Home arrow Fair Competition arrow Articles arrow Market Dominance: Setting the Record Straight

Did You Know?

  • The FTC must consult the public before making decisions on utility regulation matters.
  • The FTC has the power to stop a merger.
  • If you have been misled about the price or nature of goods or services, you must first let the business try to resolve it before contacting the FTC.
Market Dominance: Setting the Record Straight PDF Print
One of the key objectives of Competition law is to ensure that all enterprises, irrespective of size, (large, medium and small), have the opportunity to participate equitably in the market place. Competition Law seeks to promote and maintain competition among businesses because competitive environments inspire innovation and efficiency, and result ultimately in the expansion of businesses.

Statements made recently, in a public business forum, suggested on the contrary that, Competition Laws in the region, especially as they relate to dominance, were likely to restrict the ability of Caribbean businesses to grow. The statements articulated that the laws which address dominance were in fact relegating local companies to the status of “small businesses”.

Today, the Commission is seeking to clarify the role of Competition Law in the Barbados business community as it pertains to dominance and the abuse of dominance.

Contrary to the sentiments expressed, Competition Law in no way condemns the control of substantial market shares by firms. Neither does the Barbados Fair Competition Act, nor the Competition laws of other regional territories place any limitations on the percentage of the market share that may be acquired by any one firm. There is absolutely no prohibition of market dominance. Simple checks would reveal that indeed, several monopolies (100 percent market share) exist in the Barbadian market and in other regional markets, all operating legitimately within the rules of fair competition.

Competition Law encourages large firms to grow and compete. Section 16 (4) (C) of the Act in actual fact exempts the effects of any activities by a dominant firm in so far as they are achieved through competitive performance. That Section of the Act states that an enterprise shall not be treated as abusing a dominant position if “the effect or likely effect of its behaviour in the market is the result of its superior competitive performance”.

It should therefore be clear that Competition Law condemns only the unfair or abusive use of one’s market power and not simply the legitimate possession of that power.

Dominance Defined

A firm is said to hold a dominant position in a market if, by itself or with an affiliated company, it occupies such a position of economic strength as will enable it to operate in the market without effective competition. The Commission generally considers a firm that has had a sustained market share of 50% or more to be in a position of dominance, firms with market shares of less than 50% may also be dominant if their individual market share is substantially greater than any of its remaining competitors. Market share however, is not the only determinant of dominance and each case is considered on its own merit.

The Act provides clear guiding principles to distinguish between vigorous competition which is encouraged and protected, and abusive conduct which is prohibited. An enterprise with a dominant position abuses that position only if it acts so as to impede the maintenance or development of effective competition in a market. If the dominant firm does not restrict competition (i.e. the performance of its competitors) it is not guilty of abusing its dominant position under the Act.

Importance of Abuse of Dominance

The Commission has since the introduction of the Act in January 2003, received complaints of abuse of dominance by domestic businesses. The Commission in investigating these complaints has in several cases agreed that such conduct has taken place, and has directed the businesses concerned to discontinue the particular activity. The businesses filing the complaints have often been the recipients of injury caused by the conduct of the dominant firm. The Law therefore provides an outlet or recourse of action to the parties affected in this manner.

It is even more likely that with the emergence of the various trading arrangements that there will be bigger players seeking to access regional markets. Firms which are now considered dominant may no longer be so in future, and may be relieved to have the appropriate legislation to deliver meaningful recourse. It must be reiterated that regional competition Laws are designed to maximize domestic and regional growth, with the ultimate objective of developing lean and primed performers who will be able to excel on the international stage.

For further information, please contact the Commission at 424-2FTC.

< Prev   Next >