COMPLIANCE WITH COMPETITION LAW: Competing Equitably in the Marketplace Small Business Sector

1. Presented to the Small Business Association on 2009 – 11 - 24 COMPLIANCE WITH COMPETITION LAW:Competing Equitably in the MarketplaceSmall Business Sector

2. Importance of Small Business Sector • 11,300 small businesses in Barbados, • On average small businesses in Barbados employ around 4 persons each, • 45% are sole proprietors, • 40% are incorporated firms, • 15% are partnerships. The Small Business Sector is the engine of our economic growth

3. Purpose of Competition Law • promote and maintain competition by ensuring that markets function fairly and efficiently. • prohibit business practices that would prevent free and fair competition from taking place • educate and inform business persons of their rights and responsibilities under the Act Competitive markets are essential to economic growth and improvement in consumer welfare

4. Objective No. 3 of Fair Competition Act • to ensure that all enterprises, irrespective of size, have the opportunity to participate equitably in the market place • freedom to operate without interference • equal access to raw materials, finance, customers, equipment, and support schemes • equal access to regulatory redress.

5. Anti-competitive Conduct • Anti-Competitive Agreements • Any arrangement or understanding whether oral or in writing likely to prevent, restrict or distort competition • Abuse of Dominance • An enterprise holding a dominant position that engages in conduct which impedes the maintenance or development of effective competition in a market. • Anti-competitive Mergers • when two or more businesses cease to be distinct entities and are likely to control 40% or more of any market, the merger will not be permitted if it is likely to affect competition adversely or be detrimental to consumers or the economy;

6. How the Commission Investigates • The Commission has: • significant investigative powers to compel a person to provide information • powers of search and seizure of documents • The Commission: • receives complaints from competitors and consumers or from its own monitoring programme • begins an investigation based on the complaint or on its own initiative • conducts relevant investigative tests

7. Commission’s Decision Making Process • Compile all available evidence • Match the evidence against the law and previous cases • Use logical deduction to reach a preliminary conclusion • Invite defendant to respond by providing any evidence or alternative interpretation of the facts • After consideration of the defendant’s views a final determination of a breach is given.

8. Why Small Businesses must be Aware • Often are victims of unfair business practices • forced to absorb higher than economic operational cost • Can be perpetrators of unfair activity. • remove the very competition that leads to increased innovation and productivity • Unlikely to maximise potential in market-place. Need to be familiar with the concepts of competition law and the benefits of maintaining fair and competitive markets.

9. How small businesses have become victims • forced to purchase their raw material and other inputs at excessive prices • excluded from certain discounts because they were not affiliated to the supplier, or part of a ‘grand-father’ agreement. • forced to share detailed confidential cost information • forced to do business only with particular supplier or not get supplies. • large businesses direct new business to the larger more established businesses

10. How small businesses are perpetrators • small businesses have acted in breach of the law, not always knowingly but Ignorance of the law is no excuse. • group of small businesses in the distribution sector agreed to pass on the increase in price, plus a little extra to earn greater profit. • agreed with supplier how they would set prices so as not to compete • professional associations agreed and developed mandatory lists of the prices

11. Tips for recognising Unfair Conduct • Collusion • The prices of similar products of different suppliers are always identical, especially when they were different previously. • statements indicating an understanding on prices • Bid rigging • Same company always wins bids • Rules and conditions that exclude many potential bidders • Successful bidders repeatedly subcontract unsuccessful bidders • Abuse of Dominance • The price of a good bears little relation to its cost of production • Requirements stipulating with which businesses you must deal • Competitors being charged different prices for same good

12. Responsibility of Small Business Anti-competitive conduct acts to frustrate the potential benefits that should be generated in a free and competitive market Only where such activity is eliminated, can the small business sector really maximize the potential opportunities that are available in the market place. Onus is on small businesses to be aware, to be vigilant and to act when you observe these signals.

13. Presented to the Small Business Association on 2009 – 11 - 24 COMPLIANCE WITH COMPETITION LAW:Competing Equitably in the MarketplaceSmall Business Sector