Press Campaign 2nd WCD (2011)

Les avantages de la libre concurrence expliques aux medias

Togo-Presse-N 8679-du, December 08, 2011

On World Competition Day, attention shifts to laws against cartels

The Guardian Nigeria, December 08, 2011

AS Nigeria battles the known and unknown cartels holding the nation’s oil sector to ransom, the need to formulate laws to effectively deal with unwholesome ganging-up against public interest in the country and across the world is the focus of this year’s World Competition Day being marked this week.

Consequently, the Consumers Empowerment Organisation of Nigeria (CEON), in collaboration with CUTS International and other members of the International Network of Civil Society Organisations on Competition (INCSOC) are calling on African countries to strengthen alliance with consumer protection organisations and other relevant stakeholders, in order to release economies from cartels.

They are also calling on consumers to unite and refuse to be exploited henceforth.

This year’s day is premised on the theme: Cartels and their harmful effects on consumer.

A statement from CEON yesterday, emphasised the need to reflect on measures to protect consumers from cartels, and sharpen such measures to any extent possible.

CEON said: “The measures to protect consumers would not only shake-up entities that have flagrantly practised exploitative practices, but would also bring the average consumer closer to the process of competition reforms in developing countries. “Cartels result from the action of firms that are nominally competitors agreeing to coordinate their price and output decisions, or to limit the geographic markets they will supply, so as to reduce or eliminate competition between them. Where competition laws exist, cartels are illegal.

“There is need to appreciate that consumers in different countries are affected differently by cartels depending on the extent to which their economies have put institutions in place to protect them against such cartels.

The December 5 World Competition Day celebration is in response to a proposal made by the International Network of Civil Society Organizations on Competition (INCSOC) at the sixth UN’s Review Conference on the Set on Competition Policy to celebrate fifth December as the World Competition Day. This year’s events should allow stakeholders to say out loud ‘No More’ to the perpetrators of cartel activities.”

Calling attention to the non-existence of strong laws to deal with such cartels, the group also observed that for many products, the elasticity of demand is very low, which gives cartels an opportunity to raise prices and gain more revenue.

CEON’s Coordinator-General, Adedeji Babatunde said: “ Evidences from the ground shows that Africa is extremely prone to cartels. An earlier study by Evenett, Jenny and Meler in 2006 revealed that 87 cases of cartels, representing about 34 per cent of all the anticompetitive practice cases, were reported in different newspapers in Sub-Saharan Africa during the period 1995-2001. The number increased to 102 during the period 2002 to 2004.

“It is not difficult to understand why the Africa continent is prone to cartels. Firstly, firms have realised that there is a low possibility of being punished when engaged in cartel activities, given that even in countries with a competition law, in the unlikely event that they succeed in cartel-busting, sanctions are not too prohibitive. Cease and desist orders and fines that are often lower than profits from cartelisation cannot act as deterrents. “Secondly, the probability of getting caught is very low given the absence of competition laws or limited provisions thereof.”

He added: “Many markets are highly concentrated due to both behavioural and structural factors and this is often aided by vested interest, resulting in higher prices due to limited options for consumers.

“Fourthly, consumers in Africa rarely possess the bargaining buyer power needed to force suppliers to take them seriously. Consumers are seldom united here, like in other parts of the developing world, which makes it difficult for them to fight against perpetrators of cartels.

“The prevalence of cartels in Africa is also a cause of concern from the development and poverty alleviation perspective. The most critical sectors of the economy, such as agriculture, health and transport are not spared, leaving consumers with no option but to pay large amounts of money for these essential goods and services.”

According to him, “For Countries without competition laws, consumer protection organisations need to raise their advocacy and team-up with the media and other relevant stakeholders to spread the word.”

“Consumers have long been victims of exploitative practices of firms and it is time to say ‘no more’ to cartel! The time is now! Consumers deserve better treatment and fair deal in the market place.”

This news item can also be viewed at: http://www.guardiannewsngr.com/

CUTS promotes second World Competition Day

Global Competition Review, December 07, 2011

Members of the antitrust community from several countries observed the second World Competition Day on Monday, an initiative promoted by Indian-based pro-competition group CUTS International.

This year CUTS identified cartels as the target of World Competition Day. The organisation gathered support among competition authorities around the world to raise awareness about the harmful effects of cartels on consumers.

