Intergovernmental Group of Experts on Competition Law and Policy. UNCTAD Technical Assistance in the Field of Competition and Consumer Protection

Transcription

1 Intergovernmental Group of Experts on Competition Law and Policy Geneva, July 2007 UNCTAD Technical Assistance in the Field of Competition and Consumer Protection By Mr. Lloyd Muhara Chairman Competition and Fair Trading Commission MALAWI The views expressed are those of the author and do not necessarily reflect the views of UNCTAD. 1

2 BRIEF ON PROGRESS AND CHALLENGES OF THE COMPETITION AND FAIR TRADING COMMISSION IN MALAWI TO BE DELIVERED AT THE 8 TH SESSION OF THE IGE AT THE UNITED NATIONS HEADQUARTERS, GENEVA, SWITZERLAND 17 TO 19 JULY 2007 BY LLOYD MUHARA CHAIRMAN MALAWI COMPETITION AND FAIR TRADING COMMISSION July,

3 Mr President, Mr H Qaqaya, Head of Competition and Consumer Affairs Branch, UNCTAD Distinguished participants 1.0 Introduction Malawi is among the seven COMESA member states that have enacted legislation on competition law and policy. Malawi enacted the Competition and Fair Trading Act in 1998, and the law was made operational by the Enabling Act of The Board of Commissioners was appointed by His Excellency the President Dr. Bingu Wa Mutharika in February, Although it is now over eight years since the law was enacted, institutional arrangement has not been fully put in place to implement the law. The absence of a functional Secretariat to implement the Act has become a source of frustration and worry on the part of the private sector and consumers at large. 2.0 Interim Secretariat Realizing the important role the implementation of the Competition law could play in uplifting the welfare of consumers and the development of the national economy, the Ministry of Industry, Trade, and Private Sector Development decided, despite financial limitations, to put in place an Interim Secretariat of the Competition and Fair Trading Commission (MCFTC) using resources from its allocation. The decision was made due to the public uproar especially from the private sector regarding the urgent need to set-up the Commission to regulate anti-competitive behaviour in the market. As a result, the Ministry had to allocate temporary office space to the Secretariat to commence partial operations and in addition, facilitated, through the Commonwealth, the recruitment of a Consultant to assist in setting up a fully fledged Secretariat of MCFTC and help build capacity of the interim staff members of the 3

4 Secretariat. The Ministry also seconded three staff members to make-up an interim secretariat and work with the Consultant so that they could be trained on the job and become the nucleus of the future Secretariat. 3.0 Justification of the Need for a Functional Competition Authority There are several reasons for the need for Malawi to have a functional Competition Authority. Two of the major justifications include are listed below:- 3.1 Competition and Efficiency Gains Malawi is still undergoing the transition into a market economy in line with the new global economic order. A country that has undertaken trade liberalisation and deregulation measures like Malawi has every interest to ensure that the welfare and efficiency gains arising from the market are not lost due to anticompetitive trade practices by firms. The country has come to realise that the benefits of market oriented reforms are only going to benefit the people if enterprises are driven by the competition agenda. Such anticompetitive practices by the local firms have continued to manifest themselves through price fixing schemes, exclusive distribution and dealership agreements, restrictions on market allocation, discriminatory trading conditions, refusal to supply etc. The objective of the Competition Act is, therefore, to enhance the welfare of the people of Malawi through the promotion of competition and fair trading and provision for consumer protection. The Act provides two main ways of achieving this objective: Preventing anticompetitive conduct, thereby encouraging competition and efficiency in the manner in which our local firms do business, 4

5 resulting in wider choice for consumers in price, quality and service, and; Prohibiting enterprises from conducting unfair trading practices in order to safeguard the Malawian consumers against exploitation through misleading conduct and other sharp selling practices, and preventing unprincipled businesses from gaining an unfair advantage over their rivals. In this regard, the competition law requires that mergers, takeovers, and acquisitions effected on the Malawian market obtain prior authorization from the Commission. In the absence of such authorization, such a merger, takeover, or acquisition shall have no legal effect in Malawi and no rights or obligations imposed on participating parties by any agreement in respect of such a merger or takeover shall be legally enforceable. There are many other similar statutory obligations in the law which requires a functional Commission if business has to comply with the law. The absence of the Commission has created a business regulatory vacuum and uncertainty in our market. Government is required to facilitate compliance by making the Commission functional. 3.2 Competition and Economic Development Malawi, like other countries, has recognized the value of competition as a tool for spurring innovation, economic growth and the economic well being of its people.; We realise that competitive markets provide strong incentives for achieving economic efficiency; market forces ensure that production of goods and services responds to consumer wants; market forces ensure the most efficient production and distribution. In addition, competitive market forces ensure that the market players invest sufficiently in new production 5

6 technologies, new production processes and new products. In other words, the creation of competitive markets in the national economy shall promote productive, allocative, and dynamic efficiency. 4.0 Consequences of a Non Functional Competition Authority As a result of lack of enforcement of the country s competition law, the Malawian economy and business has continued to be disadvantaged at national, regional and global level. Some of the major consequences of the absence of the market regulatory body are: 4.1 Regional mergers and takeovers Major business transactions at regional level have gone through without Malawi as a country making an assessment of the impact on the national economy of such transactions. These include the following: Takeover of Malawi Breweries Limited through Lonrho Africa, a regional transaction; Acquisition of Cadbury Schweppes by CocaCola Company (TCCC), a regional transaction; Takeover of Tate and Lyle shares in Malawi Sugar Company by Illovo Sugar of France, a regional transaction, and the; Takeover of Malawi Cement Company by La Farge of France, a regional transaction. The above transactions were effected at regional level covering South Africa, Zimbabwe, Zambia and Malawi. Except for Malawi, in all the three countries, the transactions were notified to the country s National Competition Authorities and were subjected to scrutiny by the Authorities 6

