FTC to Place More Focus on Competition Advocacy

The Fair Trading Commission (FTC), during this fiscal year, will be focused on competition advocacy, especially as it relates to government procurement bodies, says the agency’s Executive Director, Barbara Lee. As Mrs. Lee explains to JIS News, “to a large extent, procurement government bodies are probably sometimes not aware of how their activities can affect competition in the market.let’s say they have to deal with auctions for goods and services.there is a very serious offence referred to as bid-rigging, where people can get together and plan what kinds of bids they are going to put in and they distort the market.
We see sometimes persons over and over getting contracts for whatever government services and goods are being procured. We feel therefore that there is a need for us to do some amount of work with government procurement officers, for this year”. Highlighting some of the agency’s achievements during the last fiscal period, she says the FTC is particularly proud of its intervention in what began as a consumer-related matter in regards to how airlines advertise ticket prices.
“We are very proud of what we have achieved in that regard, because the competition authority in the EU (European Union) is just now moving toward legislation to accomplish exactly what we accomplished, which is, to get the airlines to say more when they advertise the prices of tickets.as to exactly or as close as possible, what the ticket is likely to cost.
“Tickets are advertised at certain prices and when you get to paying for the ticket, you are paying almost double because there are certain taxes and fees that are included, that were not made known in the newspaper,” she points out. This particular issue, she says, had not required legislative intervention, as when the FTC communicated its concerns with the airlines, they all cooperated and adjusted advertising information, so that, “now you will see in the advertisements, the price of the ticket and at the bottom you will see taxes and charges of approximately ‘x’ percentage more. So the consumer has a pretty good idea of what he is up against rather than thinking he is going to get a ticket for $155 and it turns out to be a ticket for $300”. The FTC also did extensive work in preparing a code of conduct for the petroleum industry, as requested by Minister of Industry, Technology, Energy and Commerce, Phillip Paulwell. “We did a whole lot of consumer surveys. The aim was to put something in place that would help the players in that market to have a better relationship and that ultimately, consumers would benefit. The work was very revealing, because we saw exactly how that market is structured,” Mrs. Lee says.
The FTC is occassionally called upon to examine legislation and to see the extent to which these may be promoting anti-competitive behaviour. Citing an example, Mrs. Lee says, “recently the Dairy Industry Board said it was planning to determine farm gate prices for milk, we intervened quickly and they sent us a copy of the draft legislation. and we looked at it and indicated what would be acceptable under a free market regime. They cooperated and we sat in on a meeting of the Joint Select Committee of Parliament, to indicate what makes that particular provision (of the law) uncompetitive, and we indicated what would be acceptable under our competition law”.
The agency also took on the issue of parking spaces at the Norman Manley International Airport. “At one time, only JUTA could get licenses to park there and what we have done is to get the Airports Authority (of Jamaica) to let competition into that market for the slots, therefore, other persons can now put in bids and be able to get parking slots out at the airport,” Mrs. Lee informs. In addition, she tells JIS News, the betting sector, in particularly Caymanas, was examined and that suggestions were made as to ways in which the relevant law should be improved to address competition. “It is our understanding that the amendment is being done,” she says. Mrs. Lee further discloses that, “we have looked at a lot of pieces of legislation and made an input in getting those legislation to become aware or to acknowledge the value of competition in the free market economy.we have also rendered opinions on various moves that the government might be thinking of making for example.privatizing the railway”.
The FTC was established in 1993 to administer the Fair Competition Act, which provides for the maintenance and encouragement of competition in the conduct of trade and businesses, and in the provision of services in Jamaica.
When Jamaica moved towards a system of liberalization in the late 1980s to early 1990s, the “commanding heights” of the economy were no longer controlled by the state and there were moves toward privatizing most of if not all of the previously state-owned enterprises as the economy was freed up, so that private individuals could now play a part and compete within the marketplace.
In such a liberalised system, Mrs. Lee says, it is important that rules exist to determine how private firms should behave as with the existence of large and small firms, the tendency is for the larger firms to overpower and overwhelm the smaller entities.
