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Opinions of Tuesday, 10 December 2013

Columnist: Adomako, Appiah Kusi

Why Ghana needs to have a competition policy and law?

Appiah Kusi Adomako, Centre Coordinator, CUTS Accra

A large number of countries have urged the adoption of 5th December as World Competition Day, in order to popularise the need for developing countries to attach greater attention to the process of competition reforms, as a key public policy issue. The process of competition reforms not only benefits consumers, but also producers and the economy in general. The linkage is often not understood by policymakers – hence organisation like CUTS has been leading the campaign for promoting competition globally.

One of the highlights of this campaign is for the United Nations to declare 5th December as World Competition Day – a CUTS campaign that has now been supported by nearly 25 countries from all around world.
A number of countries have already started observing 5th December as World Competition Day. The purpose of this article is to explain to ordinary Ghanaians the importance of competition in their daily lives – so that a ground swell can be developed to lead to the adoption of a national competition regime in Ghana – which has been a pending reform action in the country for a while.
What is Competition and why is it needed?
By definition, competition law promotes competition in markets and curbs anti-competitive conduct by firms. In a fair and competitive market there are large numbers of sellers and buyers, variety of quality goods and services for consumers, and free entry and exit for firms. In every market, producers aim is to maximize profit whilst consumers also want to maximize utility. Market competition thus encourages production of goods and services that are desired by consumers, making use of the most cost-effective use of available resources. Thus, consumers get the best possible choice of goods and services at the lowest possible price.
In a fair market, firms compete with each other ‘on merit’ to win consumers and increase their share of the market. Competitive markets provide incentives for firms to produce quality goods and services at low prices – thereby improving on productivity and in turn boosting an industry, the sector and finally the economy.
One can relate to this from a case in Ghana – pertaining to Ghana Telecom and its cellular network called OneTouch. When it was introduced in early 2000, Ghana Telecom controlled the supply of the sim cards. The sim cards were sold in the black market for more than 600% of the official price. It was alleged that officials in the company were selling the cards through the backdoor. Spacefon, another cell network provider took advantage of the market and expanded its capacity. By the time Ghana Telecom reacted to the new entrant, Spacefon had already taken a large share of the market.
A large number of countries in the world including developing countries from Africa (Zambia, Malawi, Zimbabwe, Botswana, South Africa, Kenya, and our neighbours like The Gambia, Burkina Faso, Mali, etc.) have put in place a competition law and an agency to implement the act. However, in spite of having made a few attempts, Ghana has not been able to adopt a Competition Law. The effect of the absence of a competition law is often intangible, but is explained here through the following illustrations.
Ghana Telecome and Vodafon Ghana
It started when it was called Ghana Telecom. In the late 90’s and early 2000’s, the then Ghana Telecom dominated the telephony market in the country. Whenever a subscriber wanted to dial any cell phone number through Ghana Telecom’s fixed land line, the chances of getting through to the other party was fairly minimal. Ghana Telecom was simply restricting the number of calls routing through its platform to other competitors - Spacefon and Mobitel.
Fifteen years down the line, Vodafone which took over from Ghana Telecom seem to have maintained the same posture. As a company with monopoly in the fixed landline and broadband internet in the country, Vodafone has been alleged to be exploiting its monopoly to the disadvantage of other competitors and consumers. Several cases have come to the fore when Vodafone Ghana has declined to provide a fixed telephone line to a subscriber without him/her applying for a broadband as well. This is a classical case of ‘tied selling’, and is prohibited under all competition laws. A question is whether the company could have resorted to such actions if Ghana had a Competition Agency implementing a competition law. Further, Vodafone Ghana has placed a cap on data usage on its broadband usage even on its ‘unlimited plans’, this is not a common practice across the world.
Antrak-Citylink Duopoly on Domestic Air Travel
Antrak and Citylink airlines until hitherto had dominated the domestic airline industry especially Accra-Kumasi, and with Antrak taking monopoly over Accra-Tamale route. Fares on these routes were prohibitively expensive to the extent that the domestic air travel was seen to be the preserve of the upper class. However, things changed from 2011 when Starbow and Fly 540 entered the market. These two companies injected competition into the industry and their presence started bringing the fares down. Back in 2009, the average price on Accra-Kumasi flight was about GHC 180. When Starbow and Fly 540 came, they began by charging as low as GHC 35 and still made profits. The dominant firms soon realized that if they do not follow competitive pricing strategy, or they could be crowded out from business - so they started to allow market forces determine the price.
Ghana Botched Attempts to Have Competition Law And Policy
Ghana’s attempt to align business and trade to international best practices resulted in Ghana passing the Protection Against Unfair Competition Act, 2000 (Act 589), which had a lacklustre approach to addressing competition. It has had another draft readied in 2008 – but that too was a non-starter. Ghana is now in the process of putting in place a Competition Policy that would lay out the ground for a national competition law, subsequently.
The Ministry responsible for Competition Policy and Law, i.e., the Ministry of Trade and Industry (MOTI) needs to realise the importance of a Competition Law and convince the other policymakers of its benefits.
Ghana seem to have waited too long for having the ‘most perfect’ piece of competition legislation, while ordinary consumers and even the economy seem to have suffered as a result of various market practices that could have been dealt with if the country had an operational legal framework for the same.
Let us all urge in our own capacity on 5th December – World Competition Day – for Ghana to have a national competition regime without any further delays!

Editor’s note: The writer is the Centre Coordinator for CUTS Accra. He can be contacted through: apa@cuts.org or 024-392-0926. For more information about CUTS Accra, visit http://www.cuts-international.org/ARC/Accra/