BUSINESS AssociationsÂ can play a productive, pro-competitive role in the development of a particular sector, thus promoting the efficient functioning of that market. Associations, consist of individuals and firms with common interests in trade, join together to further their commercial or professional goals. Although the principal function of an association, typically, is to provide services to its members, these groupings also have an industrial policy and political functions.
Associations frequently perform many valuable functions and through co-operation, they can significantly increase the efficiency and performance of a particular sector. Nevertheless, collaboration between otherwise competing firms raises the possibility that cooperation may overflow into coordination, thus lessening competition between these firms or in the market more generally.
Consumer harm, in the form of raised prices or lower quality goods or services, is the almost inevitable consequence of such collusion. In a number of instances globally, associations have played a central role in the management of a cartel among their members.
On various occasions, the Competition Consumer Protection Commission (CCPC), even in its old outfit as Zambia Competition Commission (ZCC), has encountered varied situations. Many media articles and annual reports for the Commission suggest that where BAs have coordinated, or have been used as a vehicle by which to coordinate the activities of member firms, the consequence has been that competition between member firms is restricted. In light of these experiences, CCPC has continued to raise specific concerns regarding activities of associations and their compliance with competition law.
One contemporary issue relates to the Millers Association of Zambia. The latterâ€™s recent quest to hike mealie-meal prices has receive resistance from various stakeholders, including Government. It is good that the millers and government, through the Ministry of Agriculture, have been able to dialogue over the matter.
However, in as much as the millers, just like other industry players, are facing a hard time, it is business immorality for the association to continue setting prices. This practice has been a tendency by most associations and this cannot be allowed to pervade the existing free market economy.
Within the category of coordinated activities, it is firmly established that there are certain practices which are absolutely prohibited, such as price-fixing, as well as many practices which may stifle competition . Section 8 of the Competition and Consumer Protection Act (CCPA) of 2010 and the subsequent provisions prohibit and make void all decisions taken by associations of undertakings, as well as agreements and concerted practices between undertakings, which have either the object or the effect of preventing, restricting or distorting competition.
To get a clear understanding on whether effective competition has ensued or not, two variables will always have to be factored in mind, that isÂ price and non-price competition. These two factors, collectively, form what might be termed as effective competition, although they can be looked at independently.
Therefore, any effort to undermine either of the two factors through concerted effort or price fixing is prohibited under most competition laws. In short, competition law prohibits any coordinated activity between competing firms which lessens the normal uncertainty that should exist between them in relation to pricing policies arrived at independently on the market.
Thus, firms are prohibited from entering into agreements which restrict the freedom of the contracting parties in relation to pricing in any way.
Some of the actions that couldÂ be taken are carrying out a legal audit of some of the constitutions governing these associations and vet whether there are provisions which promote anti-competitive behaviour.Â If not, this could be one potential area of work the ZCC could explore. More importantly, since the CCPA is under review, it is important to include such explicit provisions than leaving it to wider interpretation.
The latter part of the preceding sentence shows that the concepts of agreement and concerted practice among business associations can be been interpreted widely. Agreements can also include unwritten agreements and gentlemenâ€™s agreements as well as formal contracts for as long as they are promoting anti- competitive practices and restrictive business behaviour. The CCPA in Section 9, exemplify a similar situation through definition of a horizontal agreement. If one closely looks at these potential violations as provided in the Act, the major source for such violations could be through consented practices in associations.
Now that the law is clear, why has the MAZ shunned heeding CCPC? Or why has MAZ opted to ignore such provisions and continue to announce prices instead of leaving it to individual players.
The Zambian competition law and others acknowledge that cooperation between associations may, in certain instances, result in some benefits to consumers. If co-operation does not appreciably restrict, prevent or distort competition in the first place, it will fall entirely outside the prohibitions contained in Part III of the CCPA which deals with restrictive business and anti-competitive trade practices.
The Author is the Centre Coordinator for Consumer Unity and Trust Society International Lusaka.