Putting all the Apples in one basket?

Competition in the mobile phone market made headlines on Sunday when the Egyptian Competition Authority (ECA) accused Apple and its distributors of violating antitrust regulations. However, industry insiders told Mada Masr that an extralegal list of approved importers that has been enforced by the National Telecommunications Regulatory Authority (NTRA) is behind monopolistic practices.

On Sunday, the ECA issued a statement outlining the supposed violations of Apple and its distributors, citing exclusive distribution agreements and prohibitive import procedures that have limited “intra-brand competition.” By the the regulatory authority’s account, these practices, which it asserted violate the Competition Protection Law, led to an unjustified rise in the price of Apple products in Egypt, far above the retail price of the company’s products in other Middle Eastern countries, including Saudi Arabia, the United Arab Emirates and Kuwait, as well as the United States.

In its statement, the ECA announced it had taken a decision to nullify a number of standard clauses in contracts signed between Apple and its distributors, ones that reportedly violate the Competition Protection Law. The decision was published in the Official Gazette on Monday, stipulating that Apple was obliged to remove any restrictions on Egyptian distributors or retailers within a maximum period of 60 days.

According to an ECA official, who spoke to Mada Masr on condition of anonymity, there have been a number of complaints filed against Apple and its distributors, which will be referred to the Public Prosecutor if a resolution is not found within the 60-day timeframe.

However, the criticism leveled at the the global technology company may only tell a part of the story. Walid Ramadan, the former head of the Mobile and Communications Department of the Cairo Chamber of Commerce, placed responsibility for monopolistic practices on the NTRA and Arab Business Machine Ltd., Apple’s authorized distributor in the Middle East. Ramadan told Mada Masr that the actions of the two entities have crowded out the majority of retailers in the market, all of which did not appear on a “pre-approved list” of importers submitted to the regulatory agency by Arab Business Machine Ltd.

In the absence of an official Apple vendor based in Egypt, the pre-approved list submitted to the NTRA allowed only a handful of Egyptian distributors to import products into Egypt, including Best Buy, Tradeline, iShop and Switch.

The NTRA prevented other distributors from importing devices from a number of brands, including Apple, under the claim that their names were not included on the list of approved importers, Ramadan said. This action, he added, allowed certain retailers to adopt monopolistic practices, in addition to contradicting the NTRA’s role, which is to ensure that imported devices conform to standards rather than to prevent companies from importing products.

According to Ramadan, in doing this, the NTRA violated Article 7 of the Competition Protection Law, which stipulates that “any agreement between an individual and their distributors or clients shall be prohibited if it could reduce competition.” He added that there is no reason to allow one company to have exclusive import rights, as there are no official agents of major mobile phone manufacturers operating in Egypt, which means that all retailers import from brand agents in the UAE.

This import process is also partly responsible for the price surge, according to Ramadan, who explained that the higher prices for Apple products in Egypt stem from the fact that Egyptian retailers are importing devices from authorized retailers at full retail price. The retailers then add a profit margin to the price, which drives up the end price for consumers.

The NTRA’s actions have not gone overlooked by those in the industry, as several merchants took legal action in 2017 against the former Minister of Communications and Information Technology Yasser al-Qady, in his capacity has the head of the telecom agency, according to Ramadan. The plaintiffs, a number of mobile phone retailers in Egypt, contested that the agency had violated the law by exclusively allowing a select number of distributors to import mobile phones from abroad but barring them from doing the same.

Tarek Eid, the director of general relations for an Egyptian mobile phone company, said that Arab Business Machine Ltd. prevented any parallel imports of Apple products inside Egypt. This has pushed merchants to bring these products into Egypt by illegal means, he explained, namely smuggling them in from the UAE, preventing equal opportunities and free competition, and making Egyptian consumers purchase Apple products at higher prices than in other markets.

For Ramadan, Sunday’s ECA ruling is a serious step toward addressing what he described a wider need for the state to regulate the mobile phone market to bring practices in accordance with the law.