Pillars of the Competition Policy in Jordan  
   
A.
Frequently asked questions
 
   

 How did the Law define the enterprise?
The Law defined the enterprise as the natural or incorporeal entity that undertakes an economic activity or any group of these entities.

 How is the concerned market identified?
The market is identified in accordance with the principle of substitution in commodity and geography terms on the basis of price, specifications and usage. The Law defined the market as a commodity or service or groups of commodities and services that are, depending on its price, specification and usage, subject to substitution by any other in order to meet a specific demand by the consumer in a specific geographic location where competition circumstances are equally proportional.

The definition of the market includes the following dimensions:

  • Market mechanisms (demand and supply): the inclusion of concerned parties in trade transactions and those subject to competition circumstances of equal proportions.
  • The Relevant Product Market: listing commodities that could be classified as possible alternatives.
  • The Relevant geographic Market: covering all regions where the concerned commodity is produced and consumed in line with the above-mentioned principles of substitution.

The Competition Directorate defined the concerned mar ket by subjecting it to the test that is adopted on the international level for that purpose, namely the (SSNIP) test, which is based on a number of presuppositions, and they are:

  1. The presence of a hypothetical commodity or service provider who enjoys the following qualities:
    • Being the sole provider of the commodity or service.
    • Is not threatened by the entry of other competitors into the market.
    • Seeks to maximize his profits.
  2. The maintained stability of the other factors.

The definition of the concerned market in accordance with the (SSNIP) test:

The smallest space through the control of which the hypothetical provider can raise the commodity or service price at a minimum and with impact for a significant period of time in line with the three dimensions that make up the marketís definition:

  • The Market Mechanisms.
  • The Relevant Product Market .
  • The Relevant geographic Market


 What is a dominant position?
It is the situation where an enterprise is able to control or affect market activity because of its economic power.

 What is an economic concentration?
Any action from which complete or partial transfer of ownership, usufruct in property, rights, stokes, shares, or obligations from one enterprise to another, leading to enabling one enterprise or a group of enterprises to gain control, directly or indirectly, over another enterprise or a group of other enterprises.

 What is the effective purchase price?
It is the price stated in the invoice after deduction of any discounts stated therein.

 Why grant exemptions?
Exemptions are granted to achieve positive outcomes that are in the public interest and which may not be achieved without such exemptions, such as improving the competitiveness of enterprises, improving the production and distribution processes, and providing benefits to consumers.

 Will professional confidentiality be maintained?
Yes, officers of the Competition Directorate and any person looking into its activities are committed to maintaining professional confidentiality. Any person who discloses information deemed confidential without court order will be prosecuted.

 

 
   
 
    B. Banning Anti-Competitive Practices

 
   

In order to guarantee the freedom of competition in the market, the Law banned a group of practices that would restrict or violate competition among enterprises and companies operating in the market, leading to weakening enterprisesí creativity, rejuvenation, and progress, which in turn would inflict harm on the economyís development process. Anti-competitive practices also deprive the consumer of access to high quality products at competitive prices, and will inflict harm on small and medium enterprises and the foreign investments activity.
Anti-competitive practices banned by the Law are divided into:

 It is noteworthy that the Law had excepted/exempted the following cases from being anti-competitive practices and abuse of dominant position:

  • Practices that result from the implementation of an enforceable law.
  • Practices that are deemed permissible by the government to cope with exceptional circumstances, an emergency or a natural catastrophe.
  • Practices exempted by the Minister of Industry and Trade based on their positive outcomes and the resulting public interest. Relevant enterprises should request to be granted this exemption in accordance with a designated form.

 

  • Anti-Competitive alliances

The exemplary status of the market, where a large number of enterprises compete amongst themselves for higher profit and a larger market share of consumers, would guarantee the consumerís access to the best of products and services at the best of prices. Yet, some enterprises may resort to deception and bypassing the rules of competition by coordinating amongst themselves to increase their profit and lower their cost. This usually occurs in situations where it is easy for enterprises to coordinate amongst themselves, such as when they are few in number and in control of a large part of the market. These enterprises would, for instance, agree on a fix selling price for commodities and services they handle, thus depriving the consumer of the opportunity of acquiring preferential prices that result from competition amongst the enterprises, and in turn inflict harm on the economy by taking away the motivation for achieving productivity efficiency and low cost. In addition, such enterprises may share the markets amongst them, thus eliminating the factor of creativity that would otherwise meet the consumerís needs through improvement of the commoditiesí quality. By absenting creativity and economic efficiency, we would steer away from the purpose of achieving a sustainable economic growth.

