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Cartel behaviour

The wholesale and retail distributive sector in Barbados operates like a cartel. Distribution is concentrated in the hands of two maybe three large companies who dictate prices and in concert with some miraculously calculated customs charges they leave the average consumer staggering at the supermarket checkout.

Believe it or not, in other parts of the world things like interlocking directorships, anti-competitive practices and monopolies are treated with the seriousness they deserve.

Based on the terms of our Fair Competition Act, Cap. 326C Barbados is meant to be taking these issues seriously as well but if the Fair Trading Commission has been playing the part of the fearless watchdog then I have failed to notice.

Section 13 of our Act prohibits “all agreements between enterprises, trade practices or decisions of enterprises or organisations that are likely to have the effect of preventing, restricting or distorting competition in a market”.

Examples of such practices include price fixing, limiting production or technical development and applying dissimilar conditions to the same type of transactions with persons in the same trade thus placing them at a competitive disadvantage.

Abuse of one’s dominant position by restricting new entrants into a particular market, eliminating competitors, or exclusively dealing with one entity or tying the sale of one product to that of another also breaches the provisions of section 16 of the act. I am sure that anyone can name at least one example that fits any of the above infringements.

Restricting the development of alternative energy sources so that the population continues to consume fossil fuels at greatly elevated prices might be one such example. Restricting the availability of certain goods in the months leading up to December so as to artificially drive up the price of said goods for Christmas would be another example.

Dominance implies that a business or enterprise must have the ability to act independently of its customers, competitors and consumers. Establishing if a company is dominant requires a complex assessment of a number of elements but a good rule of thumb would be a majority control of the market. So, ownership of the majority of gas stations in the island would generally amount to a dominant position.

A cursory check of the corporate records or any of the annual publications of the “who’s who” of Barbadian business would indicate that the commercial ruling class is somewhat “inbred”.

Section 23 of the Act provides that “Where a director serves on a board of directors of two or more companies that are significant competitors and the director’s conduct has the effect of welding together the policies of those companies in such a way as to significantly reduce competition between them or to eliminate such competition the Commission shall direct that the director serve on not more than one board of the relevant companies.” This is Barbados where “gentleman’s agreements” abound.

Penalties for offences under the act are generally $150,000 for an individual and the greater of $500,000 or 10 per cent of the preceding year’s turnover in the case of a company. The Competition Act 1998 and the Enterprise Act 2002 of the UK allows for fines of up to 10 per cent of group global turnover (quite a hefty sanction), actions for damages from customers and competitors who can show they have been harmed by the anti-competitive behaviour and disqualification of or criminal sanctions against individuals serving as directors.

Having mentioned the word cartel at the beginning of the article for effect it is only fair that one expands on the subject. Cartel behaviour between competitors is the most serious form of anti-competitive behaviour in the UK and carries the highest penalties.

Cartels engage in price-fixing, market sharing, bid rigging or limiting the supply or production of goods or services. Individuals prosecuted for a cartel may be liable to imprisonment of up to five years and/or the imposition of unlimited fines in the UK.

As with all other infringements in the commercial sphere the Fair Trading Commission has wide powers to investigate, require rectification and to penalise. In these times of economic crises, the public should bring matters to the Commission’s attention and demand justice since this will redound to the benefit of our individual pockets.

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