GEISHA KOW­LESSAR-ALON­ZO

Are play­ers in the su­per­mar­ket and gro­cery in­dus­try en­gag­ing in tac­it col­lu­sion to set prices?

Be­van Nar­i­nesingh, ex­ec­u­tive di­rec­tor of the T&T Fair Trad­ing Com­mis­sion (TTFTC), the in­de­pen­dent com­pe­ti­tion watch­dog, says there is the pos­si­bil­i­ty of this tak­ing place in T&T as the prices of food seem to be “very stan­dard or re­flect­ing very lit­tle changes.”

Tac­it col­lu­sion is a type of col­lu­sive be­hav­iour where firms co­or­di­nate their ac­tions with­out ex­plic­it­ly com­mu­ni­cat­ing or reach­ing an agree­ment.

In­stead, busi­ness­es may sig­nal their in­ten­tions through var­i­ous ac­tions, such as pric­ing mod­els or out­put lev­els, to co­or­di­nate their be­hav­iour and achieve high­er prof­its.

Nar­i­nesingh made the com­ments in a one-to-one in­ter­view with the Sun­day Busi­ness Guardian as the en­ti­ty marked its 10 an­niver­sary last week.

He ex­plained while tac­it col­lu­sion is not “overt­ly en­cour­aged,” it is not il­le­gal un­der the Fair Trad­ing Act.

How­ev­er, he em­pha­sised that busi­ness­es should price items based on their unique mar­ket fac­tors.

While Nar­i­nesingh said he would not use the word “ram­pant” re­gard­ing the pos­si­bil­i­ty of tac­it col­lu­sion in the food sec­tor, he said, “It ap­pears to be quite ev­i­dent.”

“If some­body has a fam­i­ly-owned busi­ness and they own the premis­es and are not pay­ing rent, the per­son who is pay­ing rent may have high­er in­ci­den­tal costs. So why would you charge the same? You could still make a prof­it if you charged a lit­tle less.

“...I think busi­ness­es need to bear in mind that if you see some­one charg­ing $5 you can charge $4.50 and still make a prof­it and this will still en­sure you keep cus­tomers lat­er on. What we see a lot is prices tend to be the same around the coun­try. That is not nec­es­sar­i­ly an an­ti-com­pet­i­tive con­cern but it is a con­cern that en­ti­ties need to be more in­de­pen­dent in terms of their think­ing and long-term per­spec­tives and not nec­es­sar­i­ly look at what some­body else is charg­ing,” Nar­i­nesingh said.

High gro­cery bills con­tin­ue to be the com­mon com­plaint of con­sumers and al­so while the price of flour waas re­cent­ly re­duced, re­lat­ed pro­duced like bread, a sta­ple item, and pas­tries have not seen a dip in cost.

The TTFTC is an in­de­pen­dent statu­to­ry agency es­tab­lished pur­suant to the Fair-Trad­ing Act 2006. The Act was passed in 2006. How­ev­er on­ly parts of it were pro­claimed in 2007 and 2014. In 2020, all re­main­ing parts of the leg­is­la­tion were pro­claimed.

Procla­ma­tion of the Act means that the TTFTC of­fi­cial­ly re­ceives and in­ves­ti­gates com­plaints and al­le­ga­tions of an­ti-com­pet­i­tive con­duct in T&T.

Un­der its re­mit, the com­mis­sion al­so looks at ap­pli­ca­tions for ac­qui­si­tions and merg­ers and in do­ing so, en­sures the mar­ket re­mains fair.

Since the full procla­ma­tion of the Act, the com­mis­sion has dealt with 30 merg­ers or ac­qui­si­tions.

M&A ac­tiv­i­ty

“The pro­vi­sions we have to fol­low when de­ter­min­ing a merg­er is to make a de­ci­sion whether this, if ap­proved, would sub­stan­tial­ly lessen com­pe­ti­tion in T&T.

“So be­cause of that, our in­ves­ti­ga­tors, our le­gal per­sons have to do an analy­sis of the rel­e­vant mar­ket to see if this merg­er is ap­proved, if it would have a neg­a­tive ef­fect on the mar­ket,” Nar­i­nesingh said as he ex­plained the process.

How­ev­er, Nar­i­nesingh said ap­prov­ing merg­ers or ac­qui­si­tions is not an “open and shut case.”

Shar­ing in­sights about some of the type of merg­ers which came to the com­mis­sion’s at­ten­tion, he said a cur­rent case in the en­er­gy sec­tor.

Touch­stone Ex­plo­ration Inc, which is head­quar­tered in Al­ber­ta, an­nounced on May 1 that it reached an agree­ment to ac­quire Trin­i­ty Ex­plo­ration and Pro­duc­tion Plc, which, if ap­proved, would bring to­geth­er two small, in­de­pen­dent en­er­gy com­pa­nies op­er­at­ing in T&T.

In giv­ing an up­date on the mat­ter, Nar­i­nesingh said, “We are present­ly re­view­ing the pro­posed trans­ac­tion to make a de­ter­mi­na­tion whether, if ap­proved, it would have a neg­a­tive af­fect on the oil and gas in­dus­try and more specif­i­cal­ly the ex­plo­ration in­dus­try. This is an ac­qui­si­tion by a for­eign com­pa­ny of a lo­cal com­pa­ny which rais­es the ques­tion of how this would af­fect that sec­tor of the oil and gas in­dus­try? We would al­so look at what kind of prac­tices they would have been con­duct­ing in oth­er ju­ris­dic­tions where they op­er­ate to de­ter­mine whether they have a his­to­ry of an­ti-com­petive prac­tices and things like that.

