Anti-competitive Behaviour
1. Dividing the Market: Cartels and Price-Fixing
Imagine two big pizza shops in a town secretly agreeing to both sell a large pizza for $20 instead of competing and lowering the price. This is called price-fixing. It is a classic example of anti-competitive behaviour. Sometimes, competitors go further and divide customers or regions. For instance, one company agrees to serve only the north side of a city, and the other takes the south side. This is market allocation. Both actions remove the need to compete, which usually hurts consumers who end up paying more.
A real-world example happened with electronics. Several big companies secretly agreed to fix the prices of certain TV screens. They were caught and had to pay huge fines. This shows how authorities work to stop such agreements.
2. Real-World Moves: Predatory Pricing & Exclusive Dealing
Sometimes, a big company lowers its prices so much that smaller shops can't survive. This is called predatory pricing. The big company might sell products at a loss for a while. Once the competitors are gone, it raises prices again because it has no rivals left. Another tactic is exclusive dealing. This is when a supplier forces retailers to only sell its products. For example, a popular soda brand might tell a school cafeteria, "You can only sell our soda, not our rival's." This blocks other brands from reaching customers.
A scientific example from the lab: Think of a network of ant colonies. If one colony blocks all the paths to food sources for others, it hoards the food. Similarly, when a company blocks rivals' access to customers or supplies, it's an anti-competitive move.
3. Quick Look: Common Anti-Competitive Acts
| Practice | How it Works | Example |
|---|---|---|
| Price-Fixing | Competitors agree on selling prices. | Two airlines agree to charge the same fare. |
| Market Allocation | Dividing customers or regions. | Firm A takes the east coast, Firm B takes the west. |
| Predatory Pricing | Setting very low prices to kill rivals. | A big store sells milk at a loss until small shops close. |
| Exclusive Dealing | Forcing a buyer to only buy from one seller. | A popular video game console is only sold in one store chain. |
4. Important Questions About Anti-Competitive Behaviour
A: Yes, if they discuss fixing prices or dividing markets, it is usually illegal. Even a casual conversation that leads to an agreement can be seen as anti-competitive. This is why companies have strict rules about communicating with rivals.
A: It usually means you pay higher prices, have fewer products to choose from, and see less innovation. For example, if companies don't compete, they don't have to work hard to make better or cheaper products for you.
A: They have competition laws (often called antitrust laws[1]). Agencies like the Federal Trade Commission (FTC) investigate companies. They can break up big companies, stop mergers, and impose huge fines on those that break the rules.
📝 Footnote
[1] Antitrust laws: Rules and regulations that protect competition by preventing unfair business practices. They are designed to stop monopolies and promote fair play.
Exclusive dealing: An arrangement where a seller restricts a buyer from purchasing goods from another seller. Predatory pricing: The practice of selling a product at a very low price to drive competitors out of the market.