The Ideal World: Regulating Competition in the Bahraini Market
In an ideal world, consumers have high purchasing power, businesses exceed their expected profits, and the economy booms. Yet, fulfilling every request of market players could lead to undesirable effects. Ensuring a fair market and encouraging competition between businesses is the key to accomplishing the end goal; increasing business certainty and expanding consumers’ choices, where prices fall, and the overall quality of goods and services are enhanced.
The Kingdom of Bahrain, through the Promotion and Protection of Competition Law No. 31 of 2018 (the “Competition Law”), regulates the market by permitting and prohibiting certain activities under the monitoring of the Ministry of Industry and Commerce (the “MOIC”).
This article will outline some of the provisions of the Competition Law which ensure fair competition in the market:
- Anti-Competitive Practices
Pursuant to the Competition Law, certain actions and activities are prohibited with the aim of safeguarding the market from anti-competitive practices, since unregulated powers of a business may hinder consumers and other competitors.
As a result, businesses cannot negatively influence the market by raising, reducing, or fixing selling prices nor can a business limit or control production, marketing, investment, or technical development. Other practices such as coercing the market for the benefit of the business through knowingly spreading false information or colluding bids in auctions or tenders are prohibited. In addition to the other prohibitions against anti-competitive practices outlined in the Competition Law, these activities may give rise to an executive order that enforces division and restructuring of a violating business in order to remove and prevent recurrence.
The Competition Law stipulates exemptions to the aforementioned prohibitions. The requirements for an exemption include activities conducted that may (i) significantly improve the production or distribution, (ii) enhance technical or economic progress, (iii) allow consumers a fair share of any resulting benefit, and other such requirements that aid the overall welfare of consumers and are advantageous to the market.
2. Abuse of Dominant Positions
The Competition Law also regulates businesses considered to be in a dominant position in the market. Such a position exists when the business possesses great economic strength enabling it to act in a manner significantly independent from consumers and other competing businesses.
Therefore, a business in a dominant position is prohibited from directly or indirectly imposing prices in the market or refraining from concluding sale contracts with another business without a legitimate reason. Other acts such as selling products at lower prices than the actual cost or suspending transactions with the aim of eliminating competing businesses are strictly prohibited. Additional regulations in respect of the abuse of dominant positions are described under the Competition Law, which may result in an investigation by the MOIC if violated.
The aforementioned activities may be permitted in cases of compelling grounds regarding the protection of public policy.
3. Market Concentration
Shift in market control may establish market concentration, which in turn creates an imbalance. Such potential imbalances must be regulated to ensure the sustainability of the economy and reduce the risk of a market crash. The Competition Law defines this shift in specified instances, such as the following transactions:
- a merger of two or more businesses that were previously independent, whether fully or partially;
- an acquisition of control by a business over another, whether the control is direct or indirect, or the transaction is considered a full of partial acquisition; or
- a joint venture established to undertake all the duties of a single independent business.
Business transactions that may create a shift in market control, however fulfilling the requirements stipulated under the Competition Law, are permitted to proceed by attaining the prior approval of the MOIC. However, transactions deemed to substantially limit competition in the market are prohibited, unless on the basis of public policy.
Considering the above, micro and small enterprises are exempted from some of the abovementioned requirements (pursuant to Resolution No. 71 of 2019), thus showcasing the efforts of the Kingdom to practically encourage a fair and competitive market that aids in boosting the economy and satisfies all market players.