Adopting and implementing a policy of competition
Amirul Islam | Monday, 4 August 2008
IT is not enough to claim that a market economy is functioning and to remain content, thinking that the competition to ensue in such a market economy among different producers of goods and providers of services would automatically translate into advantages for the consumers in all areas such as quality, price and choice. For even within a declared market economy such as the one in Bangladesh, the competition may not be automatic. There may exist restrictive trade practices, monopolies, 'syndicated' activities and other ills hidden in the garb of the so-called market economy. To ensure that competition does happen, unfailingly in all areas of the economy, it is also necessary that the laws to that effect exist and are operated vigorously.
Not only laws but their applications and the existence of institutional mechanisms are also required to create actual competition as an unavoidable factor. But the starting point of all these is a policy favouring competition which Bangladesh seems to be lacking at the moment. Thus, the importance of having such a policy was strongly recommended in a recent seminar in the capital city.
The consumers in Bangladesh, generally, are a very harassed lot at the moment. The absence of comprehensive consumer protection laws is, in other words, a prescription for their suffering. Comprehensive consumer protection laws, therefore, need to be introduced at the fastest. But the same would need to be reinforced by a proper policy of competition so that consumers can benefit from the gains derived simultaneously from a legal environment protecting their interests as well as from the fruits of competition compulsorily generated by such a policy.
The government in Bangladesh can learn from how other countries are applying their competition policies in their own conditions. For example, in the UK, there is the Office of Fair Trading. This public organisation is responsible for seeing that the government's policy on monopolies and competition is carried out. The UK laws do not completely prohibit monopolies, because the same in exclusive cases can extend greater benefits than disadvantages to consumers. But generally the creation of monopolies is discouraged because concentration of market power enables them to dictate price of goods and services sold by them. This can lead to their complete dominance over the market. The Office of Fair Trading collects information on how these companies and trade associations conduct their businesses and accordingly recommends actions when it appears that those firms are doing things that are going against the public interest.
There is also another publicly operated organisation, the Monopolies and Mergers Commission (MMC) in the UK. The task of the MMC is to investigate monopolies and publish reports on their findings. In these reports, the MMC sets out any changes it would like to see in the organisation of the industry-the way in which goods and services are marketed, the way in which prices are fixed, and so on. After considering such a report, the government decides what actions should be taken. It may advice or, if necessary, order firms to maker changes in the way they are running their businesses. The MMC can also be asked to investigate and report on the likely effect of proposed mergers. A merger can be vetoed by the government, if it thinks it may lead to an unsatisfactory monopoly situation.
A branch of the High Court, the Restrictive Practice Court, also operates in the UK. The task of this court is to examine whether a restrictive practice should be made illegal because it is restricting competition that enables a firm or firms to keep prices higher than they would be without the practice. The court also examines whether a practice is preventing other firms from entering the industry and whether practices restrict consumers' freedom of choice.
Not only in the UK but also many countries in the world including those among the developing economics, institutions and authorities are in place to ensure fair competition among the procedures, and providers of goods and services. Here, the most important aspect of the operations of such regulatory authorities and agencies is their transparency as well as their effective role in implementation of related policies to combat the menace of monopolistic and restrictive trade practices that harm the interests of the consumers most. That has enabled the countries under mention here to counter the problem of "syndicates" -- a problem that reflects policy failure or lack of institutional supports to address it properly.
The establishment of similar institutions backed up by the introduction of a proper competition policy need to be considered in the context of Bangladesh at the earliest for the economy and the consumers to get the benefits of the same.
Not only laws but their applications and the existence of institutional mechanisms are also required to create actual competition as an unavoidable factor. But the starting point of all these is a policy favouring competition which Bangladesh seems to be lacking at the moment. Thus, the importance of having such a policy was strongly recommended in a recent seminar in the capital city.
The consumers in Bangladesh, generally, are a very harassed lot at the moment. The absence of comprehensive consumer protection laws is, in other words, a prescription for their suffering. Comprehensive consumer protection laws, therefore, need to be introduced at the fastest. But the same would need to be reinforced by a proper policy of competition so that consumers can benefit from the gains derived simultaneously from a legal environment protecting their interests as well as from the fruits of competition compulsorily generated by such a policy.
The government in Bangladesh can learn from how other countries are applying their competition policies in their own conditions. For example, in the UK, there is the Office of Fair Trading. This public organisation is responsible for seeing that the government's policy on monopolies and competition is carried out. The UK laws do not completely prohibit monopolies, because the same in exclusive cases can extend greater benefits than disadvantages to consumers. But generally the creation of monopolies is discouraged because concentration of market power enables them to dictate price of goods and services sold by them. This can lead to their complete dominance over the market. The Office of Fair Trading collects information on how these companies and trade associations conduct their businesses and accordingly recommends actions when it appears that those firms are doing things that are going against the public interest.
There is also another publicly operated organisation, the Monopolies and Mergers Commission (MMC) in the UK. The task of the MMC is to investigate monopolies and publish reports on their findings. In these reports, the MMC sets out any changes it would like to see in the organisation of the industry-the way in which goods and services are marketed, the way in which prices are fixed, and so on. After considering such a report, the government decides what actions should be taken. It may advice or, if necessary, order firms to maker changes in the way they are running their businesses. The MMC can also be asked to investigate and report on the likely effect of proposed mergers. A merger can be vetoed by the government, if it thinks it may lead to an unsatisfactory monopoly situation.
A branch of the High Court, the Restrictive Practice Court, also operates in the UK. The task of this court is to examine whether a restrictive practice should be made illegal because it is restricting competition that enables a firm or firms to keep prices higher than they would be without the practice. The court also examines whether a practice is preventing other firms from entering the industry and whether practices restrict consumers' freedom of choice.
Not only in the UK but also many countries in the world including those among the developing economics, institutions and authorities are in place to ensure fair competition among the procedures, and providers of goods and services. Here, the most important aspect of the operations of such regulatory authorities and agencies is their transparency as well as their effective role in implementation of related policies to combat the menace of monopolistic and restrictive trade practices that harm the interests of the consumers most. That has enabled the countries under mention here to counter the problem of "syndicates" -- a problem that reflects policy failure or lack of institutional supports to address it properly.
The establishment of similar institutions backed up by the introduction of a proper competition policy need to be considered in the context of Bangladesh at the earliest for the economy and the consumers to get the benefits of the same.