Inventory of Domestic Laws and Regulations Relating to
Competition Policy in the Western Hemisphere
Submitted by the OAS Trade Unit to the FTAA Working Group on Competition Policies
VI. Prohibited Conduct: Definitions
Conspiracy: Any practice whereby one person combines, agrees or arranges with another to limit unduly the manufacture, transport or supply of any goods or services or to enhance the price of same or to restrain or injure competition unduly. (Section 35)
Exclusive Dealing: Any practice whereby a supplier of goods requires that his customers interact exclusively with him as a condition precedent to the supply of the goods, which in effect protects the supplier from his competitors. (Section 33)
Tied Selling: Any practice whereby the supplier of an article as a condition of supplying the article requires his customer to, at the same time, purchase any other item. (Section 33)
Market Restriction: Any practice whereby the supplier of goods requires that his customer supplies goods only in a defined market or extracts a penalty of any kind from the customer if he supplies of any goods outside the defined market. (Section 33)
Abuse of Dominant Position: An enterprise which by itself or together with an interconnected company, occupies such a position of economic strength as will enable it to operate in the market without effective constraints from its competitors or potential competitors, abuses its dominant position, if it impedes the maintenance and development of effective competition in a market. (Sections 19 and 20).
Subject to the standards in Articles 11, 12, and 13 of this Act, contracts, agreements, or combinations whose purpose or effect is, or could be, to unfairly drive other economic agents from the market, substantially impede their access to the market, or establish exclusive advantages in favor of one or more persons shall be deemed "relative" anticompetitive practices when they involve: I. the conclusion, imposition or establishment of agreements between economic agents that are not competitors for exclusive distribution of goods and services based on subject matter or geographic area, or for specific periods of time, including the division, distribution or allocation of customers or suppliers - as well as imposition of an obligation not to produce or distribute goods or services for a specified period; II. the imposition of procies or other terms and conditions under which distributors or suppliers must sell or distribute goods and services; III. making sales or transactions conditional upon the purchase, acquisition, sale or provision of another, normally separate product or service, or on the basis of reciprocity; IV. making sales or transactions conditional upon not using, purchasing, selling or providing goods and services produced, processed, distributed or sold by a third party; V. unilateral refusal to sell or provide to particular persons goods or services normally available and offered for public sale; VI. conspiring with other economic agents, or inciting them to apply pressure on a client or supplier in reprisal for certain actions or for the purpose of forcing that person to act or refrain from acting in a given manner; or VII. in general, any act which unduly diminishes, harms or impedes competition in the production, processing, distribution or marketing of goods and services. (Article 10).
A practice referred to in Article 10 is a violation of this Act if: I. the economic agent or agents have substantial power in the relevant market; and II. the practices in question involve goods or services pertaining to that market. (Article 11).
The following criteria shall be used to determine the relevant market:
I. the possibilities for substituting other goods or services, whether domestic or foreign, for the relevant goods or services, taking into account technological possibilities for producing the substitute good or service, the extent to which consumers have access to the substitute, and the time required to make the substitution; II. the distribution costs, cost of inputs and complementary products and, substitutes, domestic or foreign, taking into account freight and insurance costs, tariff and non-tariff barriers, restrictions imposed by the economic agents or their associations, and the amount of time required for goods and services from other regions to reach the market; III. the cost to purchasers, and their access to other markets; and IV. the federal, local or international restrictions that limit the access of purchasers to other sources, or suppliers to other customers. (Article 12).
The following criteria shall be used to determine whether an economic agent has substantial power in the relevant market:
I. the agent's share of the market and whether it can unilaterally set prices or substantially restrict the flow of goods or services in the relevant market, under conditions in which its competitors do not have and are not likely to develop the capacity to counteract such action; II. the existence of barriers to entry, and any foreseeable changes in these barriers and in the goods and services offered by other competitors; III. the existence and market power of its competitors; IV. the access of the economic agent and its competitors to sources of necessary inputs; V. the economic agent's recent conduct; and VI. such other criteria as are established in the regulations implementing this Act. (Article 13).
