What is 'anti-competitive behaviour'?

 

Competition law aims to prevent behaviour which prohibits the proper functioning of the free market, deemed essential to economies around the world. Competition law is practiced by specialist competition law solicitors who offer legal advice and representation for firms involved in competition law disputes and investigations.

Anti-competitive behaviour

The main purpose of competition law is to protect consumers from anti-competitive practices.

The UK economy is set up to promote competition. The natural consequence of competition are said to be better and cheaper products and services, as businesses try and win more customers.

Anti-competitive behaviour hinders the proper function of a free market economy, and can result in overcharging or the hindrance of innovation as businesses opt to exploit rather than serve the consumer.

There are lots of types of anti-competitive behaviour. For example:

  • Dumping involves selling stock at a loss in order to push competitors with less cash reserves out of business
  • Exclusive dealing restricts a distributor or retailer to buying their stock only from a limited source, preventing competitors from approaching them

Collusion, or 'cartel behaviour'

Collusion is an umbrella term for anti-competitive practices involving one or more businesses who are seeking to prevent fair competition, by agreeing to fix prices, limit production or divide a territory for distribution.

Cartels are a form of explicit collusion, in which businesses actually work together in an anti-competitive way. Collusion can be implicit however, when businesses simply act in tandem.

Price fixing is illegal, and involves one or more companies agreeing privately to a set price for a product. This effectively eliminates price competition, resulting in an artificial market rate for a product or service, to the disadvantage of consumers.

Predatory pricing

Predatory pricing is viewed as an abuse of a dominant market position, one of the major forms of anti-competitive behaviour prohibited by competition law.

Dominant market positions are carefully monitored as they permit businesses the power to act against the interests of competition. In the case of predatory pricing, the business in a dominant position is able to lower their prices to a level where they actually make a loss. They are able to do this for some time, due to their size and strength.

Smaller rivals with fewer resources are unable to compete and eventually are forced out of the market. Prices can then be raised to a higher level by the dominant business, which would now enjoy a higher market share.

How to prevent anti-competitive behaviour

Modern anti-competition law aims to prevent many forms of anti-competitive behaviour through a mixture of civil and criminal sanctions. Some of the more serious anti-competitive practices have in recent years given rise to criminal punishment and hefty fines.

If you run a business or suspect that you may be subject to anti-competitive behaviour then you should consult your commercial solicitor for legal advice, or consider making a complaint to the Office of Fair Trading for UK issues, or the European Union Competition Commission for EU market issues.

Contact Law can recommend a commercial solicitor specialising in UK and/or EU competition law to help with any business issues you may be facing, as a result of anti-competitive behaviour. Please call us on 0800 1777 162 or complete the web-form on the right hand side.

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