Competition law and consumer protection

1. Competition law and consumer protection Cornelius Dube CUTS Centre for Competition, Investment and Economic Regulation (CUTS CCIER)

2. Outline • Consumer Welfare indicators • Competition law objectives and consumer welfare • Competition law and consumer rights • Competition law and consumer protection frameworks • Factors to determine frameworks • Recommendations

3. Consumer Welfare as satisfaction in trade • A consumer is generally satisfied in trade if happy with the following attributes: • Prices • Choices • Quality • Proximity • These can be used as acceptable measurements of consumer welfare • Can the implementation of a competition law assist in attainment of these four attributes?

4. Consumer welfare as attainment of basic rights • The Consumers International Charter recognises eight basic consumer rights as follows: • right to basic needs; • right to safety; • right to choice; • right to redress; • right to information; • right to consumer education; • right to representation; and • right to healthy environment • Can a competition law help in the attainment of any of these rights?

5. Competition law objectives and consumer welfare • Static Efficiency: • Lower prices • Better quality • More choice • Dynamic Efficiency: • Efficient allocation of resources • Management, processing and technological improvements • Product innovation • These objectives all have consumers as the ultimate beneficiaries and result in satisfaction in trade (consumer welfare) • Competition laws can be used to attain consumer welfare • Consumer interests are specific concern of EU Law • The UN Set of Principles and Rules on Competition has Consumer Welfare among its Objectives

6. Competition laws and consumer rights • The right to basic needs (through the price effects and increased production) and the right to choice are directly enhanced by competition law enforcement for all jurisdictions. • Some competition laws also include unfair trade practices (UTPs), which directly benefit consumers rather than indirectly. • In addition to the general issues such as bait and switch, misleading advertising etc, UTPs provision include issues addressing some basic rights such as: • obligations to indicate prices and terms of trade and prohibiting misleading advertising (right to information); • compensation for harmful and defective products (right to safety and right to redress); • Competition laws can also be used to attain some basic consumer rights • The recognition of the common objective has also given rise to operational framework questions

7. Competition and consumer protection frameworks • Hybrid laws, where the competition law also include provisions relating to consumer protection issues • E.g. Zambia, Zimbabwe and Tanzania also encompassed consumer protection issues under UTPs in the competition law • Hybrid agency, where there are two different laws on competition and consumer protection, but the laws are enforced by one institution. • Eg. The ACCC of Australia • Two separate institutions- competition authorities handling competition issues while consumer protection institutions handle consumer interest issues, including UTPs • India, CCI and CAT enforces Competition Act, 2002 while COPRA 1986 is enforced by a Central Consumer Protection Council. • South Africa, the Competition Commission and the Tribunal for competition Act, 1998 while a National Consumer Commission enforces the Consumer Protection Act.

8. Factors to determine frameworks • The country size and resources are sometimes used as the basis for choosing a framework. • For small economies, it is normally recommended that hybrid laws and agencies are more appropriate • Hybrid laws and agencies also save resources, and are also recommended for poor countries • Expertise considerations are also important • Most competition authorities lack the technical knowledge regarding the implementation of consumer laws, e.g. cheating on weights and measures; over-indebtedness of consumers; small-claims damage actions • Multiple agencies can give rise to conflicts, influenced by vested interest groups • Absence of perfect or total complementarity between the two policies imply difficulties in their implementation by one agency; conflicts are possible, e.g price controls.

9. Factors in choosing frameworks (cont..) • Establishing one comprehensive law to cover both competition and consumer issues is not an easy task- critical provisions in one or both may be left out. • Enactment might be easier compared to enforcement- having one regulatory authority in charge of two policies implying a multiplication of the implementation gaps for the two laws. • Line ministries may be different, e.g while competition authorities are largely hosted by the Ministry of Industry, consumer protection authorities may fall under the Ministry of social welfare/affairs.

10. Pros and Cons (Summary)

11. Recommendations • Countries should choose a framework that is likely to bring the best outcome for both competition and consumer protection • The drafting of comprehensive laws is one of the most important aspect in ensuring better outcomes; this is best if separate laws exist • Ideally, both competition and consumer protection issues are too important issues requiring specialized skills for agencies- separate institutions could be better. • For small countries and most developing countries, it might be better to find ways of creating a hybrid agent which is very competent to handle both competition and consumer protection issues • Funding; separate departments to allow specialization; quality staff etc.

12. THANK YOU! cd@cuts.org C-cier@cuts.org