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When attempting to regulate prices in a market, there is only so much you can do by relying on administrative directives to cauterize a spate of price rises. With the Ghana cedi currently in an almost free fall against other major trading currencies, and the incidental price hikes in goods and services that usually come with it, the price of cement hovers above GHS 100 at the time of writing this article. In response, the Minister for Trade and Industry directed the Cement Manufacturing Development Committee (CMDC) to intervene immediately.
The issues of interest to most are “What will this intervention look like, and to what extent will the intervention result in a sustained price decrease and the protection of consumers”.
Both issues underscore the state’s recognition of a need to protect consumers from excessive price levels. While cement producers easily attribute these prices to inflation and by extension, the failure of the state’s monetary policies, an explanation might be found in competition (anti-trust law).
This article suggests that a legislative instrument regulating the activities of cement manufacturers and distributors is ill-equipped to guard against exploitative behavior, if these high prices may be characterized as such, by firms in that industry.
Instead, a comprehensive competition law regime provides the frameworks for achieving the ends of protecting the welfare of (cement) consumers.
As has been shown previously, competition law primarily seeks to protect the process of competition and the ultimate consumers. The pathways to arrive at this end are preventing abuse of market power and collusive acts between market competitors, depending on the actions in question.
The world over, the cement market has earned notoriety for its cartelistic ways. While the word cartel evokes imagery of Southern/Central American groups of gangs, dealing in drugs and committing unimaginable violence, the word is also used in competition law to refer to an agreement between two or more economic units to restrict competition.
The EU’s law prohibiting cartel activities prohibits such agreements which have as their object or effect, the fixing of prices, limiting production, and sharing markets, amongst others.
In the USA, the Sherman Act prohibits arrangements which are in restraint of trade. The preponderance of cartels in the cement industry has been attributed to the inherent characteristics and incentives in the industry. The reasons given here are the heavy concentration of the industry, the homogeneity of the product, and the firm elasticity.
If the cement industry in Ghana is presumably operating with the same motivations as its sister companies around the world, and there are enough reasons to believe so given the presence of multinational corporations in the industry like Dangote and Heidelberg, the approach to protecting consumers from excessive prices cannot be devoid of market-based analysis.
In most countries with competition law enforcement, there have been successful enforcement cases brought against cement manufacturers. The two aforementioned firms for instance have been found in breach of anti-cartel provisions of the relevant competition laws in South-Central Africa and Germany respectively.
Despite having a competition and consumer protection law drafted as far back as 2006, Ghana’s parliament has yet to pass the bill into law. In the interim, different statutory authorities are utilizing regulations to protect consumers in a sub-optimal manner that has in some instances, resulted in price hikes while protecting overall competition in that industry.
For a country with a bitter experience with price settings dating back to the military days of the 70s and 80s, the proposal to set prices through a constituted board of civil servants and technocrats has not assuaged the country’s generational trauma.
Locating its power to set prices under Rules 1 and 2 of the Ghana Standards Authority (Manufacture of Cement) Regulations, 2023, the Minister for Trade is now pushing for a further criminalization of non-compliance with provisions issued under the legislative instrument.
This article does not argue against price setting or economic regulation, if we can term the ministry’s actions as such, per se. There exists a moral and in some instances, economic argument to fix prices. In fact, economic regulation is globally accepted, even in capitalist countries, as a way of state intervention to correct market failures.
hat is being proposed by the LI seems to have reflected this end. The point being made here is that with the wealth of experience across the world on how to interrogate the activities of the cement industry, a more tried and tested option is available.
By looking to examples in other jurisdictions where the rigorousness of competition law has been able to evince the colluding acts of economic undertakings (firms, if you will) to fix prices, carve up markets to deny consumers of the benefits of competition, and some instances, limit production to drive up prices, this article argues in favour of competition law.
In South Africa, the Competition Commission was able to show colluding activities between some of the country’s leading cement manufacturers. Econometrics analysis showed the cartel activities resulted in a 19% overcharge of consumers. In Germany, the price overcharge was found to be about 20%.
Setting a price ceiling certainly has its utility, especially in emergency times, as seen around the world during the COVID-19 pandemic. Doing so in “normal times” is sure to result in pushback from firms, especially when they have a cover under the excuse of currency depreciation and inflation.
To rebut that, the ministry would have to continuously show that the proposed price ceiling reflects a price that is not excessive, a potentially subjective process that is susceptible to political capture. If the ministry instead utilizes competition law, what it would be doing is investigating the firms and their umbrella association, the Chamber of Cement Manufacturers Association Ghana, to prevent collusion in restricting output, fixing prices, or any other activity, ostensibly in restriction of trade. Doing so would be a fitting first step in Ghana’s journey towards a competition law jurisprudence.
Source: Shafic Osman
