Fair Trading Commission is on the Job
Fair Trading Commission is on the Job
Eight years after the passage of legislation in 2006 aimed at curbing anti-competitive practices, four commissioners of the Fair Trading Commission (FTC) received their instruments of appointment from Vasant Bharath, Trade, Industry, Investment and Communication Minister.
The commission is chaired by retired High Court judge Amrika Tiwary-Reddy. She, along with the other commissioners—retired Republic Bank economist, Ronald Ramkissoon, economics lecturer Anne Marie Mohammed and executive director Bevan Narinesingh—received their official appointments in July 2014. According to the Fair Trading Act, between three and five commissioners can be appointed.
The FTC is an independent statutory body which is responsible for administering and implementing the Fair Trading Act.
Since the appointment of a chair and commissioners, the FTC has been in the process of recruiting staff, acquiring equipment and finding an independent home, said Narinesingh, an attorney, who previously worked at the Caricom Secretariat. Although the commission has received many resumes, it has selected staff but they are not officially employees yet since the FTC does not have a home. Narinesingh is the lone employee for the meanwhile and has to wait until the remaining staff are officially employed at the FTC so he can make submissions for competitive salaries.
The FTC is currently housed on the 12th Floor in the Ministry of Trade, Nicholas Tower, but not on the same floor as Minister Bharath. This is on Independence Square, Port-of-Spain.
Its main purposes:
- To promote and maintain effective competition throughout the economy, and to ensure that competition is not distorted, restricted or prevented.
- Ensure that all legitimate business enterprises have an equal opportunity to participate in the economy
- Prevent anti-competitive conduct and maintain and encourage free and fair competition in business
The Fair Trading Act was passed in 2006 because the Government, at the time, recognised the danger of anti-competitive practices. Although the legislation was in existence, it took eight years for commissioners to be appointed, which left the path clear for wrongdoers to engage in anti-competitive practices.
Anti-competitive practices include business or government practices that prevent, restrict or distort competition in the market. The result will likely be higher prices, lower quality of products, poor service, lower output and less innovation. These practices make it more difficult for smaller firms to either survive or subsequently enter the market.
Anti-competitive practice can occur if the leaders of a group of businesses belonging to the same sector, meet to fix a price or engage in anti-competitive practice such as: collusion, price-fixing, bid-rigging and boycotts.
Now that commissioners are in place, Tiwary-Reddy is confident she can take on the task of chairing the Fair Trading Commission (FTC) even though parts of the act have not been proclaimed.
Narinesingh explained the parts of the legislation that have not been proclaimed:
- Part I which deals with preliminary matters;
- Part III which deals with examination and approving of proposed mergers and the investigation into anti-competitive agreements and monopolies;
- Part VII which deals with the jurisdiction of the Court to deal with decisions of the commission including appeals from a High Court decisions and;
- Part IX which deals with miscellaneous and general matters.
Narinesingh said: “Once we are properly established with a more permanent location and with properly trained staff we will request that the President proclaim the remaining parts of the act still to be proclaimed.”
“When the full act is proclaimed, we can carry out investigations. We have to keep the minister advised on competition matters and what’s going on in the economy. We have to make available to businesses and the general public, information with respect to their rights and obligations. Then we have to undertake studies, publicise reports,” said Tiwary-Reddy.
But before any work can begin, there is need for the FTC to find headquarters which are independent of the Ministry of Trade so the public can feel comfortable to file any complaints or queries.
Investigators, a corporate secretary and other staff members are some of the items on the commission’s check list to be officially employed at the FTC. Generally, she said, the FTC’s work involves implementing the fundamentals of economics and law.
Referring to fines/penalties, Tiwary-Reddy said the board does not have the power to impose fines but can take the accused to court. She added that the ground work must first be done in order for a “case to be made out” against the accused then it goes to court.
“The court, which is the High court, would be able to adjudicate. We would have to do the ground work to make out a case for doing it. That is not available yet as the law is not yet passed to give the High Court the power.”
She said the decision to take the matter to court lies with the commission. However, if the accused does not agree with that decision they can go to court to contest that decision.
“The court can review a decision made by the commission at the request of any party. For instance, somebody has come to complain to you, and you found that there wasn’t any evidence to support it, you chose not to go to court. If that aggrieved party chooses to go to court and challenge your decision, they can do it. The court can review the decision of the commission for deferment under another section.”
There are 192 fair trading commissions globally, said Tiwary-Reddy. Looking at the UK version, known as the Office of Fair Trading (OFT), in 2002 and 2003 it accused nine companies of collusion to rig the price of cheese and milk, the UK-based Guardian reported. The scandal cost consumers about £270m. The accused supermarket chains were Tesco, Asda, Sainsbury’s and Safeway.
