Home arrow Fair Competition arrow Articles arrow Distorting Competition
Distorting Competition PDF Print

Under the Fair Competition Act CAP326C, many specific anticompetitive practices are highlighted under various sections, however Section 13 (1) of the Act speaks to the general distortion of competition. This Section specifically states that

“All acts or trading practises prescribed or adopted by

a) an enterprise

b) an association of enterprises; or

c) a group of affiliated companies that result or are likely to have the effect of preventing, restricting or distorting competition in a market are prohibited.“

The Act goes on to mention several specific anti-competitive practices which can be considered as a distortion of competition in a market. However, the above mentioned section can be used on its own to relate to any conduct by businesses which prevent free or natural competition from taking place. In a market where there is natural competition firms can compete to attract their customers by offering better products, better services and better prices. This competitive process usually provides the incentive for businesses to continually improve. When there is some restriction on this process, be it by other competitors in the market or other firms outside the market, the Commission, after considering all effects of this restriction, may consider it anti-competitive.

In order to better understand the ways in which other competitors attempt to restrict competition, note the following example. A computer retail industry has six players. One of these retail firms called Keyboards. Inc. is also the retail arm of the sole local computer manufacturer. . A new condition of purchase introduced by Keyboards Inc. is that for persons to buy a computer it must have a guarantee stamp by Keyboards Inc. requiring that the retail firms submit to them, their purchase prices and discounts in order to receive the manufacturers guarantee stamp. This would mean that as a competitor in the retail market, the manufacturing/retail firm would now have confidential commercial information from the other players and may use this as a way to gain a distinct advantage over the other retail firms. This unfair advantage may be seen as the distortion of natural competition within a market and competition practitioners will, after analysis, consider that anti-competitive behaviour an abuse of its dominant position in the computer manufacturing market.

Another case where distortion of competition may occur is where a firm not in the industry prevents competition in another market by influencing the business of that particular market. For example, let us assume a condition of service which states that the consumer must pay for the labour when the computer is in need of repairs and the manufacturer will pay for the parts. Although the consumer is paying for the labour the agreement lists four repair stores which the consumer is mandated to utilise. However, there are approximately ten computer repair stores of that caliber in the market. The sole manufacturer further specifies that if the computer is repaired at a repair store outside of these four stores they will not honour the guarantee. Not only would this condition mean that the computer repair stores not on their list would be disadvantaged and may restrict the natural competition process but consumers would also be affected by limited choice.

State regulations may also cause competition in an industry to be distorted in some way. The government may institute a new policies which may try to provide efficiencies in one market but may cause another to suffer. For example the government may decide that in order to cut down on the cost of flour to the consumers they may institute make a policy decision to subsidize the cost of delivery by trucks that can carry over two tons. Although this may mean savings on deliveries and thus maybe lower costs to consumers, that decision may also distort competition in delivery of flour market where all types of trucks compete with each other. This would put the larger trucks at an unfair advantage.

From these scenarios it can be seen that distortion of competition can occur in many areas of business, in fact, this area of competition law is fact so vast and at times ambiguous that the European Commission has had numerous cases on the matters and has also adopted an exemption clause for some markets or practices which may be considered a distortion of competition but which may ultimately benefit consumers.

Nevertheless, vibrant and effective competition is one of the key elements of a successful market economy as it should encourage the efficient use of the resources and lead to significant benefits to Barbados and its people.

< Prev   Next >