Competition Law: Bringing order in a jungle

Benefits such as economic growth and consumer welfare due to competition, mostly understood as rivalry among firms are obvious. But perhaps what is not clear is the role of competition law in a market which is purportedly free and liberalised.

Arguably, competition among firms will obviously benefit the consumer through improved access to goods and services, better prices and quality goods and services. Through competition, the economy also benefits through efficient allocation of resources, innovation and improved productivity and ultimately stimulates economic growth all of which creates wealth and reduces poverty.

Looking back, around the 1990s Malawi implemented market-oriented reforms which included market liberalisation and deregulation of the economy aimed at enhancing the efficiency and competitiveness of domestic markets. These reforms were premised on the above argument—competition will bring forth economic growth and reduce poverty.

But does competition obviously bring forth economic growth and consumer welfare? Certainly it does not always.

Markets do not always work perfectly. Some markets may actually be less competitive while some firms may take advantage of the deregulated markets to harm consumers and restrict entry or peaceful co-existence with other firms. Having appreciated the shortfalls of a deregulated market, the Malawi government, in 1997, adopted a Competition Policy.

In 2003, Malawi also enacted the Consumer Protection Act to buttress the need for fair play on the market.

As Malawi commemorated the World Competition Day on December 5 in Kasungu under the theme “Market Dominance and Consumer Welfare” a lot of issues were brought to the fore.

One of the issues is that the conduct of dominant firms on the market does not only affect consumers, but also competitors in that market.

It is worth noting that in Malawi, dominant firms are prevalent in most markets, which unfortunately risk some anti-competitive business activities occurring.

These anti-competitive business practices include predatory behaviour towards competitors including the use of pricing strategies to damage, hinder or eliminate competition. It may also include discriminatory pricing or mere discrimination in terms of conditions in the supply or purchase of goods or services, pricing policies to affiliated and unaffiliated enterprises and tying and bundling.

It has also been noted that some firms impose restrictions where or to whom or in what form or quantities goods supplied or others may be sold or exported while other dominant firms practice resale price maintenance.

It has also been widely noted that some firms through trade agreements fix prices between persons engaged in the business of selling goods or services.

More so in tendering for bids, some engage in collusive tendering—a situation where companies illegally share information among themselves when offering to supply goods or services in order to control the price. Some also engage in bid-rigging—a scheme in which businesses collude so that a competing business can secure a contract for goods or services at a pre-determined price.

It is, therefore, imperative that matters of consumer violation resulting from outcomes on highly concentrated markets should be dealt with for remedial measures to be. This therefore calls for the need for some sort of regulation of such markets to protect consumers.

That is because the market is liberalised, sometimes it might be a jungle out there clearly requiring some rules and a referee to ensure there is fair play for all firms and consumers.

The country’s competition laws endeavour to ensure that the negative effect of the conduct of dominant firms on the market does not harm competitors and most importantly, consumers. n