Manual for Azerbaijan companies Rena Safaralieva

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Creation of state enterprises under state regulatory agencies in the same sector shall also be qualified 

as a variety of unfair competition.  Such enterprises are either monopolists or enjoy unfair advantages 

in this area compared to their competitors. Ministries of Culture, Education, Communication, and 

Healthcare issue licenses to private firms for business activities and, at the same time, have 

commercial enterprises reporting to them, in the same industry. For example, Azeurotel claims that 

Ministry of Communication creates obstacles for its  normal work in pursuit of “preservation of 

monopoly in the sector of telecommunications”. 

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The imperfection of the legal base in Azerbaijan can hardly be denied

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, however, it is not the main 

reason  feeding  unfair competition. Lack of strong democratic institutions, namely free press, civil 

control and efficient judicial system, i.e., mechanisms of control over implementation of laws, foster a 

favorable environment for unfair competition in much more significant way.  

 

Absence of fair competition results in extraction of super-profits by unscrupulous companies at the 

expense of consumers and deprives  law abiding companies of an incentive for modernization and 

organization of  an efficient management system. In the modern global economy fair competition is in 

some cases restricted by governments, who aim to support local manufacturers. This mechanism can be 

justified only  under certain conditions and as an  interim measure. For example, local legislation taxes 

imported finished products more heavily than import of raw materials and semi-finished products. It is 

difficult to disagree with expediency of this measure in the light of enormous volume of imports into 

Azerbaijan and insufficient rate of local production. Nevertheless, as local industries develop, for 

example, the food processing industry, tax advantages should be lifted, because local producers have to 

learn to compete with producers of adjoining countries.  

 

The U.S government protectionism policy for American car manufacturers led to loss of positions of 

American cars to Japanese and South-Korean competitors in the global market.  

 

Violation of anti-trust legislation 

 

Classic types of violation of anti-trust legislation are: division of market, collusion, coordination of 

pricing policies and creation of monopolies. Market division takes place when several major companies 

reach an agreement to divide the market for their product, for example, region-wise. Coordination of 

pricing policies means that major manufacturers agree on the same artificial price for certain  products 

and thus deprive their customers of a price-based choice.  

 

Two cell phone companies - Azercell and Bakcell regularly introduce into market new diverse packages 

of goods and services, accompanied by well conceived promotional campaigns. However, these 

companies maintain a similar pricing policy. We hope that advent of a third operator, already being 

discussed by media for some time now, will benefit consumers.  

 

Collusion is often resorted to at closed auctions. For example, a company reaches an agreement with 

competitors that they will recall their bids or set exaggerated prices to clear a  way for this company in 

exchange for other concessions. Creation and sustenance of monopolies in spheres other than natural 

monopolies, like Barmek or Apsheron Regional Water Company shall also be qualified as a sort of unfair 

competition. Such enterprises, as Karadag Cement, Baku Steel, European Tobacco are recognized 

monopolists in their sectors of industry. It should be mentioned that in our country, the market is 

dominated by state monopolies, rather than private companies. However, the corrupt practices of some 

public officials very often contradict public interests, which these officials are duty-bound to protect, 

leading to a classic conflict of interest.  

  

Industry self-regulation  

 

                                                 

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 Letter sent by Azeurotel to their customers at 14.36 on 2 March 2003 by e-mail, stated that at 11.30, 1 March Ministry of 

Communication illegally cut the company off communication for the second time within 10 days.  

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 However, the country has a law  on unfair competition and a law on anti-trust policy.  

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According to a research, conducted in St-Petersburg, 30% of respondents claim that they suffer losses 

from unethical behavior of their competitors.

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In theory, the most logical treatment of unethical competitors would be  litigation. However, this method 

is not without its deficiencies: as mentioned in Chapter I, legal norms give us minimums and do not 

always cover all kinds of ethical misbehavior. Besides, legal procedures may drag on for years and 

considerable expense may be incurred. In addition, the fairness of our courts is disputable. In other 

countries, businesses wishing to follow ethical principles in addition to legal mechanisms (court 

litigation), would resort to professional self-regulation instruments as well.  

 

One self-regulation instrument used by businesses belonging to a business association, is the adoption of 

program documents of various levels: statements, principles or declarations of business integrity or codes 

of conduct or ethics. The main difference between these two types of documents lies in the degree of their 

details. A code is a set of more detailed norms and principles, which takes into consideration the specifics 

of business activities of a company, while other documents state the basic ethical principles shared by all 

members of an association, which can be subsequently elaborated into a company code. An illustration 

here is a Sample Code of Integrity, designed by International Chamber of Commerce and approved by 

Council of Europe in December 1994,

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 or the Declaration of Business Integrity in St. Petersburg, 

designed by Center of Business Ethics and Corporate Governance.

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 Another very convenient method for 

small companies is to design and a adopt an industry code. Businesses, joining professional associations, 

can use industry codes without any changes or  introduce minor amendments to them, but will not need to 

make  any radical changes.  

  

Courts of Arbitration, consisting of three impartial and independent persons, might be another option. 

Such courts, in fact, represent an attempt at pre-trial settlement. According to Azerbaijan legislation, 

verdicts passed by courts of arbitration shall be recognized by public courts and thus acquire a legal 

status. At the moment there is an independent non-governmental organization (NGO) in Azerbaijan, 

working to establish such a court.

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 Another NGO is also engaged in pre-trial settlement of disputes. For 

example, this organization successfully settled a dispute in respect of arrears in wages of Resonance 

newspaper and its founder, when the newspaper was closed down.

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Finally, the compilation and publication of “black lists” of violators – as practiced by the World Bank - 

and expulsion from professional unions are possible.  

 

Relations with authorities 

 

In many countries businesses, in cooperation with the state, establish Coordination Councils to relay their 

concerns and share experiences with the government. One may note that in Azerbaijan there is the 

Entrepreneurship Development Fund and the Agency on Development of Small and Medium Size 

Enterprises, which can perform these functions. However, as these are state structures, they do not fully 

reflect the concerns of the business community. Recently a Coordination Council, comprised by 

representatives of business associations,  has been established. We hope this  Council will  meet with the 

Ministry of Economic Development on a regular basis and make recommendations, publicize new 

initiatives, promote the interests of businesses, file complaints of illegal actions by state organs, share 

success stories, and ask for assistance to resolve delicate issues. In our opinion, meetings of the President 

of the country with businesses in the spring of 2002 have set a precedent for such cooperation. This series 

of meetings resulted in the adoption of a number of decrees and amendments to the Tax Code. According 

to A. Mammadov, chairman of the National Confederation of Entrepreneurs (Employers), presidential 

decrees, resulting from these meetings, “have taken into account all recommendations of businessmen, 

                                                 

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 Anna Ossipova, Presentation at a conference Managing Multi-profile Enterprises, under Business Education Project, 16 May 

2001, St. Petersburg 

 

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 For detailed information, please see www.coe.int.org

  

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 For detailed information, please see www.ethics.russia.org  

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 Information provided by International Court of Arbitration NGO, funded by Eurasia Foundation, Project Coordinator Natiq 

Abdullayev, tel. 97 73 67 or 97 73 66, e-mail [e-mail] 

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 Information provided by Independent Legal Center NGO, Project Coordinator Aydin Kerimov, tel. 41 37 32, e-mail 

[e-mail] 

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