15 February 2016 10:00
Competing fairly in business - why it matters to start-ups
I recently listened to a brilliant podcast called "Start-up". Unsurprisingly, it's about a guy who's starting his own business. What is surprising - at least to someone who isn't in the middle of starting a company from scratch - is the sheer scale of what he had to do.
Coming up with a great idea was just the beginning; turning that idea into a business involved organising finance, creating a product, hiring staff, finding premises, negotiating contracts, making plans, managing crises - not to mention living on a shoestring until revenue started coming in.
But one thing that made it easier for this start-up business was the fact that other businesses weren't stopping him from starting up. This may sound obvious. But behind the scenes, the invisible hand of competition law ensured that he benefited from a level playing field.
How competitors can stop start-ups
Start-ups can be sabotaged when bigger, established businesses don't like a new competitor's cheaper prices, better products or innovative, more efficient business models.
They try to find ways to block them from advertising cheaper prices. They stop their customers from using them. Or they use their revenues from other products to fund discounted prices and squeeze their fledgling competitor out of the market - before hiking their prices right back up again.
How suppliers can scupper start-ups
At other times, start-ups are stopped or slowed because the suppliers they use are colluding on prices or dividing up markets. This artificially drives up prices, making a new company pay more than they should for essential services - the last thing they need if they want their business to be a success.
What you can do about it
Hindering other businesses like this is unfair, anti-competitive and illegal. Indeed, healthy competition is the very reason why new businesses launch in the first place, and there are serious penalties for businesses and individuals who behave anti-competitively, including fines and prison sentences.
Before embarking on any new business venture, it is vital to know what anti-competitive behaviour looks like. On the one hand, this means that where you become a victim, you know to report it and you understand that it can be stopped.
On the other hand, you need to be able to recognise price-fixing, market-sharing, bid-rigging and resale price maintenance to protect your own business from getting into trouble with competition law.
The good news is that the basic principles behind competition law are quite straightforward. If you'd like to know more about it, you can follow this link to Competing fairly in business - a collection of free, bite-size materials, including one-minute videos on each aspect of how to compete fairly.
Make sure you know as much as you need to about anti-competitive activity - it's worth the few minutes it will take to read up on it.
Copyright © 2016 Susanne Quick, Competition & Markets Authority.