By Siddhartha Mitra and Udai S Mehta
The Bangladesh government is considering enacting a ‘Competition Act’ to help increase competition among businesses so that they offer quality goods and services at fair prices. This is because competition, whether protected by law or promoted by advocacy or policy, is associated with freedom for all firms to enter and exit markets and compete for market shares, and therefore price decreases and quality improvements benefit the common man. Bangladesh will soon join the advanced group of close to over 120 countries across the globe which has enacted a Competition Law.
Clearly, such enactment is timely as Bangladesh, similar to other developing countries, is plagued by anti-competitive cartels, hoarding and black marketing of commodities, etc. However, there is not much research or published material on market behaviour/practice in Bangladesh which may aid the formulation and implementation of competition law. Thus, there is a lot to learn from the experiences of neighbouring countries.
The Indian experience: In regard to the formulation of competition laws, the Indian experience might be worth emulating. In 2002, India adopted a brand new Competition Act, 2002 to replace the archaic Monopolies and Restrictive Trade Practices Act and thus the earlier structural assessment and identification of anti-competitive practices with a behavioural one. In other words, unlike the previous act, which penalised dominance of the market by a firm per se, the new act lay stress on identification and then punishment of the abuse of such dominance. This was a welcome step as dominance of a market is often achieved on the basis of superior efficiency; penalising such dominance thus serves as a huge disincentive in regard to efficiency enhancement.
In addition, the act introduced provisions which enabled the competition agency to detect and therefore punish cartels. Cartels are often associated with higher prices of essential goods with a disproportionate adverse effect on the poor and therefore the furtherance of inclusive growth.
But if Indian initiatives in regard to ushering in a modern competition law are worth drawing inspiration from, it’s later efforts to fine tune and enforce the law offer a lesson in what needs to be avoided. The new act, ushered in through activism by organisations such as CUTS International, led to optimism about the promotion of inclusive growth through its enforcement by the newly formed Competition Commission of India (CCI). But the inertia thereafter proved to be a dampener.
The period between 2002 and 2007 was marked by uncertainty regarding the future of the CCI as certain weaknesses in the new act, which imbued the commission with the unacceptable combination of legislative, executive as well as judicial powers, came to the fore. These weaknesses had to be subsequently remedied by the Parliament. In this period a toothless and ill-staffed and equipped CCI functioned but the constraints facing it did not enable it to do much of note. Finally after 5 long years, the necessary amendment was made in 2007 and two years later, a full-fledged authority came into being and generated great expectations. It has been there for over one year, but is yet to hit the track on full steam — right now it has around 30 cases, of which 6 are in an advanced stage of dispensation, but there is no order as yet.
Clearly, the Indian experience in implementing and enforcing competition law is not the right one to follow. Here Pakistan and other young rookies such as Egypt and Mauritius can be good role models.
The examples of Pakistan, Mauritius & Egypt: The Competition Commission of Pakistan (CCP) has impressed all commentators through its initiatives, boldness, neutrality and professional skill in promoting competition in Pakistan’s markets in an environment fraught with uncertainty. In February this year the CCP fined the state-owned Pakistan Steel Mills Rs. 25 million for abusing its dominant position in the low carbon steel market, an action which showed that it was not afraid to take on even the state if it was on the wrong side of the law. The CCP has also made laudable efforts to promote competition culture within Pakistan and in the South Asian region.
The CCP has unexpectedly found a close ally in powerful elements of the polity, possibly because of the appreciation for its efforts expressed by the media and elements of the private sector. This is demonstrated by the re-promulgation of the CCP in quick response to the March 26 nullification of the Competition Ordinance 2009 which could not be turned into a law.
However, the CCP is not the only example of an effective young competition agency. Exactly six months after its establishment, the Competition Commission of Mauritius (CCM) launched its first investigation in December 2009. The Competition Act 2007 was the second attempt by the island state. The agency is on a sound growth trajectory, not only in terms of developing its own fleet of enforcement officials, but also in terms of selecting the right cases, which when decided would provide even wider stakeholder support to the authority. Further, while many young competition agencies are often circumspect to present details of their investigative actions, the CCM is an exception.
Like the CCM, The Egyptian Competition Agency (ECA) has made its intentions clear to operators in markets. Not only has ECA developed a formidable internal team of experts and practitioners to enforce the competition law it has also established effective lines of communication with big business houses, sensitising them of the value of competition compliance. All of this has also been facilitated by a strong commitment from the highest level within the Egyptian government towards strengthening the agency and evolving a healthy competition culture in the country.
Strong leadership seems to be a common thread among all these ‘young and successful’ competition agencies. Evidence from across the globe indicates that strong leadership stands out as an essential attribute that has facilitated emergence of effective competition regulators. Early signs are very promising as these young agencies move from strength to strength and take up the challenge to prove themselves as the best among equals in the international competition circuit! There is much that Bangladesh can learn from the experience of these young rookies.
Siddhartha Mitra is Research Director, CUTS International and Udai S Mehta is Policy Analyst, CUTS International. They can be reached at e-mail: sg-cuts@cuts.org