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Competition and Small Businesses PDF Print

Printed in the "Business Monday" newspaper on October 19, 2009

One of the objectives of the Fair Competition Act (the Act) is to ensure that all businesses irrespective of size have the opportunity to participate equitably in the market place. This means that whether a company is large or small, the Commission’s aim is to ensure that the process of competing in the market remains free from anti-competitive behaviour. Many small-business persons are of the view that competition law applies only to big business, and while it is true that the competition legislation specifically speaks to the prohibition of abuse of dominant positions by companies that possess great market power, there are several ways by which small businesses can breach the legislation. 


Due to their very nature and size, smaller businesses sometimes engage in practices which may appear to be good business strategies designed to increase their profits but which may be anti-competitive. They therefore need to be aware of the potential harm of some of these practices. For example, in order to maximise their profits, small firms might enter into customer or market sharing agreements where competitors decide not to compete in certain geographic areas or agree not to poach each others’ pre-existing customers. This type of agreement is prohibited under the Act and Sections 13 (2) and (3) of the Act speaks specifically to prohibiting all agreements between enterprises that:

(a) Limit or control production, markets, technical development or investment,


(b) Provide for the artificial dividing up of markets or sources of supply

Small markets can usually only accommodate a small number of firms. These oligopoly market structures make it easy to inadvertently engage in some anti-competitive practices. For instance, in these markets where there are few sellers and where the decisions of one firm can influence, and are influenced by, the decisions of other firms, this tends to lead to anti-competitive agreements or collusion. This type of conduct is not always deliberate; in fact, smaller sized firms which may be trying to determine and set an adequate market price may employ similar pricing strategies and may unintentionally engage in a form of tacit collusion. This is prohibited under the law. Further, Section 13 (3) of the legislation expressly prohibits agreements which “directly or indirectly fix purchase or selling prices or determine any other trading conditions”.

Collusive and follow-the-leader practices involving the setting of prices are fundamental doctrines under competition law and are considered illegal in most jurisdictions. For instance, in the United States, an ice packaging company recently faced up to $10 million in fines for price fixing in which they were the principal culprit. In Barbados the Commission has determined that members of professional associations which get together and set the fees for their services are in breach of the Act.

In order to remain within the legal boundaries of competition law as it relates to collusion, small firms should seek to answer the following questions:

  • What type of communication am I engaging in with other businesses in the market?
  • Am I employing any strategies which may be potentially anti-competitive?
  • Is the market in which your business operates one with a small number of competing businesses who are adequately aware of each other’s commercial activities?


If they are cognisant of these market practices and can assure compliance with the Act, companies can avoid the hassle of being investigated.

In addition to the practices mentioned above, anti-competitive conduct such as resale price maintenance and to a greater extent withholding supplies are also found to be somewhat prevalent in markets where there are small manufacturing businesses. For example firms in these markets sometimes see it as beneficial to their business to be able to determine the resale price of the product being sold by the retailer, so as to ensure adequate profits and possibly maintain a competitive edge, however competition legislation sees this as unlawful. Sections 24 and 25 of the Act explicitly prohibit this type of conduct and further deem it illegal for these firms to withhold supplies from suppliers who do not agree to a set a resale price.

Generally, any act by an enterprise that has the effect of distorting competition in a market could be deemed anti-competitive and thus unlawful. The Commission can in no way sanction or promote practices it deems to be anti-competitive in the context of the Act. However, such agreements will not be prohibited under all circumstances. Agreements which contribute to the improvement of production or the promotion of technical or economic progress while allowing consumers a fair share of the resulting benefit are not considered unlawful.

While this article outlines many types of conduct which can be engaged in by or against small businesses and which are prohibited under the law, the Act’s main purpose is to maintain and ensure fair competition among all businesses, big or small.

If you have any questions email us at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or call us at 424-0260. We can also be contacted at our offices at ‘Good Hope’, Green Hill, St. Michael.

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