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Distortion of Competition Not Tolerated Under Any Condition PDF Print

Printed in the Business Monday newspaper on September 6th, 2010

The Fair Competition Act CAP.326C, prohibits many specific anti-competitive practices including predatory pricing, price fixing and exclusive dealing. Section 13 (1) of the Act however speaks to the general distortion of competition and indicates that any and every practice that distorts competition is prohibited. The Section specifically states that:

“All acts or trading practices 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.”

From this provision it is clear that any conduct by businesses which prevents free or natural competition from taking place is unlawful.

In a market where there is effective competition firms 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 interruption or restriction on the competitive process, whether 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 some of the ways in which competitors may restrict competition, consider the following: A computer retail industry has six computer retail outlets. One of these retail outlets ‘Keyboards Inc.’ is also the retail arm of the sole computer manufacturer. Keyboards Inc. in its capacity as manufacturer introduces a requirement that, retail outlets purchasing computers from Keyboards Inc. must submit their purchase prices and other internal cost information in order to receive the manufacturer’s guarantee stamp. This would mean that Keyboards Inc. as a competitor in the retail market, would now have confidential commercial information from its competitors and could use this as a way to gain a distinct advantage over the other retail firms. This unfair advantage may be viewed as a distortion of natural competition within the market and the Commission may after investigation, order the prohibition of such a practice.

Another example of distortion of competition would be a firm in one industry preventing competition in another market by influencing the business of that particular market. For example, let us assume a condition of service from the above example which states that, consumers 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 10 computer repair stores 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 but consumers would also be affected by the limited choice. A practice of this nature would be viewed by the Commission as a distortion of competition in the computer store market.

The important factor to bear in mind from these scenarios is that as far as possible the Fair Competition Act requires that competition between firms in Barbados be free and fair. Any activity by firms deliberate or otherwise which restricts this process will be deemed a distortion of competition and may be consequently prohibited.

Distortion of competition can occur in all areas of business, and the opportunity for breaches is wide. International competition authorities like the European Commission, the United States Federal Trade Commission and even the Jamaica Fair Trading Commission, experienced numerous cases. To manage this, some countries have adopted exemption clauses for some markets and some practices, permitting them even though they may be considered a distortion of competition.

In Barbados there are presently no markets or practices that are exempted from the Competition Act. The law demands free and fair competition, recognising that vibrant and effective competition is one of the key elements of a successful market economy as it will encourage the efficient use of resources and lead to significant benefits to Barbados and its people. To this end, any act of distortion of this process pursuant to Section 13 is prohibited.

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