Securing a competitive business environment in Guyana: The role of Fair Competition Legislation

Ministry of Business Column

Professor Leyland Lucas

The Competition & Consumer Affairs Commission (CCAC) apart from its mandate to enforce Guyana’s consumer protection legislation is also mandated to enforce rules of competition set out in the Competition & Fair Trading Act of 2011 or CFTA. The CFTA does two main things. First, it establishes the CCAC and confers on it the authority to administer and enforce the CFTA. Second, the CFTA describes a whole host of rules governing market players. Some of them are rules intended to protect consumers and some are rules intended to protect the competitive process or competition on a market (which necessarily means all market players and market forces).The rules of competition are those that, when enforced, protect the competitive process. These rules are intended to prevent and stop activities by enterprises that reduce or prevent competition or rivalry among themselves.

Benefits of fair competition

 With a more competitive market place, consumers as well as businesses prosper and Guyana can continue to ascend on the development path. As a matter of corporate social responsibility every business should play its part in becoming compliant with competition law. This is because the rules of competition when enforced and adhered to, promote:

  Efficiency: With competition law, more businesses can enter the market and with more competition on the market, incumbent business must undertake prudent activities to ensure efficiency and seek out the production of more innovative and better-quality products so they have a competitive edge that is not just based on low prices but also on product quality. Efficiency results in lower costs of production for businesses and naturally leads to higher profit margins.

  Consumer Welfare: A more competitive market place results in businesses competing on price, quality, and aftermarket services. This is good for the consumer in Guyana. The agency has a vested interest in seeing consumers in Guyana have choice in where they shop and what they buy. The agency would like to see more competitive prices for well-produced and safe products.

  Opportunities for Guyanese companies to fairly take advantage of the CARICOM Single Market and Economy (CSME): By working with the CARICOM Competition Commission the agency can ensure that Guyanese businesses are not disadvantaged by anticompetitive business conduct that prevents or distorts trade in the CSME.

  The Growth of Small and Medium Sized Entities: The removal of barriers to entry into a market will bring about the entry and expansion of small businesses in Guyana.

 Rules of Competition to Observe in Guyana

The CFTA outlines two main rules of competition:

1.   Prohibitions of Anticompetitive Agreements: In practical terms this means that agreements between competitors at the same level of product and agreements among market players at different levels of production, i.e., horizontal and vertical agreements, to the extent that they distort or restrict competition, are prohibited at law and are unenforceable by the parties to the agreement.

Examples of anticompetitive agreements include: competitors directly or indirectly agreeing on prices to charge, sharing markets, limiting or controlling production or investment, collusive tendering (bid-rigging), joint purchasing or selling, sharing information, exchanging price information etc.

2. Prohibition of abuse of dominance: Any abuse of a dominant position by one or more enterprises in a market is prohibited. This means that the legislation prohibits single firm abuse or abuse of firms acting collectively so long as the single firm acting alone or the collection of firms acting together possess a dominant position on the market. Firms that have 40 per cent or more market share are presumptively dominant. This means that the agency believes, without more, that the firm has the ability to control prices on the market or to act independently of its competitors, customers or suppliers when it is making any business decisions.

Examples of conduct which constitute an abuse of dominance includes: restricting entry by any other enterprise into a market; preventing a firm from competing on the market; excluding or foreclosing a competitor from the market or from access to consumers; directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; limiting production, markets or technical development to the prejudice of consumers etc.

Penalties for engaging in anti-competitive conduct

 If an enterprise is found to be in contravention of the CFTA the consequences can be quite costly. Under the legislation the enforcement remedies are pecuniary and punitive in nature. A business executive in contravention of the Act can be sent to prison and businesses can be ordered to pay a fine (ranging from one million to fifty million dollars) and to pay damages to parties who are harmed as a result of the business’ anticompetitive conduct. The business can also be ordered by the court to cease and desist the anticompetitive conduct for any period of time.

Steps to getting the business on a compliance path

From time-to-time businesses participate in trade association activities and industry boards. These types of forums do create the opportunity for lawful collaboration among businesses but they can also be used as a means of engaging in anticompetitive activities like fixing prices or production supplies. Businesses should utilize procedures to properly advise their employees of proper, lawful and ethical business practice to be utilized when participating in industry-type forums.

Every business should contemplate the usefulness of carrying out audits of its current/existing business practice to ensure they are presently in compliance with the CFTA. This could mean enlisting the help of legal counsel in reviewing the business policies, practices and agreements with suppliers and customers to ensure they are in fact compliant with the Act.

Firms can utilise a range of instruments such as policies, compliance programmes, training sessions, workshops, departmental rules and procedures for ensuring compliance with the CFTA.

Whatever programme that is used should transcend all levels of employment and be used by directors, senior management and all other employees.

 If enterprises have been harmed by anti-competitive conduct or have knowledge about practices that can be deemed anti-competitive under the CFTA they have the responsibility to report such conduct to the CCAC. The CCAC has the responsibility to carry out investigations in relation to businesses in order to determine whether they are engaging in practices in contravention of the CFTA.

  It is important to note that competition legislation and its enforcement is not intended to create unnecessary red tape for business or in any way provide road blocks or hindrances to their success but rather it seeks to help them by promoting fair rivalry and it forces them to perform optimally. This in turn helps to create a competitive environment where they can survive and thrive, promotes consumer welfare and overall economic wellbeing for the country. The CCAC has a key role to play in ensuring the objects of the CFTA are met and that the relevant stakeholders are aware of their responsibilities under the Act. For these reasons persons are encouraged to contact the CCAC to report suspected anti-competitive activity, to obtain more information to help them on a compliance path or to access any of the other services of the Commission.

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