Rijit Sengupta, CUTS regional director for Africa, says: “Like other international days, the world competition day would help garner public support in favour of competitive markets, which in turn would have positive impacts on the countries. This is particularly important in case of developing countries, which have to deal with considerable challenges that impede the process of competition reforms.”

Antitrust enforcers from countries including Armenia, Namibia, Zimbabwe, Pakistan, Russia, and the UK expressed their support for the event. Sengupta says CUTS is working to submit the proposal of a World Competition Day to the general assembly of the United Nations.

“Some competition agencies have already shown support for this day, and we hope that others join in at the earliest,” he says.

Samir Gandhi, at Economic Laws Practice in New Delhi, says the initiative may be a positive step to highlight the role of healthy competition and competition regulation in the emerging markets of South Asia.

“Competition awareness programmes should be ongoing efforts to engage with regulators, the corporate sector and consumers,” he says. “They should be based on a balanced, effects-based analysis to address market distortions that have crept into the system in many south Asian economies.”

Gandhi adds that South Asian countries are increasingly realising the importance of competition authorities, as regulatory barriers and foreign investment limits are being dismantled.

“The creation of the Indian Competition Commission as well as the Competition Commission of Pakistan in the last decade is a clear indication of this,” he says.

But Manas Kumar Chaudhuri, at Khaitan & Co in New Delhi, says awareness about competition law in India is “negligible” and more efforts should be made to inform people about the importance of competition.

“The average consumers in India have not one iota of information about this law in spite of tall claims being made in selected public fora about competition advocacy and public awareness campaigns by some of the stakeholders,” he says. “The outputs of competition advocacy seminars, both national and international, have not seen the light of the day beyond the air-conditioned rooms of seminar halls and cosy hotel meeting rooms.”

Chaudhuri adds that the Indian Competition Commission’s role is crucial in this respect.

He says: “Consistent robust judgments and other decisions of the authority can play a major role in creating awareness, but that too seems a far-fetched reality at present in India.”

This news item can also be viewed at: http://www.globalcompetitionreview.com/

World Competition Day says no to cartels

The Independent, Bangladesh, 06 December 2011

The second World Competition Day was observed on Monday across the world with the theme ‘Cartels and their harmful effects on consumer’, says a press release. There is a need to reflect on measures to protect consumers from cartels, and sharpen such measures to the extent possible, it stated. Cartels steal billions of dollars from businesses, taxpayers and ultimately from consumers.

For example, the Lysine cartel increased prices by 70 percent in the first six months of its existence and the six cartels in the vitamins, citric acid, bromine, seamless steel tubes, graphite electrodes and lysine industries resulted in overcharges of US$1.71bn, $67mn, $8mn, $1.19bn, $975mn and $43mn, respectively.

However, 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 allows a scope for greater discussions and dissemination of the beneficial effects of competition on the average consumers – either directly or indirectly. In effect, it is expected to result in greater public understanding and support on the need to crack down cartels.

To ensure that consumers from across the world realise the potential benefits from an effectively implemented competition regime and also play their role in making competition regimes work worldwide, it is critical that focus on competition policy and law issues at an international level be strengthened. This can be achieved through the adoption of World Competition Day.

International days are observed in various areas of governance to focus attention of the society to burning and vital issues. Such observances in the developing world are always very helpful to accelerate the agenda.

“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.

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 December 5, 1980. It is therefore important that the fifth of December be remembered and commemorated each year as a World Competition Day.

This news item can also be viewed at:
http://theindependentbd.com/
http://www.newstoday.com.bd/
http://www.unbconnect.com/

Competition day: say no to cartels

The Monitor, December 06, 2011

By Gideon Nkala

A few weeks ago during a radio interview on DUMA fm I almost created a stir, when discussing the mandate of the Competition Authority I said the Authority is charged with the responsibility to identify and stop cartel behaviour in Botswana’s business space.
“Is the word ‘cartel’ really appropriate? Surely in Botswana we have not descended to that level,” protested the radio presenter who was obviously taken aback and unnerved by the use of a word he found a misnomer in Botswana’s business environment.

Today, December 5, Non-Governmental Organistations across the globe are celebrating World Competition Day under the theme,” harmful effects of cartels on consumers”.This day coincides with the day the United Nations General Assembly passed the UN set of principles and rules on competition.

