Not everyone is happy about the new anti-trust bill, reports Gamal Essam El-Din When prices shot up last year, experts agreed on the culprit -- the devaluation of the pound. But then, as prices kept on rising, even as the dollar- pound exchange rate shifted six per cent in the Egyptian currency's favour, blame began to shift to businessmen and their monopolies. There has always been a consensus that an anti-trust law was a basic necessity to ensure fair competition in the local market. Monopolies, after all, have been one of the major stumbling blocks confronting Egypt's new free market system. And yet it has taken nearly 15 years for that anti-trust law to come into being, which it finally did via a People's Assembly vote on 17 January. When the first draft of the anti-trust law was put together 15 years ago, the private sector's contribution to the national economy was no more than 20 per cent; in fact, it was the government that was monopolising most of the economy. Today, with the private sector accounting for 75 per cent of the economy, the need for an anti-trust law has never been so compelling. The law that passed last week went through six months of intense debate at both the People's Assembly and the Shura Council. The 27-article law, known as the law on the protection of competition and the prevention of monopolistic practices, features a number of articles aimed at tightening control on monopolistic practices that could negatively affect free competition on the local market, and seriously reduce Egypt's export volume. According to Investment Minister Mahmoud Mohieddin, the steady rise in prices that accompanied the rapid growth of the private sector's role in the national economy (after long years of public sector domination) catalysed the law's emergence. Egypt's attempts to integrate into the world economy by joining the World Trade Organisation (WTO) and partnering with the European Union also played an important role in pushing the law through. Finance Minister Youssef Boutros-Ghali said the anti-trust law is the second of three laws aimed at regulating the local market. It was preceded by last year's intellectual property rights law, and will be followed by a new consumer protection law that's still in the making. The new law defines a monopoly as the practice enabling one company, or a group of companies that have merged together, to corner at least 25 per cent of a certain product or commodity's market share. The law, however, Boutros-Ghali said, "outlaws monopolistic practices, not monopolies." The oft- mentioned Ezz Steel Rebars Company is a case in point, the minister said. "Although [Ezz] controls around 70 per cent of the steel market, it is not monopolising that market because importing foreign steel is not banned," and thus buyers are free to choose between Ezz's products and those of other companies. Boutros-Ghali's justification may not convince those who made a furor in parliament over the past year accusing Ezz -- an influential member of the National Democratic Party and chairman of parliament's Budget Committee -- of exploiting his connections and status to dominate the market. According to Mohieddin, "as long as a company -- no matter how large its market share -- does not hamper the promotion of free and healthy competition in the local market," there's no problem. In fact, Boutros-Ghali said, it was important that strong companies exist so Egypt could better compete in the world export market. Supply Minister Hassan Khedr said the law distinguishes between companies dedicated to "pursuing innovation and upgrading quality, that do not aim to drive away other local market competitors, and those that aim to drive away competitors, with the objective of dominating the market and manipulating prices and quality." It is the latter, of course, that will be targeted by the new law, which establishes an Anti-Trust and Competition Protection Commission (ACPC), which will be affiliated to the cabinet. "The ACPC will have judicial powers to closely monitor the effect of any monopolistic deals on the local market, and take abusers to court," Khedr said. He cautioned, however, that the law also stipulates that the ACPC must obtain prior written approval from the cabinet before it takes monopolisers to court. Businessmen are worried about the ACPC using its powers in an arbitrary way that might scare investors away. Leftist MPs, meanwhile, raised concerns that businessmen would improperly manipulate the ACPC. MP Abul-Ezz El-Hariri accused Prime Minister Ahmed Nazif's government of being in cahoots with the business community, and said the only way to ensure ACPC's independence was for it to be affiliated to the Central Auditing Agency rather than Nazif's cabinet. El-Hariri was also wary of the fact that the ACPC's budget would mainly be provided by donations from private institutions and businesses, calling for the state to step in with full funding so as to avoid the new body falling under the business community's control. Khedr defended the ACPC, saying that although it was nominally affiliated to the cabinet, it would also be completely independent, composed, as it was, by representatives from all market players. "Three of its members will be representing the government," he said, "and 13 will be representing the Federation of Egyptian Industries, consumer protection societies and investor associations." Khedr also indicated that private donations would only be complimentary to government funding. Business-oriented and leftist MPs joined forces to attack the law's Article Nine, which states that a number of state- owned strategic public utilities be exempted from the law. Boutros-Ghali indicated that these include the water, gas, electricity and petroleum authorities. "The government wants this article to ensure that poor and limited-income classes continue to enjoy easy and affordable access to these utilities," he said. The law also empowers the prime minister, Boutros-Ghali said, with pricing strategic products like pharmaceuticals, petroleum products and other subsidised goods, so as to protect them from unfettered market forces. Business- oriented MPs said such a stipulation was in stark violation of the law's liberal objectives, and disrupted market forces to boot. MP Mustafa El-Sallab, who runs a highly successful ceramics business, said most public utilities should no longer be deemed "strategic" since they were currently operating as for-profit companies. Mohieddin, however, said public utilities would only fall under the law's jurisdiction if they were privatised or turned into holding companies. Leftist MPs asked Mohieddin, Khedr and Boutros-Ghali why the telecommunications sector should also be protected from the law. "While the fixed phone lines market is monopolised by one company (Telecom Egypt), mobile phone service is monopolised by just two companies," El-Hariri said, "which are exploiting their monopoly to impose higher prices on consumers." Khedr attributed the telecom sector exemption to the existence of a Telecommunication Regulatory Authority, which already served as the sector's watchdog. MPs of all political stripes were also up in arms over what they termed the law's leniency when it comes to actually punishing monopolists. Only fines, and not jail terms are stipulated. According to Boutros-Ghali, this fit with international norms so as not to "frighten foreign investors away from the local market". Penalties range from LE30,000 to LE1 million, Boutros-Ghali said. Unconvinced, leftist MPs charged that monopolists are as dangerous to society as drug traffickers, and that the government must be merciless in standing up to them. Eventually, the MPs managed to press Boutros-Ghali and the other ministers into raising the maximum fine to LE10 million. While some, like El-Hariri, argued that the law should have been drawn up earlier, other MPs said that it was better late than never. El- Hariri's view was that the damage had already been done via the major developments in the local market in recent years, "the mergers, strategic alliances, buyouts, acquisitions and takeovers that took place with no regard for protection against monopolistic practices." El-Hariri was also pessimistic about the Nazif government "actually taking action against monopolistic businessmen".
