Competition Law Handbook

HANDBOOK ON COMPETITION LAW

Competition and Consumer Affairs Commission National Exhibition Site Sophia Georgetown Guyana Tel: 219-4410-3 Email: guyanaccac@gmail.com

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This publication is not a legal document. It contains general information intended for the convenient use and guide on how the rules of competition under the Competition and Fair Trading Act 2006 are applied. This publication can be made available in alternative formats upon request. Please contact the Competition and Consumer Affairs Commission using the contact information listed below. This publication may not be reproduced, in part or in whole by any means without the expressed permission of the Competition and Consumer Affairs Commission.

For further information on the Competition and Fair Trading Act and for information on the Competition and Consumer Affairs Commission, please contact: The Competition and Consumer Affairs Commission National Exhibition Site Sophia Georgetown Guyana Tel: 219-4410-3 Email: guyanaccac@gmail.com

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Forward by the Director

This handbook on competition law is intended by the Competition and Consumer Affairs Commission (CCAC, the agency or the Commission) as a support tool for businesses, their attorneys and also the public at large in Guyana.

The agency strongly supports all the initiatives of the Government of Guyana to engender strong competition among firms on the market with a view to seeing prosperous businesses and heightened levels of consumer welfare.

The handbook describes steps that businesses can take to ensure that they avoid business activities that can harm competition on the market and put them in a position of contravening the Competition and Fair Trading Act 2006.

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Contents I. Introduction .................................................................................................................................... 5 II. Importance of Adhering to the Competition and Fair Trading Act .............................................. 6 III. Rules of Competition to Observe ................................................................................................ 8 IV. Steps to Getting the Business on a Compliance Path ................................................................ 11 Business Activities that can lead to Enforcement Action by the CCAC ..................................... 13 Summary of Compliance Guidelines........................................................................................... 14 V. How the CCAC Can Help You with Compliance ...................................................................... 15

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I. Introduction The purpose of this handbook is to (i) provide a broad overview of the role of the CCAC and the services it provides and an overview of the rules of competition and (ii) to provide some basic guidance on how companies can ensure that they are in compliance with the rules of competition.

Competition among businesses in Guyana plays a significant role in the development of Guyana’s economy. Competitive markets lead to innovative and better products and services, and lower prices for consumers and create a level playing field in which small- and medium-sized enterprises can enter and remain profitably in any sector.

The CCAC is an independent statutory authority that is mandated to enforce rules of competition which are intended to prevent distortions or restriction of trade in Guyanese markets. By educating the public and promoting the rules of competition and instituting enforcement action against companies that distort competition the agency is playing its part in securing Guyana’s path to development.

As part of its education initiative the agency periodically produces publications on the CFTA. It is a means by which the agency can highlight for the public what is essentially an area of law that is new to Guyana and also the wider Caribbean. This publication describes the functions of the CCAC and the rules of competition in an illustrative way. The examples on ensuring compliance within a business and the guidance provided here are not legally binding on a company, and they represent only suggested methods for securing compliance with the CFTA. As each business differs and occupies different positions on the market, it is important for a business to carefully consider how its market position should impact on the strength of any in-house programme designed to secure compliance with the CFTA. As with any other guidance document published by the Commission, it should be noted that this document is not intended to convey legal advice and is not a substitute for the advice of legal counsel.

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II. Importance of Adhering to the Competition and Fair Trading Act The CFTA does two main things. First, it establishes the CCAC and confers on it the authority to administer and enforce the CFTA. Second, the CFTA describes a whole host of rules governing market players. Some of them are rules intended to protect consumers and some are rules intended to protect the competitive process or competition on a market (which necessarily means all market players and market forces).The rules of competition are those that, when enforced, protect the competitive process.

In addition to setting out prohibitions, the CFTA sets out broad enforcement powers of the agency to grant it and its employees the authority to promote competition, to prevent anticompetitive conduct and to remedy anticompetitive conduct.

There are two main rules of competition that the CCAC is charged with enforcing:  Abuse of Dominance  Anticompetitive Agreements In respect of those two main rules the Commission has the power to, for example:  Educate the public;  Publish sector studies to better understand the market;  Undertake promotional activities for the benefit of businesses;  Work with the academic community on ensuring learning and advocacy initiatives are undertaken;  Work with the CARICOM Competition Commission to investigate anticompetitive conduct that has an impact on trade between Guyana and other CARICOM Member States and;  Undertake investigations and enforcement actions against companies that violate the rules of competition.

Enforcement action includes securing warrants to search premises and seize documents that can inform the Commission’s investigation and analysis of whether there is in fact an infringement of the Act and also the production of an enforcement statement which outlines the case against an infringing party and the attendance at hearings concerning a case and seeking out determination of the issues in the enforcement statement before the body charged with adjudicating the rules of competition.