To many of us the mention of a ‘cartel ‘transports us to the Box Office realities where we visualise the Colombian, Mexican and other South American drug cartels that infiltrate, paralyse law enforcement through callous and corrupt means imaginable and visit violence upon anyone who stands in their way.

Cartels whether in drugs or in any other industry are motivated by greed and the desire to reduce competition. Without competition, cartels steal and rob from the public or consumers. Some studies say the median price index achieved by cartels over a long period could be as high as 25 percent. Differently put, in an area where the market is dominated by cartels there is a high likelihood that the public could be losing up to 25 percent. Considering that this is only a median ,the overcharges burden could be much higher and this has grave consequences for the poor.

Adam Smith is credited with an observation that I find very apt on this occasion. Smith found it intriguing that businesses trading in the same market seldom have any merriment to share between themselves. The rivalry and boundary wall, Adam observed, collapses when the intention is to conspire against the public, often in contrivance to raise prices against the public. Competition literature is replete with instances where competing business firms collude to enter into an agreement to fix prices, rig tenders, allocate markets in order to maximise profits. This is what is characterised as cartel conduct.

Competition regulators are often girded with commensurate legal armour to weed out any cartel behaviour. In pursuit of this goal, identifying and breaking up of cartels is critical.

During the radio discussion alluded to above, the radio journalist wanted to know whether there is cartel activity in Botswana.

Without any empirical finding by the Competition Authority it would be misleading to say otherwise. Suffice to add that the Botswana government had commissioned an economic mapping survey conducted by Botswana Institute for Development Policy Analysis (BIDPA) which study informed the Competition policy of 2005. This study identified market dominance in sectors such as meat industry, cement, sugar, beverages, mining and motor vehicle distribution. The survey opined that firms in these sectors enjoy substantial market power. It might be helpful to consider that studies generally conclude that cartels predominately occur where there are a limited number of firms trading in the same or fairly homogenous products.

Every year the public and consumers lose billions of dollars to business cartels and this cannot be allowed to go on. This year, we in Botswana should add our voice to the global clarion call against harmful effects of cartels.

On the occasion to mark Competition Day, we urge Batswana to help amplify the benefits of open markets while at the same time highlighting the harmful effects of the anti-competitive conduct. In the era of economic recession, budget cuts and austerity measures the cartel overcharges burden should stick out like a sore thumb.

We at the Competition Authority urge Batswana to be vigilant against cartels. Most importantly, we implore civil society, media, prosecutors and legislators to take a tough stance that will lead to the deterrence of cartels. In other jurisdictions civil societies groups are calling upon legislators to impose stiffer penalities on cartel conduct.

Fortunately for us in Botswana, the government has domesticated the UN set, SADC/SACU anti-competitive principles through the enactment of the the Competition Act of 2009. The act explicitly forbids price fixing (indirect or direct), dividing markets by allocating customers, suppliers or regions, bid rigging, production restraints, collective denial to market entry

*Gideon Nkala is the Director of Communications and Advocacy at the Competition Authority

This news item can also be viewed at: http://www.mmegi.bw/

Clarion call to enforce competition law

Republica, December 06, 2011

Even though the government enacted competition law some five years ago, experts and consumers´ rights activists on Monday lamented over lack of implementation of the law and flayed the government for not being able to deliver desired benefits to both consumers and industries.

Interestingly, even senior government officials supposed to enforce the Competition Promotion and Market Protection Act (CPMPA) themselves expressed their helplessness in fighting cartel, syndicates and other forms of anti-competitive practices running deep in the market.

“The influence and nexus of business community with political leaderships runs deep. In such a situation, political costs and risks becomes too heavy for us to take action against the anti-competition forces,” said Lekh Raj Bhatta, Minister for Commerce and Supplies.

Speaking at a program organized to mark World Competition Day, Minister Bhatta admitted that cartels and syndicate present in almost all businesses were preying on general consumers´ rights and eroding level-playing field for genuine businessmen. “Sadly, we still have not been able to do anything even as it is causing heavy costs on the economy,” he stated.

Experts, on the other hand, demanded that the government bolster state´s presence in the market to correct the anomalies in the market.

They also pushed for the formation of an autonomous and resourceful Competition Board, a separate institution, to foster fair competition in the market.

“The Competition Board presently envisaged in the Act depends on government for resources and also the appointment of senior officials. In such a situation, we do not expect it to work strongly for upholding norms of competition,” said Dr Dhrubesh Chandra Regmi, program director of South Asia Watch on Trade Economics and Environment.

