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Competition Regime In Ghana—A Prerequisite For Consumer Welfare And Protection

By G.D. Zaney

 

Research has shown that businesses and consumers in Ghana continue to suffer largely due to the absence of a functional competition regime in the country. Competition refers to the process of rivalry between firms striving to gain sales and make profits. While the Americans call it “antitrust”, the Chinese call it “antimonopoly”.

 

Competition is a fundamental tenet of well-functioning markets and encourages companies to provide consumers with the products and services that they wanted, resulting in the lowering of prices for goods and services, better service quality, wider choices for consumers, stimulation of innovation and, more importantly, efficiency in allocation of resources.

 

In the absence of competition, firms engage in bad practices like the abuse of monopoly, price fixing, cartelization of goods and services, bid rigging and exclusive market sharing agreement, among others.

 

Anticompetitive agreements include Horizontal Agreements, whereby firms in the same business agree not to compete through bid rigging—largely in public procurement; output restrictions such as price fixing, an example of which is the fixing of prices of car motor insurance by an Insurance association recently; and market allocation.

 

Also employed in anti-competitive agreements are Vertical Agreements involving firms in a supplier-customer relationship through exclusive supply/purchase agreements, tie-ins and resale price maintenance.

 

Another dimension of anti-competitive activity is the abuse of dominance where a firm with a dominant position (market share/power) abuses its position in the market. For example, it has been reported that for many years, Ghana Cement Manufacturing Company (GHACEM) exploited its dominance in the cement markets in Ghana.

 

The abuse of dominance can occur in two ways, namely exploitative practices of a dominant firm which engages in excessive pricing through discriminations and tied selling, for example Vodafone will not sell fixed line unless the buyer accepts their broadband services. 

 

A second way of abuse of dominance involves exclusionary practices which aim to drive competitors out of business through predatory pricing Anti-competitive practices also take the form of anticompetitive mergers & acquisitions, where anticompetitive mergers are those that create a dominant player in the market or those which increase the market share of an already dominant market player (higher market concentration).

 

Anticompetitive mergers & acquisitions are of three types, namely Horizontal mergers involving a reduction in the number of market players, for example a merger between MTN and Airtel); Vertical mergers involving firms in a supplier-customer relationship which can result in a foreclosure; and Conglomerate mergers which involve firms in different lines of business which could lead to considerable market power.

 

Competition is, therefore, key to consumer protection as well as industry growth— and a functional competition regime consists of a national competition policy and a competition law implemented by a well-resourced competition authority.

 

A competition policy refers to government’s commitment to promoting competition across the economy and good competition policy is an essential requirement or tool for market-based reforms, while a competition law is the Act developed to curb anti-competitive practices and enforce the competition.

 

Evidence is available to show that there are measurable benefits from an effective competition regime in developing countries for ensuring competition reforms.

 

A competition regime— competition policy and law— ensures that tax payers get value for money for goods and services, and consumer and producer welfare greatly enhanced. Among the benefits of competition regimes are market predictability, promotion of innovation, easing of market entry and exit, better access to inputs, growth of sector and increased investment possibilities.

 

For consumers, the benefits are lower prices, better quality of goods (without increase in cost), greater product (goods & services) choice, easier access to goods and services, and time savings.


A well-enforced competition regime, therefore, reduces uncertainty for businesses and is an essential tool for the promotion of private sector development.
There are nine principles of competition policy, namely fostering competitive neutrality, ensuring assess to essential services; facilitation of movement of goods, services and capital, and the separation of policymaking, regulation and operational functions.

 

The others are ensuring a free and fair market process; balancing competition; ensuring a transparent, predictable and participatory regulatory environment; notification and justification of deviation from competition principles; and respecting international obligations.

 

There are also a number of African regional Antitrust competition laws such as the East African Community (EAC) Competition Law, Economic Community of West African States (ECOWAS) Competition Law and the Common Market for Eastern and Southern Africa (COMESA) Competition Law.

 

The salient features of a competition law are that the law protects the competition process and not the competitors; its provisions are designed to curb anti-competitive practices such as agreements, abuse of dominant position and anti-competitive Mergers and Acquisitions (M&As); it creates institutions like an Authority and Tribunals to deal with competition issues; and that these institutions are required to be functionally independent.


Most modern competition laws have four components such as Anti-competitive Agreements, Abuse of Dominance, Anti-competitive M & As and Competition advocacy while competition authorities and tribunals are created with their jurisdiction and functions specified and administrative issues governing operations of the competition authority also provided for.


