Final Report Save

8/3/2019 Final Report Save

1/26

1

COMPETITION LAW AND CONSUMER PROTECTION ACT- NEED TO

DEVELOP COORDINATING APPROACH BETWEEN TWO

COMPLIMENTARY LEGISLATIONS

.1.Introductory 5

2.Policy Approach of Competition Act and Consumer Protection Act 6

3.Relationship between consumer protection law and competition law.. 8

3.1 Distinct But Overlapping Fields 8

3.2 Cherishing ideals of consumer welfare . 9

4. Functioning of Competition and Consumer Protection Act ... 10

5. Promoting Consumer Welfare- A Goal ofCompetition Law Regime 13

6. Need to Develop a Coordinating Approach Between Two Complimentary

Legislations .. 15

7. Some International Models Adopting a Coordinated Approach .. 19

8. Responsibility of the Government and Other Concerned Agencies and the Consumers

Themselves to Protect and Improve Competition Culture 22

9. Suggestions and Conclusions

9.1 Suggestions 25

9.2 Conclusions . 26

BIBLIOGRAPHY . . 27

WEBSOURCES 28


2/26

2


3/26

3

COMPETITION LAW AND CONSUMER PROTECTION ACT- NEED TO

DEVELOP COORDINATING APPROACH BETWEEN TWO

COMPLIMENTARY LEGISLATIONS

1. Introductory

The present research work throws light on the ideals of consumer welfare in the competition law

enforcement and stresses upon the need to integrate competition law and consumer protection

act, which in their policies are complimentary to each other and can be mutually enforced. While

stressing upon the need to adopt a coordinating approach between these two legislations it also

seeks to explore how consumer protection law and competition policy share common goal of

consumer welfare when these two policies addresses this goal from different perspectives.

Although both the policies differ in their aims, at functional and jurisdictional level but when

adopted in practices there is certain overlap between the two fields which has to be addressed by

adopting a coordinating approach. Some international models of other countries have been traced

who have recogonised the need to engrave consumer welfare standards in their competitionpolicies.

Present work also throws light on how the consumer should stand for their own welfare when

consumers are stakeholders in any matter affecting competition. It at times happen that

uncharitable market players resort to unethical and illegal practices to thwart competition. In

such a situation the task of government and law enforcement agencies become very crucial. It

also brings out the collective responsibility of the Government, other concerned agencies and the

consumers themselves with their respective arrangements to establish and improve thecompetition culture in India.

Paper ends with conclusion and some recommendations to protect and promote competition

culture.


4/26

4

2. Policy Approach of Competition Act and Consumer Protection Act

While acknowledging the different modes of functioning of consumer protection and

competition laws, it should be remembered that competition issues are closely related to

protection of consumers economic interests. So, we must acknowledge how the policies

complement each other.

The preamble of the Competition Act 2002, which lays the objective of the Act provides-

An Act to provide keeping in view of the economic development of the country, for the

establishment of a commission to prevent practices having adverse effect on competition, to

promote and sustain competition in the markets, to protect the interest of consumers and to

ensure freedom of trade carried on by other participants in India..

So, the spirit of protection of the interests of the consumers is envisaged in the preamble of the

Act itself. The preamble of the act clearly responds for an answer to a question that Competition

Law for whom? So, it is ultimately to prevent the practices adversely affecting the competition

so as to promote and preserve it and for the protection of consumers interest.

Ensuring economic justice has been the main aim of the Government since independence. With

this objective in mind, the Government enacted Monopolies Restrictive Trade Practices Act,

1969. But this legislation attracted sharp criticism on account of its ineffectiveness in

achieving the objective stated in the Act.1Economic reforms in 1990s significantly changed the

economic environment of the country. The MRTP Act 1969 was considered to be inadequate to

deal with new emerging economic order. So, in view of new economic scenario, India adopted a

new competition law, the Competition Act, 2002 to replace MRTP Act, 1969.

With the repeal of MRTP Act, 1969 (subject to the enforcement of Competition Act, 2002) the

mandate of consumer protection against Unfair Trade Practices primarily vests with the redressal

authorities established under the Consumer Protection Act. To facilitate their tasks, the definition

of Unfair Trade Practices have been suitably revised. Anti-Competitive agreements (hitherto

referred to as restrictive trade practices under the erstwhile MRTP Act) and abuse of dominance

1Radha B. and Prof. KV Rao, Competition Act 2002- A Critical Analysis, September 2004, p.28 available at

www.icai.org/resource_file/10998p281-286,last visited on 13th

January at 13:00 hrs.


5/26

5

(hitherto referred to as Monopolistic Trade Practices under the erstwhile MRTP Act), fall under

the dominance of competition under the Competition Act.2

Consumer Protection Act, 1986 is an important central legislation to provide for the protection of

consumers besides the Competition Act. The sole concern is the welfare of consuming public3

whereas the competition act is meant to curb anti-competitive agreements, abuse of dominance

and anti-competitive mergers. The redressal authorities set up under the Consumer Protection

Act enforce consumer protection law to prevent deception and unfair marketing practices, which

hurt the public at large, as consumer goods and services. Anti-competitive and consumer

protection laws have to play a significant role in maintaining the competitiveness in the Indian

market and generation of best products at lowest prices to provide benefit to consumers.

