Impact of a Merger Assessment False Positives and Negatives

 A merger assessment regime is regulatory tool used by competition authorities to filter mergers with anti-competitive effects in order to maintain competitive markets. However, predicting the future economic landscape is inherently prone to uncertainties and diagnostic errors (Devlin, 2012). Competition authorities are particularly faced with a challenge of ensuring a delicate balance between two distinct regulatory missteps: False positives (Type I errors) and False Negatives (Type II errors) (Manne, 2020) which carry profound economic consequences, albeit with different impact manifestations across the marketplace.

The Cost of False Positives (Type I Errors)

A false positive occurs when a competition authority erroneously intervenes against or blocks a merger that is actually pro-competitive or economically benign (Manne, 2020). Such an error can permanently suppress economic efficiencies and synergies of a merger, including but not limited to:

Chilling Innovation: When a pro-competitive merger is blocked, the market loses out on structural optimization, economies of scale, and enhanced research and development (R&D) capabilities.

The "Shadow of the Law": The chilling effect extends far beyond the affected merger. Over-enforcement creates regulatory friction and causes future market participants to avoid beneficial consolidations out of fear of entering into a protracted, expensive but unpredictable litigation (Khan & Davies, 2009).

Historically, competition authorities have relied on the antitrust doctrine to guard against false positives. They have operated on the assumption that market mechanisms may naturally self-correct against monopolies, but can never resurrect a beneficial merger that was erroneously killed (Devlin, 2012).

The Peril of False Negatives (Type II Errors)

Conversely, a false negative occurs when a authority erroneously approves a merger with anti-competitive effects (Salop, 2016) such as the following:

Entrenched Monopolies: If an agency clears a transaction believing it will yield consumer benefits, but it instead creates unchecked market dominance, the immediate result is consumer harm through inflated prices, diminished product quality, and reduced consumer choice (Röller & De La Mano, 2006).

Erosion of Competitive Dynamics: In modern digital or high-barrier industries, the classic assumption that a market will "self-correct" against a monopoly often fails. Dominant firms can use their consolidated power to permanently box out emerging rivals (Manne, 2020).

A notable real-world example of the weakness in remedy-based clearances is seen when behavioral or structural remedies fail, such as the structural divestitures in the Albertsons/Safeway merger, where the buyer of the divested stores quickly went bankrupt, effectively reducing local competition despite the agency's intended safeguards (Salop, 2016).

Impact on Regional Integration in Developing Countries

Merger assessment errors have overarching impact on developing economies and the stakes get amplified under a regional integration framework (such as COMESA,  ECOWAS or AFCFTA). A single regulatory miscalculation ripples across multiple borders with regional false positives and false negatives:

Regional False Positives: When a regional authority erroneously blocks a beneficial merger, it can severely fragments and deter deepening of the integration. Developing markets often require cross-border consolidation to build the critical mass and regional champions are key to achieving regional economies of scale. A regional false positive isolates domestic markets, denying economic bloc the chance to integrate supply chains and attain cross-border efficiencies for regional resilience.

Regional False Negatives: Conversely, an erroneous clearance by a regional authority can establish a cross-border monopoly. If a dominant multinational or state-backed firm swallows up nascent local competitors across a trade bloc, it can permanently heighten entry barriers for regional entrepreneurs. This leaves weaker partner states vulnerable to regional price-gouging and economic exploitation.

Strategic Considerations for Improvement

To minimize these errors under constrained resources, developing competition authorities can adopt targeted structural reforms:

Introduce Dual-Track Thresholds: Regional authorities should try to pronged approach of splitting the review processes. They should identify small cross-border mergers which can be fast-tracked with minimal clearances mistakes yo avoid Type I errors. This also allows enforcement resources to be fiercely concentrated on mega-mergers that risk systemic market foreclosure (Type II errors).

Harmonize Regional Substantive Tests: Regional authorities should align the assessment regime including the definition frameworks and merger-notification guidelines across with national regimes and the trade dynamics of their respective economic blocs to minimize legal friction, disincentive forum shopping and reduce possibilities for false positives.

Deploy Effective Cross-Border Information Gathering and Sharing: Regional authorities should establish formal protocols to gather and share key market data and prevailing economic conditions across the economic bloc. Pooling localized market intelligence directly rectifies the information asymmetries that breed diagnostic errors.

