For most companies and other legal persons thoughts of a looming recession usually turn to thoughts of mortality and survival. The company is charging headlong into a battle for survival and is prepared to use any means necessary to emerge from the rubble. Like a battle, the use of force can escalate from intimidation to sending troops and, in the most serious cases, nuclear bombardment. When faced with the choice of you or them… well as the saying goes ‘all is fair in love and war. But is it really?
The Fair Competition Act standardizes competitive practice in Jamaica and ensures that in business, unlike love and war, all is not fair… Competitive is fair. One of the most significant features of the Fair Competition Act is that it seeks to control what are termed “uncompetitive practices”.
What are uncompetitive practices?
An uncompetitive practice is also sometimes more accurately referred to as an “anti-competitive practice”. In summary, an uncompetitive practice or an anti-competitive practice describes behaviour that prevents or reduces competition in a market. Some examples of uncompetitive practices are the abuse of a dominant position in the market, entering into agreements that have the effect of lessening competition, and price fixing. Let’s examine what these involve.
Agreements that lessen competition
In Jamaica, provisions of agreements that have as their purpose the substantial lessening of competition or have, or are likely to have, the effect of substantially lessening competition in a market are unenforceable. Provisions that have the effect of substantially lessening competition include: minimum resale price clauses, clauses limiting production capacity, clauses limiting access to investment, clauses that make a contract subject to the acceptance of another contract which is commercially unrelated. All of these types of clauses have the potential to result in some sort of detriment to the consumer.
Abuse of dominant position
A company holds a dominant position in a market if itself or together with an interconnected company, it can act independently in a market without the need to be concerned about the reaction of its competitors, potential competitors, or its customers. This usually means that the company can control, on its own, the price or supply of a particular product or service.
A company abuses its dominant position when it impedes the development of competition in the market. What does this look like? A few examples of abuse of dominant position are setting prices at a value that competitors in the market cannot match, limiting supply of a product to the detriment of consumers, and directly or indirectly imposing an unfair purchase price, this is in no way an exhaustive list. The clear position of the law in this case is that monopolies are bad.
A company, however, will not be treated as abusing its dominant position if it can prove that its behaviour was “exclusively directed to improving the production or distribution of goods or to promoting technical or economic progress and consumers were allowed a fair share of the benefit” or if the only action taken by the company was the enforcement of an intellectual property right held by the company such as copyright, patent, registered design or trademark.
Collective Agreements and Collective Resale Price Maintenance
Collective resale price maintenance occurs when suppliers of goods enter into an agreement, written or otherwise, to manipulate market prices to the detriment of consumers. This manipulation can include actions such as withholding goods from dealers that do not wish to sell the goods at the recommended resale price or supplying goods on less favourable terms to dealers who do not wish to resell the goods at the recommended price.
Consequences of Engaging in Uncompetitive Practices
The consequences for participation in an uncompetitive practice are two-fold. While we already know that provisions of agreements that have the effect of lessening competition will be unenforceable, there are additional consequences that apply to agreements as well as other uncompetitive practices. According to the Fair Competition Act, If the Court is satisfied on the application of the Fair Trade Commission that any person has failed to comply with any direction of the Fair Trade Commission or engaged in an uncompetitive practice then the Court may order the offending person to pay a fine of up to one million dollars in the case of an individual and up to five million dollars in the case of Company and/or grant an injunction restraining the person from engaging in the objectionable conduct. Additionally, the Fair Competition Act provides that any person who engages in an uncompetitive practice “shall be liable in damages for any loss caused to any other person by such conduct”. An award of damages in these circumstances can result in massive monetary losses for the offending person. A person could find themselves subject to a fine, injunction and liable for damages as a result of their engagement in an uncompetitive practice.
These are just a few examples of the restrictions and penalties imposed on businesses for the protection of the consumer and the furtherance of fairness in the market. There are other anti-competitive practices that businesses should be careful not to engage in (those may be the subject of another article). However, it is important as we enter into these dangerous times that businesses large and small keep in mind that collective survival is dependent on a competitive market. Therefore, in the struggle for survival, neither nuclear bombardment nor anti-competitive practices are an option.
Luke Phillips is an Associate at Myers, Fletcher and Gordon. He may be contacted at email@example.com or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.