Thus, these two regulatory authorities (i.e., Competition Commission and Redressal Authorities

setup under the Consumer Protection Act), ensure that nations market are vigorous, vibrant,

efficient and free from restrictions. These legislations also protect from the harm to the industry,

trade and also the consumers causes due to these restrictions. This indeed has become the task of

prime importance in the context of present day global markets, high technology, innovations and

fast changing landscape.

Competition Act is basically a legislation to regulate the market place to ensure that free trade

and competitions is not suppressed in any way. It aims at preserving the competition as

competition serves to optimize consumers interest. Consumer Protection Regulation is a body of

law designed to protect consumers interest at the level of individual transaction.

There is strong commonality between competition policy and law on the one hand and consumer

protection policy and law on the other. An effective competition policy lowers entry and exit

barriers and makes the environment conducive to promoting entrepreneurship, which also

provides space for the growth of small and medium enterprises and consequent employment

expansion. Competition law concentrates on maintaining the process of competition between

enterprises and tries to seek remedy for behavioural or structural problems in order to re-

2

SM Daugar, Commentary on MRTP Law, Competition Law and Consumer Protection Act, Lexis NexisButterworths Wadhwa, Nagpur,2010.3

Pradeep S Mehta, Towards A Functional Competition Policy For India-An Overview, Academic Foundation, NewDelhi, 2005, p.49.


6/26

6

establish effective competition in the market. The consequence of this is higher economic

efficiency, greater innovation and enhancement of consumer welfare. Thereby the consumer

experiences wider choices and greater availability of goods at affordable prices. On the other

hand, the consumer protection policy and law are primarily concerned with the nature of

consumer transactions, trying to improve market conditions for effective exercises of consumer

choice. Thus, the two disciplines focus on different market failures and offer different remedies,

but are both aimed at maintaining well functioning, competitive markets that promote consumer

welfare. The two disciplines since, complement each other policy they can be made mutually re-

enforcing.

3. Relationship between consumer protection law and competition law

3.1 Distinct but overlapping fields

Although consumer protection and competition law seem to be two distinct fields, one dealing

with production options and other with ability to chose among them. Competition law cannot

provide a remedy to a consumer harmed by virtue of unfair trade practices or by vague and

unfair contract terms imposed by a (non-dominant) company does not affecting the competition

and in the same way consumer protection law cannot prevent the companies from forming cartels

or mergers.4 Protection of consumers is ensured by prescribing and setting minimum quality

specifications and safety standards for both goods and services and establishing redressal

mechanisms for the redressal of consumers grievances while the objective of competition is met

by ensuring that there are sufficient number of producers so that not a single producer may attain

a position of dominance and abuse his dominant position. Similarly, both the legislation deals

with different issues like competition law deals with predatory pricing which may affect supply

of options rather than consumers choice among options, and vice-versa fraud and deception

which are issues under consumer law may affect only the choice among options rather than their

supply.

4Irina Haracoglu, The Competition Law Review, Volume 3, March 2007, p.184. available at

www.clasf.org/CompLRev/Issues/Vol3Issue2Art2Haracoglou.pdf, last visited on 19th

January at 10.20 IST.


7/26

7

While this separation of fields is sustainable in different prepositions of the two legislations

however, in practice there is inevitable overlap between the two fields. Certain practices do not

encroach the circumference of each other but may affect the supply of options and the choice

among them.

Tying may not involve an anti-competitive effect insofar as it may involve leveraging market

power from one market into another, but it may also directly affect consumer choice by making

it difficult for consumers to evaluate or price either of the two tied products separately. 5

Similarly, resale price maintenance can restrict the pricing options for dealers and rise anti-

competitive concerns. It can however distort consumer choice, insofar as it may be used to

guarantee large retail margins, which will give salespeople an inventive to push certain brands of

products, even if those brands are not superior to competing brands in the same price range.6

3.2 Cherishing ideals of consumer welfare

Both the policies i.e., competition law and consumer protection, share common interest of

promoting consumer welfare and at various functional level can be seen complementing and

cherishing each other. Competition ensures that market functions in such a way that it does not

prevent choices from reaching consumers while consumer protection can make well informed

decisions among the available choices. Lande & Averitt have termed this notion consumer

sovereignty referring to the state of affairs where the consumer has the power to define his or

her own wants and the ability to satisfy these wants at competitive prices.

There must be a range of consumer options made possible through competition, and consumers

must be able to choose effectively among these options. The boundary between anti-trust and

consumer protection is best defined by reference to these two elements of consumer sovereignty.

The anti-trust laws are intended to ensure that the market place remains competitive, so that a

meaning full range of options is made available to consumers, unimpaired by practices such as

price fixing or anticompetitive mergers. The consumer protection laws are then intended to

ensure that consumers can choose effectively from among those options, with their critical

5National Society of Professional Engineers U.S 435 US679 (1978), which involved a group of restrictions on price

information options promulgated by the association of professional engineers, which when eliminated by the

Supreme Court gave a more effective ability to choose among available providers.6

NW Averitt & Lande, Consumer Sovereignty: A Unified Theory of Antitrust and Consumer Protection Law

(1997) 65 Antitrust LJ713, p 19.


