When conducting business in Trinidad & Tobago, it is worthwhile to foreign investors to understand the prohibitions against anti-competitive behaviour in Trinidad and Tobago.
Unfair competition may arise through the dumping of goods into the local market, or through unfair competitive practices conducted by dominant business enterprises or by anti-competitive agreements.
Legislation has been introduced to afford a remedy to local manufacturers who face unfair competition in the form of (1) imports of dumped or subsidized goods where the local manufacturer suffers material injury caused by such imports; and (2) anti-competitive practices.
Fair Trading legislation has also recently been introduced to promote and maintain effective competition. Companies considering a merger transaction should seek guidance to determine whether the transaction would be captured under the new legislation, and if so, how to comply.
In this Chapter, Fanta Punch, Partner in Hamel-Smith’s Dispute & Risk Management Department presents an overview of the legislative controls and restrictions on unfair competition.
Anti-Dumping
Dumping and Subsidy Defined
Dumping occurs where a foreign entity exports into Trinidad and Tobago goods at a price which a lower than the price it would normally charge for the same goods in its own domestic market.
A subsidy is deemed to exist where a foreign government or public body provides a financial contribution to an entity which exports to Trinidad and Tobago, thereby affecting the price at which such goods may be sold in Trinidad and Tobago.
The act of dumping and the provision of subsidies may have the effect of negatively affecting the ability of local manufacturers to compete with the price of goods imported into the country.
Anti-Dumping Legislation
The following pieces of legislation have been introduced in Trinidad and Tobago to combat the effects of such anti-competitive activities:
- The Anti-Dumping and Countervailing Duties Act, Chapter 78:05 (the ‘ Anti-Dumping Act’);
- The Anti-Dumping and Countervailing Duties Regulations; and
- The Anti-Dumping and Countervailing Duties ( Subsidies) Regulations ( the ‘Anti-Dumping Regulations’)
The Anti-Dumping Authority
The Anti-Dumping Authority established by the Minister of Trade and Industry pursuant to the Anti-Dumping Act is under a duty to:
- investigate the existence, degree and effect of alleged dumping or subsidisation of goods;
- ascertain whether any imported goods cause or threaten to cause material injury to any industry in Trinidad and Tobago or materially retard the establishment of any new industry;
- identify goods liable for any duty (see below);
- submit findings to the Minister of Trade as to the margin of dumping or the margin of subsidy;
- make recommendations to the Minister regarding directions and determinations.
Material Injury and Causation
The mere act of dumping or foreign subsidisation is not prohibited. What is prohibited is such action which has caused material (or actionable) injury to the production in Trinidad and Tobago of identical or similar goods by local manufacturers. It cannot automatically be presumed that dumped or subsidised goods are the cause of injury. In fact, the Anti- Dumping Regulations list a number of factors which may cause injury, but which will not be attributable to the dumped or subsidised goods.
Investigation of the Anti-Dumping Authority
The Anti-Dumping Authority may initiate an investigation on its own initiative, or at the direction of the Minister of Trade. The Authority may also receive a complaint in writing, by or on behalf of local producers of identical or similar goods who have been injured by the dumped and subsidised imports. Certain information, as prescribed by the Regulations, must be set out in the complaint. The Authority then decides whether to initiate an investigation.
Before the Anti-Dumping Authority can initiate an investigation, it must satisfy itself that it has sufficient prima facie evidence of:
- dumping or the giving of a subsidy, and of the quantum;
- actionable injury;
- a causal link between such imports and the alleged actionable injury.
Imposing Anti-Dumping/Countervailing Duties (taxes)
Where it has been determined that dumping or subsidization has occurred which has caused material (or actionable) injury, as a first step the foreign exporters shall be given the opportunity to cease exporting at dumped prices.
Where the Minister of Trade and Industry on the recommendation of the Anti-Dumping Authority has determined that dumping or subsidisation has occurred which has caused material (or actionable) injury, (and that the foreign exporters have not within thirty (30) days ceased exporting as requested) the Minister may impose certain duties. In the case of dumping, the Minister may impose an “anti-dumping duty”; and in the case of subsidization, the Minister may impose a “countervailing duty”.
The rate of the anti-dumping duty shall not exceed an amount that is necessary to prevent dumping, and in any event shall not exceed the margin of dumping. Similarly, the rate of the countervailing duty shall not exceed an amount that is necessary to prevent actionable injury being caused, and in any event shall not exceed the amount of the subsidy given on the goods.
