_Develop_ **_Comprehensive Merger Guidelines._** Resources should also be directed at preventing further horizontal and vertical consolidation through mergers and acquisitions in markets where structural dominance and autarky are already excessive. This should be the first of line of defense. Initiatives here can build on MAPSE's current system regarding assessment of mergers. But more explicit and well-defined merger guidelines should be developed and announced that establish general policy parameters for distinguishing between pro-competitive and anti-competitive mergers based on similar guidelines used in industrial countries, such as the EU and the US. The blanket application across all markets of the current cutoffs of 35% and 65% has little economic rationale; refnements are needed to take into account the underlying technology of the production process, and product and geographic market boundaries. Public announcement of the guidelines is critical to maximize transparency, credibility and predictability of the merger/acquisition policy regime so as to not hinder a "market for corporate control" and the rechanneling of assets to higher values in use. Merger applicants should know ex ante they have to meet the burden of proof that a merger will enhance efficiency and not result in a significant loss of competition. But a balance must be struck between, on the one hand, prohibiting excessive enterprise integration that engenders the exercise of market power, and on the other, fostering sufficient integration that permits the realization of technical economies of scale and scope. Big business is not always bad. Where existing firms are below minimum efficient scale, integration should not be prevented but rather encouraged. Newly created integrated company structures that span otherwise regionally autarkic markets, including perhaps as a transition device newly established industry-led FIGs, can help ameliorate the existing artificial market segmentation.

**_Develop Rules-Based Competition Policy Institutions._** Experience in both Russia and elsewhere shows that when implemented poorly, i.e., as a new source of discretionary authority, competition policy can do great harm. While Russian competition law is, for the most part, up to par with international standards, the institutional regime for its implementation and enforcement responsibilities is extremely weak and subject to excessive discretion, especially in light of the power and involvement of sub-federal governments in promoting regional industrial policy. Several steps could be taken. The Government at the very highest levels should review the mission of the current MAPSE, with a view towards developing, in consultation with renowned international experts, recommendations to introduce a rulesbased competition policy institutional regime at the federal and sub-federal level of government. To institutionally strengthen MAPSE, the agency should be twinned with competition authorities in OECD countries to carry out a series of sectoral appraisals. Consideration should also be given to promoting the establishment of a non-governmental "foundation for competition" whose role is primarily educational initially; in time, it could serve as an ombudsman.

_Conduct_ **_Comprehensive Empirical Assessment_** _of_ **_Horizontal and Vertical Structures._** The task of de-monopolization or dis-integration in the industrial sector is a complex one and should be part of the medium term agenda. A prerequisite for any proactive competitive restructuring is comprehensive empirical investigation examining current horizontal and vertical concentration in key product and geographic markets. Efforts here can build on existing Goskomstat data. The investigation should assess the competitive impact of emerging economic agglomerates, including FIGs, in priority sectors.

# **Policies to Foster** New **Entry**

**_Implement Rules-Based Streamlined Business Licensing at the Federal and Local Levels._** In January 1998 new initiatives were discussed at a Government meeting on the problems of SMEs, including changes in issuing of licenses. But the measures do not address the problem that the setting of license fees is subject to the discretion of local authorities, which results in price discrimination and

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