Why it pays to know your Competition

Competition and Consumer Law Regulation Across Melanesia

By Andrew Kidu and Dirk Heinz

As businesses who have been operating in the Pacific long enough will tell you, consumer and competition law is a tricky issue to navigate. This is not so much because of the layers and hoops that exist in the various competition law frameworks – as you might expect to see in jurisdictions like Australia – but more the opposite, namely the fact that in a number of Pacific jurisdictions, competition and consumer law don’t exist or are not well understood, or not consistently applied by regulators.

Here’s a snapshot of things to be mindful of when transacting in or across key Pacific jurisdictions.

Vanuatu

Let’s start with, arguably, the jurisdiction with the leanest competition and consumer law regulation and work back from there. Despite representations by various governments over the years and numerous reports written by consultant “experts” engaged to draft the framework for competition and consumer laws, Vanuatu still does not have dedicated competition law and consumer protection legislation.

There are rumblings from the Vanuatu Government the Price Monitoring and Consumer Affairs Bill is at an advanced stage of development and due to be passed soon, but no firm date for the ascension of that Bill has been set. While the country waits for that legislation to come into force, in terms of consumer protection, the main tool used by Government to protect consumers rights is by controlling prices through the Price Control Act and regulations made under that Act. Under the Act, a Price Control Bureau is required to ensure that any legislative document intended to set price ceilings for certain goods is observed by retailers and traders. However, while it is something, protecting consumer rights via price control is an imperfect system as it is often slow to react to the changing societal and economic circumstances like times of emergency (i.e. events like the COVID lockdowns and periods following natural disasters when supply chains are constrained). Similarly, the Bureau will always be challenged to have the resources and personnel to ensure compliance across the retail sector. Work to strengthen and regulate labelling requirements is one avenue through which consumer protection could be improved while the country waits for substantive legislation to be developed. While labels on foods are regulated through the Food (Control) Act, labelling requirements for other retail goods than food are currently not as well regulated.

What’s the result of all this? From a competition law perspective, the Price Control Act only affords limited protections to consumers against conduct like anti-competitive business practices, cartel conduct and misleading or deceptive retailer conduct. Consumer grievances which make their way to the courts are often decided based on common law principles such as implied fair terms, contra proferentem and equitable principles like unconscionable conduct and estoppel. Such protections are less than ideal for consumers who would benefit much more from the security of designated legislation.

Solomon Islands

The Solomon Islands has had a Consumer Protection Act since 1974 – ahead of its time when compared to other Pacific jurisdictions. However, the Act has not kept up with changing market forces and is in need of substantial overhaul. Like Vanuatu, the Solomon Islands government typically use price control legislation (Price Control Act 1975) to set prices for key consumer goods on an ad hoc basis. Numerous orders and regulations setting price controls and restrictions are passed each year.

The Consumer Protection Act itself is based on Australia’s repealed Traded Practices Act. Like a lot of foreign legislation transplanted into the Pacific, many of the provisions of the Solomon Islands CPA replicate their Australian forerunner word for word. Notwithstanding the need for amendments – which are being touted following the standard process of examination and review by foreign consultant bodies – the CPA arguably already offers enough teeth to regulate competition and consumer affairs in the country. The regulatory responsibility for enforcement of the CPA sits with the Consumer Affairs Department, a division of the Ministry of Commerce, Industry, Labour and Immigration. In reality, due to a range of factors which include common regional constraints like lack of resources, funding and capacity, the functions of this regulatory unit are typically restricted to operating awareness programs about consumer affairs, as opposed to actual enforcement. To give you an example of how little competition and consumer law features in the Solomon Islands landscape, a search of references to the Consumer Protection Act across all recorded case law on Paclii (as in since records have been kept) will yield one case.

Once again, the ultimate result of the lack of application and understanding of this important body of law is that the average Solomon Islands consumer is at risk of price gouging, price fixing and generally poor retailer conduct.

Papua New Guinea

Papua New Guinea’s competition and consumer legislation has been in place since 2002. The Independent Consumer and Competition Commission Act 2002 (ICCC Act) provides the legislative framework to regulate and monitor competition and consumer affairs and established the current independent regulator, the Independent Consumer and Competition Commission (ICCC).

The ICCC serves as both the competition regulator and consumer watchdog. The primary role of the ICCC is to promote competition and fair trading, regulate prices for certain goods and services, and protect the interests of consumers. This includes regulating prices and service delivery standards of certain goods and key services provided by State Owned Entities.

Apart from the ICCC Act, the ICCC also administers the Prices Regulation Act 1949, Trade Measurement Act 1973 and Commercial Advertisement (Protection of the Public) Act 1976.

Since its inception in 2002, the ICCC has undergone some significant restructuring and changes to its powers and functions – one of the key changes was transferring its licensing and regulatory powers over the telecommunications industry to a separate independent ICT regulator in 2009/2010, although it maintains its powers as a competition and consumer regulator in this industry.

The ICCC has been and continues to be an active watchdog, especially in instances where there have been changes to the competition landscape in PNG via business acquisitions and mergers, including changing the ICCC Act to include mandatory notification thresholds for certain acquisitions. It has also taken an active interest in monitoring retail behaviour in the consumer market which is demonstrated by its current door-to-door monitoring of retailers around the country.

Despite these positive developments, the ICCC requires the support of the Government to ensure it is suitably funded and staffed so that it can properly exercise its powers to achieve its key objectives and keep up with the rapidly changing competition and consumer landscape.

What does all this mean for businesses operating in the region?

A free lesson learned doing law across emerging economies in the Pacific is that legal and regulatory vacuums will invariably lead to people seeking to exploit those gaps for their own benefit. Unfortunately, with perhaps the exception of PNG (where there is still considerable room for development), their exist substantial gaps in the application and enforcement of protective frameworks in the competition and consumer space. Generally, these gaps come at the expense of consumers in these Pacific countries.

However, this is not to say that businesses should not take the overall lack of regulation in the region to mean they are free to operate in these markets as they please, without regulatory oversight. PNG has provided a number of recent examples of the ICCC weighing in on proposed corporate mergers and acquisitions in that jurisdiction – such as the 2021 rejection of Kina Bank’s acquisition of Westpac PNG citing reduced competition within the highly concentrated PNG banking sector. The broad power of the ICCC allows it to monitor transactions even if no application for clearance or authorisation has been made – this includes the power to apply for an injunction to stop a transaction. The ICCC can also impose fines, apply for directors and managers to be excluded from acting in such positions and even move to start the divestiture of assets or shares already transferred.

As for Vanuatu and Solomon Islands, good conscience is good business. Corporate entities and international wholesalers and retailers should hold themselves to the competition and consumer law standards they are required to apply in more regulated jurisdictions like Australia, New Zealand, Fiji and, increasingly, PNG. As the laws in these jurisdictions (hopefully) continue to develop and become more robust, future reputational risk will exist for those companies who are subsequently shown to have been engaging in improper market conduct.