Comparing Apples and Oranges – the problem with the Competition Act 2012 – (February 2013, Issue 1)

February 6, 2013, by Junayed Chowdhury

The Government of Bangladesh has finally enacted Competition Act 2012 (“the 2012 Act”) to regulate the antitrust regime. Before this enactment, competition laws in Bangladesh remained fairly weak and the market has always been plagued with a number of distortions like market syndicates, unfair spiraling price hikes, abuse of dominant positions, cartels and so on, resulting in endless sufferings for the consumers and hampering overall market efficiency.


The 2012 Act prohibits anticompetitive activities by restricting monopoly, oligopoly and misuse of dominant position. Section 16 of the 2012 Act restricts enterprises and groups from abusing its dominant position. The 2012 Act defines “dominant position” as a position of strength enjoyed by an enterprise, in the relevant market, which enables it to operate independently of competitive forces prevailing in the relevant market, or affects or moves its competitors or consumers or the relevant market in its favour.  To determine whether an enterprise actually enjoys a position of strength, the Competition Commission at first has to identify the relevant market of that enterprise.


The “relevant market” under the 2012 Act means (a) a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use; (b) a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighboring areas. In other words, it can be said that a relevant market mean the relevant product market (RPM) and/or relevant geographical market (RGM).


The 2012 Act, however, remains silent as to the factors which the Competition Commission shall take into consideration in order to determine a relevant market (or a RPM or RGM). It is important to determine the RPM or RGM because if the RPM or RGM is widely defined, there is less likelihood that a particular enterprise will be dominant. Conversely, if a RPM or RGM is narrowly defined, the likelihood of dominance would increase.

Let us take an example. A, a large Bangladeshi packaging firm is being taken over by an USA company B which is a controlled foreign company of C, another US company. C is a global leader of packaging operations. C holds 85% of D, a prominent Bangladeshi packaging firm engaged in the manufacturing of light metal containers for fish and meat. C proposes to transfer its 85% shares of D to B. The result would be B directly and C indirectly (through B) would be holding significant market share in Bangladesh packaging industry.


Would the proposed takeover of A by B be in violation of section 16? Would the proposed takeover amount to abuse of dominant position by C? It could be argued that when B acquires A, C, the parent company of B would be in a dominant position in Bangladesh in two separate product market – light metal container for meat product and light metal container for fish product. It could also be argued that here, the RPM is not light metal container for meat product or light metal container for fish product but the entire packaging market as a whole.



What is the RPM here? More importantly, how would the Competition Commission determine the RPM here? What are the factors the Competition Commission would take into account in determining the RPM here? How would the Competition Commission determine the cross-elasticity of demand and supply? The 2012 Act is completely silent on these issues.


Factors such as physical characteristics or end-use of goods, price of goods or service, consumer preferences, exclusion of in-house production, existence of specialized producers, classification of industrial products are relevant in determining a RPM. On the other hand, factors such as regulatory trade barriers, local specification requirements, national procurement policies, adequate distribution facilities, transport costs, consumer preferences can be taken into account when determining a RGM. The 2012 Act does not specify any of these factors.


Thus, the 2012 Act has failed to address some of the basic yet important features of antitrust laws that are consistent throughout the world. Nevertheless, we welcome the 2012 Act and hope that the Government would make the necessary rules under the 2012 Act to address these important issues.


Written by Junayed Chowdhury, Managing Partner  


† Disclaimer: The opinions and comments expressed in this Blawg are not to be regarded or construed as legal advice by and from Vertex Chambers or any of its members. It is highly advisable that any person should seek independent legal advice before relying on any of the contents of this Blawg.