·       Early Development: Pre-Revolutionary Period

The concept of competition law in Iran has roots in early legal codes, though these were fragmented and lacked a cohesive framework. One of the first mentions of competition-related issues appears in the 1925 Penal Code, particularly Article 244(A), which addressed unfair competition by penalizing practices that disrupted fair market operations. Other laws, such as the 1960 Civil Responsibility Act, the 1969 Commercial Code Amendment, and international conventions like the Paris Convention for the Protection of Industrial Property, introduced provisions against practices detrimental to fair competition. However, these provisions primarily focused on commercial ethics rather than fostering competitive markets.

Despite these initial efforts, these laws were not integrated into a broader competition policy. They primarily targeted unfair trade practices and individual behaviors rather than addressing structural market distortions such as monopolies and cartels.

·       Post-Revolutionary Shift: State Dominance and Economic Control

The 1979 Islamic Revolution marked a significant shift in Iran’s economic and legal landscape. The new Constitution, adopted in 1980, prioritized state control over major industries. Articles 43 and 44 of the Constitution formalized this approach by establishing a tripartite economic system comprising state, cooperative, and private sectors. The state sector controlled large-scale industries, such as banking, mining, telecommunications, and transportation.

This state-centric economic model, combined with the nationalization policies of the post-revolution period, left little room for competitive market practices. Market regulations aimed more at managing resources and controlling the economy rather than promoting competition. During this time, the legal framework did not evolve to address anti-competitive practices or create a fair market environment.

·       Economic Reforms and the Path to Competition Law

The inefficiencies of a state-centric economy became apparent in the 1990s, leading to discussions among policymakers, economists, and legal experts about the need for economic reforms. The First Five-Year Development policy (1989-1993) set initial privatization goals, but it was not until the Third Five-Year Development Policy (2000-2004) that privatization and competition received focused attention. Chapter 4 of this policy introduced provisions for promoting competition and regulating monopolies, signaling a shift towards a more market-oriented approach.

A turning point came in 2004, when the Expediency Council reinterpreted Article 44 of the Constitution. This reinterpretation, later endorsed by the Supreme Leader, called for the reduction of the state’s role in the economy and encouraging private sector participation. This policy laid the foundation for the 2007 Act on the “Execution of General Policies of Article 44 of the Constitution” (hereinafter “the Act”) , which integrated competition law into Iran’s broader economic reforms.

·       The 2007 Act: A Comprehensive Competition Framework

The 2007 Act marked Iran’s first systematic attempt to establish a cohesive competition policy. Modeled in part on European Union competition laws, the Act addressed both privatization and competition in a single legislative framework. Chapter 9 of the Act, titled “Facilitating Competition and Prohibiting Monopoly”, is dedicated to competition law. Key features of this chapter include:

1.     Prohibition of Anti-Competitive Practices: The Act clearly identifies and prohibits a range of anti-competitive practices, including abuse of market dominance, collusion, and monopolistic behaviors. For example, dominant firms are restricted from engaging in price-fixing, market allocation, or practices that unfairly exclude competitors. These provisions aim to prevent entities from manipulating market conditions to their advantage, ensuring a level playing field for all participants.

2.     Establishment of the Competition Council: The Act mandates the creation of the Competition Council, an independent regulatory body tasked with overseeing market operations and enforcing competition laws. The Council’s responsibilities include investigating alleged anti-competitive practices, imposing sanctions, and ensuring compliance with legal provisions. Its role is pivotal in maintaining transparency and accountability within Iran’s economic framework. However, the Council’s effectiveness depends on its autonomy, resources, and the political will to support its actions.

Competition Council

3.     Focus on Economic Efficiency: Although the Act acknowledges consumer protection, its primary focus is on fostering economic efficiency and promoting structural economic reforms. By addressing inefficiencies and barriers to market entry, the Act seeks to create an environment conducive to innovation, investment, and productivity. This approach reflects the broader goal of transitioning from a state-controlled economy to a market-driven system while minimizing resource wastage and enhancing overall economic performance.

·       Islamic Influence on Competition Law

Islamic jurisprudence, which significantly shapes Iran’s legal system, aligns with several principles of modern competition law. Concepts like “hisbah” (market oversight) and the prohibition of unfair trade practices such as monopolies and hoarding are rooted in Islamic teachings. These principles emphasize fairness, transparency, and the prevention of harm (known as the “No-Harm Rule” in Islamic law), providing a cultural and religious foundation for Iran’s competition policies.

·       Challenges and Limitations

While the 2007 Act represents a significant milestone, several challenges persist:

1.     Economic Structure: The dominance of state-owned and semi-public enterprises undermines competitive dynamics in many sectors. These entities often receive preferential treatment, such as subsidies, exclusive access to resources, and regulatory exemptions, which distort the competitive landscape. This concentration of power stifles innovation and limits opportunities for private enterprises to thrive.

2.     Weak Enforcement Mechanisms: The Competition Council, though tasked with critical oversight responsibilities, faces resource constraints and limited independence. These challenges hinder its ability to investigate and penalize violations effectively. Additionally, political interference and bureaucratic inefficiencies undermine the Council’s authority and credibility.

3.     Integration with Privatization: Embedding competition law within the privatization framework has created ambiguity about its application once the privatization process is complete.³ In some cases, privatized entities inherit monopolistic advantages, further complicating the enforcement of competition laws. This overlap has led to inconsistent interpretations and enforcement, reducing the effectiveness of the legal framework.

4.     Lack of Awareness: Businesses and consumers often lack sufficient knowledge about their rights and obligations under competition law. Many private sector entities remain unaware of the protections afforded to them against anti-competitive practices. Similarly, consumers lack the necessary education to identify and report instances of market abuse, leading to underutilization of available legal remedies.

Conclusion

Iran’s journey toward establishing a robust competition law framework reflects its broader economic and political transformations. From fragmented early provisions to the comprehensive 2007 Act, the evolution of competition law has been shaped by both domestic imperatives and global influences. Moving forward, addressing structural challenges and fostering a culture of competition will be critical for achieving the full potential of these reforms.