Currently there are no laws on the books dealing with monopolies.
The government must move speedily to pass laws controlling monopolistic practices in line with international standards. We are behind the curve on this matter. This could explain the difference between maintaining the status-quo and governing.
The acquisition of Imperial Life Assurance by Colina Insurance will set a precedent for government policy in the absence of any statutory or substantial law dealing with anti-trust. It will also create a dominant player in the market, thereby giving it a disproportionate influence, not only in the Insurance sector, but also in the Capital Market and the Banking sector.
Once a company acquires a dominant position, it has the ability to influence the placement and movement of business for a whole range of service providers. For example, if a company through a series of mergers and acquisitions controls a very high volume of bank deposits within the system, they can begin to dictate to the banks what rate to pay. In effect some small institutions can be adversely affected by the leverage which the dominant player acquires in the market place.
On the Capital Market side, a dominant player can actually control a very substantial part of transactions within that sector – such as Private Placements and Initial Public Offerings (IPOs). They can have a disproportionate influence over matters of restructuring of debt, the issuance of bonds and the selling of shares.
This is why developed countries have a sophisticated regime of laws and procedures to protect the public from monopolistic practices. We should not wait to be forced by foreign organizations such as the World Trade Organization (WTO) to enact appropriate laws dealing with competition, anti-trust and monopolies.
In developed countries, monopolies are looked upon as potentially distorting normal market forces which is invariably detrimental to the consumer. When you have a monopoly your price can be high and not subject to market forces, supply and demand; the quality of goods and services does not have to be high and the delivery of your services does not have to be good because the consumer has no where else to go. Monopolies can gouge the public. That is why they have to be controlled.
If a dominant player is able to control a very high percentage of market share such as Major Medical Insurance, Life Insurance, Bank deposits, Pension Funds, Capital Market transactions, then that entity can begin to dictate to the market terms for conducting business, thereby distorting the natural rules of the free market. Examples of this can be seen at the Atlantis Resort, Paradise Island and Cable Bahamas.
In the case of Atlantis, that company is in a position to dictate to the government simply because of its size and strength in the hotel sector. Cable Bahamas has a dominant influence over the access of a large percentage of the Bahamian community to the Internet and the outside world. They control Cable television and the company controls the level of connectivity which exists in the Bahamas. This is why some people insist that the monopoly on telephone service should be broken. This also is the reason why in the United States the authorities broke up AT&T. As a result a very large number of telephone companies and carriers came into existence, giving the consumers a wide choice.
In the world in which we live the consumer is king. The question must be asked, how can the consumer be king in the Bahamas if he has nowhere else to go, or no choice in selecting who he does business with? The government should be extremely careful to consider the macro policy considerations relating to the proposed acquisition of Imperial Life. To get it wrong may inflict irreparable damage on major sectors of the economy which would severely prejudice the interest of consumers and policy holders in this country.
Also on the macro level, the appropriate legislation enacted should bring the Bahamas in line with international standards. The issue is not whether or not such laws should be enacted, because inevitably we will be required to do so. The real point is that the government should lead on the point and enact legislation in our own time frame, or once again be dictated to at the eleventh hour by some international organization.
Wendall K. Jones, The Bahama Journal
