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Looking Beyond the Surface - Legitimate Business Practices PDF Print
The Fair Trading Commission is sometimes faced with complaints about business practices which on the surface are perceived as anti-competitive. However on further investigation these practices often prove to be legitimate business activities not in contravention of the Fair Competition Act Cap.326C (Act). Today’s article looks at and provides an example of particular business practices that are legitimate, contrary to the common assumption that they are anti-competitive.


For example, a company Bluebird is the only producer of its branded Bluebird pies, muffins and tarts in Barbados. It contracts fifteen independent retail agents to purchase its goods and resell to various outlets. Under the arrangement the products are bought by the agent and those which are not sold cannot be returned to the Bluebird Company. Bluebird subsequently decided to commence retailing on its own whilst still offering the particular products for resale to the agents. This has resulted in increased competition for the independent agents. The contract that these agents have is an exclusive one where they must retail only products produced by Bluebird.

The Commission encourages consumers and businesses alike to contact them with any queries or comments and two of the agents did just that.


Firstly, a manufacturer and supplier such as the Bluebird Company has the right to undertake exclusive agreements with retailers with regard to a specific brand of product providing that the agreement does not seal off a substantial portion of a given market to other potential retailers.

Secondly, this practice is also allowed providing that the agreement between Bluebird and the retailers does not contain provisions that directly or indirectly fix purchase or selling prices. An agreement on pricing of products between a manufacturer and its retailers is resale price maintenance, which is a breach of the Act. The Act does not prohibit a company from retailing its own products even though they have contracted independent agents to sell the same products. However in such cases a vertically integrated firm such as a manufacturer that also operates its own retail arm for the same product must ensure that the internal transfer price at which it sells to its retail arm is the same as the wholesale price it charges to its wholesale customers. Such a practice ensures fairness in the relevant retail product market. To do otherwise may be discriminatory. The wholesale customers of this vertically integrated manufacturer would therefore have no reason to be wary of the vertically integrated manufacturer operating at the retail level when this policy is observed. However, if upon investigation the Commission finds that the actions of Bluebird Company substantially foreclosed competition in that particular market or even restricted the access of other competitors to distributors, this practice will raise anti-competitive concerns.

Practices most commonly mistaken as anticompetitive

The most common claims which often turn out to be of legitimate activities are claims of predatory pricing, excessive pricing, and tied selling. Very often complaints in regard to these activities describe circumstances where competition is not impacted. Nevertheless persons are encouraged to draw all matters they perceive to be anti-competitive to the Commission’s attention, because on the other hand activities which some firms deem as legitimate sometimes are found to be in breach of the Act. The Commission treats all matters coming before it as confidential and will try to review all complaints and communicate to the complainant whether a breach of the law has occurred.

Keys to identifying anti-competitive practices

It is not always easy to determine whether a business practice is anti- competitive; however there are certain key factors which will most times indicate that a practice is anti-competitive. These are when particular practices significantly disrupt normal competition within the market, to the extent that:

  • firms are being forced out of business,
  • potential competitors are being prevented from entering the market, or
  • operating businesses are hindered from sourcing, producing or retailing their products.

Whenever persons recognize the existence of these factors taking place within particular markets, they should contact the Commission immediately. It must be reiterated that the Commission will in no way tolerate practices it deems to be anti-competitive in the context of the Act. The Commission continues to monitor the business community in Barbados.

For further queries or comments please contact us at 424-2FTC.

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