Retool and employ competent staff: Merger Assessment is skill based discipline and therefore requires expertise and competencies. The regional should have in place enough competent and adequately facilitated staff with the necessary tools to conduct effective assessments.

Ultimately, neither error can be completely eliminated. Modern competition policy must constantly calibrate its evidentiary thresholds to minimize the collective total cost of both chilling dynamic market evolution and allowing anti-competitive consolidation to slip through the cracks.

 

References

 Devlin, A. (2012). Antitrust error. William & Mary Law Review, 54(1), 75–132.

Khan, R. A., & Davies, G. (2009). Merger control and the rule of law. Erasmus Law Review, 2(1), 25–58. https://doi.org/10.5553/elr221026712009002001003

Manne, G. (2020). Error costs in digital markets. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3733662

Röller, L. H., & De La Mano, M. (2006). The impact of the new substantive test in European merger control. European Competition Journal, 2(1), 9–28. https://doi.org/10.5235/ecj.v2n1.9

Salop, S. C. (2016). Modifying merger consent decrees to improve merger enforcement policy. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2768143

Gal, M. S. (2003). Competition policy for small market economies. Harvard University Press.

Fox, E. M. (2012). Competition, development, and regional integration: In search of a competition law fit for developing countries. Law & Economics Research Paper Series, New York University School of Law.

The Impact of Dark Patterns on Consumer Trust in Africa

With the advent of digital markets, Dark Patterns which are likely to undermine trust of the consumer trust in digital platforms. Dark Patterns exploit the cognitive biases to steer users toward choices favouring the platform over the consumer. The OECD's 2022 report identifies recurring tactics: false urgency countdowns, pre-selected add-ons, hidden fees disclosed only at checkout, confirm-shaming, and "roach motel" subscriptions that are easy to enter but deliberately hard to exit.

Consumer trust is the expectation that a seller will act honestly and deliver as represented, without the buyer needing to verify every claim. In digital markets, where consumers cannot physically inspect goods or counterparties, trust substitutes for that missing verification; it is what enables the consumer to enter card details, accept a subscription, or return to a platform. Trust is therefore not incidental to e-commerce, it is the transactional base on which growth, repeat custom, and cross-border digital trade depends.

Dark Patterns however, have the potential to erode this trust directly. Once a consumer discovers they were nudged into an unwanted charge or an inescapable subscription, the perceived fairness of the transaction collapses, producing frustration, regret, and declining confidence not only in that seller but in online commerce generally. The 2024 OECD-ICPEN review found over 76% of websites examined used at least one dark pattern, with 67% using multiple tactics , a clear evidence of how pervasive these designs have become.

Africa's exposure is rising alongside its digital growth with various countries e-commerce revenue projected to reach $112 billion by 2029, driven by a surge in mobile money and expanding digital markets. As AfCFTA advances digital trade, member states should codify dark patterns as unfair practices and harmonise disclosure standards, before eroded trust undermines the continent's digital trade ambitions.

IMPLICATIONS OF THE GLOBALIZING DIGITAL RETAILING ON COMPETITION AND CONSUMER PROTECTION IN COMESA COUNTRIES

ABSTRACT

IMPLICATIONS OF THE GLOBALIZING DIGITAL RETAILING ON COMPETITION AND CONSUMER PROTECTION IN COMESA COUNTRIES

 

Digital retailing has become one of the major factors contributing to globalization of markets with a substantial impact on trade and consumer welfare at the national, regional as well as multilateral levels. However, digital retail base in developing countries remains relatively low due to competitiveness challenges including weak institutional frameworks, inadequate supportive infrastructure, limited market size and skills gap, among others which make it difficult for an individual developing country to apply policies to effectively address competition and consumer protection related challenges.  As a result, some of the developing countries may find it difficult to apply competition and consumer protection policies to fully utilize digital retail potential while ensuring consumer welfare in the market. The challenges are exacerbated by practices in foreign territories, where developing countries have no jurisdiction, but which have an impact on them due to cross border effects. The study therefore sought to identify specific policy options and implementation approaches countries in the Common Market for Eastern and Southern Africa (COMESA) can adopt to address the multi-jurisdictional limitations of digital retail to promote effective competition and ensure consumer welfare while harnessing the potential of ecommerce in the region.

