Purpose of oversight on competition
Most countries in the world have introduced a system for competition oversight aimed at a better functioning of the market. In other words: to let competition work effectively.
Effective competition leads, in general, to increased welfare. This is realized in three ways:
- Firstly, competition leads to efficient production. This means that goods and services are produced at the lowest possible costs. Companies are forced to look for better production methods so the product can be manufactured at lower costs. In the event of effective competition, competitors will punish them immediately if they fail to do so.
- Secondly, competition leads to allocative efficiency. This means that available inputs are used where they contribute the most to welfare. As a result, production optimally meets demand.
- Thirdly, competition ensures dynamic efficiency (innovation). This means that companies are constantly incentivized to look for new, more innovative products. Without effective competition, manufacturers will continue to manufacture unwieldy and obsolete products. This is not only to the disadvantage of consumers but it also undermines a country’s competitive strength.
A free and undistorted market is not a given. Companies can collude to eliminate competition, for example by concluding agreements on the selling prices of their products or by dividing customers between themselves. Furthermore, large companies can abuse their dominant position to exclude smaller companies from the market. Consequently, prices will be higher, supply will be less diverse, service will be inadequate and quality will be poor. In other words: distortions of competition are bad for the economy.
Oversight by the Fair Trade Authority Curacao
The FTAC aims to promote free and undisorted competition in Curacao. This means that the FTAC will take action if competition is hindered, restricted or distorted. For example, when companies conclude mutual agreements to share the market, increase prices or determine who will win a tender. We inform (associations of) companies about the new rules but we also detect cartels and, if required, impose fines on the companies. The FTAC can also impose fines on persons concerned who actually coordinated [in Dutch: feitelijk leidinggeven] the infringement. We also take action against companies which abuse their dominant position.