In recent years, Iran’s competition law landscape has been undergoing significant changes, reflecting broader shifts in its economic and legal frameworks. These trends aim to address the challenges of emerging and developing digital markets, and inefficiencies in state-dominated sectors. Below are some of the key new trends shaping competition law in Iran.

1. Focus on State-Owned Enterprises (SOEs)

State-owned and semi-public enterprises have long dominated Iran’s economy, often stifling private sector growth. Recent initiatives aim to:

·        Apply Stricter Competition Rules to SOEs: Many state-owned enterprises have historically enjoyed monopolistic advantages, such as exclusive access to resources, favorable regulations, and government subsidies. New policies are designed to level the playing field by applying competition laws that restrict anti-competitive behaviors.

·        Monitor Preferential Treatment and Subsidies: SOEs often receive preferential treatment from the government, which distorts market dynamics and creates an unfair advantage over private competitors. Recent measures focus on monitoring and reducing such privileges to ensure that competition principles are applied uniformly across all market participants.

·        Encourage Greater Private Sector Participation Through Fair Competition: By reducing the dominance of SOEs, the government aims to create more opportunities for private enterprises to enter and compete in various sectors. This includes fostering a fair competitive environment where private companies can access resources, bid for contracts, and operate without fear of being overshadowed by state-backed rivals.

These measures align with broader privatization efforts, which seek to transfer ownership of state assets to private entities. However, unlike earlier privatization waves, the current approach emphasizes the need to maintain fair competition post-privatization. This involves addressing structural inefficiencies within SOEs, such as outdated practices and lack of innovation, to ensure that privatized entities contribute to a more dynamic and competitive economy.

2. Sector-Specific Regulations

Competition authorities are prioritizing key sectors that are vital to Iran’s economy, including energy, telecommunications, and healthcare. To address the unique challenges within each of these industries, they are developing sector-specific regulations and guidelines. These tailored measures aim to promote fair competition, prevent anti-competitive practices, and enhance efficiency while fostering innovation and ensuring equitable access to essential services.

3. Digital Economy Regulation

As Iran’s digital economy grows, fueled by a surge in e-commerce platforms, fintech services, and tech startups, regulators are increasingly focusing on competition issues within the digital markets. Immerging competitive challenges in the digital economy drive Iran’s Competition Council to intervene in digital markets.

·        Abuse of Dominance by Major Online Platforms: With the rise of large dominant digital platforms, concerns have emerged about their ability to control markets, set unfair terms for smaller players, and limit consumer choice. For instance, these platforms might prioritize their own products or services over third-party offerings, creating an uneven playing field. Additionally, the utilization of consumers’ data, and the resulting access to databases, strengthens the dominant position of online platforms, which can jeopardize fair competition through the abuse of dominance in digital markets.

·        Algorithmic Collusion and Price-Fixing: Advances in artificial intelligence and machine learning have enabled the use of algorithms to set prices dynamically. While this can benefit consumers in some cases, it also raises the risk of algorithmic collusion, where competitors use algorithms to coordinate pricing strategies without direct communication, effectively sidestepping traditional anti-collusion laws.

·        Unfair Trade Practices Affecting SMEs: Small and medium-sized enterprises (SMEs) often struggle to compete with well-funded digital giants that can undercut prices or engage in predatory pricing. These practices can drive smaller competitors out of the market, reducing diversity and innovation in the digital economy.

·        Mergers and Acquisitions in the digital economy: Mergers and acquisitions in the digital economy, particularly the acquisition of small startups by large platforms and enterprises with dominant market positions, pose significant risks. Such practices can undermine competition in digital markets and stifle innovation by discouraging smaller players from entering or expanding in the market. The latest decision issued by the Competition Council in the field of digital acquisitions concerns group-discount markets, where the Competition Council ruled to annul the acquisition of NetBarg by Takhfifan, two Iranian platforms for sharing group discounts. Despite the Council’s effort to rule this agreement as well, its decision has faced significant criticism, including arguments that the Council failed to consider the specific elements of digital markets, such as the importance of innovation and technological advancements, and instead issued its ruling to annul this acquisition agreement based on traditional competition rules.

By addressing these issues, the aim is to create a digital market environment that fosters innovation, enhances consumer protection, and ensures a level playing field for all market players. Regulating and monitoring digital markets based on traditional competition rules is not feasible and will gradually lead to the destruction of these markets, create barriers for new entrants, and eliminate innovative incentives. As a result, these markets will lose their vitality. Therefore, the modern nature of markets and competition requires new competition regulations and methods.

Conclusion

Iran’s competition law is undergoing substantial transformation to address the complexities of modern economic challenges, particularly in the digital markets and state-dominated sectors. The recent trends reflect a growing recognition of the limitations of traditional competition rules in effectively regulating dynamic and evolving markets. The challenges associated with regulating digital markets, such as mergers and acquisitions that may undermine competition, highlight the need for modernized regulatory approaches. Outdated competition frameworks jeopardize developing digital markets, by discouraging innovation and creating barriers for new entrants.

By transitioning to a more nuanced and forward-thinking approach, Iran can create a competitive environment that not only fosters innovation but also ensures a level playing field for all market participants.