Competition policy and pro-poor development
An issue, often raised, while discussing competition policy in the
context of a developing country, is the role of competition policy in
the process of economic development of a country.
The biggest challenge in the developing world today is to get rid of
object poverty that deprives a large section of their population a
An important approach to poverty reduction is to empower the poor,
provide them with productive employment and increase their access to
land, capital and other productive resources. But this approach may not
be successful unless people are linked to the market and these are made
to work for their benefit.
â€śWell functioningâ€ť implies markets that work efficiently and without
distortions. Nevertheless, competition is often distorted by few
players, and it is essential that governments enact competition laws to
regulate the distortions.
What is very often ignored is the fact that the prevalence of
anti-competitive practices in the markets hurt the poor more. A rich
person would not mind paying few rupees more for buying something but
for people living on a few rupees a day, getting value to money for
every cent they spend is more vital. This is the consumption side.
If we turn to â€śability to payâ€ť angle or the â€śincomeâ€ť side, a sector
that immediately comes to mind is agriculture. Of the 1.2 bn people of
the world population who live in extreme poverty, approximately about 75
per cent live and work in rural areas and two-third of them draw their
livelihood directly from Agriculture.
The market for agricultural products is very often considered to be
an example of a perfectly competitive market. After all, there is a huge
gap between the prices consumers pay and the farmers actually receive.
This is because of the chain of intermediaries between the consumers and
farmers that do not always work in a competitive manner.
These intermediaries abuse their monopolistic dominance in the market
for final product while in the markets for primary products, they abuse
their monopsonistic dominance.
In a Country like Sri Lanka where two-thirds directly or indirectly
draw their livelihood directly from agriculture, the linkage between
market imperfections in agriculture goods and poverty is manifest.
It needs to be realised that competition law is not a luxury of the
developed world, but one of the necessary tools for developing
countries, in their fight against poverty.
Developing countries should not be dogmatic about withdrawing from
the markets as distortions and failures in markets are quite ubiquitous
and the state needs to play a role in promoting a fair and orderly
Competition Policy maximises consumer welfare, by ensuring goods and
services at best possible quality, offered at lowest prices and
available in adequate quantities. Alongside, competition policy also
loads to business welfare, by ensuring for instance, that intermediate
goods and services consumed by businesses are available through a
CAA Executive Director
New Companies Act
The Companies Act No. 7 of 2007 is an attempt to simplify the
procedure on company formation and functioning which has not been
changed since the introduction of the previous Act No. 17 of 1982.
Before 1982 the basis of the company law in the procedure was based on
the legislature which was introduced in 1948 onwards.
The Company Law and Procedures was inherited to us by the British who
had long experience of companies. The British East Indian Company was
founded in 1599.
The Company as a part of the expansion of business invaded other
countries and colonised in order to conduct the business dealings with
the naval power which they had to compete with the Danish India Company
founded in 1616.
The Dutch East India Company was founded in 1602. The French East
India Co was founded in 1664 and the Swedish East India Company was
founded in 1731.
The Honourable East India Company often referred to as â€śJohn Companyâ€ť
who were the hoist joint stock company was granted an English Royal
Charter by Elizabeth I on December 31, 1600 with the intention of
favouring trade privileges in India.
The company transformed from a commercial trading venture to one that
virtually ruled India as required auxiliary governmental and military
functions until its dissolution in 1858 following the events of the
Automatically, Sri Lanka then Ceylon too came under the Company and
the British Monarchy thereafter.
Based in London the company presided over the creation of the British
Raj in 1617 and since then the British company model has assimilated
into the Indian and Sri Lankan commercial law and procedure to date.
In the West the system of Company Law and procedure has been
successful. The Company is a juristic person who acts and function
independently and there is continuity irrespective of the individuals.
In the West there are multi national companies running into generations
managed by directors and shareholders acquire ownership subsequently.
Under Act No. 9 of 2003 the Consumer Affairs Authority is empowered
to regulate trade in various ways.
