Monday, September 28, 2020

The insurance industry is guilty of anti-competitive behaviour

Lately the print media carried reports that a competition law in Botswana is in the offing. The commentaries applauded the move, particularly that the Department of Consumers and Consumer Affairs has been quoted as having confirmed that the Competition Bill No. 17 of 2009 shall be considered by Parliament in November 2009 (Sunday Standard, Oct 4 – 10, p13 and pg8).

Indeed if the Bill is to be considered this soon, this calls for applause. For many years Botswana has been in need of a law that regulates and controls competition, in the least because the business arena in this country is stuffed up with large multi‐national organisations and chainstores the consequence of which has been that the ordinary and small‐scale businessman was to a large extent relegated off into the periphery. Better things are however expected from the upcoming law.
Of particular interest in this note is the fact that while the law is still in the pipeline, the very anti-competitive behaviour that it aims to combat continues to go on right under our noses.

When reading the articles noted above, one’s mind could not help but race back to a front page article of the Mmegi newspaper of 25 Sept 2009 (Insurance companies to stop insuring imports?).

It is reported in that article that market controllers in the insurance industry are to meet soon and decide on the fate of Asian motor vehicles in Botswana. It is reported that the insurers desire to stop insuring such vehicles. In fact one insurance house is quoted as having confirmed that “We are yet to make a decision about the issue as the insurance industry. You have to wait until we have reached a consensus about it and then we will make our decision public”. Now this is wrong! This is blatant and sheer conspiracy against the public. Just why in this turmoil period would these people do this to the public? The meeting and consensus that the insurer above speaks of is aimed at nothing but hurting the public. The ‘consensus’ amounts to what the Competition Bill describes as ‘concerted practice’, which in broad terms is a coordination between businesses by which it is deliberately intended to eliminate the independent action of competitors and thus influence the conduct of the market. The practical effect of such behaviour is that instead of risking competition against each other for the same market, competitors gang‐up together against the public. They calculatingly eliminate competition such that the consumers have no choice of services in that competitor X will offer the same service as competitor Y and at the very same price. In this way consumers are blackmailed and extorted into paying for services that they do not desire and do not have a choice over.

Whilst the Bill has yet become law and thus legally speaking there is not yet a transgression by the insurers, their actions must surely call for shame upon them. It is unfair for the insurers to agree on a trading term that they know very well will prejudice the general public, all for purposes of their own financial gain. It invites for no debate that a substantial number of Batswana families use and own vehicles of Asian origin. The prices for these vehicles are considerably affordable to many than the prices of the local vehicles. Now if the insurance industry is going to agree, collectively in a meeting, that it phases off its services to the public regarding the Asian vehicles, this will most unambiguously have terrible ripple effects on the lives of many in this country. For example: the supply of spare parts for these vehicles will suddenly plunge and the demand for the spares will correspondently rise, together with their price; supply of the vehicles will itself drop and car dealers will lose business and be forced to retrench staff – some dealers may in fact have to completely wind up; bankers will stop financing the vehicles and for the many who use such vehicles for business and to put bread on their tables, poverty will surely knock at the doorsteps! The vicious circle simply expands exceedingly as one continues to ponder on the issue.

The action by the insurers is most unfair. There is no reason why the insurers should contaminate the competition landscape in Botswana. They should rather improve the status quo, by offering better and reasonably priced services. As competitors in the same market, insurance companies must employ innovative methods of improved service delivery, rather than mortgage themselves to anti‐competitive practices at the peril of their customers. If one insurer can insure my health, another my home loan and another my job, why should one insurer be unable to insure a Toyota from Motor Centre and another a GoNow from Supa Cars? Should it not be all about exploring the potential of the available market and the pioneering strategies of the different competitors? One can only hope that the anticipated competition law does not come too late when damage is already done. Meanwhile, the public and the authorities should just keep a close eye on the insurers.

Perhaps while one still has this forum, a general comment on the Competition Bill should be made. Perusing through the Botswana Bill one immediately notices the absence of provisions for the criminalisation of anti‐competitive behaviour vis-a-vis executives of companies found guilty of engaging in such behaviour. Companies do not make decisions for themselves, there are always controlling human minds behind every single decision made. It is these individuals who bring anti-competitive behaviour into companies, and it is for this very reason that most competition laws in the world contain clauses providing for the personal criminal prosecution of such individuals. The prospects of spending time behind bars, no matter how minimal, is reason enough on its own to make a business executive think twice before agreeing to engage in anticompetitive behaviour it being remembered that prevention, rather than cure, is the major aim of competition regulation. One other issue regarding cartels [anti-competitive cliques] is this: because ordinarily enterprises adopt very cunning methods to engage in anti-competitive practices and the cartels they form are very difficult to detect, competition regulators the world over do to a large extent actually rely on members of cartels to detect and bust cartels. This is done through encouraging cartel members to blow the whistle on the others members in return for immunity against prosecution ÔÇô a concept commonly known as ‘the leniency policy’. The leniency policy has served seasoned competition regulators such as the Competition Commission of South Africa, the Office of Fair Trading in the UK and the Justice Department in the USA quite well. It is hoped that our Competition Commission will upon its birth, seriously consider coming up with a similar leniency policy, for it is otherwise difficult to envisage how effective our anticipated competition watch‐dog will be in the absence of such a policy.

* The author is a practising attorney in Gaborone.

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.