The concept of Competition Law and the Bangladesh perspective

Competition law is an act of prohibiting firms from engaging in activities that distort the competitive process and have competition. For example, firms engage in activities that prevent firms from indulging in anti-competitive agreement, preventing firms with powerful position (monopoly) in the market place from abusing their market power. The primary objective of competition policy is to enhance consumer welfare by promoting competition and controlling practices that could restrict it. More competitive markets lead to lower prices for consumers, more entry to new entities and new investment, enhanced product variety and better quality product and more innovation.

Competition policy is important because the proper implementation of it leads to promotion of efficiency, which in turn maximizes welfare. Here the term welfare implies the sum total of consumer’s surplus and producer’s surplus as well as taxes collected by the government. Competition law prohibits and penalizes anti- competitive practices by enterprises functioning in the markets that is it addresses market failure. The aim of the competition policy is to create a framework of policies and regulations that will facilitate competitive outcome in the market. The law by prohibiting private monopolization, unreasonable restraint of trade and unfair trade practices by preventing excessive concentration of economic power and by eliminating unreasonable restraint of production, sale, price, technology and the like and all other unjust restriction of business.

The need for competition law arises because markets can suffer from failures and distortions and various players can resort to anti- competitive activities such as forming cartels, abuse of dominance, etc. which adversely impact economic efficiency and consumer welfare. Competition policy is about applying rules to make sure business and companies compete fairly with each other. This encourages enterprises and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality. The anti-trust laws are statutes developed by government to protect consumers from predatory business practices and ensure fair competition. Anti-trust laws are applied to a wide range of questionable business activities including market allocation, bid rigging, price fixing and monopolies. Competition law prohibits the abuse of existing dominant position and anti-competitive agreements including both agreements between competitors and agreements between suppliers and buyers or procurers. Generally free and open competition benefits consumers by ensuring lower prices and new and better products. When competitors agree to fix prices, rig bids or allocate consumers, consumers lose the benefits of competition.

The benefits of competition are well known such as lower prices and more product variety for consumers and more efficient, dynamic and innovative firms. Competition promotes quality, efficiency and consistent improvement and it disciplines firms to the challenges of the market place. The anti-trust and competition laws discourage anti-competitive mergers. Competition Act was enacted to provide for the establishment of a commission to prevent practices having adverse effect on competition and to promote and sustain competition in the business environment and to protect the interest of the consumers and to ensure freedom of trade carried by others. The law promotes healthy competition, bans agreements to fix prices or to crave up markets, and makes it illegal for business to abuse a dominant market position. Even Competition Commission, India (CCI), formed under the Indian Competition Act regulates competition in India and has the mandate to eliminate practices having an adverse effect on competition, promoting and sustaining competition, protecting the interest of the consumers and ensuring freedom of trade in the Indian market.

When businesses are competing for customers, it gives those customers the benefits of more choices, lower prices, better quality and more innovation. The laws of the competitive market place are enforced by the Federal Trade Commission (FTC) in the US. The Anti-trust Laws FTC enforces benefit all customers. In the US Congress passed several laws to help promote competition by outlawing unfair method of competition. The Sherman Act is one of the oldest anti-trust laws in US. Most of the Developing countries have their anti-trust laws to regulate monopolies and prevent them from forming in future. The laws prevent unfair business practices such as false advertising, deceptive price including discount offer and misleading labeling. In the US FTC enforces Clayton Anti-trust law to prevent false advertising and misleading labeling. In a laissez faire economy producers and consumers are relatively free of government interventions. So competition plays a powerful part in a free enterprise system. In a free economy bid rigging is prohibited. Bid rigging is a collusive behaviour of bidders resulting from a pre-determined arrangement between them. This act is known as bid rigging. It is an anti-competitive practice as the collusive agreement between Buyer A and Buyer B reduces fair competition for other participants in an auction. In Bangladesh the share market scam was an example of bid rigging.

Parliament in Bangladesh passed the Competition Act 2012, which states that the law aims at preventing, controlling, and eliminating anti-competitive activities related to collusive situation of monopoly and oligopoly, combinations or abuse of dominant positions. The law in Bangladesh serves to promote, seek and maintain market competition by regulating the anti-competitive activities of business firms. Unless anti-competitive activities are regulated or controlled free market economic system breaks down. Any damage done to destroy competitive system by very powerful prominent companies having very high position in the market preventing competition and resisting new firms from entering into market would reduce the benefits of free market economy. So, competition law is the only tool to deter those firms from such activities.

Bangladesh competition law has three major elements. They are (i) prohibiting agreement/practice restricting free trade and competition (ii) Banning abusive forces to dominate market or anti-competition and achieving dominant position so as to influence prices both predatory pricing or refusal to deal and (iii) supervising the merger and acquisitions of firms.

A healthy and competitive market environment is essential to ensure quality product at a reasonable price. Bangladesh Competition Act is formulated to ensure, promote and sustain an environment so that fair competition in trade could play its due role and prevent collusive tendering and control monopoly and oligopoly. To achieve its objectives government has set up Bangladesh Competition Commission. The commission is to ensure competitive market environment, protect consumers’ interest and foster advocacy and enforce law. The commission is to hear complaints, control and prohibit anti-competition agreements, conduct investigation regarding trade offences. The commission has full authority to prevent all unfair trade practices. However, there is a feeling among the general masses that the Commission is like the proverbial Kazi’s cow, they are on paper but not in the shed. Officially the commission is in paper but its performance has never been felt or seen to protect the interest of the consumers. Neither it has ever controlled monopoly and oligopoly nor taken action against false advertising. As such general masses are the prey of these powerful firms in the market. Since the Competition Law is new in Bangladesh the general public is unaware of its existence. The commission should take initiative to make people aware about the positive side of the law, so that both firms and public comply with the provisions of the law. However, a decade has gone but the activities of the commission could not be observed or felt in the market. Bangladeshi markets are dominated by either monopoly or oligopoly firms, putting the consumers at their mercy. The time is up when the commission should raise its voice and show its teeth to have discipline in product market.

The writer is former Director General of Export Promotion Bureau. He can be contacted at hassan.youngconsultants@gmail.com