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Of competition and cement

SOSUEME-1So after a generation or so of price-gouging on the cost of cement, Arawak is now waging “war” with the competition. You have the major foreign shareholder engaging in a war of words via the press as if the Barbadian public must buy cement from them.

On the other hand, you have the typical “small black businessman” bellyaching that the same cement manufacturer is now coming to compete with them as well. Why is competition such a bad word in this corner of the globe?

Additionally (because we needed some icing and a cherry on top), we have the Minister for Commerce etc. saying that he hopes that the Fair Trading Commission (FTC) will look into whether Arawak is selling cement to itself at anti-competitive prices. You could not make this up if you tried.

The FTC, which falls under the portfolio of the said minister, is an entity created by section 3 of the Fair Competition Act, 2002 of the Laws of Barbados. Section 5 of that Act states, amongst other things, that:

“(1) The Fair Trading Commission shall (a) be responsible for the promotion and maintenance of fair competition . . . (e) take such action as it considers necessary to (i) prevent the abuse of a dominant position by any enterprise; [and] (ii) eliminate anti-competitive agreements . . .”

Section 13 of the Act states that “all acts or trading practices prescribed or adopted by” companies, groups of companies or affiliated companies “that result in the disruption or distortion of competition are prohibited.” Any and all agreements between such enterprises are also prohibited and even where they have been executed, section 13 renders them void.

The section goes on to provide examples of agreements which would be prohibited but, for the purpose of this article, section 13 (3)(e) prohibits applying “dissimilar conditions to equivalent transactions with other parties engaged in the same trade, thereby placing those other parties at a competitive disadvantage.”

Without delving totally into contract law, agreements may be oral, written or a combination of the two. In the context of Arawak versus Rock Hard Cement versus “the small black businessman” (SBB for short), if Arawak starts to sell itself or its affiliate company cement at a price cheaper than that available to the SBB, then they would run afoul of section 5. The “dissimilar conditions to equivalent transactions” being the price of the cement.

Arawak and the SBB are now in the business of selling ready-mixed concrete products but Arawak is the supplier of concrete to both itself and the SBB. Arawak can then go below the open market price of cement, thereby undercutting Rock Hard (the alternate supplier) and the SBB. The end result being that the SBB cannot compete and goes out of business.

Section 16 of the Fair Competition Act speaks to the abuse of dominant position. An entity is in a dominant position where “by itself or together with an affiliated company, it occupies such a position of economic strength as will enable it to operate in the market without effective competition from its competitors or potential competitors.” Now that the tax on imported cement has been reportedly dropped to five per cent and we have seen the birth of Rock Hard, it would be a question of fact to be determined in any proceedings whether Arawak still holds such a dominant position.

If it does still occupy that position, then under section 16 (3), it would abuse that position if it “directly or indirectly imposes unfair purchase or selling prices that are excessive, unreasonable, discriminatory or predatory… or (h) uses any other measure unfairly in its trading operations that allows it to maintain dominance.”

Where the FTC determines that an agreement runs afoul of section 5 or “has reason to believe” that a dominant position is being abused under section 16, then it may carry out an investigation. It would be up to the Minister, an SBB or a group of them (since Barbadians like to cry out anonymously in groups) or Rock Hard, to bring the matter to the FTC’s attention. The FTC can act of its own volition but, realistically speaking, this is still Barbados.

Of course, if Arawak were trying to be smart, they would simply “agree” to supply cement at the going rate but never require the affiliate company to pay and eventually write it off as a bad debt. That bears watching by the FTC as well. As an enterprise, Arawak would be liable to a fine of $500,000 or ten per cent of the “turnover…. for the financial year preceding the date of the commission of the offence; whichever is greater” for a breach of section 13.

They would be liable to get a “direction” from the FTC to cease the abusive practice for a breach of section 16.

(Alicia Archer is an attorney-at-law in private practice)

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