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The rules of the Act set out the basic framework, providing for the maintenance of effective competition in the market. The Competition Act based on Articles 85 and 86 of the Treaty of Rome provides control to business practices within our market. "The following shall be prohibited as incompatible with the common market: all agreements between undertakings , decisions by associations of undertakings, and concentrated practices which may effect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the common market " Therefor any agreement, decision, and practice caught by Section 5(1) must have the following conditions 1. There must be some form of collusion between the undertakings 3. There must be must some adverse effect on competition. This Section covers such agreements, decisions, practices which: a. Directly or indirectly fix the purchase or selling price or other trading conditions b. Limit or control production , markets, technical development or investment c. Share markets or sources of supply d. Impose the application of dissimilar conditions to equivalent transactions which other parties outside such agreement, thereby placing them at a competitive disadvantage e. Make the conclusion of contrast subject to the acceptance by the other parties of supplementary obligations, which by their nature or according to commercial usage, have no connections, which the subject of such contracts. The competition act analyzes various aspects so as to promote a healthy business environment. It gives a clear picture in respect to positioning in the market. Clearly, the narrower the definition of the relevant market, the greater the importance of an undertakings share of that market. Once one has defined the relevant market, one must determine whether the questioned undertaking has a dominant position in that market. In general, an undertaking has a dominant position if it can act on the market independently from its competitors. Thus, if a seller can ask any price for a product, even though its competitors are selling a similar product for much less, it is likely that the seller in question has a dominant position. The market share is a very important element. In general, a large market share will warrant a finding of a dominant position. However, the Court will normally not limit its inquiry to determine the market share, but will examine other relevant circumstances, such as the size and economic might of the competitors. A large market share does therefore not necessarily imply a dominant position. Another important concept for defining the relevant market is that of interchangeability. If two products are reasonably interchangeable, i.e. if the buyer is likely to choose between two products on the basis of their respective price and quality, the two products are probably going to be considered to be part of the same market. If, on the other hand, the buyer is unlikely to choose one product over another one, notwithstanding more advantageous price and/or quality terms, the two products will not be considered to be in the same market. The competition act also provides a list of certain examples describing abuse of a dominant position (section 9). This list, not restrictive, includes the following: imposing unfair prices or other unfair trading conditions; limiting production, markets or technical development; discriminating between trading partners; and imposing tying arrangements. Pricing can amount to an abuse of a dominant position when it is excessively high with respect to the cost incurred by the undertaking in the dominant position. A very low price can also be an abuse of a dominant position when the low price is "predatory", i.e. when it is intended to knock competitors out of the market. Clearly, it is not easy to determine when a price is excessive, and this kind of determination will depend from the factual circumstances of the case. One good example of this kind of abuse can be found-in the decision by the Commission in the General Motors Continental matter . Under Belgian law, General Motors was required to issue a certificate of conformity before a new General Motors vehicle could be registered in Belgium. This requirement applied both to General Motors cars that had been bought in Belgium and in other countries. General Motors had therefore a situation of virtual monopoly over the issuance of the certificates. The commission held that the high fee required by General Motors for issuing the certificate was an abuse of a dominant position, as there was an "extraordinary disparity" between the actual costs incurred and the prices that were charged. An excessively low price can also amount to an abuse of a dominant position if its purpose is to oust from the market a competitor who does not have the financial resources to withstand for a long period of time sales that are below cost. The refusal to deal by an enterprise with a dominant position has been viewed negatively within the Competition act so implying that for example: a producer of a raw material with dominant position can not refuse to supply an important manufacturer of a derivative product if this refusal could eliminate all competition from such manufacturer of the derivative product in question. In some circumstances two or more economically and legally independent firms might be considered to hold a "collective dominant position" on the market and that their market behavior could then be controlled under the head of abuse. The undertaking, which does not develop its technologies to better its product, will be considered to prejudice its customers. An investment in technology would influence product quality, service and output An underrating enjoying a dominant position may impose it as a condition in a contract, that it will only supply it's customers with a particular product, if customers buy another product manufactured by that undertaking, the latter having no relation whatsoever with the subject of the contract. Also a dominant undertaking may make use of what is known as "Full line Forcing" so as to have full control of the market. "Perfect Competition" where the establishment of equilibrium between consumer demand and producer supply ensures maximum efficiency, is unattainable for many reasons. A more pragmatic attitude to the market has to be taken. This is reflected in the notion of "Workable Competition". This notion refers to the task of fashioning a market in which competition is induced and maintained but where crubs on its feasibility and desirability are acknowledged and allowed to impose pragmatic constraints on the purity of the vision of perfect competition. Bibliography: Word Count: 1158
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