8/26

8

faculties unimpaired by such violations as deceptions or the withholding of material

information.7

Understanding more about the consumer welfare standard can be one way to understand more

about the relationship between competition law and consumer law as well as between their

enforcement methods and their enforcement agencies. Consumer protection and competition law

seems to have developed in many legal systems along each other and not in cooperation with

each other. This has lead to overlaps and gaps between the legal rules and the ways these rules

are enforced. Both the complements and the tensions have to be addressed between the two

areas. Synergies should be more extensively discussed and taken into consideration when policy

decisions are made. Outlining neglected tensions between the two areas enhances conceptual

clarity as well as the protection of both competitive markets and individual consumers. When

policy claims are made about the benefits of competition law enforcement for consumers hard

cases and solid evidence should support these claims. At the moment, at least in EC competition

law, there are little of both. These two areas of the law share a common goal that is to provide

consumers with access to a range of competitively priced goods and services in markets free of

unfair and deceptive practices. It is commonplace that a competitive market structure needs

active consumers and vice versa. Yet, this fact seems to be more often forgotten than realised.8

4 Functioning of competition and consumer protection legislation

Although both the legislations share the same ending in terms of their objectives they operate on

different level touching the inherent issues between the two as follows-

i. As mentioned earlier, while competition and consumer protection legislation share acommon goal, which is to promote consumer welfare, but they tend to achieve this goal in

different ways. Competition law by restricting unfair competition in the market promotes range

of choices in services and goods available to the consumer; whereas consumer protection lawenables the consumers to have access and freedom to select among the available choices/options.

The two policies address the same goal from different perspective.

7NW Averitt & RH Lande, Consumer Sovereignty: A Unified Theory of Antitrust and Consumer Protection Law

(1997) 65 Antitrust LJ 713.8

KJ Cseres, Controversies of Consumer Welfare Standards, Competition Law Review, Volume 3, March 2007,available at www.clasf.org/CompLrev/Issues/Vol3Issuee2Art1Cseres last visited on 20th January at 9.30 IST.


9/26

9

ii. Competition law engages a set of rules, to address competition in the markets in a broad-spectrum and homogeneous manner, to bring about gains to the market as a whole; consumer

protection law uses targeted rules, addressed at specific sectors sometimes, to create a more

empowered and advantaged consumer. These rules direct particulars sectors or firms not to

pursue deceptive or unfair trade practices and act in violation of consumer welfare standards.

iii. Competition law rules are straight out directed at the market and are framed in order inregulate the manner firms compete with each other in a marketplace, with a view to promoting

fair competition among firms and in thus enhancing consumer choice; Consumer protection law

has a more diverse range of rules, which address the conduct of firms and the specifically the

standards by which they operate, and the rules governing the engagement between businesses

and individual consumers, with a view to promoting access to goods and services, greater quality

in the available choices, and ensuring consumer access to unfailing and undistorted information

to assist the consumer in making that choice. Furthermore, the benefit of competition law is

usually expressed in terms of economic efficiency, although this notion has been opposed by

various economists, jurists and even by the European courts (by choosing consumer welfare over

economic efficiency whenever the conducts present a conflict); whereas the benefit of consumer

protection law can be economic, and it can also engender non-economic quantities of value such

as the safety and health of the consumer. They have direct bearing on consumer welfare.

iv. As a matter of general application of the law, competition laws have an applicable limitin the sense that competition rules of exclusionary conduct and collusion cannot be manipulated

to bring about change in a particular sector or in the structure of a particular market. The rules

are generally applied uniformly across the board. Consumer protection laws, on the other hand,

can be used to impose rules of behaviour on firms in a particular sector to give consumers better

information on choice, access to safer goods, and redress in the case of misleading contract

terms.

v. Consumer protection law provides protection to the rights of consumers at the level of theindividual transaction, against a range of abuses and unfair trade practices; whereas competition


10/26

10

law functions at the level of the marketplace, it is meant to curb anti-competitive agreements,

abuse of dominance and anti-competitive mergers. It carries out its agenda by promoting

consumer interests not at the transactional level but at the level of firms in the market.

vi. With respect to the design of remedies, it is important to note that consumer protectionlaw remedies can be far more targeted than competition law remedies; the remedies of consumer

protection law, like the prescribed rules, can go beyond fines and prohibition of conduct. A wider

array of tools can therefore be employed in this regard. For example, restitution via

compensatory damages is one option; so too are prevention and deterrence via fines, punishment

via imprisonment, and suspension of business licenses. As regards restitution in particular, since

consumer protection law is usually grounded in principles of fairness and balance of rights,

restitution will be one of the more effective remedial tools.9

vii. The reference to consumer welfare in the preamble of the Competition Act, 2002 reflectsParliaments appreciation that a properly functioning marketplace requires not only enforcement

against market power abuses, but also transparency in information provided to consumers to

promote well-informed purchasing decisions. Hence, consumer and competition policy are

mutually reinforcing.

9Cseres K (2009). Competition and consumer policies: Starting points for better convergence. Amsterdam Centre

for Law and Economics working paper no. 2009-06. 1 April. Available at: http://ssrn.com/abstract=1379322.


