Outcomes of the Three-week “Anti-Monopoly” War
The war declared against monopolies by the Government is over. It ended yet without starting. Crucial commodity markets of social importance like those of sugar, flour, wheat, oil, rice, buckwheat, butter, margarine, banana, orange, children’s food, poultry, medication, petrol and diesel fuel, although they are not monopolistic formally, by the public they are perceived as monopolies. This was stated at the Government’s session on Thursday by Hovik Abrahamyan, RA Prime Minister. In other words, the state itself is ready to struggle, however, de jure there are not monopolies in Armenia.
However, that Government won’t give way. The PM gave a few assignments. He assigned the Minister of Economy to develop clear guidelines by detailed description of procedures of commodities՛ import, they should include all necessary documents, expertise, certificates, payment deadlines, respective bodies, claiming order and etc. It was assigned to head of State Revenue Committee (SRC) and Control Service of the Prime Minister from August 1 to publish monthly analytical report on identical approach during the customs formulations while importing, upon mentioned commodity markets.
This means an attempt is made to define equal conditions for the game. This is struggle not of monopolies, but of reasons generating monopoly, on the necessity of overcoming which the PM mentioned in his speech. However, the key point is that those reasons have done their “dirty job” long ago. Monopolies have already been developed.
Guidelines how to import sugar, what conditions are available, how to deal with customs clearance and etc. will simply bear reconnaissance nature. People will accept it and go on, realizing that it’s useless. Even if the law will equally function for everyone, if there won’t be advantageous people, corruption and other manifestations will be excluded, it’s no more possible to struggle against monopolies. As upon scales it has captured the small market, and formally it has a few minor “contestants.”
Regarding sugar, we deal with a monopoly, which is considered quite “natural.” As we adopted a respective legislation within EEU, pursuant which import of ready-made sugar is quoted and a high customs duty is charged, meanwhile sugar raw material is free from customs duty, and there is no maximal threshold for import. This means, one may contest with Samvel Aleksanyan only through constructing the second sugar plant. And this, of course, won’t occur. Thus, these assignments may be considered as belated. Maybe in other markets they’ll prevent generation of monopolies, however, in case of already existing monopolies they can do nothing.
They realize this in the Government perfectly well. They also understand that, however, something should be done. Accordingly, the PM assigned the Ministry of Economy and SRC to discuss and on a two-month basis introduce a concept, which additional regulations should be applied in import-wholesale trade-retail trade chain to exclude dictation of game rules in commodity market by big householders.
Thus, we agree, that formally there is no monopoly. Basically, we get along with it for some reasons, we have dominants (slightly said) due to being inconsistent in time, however, we don’t tolerate that they abused the dominant role and dictate game rules. Samvel Aleksanyan maintains the dominant position, however, he’s not able to dictate rules for the game. Thus, struggle against monopoly fluently turned into struggle against abuse of a dominant position. But, wait, what was busy the State Commission for the Protection of Economic Competition with all this time? As it was being stated that they were busy with that, weren’t they? Thus, do we have shortcomings in this regard? It turns out—no, the state did everything possible, however, the mechanisms are not enough. And as an example of functioning mechanism, the PM proposed to discuss the idea of banning simultaneous wholesale and retail trade by the same big householders in socially crucial commodities.
“In that case the big householder should implement wholesale trade only through electronic platform controlled by the state, where trade conditions should be transparent and equal for all consumers,” H.Abrahamyan said. This issue has been repeatedly touched upon, as really unequal conditions are being created for wholesale traders and other players of the market. The example should again be brought for sugar, as it’s the most obvious one. “Alex Grig” defines wholesale price for sugar, for instance AMD 360 and sells it in “Yerevan City” supermarkets owned by them for that very price. The one buying sugar from it should at least resell the sugar by AMD 400. However, if there is “Yerevan City” nearby, then the consumer will buy it from the supermarket by paying AMD 360.
What will happen if “Alex Grig” bans both wholesale and retail trade of sugar? From the wholesale trade, naturally, the company won’t withdraw, there is no any other supplier. On the one hand, it would be illogical not to sell sugar in the supermarket. In that case Samvel Aleksanyan will have to separate “Yerevan City” from sugar business (like it used to, when there was a separate company on sugar—“Lusashogh Sugar”). Thus, two companies will be established, one of which will import sugar (will produce) and will sell it to the other.
The sugar producing enterprise will supply to “Yerevan City” with the same price—AMD 360 and “Yerevan City” will sell that like others—by AMD 400. This will eliminate unequal competition in retail market, however, price for sugar will rise, and “Yerevan City” will benefit from that.
It turns out that sugar monopoly (in public perception) won’t be eliminated, and the only sufferer from that will be the consumer. Thus, the Government stresses changing of the game rules in retail market, and the wholesale market will operate upon former rules. In short, the Government itself is at a deadlock. On the one hand, it accepts that public criticism regarding monopolies is proper, and states that it’s ready to struggle and want to please the society. On the other hand, obviously, such a “struggle” won’t please anyone and won’t increase already low trust, just the contrary—will weaken it. Its vivid example is the stormy reflection of Artsvik Minasyan’s, RA Minister of Economy, well-known statement. Meanwhile he said what is possible to do, within law.
Was there any other variant to satisfy the society again within the framework of law? Yes. The only variant was in-depth survey i.e. going back by 10-15 years and implement detailed study of the dusty road of monopolies: how they generated, from where they acquired initial capital, who they bribed, who they terrified, with whom they came to a collusive agreement, where they cheated and etc. In short, checking all the suspicions “hanging in the air.” In case of uncovering of essential violations the company would be nationalized and through free trade of its shares it would turn into a public company. On the whole, dispossessing is this very process.
However, as we formerly mentioned, the authorities won’t take that step. In case of such examination of 90% of big businessmen facts will be uncovered, which may become materials for criminal cases, and the business elite will appear behind the bars. Besides the business elite, overwhelming majority of Armenia’s officials will appear in the same situation as well. Moreover, this won’t occur in case of change of power, as everybody avoids in-depth analysis of the so-called “initial stage of capital accumulation”—it may seriously shake the country. The political will, thus, has borders, which it can’t surpass.
Probably, they will take that step in case of some problematic individuals or businesses, however, alternative approach of the law—punishing this one, and bypassing the other, will lead to the same issues after a while.
If we make a formula, it will turn out, that in our country, the monopolist should either be sentenced or we should get along with his/her monopolistic status. The Government chooses the second option.
Upon sober judgment, this will also be a positive step, if the game rules really change. Accept what we presently have, what we had, and plan new rules and move forward. Finally, the society isn’t concerned whether one person imports sugar or a few. The society is concerned in the fact that the importer was conscientious and didn’t cheat. However, on the other hand, we shouldn’t forget that it has repeatedly been stated on establishment of new rules for the game, including by the incumbent Government as well.
By Babken Tunyan