Tika Ram Bhandari, director of Department of Commerce, presently entrusted to enforce the CPMPA opined that the government should amend the Act, set up a separate institution to implement it and provide more teeth to the market inspectors if it wishes the Act to be implemented effectively.

He also sought changes in Firms Registration Act that presently restricts the government from scrapping the firms once they are registered.

This news item can also be viewed at: http://www.myrepublica.com/

Today is world competition day

The Free Press, December 05, 2011

Competition watchdogs across the world will celebrate World Competition Day on Dec 5 and the theme this year is ‘cartels and their harmful effects on consumers’. Countries including Armenia, Namibia, Zimbabwe, Pakistan, Gambia, Fiji, Russia, Zambia and United Kingdom have already expressed their support for the World Competition Day.

“Aberration in production, prices and availability of goods and services, particularly in the prevailing inflationary environment has prompted a renewed discourse on the possibility of cartels in sectors such as drugs, tyre, milk, film production and distribution, cement, sugar etc,” said Consumer Unity & Trust Society ( CUTS) – a nonprofit organisation working on consumer protection issues.

Cartels are a type of restrictive trade where players in the same business connive to raise prices, distribute customers or restrict the supply/ availability of products in the market.

This news item can also be viewed at: http://www.freepressjournal.in/

5th December – World Competition Day

FAS, December 05, 2011

On 5th December 1980, at the 35th session the UN General Assembly adopted the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices.

That is why it is so important to remember and mark the World Competition Day on 5th December.

Russia, the UK, Namibia, Zimbabwe, Pakistan, Gambia, Fiji and Zambia have already asked UNCTAD to make this an official day in their countries.

This news item can also be viewed at:
http://en.fas.gov.ru/

Dec 5 is world competition day

SME Times News Bureau, December 05, 2011

Competition watchdogs across the world will celebrate World Competition Day on Dec 5 and the theme this year is ‘cartels and their harmful effects on consumers’.

Countries including Armenia, Namibia, Zimbabwe, Pakistan, Gambia, Fiji, Russia, Zambia and United Kingdom have already expressed their support for the World Competition Day.

“There is enough evidence to suggest that cartels exist in various sectors in the country, and public concerns have also been raised on a number of occasions against them,” said Consumer Unity & Trust Society (CUTS) — a non-profit organisation working on consumer protection issues.

Cartels are a type of restrictive trade where players in the same business connive to raise prices, distribute customers or restrict the supply/availability of products in the market.

“Aberration in production, prices and availability of goods and services, particularly in the prevailing inflationary environment has prompted a renewed discourse on the possibility of cartels in sectors such as drugs, tyre, milk, film production and distribution, cement, sugar etc,” the organisation added

This news item can also be viewed at: http://www.smetimes.in/

Set up recall system to protect consumers: Fomca

Bernama, Malaysia, December 05, 2011

A recall system should be set up to protect consumers from manufacturer defects and mistakes.

The chief executive officer of the Federation of Malaysian Consumers Associations (Fomca), Datuk Paul Selva Raj, said the system’s function will be to recall spoiled products and goods bought by consumers.

“After the withdrawal of a product, the manufacturer or seller responsible should replace the product or pay compensation.”We do not want consumers to bear losses for the mistakes of the producers,” he told reporters at a media conference held in conjunction with World Competition Day here on Monday.

Paul said the system should become part of regulations, so that enforcement can be carried out to ensure the interest of consumers are protected.

“It would be good if producers or companies voluntarily take responsibility for the problem by providing compensation, otherwise enforcement by law is needed,” he said.

He said there are not many producers or sellers who are willing to compensate consumers for faulty products. Paul said he hoped the Competition Act 2010 would be enforced on Jan 1 to create a freer and more competitive market among producers and sellers.

“When there is competition, consumers benefit from lower prices, higher quality of goods, and more choices,” he said. He said industries that should focus on creating a freer market include food, pharmaceutical, airline, publication and communications industries. – Bernama

This news item can also be viewed at:
http://thestar.com.my/
http://www.bernama.com.my/
http://broadcast.my/
http://www.theborneopost.com/
http://my.news.yahoo.com/

Monday is World Competition Day

IANS, December 05, 2011

Competition watchdogs across the world will celebrate World Competition Day on Dec 5 and the theme this year is ‘cartels and their harmful effects on consumers’.

