Anti-Competitive Behavior

Sarah Simon

12 min Read Time | September 16th 2021

Key Takeaways

1

The final impact rests on the effects anti-competitive behavior has on society. The output can be measured in price hikes, reduced innovations, and consumer choices, among others. Impact, on the other hand, can be gauged by job destructions, the emptying of city centers, and rising poverty rates.

2

Lawsuits and fines are not considered impacts. To clearly show the extent of the company’s actions, go beyond imposed fines and violations, and assess how society is harmed at large.

3

This topic covers the negative impact only.

What is it?

Free market competition increases efficiency and innovation, helps to reduce prices, and increases the variety and quality of products and services overall.

Anti-competitive behavior is:

  • practices that prevent or reduce competition in a market,
  • allowing companies to create monopolies and generate higher profits at the expense of customers,
  • the consumers, in turn, may experience higher prices, less variety, and lower quality of products and services, among other downturns.

Anti-competitive behaviors can occur between competitors at the same level of the supply chain (Horizontal restraints) or between suppliers and distributors at different levels of the supply system (Vertical restraints).

These practices include price-fixing, market divisions, collusions as well as tying, exclusionary exclusive dealing contracts, and imposing minimum resale prices.

Sources

https://ec.europa.eu/competiti...
https://www.phcc.gov.ph/wp-con...
https://www.classlawgroup.com/...
https://www.accc.gov.au/busine...

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Impact assessment

This topic addresses the social impacts associated with anti-competitive violations. It covers but is not limited to, practices like forming illegal monopolies, abusing dominant positions, colluding, forming price-fixing cartels, bid-rigging, and illegally protecting patents and intellectual property (IP).

These practices might result (outcomes and impacts) in one or more of the following: price hikes, restricted innovation, or lower product and service quality, among others.

Introduction

The introduction should provide the reader with the necessary background on the social impacts of anti-competitive behaviors.

What are the impacts of restricting competition? How does this harm customers? How does this affect society at large?

Core Analysis

The core of the analysis should disclose the anti-competitive practices, this should be substantiated with evidence, the outcome from such practices, and an assessment of the wider impact.

Biotechnology & Pharmaceuticals

  • What anti-competitive practices the company engaged in, such as Pay-to-Delay schemes, kickback schemes, and others.

  • Describe and quantify the outcome, such as limiting consumer choice, unaffordability, hindering innovation, and economic growth.

  • Describe and quantify the impact. This can be in terms of lowering access to medicines, increasing financial burdens for customers, degrading health, and presenting a societal burden regarding issues with healthcare.

For example

Avoiding allegations and accusations by disclosing a clear ruling, and describing the anti-competitive practices: Reckitt Benckiser is a UK-based company that produces health, hygiene, and home products with 568 Mn customers and a market capitalization of $55.6 Bn. In 2019, Reckitt agreed to pay $50 Mn to Federal Trade Commission (FTC) for using unethical product hopping to ensure the monopoly of its drug called Suboxone between 2013 to 2019.

Describing the scale, the outcome in terms of economic costs, and its wider impact on the country's healthcare system: Through deploying product hopping for Suboxone, Reckitt overcharged 51,875 people. The fine amount of $60Mn (including the $10Mn fine of Indivior) was distributed to the affected customers with each receiving an avg. of $1,139 to compensate for the extra customer financial cost9. Reckitt has put an additional burden of $403.2 Mn (8.57% of the burden caused by top 5 US Pharma) on US healthcare through product hopping.


Food Retailers & Distributors:
  • What anti-competitive practices did the company engage in

  • Describe and quantify the outcome, such as restricting competition and innovation, abusing its position with small retailers and manufacturers, and others.

  • Describe and quantify the impact, in terms of job destruction, reduction of consumer choice, unaffordability, and others.

