory structures should be streamlined, preferably by establishing a single, independent and nationwide regulator with complete competencies. Moreover, the further development of wholesale markets and international interconnection capacity should be encouraged to facilitate new entry. A positive market opening measure was the government requiring the incumbent in the electricity sector to auction off part of its production capacity. This measure should be continued and expanded. In some network sectors, such as rail and postal services, liberalisation has been only enough to meet minimum EU requirements, and the sectors may thus not be prepared for the eventual full market opening. In addition, in many sectors there is an unusually wide scope of universal service obligations, posing problems in terms of an implicit barrier to entry and expansion of competitors. The first step to facilitate new entry should be the introduction of standardised universal service obligations that focus on generally accepted provision standards. Moreover, contracts for universal service obligations should be subject to competitive tendering and financed by the government imposing the obligations.


The liberalisation of the telecommunication sector has been less successful than in other countries

The liberalisation of the telecommunication sector has led to a decline in prices. However, the sector is dominated by incumbents, leading to higher prices and a slower roll-out of new technologies than in other countries. The sector needs extensive reform to promote competition to boost consumer welfare through lower prices and a more rapid introduction of new technologies. The telecommunication regulator should have greater powers to prevent the incumbents from exploiting their dominant positions. Moreover, efforts to dilute regulatory powers by delegating some responsibilities to community level broadcasting regulators should be strongly resisted. In fixed-line telephony, the main hindrance for new entry lies in the ability of the incumbent to delay local loop unbundling. To secure effective local loop unbundling stricter conditions should be imposed on the incumbent – a measure that should be backed up by greater use of sanctions in case of violations. In mobile telecommunication, there are an internationally high number of alternative providers, but their combined market share is lower than in other countries. Mobile termination charges should be further lowered and a fourth network operator should be introduced as soon as possible. Consumer switching should be facilitated by reducing maximum contract duration.

 

How to obtain this publication

 

The complete edition of the Economic Survey of Belgium is available from:

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.

 

Additional information

For further information please contact the Belgium Desk at the OECD Economics Department at eco.survey@oecd.org

The OECD Secretariat's report was prepared by Jens Hoj and Tomasz Kozluk under the supervision of Pierre Beynet. Research assistance was provided by Sylvie Foucher.

 

 

 

Countries list

  • Afghanistan
  • Albania
  • Algeria
  • Andorra
  • Angola
  • Anguilla
  • Antigua and Barbuda
  • Argentina
  • Armenia
  • Aruba
  • Australia
  • Austria
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Bangladesh
  • Barbados
  • Belarus
  • Belgium
  • Belize
  • Benin
  • Bermuda
  • Bhutan
  • Bolivia
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei Darussalam
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Cape Verde
  • Cayman Islands
  • Central African Republic
  • Chad
  • Chile
  • China (People’s Republic of)
  • Chinese Taipei
  • Colombia
  • Comoros
  • Congo
  • Cook Islands
  • Costa Rica
  • Croatia
  • Cuba
  • Cyprus
  • Czech Republic
  • Côte d'Ivoire
  • Democratic People's Republic of Korea
  • Democratic Republic of the Congo
  • Denmark
  • Djibouti
  • Dominica
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Equatorial Guinea
  • Eritrea
  • Estonia
  • Ethiopia
  • European Union
  • Faeroe Islands
  • Fiji
  • Finland
  • Former Yugoslav Republic of Macedonia (FYROM)
  • France
  • French Guiana
  • Gabon
  • Gambia
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Greenland
  • Grenada
  • Guatemala
  • Guernsey
  • Guinea
  • Guinea-Bissau
  • Guyana
  • Haiti
  • Honduras
  • Hong Kong, China
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iraq
  • Ireland
  • Islamic Republic of Iran
  • Isle of Man
  • Israel
  • Italy
  • Jamaica
  • Japan
  • Jersey
  • Jordan
  • Kazakhstan
  • Kenya
  • Kiribati
  • Korea
  • Kuwait
  • Kyrgyzstan
  • Lao People's Democratic Republic
  • Latvia
  • Lebanon
  • Lesotho
  • Liberia
  • Libya
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Macao (China)
  • Madagascar
  • Malawi
  • Malaysia
  • Maldives
  • Mali
  • Malta
  • Marshall Islands
  • Mauritania
  • Mauritius
  • Mayotte
  • Mexico
  • Micronesia (Federated States of)
  • Moldova
  • Monaco
  • Mongolia
  • Montenegro
  • Montserrat
  • Morocco
  • Mozambique
  • Myanmar
  • Namibia
  • Nauru
  • Nepal
  • Netherlands
  • Netherlands Antilles
  • New Zealand
  • Nicaragua
  • Niger
  • Nigeria
  • Niue
  • Norway
  • Oman
  • Pakistan
  • Palau
  • Palestinian Administered Areas
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Qatar
  • Romania
  • Russian Federation
  • Rwanda
  • Saint Helena
  • Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Samoa
  • San Marino
  • Sao Tome and Principe
  • Saudi Arabia
  • Senegal
  • Serbia
  • Serbia and Montenegro (pre-June 2006)
  • Seychelles
  • Sierra Leone
  • Singapore
  • Slovak Republic
  • Slovenia
  • Solomon Islands
  • Somalia
  • South Africa
  • South Sudan
  • Spain
  • Sri Lanka
  • Sudan
  • Suriname
  • Swaziland
  • Sweden
  • Switzerland
  • Syrian Arab Republic
  • Tajikistan
  • Tanzania
  • Thailand
  • Timor-Leste
  • Togo
  • Tokelau
  • Tonga
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Turks and Caicos Islands
  • Tuvalu
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • United States
  • United States Virgin Islands
  • Uruguay
  • Uzbekistan
  • Vanuatu
  • Venezuela
  • Vietnam
  • Virgin Islands (UK)
  • Wallis and Futuna Islands
  • Western Sahara
  • Yemen
  • Zambia
  • Zimbabwe
  • Topics list