Abuse of a Dominant Position / Law for the Defense of the Competition.
By Jacqueline Dhimes.
The Dominican Republic Beer market. First case decided by the National Commission for the Defense of Competition.
On January 31, 2017, through Resolution No. DE-001-2017, the Executive Council for the National Commission for the Defense of the Competition of the Dominican Republic-hereinafter known as “PROCOMPETENCIA”- ordered a formal investigation regards to the production, commercialization and distribution of beer in the Dominican Republic due to “the existence of facts that can reasonably point out to unlawful practices, a result of an abuse of power from a dominant or privileged market position as is the National Dominican Beer company (Cervecería Nacional Dominican, S.A.)”.
As a result of this investigation, on January 5 2018, the Executive Council of PROCOMPETENCIA presented its evidence to the President of the Directive Council of this same institution “Instruction of the Investigation initiated under Resolution No. No. 001-2018” soliciting the Directive Council to commence administrative sanctions against the National Dominican Beer Company for existing violations.
Article 6 on Law 42-08 on the Defense of the Competence shows violations on a), b) and d) as we will summarize below:
Article 6- “An abuse from a dominant market position. Conduct that constitute an abuse from a dominant market position are unlawful if they create unjustifiable barriers or boundaries upon competitors. Included under the category of abuse of power from a dominant market position are the following forms of conduct:
a) “To condition purchase or selling decisions reliant on the buyer abstaining from purchasing or distributing products or services from other competing entities”;
b) “suppliers unwarranted imposition of prices or other selling conditions to its distributors, without their being a commercial reason to justify this action”;
d) “the sale or any other transaction conditioned upon the receiver not doing business be it either purchasing selling or distributing any other product from another entity”.
By Resolution 018-2018 dated December 4, 2018, the Directive Council for the National Commission for the Defense of Competition determined that the National Dominican Beer company was at fault (CERVECERIA NACIONAL DOMINICANA, S.A. abuses of its dominant market position in the beer market, in clear violation of Article 6. The Resolution imposed the strictest sanction allowed by the law, a total fine of RD$ 46,342,800. The Directive Council also ordered the stop of any abusive conduct as well as the elimination of any contracts established with these unlawful conditions.
This historical decision, the first for the National Commission for the Defense of Competition and, the first time the Dominican government applies sanctions and forces the powerful, previously untouchable, National Beer company to face the its economic penalties. Also sets the stage for the competitors in the beer market to have as more active participation.
The totalitarian nature of the National Beer Market was determined to exceed a 98% of the total beer market. It allowed them to impose unlawful and unjustified restrictions such as, controlled pricing for re-selling, closing markets through exclusive contracts of distribution, commercialization, promotion and publicity and visibility restrictions for competing brands
The effect of these sanctions against an imposing entity that was clearly enjoying of a monopoly in its market represents an important landmark. In general, a market that does not enjoy of competitive freedom is a market that does not attract new competitors, it’s a market that negatively limits participation but most importantly it’s a market that negatively affects the proper economic development of the country and the inherent right to compete with equal conditions, this right is constitutionally protected and is illustrated in Article 50.
These unlawful practices negatively affect Dominican consumers in different ways. The first is that they reduce “consumer well-being” by making them overpay for a product that would be more reasonably priced if it were a proper, free-competition market. In addition it limits the options or alternatives that a consumer can consider, since the monopolistic practices of the National Dominican Beer company greatly restricts the alternative beer products resulting in a consumer that hasn’t even had the chance to get to know a new product.