The accused dairy processors were: Arla, Dairy Crest, McLelland, the Cheese company and Wiseman. The accused companies Sainsbury’s and Asda are among companies that have agreed to pay the Treasury near-record fines of more than £116m after admitting that they fixed the price of milk, cheese and butter.
Each received lenient fines after admitting liability, but Tesco denied that it colluded with the other companies and threatened legal action and questioned the OFT’s role in imposing fines.
The OFT had said its decision to impose fines would send a clear message to businesses engaging in anti-competitive practices to halt their wrongdoing, therefore its role was an important one.
Since July, the FTA has also been networking and meeting stakeholders, making presentations about its work to associations and groups. It is also the newest member of the International Competition Network (ICN) which is the global think tank in the area of competition law and policy.
Mergers and acquisitions
Referring to mergers and acquisitions, Narinesingh said: “Part III of the act deals with mergers and acquisitions. We are also in the process of preparing merger guidelines based on a Caricom model which we expect will give greater guidance with respect to the merger approval process.
If that part of the act were to be proclaimed, companies merging would be required to register with the FTC, Tiwary Reddy said.
“Under Section 14, all anti-competitive mergers are prohibited. Enterprises should not enter into a merger unless they obtain permission from the commission where their assets exceed $50 million or where one of the enterprises carries on or intends to carry on business in T&T.”
There is power in the act to make regulations as well.
“At this stage we don’t have the regulations in place, it would have to be done by the Parliamentary people.”
The FTC has the power to deal with issues such as:
- The abuse of monopoly power
- Anti-competitive mergers
- Anti-competitive agreements
- The enforcement of relevant clauses or enforcements measures
Narinesingh said with market liberalisation there is the possibility of anti-competitive behaviour, therefore it is imperative that a FTC be established. Narinesingh said T&T has joined the international Fair Trading network which means it can get advice and expertise on the way forward.
Businesses that do not fall under the purview of the FTC include:
- telecommunication sectors
- Regulated Industries Commission
Businesses which come under the FTC’s watch are:
- Retail stores
- Agriculture sector
- Hotel industry
- Health sector (private)
Doing industry studies are key in terms of understanding a market, as well as the commission can determine which parts of the sector which are anti-competitive, Narinesingh said.
“If owners of private healthcare institutions, maybe six of them, meet somewhere and decide we control the market and we can charge $100,000 for a surgery and we are not going under that, if anybody goes under $100,000 we would take you out of the market. This is like a cartel.”
He said it does not mean that every business within that same sector must have one price. “This would be a way to ensure that everyone has better quality services at better prices to ensure fairness and competitiveness.”
Narinesingh added that when a free market works, the true costs of something is reflected by demand and supply. “We are trying to get a market closer to perfect competition, you won’t have that, but at least it is closer to that possibility.”
Poor conduct is another area that falls under the duties of the commission.
“We are here to outlaw anti-competitive behaviour which is detrimental to the consumer or the economy on the whole.”
Poor conduct defined by Narinesingh occurs when a business does not promote efficiency and the business is operating in a manner where they are creating barriers to entry, resulting in smaller businesses getting pushed out of the market or not being attracted to the market. Behaviour such as under pricing of goods so the competitor would not be able to enter the market is one example of Poor conduct.
Global competitive index
Narinesingh believes that T&T can get a better score now that the FTC is in place since international assessment agencies look at matrices as well as whether there is a competition agency in place.
“One of the reasons we were put in place is to help attract foreign direct investment because investors would know there is an independent competition agency. If there are issues about business practices by competitors, they would want to ensure that they are properly established in a country and has a level playing field.”
He also said the FTC would be working with the Caricom Competition Commission in Suriname to deal with cross-border issues that may arise. The legislation that entity uses is the Caricom Treaty.
About the Caricom Competition Commission:
The CCC was inaugurated on January 18, 2008. It was established by Article 171 of the Revised Treaty of Chaguaramas. It is one of the institutions in support of the Caricom Single Market and Economy. The CCC is headquartered in Suriname.
The functions of the CCC:
- apply the rules of competition in respect of anti-competitive cross-border business conduct;
- promote and protect competition in the Community and co-ordinate the implementation of the Community Competition Policy; and
- perform any other function conferred on it by any competent body of the community
Section 174-177 outlines the powers of the CCC which include:
“Subject to Articles 175 and 176, the Commission may, in respect of cross-border transactions or transactions with cross-border effects, monitor, investigate, detect, make determinations or take action to inhibit and penalise enterprises whose business conduct prejudices trade or prevents, restricts or distorts competition within the CSME.
The commission may, in accordance with applicable national laws, in the conduct of its investigations
Concerning consumers, the CCC has the following powers:
- Article 186: Action by the commission to provide support in the promotion of consumer welfare and protection of consumer interests
(according to http://www.caricomcompetitioncommission.com/en/)