Legal regime and regulatory frameworks to support implementation of AfCFTA and improve compliance by the Member States

Efficient supranational institutions will be required to coordinate implementation and deepening of the African Continental Free Trade Area (AfCFTA). The AfCFTA will need supranational institution similar to those at the national level and probably with much higher authority to monitor and enforce implementation of the AfCFTA decisions in the member states and at the regional level. To achieve this, Member States need to cede some sovereign powers to the continental authorities and allow their national bodies to operate on the principal of subsidiarity. In other words, the ultimate power has to be at the continental level as operations and enforcement are achieved through the national bodies.

The AfCFTA should avoid following wholesomely the footsteps of the existing economic blocs in Africa. A closer look at these blocs reveals that only a few supranational authorities have been established and even then they are not empowered with enough authority to monitor and enforce implementation of the decisions. In most of the economic blocs in Africa, the visible and operational supranational institutions are mostly the Secretariats. This is noticeable with economic blocs such as EAC, COMESA, SADC, ECOWAS and IGAD, among others. Although the Secretariats are important in the integration process, their main function has been mainly to coordinate the blocs in the integration process. Secretariat have been limited to preparation and coordination of  meetings, following-up and tracking progress on implementation of the decisions and updating the responsible parties. In most cases and as reflected in article 13 of the agreement establishing the AfCFTA, Secretariats have limited powers to enforce implementation and reprimand member states for noncompliance.

However, supranational institutions are meant to break the barriers of sovereignty and increase openness in all economic forms. Thus they need adequate mandates and authority to act independently on measures of Member States that are inconsistent with the Treaty. Take an example of article 116 of the Treaty on the functioning of the European Union (TFEU), the Commission is mandated to monitor and determine consistence of the measures in Member States, determine whether they distort the conditions of competition in the internal market and consult the Member States concerned to address the distortion. Where consultation fails, the European, Parliament and the Council, are mandated to issue the necessary directives to address the distortion. Articles 28 and 30 of the TFEU prohibit imposition of customs duties or charges with equivalent effect on goods originating from a member state. In article 258 the Commission is mandated to assess whether a Member State is fulfilling an obligation under the Treaties, if it is not conforming, the Commission delivers a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations. Where the State concerned does not comply with the opinion within the period laid down, the Commission can forward the matter before the Court of Justice of the European Union.

It is clear from the example above that EU member states intentionally empowered the Commission to be an authority on matters of enforcing compliance. African Union can borrow a leaf to establish institutions with such powers. Member States cannot be left alone to monitor and compel themselves to comply with the Agreement. They are competitors in the market with domestic, sovereign and political interests to serve. This brings in a conflict of interest which has to be checked by an independent party.  

For example, in addition to the Secretariat and the Dispute Settlement Authority that have already been established under articles 13 and 20 of the Agreement establishing the AfCFTA, more authorities will be needed to ensure effective coordination, monitoring and enforcement of Agreement. Other supranational or continental authorities required Include

(a)  the Surveillance and Monitoring Authority to monitor the market, assess the application of the AfCFTA Agreement by the Member States and  ensure  fulfillment by the AfCFTA Member States of their obligations. The Authority should be given powers and mandate similar to those of the EU Commission or the Surveillance Authority of the European Economic Area (EEA). Where a new authority is not possible the Secretariat can be empowered to perform this function.

The AfCFTA Protocol on rules and procedures on settlement of disputes as currently designed will not be sufficient to compel Compliance by the Member States. Articles 4 to 10 on nondiscrimination of the AfCFTA Protocol on trade in goods or article 4 of the Protocol on trade in services will require close monitoring and surveillance. Member States tend to apply complex measures to evade compliance and takes a dedicated market surveillance and technical assessment to ascertain existence of a noncompliance measure by a Member State. Leaving it to the traders to identify such measures and then report to their countries to raise the matter may not be the best way to go about. Moreover, Member States have other considerations before raising any complaint against a trading partner. A Member State may choose not to complain or report an ongoing non-tariff barrier in fear of trade retaliation or in other spheres. It is easier to secure compliance where an independent body is responsible for picking up inconsistent measures and following the laid up procedure impose a remedy

(b)   Competition Commission to implement decisions aimed at maintaining fair competition within the AfCFTA by monitoring and enforcing measures on anti-competitive conducts by companies that would damage the interests and erode the benefits of the FTA. The powers and mandates should be aligned  with existing regional competition commissions under COMESA, EAC, ECOWAS and say with similar arrangements to the EU and EEA.