11/26

11

Policy Competition law Consumer protection law

Aim Protect competitive processes/supply

of options

Protect ability to chose

Target group Fairness between trading parties /

enforcing conduct for market/

interest of consumers

Fairness between traders and

consumers mostly / empowering

consumers

Practices covered Cartels, abuse of dominance, anti-

competitive merges, competition

advocacy etc.

Unfair trade practices and deceptive

advertising, fraud etc.

Legislative

regime

Competition Act 2002 Consumer Protection Act, 1986

Enforcement By Competition Commission of India

and other sectoral regulators

Three tier redressal machinery set

up under the Act

Competition issues are closely related to protection of consumers economic interests and this

can be very well acknowledged from the different modes of functioning of consumer protection

and competition laws. In fact, many European nations have acknowledged how the policies

enhance each other.

5. Promoting Consumer Welfare- A Goal of Competition Law Regime

Consumer welfare is defined as consumer surplus, which is a part of total surplus that accrues to

consumers. Thus, competition law is not concerned with maximizing of firms; rather it is

concerned with defending market competition in order to increase welfare, not defending

competitors. Prof. Joseph Brodely argues that the end result of competition is the enhancement of

the aggregate social wealth (economic efficiency) subject to the constraint that consumers shall

receive an appropriate share of such wealth (consumer welfare). Thus, competition policy

enunciates a distinct economic objective, a blending of efficiency and consumer welfare to be

achieved by a particular social instrumentality-inter firm rivalry. Because the economic rationale

of competition is neither economic efficiency nor consumer welfare standing alone, it is best


12/26

12

described by a distinctive term-competition welfare.10

And the term consumer welfare does not

only refer to the individual consumers rather it includes in its purview all third parties who are

affected by the anti-competitive agreement behaviours or mergers.

Even in international perspective, the conventional wisdom in the antitrust community is that

the anti-trust laws were passed to promote economic efficiency. This view, held by most

economists, conservative scholars, federal enforcers and practicing lawyers, is incorrect. Neither

the sole nor even the primary purpose of these laws, is or ever has been, to enhance efficiency.

The legislative histories of the anti-trust laws and recent cases reveal this overarching purpose.

Current opinion of U.S Supreme court focus much more on protecting consumers than on

increasing efficiency.

The fundamental goal of anti-trust, in other words is to protect consumers in the relevant market

from anti-competitive behavior that exploits them like unfairly transfer of wealth to firms with

market power and not to increase the total wealth of the society.

When the conduct presents a conflict between protecting consumers and promoting the

efficiency of the economy, the courts have always chosen consumers protection over efficiency.

European courts have equated consumer welfare not with economic efficiency but with the

benefits received by the consumers in the relevant market. In measuring consumer welfare by the

level of prices in the market rather than by the allocative efficiency, the courts signaled that the

ultimate aim of anti-trust law is to enhance the wellbeing of consumers in the relevant market,

not maximize economic efficiency, or minimize economic inefficiency. Courts have expressly

examined the effect of anti-trust laws on things that matter to consumers- such as price, quality,

or choice but they never expressly examine its effects on total welfare of the market or economic

efficiency. They have not mentioned producers surplus; they do not compare gains in

producers surplus with reductions in consumers surplus. Whenever courts have addressed an

actual or potential conflict between consumers wellbeing and economic efficiency, consumerinterest have always prevailed.

National Competition Authorities carry out their enforcement duties on the presumption that

ensuring the maintenance of competition on market will ultimately benefit the consumer welfare.

10Jayant Kumar, Abir Roy, Competition Law in India, Eastern Law House Pvt. Ltd. New Delhi, 2008, p.21.


13/26

13

Competition law seeks to ensure that efficiency in the market is maximized in terms of lower

costs and prices, quality, availability of choices, services etc. which will eventually benefit the

consumer welfare.

6. Need to Develop a Coordinating Approach Between Two Complimentary

Legislations

Depending upon the legislation under which the objective of consumer welfare operates or if

there be a separate legislation for Consumer protection, the National Competition Authorities

must try to establish coherence between such other legislations and competition law. National

Competition Authorities shall bear the burden of bringing about such coherence because at every

level of its functioning competition laws touch the consumer welfare standards which is an

underlying enforcement goal of Competition Law. Moreover, the consumer policies can embed

into themselves antitrust enforcement experiences for designing their future strategies.

Cooperation between competition policy and consumer protection officials can accelerate

effective approaches to detect and punish frauds. Following are some points in this regard which

emphasizes upon the need to integrate consumer protection act and competition act.

i. Till now our public education campaign was geared at educating the general public,including merchants, on consumer protection matters with a little emphasis on competition

issues. This had negative effects on competition authority as industries, local firms and consumer

had developed a very limited understanding for the Competition Act to expend the significant

resources on sensitizing industry and consumers on competition law through public education

activities. Such harmonization will enable us to make utilization of our pre-invested resources in

sensitizing competition issues. A platform has already been build up and it would be just enough

to place competition policy on it.

ii. Consumers are the major stakeholders in any matter affecting competition. Competitionauthority is to earn and maintain the trust and support of the general public, the authorities must

demonstrate that it is serving consumers interests. Using consumers complaint to demonstrate

the benefits competition is more appealing and makes it easier for the public to understand


14/26

14

competition issues. The matters complained of by the consumers are numerous and involve a

wide variety of industry, market, products, and services. Smaller merchants that may be affected

by the activities of larger merchants generally do not complain because of ignorance. It is

generally the consumer who provides much of information on issues affecting the competition in

markets. So, somewhere it appears to be very essential that consumer at individual level must

find a place in the competition policy. It would also bring in front the current market scenario

and help the competition authorities to develop a deep insight into the issues affecting the

competition.

iii. When competition law is enforced on the basis of the consumer welfare standards, it canbe reasonably assumed that consumers economic interests in the terms of price, output and

quality are being seriously pursued. Acknowledging this affect should influence the point where

the category of consumers needs for which consumers rules have to be legislated and enforced.

