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Challenges of Challenges of Competition Reforms in Competition Reforms in

BangladeshBangladesh

Dr. Md. Mozibur RahmanDr. Md. Mozibur RahmanChairmanChairman

Bangladesh Tariff Commission Bangladesh Tariff Commission

Competition Policy and Competition Policy and LawLaw

• Competition policy refers to those Competition policy refers to those government measures that directly affect government measures that directly affect the behaviour of firms and structures of the the behaviour of firms and structures of the industry. industry.

• It is an integral part of economic policy, It is an integral part of economic policy, which may include several elements, such which may include several elements, such as trade liberalization, industrial, as trade liberalization, industrial, investment and privatization policiesinvestment and privatization policies

• The main objective of the competition The main objective of the competition policy is to preserve and promote policy is to preserve and promote competition to ensure efficient allocation of competition to ensure efficient allocation of resources in an economyresources in an economy

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Competition Regime in Competition Regime in BangladeshBangladesh

• Bangladesh started liberalizing & Bangladesh started liberalizing & deregulating trade regime in early 80s and deregulating trade regime in early 80s and progressively all sorts of government progressively all sorts of government controls have been withdrawn controls have been withdrawn

• Through all the activities regarding Through all the activities regarding liberalization & deregulation, open liberalization & deregulation, open competition has been encouraged among competition has been encouraged among private sector entrepreneurs private sector entrepreneurs

• Now, all business activities are being Now, all business activities are being operated and conducted by the private sectoroperated and conducted by the private sector

• Though liberalization & deregulation Though liberalization & deregulation encourages competition, these policies alone encourages competition, these policies alone do not guarantee fair competitiondo not guarantee fair competition

Contents of the Contents of the Competition LawCompetition Law

• The Competition Law contains 07 chapters and The Competition Law contains 07 chapters and 46 Articles46 Articles

• Chapter-I : Chapter-I : PreliminaryPreliminary• Chapter-II : Chapter-II : Bangladesh Competition Bangladesh Competition

Commission, etcCommission, etc• Chapter-III :Chapter-III : Anti-competitive agreements and Anti-competitive agreements and

abuse of dominant positionabuse of dominant position• Chapter-IV :Chapter-IV : Complain, Enquiry and Order, etcComplain, Enquiry and Order, etc• Chapter-V :Chapter-V : Penalties, Review and Appeal, etcPenalties, Review and Appeal, etc• Chapter-VI :Chapter-VI : Financial matters of the Financial matters of the

CommissionCommission• Chapter-VII :Chapter-VII : Miscellaneous Miscellaneous

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Salient Features of the Salient Features of the LawLaw

• Recently, the Competition Law has been passed Recently, the Competition Law has been passed by the National Parliament with the following by the National Parliament with the following objectives:objectives:

- To encourage, ensure and maintain - To encourage, ensure and maintain competitive environment competitive environment – To prevent, control or eliminate anti-To prevent, control or eliminate anti-

competitive agreements competitive agreements – To prevent abuse of dominant positions of To prevent abuse of dominant positions of

market powermarket power– To regulate unwanted combinationsTo regulate unwanted combinations– To establish a Competition Commission To establish a Competition Commission

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Application of the AgreementApplication of the Agreement

• Article-3 mentions that tArticle-3 mentions that this Law shall be his Law shall be applicable to all enterprises that are applicable to all enterprises that are engaged in providing goods and services engaged in providing goods and services for commercial purposesfor commercial purposes

• However, Article-4 allows following However, Article-4 allows following exemptions : exemptions :

– the Government may exempt any goods or the Government may exempt any goods or services from the operation of this Actservices from the operation of this Act

– sectors/sub-sectors of goods and services, sectors/sub-sectors of goods and services, not not opened for the private sectoropened for the private sector, , that are that are controlled by the Governmentcontrolled by the Government in the in the interests of safeguarding its sovereign interests of safeguarding its sovereign functions and national security shall remain functions and national security shall remain outside the purview of this Actoutside the purview of this Act

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Anti-competitive Anti-competitive agreementsagreements

• Anti-competitive agreements are Anti-competitive agreements are prohibited in the Competition Lawprohibited in the Competition Law

