The Legal Anatomy of Price Manipulation
Price manipulation, as an accusation built on artificial influence over a market, unfolds in Georgia under two norms of the competition law: the restrictive agreement — including price fixing — and the abuse of a dominant position — including the setting of an unfair price. The first norm concerns horizontal action — agreement between competitors; the second concerns unilateral action — the exploitative conduct of a dominant agent. A boundary should be noted as well: the criminal commodity and antitrust market-manipulation statutes known from the United States system find no direct analogue in the Georgian system — the Georgian route runs through the administrative apparatus of competition law, and a criminal qualification opens only where the manipulation grows into fraud.
The Restrictive Agreement — Article 7
The law prohibits the conclusion, between economic agents or within their associations, of contracts, the taking of decisions or the carrying out of concerted actions whose purpose or effect is the restriction, prevention or suppression of competition on the market. In the list of prohibited forms the very first place belongs to our subject: the direct or indirect fixing of purchase or sale prices or of other trading conditions. The list continues: the limitation of production, markets, technological development or investment; the allocation of markets or sources of supply; the imposition of different conditions on identical transactions, placing partners at a competitive disadvantage; and the imposition of supplementary conditions having no connection, substantive or commercial, with the transaction. A detail of great consequence is the rule of nullity: a prohibited agreement is void unless the exceptions established by the law extend to it — which means the agreement is stripped of legal force from the outset, and no party may claim restitution on its basis. For the defence, the "purpose or effect" test is central: parallel prices on a market do not automatically signify agreement — the fact of coordination must be established in addition.
Abuse of a Dominant Position — Article 6
The second norm concerns the dominant position of one or several economic agents: its abuse is impermissible. Abuse may be held to include: the direct or indirect fixing of an unfair purchase or sale price or of other unfair trading conditions; the limitation of production, markets or technological development to the detriment of consumers' interests; the imposition of different conditions on identical transactions; and the imposition of supplementary conditions unconnected to the transaction. In the price context this means the accusation stands on two steps: first the dominant position is established, then the unfairness of the price; both circumstances are evaluative and require economic analysis. For an agent not in a dominant position, the second step never opens at all — and that distinction is the first boundary of the defence. The second boundary is the assessment of the fairness of the price: the category of an unfair price rests on the assessment of the competition authority, and it is precisely there that the defence can present economic argumentation — the cost structure, market conditions and the availability of alternatives — in answer to the accusation.
The Economic Argumentation of the Defence
In a price case the strongest instrument of the defence is often not legal but economic argument. The answer to an accusation of agreement begins in two directions: first, an alternative explanation of parallelism; second, the absence of a trace of communication. To an accusation of dominance there are three lines: the method of defining the boundaries of the market share, the temporality of dominance, and the cost basis of the price. A well-documented economic file often keeps the case from reaching court at all, before the thesis of the accusation has even been formed.
The list contains a separate form connected with state procurement: the establishment of coordinated conditions of a tender bid for the purpose of material advantage or preference, which substantially infringes the lawful interests of the purchasing organisation. In the price context this means that coordinated tender prices fall under the general prohibition just as much as price fixing on an ordinary market — the form of the market does not neutralize the prohibition.
Frequently Asked Questions
Below we answer the most common questions about price manipulation.
What is price fixing?
The direct or indirect fixing of purchase or sale prices or other trading conditions between competitors — the first form in the list of restrictive agreements.
What follows from a prohibited agreement?
It is void, unless an exception applies — obligations assumed under it lose legal force.
When is a dominant agent's price abusive?
Where the dominant position stands and the price is unfair — both elements must be established separately.
Can a criminal qualification arise?
Only where the manipulation rises to obtaining property by deception — such episodes are assessed separately.
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