Competition law and sustainable development

Published by Dhaka Tribune  January 31, 2020 (Link Here)

In Bangladesh, the Competition Act was enacted in 2012 with the subsequent establishment of the Bangladesh Competition Commission (BCC)

Competition law, also known as anti-trust law, is the set of legislations which promote and maintain market competition by regulating anti-competitive behaviour and arrangements among the companies in a particular economy. In Bangladesh, the Competition Act was enacted in 2012 with the subsequent establishment of the Bangladesh Competition Commission (BCC). The rules under the act are yet to be formulated.

Competition law aims to control mainly three types of situations in an economy:

1. Anticompetitive agreements and natural monopoly: Where two or more firms agree among themselves to fix prices, limit production, divide markets geographically, or rig bids when tendering for government contracts.
2. Abuses of dominance or exclusionary behaviour: Where one firm is so powerful that it can act without thinking about its competitors. Abuses of dominance or exclusionary behaviour can include predatory pricing, i.e. pricing below cost to drive competitors out of a market and then raising prices once they are gone.
3. Merger-control regulation: Where firms that want to merge are reviewed to ensure that their deal is not likely to reduce competition significantly, which may lead to abusive behaviour.

Also Read- Meet the man in charge of market competition

Competition law in the aspect of economic growth

For the sustainable economic growth an efficient and fair market works as a catalyst. Mostly the government takes the necessary initiatives to eradicate any conduct by any undertaking that comes in between the effective functioning of the market for all classes of people. This eventually increases the productivity which leads to the economic welfare and growth, by the fair application of efficiencies, which can be observed in the economy again in three ways:

1. Productive efficiency: Competition leads a firm to use their inputs in the most efficient way in order to supply the best of their goods and services at the lowest possible costs. As a result of resource efficiency, competition drives inefficient companies out of business and allows efficient companies to enter markets or gain market share.

2. Dynamic efficiency: Competition drives companies to innovate and create new products and services to gain market share. Thus, in this way competition brings technological progress through an innovative channel.

3. Allocative efficiency: Competition causes firms to only produce the goods and services which are demanded by the consumers.

Competition law in the aspect of social and environmental growth

An economic growth is proportionate to the social growth. Competition provides opportunities for new entrepreneurs to enter the market and also creates opportunities for innovation and employment. These directly hit the social growth.

An initial thought might come as to how competition law has any relationship to the environment. The government can introduce certain barriers for the undertakings that would restrict them to enter the market, for example, making it a requirement for the undertakings specifically the firms in the dominant position to have expensive pollution control technology. Furthermore, the government can restrain a firm from selling their products because of their products, process or material being harmful to the environment.

As the economy of Bangladesh is booming and we have also witnessed a wholesale rise in the social indicators, it is high time that the Bangladesh Competition Commission drive into the market and gradually create a competitive market economy. This will ensure better consumer protection, allow new entrepreneurs to join the market, eradicate unhealthy business practices and unwanted price hike of commodities etc., the recent onion price hike being the most ardent example. The commission should immediately adopt necessary action plans to create awareness of the law, especially amongst the corporations. The corporate houses shall start doing a “competition health-check” of their businesses in light of the Competition Act 2012 and ensure that their initiatives are not caught as anti-competitive.

The writer is a competition law practitioner, an advocate of the Supreme Court of Bangladesh and head of chambers, Legal Counsel. He can be reached at omar@legalcounselbd.com