• Those agreements are anti-Those agreements are anti-competitive agreements, which :competitive agreements, which :– directly or indirectly determines directly or indirectly determines

purchase or sale prices purchase or sale prices – limits or controls production, supply, limits or controls production, supply,

markets markets – shares the market or source of shares the market or source of

production production – directly or indirectly results in bid directly or indirectly results in bid

rigging or collusive biddingrigging or collusive bidding

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Anti-competitive Anti-competitive agreementsagreements

• The following arrangements are also anti-competitiveThe following arrangements are also anti-competitive

tie-in arrangementtie-in arrangement – condition of purchasing other – condition of purchasing other goodsgoods

exclusive supply agreementexclusive supply agreement – restricting from – restricting from acquiring or dealing with any goods other than acquiring or dealing with any goods other than seller’sseller’s

exclusive distribution agreementexclusive distribution agreement – limiting, – limiting, restricting or withholding output or supplyrestricting or withholding output or supply

refusal to dealrefusal to deal – keeping buying or selling limited – keeping buying or selling limited to few to few

resale price maintenanceresale price maintenance – resale price is fixed by – resale price is fixed by the sellerthe seller

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Abuse of Dominant Abuse of Dominant PositionPosition

• According to the Law, no enterprise, deemed to be According to the Law, no enterprise, deemed to be considered dominant, shall abuse its dominant positions considered dominant, shall abuse its dominant positions in the marketin the market

• There shall be abuse of dominant position, under the There shall be abuse of dominant position, under the Law, if Law, if an enterprise- an enterprise-

(a) (a) directly or indirectly, imposes unfair or directly or indirectly, imposes unfair or discriminatory discriminatory – condition in purchase or sale of goods or service; orcondition in purchase or sale of goods or service; or– price in purchase or sale (including predatory price) price in purchase or sale (including predatory price)

of goods or serviceof goods or service

(b) (b) limits or restricts production of goods and serviceslimits or restricts production of goods and services

(c) (c) engages in practices that result in denial of access engages in practices that result in denial of access to to market, i.e. creating entry barriermarket, i.e. creating entry barrier

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CombinationCombination

• Combination having adverse effect on Combination having adverse effect on competition is prohibited in the Lawcompetition is prohibited in the Law

• Combination means-Combination means-–acquisition acquisition –acquisition of control acquisition of control –merger and amalgamation merger and amalgamation

• Detailed provisions on combination Detailed provisions on combination including inquiry procedures will be including inquiry procedures will be formulated later by the Commission formulated later by the Commission through regulationthrough regulation

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Competition CommissionCompetition Commission

• Under the Law, the Government will Under the Law, the Government will establish a commission named as establish a commission named as “Bangladesh Competition Commission”“Bangladesh Competition Commission”

• The Commission will be a statutory bodyThe Commission will be a statutory body• The Commission will be composed of one The Commission will be composed of one

Chairperson and not more than four Chairperson and not more than four Members Members

• Qualifications of Chairperson and Members is :Qualifications of Chairperson and Members is :– Minimum 15 years’ practical experience in Minimum 15 years’ practical experience in

economics, any market-related subject, public economics, any market-related subject, public administration, legal profession or in any other administration, legal profession or in any other subject necessary, in the consideration of the subject necessary, in the consideration of the government, for the Commission government, for the Commission

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Duties of the CommissionDuties of the Commission• Duties of the Commission shall be Duties of the Commission shall be

– To eliminate practices having adverse effect on To eliminate practices having adverse effect on competition competition

– To promote and sustain competition To promote and sustain competition – To protect the interests of consumersTo protect the interests of consumers– To ensure freedom of tradeTo ensure freedom of trade– To conduct inquiry/investigation, receipt of a To conduct inquiry/investigation, receipt of a

complaint, or on its own motion, all alleged anti-complaint, or on its own motion, all alleged anti-competitive practicescompetitive practices

– To conduct research on competitionTo conduct research on competition– To create awareness about competitionTo create awareness about competition– To work for development of competitionTo work for development of competition– To provide trainings on competition To provide trainings on competition

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Orders after InquiryOrders after Inquiry

