Introduction
Major Grain is company, which owns the majority of land, which produces wheat and bran, therefore, making it a key stakeholder on the services regarding the purchase and distribution of these two products. On the other hand, we have a cereal company (Big Breakfast Ltd) which depends on these two products so as to give process it and sell to their customers. The enigma in this scenario is that, Major Grain wants to create a monopoly where it dictates the price and distribution of these products at their profit thus can only distribute the product to cereal companies that have a large purchase demand referred to as the big six. Since Big Breakfast Ltd is not one of the big six they have to comply by these terms and conditions so as to continue supplying their customers with cereals. Henceforth, Big Breakfast view these demands unacceptable, thus raising the question, what legal provisions are available that could help Big Breakfast Ltd a fighting chance and reverse these regulations put in place by their supplier.
Problem Identification
The issue here is that Major Grain wants to cut its production cost by streamlining their product allocation model to increase profits. In order to do so, they want Big Breakfast which is considered a small player with regards to their purchasing power, to increase their allocation of bran by 300% so that they could be eligible to join the priority customer list as well acquire it at the previous normal price. Big Breakfast are against this move since they don’t have enough consumers to purchase the 300% bran product increase and are also not supporting the fact that this move to fluctuate prices is due to production and supply costs that Major Grain is facing.
Law
The law can try to come up with reasonable advice for Big Breakfast to consider why Major Grain made the decision and under what circumstances.
The Irish competition Act of 2002 has something to say on this issue taking place between Big Breakfast limited and Major Grain. In Part 2 under competition rules and enforcement, clause (5) abuse of dominant positions. The law strictly states that Any abuse by one or more undertakings of a dominant position in trade of any goods and services in the state or any part of the state is prohibited. Therefore, in this case Major Grain could be regarded as a dominant position trying to monopolize events for its own benefits and thus could be liable for penalty.
In addition to this the law strictly categorizes the different forms that such undertakings could take place with emphasis placed on:
- Prejudice regarding the imposing of unfair purchase and selling prices either directly or indirectly.
- Limiting of production, supplies and markets to the prejudice of the consumers
- Initiating different conditions to balance transactions with other trading parties thus placing them at a disadvantaged competition and,
- Declaration of contracts with other parties declaring the approval of new commercial agreements which on the contrary are null and void.
These are some of the provisions which are provided for by the Irish constitution when it comes to their competition law.
Application
First and foremost, Major Grain and the Big six are trying to create an undertaking since they are mutually benefiting from any merger they make to ensure that they purchase all bran and grain thus leaving out the less small entrepreneurs from the equation. This would create either or both a direct or indirect biasness on the buying and selling prices of the commodity thus creating unfair competition. The law therefore, could be instrumental in establishing a ruling and enabling a solution to this problem.
On the other hand, also the Irish competition act of 2002 could be applicable under Part 2 section 5 clause 2 (a) where it is prohibited to initiate different dealings or conditions to balance transactions thus putting them at a disadvantaged competition. Major Grain is trying to create a condition where they are compelling companies with lesser market share to increase their purchase just as what the Big six have done so as they could balance their transaction. Under the law this is prohibited and is liable to punishment.
Big Breakfast can also present a formal complaint to the competition authority on the grounds of an undertaking by the Big Six and Major Grain to create a disadvantaged competition on their favor. The Authority therefore can initiate proceedings and make a ruling for an offence as provided for under section 6 of the act.
In case of breach of the act through an undertaking that is a corporation such as Major Grain could be eligible to the payment of a fine not exceeding €4,000,000 or 10% of the annual turnover of the undertaking in the financial year ending 12 months prior to the conviction.
ConclusionThe competition law can only be eligible for use if it respects and adheres to the principles of economics such as supply and demand, free market theory, efficient allocation of resources and cost of production. Some economists argue that the law should not interfere beyond this lines that make the market structure. But since it is impossible for a perfect competition to take place the need for the law is considered relevant now more than ever. Henceforth, there is need for stringent regulatory instruments and frameworks as well as enforcement strategies which will ensure credibility, fairness, justice, and minimize cost of doing business. Furthermore, the diversification of the market system which now includes a global platform where more companies provide services to a rather limited customer base, competition needs to be regulated even more.
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