ANTI-COMPETITIVE BUSINESS AGREEMENTS
What is meant by an anti-competitive business agreement?
Article 177 of the Revised Treaty of Chaguaramas prohibits, among other anti-competitive business conduct, agreements between enterprises and concerted practices by enterprises, which have as their object or effect the prevention, restriction or distortion of competition within the Community.
Restrictions of competition by object are those that by their very nature have the potential to restrict competition within the Community. On the other hand, business agreements that have restrictive effects on competition are those that inadvertently reduce competition by having an adverse effect on prices, output, or product quality in the Community.
Why are anti-competitive business agreements prohibited?
Anti-competitive business agreements are prohibited because they take advantage of consumers and other businesses and also restrict healthy economic growth by:
- Increasing prices for consumers and businesses through artificially inflating inputs and/or final products.
- Reducing innovation and consumer choices by protecting the parties to the business agreement.
- Deterring new industry entrants that might invest in opportunities, economic growth and jobs.
- Locking up resources because they interfere with normal supply and demand forces and can effectively lock out other operators from access to resources and distribution channels.
- Controlling markets and restricting goods and services to the point where other businesses cannot survive and must exit the market.
- Rigging bids in public infrastructure projects which inflates costs and ultimately reduces the public sector capacity to invest in beneficial projects.
- Applying different conditions to equivalent transactions with other parties engaged in the same trade (competitors) hence, putting them at a competitive disadvantage.
What are the most common types of anti-competitive business agreements?
- Bid-Rigging: This occurs when suppliers communicate to each other before lodging their bids and agree among themselves who will win and at what price.
- Collective Bargaining or Boycott: Collective bargaining is an arrangement where two or more competitors come together to negotiate with a supplier or a customer over terms, conditions and prices. A group of businesses may sometimes appoint a representative, such as an industry association, to act on its behalf in the negotiations.
- Price fixing or price signalling: directly or indirectly fix purchase or selling price or any other trading conditions
- Limiting or controlling production: The intention of businesses in restricting outputs is to create scarcity in order to either increase prices or stop prices from falling. Any business may independently decide to reduce output to respond to market demand, but it is against the law to make an agreement with competitors to coordinate restricting an output.
- Artificial dividing up of markets or sources of supply: Market sharing occurs when competitors agree to divide or allocate customers, suppliers or territories among themselves rather than allowing competitive market forces to work.
What recourse do regional companies have?
If a business in a Member State suspects that two or more companies in other Member States in the region may be party to an anti-competitive business agreement, it should contact its national competition authority, or national competent authority (a Ministry responsible for competition matters). The national competent authority could then bring the matter before the CARICOM Competition Commission for investigation.