On Kadooment day just past, during the last lap of the festivities on the Spring Garden Highway, there were large and small stalls crammed into every available space on the sidewalks. Each stall owner striving to outdo the other in attracting customers to their stalls.

The benefits of competition were on offer for anyone that was thirsty, hungry or just looking to enjoy the moment. If you did not like a price or selection on offer by any vendor there were plenty of others to choose from.

But what if all the vendors had through a vendors’ association agreed beforehand on all the prices that each operator would be charging for their products? Gone would be the options of individual owners to set their own prices, and gone would be the opportunity for consumers to choose the best prices. Agreements of this nature to fix prices have been known to occur in certain industries.

In most industries it is accepted procedure for businesses to form associations that represent their interests or to set standards of behaviour and practice. While the Commission supports such activities as an important element of good commercial practice, such arrangements cross the line into anti-competitive behaviour when participants agree amongst themselves to fix the prices of the goods and services they provide.

Price fixing agreements are considered to be one of the worst forms of anti-competitive conduct, one for which there is generally no defence. These agreements always exploit consumers through the imposition of higher prices, the reduction in product quality and in a limitation of customer choice. One of the most high profile price fixing cases was the vitamins cartel which affected several countries. It was exposed in the late 1990s. That cartel agreement operated from January 1990 until February 1999. The cartel members agreed to fix and raise prices on vitamins A, B2, B5, C, E, beta carotene, and numerous other processed foods.

In the United States, two of the main conspirators in the cartel Hoffmann-La Roche and Badische Anilin- & Soda-Fabrik AG (BASF) pleaded guilty to the conspiracy and were ordered to pay record criminal fines of US$500 million and US$225 million respectively.

Barbadian customers also, have been harmed by such price fixing agreements. The Commission has received a number of these allegations since the introduction of the Fair Competition Act (FCA). Most complaints of this nature have been associated with the distributive, manufacturing and agricultural sectors.

Allegations coming before the Commission have included situations where:

• Competing businesses seeking to take advantage of periods of rising costs instituted a price fixing agreement which imposed super normal price increases over and above the increased costs of producing the product. The companies involved quickly reduced their retail prices when they became aware of the Commission’s interest in the fact that the competing companies retail prices were all the same.
• A group of small businesses wanting to better compete with a large established company, sought to establish an agreement with each other to fix their prices at the high end so as to boost their operations. This may have seemed like a legitimate reason for price fixing but such practices tend often to protect inefficient businesses while harming consumers in the long run. This practice was not pursued ultimately. However, if there are excellent efficiency reasons for a price fixing agreement, a case could be made to the Commission for an authorisation to undertake such an otherwise anti-competitive agreement.
• The Commission was also asked to look into a matter wherein a supplier who was also a retailer had been engaging in the practice of price fixing with its authorised dealers for quite some time. In that scenario, the Commission was able to draw the matter of a breach of the FCA to the attention of the firms involved. The Commission then subsequently worked with the parties to develop a new pricing scheme that promoted greater competition.

Price fixing cases of this nature in Barbados are remnants of the period prior to the implementation of fair competition legislation. At that time such practices were viewed simply as legitimate means of protecting prices and the interests of specific businesses. However, many traditional business practices that were once considered standard are now illegal and anti-competitive under the FCA. An integral part of the Commission’s mandate is to find and eliminate such activities in Barbados.

If you have queries about fair business competition, consumer protection or utility regulation, you can contact the Fair Trading Commission on its hotline at 421-2FTC (421-2382).