Countries including Armenia, Namibia, Zimbabwe, Pakistan, Gambia, Fiji, Russia, Zambia and United Kingdom have already expressed their support for the World Competition Day.

‘There is enough evidence to suggest that cartels exist in various sectors in the country, and public concerns have also been raised on a number of occasions against them,’ said Consumer Unity & Trust Society (CUTS) — a non-profit organisation working on consumer protection issues.

Cartels are a type of restrictive trade where players in the same business connive to raise prices, distribute customers or restrict the supply/availability of products in the market.

‘Aberration in production, prices and availability of goods and services, particularly in the prevailing inflationary environment has prompted a renewed discourse on the possibility of cartels in sectors such as drugs, tyre, milk, film production and distribution, cement, sugar etc,’ the organisation added.

This news item can also be viewed at:
http://in.finance.yahoo.com/
http://news.in.msn.com/
http://www.southasianews.com/
http://www.daijiworld.com/
http://www.newkerala.com/
http://www.thaindian.com/
http://www.boloji.com/
http://news.webindia123.com/
http://news.smashits.com/
http://www.newsleaks.in/
http://www.indiatalkies.com/
http://www.india-forums.com/
http://www.keralanext.com/
http://www.inamibia.co.na/
http://www.up2datenews.com/

Consumers united

The Kathmandu Post, Nepal, December 06, 2011

Consumers unite and say ‘no more’ to being exploited by cartels

Financial Express, Bangladesh, December 05, 2011

Saying “no more” to cartels

The News, Pakistan, December 04, 2011

Consumers unite against exploitation by cartels

l’ express Weekly [Friday 2 December 2011 • Insert N° 4 L’EXPRESS YOURSELF]

By Pradeep S Mehta

Calls are being made for developing countries across the world to strengthen their competition law enforcement processes to deal with cartelisation

“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 second World Competition Day on 5th of December this year dedicated to the theme, “Cartels and their harmful effects on consumer”, there is a need to reflect on measures to protect consumers from cartels, and sharpen such measures to the extent possible.

This would not only shake up entities that have flagrantly engaged in exploitative practices, but would also bring the average consumer closer to the process of competition reforms in the developing world.

There is need to appreciate that consumers in different countries are affected differently by cartels depending on the extent to which their economies have put institutions in place to protect them against such cartels. The World Competition Day (in response to a global call by CUTS) for this second year allows a scope for greater discussions and dissemination of the beneficial effects of competition on the average consumers — either directly or indirectly.

In effect, it is expected to result in greater public understanding and support on the issue. This year’s events should allow stakeholders to say out loud ‘No More’ to the perpetrators of cartel activities. This article urges countries, competition agencies to stand up and protect their consumers against the harmful effects of cartels.

Indications on the ground show that developing countries are very prone to cartels, because they often lack effective competition regimes. For example, the latest news is the cartelisation is in the cement sector. In India, recently the real estate developers body National Real Estate Development Council has approached the Competition Commission of India (CCI) seeking intervention against alleged cement cartelisation hitting real estate developers. One has to wait and watch how the same is handled by CCI.

In other jurisdictions too, the cement manufacturers association have been penalised along with the colluding firms. For example, the Pakistan Competition Commission imposed a fine of about $77 million on 20 cement companies found guilty of operating as a cartel and raising prices under mutual agreement. Actions were also taken by the Egyptian Competition Commission in order to break cartel activity by referring twenty executives from Egyptian cement firms to a criminal court for conspiring to fix prices.

Across the globe, cartel activities are being penalised. Record fines of more than $1.00bn have been levied by the UK, US and other competition authorities on airlines on cargo freight. There are other airlines too, such as Korean Airlines, etc. British Airlines is also facing action under the EU laws and other jurisdictions. Furthermore, the affected consumers in the US have also filed for class action damages against BA.

It is not difficult to understand why the developing countries are more prone to cartels. Firstly, firms have realised that there is a low possibility of being punished from being involved in cartel activities, given that even in countries with a competition law, sanctions are not too prohibitive. Cease and desist orders and fines that are often lower than profits from cartelisation cannot act as effective deterrents. Secondly, the probability of getting caught is very low in many other countries, given the absence of competition laws in them or limited provisions thereof.

