Does Your Strategy Encourage Competition on Merits?

Competition drives us to work more efficiently than others, to make superior products that are of higher quality, to serve our customers better and to generate more value for shareholders. This is competition on merits, the very core of competition.

Companies that believe in what they do care for their employees and customers and keep abreast of the changing world. This recipe for success ensures that the company will not face problems with competition law compliance.

Nevertheless, success also requires growth and collaboration. Many companies benefit from industry cooperation, but the decision how to cooperate and with whom requires careful thinking. You cannot join forces with your competitors to do things you could equally well do on your own. You cannot exchange information on factors that affect how you compete or ask about your competitors’ pricing strategies. The idea of free competition requires that everyone compete on their own merits.

Growth enhances efficiency and brings synergies. However, there are limits to growth in business. A very strong market position may hamper efficiency and innovation. If your company becomes dominant, competition law will restrict its freedom of contract and freedom to operate.

It is up to the management and board of directors to ensure that a company abides by the rules. This will be hard to achieve if the strategy guides the company in another direction or if the connections of the board members  limit effective competition. From this perspective, the Supreme Administrative Court’s  recent ruling on the bus cartel is a  decision all board members should read carefully.  It also states that the companies represented in the board of directors of the company will be held responsible for the infringement the board becomes aware of.  The ECN+ Directive, in turn, introduces changes to the national competition laws of the Member States that will entail more severe sanctions.

From time to time, companies should take a critical look at their strategies: Does our strategy rely on genuine competition and developing our own strengths? Do our partnerships promote efficiency, innovation and customer’s interest? This kind of competition will ultimately produce the best results for the company itself and for society as a whole.