Lebanon’s Rigged Markets Are Killing Competition
For decades, Lebanon’s economy has overwhelmingly served the interests of certain economic actors, who preside over widespread monopolies and oligopolies. This endemic power imbalance reflects a country where unfair competition is rife, allowing powerful groups to maximize their profits at the expense of everyone else. For instance, a bag of cement in Lebanon has long cost around triple the international market price. Why are Lebanese consumers paying so much more for the same product? The simple answer is that they have no other choice, due to a lack of proper market competition.
In other industries, unfair competition has long meant that vulnerable workers lose out. In Lebanon’s northern Akkar governorate, one of the poorest in the country, a powerful trading conglomerate controls large parts of the local value chain for potato farming. The oligopolists lock vulnerable farmers into a “closed loop,” in which they can only sell their produce to a specified trader at a reduced price. These practices ensure that, by slashing farmers’ profit margins, consumers pay lower prices for potatoes. But the overall economy still loses out, as small-scale growers have precious little capacity or incentive to invest in improving the nation’s agriculture sector.
While these endemically unfair markets have persisted for decades, the past year’s tumultuous events have thrust sweeping change upon Lebanon, bringing an unprecedented economic correction. As the nation grapples with an unprecedented economic crisis, even oligopolists must adapt to new commercial realities. The cement cartel has largely accepted government demands to lower prices, given the inability of consumers to continue meeting their extortionate rates. In Akkar, powerful potato scions can no longer entrap small-scale farmers in vicious debt cycles, because it is no longer viable to extend lines of credit for agricultural inputs.
Although these developments have shaken long-standing practices of restricting competition, the fundamentals of these exploitative value chains remain standing. Lebanon’s cement companies have temporarily priced their products more affordably, yet they still benefit from enormous, state-sanctioned barriers to entry for would-be competitors. Small-scale farmers still lack viable alternatives to entering a rigged debt cycle to continue farming, even if those loan schemes have halted for now. The root causes of unfair competition continue to underpin both sectors, ready to be reactivated – and re-exploited – when Lebanon’s economic situation eventually improves.
This paper explores how unfair competition in Lebanon works in practice, with reference to value chains for potato production in Akkar and national cement production. The path to addressing these kinds of monopolist practices lies in establishing a comprehensive competition law and policy, appropriately adapted to the Lebanese context. Despite more than 15 years of debate, Lebanon’s draft competition law still gathers dust inside a parliamentary desk drawer.
Unfair competition in Lebanon is a veritable Medusa, whose snake-ridden hair represents the myriad shady business interests that preclude economic development – all in the name of petty individual gain. Confronting this many-headed commercial monster requires nothing less than a resolute competition law, a dynamic competition authority and heroic levels of political commitment.