Corporate Social ResponsibilityTowards the Competition

By

Raymund N. Sanchez

Agenda

Overview of CSR

Unfair competition- Definition- Antitrust laws- Microsoft case

Cartels

Intellectual Property Rights

Blood Diamonds

CSR Overview

CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.

Unfair Trade Practices

Resorting to unethical business behavior to gain a competitive edge (advertising fraud, patent/ trademark infringement, socially irresponsible gimmicks, etc.)

Reasons why companies resort to Unfair Trade Practices

Globalization of competition

Better informed & more discerning customers

Increasing number of competitors

Rapid advance in both soft & hard technology

Advances in scientific fields

In short, competition is getting stiffer & stiffer,

Any kind of edge will count, which is why some

companies resort to unethical practices.

When profit maximization becomes the sole driving force of the business that it pursues it with any means necessary. Resorting to:

Fraud

Violation of human dignity

Patent/Trademark infringement

Socially irresponsible gimmicks

others

When does competition become UNFAIR?

Anti Trust Laws

Trust: or corporate monopoly was created for the purpose of eliminating competition in an area of business & of controlling the market for a product

Coverage of Anti Trust Laws

Price fixing between competitors

Abuses of market power by a monopolist or dominant firm

Agreement between competitors to restrict output

Price Fixing between Competitors

PRICE: often the principal way by which firms compete

Agreements on price initiatives, price ranges, price targets, collusion between competitors on floor prices are generally illegal under antitrust laws

Price Fixing between Competitors

Are similarity of prices, simultaneous price changes, or high price, indications of price fixing?

NO, not always

Supply & Demand can cause these. Price fixing must be PROVEN. (systematic exchanges of pricing information between competitors)

How do we determine the
Just Price

Pricing Process: requires business to effectively calculate resources/needs, supply/demand.

Just Price: one in which both buyer & seller are given what is due them (price a manufacturer charges its customers for G&S is total cost of investment plus normal profit)

How do we determine the
Just Price

Buying & selling were instituted for the common good of both parties since each needs the product of the other... Therefore, the contract between them should rest upon equality of thing to things. The measure of a value of a thing which is exchanged should be given by its money price. Hence to sell a thing dearer or buy it cheaper than it is worth is unjust -St. Thomas Aquinas

How do we determine the
Just Price

Prada

Louis Vuitton

Rolex

Rolls Royce

Q: Do these products ask for a Just Price?

Abusing Market Dominance

Dominance: refers to a position of considerable economic power in a market held over a period of time

Abusing Market Dominance

Q1: Is Being Dominant bad?

Q2: Why is the law punishing companies for being too good at what they do?

Abusing Market Dominance

Conduct of dominant companies that violate antitrust laws:Refusal to supply for non-objective reasons

Unfair discrimination between equivalent transactions

Non-objective refusal to grant access to essential facilities

Unfair / predatory pricing

Engaging in practices to raise rivals costs or foreclose competitor entry

Unfair rebating practices & customer ties

Case Study Microsoft IE

During the browser wars, 95% of PC were pre-loaded with Windows

Microsoft's IE was introduced in 1995 due to being incorporated into the Windows 95 OS

Market share diminished from Netscape who then charged Microsoft with anti competitive behavior

Oligopoly: Agreements between competitors

Oligopoly: agreements between competitors wherein prices can be set at highly profitable levels & restricts competition

Oligopoly: Agreements between competitors

Why is Oligopoly wrong?

1) It is basically a monopoly2) No competition = no benefit to the consumer -no improved product quality -no better price -no choice

Cartels

A cartel is a formal (explicit) agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production.

Cartels

Strategies of Cartels

Market division & market sharing

Agreements between competitors to restrict output

Collective boycotts

Resale price maintenance agreements

Cartels

Market division & market sharing: conformity among competitors to divide sales territories or allocate customers (agreement not to compete)

Cartels

Agreements between competitors to restrict output: collusion between competitors to restrict production facilities in order to drive up the price

Cartels

Collective boycotts: conformity between competitors not to deal with anther person or business (illegal because it twists/deforms the competitive process by foreclosing competitive opportunities for suppliers or by denying customer choice)

Cartels

Resale price maintenance agreements: agreement between a supplier & dealer that fixes the minimum resale price of a product

Grey Areas

An agreement between competitors to adopt standards that require fire-resistant materials for certain products.

Con:The agreement to adopt is restrictive. The manufacturers have limited their own ability to use other materials & have limited supplier choice

Pro: Will benefit consumers in terms of safety

Q: Is this a Cartel? Should this be illegal?

Intellectual Property Rights

Intellectual Property: Constitutes those original creative works that have economic value & are protected by law

Reasons for
Intellectual Property Rights

They reward the creators of original works by preventing others from copying, performing or distributing those works without permission

They provide incentives for people to produce scientific & creative works that benefit society at large

Intellectual Property Rights

Patent law: protects inventions that demonstrate technological progress

Intellectual Property Rights

Copyright law: protects a variety of literary & artistic works, including paintings sculpture, prose, poetry, plays, musical competitions, dances, photographs, motion pictures, radio, TV, computer programs

Intellectual Property Rights

Trademark law: protects words & symbols that serve to identify different brands of G&S in the marketplace

Intellectual Property Rights

Q: By assigning exclusive rights to an idea/thing, doesn't it make IPR anti-competitive?

A: Trick Question. IPR has an expiration date.

Intellectual Property Rights

By giving IPR a termination date, it allows society to benefit from the idea/thing after the inventor has had an opportunity to earn a good/fair/reasonable reward.

Note: trademarks never expire

Intellectual Property Rights

Counterfeiting: a criminal offense of making an imitation of an article with intent to defraud others into accepting it as a genuine item

Intellectual Property Rights

Is piracy truly a 'Victimless' Crime?

No!

1) Creators are robbed of income supposed to be for them2) Consumers receive defective products

Intellectual Property Rights

Reverse Engineering: process of analyzing & copying products off the competitor, sufficient to replicate the parts using appropriate fabrication techniques & coming out with new products in the company's own version

Intellectual Property Rights

How do we protect IPR?Government implementation

Improved technology (digital watermarks)

Consumer understanding

References

Corporate Social Responsibility, Basic Principles & Best Practices by Jose Mario B. Maximo

Multinationals & Corporate Social Responsibility by Jennifer A Zerk

-END-

Click to edit the title text format