Although competition is a core element of the free market economy, businesses across the world are not always comfortable with competition. The lesser the competition, the higher the profit. Absence of competition, fair competition to be precise, takes heavy toll on consumers. It also puts barriers to growth of small and medium-sized enterprises (SMEs) which squeezes employment generation. Thus, there is a strong need for ensuring conducive environment for competition where manufacturers, traders and suppliers of goods and services can optimise their profits and consumers can also optimise their gains.
According to the United Nations Conference on Trade and Development (UNCTAD), "Competition stimulates innovation, productivity and competitiveness, contributing to an effective business environment. This generates economic growth and employment. It creates possibilities for small and medium sized enterprises, removes barriers that protect entrenched elites and reduces opportunities for corruption. Competition therefore increases a country's attractiveness as a business location, triggering national and foreign investments. Competition also delivers benefits for consumers through lower prices, improved services and greater choice. In this sense, Competition generates total consumer welfare."
In reality, this is not an easy task, especially in a country like Bangladesh where market distortion is very high. Such distortion requires remedial measures by law. Here lies the importance of a competition act or law. The primary purpose of competition law is to remedy some of the situations in which the free market system breaks down.
It is interesting to note that competition law, or anti-trust act as dubbed by Americans, is not a new phenomenon in the global market. Although the American Sherman Act 1890 is taken as the starting point of modern competition law, similar kind of legal tools were also available in ancient time. For example, Byzantine emperor, also known as emperor of the East, Zeno promulgated a constitution in 483 which contained some issues of competition. In England competition law was developed more than a thousand year ago.
Under the competition law, a competition commission or board or similar regulatory authority is tasked with ensuring free play in the market by curbing anti-competitive practices.
There are two root causes, as identified by UNCTAD, of anti-competitive behaviour in the market. One is from the businesses and market players as they some times develop an understanding among themselves to 'not to compete'. Thus they adopt cartel, price fixation and territorial divides as well as formal and legal groupings. Another is from government policies like restrictive licensing regimes, quotas, canalised trading etc that restrict competition.
To contain anti-competitive behaviours, like many other countries, Bangladesh has also adopted a competition law. The country enacted the `Competition Act 2012' in June, 2012 in a bid to `prevent, control and eradicate collusion, monopoly and oligopoly, abuse of dominant position in the market and other anti-competitive practices.' But almost four years have gone, implementation of the law is yet to start as the government didn't form the competition commission.
A recent news report, published in the Financial Express, however, presented a positive development in this regard. It said that the government is in the final stage of appointing chairman and members of the competition commission and the authority would start functioning from the next month (April, 2016). In this regard, experiences of some countries in South Asia need to be reviewed carefully.
SOUTH ASIA: Currently, seven countries in South Asia including Bangladesh have competition law and competition commission or similar authority. But all are not fully functional.
Nepal adopted a law in 2007 and established the Competition Promotion and Market Protection Board. But the law is yet to be implemented. Bhutan has drafted its National Competition Policy.
Sri Lanka established the Consumer Affairs Authority under the Ministry of Industry and Commerce in 2003. The authority is primarily responsible for consumer protection, but also mandated to ensure fair market competition. In a similar vein, Afghanistan, in 2010, established Competition and Consumer Protection Directorate (CPCPD) under the Ministry of Commerce and Industry. Thus, both the authorities in Sri Lank and Afghanistan are entrusted dual roles-- protect consumer and warrant competition in a synchronised manner. The idea is that fair competition and consumer right are interlinked.
India and Pakistan have developed their respective competition acts and relevant commissions from their previous inadequate laws on controlling and preventing monopolies and restrictive trade practices.
India enacted the law in 2002 and subsequently Competition Commission of India (CCI) was established in 2003. But it couldn't be functional until amending the act in 2007 due to legal fight in the court. Later, the new CCI was established in 2009. It consists of a chairperson and six members, appointed by the central government.
Pakistan enacted the Competition Ordinance in 2007 and established the Competition Commission of Pakistan (CCP). The ordinance was, however, revised later and Competition Act 2010 came into effect.
Thus, existence of modern competition laws and relevant enforcing authorities or commissions in South Asian countries is mostly a decade-old phenomenon. Moreover, the activities of Indian and Pakistani competition commissions have some visible impacts so far.
An article of the Economic Times in December last depicted a brief report card of CCI. It showed that the commission has imposed about Rs 140 billion ($2.1 billion) penalties to Indian companies for anti-competitive practices in the last seven years. For instance, in 2012, CCI imposed fines around $995 million on seven big cement companies for cartelisation in price fixing. In 2014, the commission fined Coal India with $266 million, the state-owned corporation, for abusing dominant position in fuel supplies. Of the total fine amount, only Rs 820 million ($12.30 million) actually got paid by few companies while others moved to Competition Appellate Tribunal and Supreme Court and got stay orders. Nevertheless, the commission continue to shows its teeth by charging big cartels backed by big conglomerates as well as state-owned corporations. It has dealt with more than 1,000 cases and one-third of the cases are regarding monopolistic merger and acquisition (M&A).
On the other hand, the commission in Pakistan has imposed $252.53 million (Rs 26,446 million) fine on 152 companies since its inception in 2007. But during these eight years, only $0.19 million (Rs20.37 million) was realised. According to a news report of the Daily Times in this month, the companies, fined for anti-competitive behaviour, include: fertiliser, telecom and cement companies, public and private banks, educational institutions and private hospitals and medical centres. Thus CCP has failed to recover more than 99 per cent of the outstanding fines mainly due to flaws in existing law and litigation filed by the fined companies.
Thus a common problem faced by the commissions in both India and Pakistan is non-realisation of fines or penalties as fined firms and companies challenged the legal validity of the decision and moved to higher courts.
LESSON FOR BANGLADESH: Experiences of India and Pakistan have critical importance for Bangladesh to implement competition law as a large section of businesses and traders in this country indulge in anti-competitive behaviour and cartelisation. Country's public transport sector is one of the best examples. There are many small cartels or syndicates that control the different bus routes across the country. It is almost impossible for any new company or individual to enter the market without negotiating with such cartels. Again, private bus owners-labours create a combined aggressive monopolisation and block bus service of the state-owned BRTC (Bangladesh Road Transport Corporation). The bus owners and labours are so powerful that no government machinery is able to crack down the syndicate, thanks to their strong political backing. The cartelisation is also in edible oil market where major players usually fix prices in a way that clearly violates consumer interest. For example, a one-litre container doesn't contain exactly one litre of edible oil, but 950 millilitres while consumers have to pay the price for one litre.
As a quasi-judicial body, the Commission has to rely on strong evidences and legal documentations to prove anti-competitive behaviour or syndication. Without sufficient evidence, the Commission can't take any remedial or disciplinary action against any cartel or price fixation. Documenting and proving such activities requires technical and legal expertise. Moreover, effective functioning of competitive behaviour requires cooperation from businesses and consumers and related government bodies. Thus, it is a very big challenge for the government to make the competition law as well as the commission effective.
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