ICCC News

The Independent Consumer and Competition Commission (“ICCC”) would like to support the call by the Prime Minister, Hon. James Marape for all contractors to do “fair bidding with (the) right price” to be awarded with State contracts (The National, Monday, 03rd June, 2019, p.2).

ICCC Commissioner and Chief Executive Officer, Paulus Ain said in support of this call the ICCC would like to inform business houses, relevant stakeholders and the public that bid rigging in public procurement is a serious anti-competitive conduct and is criminal in nature.

Mr. Ain said if a company or person is found to be engaging in such conduct, they can be prosecuted and if found guilty, severe penalties (both civil and criminal penalties) may be applied by the Courts under the Independent Consumer and Competition Commission Act 2002 (“ICCC Act”).

“Bid-rigging is a major cause of over-priced tenders, resulting in low quality and substandard infrastructure.”

“PNG relies heavily on tender processes to procure construction services for public infrastructure and other public services such as health and education. Therefore, this is an important call by the Prime Minister to our contractors providing services in PNG to “play by the rules going forward.””

According to the Consumer and Competition Framework Review: Final Report and Recommendations, that was released in 2017 and supported by the Department of Treasury and the Asian Development Bank “bid-rigging is a particular form of price fixing that is of serious concern in an economy that relies heavily on tendering and where genuine competitive bidding is essential to keep prices low and quality and innovation high.”

Mr. Ain added that price fixing is seen as the worst form of anti-competitive conduct where competitors discuss the price, rebates, discounts, and supply among other things, to charge consumers.

“This results in the consumers ending up with substandard goods and services paid for at a high price. Price fixing is defined under Section 53 of the ICCC Act and strongly prohibited by Section 50.”

In a public procurement process, if parties to a tender talk to each other and discuss the price each party will be bidding, with the aim of making the bid favorable to one of them, then such behavior is anti-competitive in nature and is called bid-rigging. Parties may reach an agreement that the winning party will then give out sub-contracts or pay the other parties some monetary gifts for keeping to the agreement.

This then results in over-priced projects with low quality output. This is because the bidding is not done in a competitive manner which would ultimately result in the best firm being engaged to produce quality output. The users of such substandard public infrastructure are the ultimate losers, including the overall economy of a nation.

Mr. Ain said the State also loses out in the end for spending too much at the expense of other social services such as health and education.

“ICCC is therefore looking at initiating a market study into the procurement market in PNG to better understand the drivers of bid-rigging and the costs associated with such anti-competitive conduct.”

“The ICCC intends to work with the newly established National Procurement Commission on this study and understand the dynamics to the procurement processes and how competition can be fostered in public tendering and procurement processes.”

The Independent Consumer and Competition Commission (“ICCC”) has granted authorization to PNG Air Limited (PNG Air) to give effect to a code-share agreement it is entering into with Virgin Australia for services between Port Moresby, PNG, and Brisbane, Australia.

After comments received from stakeholders and submissions from the parties, the ICCC assessed the application and is satisfied that the code-share services, if authorized, would generate more benefits to the public which are likely to outweigh any detriments, including any lessening of competition.

Commissioner and Chief Executive Officer Paulus Ain whilst acknowledging that free sale code-share arrangement is not very competitive said that the arrangement will allow a new marketing carrier to enter the market.

“The ICCC considers that in the present circumstances, it is better to have PNG Air commence its international operations on the Port Moresby/Brisbane route on a free sale arrangement.” Commissioner Ain said.

Commissioner Ain added that consistent with its draft determination which was released on 1st February 2019, the ICCC considered that the following potential public benefits are likely to result if the parties provide the code-share services (despite likely anti-competitive outcomes):

  • Travellers’ choice (of marketing carriers) would be increased (from three – currently Qantas, Air Niugini and Virgin Australia – to four);
  • Travellers would have access to cheaper and more frequent passenger air services between PNG and Australia; 
  • Passengers would benefit from direct connections and ease of luggage transfers for connections to and from PNG Air’s domestic services;  
  • Further development of the route and making Port Moresby as a transit hub as passengers from other Pacific nations such as Federated States of Micronesia travel to Australian ports via Port Moresby; and vice versa; thus, increasing traffic volume through Port Moresby making possible for more frequent services, reducing passenger flight times to Australian destinations, and leading to cheaper fares in the long run as a result of increased passenger volumes;
  • As the competitive pressure builds up and more public benefits are realised, it would lead to increase in traffic volume; hence, the possibility of other airlines entering the market by code-sharing or independently after airline companies provide aggressive competition on this route; and provision of direct services on a high frequency basis; 
  • Indirectly, the code-share arrangement has the potential of increasing competitive pressure between Air Niugini and PNG Air in the domestic market and will lead to benefits such as reduced airfares and better services for domestic consumers; and
  • The above could increase traffic volume through Port Moresby, and make it possible for more frequent services, reduce passenger flight times to Asian destinations. Such outcome would also lead to cheaper and special fares in the long run.

