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The Importance of Protecting Competitive Markets PDF Print

Printed in the "Business Monday" newspaper on September 21, 2009

Over the last few months the Fair Trading Commission (Commission) issued directives to cease and desist, in regard to two businesses. Worldwide other competition authorities across Europe and in the United States have been examining cases of anti-competitive conduct by large multi-national firms and have on occasions imposed significant fines on these companies. These actions and the vigour with which they are pursued speak to the role of a competition authority, which is not to punish shareholders and entrepreneurs but rather to ensure that competition is duly protected.  

In Barbados the role of the competition authority is set out in the primary objectives of the Fair Competition Act CAP.326C which are,

“to promote, maintain and encourage competition, and to prohibit the prevention, restriction or distortion of competition and the abuse of dominant positions in trade in Barbados and within the Caricom Single Market and Economy”

It is important however to recognise that the protection of competition law is not an end in itself, and that the ultimate achievement of the enforcement of competition law is the improvement of consumer welfare or overall living standards of the consumer. The competition authority achieves this objective by protecting the competitive process which drives efficiency, increases productivity and overall economic development.

Yet there are those who would question the relevance and value of competition law enforcement. In addressing this issue, the Office of Fair Trading (OFT) in the United Kingdom (UK) recently commissioned a study to examine the deterrent effect of enforcing competition law.

The study surveyed companies and legal firms. It found that among companies, for every case of anti-competitive commercial agreement uncovered, there were seven contemplated anti-competitive agreements which were not carried out, because of the actions of the competition authority. In addition the study found that for every case of unfair conduct by a dominant firm exposed, four potential abuses of dominance actions were deterred. The abuse of dominance includes such practices as excessive pricing and price discrimination undertaken by large powerful firms. The results of the study indicate that the OFT had some measure of deterrent effect on the markets within that economy. With respect to the companies, it found that the deterrent effect was magnified by three to four times when compared to the information received from the legal firms. This suggested that even before approaching their legal advisors, companies were contemplating at least twenty-one (21) anti-competitive commercial agreements for every one concluded and twelve (12) abuses of dominance for every one committed.

These results help to confirm the value of protecting competition. They show the important deterrent effect of the actions of the competition authority through the enforcement of competition law. The actions of the authority in eliminating potential anti-competitive conduct protected the competitive process in the respective markets to the ultimate improvement of consumers’ living standards.

In a related study conducted in March this year, European Commissioner for Competition Policy, Neelie Kroes estimated that between 2005 and 2007 the European Community (EC) avoided around €20 billion (BDS $57.2 billion) each year in consumer harm that would have resulted from cartel activity, and this was a conservative estimate. This study focused not on the deterrent effect, but the potential consumer welfare savings that were achieved by the presence of competition authorities and their actions in promoting and protecting competition. It shows that the act of competition law enforcement can result in substantial savings for the consumer.

These studies can be applied to Barbados and other countries where competition authorities bring action to protect competition. The research suggests that the enforcement of competition law, and the overall protection of competition, wherever it is vigorously practised, is likely to realise significant direct positive effects on the competitive process, and ultimately to the economy.

Based on these findings it may be fair to conclude that competition policy and the competition authority are valuable assets in nurturing the competitive climate necessary for the improvement in living standards in Barbados and elsewhere.

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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