Competition Law

How Does it Apply to Me and My Business?

Competition Law – How Does it Apply to Me and My Business?

 

Competition benefits everyone; businesses, consumers and the economy as a whole. It encourages businesses to compete for customers. Buyers of goods and services, from individual consumers to businesses, benefit by paying less and having more choice and better quality. Competition results in open, dynamic markets, featuring increased productivity, innovation and better value.

The Competition and Consumer Protection Commission (‘the CCPC’) is responsible for enforcing Irish and EU competition law.

Irish competition law is contained in various pieces of legislation, which are set out in the enforcement section. The most important principles of Irish competition law are set out in sections 4 and 5 of the Competition Act.

What constitutes anti-competitive behaviour?

Competition law prohibits businesses from:

  • Entering into anti-competitive agreements or concerted practices with others. Competition law applies not only to formal agreements but also to any sort of informal arrangement between businesses, whether written or verbal, which has an anti-competitive object or effect.

Competition law specifies certain types of behaviour which are expressly prohibited. These include agreements which:

  • Fix prices

  • Limit or control production or markets

  • Share markets or sources of supply

  • Apply different conditions to equivalent transactions with other trading parties thereby placing them at a competitive disadvantage

  • Abusing a dominant position. Competition law does not prohibit you from having a dominant position; it only prohibits the abuse of that position. Generally, you would be considered to be dominant if you are able to act without first considering the reaction of your customers or rivals, e.g. if you can increase your prices because you know that your customers have very few alternative sources of supply and so will have little choice but to pay the higher price. You will not be in breach of competition law if your business’s vigorous competitiveness takes sales away from less efficient rivals, as this is competition working effectively.

Articles 101 and 102 of the Treaty on the Functioning of the European Union prohibit the same kind of conduct as that prohibited by Irish competition law, as long as it can be shown that the relevant conduct might affect trade between Member States of the EU.

The CCPC is responsible for enforcing Irish and EU competition law by investigating suspected breaches of these prohibitions. More information is available in the enforcement section.

In Ireland, the Commission for Communications Regulation (ComReg) also has a limited power to enforce sections 4 and 5 of the Competition Act and Articles 101 and 102 of the Treaty on the Functioning of the European Union in the field of electronic communications networks, services and associated facilities.

How can you protect your business from anti-competitive behaviour?

There are steps you can take to protect your business from anti-competitive behaviour. The most important thing is to be vigilant and to report any suspicions of anti-competitive behaviour to the CCPC.

There are a number of things which you should look out for among competitors and suppliers:

  • Cartels

  • Abuse of a dominant position

  • Other potentially anti-competitive agreements

Cartels

Cartels, where two or more businesses agree not to compete with each other, are the most serious form of anti-competitive behaviour. The agreement does not have to be in writing, nor does it even have to have been carried out. Simply making a cartel agreement is illegal. Cartels can result in increased prices, lower quality products and narrower choice for consumers. The cartel offence stands out from most other offences in that consumers typically do not know that they have been a victim.

Cartels include:

  • Agreements between competitors to fix prices for goods and services, including agreements with competitors on discounts

  • Market-sharing, where competitors divide up locations or customers among themselves

  • Controlling the amount of goods or services being supplied in order to keep prices higher

  • Rigging bids among competitors in order to guarantee that one person or company in particular wins the contract

What you should look out for:

  • Signs that competitors are exchanging confidential pricing or sensitive business information

  • Evidence that competitors have agreed to price or discount products in a certain way

  • Price changes happening in regular and similar ways over time

  • Use of similar phrases or explanations by competitors when price changes are announced

  • Refusals to provide quotes (or providing inexplicably high quotes) to customers outside their normal trading areas

  • Comments by sellers that certain customers are “their customers”

  • Restrictions on output that reduce the quantity of desirable goods available to consumers and which keep prices high

Abuse of a dominant position

What to look out for:

  • Predatory pricing: selling a product or service below cost to drive competitors out of the market

  • Exclusive dealings: where a company 'ties' a retailer or wholesaler to purchase from them on the promise that no other company will be supplied in that area

  • Tying: making the sale of one thing to your business conditional on buying something else

  • Refusal to supply: as an excuse to eliminate competition

Other anti-competitive agreements

Other agreements (written or otherwise) which may be anti-competitive, depending on the circumstances, include:

  • Agreements (like resale price maintenance) between firms that are not competitors but are connected through a chain of distribution, for example, manufacturers and distributors, distributors and retailers, franchisors and franchisees

  • Agreements between competitors that reduce competition, by co-ordinating behaviour, preventing new competition or discouraging aggressive competition

  • Agreements incorporating long exclusivity periods

These agreements may have been entered into for seemingly valid business reasons but may be in breach of competition law because of their anti-competitive effect.

