The role of the Competition Commission in inflation management

The rising tide of inflation in Bangladesh is more than just a statistic; it represents a growing crisis that affects everyday life. With inflation hitting 10.49% in August 2024 — down from 11.66% in July — consumers are feeling the pinch in their wallets.

At the heart of this challenge are supply chain disruptions, exacerbated by logistical inefficiencies, reliance on imported goods and monopolistic practices in essential industries. As these factors combine, it creates a perfect storm for market volatility. The Bangladesh Competition Commission (BCC) must urgently step up its efforts to address these issues, regulate market dynamics and protect consumers from the relentless march of price hikes.

Established in 2012, the CCA plays a crucial role in fostering competitive markets and curbing anti-competitive practices. However, operational delays, lack of qualified personnel and lack of initiative hampered its effectiveness.

Strengthening commission capacity is essential as monopolistic behavior by wholesalers and distributors continues to drive up prices. In markets dominated by middlemen, supply manipulation and unfair margins further stress consumers while reducing profit margins.

Concentration within supply chains significantly hampers producers’ ability to negotiate favorable terms, limiting consumer choice and contributing to higher prices. Recent projections by the Asian Development Bank anticipate inflation to rise to 10.1% in fiscal 2024-2025, underscoring the urgent need for proactive measures in market regulation. Addressing these challenges is vital to creating a more competitive environment, market stability and fair pricing.

The CCA should also prioritize removing blockages in agricultural and consumer goods markets, where intermediaries exert significant influence. Promoting direct sales from producers to consumers through avenues such as farmers’ markets and digital platforms can help reduce reliance on middlemen. However, the successful implementation of these reforms will require long-term structural adjustments.

In addition, vigilant monitoring of mergers and acquisitions will be essential in preventing excessive market concentration. CCA must take assertive action when such mergers endanger competition, saving a fair and dynamic market environment.

Inflation was further fueled by disruptions in transport and reliance on imports. Recent data indicates that local items account for 72.5 percent of inflation, underscoring the need for improved distribution.

Government can support CCA by providing sufficient funding and providing technical expertise, particularly in competition law and supply chain management. The Commission needs well-informed and capable people to increase its effectiveness.

In order to strengthen the enforcement of competition law, it is important to streamline processes by simplifying the submission of complaints and investigations, thus encouraging the participation of interested parties. Implementing regular monitoring of market practices and publishing enforcement reports will increase transparency. In addition, educating businesses and consumers about competition law and its reporting mechanisms is critical to promoting compliance. In addition, imposing stricter penalties for violations will deter anti-competitive behavior and promote compliance.

A comprehensive response to inflation requires synergistic collaboration between government entities, market regulators and private stakeholders. By further empowering the CCA to take effective action, the country can foster competitive markets, address supply chain inefficiencies and protect consumers from unfair price increases.

As inflationary pressures continue to mount, the urgency for decisive action has reached a critical juncture. Improving CCA capabilities and effective execution and enforcement are essential to restore market confidence and protect the economy from potential disruptions. This proactive measure will not only stabilize the current economic landscape but also strengthen Bangladesh’s resilience to future challenges.

The writer is a logistics specialist and the president of AmCham Bangladesh.