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What is Unfair Competition Among Businesses & How is it Regulated?

“Competition”, as a term, features in many commercial transactions and everyday dealings among individuals and / or Entities.

In order to guarantee that consumers will enjoy the best options available in the market, while Enterprises will refrain from abusing their dominant position or entering into restrictive agreements of the competition, the Parliament of the Republic of Cyprus enacted a specific legal framework which is completely harmonized with the relevant Directives of the European Union (hereinafter referred to as the “E.U.”).

Undoubtedly, with a successful dealing and protection of itself from unfair competitive decisions that could affect the harmonious operation, various constitutions are put in place so as to ensure the economic growth and to promote the social prosperity. Under circumstances of healthy competition, the consumers may enjoy benefits and competitive prices.

The need for fair competition and cooperation among the organizations which is relying on rules and principles of the E.U, along with the need for regulation of the restrictive agreements and (formal or informal) practices, led to the enactment of the legislation for the Protection of the Competition Law 2008 (13 (I) /2008) that was amended by the Law 41(Ι)/2014 (hereinafter referred to as the “Competition Law”).

MAIN SECTIONS OF THE COMPETITION LAW:

A. Section 3 (1):

All agreements between Enterprises that have as their object or effect the prevention, restriction or distortion of competition and are being taken by associations of undertakings shall be prohibited, especially those which:

(a) Directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) Limit or control production, markets, technical development or investments;

(c) Share markets, geographically or otherwise, or sources of supply;

(d) Apply dissimilar conditions to equivalent transactions thereby placing certain undertakings at a competitive disadvantage;

(e) Make the conclusion of contracts subject to acceptance by other parties of supplementary obligations which have no connection with the subject of such contracts.

B. Section 4 (1):

Agreements, decisions and concerted practices caught by section 3(1) of the Competition Law, shall be permissible if they satisfy the following:

(a) They contribute in the development of production or distribution of goods or in the promotion of technical or financial development, allowing the consumers to accrue a fair consideration from the arising benefit; 

(b) They do not impose, on the undertakings concerned, restrictions unless they are absolutely necessary for the achievement of the above-mentioned purposes; and 

(c) They do not grant the possibility of competition’s elimination from a substantial part of the market product concerned. 

It is noted and worth mentioning that collusions which contribute to the improvement of production and the impose restrictions which are necessary for a successful improvement, are permissible and valid, even though they fall within the scope of section 3(1). However, Cyprus Commission for the Protection of Competition (hereinafter referred to as the “CPC”), has the ability to examine any operation or agreement and decide if the procedure and aim is in respect of the pursuant regulations. In the unwanted scenario where such function it is not found, any action is considered invalid and its practice is strictly prohibited.

C. Section 5 (1) (3a):

The Council of Ministers may, following a reasoned opinion of the Commission, issue Orders to be published in the Official Gazette of the Republic, which declare section 3 inapplicable to certain categories of collusions. For this purpose, the burden of proof lies in the business which invokes the particular Order.

D. Section 6 (1) (2):

Any abuse by undertakings of their dominant position or in substantial part of it in respect of a product shall be prohibited, in particular if this practice results or may result in:

(a) Direct or indirect fixing of unfair purchase or selling prices or any other unfair, under the circumstances, trading conditions;

(b) Limiting production, distribution or technical development to the prejudice of consumers;

(c) Applying dissimilar conditions to equivalent transactions, thereby placing certain undertakings at a competitive disadvantage;

(d) Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 

E. Section 7:

The provisions of the current legislation shall not apply in employment agreements and their working conditions or in undertakings that provide services of general financial interest either having the character of revenue producing monopoly. CPC may examine and decide whether a business does or does not fulfill the conditions provided for in the said section.

COMPETENT BODIES:

A. Cyprus Commission for the Protection of Competition:

As a consequence of the Competition Law, CPC was established in 1990. CPC is the main representative, administrative and responsible body for enforcing and applying the rules and principles of fair competition; additionally, the investigation and decision on whether illegal collusions under the Republic occurred, are some of its obligations.

The CPC is also responsible for applying the corresponding provisions in the Treaty on the Functioning of the E.U. (hereinafter referred to as the “TFEU”).

B. Service of the Commission for the protection of Competition:

The Service of the Commission is responsible for the given by the Competition Law obligations. Mainly, to grant every possible facilitation in order for Commission to completely fulfil its duties, while performing a proper and thorough investigation about an alleged infringement. Service’s members are allowed to be present in the meetings or procedures of the Commission and express their opinions on matters they were occupied with. A worth-while point is that their presence does not affect the validity of the decisions of the Commission.

CONCLUSION:

Any unfair competitive decision that creates an uncertain climate between, firstly, the consumers and the market, and secondly, the market and the businesses, is able to compete the wide range of provisions that the law applied for the elimination, restriction or distortion of competition. Actions such as predetermined purchase prices or intended geographical placement of services are becoming automatically invalid, without the official relevant decision of the CPC being required.

Even though prohibitions and restrictions are strict, CPC has already examined and issued various decisions. Infringements are being followed by measures such as administrative fines and certain time-limits, which force the undertakings to terminate contraventions and avoid any repetition of them in the future (based on Section 24, a-d).

This Article and any content forming part of it is only intended to provide a guide on the subject matter and does not constitute legal or any other advice. If professional advice is required, G.C Charalambous & Co LLC would be glad to assist you in this respect.