Remedies against Imposition of Duties
A person aggrieved by an order imposing duty may appeal to the Tax Appeal Board. As a body deriving its powers from statute, should the Anti-Dumping Authority fail to comply in material respects with its enabling legislation or the requirements of natural justice, it could be subject to Judicial Review of the exercise of such powers before the Supreme Court on any or all of the grounds of illegality, irrationality or procedural impropriety.
Anti-Competition
Legislation in the form of the Fair-Trading Act, , Ch. 81:13 (the ‘Act’) promotes fair competition in the Trinidad and Tobago economy, and are aimed at protecting trade and commerce from unfair business practices. Competition law has as its focus:
- Regulation of transactions which involve, mergers and acquisitions of large corporations;
- Prohibiting anti-competitive agreements, s or practices that restrict free trading and competition between business entities; and
- Prohibiting abusive monopolistic practices by entities with dominant market power.
Under Part II of the Act, the Commission may, of its own initiative or by request of any interested person, initiate investigation of suspected anti-competitive behaviour by business enterprises. It also has the power to make an application to the Court for the determination of any contravention of the Act.
Provisions under the Act
The Act is of particular significance to foreign investors as it prohibits or controls certain mergers, anti-competitive agreements and monopolistic behaviour.
The Anti-Competition Provisions under Part III of the Act are considered below:
Mergers: An anti-competitive merger is defined as a merger which restricts or distorts competition in a market. The Act prohibits all anti-competitive mergers but enables the Commission to grant permission for mergers of enterprises if the proposed mergers are not detrimental to the consumer or to the economy. It also empowers the Commission to take steps for the determination of mergers which have been effected without obtaining permission under the Act. Further, it empowers the Commission to initiate an investigation into mergers for which no permission has been granted.
Notably, the Act defines a ‘merger’ as the cessation of two or more enterprises from being distinct whether by: (i) purchase or lease of shares or assets; (ii) amalgamation; (iii) combination; (iv) joint venture; or (v) any other means through which influence over the policy of another enterprise is acquired. Enterprises shall not enter into a merger unless they obtain permission from the Commission where:
- the combined value of the parties’ worldwide assets exceed TT$50 million; and
- at least one of the enterprises will carry on or intends to carry on business in Trinidad and Tobago.
As such, if a proposed transaction results in cessation of two or more enterprises from being distinct or leads to influence over the policy of another enterprise being acquired, and both the asset and carrying on business thresholds are met, the Commission’s permission is required prior to merging. Any proposed merger that restricts or distorts competition, or which would be detrimental to the consumer or the economy, will not be granted permission.
While the Act does not include specific filing requirements, the Commission has published a Merger Application Form and draft Merger Guidelines to be used by parties seeking to make an application for permission to merge.
Anti-competitive Agreements: The Act prohibits agreements which prevent, restrict or distort competition or seek to do so. It is an offence to enter into or give effect to horizontal agreements or vertical agreements. Anti-competitive agreements seek to fix prices, carve up markets, limit production or discriminate between customers.
The Commission has the authority to agree with businesses which have entered into anti-competitive agreements before the coming into operation of the Act, to phase out and terminate the agreements.
Monopolies: The Act provides that an enterprise has monopoly power in a market if, by itself or together with an inter-connected company, it has sufficient economic strength that would enable it to operate in the market without effective constraints from its competitors or potential competitors. Such an enterprise will be deemed to have abused that power if it impedes the maintenance or development of effective competition in a market.
Abusive behaviour could include for example, restricting entry into markets, deterring or preventing competitive conduct in a market, elimination of other competitors from a market, setting production limits, engaging in exclusive dealing tied-selling or market restriction, directly or indirectly imposing unfair pricing.
The Commission has the power to initiate an investigation if it has reason to believe that an enterprise has monopoly power in a market and has abused or is abusing that power (only if the Commission is satisfied that the enterprise concerned controls more than forty percent (40%) of the market).
Exemptions under the Act
The Act does not apply to the following:
- Combinations of activities by employees for their own reasonable protection as employees;
- arrangements for collective bargaining on behalf of employers and employees for the purpose of fixing terms and conditions of employment;
- agreements regarding intellectual property;
- professional associations;
- activities required or authorised by any treaty or agreement to which Trinidad and Tobago is a party;
- companies that fall under the purview of the Telecommunications Authority Act 2001;
- banks or non-bank financial institutions that fall under the purview of the Securities Industry Act 1995; and
- any other business or activity declared by the Minister by Order subject to affirmative resolution of Parliament.
The implications of the Act are quite far-reaching and the Commission’s jurisdiction with regard to approving mergers is quite broad. As the potential fines and other consequences for breaching the Act are significant, companies operating locally, and prospective investors should seek advice to ensure that their current practices and potential investments do not run afoul of the Act.