We have been advocating for an International Competition Fund to be created out of fines levied by developed country authorities on international cartels, which have an impact on developing countries. For example, the global air cargo cartels have affected many developing countries but have not been prosecuted in any developing country, mainly because of a lack of capacity. Such a fund can be used to build capacity of competition agencies and advocacy groups in the developing world to be able to do better and more in arresting the malaise.

For many products, the elasticity of demand is very low, which gives cartels an opportunity to raise prices and gain more revenue. Many markets are highly concentrated due to both behavioural and structural factors and this is often aided by vested interest, resulting in higher prices due to limited options for consumers. Fourthly, consumers in developing countries rarely possess the bargaining buyer power needed to force suppliers to take them seriously. Consumers are seldom united, like in other parts of the developing world, which makes it difficult for them to fight against perpetrators of cartels.

Furthermore, across many developing countries, the business associations that have been formed across many sectors provide a platform for producers to meet and discuss viability strategies. Although these associations are prohibited from discussing pricing or common business arrangements in order to prevent cartels, their discussions are rarely monitored by competition authorities or other watchdogs. However, there are exceptions, in 2010 the Competition Commission of Pakistan (CCP) imposed a penalty of 50 million Pakistani rupees on the Pakistan Poultry Association for alleged cartelisation in the chicken and egg markets and also imposed a penalty of 23 million Pakistani rupees on the Pakistan Jute Mills Association and its ten-member mills on the charges of cartelised behaviour and other malpractices.

The prevalence of cartels in developing countries is also a cause of concern from the development and poverty alleviation perspective. The most critical sectors of the economy, such as food, health and transport are not spared, leaving consumers with no option but to pay large amounts of money for scarce goods and services.

It is within this context that calls are being made for developing countries across the world, through the World Competition Day, to strengthen their competition law enforcement processes to effectively deal with cartelisation. In countries without a competition law, consumer organisations need to team-up with parliamentarians, media and policy makers to spread the word around. Consumers have long being victims of exploitative practices of firms — and let’s say ‘No more’ this December 5th!

The writer is Secretary General, CUTS International

This article can also be viewed at:
http://www.ekantipur.com/
http://www.thefinancialexpress-bd.com/
http://jang.com.pk/
l’ express Weekly [Friday 2 December 2011 • Insert N° 4 L’EXPRESS YOURSELF]

AAI Calls for Increased Cartel Penalties in Honor of World Competition Day

AAI, November 30, 2011

The American Antitrust Institute (AAI) will be honoring World Competition Day on December 5, 2011 by highlighting cartels’ harmful effects on consumers and calling for the U.S. government to set penalties at a level to more optimally deter cartels. We urge the media, antitrust agencies at all levels, elected officials, and consumer organizations to take formal public notice of World Competition Day.

World Competition Day was founded by non-governmental organizations around the globe as an occasion to propagate the benefits of competitive markets and harmful effects of anticompetitive behavior to citizens, internationally. The theme of this year’s event is the harmful effects of cartels on consumers. Recognition of the economic impact of cartel overcharges is especially important at a time of governmental budget cutting, where reduced public expenditures on antitrust enforcement could be severely counterproductive.

Private cartels fix prices, rig bids, or divide customers or markets to cause harm to consumers by causing them to pay monopoly overcharges. Such collusive behavior is felonious and can also give rise to private actions to recover treble damages. An AAI study found that in the United States $9 to $30 billion was returned to victims of cartels through private enforcement since 1990. As long as cartelizing companies and their decision-making employees can profit as they do, even after detection, governmental prosecution, and private treble damage awards, they will continue to cause huge harm to consumers.

The AAI is calling on the U.S. government to work to increase corporate penalties and improve employment practices to help deter cartels. The AAI proposes five important steps to raise the existing levels of sanctions so that they are more nearly optimal.

1. Congress should enact a law adding prejudgment interest to both private treble damage actions and criminal fines.

2. The U.S. Sentencing Commission should double its mistaken presumption that cartels raise price by an average of only 10 percent.

3. The Department of Justice Antitrust Division (DOJ) could change its administrative practice of recommending fine discounts from the bottom of the Sentencing Guidelines’ range and start instead from the middle or top of the range.

4. The DOJ should, as part of it settlement negotiations, require corporations never to hire as officers, directors, or consultants persons convicted of antitrust felonies.

5. The DOJ should require corporations not to indemnify culpable employees for the criminal fines imposed against them as individuals or the costs of their legal defense, if convicted.

