Saturday, 13 November 2010 21:08

Anti-Competitive Conduct under the CARICOM Competition Regime

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The following anti-competitive conducts are prohibited under Chapter 8 of the Revised Treaty of Chaguaramas.

  • Fixing of Purchase or Selling Prices, Directly or Indirectly
At the international level, very damaging cartels are formed, such as the Lysine Cartel which operated from 1992- 95, fixing prices on feed additives for poultry and swine. The membership included some of the world's most significant lysine producers. Production facilities were located in the US, France, Hungary, indonesia, Italy, Japan, Korea, Mexico and Thailand. Over its lifespan, the cartel raised prices of US$1.4 billion in global sales, overcharging by 100% and gaining rents of some US$140 million. Every person in CARICOM who eats poultry and pork paid more for the products as a result of this cartel. One of the conspirators was Archer Daniel Midland (ADM) which has flour mills in Jamaica, Belize, Barbados and Grenada.
  • Restricting Competition by Arranging Not to Compete Against Each Other in Markets, or to Restrict Supply of Sources.
The free flow of goods and services within the CSME could be compromised, for example if producers of pharmaceuticals were to agree not to compete in each other's home markets. So for instance, producers in St. Lucia would not compete in Jamaica and vice versa, resulting in higher prices being charged in the market.
  • Limiting or Controlling Production, Markets, Investment or Technical Development
When firms allocate output quotas amongst themselves, they create scarcity and cause price increases. Limiting investment or technical development could have a dampening effect on production of goods and services, or could inhibit efficiency creating changes, leading to higher prices due to inefficiency and scarcity. For instance, intellectual property holders may deliberately obtain a patent in a developing country so as to bar entry to competitors, thus limiting the extent of investment or technology transfer.
  • Bid Rigging (or Conspiring to Affect Tenders Submitte in Response to a Request for a Bid)
When collusion occurs between the entities submitting tenders, the result is winning bids that are above the level that would prevail in the absence of collusion . For example, in an instance where the market price may have beeen US$100,000, for four conspire to allow one to submit a bid of US$150,000 while the others submit higher bids. In doing so, the body inviting the tenders pays a significantly higher cost, while the winner would have receive rents of US$50,000. The colluding firms then take turns submitting the "winning" bids.
  • Exclusionary Vertical Restrictions (or Restricting the Activities of Those Lower in the Production Chain)
Vertical Relationships are defined as the interactions existing between persons operating at various points of the production chain. An example of a Exclusionary Vertical Restriction, would be a dominant firm seeking to prevent its distributors from carrying a competitors product. The firm may attempt to do so in order to avoid have to lower its price or raise its quality in response to competitive offerings.
Mittal SA, an South African steel company with a subsidiary in Trinidad and tOBAGO (ISPAT), was manipulating the supply of flat steel products on the domestic market in order to reduce the supply so that the price could remain at a pre-determined level. In order to so do, the firm sold to key merchants as a reduced price on the condition that the steel had to be used for certain purposes and could not be offered for resale. In September of 2007, Mittal SA was fined US$95.9 million and ordered to discontinue its non-competitive practices.
  • Conferring a Competitive Advantage to One Party Over Another byTreating Parties Engaged in Similar Commercial Transactions Unequally
Price differentiation is only allowed on the basis of quantity, quality and other similar trading conditions, not to different customers or categories of customer. Firms are not allowed to give a subsidiary a better price than it gives to a rival of its subsidiary. An example of this would be the case of BRC in Barbados who were found in breach of the Fair Trading Competition Act, for engaging in price discrimination and price maintenance. BRC cooperated with the Commission to become compliant.
  • Inclusion of Additional Obligations Not Connected to the Substantive Contractual or Sale Transaction
Examples include banks making it compulsory to purchase an additional product as a condition of getting a loan or a firm getting rid of excessive stock buy tying the purchase or one product to another.
  • Restricting the Access of a Competitor to an Infrastructure or Network Essential to Conduct to the Competitor for Their Business
Case 1: The owner(s) of telecommunication networks and infrastructures are obligated to allow competitors (e.g internet and mobile providers) to use their networks, as these are essential for competitors to conduct business.
Case 2: The owner of a dock and ferry service was ordered to give a potential competitors in the ferry business access to the dock at prevailing market price. As it was ruled that the cost of building another dock was both wasteful and prohibitive.
  • Predatory Pricing
Some firms have attempted to price their goods or services with the intention of harming or crippling the competition. As such a firms may resort to selling a product beneath cost price in order to drive a competitor out of the market or even to prevent competition from entering the market.
  • Restrictive practices.
A company may attempt to impose unfair purchase or selling prices that bears no relation to the good's actual economic value. This is done in order to maintain profits that are appreciably higher than what would prevail in a competitive market.
Examples of an unfair price would be when large supermarket chains dictate the price of goods in exchange for shelf space or when large tour operators refuse to include a hotel in their listings unless a very low rate is given to their customers.
  • Any Business Conduct that Exploits customers and/or Suppliers.
Competition law aims to protect competition not competitors and therefore maintain competitive markets. National Competition Authorities are therefore afforded the ability to discipline firms that engage in exploitative practices.
Last modified on Monday, 15 November 2010 14:43
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