World Competition Day: December 4, 2012, 6:32 pm
Impact of cartels on the poor
"Our competitors are our friends, our customers are the enemy" is an actual statement made by an executive of Archer Daniel Midland, in the famous case of the lysine (a feed additive) cartel, which was caught on videotape by the FBI. As the international competition community once again gears up to observe the third World Competition Day on 5th of December this year (dedicated to the theme, Impact of Cartels on the Poor), there is a need to reflect on measures to protect consumers from cartels, and sharpen such measures to the extent possible.
Cartels are capable of affecting directly the daily life of the poorest of the society and in undermining the efforts of government to provide comprehensive social security to this section of society.Cartels steal billions of dollars from businesses, taxpayers and ultimately from consumers. For example, there had been cases of price-fixing and other types of collusion between certain business entities in the basic foods industry of South Africa. Bread cartel uncovered by the Competition Commission of South Africa increased the price of basic bread by 35 cents, slashed the discount of distributors from 90 to 75 cents and refused any alternatives to them. The penalty imposed on the accused brands amounted to an approximate 10% of their national turnover for bread operations for the 2006 financial year. Further, the milk cartel had fixed prices indirectly by co-ordinating the removal of surplus milk from the market, while fixing the price of UHT milk and allocating geographic areas in which they would not compete in selling. The price of raw milk paid to farmers has dropped to its lowest level in 40 years. The Commission further found that corporations had exchanged sensitive information on procurement prices of raw milk in various ways.
Small economies are also not immune to the pernicious effects of price fixing conspiracies and other anti-competitive practices. A cement cartel that was in operation in Sri Lanka and ripping-off consumers was highlighted in a publication brought out by the Institute of Policy Studies of Sri Lanka (IPS), Law and Society Trust (LST), and Consumer Unity and Trust Society (CUTS) in 2003. This study also highlighted prevalent anti-competitive activities in the pharmaceuticals and shipping industries. The importance of effective competition policy for Sri Lanka has been highlighted in another study by the same three organizations titled: "Towards a New Competition Law in Sri Lanka" brought out in 2002 and more recent work of the IPS (http://www.ips.lk/percr/publications.html). The two critical problems in Sri Lanka are the lack of a pro-active competition authority combined with the absence of active consumer interest groups.
The culture of competition is quite weak in many countries and consumers have limited understanding about the harmful effects of cartels. Thus, the World Competition Day (WCD) allows a scope for greater discussions and dissemination of the beneficial effects of competition on the average consumer – either directly or indirectly. In effect, it is expected to result in greater public understanding and support on the need to crack down cartels.
The 5th of December 1980, saw the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices (UN Set), being adopted by the UN General Assembly at its thirty?fifth meeting on 5 December, 1980. It is therefore important that the 5th of December be remembered and commemorated each year as a World Competition Day. To reach out to the common man with the message, ‘Say No to Cartels’, various stakeholders such as competition agencies, Civil Society Organizations (CSOs), development organizations and individuals around the world are planning to organize seminars/roadshows, publish newspaper articles/press releases, press conference, etc to celebrate the ‘World Competition Day’ with the purpose of creating awareness about the importance and benefit of competition by curbing Cartels.
The cause has been supported in the form of a letter to UNCTAD towards formal adoption of the day by many countries (Competition Agencies) viz: Namibia, Zimbabwe, Pakistan, The Gambia, Fiji; Russia, Zambia and United Kingdom; and many more countries are in the process to send formal letter to UNCTAD.
Recently, the Philippines Government passed a proclamation declaring 05th December, as the National Competition Day to give due recognition to the CUTS Campaign on WCD (http://www.gov.ph/2012/05/18/proclamation-no-384-s-2012/).
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Last Updated Jul 24 2016 | 09:04 pm