A paper with empirical data and detailing the five recommendations is available here.

This news item can also be viewed at: http://www.antitrustinstitute.org/

Harmful impacts of cartels on consumers

The Daily Star, November 27, 2011

By Munshi Abdul Ahad

A cartel is an anti-competitive arrangement between two or more competing businesses. Anticompetitive agreements, particularly cartels, harm consumers in urbanised society, as well as in the emerging countries. In adding together, cartelised industrial sectors lack competition which certainly reduces competitiveness in the long run and may have a negative impact on the overall performance of a country’s economy. Widespread shapes of cartels conduct are: price fixing, market sharing, bid rigging and output control.

Price fixing take places when competing businesses make an agreement that has the purpose or effect of fixing, controlling or maintaining the price of goods or services prices. This may be in the form of agreed selling or buying; agreed minimum prices; agreed formula for pricing or discounting goods and services; agreed rebates, and allowances or credit terms.Such agreements may be in writing but are often informal and verbal.

Market sharing refers to agreements between competitors that split up the market so that the participants are privileged from competition.Such agreements include allocating customers by geographic area; dividing contracts within an area; agreeing not to compete for established customers; agreeing not to produce each other’s products or services; and agreeing not to expand into a competitor’s market.

The key is that competitors agree among themselves how the market will operate, rather than allowing competitive market forces to work.

Bid rigging comes about where two or more competitors agree they will not compete genuinely with each other for particular tenders, allowing one of the participants in the agreement to win the tender. Collusive tendering is a dangerous form of anti-competitive behaviour, some of the more common bid rigging tactics:

Cover bidding — competing businesses choose a winner while the others deliberately bid over an agreed amount, which ensures the selected bidder has the lowest tender and also helps to establish the illusion that the lowest bid is indeed competitive.

Bid suppression — a business agrees not to tender, thus ensuring that the pre-agreed participant will win the contract.Bid withdrawal — a business withdraws its winning bid so that a competitor will be successful instead.

Bid rotation — competitors agree to take turns at winning business, while monitoring their market shares to ensure they all have a predetermined slice of the pie.

Non-conforming bids — businesses deliberately include terms and conditions that they know will not be acceptable to the purchasers, ensuring that they will not win the bid and that the pre-agreed business will be successful.

Output controls, decided on between companies, can occur in the form of production or sales quota arrangements that involve an agreement between competitors to limit the volume of particular goods or services available on the market; they have the effect of inflating prices in the market. Output restrictions occur when the participants in an industry agree to prevent, restrict or limit supply. The purpose is to create scarcity in order to increase prices (or counter falling prices) while also protecting inefficient suppliers.

Community, consumers, businesses and even governments can be forced to pay higher prices for goods and services. Cartels also distort economic markets, and serve to slow innovation — after all, companies charging abnormal prices have little incentive to spend money on research and development.

The “fighting of cartels” is given a high priority all over the world. Cartels that damage the interests of consumers are a very serious form of economic crime. However, identifying, detecting and proving cartels are a difficult task that requires a combination of law and economic competencies.

Market economy and free trade promote growth and prosperity in structured market. There is a need of co-operation over the frontiers in order to achieve more effective functioning of markets.

There are, however, different views on how cartels could be defined and detected and on what instruments competition authorities should use to fight cartels that are detrimental to consumers. Serious anti-competitive practices are, almost by definition, kept behind locked doors. Competition authorities have different ways and means to collect the necessary evidence that could bring these harmful practices to an end.

Globalisation, the rapid development in the field of information technology, electronic commerce and the so-called new economy are all current phenomena that bring about new challenges for companies as well as for competition authorities.

Bangladesh is going to enact an act styled “Competition Policy and Law”. The objective of competition law and policy is to eliminate such anticompetitive practices, including cartels, thereby enhancing consumer welfare and contributing to country’s competitiveness.

CUTS International (Consumer Unity & Trust Society) India is working to protect the interest of consumers and fashioning the awareness building against the cartelist activities.

CUTS International called 5th December 2011 “World Competition Day (WCD) with theme “cartels and its harmful effects on the consumers.”

CUTS considers that an agenda to discipline cartels would provide multiple benefits both to the agency/government and consumers. Cartels steal billions of dollars from businesses, taxpayers and ultimately from consumers. Consumers benefit from competition through lower prices and better choice and quality products and services.

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