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COMPETITION LAW AND POLICY IN EGYPT
The Law of Protection of Competition and Prohibition of Monopolistic
Practices, ratified in February 2005, sets policies designed to
even the playing field for large and small companies alike. The
pressing question now is how to get the private sector and consumers
to utilize the law to its full potential.
Egypt’s Competition Law 3/2005 has been hotly debated. If
the private sector is to thrive and expand, a fair competitive environment
needs to prevail. Consumers, integral to the equation, are set to
benefit from the new legislation with more choices, better quality
and ultimately lower prices. But effectively implementing the law
to create such an environment could be a serious challenge as many
believe an effective competition policy is far from a foregone conclusion.
As the Egyptian Competition Authority (ECA), created in August 2005,
has discovered, getting consumers and businesses to utilize the
law is an uphill battle. Egypt’s nascent culture of competition
still has a long way to develop and many citizens do not fully understand
how the marketplace can benefit from such a law. One indicator of
this is that to date not a single private sector company has approached
the ECA with a complaint about monopolistic practices. Yet we all
suspect they exist.
Certainly it is not helping that the local press, one of the main
tools for increasing the awareness of the law, is ill-informed of
its workings. The press agenda so far has been largely limited to
publishing unsubstantiated allegations about monopolistic practices.
Often these reports provide no data or accurate information to back
up their accusations.
Carrying the burden of informing the public, businesses and the
press is the ECA, a young organization that is working to gain the
public’s trust. The authority has been holding regular seminars
and conferences to increase the public’s awareness of the
law and its role. During these sessions, attendees are given the
opportunity to voice their questions and concerns about increased
competition, the law, and their rights and obligations under it.
While the seminars are a positive step towards the opening of dialogue,
the hesitancy of the public to embrace this change is likely to
continue for some time, as Egyptians are often uneasy when it comes
to adopting change. They are somewhat suspicious of the ECA and
are waiting for it to prove itself. The ECA will need a few effective
investigations under its belt before the public deems it trustworthy.
Another challenge is Egypt’s legacy of protectionism versus
the new push for opening the market to competition, both domestic
and international. Like many developing countries, Egypt until recently
instituted protectionist policies that facilitated the monopolistic
practices of public sector companies and stunted the growth of entrepreneurship.
This legacy has created a market that meanders around monopolies
with little attempt to dismantle them. It also forced consumers
to lower their standards and accept a market with limited or no
alternatives. While many believed that the passing of Competition
Law 3/2005 would end this trend, consumers and companies have not
really given the new law a chance.
In order to end this vestige of socialism, it is imperative that
the competition law provides, among other things, sufficient protection
for small and medium enterprises (SMEs). By their nature, SMEs can
drive economic growth because of their flexibility. A level playing
field will give them a fighting chance to carve out a niche among
the larger domestic companies and multinationals.
Similarly, an efficient, transparent and well-enforced law will
create the predictability needed to attract more foreign direct
investment (FDI) without driving away existing players. An effective
competition law is attractive to foreign companies contemplating
investment in an emerging market such as Egypt. It assures investors
that once they invest in the market, they will not face anti-competitive
practices or unfair advantages offered to incumbents. It also signals
the government’s readiness to eliminate anti-competitive practices
carried out by the market’s various players.
Along with lower taxes and customs duties, the presence of properly
regulated competition in the market can give Egypt an advantage
over other countries seeking to attract FDI. This point has not
been lost on the current reform-oriented government, which has addressed
many of the common FDI deterrents. Increasing competition, however,
requires a legal framework as well as a market that is willing to
accept it. While the former is present, the latter has proven more
challenging.
To highlight the expectations and challenges associated with the
effective implementation of the competition law, AmCham Egypt’s
Trade-Related Assistance Center (TRAC) has, through consultation
with both international competition experts as well legal practitioners,
developed a number of recommendations for the effective implementation
of the competition law in Egypt. Among these are the need for ongoing
open and transparent dialogue between the government and members
of the private sector to further their mutual understanding of the
law and increase their compliance with it. This dialogue will ensure
that the law is enforced in a manner relevant to domestic conditions,
while providing opportunities for new companies to enter the market.
Competition laws are not designed to function as stand-alone policies.
They are integral components of market liberalization. As such,
the competition law must also be complemented by an effective policy
and conducive environment that promotes free trade and openness.
It is also imperative for the ECA to cooperate effectively on the
bilateral and regional levels with other competition authorities
to acquire the skills and experience needed at the early stages
of its development. This cooperation will serve the authority in
several ways, including allowing it to benefit from lessons learned
by other, older competition authorities and the data they have gathered
on monopolistic practices in certain sectors or by certain players
in a given sector. At the same time, stronger cooperation –
especially with other developing markets – can help leverage
Egypt’s strength to confront the monopolistic practices that
take place at the international level, particularly by multinationals.
Competition laws and policies are double-edged swords. Although
competition forms the engine for economic growth, it also entails
changes that the Egyptian market might not be willing to embrace
as rapidly as other market reforms. The ECA has been established
to facilitate the adoption of competitive practices in the market,
but it will have to work closely with companies and the general
public to facilitate their adoption of these policies. Moreover,
it must be mindful of the impact of this change on the private sector,
particularly on SMEs.
To succeed, the ECA needs to maintain dialogue with all players
in the market, as well as consumers, to ensure that they utilize
the law to their advantage. It also needs to strike a balance between
encouraging investment and competition in the domestic market, on
the one hand, and allowing SMEs to preserve their niche in the market,
on the other.
This is a crucial part of making the law effective because it ensures
that all players in the market benefit from competition and the
prevention of monopolistic practices regardless of their size. Yet
enforcement of the law alone is not a sufficient guarantee for a
flourishing domestic market; the competition law is but an integral
part of a larger framework and needs to be consistent with the economic
liberalization process. To succeed it must be accepted by both the
government and public alike.
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