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Competition Bill 'answers prayers' over Bahamasair

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."

Comments

DDK 5 years, 12 months ago

You do notice that all the bills that are acted on poste haste are for the elite. Nepotism is alive and well and thriving!

newcitizen 5 years, 12 months ago

Are you in favour of BahamasAir costing tax payers $13 million a year?

DDK 5 years, 12 months ago

No, nor am I in favour of nepotism. This Bahamasair low fare thing has been going on for decades. Now we have an owner of another Bahamas operated airline in the HOA as Finance Minister, no less. It's like the thing with duty on commercial washers and dryers.

Well_mudda_take_sic 5 years, 12 months ago

Our Deputy PM and Minister of Finance (Turnquest) has a significant ownership interest in Sky Bahamas. It seems he was not content to reduce the customs duty on airplanes to zero in the recent annual budget. Now we see a piece of legislation aimed at thwarting competition and making it more costly for Bahamians and tourists to fly from island to island within the bahamas. This bill if enacted would essentially require Bahamasair to charge higher airfares for air travel within the Bahamas as a means of protecting the higher airfares that Sky Bahamas wishes to impose on its passengers. It is abundantly clear that Turnquest is using his elected office and cabinet posts to enrich himself at the expense of Bahamians and tourists traveling by air within their own country. And Turnquest will untruthfully and self-servingly tell us that he had nothing to do with the bill and that he understands it is for the purpose of reducing Bahamasair's losses and the level of its subsidization by government. But nothing could be further from the truth. The bill will put more money in the pockets of the owners of Sky Bahamas, less money in the pockets of the national airline we taxpayers subsidize, and make it much more costly for Bahamians and tourists to travel from island to island within our country. And Minnis continues to turn a blind eye to the blatant efforts of Turnquest to greatly enrich Sky Bahamas and himself as a major stakeholder in that airline. One can only begin to wonder what egregious conflicts of interest and deal cutting Minnis is letting the other members of his cabinet get away with, or is being done by himself for his own personal benefit.

newcitizen 5 years, 12 months ago

You seem to miss the point that your and my taxes are what are paying for those lower fairs. $13 million a year doesn't come from thin air. It comes from customs duty and property tax and VAT. Why are you and I supposed to pay for that instead of the ticket buying passenger?

Well_mudda_take_sic 5 years, 12 months ago

Ask yourself how is it Sky Bahamas is laying claim that it cannot compete with our subsidized national airline (Bahamasair) that has 8 aircraft and 800+ employees? Bahamasair has always offered fair airfares for intra-Bahamas travel, and must do so to keep us a competitive tourist destination. Bahamasair is being subsidized because politicians have used (abused) it as a source of employment, resulting in its very bloated head count. Our national flag carrier has never been subsidized for the purpose of undercutting the airfares offered by its competitors, as wrongly and very self-servingly alleged by its competitors. It has only ever been subsidized to fund the foolish payroll (head count) padding caused by our corrupt politicians.

Think about the cost of beer in the Bahamas relative to the cost of beer in nearby Florida. Our government has interfered with the free market system by imposing high duties and excise taxes on imported beers to protect the Heineken/Khalik and Sands breweries. These breweries together employ a relatively small number of Bahamians with relatively low paying jobs. Their owners (shareholders) on the other hand are literally minting money from the protectionist policy that favours their products. Bahamians and all tourists coming to our country pay dearly for a cold beer..... for Bahamians its a higher cost of living and for tourists its a more expensive vacation. The government is of course happy with this protectionist arrangement because it receives the higher taxes, but the arrangement costs everyone else dearly, except of course the owners of the protected businesses. This is what Turnquest is wrongfully seeking for himself and his partners in Sky Bahamas through the misuse of his elected office.

newcitizen 5 years, 12 months ago

You do realize that the excise taxes on beers are paid on local beers as well. That's why they are so high. Locally produced beer (Heineken/Khalik and Sands) pay the same excise tax to the government that an imported beer is charged. Please read about the things you are commenting on before doing so.

Well_mudda_take_sic 5 years, 12 months ago

Why so quiet about the customs duty? Is there no duty? Is the excise tax levied on cost before or after inclusion of customs duty? But what's your point? Most of know a 6-pack can be had for $6 or less in Florida compared to the exorbitant price we pay for same here in the Bahamas. And that's only because of our government forced inflated pricing of imported beer to help subsidize the operating costs of the local breweries, specifically Heineken/Khalik and Sands. More importantly though, do you want to be subsidizing the operating costs of Sky Bahamas? We already subsidize enough things as it is.

BahamaLlama 5 years, 12 months ago

Wait, the Bill will enable BahamasNightmAir competitors the freedom to increase prices? Competition is supposed to lower them.

How about we sell it off, get the government out of aviation,allow in lots more foreign airlines, and let the carriers do as the market wants?

ohdrap4 5 years, 12 months ago

when the market does what it wants, like avaiation and andros, you have to fly hackers.

or, for example, bahamas ferries who completely dropped passenger trips to south abaco.

Dawes 5 years, 12 months ago

I take it that all those who want the ticket prices to be under cost to the airline have no problems continuing to pay increases in taxes. Bahamasair has us the taxpayer over $500 million since it started. But hey we got cheaper flights so thats ok.

bogart 5 years, 12 months ago

For far too long and particularly now ....the majprity of the pore people who only travels to da numbers shop....da corner store...an da water pipestand.... travels by jitney....should not hav to be subsifizing dis airline used by da politicians...da rich travelling an shopping in Miami...an dere illegal migrant servants who Immigration catches and sends back by thousands to Haiti.....it is nuff time authorities do someting wid da some 800 workers an 8 planes....stop tekking bread outta pore people mout to helps support da rich....jetting here dere an everywhare

Economist 5 years, 12 months ago

The Bill will effect all areas of business and not just aviation. A law like this has been needed for decades. Sure Sky may benefit, but so will many other businesses. This bill is good for the consumer.

Well_mudda_take_sic 5 years, 12 months ago

Have you even read the bill? If you haven't (which I suspect), please go to the Bahamas Government portal online and do so.

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