Five traders control the Egyptian rice market, squeezing growers and consumers. Photo by Mai Shaheen)
The Egyptian Association for Competition (EAC), an NGO that promotes competitive practices, have heavily criticised new amendments to Egypt's anti-monopoly law, saying they fall short of ensuring the independence and effectiveness of the Egyptian Competition Authority (ECA).
On Monday, Egypt’s cabinet approved amending the anti-monopoly law to increase the fine for violations by 500 per cent, to at least LE300 million ($50.8 million) compared to LE50 million ($8.4 million) previously. The modifications also include an article exempting the first whistleblower who reports an anti-competition arrangement.
Mona Yassin, vice chaiman of EAC, dismissed the current status of ECA as inactive and needing more powers to be able to properly monitor all acquisitions and mergers in the country and maintain equal grounds for competition for businesses. "We want to see an independent entity that is able to effect decisions in spite of outside influnces, be it government or otherwise,” says Yassin, who is also a former head of the ECA.
Yassin added that the increase in the set fine did not meet expectations.
During her time as ECA head, Mona Yassin ruled in more than 50 cases of monopolistic practices, including two cases deemed both delicate and difficult, cement and steel. In the first case, 20 cement industry executives were found guilty of price fixing. Each was punished with a LE10 million ($1.87 million) fine and another LE10 million for the implicated companies in August 2008. In the case of the steel industry, the court found in 2009 that Ahmed Ezz Steel Group has not engaged in any anti-competitive or monopolistic practices after a two-and-a-half-year investigation, a conclusion that shocked many observers.
"The fine should not be capped,” Yassin said, explaining that fines should be a percentage of sales of the perpetrator. Other experts believe that supplementary measures, besides the law's amendment, should be undertaken. "The amendments in themselves are not completely deficient, but they would prove insufficient if not aided by other policies," said Ahmed Ghoneim, economics professor at Cairo University.
Ghoneim elaborates that stronger leadership from the ECA along with increased awareness about competitiveness in business and governmental circles are the two pivotal issues required to raise the efficiency of Egyptian markets. "There are many misconceptions about ECA's role among institutions and individuals. It must be known that ECA does not set prices or control the market, but rather help improve the way it operates," he added.
The law states that the ECA should be under the direct supervision of the prime minister, but since its establishment, the premier delegates his duties to the minsiter of trade and industry. "The current minister overseeing ECA is an industrialist not an economist, and this is problematic," Ghoneim says referring to Mahmoud Eissa, Egypt's minister of trade and industry.
Ghoneim indicates that an economist would have a superior grasp on the magnitude of the issue of competition, and would be more able to assess market inefficiencies and push to fix them accordingly. Ghoneim also explains that as long as the government is overseeing the ECA, it is obliged to be actively working to enforce the law and promote it in all ways possible using its executive powers.
"The government can have a more proactive role through initiating investigations, which will consequently empower the ECA," Ghoneim said.
Egypt's minister of social solidarity, Gouda Abdel Khalek, openly delclared last Tuesday that five traders control the supply and price of rice in Egypt, driving its local prices upward. "It is very strange to find such a statement coming from a government official. If such information is available, why don't they take action?" asks Ghoneim.
Many Egyptian sectors and industries are dominated by oligopolies, where few producers or traders have an influensive market share and are often accused of manipulating the market to make more profit. Meat importers, wheat importers, and steel producers among the most pertinent examples.
The regulatory body is often criticized for having its hands tied, lacking autonomy because of its affiliation with the government. Many, including Yassin, view full independence of ECA as a prerequisite for its effectiveness.
In order to be effective, competition needs suppliers who are independent of each other, each subject to the competitive pressure exerted by the market.
The competition authority was created in 2005 as per the newly enacted competition law. Since then, the competition law was deemed deficient and difficult to amend. An attempt in 2008 to reinforce the law was aborted in parliament by Ahmed Ezz, the steel magnate who controled almost half the steel market in Egypt, when he orchestrated an overwhelming majority to vote against the amendments.