Malawi competition commission faults Bankers Association, suspects of bid-rigging
Malawi Competition and Fair Trading Commission (CFTC) has faulted Bankers Association of Malawi (BAM) of creating market monopoly by denying other players in the credit referencing bureau sector in preference to one company.
The Commission, in a determination by its Board of Commissioners and its members on allegations of anti-competitive practices by BAM has also faulted the association of suspected collusive tendering and bid-rigging when it awarded a contract to CRB Africa Limited despite some of its members being shareholders.
In the 37-paged report which Nyasa Times has sourced, it is revealed that, the consumer protection agency instituted investigations following a complaint by Credit Data in September last year that it was being refused access to credit data information by commercial banks but were providing similar information to CRB Africa Limited, the only other player licenced on the market.
The report disclosed that BAM has pre-existing credit reference scheme agreement with CRB Africa Limited to exclusively provide credit referencing services to its members, who in turn, would provide credit information of their customers.
The agreement is argued that is contrary to Section 32 of the Competition and Fair Trading Act, which faults the Association of creating a monopoly in the Credit referencing bureau sector by denying Credit Data access to the market in preference to CRB Africa which some of its shareholders are executive members of BAM.
But BAM while revealing to have agreed to use CRB Africa only, denied any anti-competitive practices during interrogations by MCFTC.
BAM argued that the choice was done as one measure of security and that at that moment credit referencing scheme was just new initiative.
However, MCFTC revealed in its finding that the conduct by members of BAM have created an anti-competitive environment in credit referencing, which is also contrary to Credit Reference Bureau Act, which demands each BAM member is to individually deal with a credit reference bureau of their choice.
There are only two licenced bureaus, thus, Credit Data and CRB Africa Limited.
“The Commission also established that the selection of CRB Africa was done through tender process and the Commission has suspicion of the likelihood of collusive tendering and bid-rigging which are anti-competitive practices in the bidding process. This is because of established facts of conflict of interest between BAM and CRB Africa which was eventually awarded the contract,” reads the report in part.
The Commission notes that aside the established anti-competitive practices, some key players in BAM happens to be shareholders in Investment Alliance Limited (Malawi), which holds 10 percent shares in CRB Africa.
CFTC argues that by denying Credit Data information created undue advantage in favour of CRB Africa that gave BAM members an exclusive dealing in a period of three years, adding it also provided competitive edge for CRB Africa, which in that period will have built a broader database using information provided by BAM members under the terms of the agreement.
“With no elaborate database, chances are high that the complainant (Credit Data) would be outcompeted in subsequent bidding and will not even have an opportunity to cater for some niche markets outside BAM
members. It is therefore, evident that the system that BAM has adopted has the potential of creating monopoly in the provision of credit referencing business”.
The Commission further argues that based on its findings, the identification of CRB Africa and the agreement it signed with BAM have effect of lessening competition in the provision of credit reference services through its influence of the conduct of Bam members with regard to provision of credit data to the complainant.
“The pre-existing agreement also denied the complainant an opportunity to develop necessary infrastructure (database) to participate in credit referencing business and created artificial monopolistic environment. The conduct by BAM members by refusing to provide information to the complainant, constrained opportunities for competition,”
Meanwhile, CFTC pointed out that the absence of regulations to safeguard credit data holders from liability for breach of confidentiality rights of customer is a major stumbling block.
“There is, therefore, need for the Reserve Bank to come up with appropriate regulations that among other things ensure effective implementation of section 13(3)(a) of the Credit Reference Bureau Act”.
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