Why the private sector must support the call for Competition Law?

Competition/Antitrust law over the past 150 years has been seen as one of the regulatory packages needed to ensure that the market works efficiently for both producers and consumers. In the era of trade liberalization and deregulation, where businesses are competing among themselves, the playing field cannot be left without clear market rules.

The essence of competition law is to ensure that businesses operating in the market place do not engage in anti-competitive behaviour which could affect other competitors and consumers. Take for an example, market where one firm controls the production and supply of essential goods or services like, prices are determined by profit motive and not market forces. When a monopoly or oligopoly dominates a market, they can decide whom to sell to and what price to sell.

Markets devoid of competition law can also be replete with cartels controlling the supply and manufacture of essential goods and services. Activities of cartels can be so dangerous to the economy in many ways. They can distort the functionality of the market by limiting production or supply just to spike prices. Unfortunately, the Ghanaian market is without competition policy and law, which implies that firms can get away by engaging in such conducts.

The objective of the competition law is to maintain, promote and sustain fair and free competition in the market, to prohibit anti-competitive practices, to prevent practices having adverse effect on competition, to protect the welfare and interests of consumers and others acquiring or using goods or services in respect of prices charged, the quality and the variety of goods and services supplied in the country promoting through competition the reduction of costs and the development and use of new techniques and new products, facilitating the entry of new competitors into existing markets, and for matters connected therewith or incidental thereto.

What will Competition Law do for the Private Sector?

Competition law seeks to punish bad business behaviour like price fixing, predatory pricing, abusive monopoly and cartelization. It removes any entry barrier to allow firms who want to enter the market come freely as well as exit freely. Bad practice like tied selling, and refusal to deal is an offence under the competition regime. It protects small and medium enterprises (SMEs) from bigger firms by ensuring a level playing field.

1.Fair Market Process

Competition law ensures that market regulation procedures are rule bound, transparent, fair and non-discriminatory. Public interest tests are used to assess the desirability and proportionality of policies and regulations, and these would be subject to regular independent review. This include tax holidays, and other government incentives to businesses operating in country. The question is: why should government grant a tax holiday to firm which is already competing other competitors? Competition law is designed to create a level playing field for all market players.

2.Competitive Neutrality

Competitive neutrality is the recognition that significant government business activities that are in competition with the private sector should not have a competitive advantage or disadvantage simply by virtue of government ownership and control. Consequently, a government entity engaged in business activities must not have an unfair edge over private actors in the same field.

Third Party Access to ‘Essential Facilities’

This requires dominant infrastructure owners including public institutions to grant access to third parties (for example, electricity (grid), communications (underground and overhead telephone cables), gas pipe lines, railway tracks, and ports) to their infrastructure on agreed terms and conditions and at regulated prices, and aligned with competition principles.

Restrictive Trade Practices

Any agreement entered into between persons or enterprises, decision by associations of persons and enterprises (including cartels) or concerted practice, which has as its object or effects the prevention, restriction or distortion of competition is prohibited under competition law.

Competition law has a provision which deals with vertical agreement. Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including tie-in arrangement; exclusive supply agreement; exclusive distribution agreement; refusal to deal, resale price maintenance; and discrimination in supply or acquisition shall be an agreement in contravention of competition law.

Predatory Pricing Behaviour

The proposed law also has a provision which deals with predatory pricing behaviour. Currently, as it stands now, if a competitor sells his or her products below its cost of production, there is little that the current law can deal it with. Predatory behaviour towards competitors, such as pricing below cost of production to eliminate competitors will be prohibited under the proposed law. This means that market players will have to be guided by conduct rule to ensure predictability in the market place.

Regulation of Mergers and Acquisitions

Competition law prohibits mergers and acquisitions when the effect may be to substantially lessen competition, or to tend to create a monopoly. The key question the Competition Commission asks is whether the proposed merger is likely to create or enhance market power or facilitate its exercise. The greatest antitrust concern arises with proposed mergers between direct competitors (horizontal mergers). The Competition Commission may allow or block such a merger.

Conclusion

In conclusion, competition law protects businesses from harmful business conduct. It benefits both the consumer as well as the producer. It results in innovation, improved variety of goods and services whilst at the ensuring competitive prices. The private sector organizations like Association of Ghana Industries (AGI), Private Enterprise Federation (PEF), Ghana Union of Traders Association (GUTA), Ghana Chamber of Commerce and Industries (GNCC) must support the call for competition policy and law. The Ministry of Trade and Industry (MOTI), Cabinet and Parliament must not miss its timeline in ensuring the passage of the law this year.

Appiah Kusi Adomako is the Country Coordinator for CUTS International Ghana. CUTS Ghana is a research and advocacy public policy think tank which works in the areas of consumer protection and education, economic regulation, trade and development, regional integration, competition policy and law, etc. CUTS can be contacted through | Office: +233.24.392.0926| Email: apa@cuts.org, Website: www.cuts-accra.org