This is the account of a week spent teaching antitrust law in a World Bank sponsored program for the Tanzanian Fair Competition Commission and members of their High Court. Before I leave, my seven year old daughter asks “why do you want to go to Africa?” So do some friends and clients. Most of what we hear about Africa is awful. Extraordinary violence, famine, tribal war, Aids, contagion, and more. My purpose is not to explain why a lawyer from Cleveland would head off on the 4th of July for sub-Saharan Africa, but what I found there. I hope the Tanzanians found our time informative; I learned a lot.
Vol. 3: Competing with the Technocrats
After four days, I have a routine. I swim in the ocean; I teach for four and a half hours a day; and at night, shrouded in mosquito netting, I prepare for the next days’ session. I know the tides (not a small issue because low tide forces me to go a long way from the hotel) and the rhythms of the hotel. I have seen little of Africa at this point, but Africa comes to us. Before bed, I go down to the bar – where I am known whimsically as “the Professor” – and drink Kilimanjaro beer and some nights there are traditional African performers. In addition to our conference, there is some sort of United Nations/World Bank economic conference that draws people from all over Africa.
One morning, I am eating breakfast with the Colonel when a tall man in a pin striped suit sits next to me. He nods at the Colonel and then starts quickly eating his bowl of porridge. When he gets up to get more food, I ask the Colonel about him. “This man is Eritrean,” the Colonel says. “Very good fighters.”
After nine hours with the Decision Makers, I lobby to switch to the Technocrats. This is the unfortunate name given to the some forty-five line attorneys, economists, and statisticians who work for the Fair Competition Commission. Why switch from those with real authority? Well, the Commissioners only have one case at present. If more cases are to be brought, the Technocrats – the younger Tanzanians in the other room – will have to bring them. And I sense an easy audience. The Technocrats have had seven straight days of economics and econometrics. With some persistence, I get one day with them in the Mandela room.
We start at the beginning: the benefits of competition. I offer a hypothetical where I own the only petrol station in a town. The nearest one is 40 kilometers away. I open when I want to and I price the petrol just below the point where demand turns elastic and customers start riding bikes or walking instead of driving. Life is good for me; life is bad for the consumer. And then you come along. You open a station right across the street. You open earlier, stay open later, wash windshields, and cut prices. The cars line up at your station.
“What do I do?”
“Consider murder,” someone jokes.
“Let’s be optimists about humankind,” I say. “I buy an alarm clock and cut prices. But you look across the street and see my lower prices and some of the cars come back. You cut prices again. What do I do? Let’s now be realists about mankind, I walk across the street after closing and say we need to talk. And on we go into conspiracies to restrain competition.”
“The Technocrats” are an active audience. They have these microphones befitting a United Nations Security Counsil meeting, where to speak they flick a switch and a red light comes on. At some points, the audience lights up like a Christmas tree. The chief economist is particularly active. He is polite, but persistent in challenging me on specific points of economics.
We watch the famous undercover videos of the Lysine (a feed additive) cartel at work that gave us the perverted mantra: “Our competitors are our friends. Our customers are the enemy.” The appeal is universal. When a Japanese executive named Mimoto jokes about an empty chair at the table for the FBI, the Tanzanians laugh because the joke is on Mimoto. The one slightly uncomfortable moment is watching the conspirators sit in a hotel room and fix the prices in Canada, then the United States, Europe, and Asia. I suggest that perhaps Africa is rolled into Europe, but the other conclusion is that Africa is simply forgotten.
The part of the day they enjoy the most is the discussion of law enforcement techniques for investigating conspiracies: Developing confidential informants, amnesty and leniency programs, pen registers and phone records, executing search warrants, and techniques for interrogation. You can see the wheels turning. The Chief Economist turns on his mike. “What role do I have as an economist in these investigations?” he asks.
“Two things: You can identify the markets that economics tells us are conducive to a conspiracy so your efforts are focused in the right places; and you can develop economic proof of a conspiracy.” I discuss a matter they reviewed. The big importers of a certain commodity control the storage tanks at the port in Dar. Smaller competitors enter the market but have to lease storage space from their competitors. The big guys all at once triple “the hospitality fees” charged to the little guys for storage. There is general suspicion that they did not act independently, but the resolution is simply that the Government will build more storage for the little guys. Anyone believe action should have been action taken against the big importers? What economic evidence was there? The case study notes that the big guys had high fixed costs and yet all raised prices at the same time despite substantial excess storage capacity. There is also evidence that the prices per cubic meter were more than five times that charged in Kenya. Not enough to charge the case, but enough perhaps to get a search warrant out of the Chairman.
There is an undercurrent of feeling of exploitation. Tanzania is one of the poorer countries in the World (how poor I will soon see). The foreign aid flows in but foreign companies are generally the sellers, prices are rising, and the money flows out again. We move to the issue of the extraterritorial reach of the Tanzania act. It is now nearly three o’clock and we are scheduled to end at three-thirty. And then something happens; something I can’t remember ever happening in my nineteen years of schooling. I tell you not to wax braggadocio, but to speak to the commitment of the Tanzanians. Shadruck, the senior Technocrat, switches on his microphone: “Point of order, we will continue to four o’clock.”
