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Tinashe Makichi Business Reporter
The Common Market for East and Southern Africa plans to introduce a competition policy to curb uncompetitive behaviour among multinational companies within the region.
In most cases national competition authorities have been facing challenges in curbing multinational anti-competitive behaviours given jurisdictional and practical limitations of their enforcement powers.
However, COMESA identified the challenge and is of the view that implementation of a competition policy enables companies to compete fairly with each other while encouraging enterprise and efficiency.
A competition policy is a rule applied to make sure businesses and companies compete fairly with each other. This rule encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality.
COMESA Competition Commission chief executive Mr George Lipimile last Friday said COMESA plans to introduce a collective competition policy that will encourage fair trade in the region. He said a solid competition framework provides a catalyst to increase productivity as it generates the right incentives to attract investors.
“A strong competition policy can be an effective tool to promote social inclusion and reduce inequalities as it tends to open up more affordable options for consumers, acting as an automatic stabiliser for prices. Competition promotes innovation as firms facing competitive rivals innovate more than monopolies.
“The purpose of competition law is to facilitate competitive markets, so as to promote economic efficiency, thereby generate lower prices, increase choice and economic growth and thus enhance the welfare of the general community. To achieve this goal competition law must be enforced effectively,” said Mr Lipimile.
He said the globalisation of the economy has impacted on the work of competition authorities and the impact of anti-competitive behaviour often goes beyond national borders, in particular in the case of international cartels.
Mr Lipimile said the absence of a competition policy created cartels in the fertiliser, bread and construction industries.
“Mergers and transactions often have an international dimension and produce effects in various markets. Recent examples include the acquisition of Game Stores by Wal-Mart, Lafarge in cement sector, Illovo Sugar; South African Breweries in the beer sector among others,” said Mr Lipimile.
COMESA Competition Commission manager for mergers and acquisitions Mr Willard Mwemba said merger regulation in the common market is an important aspect in ensuring that the single market agenda is realised.
He said one of the ways in which a single market is realised is through the elimination of barriers to trade like the traditional tariff and non-tariff barriers to trade.
Mr Mwemba said if certain mergers are left unchecked, they can create more barriers to trade than those already dismantled through the trade policy.
“In many emerging economies, domestic markets are dominated by a few players where entry is difficult and costly. Laws and regulations may distort market competition, encouraging the existence of cartels and monopolies.
“Sector specific constraints created by government policies limit entry or affect firms’ capacity to compete in specific markets. Ineffective enforcement of competition rules allow for poor and anticompetitive business practices.
“As a result, local markets do not develop fully and firms are less competitive than their foreign rivals and less likely to compete globally,” said Mr Mwemba.
He said effective competition policies aim to foster economic welfare by applying a set of market rules that guarantee a level playing field for all businesses.
A successful implementation of competition policy results in the elimination of anti-competitive regulation and unnecessary barriers to competition imposed by government policies.
Online Reporter