FTC – doing things the right way

Fair and open competition in TT’s markets is a good thing.

When competition is fair, it helps businesses grow, prompts innovation and productivity, and it gives entrepreneurs incentive to perform at their best – and most of all, it protects the consumer and makes sure they are given the best quality product for the best price.

But there is a right way and a wrong way to trade in an open market and some businesses may be doing it wrong. The TT Free Trading Commission (TTFTC) is here to teach TT business the difference.

The TTFTC is the TT chapter of the worldwide network of independent statutory bodies which educates on and enforces practices of free trade and competition in business. It was given its full complement of legal powers when the Free Trading Bill of 2006 was fully proclaimed on February 10. This means they will be able to investigate matters and complaints of unfair trading practices and suggest reprimands through the civil courts.The consequences of infringement can be major, including significant reputational damage, unenforceability of agreements, risk and costs of investigation and ultimately, significant fines being imposed – up to ten per cent of total annual turnover.

However, in an interview with Business Day, chairman Dr Ronald Ramkissoon and executive director Bevan Narinesingh explained that the office’s function is not that of an enforcer, but an educator and advocate.

“It is not only the investigative part of it,” Narinesingh said. “It is to promote and maintain a fair marketplace in TT. We go out to various stakeholders and explain the benefits of competition – how competition leads to more competitive prices, higher quality goods and service and a more efficient and effective marketplace in TT. It is not only the investigative part of it.”

The Fair Trading Act, under which the FTC operates, was passed in part in 2014. This was when Narinesingh was appointed executive director and Ramkissoon became a member, and then chairman in 2018. But in 2014, they didn’t have the power to investigate, so they focused on the educating businesses on the right way to carry on free trade in TT.

Now with the act fully proclaimed, they intend to use their full complement of investigators and a fully functional board with years of experience to educate in the first instance, and investigate and implement fines if some businessmen refuse to listen.

Along with Ramkissoon, former senior economist at Republic Bank and manager of its economic intelligence unit, and Narinesingh, former Caricom senior legal officer, the board selected to undertake the task of teaching TT fair trade is a mix of lawyers and representatives of industry, supported by a staff that ensures the task of educating businesses is met.

Under the act, the commission has the duty to educate businesses and the general public on fair trading practices, inform them of their rights and obligations, to undertake and publish reports regarding matters of interest to consumers, and assist associations and bodies in promoting best practices for fair trade.

In addition to investigations, the FTC can also summon and examine witnesses. It can also issue summons for files and documents of any business with respect to an investigation. If the evidence is not provided they can commission an enterprise – like the police – to take the necessary measures to retrieve that information.

But its powers go only so far. The Fair Trading Act does not apply to the securities industry, telecoms, the banking industry, professional associations and collective bargaining situations, and intellectual property.

In essence, an anti-competitive practice is one that would give one or a group of companies an unfair advantage in a market that would affect another company’s ability to fairly engage in open competition in the market. Under the act, practices like price-fixing, bid-rigging, group boycotts, market-sharing and output limitations are all considered unfair practices.

These practices substantially lessen competition, but ultimately hurt the consumer, who deserves to be able to choose from the widest availability of products of any market at the most competitive price.

“For instance, if two entities decide, 'Well, you can take the Tobago market while I take the Port of Spain market,' that I call market sharing. That is anti-competitive,” Narinesingh explained. “If you decide on your own to sell in one area because of market prices and other factors, then that is your prerogative, but that cannot be an agreement.”

Other practices include price fixing, which involves agreements between entities to agree on one common price, to ban or limit discounts, or agree to hike a price much higher than what it would be under normal conditions.

There is also abuse of monopoly power, which involves an entity that holds40 per cent or more of a market share using its influence to prohibit fair competition among other entities.

“If the entity is dominant in a marketplace they still have a duty to try to encourage competition. So, if they try to make contracts subject to certain conditions – for instance, if you are in a dominant position and you make a contract saying someone can only by a product from you or you will terminate the contract – unless there is a justifiable reason for that, it is an abuse of dominant position.”

Mergers grossing higher than $50 million are under FTC jurisdiction as well. The act says mergers exceeding $50 million need to be audited and approved by the FTC. Mergers such as these could restrict or distort competition, so the FTC examines the justification for the merger and tries to find out if it would have any anti-competitive effects, then seeks to implement either structural or behavioural changes that would remedy the effects.

The FTC also looks into a business if a complaint is made against that business at the request of the Minister of Trade, by communication from Caricom or at their own initiative. The commission then gathers evidence through market analysis, information collected by request or offered by the complainant, formal investigation or hearings.

“Everything that we bring would have to be based on data as well as evidence so it is a mixture of economic data to support the argument we are making and anything to support the legal aspect of it. Some of it may be circumstantial, but we leave it up to the courts to decide.

"Very rarely would we see a piece of paper where five different entities agree to something. Our evidence-gathering will be based on what the data is showing for different entities. We would say these entities are similar, they are part of the same trading foundation, they tend to be meeting – how all of a sudden would certain prices be the same?

"So we would bring that case.”

Even when a business is found in breach of the act, or operating unfairly in the market, it is not punished in the first instance. The FTC issues a report, which may involve taking the matter to court, but the commission first sends a letter of notification to the business and gives them a timeframe in which to change their practices.

“I think some of the times people do things because that is the way they were doing business all the time. So I don’t think that businesses would come out to breach legislation; they were doing things the same way for 50 or 100 years.

"What we are here to do is change that. We want to tell them you may have been doing this before, but you can’t do it now.”

If the FTC’s case is successful in the courts, businesses could lose up to ten per cent of their profits in fines.

“And that could be a hefty fine,” Narinesingh pointed out. “Imagine a business making $50 million in profits – ten per cent of that is $5 million.”

The fines may not be the only punishment. Companies could also face significant reputational damage, or incur the cost of investigation, and may not be able to enforce agreements and contracts.

Narinesingh said the FTC’s role in the business community could improve TT’s ratings when it comes to ease of doing business, as an independent body that will and advocate for fair trade.

“When it comes to ease of doing business, one of the areas we are not strong in is the institutional aspects. We need strong institutions. When foreign investors are looking for places to do business, they have to do a checklist on certain things. Once marketers try to promote TT and they indicate the laws we have and the kind of agencies you have to at least give some measure of protection, it could, indirectly change those standings.”

Ultimately the role of the FTC is to assist errant businessmen change their attitude and do business the right way.

“It is a change in conduct, if what you are doing is indeed anti-competitive. It is about how you conduct yourself in meetings: what you are supposed to say, what should be happening in a meeting. We are here to help,” Narinesingh said.

“We have gotten and continue to get help from the business community and we are here to encourage business to follow the proper business practices,” Ramkissoon added.