How to make sure your business is in compliance with competition law

Introduce a compliance programme

Making sure you or your business does not become a victim of anti-competitive behaviour is important. It is vital to encourage a culture of compliance in your business. This should be evident from the top levels of management down through all levels within the organisation. All staff should show a commitment to complying with the law. A competition law compliance programme is a way your business can strive to have the right measures in place and can form part of your company's overall risk management and compliance measures.

Having an effective compliance programme in place not only reduces the risk of breaking the law but helps create a culture of compliance with the law, which gives your business a competitive edge and can lead to improved performance. Compliance goes hand in hand with good ethical behaviour and corporate responsibility.

Every business needs to design a compliance programme that suits its needs. It will depend on the structure and conditions of the market you are operating in and the size and structure of your business. A compliance programme does not need to be costly but should be implemented fully, with proper training for staff and reviewed regularly. Once staff are trained they will also be able to spot instances where your firm is a potential victim of an anti-competitive practice.

We have a guide available on how to set up an effective compliance programme.

Checklist of key items for preventing cartel behaviour:

  • Make all pricing decisions independently of competitors

  • If you must hold meetings with competitors, do so strictly in accordance with an agenda that is pre-approved by the compliance officer in your company and keep discussions to the point. Do not encourage or engage in discussions about the general difficulty of doing business, the unreasonableness of consumers or other competitors, or behaviour by competitors.

  • Keep proper records of all contact with competitors.

  • Be aware that discussing pricing, customers and markets, or levels of production and supply in informal meetings can also mean you are breaking the law.

  • Leave immediately if discussions arise that could be anti-competitive and make it clear at the time that your business does not want to be involved. Report the incident immediately to your compliance officer.

  • Seek legal advice before entering into any agreement with a competitor.

  • Be aware that any agreement with a competitor regarding price and conditions of supply, or levels of production and supply, even if unspoken, is considered a criminal cartel offence.
    Be aware that any agreement with a competitor not to compete for certain customers or in a particular product or geographic area, even if unspoken, is considered a criminal cartel offence.

  • Be aware that agreeing with competitors to submit pre-arranged separate bids or tenders, agreeing not to submit a bid or tender or agreeing to withdraw a bid or tender, is considered a criminal cartel offence.

  • Contact the CCPC if you suspect or have information of people rigging bids or colluding on tenders.

What should you do if you suspect anti-competitive behaviour?

If you or your business has been or is involved in a cartel there are steps you can take. The CCPC, along with the Director of Public Prosecutions (DPP), offer a Cartel Immunity Programme. This offers a person or business involved in a cartel the opportunity to seek immunity from prosecution in exchange for being the first to admit involvement, along with full co-operation with any subsequent investigation and prosecution.

What are the penalties for breaching competition law?

In Ireland, businesses or individuals that breach competition law may be subject to civil or criminal sanctions. For more information see enforcement.

What are the laws relating to mergers and acquisitions?

The CCPC is the statutory body responsible for the enforcement of merger control law in Ireland. Part 3 and Part 3A of the Competition Act set out the laws relating to the review of mergers and acquisitions. Read more on our role in relation to mergers.

Are there specific competition rules relating to the grocery sector?

The Competition (Amendment) Act 2006, which inserted a new Part 2A into the Competition Act, was enacted to prevent certain unfair trading practices in the grocery trade. Part 2A prohibits certain practices in the grocery trade:

  • Attempts to impose resale price maintenance

  • Discrimination by applying dissimilar conditions to equivalent transactions in the sector

  • Compelling or coercing payment or allowances for advertising or display of goods, and

  • “Hello money” in relation to new or extended retail outlets or outlets under new ownership

This conduct is only prohibited where it aims to prevent, restrict or distort competition. Read more on our role in relation to grocery regulation.

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