(c)  Court of Justice to interpret the AfCFTA Agreement and related decision to make sure it is applied the same way in all Member States, and to settle legal disputes between national governments and AfCFTA institutions. The powers and mandates should be aligned with national  courts and the existing regional Courts of Justice under COMESA, EAC, and ECOWAS, among others  

(d)   System of standards development, accreditation and surveillance on application and compliance. Standardization plays a central role in the proper functioning of the market. Harmonized AfCFTA standards will help to ensure free movement of goods within the internal market and allow enterprises to become more competitive. Harmonization helps producers to produce with one standard for all the AfCFTA market. However monitoring and enforcing compliance on standards should be lifted to continent level to avoid member states using this area to impose technical barriers to trade.

(e)  The Pan African Parliament will require supranational legislative, supervisory or budgetary powers to promote effective transparency, accountability in member states and strength cooperation under the AfCFTA.

The protocols establishing the above institutions must have clear sanctions and execution criteria in cases where there is noncompliance by the Member State or the Authority itself. The protocols must have supranational jurisdiction over the national laws.

Lastly, one important cross cutting element that must be ensured is the funding of supranational institutions. They have to be properly facilitated to enable them perform their work effectively. Lack of funding will render the supranational institutions ineffective and dependent on donor funding from development partners whose interest may not be aligned with the objectives of AfCFTA.

Regional Integration presents advantages to a landlocked country

For years it has been believed that countless ries needs access to the see in order for them to participate effectively in international trade. It is believed that transport costs would hinder countries to cost export to the markets. This idea was put in the forward because the assumption was that international market means western markets.

Regional markets were not considered to be potential markets for regional trade. All governments in Africa bought into this misnomer. They followed suit of the plan of the colonists to link Africa to Europe through railway lines and roads lead to the coast. Even a country with 5 countries to the cost would still strive to access coast without ever targeting to trade with the same countries. The countries would only roads linking to the coast but otherwise they were not interconnected on all the geographical coonners

Understanding your notes on international trade or any other topic

Many times students spend a lot of time revising the notes but at times the results from the exams do not reveal the efforts. Consider a topic on why countries engage in international trade, a student will revise this topic for five times or so prior to the exams but strangely the results will not reflect the efforts of the students. 

So what goes wrong? the problem is in the way students read and revise their notes or textbooks. When revising in preparation for an exam, say on international trade, one cannot read is if its a news paper. Human beings have a short, medium and long term memories. These affect the way we recall and respond to questions in an exam. A short term memory last between a second to say two to three days.  After that a person may not recall anything about the event or the occurrence. For example the memory of the mosquito hoovering on your head may last for two seconds. A medium term memory may last for a week and up to a few months but it may not be easily recalled after that period. For example the name of the person you met once and for a very short encounter, may be recalled at least in a few months but  after a year, it will be difficult unless that person had a subsequent impact or role in your life.. The long term memory lasts for years and at times forever in ones mind. For example the day of graduation or a weeding. the first day a new school or first sexual encounter will be recalled as if it happen yesterday, even after 30 years. 

So what is the magic? the trick is in the way we process what we read. We do not process the information to final a conclusion so as to understand it fully and be able to remember it vividly whenever we are required to do so.  Information has to be rehearsed o the point the where it be easily stored and retrieved from the long term memory. The process of rehearsing help one to put information into context and to be able to understand it from a real life perspective. This involves building of scenarios different from the way information has been packaged but pointing to the same conclusion. For example, when the topic is "International Trade" the reader is expected to first under the meaning of topic even before proceeding to the body.   The reader should be begin by asking and answering questions such as what is international?, what is trade? what is international trade? Is their another form trade that is not international, what is the difference between the other form of trade and international trade?. This approach should be done over and ever for each subtopic. 

