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‘Tariff Commission no toothless bulldog’

What role does the Competition and Tariff Commission (CTC) play in the economy? Has the CTC scored any success since inception? Our reporter Leonard Makombe (LM) talked to CTC director, Alexander Kububa (AK), on these issues.

LM: What is the mandate of the Competition and Tariff Commission and which Act of Parliament or any other piece of legislation operationalises this body?

AK: The Competition and Tariff Commission is a statutory body established under the Competition Act [Chapter 14:28] to regulate competition and to give advisory opinions on trade tariffs matters.  It is a product of the merger in 2001 of the former Industry and Trade Competition Commission (ITCC), which had come into operation in 1998 under the Competition Act, 1996 (No7 of 1996), and the Tariff Commission (TC), which also came into operation in 1998 under the Tariff Commission Act [Chapter 14:29]. 

LM: Where does CTC get its funding? Is it enough? What other avenues are you looking at for funding?

AK: The Commission is a non-commercial statutory body that gives regulatory and advisory services on government policies.  As such, its main source of funding is government.  This source of funding is not adequate for the full undertaking of the commission’s operations given the financial constraints being faced by the government.  The Commission however has other sources of funding, which are specific to operations. These are merger notification fees, which are specifically for the defrayment of the costs incurred in examining mergers and acquisitions, and funds raised from the trade development surcharge, which are used in the promotion of the export trade of Zimbabwe and which it shares with Zimtrade. The Commission can also give advisory opinions on specialised competition and trade policy topics, for which it charges fees, and distributes reports on its investigations and studies for a fee.

LM: What would you say have been the successes of the CTC?

AK: The commission has been extremely busy since the effective commencement of its operations in 1998, and has recorded numerous successes in both its competition and trade tariffs operations. In the area of competition, the Commission has handled over 1 000 competition cases, of which about 53% involved restrictive and unfair business practices and 47% were mergers and acquisitions. Common restrictive and unfair business practices investigated have included anti-competitive agreements of both horizontal and vertical nature (ie, collusive and cartel-like behaviour, such as price fixing and market-sharing arrangements, and bid-rigging, exclusive dealing, and resale price maintenance), and abuse of dominant or monopoly positions (ie, excessive pricing, discriminatory distribution, tied and conditional trading, undue refusal to distribute commodities or services, and predatory pricing.  Some consumer welfare abuses, such as misleading advertising and distribution of commodities or services above advertised prices, have also been investigated.

LM: Who should bring to the attention of CTC an anomaly that could be a violation of the Competition Act? Is it an individual like me or institutions?

AK: Anyone, whether a corporate or human can bring any competition or trade tariff complaint, or any other violations of the Competition Act, to the attention of the Commission for investigation.  However even though most of the Commission’s investigations are complaint-driven, the Commission can initiate such investigations on its own.
LM: Why does it take long for CTC to complete investigations?

AK: The Commission’s investigations into competition and tariff cases have got to be meticulous since the outcomes have serious implications on the affected enterprises and the economy as a whole.  For example, in the case of a typical competition investigation, all the affected stakeholders have to be consulted and extensive economic analysis has to be undertaken on the competitive effects of the practices under investigation.  It is therefore not uncommon worldwide for an investigation into a complicated restrictive business practice like price fixing or market sharing to take up to two years. Even though the Zimbabwean competition legislation does not give specific deadlines on the completion of competition cases, except that the cases should be looked into as expeditiously as possible, the Commission has administratively given itself up to three months to examine mergers and acquisitions.  Some mergers have been examined within a month.  Time spent on investigating cases involving restrictive and unfair business practices has ranged from two months to eight months.  The times spent by the Commission in handling competition cases are amongst the shortest in the region.

LM: Is it fair to say the current economic environment has had a negative bearing on competition, for example, you walk into most of the shops and the products, bread for example, is either a dollar or dollar for two no matter which shop?

AK: Any adverse economic environment drives enterprises to engage in restrictive and unfair business practices as they strive to maintain market share and position in the shrunk economy.  In some cases, competitors agree not to compete against each other in order to act as a collective monopoly and earn monopoly profits.  This however does not exempt them from the application of competition law.  The current situation in Zimbabwe is not an exception, as evidenced by the increased number of competition cases brought to the attention of the Commission for investigation.

LM: How do you differentiate between a proper business pricing regime and a cartel? I have here the problem of say service providers who charge a uniform price for a service despite issues like competitive advantage or efficiency. To further elaborate this, why is it that there is a standard charge for a data line no matter which provider you use?

AK: A competitive pricing regime is when competing firms independently determine the prices of their goods and services on the basis of their individual input costs and productive efficiencies.  On the other hand, a cartelised pricing regime is when competitors sit down and agree on uniform prices to be charged to their customers.  In competition terms, this is called price fixing, and is one of the most serious anti-competitive practices that are per se prohibited in most countries, ie, are prohibited without considering any defence arguments. In other jurisdictions, however, price fixing arrangements are considered using the Rule of Reason approach, ie, where an attempt is made to evaluate the efficiency of pro-competitive features of a restrictive business practice against its anti-competitive effects in order to decide whether or not the practice should be prohibited. 

In Zimbabwe, while the competition law prohibits cartel-like practices like price fixing arrangements, such practices can be allowed if they are “bona fide intended solely to improve standards of quality or service in regard to the production or distribution of the commodity or service concerned”.    Any complaint or allegations of price fixing arrangements can therefore be referred to the Commission for investigation in accordance with the provisions of the Competition Act.

LM: What right do I have as an individual to bring to your attention what I feel is an anomally, say I pay for a service but do not get the expected standard despite an assurance by the provider that I will get value for money?

AK: Any individual has the right to bring to the Commission’s attention any anomaly or restrictive practice that is prohibited under the Competition Act.  The term ‘restrictive practice’ is defined in terms of the Act. In addition, certain consumer welfare abuses are prohibited under the Act as unfair business practices.  These are: (i) misleading advertising; (ii) false bargains; and (iii) distribution of commodities or services above advertised price. While the selling and distribution of sub-standard goods is an unfair consumer practice, it is not a restrictive business practice that is specifically prohibited under the Competition Act since it does not materially restrict competition between competing firms.

LM: Many people say you are a toothless bulldog. What capacity do you have to enforce your findings or orders?

AK: The Competition Act gives the Commission the necessary teeth to enforce its orders and decisions.  The Act provides that for enforcement purposes, the Commission’s orders can be registered with, and recorded as a civil judgment of, the High Court of Zimbabwe. 

LM: Last month saw CTC asking Central African Gold and Newdawn to write a report on a deal where the latter acquired the former. What has been the finding so far?

AK: The proposed acquisition of Central African Gold by New Dawn Mining Corporation was notified to the Commission for the examination of the transaction’s competitive effects last month.  The examination is currently at an advanced stakeholder consultations stage

LM: Do you think the indigenisation regulations would see more investigations?

AK: There are no direct relationships between the Indigenisation Regulations and the incidence of anti-competitive restrictive business practices, or unfair trade practices that are investigated by the commission.  The regulations should therefore not affect the number of cases referred to the commission for investigation.

LM: What role if any do you foresee CTC playing during the implementation of the Indigenisation regulations?

AK: The commission however does play a role in the implementation of the Indigenisation regulations, as it does in the implementation of all other economic policies of the country.  Specifically in the case of the Indigenisation Regulations, the relevant enabling Act provides that all mergers notified to the Commission for examination must meet indigenisation requirements for approval.

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