It has power to undertake studies on the distribution of goods and
services, which give directions to manufacturers or traders in respect
of price marking, labelling and packeting of goods, determining
standards and specifications relating to goods and supply of services,
inquire into complaints, enter into agreements with traders,
industrialists and manufacturers and many other functions which are
described in the Act in detail. The CAA has the mandate on services such
a) Makes any article or any goods
b) Assembles or joins any article or any goods whether by chemical
process or otherwise; or
c) Adapts for sale any article or any goods
â€śserviceâ€ť means service of any description which is made available to
actual or potential users, and includes -
a) Banking, financing, insurance, shipping and entertainment
b) The construction, production, manufacture, supply, storage,
maintenance, repair, treatment, cleaning, processing or alteration of
c) Services in connection with the import, export or distribution of
d) The transportation of goods and passengers
e) The cleaning of buildings and building premises
f) The sale and supply of any utility services including electricity,
water, gas and telecommunication
g) The provision of information technology and communication
h) Professional services such as accounting, auditing, legal, medical
and health, surveying, architecture and engineering
It is in this spirit that the CAA organised a Seminar on Company Law
in collaboration with Organisation of Professionals Associations in
order to discuss future strategies to simplify and working arrangements
in the interests of consumers, companies, manufacturers, industrialists
Consumer Affairs Authority
Powers vested in Consumer Affairs Authority to Regulate trade - Part
The powers envisaged by Sections 10,11 and 12 were discussed last
week and this article reviews the provision made in Section 13 & 32 of
the CAA Act.
Powers envisaged by Section 13 and 32
As per section 13, the Authority can inquire into complaints
regarding the manufacture or sale of any goods which does not conform to
Also the Authority can inquire in to complaints regarding the
production, manufacture, supply, storage, transportation or sale of any
goods and to the supply of any services which does not conform to the
standards and specifications determined under Section 12.
When a consumer purchases a product/service in the market, there is
always an implied warranty that the product will be reasonably fit for
the purpose that they are supplied. With regard to a service it is
presumed that the service will be provided with due care and skill.
A consumer complaint has to be forwarded to the Authority within
three months of the sale of such goods or the provision of the service.
When a consumer complaint received the Authority call observation from
the respondent on the issue and the type of redress that can be offered
to the aggrieved consumer.
This information is requested under Section 57. As per Section 57,
the Authority has the power to request to furnish any information, which
the Authority consider necessary for the proper implementation of its
A person who receives such notice has to disclose the information
within given period of time. If he fails to forward the information
within the given period of time the Authority has the power to prosecute
him for non compliance.
If the defective samples are submitted to the Authority with the
complaint, those samples are sent to obtain technical reports from the
relevant institutions. Expert evidence is generally obtained from the
Department of Government Analyst, Medical Research Institute and Sri
Lanka Standards Institute.
If the respondent accepts that there is a defect in the
product/service and willing to offer a fair redress to the consumer this
complaint can be settled without mush hassle. If the complaint cannot be
settled in this manner the Authority call both parties for negotiation
discussion. At this juncture Authority acts as a mediator to settle the
problem. There are two main objectives in a negotiation discussion.
1. Seek redress to the affected individual.
2. Inform the company to correct their erroneous practice/mistake in
order to avoid affecting other consumers.
Even though there is no legal binding, our experience shows that this
method is an effective means of finding solutions to consumer problems.
If the negotiation discussion fails and if the complaint is within the
specified time period of three months an inquiry will be conducted and
after an inquiry in to a complaint, the Authority is empowered to
redress the consumer in three ways.
1. Order the trader to replace the goods
2. â€śto refund the money paid for the product
3.â€śto pay compensation to the consumer
This order is communicated to the trader through registered post. If
the trader fails or refuses to pay the amount required to be paid within
the give period of time, the Authority can make an application to the
relevant magistrateâ€™s court. Then this amount can be recovered through
the magistrate courts and offered to the affected consumer.
Director Consumer Affairs and Information
Complaints handling activated
Action has been initiated to handle complaints received from
consumers in an expeditious manner, which has reduced the delays in the
The following are two cases which have been settled by mediation by
01. A motor cycle was purchased from a trade centre by paying the
full cost of Rs. 51,500. But the Trade Centre did not provide the
consumer with the necessary documents for registration at the RMV. The
CAA having discussed the matter with the owner of the Trade Centre was
able to help the consumer to collect the required documents.
