The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian airline principal yesterday pledged to "bring the first case" under proposed competition legislation, branding it: "An answer to my prayers".

Captain Randy Butler, Sky Bahamas' chief executive, told Tribune Business that the draft Fair Competition Bill could ensure "the survival of a number of companies" in the airline industry as it seemingly provides a means to confront long-running complaints about Bahamasair's "predatory pricing".

A long-standing critic of this alleged tactic, which he says is underwritten by the national flag carrier's multi-million dollar taxpayer subsidies, Captain Butler said Sky Bahamas and other Bahamian-owned carriers always "have to consider the Treasury" in all commercial decisions they undertake.

He called on the government to ensure the Fair Competition Bill had the necessary compliance "teeth", and urged it to place sufficient resources behind its implementation so that it did not go the way of previous legislation that is on the statute book but not properly enforced.

"This may be the type of antitrust thing we need," Captain Butler responded, when informed of the proposed law by Tribune Business. "Bahamasair will be the first case, where they are doing predatory pricing against the privately-owned carriers.

"I'd probably be the first case to come. I would do that to save the domestic airlines and the jobs of our people. It's obvious; you can see it from Bahamasair's advertising."

Captain Butler has long complained of Bahamasair's alleged "predatory pricing" tactics, where it undercuts rival carriers by selling ticket prices below cost, with the shortfall covered by an annual taxpayer subsidy that is pegged at $13.365 million in the 2018-2019 Budget.

The Sky Bahamas chief argues that this forces his airline, and other privately-owned Bahamian carriers, to also sell tickets below cost to enable them to compete with Bahamasair. But, without the same subsidy support, this forces them into a loss and having to abandon certain routes.

Such market distortion and tactics will likely be frowned on by a Fair Competition Act, with the draft legislation setting out in some detail the procedures that have to be followed in investigating complaints of anti-competitive behaviour; the hearing of such cases; the rendering of decisions; and imposition of any fines and penalties.

It is unclear, though, whether the law would apply to state-owned enterprises (SOEs) that compete with the private sector, Bahamasair being the most obvious example. And there are several other existing regulatory regimes/agreements that would likely run afoul of any competition legislation.

One is the 10-year moratorium that bars new operators from entering the domestic gaming, or web shop, industry. Other private sector sources have pointed to the Government's previous granting of monopolies, such as those in the port industry relating to both Nassau's commercial shipping port and Hutchison Whampoa's former exclusivity in Grand Bahama, as arrangements that might conflict with the new law.

Sources have also queried whether the draft Fair Competition Bill as is deals adequately with cross-subsidisation, or situations where companies are able to use their "super profits" from one industry to enter other markets and under-cut rivals, driving them out of business and financing such losses elsewhere.

Captain Butler, meanwhile, suggested that the Bill was one of three desperately-needed laws - a Freedom of Information Act and Fiscal Responsibility Act being the other two - necessary "to fix a number of the crazy issues going on in the country".

"For airlines it's exciting, and it's the answer to my prayers," the Sky Bahamas chief told Tribune Business. "I would say it's very, very important, so much so that I think we in the private sector will help the Government with whatever they need to put this in place because it's going to mean the survival of a number of companies.

"It's our number one issue. Anything we do we have to consider Bahamasair and the Treasury at this time. When you come into the airline business and operate against them, this is what happens.

"No one, the chairman, the Minister, apologises for what they're doing, and from the outside it looks like their intent is to close the private enterprises so no one can compete."

Captain Butler added that the Fair Competition Bill will also enable small and medium-sized businesses "to exist", and said: "You have to have this, otherwise big companies will eat them up." He suggested it would also prevent price fixing and other forms of collusion that can harm the interests of Bahamian consumers and rival companies.

"Who's going to be the ones implementing that," the Sky Bahamas principal asked. "That's always the challenge, and the penalties will be fundamental in making the difference. Without the teeth it's useless and we need to see the Government put resources behind it."

The Fair Competition Bill is among a slew of legislation being drafted, and issued for consultation, as part of the Bahamas' accession to full World Trade Organisation (WTO) membership by year-end 2019. It is also to fulfill this nation's obligations under the Economic Partnership Agreement (EPA) signed with the European Union (EU) in 2008.

The Bill, which proposes the creation of a Fair Trading Commission to act as the Bahamas' competition watchdog, is designed to protect Bahamians by guarding against abuses and distortionary practices from rogue businesses that undermine consumer welfare.

It is typically intended to prevent, and punish, practices such as collusion by firms that results in price-fixing or restricting the availability of particular products and services. Abuse of a dominant market position, and mergers and acquisitions that may be against the public interest, are also covered by this legislation.

"Examples of the types of agreements that restrict or distort trade typically include: Price fixing agreements, production quota agreements, geographic market divisions, bid-rigging agreements, tied selling and collective arrangements among suppliers to directly or indirectly fix the resale price of a good or service," the Bill's footnotes state.

Mergers/acquisitions that result in the combined entity obtaining "at least 40 per cent share of any market, or such other amount of the market as the Minister, acting in consultation with the Commission, may prescribe" is one of the criteria that will result in the deal being referred to the Fair Trading Commission for further scrutiny, according to the Bill.

The legislation, according to the footnotes, will also apply to foreign mergers and acquisitions that affect the supply of goods into the Bahamas. "The conduct of multinational corporations--where those corporations sell goods in or into the Bahamas, is covered under this Act," the footnotes state.

"For example, if GLAXO-SMITH KLINE is merging with a North American company, and that company sells pharmaceuticals, for example, in or into the Bahamas, then that merger may be subject to the merger review and control procedures under this Act."