Every business has a duty to act lawfully and to comply with the laws of Guyana, including new legislation.

Where a business is in contravention of the Act the consequences can be quite costly to the business owners or shareholders. Under the legislation the enforcement remedies are pecuniary and punitive in nature. A business executive in contravention of the Act can be sent to prison and businesses can be ordered to pay a fine and to pay damages to parties who are harmed as a result of the business’ anticompetitive conduct. The business can also be ordered by the court to cease and desist the anticompetitive conduct for any period of time.

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But compliance with the legislation should not only be undertaken to avoid fines, damages payments and imprisonment. There are serious risks to a business’ reputation and the reputation of its directors when they do not comply with the Act. Non-compliance can also result in significant management costs resulting from loss of management time and the loss of knowledge if a director or employee goes to prison. The legal costs are also significant for a company.

The CFTA should also be observed by businesses because with a more competitive market place, consumers as well as business prosper and Guyana can continue to ascend on the development path. As a matter of corporate social responsibility every business should play its part in becoming compliant with competition law. This is because the rules of competition when enforced and adhered to, promotes:  Efficiency: With competition law, more businesses can enter the market and with more competition on the market, incumbent business must undertake prudent activities to ensure productive and allocative efficiency and seek out the production of more innovative and better-quality products so they have a competitive edge that is not just based on low prices but also on product quality. Efficiency results in lower profit margins for consumers, but lower costs of production of businesses too and naturally leads to higher profit margins for businesses.  Consumer Welfare: A more competitive market place results in businesses competing on price, quality, and aftermarket services. This is good for the consumer in Guyana. The agency has a vested interest in seeing consumers in Guyana have choice in where they shop and what they buy. The agency would like to see more competitive prices for well-produced and safe products.  Opportunities for Guyanese companies to fairly take advantage of the CARICOM single market and economy. By working with the CARICOM Competition Commission the agency can ensure that Guyanese businesses are not disadvantaged by anticompetitive business conduct that prevents or distorts trade in the CARICOM single market.  The Growth of Small- and Medium Sized Entities: The removal of barriers to entry into a market will bring about the entry and expansion of small businesses in Guyana. The Commission will work with the government to identify legislation that presently acts as an obstacle to doing business and will work to ensure that small- and medium-sized businesses can access loans without discrimination. The agency has a vested interest in seeing a greater ownership of businesses in Guyana.  Employment and Advancement of the Social and Economic Welfare of Guyana: All the promotional activities of the agency are geared towards supporting Guyanese development. This includes development of healthier and more competitive markets that can contribute to the economy and the generation of consumer welfare which impacts significantly the social development prospects of every Guyanese.

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III. Rules of Competition to Observe The CFTA outlines two main rules of competition:  Prohibitions of Anticompetitive Agreements: All agreements between enterprises; and concerted practices of enterprises or decisions of associations of enterprises which have or are likely to have the effect of preventing, restricting or distorting competition in a market are prohibited and void. 1 In practical terms this means that agreements between competitors at the same level of product and agreements among market players at different levels of production, i.e., horizontal and vertical agreements, to the extent that they distort or restrict competition, are prohibited at law and are unenforceable by the parties to the agreement.2  Prohibition of Abuse of Dominance: Any abuse of a dominant position by one or more enterprises in a market is prohibited. This means that the legislation prohibits single firm abuse or abuse of firms acting collectively so long as the single firm acting alone or the collection of firms acting together possess a dominant position on the market.3 The prohibited practices under the Act therefore can be classified as either single-firm conduct (abuse of dominance) or coordinated conduct (anticompetitive agreements). Any activity which has the effect of restricting the competition which the business faces or harming competition on the market or exploiting consumers can be considered as abusive.

Examples of conduct which constitute an abuse of dominance includes,     

Restricts entry by any other enterprise into a market; Prevents a firm from competing on the market; Excluding or foreclosing a competitor from the market or from access to consumers; directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions limiting production, markets or technical development to the prejudice of consumers

 applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage

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Section 20(1) and Section 20(4) of the CFTA. See PART IV of the CFTA. Certain exemptions

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Section 23 of the CFTA..

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are carved under the CFTA for certain agreements that, though restrictive or bear some risk of distortion of competition, have certain redeeming qualities as defined by section 20(3) of the CFTA. In other words, though an agreement can be anticompetitive sometimes the anticompetitive effects are outweighed by the pro-competitive effects. Where a business thinks its agreement is of the latter kind it can, pursuant to section 35(1), seek an authorisation of the agreement from CCAC. The agency will determine whether the agreement has any redeeming or pro-competitive effects, and if it does, grant an authorisation of the agreement, exempting the agreement from the ambit of the Act.

