-Madhab Raj Ghimire
Nepal has got Competition Act, which is welcoming step for competitors to a decade long open market development. Despite efforts of this Act, there is very weak doctrine has been set-up by the Government to create puppet Competition Promotion and Market Protection Board.
Introducing the Competition Board to promote the market is better step itself but imposing the law without preparation just to imitate from the international documentation cannot guarantee the fair, transparent and non-discriminatory market practice.
Being the economic background of Competition law, it is always directed to protect the consumer. But here again, to ensure fair market price with affordable cost and to leave space for marginal price, this authority has not shown enough positive result on the consumer side. Generally, Competition law assumes productive, allocative and dynamic efficiency. But, these efficiencies have not been working out here in our experience.
On the other hand, Act has been failed to allocate and differentiate of product and geographical market. In competition, it really makes difference to define the market. So that market share calculated. Without these basic concepts, this Act will fail completely to remark antitrust activities into competitive market.
We are experiencing market monopoly by the certain companies especially in electricity distribution, Fossil fuel supply and Media sector. Some media sectors have got license to cover all to be dominant player into the market. Normally, it is not good sign for the competitive market. This might cross-subsidized the product one to another to drive out competitors from the market. To these serious factors, our bureaucratic and political mind has not been working on to reduce future negativity in market.
However, there are other sectors as well where government (Competition Authority!) needs to regulate our market. Here again, we have weakest competition authority, whereas, Act has created for political appointment to those officials from different Ministries to fill the vacate seat in the board. If we look at to the Act’s articles, there are some clarifications within- ‘GoN can discharge the appointee failing to satisfy the conditions.’ This condition can abuse not only institution but also serious blow to the independency of the Regulatory Authority. Thus, there need to be clear without independent authority the rights of consumer cannot be guaranteed at all.
All sectors are living in state impunity. We have other mismanaged laws as well; those never come to consideration. GoN never draft our legislation gradually. Some of legislation imitated on haste manner to meet the standard of international phenomena. Before forming the Competition Board, they’re supposed to remove the exclusive right from the all the sector except from national defense, research project and service of general economic interest contents. Similarly, they’re supposed to introduce the directives to establish the regulatory framework. In some cases, sector specific regulation has been introduced; for example, the directives for the electricity generation have been working effectively. Similar manner, there should be more sector specific regulation to other sectors to liberalize the market so that competition in the market will be ease.
Our authority has not been alerted on the case of margin squeezes by the so called large companies. We have been to the witness in banking sector and our authority is completely neglecting negative consequences margin squeezes by the incumbents where they are making hard to the new entrants to newly opened markets. These unnamed companies are trying to drive out newly entrants from the financial markets. On these anti-competitive practices neither Authority nor relevant institution has been aware of this mis-conduct of large companies. These practices have to put under control by the financial sanction or heavy fine to those companies.
Another major question of “Syndicate” (queuing system) in the public service operators, there are some interest groups for the consumers are trying to feed wrong message of the entrepreneurs. In fact, we have private sector those are taking all responsibility to operate the public service vehicle with bearing of state responsibility. There are just few of economist has been given close eye to factual profit for the entrepreneurs. Thus, just blaming the private investment who is bearing the responsibility of the state job cannot be a just solution. And also, it does not help to inject money to private sector. So, we need to find the solution; if government wants to take the responsibility to bear loss of public transport investment, gives back total loss and gives nominal profit to transport entrepreneurs than public service operators has to give the state to regulate transport system on efficient and competitive manner. Even though, state should not make complete competition in sector, this could bring chaos. Thus, route franchising transport system could resolve current crisis.
Similarly, in past in major festival season, we felt that there was complete and clear cartel on the importing the meat to the Kathmandu. On the name of poultry association and transport entrepreneurs were in bid rigging importing meat to Kathmandu valley. This type of oligopoly has completely broken the norms of competitive practice in Nepalese market. Consumers realized that there are artificial scarcity of meat and other basic needs of festivals. But, we found that our Competition Promotion and Market Protection Board did nothing rather than relaxing the news of cartel case. This anti-competition impunity does not help to authority to achieve the competitive market with better product and lower price.
This article is not favoring for the ‘cut throat competition’ in the market. But we are very concerned on the consumer side, small market players as well as new entrants of competitive market. Nepal is now facing merger control phenomena too but other side anti-competitive practice; cartel, bid rigging, bundling, collusion or strategic behavior of selling below cost could affect our fragile market into the future. However, recently proposed regulatory commission for the energy has given little hope for future that there will be more sector specific regulation to solve all anti-competitive behavior.
mrghimire@hotmail.com Network Regulation Specialist/LLM in Competition Law and Economics
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