![]() ![]() They give retailers an incentive to promote the supplier’s products and reduce the overall price that customers pay. In many cases, rebates are an example of the benefits of the competitive process. Loyalty rebatesīusinesses are generally free to set their own sales promotions, including rebates. While predatory pricing by a business with substantial market power can harm an individual competitor, the test is whether the conduct has the purpose, effect or likely effect of substantially lessening competition in a market. ![]() However, if the practice leads to reduced competition or the potential for competition, the business may be in a position to charge higher prices and maintain or increase its market share in the longer term. Predatory pricing may result in a business losing money in the short to medium term. discouraging potential competitors from entering the market.disciplining or damaging competitors for competing aggressively, or.Predatory pricing occurs when a business substantially reduces its prices below its own cost of supply for a sustained period: However, in rare circumstances, very low pricing by a business with substantial market power may be predatory. Low pricing almost always benefits consumers and is part of the competitive process. This often involves businesses undercutting prices offered by rivals. Predatory pricingīusinesses compete by providing more compelling offers to consumers than their competitors. Restricting access to an essential input may prevent competitors from competing with a business on their merits. This may breach the law where this conduct has the purpose, effect or likely effect of substantially lessening competition.Īn ‘essential input’ is a resource that can’t be substituted and is essential for the provision of goods and services. In some situations, a business with substantial market power may prevent or restrict a competitor’s access to an essential input. In some situations, a business with substantial market power that refuses to deal may contravene the law if it limits the ability of others to compete on their merits. Even if a business has substantial market power, they are usually not obligated to deal with other businesses. Refusal to dealīusinesses are generally entitled to choose whether they’ll supply or deal with another business. Whether any particular example of these practices is a misuse of market power depends on the specific circumstances. However, there are practices that can sometimes be a misuse of market power. The law doesn’t label specific practices as a misuse of market power. Substantial market power to do anything with the purpose, effect or likely effect ofīusinesses with substantial market power must not do something which stops other businesses from competing on their merits. Practices that may be misuse of market power ![]() Learn more about the difference between competitive and anti-competitive conduct. drive down its prices with efficiency improvements.Ĭompetitive practices that improve efficiency, innovation, product quality or price competitiveness are unlikely to be a misuse of market power.use its skills and resources to develop a better product or service.attract customers through promotional campaigns. ![]() Learn more about what is and isn’t allowed when setting prices.Ī business with substantial market power is also allowed to out-compete other businesses. While charging high prices may seem unfair, it's not illegal. It's not illegal for a business to have or use market power.įor example, a business with market power may raise its prices above competitive levels. The business has substantial market power in the supply of cement in the regional town. With no other commercially viable suppliers of cement in the town, the business can raise its prices above competitive levels. The next closest cement works is far away, so it’s expensive to have cement brought into town from elsewhere. Example of a business with substantial market powerĪ business owns the only cement works in a regional town. ![]()
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