Answering these questions before reading the body makes one gauge the existing level of knowledge on the matter. The reader should then read the body in the same manner of reasoning while ensuring that each word or sentence is understood in its true meaning and context. Real life scenarios must be drawn to ensure that the issues are understood in practical circumstances. It is known that international trade is the trade between two or more nations. If taken literally it could mean that trade occurs only when two countries are trading which of of course will be wrong because the country as a country does not trade but its Government or people do. However as long as there is trade across borders then international trade has occurred. Trade manifests in form of goods and people crossing the border and exchange of goods for a price. So the reader must visual these to comprehend the concept. 

The reader should ensure to track and look out for answers to the questions drawn and compare with the original answers that were made before reading. Any incorrect answers made at the beginning are a sign of low levels of appreciation or understanding of the topic which should improve as one reads. This process must be repeated every time the reader comes back to the same topic and its sub topics.

The First Ever U.S-Africa Summit: A Chance to Improve U.S-Africa Trade and Investment Relations

An opportunity is presenting itself to improve U.S-Africa trade and investment relations.  President of the United States, H.E Barack Obama is scheduled to host the first ever U.S.-Africa Summit in Washington, DC on August 5 and 6, 2014. African leaders will therefore have an opportunity to identify and present their ideas to President Obama on what they believe should be done to improve to the U.S-Africa trade and investment relations. 

Africa is being seen as one of the world’s most dynamic and fastest-growing regions. According to the 2014 projections released by the Economist Intelligence Unit, four out of ten fast growing countries of the world are in Africa. These include Sierra Leone (11.2%), Libya (8.8%), Eritrea (8.0) and Zambia (7.9). Actually, Africa's growth is superseding the rates in Asia. The African Development Bank has projected that by 2030 much of Africa will graduate into middle class economies with the majority attaining consumer spending level of $2.2 trillion. These projections clearly show that the next lead destination continent for foreign direct investment will be Africa. 

It is not surprising therefore that the United States is hosting a U.S-Africa Summit which is expected to focus on trade and investment relations between the two parties. The Summit is also expected to discuss America’s involvement in ensuring Africa’s security and promoting democratic principles

The AGOA has not yet improved the US-Africa Trade and Investment Relations

African leaders however, need to take advantage of this first ever U-S-Africa Summit and use it to reverse the trade and investment trends which hitherto have been unfavorable to Africa. The U.S provides to Sub Saharan Africa duty free quota free market access to the America market under the AGOA arrangement. The objective of the AGOA is to enable Sub Saharan countries to integrate into global economy as competitive and meaningful trade and investment players. However, it does not seem that this noble objective is about to be achieved, even when AGOA has been in existence for over 13 years.

Data available from United States International Trade Commission (USITC) shows that over 32% of the exports to the US under the AGOA are contributed to by Nigeria. South Africa and Angola each contribute about 24% of the total exports from Sub Saharan Africa.  However, all LDCs in Sub Saharan Africa are contributing less than 1% to the exports under the AGOA. 

The above situation reveals that the objective of the AGOA has not been achieved. In spite of the dismal performance under the AGOA, Africa continues to import massively from the U.S a situation that is worsening the trade imbalance between the two parties and more specifically with those Africa countries whose export base does include minerals. It should be noted that oil and petroleum exports account for about 84% of the total exports under the AGOA. Apparel and textiles which supposedly are the mainstay of the AGOA, contribute about 17% of the total exports excluding oil and petroleum related exports.

Statistics can at times be misleading; the USITIC data shows that in 2013 the U.S recorded a trade imbalance with Africa to the tune of $15,286.2 million. This ordinarily implies that the U.S is importing more from Africa than it exports to the continent.  But a quick look at the data reveals that a few of the African countries are actually benefiting from this situation. These are mineral reach countries i.e. Nigeria-Oil, Angola-Diamond and South Africa-Gold. These are the main countries that have a trade balance with the U.S led by Angola which recorded $7,294.90 million in 2013 and flowed by Nigeria at $5,249.4 million. Actually Angola and Nigeria alone contribute over 70% of the total trade deficit the U.S is recording with Africa. The majority of the African countries and mainly LDCs are recording a trade deficit with America. 

