Currently, Kenya is faced with sugar shortage. This is
despite the fact that our own sugar factories are closed due to
underproduction.
The shortage is an official one created by cartels in order
to increase prices and bring to the market their own contraband.
The key is that competitors agree among themselves how the
market will operate, rather than allowing competitive market forces to work.
This may be in the form of agreed selling or buying; agreed
minimum prices; agreed formula for pricing or discounting goods and services; agreed
rebates, and allowances or credit terms.
In Government tendering, you find one contractor getting all
the bids to quote or two or more companies agree they will not compete
genuinely with each other for particular tenders, allowing one of the participants
in the agreement to win the tender.
Collusive tendering is a dangerous form of anti-competitive
behavior, as competing businesses choose a winner while the others
deliberately bid over an agreed amount, which ensures the selected bidder has
the lowest tender and also helps to establish the illusion that the lowest bid
is indeed competitive.
Competitors agree to take turns at winning business while
monitoring their market shares to ensure they all have a predetermined slice of
the pie.
In competitive markets, producers compete by driving down
prices, but competition may also compel them to innovate, leading to increased
productivity and economic growth.
In contrast, a monopoly producer may have incentive to
neither decrease price nor innovate.
Output controls, decided on between companies, can occur in
the form of production or sales quota arrangements that involve an agreement
between competitors to limit the volume of particular goods or services
available on the market; they have the effect of inflating prices in the
market.
Output restrictions occur when the participants in an
industry agree to prevent, restrict or limit supply. The purpose is to create
scarcity in order to increase prices (or counter falling prices) while also
protecting inefficient suppliers.
Community, consumers, businesses and even governments can be
forced to pay higher prices for goods and services. Cartels also distort
economic markets, and serve to slow innovation; after all, companies charging
abnormal prices have little incentive to spend money on research and
development.
The "fighting of cartels" is given a high priority
in Kenya. Cartels that damage the interests of consumers commit a very serious
form of economic crime.
However, identifying, detecting and fighting cartels are a
difficult task that requires a combination of legal and economic competencies.
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Market economy and free trade promote growth and prosperity
in structured market. There is need to co-operate over the frontiers in order
to achieve more effective functioning of markets.
There are, however, different views on how cartels could be
defined and detected and on what instruments competition authorities should use
to fight cartels that are detrimental to consumers.
Serious anti-competitive practices are, almost by
definition, kept behind locked doors. Competition Authority of Kenya has
different ways and means to collect the necessary evidence that could bring
these harmful practices to an end.
Thus, an integrated cartel impact assessment can help to
more proactively combat cartel agreements on the market and improve the
economic welfare of the country.