Consumers need to be empowered to make use of possibilities offered by the effective

competition law enforcement rather than being protected against stranger producers in the market

place. So, a more coordinated approach between these two fields of the law and policy making

seems necessary.

iv. Combining competition law and consumer protection matters under one administrativeinstitution or having an integrated legislation for both of the two fields has practical benefits and

produces useful synergies through taking a broader look at the whole market. It helps to achieve

complementarities and to avoid potential conflicts between the enforcement of competition law

and of consumer protection. Bringing a consumer welfare perspective to competition law

enforcement can also increase public awareness of anticompetitive and anti-consumer corporate

conduct and approval of the agencys enforcement activities, with potential derivative benefits

for competition enforcement.

v. There are cases where both competition law and consumer law violations are present thatcan give rise to a mix of competition and consumer issues and which can be more efficiently

viewed and solved together. Considerations in one policy area can provide useful guidelines in

the other policy area and mutually draw the attention of enforcers in one area to the concerns of


15/26

15

the other area. Co-operation between the competition policy and consumer protection officials

through effectively sharing information and collaborating can help to adjust the two policies to

each other which in turn prevent thwarting each others goals.

vi. The combination of functions allows the consideration of whether competition orconsumer protection remedies are the most appropriate and permits consumer protection

decisions to be guided by considerations of economic efficiency. Examples of the practical

advantage of such a combined approach can be seen in cases of recently liberalised markets,

where abuse of a dominant position and unfair trade practices often go hand in hand.

vii. Consumer protection rules are to provide final consumers assistance in their markettransactions either through preventing or remedying market failures. These rules target areas

where competition rules are inapplicable or ineffective. Consumer law can address information

inefficiencies like imperfect information, information asymmetries or even bounded rationality

as well as health and safety aspects of market transactions. The provision of good quality and

cost of consumer information makes free and well-informed decisions possible. Furthermore,

while health and safety measures might be less efficient in terms of economic efficiency, they

achieve social objectives of overriding interest. An integrated approach could rectify this

deficiency. Cooperation between competition policy and consumer protection officials and

practitioners can accelerate the pursuit of effective approaches to detecting and punishing fraud.

viii. Institutionalising consumer representation in competition authorities policy-makingprocesses is necessary to incorporate and advocate procedures that will take account of the

impact of both consumer behaviour in activating competition and of business behaviour on

consumer welfare.

ix. Competition policy needs to incorporate complementary consumer policies aimed atensuring that consumers can make informed and active choices in the market place. These

choices send signals to producers, and in doing so trigger the development of more competitive

markets. Thus, competition policy will be more effective where it includes action to develop the

demand side of the market. This applies whether the country is developing or developed.


16/26

16

x. Such coordination will facilitate the joint exercises by the Competition Commission ofIndia and the consumer dispute redressal system because Consumer Protection Act has

established redressal mechanism at State and District level, so a joint venture between the two

will enable the Competition Commission to share these redressal mechanism and thus will

enable the Commission to have a penetrating reach to the issues relating to unfair and anti-

competitive practices even in agricultural sector small enterprises and retail sector.

xi. Moreover, our competition policy must reflect its direct concern to protect and promoteconsumer welfare as its primary goal so as the country trying to invest its resources in India gets

a clear message that our policy will not tolerate any conduct detrimental to the interest of

consumer. Such provision will beforehand alarm the countries to redefine their priorities and

code of conduct accordingly.

Our competition law is very recent in origin as compared to the antitrust laws of European

countries. They have recogonised the spirit of consumer protection and welfare in their

functioning of antitrust laws apparently and they have been so far successful in taking up both

the issues simultaneously despite of comprising such big and complex markets as compared to

India. We have rented the antitrust provisions from these nations but not the spirit lying behind

the intent of the legislators, which is welfare of consumer. We have not come so far with ourCompetition Act. So, it is high time that we could review our competition policy and give a fair

appraisal to the consumer concern in our policies by reviewing the existing provisions in the Act

and making it corresponding with a more consumer focused approach. Taking view of the

present growth rate of the Indian markets it is predicted that it will be India, china, and USA after

twenty years who will dominate the world economies as the most powerful economies of the

world. So, our competition policies have to be prepared with a dynamic and exhaustive approach

to give a deal to such a scenario. It is very necessary that we give a wider and liberal

interpretation to our competition legislation provisions. Construing them strictly and narrowly is

not going to justify their existence in the global competitive world. They must be so flexible to

establish a effective readily coordination with global antitrust policies and other sectoral

regulators trade and industrial policies.


