The recent dispute between two associations, the Jordan Insurance Federation (JIF) and the Jordan Medical Association (JMA), has garnered substantial attention from the media and the public. Physicians threatened to decline patient care until the matter was resolved in their favour. Under mounting public pressure, the government, represented by the Central Bank of Jordan (CBJ) as the regulator of the insurance sector, and the Ministry of Industry, Trade and Supplies (MOITS), home to the Competition Directorate responsible for safeguarding competition (not necessarily competitors) in the Kingdom, has stepped in to mediate.
Inflation and rising living costs
The Insurance Federation asserts that the JMA is proposing a 400% increase in physicians' fees. In contrast, the JMA counters with a 30 to 40% increase, attributing the decision to inflation and rising living costs. In response, the government has established a committee after engaging with both parties, aiming to find a middle ground.
The problem and its solution is unclear
However, the problem and its solution seem unequivocally clear.
An examination of the Law Amending the Competition Law No. 12 for the
Year 2023 highlights Article 6, which prohibits institutions with a dominant
market position or significant market influence from abusing this power to
impede, limit, or obstruct competition. The term "dominant
organization" is defined as one capable of controlling or affecting market
activities. This raises the possibility that fee setting could defy the law.
They risk becoming cartels
Another pertinent article is Article 20 (Paragraph 3-C), which
directly pertains to the case at hand. It prohibits any association or private
sector entity responsible for regulating or advocating for economic or
commercial establishments from making decisions that breach
competition regulations, restrict competition, or violate the provisions of this law
and other legislations. Such actions incur penalties. This makes it illegal for
associations, regardless of their nature, to establish
prices for their members' services or outputs. The same rule
applies to all associations; otherwise, they risk becoming cartels (effectively
monopolies), as prohibited by Article 5 of the Law. Additionally, Article 8 A,
1, prohibits entities like producers, importers, wholesalers, or service
providers from imposing a lower limit on resale prices.
It can be argued that no association or society possesses the
right to dictate prices for its members. From an economic
perspective, uniform pricing across the board leads to inefficiency, making
discriminatory pricing a better alternative. The market, guided by skills and
reputation, should determine who earns more or less among physicians, rather
than the decision of an association.
Out of touch
Regarding inflation, the total price increase since 2008 stands at 6.67%, far from
the claimed 30 to 40%, making significant fee hikes unwarranted. Moreover, the
growth rate, whether nominal (Factoring in inflation) or real values, remains low, rendering
any discussion of substantially raising prices for essential services out of
touch with current circumstances.
Published in Jordan News:
https://www.jordannews.jo/Section-36/Opinion/Clash-of-the-monopolies-30562
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