What is Fair Competition? Definition & Examples

Fair competition is a type of competition that occurs in an open and free market in which there is equitable competition between rival companies on the basis of a few parameters like quality, price, customer service, etc.

It is an essential element of a strong economy and allows businesses to thrive in healthy competition. Fair competition laws are designed to ensure that the market remains fair and competitive. These laws are created to stop companies from using unfair tactics such as predatory pricing or establishing monopolies that would limit market access.

What is Fair Competition?

Fair competition refers to a marketplace where all businesses have an equal opportunity to succeed based on the merit of their products or services. It is a scenario where the competition isn’t skewed in favor of any particular player. Fair competition helps to ensure that no single company is able to gain an unfair advantage in the market by improving its performance in any one area.

This prevents practices like predatory pricing, where businesses might attempt to undercut competitors to an unsustainable degree, ensuring that the market remains robust, dynamic, and conducive to innovation. In fair and competitive markets, businesses are free to compete without fear of being crushed by larger players. It is important for companies to adhere to fair competition in order to maintain a level playing field and create healthy competition between themselves and their rivals.

Understanding The Concept Of Fair Competition

In general, fair competition is seen in the open markets where all the businesses selling similar kinds of products are allowed to compete with each other on a common base that is already fixed. This common base includes factors like the price of the product, the quality of the product, and also the kind of service that they provide.

Also in a fair competition, there is no limitation on the number of businesses that can jump into the market to compete. In fact, there are no restrictions at all. All of the companies are allowed to compete for supreme position and dominance in the market.

The one thing that should be kept in mind while discussing fair competition is that none of those practices which are condemned by either law or public sectors is encouraged here like the bashing of the competitors, near monopoly powers, predatory pricing, etc. It is a simple and pure type of competition where two or more two companies compete on the basic parameters of pricing, quality, and servicing.

• Fair competition can be seen mostly in ‘open markets’ which are also termed as the ‘free markets’.  It supports unbiased and impartial competition which drives the fundamental economic force on the three above-mentioned parameters which are the price, quality, and service.
• A fair competitor is based on fair practices and eliminates unfair ones.  It is a great way for the economies to thrive as the competitors competed against each other on a ‘level playing field’.
• Also in today’s date, so many powerful laws have been made that make sure that the marketplace has only fair competition practices. These are made to support the advanced economic system that the world is heading towards.  It has been seen that many emerging economies practice this system of fair competition.
• According to economists, fair competition has been improving since the 1990s because more and more people started inclining toward online platforms for marketing. Due to the arrival of online platforms, there was a revolutionary change that was seen in the marketplace.

This is because it allowed even small businesses to compete with the bigger and well-established ones in a variety of fields, hence bringing a significant change in the marketplace.

The best part about fair competition is that it eliminates any kind of negative aspects which would bring the marketplace down and this majorly includes the unfair practices of the marketing. Those practices which are condemned by public law are not at all entertained in the fair competition.

Now to omit the competitors, predatory pricing is a very popular strategy that is used by the leaders of the abusive market. In this, the price of the products is drastically reduced by them. And once their competitors take a step back from the market, they again raise their prices. Thankfully this kind of situation is completely omitted from a marketplace that supports fair competition.

What are Anti-Competitive Activities?

Anti-competitive activities are any actions that are taken by businesses in order to gain an unfair advantage over their competitors. These can include agreements between companies to reduce competition, the use of strong-arm tactics to discourage new entrants into a market, or price manipulation schemes. These tactics are illegal and can result in hefty fines from governmental regulatory bodies. Furthermore, it can harm consumers who are paying higher prices for goods and services due to the lack of competition.

It is, therefore, important for businesses to be aware of anti-competitive activities in order to protect themselves as well as their customers. By ensuring a level playing field in the marketplace, businesses can ensure fair competition which allows everyone the chance to succeed and benefit from healthy market conditions.

How American Economy Promotes Competition?

The American economy is designed to promote fair competition and discourage unfair competition across numerous sectors. One pivotal sector is the agricultural market. The agricultural industries in the United States are guided by competition law which establishes clear rules for fair treatment of all participants in the agricultural markets. It limits monopolistic activities and aids in maintaining market transparency. By doing so, it ensures that all businesses, regardless of their size, have an equal chance to compete and thrive.

Moreover, the intellectual property system in the US plays a fundamental role in promoting competition. This system protects the innovative ideas, inventions, and creative expressions of businesses, encouraging them to innovate without the fear of their ideas being stolen or exploited. The intellectual property system, through patents, copyright, and trademarks, helps maintain a balance between encouraging innovation and preventing unfair competition.

