Cartel Agreements: Real Challenge for Georgian Competition Agency
Cartel agreements are considered to be the most serious and harmful violations of the Law on Competition. The European Union Treaty on Functioning of the European Union prohibits cartels and other agreements that could disrupt free competition. Nowadays, with cartel agreements becoming more and more problematic, breaking up this kind of unlawful agreement is a crucial part of the competition policy. A cartel is an explicit agreement among a group of legally and economically independent companies or firms to fix prices, to limit supply, cooperation and competition, to restrict output and to raise prices of the product in order to make a profit 1(see in details). While there are various types of cartel agreement restricting competition, price-fixing agreements are considered to be the most serious violation of competition law. A price-fixing agreement is an illegal agreement between companies in order to maximize or minimize prices to sell or buy goods. It most often leads to high prices to gain profit. This benefits all businesses or individuals that are on the same side of the market, but companies also try to fix the common target price to their own advantage.
The Georgian economy still lacks competition. Therefore price fixing agreements should be the main target of the Competition Agency. Georgia was missing free competition in the market, and appropriate institutional framework, right up until 2012, when European Union (EU) recommendations sped up the introduction of the new Georgian Law on “Free Trade and Competition”. The law set forth basic regulations for competition and was a definite step forward, although improvements were necessary for improving conditions. The Association Agreement with the EU fostered introduction of the Georgian Law on Competition in 2014, after which the agreement on “Free Trade and Competition” was repealed.
As the Competition and State Procurement Agency of Georgia was unable to effectively exercise its functions, it seems logical that the Georgian Government decided to create a separate new Legal Entity of Public Law, the “Competition Agency,” last year. Georgia should effectively maintain free and undistorted competition in order to facilitate trade, bring foreign investment to benefit from trading opportunities, and achieve economic growth. Recent case law demonstrates that the Competition Agency has taken steps against harmful practices. In the current development the main challenge for the country and Competition Agency is to ensure adoption and practical implementation of competition legislation in line with EU practice, and to fulfil obligations under Association Agreement.
1 Simon Bishop and Mike Walker, The Economics of EC Competition Law,(University edition, Thomson Reuters Limited, 2010) P 163
Paata Phutkaradze