For example

Avoiding allegations and accusations by disclosing a clear ruling, establishing a scale, and describing the anti-competitive practices: Biedronka came into the limelight in 2020 when Poland’s anti-monopoly watchdog (UOKiK) fined Jeronimo Martins Polska $197.94 Mn for unfairly reaping profits at the cost of its suppliers. Biedronka was fined approximately 45.39% of Europe’s total fines for anti-competitive related activities in 2020.

Describing the scale, the outcome in terms of economic costs, and its wider impact on the country's healthcare system: The practices affected over 200 companies, most of which were fruit and vegetable suppliers. With these malpractices in place, Jeronimo Martins Polska earned more than $158 Mn from the suppliers in three years (2018-20).

*Note: to provide added value and show the extent of the scale, it would be good to include how the companies were affected, if people lost their jobs, etc.


E-Commerce:

  • What anti-competitive practices did the company engage in

  • Describe and quantify the outcome, such as monopolisation, hindering innovation, emptying out city centers, and others.

  • Describe and quantify the impact, in terms of restricted diversity of information and opinions, increased prices, poor governance, and other political impacts

For example

Establishing a scale, and describing the anti-competitive practices: Alibaba’s e-commerce platform holds 55.9% of the market share in China. Since 2015, the company had been abusing its dominant position in the market to prevent its merchants from using other online e-commerce platforms.

Describing the scale, the outcome in terms of economic costs, and its wider impact on the country's healthcare system: Abusing its dominant market position, Alibaba used platform rules, algorithms, data, platform forces, and other means to ensure merchants were complying with the exclusivity contracts from 2015-2021, effectively restricting competition. Five major consumer brands in the US denounced traffic, hurting their sales, and refused to sign an exclusive contract with Alibaba.

*Note: to provide added value and show the extent of the scale, it would be good to include how monopolisation of e-commerce platforms has emptied out city centers, lowering well-being through social isolation, and others,


Additional Information

Lawsuits

Please keep in mind that there should be clear rulings and sufficient evidence to support the data presented on the note to avoid defamation. If you want to include a court ruling, make sure the anti-competitive practice took place at most 3 years ago. If the practice took place more than 3 years ago, the lawsuits can be mentioned if the company has not changed its practices or is facing a similar accusation, thus showing a poor track record, and relevant impact.

To know more about avoiding allegations and accusations, please read this article.

Lawsuits and clear rulings, although necessary to avoid defamation, are not and do not imply there is a significant impact on society. Go beyond the fines imposed on a company and measure the impact of the behavior on society.

Useful Tips

Sometimes new outlets summarize court rulings leaving out particularly valuable impact data. You might retrieve this information from the actual lawsuit filings. If the case occurred in the US, this source might be of use: https://www.sec.gov/litigation/litreleases.htm

Quantifying the Impact

Quantifying the impact of the anti-competitive practice might not be straightforward in every case. To cover the related impacts more effectively, include quantitative data that helps the reader understand the depth, breadth, and persistence of the practice.

To show the scale and extent of the impact, look at

  • market share increments during the pertinent time period (substantial growth over two-three years),
  • price hikes,
  • elimination of competitors,
  • the increasing restriction of the market,
  • the percentage of revenues derived from the malpractice and the rollout of new products/services (stagnation in offerings)
  • the number of stores closed down due to monopolistic competition

etc.



To describe the scale of the impact, taking into account:

1/ The breadth of the impact

  • Is the impact local, national, or global?

  • How many people are concerned? Thousands? Millions? Billions?

2/ The depth of the impact

  • Is the life of people concerned deeply affected, or does the issue just marginally impact them?

  • Are the changes brought by the issue profoundly changing society or the planet?

3/ The persistence of the impact

  • How long would the impact described last for? Months? Years? Decades?

  • How reversible is the impact described in the impact analysis? Can it be easily stopped/extended?


In your analysis, make sure you add value to your readers and go beyond the company’s CSR report by not merely reporting data from the company’s report but going the extra mile of providing additional metrics, studies, and sources to make your analysis robust and the impact value and scale are clear.

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