“I will accept your proposal under two conditions,” I say. “First, you lie in your reviews so the economists give me a return ticket home (I am in fact reviewed every day), and, second, you allow me to play in the Technocrats football (soccer) game.”
Shadruck’s statement was a directive not a proposal, but he accepts my terms.
Only after class, do I remember that I have only a pair of loafers. Kingu, a young Commission employee who is often saddled with the gopher jobs, finds me a new pair of Adidas shoes. We play on a field on the side of the hotel that is more sand than grass. Men and women play. We run hard but the game is lighthearted. I try to guard a young Tanzanian Pele who dribbles around and through me at will. When I go down face first, he stops and extends me a hand. After a half an hour, I am out of breath and doubled over. I tell Shadruck and Gregory, the Director of Compliance from the Decision Makers, that I am going to the beach swimming.
“That is fine,” the Director of Compliance says. “But leave the shoes with us.”
Vol. 4: Malaria
I want to travel inland after class on Friday. I made no firm plans in advance because I presumed that a plan and some fellow travelers would fall into place when I got over here. I email my friend Charles Jakosa. His reports over the years from Afghanistan, Iraq, Liberia, and most recently the Congo inspire in part this effort. “Congo Journal One” is as bleak as anything he ever sent. Perhaps, he could cross the border for a weekend in Tanzania. No response.
I talk to the Tanzanians. Most recommend a trip to the Norongoro Crater although only a few have actually been there. Those that have – including the High Court Justice – speak of it with an almost religious reverence. Someone puts me in touch with a guy named Alla who will arrange a flight, lodging, and a guide. Alla texts me that I need to bring eight hundred dollars in cash to an address in Dar. “Not possible – need to pay with credit card,” I text back. “Mr. Edmund, bring half the money today. Half tomorrow,” Alla responds. I decide to put my life in someone else’s hands. I end up talking to a British guy named Basil in Tucson, Arizona who looks into adding me to one of his groups on safari. “Any lifestyles you find objectionable?” Basil asks. “Cannibalism,” I safely respond but the question itself gives me pause.
I start class on Thursday with the Decision Makers without firm travel plans. “How was your time with the economist?” I ask. “Economics,” the Colonel says smiling and shaking his head. “A lot of assumptions.”
We move from horizontal agreements to vertical agreements or restraints. For example, a manufacturer requires that its four distributors not resell a product to end users for less than 10,000.00 shillings. Should this be a violation? They start out where the U.S. once was. “The Doctor” – a tall Tanzanian with a PhD. in engineering and who lived for twenty years in Vienna – articulates the sound objection that this accomplishes the same sort of price fixing that would be a violation if the four distributors got together and agreed not to charge less than 10,000.00. “But what is the manufacturer’s motive for doing it?” I ask. Silence. “Let me ask it another way, what does the manufacturer want the distributor to do with the profits?” “Madame” – the law professor – sees the point that the manufacturer may want to make sure that the distributors make sufficient profits that can be reinvested in advertising the product, nice showrooms, knowledgeable staff, and so forth. The price floor prevents ‘the free rider” distributor who does not invest in promoting the brand from cutting prices and taking customers from the distributors that do invest in the brand. Perhaps interbrand competition is enhanced by price floors even if intrabrand competition is not.
I take a low key approach – in part because I am not feeling my best and in part because I have an easy rapport with the Decision Makers now. Only the High Court Justice is a bit aloof. She avoids eye contact, and at one point rightly abstains from discussion of a case that she may hear. On other issues, I draw her out with questions directed at her, stating “this is great, in my country the Judges ask me the questions.” I catch a faint smile.
We are having another good day, and then I take an abrupt turn for the worse. I start sweating profusely. Maybe the room is just too warm. No one else is sweating though. Then the room starts to spin like the tilta-whirl at the state fair. I ask for a moment to get some tea. I have only 20 minutes to go, but I remember that I agreed to meet Helene – an attorney from the Technocrats – to discuss issues she has with the Act. Despite my protests, Helene cancelled a scheduled radio interview to meet with me. I can’t cancel with her. Somehow, I get through class and the meeting and stagger back to my room.
Could this be malaria? Malaria: A disease spread by the bite of the female mosquito. It is remarkable how little thought I gave malaria until I got here. Hundreds of million people a year are stricken worldwide. Of these, somewhere between 1.5 million and three million die. The problem in Tanzania is particularly bad. The incidence rate is high and the strain of malaria here is particularly virulent. According to published sources, Tanzania has the highest reported death rate from malaria in sub-Saharan Africa. In recent years, someone – particularly children – dies of malaria in Tanzania every five minutes. This is a phenomenal human tragedy and it is secondarily an economic problem. Tanzania’s economy is heavily dependent on tourism. Anyone considering travel to Tanzania must consider the risk. Despite the magnitude of the problem, there is still no easy prevention. Of the three drugs commonly prescribed, none – to my understanding – are fully effective in preventing the disease and all three have common side effects that range from low-grade nausea to neuropsychiatric disorders. I discontinued my drug after several days because I did not feel well on it.
And so I lie on my spinning bed, wondering whether this might be malaria and if the symptoms persist, would I hazard a trip to the local hospital. A lot of assumptions.
(Next: Antitrust Lessons in Africa - Part III The Road to Mikumi)