Presentation on theme: "Hardcore Cartels Within The Scope of The Egyptian Competition Law (The Cement Case) Bradford University, U. K January 2010 Rostom Omar."— Presentation transcript:
Hardcore Cartels Within The Scope of The Egyptian Competition Law (The Cement Case) Bradford University, U. K January 2010 Rostom Omar
The Egyptian Competition Law addresses three types of anticompetitive practices: 1.Horizontal Agreements (Art. 6) 2.Vertical Agreements (Art. 7) 3.Abuse of Dominant Position (Art. 8)
Elements of the violation: 1- Agreement or contract: verbal or written (Article 10 of the Ex. Reg.) 2- Between competitors: persons who have the ability to carry out the same activity in the relevant market at the present time or in the future (Article 9 of the Ex. Reg.) 3- In the relevant market: relevant product + geographical area 4- Exhaustive list of prohibited agreements or contracts: price fixing – market allocation – bid rigging or collusive tendering – limiting production or services.
Price Fixing Increasing, decreasing or fixing prices of sale or purchase of products subject matter of dealings. Determination of price shall cover due returns on instalments, guarantee duration, after sale services and other contractual conditions that influence the purchasing or selling decision.
Market Allocation Dividing product markets or allocating them on grounds of: geographic areas, distribution centres, clients or goods base, market shares, seasons or time periods.
Bid Rigging Coordination with regards to proceeding or refraining from participating in tenders, auctions, negotiations and other calls for procurement. Indications that are taken into consideration for the existence of coordination are, in particular, the following: oSubmitting similar offers (prices or offer conditions). oAgreeing on the person who will submit the offer. oAgreeing on the submission of fictitious offers. oAgreeing on preventing a person from submitting offers.
Limiting Production Restricting the manufacturing, production, distribution or marketing or limiting the distribution of services in terms of its kind or volume or applying conditions or restrictions for their availability.
Standard of proof 1.Criminal case: Beyond reasonable doubt. 2.Burden of proof: ECA 3.Evidence: All types of evidence including legal and economic analysis are accepted before courts 4.Leniency: Partial leniency program subject to the discretion of the court (no bargain with ECA).
The Cement Case Facts: Market Players o9 market players Relevant market oRelevant product: Ordinary Portland Cement (OPC). oGeographic area: Egypt (No OPC imports since 2004). Study duration o2002 – 2006 (including indicative period before the entry into force of the law in May 2005, necessary for economic and legal analysis). Violations: oThe market study and the data supplied by cement producing companies indicated their violation to articles 6/A & 6/D of the law.
Factors facilitating agreement among market players in the Egyptian market: 1.Product homogeneity (unified specs). 2.Limited no. of market players (9 market players). 3.Transparency among competitors (monthly report, prepared by government, including data on production, sales and export); this report is distributed among the companies. 4.Direct communication between sales & marketing officials of the cement companies formally & informally (witnesses). 5.Demand inelasticity
Indicators assuring agreement between companies to raise prices and limit marketing : 1.The agreement resulting from the cement companies meeting with Minister of Public Enterprises in March 2003, allocating a specific market share for each company regarding local sales depending on the available production capacities for each company at that time and raising prices. Just after the meeting the average price has increased and prices have been increasing ever since.
Indicators assuring agreement between companies to raise prices and limit marketing (CONT.): 4.Local Sales & market shares –A steady increase in local sales from one year to another. –Stable market shares all over the study period, despite the increase in annual local sales. –This indicates that the 2003 agreement is still prevailing and that the Companies aren't competing with each other to increase their market shares despite, the availability of unutilized capacities in large Companies, and substituting this by increasing prices collectively.
Indicators assuring agreement between companies to raise prices and limit marketing (CONT.) : 5.Non stable export sales shares The Companies export shares are very different from a year to another among different companies. This shows that there is no agreement to limit the marketing of the cement abroad and the agreement is valid only in the local market.
Indicators assuring agreement between companies to raise prices and limit marketing (CONT.) : 6.Production capacities utilization The increase in the production capacities utilization of the companies from a year to the other did not reflect on the structure of the companies market shares of local sales, which are stable as they were since 2003 agreement.