When competition is no longer competitive: are your strategies breaking the law?

What is anti-competitive practice?

Anti-competitive behaviors are the practices that a business or group of businesses engage in to i. restrict competition ii. increase their market position and/or iii. delude consumers. These behaviors are not only unethical but also illegal, and largely revolve around the misuse of power to distort markets in unfair practice.

Some examples include:

1. Bait-and-switch: a fraudulent business model where customers are ‘baited’ for a good or service at a low price point then ‘switched’ to a costlier product when original good is not available

2. Planned obsolescence: the selling of a good with intended limited use to put the consumer under pressure to make continuous purchases

3. Tying and bundling: when the business makes a sale of a product (tying) conditional upon the purchase of another (bundling)

4. Cartel conduct: depriving consumers and other businesses in the industry of fair deals:

o Price-fixing: an agreement between firms to fix or raise product prices in order to earn higher profits

o Market sharing: when businesses collude to divide a market and drive out competitors

Whilst undoubtedly unethical, some of these behaviors may seem compelling as effective methods for fast profits and substantial market share.

HOWEVER, success built off unethical business culture is fleeting and unsustainable and comes with great cost from legal regulatory action, reputational damage and loss of consumer trust.

It is most definitely in the best interest of the business to evolve with the shifting attitudes of consumers in a socially responsible climate. Our fundamental obligation as marketers is to meet the needs and wants of consumers - whereby the ethical positioning of a business propagates as a selling point itself!

How are YOU protected as a small business?

One of the greatest downfalls of business conduct is the misinterpretation of the law, where there is a struggle to define the parameters of what is considered ‘anti-competitive’ and what is simply a competitive business strategy.

The Competition and Consumer Act (CCA) provides a framework for the declaration of the industry codes that regulate the conduct of businesses towards their consumers and other competitors in the industry. The Australia Competition and Consumer Commission (ACCC) is responsible for monitoring and enforcing the CCA, even if the conduct does not meet the obvious structure of anti-competitive behaviors.