What Is Antitrust? What is Competition Law? Why is it important?
Antitrust is the name given to laws and regulations that ensure healthy competition between businesses in the open market. It is also known as competition law in many jurisdictions. Competition helps to keep prices down, provides more choice for the consumer, and produces higher quality products and services. It also leads to greater innovation. Regulatory bodies around the world enforce antitrust and competition laws to ensure open and free markets, promote vigorous competition and protect consumers from anti-competitive practices such as cartels and the abuse of a dominant position by companies that seek to dominate a market by abusing their dominant position. Regulators and enforcement agencies also cooperate to address and police anticompetitive behaviour by companies who do business internationally.
For example, in January 2017, the US Department of Justice and the Federal Trade Commission issued updated antitrust guidance in the form of “Antitrust Guidelines for International Enforcement and Cooperation.”
Breaches of antitrust and competition laws are taken seriously. Penalties can include significant fines, the loss of reputation, and even prison sentences. Aggrieved parties, including competitors and customers, can also bring legal claims for high levels of damages against a business for anticompetitive conduct. We have a policy to help prevent breaking antitrust and competition laws, even unwittingly. We are committed to helping you fulfil your legal and ethical responsibility to guard against breaches of antitrust and competition laws!
Sofia is having lunch with a competitor, Marco, who operates in the same region. He suggests sharing and comparing company pricing structures.
How should Sofia respond?
- Go ahead. It will be good to be able to compare charges with a competitor.
- Firmly and unequivocally, but politely, decline the offer. After lunch, Sofia should send an email to report the offer to the Legal department.
- Don’t agree to the offer. Change the subject and think nothing more of it.
Under no circumstances should you share official company or market-sensitive information with competitors. This includes pricing structures. Sharing such information could seriously damage our company and is one of the most serious violations of antitrust and competition laws.
If you share sensitive market information with competitors, you and our company could face severe monetary penalties, and you could even face prison. You must decline any offer to share such information, and also report it, preferably in writing. If you encounter a similar situation, you can find out who you need to contact to report it here.
Abel, a colleague of Sofia, asks her to proofread an email to his sales director.
Which three statements should not be included in the email?
- Now that we are into the final quarter, we should consider a renewed marketing campaign.
- Our main competitor has suggested working together to crush the rest of the opposition.
- We have looked after our customers so far this year, and they are fiercely loyal; since we’re the biggest company in the market, let’s
leverage our position by hiking prices to drive the market!
- Customers want a price war, but I think if we hold our nerve, and persuade our competitors to hold theirs, we can keep prices healthy.
We are not prohibited from discussing marketing strategies internally, but language like “hiking prices” and “crush the opposition” could violate antitrust and competition laws in certain contexts. We certainly can’t collaborate with competitors to set prices; and if we’re the dominant player in the market, we have to take extra care about how we deal with customers and suppliers.
Email, like any other document, can be subpoenaed for evidence if a case were to be brought against the company. Antitrust and competition regulators also have the power to conduct raids on companies and seize documents of all kinds as part of their investigation. Bear in mind that deleted electronic materials can be retrieved.
The use of inappropriate words in both external and internal communications could be misinterpreted or mischaracterized by a regulator as indicative of an anti-competitive intent. You should consider having your presentations or other written communications checked for antitrust and competition compliance.
A competitor who operates in the same region as Sofia suggests that he’ll only pursue customers in the north if Sofia sticks to the south.
What should Sofia do?
- Agree. This makes good business sense as Sofia can concentrate her efforts in the south of the region. Firmly and unequivocally, but politely, decline the offer and report the conversation to the Legal department. Decline the offer and ask the competitor not to bring it up again.
Thanks for helping Sofia
Sofia now has a better understanding of how to deal with situations that may contravene antitrust and competition laws. Remember, agreements between competitors that restrict competition by fixing prices, limiting production, or sharing markets or customers are illegal. They lead to higher prices and lower quality for consumers. Smaller companies can be squeezed out of the market and it is difficult for new companies to enter. It cannot be emphasized enough that penalties for such activities can be very severe for the company and the individual. Always report activity that contravenes antitrust and competition laws.
Ready to show what you know? Answer five questions to complete this assessment. Pass mark: 80%
A small company has gone out of business because they couldn’t compete with the more innovative and unique products of a large competitor. A violation of antitrust and competition laws?
Two companies sign an agreement to sell their almost identical products at the same price. A violation of antitrust and competition laws?
Three different companies are bidding for the same three projects. They decide that Company 1 can win the first bid, so long as it allows Company 2 to win the second, and Company 3 the third. A violation of antitrust and competition laws?
Your nearest competitor agrees with you to divide sales for a geographical area between you both. A violation of antitrust and competition laws?
Sharing official company or market-sensitive information with competitors could seriously damage our company and is one of the most serious violations of antitrust and competition laws.
This content is an extract from the antitrust training course.