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 making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts4 Firms that have 40 per cent or more market share are presumptively dominant. This means that the agency believes, without more, that the firm has the ability to control prices on the market or to act independently of its competitors, customers or suppliers when it is making any business decisions. A dominant firm has a responsibility not to engage in any of the conducts listed above.

Certain defences can be put forth for justifiable conduct by a dominant company. Those circumstances are enumerated under section 24(2) of the CFTA.

Examples of anticompetitive agreements include:           

directly or indirectly fixing prices fixing trading conditions sharing markets limiting or controlling production or investment collusive tendering (bid-rigging) joint purchasing or selling sharing information exchanging price information exchanging non-price information restricting advertising setting technical or design standards5

Some agreements are prohibited outright or “per se”--if the Commission has evidence demonstrating that there is in fact an agreement then it will not even contemplate whether the agreement is harmful to competition and there is no possibility of justifying them on economic grounds. These latter kinds of agreements are called “naked restraint”. An example is a price-fixing agreement or an agreement to divide up markets. Certain exemptions are carved under the CFTA for certain agreements that, though restrictive or bear some risk of distortion of competition, have certain redeeming qualities as defined by section 20(3) of the CFTA. In other words, though an agreement can be anticompetitive sometimes the anticompetitive effects are outweighed by the pro-competitive effects. Where a business thinks its agreement is of the latter kind it can, pursuant to section 35(1), seek an authorisation of the agreement from CCAC. It is for the business to define for the Commission how the agreement benefits the consumer and the economy in general. For example, if the agreement maintains or promotes export, promotes the competitiveness of small businesses, prevents the decline of an industry or maintains the economic stability of an industry or causes innovation of a product or within the industry these may be This list is also presented in the CFTA at section 24(1). The list is only illustrative and is not an exhaustive declaration of the only ways a firm can abuse its dominant position.

5 This list is also presented in the CFTA at section 20(2). It is also a non-exhaustive and illustrative list.

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subject to an authorisation order by the Commission. The claimed benefits must outweigh the harm caused by the agreement. The agency will determine whether the agreement has any redeeming or pro-competitive effects, and if it does, grant an authorisation of the agreement, exempting the agreement from the ambit of the Act. If the Commission investigates an anticompetitive conduct and believes that the conduct is a direct violation of the prohibitions under the CFTA, it will draft an enforcement statement and refer the statement to the authority charged with adjudicating matters brought under the CFTA. The party will also receive the enforcement statement and will be afforded the right to put forth a defense to the enforcement statement and to request a hearing before the adjudicating authority. The adjudicating authority will then reach a decision on the matter.

Remember that the sanctions for violating the CFTA are severe they include imprisonment and fines of up to 50 million dollars. Also it is very expensive to defend a competition law case.

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IV. Steps to Getting the Business on a Compliance Path Firms can take steps to ensure that all their employees undertake business practices that are in compliance with the CFTA. Firms can employ certain procedures which can be used as a detector of anticompetitive conduct and procedures to promote awareness of the content of the legislation. These procedures once put in place can serve to alert management and persons charged with the legal affairs of the company when an inadvertent act of noncompliance has occurred or where an employee is uncertain about the lawfulness of the conduct he has or is about to undertake.

It must be remembered that as part of its powers, the CCAC has the authority to properly execute a search warrant and search business premises and other premises for records pertaining to the business and can also compel oral evidence and failure to turn over documents or to submit to questioning can lead to a summary conviction and criminal sanctions. Firms should therefore take steps to coach their employees on how to respond in these circumstances and how to properly submit to a court order such as a warrant.

From time-to-time businesses participate in trade association activities and industry boards. These types of forums do create the opportunity for lawful collaboration among businesses but they can also be used as a means of engaging in anticompetitive activities like fixing prices or production supplies. Businesses should utilise procedures to properly advise their employees of proper, lawful and ethical business practice to be utilised when participating in industry-type forums.

Every business should contemplate the usefulness of carrying out audits of its current/existing business practice to ensure they are presently in compliance with the CFTA. This could mean enlisting the help of legal counsel in reviewing the business policies, practices and agreements with suppliers and customers to ensure they are in fact in compliance with the Act. Where a business develops and utilises in-house programmes to advise, train, alert and order compliance it minimises the risk of the business falling afoul of the law, minimises the risk of loss of reputation, profits, human resource and reduces litigation costs and avoids or reduces penalties, and prison time.

Firms can utilise a range of instruments such as policies, compliance programmes, training sessions, workshops, departmental rules and procedures for ensuring compliance with the CFTA.

