Deep Dive Into Market Syndicate: How The Rich Get Richer At Your Expense

Written by: Mahdia Binte Zaman

Recently, all of us must have come across the post captioned ‘800 takar shobji bazar’, and it’s created quite a buzz among us. This viral post, showcasing the rising cost of daily essentials, has sparked an important conversation about market manipulation. The prices we pay for basic goods are no longer just a reflection of supply and demand but are often the result of an unseen market syndicate at play. 

It’s almost impossible to find someone in Bangladesh today who hasn’t heard the word "syndicate" over the past 15 years. Whether it's about daily markets, any business dealings, or both government and private sector activities, the term "syndicate" has repeatedly surfaced. 

We've heard of the egg syndicate swindling nearly 600 million BDT or corrupt syndicates using the war as an excuse to hoard and increase the price of soybean oil, making it disappear from the market. The people of this country seem trapped by an invisible force called the syndicate. During Sheikh Hasina's government, syndicates manipulated prices, driving them higher for profit. But who exactly are these syndicates?

In today’s blog, we’re diving deep to unravel the inner workings of market syndicates—how they control the flow of goods, dictate prices, and create an endless loop of exploitation.

A market syndicate generally refers to a group of businesses or traders that collaborate to manipulate market prices and control the supply of essential commodities. In Bangladesh, this term has gained prominence amid rising prices and allegations of market manipulation by a few powerful importers and traders. 

The big dealers or retailers collect that product from such syndicates at a high price and accordingly sell the same product to the customers at a high price, adding profits per unit. Therefore, the ultimate losers are the customers or end-users who have to pay unnatural prices, thus becoming victims of this artificial market mechanism.

Is syndication always considered as a negative thing?

​Syndication activities may be conducted for good as well as bad purposes, depending on the motives of the syndicators. If the motive is, for example, to earn abnormal profit or cheat the ultimate consumers, it can be termed as bad syndication. On the other hand, they may form a syndicate for noble activities like making adequate supplies rather than hoarding the commodities.

Definition and Characteristics

In Bangladesh, a market syndicate typically consists of a cohesive group of major importers and traders who work together to inflate prices for profit. They allegedly engage in unethical practices such as:

Price-fixing: Agreeing on the same prices to eliminate competition.
Hoarding: Stockpiling goods to create artificial shortages.
Creating artificial supply constraints: Limiting the availability of goods in the market.

​Consumer-right groups like the Bangladesh Competition Commission (BCC) have estimated that over 1,500 active syndicates operate in various sectors, including essential food items.

How Market Syndicates Work

​Formation:
Syndicates form when large importers with significant market control collaborate. They benefit from economies of scale, making it difficult for smaller competitors to enter the market.

Manipulation:
The syndicate takes advantage of regulatory weaknesses and engages in practices that create an inflated perception of scarcity, which allows it to set higher prices for its commodities.

Price Control:
The syndicate sets prices above competitive levels, ensuring that they maintain higher profit margins. This is similar to oligopoly or cartel behavior, where a small number of producers restrict output to elevating prices.

Distribution:
Once products are imported at artificially high prices, they distribute them through established wholesale and retail channels, maintaining price controls at various levels of the supply chain.

Naturally or Artificially Created Demand

Syndication Tactics
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• Syndicates capitalize on crises like floods, droughts, or political unrest to inflate prices.
  
• During specific events, such as Ramadan, they create artificial demand.
  
• Traders form secret alliances to control supply and hoard products, using their monopoly power.
  
• As demand rises, they gradually release limited quantities to wholesalers at inflated prices, taking advantage of consumers' needs.
  

Causes of Syndicate Formation

Demand on specific occasions: 
A notable factor that motivates dishonest businessmen to create a syndicate is the unusual demand for a particular product for a specific period. Such demand may either be created due to the shortage of supply or sudden huge demand. An example is the demand for N-95 masks and disinfectants at the time
of the COVID-19 outbreak.

