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The Benefits of Competition Policy PDF Print

Printed in "Business Monday" newspaper on January 11th, 2010

Our national Competition policy as administered by the Fair Trading Commission (Commission), seeks to create the environment in which local businesses are encouraged to develop that competitive edge that will allow them to compete globally and lead in their respective fields.

The Fair Competition Act CAP.326C seeks to achieve this competitive environment through the prohibition of agreements, trade practices or decisions of enterprises or organisations that have or are likely to have the effect of thwarting competition in a market. The most common form of anti-competitive agreements between competitors involve price fixing; output restriction; market or customer sharing or bid-rigging.

In addition to agreements, the act prohibits the abuse of a dominant position by a firm. A firm is said to hold a dominant position in a market if, by itself or together with an affiliated company, it occupies such a position of economic strength as will enable it to operate in the market without effective competition. In this respect therefore, an enterprise is said to abuse its position of dominance if it acts in such a way that it inhibits any type of competition in a particular market. The Commission is particularly concerned with whether or not the conduct is likely to adversely affect the competitive process to the determent of consumers.

Some of the more common forms of abuse are situations where a dominant company restricts the entry of a firm into a relevant market; prevents or deters a firm from engaging in competitive conduct; eliminates a firm from a market; imposes unfair purchase or selling prices that are excessive, unreasonable, discriminatory or predatory; limits the production of goods or services to the prejudice of consumers; makes the conclusion of agreements subject to the acceptance by other parties of unrelated supplementary obligations; engages in exclusive dealing, market restriction or tied selling; or uses any other measure unfairly that allows it to maintain its dominance.

The act also prohibits resale price maintenance which is conduct where a supplier takes action to try to ensure that an independent dealer does not resell goods purchased from the supplier below a price specified by the supplier. For example, the supplier may request a dealer to agree not to sell below a minimum price. Alternatively, it might withhold supply from, or otherwise discriminate against dealers who are selling, or are likely to resell below the desired minimum price.

The provisions within the act therefore provide a clear framework for developing and maintaining a stable competitive environment. With increased awareness of this framework by the business sector in Barbados it is expected that a dynamic, effective and internationally competitive market economy will emerge.

The benefit of competition policy manifests itself where, businesses once constrained by anti-competitive practices are subsequently able to compete without the hindrance of barriers to entry, such as “grandfather” or discriminatory agreements and collusion among dealers and suppliers.

A vibrant and competitive market economy is expected to deliver significant benefits to consumers and encourage the efficient use of the resources of Barbados and its people. In this regard firms will be driven to attract customers by offering better products, better services and better prices. The competitive process provides the incentive for businesses to continually improve the quality and value of their product and raise the efficiency of the firm through creativity and innovation. Therefore while economic growth is enhanced, significant social benefits accrue to all due to this enabling environment.

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