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Abuse of Dominance Case

Abuse of Dominance Case. Competition Law and Policy Workshop March 30-31, 2011 Savannah Hotel. Is Com-Com guilty of any type of anti-competitive conduct and if so what is it and how was that determined?. CASE STUDY. Steps in Investigating an Abuse of a Dominant Position.

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Abuse of Dominance Case

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  1. Abuse of Dominance Case Competition Law and Policy Workshop March 30-31, 2011 Savannah Hotel

  2. Is Com-Com guilty of any type of anti-competitive conduct and if so what is it and how was that determined? CASE STUDY

  3. Steps in Investigating an Abuse of a Dominant Position • Step 1: Identify the “relevant” market in which an abuse of a dominant position is suspected. • Step 2: Determine whether a company has sufficient control of that market to constitute a dominant position. • Step 3: Identify the conduct that may harm competition. • Step 4: Assess the conduct’s overall competitive effects.

  4. CASE STUDY - Investigation Step 1: Establishing the relevant market(s): • A market will usually be defined by the products supplied (relevant product), the area of competition between the relevant firms (geographic dimension), and the nature of the economic activity being undertaken (functional dimension) • In this case it would be necessary to define two markets • Where the company has market power, and • Which is affected by the practice

  5. CASE STUDY - Investigation Step 1: Establishing the relevant market (continued) • Product: • Look for substitutes – what will consumers substitute for these sugars; possibly perform SSNIP test • Look at both demand side and supply side substitutability • BROWN and GRANULATED SUGAR • Geographic: • Where is the product sold • Would consumers easily switch to buy this sugar directly from the US • BARBADOS Market • Functional: • Looks at whether retail, wholesale, distribution, manufacture/production etc.

  6. CASE STUDY - Investigation Step 1: Establishing the relevant market (continued) • Relevant Market is: • The production of brown and granulated sugars in Barbados • Market which is affected or harmed by the conduct is: • The transportation/distribution of wholesale brown and granulated sugar

  7. CASE STUDY - Investigation Step 2: Establishing whether the company has a dominant market position • Check market share: • Look at local sales of Com-Com and local imports. From this you will get total consumption and then what percentage of this is Com-Com’s local sales • 93% average over a 4-year period

  8. CASE STUDY - Investigation Step 2: Establishing whether the company has a dominant market position (continued) • Check barriers to entry: • Look for governmental, economies of scale, financial barriers, etc • Imported sugar faces high import duties • Due to economies of scale it is not profitable to open another sugar factory • Start-up costs for a sugar factory are very high

  9. CASE STUDY - Investigation Step 3: Identify the conduct that has the potential to harm competition • Under Section 16 (3) (g) of the FCA it holds that an enterprise is abusing its dominant position if it “engages in exclusive dealing, market restriction or tied selling • TIED SELLING occurs when a seller of product A and B requires all purchasers of A (the tying product) to also buy product B (the tied product).

  10. CASE STUDY - DECISION Step 4: Assess the competitive effects • Com-Com was found to have abused its dominant position by forcibly tying the delivery of sugar to the manufacture of that sugar. It was therefore found to be in breach of Section 16 (3) (g) of the FCA • The Commission directed Com-Com to “grant the option to those distributors who wished to make alternative delivery arrangements the opportunity to do so” i.e. they did not have to accept Com-Com’s delivery put could self-deliver.

  11. CASE STUDY - DECISION Step 4: Assess the competitive effects (continued) • It was understood by the Commission that Com-Com’s directive was a rational response aimed at improving their productivity (Section 16 (4)), however, the manner in which the practice was instituted (without proper consultation from the affected parties) constituted an abuse of their dominant position • Some distributors had stated that they had adjusted to the Com-Com’s new delivery system • Therefore, benefits to the decision included: • Reduced distribution costs and lower prices • Avenues now available to self deliver • Retail pricing of sugar became more competitive

  12. Competition Law and Policy workshop March 30-31, 2011 Fair trading Commission Good hope Green Hill St. Michael info@ftc.gov.bb THANK YOU

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