“We would, as well, speak to the Min­istry of En­er­gy to de­ter­mine if based on their analy­sis, whether this would have a neg­a­tive af­fect in terms of pric­ing for the var­i­ous cus­tomers.”

Fur­ther, Nar­i­nesingh ex­plained that it would al­so have to be de­ter­mined whether oth­er oil and gas com­pa­nies in T&T could be neg­a­tive­ly af­fect­ed by an en­ti­ty that could be in­vest­ing more in T&T.

“And be­cause of their re­sources else­where, we would have to make a de­ter­mi­na­tion whether, in fact, that could have a neg­a­tive af­fect in terms of their cus­tomers, clients and com­peti­tors,” Nar­i­nesingh added.

Apart from deal­ing with ap­pli­ca­tions for merg­ers in the en­er­gy sec­tor, the com­mis­sion al­so looks at ap­pli­ca­tions re­lat­ing to “gen­er­al busi­ness.”

“We have seen that trend where sev­er­al fam­i­ly-owned busi­ness­es are con­tem­plat­ing sell­ing out and some­times they are ac­quired by some of the larg­er en­ti­ties in T&T. When that is hap­pen­ing, we have to do an analy­sis of the mar­ket. I think what is im­por­tant is if stake­hold­ers have a con­cern they al­so need to raise it with us. That is be­cause we can on­ly act based on what the da­ta tells us and what the re­spons­es are,” Nar­i­nesingh ad­vised.

Not­ing that his­tor­i­cal­ly around the world, 95 per cent are ap­proved of merg­ers and ac­qui­si­tions are ap­proved, Nar­i­nesingh said what the Com­mis­sion is con­cerned about is the five per cent as it has to make sure those merg­ers and ac­qui­si­tions, if giv­en the green light, would not have a neg­a­tive ef­fect or sub­stan­tial­ly lessen com­pe­ti­tion.

Nar­i­nesingh al­so shared in­sights as he re­flect­ed on the the Smith Robert­son ac­qui­si­tion of Os­car Fran­cois Ltd.

In 2021, Agos­ti­ni’s Ltd, a pub­licly list­ed com­pa­ny, an­nounced that its phar­ma­ceu­ti­cal dis­tri­b­u­tion sub­sidiary, Smith Robert­son, ac­quired 100 per cent of a small­er phar­ma­ceu­ti­cal dis­trib­u­tor, Os­car Fran­cois Ltd and an as­so­ciate com­pa­ny.

The ac­qui­si­tion in­creased Agos­ti­ni’s share of the mar­ket for the im­por­ta­tion and re­tail of phar­ma­ceu­ti­cal and per­son­al care prod­ucts in T&T. Agosi­ni’s al­so owns Su­per­Pharm, which is a phar­ma­cy chain in T&T that has nine branch­es.

Nar­i­nesingh said be­fore ap­proval was grant­ed, the com­mis­sion did an analy­sis, spoke to stake­hold­ers in the phar­ma­ceu­ti­cal sec­tor, so­lic­it­ing their views and then made a de­ter­mi­na­tion.

“That would have tak­en about four months in terms of analy­sis be­cause we had to make sure we came to the prop­er de­ci­sion...If in­deed that par­tic­u­lar ac­qui­si­tion has had an­ti-com­pet­i­tive ef­fects, I have not seen it and I leave it up to stake­hold­ers to bring that specif­i­cal­ly to the Com­mis­sion’s at­ten­tion,” Nar­i­nesingh said.

He not­ed that ap­proval for a merg­er nor­mal­ly takes 30 days but there is dis­cre­tion to re­quest ex­tra time from re­spec­tive par­ties.

For the year to date, five merg­er/ac­qui­si­tion ap­pli­ca­tions have come to the com­mis­sion thus far.

“One is very con­glom­er­ate type so I would say food and bev­er­age and in the oil and gas sec­tor,” Nar­i­nesingh said, not­ing that the lat­ter is a “very wide in­ter­pre­ta­tion but very as­so­ci­at­ed with the ex­plo­ration parts of it.”

“So you can see some ac­qui­si­tions are hap­pen­ing in that in­dus­try,” he added.

Ad­vo­ca­cy re­mains an in­te­gral com­po­nent in the com­mis­sion’s work, which Nar­i­nesingh be­lieves has led to a lot of ad­her­ence to the pro­vi­sions of Act.

The TTFTC will con­tin­ue to deep­en its ef­forts in the area of ed­u­ca­tion­al cam­paigns and sen­si­ti­sa­tion pro­grammes to en­cour­age free and fair com­pe­ti­tion and dis­cour­age busi­ness­es from en­gag­ing in an­ti-com­pet­i­tive busi­ness prac­tices.

The com­mis­sion is al­so ex­pect­ed to con­tin­ue in its li­ai­son with the Min­istry of Trade and In­dus­try re­gard­ing the next steps for merg­er reg­u­la­tions to be draft­ed by the Of­fice of the Chief Par­lia­men­tary Coun­sel, Min­istry of the At­tor­ney Gen­er­al.