Finally, a competition (anti-trust) law ?

By Joseph AKYEAMPONG Esq

News about the impending passage of a Competition Law for Ghana by the Minister of Industries, Agribusiness and Trade, Mrs Elizabeth Ofosu-Agyare at the Government Accountability Series last week at the Jubilee House gladdened the hearts of many enthusiasts of competition and consumer protection laws for Ghana. This is for the regulation of unfair business practices arising out of abuse of dominant position, unfair trade practices like price fixing, bid-rigging, creation of cartels aimed at market manipulation etc. It is however important to mention the existence of a “Protection Against Unfair Competition Act 2000”, Act 589.

Overview of Control of Dominant Position in Ghana

Despite the formal absence of a competition or anti-trust law in Ghana to regulate dominant companies in manufacturing and service delivery against possible abuse to rip off customers, Ghana has not stood aloof in this direction. In the mid-1990s, in response to the escalation in prices by utility companies, the government at the time established the Public Utilities Regulatory Commission (PURC) with the mandate to fix prices for the consumption of utilities being water and electricity.

As part of its mandate, the PURC was also to ensure service quality and ensure that the prices charged by the utility companies were justified in terms of service quality and delivery. It must be recalled that at the time, there was agitation for the commission to also have the mandate to regulate companies which had a monopolistic or oligopolistic position in the provision of goods and services in terms of price fixing.

Mention could be made of the then Ghana Telecom which had a monopoly over the provision of telecommunication services, Ghana Posts which had a monopoly over the provision of postal and courier services and Ghana Cement Company (GHACEM) which had a monopoly over the supply of cement with its two factories located in Tema and Takoradi being the only cement factories in the country at the time.

There were allegations at the time against GHACEM for fixing prices unilaterally and making profits way above normal. The government also subsequently established the Postal and Courier Services Regulatory Commission (PCSRC) to regulate postal and courier services.

What is Competition or Anti-Trust Law?

Competition or anti- trust law is regulation by the government of the market place to ensure that markets are not distorted by dominant companies, be they monopolies, oligopolies or even cartels so as to create market imperfections. The rationale for competition or anti-trust law is that, there should be efficient allocation of resources in the economy.

It is deemed by proponents of competition law that when firms are left on their own to operate freely and determine their own conduct, they are likely to distort the market by creating monopolies, cartels and likely collude among themselves to fix prices which is profitable for them and detrimental to society.

The proper regulation of markets through competition law is generally held by its proponents as aimed at benefiting consumers with the prevalence of lower prices, elimination of inferior goods and encouragement of innovative practices in production and service delivery. The United States is regarded as the originator of competition or anti-trust law. In 1890, the US Congress passed the first competition or anti-trust law, the Sherman Act which sought to constrain competitive behaviour in the US. Section 1 of the law states as follows:

‘‘Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states, or with foreign nations is hereby declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony.’’

Section 2 of the Act also states as follows that:

‘‘Every person who shall monopolise, or attempt to monopolise or combine or conspire with any other person or persons to monopolise any part of the trade or commerce among several states or with foreign nations shall be deemed guilty of felony.’’

It is said that the Sherman Act was passed to combat the power of the ‘‘trusts’’. The purpose of the anti-trust laws leading to the passage of the Sherman Act was to stop the practice of owners of stocks which were held in competing companies to transfer the stocks to trustees. The trustees controlled the activities of the competing companies and thus lessened competition among the companies.

This then led to the law being called anti-trust law in the US or competition law in Europe. Competition law actually has the effect of preventing the concentration of economic power in one or a few companies, regulation of excessive profits and the fairer distribution of wealth thus resulting in the efficient allocation of resources in an economy.

Several EU countries and the EU have also promulgated competition laws which are aimed at outlawing anti-competitive practices and outlaw the abuse of dominant positions. Korea also has the Korea Monopoly Regulation and Fair Trade Act while Japan has the Japanese Anti-Monopoly Law. South Africa also has the Competition Act of 1998 with a powerful Competition Commission.

Other notable countries in Africa with competition and consumer protection laws include Kenya, Egypt, Zambia, Mauritius, Tanzania, Tunisia, Cote d’Ivoire and Morocco. It is a matter of commendation and excitement that little Gambia with a not so significant and sophisticated economy has promulgated the Gambia Competition Act and the Consumer Protection Act of 2007 and 2014 respectively with the establishment of the Gambia Competition and Consumer Protection Commission (GCCPC) .

