Oil Marketing Companies’ decisions on pricing violate NPA Act – CUTS Ghana

Appiah Kusi Adomako, Country Director-CUTS Ghana

“The Association of Oil Marking Companies’ (AOMC) decision to set a percentage cap and defer the window for reducing fuel prices at the pump violates Section 44 of the National Petroleum Authority Act 691 of 2005.  The Act says that a person or an agent of that person shall not indulge in or assist in cartelisation in the petroleum downstream industry. Section 43 prohibits the formation of cartels or any behaviour that seeks to lessen competition in the petroleum downstream market,” said Appiah Kusi Adomako, the Country Director-CUTS Ghana.

Mr. Appiah Adomako was speaking in Accra as part of activities marking World Consumer Rights Day which were held in Accra.

Mr. Adomako said: “With the emergence of price deregulation, one would expect consumers to feel the impact of the fall in crude oil prices coupled with appreciation of the Ghanaian cedi against the US dollar. However, the concerted effort by AOMCs to agree on an average percentage price reduction and deferring the time for such a reduction constitutes price-fixing – which is an offence under sub-section 3 of Section 44, which states that a person who commits an offence under this section is liable on summary conviction to a term of imprisonment not exceeding ten years, or to a fine not exceeding fifteen thousand penalty units calculated in a currency determined by the minister, or to both”.

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He added: “The statement by the Chief Executive Officer of the Association of Oil Marketing Companies (AOMCs), Kwaku Agyeman Duah, that consumers of petroleum products should not expect a drastic reduction of the commodity’s price this week, in itself is a clear indication that the association is having a horizontal and concerted action on pricing which violates the essence of free market and competition rules as contained in the NPA Act.”

The essence of the full price deregulation is to bring about competition and increase efficiency in the market, and thereby increase consumer welfare. Ghanaian petroleum consumers have not seen any appreciable decrease in the amount that they pay at the pumps when the key variables for determining prices suggest they should.  It is of much wonder why oil marketing companies in the country are very slow in reviewing prices downward but very swift when it comes to upward review of prices.

Although when there is price deregulation there is little that the NPA can do to intervene, when market players are not being responsive to the pricing variables, then the authority can act to protect the interest of petroleum consumers.

Price-fixing is an agreement that could be written, verbal, or inferred from conduct among competitors that raises, lowers, or stabilises prices or competitive terms. The reason Competition or Antitrust Regulations prohibit price-fixing is that firms have different cost structures, and by allowing market operators to fix or agree on prices or take any concerted action on prices it reduces competition and innovation in the market – and consumers are made worse-off. Though members of the association can meet to decide or agree on some issues, it is illegal for the association to decide on any matters related to pricing.

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While we wait for Parliament to pass the Competition and Fair Trade Practice bill into law, which is a key precondition for start of the second phase of negotiations for the African Continental Free Trade Area (AfCFTA), Mr. Adomako called on the NPA to use existing provisions in the NPA Act (Sections 43, 44 and 45) to investigate anti-competitive violations in the petroleum downstream sector.

World Consumer Rights Day is celebrated worldwide on March 13th annually to promote and highlight the welfare of consumers across sectors. CUTS is a research, advocacy and a public policy think-tank.

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