The African Continental Free Trade Area ("AfCFTA") was officially launched on 1 st January,2021. The purpose of the AfCFTA is to create an intra African single market for goods and services by progressively eliminating tariffs and non-tariff barriers to trade. The AfCFTA is regulated by the Agreement Establishing the African Continental Free Trade Area (the "Agreement"). 54 African countries are currently signatories to the Agreement with 36 signatories ratifying the Agreement.
The Agreement comprises three frameworks: An overarching establishment of the African Continental Free Trade Area, a Protocol on Trade in Goods, and a Protocol on Trade in Services. The Protocol on Trade in Goods outlines the general rules by which goods can be traded in the free trade area. The Protocol of Trade in Services also outlines the general rules to facilitate trade in services across the free trade area. These protocols are starting points for countries to negotiate other trade related issues such as intellectual property, investment and competition. This article highlights reasons the competition law framework in Ghana must be amended in light of the AfCFTA.
Overview of Competition Law
Competition referred to in this article is "a relationship that exists among any number of firms engaged in selling goods or services of the same type at the same time to an identifiable group of persons". Competition law or antitrust law is essentially the law that regulates and fosters competition between firms in the same market. Competition law helps to provide similar conditions for businesses in the marketplace while creating space for upcoming smaller businesses. The goal of competition law is for consumers to be offered goods and services at favourable prices.
Importance of Competition Law
Competition law is important for the survival of local businesses. Without competition law, the market will be governed by the "survival of the fittest rule" where big firms eliminate competitors and monopolise the markets. Competition law does not only benefit small businesses, but it also seeks the interest of the consumer. When firms monopolise the market of a product or services,consumers are usually forced to pay exorbitant amounts for the product or service that could have been offered for less. Consumers are also faced with limited choices. Monopoly in the market also increases complacency as firms can offer low quality products or services without worrying about competition or losing customers especially when offering essential services.
Globalisation & Competition Law
Globalisation has expanded the market potential of firms beyond their municipal states. Travelling and transporting goods has become easier over the years, supporting international commerce. Economic communities such as the European Economic Area, the South Asian Association for Regional Cooperation and the AfCFTA are convenient markets for firms to trade internationally without the encumbrance of high tariffs. International trade without the intervention of competition law may cause the demise of small local businesses and lead to the dominance of international conglomerates and corporations.
Importance of Competition Law
Competition law is important for the survival of local businesses. Without competition law, the market will be governed by the "survival of the fittest rule" where big firms eliminate competitors and monopolise the markets. Competition law does not only benefit small businesses, but it also seeks the interest of the consumer. When firms monopolise the market of a product or services, consumers are usually forced to pay exorbitant amounts for the product or service that could have been offered for less. Consumers are also faced with limited choices. Monopoly in the market also increases complacency as firms can offer low quality products or services without worrying about competition or losing customers especially when offering essential services.
Competition Law in Ghana
The Protection Against Unfair Competition Act, 2001 (Act 589) (the "Act") is Ghana's effort to legislate competition and proscribe anti-competitive practices. Comprised of just ten major provisions, the Act summarily addresses a few anticompetitive practices.
- Section 1 of the Act frowns upon using trademarks, trade names or other identifiers that would confuse or is likely to be confused with another's enterprise or its activities.
- Sections 2, 3 and 4 address issues affecting an
enterprise's reputation either by damaging its goodwill or
reputation, misleading the public or discrediting another
enterprise or its activities.
- Section 5 forbids using secret information obtained illegally in a manner contrary to honest commercial practices.
- Section 6 of the Act also forbids actions that breach international obligations that Ghana is subject to.
- Section 7 constitutes a general provision blanketing any act or practice that is contrary to honest practices as an act of unfair competition.
Honest practices or honest commercial practices are not defined in the Act. A breach of the provisions in the Act entitles the person against whom the breach is committed to civil remedies such as: (a) An order of injunction to prevent the act or further acts of unfair competition; (b) A provisional order to prevent unlawful acts or to preserve relevant evidence; (c) The award of damages as compensation; and (d) Any other remedy as the court may consider fit to order.
The Act is deficient and cannot effectively regulate competition in the Ghanaian market. Consequently, the Competition and Fair-Trade Practices Bill was drafted in 2004 but has failed to be enacted till date. Aside from lacking provisions to regulate more anticompetitive practices, the Act also neglects to establish a good enforcement mechanism.
The Act leaves its enforcement to affected business owners or persons and the courts. In Georgina Achiaa v Don Emilio Company Limited , the court held that infringing on the distribution rights of a licensed sole distributor amounted to an unfair trade practice under section 7 of Act. Although this decision lends some support to the Act, the Act as it is fails to protect small business owners who may not have the resources to hire a lawyer to seek redress in court. Furthermore, this enforcement mechanism is only available to persons who are damaged by or are likely to be damaged by the unfair trade practice. It is unclear whether 'persons' includes consumers as it is not defined in the Act. Regardless, the Act does little to prevent the formation of cartels or prevent competitors' anticompetitive agreements leading to monopoly and price fixing that unduly burden the consumer.
Good competition legislation creates a competitive market where businesses are given equal opportunities to carve their niche in the market by offering quality goods and services to consumers at the best prices. Systematic checks and processes, commissions and institutions are useful mechanisms to enforce competition. The purpose of competition is to benefit businesses and consumers. Unfortunately, it appears that the Act only considers how some unfair trade practices may affect businesses without considering the consumer.
