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Competition Law and Policy WorkshopMarch 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?

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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.

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

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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.

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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

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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   

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Total Sugar Imports

Total Sugar Consumed locally

Percentage market share for Com-Com

Years Brown Crystal Granulated Total Sales of Sugar2005 15,710,000 4,600,000 20,310,000 1,700,000 22,010,000 92%2006 26,405,000 7,345,000 33,750,000 1,610,000 35,360,000 95%2007 30,100,000 8,700,000 38,800,000 2,400,000 41,200,000 94%2008 31,520,000 9,980,000 41,500,000 3,950,000 45,450,000 91% AVG: 93%

Local Sugar Sales for Com-Com Factory

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

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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).

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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.

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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

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Competition Law and Policy workshopMarch 30-31, 2011

Fair trading CommissionGood hopeGreen HillSt. Michael

info@ftc.gov.bb

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