Post-Transformation Adjustments Between Formal and Informal Rules: Antitrust in Russia

As at the end of 1989 the process of system transformation (as a radical form of institutional change) in Russia began, there was no consensus about the range and the sequencing of reforms needed to successfully accomplish the transformation process and establish the institutional framework of a free market economy with competitive markets. Though generally agreed was that changes should rapidly lead towards maximising material welfare. The best known coordination mechanism are workable competitive markets as they contribute to optimal allocation, innovation dynamics, economic freedom, and thus provide flexibility and responsiveness of the economy. However, competitive markets without governmental protection tend to self-destruction as market participants attempt to protect themselves by monopolisation or by other anticompetitive arrangements and practices. By establishing the antitrust institutions Russia followed the approach, which was suggested by leading economists that time, and transplanted antitrust rules from the jurisdictions, in which they proved to be effective.

The paper focuses on establishing of antitrust institutions in Russia and critically analyses the impact of transplanted rules on the effectiveness of competition policy as an economic institution. First, it examines (a) the preconditions of institutional transformation and (b) the process of introduction and development of antitrust institutions in Russia from the beginning of transformation until the latest reform of competition law in 2006. Then, drawing upon a range of existing theories that explain mechanisms of institutional transformation, the paper analyses the determinants of a successful introduction of new institutions and discusses what approach of rule setting is appropriate for rapidly changing institutional environment. At the end Russian experience is valuated. The results expected are a) the effectiveness of transplanted antitrust institutions in Russia has been low due to incongruity between new formal institutions and old formal/informal institutions b) whether alternatives to this approach could be used in the particular case of Russia. The open question is whether and, if yes, how the effectiveness of institutional transplants could be enhanced.