The State of Competition Law in Ghana

Although Ghana does not have a codified and comprehensive law on competition or anti-trust, nevertheless, it is not bereft of a semblance of competition law. In the Securities Industry Act of 1993, PNDCL 333, it is stated in section 9(h) that the Securities and Exchange Commission shall have the power to ‘‘review, approve and regulate takeovers, mergers, acquisitions of any forms of business combinations in accordance with the law or code of practice requiring it to do so.

Similarly, the Bank of Ghana Act, Act 612 also grants the Bank of Ghana power to approve any mergers and acquisitions in the banking industry. There is also LI 2491 which regulates pricing in the cement industry as well as an LI for fixing fees in other sectors like health services etc.

The obvious rationale for these pieces of legislation is to prevent a situation where a business entity or a combination of business entities as in cartels, monopolies or oligopolies might upset the market and create distortions that will ensure that they make abnormal profits to the detriment of the consumer or engage in other anti-competitive practices like bid-rigging, price fixing and other forms of market manipulation.

The Need for a Competition Law in Ghana

The upward swing of the Ghanaian economy is likely to see the generation of new businesses through merges and acquisitions. In the banking sector, there is the likelihood of further consolidation with the prospect of some banks not being able to comply with new capital requirements in the future which could lead to consolidation and acquisitions with the likelihood of some few banks achieving dominant positions through mergers and acquisitions.

It is significant to recall the acquisition by Ecobank Ghana Limited of the now defunct Trust Bank in 2012 which was the first acquisition in Ghanaian banking history with the statement of intention by Ecobank at the time of its intention to acquire a few more banks in the future. Other significant mergers have been Unilever and UAC, Kumasi Brewery and Achimota Brewery to form Ghana Breweries Limited. Quite recently, there has been the merger of two big insurance companies in Ghana being Sanlam and Allianz.

There is also simmering undertones about MTN, the telecommunications giant which has already been declared as a Significant Market Player (SMP) with the prospect of abusing its dominant position in the wake of the difficulties currently being experienced by the only two other existing telecoms companies, Telecel and Airtel Tigo.

The local aviation industry with only two players, Africa World Airlines (AWA) and Passion Air also give cause for concern about a possibility of a potential collusion on price fixing and such other market distortion situations. It is worthy of note that all these acquisitions and mergers which have occurred in Ghana have been passed off by the regulatory agencies as not giving rise to any concern.

The point must be made that even in America, which is considered as the originator of modern competition or anti-trust law, it took the European Union with Van Miert as the EU Competition Commissioner to exact some concessions from the Boeing / McDonnell Douglas merger in favour of Airbus when the merged entity, now Boeing entered into a contract with the three major US airlines, American, Delta and Continental Airlines to exclusively supply them planes for 20 years. This was considered by the EU Competition Commission to be disadvantageous to Airbus, its competitor in Europe.

Conclusion

Although Ghana has touted itself as the business magnet of Africa with the self proclaimed title, “The Gateway to Africa” it rather falls short of its credentials in the absence of having competition and consumer protection laws.

With the pronouncement by the current Minister of Trade, Agribusiness and Industry of the intention of the government to soon promulgate competition and consumer protection laws for Ghana, all enthusiasts in the consumer protection space will be waiting for the day that the passage of the two laws come to fruition.

The Minister is as well encouraged and admonished to proceed quickly with her efforts in having these important laws passed to cement Ghana’s place as a vibrant business and investment destination in Africa. No time should be wasted, particularly taking into account the laborious nature in passing legislation of such magnitude through stakeholder consultations, cabinet consideration and approval, introduction into parliament and the consideration and approval processes with the possible retreat by MPs to consider the bills etc.

Nevertheless, congratulations to the Minister for taking the step to concretise the passage of competition and consumer protection laws for Ghana. The Minister must as well also consider in addition, the passage of an Act to outlaw the charlatanic advertisement of consumer goods and even services.

The writer is a lawyer and the Principal of Akyeampong & Co, Corporate and International Business Attorneys with special focus practice in Commercial, Corporate, Banking, Finance, Insurance, International Business, International Trade, Intellectual Property and Mining Law.

Email:   [email protected]

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