17/26

17

7. Some International Models Adopting A Coordinating Approach

Competition authorities all around the world are becoming more conscious of the impact that

competition policy and law enforcement has on consumers. They seem to be ever more anxious

to declare and demonstrate the significant role they play as enforcers of competition law in

consumers economic life. Role of consumers has been strengthened across Europe, both outside

and within the purview of anti-trust laws. Competition policy and law are profoundly addressing

the relation between these two systems of law. While the US, Australia, the UK and other

developed countries have been moving more towards consumer efficiency models of competition

policy, demand side policies have still not been meaningfully institutionalised throughout the

different levels of consumer interest. In less developed economies, industrial policies remain

focused predominantly on competitor protection. In the footsteps of former EC Commissioner

Mario Monti, Neelie Kroes formulated the competition policy message of her cabinet as the

following, Our aim is simple: to protect competition in the market as a means of enhancing

consumer welfare and ensuring an efficient allocation of resources. Since Mario Monti became

Commissioner in 1999, consumer interests have been high on the agenda of DG Competition.

Monti has repeatedly pointed out how competition law is to protect consumers and Commission

documents have explicitly referred to the relevant role competition law can play in consumers

lives. One of Montis priorities was to make consumers aware of the fact that, the protection of

the interests of consumers, and therefore of European citizens, is at the heart of Community

competition policy. Director General of DG Competition, Philip Lowe emphasized that,

competition is not an end in itself, but an instrument designed to achieve a certain public interest

objective, consumer welfare.

The consumers role has been made more explicit, and has been increased, in the procedural

framework of Articles 81 and 82 EC. Consumers contribution to the enforcement of EC

competition law by providing market information, bringing complaints and in the future bringing

damages claims has been considerably encouraged by the Commission. This has been reaffirmed

by the European CFI in sterreichische Postsparkasse:

It should be pointed out in this respect that the ultimate purpose of the rules that seek to ensure

that competition is not distorted in the internal market is to increase the well-being of consumers.

That purpose can be seen in particular from the wording of Article 81 EC. Competition law


18/26

18

and competition policy therefore have an undeniable impact on the specific economic interests of

final customers who purchase goods or services.11

The political economy arguments of the rebalancing model can similarly find their way in the

other parts of competition law. It has, for example, been taken into account by the Economic

Advisory Group for Competition Policy in its report on Article 82 EC:

Referring to this [consumer welfare added] standard is all the more important because, in the

actual proceedings on a given case, competitors are usually much better organized than

consumers. The competition authority receives more complaints and more material from

competitors, so the procedure tends to be biased towards the protection of competitors.

Developing a routine for assessing consumer welfare effects provides a counterweight to this

bias.

Moreover, Article 2(1)(b) of the Merger Regulation makes reference to the development of

technical and economic progress in the interest of consumers. European competition policy has

been pursuing a pro-active policy which is addressing consumer interests more directly and more

explicitly. Such policy tools are the European Commissions recent sector inquiries and its

advocacy work by which it makes competition policy more visible for consumers.

Thereby the European policy makers finally synchronize with other enforcement agencies

around the world. In the United States antitrust enforcement has a much longer tradition. Besides

the Antitrust Division of the Department of Justice, the FTC acts to ensure that markets operate

efficiently to benefit consumers. In the United Kingdom the Office of Fair Tradings Statement

of purpose declares, The OFTs goal is to make markets work well for consumers. These and

similar statements imply that competition policy works towards the improvement of consumer

interests.

In some countries and regions, however, such as Australia, France, Hungary and Poland, and in

CARICOMs regional law, the competition law contains a chapter devoted to consumer

protection. This is also the case, for example, in Lithuania and in the Bolivarian Republic of

Venezuela, where the competition laws contain regulations on unfair trade practices. In

11Cases T-213/01 & T-214/01 sterreichische Postsparkasse and Bank fr Arbeit und Wirtschaft v Commission

[2006] ECR II-1601, para 115.


19/26

19

Canada, the Competition Act contains provisions dealing with misleading advertising and

deceptive marketing practices. These provisions are designed to ensure that consumers are

provided with basic, uniform, and accurate information on certain consumer products, and to

proscribe deceptive and false representations.

Moreover, drafting two separate laws does not prevent a coordinated approach to policy

development, and although consumer protection legislation may be developed separately from

consumer protection legislation, the laws must be enforced in a coordinated way, which allows

the policies to complement and enhance one another. Also, because of the links between the two

bodies of law, the administration of these laws is often the responsibility of the same authority.

This is the case, for example, in Algeria, Australia, Colombia, Costa Rica, Finland, France, New

Zealand, Panama, Peru, Poland, the Russian Federation, Sri Lanka, the United Kingdom and the

United States, and in Hungary and Italy atleast to a certain extent.

In other jurisdictions, the administration of competition and consumer protection laws is

attributed to different authorities. For instance, in Estonia, consumer protection legislation and

the Consumer Protection Authority are separate from competition legislation and the

Competition Board. However, the Estonian Competition Act also contains provisions on unfair

trade practices. Contraventions of these provisions are determined by a civil court. In Zambia,

consumer protection legislation is covered under section 12 of the Competition Law. However, it

does not deal with specific matters of consumer welfare, such as public health, standards, sales,

and hire purchase. New Zealand in amending its competition law statute, the Commerce Act 1986.