Therefore, and in order to protect the freedom of competition, the Competition Law banned any explicit or implicit collusions or agreements that would undermine competition. This ban was stipulated in the text of Articles (5), paragraph (A) of this Law.
Among the collusions that constitute a violation of competition is any agreement that aims to:

  • Price fixing.
  • Production control or limitation.
  • Markets sharing.
  • Setting entry barriers or eliminating competitors from the market.
  • Colluding in tenders or bids.

It is noteworthy that the Law exempted from the above-mentioned ban minor importance agreements set by the Minister at (3%) of the total market transactions for agreements between competing enterprises , and at (7%) of the total market transactions for agreements between non-competing enterprises , provided that these agreements do not fix price levels or share markets.

 

  • Abuse of Dominant Position

In some markets, there are enterprises that have higher market power than their competitors, and in some extreme cases, there is one enterprise that functions alone in the market without any competitors. This position of dominance may come about as a result of a number of factors, such as when that enterprise is capable of effective and efficient production at a low cost or when it has advanced equipment or exceptional and creative employees capable of producing high quality commodities. These are all admirable qualities, and for this reason, the Law did not ban the dominant position as such, but rather placed controls to guarantee that the dominant position would not be abused to inflict harm on competition. Enterprises with a dominant position may seek to extract its small and medium competitors from the market, thus limiting the consumerís options and imposing its commodities at high prices.

Therefore, the Law banned enterprises with a dominant position over the whole or part of the market from abusing this dominance to limit competition. This ban includes:

  • Resale price maintenance.
  • Setting entry barriers or eliminating competitors from the market.
  • Subjecting other enterprises to major losses below cost.
  • Discriminating between customers in similar contracts.
  • Obliging a client to refrain from dealing with a competitor.
  • Seeking to monopolize resources necessary for the operation of a competitor.
  • Refusing, without objective grounds, to deal with a specific client.
  • Tying the purchase of a good or a service to the purchase of another one or a certain amount.

 
   
C.
Subjecting economic concentration operations affecting competition to monitoring

 
   

An enterprise may impose control over other enterprises through mergers, buyouts, overtaking, or the purchase of shares or assets sufficient to gain control of the other enterprises. These economic concentration operations result in raising the competitive level of merging enterprises and increasing their power in the market by lowering administrative and marketing costs and acquiring economies of scale.

However, some of these economic concentration operations may provide the resulting enterprises with a dominant position or support a dominant position already attained by these enterprises in a manner that inflicts harm on the status of competition in the market, and in turn inflict harm on the consumer and the national economy. Therefore, economic concentration as such was not banned in the stipulations of the Competition Law, rather the Law imposed monitoring on centralization operations that could negatively affect competition in the market to prevent the creation or support of a dominant position.

The Law divided the economic concentration operations into two parts in light of these operationsí share of the total market transactions. The two parts are:

  • If the total share of the enterprises concerned in the economic concentration operation is (40%) or less of the total market transactions, there would be no need to notify and seek the approval of the Ministry of Industry and Trade. However, parties concerned with licensing economic concentration operations must consult the Minister about the impact level of these operations on competition level in that sector.
  • If the total share of the enterprises concerned in the economic concentration operation exceeds (40%) of the total market transactions, these enterprises must notify and seek the approval of the Minister of Industry and Trade. (Kindly refer to the plan for acquiring the Ministerís approval.
 
   
 
   
The following must be attached to the application form:
- The Articles of Memorandum of Association.
- Draft of the concentration agreement.
- A list of the main goods and services of the enterprise, and their market shares.
- A report on the economic consequences of the operation.
- Financial statements for the last two years.
- A list of the partners and shareholders.
- A list of the members of the Board of Directors.
- A list of the branches of each of the enterprises.
 
   


D.
Guaranteeing fairness of commercial transactions

 
   

Although the Competition Law banned anti-competitive pra ctices, it also addressed the ban on practices that violate the fairness of commercial transactions, which are:

  • Imposing a minimum price for reselling a commodity or service.
  • Giving an advantage in the process of competition or special conditions for sales and purchases.
  • Reselling a product as is at a price less than its real purchase value added to it taxes and fees imposed on the product and transportation fees, if the purpose of which is to undermine competition. Highly damageable products, licensed deductions for any sale done to l iquidate businesses, or renewing stock at lower prices are excluded from this ban.