Abuse of market power
The size of a business, even one that dominates a particular market, is not, of itself, a cause for concern. Businesses may need to become large to achieve lower production costs or to compete against foreign and domestic competitors. However, when a dominant company exploits its market power in a way that hurts competition in the marketplace the Competition Act may come into play.
The abuse of dominant position sections of the Competition Act may apply when all of the following criteria are met:
- The dominant firm or firms have market power — that is the ability to set prices above competitive levels.
- The dominant firm or firms engage in anti‑competitive acts — business practices that are intended to reduce competition. These practices include: buying up a competitor's customers or suppliers; using "fighting brands" (discount brands) to discipline or keep out competitors; cutting off essential supplies to rival companies; using long-term contracts to stop customers from changing suppliers; and overstepping authority granted by intellectual property rights such as trade-marks and patents.
- The anti‑competitive acts have substantially lessened competition, or are likely to do so. This can happen when anti‑competitive acts eliminate a rival or prevent such things as a rival's entry into a market, potential competition, product innovation and lower prices.
The Act's abuse of dominant position sections do not penalize a company that has captured a dominant share of the market because of its better performance.
- Visit our Abuse of dominance pamphlet for more useful information.
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