BizCLIR

In recent years, Ethiopia has taken steps toward opening several sectors of the economy to competition and to encourage and facilitate new entrants into those sectors. The Ethiopian business community has responded very positively to these openings, as demonstrated by the number of new Ethiopian entrants into the banking, textiles and floriculture sectors, for example. The process of introducing free competition into the economy, however, is far from complete. Despite new entry, important sectors are still overwhelmingly dominated by State-owned enterprises, and the retail sector and financial services are, for the most part, closed to competition from foreign firms.  Government monopolies also continue to exist in energy and other sectors.

Even in those sectors where economic liberalization has taken place through reducing barriers to foreign competition and privatization of industry and services, expected economic benefits can be short-circuited by private cartels, barriers created by dominant firms and by public regulations. On April 17, 2003, to safeguard against private and public impediments to free competition taking place, and as part of the move to introduce free market forces into the Ethiopian economy, the Ethiopian Parliament passed the Trade Practices Proclamation No. 329/2003 (“TPP”). This legislation states that the Government is committed to “[establishing] a system that is conducive for the promotion of a competitive environment, by regulating anti-competitive practices in order to maximize economic efficiency and social welfare.” It prohibits anticompetitive behavior and unfair or deceptive conduct by one competitor against another; authorizes regulation of prices for basic goods and services in times of shortage; and requires disclosure on labels of basic consumer information such as weights and measures. The law also provides for the creation of two implementing institutions, the Trade Practices Commission and the Trade Practices Secretariat.

Aspects of the law and institutions, however, make it difficult to use them as effective tools for enhancing consumer welfare. First, the law has disparate goals—prohibiting anticompetitive conduct, regulating unfair and deceptive conduct between individual competitors, prohibiting importation of goods at prices that are below wholesale in the country of production, regulating prices for basic goods and services, and regulating product labeling—that divert enforcement from the most harmful anticompetitive conduct and dilute limited enforcement resources. Second, the Trade Practices Commission that has responsibility for addressing abusive conduct by dominant players, many of whom are Government-owned and controlled enterprises, is itself part of the Government’s Ministry of Industry and Trade. Its members are high-level officials of other Government agencies such as the National Bank. Third, the Commission has no staff of its own and virtually no budget. The Trade Practices Secretariat does have a small staff of approximately five, but it has a clerical, non-investigative, and non-prosecutorial function. Fourth, legal and economic training in competition policy and law enforcement at the university level does not exist.