02. A mobile phone was handed over to the owner of a Communication
Centre, from where it was brought for repairs which was within the
warranty period. However, the consumer had to pay Rs. 2,500 for the
repairs done. With the intervention of the CAA, the owner of the centre
agreed to refund the sum of Rs. 2,500 to the consumer.
List of products subjected to quality checks
The list of products which are subjected to quality checks under the
Import Inspection Scheme is as follows:-
The items are:
01. Skimmed Milk Powder,
02. Full Cream Milk Powder,
05. Soya Beans Oil,
06. Groundnut Oil (Peanut Oil),
07. Palm Oil,
08. Palm Olein,
09. Palm Stearin,
10. Sunflower Seed Oil,
11. Coconut Oil,
12. Palm Kernel Oil,
13. Corn Oil,
14. Seasame Oil,
16. Canned Fish,
17. Canned Fish Curry,
18. Brown Sugar,
19. Noodles (including instant noodles),
20. Rice Noodles,
23. Jams, jellies, Marmalades and Preserves - Homogenised preparations,
24. Fruit Squashes, Fruit Syrups and Fruit Cordials,
25. Fruit Concentrates,
26. Ready-to-serve Fruit Drinks,
27. Tomato Sauce,
28. Chilies Sauce,
29. Ice Cream,
30. Milk Added Drinks,
31. Bottled Natural Mineral Water,
32. Synthetic/Artificial Cordials,
33. Ordinary Portland Cement,
34. Baby Cologne,
35. Skin Powder for infants,
37. Toilet Soap,
38 Baby Soap,
39. Laundry Soap,
40. Safety Matches,
41. Mosquito Coils,
42. Mosquito Mats,
43. Conduits for electrical installation,
44. Rigid unplasticised polyvinyl Chloride pipes for potable cold water
45. Unplasticized polyvinyl Chloride pipe joints and fittings for
potable cold water supplies,
46. Polythene Water Storage Tanks,
47. Bicycle Tyres,
48. Bicycle Tubes,
49. Exercise Books,
50. Cotton Sewing Thread,
51. Spun Polyester Sewing Thread,
52. Protective Helmets,
53. Asbestos Cement Corrugated Sheets,
54. Asbestos Cement Flat Sheets,
55. Plain Steel Bars for the reinforcement of concrete,
56. Ribbed Steel Bars for the reinforcement of concrete,
57. Hot rolled, steel bars for structural and general engineering
i. Round bars
ii. Square bars
iii. Hexagonal bars
58. Hot rolled structural steel sections
i. U sections (channels)
ii. L Sections (equal and unequal angles)
iii. T Sections (tees)
59. Mild Steel Wire,
60. Cold Drawn mild steel wire for manufacture of wire nails,
61. Transportable welded Steel Gas Containers,
62. Wrought aluminum utensils,
63. Electric fans and regulators,
64. Ballasts for tubular fluorescent lamps,
65. Primary Cells and Batteries,
66. Lead-acid starter batteries,
67. Electric immersion water heaters,
68. Electric Hot Plates,
69. Electric Kettles,
70. Circuit breakers for over-current protection for household and
71. Residual current operated circuit breakers without integral over
current protection for household and similar uses,
72. Residual current operated circuit breakers with integral
over-current protection for household and similar uses (RCBOâ€™s),
73. Switches for household and similar fixed electrical installations,
74. Glow starters for tubular Fluorescent lamps,
75. Insulated bayonet lamp holders,
76. Household electric plugs, sockets-outlets and adopters,
77. 13-A fused plugs and switched and unswitched socket outlets,
78. Tungsten filament lamps for domestic and similar general lighting
79. Conductors in insulated cables and cords,
80. PVC insulated cables with copper conductors for electric power and
81. PVC insulated flexible cords,
82. PVC insulated electric cables 600/100V,
83. Vacuum Flasks,
84. Portland Limestone cement,
85. Blended hydraulic cement,
86. PVC-U fittings for soil and waste discharge systems inside
87. Motorcycle and scooter tyres,
88. Sanitary towels,
90. Roofing tiles,
91. Ceramic Tiles,
92. Cement Tiles,
93. Porcelain ware,
94. Galvanized steel pipes and fittings,
95. Chain link fence fabric,
96. Self ballasted lamps for general lighting services,
97. Leaf springs for automobile suspensions,
98. Radiator core,
99. Cables for motor vehicles,
100. Cables trunking.
Why a competition law?