The new Act reads that, [t]he purpose of this Act is to promote competition in markets for the long-

term benefit of consumers within New Zealand.

Therefore, in administering consumer protection, the Competition Commission works closely

with other bodies such as local authorities, the Bureau of Standards, and the public health

service.Indeed, there appear to be far more countries housing their competition authorities with their

consumer protection agencieseven though a separate department is created for each agency in

most instances, for example Australia, Barbados, Canada, France, Jamaica, Japan, Malta, Papua

New Guinea, Poland, the Republic of Korea, and the United States, to name a few. Designing a

competition authority of dual competence competition law enforcement and consumer


20/26

20

protection could create synergies if there is effective coordination. For example, dual

competence of an agency gives rise to centralized management, operational efficiencies, case

teams with a range and diversity of disciplines, and the efficient use of available expertise. Of

course, there are disadvantages, too, for while the two areas of law are similar, it is sometimes

difficult to coordinate the procedures for a law that applies at the individual consumer level with

those for a law that applies at the market level; and it is sometimes difficult to coordinate the

laws at the case level.

Despite the trend towards dual competence, there is nothing to prevent lawmakers from housing

the agencies separately. It should also be noted that even in cases where there are separate

agencies, it is possible to coordinate the activities of both agencies through the establishment of

an oversight committee or a central commission, which seats representatives from the

competition authority and from the consumer protection agency, as well as individuals from

other government departments and ministries.

Taking view of the present growth rate of the Indian markets it is predicted that it will be India,

china, and USA after twenty years who will dominate the world economies as the most powerful

economies of the world. So, our competition policies have to be prepared with a dynamic and

exhaustive approach to give a deal to such a scenario. It is very necessary that we give a wider

and liberal interpretation to our competition legislation provisions. Construing them strictly and

narrowly is not going to justify their existence in the global competitive world. They must be so

flexible to establish a effective readily coordination with global antitrust policies and other

sectoral regulators trade and industrial policies

8. Responsibility of the Government, Other Concerned Agencies and the Consumers

Themselves to establish and improve competition culture

The main objective of competition policy and law, is to preserve and promote competition as a

means to ensure efficient allocation of resources in an economy, resulting in-

i. The best possible choice of quality,ii. The lowest possible prices,iii. Adequate supplies to consumers


21/26

21

And competition is a tool to achieve these objectives. Obviously, maximizing consumer welfare

becomes a predominant concern. Therefore, it is much required on the part of Government to

formulate and implement a competition policy keeping in view that consumers need the invisible

hand of the state to protect and promote their interests.

Broadly speaking, competition policy has two elements;

a set of policies that enhance competition in local and national markets: a liberal tradepolicy, relaxed foreign investment and ownership requirements, deregulations and

privatization etc., and

legislation i.e., competition laws designed to prevent anti-competitive businesspractices and unnecessary government interventions.

Competition policy is just one tool among many overarching policies and approaches, which

must be addressed for promoting consumer welfare. Competition policy must not only be a tool

for the rich, the urban and industries alone.12

It must not only be operational at macro level alone.

It is required on the part of Government that an effective competition regime must be established

at micro level so as to prevent consumer abuses both at industry level as well as in village or

locality because the ultimate goal of competition laws is not to increase the total wealth of

society, but to protect consumers from behavior that deprives them from benefits of competition.

Competition policies must come up with methods to bring the full weight of the consumer

interest into the global economic equation. When searching for ways and means to strengthen the

competition policies of the country it must always be remembered consumers are the best allies

to the competition. Strong judiciary and public interest organizations can play a role in

monitoring competition. The focus should be on ensuring effective rights of access for relevant

public interests groups and enabling these potential allies to present amicus cariae briefs to the

courts, or even better, to bring collective actions as full parties before the courts in order to

institutionalize securely demand for competition.

Public policies towards consumers can generate competitive pressures in markets by changing

the way they behave towards providers of goods and services. Sound consumer-oriented policies

12Supra note 3, p.119.


22/26

22

can actually make markets more contested and therefore more competitive. Competition agencies

need constantly to monitor changes in markets which will affect efficiency and Consumers.

Role of consumers in the global competitive markets

Improving the interaction between competition and consumer policies is an important goal.

Consumerswho are also voterswill not support the vigorous pro-competitive reforms that are

needed unless they see the benefits clearly.

Consumers are crucial in the process of economic reform. They are the potential counterweight

to the vested interests which oppose pro-competitive reform. Persuading consumers of the

benefits of competitive markets and helping them make their voice heard is fundamental to the

reform process. So, it is clear that the consumers are major stakeholders in any matter affectingcompetition. Thus, they also owe some responsibility and have an important role to play in the

success of competition policy. They must be well informed and must avail products and services

of only those merchants offering best quality of goods and services at lowest or fairly

competitive prices, so that the merchants give best deal to consumers and avoid the risk of

becoming unprofitable.13 Consumer or competition policies can only facilitate the processes but

cannot actually establish the desired regime without the active participation of the consumers.

Consumers must keep themselves informed about the platforms provided by these policies and

appreciate the policies which are most consistent with their welfare. Consumers can accurately

reflect their preferences by their relative demand for specific goods and this relative demand on

their part have an impact on the price and supply mechanisms in the market. This ensures that

more resources are focused in generating goods and services according to consumers

preference.