Corruption: 
A significant driver of syndicate development is the high rate of corruption within regulatory bodies. Wealthy market participants can exploit this corruption to feign shortages, thereby manipulating prices to increase their profits.

Weak Regulatory Framework:
The lax enforcement of competition laws and regulations allows syndicates to thrive. With inadequate oversight, syndicates can engage in unethical practices like price-fixing, hoarding, and creating artificial shortages. Selim Raihan, an economist at the University of Dhaka, contends that the Bangladesh Competition Commission (BCC) lacks the authority to effectively regulate the market. Influential business groups often evade scrutiny due to connections with government officials.

​Limited Market Accessibility:
According to the World Bank, only 30% of Bangladeshi families have access to competitive markets, which greatly affects the availability of consumer alternatives. The lack of competition fosters an environment where traders can collude and dictate market prices freely.

Dollar Crunch: 
The ongoing scarcity of US dollars has compounded the difficulties for SMEs, limiting their ability to compete with larger firms that have better access to foreign currency and import facilities.

Economies of Scale and Economies of Scope:
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Economies of Scale: This means larger companies can produce goods at a lower cost per item by making more of them. For instance, a bakery that bakes 100 loaves of bread can spread its costs (like ingredients and rent) over more loaves, lowering the price per loaf. Smaller bakeries making only 10 loaves face higher costs per loaf.

Economies of Scope: This refers to the cost savings gained by producing different products together. For example, a bakery that makes both bread and pastries can share resources (like ovens and ingredients), reducing overall costs. 

Infrastructure Challenges:
Inefficiencies in the agricultural infrastructure impede the ability of farmers to bring their products to market. The scarcity of processing facilities and adequate transportation results in fewer suppliers, making it easier for syndicates to control prices and limit supply.

Impact on the Economy

The emergence of syndicates leads to several significant challenges:

Consumer Burden:
Deceptive price hikes orchestrated by syndicates make basic food items unaffordable for lower-income families, exacerbating poverty levels across the nation.

Hindrance to Small Businesses:
Syndicates dominate the market, leaving little room for smaller enterprises to compete. This diminished competition stifles innovation and limits economic growth within the sector.

Market Innovation: 
The lack of competition stifles innovation and restricts the development of new products and services in the market.

Supply Chain Inefficiencies:
By stockpiling essential goods, syndicates create fictitious shortages that increase transaction costs for businesses and consumers. This inefficiency wastes resources and complicates access to necessary products.

The Current Landscape:

​Experts, including Ghulam Rahman from the Consumers Association of Bangladesh, highlight that many companies control much of the market. He notes, “Competition is decreasing day-by-day due to the market mechanisms of some big companies, driving many small and medium traders out of business.” According to Mustafizur Rahman of the Centre for Policy Dialogue (CPD), while more than 50 traders are officially listed, only four or five major businesses effectively import essential goods.

How is Bangladesh suffering due to this vicious cycle of syndication?

In July of this year, food prices in Bangladesh surged by 14.10%, marking the highest increase in the last 13 years. According to a report by the World Food Programme (WFP), the per capita monthly food expenditure for a Bangladeshi was BDT 1,851 in 2022, which has skyrocketed to BDT 2,923 by February 2024. This represents a staggering 58% increase in food prices over just two years, pushing 17% of the population—about 29.6 million people—into food insecurity.

The impact is severe, with 68% of people cutting down on their purchases just to survive and 30% consuming insufficient amounts of food. What’s even more alarming is that 43% of the population is now buying food on credit, while 22% have been forced to reduce medical expenses. Additionally, 13% have depleted their savings entirely.

The crisis is taking a heavy toll on mental and physical well-being, with 71% of people stating that rising costs are seriously affecting their health. Perhaps the most distressing outcome is the growing child food poverty, with two out of every three children—about 10 million—unable to access nutritious food. As a result, Bangladesh is now ranked among the top 20 countries in the world with the highest childhood food poverty.

This situation paints a grim picture of how the skyrocketing cost of living is pushing millions into survival mode, and the long-term consequences are deeply worrying for the future of the nation.