On the other hand, the ICCC also noted that the following detriments are likely to occur:

  • The ‘free sale’ arrangement is not likely to stimulate sufficient competition between PNG Air and Virgin Australia; and
  • The code-share agreement would diminish the chances of independent entry by PNG Air.

Commissioner Ain said the ICCC has also noted some market conditions that may contribute to hinder potential new entry.

“The ICCC has noted that availability of limited slots at the Port Moresby Jackson’s International airport could potentially inhibit new entries. The ICCC considers that despite the recent redevelopment at the Jackson’s Airport, there was no evidence which suggested that slot availability has increased.”

“Should the demand grow for passenger (and freight) services for international flights, new carriers may enter the market and provide air transport services.”

The limited availability of slots and how the slots are allocated could hinder the entrance of potential airlines. This would likely lead to delayed/missed opportunity to enhance competition on the incumbents; hence the likely benefits. This is the matter for the National Airports Corporation to assess and take appropriate steps, if deemed necessary to improve.

The ICCC also noted that regulatory requirements such as airline designation and capacity requirements as per bilateral agreements between PNG and Australia can prove at times, to be challenging for a new carrier to enter.

It is understood that before an airline can operate international services to another country, the government must first negotiate a treaty level agreement with the destination country’s government. PNG has a bilateral Air Service Agreement (ASA) with Australia. Under the ASA, requirements such as traffic rights, capacity, designation, ownership and control, other policy, safety and security clauses would be included. Such regulatory requirements can make entry of a carrier into the international air transport services challenging; hence hinder potential effective competition. The State and the Department of Transport can consider this in the next bilateral ASA discussions with Australia.

The ICCC has considered the likely detriments in light of the current market conditions discussed above and the passenger volume growth being stagnant. Also, the ICCC notes that Air Niugini and Qantas have been taking up much of the volume. Overall, the ICCC has considered that, whilst free sale may not stimulate much competition between PNG Air and Virgin, the arrangement would put some competitive pressure on the ‘bigger’ carriers. This would result in overall fare competition and benefits the traveling public. Regarding the independent entry, the ICCC has considered that this code-share arrangement will assist PNG Air to ‘test the waters’ and eventually make a decision on whether or not to enter independently in future.

The Independent Consumer and Competition Commission (“ICCC”) advises that it does not have any competition concerns on the proposed acquisition of Highlands Pacific Limited (“Highlands Pacific”) by Cobalt 27 Capital Corporation (“Cobalt 27”) which was announced in the media at the beginning of the year. 

Following the announcement of the proposed acquisition, the ICCC conducted an independent investigation and sought information from both parties to the acquisition as well as relevant stakeholders within the mining industry.

ICCC Commissioner and Chief Executive Officer, Paulus Ain said after considering the main business areas of both Highlands Pacific and Cobalt 27, the ICCC considered the relevant ‘market’ for this proposed acquisition is the market for the supply of mined cobalt and the supply of mined nickel.

“Based on ICCC’s review of the information provided by Cobalt 27 and other market information available made to it, the ICCC found that there are no serious competition concerns and has considered not to intervene at this point in time.”

“The ICCC however advises that it reserves its rights to revisit this matter should new information suggests that the acquisition will give rise to serious anti-competitive effects in a market,” Mr Ain added.

Cobalt 27 is a Canadian-based non-operating mining company that invests mainly in battery metals streaming and royalty offering direct exposure to cobalt, nickel and lithium (integral elements in technologies of electric vehicles and energy storage systems). Highlands Pacific, on the other hand, is an Australian-based, PNG incorporated mining and exploration company listed on the Port Moresby Stock Exchange as well as the Australian Stock Exchange and currently holds interests in four mining projects/tenements in Papua New Guinea.

Commissioner Ain said the ICCC was thankful for the assistance of the PNG office of Dentons Lawyers and the legal team of the parties to the acquisition in cooperating with the ICCC and ensuring that the ICCC’s concerns and its requests for information were attended to in a timely manner.

The Independent Consumer and Competition Commission (“ICCC”) hereby announces the new retail fuel prices for this month, which will take effect on Wednesday, 08th May, 2019.                     

According to the ICCC’s calculations, retail prices for petrol, diesel and kerosene will all increase on average throughout PNG as of 08th May. The increase in the retail prices is mainly attributed to the increase in the crude oil prices driven by steady demand and tight supplies, the depreciation of the PNG Kina against the US dollar in April, 2019, plus an increase in international sea freight for the petroleum products in the same month.

The domestic retail fuel prices for petrol, diesel and kerosene are inclusive of the IPPs, domestic sea and road freight rates for the second quarter of 2019, the 2019 wholesale and retail margins for petrol, diesel and kerosene; including excise duty for petrol and diesel, and the Goods and Services Tax (GST).

PORT MORESBY

As a result of adding all the various cost components mentioned above, the maximum retail prices for fuel in Port Moresby are as follows:

Port Moresby Retail Prices (toea per litre)

 

Petrol (tpl)

Diesel (tpl)

Kerosene (tpl)

Retail Prices as of 8th May, 2019

371.90

337.97

309.03

Retail Prices as of 8th April, 2019

356.94

331.83

301.95

Price Variance (+/-) toea per litre

+14.96

+6.13

+7.08

 

Retail prices in all other designated centres will change according to their approved in-country shipping and road freight rates (for the second quarter of 2019) that are charged by the fuel wholesalers.

