Comesa begins crackdown on rogue companies

Saturday September 14 2019

fake goods

Kenyan authorities destroy contraband goods. However, most competition laws within the Comesa region are not being enforced. FILE PHOTO | NMG 

JAMES ANYANZWA
By JAMES ANYANZWA
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The Common Market for Eastern Africa Competition Commission has opened investigations into firms operating in the 19-member economic bloc, which exploit consumers to make super profits.

The EastAfrican has learnt that pharmaceutical and construction companies are targeted in the initial phase of investigation on production of fake goods, price fixing and cartel-like behaviour. The investigations are expected to be completed by December .

The next phase of investigations, which starts in January 2020, targets firms in the banking, telecommunications, dairy, beverages and water sectors.

It is estimated that countries without effective competition laws lose one per cent of their gross domestic product annually from reduced production and investments.

According to the regional competition watchdog, trading malpractices among firms operating within the Common Market for Eastern and Southern Africa member states have seen prices of certain goods and services inflated by between 25 and 30 per cent by unscrupulous traders.

Price fixing

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The products highly susceptible to price fixing are white rice, white sugar, frozen chicken, bread, butter, flour, milk, potatoes, eggs and chocolate.

According to the Commission the retail prices of 10 key consumer goods are on average at least 24 per cent higher in African cities than in other economies around the world even after factoring in transportation and other input costs.

“In some sectors such as banks, collusion behaviours by a few dominant firms have produced significant costs for local consumers raising prices above the international levels,” said George Lipimile, CCC’s chief executive.

According to the commission, collusion and cartel-like behaviour in various sectors of the economy are largely brought about by firms which cannot compete at both national and regional levels.

As a result, the commission is collaborating with national competition authorities and ministries of trade of member states to gather information on firms suspected to be involved in trading malpractices with sanctions including financial penalties amounting to 10 per cent of each firm’s annual turnover.

“We are currently screening various sectors, which have prioritised to identify the anti-competitive practices such as price fixing and collusion tendencies,” said Stellah Onyancha, CCC’s manager in-charge of enforcement and exemptions.

Competition laws

Although all Comesa member states save Somalia, Libya and Eritrea have competition laws in place the enforcement of these legislations in several countries has been hampered by lack of capacity and political will.

“Competition laws are meant to protect and promote the competitive process so as to promote economic efficiency in terms of low prices and increased consumer choices.

However, most competition laws within the Comesa region are not being enforced. Most competition laws are just gathering dusts on shelves,” said Mr Lipimile.

Within the East African Community member states the competition Authority, which started operations last year said it was also investigating firms and trade associations engaged in trade malpractices and exploitation of consumers through price fixing.

It is also undertaking sector studies to inform the competitiveness of the regional economy.

It is argued that East Africa’s competitiveness as an investment destination is at risk from the rising incidence of unfair trade practices among firms operating across the region.

Firms operating across the region engage in exclusive agreements, and form cartels, forcing consumers to pay relatively higher prices for goods and services.

In South Africa the Competition Commission recovered close to $20 million after reaching a settlement with a Japanese company Kawasaki Kisen Kaisha Ltd (K Line) in a price-fixing case against them last year (2018).

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