What practice does competition policy explicitly prevent?

Competition policy is designed to maintain fair competition within markets and prevent practices that could harm consumer welfare and market integrity. One of the predominant practices that competition policy explicitly prevents is participation in cartels.

Cartels involve agreements between competing companies to set prices, limit production, or engage in other activities that restrict competition. This collusion undermines the basic principles of a free market, where competition typically drives innovation, quality, and fair pricing. By preventing such behavior, competition policy aims to promote an environment where companies must compete fairly for customers, ultimately benefiting consumers through better prices and services.

The other options listed, though they are business practices, do not inherently violate competition laws. Encouraging product diversification, fostering customer loyalty programs, and supporting local community initiatives can all contribute positively to a business's market strategy without colluding with competitors or undermining market competition.