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Why government need to defend market competition during pandemic

By Femi Adekoya
15 April 2020   |   3:05 am
With consumers struggling for scarce resources to tackle the coronavirus pandemic globally, the United Nations Conference on Trade and Development (UNCTAD) has recommended that governments

With consumers struggling for scarce resources to tackle the coronavirus pandemic globally, the United Nations Conference on Trade and Development (UNCTAD) has recommended that governments take five key actions to protect competition in the markets during the pandemic.

According to the agency, there is need for governments to ensure equal conditions between companies for a level playing field that remains relevant even in a crisis period; temporarily allow cooperation arrangements necessary to ensure the supply and distribution of affordable products to all consumers to prevent a shortage of essential products.

To check price gouging in Nigeria, the Federal Competition and Consumer Protection Commission (FCCPC) had issued a warning to sellers engaged in price gouging and arbitrary increases in prices of protective and hygiene products.

According to the Chief Executive Officer, FCCPC, Babatunde Irukera, the unusual and inordinate practice of unreasonably increasing the price of these (protective and hygiene) products in an indiscriminate manner, on account of the national public health concern (Coronavirus) violates both moral codes and extant law.

“Abusing citizens’ sensitivity, apprehension, anxiety and vulnerability, especially during emergencies that could adversely affect national security is a violation of the law.

“Specifically, S. 17 (s) of the Federal Competition and Consumer Protection Act (FCCPA) prohibits obnoxious trade practices or the unscrupulous exploitation of consumers”, he added.

Similarly, the UNCTAD urged for close monitoring of markets of essential products such as disinfectants, masks and gels to ensure their availability, if necessary, through temporary prices caps to protect the health of consumers during the pandemic.

“We recommend that governments vigorously enforce competition law against companies that take advantage of the crisis by creating cartels or abusing their market power; adapt competition procedures and deadlines to the extraordinary circumstances created by the pandemic”, it added.

Under normal circumstances competition is needed in markets to keep prices low, but with the COVID-19 crisis wreaking havoc on markets the world over, collaboration has taken precedence.

The pandemic’s sweeping economic impact has left governments balancing between defending competition, so prices do not become prohibitive, and granting exemptions to competition rules to ensure the survival of entire economic sectors.

“Many authorities are adjusting the enforcement of competition laws to serve the greater public interest during this crisis,” said Teresa Moreira, head of UNCTAD’s competition and consumer policies branch.

For example, the United States’ Department of Justice and the Federal Trade Commission have allowed collaborations among competitors in the health sector based on previous measures taken in the aftermath of hurricanes Harvey and Irma.

The United States has enacted strict guidance on collaboration in a time of emergency.

Likewise, Canadian and German authorities have allowed pro-competitive agreements between companies competing in the same market if they have good justifications.

While Germany has given the green light for collaboration in the retail industry and for supermarkets, Canada has allowed collaboration to support the delivery of affordable goods and services.

Similarly, the competition and markets authority in the United Kingdom has temporarily allowed retailers to collaborate to ensure the continuity of food supplies.

Some governments have enacted sector-specific legislation granting different levels of exemptions from anti-collusion rules to businesses to mitigate the pandemic’s ripple effect on economies.

For instance, South Africa has approved a specific list-based block exemption from antitrust rules in the health-care sector to allow cooperation.

Norway has granted a three-month exemption from the national antitrust laws to the airline transport industry.

As the pandemic evolves from a health crisis to an economic one, competition authorities are closely monitoring market developments and reacting accordingly.

They are facing down excessive pricing of sorely needed products in various countries.

Consumers have pinned hopes on announcements by the UK, France, Brazil, Russia and Italy that are monitoring claims of excessive pricing and may establish price controls over high-demand items such as masks and hand sanitizers.

As a preventive measure, the French government issued a decree to regulate the price of hand sanitizers to prevent retailers and pharmacists from engaging in abusive price increases.

Competition authorities in Kenya and China have heavily sanctioned retailers engaged in excessive pricing of health-related products.

“Authorities have to use all their tools to combat the adverse consequences of the COVID-19 pandemic in the markets,” Ms. Moreira said.

Governments are also encouraging collaborative research and development efforts. These are compatible with competition legislation, as was the case in previous health emergencies such as the swine flu outbreak in 2009 and the Middle East Respiratory Syndrome in 2015.

For instance, the European Commission granted an exemption to European competition rules to research and development efforts towards a vaccine against COVID-19.