The Sherman Act, which has been read into section 5 of the FTC Act, prohibits agreements or understandings, express or implied, between two or more persons or firms that unreasonably restrain trade in any product or service. To determine whether an agreement unreasonably restrains competition, courts have applied one of two methods of analysis, depending on the type of agreement at issue.
Certain agreements (called "per se" offenses") are deemed to be so inherently anticompetitive that they are always illegal, regardless of the intent of the parties or the actual effect of the agreements on competition. These agreements include agreements between competitors to fix prices or the terms and conditions of credit and sales, to allocate customers or territories, not to deal with any person or persons ("group boycotts"), and, in certain circumstances, to sell one product conditioned on an agreement by the buyer to purchase a second, distinct product ("tying"). Resale price maintenance is also per se unlawful.
The offense of unlawful monopolization has two elements: possession of market power in the relevant market, and the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. Market power has been defined as the power to control prices or exclude competition, and market share is the most
important factor in measuring market power, with shares exceeding 70 percent usually considered sufficient for a finding of market power, and shares of less than 40 percent generally insufficient. For the second element, courts have required a showing of anticompetitive or predatory conduct -- efforts to exclude rivals on some basis other than efficiency. Examples of such conduct include -below cost- pricing, filing of baseless litigation against competitors, or denial of access to an essential facility.
The offense of attempted monopolization has three elements: specific intent to control prices or destroy competition, predatory or anticompetitive conduct directed at the unlawful objective, and a "dangerous probability of success" in achieving a monopoly in the relevant market.
Agreements, decisions, collective recommendations or concerted activities are prohibited if they: 1. Fix, directly or indirectly, prices or other conditions essential to the sale or provision of goods or services; 2. Limit production, distribution, and the technical or technological development of investments; 3. Divide markets, geographical areas, supply sectors, or supply sources between competitors; 4. Impose unequal conditions, within any commercial or service transaction, for identical supplies provided that disadvantage one customer over others; and 5. Attach, to any contract, ancillary conditions that because of their nature or because of their accepted commercial use, exhibit no relation to the objective of the contract. (Article 10).
Economic concentrations are prohibited, especially if they arise from the exercise of a single activity, when as a consequence of this activity free competition is restricted or a situation of dominance results in the market or in any part of the market. (Article 11).
Contracts between persons subject to this Law, are prohibited insofar as they set prices and contractual terms for the sale of goods or provision of services to third parties, and are intended to have, or have, or may have the effect of restricting, falsifying, limiting, or impeding competition in all or part of the market. (Article 12).
Abuse on the part of one or several persons subject to this Law who hold a dominant position in all or part of the national market is prohibited, and in particular the following conduct is prohibited: 1. Price discrimination and other conditions of sales or services; 2. Unjustified limitations of production, distribution, or technical or technological development, harmful to firms or consumers; 3. The unjustified refusal to meet the demand of goods and services; 4. The imposition, in business and service relations, of unequal conditions for equivalent goods and services that disadvantage some competitors over others; 5. Attach, to any contract, ancillary conditions that because of their nature or because of their accepted commercial use, exhibit no relation to the objective of the contract; and 6. Others of equivalent effect. (Article 13).
For the purposes of this law, a dominant position exists when: 1. A specific economic activity is conducted by a single person or a group of persons who are associated as buyers or as sellers or as either providers or purchasers of services; and 2. There exists more than one person conducting a specific type of activity but with no effective competition between them. (Article 14).
The development of commercial policies which tend to eliminate competitors through unfair methods of competition are prohibited; especially in the following cases: 1. Misleading or false advertising directed to impede or limit free competition; 2. The promoting of products and services based on false declarations with regards to the disadvantages or risks of any other competitor=s products or service; and 3. Bribery in commerce, the violation of industrial secrets and the pirating of products. (Article 17).