By: Faris Al Hashmi
MUSCAT: Experts say the Competition Protection and Monopoly Prevention Law has set an important basis by defining free competition, but true implementation will require executive agencies to adapt to a new role.
However, they warn that powerful companies may pose a challenge to authorities.
Jamal al Nofali, a lawyer at the Oman Arab Bank said the authorities would face a challenge from large, foreign companies who have experience with laws.
“The law should be applied first and foremost on these big [foreign] companies. They are the most capable of practicing monopolisation and are the prime beneficiaries of it,” he said.
“These companies will find many ways to circumvent the law and avoid its application. We are still in the beginning stages and the follow up and tracking these companies has yet to begin.”
“The law fulfilled an urgent need to deal with big problems plaguing the Omani economy,” said Nofali. “And the biggest problem is monopolisation, which consumers and other companies suffer from alike. The economy is still reeling under the control of certain companies and families.”
Almukhtar al Abri, economics professor at Sultan Qaboos University, said the law (issued on November 30, 2014) represented an important first step by clarifying market structures.
“The law has provided a broad legal framework of a free market,” he said. “Generally speaking, the law defines what actions or behaviour is considered monopoly or leading to unlawful market concentrations.”
He said this would give a legal basis to determine if markets are subject to monopolistic practices.
“The law will help establish what is referred as the ‘contestable markets’,” Abri said. “This means that the law will provide the legal rights to enter and compete in any market.”
The law defines domination as having control or influence of 35 per cent of a market both sales and supply, according to Bruce Palmer, managing partner at the law firm Curtis Oman.
In a report issued in December, Curtis was optimistic about the effect the law would have on the image of the country.
“The implementation of the law is certainly encouraging from the perspective of foreign investors who are more likely to consider investing in a country which values and protects free competition,” it read.
But analysts said there were also complexities in the understanding of free markets which could pose a challenge for the law.
“Monopolisation has many faces and many different manifestations. Sometimes it is of a specific product, sometimes it is of a market or towards certain consumers,” Nofali said. “Determining the level of domination of a product and the market needs effort, precise study, and sincere, accurate, and strict monitoring.”
Specifically, Abri said the law does not resolve challenges to new companies entering markets.
“[The law] might not lead to ‘de facto competitive markets’,” he said. “There are other non-institutional barriers to establishing markets, such as the size of companies or economies of scale and access to key resources and established distribution networks. In this case, new entrants will not be able to enter into certain markets due to these barriers.”
Analysts said the law’s effectiveness cannot be fully judged until bylaws are issued in May.
The law makes the Public Authority for Consumer Protection (PACP), which has mostly been concerned with product quality and prices, to assume a larger, regulatory responsibility.
“It may be inferred that PACP’s role, as the authority of the first competition law in Oman, has evolved,” Palmer said.
But it has shown constant progress said Abri. “I believe PACP has shown constant progress since its inception,” he added.
In fact, the law even grants PACP the right to grant exceptions for certain monopolistic actions.
“As far as we are aware, if you have been granted the exemption then the [law] doesn’t apply,” Palmer said.
Nofali said this stipulation was a pragmatic reflection of the business environment.
“[Exceptions] could allow monopolies to evade the law,” he said. “At the same time, it’s difficult to put in place a 100 per cent strict law in a growing economy that seeks foreign investment.”
SOURCE: Muscat Daily