Beware of unfair competition

Oct 15 2008 By Angelo Basu for The Journal

THE past year may have been a difficult one for business and there may yet be further challenges ahead, but the Fastest 50 shows that the region is in good health and has many businesses which are well placed to weather the storms.

In challenging economic conditions, the most efficient, nimble and innovative businesses, like those found in the Fastest 50, can gain the biggest advantages.

However, tough times also make it increasingly appealing for less efficient businesses to seek out whatever means they can to shore up their positions. One of the common ways of doing this is to be tempted into anti-competitive behaviour like agreeing to reduce the risk of a price war and reducing margins by entering into understandings with other hard-pressed businesses. Large companies may try to abuse their strong existing market positions to try and drive out more agile new and growing businesses.

This harms efficient businesses which are no longer able to take advantage of their leaner operations without the risk of unfair retaliation. It also harms customers who end up paying more than they ought.

In the past, Competition Law has been seen to be principally a compliance and risk reduction issue. Certainly it is worthwhile for all businesses to ensure that they behave in a competitive manner.

However, for those businesses like the Fastest 50 which intend to thrive in difficult conditions rather than use fair means or foul merely to survive, it is also worth remembering that Competition Law is there to protect them and can be used to thwart attempts to harm them.

Competition law is there to help stamp out such practices and to let businesses like the Fastest 50 reap the full rewards of their endeavours. Businesses are able now not only to persuade the Office of Fair Trading (OFT) to investigate but also to take legal action in their own right to stop such behaviour and to obtain damages for the harm they suffer.

The OFT has been increasingly willing to punish and discourage anti-competitive behaviour, imposing large fines on many businesses.

Moves are developing to make taking legal action simpler and more effective in protecting competitive businesses and customers harmed by anti-competitive behaviour.

The courts have also shown themselves willing to impose long prison sentences on employees and directors of companies who have been involved in cartels.

Not all competitive problems stem from overt attempts to harm like this. Sometimes the problems are more deep-rooted in the structure of the market itself. The OFT and Competition Commission are also able to investigate structural market problems and remedy them.

As consumers feel the pinch more, there will be more impetus for markets to be investigated and real benefits for those businesses which can be seen to be ahead of the game and willing to innovate outside the “way things have always been done”.

Angelo Basu has more than 10 years’ experience in EU and competition issues. For advice and assistance on the above issues, or any other competition matter, please contact Angelo at angelo.basu@wardhadaway.com or on (0113) 205-6644.