• After inquiry if any anti-competitive After inquiry if any anti-competitive practice is detected, the Commission practice is detected, the Commission may pass following orders :may pass following orders :– To discontinue and not to commit such To discontinue and not to commit such

practicepractice– To impose penalty, not more than 10% of To impose penalty, not more than 10% of

the average turnover of previous three the average turnover of previous three yearsyears

– In case of cartel, for each party, penalty is In case of cartel, for each party, penalty is three times of the profit or 10% of the three times of the profit or 10% of the average turnover of the cartel for last three average turnover of the cartel for last three years, whichever is higher years, whichever is higher

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Orders…..Orders…..– In case of abuse of dominant In case of abuse of dominant

positions, to recommend to the positions, to recommend to the Government appropriate actions, Government appropriate actions, including division of the enterpriseincluding division of the enterprise

– In case of combination, In case of combination, •Approve the combination, if it has no Approve the combination, if it has no

adverse effect on competitionadverse effect on competition•Disapprove the combination, if it has, or Disapprove the combination, if it has, or

may have, adverse impact on competition may have, adverse impact on competition

Other Offenses under the Other Offenses under the LawLaw

• If any person violates any order/direction of If any person violates any order/direction of the Commission, it will be considered as the Commission, it will be considered as punishable offense and punishment for this punishable offense and punishment for this offense may up to 01 (one) year’s offense may up to 01 (one) year’s imprisonment imprisonment

• If any person protect authorized person to If any person protect authorized person to apply law, this will it will be considered as apply law, this will it will be considered as punishable offense and punishment for this punishable offense and punishment for this offense may up to 03 (three) year’s offense may up to 03 (three) year’s imprisonment imprisonment

• However, for trial of these kinds of offenses However, for trial of these kinds of offenses the Commission will need to file complaint in the Commission will need to file complaint in the court of First Class Magistratethe court of First Class Magistrate 15

Review and AppealReview and Appeal

• If any person aggrieved by any If any person aggrieved by any decision of the Commission, he may decision of the Commission, he may either apply to the Commission for either apply to the Commission for review or to the Government for review or to the Government for appealappeal

• If any person aggrieved by any If any person aggrieved by any decision of the Magistrate Court, he decision of the Magistrate Court, he may apply to the relevant Session may apply to the relevant Session Judge Court for appeal Judge Court for appeal

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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

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.

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.

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.

Challenges of the Competition Challenges of the Competition reform….reform….

• There are many challenges that will be There are many challenges that will be encountered in reforming the competition encountered in reforming the competition regime and also in proper implementation of regime and also in proper implementation of the competition law, which may be the competition law, which may be summarized as follows :summarized as follows :– Entities involved with anti-competitive activities Entities involved with anti-competitive activities

are very organized and powerful, which acts as a are very organized and powerful, which acts as a crucial challenge to implement any competition crucial challenge to implement any competition reform reform

– This kind of law and reform is very new to the This kind of law and reform is very new to the stakeholders and they are skeptical about the stakeholders and they are skeptical about the implications of the reform, particularly about the implications of the reform, particularly about the application of the newly enacted competition lawapplication of the newly enacted competition law21

Challenges of the Competition Challenges of the Competition ReformReform

– Establishment of an effective and efficient Establishment of an effective and efficient CommissionCommission

– Formulation of essential rules and Formulation of essential rules and regulations under the law regulations under the law

– The competition authority needs to be The competition authority needs to be independent from political interference.independent from political interference.

– Recruitment of professional manpower to Recruitment of professional manpower to make the Commission truly operationalmake the Commission truly operational

– Limited understanding of fair competition Limited understanding of fair competition principles from judgesprinciples from judges

– Lack of coordination and support among Lack of coordination and support among enforcersenforcers 22

Challenges of the Competition Challenges of the Competition ReformReform

– Resistance of business actors to apply Resistance of business actors to apply fair competition principlesfair competition principles

– It is difficult for the government to create It is difficult for the government to create alternative source of supply to meet total alternative source of supply to meet total demand of goods or services.demand of goods or services.

– Collaboration with other Laws and Collaboration with other Laws and PoliciesPolicies

– Raising awareness about the competition Raising awareness about the competition among the stakeholdersamong the stakeholders

– Understanding market dynamics properly Understanding market dynamics properly to identify anti-competitive activities is to identify anti-competitive activities is also a big challenge also a big challenge

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Thank YouThank You