Fair competition

Fair competition
See also
Price strategy to eliminate competitors Monopoly Resale price maintenance Imitator strategy Monopolistic agreement Competitive environment Price and non-price competition Cartel Preventive pricing strategy

Fair competition term describes a situation on market when market is free for all and all of subjects making actions in this business environment are equal, free from acts of unfair competition. Businesses using basic factors like quality and focusing on own development and strategies to get customers instead of actions which are targeted to destroy competitor's market image or economic situation.

Market environment

Being a company on the market focused on development and getting more and more customers and is usually a tough nut to crack. Business should have specific strategy to entry and keep on the market, but sometimes it is impossible to develop if company's position on marketplace and size isn't big enough.

There are a few systems which can be experienced on market, for example:

• Perfect Competition,
• Monopoly,
• Oligopoly,
• Monopolistic Competition,
• Monopsony.

Fair competition refers to keeping a market open for any other players. There wouldn't be applied strategies like predators pricing, which is an market action, when the biggest players such sacrifice some amount of money and cash flow by severely under-pricing their products as long as competitors will not be able to maintain basic company expenses. This situation favors more experienced company and destroys any chances to entry the market for other competitors.

By the definition, fair competition allows become strong leader, but not at the expense of others. Competitive factors are usually quality, price and customer service. Market field is free from acts of unfair competition which can be harmful for other subjects participating in it. Moreover, companies are not imposed to agrees to fair competition system but freely making marketplace a fair environment to compete. All over the time fair competition becoming more and popular and entrepreneurships respect these rules also caring for their own image.

Examples of Fair competition

• Price competition: Price competition occurs when firms in a market compete with each other on the basis of pricing. This often leads to lower prices for consumers and is considered a form of fair competition. For example, when two supermarkets are located in close proximity to one another, they may compete on price in order to draw in more customers.
• Quality competition: Quality competition occurs when firms in a market compete by offering higher quality products or services. This type of competition is also considered a form of fair competition as firms strive to create better products to gain an edge over their competitors. For example, two bakeries might compete by offering higher quality breads or pastries in order to gain customers.
• Innovation competition: Innovation competition occurs when firms in a market try to out-innovate one another. This type of competition is considered a form of fair competition as firms strive to create better products or services through innovation. For example, two smartphone companies might compete by introducing new features or technology in order to gain an edge over their competitors.

Advantages of Fair competition

Fair Competition has many advantages. These advantages include:

• It encourages healthy competition between businesses, which leads to better products, services and prices for consumers. This can help create innovation and drive economic growth.
• It creates an environment of trust and transparency, which helps protect businesses from fraud or predatory practices.
• It provides a level playing field, so that businesses have a fair chance to compete and succeed.
• It allows businesses to focus on developing their own products and services, rather than wasting resources on anti-competitive practices.
• It helps eliminate unethical and illegal practices, such as price-fixing and collusion.
• It helps to protect consumers from unfair and deceptive practices, such as false advertising.

What limits fair competition

The limitations of Fair Competition include:

• Monopoly Power: A single company or entity may have a dominant position in the market, allowing them to control prices and limit competition.
• Collusion: Companies may collude and form cartels to limit competition and drive up prices.
• Merger and Acquisition Activity: Large companies may acquire smaller competitors and thereby reduce competition.
• Government Regulation: Governments may impose regulations that limit competition, such as tariffs and subsidies.
• Barriers to Entry: Companies may use legal or technological means to make it difficult or impossible for new competitors to enter the market.
• Unfair Practices: Companies may engage in unfair practices such as predatory pricing or dumping to gain an unfair advantage over competitors.

Other approaches related to Fair competition

An introduction to the topic of Fair Competition is that it is a regulatory framework and market environment which promotes fairness and equal opportunity for all participants. Other approaches related to Fair Competition include:

• The promotion of healthy competition - This involves creating an environment where businesses compete with each other on the basis of quality and innovation, rather than price or other anti-competitive tactics.
• The prevention of anti-competitive practices - This includes preventing companies from engaging in practices such as collusion, price-fixing, or predatory pricing.
• The protection of vulnerable or disadvantaged players - This involves ensuring that companies are not exploiting their market power to disadvantage smaller or weaker competitors.

In summary, Fair Competition promotes a healthy market environment for all market players, by fostering healthy competition and preventing anti-competitive practices, as well as protecting vulnerable or disadvantaged players.

References

• Benhamou, F. (2015). Fair use and fair competition for digitized cultural goods: the case of eBooks. “Journal of Cultural Economics”, 39(2), 123-131.
• Hu, J., Goodman, E., Seo, K., Fan, Z., & Rosenberg, R. (2005). The hierarchical fair competition (hfc) framework for sustainable evolutionary algorithms. . “Evolutionary Computation”, 13(2), 241-277.
• Ledgerwood, J., Earne, J., & Nelson, C. (Eds.). (2013). new microfinance handbook: A financial market system perspective. . "The World Bank", 15-48.
• McGowan, D. (1998). Free contracting, fair competition, and article 2B: Some reflections on federal competition policy, information transactions, and aggressive neutrality. . "Berkeley Tech". LJ, 13, 1173.
• Sartori, N. (2013). The European Commission Vs. Gazprom: An Issue of Fair Competition Or a Foreign Policy Quarrel? . “Istituto affari internazionali”, 5.
• Vagstad, S. (1995). Promoting fair competition in public procurement. “Journal of Public Economics”, 58(2), 283-307.

Author: Krystian Prorok