Competition policy critical for consumer welfare

Nairobi, 12-13 December 2015

Competition policy critical for consumer welfare

East African vanguard, December 13, 2015

NAIROBI, Whereas about two-thirds of the world’s Gross Domestic Product (GDP) is driven by consumers, they are often not given the recognition and the importance they deserve, a senior UN official has said.

Speaking at the opening of the competition, regulation and development conference organised by CUTS International at Eka Hotel in Nairobi on December 12, the United Nations Conference on Trade and Development (UNCTAD), Secretary General, Dr Mukhisa Kituyi, said because consumers are not given the recognition, they are often subjected to anticompetitive behaviour by a powerful network of businesses, which controls capital.

“Competition policy is critical for the attainment of consumer welfare and Sustainable Development Goals,” Dr Kitui said.

Dr Kituyi, pointed out that in any country, there is bound to be a connected network of business which has influence, to the effect that national regulation may have challenges in controlling its abusive behaviour.

“It is only combined effort at regional level that is strong enough to deal with such connections,” he said

Speaking during the same occasion, the OECD Chairperson Competition Policy Committee, Mr Frederic Jenny, stressed that while evidence has been presented on the benefits of competition reforms, there still remains scepticism among some stakeholders on the importance of competition due to several reasons.

“One of the reasons why there is continued debate about the benefits of competition, even though more than 130 countries in the world have competition laws, is due to the conspiracy theory, where powerful business and those with vested interest are lobbying against competition reforms as a way of protecting the gains of anti-competitive behaviour, which negatively affects welfare” Jenny.

In his highlights on the findings from the CREW project, which was implemented in four countries (Ghana, India, the Philippines and Zambia), the CUTS International, Secretary General, Mr Pradeep S Mehta, indicated that there is value in having the right regulatory safeguards like the competition policy in place to ensure that benefits of trade liberalisation can be derived fully by the citizens/country.

“Although subsidies are generally a departure from normal competition principles, they can assist farmers in remote areas where the private sector might generally not be willing to participate if they are properly targeted and measures to safeguard their abuse are in place” Mehta said.

Mr Mehta also demonstrated how competition policy can be a useful tool for the attainment of SDGS. He said the first and second SDG goals that emphasise “End poverty in all its forms everywhere” and “End hunger, achieve food security and improved nutrition, and promote sustainable agriculture” respectively, can be threatened by anticompetitive practices, which inflate basic food prices and make them unaffordable to the poor, thereby worsening poverty.

“Abuse of dominance and cartels are very prevalent in both developing and developed countries in the basic food sector, making competition law implementation very relevant as a tool for reducing prices, which is a positive step towards poverty alleviation,” the CUTs Secretary General said.

The conference also noted that sustainable agriculture is also threatened due to the numerous competition distortions that can appear at different stages in the agriculture supply and value chains (seed, fertiliser, output, agro-processing etc). These were seen as factors that that can threaten the attainment of the second goal and therefore, makes competition policy very relevant.

The meeting further noted that even as the SDG’s Goal 3 talks about “Ensuring healthy lives and promoting well-being for all at all ages”, access to affordable medicine, which is seen as a critical determinant of the state of health in developing countries, is often compromised due to competition distortions in the pharmaceutical market. This, the conference argued, can be addressed through the implementation of an effective competition law.

The conference also noted that the competition policy is relevant in the attainment of goals 4 to 9 of the SDGs.

“Anticompetitive practices are characterized by private education, the informal sector markets where players are dominant and where women are mostly concentrated and thus have gender implications, energy, and water and sanitation sectors. Measures done for the attainment of all these goals need to be complemented by competition policy,” the conference noted.

The two day conference was organised as a combination of CUTS flagship Biennial Competition, Regulation & Development Conference as well as a final conference of the project entitled ‘Competition Reforms in Key Markets for Enhancing Social & Economic Welfare in Developing Countries’, referred as the CREW Project.

CUTS International has been implementing the project since November 2012, with support from DFID (UK) and BMZ (Germany) facilitated by GIZ (Germany). The theme of the conference is “Ascertaining the relevance of competition and regulatory reforms in pursuing the recently launched Sustainable Development Goals (SDGs)”.

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