Theoretically speaking, trade liberalisation is one of the most
effective measures to ensure competition in the market place and abuse
of market power. However, even this has its limits.
Imported goods cannot reach the customers directly and the well
entrenched market players way have a grip over the distribution systems
or channels, which way nullify the gains of liberalised trade.
Then there are goods and services which are not tradeable. There are
goods which are tradable only within a limited market, cement being a
classic example of this due to its bulby nature it is no economical to
transport it to distant markets. As a result even geographical segments
of a national market can be successfully monopolised.
Therefore, it is not surprising to see that while countries have gone
to more and more trade liberalisation over the last decade, more and
more countries have also embraced competition laws with many adopting
new laws after scrapping their old ones.
In the beginning of 1990 or so, there were number of countries with a
competition law. However, at present, the number is more than it was and
many more in the queue obviously there is a greater acceptance of the
fact that trade liberalisation may not always be a perfect remedy for an
abuse of market power.
Although a competition law may be quite narrow in its scope,
competition policy is much more broad and comprehensive in its scope and
tries to bring harmony in all government policies that may encourage or
adversely affect competition and consumers welfare. To put it
differently, ensuring competition is just a means to achieve the above
There are complex inter-relations between competition and other
public policies. This factor has a direct bearing on the extent to which
competition policy objectives can be pursued without being constrained
by or confliction with other public policy objectives.
Accordingly, even in the absence of a competition law a stated
competition policy, many of the related concerns can be addressed, at
least partially, if there are other polices, which are favourable to
In terms of Section 34 of the Consumer Affairs Authority Act No. 9 of
2003, the Authority on its own motion or on a complaint or request made
to it could investigate the prevalence of any anti-competitive practice.
In implementation of the above the Authority considers the following;
1. What does Anti-competitive practice mean?
In a nut shell
â€śPersons involved in the sale and supply of goods and services get
together to avoid competition among them to maintain the price for any
goods or services they wish to keepâ€ť
2. What is the nature of an Anti-Competitive Practice and how does it
Practices which will generally need investigations will be those,
a. Restricting the persons to whom goods are sold or from whom goods
b. Requiring purchaser of goods to purchase some other goods as a
condition of purchase;
c. Restricting a purchaser from acquiring or otherwise dealing in any
goods other than those of the seller or any other person;
d. Ensuring that the purchase or sale of goods or the services or the
tenders for the sale or purchase of goods is made only at prices or on
terms or conditions that have been agreed upon between the seller or
e. Granting or allowing concessions or benefits, including
allowances, discounts, rebates or credits in connection with, or by
reason of dealings;
f. Ensuring that the sale of goods is made on condition that the
prices to be charged on re-sale by the purchaser shall be the prices
stipulated by the seller unless it is clearly stated that prices lower
than those prices may be charged;
g. Limiting, restricting, or withholding the output or supply of any
goods or allocating areas or markets for the disposal of the goods;
h. Preventing or restricting the employment of any methods, machinery
or process in the manufacture of goods;
i. Excluding from a trade association any person carrying on or
intending to carry in good faith the trade in relation to which the
trade association is formed;
j. Ensuring the sale of goods at such prices as would how the effect
of eliminating competition or a competitor;
3. If Anti-Competitive Practice affects the following areas in any
form then Consumer Affairs Authority can intervene.
3.1 Competition in the production, supply or distribution of goods
3.2 Consumer prices
3.3 Cost of production of the goods
3.4 Quality and Variety of the goods supplied or services provided
3.5 The balanced distribution of industrial activity and employment
3.6 The internal trade or the public interest
If Anti - Competitive Practice Restricts the following events in any
form then again the CAA can intervene
4.1 The Entry of new Competitors into the market
4.2 Technical developments
4.3 Capital investment
Director - Competition promotion