Competition in the EU
The EU has been in existence since 1993 and the European Economic Area since 1994. Competition was addressed in the Treaty on the Functioning of the European Union (the"Treaty"). The first article on competition in the competition framework of the Treaty prohibited agreements, decisions or practices that promoted price fixing, limiting development and production, sharing markets, placing trading parties at different competitive advantages by applying better conditions to one over the other, subjecting parties to a contract to supplementary obligations which have no commercial bearing or are usual to the subject of the Agreement. Thus, parties in an agreement, are bound to the existing EU competition rules and are thereby prohibited from abusing market dominance positions and carrying out anti-competitive practices.
The Treaty deems decisions or agreements made in contravention
of the above automatically void. The Treaty then proceeds to
prohibit monopoly by banning abuse by undertakings in a dominant
position. State aid that distorts or threatens to distort
competition by granting undertakings or productions an unfair
advantage in the market is also prohibited State aid that does not
fall under the above is welcomed. The remainder of the framework
addresses developing regulations and enforcement strategies to give
effect to the substantive articles on competition in the Treaty.
Article 106(1) prevents member states from enacting or maintaining
any measure contrary to those in the Treaty. The EU is also
intentional to include competition policies in international
treaties and agreements it has with other continents and countries
are not members of the EU.
Unlike Act 589, several factors contribute to the making and
enforcement of competition policies in the EU. Chapter I and II of
the UK Competition Act 1998 prohibits anti-competitive behaviour
that may affect trade between EU member states. In effect, both EU
and UK laws prohibit any arrangement, agreement or concerted
business practices which will significantly prevent, distort or
restrict competition, or where this is the intended result, which
may affect trade within the UK or EU. The consequences of a
breach/infringement of Article 101and 102 (Chapter I&II) may
include, but not be limited to, fines of up to 10% of group global
turnover, render agreements
unenforceable/void, mass action suits from consumers or competitors or court injunctions and the disqualification of individuals from acting as company directors as well as risking prosecution under the criminal cartels' offences.
The European Commission oversees the enforcement of competition rules in the EU. The European Parliament has two competition committees that help develop competition policies and strategies. The European Court of Justice interprets competition law to ensure a uniform application throughout the EU. The European Social and Economic Union which is constituted of civil society unions like trade unions that highlight issues and opinions contributing to the decision-making process of competition policies. The Commission allows citizens of State Parties to lodge formal complaints of anticompetitive practice for further investigation. There is much that Ghana and the AU can learn from in developing a competition law framework and enforcing it from the EU's example. Competition law and compliance is highly valued by the EU for good reason. Ghana and Africa can learn some lessons from the EU which can be applied to our unique markets.
Why Competition law is important in the Age of AfCFTA
As part of the Phase II operationalisation of the Agreement, state parties will be expected to submit competition policies and strategies demonstrating how competitiveness will be handled in their jurisdiction. During the AfCFTA Start of Trading ceremony, it was confirmed that eleven state parties had brought forward their competition strategies and have earned approval. The deadline for the completion of negotiations on Phase II is 31 st December, 2021.
The Act neglects to fully address anticompetitive practices such as price fixing, abusing market dominance, trade association rules and exclusive dealing making and others. Price fixing includes the use of predatory, excessive and discriminatory pricing methods or anticompetitive trade association rules such as tying; which stipulates that a buyer wishing to buy one product must purchase some or all their requirements for a second product from the dominant supplier. The abuse of market dominance refers to instances where the dominant market shareholder or companies with over 50% market share or dominance imposes unfair trading terms and conditions.
The AfCFTA will open the markets of state parties populated by
SMEs to more developed stateparties with giant corporations. To
ensure fair competition, each state party must have competent
competition laws and strategies to enforce same. There have been
many calls over the years for a more comprehensive competition
legislation especially with Ghana's growing economy and the
flooding imports of cheaper foreign products which have a high
propensity to drown domestic products. Several local factories have
been forced to close down because they could not compete with the
cheaper products imported from countries with cheaper costs
production and those that enjoy government subsidies. It must be noted that, even indigenous products like African print cloth are now dominated by foreign businesses and foreign manufacturers. The lack of a national competition policy acts as a disincentive for Ghanaianbusinesses to innovate to be able to compete with foreign businesses. The commencement of the AfCFTA may worsen the plight of the Ghanaian local industry if due action is not taken considering the fact that 88% of businesses in Ghana are considered small and medium scale.
The current law is insufficient to regulate competition in Ghana. Good competition policies coupled with enforcement can help Ghana regain more control over its market and combat the unwanted effects of high competition that the AfCFTA would bring. Since the AfCFTA is now officially in operation, it has become even more urgent for Ghana to review and upgrade its competition framework by amending to provide the required protective mechanisms for the SMEs. A good competition framework would prevent the Ghanaian economy from being controlled by businesses with foreign identities or allegiances to the detriment of Ghanaian businesses or consumers. Ghana's competition framework must delicately balance protecting domestic businesses and making Ghana business friendly to other State Parties within the EU.
Written by Sharon Okai a Legal Intern at Koranteng & Koranteng Legal Advisors
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.