Challenges of Competition Reforms in Bangladesh

1. Challenges of Competition Reforms in Bangladesh Dr. Md. MoziburRahman Chairman Bangladesh Tariff Commission

2. Competition Policy and Law • Competition policy refers to those government measures that directly affect the behaviour of firms and structures of the industry. • It is an integral part of economic policy, which may include several elements, such as trade liberalization, industrial, investment and privatization policies • The main objective of the competition policy is to preserve and promote competition to ensure efficient allocation of resources in an economy

3. Competition Regime in Bangladesh • Bangladesh started liberalizing & deregulating trade regime in early 80s and progressively all sorts of government controls have been withdrawn • Through all the activities regarding liberalization & deregulation, open competition has been encouraged among private sector entrepreneurs • Now, all business activities are being operated and conducted by the private sector • Though liberalization & deregulation encourages competition, these policies alone do not guarantee fair competition

4. Contents of the Competition Law • The Competition Law contains 07 chapters and 46 Articles • Chapter-I : Preliminary • Chapter-II : Bangladesh Competition Commission, etc • Chapter-III : Anti-competitive agreements and abuse of dominant position • Chapter-IV : Complain, Enquiry and Order, etc • Chapter-V : Penalties, Review and Appeal, etc • Chapter-VI : Financial matters of the Commission • Chapter-VII : Miscellaneous

5. Salient Features of the Law • Recently, the Competition Law has been passed by the National Parliament with the following objectives: - To encourage, ensure and maintain competitive environment • To prevent, control or eliminate anti-competitive agreements • To prevent abuse of dominant positions of market power • To regulate unwanted combinations • To establish a Competition Commission

6. Application of the Agreement • Article-3 mentions that this Law shall be applicable to all enterprises that are engaged in providing goods and services for commercial purposes • However, Article-4 allows following exemptions : • the Government may exempt any goods or services from the operation of this Act • sectors/sub-sectors of goods and services, not opened for the private sector, that are controlled by the Government in the interests of safeguarding its sovereign functions and national security shall remain outside the purview of this Act

7. Anti-competitive agreements • Anti-competitive agreements are prohibited in the Competition Law • Those agreements are anti-competitive agreements, which : • directly or indirectly determines purchase or sale prices • limits or controls production, supply, markets • shares the market or source of production • directly or indirectly results in bid rigging or collusive bidding

8. Anti-competitive agreements • The following arrangements are also anti-competitive • tie-in arrangement – condition of purchasing other goods • exclusive supply agreement – restricting from acquiring or dealing with any goods other than seller’s • exclusive distribution agreement – limiting, restricting or withholding output or supply • refusal to deal – keeping buying or selling limited to few • resale price maintenance – resale price is fixed by the seller

9. Abuse of Dominant Position • According to the Law, no enterprise, deemed to be considered dominant, shall abuse its dominant positions in the market • There shall be abuse of dominant position, under the Law, if an enterprise- (a) directly or indirectly, imposes unfair or discriminatory • condition in purchase or sale of goods or service; or • price in purchase or sale (including predatory price) of goods or service (b) limits or restricts production of goods and services (c) engages in practices that result in denial of access to market, i.e. creating entry barrier

10. Combination • Combination having adverse effect on competition is prohibited in the Law • Combination means- • acquisition • acquisition of control • merger and amalgamation • Detailed provisions on combination including inquiry procedures will be formulated later by the Commission through regulation

11. Competition Commission • Under the Law, the Government will establish a commission named as “Bangladesh Competition Commission” • The Commission will be a statutory body • The Commission will be composed of one Chairperson and not more than four Members • Qualifications of Chairperson and Members is : • Minimum 15 years’ practical experience in economics, any market-related subject, public administration, legal profession or in any other subject necessary, in the consideration of the government, for the Commission

12. Duties of the Commission • Duties of the Commission shall be • To eliminate practices having adverse effect on competition • To promote and sustain competition • To protect the interests of consumers • To ensure freedom of trade • To conduct inquiry/investigation, receipt of a complaint, or on its own motion, all alleged anti-competitive practices • To conduct research on competition • To create awareness about competition • To work for development of competition • To provide trainings on competition

13. Orders after Inquiry • After inquiry if any anti-competitive practice is detected, the Commission may pass following orders : • To discontinue and not to commit such practice • To impose penalty, not more than 10% of the average turnover of previous three years • In case of cartel, for each party, penalty is three times of the profit or 10% of the average turnover of the cartel for last three years, whichever is higher

14. Orders….. • In case of abuse of dominant positions, to recommend to the Government appropriate actions, including division of the enterprise • In case of combination, • Approve the combination, if it has no adverse effect on competition • Disapprove the combination, if it has, or may have, adverse impact on competition

15. Other Offenses under the Law If any person violates any order/direction of the Commission, it will be considered as punishable offense and punishment for this offense may up to 01 (one) year’s imprisonment If any person protect authorized person to apply law, this will it will be considered as punishable offense and punishment for this offense may up to 03 (three) year’s imprisonment However, for trial of these kinds of offenses the Commission will need to file complaint in the court of First Class Magistrate

16. Review and Appeal If any person aggrieved by any decision of the Commission, he may either apply to the Commission for review or to the Government for appeal If any person aggrieved by any decision of the Magistrate Court, he may apply to the relevant Session Judge Court for appeal

17. Experiences of Implementing Competition Policies in other Countries • Thailand - Thai Trade Competition Act of 1999 established Trade Competition Commission (TCC) - TCC is vulnerable to political intervention - Conflict-of-interest

18. Experiences of Implementing Competition Policies in other Countries • Indonesia - Commission for Supervision of Business Competition was established under Law Number 5/1999 - Limited human resources, limited authority of KPPU’s investigators to enforce law, limited understanding of fair competition principles from judges, lack of coordination and support among enforcers, and resistance of business actors to apply fair competition principles.

19. Experiences of Implementing Competition Policies in other Countries • Pakistan - Competition Commission of Pakistan was established on 2 October 2007 under the Competition Ordinance 2007 - In February 2010, the Competition Commission of Pakistan (CCP) fined the state-owned Pakistan Steel Mills Rs. 25 million for abusing its dominant position in the low carbon steel market, an action which showed that it was not afraid to take on even the state if it was on the wrong side of the law.

20. Competition Challenges in WTO regime • In January 1997, the WTO established a working group on the interaction between trade and competition policy to explore the linkages and see whether a multilateral agreement on competition could be incorporated in the WTO. • Trade and competition policy was taken off from the negotiating agenda of WTO in 2004 due to opposition by developing countries.

21. Challenges of the Competition reform…. • There are many challenges that will be encountered in reforming the competition regime and also in proper implementation of the competition law, which may be summarized as follows : • Entities involved with anti-competitive activities are very organized and powerful, which acts as a crucial challenge to implement any competition reform • This kind of law and reform is very new to the stakeholders and they are skeptical about the implications of the reform, particularly about the application of the newly enacted competition law

22. Challenges of the Competition Reform • Establishment of an effective and efficient Commission • Formulation of essential rules and regulations under the law • The competition authority needs to be independent from political interference. • Recruitment of professional manpower to make the Commission truly operational • Limited understanding of fair competition principles from judges • Lack of coordination and support among enforcers

23. Challenges of the Competition Reform • Resistance of business actors to apply fair competition principles • It is difficult for the government to create alternative source of supply to meet total demand of goods or services. • Collaboration with other Laws and Policies • Raising awareness about the competition among the stakeholders • Understanding market dynamics properly to identify anti-competitive activities is also a big challenge

24. Thank You