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CONVERSATIONS WITH THE FTC: More queries on pricing, directorships

BEA DOTTIN, [email protected]

CONVERSATIONS WITH THE FTC: More queries on pricing, directorships

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Conversation with DeCoursey Eversley, director of fair competition at the Fair Trading Commission
Conversations: Director, it’s been some time since you last spoke to us about the progress in promoting competition and I know that you just completed your fourth annual training workshop on competition law and policy. What were the highlights of this year’s programme?
Eversley: As you know, the purpose of our annual training programme is to increase awareness within the business community as to the importance of effective business competition to our economy.
This year we had the deputy assistant director of the Bureau of Competition of the United States Federal Trade Commission to assist us in the workshop. He along with the commission’s staff presented on the core areas of competition law ranging from abuse of dominance to anticompetitive agreements and merger control.
We had quite a number of people from the distribution and shipping sectors and this allowed us to focus on issues that affect these particular areas. There was a high degree of knowledge transfer, judging from the quality and depth of the discussion. Several of the participants indicated how much they benefited from the exposure to the subject, so generally I would say that this year’s programme was a success.
Conversations: What other activities have you been undertaking in the area of public education and how would you assess the overall impact of your efforts?
Eversley: In addition to the hosting of workshops, we continued to speak to individual businesses, business organizations, tertiary education institutions, as well as write regularly in the Press. I would say that the impact of our promotion has been quite significant.
This is manifested in the level of behavioural change that we have been observing, be it the increased number of incidences of anti-competitive conduct people have been reporting or the fact that some businesses have rearranged their operations in a way that is now consistent with the law.
It demonstrates a measure of progress and that we are slowly but surely developing the culture we were hoping to achieve in Barbados. It is a certainty that fair and effective competition will enhance the welfare of consumers and will drive the level of investment, innovation and efficiency.
Conversations: With regard to enforcement activities, what are the main types of conduct that you have had to address within the past year?
Eversley: In the past year we have had a lot of queries regarding resale price maintenance where suppliers/manufacturers are dictating to retailers the price at which goods should be resold. We carried out a study in this area and found that in general, distributors possessed a good understanding of the law on resale price maintenance and the correct application of suggested/recommended prices.
There were some cases however where manufacturers indicated that they merely issued suggested prices to their retailers but these recommended prices were viewed more as prescribed prices that had to be charged. Most suppliers and manufacturers are aware that where information on prices is communicated to a dealer/retailer, it must be communicated in a way that creates no obligation on that dealer/retailer that the price must be implemented. The commission agreed to undertake further public education on the subject of Resale Price Maintenance and this exercise will be undertaken during this financial period.
Conversations: Apart from resale price maintenance, what other types of investigations did you initiate?
Eversley: Following a significant amount of public comment, the commission agreed to look into the practice of interlocking directorships. This is a case where one director serves on the board of two significantly competing firms. We found several instances of a director serving on the board of multiple companies. In most cases, however, the companies involved were affiliated to the same parent company, therefore the practice was not in breach of the FCA.
We noticed a few instances of directors serving on the board of two competing companies, but there was no evidence that their presence on the second board allowed them to influence the decisions of the second company in a way that restricted competition between the two firms. We accepted, however, that additional research should be conducted to understand the purpose for these arrangements to find any behavioural evidence that would suggest that the particular interlocking directorships led to a lessening of competition between the relevant companies.
Conversations: What about the issue of price gouging? There continues to be much public discussion in this regard. What is the commission’s role regarding this practice?
Eversley: People tend to say that price gouging is occurring when they see the high prices in the supermarkets but the term price gouging itself actually refers to the imposition of high prices in an emergency situation such as before or after a hurricane where customers rush to buy items such as batteries or lumber and find that the prices have been increased significantly.
The commission has spoken on the subject of price gouging before and I must state that the term itself is not one found in the legislation. The commission has no jurisdiction in relation to general high prices. The legislation speaks to what is called excessive pricing and this refers only to those cases where a monopoly firm or one that is dominant changes prices that are higher than normal.
Competition legislation does not address high prices by individual stores/businesses but merely seeks to promote competition such that competition would force those high-pricing outlets to bring their prices down. But the legislation itself does not deal with price gouging.
Conversations: In relation to the enforcement of competition laws regionally, for which I know you share some responsibility, what is the state of development of competition policy elsewhere in the region?
Eversley: The CARICOM Competition Commission (CCC) is continuing to develop the necessary framework to facilitate the enforcement of competition regionally. It developed new procedural rules which will govern the processes by which businesses can make complaints, the way in which information can be shared [with] complainants and the subjects under investigation, how decisions will be reached, and how people can seek redress.
The CCC is hoping to promote these rules across the region, and has already done so in two member states and is hoping to come to Barbados shortly. Now that these rules are operational, I expect to see the CCC addressing several more matters of anti-competitive conduct regionally.
Conversations: I understand that congratulations are in order as the commission has recently been elected to the steering group of the ICN. Tell us a little about that.
Eversley: Well, in may last year the commission was elected to join the steering group of the International Competition Network, or the ICN. The ICN comprises 120 competition authorities from 110 countries and is basically run or given its direction by the steering group. This announcement was made officially during the plenary session at last year’s conference in The Hague.
The commission applied to the ICN steering group to become a member based on its substantive contribution to the ICN and its application was accepted. Since then we have made several contributions in the meetings held and we are hoping to continue to raise awareness on the issues affecting the enforcement of competition in small developing states like Barbados.