Abuse of a Dominant Position
What is an abuse of a dominant position?
An abuse of a dominant position occurs when a firm that has a position of economic strength in a product market engages in conduct that is likely to restrict or distort effective competition in that market.
From a regional perspective, Article 179 of the Revised Treaty of Chaguaramas prohibits any business conduct by a firm, or group of firms, that occupy a dominant position to the extent that its conduct frustrates the benefits expected from the establishment of the Caribbean Single Market and Economy (CSME).
Common types of abuse by dominant firms
Some of the more common, and highly publicised, types of abuse by dominant firms over the recent years have included tied selling, margin squeezing and price discrimination.
- Tied selling: This occurs when a company with a dominant position in a market provides its product (or service) on the condition that customers purchase an additional product (or service) from the same or related company. In doing so, the company is able to use its dominant position in one product market to foreclose competitors in another product market.
- Margin squeezing: Margin squeezing basically relates to profit sacrificing by a firm enjoying a dominant position in a product market. Such behaviour makes the market less attractive for actual or potential competitors by artificially lowering prices. This may lead to the eventual exit or exclusion of competitors from a market and allow the dominant firm to subsequently reap monopoly profits. Cases of margin squeezing are typically found when firms are vertically integrated (i.e. the firms are both wholesalers and retailers of their products). The vertically integrated firm may sell its product (or service) to a retailer, at a wholesale price that does not allow companies in the retail market to effectively compete.
- Price discrimination: As a means of abuse of dominance, price discrimination refers to the treating of customers in a dissimilar manner without a cost-based or lawfully acceptable reason from a competition law viewpoint. Price discrimination may involve collecting dissimilar prices from the same product, or collecting the same price from different products.
What recourse do regional companies have?
If a company in one Member State suspects that a company in another Member State may be abusing a position of dominance in the region, it should contact its national competition authority, or national competent authority (a Ministry responsible for competition matters). The national competent authority could then bring the matter before the CARICOM Competition Commission for investigation.
Penalties for abuse of dominance in Community Competition Law
Currently the CARICOM Competition Commission does not have established penalties for companies that are found to have abused a dominant position (see Fining Regime).