The
role of every Government is to do what is best for its people.
“What is best” is often debated, lacks
clarity and changes over time.
Besides,
it differs from one person, or group of persons, to another.
Luckily,
there is no ambiguity in economics.
“What is best for the consumer” is more choices, lower prices and better
quality. Clear, concise and quantifiable.
Yet,
why is it so difficult for many Governments to deliver what is best for the consumer?
Why can’t Governments deliver something as simple as what is best for the
people in terms of goods and services?
Malaysia: Competition Commission Act 2010
Gazetted
on 10 June 2010, the role of the Commission created by this Act is to advocate
for competition and to penalize anti-competitive behavior.
While
the Commission has the power to impose penalties for the infringement of the
provisions of the law, it does not have the power to prosecute or to block or
reverse any transaction. Persecution is only with the written consent of the
Public Prosecutor.
There
are also four criteria that allow parties to be exempted from the Act. They
include identifiable social benefits or where the detrimental effect is matched
by the benefits. This is worrisome, especially when the decision to exempt is
outside the purview of any oversight.
In September
2013, we saw the first substantial action of this Commission. It ruled that the
merger of Malaysia Airlines and AirAsia in 2011 was in breach of the
competition laws and fined both parties RM10 million each.
A tour of other jurisdictions
Competition
law has been in existence since the Roman Republic around 50 BC. Today, the two
most widely quoted laws are the United States Antitrust laws and the European
Union Competition Law.
Basically,
these laws have the following characteristics: Prohibit the restriction of free
trade and competition, ban abusive behavior by firms dominating a market or engaging
in anti-competitive practices. The laws also supervise mergers and acquisitions
that threaten the competitive process.
While
protecting the interest of the consumer is the underlying principle, its other
objective is often also ensuring that entrepreneurs have an opportunity to compete
in the market economy.
Senator
John Sherman provided the moral justification in 1890, “If we will not endure a
king as a political power, we should not endure a king over the production,
transportation, and sale of any of the necessaries of life.”
As
for economic justification, the entire theory of economics is based on
competition leading to efficiency and better resource allocation.
Ever
since the break-up of the Standard Oil Company in 1911, the US has enforced
rigorously against anti-competitive practices, from cartels and collusion to
mergers, price discrimination, exclusive dealings, predator pricing and
intellectual property.
Enforcement
is effective in the US for the following reasons. The Federal Trade Commission,
the US Department of Justice, state governments and private parties who are
sufficiently affected may all bring actions in the courts to enforce the
antitrust laws. Large companies must also notify the Federal Trade Commission
and the Department of Justice’s Antitrust Division prior to attempting any
merger exercise.
Private
parties, who can prove that they are injured by the actions of firms that act
in anti-competitive behavior, can sue to recover three times their actual
losses.
The
commitment to enforce is based on a fundamental belief that competition is
good, where the Supreme Court believes the Act is to protect free enterprise,
and the ultimate goal is to protect consumers.
Back to home
Cars
in Malaysia are among the most expensive in the world, with exorbitant profits accrued
to a few car importers who are given exclusive permits.
What
economic benefits do they provide to consumers?
As very
few of the locally manufactured cars are exported, it is clear this subsidy
does not create globally competitive companies.
Another
example is the domestic steel sector, which is globally uncompetitive and
inflates the domestic costs of construction. Or the exclusive permits to import
basic necessities like rice, sugar and beef. Many public sector procurements
are also non-competitive and non-transparent.
Nothing
is more real than personal experiences, where anti-competitive behaviors come
in different forms. Let me share a few.
In
1995 when PhileoAllied Bank introduced online banking and stockbroking, the
Kuala Lumpur Stock Exchange tried to stop this innovation by going to the courts.
The reason was to protect their market share and commission rates.
And
after the successful launch of OneAccount in 1996, the first current account
that pays fixed deposit interest rates, Bank Negara stopped the launch of the
OneCorporate account that would have given companies the same benefit. A few
large banks protested.
In
the name of consolidation of the banking sector, an innovative, technologically
superior and profitable bank was forced to be sold in 2001.
More
recently, on 20 August 2013, The Edge Communication received approval for its
application of a publishing permit to publish a general daily newspaper, FZ.
On
28 August 2013, we received another letter from the Ministry that said
“Penangguhan Permit Penerbitan”. The approval we received just a week earlier
was now “deferred”. No reason and no indication for how long was given.
What
happened during the one week, between 20 August and 28 August 2013? Three guys,
each involved in separate media companies, met together and with others.
By
23 August 2013, I was already informed of the contents of the Home Ministry
letter of 28 August 2013. The CEO of The Edge Media Group was told by one of the
three guys.
The
Government, which regulates the private sector, has now become “regulated” by
such powerful private sector elites.
More
important is the question WHY. Is it good for the consumer and the public?
Looking
back at history, I entered into a partnership with the Berjaya group to combine
The Edge and TheSun in 2002. TheSun was turned
around and Berjaya wanted to part ways in 2008.
In
recent times, I have been approached if I would consider buying TheSun again.
I
was also asked if I would consider partnering The Malay Mail and Malaysian
Reserve.
FZ
getting a license to publish a general daily newspaper would obviously be a
threat to other publications. It will also remove a “rent-seeking” opportunity
to some others who might profit from selling their licenses.
What is best for the consumer
We
know what is best for consumers, even if there are some debates on long-term
versus short-term goals, on employment and on supporting local industries and
building a critical mass to achieve economies of scale.
We
can incorporate these objectives into measurable trade-offs to arrive at clear,
concise and quantifiable outcomes.
Implementing
the following measures will strengthen consumer protection:
(A) Empower
and enrich the Competition Commission with knowledge, expertise and enforcement
capabilities. Ensure there are sufficient checks and balances to remove internal
abuses and corruption.
(B)
Mandate the courts to protect consumers. The doctrine is that competition is
the ultimate safeguard against corruption, abuses, profiteering and
inefficiencies.
(C) Where
there are social issues, trade secrets or where it can be argued that certain
forms of collusion may indeed have more positive than detrimental effects, let
the courts decide in public. The people will
be the final arbitrator.
(D)
Finally, amend the Competition Act and allow injured parties to sue through the
courts for losses suffered from anti-competitive behaviors. Such actions can be
taken independently of the Commission or the Public Prosecutor.
What
stand in the way of what is best for consumers? Powerful, extractive elites!
Are
we willing to continue enduring “Corporate Kings”?
Some countries said NO more than 120 years ago. Most other
countries have rejected them.
Is it not
time for us to say NO too?