​Comparative analysis with the previous year

Commodities	Prices on August 2024 per kg	​Prices on August 2023 ​Per kg	​Price Hike
Rice	80	72	11.11%
Potato	60	42	42.86%
Onion	120	85	41.18%
Chickpea	120	80	50%

In August 2023, while global food prices saw a significant drop—reaching their lowest in two years—Bangladesh faced a completely different reality. During the same period, food prices in Bangladesh surged by an astounding 12.54%, marking the highest increase in 13 years. This stark contrast raises a crucial question: why did food prices in Bangladesh rise so sharply when global trends suggested they should have decreased?
Historically, we’ve never seen a situation where global food prices increased while Bangladesh’s prices fell. Yet, in this case, as global prices plummeted, Bangladesh saw the opposite effect, leaving many puzzled and frustrated.

Role of interim government in curbing the situation:
​

Commerce Adviser Salehuddin Ahmed has expressed dissatisfaction with the rising prices of essential commodities, particularly eggs, where companies like Kazi and Paragon are reportedly manipulating prices. He noted the difficulty in enforcing government-set prices and highlighted concerns over syndicates affecting market dynamics.

Adviser Asif Mahmud Shojib Bhuiyan stated that strict legal action under the Special Powers Act will be taken against those involved in price-fixing syndicates. He cited supply-demand imbalances following crop losses and the influence of these syndicates as key factors for rising prices. 

Asif criticized the weakened Consumer Rights Protection Act, suggesting it should be revised to include harsher penalties, including jail time for offenders. He advocated for young entrepreneurs to source directly from farmers to help lower prices while also mentioning that the Trading Corporation of Bangladesh (TCB) will strengthen efforts to provide goods at reasonable prices.

Both advisers acknowledged the historical role of previous governments in enabling the growth of these syndicates, emphasizing that while some solutions may appear theoretical or ambitious, thinking big is essential to achieving transformative change. They highlighted the need for unity in building a stronger, more resilient Bangladesh—a nation forged through hard work and collective effort. By standing together, we can confront and dismantle the "cancer" of syndicates that have long plagued our economy. The advisers also underscored the critical importance of political cooperation to eliminate extortion and curb unjust price hikes. A comprehensive campaign against these syndicates is now in motion, with the current government firmly committed to tackling the economic challenges inherited from past governance and paving the way for a fairer, more prosperous future.
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Is it actually possible to break the syndicate?

To tackle rising prices of essential commodities, the government should implement the following:

 Immediate Measures:
1. Price Controls: Set limits on essential goods.
2. Supply Chain Reforms: Use digital tools for transparency and reduce hoarding.
3. Import Liberalization: Lower import duties on essentials to boost supply.
4. Consumer Protection: Enforce strict anti-hoarding regulations.

Long-term Strategies:
5. Strengthen the Competition Act: Prevent monopolies.
6. Anti-trust Clauses: Impose penalties for violations.
7. Empower BCC: Grant inspection authority and increase staffing.
8. Enhance Anti-Corruption Laws: Curb market manipulation.

By shedding light on the pervasive issue of market syndicates and fostering a collective commitment to transparency and fairness, we can pave the way for a more equitable and prosperous economy—one that truly serves the people and empowers the nation to thrive.

   Resources:

• https://thefinancialexpress.com.bd/views/columns/the-myth-of-market-syndication
• https://www.dhakatribune.com/opinion/312012/why-food-commodity-market-turning-changing-rapidly
• https://www.tbsnews.net/bangladesh/syndicates-have-taken-hold-economy-market-state-minister-industries-630230​
• https://global.chinadaily.com.cn/a/202408/13/WS66baf91ba3104e74fddb9be3.html#:~:text=DHAKA%20%2D%20Inflation%20in%20Bangladesh%20accelerated,in%20at%20least%20a%20decade.
• https://www.thedailystar.net/business/news/action-against-price-hiking-syndicates-under-special-powers-act-3728161