Competition Regime in Ghana: Need of the Nation

1. Competition Regime in Ghana: Need of the Nation Appiah KusiAdomako& AbubakariZakari CUTS Accra, 5th November, Accra (Ghana)

2. Part I: Introduction to Competition & its Benefits • Part II: Promoting Competition Reforms in Ghana (COMPAD Project Findings)

3. Outline: Introduction to Competition & its Benefits • What is Competition? • Forms of Market Competition • Competition Regime & Competition Reforms • Benefits of Competition Reforms • Prevailing Anti-competitive tendencies in Ghana • Towards a Functional Competition Regime: Essential Steps

4. Trip down Memory Lane • GT Onetouch sim card cost more than GHC 300 cedis about 13 years ago • When GTV and GBC 1,2 were the only TV and radio station in the country • Antrack and Citylink dominated the domestic airline market • STC controlled the best of intercity routes • All these can be as results of development but I will call them as results of competition

5. 1. What is Competition? Competition Literary meaning: a contestable situation where people fight for superiority. In market economy, competition is a process whereby firms fight against each other for securing consumers for their products

6. 1. What is Competition? “Competition is a basic mechanism of the market economy and encourages companies to provide consumers products that consumers want. It encourages innovation, and pushes down prices. In order to be effective, competition needs suppliers who are independent of each other, each subject to the competitive pressure exerted by the others.” [European Commission (Year………)]

7. 3. Competition Regime Competition Regime = Competition Policy + Competition Law (1) Competition policy: Policy statement lays down Government commitment to promote competition across all sectors of an economy. Aims to remove policy distortions that affects competition in markets. (2) Competition law: Act that empowers a Competition Commission to curb anti-competitive practices (anti-competitive agreements, abuse of dominance, anti-competitive M&As) in an economy

8. Competition Law (National) Anti-Competitive Agreements Between Firms ( Collusion) Regulation of Mergers to Prevent Tactics to Gain Excessive Dominance in a Market Abuse of a Dominant Market Position Applies to: • Import cartels • Price fixing • Market sharing • Bid rigging • Limiting production • Refusal to buy or supply • Tie-in arrangements • Exclusive-dealing • Territorial allocation • Predatory pricing • Price discrimination • Excessive pricing • Abuse of intellectual property monopoly • Total unification of the companies involved • Buying of sufficient shares in a company so as to have a say in policy formulation

9. 4. Competition Reforms 3 Components of Competition Reforms: (1) Enabling government policies, promoting competition (2) Well designed and implemented regulatory frameworks (3) Effective enforcement of national competition law

10. 5. Benefits of Competition Reforms for Consumers • Best possible quality • Lowest possible price • Adequate supply • Number of options

11. 5. Benefits of Competition Reforms for Producers • Safeguard against practices by other businesses • Lower entry barriers to promote entrepreneurship and growth • Efficient allocation and utilisation of resources ensures efficiency and enhanced productivity • Enables cost savings by companies

12. 6. Prevailing Anti-competitive tendencies in Ghana • Ghacem still dominates the cement market • ECG controls end user electricity distribution • Vodafone Ghana controls the entire fixed line assets. Cap on broadband usage • Associations meet to fix prices promotes inefficiency • Merger and Acquisitions in the banking sector; ECOBANK becoming bigger • NHIA cannot be the referee (Regulator) and still run and manage (Service provider) the NHIS at the same time • Some firms meet secretly to fix prices SO, LACK OF COMPETITION REGIME IN GHANA AFFECTS CONSUMERS & PRODUCERS/BUSINESSES

13. 7. Towards a Functional Competition Regime in Ghana: Essential Steps 1. National Competition Policy 2. Adoption of a Competition Law (Ghana) 3. Legal inventorisation: Identification of Laws with provisions affecting competition in markets 4. Establishment of national Competition Authority

14. Outline - Promoting Competition Reforms in Ghana (COMPAD Project findings) • Introduction to COMPAD Project • Project Methodology • Study Findings (Producer Feedback & Consumer Feedback) • Emerging Recommendations

15. 1. Introduction to COMPAD project • Purpose of COMPAD project: develop body of evidence to advocate about need for a competition regime in Ghana • Outlines how functional competition regime can be helpful for government, consumers & producers • Identifies anti-competitive practices in key sectors • Analyses reactions of firms towards Competition issues • Analyses opinions and perceptions of ordinary consumers

16. 2. Project Methodology • Research based on both secondary data (literature review) & primary data (field work) Secondary research • Review of relevant literature on competition policy and law issues • Identified consumers and producers’ concerns and reactions • Mapping of stakeholders and data/information required Primary research • Based on field surveys: (i) Business firms & (ii) Consumers • Businesses: A sample of 50 firms was selected of which 31 responded • Consumers: A sample of 1166 consumers were surveyed

18. Profile of Consumers Surveyed Consumers targeted from Greater Accra and Ashanti regions

19. 3. Findings PRODUCERS/BUSINESS FEEDBACK • Many firms able to exploit consumers through high prices and controlled quantities for abnormal profits - as they face little or no competition even in key markets • High cost of capital in Ghana has been one of the limiting factors that prevent entry of firms in to market – thereby affect entrepreneurship and job-creation • Business membership organisations and Business Associations influence business behaviour and concerted practices (allowing members to discuss prices, qualities or quantities of goods and services) • Firms agree (through Associations) to control prices or exclude entry of new competitors in market

20. 3. Findings PRODUCERS/BUSINESS FEEDBACK • Firms react to competitive pressure in diverse ways: • Positive: increased investment in innovation, reduce costs, etc. • Negative: price undercutting, manipulation of supply, etc. • Firms feel a competition regime will help stabilise prices of goods and services to levels that generate economically efficient outcomes • Firms opine fair competition can contribute to innovation, productivity & growth if law appropriately enforced

21. 3. Findings CONSUMER FEEDBACK • Ghanaian consumers are much concerned about price, quantities and quality of goods and services of daily use • Consumers think that prices and quantities are not competitive in the markets • Consumers expect the competition regime would help them obtain variety of goods and services, consumer satisfaction and safety – thereby enhancing welfare gains

22. 4. Emerging Recommendations • There should be consultations with all stakeholders to ensure effective enforcement of the Competitive Act • Government must have a consultation with industry players regularly to contribute their views on evolution and implementation of the competition law • Enforcement should be independent of politics and bias • Government should address factors rendering high cost of production to enable them to operate efficiently in the markets • Ensure fair play in the sector and not to give advantage to government owned entities (competitive neutrality)

23. 4. Emerging Recommendations • The Act should allow for sanctioning for infringing its provisions • The Commission should work in close collaboration with relevant regulators and Government departments • Government must not allow firms to form of association, as often its driven solely by the urge to collude • Give considerable attention and visibility to the national Competition Agency

24. Thank You Appiah Kusi Adomako: apa@cuts.org Abubakari Zakari: abz@cuts.org