Basis of Competition Laws Around the World

Governments all over the world are cracking their whips on the big businesses that are making it difficult for small businesses to survive in the market. This article details with the basic issues that are covered under the competition laws that are practiced in many countries around the world.

Relations with Competitors

Competition laws around the world take special view on the relations existing between the competitors in an industry or a country. Agreements that are perceived to have been entered between the competitors in an industry with the explicit purpose of stifling competition are prohibited by the competition laws of any country. Some of the activities that prohibit the relations between the competitors are: price fixing, inappropriate division of the market territory between the various competitors in a marketplace, limiting the production in a marketplace, rigging of bids, joint purchasing and joint commercialisation of products, exchange of information that can prevent the competitiveness of the industry, and illegitimate agreements between competitors for standardization of products (Akzo Nobel 2008).

Relations with Suppliers, Distributors, and Customers

Competition laws also take a careful of the agreements that a company enters with its suppliers, customers, and distributors. Some agreements that companies enter with their suppliers, distributors, and customers like buying a substantial chunk of the production output, entering into exclusive distribution agreements with distributors to supply the produce manufactured by them, and practices that make it difficult for customers to switch between different players in the industry. Some of the relations by the companies with their competitors that are explicitly prohibited by the competition laws are: resale price maintenance, price discrimination, restrictions of resale or use, long-terms supply deals entered by companies with its business partners, and bundling of goods and services with the intention of artificially inflating the prices in the marketplace.

Abuse of Collective Dominant Position/ Monopolisation

A major threat to the competition in the marketplace might also occur when a group of companies in the market place abuse their dominant position in such a way that could be harmful to the interests of the customers. However, competition laws do not explicitly prohibit companies to have a dominant position in the market. It is the abuse of such dominant position to stifle competition in the market that is prohibited by the competition laws of a country. Some of the cases of players with dominant positions abusing the competition in the marketplace are: tying up with each other to restrict competition, discrimination in the prices charged and other conditions of trade, rebates and discounts related to fidelity, refusal to supply to all the players in the market equally, and forcing the competitors in the market out of the business (explicit predatory behaviour), excessive pricing, and other forms of abuse of dominant position like restrictions on customers from using products made by competitor companies.

Competition Laws and Intellectual Property Rights

Intellectual property rights are some of the core assets of all the major businesses in a country. But some companies try to misuse their intellectual property rights by preventing the competition from developing competing technologies that can rival them in the marketplace. Such restriction over the development of competition technologies would restrict the competition in the marketplace and limit the choice for companies. Many IT companies that have resorted to such abusive practices in the US and Europe was prevented by competition commissions there. Other important cases where the competition agencies interfered regarding the abuse of the intellectual property rights owned by companies was in the case of drug companies owning patents on sensitive drugs used for the treatment of diseases like HIV and preventing other companies from getting hold of them. Competition regulators in Asian and African countries have given compulsory access to the companies in developing countries to these key lifesaving drugs.

History of Competition Laws

Competition laws are framed with the intention of ensuring that competition between the players in the economy in stifled by certain dominant players that can harm the interests of the society and the common good. Firms when the left unmonitored may increase the profits and the GDP of the country, but may be harmful to the society. Governments control the businesses of an economy through multiple means like licenses, regulation, and a competitive policy. Government regulation refers to the control of businesses in a country through a set of policies and frameworks on part of the government (U.S. S.E.C. n.d.). Governments generally issue licenses to players in the key sectors of the economy and establish regulators with the mandate of controlling the activities of companies in key sectors of the economy like telecom, insurance, banking, and capital markets. Some of the world’s well known regulators are the U.S. Securities and Exchange Commission and the Indian IRDA which regulates the country’s insurance sector. Both regulation and competition laws are intended at dealing with market failures. However, both of them differ with each other in terms of procedures and control rights. The main difference between the competition laws and regulation is the extensive powers that the latter have (ECO 2012). While competition laws come into picture only in cases where any misconduct is detected on the part of market players, regulators continuously keep controlling the affairs of the firms in a specific industry. Both regulation and competition laws serve different functions with a single intention of protecting the welfare of people living in a country.