Should financial penalties be introduced for abuse of dominance cases in Mauritius?
A firm is said to be abusing of its dominant position when it holds market power and is engaging in anti-competitive business practices so as to maintain or increase its position in the market. In Mauritius, such type of conduct would be breaching the abuse of monopoly situation provision of the competition law. Unlike cartels where financial penalties can be levied, in abuse of dominance cases, the Commission can only impose directions in the form of behavioral and/or structural remedies to address the competition concern.
Behavioral remedies obligate an enterprise to cease or amend a practice which was found to be unlawful during an investigation. Structural remedies force an enterprise to separate or divest itself from enterprises or assets. On one hand, by putting an end to an anti-competitive behavior, a behavioral remedy aims to restore the pre-violation level of competition in the market - but this may not always be successful. On the other hand, structural remedies can rapidly eliminate market power and ease market entry to competitors, but they can also create immediate inefficiencies due to loss of scale economies.
Over the past 9 years of operation, the Competition Commission has mostly applied behavioural remedies in abuse of dominance cases. The deterrence effect of behavioural remedies is however limited. For instance, it is found that some enterprises have repeatedly been investigated for potential abuse of dominance cases. These ultimately question the effectiveness of the current remedies imposed in deterring enterprises from violating the monopoly provisions of the Competition Act. The question that arises is whether recidivism occurs because firms know that they can only be punished by behavioural and/or structural remedies and not financial penalties?
After considering the present situation and the effectiveness of the current remedies, it can be argued that it may be time to introduce financial penalties for abuse of dominance in Mauritius. Unlike behavioral and structural remedies which only cure the harm to competition, the goal of financial penalties is to punish enterprises from abusing of their dominant position. The prospect of giving up money can act as a deterrent and prevent enterprises from recidivating in the future. The imposition of financial penalties will open up avenues for firms to re-think before abusing their position on the market to reap higher profits. The impact of financial punishment will directly affect their profitability and their reputation. With the risk of suffering from huge financial implications, such punishment may consequently strongly deter firms from abusing of their situations.
From a competition authority perspective, financial penalties are easily administered and do not need to be continuously monitored by the competition agency, unlike behavioural remedies. It is likely to strengthen its objective of deterring anti-competitive conducts. The common benchmarking for calculation of fines for abuse of dominance cases across various jurisdictions is normally a maximum of 10% of the turnover of the enterprise.
An introduction of financial penalty on abuse of dominance cases is likely to promote competition. Dominant firms are likely to be more cautious in the way they do business.
This article forms part of a series of stories of the Competititive Commission.