Cartels can be found all across Malta’s economy, Finance Minister Clyde Caruana has said in an admission about the lack of competition within various economic sectors.

“Competition here in Malta is what it is,” Caruana said on Tuesday morning.

“If you had to look at each and every sector, the providers and suppliers are at best three or four.

“Whether it’s banking, telephony, whatever - it’s made up of cartels, there aren’t too many suppliers,” the minister said at a business breakfast organised by Times of Malta. 

Caruana’s frank admission is likely to arch some eyebrows within the European Commission, which actively works to rip cartels apart through antitrust enforcement.

Cartels are also outlawed under domestic law: the Competition Act prohibits anti-competitive agreements between two or more independent operators.

A cartel is an organisation or grouping made up of producers or suppliers of a good or service that seeks to control supply or prices.

Cartels work together to fix prices, cap the supply of their goods or services or slice up markets among themselves.

Such collusion distorts markets, makes it harder for competition to enter the fray and ultimately leads to worse outcomes for consumers. EU law explicitly outlaws cartels by prohibiting anti-competitive agreements between two or more independent market operators.

As Caruana implied on Tuesday morning, cartels thrive in smaller markets, where it is easier to seize a commanding share of a market. Research also suggests cartels in such small markets cause greater distortion than in larger ones – and, conversely, that measures to break them up have an outsized positive impact on small markets.

But Malta’s finance minister does not appear to hold out hope of that happening soon.

“When you have markets which are small, intrinsically there’s going to be a problem with respect to competition. We see it in all markets and it’s very difficult to address that,” he said.

Caruana sought a silver lining by arguing that Malta is actually doing better than one could expect, given an element of exploitative pricing within some sectors, sparked by what he termed "greed inflation".   

“There may be an element of greed inflation. Even ECB president Lagarde said there are signs of that across member states, so we don’t stand out,” the minister said.

“Given that competition is what it is in our market, one would expect a higher degree of such elements.”

Talk of collusion between market players made local headlines recently when Labour MEP Alex Agius Saliba announced that he has asked the European Commission to probe local food importers, who he suspects are colluding to bump up food prices. 

His claims prompted the Opposition to accuse him of throwing industry under the bus and dismissals from industry leaders, who accused him of being "presumptuous" or harbouring a "negative attitude" towards business.

Who regulates competition in Malta?

Locally, the responsibility for overseeing economic operators to block cartels or cartel-like behaviour rests with the Malta Competition and Consumer Affairs Authority.

A relatively low-key regulator, the MCCAA is not an independent entity and is instead parked within the Ministry for Inclusion, Voluntary Organisations and Consumer Rights led by Minister Julia Farrugia Portelli.

According to its 2021 annual report – the most recent report available on its website – the MCCAA relies on 71 professional and technical staff members to do its work.

But aside from its competition office, that includes all its directorates for consumer affairs, technical regulations and standards and metrology.   

The MCCAA's annual budget of €7.1 million is higher than the annual budgets of the National Audit Office (€4.2 million) or Superintendence of Cultural Heritage (€1.7million) but significantly less than the €11.5 million allocated to Transport Malta or €17.5 million granted to the Malta Financial Services Authority.

Despite its limitations, the MCCAA does at times step in to stop what it believes is anticompetitive behaviour. In 2017, it forced Melita and Vodafone to call off a planned merger, while in 2021 it probed Lidl’s plans to acquire two Scotts supermarkets in Burmarrad and Żabbar. Lidl ultimately dropped its Żabbar plans.

However, it is sometimes the public sector itself that shows little regard for the regulator’s decisions.

In 2021, the MCCAA advised the Health Ministry’s Central Procurement and Supplies Unit to source infant formula for Mater Dei Hospital from more than one supplier, to avoid distorting competition. The CPSU ignored that advice and went ahead with awarding the full tender to a single supplier.