Law in place to check monopolies

THE Government’s recent an­nouncement that Bernas’ monopoly to import rice would end soon and that other monopolies would also be reviewed was good news.

Following this was the revelation that the pharmaceutical industry has long been manipulated and that bid-rigging was a norm in the industry. This has come as no surprise to me personally because during my tenure as CEO of The Competition Commission (MyCC), there were many complaints from the smaller pharmaceutical companies on issues of high pricing and dominant companies arm-twisting the smaller ones.

I am quite sure that as time goes by, more issues related to monopolies, dominant companies and GLCs will slowly emerge.

Monopolies have no incentive to lower prices, raise the quality of products or increase their line of service or goods simply because they have the competitive edge over every other company. Of course, some monopolies are good, like the utilities market which are regulated by the Government to ensure that there are no disruptions in the supply of services.

So when it was announced that Bernas’ monopoly on the supply of rice would end, I was elated as that would mean more players in the market, making pricing competitive to the advantage of consumers and also offering a more varied line of rice supply in the country. It could also provide smallholders better options to sell their produce.

The fact that the Government wants to review other monopolies and introduce a policy on monopolies is indeed encouraging.

However, an act already exists, the Competition Act 2010 (CA 2010), which is a powerful tool that can address not only monopolies and dominant companies but also cartel activities like price fixing and bid-rigging.

Not many people are aware that the CA 2010, which came into force on January 2011, has wide-ranging powers. The MyCC set up to implement this law has powers of investigation and can fine offending individuals or companies up to 10% of their worldwide turnover.

MyCC has, among others, power not only to investigate cartel activities or dominant companies if there is a complaint but also to advise the Minister or any other public or regulatory body on all matters concerning competition.

MyCC could also carry out general studies on issues related to competition, known as market studies. Any recommendation arising from the study could be channelled to the appropriate authority for further action or attention.

Therefore, since MyCC has been given such wide-ranging powers, it must be fully utilised to assist the Government in addressing the structural imbalance caused by corruption, nepotism and the like.

Bid-rigging, a hard core cartel activity, is regarded as among the most serious infringements of competition and antitrust law by competition authorities and courts worldwide. And that is one of the reasons many countries have amen­ded their competition laws to make bid-rigging a criminal offence. It is reflective of the damages it can create. From several reports produced by more mature competition jurisdictions, evidence suggests that cartels overcharge by up to 20%.

Bid-rigging can be investigated under the CA 2010.

Not many companies know that under the CA 2010, the director, CEO, COO, manager or any other officer could also be liable for offences if the case of bid-rigging was proven. Civil servants who are party to the rigs could face the MACC for corruption.

Public procurement makes up to 15% of a nation’s GDP. Therefore, when a bid is rigged, it has the potential to cause great harm to consumers.

With due respect therefore, I do hope the Cabinet has been briefed about CA 2010, its objectives as well as the powers of the MyCC. Section 4(1) and (2) of the Act address anti-competitive agreements while Section 10 addresses abuse of dominant positions. The objective of the law is “to promote economic development by promoting and protecting the process of competition, thereby protecting the interests of consumers.”

It is hoped that the existing tools already available would be used. MyCC should also be more proactive, visible and transparent so that the public will know that the Act is in effect and that the above mentioned issues should be handled by MyCC and not MACC.

MyCC also offers a leniency programme which would be useful for companies involved in a bid-rigging case or anyone involved in a bid-rigging case. They could be eligible for immunity if they are the first to report to MyCC. Subsequent reporting also warrants lenient treatment but several factors would be considered by MyCC before leniency is granted.

As time goes by, many other government policies which could be deemed to be anti-competitive in nature will need to be addressed and reviewed. This will take time but a great step has already been taken and I sincerely hope the CA 2010, with its noble objective, will in time become a powerful tool to address the distorted market structure and usher in a competitive environment to benefit not only consumers but also the business environment.