Clash over New Caledonian antitrust agency exposes politics of competition

29 January 2018 12:49pm
New Caledonia on Map

15 January 2018. By James Panichi.

When France’s competition regulator issued a statement welcoming the setting up of a five-member antitrust watchdog in a small Pacific territory on the other side of the world, it was careful to gloss over the bitter factional clash that had marred the occasion.  

In a diplomatic press release, the Autorité de la concurrence noted simply that it had been calling for an “independent authority in charge of competition regulation in New Caledonia” since 2012.

Yet the five-year delay in setting up the French territory's competition regulator, which will finally assume its role on Feb. 22, was all about politics. The impasse was a symptom of the archipelago’s deep political and ethnic divide.

With a referendum on independence from France on the horizon and the 2017 French parliamentary election affecting New Caledonia’s political balance, the makeup of the future watchdog quickly became a political football.

It mattered little that, for years, most local politicians agreed that the territory’s small-island economy was screaming out for a competition watchdog.

Retail, the automotive trade, construction and the pharmaceuticals sector all raise serious antitrust concerns in New Caledonia — something highlighted by local media whenever price rises make headlines in the territory’s capital, Nouméa.

Adding to the frustration of those advocating for a competition watchdog was the success of the antitrust regulator in French Polynesia — another of France’s three, inhabited Pacific territories — where allegations of market failure have been attracting regulatory scrutiny since 2013.

But politics in New Caledonia have always been more polarized, with an indigenous, mainly Melanesian population striving to stake its political claims against those of the largely European business community.

It’s in that vexed context, and with a vote on self-determination expected by the end of 2018, that the new authority will have to operate.

The Autorité de la concurrence will have to confront the demands of left-leaning indigenous politicians, who are hoping that competition enforcement will help bring to heel a business community they don’t trust.  

The new body will also have to stare down opposition among parts of the business community, which remain unconvinced of the need for a competition enforcer in a small economy servicing a population just shy of 270,000.

Finally, it will need to grapple with what remains, by European standards, a highly regulated economy, in which some monopolies can operate legally, the government reserves the right to fix some prices, and state aid is considered part and parcel of island life.

Breathing space

The new authority will be chaired by Aurélie Zoude-Le Berre, a Paris-based senior public servant who has worked on the legal affairs committee of France’s National Assembly and who has a strong background in administrative law.

Answering questions put by MLex, Zoude-Le Berre conceded that managing the political parties' different expectations won't be easy, if the authority's confirmation hearing in the territorial assembly was anything to go by.

"The pro-independence parties insisted ... on the need to fight for the cost of living, while other politicians feared the [authority's] impact on New Caledonia's business environment," Zoude-Le Barre said.

But that context doesn't mean the new regulator will be taking sides. "I consider the creation of [the authority] a chance for New Caledonia's economic development," she said.

"By supporting the opening of markets, with the arrival of new players, the reduction or elimination of certain barriers to entry, the stimulation [of competition] among enterprises already present on New Caledonia's markets ... this will, in turn, contribute in giving residents back their buying power while improving competition," she said.

But the authority would also have what Zoude-Le Barre described shortly after her hearing as a “curative mission” for those businesses that fall victim to anticompetitive practices; in short, it will be able to intervene directly if it uncovers uncompetitive markets.

Zoude-Le Barre says that this right to take action will give the watchdog powers that go beyond those of its counterpart in France.

Although based on French competition law, the territory’s regulations include provisions under which large companies that control more than 25 percent of any given market can face “structural injunctions” that may lead to sanctions.

That means the new regulator has the power to pursue companies with large market shares — even without having to prove that those companies have abused their dominant positions.

Monopolies rule

New Caledonia’s departure from aspects of France’s competition provisions isn’t surprising.

The new competition authority isn’t an institution of the French state. Under French legislation, the territory’s local political assembly, or congress, may establish its own authorities, providing that certain independence requirements are met.

The territory’s first foray into competition law dates back to 2004, when local antitrust rules were adopted. Although they are modeled on existing French regulations, the territory was determined to maintain control over certain industries and some price mechanisms.

It could do so without concern for EU state-aid rules: As a French overseas territory, New Caledonia is exempt from European regulation.  

Electricity distribution operates as an approved monopoly and prices for both domestic and business use are fixed by the territorial government. Meat imports are also tightly controlled. Domestic and international air travel is dominated by local operator Aircalin.

These legally entrenched monopolies will remain outside of the purview of the new competition watchdog and the territory’s tough competition laws.

Competition politics

Last August, the warring political parties in New Caledonia’s congress appeared close to breaking the impasse that had for years blocked the launch of the competition authority.

Although the conservative Caledonian Republicans abstained from the vote, both anti-independence centrist parties and pro-independence groupings, which include the Front de Libération Nationale Kanak et Socialiste, or  FLNKS, agreed to appoint lawyer and judge Stéphane Hoynck as the authority's chairman.

Hoynck, a competition expert who serves on France’s supreme administrative court, was in Nouméa for the August congressional hearing, which was not particularly controversial. But he was later told that the pro-independence parties had withdrawn their support.

The move was widely regarded as having no connection to Hoynck’s suitability or competition concerns. Rather, the target of the FLNKS vote had been Philippe Gomès, a former president of the territorial government who was elected to France’s national assembly in June.

Gomès, who had been one of the strongest supporters of the planned competition authority, described the August vote that ended Hoynck’s candidacy as “payback” for an election campaign which hadn’t gone well for the FLNKS.

But in December, pro-independence members of congress decided to support the appointment of the new panel, headed by Zoude-Le Berre, allowing the congress to overcome the abstention of the Republicans, who have close ties with the territory’s business community.

The Republicans' suspicion that the new competition authority would be used as a stick with which to beat business was, oddly, given some credence by pro-independence party member Jacques Lalié.

Speaking after the vote, Lalié told local media that he hoped the new watchdog would look into an economy that was “dominated by certain groups” and said the time had come to “democratize the economy.”

His comments make clear the way in which a clash of class, ethnic and political cultures will provide a controversial yet unavoidable backdrop to the new authority’s work.

Zoude-Le Barre was nevertheless happy to acknowledge the reality of New Caledonian politics, telling MLex that partisanship wouldn't change the way the authority carried out its work.

"As president, I will be particularly careful to guard [the regulator's] independence from both political power and business lobbies," she said.

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