Consumers and their representative themselves have to be alert in order to keep the government

as well as the competition authorities of their own country active in implementing competition

rules. This becomes important in the liberalised era, where less regulate market players are well

informed and organized, while consumers are still ignorant and unorganized.14

13Kevin Harriott, Consumer Welfare Within Competition Policy, Paper Presented At CSMEs Competition and

Consumer Welfare Satisfaction Workshop, March 16, 2010 in Antigua & Barbuda14

Supra note, p.2.


23/26

23

9. Suggestions and Conclusion

9.1 Suggestions

Following are some recommendations which could be useful in the design of future strategies for

the competition authority to protect and promote competition culture in the country, and to equip

the competition policies with the consumer welfare standards.

i. Mechanism should be made for consumer representation, on consumer issues, in a

structured manner. If there is no mechanism for giving rights of access to the consumer to pursue

his/her legitimate interest under competition laws then both supply and demand for competition

are seriously undermined.

ii. Competition advocacy tools must be geared towards reflecting that how the competition

serves the consumer welfare apart from educating the people on competition issues. They must

highlight the interface between competition and consumer welfare- the contact point for

consumers on competition issues.

iii. While competitive markets benefit consumers if privatization and liberalization is

embarked upon with sound competition and consumer policy, these newly liberalized markets

will not function to the benefits of economic efficiency or consumer welfare. As competition

becomes more acute, businesses have attempted to cut their costs and secure their marketposition by reducing the standards of their product and services to an unsafe level, or by making

fraudulent practices. So, competition authority must also assume this responsibility and apply its

tools to monitor such situation.

iv. Competition authorities can incorporate mechanisms that will help consumers to

encourage - even force - businesses to act more effectively by working with national consumer

organisations to disseminate information, mobilise consumers and undertake consumer research

to input a consumer welfare perspective into investigations and policy making. This presents not

only a cost effective means of enhancing competition, but perhaps more important; it increases

consumer welfare, provides legitimacy to consumer welfare objectives.


24/26

24

9.2 Conclusion

Consumers are biggest beneficiaries of fair competition. Competition policies are designed to

achieve goals of economic efficiency, fair distribution of wealth and resources and consumer

welfare. All these objectives when harmonized deliver total welfare for consumers. Consumer

welfare is the underlying enforcement objective of competition law and policy so it must be

considered at every level of enforcement process. It must be realized that competition is not for

the sake of competition and market does not exist for the sake of market. It is for the sake

welfare of welfare of consuming public that these mechanisms are being established. So, there is

a strong need that consumers must secure fair amount of representation in the National

Competition Policies.

In India we have two separate legislations to redress competition issues and consumer grievances

but these two pieces of legislations must be enforced in a coordinated way and in such a manner

that both the policies complement each other.

**************


25/26

25

BIBLIOGRAPHY

Dhall, Vijay,Competition Law Today: Concept, Issues, and The Law in Practice, Oxford

University Press, New Delhi, 2007.

Tripathi, S.C., The Consumer Protection Act, 1986, Central Law Publications, Allahabad, 2006.

Barry J. Rodger & Angus Mac Culloch, Competition law and Policy in The EC and UK,

Cavendish Publishing Limited, London3rd Edition, 2004.

Gambhir, Cheena, Consumer Protection Administration Organisation and Working, Deep and

Deep Publication Pvt. Ltd., New Delhi, 2007.

Jain N.K., Consumer Protection Law and Pratice, Regal Publications, New Delhi, 2008.

Kannha, Rakesh, Consumer Protection Laws, Central Law Agency, Allahabad, 2005.

Kaushal, Anup, Practical Guide To Consumer Protection, Universal Law Publication Co. Pvt.

Ltd. New Delhi, 2006.

Katalin Judit Cseres, Competition Law and Consumer Protection, Kluwer International,

Netherlands, 2005.

Anslem Kamperman, Unfair Competition Law: The Protection of Intellectual and Industrial

Creativity, Clarendem Press Oxford, Newyork, 2004.

Pradeep S Mehta, Towards a Functional Competition Policy For India: An Overview, Academic

Foundation, New Delhi, 2005.

Geraint G. Hawells, Stephen Weatherhill, Consumer Protection Law, Ashgate Publishing

Limited, London, 2005.

H. Stephen Harris, Competition Law Outside The US: Volume 1, American Bar Association,

Chicago, 2001.

Eugene Buitigieg, Competition Law: Safeguarding The Consumers Interest, Kluwer

International, Netherlands, 2009.

Prof. Emeritus, Competition Law Journal: Volume 12, Butterworths, 2004.

Jayant Kumar, Abir Roy, Competition Law in India, Eastern Law House, New Delhi, 2008.


26/26

WEBSOURCES

issuu.com/stockholmnetwork

www.ssrn .com

www.legalservices india.com

www.nwp.usace.army.mil

planningcommission.nic.in

consumer.indlaw.com

www.kluwerlaw.com

www.amazon.com

papers.ssrn.com

www.maine.gov

www.maine.gov.in

www.oag.state.va.us

books.google.co.in

www.ftc.gov

www.antitrustlawblog.com

wiki.answers.com

www.accc.gov.au

www.safetrac.com

www.mondaq.com

www.justice.gov

Final Report Save

Documents