7 with a view to find the effect of each transaction on the national economy. Unfortunately for Malawi, because of not having a national Competition Authority in place, all the above transactions were effected in the country without the relevant assessment by a responsible authority. In all the other countries mentioned, the competition authorities were able to set conditions for the mergers and takeovers and consumers were and are protected. Apart from the need to identify and prevent those takeovers that are harmful to competition, there is also the possibility that by not having a Commission, Malawi has deprived itself of the legal powers to challenge foreign takeovers which might have adverse effects on its national economy. 4.2 Consumer Protection The violation of consumer rights in Malawi has continued to be of great concern to Malawi. The Commission, once fully operational, shall enforce a variety of provisions aimed essentially at protecting consumers and which, in many cases, shall also provide an avenue of redress for people suffering loss or damage through violations of consumer rights. The Commission Secretariat once fully established shall deal with matters relating to unfair practices i.e. false representations and misleading business conduct, product safety, and information, liability for unsafe goods, and conditions and warranties in consumer transactions. At the moment, there is no capacity in the Commission to deal with consumer complaints. An example of a common consumer violation happening right now is the selling by Shoprite and Game Stores of electrical appliances fitted with round pin plugs, unsuitable for the Malawian market. This situation presents an opportunity where the existence of a Competition Authority can protect the rights of a consumer. 4.3 Hoarding of Maize. 7

8 There have been over the years, great concerns by Government about unscrupulous traders hoarding the national staple food, maize, with the view of creating artificial shortages and in turn increase and charge exploitative prices for maize. This is a practice expressly prohibited under the Competition and Fair Trading Act. However, due to the absence of an effective Secretariat in the Competition Commission, We have not been able to address this exploitative situation effectively, hence the majority of our poor people continue to suffer and be disadvantaged. 4.4 Unconscionable Conduct The Secretariat once established shall look at the impact multinational companies trading rules have on rural producers in their dealings with competitors, suppliers and customers. The rural sector stands to gain from competition policy in many ways. Where small growers or producers of agricultural products deal with relatively few, large and powerful processors, there may be an inequality of bargaining power. This situation has already been witnessed in auctioning of tobacco, Smallholder cotton and sugar schemes. As Competition Authority we shall be able to argue on behalf a rural producer that the behaviour of the multinational companies engaged in contract farming or buying, amounts to what is known as unconscionable conduct. Through the Commission, the rural farmer shall be able to establish that he was in a position of strong disability which the multinational company as a stronger party knew about and took unfair advantage of. Some of the factors recognized under the competition rules as amounting to a special disability are commonly found with our rural farmers. These include ignorance of important facts known to the other party, illiteracy or lack of education, poverty and infirmity. 5.0 COMESA Competition Authority 8

9 Let me also bring it to the notice of the 8 th IGE that that there is now in operation the COMESA Regional Competition Regulations which were approved by the COMESA Council of Ministers in Under this Competition Protocol, Malawi is one of the countries (the other one being Rwanda) which have offered to host the COMESA Regional Competition Authority in Zomba. His Excellency The State President has already approved that Malawi bids to host such an important regional institution. If we succeed, this will be an added advantage to the Malawian business environment. All these developments make it imperative that Government and all our cooperating partners should assist to establish and operationalise a Secretariat for the Malawi Competition and Fair Trading Commission as a matter of urgency. 6.0 Progress Made by the Interim Secretariat It is important to repeat that the Competition and Fair Trading Act is already in operation and a Commission is in place. Despite the limited staff capacity and financial resources, the interim Secretariat has so far managed to achieve the following: The Commission has conducted Stakeholders Awareness and Advocacy Workshops on Competition Policy and Law targeting, the Judiciary, Business Community, Parliamentarians, Sector Regulators, Professional Associations and the Media ; Investigated several anticompetitive cases on the market including those in the Poultry and Air Travel industries; Put in place regulations required under the Act which were gazetted in the year 2006; 9

10 Developed financial regulations which sets out the financial policy of the commission Is in the process of securing office accommodation. Reviewed and made decisions on some merger and takeover applications including the takeover of: 1. Mobil Oil Company by Total Oil Company; 2. Baobab Pensions by Aon Malawi Limited; 3. SSI Holdings Limited by G4S International Holdings Limited; 4. Clark Cotton Malawi Limited by Cargill Incorporated. 5. Acquisition of 60 % shareholding in Telekom Networks Malawi by Malawi Telecommunications Limited; 6. Takeover of Malawi Distilleries Limited by the Bottling and Brewing Group Limited; One of the major cases under consideration by the Commission is the Takeover of Stancom Tobacco Company Limited by Dimon Tobacco (Malawi) Limited; Conclusion In order to effectively operationalise the Commission and ensure its sustainability, it is vital that the Authority is allocated sufficient resources by Parliament to enable it establish an effective Secretariat which could meaningfully act as a market watchdog. 10

11 It is also important to note that there are several cooperating partners and agencies willing to assist the Commission with financial resources and technical expertise but are put off by lack of commitment from Government. The cooperating institutions would like to see willingness from Government and commitment to the cause of the competition watchdog as a way of ensuring sustainability of the institution other that have a donor driven initiative In conclusion the Commission wishes to thank the United Nations Conference on Trade and Development for its assistance which ensured the birth of the Commission. I would like to ask UNCTAD to continue assisting the Commission since the Malawi economy is not ripe enough to fully support an institution like ours. Thank you LLOYD MUHARA CHAIRMAN MALAWI COMPETITION AND FAIR TRADING COMMISSION JULY