The poor performances of the exports from African countries save for those that are endowed with rich mineral resource base are attributed to a number of factors which indicated below;

Factors affecting the growth the U-S-Africa Trade and Investment Relations

1. Some of the agricultural products in which African countries have competitive advantage are not included  in the list of AGOA eligible products. These include coffee, tea and tested herbal medicines, among others. This has limited the scope of exportable products available to these countries. The majority of the provided would require African countries to begin, integrate and standards their production process. In other words agricultural based economies were not provided with an opportunity to start from the acquis (i.e. to start and build from the existing production systems in place), because the traditional products whose production system had already been developed are excluded from the AGOA.
2. Africa has not been able to attract U.S citizens to invest in Africa which is one of the mechanism through which Africa was expected to uplift its production levels.
3. The costs of doing business remain very high due to the supply side constraints.
4. The value chain of the agricultural products are not integrated due to lack of mid-level value addition investments. As a result Africa continues to export sem-finished or raw products. This plays to the advantage of the U.S since it provides an avenue to access the much needed raw materials for U.S industries. 
5. Trade infrastructure is inadequate to facilitate the production, value addition and transaction of the products. Africa still lacks transport inter-connectivity that can be used to facilitate not only the backward and forward follow of goods but also to enable value chain integration or cumulation   between African countries. In addition to transport infrastructure, Africa is yet to provide for adequate storage (include cold and warm chains stores) and warehousing facilities along the value chain of the targeted products.
6. The rules of origin and the standards requirements by the U.S are not favorable for the improvement of the U.S-Africa trade and investment relations. The requirements remain so stringent and sometimes unnecessarily above the international standards in order to provide Americans with an effective competitive level.
7. Predictability under the AGOA remains a very big hindrance to the attraction of targeted investments. The AGOA was first introduced for five years and later on extended for 8 years. But in both the first and the second AGOA the time has been so short for African countries to attract meaningful and targeted investments. An investment must be provided with an incubation period within which production will stablise and investment costs recovered before the returns to investment can be realized. The time allowed for this could be up to to ten years, a period longer than the duration of the AGOA itself. Therefore is therefore need for a more predictable and reliable regime within the U.S-Africa trade and investment relations will be improved. The AGOA should be extended for at least 15 years. Anything duration below, is simply not going to support Africa improve her trade relations with America but instead, it will only serve to provide a platform for the U.S to make propaganda of its efforts to uplift Africa.
8.  Transaction costs are very high mainly because of the high transport costs. There are limited or no direct flights from Africa to U.S. These force exporters to go through Europe or Asia before delivering to the U.S. Exporters are made to pay unnecessary transport costs just because the U.S, accordingly for security reasons, has not accredited some of its airlines to fly directly to Africa. The persistent labeling of Africa as an insecure continent have continued to make direct roots as not worthwhile investment ventures.
9. There is limited collaboration between trade facilitating institutions in Africa and their counterparts in the U.S. For example on issues of sanitary and phytosanitary standards, the U.S food and drugs must accredit related products before they are imported into the U.S. There is however not much collaboration with the equivalent institutions in Africa to ensure that the requirements are adhered to and that the accreditation process is fast-tracked. This is also true with customs agencies as far as issues of tariffs and rules of origin are concerned.     
10. Immigration visas to the U.S remain to most costly and unfriendly for business. The requirements and procedures involved do not necessarily promote movement of business persons from Africa to the U.S. As long as business people are not allowed to easily move to the U.S, there is no way that U.S-Africa trade and investment will improve.

The need for Africa to maximize from the U-S-Africa Summit

In a nutshell, African leaders will need to reflect on these and others issues in their engagement with the United States during their first ever US-Africa Summit. Africa must rise up to the occasion and call for terms of engagement which will promote mutually beneficial US-Africa trade and investment relations. It is important for Africa to move to the Summit with one voice and position on their expected outcomes. The U.S should be made to understand that there are now many world trade and investment players and that if they, the U.S, do not provide favorable terms, then there will be options for Africa in promoting its trade and investment relations with third parties. Africa has showed that it can emerge and so, this should be the opportunity for the continent to influence global economics to its advantage.