Whatever programme that is used should transcend all levels of employment and be used by directors, senior management and all other employees. The programme that is used should have an audit, education, monitoring, compliance initiative as well as a reporting and disciplinary component. If a compliance programme is utilised it should be closely tied to the legislation and it is important to use simple and straightforward language that all employees would appreciate and highlighting “Dos”, “Don’ts” and red flags are an effective method of communicating the rules and how they should be observed.

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Each business is different and as such businesses must design their own specific methods to ensure that each department is acting in compliance with the rules under the CFTA. Here are some additional points to note and which can guide your activities so that you are at all times in compliance with the CFTA.

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Business Activities that can lead to Enforcement Action by the CCAC  Information Sharing: Exchanges of information with a competitor concerning prices, costs, terms of sale, business plans, revenues, suppliers, customers, territories, capacity, production, or any other subject that could be commercially important could amount to a violation of the CFTA. The transfer of information to or from another company should only be undertaken if there is a legitimate business purpose and it will not produce significant anticompetitive results. Legitimate business purposes may include enhancement of security or safety, preparation of presentations to governmental bodies, or compliance with governmental regulations.

 Joint Action or Cooperation with Other Competitors: Setting industry standards and engaging in joint action to develop industry benchmarks or for research and development is subject to the scrutiny of the CCAC. If there is a legitimate business purpose for exchanging proprietary information among competitors, such information should normally be gathered from individual firms on a confidential basis by an independent outside party and disseminated on an aggregate basis. Enterprises should limit the scope of the joint operation in terms of functions, geography, and time to that which is reasonably required to achieve the benefits that justify the joint operation.

 Trade Association Activities: The activities of a trade association will attract a lot of scrutiny. Enterprises that belong to a trade association or who are contemplating becoming a member should review the rationale for joining and any charter, by-laws, or other documents describing the organization and operation of the association. In addition, since an association’s purpose and activities can change over time, the Company should periodically review its membership and degree of participation in the association.

 Intellectual Property Rights (IPR): The owner of a valid IPR has the right to exclude others from using the invention claimed in the IPR. This power of exclusivity equates to being dominant/having a monopoly in the country of registration limited to the life of the IPR and the scope of the IPR subject matter. An enterprise can seek to enforce its IPR and in such a case will not be held to be abusing its dominance if it is validly engaged in the enforcement of their IPR.

 Written Communication: It should be remembered that everything you write, including notes on another person’s memorandum, may become evidence in a lawsuit. Remember that electronic communications such as e-mail and other computer-generated writings may be stored for an indefinite period in the computer system, even though they may have been deleted from the personal computers of those who wrote, sent, or received the communications. The CCAC can seize all forms of written communication in pursuance of an investigation of conduct allegedly in violation of the CFTA.

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Summary of Compliance Guidelines  Do not have conversations or comunications of any kind with competitors concerning prices, costs, terms of sale, business plans, suppliers, customers, territories, capacity, production, or any other subject that could be commercially important unless they are approved by the business’ lawyer or legal department. If such a topic arises in the presence of a competitor, you must tell everyone present that discussing this matter is improper and see that the subject is immediately dropped. The best thing to do is to leavve the discussion.  Companies should not try to dictate the price of the product. Companies should refrain from restricting the resale price of a product.  Sometimes your competitor may also be a customer. Any discussions with a customer that is also a competitor should focus on the vertical buyer-seller relationship and all discussions on price, for example, should focus on the buyer-seller transaction.  Do not attempt to use purchase, sale, or lease contracts to put pressure on resellers for other purposes, such as reciprocal dealing, tying purchases, or forcing product lines on them.  Remember a dominant company has a responsibility to refrain from any conduct that would harm competition. Avoid any use of size, financial resources, or competitive position that could appear to be aimed at eliminating or preventing competition. Note that robust and vigorous competition on price, product quality or service is encouraged.  Do not exchange information on price or any other information which would limit the ability of your company to act on its own in taking decisions on a market. For example competitors even in a trade association meeting should not limit production supply, set quotas, divide up markets by territory or customers with each other.

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V. How the CCAC Can Help You with Compliance In order to assist companies in their efforts to comply with the CFTA the legislation grants the Commission the power to assist parties through the issuance of non-binding advisory opinions on whether a proposed conduct is likely to contravene the Act. The Commission also provides certain services aimed at assisting businesses and the public at large to better understand the Act. These include hourly workshops, day long seminars and tailored publications.

Services of the Commission include:  Advisory Opinions  Seminars  Workshops

For further information please contact: Competition and Consumer Affairs Commission National Exhibition Site Sophia Georgetown Guyana Tel: 219-4410-3 Email: guyanaccac@gmail.com

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