Furthermore, authorities like the Federal Trade Commission (FTC) work tirelessly to enforce these competition laws. The FTC actively investigates and acts upon any perceived antitrust violations, ensuring that all businesses adhere to these regulations. This promotes fair competition and guards against unfair practices, thereby benefiting consumers with better products, services, and prices.

Through these measures, the American economy fosters a competitive environment where businesses can compete on a level playing field, thereby promoting innovation, growth, and consumer welfare.

Examples Of Fair Competition

Now that fair competition uses only fair and impartial practices, it is used in a majority of places. Here are a few examples of fair competition-

1. In terms of price competition: In this, all the firms in a common marketplace selling similar kinds of goods for example ‘furniture’ will fix a certain amount of price and all the firms will have to agree to it. Now the firms may go a little up and down depending on their business condition, but none of them can decrease the price to a tremendous level. All of them will have to maintain the pricing of their products somewhere near that fixed pricing.

2. In terms of the protection of the consumer: In fair competition, a set of a basic level of quality is set which should be offered to the customers by all firms. For example- in food inspection agencies, some basic food safety standards are set which are mandatory for all the companies which are related to the food department have to follow, or else their license may get canceled. This is very effective as it will maintain the quality of the product without misleading the consumers.

3. In terms of the free market: In this, anyone can start their business and the government would not intervene. This way with new and more companies emerging every single day, the completion in the market grows, hence it ensures that the companies try to maintain their best performance so that they do not lose out on any consumer.

What is the Importance of Fair Competition?

Fair competition is quite important as it adds to the growth of the economy of a particular company. Thus marketers are encouraged to practice these tactics of fair competition so that it can boost the economy in a positive manner.

It is also important because due to fair practices, more and more people are encouraged to start their own businesses. This not only adds up to the economy but also brings out more employment opportunities.

Also, fair competition is necessary for any kind of market because since certain standards are set, it becomes a compulsion for all the companies that are completely against each other to follow those standardized set of rules while manufacturing and producing their products.  This way the prices remain at a decent level, no compromise is made with the quality of the product and also the customer service is quite appreciable.

This is mainly because, in a fair competition, all types of businesses are involved. This leads to a rise in the competition. Now with the increase in competition, people will be having quite a lot of options to choose from.

As a result, the companies will try to put their best foot forward in front of their consumers so that they can maintain their strong customer base. Thus fair competition is very essential as it allows all kinds of companies to grow is it big or small, generates new employment opportunities, provides good quality products, maintains a decent price level that is neither too high nor too low, and on top of it they try to give the best customer service possible.

What is the usage of fair competition?

The practice of fair competition is brought into use usually in those markets where the government finds that the unfair means of practices are on the rise. To help curb the situation and to make the market a better place for all individuals or entities, fair competition is used. In this, all of the rival companies compete against each other on equal terms following the same kind of rules and regulations.

Also, all of the terms and conditions and the rules and regulations are applied equally to everyone who is in the same market. In this fair competition, none of the companies try to bring down or harm the other companies. The practice of fair competition is used in many developed and developing countries as it has been seen that it increases the growth of the economy of a country and boosts it to a whole new level.

What are the advantages of Fair Competition?

The several advantages of fair competition are as follows-

1) It offers lower consumer price

In fair competition, since the companies have to compete with a lot, the companies try of offer a lot of discounts on the fixed prices in the form of coupons, etc so that they can attract more and more customers. And they also do not make any compromise with the quality of the product.

2) There has been an improvement in technology and innovations

Now companies that compete in a fair market use technology to attract customers. They focus more on innovations so that they can come up with products that are cheap in cost but at the same time good in quality. This way more customers will buy their products, hence increasing their profit margin.

3) The customers have a variety of options to choose from

Since fair competition gives equal opportunities to all, more and more companies are on the rise. This way the customers get so many options from which they get to choose the one that suits them the most.

4) The quality of service is improved

This is one of the best things about fair competition that the customers will get the best services offered by the companies because they don’t want any of their customers to simply slip always from their hands. And thus provide them with the best service.

Fair Competition vs. Fair Trade

Though, both fair competition and fair trade are related to each other but they both refer to different concepts. Fair Competition is a concept related to competitive markets in which all participants have equal rights and opportunities to access resources, while Fair Trade is a cooperative movement that focuses on paying fair wages and working conditions to those involved in the production of goods.

The main objective of Fair Trade is to provide better trading conditions and promote sustainability while the purpose of Fair Competition is to create a level playing field for all participants in a market.

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