ALL CENTRES

For all centers, the maximum retail fuel prices for each petroleum product in the country will change on average as follows:

  • Petrol prices will increase by 14.96 toea per litre;
  • Diesel prices will increase by 6.13 toea per litre; and
  • Kerosene prices will increase by 7.08 toea per litre.

As part of the ICCC’s enforcement and compliance of fuel prices, its Investigation Officers will conduct inspections at all service stations to ensure prices of petroleum products do not exceed the allowable maximum prices. The following ICCC officers will conduct compliance inspections in Lae, Goroka, Kokopo and Port Moresby. Inspections in other provinces will be supported by our contacts in those provinces. Please note:

  • Mr. Christopher Gabesoa, Mr. Seri Tau Vali, Mr. Dennis Jerry and Mr. Bill Boiu will conduct compliance inspections to all service stations in the National Capital District. They can be reached on telephone number 325 2144;
  • Ms. Pamela Ipambonj and Mr. Timothy Ponau will conduct compliance inspections in Lae. They can be reached on telephone number 472 2859;
  • Mr. Bobby Tei, Roman Rosting and Mrs. Dorcas Baining Julai will conduct compliance inspections in Kokopo, Rabaul, Kerevat, Warangoi and Toma. They can be reached on telephone number 982 9711; and
  • Mr. Kevin Kondo and Mr. Jeffery Khar will conduct compliance inspections in Goroka, Kainantu, Kundiawa and Mt. Hagen. They can be reached on, following mobile numbers 7369 8251/ 7232 4861.

The prices set by the ICCC are the indicative maximum retail prices, for which retailers may choose to sell below the ICCC approved maximum price. The ICCC would like to remind retailers who sell fuel-using pumps to set fuel prices to one decimal place while the ICCC will continue to set the maximum price to 2 decimal places.

No fuel pump operator should charge above the Indicative Retail Price for this month’s price regardless of the number of decimals. This is to ensure compliance with the Prices Regulation Act under which the maximum prices of refined petroleum products are set. Retailers who are displaying prices to 1 decimal place are urged by the ICCC to round the prices down to ensure prices are within the allowable indicative retail prices. The ICCC Inspectors will continue to conduct spot checks after 08th May, 2019, to ensure on-going compliance by fuel operators.

Consumers are advised to report any instances of overcharging by retailers through the ICCC’s Consumer Protection Division on 325 2144, on toll free number: 180 3333 or by contacting our Regional Offices closest to you on the numbers provided above.

The Independent Consumer and Competition Commission (“ICCC”), on 1st April 2019, granted Clearance for Kumul Consolidated Holdings Limited (“KCHL”) to transfer all of its shares in Bemobile Limited (“Bemobile”) to Kumul Telikom Holdings Limited (“KTH”).

ICCC Commissioner and Chief Executive Officer, Paulus Ain said KCHL submitted an application to the ICCC seeking clearance to transfer all of its shares in Bemobile to KTH in November last year.

“The ICCC completed its assessment of KCHL’s application and granted clearance for KCHL to proceed with the proposed transfer after it concluded that the proposed share transfer will not, and will not be likely to, have the effect of substantially lessening competition in the market for the provision of retail mobile voice, SMS and internet services in PNG.”

“The ICCC therefore has given this Clearance for the proposed transfer of shares of KCHL in Bemobile to KTH to proceed.”

The share transfer is to facilitate the decision of the Government of PNG to restructure the State-owned telecommunication enterprises by consolidating Bemobile, PNG DataCo Limited (“DataCo”) and Telikom PNG Limited (“TPNG”) under KTH as the single holding company.

Commissioner Ain added that the share transfer would involve the transfer of shares only and that no assets will be transferred between DataCo, Bemobile and TPNG.

“The restructure would result in TPNG, DataCo and Bemobile becoming wholly owned subsidiaries of KTH. KTH would remain a wholly owned subsidiary of KCHL with KCHL still retaining full control of KTH. However, the directors of KTH would be formally appointed by the National Executive Council.”

Commissioner Ain explained that the ICCC had initially granted clearance to the parties on 26th June 2017. However, the parties were not able to complete the share transfer within the required statutory time limit of 12 months, hence, KCHL submitted this new application.

The ICCC, as part of the clearance process, undertook public consultation on this application inviting interested stakeholders to make submissions and comments on the proposed share transfer.

The ICCC completed its competition assessment and concluded that the proposed share transfer:

  • would not cause prices to rise;
  • would not remove or reduce the chances of consumers/customers to choose amongst similar products;
  • would not reduce or cause harm to growth, innovation and product differentiation of any company in the market;
  • would not remove from the market a strong and reliable competitor or company; and
  • would not greatly increase or strengthen any vertical integration for any company in the market after the proposed merger.

The proposed share transfer will be pro-competitive where it creates a player that will be stronger financially and operate vigorously to increase its investment in competitive service provision.