The challenges presented by the prevailing situation in Zimbabwe are an interesting and unique case study for those in the competition field. Research institutions and scholars should develop an interest on the competition scenario in the country so as to devise new methods of handling competition cases under a hyperinflationary environment, says Cornelius Dube
The enforcement of competition law in Zimbabwe, formally adopted in 1996 through the enactment of the Competition Act, 1996, now the Competition Act [Chapter 14:28] is under serious challenges due to a hyperinflationary environment. This is self-evident when one compares competition law enforcement experience before the economic crisis and the present situation.
The tendency by enterprises operating in a business environment that is not conducive is to seek survival strategies including engaging in serious anti-competitive practices. Such practices may include, among others, increased incidence of exploitative and exclusionary practices, collusion, misleading practices and mergers & acquisitions prompted by non-efficiency considerations. Consequently, benefits that should be delivered by competition law are overshadowed prompting consumers to question and doubt the importance of the law.
Shortages of essential raw materials for production and basic commodities as well as critical commodities for production such as fuel, electricity and foreign currency affect production and hence competition. Excessive Government intervention measures, such as price controls, which were once removed following the adoption of market reforms in 1990, have been re-introduced enforced by the national Incomes and Pricing Commission (NIPC), established under a fast tracked National Incomes and Pricing Act. The list of controlled products, initially covering critical products such as fuel, electricity, and some few basic commodities (sugar, flour, mealie meal etc) has been extended to almost all the products.
Firms are devising all possible survival means, which include mergers and acquisitions as well as restrictive business practices, as price controls removed prospects for price competition as firms charge same price across the whole country.
The operations of the Competition and Tariff Commission have been affected largely due to the dynamic nature of the business environment that keeps changing all the time. The Commission is inundated with competition cases as companies try to seek protection to survive. Although the Commission’s competence in handling cases within the confinements of the Act is not questionable due to its immense experience, the hyperinflationary environment call for quick decisions which may not be practical. Most cases dealt with, particularly with respect to abuse of dominance (predation, refusal to deal, market foreclosure) have been concluded at a time when the complainant had already been forced out of the market.
Market shares evolve on a monthly basis; it is difficult to make appropriate decisions as the situation would have changed by the time the analysis is concluded. The relevant market is difficult to define; by the time the case officer completes the analysis, probably one firm would have exited the market or an opportunistic one would have entered the market, and the decision may not be the most appropriate. This also takes place at a time when the Commission has been excluded from external capacity building programmes on competition policy that would have helped the new staff acquire skills and to rise up to the challenges.
Competition law enforcement under a hyperinflationary environment has ushered in new challenges which are outside the framework of the standard approach to the design and implementation of competition law. The issue warrants attention, whether or not there is a change of government. This is a new phenomenon which calls for further research.
The challenges presented by the prevailing situation in Zimbabwe are an interesting and unique case study for those in the competition field. Research institutions and scholars should develop an interest on the competition scenario in the country so as to devise new methods of handling competition cases under a hyperinflationary environment. Most of the current documented procedures have numerous limitations when it comes to competition law and policy administration in Zimbabwe.
(Cornelius Dube is an Economist working for Consumer Unity and Trust Society (CUTS) International, an international NGO based in India).