Therefore, one of the major provisions of competition law is to ensure that this does not happen and to that extent, the Executive Director says, “we have provisions concerning how dominant firms should behave in the market. We are not concerned about them being dominant.they can be as big as they want to be because this law does not outlaw monopolies.this one is interested in how that dominant firm behaves”. The offence related to this kind of behaviour is referred to as an abuse of dominance.
Mrs. Lee says dominant firms sometimes try to chase out competitors or create barriers to entry. Such barriers she says, vary and may include, “not granting you anything that you need to do to carry out your business.they might try things like predatory pricing [which is], pricing their own goods and services at such a low cost, for long enough to prevent the competitor from entering the market or [causing them to] fall out of the market.once the large firm gets the competitor out, or prevents one from entering, then it puts up its own prices”.
Secondly, Mrs. Lee informs, competition law serves to prevent persons entering into agreements that would seek to lessen competition. “Any agreement that would undermine the natural order of competition would be considered to be anti-competitive,” she states. The law also addresses cartels, and ensuring that entities or persons do not get together to share up markets. “In other words (firms or individuals decide) you will produce this set of goods and services here in this parish or this side of the island and I will produce in that other side. Cartels also fix prices and that is probably the most egregious of competition offences. because invariably, it (the fixed price) is going to be a high price. They are not going to get together to set a low price, and therefore, consumers will be disadvantaged”.
Also she notes, cartels sometimes withhold supply in order to hike prices because if the supply is low and the demand is present, then these firms or individuals get to maintain high prices.
She notes that while the FTC is not mandated to look at price gouging or the final price of a good to the consumer, it has a duty to see to it that consumers receive the best prices and the best product and service choices.
With the promulgation of the Consumer Protection Act, which is enforced by the Consumer Affairs Commission (CAC), parts of the competition law relating to consumerism, are handled by the CAC.
Nevertheless, the FTC has an interest in matters that constitute unfair competition, Mrs. Lee says, “whereas we would not anymore be looking at getting back a refund for the consumer, or getting your fridge back for you, etcetera”.
In terms of how the FTC carries out its operations, she explains that investigations are based on complaints that come in. “A business might lodge a complaint indicating that its competitors are carrying out some activities that are undermining competition and we would start by looking at the case, seeing whether it has merit. we would try to get as much information as possible from the person who is lodging the complaint,” she outlines.
She adds that having sourced some preliminary information, the agency makes a determination as to whether there is any merit in the case, and whether or not and how it should proceed.
Depending on the alleged offence, the investigation could include trying to get documents such as the sales records of the accused companies, tax returns, and minutes of meetings.
“If we are looking at a cartel or example, we can probably get the police to get a warrant and go in with us to see what kind of evidence we can come up with to do the investigation. The investigation is to prove the offence and therefore, we have to look at the specific offence and see what is required,” she continues.
After enough information is gathered, the FTC prepares a report and if it is found that an offence has been committed, the offender is provided with a copy of the report. “When we shall have produced that report, the respondent will get a chance to address the issues.when we first get the complaint, we inform them and depending on what is said, then we move in one direction or the other,”Mrs. Lee says.
Eventually the matter is heard before the commissioners or before a tribunal in a quasi-judicial hearing, where the FTC presents its case and the accused responds, leading to a final decision. If an offence has been committed and so found, then a number of penalties may apply. These Mrs. Lee says can range from “a slap on the wrist or being ordered to change certain activities, or readjust their business, or sell some assets to reduce dominance”, to fines, which will be enforced by the court. The current maximum fine is $5 million for a company and $1 million for an individual. “We are agitating to have those fines increased,” she notes.
The Act provides that where persons are refusing to cooperate, hiding documents, or providing false information, a summons can be served and an application made to the Resident Magistrates Court on the grounds of obstruction of an investigation. Here, there is a $500,000 fine and incarceration provisions not exceeding one year. In some cases, an offender can be fined as well as imprisoned.