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< Go back

Blog > Insights

What is Unfair Competition Among Businesses & How is it Regulated?

“Competition”, as a term, features in many commercial transactions and everyday dealings among individuals and / or Entities.

In order to guarantee that consumers will enjoy the best options available in the market, while Enterprises will refrain from abusing their dominant position or entering into restrictive agreements of the competition, the Parliament of the Republic of Cyprus enacted a specific legal framework which is completely harmonized with the relevant Directives of the European Union (hereinafter referred to as the “E.U.”).

Undoubtedly, with a successful dealing and protection of itself from unfair competitive decisions that could affect the harmonious operation, various constitutions are put in place so as to ensure the economic growth and to promote the social prosperity. Under circumstances of healthy competition, the consumers may enjoy benefits and competitive prices.

The need for fair competition and cooperation among the organizations which is relying on rules and principles of the E.U, along with the need for regulation of the restrictive agreements and (formal or informal) practices, led to the enactment of the legislation for the Protection of the Competition Law 2008 (13 (I) /2008) that was amended by the Law 41(Ι)/2014 (hereinafter referred to as the “Competition Law”).

MAIN SECTIONS OF THE COMPETITION LAW:

A. Section 3 (1):

All agreements between Enterprises that have as their object or effect the prevention, restriction or distortion of competition and are being taken by associations of undertakings shall be prohibited, especially those which:

(a) Directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) Limit or control production, markets, technical development or investments;

(c) Share markets, geographically or otherwise, or sources of supply;

(d) Apply dissimilar conditions to equivalent transactions thereby placing certain undertakings at a competitive disadvantage;

(e) Make the conclusion of contracts subject to acceptance by other parties of supplementary obligations which have no connection with the subject of such contracts.

B. Section 4 (1):

Agreements, decisions and concerted practices caught by section 3(1) of the Competition Law, shall be permissible if they satisfy the following:

(a) They contribute in the development of production or distribution of goods or in the promotion of technical or financial development, allowing the consumers to accrue a fair consideration from the arising benefit; 

(b) They do not impose, on the undertakings concerned, restrictions unless they are absolutely necessary for the achievement of the above-mentioned purposes; and 

(c) They do not grant the possibility of competition’s elimination from a substantial part of the market product concerned. 

It is noted and worth mentioning that collusions which contribute to the improvement of production and the impose restrictions which are necessary for a successful improvement, are permissible and valid, even though they fall within the scope of section 3(1). However, Cyprus Commission for the Protection of Competition (hereinafter referred to as the “CPC”), has the ability to examine any operation or agreement and decide if the procedure and aim is in respect of the pursuant regulations. In the unwanted scenario where such function it is not found, any action is considered invalid and its practice is strictly prohibited.

C. Section 5 (1) (3a):

The Council of Ministers may, following a reasoned opinion of the Commission, issue Orders to be published in the Official Gazette of the Republic, which declare section 3 inapplicable to certain categories of collusions. For this purpose, the burden of proof lies in the business which invokes the particular Order.

D. Section 6 (1) (2):

Any abuse by undertakings of their dominant position or in substantial part of it in respect of a product shall be prohibited, in particular if this practice results or may result in:

(a) Direct or indirect fixing of unfair purchase or selling prices or any other unfair, under the circumstances, trading conditions;

(b) Limiting production, distribution or technical development to the prejudice of consumers;

(c) Applying dissimilar conditions to equivalent transactions, thereby placing certain undertakings at a competitive disadvantage;

(d) Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 

E. Section 7:

The provisions of the current legislation shall not apply in employment agreements and their working conditions or in undertakings that provide services of general financial interest either having the character of revenue producing monopoly. CPC may examine and decide whether a business does or does not fulfill the conditions provided for in the said section.

COMPETENT BODIES:

A. Cyprus Commission for the Protection of Competition:

As a consequence of the Competition Law, CPC was established in 1990. CPC is the main representative, administrative and responsible body for enforcing and applying the rules and principles of fair competition; additionally, the investigation and decision on whether illegal collusions under the Republic occurred, are some of its obligations.

The CPC is also responsible for applying the corresponding provisions in the Treaty on the Functioning of the E.U. (hereinafter referred to as the “TFEU”).

B. Service of the Commission for the protection of Competition:

The Service of the Commission is responsible for the given by the Competition Law obligations. Mainly, to grant every possible facilitation in order for Commission to completely fulfil its duties, while performing a proper and thorough investigation about an alleged infringement. Service’s members are allowed to be present in the meetings or procedures of the Commission and express their opinions on matters they were occupied with. A worth-while point is that their presence does not affect the validity of the decisions of the Commission.

CONCLUSION:

Any unfair competitive decision that creates an uncertain climate between, firstly, the consumers and the market, and secondly, the market and the businesses, is able to compete the wide range of provisions that the law applied for the elimination, restriction or distortion of competition. Actions such as predetermined purchase prices or intended geographical placement of services are becoming automatically invalid, without the official relevant decision of the CPC being required.

Even though prohibitions and restrictions are strict, CPC has already examined and issued various decisions. Infringements are being followed by measures such as administrative fines and certain time-limits, which force the undertakings to terminate contraventions and avoid any repetition of them in the future (based on Section 24, a-d).

This Article and any content forming part of it is only intended to provide a guide on the subject matter and does not constitute legal or any other advice. If professional advice is required, G.C Charalambous & Co LLC would be glad to assist you in this respect.

Latest Updates