EDEN BUILDING TO STOCK EXCHANGE Published: 24 June 2018
Competition Commission of Bangladesh in action M S Siddiqui In the globalized market economy, the market is open to competition and survival of fittest. The biggest players are apparently free to take over the dominant role in the market. One of the market regulations available in the free market is the Competition law. The interest of consumers and relatively small businesses are protected through fair competition and regulated by Competition Commission (CC). Bangladesh has quite number of Commission created by different law. The Energy Regulatory Commission, Telecommunication Commission, Anti-corruption Commission, Human Rights Commission etc are active in Bangladesh. These commissions are constitutes to overcome the limitation of bureaucracy and get the justice from dominate role of government and quick delivery of services. Those commission are supposed to work independently. Historically, commissions are to protect interest of citizen from mightily government mechanism and other powerful stakeholders. Unfortunately these commissions are constituted with retired bureaucrats and Commissions are seems part of the government with their actions. These commissions hardly fulfil the desire of the law makers and citizens. Now, there is a Competition Commission (CC) formed under The Competition Act, 2012. This Commission was beyond the knowledge of common people but their first action against one anticompetitive agreement plausible. The competition laws restrict monopoly of holding a dominant position or a monopoly in a market. In certain case monopoly is often not illegal in itself but certain categories of behaviour can be considered abusive and therefore incur legal sanctions when business is dominant. The verb monopolize refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices. Even the monopoly purchase by a single enterprise of a good or service is called monopsony also may be restricted and illegal. In the first action of CC has done a remarkable job. According to the facts of the anti-competitive agreement, the Retired Army officers club (RAOWA) use to rent their convention hall for social programs to earn money and had an agreement with Iqbal Hossain Catering service to cater service including supply of food on exclusive basis.
As per agreement, RAOWA have taken security money of 5 crores and 5 crores is advance of profit from service extended for the social programs. RAOWA use to get Tk100 per person for the service. Upon complain the CC investigated the matter and find that other nearby convention centre doesn't have such exclusive agreement with any catering service providers to the service recipients. They have few enlisted catering companies facilitating the negotiation of price of services. RAOWA is a registered society under the Societies Registration Act 1960 and non-profit welfare society. It has entered in an agreement of sharing the profit with Iqbal catering services. The exclusive agreement between TAOWA and Iqbal Hossain Catering service is to maximize their profit. In the historic maiden judgement CC has ordered for cancellation of monopoly agreement with Iqbal Hossain Catering before 30th June 2018 and enlistsmore than one service providers within 8th July 2018. The authority of RAOWA club has terminated the agreement with Iqbal Hossain and initiates the process of enlistment of more than one catering service providers and duly reported to CC. The justification of the judgment is some logic and validation. A monopoly exists when a specific enterprise is the only supplier of a particular commodity. Monopoly is thus characterized by a lack of economic competition to produce or supply of the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit. The characteristics of monopoly situation create an environment for one party the market to maximize profit and they decides the price of the good and service to be sold but does so by determining the quality in the order to demand the price desired by the supplier. In a monopoly market there is only one seller of the good or service, therefore market is served by a single company.Other suppliers are unable to enter the market of the monopoly. The monopolist company can charge the price and quantity of the products. The monopoly situation created due to certain condition of the market. The major reason of monopoly situation is barrier on entry of other competitors in the market. There are three major types of barriers to entry: economic, legal and deliberate. Economic barriers: Economic barriers include economies of scale, capital requirements, cost advantages and technological superiority. Economies of scale: Certain products and services require high investment in fixed and working capital. Again the larger volume of production decreases the unit cost of products. The decreasing cost coupled with initial large investment due to bigger investment in land, machinery and working capital etc create an advantageous position of monopoly. Monopoly players are often in a position to reduce prices below a new entrant's operating costs and thereby prevent them from competing. Thus the size of the industry relative to the minimum efficient scale may limit the number of companies that can effectively compete within the industry. The new entrains cannot produce at an average cost that is competitive with the dominant company.
Capital requirements: There may be requirement of large investment of capital and initial uncertain investment in research and development may also limit the number of enterprises in any product market. Technological superiority: A big player or technologically superior enterprise may be better able to acquire, integrate and use the best possible technology in producing its goods while entrants either do not have the expertise or are unable to meet the large fixed costs of research needed for the most efficient technology. Therefore, any large company can often produce goods cheaper than several small companies. No substitute goods: Anenterprise can have monopoly a good for which there is no close substitute. The absence of substitutes makes the demand for that good relatively inelastic, enabling monopoly to extract positive profits. Legal barriers: Legal rights such as intellectual property rights (IPR) including patens and copy rights can provide a monopolist exclusive control of the production and selling of certain goods. Property rights on certain natural resources may give a company exclusive control of the materials necessary to produce a good. Manipulation: A company may monopolize a market may engage in various types of deliberate action to exclude competitors or eliminate competition. Such actions include collusion, lobbying governmental authorities, force and illegal agreement to barriers to entry and competition. Even agreement, practices and alignment between the competing enterprises or between any enterprises and service facilitators or clients for preventing competition may create anti-competitive situation. In the RAOWA-Iqbalossain case, there was a collusion and illegal agreement. All the organizations in business regulation and action the concern parties should adopt or follow national competition law and policy of the land to discourage anticompetitive business conduct, with the objective of promoting economic efficiency and consumer welfare, and shall take appropriate action with respect to such conduct. Any agreement or action to process of price fixing based on the natural progress of competition in the market through fixing, increasing or decreasing prices, or other conditions of sale and purchase including international trade are not lawful. Such an anti-competitive agreement between businesses to fix prices or to carve up markets doesn't permit in any Competition law. It also makes it illegal for companies to abuse a dominant market position. In this situation consumers can end up paying higher prices or having reduced choice of goods or services as a result of such agreements. The type of agreements that are illegal can involve two or more businesses colluding between themselves, or the actions of a single business or person or unilateral conduct. Coordinated conduct includes: (1) Agreements that substantially lessen competition in a market, (2) Agreements that exclude or limit dealings with a rival, (3) Agreements that fix, maintain or control prices. The unilateral conduct includes: (1) A person or business taking advantage of their dominant position in a market for an anti-competitive purpose, (2) A person or business specifying a minimum price at which its goods or services can be sold by another - this is called resale price maintenance.
Any establishment which has a dominating situation in the market or in a significant part thereof shall be prohibited to abuse, by its own or in conjunction with other establishments, this situation in order to limit possible accessibility to the market, to breach competition, limit or prevent it, which has or might have harmful effects on the market. Bangladesh can uphold the prestige and image with the action of CC and this will give a positive message to local and overseas investors. The writer is a legal economist. mssiddiqui2035@gmail.com