Some countries— Ethiopia, Kenya, Malawi, Botswana and Zambia— for example, are known to have hybrid laws and agencies, meaning they have combined competition laws with consumer protection provisions.


Cases of Antitrust activities abound, some examples of which are that in May 2014, Brazil's antitrust watchdog fined six cement makers a combined US$1.4 billion for fixing prices for two decades and ordered the companies to dispose of many assets.


Then, the EU in 2010 fined 11 air cargo carriers, including Air Canada, Air France-KLM, British Airways, and Singapore Airlines, a total of €800 million for operating a worldwide cartel which affected cargo services within the EU area.


And in 2014, five beer companies in Germany were fined US$ 150 million by the German Federal Cartel Office for illegally fixing prices for their products. In secret phone calls and private meetings, the breweries agreed to raise the cost by five to seven Euros ($7 to $9.5) per hundred liters of beer, according the Federal Cartel Office.
In Ghana, one area of economic activity which requires a competition policy direction to ensure sanity and serve as an essential tool for national development is public procurement.

 

Currently, suppression schemes, complementary bidding and bid rotation schemes have been identified as some of the competition or anti-trust issues in public procurement.

In bid suppression schemes, for example, one or more competitors who, otherwise, would be expected to bid, or who had previously bid, would agree to refrain from bidding or withdraw a previously submitted bid so that the designated winning competitor’s bid would be accepted.

 

On the other hand, complementary bidding occurs when some competitors would agree to submit bids that either are too high to be accepted or contain special terms that would not be acceptable to the buyer. Such bids are not intended to secure the buyer’s acceptance, but are merely designed to create a (false) appearance of genuine competitive bidding.

 

Then, in bid rotation schemes, all conspirators would submit bids but take turns being the low bidder, allocating equal amounts to each conspirator or allocating volumes that correspond to the size of each conspirator company. There is also what is called single or sole sourcing in public procurement which is being abused.

 

Aspects of a national competition law, when passed, could, therefore, address the issue of non-competitive tendering, make single or sole sourcing in public procurement give value or money and prevent public officials from bending the rules when doing public procurement. Anti-competitive practices have also been identified in Fertilizer Transportation, Maize and Bus Transport sectors in Ghana with uncertainty for businesses.

 

Although competition issues began to receive attention since the 1890s when Canada and the United States of America (U.S.A.) adopted competition regimes, the phenomenon of competition regimes gained more international prominence due to globalization and the development of international trade.

 

Accordingly, on December 5, 1980, the United Nations Organization (U.N.O.) adopted the International Standard for Competition Laws under what is called the UN Set on Competition Policy.

 

This was followed by a call by the International Network of Civil Society Organizations (CSOs) on Competition (INCSOC) to recognize December 5 as World Competition Day—with 24 countries including the United Kingdom, Russia, Sweden, Austria, Afghanistan, Tanzania, Spain and Gambia having supported the call and written formally to the United Nations Conference on Trade and Development (UNCTAD) to that effect. But how far Ghana has reached in the quest for a competition policy and consumer welfare and protection, one may ask.

 

Ghana’s attempt at a competition law resulted in the enactment of the Protection Against Unfair Competition Act, 2,000 (Act 589), but the law, the experts say, is weak and does not address the key functional areas of competition law. This means that the current law, Act 589 must be reviewed to comply with international best practices.

 

Currently, the Ministry of Trade and Industry (MoTI) is working towards developing a national competition regime for Ghana—with support from the Ghana Chapter of the Consumer Unity and Trust Society (CUTS Ghana), a registered non-profit organization which works in the areas of consumer protection, economic regulation, trade and development, regional integration and competition policy and law, among others.

 

With funding support from the Business Advocacy Challenge (BUSAC) Fund, CUTS Ghana launched a project referred to as the Competition and Advocacy Project (COMPAD Project).

 

The 15-month project, titled “Advocating for a Functional Competition Regime/ Framework,” was to be implemented in three phases, with the aim of complementing government’s efforts towards evolving a functional national competition policy and law in Ghana.

 

Apart from the COMPAD Project, CUTS is also executing the Competition Reforms in Key Markets for Enhancing Social and economic Welfare in Developing countries (CREW Project).

 

The project, involving three Ministries— Transport, Food and Agriculture, and Trade and Industry, with ISSER as its research partner —is to demonstrate measurable benefits from an effective competition policy and law regime in developing countries for ensuring competition reforms.

 

It is expected that the efforts of CUTS through the CREW and COMPAD projects would feed into developing a sustainable competition policy and law for Ghana that will address the challenge of weak competition enforcement and attract attention to competition reforms in the country.

 

The writer is an officer of the Information Services Department.

 

 

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